In the first installment in a series on corporate monitoring, “Mr. Monitor” Jay Rosen explains what a corporate monitor is and answers some of the commonest questions organizations have when facing a monitorship.
Over the next several weeks and months, we will be commencing a journey together about corporate monitors. We will explore who they are, what they do, when you engage them, where to find them, how they work and one of the most often asked questions: who pays the bill?
Since the turn of this century, many global corporations have settled a Foreign Corrupt Practices Act (FCPA) matter with either a deferred prosecution agreement (DPA) or a non-prosecution agreement (NPA) and usually have a corporate integrity monitor assigned to their company for a period of 24 to 36 months. While many people are familiar with this occurrence in an FCPA setting, this is only one of many instances where a corporate monitor can be engaged to add value to a company that’s in trouble (or isn’t, yet).
Here are a few questions we will consider during our exploration of monitors:
- Should a corporate monitorship be feared if your company is in the middle of an FCPA matter?
- How can a monitor be leveraged to ensure your business is operating in an ethically compliant manner?
- Can a monitor be used in a manner other than post-settlement, such as proactively to help forestall a government enforcement action, fine or penalty?
- There is lots of talk about the alleged exorbitant costs of a monitorship… Is this an urban myth or is it based on facts? If the latter, what can a company do to protect itself?
What is a corporate monitor?
A corporate monitor is an individual or team of individuals that are independent of an entity that requires corporate oversight. The monitor brings to bear their compliance knowledge, training and learning to any task where a true independent expertise is needed to assess the validity of the required criteria as defined in a relevant settlement document. As we discussed above, in the FCPA world, that could be through a DPA, NPA or other type of agreement.
What agency has oversight?
Monitors generally report to an oversight agency (e.g., The Department of Justice (DOJ), the Securities and Exchange Commission (SEC) or another regulator) and work with a company or individual. The specific issues to be monitored, as well as how often and to whom the corporate monitoring is required, is highly negotiated and will be specifically addressed in either the “Corporate Compliance Reporting” or the “Independent Compliance Monitor” section of the agreement – most often it is Attachment C.
Who foots the bill?
The cost of the monitorship is borne by the company being overseen. It is a unique model: An unrelated, independent private person or entity is still being overseen by a government agency or regulator monitoring a company, but with specific terms for that third party. It is spelled out in the settlement documents referred to above.
What about subject matter expertise?
A key for a successful corporate monitorship correlates with the independent monitor’s area of subject matter expertise. Obviously, first-rate knowledge of compliance and ethics is critical, but as monitoring is used across multiple industries and businesses, a wider variety of technical experience is required.
Monitors have been used in health care, financial services and police departments, just to name a few. A wide variety of subject matter experts may be required as part of the monitorship team to successfully complete the assignment.
Now that we have introduced the basics, in next week’s column we will explore what a post-monitor resolution is and how it works.