What are the considerations a company should employ when retaining a corporate monitor? I recently put that question to Vincent L. DiCianni, founder and President of Affiliated Monitors, Inc. (AMI), and Eric R. Feldman, Senior Vice President and Managing Director of Corporate Ethics and Compliance Programs for AMI.
It is important to note right off the bat that the selection of an appropriate monitor can either make or break the entire monitorship program for an organization. Feldman advises that to forestall such a problem a company needs to have a clear understanding of what wants to achieve from a monitorship. If you are at the end of a Foreign Corrupt Practices Act (FCPA) enforcement action, your goals may be different than attempting to engage in a pre-settlement monitorship. You also need to understand what might be required by the government in any post-resolution settlement.
After this initial self-assessment of the company’s goals, you can move to considering the monitor. Here you need to assess what Feldman called the philosophy of potential candidates. Is the monitor coming in to simply investigate the company or help to prevent or resolve issues? This means staying away from the prosecutorial ‘gotcha’ mindset and move towards a monitor who is focused on remediation “to help you be a better company”.
The next line of inquiry is can the company obtain the maximum value it can get from the expertise, the independence and the viewpoints the monitor can provide? In other words, what is the value the monitor will deliver to your organization? Feldman suggests asking a question such as: “Can the Monitor help my business?”
Third is the expertise of the monitor. However, this is more than being a subject matter expert (SME) in the area of law being applied, such as the FCPA; it is being an expert in monitorships. It is also more than simple cost-effectiveness. It is also how the monitor will work without disrupting your organization or working to keep such disruptions to a minimum. Such expertise would include how to conduct an evaluation, how to create a work plan which is rigorous yet cost-effective, and to “socialize the work plan with the company and with the government.” This means the monitors should have experience in balancing the interests of the government and the company. Other skills necessary include interview skills, ability to conduct focus groups, data gathering and analytics are also critical. Finally, consider the writing of the report and communication of information, for, as Feldman stated, “There’s no value added if there’s not a clearly written factually based monitoring report, at the end of the process, that makes recommendations that logically flow from the information gathered and are culturally appropriate for that particular company. There is no one size fits all for the reporting or for the recommendations.”
Feldman spoke about the different types of value a monitor can bring. Obviously, the situation where there is a Deferred Prosecution Agreement (DPA) or other enforcement action resolution document in place would suggest one type of value. Yet there are other more business-process focused values a monitor can add. In the area of internal controls, a monitor’s assessment can lead to more effective internal controls, often through a reduced number of overall internal controls.
Feldman spoke to another ‘soft’ factor when he noted, “There’s also another interesting factor involving value in a company. That is that the actual methods that we use to do the monitoring to go in and talk to employees, to do employee surveys to do interviews. That alone can have something of a cathartic effect on the company’s employees and on the mood and the morale in the company. And we’ve seen that over and over again, when employees see that the company cares enough to bring in a firm that asks their opinions on what works and what doesn’t work and ask their opinions about whether their managers are creating and an open environment to communicate issues and to report issues. It helps improve the company and as we know better morale in the company improves the bottom line.”
Finally, a company needs to consider whether the monitor is “independent and conflict free”. Feldman says this is important “Because if not, then the value of the findings the value of the entire effort can be at risk. And we’ve seen this over time in organizations that bring in monitors that you know may, within their broader organizational structure, have some kind of a conflict within the industry or within that company.”
I asked DiCianni about the always controversial topic of monitorship costs and expenses. He noted that in any post-resolution monitorship, the monitor is coming in at the end of a long process. If it was a FCPA enforcement action, it could have been a years-long process with a lengthy investigation, coupled with an extensive remediation and then long negotiation with the government over the final penalty. Yet there is an approach that a company can use to help the final leg of this process more palpable.
DiCianni breaks the process down into three key areas. The first is the scope of the monitorship. You must understand the settlement documents so that you can fully appreciate the scope of the monitor’s remit and what the government expects from the monitor. DiCianni noted that some resolutions can have a narrow focus, with a finite number of records or other documents to review. With such information, you can work to scope out a range of what your costs might be. Conversely the settlement documents can literally be wide-open, which obviously will have a dramatic impact on potential costs and even estimating.
DiCianni related the next factor to consider is frequency. By this he meant how often is the monitor actually engaging in monitorship activities for the company. Is it daily? Is it weekly? Is it quarterly? The frequency of monitoring will have a significant role on your overall monitorship costs. The final factor to consider is duration. Tied to this question of frequency is the length of the monitorship. How long will the monitorship last, one-year, two-years, three-years or even five years; is a critical element.
The final factor is the experience of the monitor. As we are discovering in this series, you really need to have a very direct conversation with monitor candidates to determine if they have the experience to work with other individuals or teams of individuals. Does the monitor understand their role, as prescribed by the four corners of the settlement document(s)? Are they going to reinvent the wheel for each new part of the monitorship? DiCianni said, “as they are going along which is going to add to the cost of the monetization so that’s a factor that I think companies should consider”. This brings up another important factor on costs, as it is not only the scope of the monitorship but also the efficiency of the monitor.
Any company faced with the selection of a monitor should take care in the process. Use a deliberative process which allows you to understand not only your goals, but also your requirements back from a monitor.
What are the key considerations a company should evaluate when hiring a monitor and to keep costs under control?Click to tweet
This week, in a five-part podcast series, I am exploring the role of corporate monitorships in compliance and some of the key issues which companies and compliance professionals may face in dealing with monitors. I am joined in this exploration by Eric R. Feldman and Vincent L. DiCianni, founder and President of AMI, the sponsor for this podcast series. You can check it out each day, when the new podcast posts on this site at 10 AM CDT and they are all available on iTunes.
This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at firstname.lastname@example.org.
© Thomas R. Fox, 2018