The Compliance Evangelist is on assignment this week in São Paulo, here to present several talks and speeches on the current state of compliance. However, in pre-conference mode today, I took in the Museu Do Futbol, the country’s shrine to its legendary soccer players, teams, championships and losses. It was a great exhibit and an excellent way to launch myself back into Brazilian culture as I prepare for my events. One of the exhibits spoke to today’s theme of fears and concerns in going forward to work with monitors.

One part of the exhibit which struck me was the section dedicated to Brazil’s World Cup performances; the good, the bad and the ugly. While its 2014 shellacking by Germany of 7-1 on its national home field was certainly the ugliest, the exhibit revealed that a prior World Cup loss, in 1950 was in many ways more devastating. Brazil built its world-famous Maracana Stadium for the event and it was to be Brazil’s coming out party on the world’s biggest soccer stage. There were 200,000 in attendance for the finals where Brazil met Uruguay. Brazil was the prohibitive favorite. However, Uruguay star striker Alcides Ghiggia, silenced the crowd near the end of the match with the game-winning goal. As he peeled away to celebrate, Ghiggia noticed that the huge stadium had fallen silent. Ghiggia later said, “Three people have silenced the Maracana – Frank Sinatra, the Pope and me.” Today Brazilians still fear playing Uruguay in the Maracana.

This devastating loss and attendant fear inform today’s blog post. This week on the FCPA Compliance Report, I have a five-part series on working with monitors, in which I visit with Don Stern, Managing Director, Corporate Monitors and Consulting Services at Affiliated Monitors, Inc., (AMI) who is the sponsor of the podcast series. Over the podcast series we will consider in Part I – Fears and Concerns in Working with Monitors; Part II – The Impact Monitors Can Have for an Organization; Part III – How Monitors Do Their Jobs; Part IV – Regulators Using Monitors; and in Part V – Attorneys Using Monitors. At the end of this series you will have a much broader appreciation on the benefits of an independent monitor, how monitors work and how the different types of monitorships can benefit a wide variety of businesses, transactions and business relationships.

There can be a wide variety of concerns for those considering or being required to work with a monitor, both from the corporate perspective and individual employees. From the corporate perspective, the concerns can include the costs of a monitorship and the impact on the bottom line; opening up books to an outsider and interference with business operations. These are acerbated by a fear the monitor does not understand the business of the organization or even how business in done in the real world. Things that tend to bring more fear are that the monitor will engage in slow but sure mission creep and exceed the boundary of the charge. Many see monitors as an extension of the government and believe that monitors are junior G-men and investigators, tasked by the government to investigate “goings on”. Employees tend to be more afraid the monitor will come in with dictatorial powers and exercise them. Employees are usually more concerned with the company’s reputation and business credibility with employees and subcontractors.

Stern believes some of the fears and concerns are understandable, particularly if a company does not have experience with the positives of the use of an independent monitor and a monitor’s assisting a company in improving their compliance program. While some of it may have to do with the unknown, if the monitor is a part of a government settlement or resolution, there can be the fear, sometimes driven by war stories, that monitors will have mission creep and continue the investigation, even after a resolution. A company may fear that a monitor will come in and look under every nook and cranny. This feeds into both concerns of cost and mission creep.

Another concern is that many monitors are former prosecutors and still retain a prosecutorial mindset. This can lead many companies and their employees to fear a ‘got-cha’ mentality of a monitor who is looking for items to run back to the government or regulators with through their monitorship investigations.

Stern believes that all of these concerns can be handled if not fully alleviated, through thorough discussions with monitor candidates. Stern noted that one of the areas a company needs to be asking about during the monitor selection process is what is “the approach that the monitor is going to take? What’s the approach in a meeting or an interview with a mid-level employee in a branch office? Is that person going to feel as if they’re under attack or are they brought in to explain all the good things and all the bad things that are going on so that the monitor can basically make some helpful recommendations.”

In addition to the monitor interview process, companies should understand that the terms of any monitorship are set in the resolution agreement. This is why it is important not only to address these issues during settlement discussions but also take care in the drafting of such agreements to try and remove as many ambiguities as possible. At times, the parties may not want to address what they believe are sensitive issues head on as part of the negotiation process, other times there is not a full understanding of how monitors works. Stern has been brought in as the parties negotiate to simply educate people as to what monitors do and how they operate and to demonstrate how the monitorship can be more successful for both sides, i.e. the government and the company. In drafting the resolution agreement, the key is to lay out the scope, properly and tightly designed. When there are ambiguities which come up in the process of the monitors work, the monitors should work with both sides, as a facilitator, to have both parties basically come together and to resolve those issues.

The key is for companies to have a thorough understanding of the monitorship process, whether it is a post-resolution monitorship where the monitor is focused on the company’s compliance with its agreement in the resolution document, Deferred Prosecution Agreement (DPA), Non-Prosecution Agreement (NPA) or other; or a pro-active monitorship. This understanding comes from discussions, reviewing and negotiating the scope of the agreement and hiring experienced monitors who understand their role and, more importantly, what is not their role going forward.


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© Thomas R. Fox, 2018