I continue my five-podcast exploration of working with monitors. I am joined by Don Stern, Managing Director, Corporate Monitors and Consulting Services at Affiliated Monitors, Inc. (the sponsor of this five-part series) on working with monitors. Today we consider the various manners in which regulators at all levels, from the federal, to state and local levels, use monitors. We also consider how monitors can be used outside the regulatory context in areas as diverse as mergers and acquisitions, business ventures, IP and licensing.

Most compliance practitioners are aware of the role monitors play in the Foreign Corrupt Practices Act (FCPA) enforcement arena. However, the use of independent monitors is much broader than simply in criminal or civil enforcement actions involving a Deferred Prosecution Agreement, Non-Prosecution Agreement, Corporate Integrity Agreement or other form of resolution. Federal agencies use monitors for a wide variety of roles to ensure compliance with agreements.

At its most basic level, an independent monitor is a way for the government to extend its reach. Both in terms of lengthening out the time that you have true government oversight and in terms through many of the techniques we discussed earlier:  focus group meetings, review documents, talking senior and middle management. It is a very cost-effective way for federal, state and even local governments to extend out their reach. This cost-effectiveness is driven home by that fact that the cost is not borne by the governmental entity or the regulators. The cost is borne by the entity involved.

Stern pointed to the use of an independent monitor by the Federal Communications Commission (FCC) to ensure that the conditions around anti-competitive and other issues, the FCC approved for the merger between AT&T and Direct TV, were fulfilled. He went on to provide an example where “one of the conditions was  they had to offer a discounted broadband service to certain low-income households. The FCC  wanted access to broadband for low income families, particularly for school kids. The monitor assessed the marketing program on this issue, looking at their efforts to provide discounted broadband, low income households.”

Stern provided another example of regulator use of an independent monitors, this time by a state regulator, the Attorney General of Rhode Island in the area of hospital conversions. This is the situation where a non-profit hospital is purchased by a for profit chain. In such situations, the state attorney general in most states will have to approve that transfer of assets from charitable assets to for-profit assets, applying certain conditions. It could be in the area of recruiting  physicians or requiring the acquiring institutions to keep the mental health services open. You don’t have to spend x millions of dollars on new equipment. It is generally around very specific metrics  and it is “increasingly being used by government agencies as a way of not only having confidence that the regulatory decisions are being followed but provides some comfort and confidence to the public knowing that who is looking over the shoulder of the organizations in the public’s interest.”

Yet an independent monitor can be used in non-regulatory areas. One that certainly comes up is pre-acquisition due diligence in the FCPA realm. An independent monitor can be used to assess whether a target or takeover candidate has a robust compliance program. These same concepts also work in the licensing area in pre-acquisition work and even for company which want to test the audit compliance of customers.

The bottom line is independent monitors can come in and look at the system of controls in a wide variety of regulatory and legal areas. This is true because there is no substitute for having somebody independent of the company with some expertise and common sense and practical reality coming in and asking, how are you doing? Stern concluded, “You don’t have to do this all the time. It isn’t something you need to do even every year, but every once in a while, have somebody come in and take a hard look at how you’re doing and then reporting back internally to the company. It is money well spent because you have established that the organization being reviewed has a good program and if you need to fine tune your program in certain ways. Here again, I think that’s all to the good.”

For more information on how an independent monitor can help improve your company’s ethics and compliance program, visit our sponsor Affiliated Monitors at www.affiliatedmonitors.com.