This week I am running a five-part podcast series to celebrate the 15-year anniversary of Affiliated Monitors (AMI), the sponsor of the podcast series. From an idea in founder Vin DiCianni’s head to the oldest organization dedicated to providing independent monitoring services, AMI has literally been at the forefront of the evolution of both independent monitors and corporate compliance programs. This podcast series tells the story of AMI, the growth of independent monitors and the expansion of compliance and ethics programs.

The prototype of an independent monitor came from a number of special Commissions that were created by New York City to address improprieties by construction contractors in building public schools in New York City. Out of those Commissions arose the concept of Independent Private Sector Inspector General (IPSIG) and the model was to bring accounting, legal, and engineering skills into the oversight of construction contractors who were about to lose a contract because of some type of violation of the terms of the contract. This IPSIG model was used to provide oversight for these contractors so that the buildings needed could get built.

However, this IPSIG model was very intrusive, with the monitor literally in the back pocket of the contractor reviewing accounting records, engineering drawing and contracts on an almost continuous basis. DiCianni envisioned a less intrusive, more collaborative model. Yet he noted it took time to convince all the relevant parties, the regulators, defense counsel and companies of the effectiveness of this approach. He said there were three key factors in this process.

The first was to convince the regulators that a truly independent monitor not only had advantages but would work. A second factor was that many government agencies and state oversight boards did not want to put the licensed companies and persons out of business because the government and people in a state needed the services. For instance, in many ways it may hurt more than help to shut down a hospital or a physician’s practice for regulatory violations, particularly if the violations are not life-threatening to patients. Finally, during this time there were economic pressures which caused cut-backs to funding and the regulators simply did not have the head count to fulfill the oversight role that an independent monitor can perform.

Similarly, DiCianni needed to convince white collar defense lawyers of the efficacy of an independent monitor. He said that for “defense attorneys like myself, this was an idea that gave them something to negotiate with for their client before the regulatory agencies. One of the sort of benefits, for defense attorneys, is that they now had something that they could use to leverage with regulatory agencies as opposed to just being confronted with your client’s going to be suspended for five years.” Moreover, under this remedial approach, the recalcitrant party would agree to pay the cost of the independent monitor. When the defense counsel recognized the benefit that an independent monitor could bring to their clients, they became advocates for the independent monitorships with the regulators.

The use of independent monitors has greatly expanded over the life of AMI. This expansion has been at all levels of domestic government: in the federal sector, in the state arena and down to the municipal level. It has also expanded into the international sphere as well as the private sector. The US Department of Justice (DOJ) began using monitors in the early 2000s around money-laundering (AML) prosecutions. Independent monitors were used by a wide variety of other federal agencies, from the Department of Transportation (DOT) to the Department of Defense (DOD).

AMI has provided independent monitorships in a wide variety of situations, including AML prosecutions at the federal level. At the state level one of the earliest was in Massachusetts, involving the Big Dig in Boston Harbor. At the municipal level, there have been independent monitorships around public schools and even pension plans. AMI’s work has extended into areas as diverse as prisons to alcoholic beverage regulatory issues. The subject matter expertise of AMI can have different focus, working with different levels of government. In the federal focus, there is compliance and ethics concentration, with state regulators the monitorship may be more focused on businesses meeting their regulatory obligations and with municipalities, the focus may be more around contract issues of procurement and execution.

I was intrigued by the structure of an independent monitor and how broad the work is to the various types of matters. DiCianni noted that independent monitors come “in all shapes and sizes, you could work on a gigantic international or multinational company to a midsize or small size company down to individuals. So each case is very different. Each case will have a certain set of conditions or criteria for the monitor.” He further explained this is why a well-crafted settlement agreement is required as it will detail the rights and obligations of all parties. It might lay out the requirements for the monitor and should lay out the reporting schedule and other items or issues the parties must consider going forward.

I asked DiCianni if he could provide an example of an independent monitorship which tied all these elements together. He related that AMI acted an independent monitor in a civil rights case out of New York City a number of years ago. Based upon this work “AMI received a call from the New York State Attorney General’s (AG) office. They had a small manufacturing company on Long Island which had hired and employed all disabled people. The company got into hot water with the state EEOC function for equal employment of violations. The state AG’s office was in a quandary, as it did not want to close down one of the last manufacturing company’s in this particular city on Long Island. However, the AG had to deal with these realistic problems that the company was having in the EEOC realm. AMI came up with a model under which the company implemented an ethics and compliance program for the state’s EEOC. Some of the elements included a hotline, AMI put on EEOC training for the staff and the management team. AMI then monitored the company for a period of time, to ensure the solution desired by all parties was obtained.”

Another example involved a railroad company that “got in trouble for some unauthorized activity on the billing under a contract. AMI was required to understand not only what had happened, how it had occurred from the root cause standpoint. From this root cause analysis, AMI was able to detail some of the deficiencies in the company’s control and create the monitorship around those issues.” The bottom line, as DiCianni stated, is that “we’re very comfortable monitoring almost any situation because of our years of experience doing it.”

The podcast series, Affiliated Monitors: 15 Years of Independent Monitoring Excellence. The podcasts will go out one each day on the FCPA Compliance Report at 10 AM and at 6 AM on JDSupra. All five episodes will be released at midnight Monday on Spotify, iTunes and Megaphone for binge listeners who want to go through the entire series back to back.

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 tfox@tfoxlaw.com.

© Thomas R. Fox, 2019