During this series I am visiting with Vincent DiCianni, Chief Executive Officer (CEO) and founder of Affiliated Monitors, Inc. (AMI), for a retrospective of the company’s first 15 years. AMI sponsored this podcast series. This series is much more than simply the history of AMI as it details the rise of independent monitors in the US at multiple levels: the federal government, state agencies and local authorities as well as internationally. AMI has been at the forefront of not only the use of independent monitors but also the dramatic growth of the compliance and ethics profession over the past 15 year. This is a history of both the rise of independent monitors as well as the government’s embrace of corporate compliance and ethics programs. In Episode 2, I we discuss the early days of AMI.

I began by asking if there were any models for monitorships that DiCianni could draw on as a prototype for AMI. He said the initial model 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.

I asked DiCianni if there were any areas of significant push back from regulators or others in the early days of AMI. He responded that, although it was really not push back on the independent monitor concept, there were some instances where the regulators desired to use the independent monitor in a manner wholly inappropriate to the overall concept. This was in the realm where a regulator desired the independent monitor to act as the investigative arm of the regulator, continuing to investigate the company or person after the resolution had been agreed to and signed off on by all parties.

DiCianni mentioned two other areas of pushback. The first was around the cost of the monitorship, which is borne by the company. Here he noted that setting expectations is critical, particularly through a workplan. The second was what he termed as “opening the kimono” as many companies were initially reluctant to share documents, information and even employees with a monitor. Here DiCianni said the key was a well-structured Corporate Integrity Agreement (CIA) or Deferred Prosecution Agreement (DPA) which laid out with specificity the rights and obligations of all parties to the resolution agreement: the regulators, the party (ies) and the independent monitor.

Join us tomorrow where we discuss the expanded use of an independent monitor.

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.

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