In this five-part podcast series, sponsored by Affiliated Monitors, Inc. (AMI); I am joined by AMI Managing Director Stern. We consider how defense counsel can work proactively with independent monitors to help clients who may have sustained an ethical or compliance violation or are under government scrutiny for allegations of illegal misconduct in a wide variety of industries, disciplines and corporate settings. In this first episode, we introduce the concept of defense counsel working with independent monitors.
Stern has served in the public arena for many years and served as United States Attorney for the District of Massachusetts. In this role, he had responsibility for numerous criminal investigations and prosecutions, as well as civil enforcement actions. Stern oversaw three offices in Massachusetts, with over 100 attorneys. During this time, he also served as chair of the Attorney General’s Advisory Committee. He later migrated to private practice, working in blue chip law firms where he practiced in white collar defense. He joined AMI in 2013. With his professional background, Stern is uniquely situated to see how an independent monitor can greatly assist defense counsel, companies and those under investigation.
Stern began by noting that traditionally defense lawyers were very wary about getting compliance professionals engaged and involved in assessing a company’s compliance plan in the midst of an investigation. They tended to focus on such criteria when an investigation is active, the overall investigation. Moreover, initially the government wanted companies to wait until an investigation was over before a company would begin to fix things. However, those days have long since passed. Stern said, “at this point, the worst thing that a defense lawyer can do is to sit back, wait for the investigation to complete either their own internal investigation or the government’s investigation and then say to the government, well now we’re going to fix things. I think it’s important to get in there as quickly as possible.”
As recently as last week, at the Ethics and Compliance Initiative (ECI) Impact 2019 Conference, Assistant Attorney General Brian Benczkowski delivered the afternoon Keynote Address. He gave some significant comments around the corporate compliance function. Benczkowski said the Department of Justice (DOJ) will assess “a company’s compliance program at the time of the misconduct to determine the company’s culpability score under the U.S. Sentencing Guidelines, which determines the company’s ultimate fine range. If the company maintained an effective ethics and compliance program at the time of the misconduct, the company would also be eligible for a significant reduction in its overall fine.”
Moreover, Benczkowski said the DOJ will consider a “company’s compliance program at the time of the resolution to determine whether an independent compliance monitor is necessary to prevent the reoccurrence of misconduct, or whether the compliance program is sufficiently effective to permit the company to self-monitor.” Stern noted, “you just can’t sit back, sit on your hands a hope for the best, and then if pushed over the cliff make changes, you’ve got to be proactive, assess the situation early on and make those changes yourself.”
He said that it also calls for a bit of a different mindset from counsel. Typically, a defense counsel will have a goal similar to in-house counsel, which is to protect the organization. Obviously, that is not the role of the compliance function but it also not the role of an independent monitor. Stern said there were four overall goals in this process. The first is to fix the problem. It could be that you have to begin with putting your finger in the dike but you first must stop whatever the illegal conduct might be. The second is to perform benchmarking to find out how your organization might stand up in the industry regarding your compliance regime.
Interestingly, Stern noted the third goal is one that he feels is often overlooked. He said, “you send a very important message internally when you bring in a third party independent as opposed to just having your HR department or your in-house counsel or even outside regular outside counsel” do this work. “You send a very powerful message to employees that this is important to us, we care about it, and we want to listen to you and you can tell us things that you might not feel comfortable telling people in house.”
Stern said the fourth goal is in your communications with the government. Whether or not it is through a self-reporting mechanism or simply through the context of an ongoing investigation, “you’re telling the government, we get it, we understand that we have to be better and we’re not going to wait for you to beat us over the head and tell us we have to do it. We’re going to invest their own resources and our own time into identifying the problem now and trying to fix it.” It helps to send the message, not only internally but outside the company that you understand compliance is important.
There are then multiple reasons for defense counsel, whose primary role is to defend an individual or organization. Stern ended by concluding, “the government has become much more sophisticated in assessing compliance programs. It used to be that you can simply present the policies, procedures and some metrics and the prosecutors or the regulators would nod their head and say you’ve got a very good program. But that is not anymore. They want an on the ground assessment as to whether it’s really working and whether people take it seriously.” The bottom line is that the “best way to do that in my view is having a third-party independent come in and do that work.”
Join us in our next episode where we dive into the weeds by looking at the nuts and bolts of working with a third-party independent monitor.
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