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 third episode, we look at some case studies. Case studies are something every lawyer and compliance practitioner responds to because it presents real facts and events that the corporate compliance discipline can learn from and hopefully incorporate these lessons learned into their organizations.

Stern began with an example of a company was being investigated by the Department of Justice (DOJ) for an environmental violation involving an oil spill. Its employees had  falsified inspection records. This is viewed as very serious by the regulators because under a voluntary compliance regime, accurate and truthful reporting is a critical part of what makes it all work. AMI was brought in to assess the compliance program of the company, not simply in the specific geographical area where the discharge event occurred but across the company.

Stern said the initial goal was to identify the problems and fix the problems, but also be in a position to go to the government and (hopefully) relate that the event was an isolated problem. However, AMI took a broader look at the company. They did this by “spending a lot of time talking to employees, not simply the employees who were involved in the problem, but more generally in terms of the culture of the company and ethics of the company. This included the training around compliance and ethics, the kind of whistleblower program they had and how all of these things related together.” Armed with all this information, the company asked AMI to be at the meetings with the regulators and prosecutors. Stern said, “We want you to come with us and we want you to tell them what you found. We ended up going with the company to meet with the disbarment officials at the EPA.”

Stern related that at this meeting, “we patted the company on the back said, ‘here are some things that the company has done right’, but we were very critical in one or two areas.” This gave  credibility to the company because it said to the government, “this organization takes compliance and ethics very seriously. We wanted an independent third party to come in, no holds bars and tell us how we can fix it and make it better. And that’s what these guys did.” Stern believed it made a difference with the regulators because, although  the company did pay a fine, “it ended up with a resolution, which at least in the view of the outside lawyers was far better than they would have obtained. The short answer is yes, it did. It helped them.”

We then flipped the scenario about the advantages of a third-party independent to a company to the benefits it brings to government regulators, whether at the federal, state or even municipal level. I put the question to Stern “drawing from your experience as a prosecutor and as a white-collar defense lawyer, why is that third party independent aspect so important to regulators?”

Stern believes, “it does lend some support. The organization under investigation not only has the right instincts, motivations and goals but it intends to fix the problem.” He believes they do “not expect you to assess every conceivable possibility and turn over every possible rock to interview every employee that might be involved. They want you to take a more risk based focused view on where you see the problems. The best way to do that is not by looking to people internally whose livelihood depends upon getting a paycheck every other week or every month from the company, but the people who were outside the company and who have some measure of independence.”

But it is more than simply independence, it is about the data and the metrics you use to reach your conclusions. This is because prosecutors are becoming much more sophisticated in their understanding of what constitutes a best practices compliance program. Stern noted that in areas as diverse as the Foreign Corrupt Practices Act (FCPA) or health care fraud not just the federal government, but state governments and now increasingly local governments, are really asking the right questions. They want to know, “what makes a good compliance program and what assurances do we have that if we give you a break in this case that you’re actually going to end up at the end?” The government wants corporations to be good corporate citizens and third-party independent monitors can help provide that assurance.

Join us in our next episode in which we consider working with independent third-party monitor in the health care setting.

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