During my tenure as the Compliance Counsel Expert at the Fraud Section in the Criminal Division of the U.S. Department of Justice, I consulted on the monitoring of compliance programs – through either self-reporting or monitorships – after the companies had resolved their cases. My time at the Fraud Section also saw the imposition of 15 monitorships on companies, a very notable increase from prior comparable periods. I participated in assessments of the need for monitors and in interviews of monitor candidates, reviewed work plans and reports of monitors, assisted in mediating disputes between monitors and companies, and hosted Fraud Section’s monitor support network and its first-ever monitor training session. Since leaving the Fraud Section, I have received numerous requests to consult with companies facing the possibility of monitorships, currently under monitorships, as well as those interested in becoming monitors. Below are some tips for all.
An important caveat is that every agency has its own process and expectation for monitorships. Indeed, even within the Department of Justice, different divisions have different policies and procedures. That said, I believe the following points are generally applicable.
Companies Facing Potential Monitorships
– Planning: Yes, you can avoid monitorships, if you plan ahead. Fortunately, most white-collar investigations take years. Planning ahead, as soon as your investigation or self-disclosure starts, would allow you to build or enhance your compliance programs in ways that would satisfy prosecutors and regulators that you do not need to be monitored.
– Choosing: DOJ Criminal Division’s process allows companies to nominate monitor candidates. In selecting your candidates, choose those from whom you believe you can learn. You don’t want this to be a mere exercise to satisfy someone else: you are paying for it, and you want to benefit from the experience.
– Credibility/Fit: Along the same lines, choose someone who would have credibility in front of the agency that is selecting the monitor. That does NOT mean you have to choose someone who had worked at the agency: in fact, choosing someone purely because they are an ex-[agency] can backfire. There are those with experience in representing companies before the agency, as well as those who are reputable due to the experiences that they have had in building and enhancing compliance programs. Also, choose someone who fits your company: a monitor team that has no capacity to function in your company’s primary languages, for example, would not have credibility.
Companies Under Monitorship
– Process: as soon as you know you are getting a monitor, start planning for the process of coordinating the work. The monitor will need a lot of information and data upload. The more quickly and efficiently you can facilitate the information transfer, the more smoothly the monitorship will go. Think through who in your company will be responsible as the monitor’s main point of contact, and make sure that contact person understands the role as a facilitator, not a “screener” (e.g. one perceived as blocking information to monitor or reporting confidential employee feedback to management). Appoint owners in all stakeholder functions (e.g. Legal, Finance, Procurement) to work with the point of contact.
– Attitude: monitorships work best when everyone is onboard, working toward the same goal of enhancing the company’s compliance program. This means it would not be productive to treat the monitor as the enemy or an agent of the government. The monitors, at least the Fraud Section ones, are independent. This means they have presumed respect from the government agencies that appointed them. Winning them over, rather than fighting them, would be a much wiser strategy.
– Communicate: this is the key to a successful monitorship. There should be no surprises to anyone at any time. Engage in an ongoing dialogue with the monitor: tell the monitor about planned changes in your company, new allegations and investigations, and progress on your work. Listen carefully to the Monitor and the agency’s responses and suggestions. Also, communicate with the regulating/prosecuting agency, particularly if there are issues with the monitor. Do not wait until an issue blows up into a problem.
– Preparation: it has been astounding to me to see how many monitor candidates are ill-prepared for their interviews. This is the pitch of a lifetime! Fraud Section expects the monitor candidates to be thoroughly familiar with the company’s history (particularly any history of misconduct), risk profile, business model, and all the information that is publicly available, including SEC filings and annual reports. As a test, I used to ask one of the analysts in the Fraud Section to spend a few hours searching for such record, and see if the monitor candidates can match what she learned from that exercise. Guess the result?
– Team: put together your whole team and bring all the key players to the interviews. Fraud Section (and smart companies) do not want to hear that you haven’t yet selected a forensic adviser, a technical expert, or a country/region/industry specialist. You need to bring those team members to the table, because you will be evaluated on the strength of the whole team.
– Day 1: Be prepared to talk about what you will do on Day 1 of the monitorship. Monitorships run on tight timelines, and there is no days to waste. If, at the interview, you cannot articulate exactly what you will do, including what specific information/data you will ask for, you are not prepared.