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Monday, August 05, 2013

Introduction & Corporate Compliance Monitors

Many thanks to Dan and the rest of the group for inviting me to join PrawfsBlawg this month.  I recently completed my first year as a Visiting Assistant Professor ("VAP") at Notre Dame Law School.  I write at the intersection of professional responsibility, corporate governance, employment law, and corporate social responsibility.  I am interested in understanding the institutional mechanisms that firms use to (i) ensure and improve long-term compliance with legal and regulatory requirements and (ii) strengthen antidiscrimination norms.

One of the projects I'm currently working on looks at the role of corporate compliance monitors as part of corporate compliance efforts.  This project will be the focus of most (if not all) of my posts here this month.

I will begin by explaining what I mean by the term "corporate compliance monitor."  After a corporation is found to have engaged in misconduct, it has become commonplace for the government to enter into an agreement with the corporation in lieu of prosecution.  One common feature of these agreements is that the corporation is responsible for retaining a highly-skilled professional, like a lawyer or an accountant, who can (i) investigate the extent of the wrongdoing already detected and reported to the government, (ii) discover the cause of the corporation's compliance failure, and (iii) analyze the corporation's business needs against the appropriate legal and regulatory requirements.  This individual--a corporate compliance monitor--then provides recommendations to the corporation and the government that are meant to assist the corporation in its efforts to improve its legal and regulatory compliance. 

This month, I will discuss some of the interesting questions that arise out of this relationship, including the difficulties these agreements might cause for private lawyers and whether corporate compliance monitors are another form of gatekeepers or corporate probation officers.  I look forward to our conversation on these issues. 

Posted by Veronica Root on August 5, 2013 at 11:25 AM | Permalink


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Thanks for the comment. Based on my review of several dozen agreements (DPAs, NPAs, agreed upon consent orders, etc.) between the government and corporations, it seems as if there are a large swath of corporate compliance monitors that are engaged in more than rote "monitoring" and evaluating compliance. Most of the agreements I've reviewed require the monitor to provide something more than "monitoring."

For example, the following text from a recent DPA between Total S.A. and the DOJ provides an (imperfect) example of what I outlined above.

My #1: “The Monitor's work plan for the initial review shall include such steps as are reasonably necessary to conduct an effective initial review in accordance with the Mandate, including developing an understanding, to the extent the Monitor deems appropriate, of the facts and circumstances surrounding any violations that may have occurred before the date on which this Agreement is accepted . . . .”

My #2: In the Total DPA, my #2 outlined in the post above is essentially by the language I quote here for numbers 1 & 3.

My #3: “[T]he Monitor shall formulate conclusions based on, among other things: (a) inspection of relevant documents, including Total's current anti-corruption code, policies and procedures; (b) on-site observation of selected systems and procedures of Total at sample sites, including internal controls and record-keeping and internal audit procedures; (c) meetings with and interviews of relevant employees, officers, directors, and other persons at mutually convenient times and places; and (d) analyses, studies, and testing of Total's compliance program with respect to anti-corruption laws.”

Recommendations: “[T]he Monitor shall issue a written report . . . setting forth the Monitor's assessment and making recommendations reasonably designed to improve the effectiveness of Total's program, policies and procedures for ensuring compliance with the anti-corruption laws. The Monitor is encouraged to consult with Total concerning its findings and recommendations on an ongoing basis, and to consider and reflect Total's comments and input to the extent the Monitor deems appropriate.”

I could go on with examples from more agreements, but this "reply" is already a bit long. Feel free to email me directly to get into a more in-depth conversation.

Posted by: Veronica Root | Aug 6, 2013 5:12:01 PM

This is interesting. Broadly speaking, I always thought of an independent monitor as having much more of an ex post role -- basically making sure that the monitored entity is complying with the terms of its agreed correction plan. In that view, the monitor would do very little of (1) through (3). Instead, it would be regulators and/or investigators that would investigate, identify a cause of the problem at issue, and negotiate a balance between compliance with business needs. Then the monitored entity would hire an independent monitor to evaluate its compliance over a set period of time.

This is certainly how it works in my experience in a regulated industry, but that could just be specific to that particular industry.

Posted by: Huh | Aug 5, 2013 5:19:42 PM

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