Monitorships: A Last Resort for Corporate Compliance

Posted by Pamela S. on Monday, September 3rd, 2012

The last thing any company wants is an outside party coming in and reporting on their activities. If a corporation is facing allegations of misconduct; such as unethical behaviour or fraud, hiring an independent monitor may be the only way to salvage the company’s reputation and save thousands of jobs.  We hope that you never need this information, but it may be the only way to avoid an empty boardroom.

Often, a monitorship is not a voluntary decision. It can be a requirement of a Deferred Prosecution Agreements (“DPAs”), or Non-Prosecution Agreements (“NPAs”).

When an executive, or group of executives in a corporation break the Code of Ethics and commit fraud or some kind of unethical act, such as SEC violations, saving the company becomes the main consideration. More often, lawyers are negotiating settlements known as Deferred Prosecution Agreements (“DPAs”), and Non-Prosecution Agreements (“NPAs”). These are usually contracts between the Department of Justice and the defendant corporation. In order to ensure corporate compliance with whatever sanctions have been determined, the corporation may be ordered to bring in an independent monitor.

The National Association of Criminal Defense Lawyers (NACDL) has links to a number of such agreements on their website, involving some high profile cases.

Even reputable companies that do a lot of good work in the community and on an international level have gone through this process. In May, Reuters reported that Wal-Mart Stores Inc. may be forced to hire

an independent monitor. The corporation is facing allegations that “its Mexican unit paid $24 million in bribes to accelerate its expansion.”

As mandated by the Justice Department, the responsibility of a monitor “is to assess and monitor a corporation’s compliance with the terms of the agreement specifically designed to address and reduce the risk of recurrence of the corporation’s misconduct, and not to further punitive goals.”

A monitorship is an expensive and challenging endeavour, but in the long run, your company will benefit. This is not a short term solution. Some monitorships last for a number of years. Read “Life Under the Monitor’s Microscope: A Renewed Focus on Corporate Compliance”

The International Association of Independent Private Sector Inspectors General (IAIPSIG)  has a number of articles on this subject, as does the United States Department of Justice website.

For in-depth information on this subject, read this 60 page report “ Can Corporate Monitorships Improve Corporate Compliance?” written by Cristie Ford, Faculty of Law, University of British Columbia, and David Hess and Stephen M. Ross of the School of Business, University of Michigan.

There are ways to avoid ever getting into this situation:

• You should have a Code of Ethics and lead by example.
• Implement a Whistleblower hotline. Don’t ignore any reports of wrongdoing. Sweeping allegations under the carpet will only come back to bite you.
• Conducting a thorough background search of all employees, from the top down will ensure that you hire the right people.
• Don’t become complacent. You need to constantly monitor your processes and reevaluate the way that you conduct business.

Former FBI Assistant Director Tom Sheer has recruited the best from the FBI, DEA, IRS and Secret Service to build a formidable team at Sheer Investigations. Our private investigators have the sensitivity and experience to handle the most delicate investigations.

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