Today’s guest blog post is written by Ms. Kathleen Hamann. Ms. Hamann, a partner at White & Case LLP in Washington, DC, was previously a Trial Attorney in the FCPA Unit at the Department of Justice, where she selected and oversaw a number of monitorships in a variety of industries and saw firsthand the problems with keeping monitors in check.
So the investigation is finally over, and settlement negotiations are nearing their end. The whole company can breathe a sigh of relief that the constant interviews, document requests, and never-ending upheaval in your offices and stress on your employees is over, right? Wrong. The company has been hit with a monitorship. The nightmare stories of the “runaway monitors” in the New Jersey medical device cases – some of whom cost more than $50 million – and Apple’s woes with its judicially-appointed monitor cast a pall, promising three more years of the same.
But there is some hope. For monitors in transnational bribery in both the U.S. and the U.K. (at least pursuant to the new U.K. DPAs), the company gets to nominate three candidates from which the government will select the monitor. Careful selection of those candidates can minimize the cost to the company, both in terms of the monitor’s fees and the business disruption that comes from a monitorship. Here are the key questions to ask of those you invite to pitch to you:
Do you know transnational bribery and my company’s industry?
One of the key complaints Apple had about its antitrust monitor was that he had no experience in antitrust. Your monitor candidates need to know the FCPA or the UKBA, of course, but it’s also helpful if they understand anti-bribery laws more broadly so they can check your systems across the board, and you don’t want to have to pay for their education. If they lack the broader expertise, you may end up with repeat reviews to check for other compliance issues or to go back and evaluate key risk areas that the monitor missed the first time around. Worse yet, failure to look for other compliance issues – as happened with a number of medical device companies – can lead to a second set of prosecutions under a different anti-bribery law. Waiting for the monitor to learn all the rules will cost you.
Likewise, if your monitor candidate is not already familiar with the risks specific to your industry and how your industry operates, you’re looking at paying for a longer ramp-up time as they get to know where the issues might be and where they need to focus. This not only increases your costs, but it might delay the start of the monitorship. In addition, it may mean the first report to the government is all about how your company operates and how the industry works, which the government already knows from the investigation, potentially delaying termination of the monitorship.
What is your plan for the monitorship?
So many monitor candidates walk into the interview with the government – let alone the company – with no plan for conducting the monitorship. The presentation is basically, “I used to be someone important, therefore I’ll be a great monitor.” Having once held an important position does not necessarily correlate to being a good monitor who won’t waste your time or your money – in fact, history shows those types of candidates sometimes make the worst (and certainly the most expensive) monitors. You aren’t looking for a big name. You’re looking for someone who knows what they’re doing, and will do it efficiently.
The first stage of any monitorship is the proposal of a work plan, which is reviewed and approved by the government. There’s only so much a monitor candidate can do before they know all the details of the problems the company is resolving, but some candidates don’t want to invest in putting a plan together at all until they are being paid for it. They will come in to pitch to you empty handed aside from their resumé. Don’t let them get away with it – there is virtually no way to ensure their plan is properly designed to minimize both fees and disruption to business operations if you don’t know what it is until they’ve been appointed. At a minimum, they should be able to outline (in writing) their philosophy, strategy, and approach. The better they know the issues and the industry, the more detail they can provide. Particularly if the monitor is offering an alternative fee arrangement like a soft cap, the plan needs to be accurate and appropriate, to limit the possibility that they will cite unforeseen complications as a reason to exceed the cap. More…