Like it or not, compliance monitors are back, and this time they’re here to stay. At least that seems to be one message to take from last week’s deferred prosecution agreement between French company Total S.A and the Department of Justice. Total admitted to bribing Iranian officials and violating the Foreign Corrupt Practices Act (FCPA), agreeing to pay a $398 million fine and enter into a 3-year compliance monitor program.
For a period of time, it appeared as if there were a trend away from using compliance monitors in FCPA settlements, but today corporate monitorships remain fairly common, as evidenced both by last week’s Total settlement as well as DOJ settlements last year with Smith & Nephew, Biomet and Eli Lilly, to name just a few. So here’s a quick refresher for those who need to brush up on corporate compliance monitors:
What is a compliance monitor?
A compliance monitor is a government-appointed third party hired by the company under the terms of a negotiated settlement with the government to oversee the company’s efforts to fix its compliance program. They are not required by law, but compliance monitors are frequently imposed as a condition of settlement with the DOJ and are, at the very least, contemplated under the comments section of the Federal Sentencing Guidelines as experts that may be employed by the courts to “assess the efficacy of a compliance and ethics program.” (Guidelines Manual §8D1.4).
What a compliance monitor actually does will usually depend on the specific terms of the company’s settlement agreement. Often they are part-investigator, tasked with figuring out what went wrong in the company, and part-senior executive, tasked with restructuring the company’s compliance program to fix any outstanding issues. Quite often the settlement agreement will stipulate that the compliance monitor has full access to the company’s records and provide a yearly report to the government detailing what progress has been made in such areas as third-party due diligence, risk management and employee training.
Why are compliance monitors so controversial?
Besides being intrusive, companies often complain that compliance monitors are overly expensive. The list of those who have served as compliance monitors in the past includes a former German Finance Minister (Siemens), a former FBI director (Daimler), and a former Attorney General (Zimmer Holdings), none of whom came cheap. In the case of Zimmer Holdings, former Attorney General John Ashcroft estimated that his 18-month contract with the company was worth between $28 million and $52 million, a sum that seemed especially egregious given that Ashcroft had been appointed by then-New Jersey prosecutor Chris Christie in what many viewed as a politically-motivated maneuver by Christie to help out his former boss. More…