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I think there is a great deal of misunderstanding about Monitors and their roles. In part, it is because the Monitor label is used to cover many different types of oversight – some benign, some investigative, some constructive and some downright adversarial. As someone who has served as a Monitor since the mid-1980s, I’d like to help set the record straight. How a Monitor is selected and when the Monitor enters the process is not as critical as understanding what a Monitor is expected to accomplish. A Monitor may serve post-conviction, under a deferred prosecution agreement, under a non-prosecution agreement, by invitation when there is no immediate problem and before a deal is struck with the government or regulators. It is true that most Monitors are selected as a result of some misconduct or regulatory conduct, which is what I want to focus on in this discussion.
First, and I would have thought this was obvious, as the term is usually used, a Monitor is the creation of a contract (consent order) between parties. It is voluntary, albeit under unpleasant circumstances. It is agreed to and accepted by both parties and the scope and responsibilities of the Monitor are agreed to in a document. If a person is imposed on an entity without its agreement and without ground rules, it is an entirely different relationship and dynamic.
Second, in every case that I have been involved in, the government or regulator agreed to a Monitor because there was a belief that the entity was genuine in its efforts to achieve best practices. In other words, the entity was already demonstrating its intention to make things right and was prepared to invest in it and accept guidance from an independent party.
Third, following the second point, the monitored entity was already committed to spend resources – fiscal and intellectual, to improve and the Monitor is part of that budget. Of course, there have been cases of abuse, which makes the selection of the right Monitor so critical.
Fourth, the appointment of a Monitor should not be seen by either side as additional punishment. If that is the atmosphere, then very little will be accomplished and cooperation amongst the parties will be like pulling teeth. Nor should it be used as an alternative when insufficient evidence exists to bring civil and criminal charges. That too will result in an unproductive engagement.
Fifth, a Monitor should be forward looking. It is NOT “another investigation.” I have turned down assignments where a company asked me to investigate wrongdoing and help build a compliance program. You can do one or the other; but I believe doing both is difficult, if not impossible, and if undertaken will cause problems on both sides of the equation. Think about it, how can one assign blame on one day and then seek cooperation the next day? It will not work.
Sixth, generally speaking monitoring is a constructive engagement meant to help improve and institutionalize best practices. This cannot be accomplished in an atmosphere of fear and recriminations. The two most difficult tasks a Monitor faces are receiving cooperation from individuals and building a program that is sustainable.
Seventh, a Monitor still must be vigilant. If the government selects the right company for the monitoring, vigilance is not a threat but an asset for the compliance program.
Eighth, monitoring can help keep costs down. It seems so obvious to me, but I am decidedly in the minority among Monitors, as best as I can tell. If the resources of the entity, such as internal audit, compliance and IT were not tainted and suspected, then the Monitor should utilize them. This results in at least three distinct advantages and benefits: (1) the Monitor has access to people who really know the company, its culture and its personalities, (2) the company’s resources which are working with the Monitor are learning how to think with some independence and conduct business properly – the influences you want to have and leave behind when the monitoring assignment is complete and (3) it saves the monitored entity money since you are utilizing existing personnel and resources. I’m not talking about abdicating responsibility, but benefitting from capable resources.
Ninth, with the knowledge and permission of the government or regulatory body, the Monitor may assist the entity with its constituents. I have been authorized to talk with potential customers about my role and thereby provide reassurance that things are on the mend. I have been authorized to bring company representatives to meet other regulators than those involved in the case in an effort to improve relations with the regulators. Similarly, a focus on compliance and ethics has proven to be effective with recruiting.
Tenth, a Monitorship is not a “gotcha.” Most importantly, it is a constructive process that inculcates an entity with the right culture, protocols and attitude toward compliance and ethics. Employees will have the confidence to ask questions instead of taking chances. After all, success is measured not when the Monitor is in place looking over the company’s “shoulder,” but after the Monitor leaves.
In future discussions I will address reports, “volunteer” Monitors and other relevant topics.
Bart M. Schwartz is the chairman of Guidepost Solutions LLC, a global leader in investigations, due diligence, security and technology consulting, immigration and cross-border consulting, and monitoring and compliance solutions.