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Why Voluntary Independent Compliance Monitorships Are Growing in Popularity

“If you think you have a problem, or if you’re facing an investigation, it might be wise to hire an independent compliance monitor who’s going to start vetting your program and recommend improvements.”

When companies get into trouble, it’s common practice for the government to call on independent third parties to help clean up the mess.

Companies under investigation by the Department of Justice (“DOJ”) often agree to have a court-appointed monitor as part of a Deferred Prosecution Agreement or Non-Prosecution Agreement. The monitor — generally a former prosecutor or compliance officer — is tasked with reviewing the company’s compliance program and putting controls in place to avert future misdeeds. By satisfying the terms of the agreement, the company can defer and avoid prosecution.

While the Trump administration curtailed the use of court-appointed monitors, we’re likely to see an increase in court-appointed monitors under the Biden administration. In a recent speech promising to “invigorate” corporate enforcement, Deputy Attorney General Lisa Monaco expressly endorsed the expanded use of corporate monitors in corporate prosecutions and a reversal of the recent trend.

But there’s another type of monitor that’s gaining some attention these days. Under certain circumstances, a company facing a government investigation might preempt government involvement and decide on its own to install a monitor. The goal: To signal to the government that the company takes its compliance obligations seriously and can be trusted to fix its own problems without the need of a court-imposed monitorship.

In other situations, an organization may not be specifically worried about being prosecuted but will voluntarily appoint an independent monitor to conduct an internal investigation and recommend program changes. A company facing public criticism may wish to demonstrate transparency and build credibility with external advocacy groups or other non-governmental organization (“NGOs”).

DOJ guidance issued in recent years makes the idea of hiring a voluntary monitor even more compelling than in the past. In determining whether to prosecute, the DOJ previously focused on the compliance program that a company had in place at the time of its misconduct. Companies with strong programs that existed when their misdeeds occurred were looked upon more favorably, while those without were out of luck.

Now the government also takes into consideration the efforts a company makes to improve its compliance program at the time it learns it is under investigation.

“You still have a chance to influence the outcome by remediating and building a compliance program as soon as you find out you have a problem,” says Michael Ward, a partner in the Government Investigations & White Collar Criminal Defense practice at Vinson & Elkins (“V&E”), who previously in his career served as both a federal prosecutor and the chief compliance officer at multiple companies.

“If you think you have a problem, or if you’re facing an investigation, it might be wise to hire an independent compliance monitor who’s going to start vetting your program and recommend improvements,” Ward added. “By the time the case is ready for resolution with the enforcement agencies, you will have this period of monitorship that can be reported to the government, and a monitor who can vouch for the effectiveness of your newly implemented compliance program.”

V&E+ recently sat down with Ward and two of his partners in V&E’s Government Investigations & White Collar Criminal Defense practice, Fry Wernick and Zachary Terwilliger — all prominent former federal prosecutors — to learn more about voluntary monitorships.

As a supervisor with DOJ’s Criminal Fraud Section, Wernick prosecuted multiple companies at DOJ where the ultimate resolution included the government’s imposition of a corporate monitor and he recently represented MoneyGram in the dismissal of a criminal case and the successful termination of a Deferred Prosecution Agreement and court-appointed monitorship. Terwilliger was formerly the U.S. Attorney for the Eastern District of Virginia, and he authorized several high-profile corporate criminal resolutions, including those with corporate monitors. And Ward himself is currently serving as a voluntary monitor for a major corporation. Here’s what they each had to say.

Under what circumstances might a company voluntarily appoint an independent compliance monitor?

A voluntary monitorship is most frequently used as a proactive tactic by a company that is under active investigation. In hiring a monitor, the company wants to demonstrate its good faith by immediately moving forward with an aggressive independent program review rather than waiting for the end of the investigation when a monitor might otherwise be appointed. Because investigations can take several years to conclude, it’s wise not wait to see if the government will appoint a monitor, but rather to move proactively.

Companies also hire monitors when they expect future scrutiny, such as when the DOJ focuses on a particular industry in a “sweep.”

What are some of the key differences between court-appointed and company-appointed monitors?

Both types of monitorships are independent professionals who assess a company’s compliance program and help prevent the company from committing future misconduct. But while court-appointed monitors report their findings to a government regulator and to the company, the reporting dynamics of voluntary monitors are usually defined by the objectives of the monitorship.

Sometimes, the report may be delivered privately only to the company. Often, the report may also be delivered to an interested regulator or enforcement agency, key external stakeholders, such as NGOs, or business partners. In other situations, where the objective is to demonstrate broad transparency, the monitor’s report might be shared publicly.

Another key difference: In a court-appointed monitorship, the government decides how long the monitorship will last, even though the company is footing the bill. Court-appointed monitors generally have broad power to determine the scope of the work. The costs can be significant, especially when monitors take steps beyond those that are necessary. Conversely, in a voluntary monitorship, the company and the monitor jointly define the terms of the monitorship to address the company’s transparency or other objectives.

Can you provide an example of a voluntary monitorship that helped a company avoid prosecution or achieve another goal?

In 2017, Airbus voluntarily appointed an independent compliance review panel to examine its anticorruption practices and to recommend improvements to its compliance program after Britain and France launched fraud and bribery investigations into Airbus’ sale of jetliners. Three years later, the DOJ entered into a Deferred Prosecution Agreement with Airbus. The DOJ did not appoint a monitor, citing the company’s considerable remediation efforts.i

What types of professionals typically serve as monitors?

There are two key requirements in a monitorship: (i) credibility with the target audience and (ii) expertise in building effective compliance programs. Typically, monitors are former prosecutors with strong compliance backgrounds who have spent significant time investigating corporate crimes comparable to the types of crimes that are under investigation. In many cases, a company will seek an experienced compliance officer familiar with integrating compliance controls with the operational demands of a business.

Depending upon the case, a monitor might also work with other professionals, including forensic accountants and industry experts.

What should companies be looking for in hiring a voluntary monitor?

Companies should look for monitors who have deep experience in the compliance arena, a strong reputation for independence, and a track record of trust and credibility with potential government prosecutors, external stakeholders or other interested third parties.

What does V&E bring to the table?

V&E’s white-collar defense team includes a skilled group of prominent former federal prosecutors as well as a former chief compliance officer.

In addition to having deep compliance experience and credibility with prosecutors, the firm is sensitive to the fact that monitorships can be costly and unduly intrusive if not handled with care. V&E focuses on enhancing a company’s compliance program while being mindful of the company’s business objectives.

Do you expect more companies to hire voluntary monitors? If so, why?

Absolutely. While the Trump administration curtailed the use of court-appointed monitors, the DOJ under President Biden has already signaled that it intends to use corporate monitors more frequently. As a result, the concept of a voluntary monitorship should and will become part of the toolkit for companies facing government scrutiny.

Even beyond an active investigation or prosecution context, companies facing external pressure or criticism may consider whether voluntarily appointing an independent monitor could help build transparency and resolve credibility challenges with external stakeholders.

i Wernick supervised the Airbus case while working at the DOJ. The information regarding the Airbus investigation and the company’s voluntary monitorship is based on publicly available information. Wernick did not share any internal DOJ deliberations or confidences for this article.