Deferred Prosecution Agreements, Working with an Independent
Monitor and Getting Beneficial Results
Presented by: Bart M Schwartz
Global Compliance Symposium, Washington, D.C. Dow Jones
April 1, 2011
© Guidepost Solutions LLC 2011
What is a Deferred Prosecution Agreement?
Voluntary alternative to adjudication following the filing of a formal charging document by the government
Entered into between a prosecutor and defendant Grants relief in return for defendant’s adherence to certain
requirements, e.g. fines, corporate reforms, cooperation, appointment of an independent monitor/expert/consultant
Fulfilling requirements results in dismissal of charges
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Variations on the DPA
Non-Prosecution Agreement An agreement not to prosecute, so no formal charges are filed by the
government Under the agreement the defendant may be required to pay fines,
cooperate institute reforms, or retain an independent monitor or expert
Prosecution with monitor
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Source: Gibson Dunn & Crutcher
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Source: Gibson Dunn & Crutcher 5
Why does the government appoint a
Monitor? Serve the Public Interest by providing
Long Term Oversight Supplementing or freeing up government resources Maintaining jobs, products/service Elevating industry standards Protecting innocent shareholders Deterrence Early warning system for the government
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Goals of the Monitorship
Change and/or improve culture Create a system which outlasts the Monitor Be vigilant Do not limit oversight to narrow issues Seek to have a broad impact on the organization
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Selecting the Monitor DOJ system- March 7, 2008 Pre-approved list Veto power only Combinations Skill sets
Industry expertise Investigative Management Prior monitorships Teacher Facilitator Disciplinarian Sometimes, even a cheerleader
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Monitor’s “Contract”
Negotiated by the subject and the government, without input from the Monitor
Generally includes a scope which may be quite detailed May state what is NOT within the Monitor’s jurisdiction
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Elements of a typical contract
Term and internal deadlines Recitation of related matters e.g., DPA Representations Due diligence for new hires Code of conduct and training Retention of Monitor Funding of Monitor Secrecy of bills Duties and responsibilities of Monitor Privilege issues
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Elements of a typical contract cont’d.
Protection of propriety information Monitor reports Sale of Company/Unit Determination of violation Consequences of violation Indemnity Removal or replacement of Monitor
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The Monitor is coming!
Will the Monitor be able to deal with both government and corporate constituencies?
Now there’s an outsider in my business! Can we “confide” in the Monitor? It looks like the Monitor has a “blank check”- Where will he go, what will he
look at? Can the Monitor distinguish between bad conduct and mistakes or
misjudgments? Will the Monitor understand and appreciate our business needs? How much will this cost?!
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How to work with the Monitor
Understand the Monitor’s responsibilities and requirements Does the Monitor’s have to submit a work plan to the regulators? What other reporting requirements does the Monitor have? What is the timeline for reporting?
Initial meeting-setting the tone Understand the Monitor’s approach to the engagement. Not all monitors are alike.
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How to work with the Monitor cont’d.
Designate a company response team as a resource for the Monitor Appoint a key contact. Include individuals from IT, Internal Audit, Legal and other functions on the
team in order to be able to respond quickly to requests and meet the needs of the Monitor.
Open communications at all times Inform the company of the need to cooperate and reinforce message
periodically. Have regular interactions with the Monitor and his/her team. Consider periodic status meetings to discuss the Monitor’s ongoing
requirements. Keep apprised of the Monitor’s level of satisfaction with the company’s
cooperation.
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How to work with the Monitor cont’d.
Share corporate resources with the Monitor as appropriate Collaborations with Internal Audit for specific reviews
Cost Savings Training Knowledge
Possible involvement of Legal in ad hoc investigations IT assistance in investigations and other monitoring activity
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Overcoming bumps in the road
If problems arise during the course of the monitorship-either self-reported or discovered by the Monitor-address them immediately, openly and comprehensively.
Demonstrate willingness to correct and discipline if appropriate.
Consider using the problems as a “lessons learned” communication to employees.
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Winding down but not out
While the Monitor is still engage him/her in sustaining good practices and developing them into best practices.
Use the Monitor’s experience with other companies and industries to help fashion a compliance program and culture that will become embedded in everyday activities.
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Outsized Problems from Undersized Units
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Irrational Comfort with Risk
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Battling H.R. and Legal
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The Pluto Theory of Compliance - Incentives
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Focus on Business Units Not Compliance
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Risk Analysis for Resource Allocation
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Training Fatigue
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Tone All Over Where The Top Is Depends Upon Where You Are
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Confidence To Speak Up and Ask Questions
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Ability to Identify Issues
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Investigations
More Than You Think Dangers Building Respect for Results
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Dumping Grounds
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Consistent Policies and Legacy Policies
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Straight Talk
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Compliance Knowledgeable About The Business
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Movement From Compliance to Business and In The Other Direction
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Compensation Link
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Sharing Best Practices
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Support Functions Need To Understand Their Critical Contributions
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Vendors Need To Understand Their Critical Contributions
Code of Conduct
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Goals
To Work To Create A Culture In Which:
Employees expect legal and ethical behavior of themselves, their colleagues and their counterpartiesEmployees are able to identify and recognize legal and ethical hazards when they ariseEmployees have the tools , training and resources to make the right decisions and the confidence to seek advice
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