In the United States, the past decade has seen a notable increase in the use of independent corporate monitors in connection with the resolution of corporate criminal and regulatory investigations. This trend has also recently found a statutory foothold in the United Kingdom, after a period of sporadic sampling of use of corporate monitorships as a tool in the sentencing armoury. Now, in the wake of the United Kingdom’s deferred prosecution agreement regime, it is safe to assume that the appointment of a monitor will increasingly feature in the settlement and disposal of corporate investigations. Although monitors come in many shapes and sizes, they typically help to create and supervise the implementation of compliance and remediation programmes to address the perceived deficiencies that gave rise to the wrongdoing. It is expected that monitors will reduce recidivism for corporate misconduct, benefiting the corporation, its shareholders and the public.
In the United States, monitors have been used in both the civil and criminal contexts, typically in conjunction with a settlement agreement negotiated between the parties to a dispute, and often with the approval and supervision of the courts.2 Outside the criminal context, monitors have been used as conditions of settlements between business entities and a wide range of federal and state agencies,3 as well as international bodies such as the World Bank.4 Even private litigants have included monitors in their settlement agreements.5
Yet the prevalence of monitors as a condition of high-profile corporate criminal resolutions sets the stage for close scrutiny of the practice in the United States and has given rise to congressional hearings, several United States Department of Justice (DOJ) policy enactments, legal challenges and the promulgation of bar association standards. Therefore, this chapter will focus on monitors used in conjunction with the resolution of federal criminal investigations conducted by the DOJ (including, of course, the various United States Attorney’s Offices).6 Because the practice of using monitors is relatively new in the United Kingdom, this chapter will draw parallels and contrasts in UK law and practice where appropriate from the more developed US practice. After briefly discussing the history of corporate monitors in both countries, this chapter will analyse certain key issues surrounding the use of monitors in both jurisdictions, including the appointment, roles, supervision and funding of monitors.
33.2 Evolution of the modern monitor
33.2.1 United States
Most monitorships arise as a result of a corporate guilty plea, deferred prosecution agreement (DPA) or non-prosecution agreement (NPA).7 The DOJ first used DPAs and NPAs in 1993,8 with the first recognised monitorship following in 1995, in connection with Consolidated Edison’s sentencing for disclosure failures following a deadly steam pipe explosion.9 Spurred on by the collapse of Enron in 2001 and other high-profile instances of corporate misconduct, the US federal government prioritised and increased the investigation and prosecution of corporations. This increase naturally led to a growth in the number of corporate guilty pleas, DPAs and NPAs, and, concomitantly, the rise of monitorships as a condition of settlement.
As the frequency of monitorships has increased, so too has their level of scrutiny. One of the most controversial aspects of monitorships has been monitor selection. The issue received considerable attention in 2007 when Chris Christie – then the US Attorney for the District of New Jersey – approved, without a bidding process, a contract for a consulting firm founded by his former boss, Attorney General John Ashcroft, to serve as the monitor for medical device company Zimmer Holdings (a contract reportedly worth between US$28 million and US$52 million in monitor fees).10 Concerns of cronyism, transparency and conflicts of interest led the US Congress to hold an investigative hearing to better understand the appointment.
In the wake of – and likely to quell criticism over – that controversy, the DOJ first issued guidance on the retention and selection of monitors and has since updated its policies three times. The primary materials issued by the DOJ are the following:
- The Morford Memorandum: In March 2008, then acting Deputy Attorney General Craig Morford issued a memorandum establishing guidelines and decision-making procedures for the appointment of monitors titled ‘Selection and Use of Monitors in Deferred Prosecution Agreements and Non-Prosecution Agreements with Corporations’.11
- The Breuer Memorandum: In June 2009, Assistant Attorney General Lanny A Breuer issued a memorandum titled ‘Selection of Monitors in Criminal Division Matters’, in which he built on the Morford Memorandum, outlined the terms required in all monitorship agreements and refined the selection and documentation process for monitors.12
- The Grindler Memorandum: Gary Grindler, then acting Deputy Attorney General, issued a memorandum in March 2010 titled ‘Additional Guidance on the Use of Monitors in Deferred Prosecution Agreements and Non-Prosecution Agreements with Corporations’, outlining the means by which corporations can reject a monitor’s recommendation for being too costly. This guidance was the result of the increasing costs of monitorships and heavy public scepticism about their benefits.13
- The Benczkowski Memorandum: In October 2018, Assistant Attorney General Brian A Benczkowski issued a memorandum titled ‘Selection of Monitors in Criminal Division Matters’ that supplemented the guidance provided by the Morford Memorandum. The Benczkowski Memorandum specified, in greater detail, the principles for determining whether a monitor is needed and formalised in many ways the procedures for monitor nomination, selection and approval.14
Many defence attorneys read the Benczkowski Memorandum as making corporate monitorships the exception, not the rule, because it directed prosecutors to recommend monitorships only when there is a ‘demonstrable need’ for them.15 That will no longer be the case under current Attorney General Merrick Garland, whose Deputy Attorney General, Lisa Monaco, announced in a speech in October 2021 that she was ‘rescinding’ any ‘guidance’ that ‘suggested that monitorships are disfavored or are the exception’.16 Going forward, then, we can expect the DOJ to expand the use of corporate monitorships.
As a result of these policies, the DOJ’s selection process is arguably the most formalised and transparent of any agency. The DOJ has further increased transparency by publishing a list identifying all corporate monitors actively engaged by companies as a part of their criminal resolutions.17 Nevertheless, concern over the selection and use of monitors continues, as Deputy Attorney General Monaco also announced the formation of a Corporate Crime Advisory Group to consider these issues, along with corporate recidivism and non-compliance with NPAs and DPAs, and the benchmarks the DOJ should use to measure successful co-operation.18 The American Bar Association has also weighed in, having promulgated black-letter standards for monitors (the ABA Standards).19 The ABA Standards address a variety of issues, ranging from the selection and evaluation of monitors to the establishment of monitor work plans, and are ‘the culmination of three years of work by an ABA task force in consultation with judges, prosecutors, defence counsel, court personnel, and academics’.20
Controversy over monitors has extended to the courtroom, as companies and monitors battle over, inter alia, the legality of court-appointed monitors and the scope of the monitor’s powers,21 the monitor selection process and the confidentiality of monitor reports,22 and the costs monitors impose on the company.
33.2.2 United Kingdom
As the use of corporate monitors grew in the United States after the collapse of Enron, so UK authorities increasingly recognised the possibility of deploying similar monitorships as part of the resolution of their own corporate criminal investigations.23 At the outset, this was done ad hoc and at the instigation of the relevant investigating authority. By way of example, in 2008 the Serious Fraud Office (SFO) settled civil proceedings against Balfour Beatty arising out of a construction project in Alexandria, Egypt. As part of that settlement, the SFO required the company to accede to ‘a form of external monitoring for an agreed period’. This was an early example of the SFO fashioning new tools to remedy perceived corporate governance failings.
Another example was the SFO’s successful prosecution of a construction firm, Mabey & Johnson Ltd, in 2009. This was the first-ever successful prosecution of a British company on charges of overseas corruption and breaching United Nations sanctions, and as part of its guilty plea Mabey & Johnson agreed to the appointment of an independent monitor for three years to oversee future conduct. Although this monitorship was approved by the court, Judge Geoffrey Rivlin QC24 noted that it was likely to prove an expensive exercise and ordered that the costs of the monitor for the first year be capped at £250,000.
Nonetheless, the use of monitorships remained a novelty in the United Kingdom in the absence of a formal statutory footing. Indeed, it even drew notable judicial criticism on occasion. In the case of Innospec Ltd,25 in which a manufacturer was found to have paid substantial bribes to Indonesian and Iraqi officials, the English courts expressly criticised the three-year monitorship regime that had been jointly agreed by the SFO and DOJ as part of a ‘global settlement’ with the company. This was to be the first-ever US–UK joint monitorship, and illustrated the extent to which the UK investigating authorities were attracted by the US regime in adopting monitorships in the determination of corporate criminal investigations.
However, although the English court was prepared to approve this aspect of the settlement, the case – and in particular the terms of the cross-border determination reached between the parties – was controversial. Most unusually, a senior appellate judge, namely Lord Justice Thomas,26 was brought in to sit on the case at first instance. He made clear that the court’s approval for the appointment of a joint monitorship ‘should be no precedent for the future’. In particular, he stated that the dual monitorship risked incurring unnecessary costs, and noted that ‘imposing an expensive form of “probation order” seems to me unnecessary for a company which will also be audited by auditors well aware of the past conduct and whose directors will be well aware of the penal consequences of any similar criminal conduct’. In his view, the sums used on such monitoring might have been better allocated to paying fines or compensation. Either way, he made clear that in future ‘the request for such an order will have to be fully explained in terms of its cost effectiveness’.27
Innospec was widely seen as a setback for bilateral appointment of monitorships and signalled some judicial resistance to the US approach to presenting the court with a sentencing or settlement package to be approved. But, in spite of Lord Justice Thomas’s reservations, UK investigating authorities continued to seek and obtain orders for corporate monitorships, and these were included in civil recovery orders agreed between the SFO and both Macmillan Publishers (in 2011) and Oxford Publishing28 (in 2012). However, the actual and prospective role of monitorships as a tool of corporate compliance has increased substantially since the creation of the DPA regime in the United Kingdom, introduced by the Crime and Courts Act 2013. In light of that legislation, it is now clear that corporate monitorships have an express and permanent statutory place in the UK criminal law calendar of powers and remedies for holding a corporation to account.29
Following the passing of that Act, the SFO launched a consultation process in June 2013 to finalise a Code of Practice for the new DPA regime (the Code). The Code was issued on 14 February 2014, and gives close attention to the role and duties of corporate monitors. Although such monitorships are not a mandatory feature of the new regime, the focus on monitoring in the Code is a powerful indication of the role that UK authorities expect them to play in the future. The Code also sets out a detailed framework for the appointment of monitors, the costs and terms of the monitorship, and the areas that the monitor may be expected to supervise or restructure.30
The SFO’s first application for a DPA was approved by a senior appellate judge, Sir Brian Leveson, then President of the Queen’s Bench Division, on 30 November 2015.31 The DPA involved Standard Bank Plc, which was the subject of bribery charges relating to multimillion-dollar payments made by a former sister company in Tanzania. As part of the agreed DPA, Standard Bank agreed to submit, at its own expense, to an ‘independent review of its existing internal anti-bribery and corruption controls, policies and procedures regarding compliance with the Bribery Act 2010 and other applicable anti-corruption laws’.32 The independent reviewer appointed was PricewaterhouseCoopers LLP. In his judgment approving the DPA, Leveson P made a number of observations about the difference between the DPA regimes in the United Kingdom and the United States, noting that ‘[i]n contra-distinction to the United States, a critical feature of the statutory scheme in the UK is the requirement that the court examine the proposed agreement in detail, decide whether the statutory conditions are satisfied and, if appropriate, approve the DPA’. In particular, he observed that the court will only approve a DPA if it is fair, reasonable and proportionate in all the circumstances, but that it will typically consider this question in private so as not to prejudice any potential prosecution in the event of an adverse decision.33 In the case of Standard Bank, he declared himself fully satisfied that the DPA was in the interests of justice.34
Following the high-profile Standard Bank case, the SFO soon made a second successful application for a DPA, approved by Leveson P on 6 July 2016.35 The company, Sarclad Limited, which originally could not be named because of parallel legal proceedings, pleaded guilty to charges of conspiracy to corrupt. The DPA provided that Sarclad would undertake a review of its internal compliance controls, and that its chief compliance officer would prepare a report for submission to the SFO on its anti-corruption policies and their implementation, to be submitted within 12 months of the DPA and then annually for the DPA’s duration.36 Although it is not known why this approach was taken by the SFO, it seems likely that it was because the company in question was relatively small and the appointment of a full-time monitor would have been unduly financially onerous. Again, this would appear to demonstrate the flexibility with which UK authorities are now prepared to apply monitoring tools to fashion bespoke remedies for corporate wrongdoing.
Another example is the DPA agreed between the SFO and Tesco Stores Ltd, the supermarket conglomerate, on 28 March 2017 in respect of accounting irregularities. Deloitte was appointed to a monitoring role to review and report on Tesco’s controls and governance in respect of the recognition of commercial income.37 This suggests an ever wider role for corporate monitorships in the United Kingdom, which may be imposed in contexts beyond international bribery and corruption. However, the touchstone for the appropriateness of a monitorship is always likely to be how the corporate has responded to allegations of wrongdoing: in the DPA agreed between the SFO and Serco Geografix Ltd,38 dated 2 July and judicially approved on 4 July 2019, the SFO was satisfied that an undertaking of ongoing co-operation by its parent and a far-reaching corporate renewal programme were sufficient to make a monitorship unnecessary. The SFO adopted a similar approach in its recent DPA with Airbus SE, judicially approved on 31 January 2020, and agreed that a monitorship was not required in the light of what the reviewing judge described as ‘significant changes to [the company’s] internal processes’39 and also because the Agence Française Anticorruption was appointed to oversee improvements to Airbus’s compliance arrangements in any event. By contrast, in the still more recent DPA agreed between the SFO and G4S Care and Justice Services, approved by the courts on 17 July 2020, the SFO adopted an intermediate position. While it agreed not to impose a formal monitorship on the respondent company in the light of internal governance changes, it nonetheless insisted on the appointment of an external reviewer ‘to review and report on the compliance measures being taken’ by the company and its subsidiaries.40 The new regime was described by Justice Davis in the following terms: ‘The intensity of the external scrutiny as set out in the DPA is greater than in any previous DPA. This is necessary and appropriate given the exposure of both G4S C&J and the parent company to government contracts. Equally, it is an important factor in providing reassurance to the SFO, to relevant government departments and to the wider public that both companies have proper controls in place to ensure the integrity of their accounting and governance processes. The DPA will last for three years, during which period the compliance measures will continue and will be reviewed.41 This is an indication of the flexible way in which the SFO approaches ensuring compliance.
In light of these developments, where the circumstances and interests of justice require it, the use of corporate monitorships looks set to increase in the United Kingdom, and a greater convergence with US practice can be expected. This is all the more so given the appointment of Lisa Osofsky, a former deputy general counsel of the FBI and a monitor in private practice, as Director of the SFO in 2018. In a keynote speech on 17 October 2018, Ms Osofsky highlighted the differences between the UK and US regimes in respect of corporate prosecutions and DPAs but indicated that the SFO may take a more interventionist approach in future. Above all, she stressed that the SFO ‘will want assurance that companies are doing everything they can to ensure the crimes of the past won’t be repeated’.42 In that context, and subject to the terms of the Code, the UK authorities’ approach to the appointment and conduct of corporate monitors is ever more likely to follow the lead of the United States in the coming years. Although in the recent DPAs reached with Amec Foster Wheeler Energy Limited (AFWEL) in June 202143 and two yet to be identified UK-based companies in July 2021,44 the SFO agreed to corporate undertakings to provide it with annual reports on corporate remedial works and compliance enhancements during the term of the DPAs instead of monitors (the court in AFWEL noting that the undertaking extended beyond AFWEL to the whole Wood Group and wider than other orders the court could impose, and was tailored to the facts of the case).45
33.3 Circumstances requiring a monitor
In general, the DOJ assesses the need for the appointment of a monitor based on whether the corporation is capable of remediating, or has already remediated, its past wrongdoings without the assistance of a monitor, and whether the DOJ believes there is a risk of recidivism. That, in turn, often translates into an enquiry of ‘tone at the top’ – whether, inter alia, management was involved in the criminal conduct, was negligent in failing to implement a proper compliance programme, fostered a culture that bred non-compliance with ethical and legal duties, and, critically, self-reported the misconduct to the DOJ.46
The DOJ places significant weight on a company’s decision to self-report. The importance of self-reporting was demonstrated in the Foreign Corrupt Practices Act (FCPA) Corporate Enforcement Policy, announced on 29 November 2017,47 and most recently updated in November 2019.48 The Corporate Enforcement Policy states: ‘When a company has voluntarily self-disclosed misconduct in an FCPA matter, fully cooperated, and timely and appropriately remediated . . . there will be a presumption that the company will receive a declination absent aggravating circumstances involving the seriousness of the offense or the nature of the offender.’49 Significantly, the DOJ has recently signalled its intent to apply the Corporate Enforcement Policy’s principles to other white-collar matters,50 further emphasising the value it places on self-disclosure. Therefore, with increased self-reporting, it is reasonable to expect that monitorships will decline.51 However, it is still unclear how the Biden administration will handle self-disclosure and monitorships, and the DOJ’s new policies are likely to result in more monitorships than during the Trump administration.
In addition to self-reporting, the DOJ considers the effectiveness of a company’s compliance programme. Under the FCPA Corporate Enforcement Policy, ‘[i]f a criminal resolution is warranted’, the DOJ ‘generally will not require appointment of a monitor if a company has, at the time of resolution, implemented an effective compliance program’.52 Recently, the DOJ has reiterated the importance of an effective compliance programme in its monitor decision-making through updated guidance to prosecutors on the ‘Evaluation of Corporate Compliance Programs’,53 and the release of the Second Edition of its Resource Guide to the FCPA.54 Both updates expressly incorporate and reflect the principles in the Benczkowski Memorandum.55 The Benczkowski Memorandum provided additional guidance to the Morford Memorandum, which offered two broad considerations to guide prosecutors when deciding when a monitor is appropriate: ‘(1) the potential benefits that employing a monitor may have for the corporation and the public, and (2) the cost of a monitor and its impact on the operations of a corporation.’56 Because of the breadth of these considerations, the Benczkowski Memorandum clarified that when assessing ‘potential benefits’ of the monitorship, one must consider, among other factors: (1) whether the misconduct involved the manipulation of books and records or the exploitation of an inadequate compliance programme, (2) the pervasiveness of the misconduct across the business organisation and the degree of its facilitation by senior management, (3) investments by the corporation to improve its compliance programme and internal controls, and (4) whether these remedial improvements had been tested to detect or prevent future similar misconduct.57 Ultimately, the Benczkowski Memorandum laid down the principle adopted in the Corporate Enforcement Policy: ‘Where a corporation’s compliance program and controls are demonstrated to be effective and appropriately resourced at the time of resolution, a monitor will not likely be necessary.’58 These considerations must be weighed in light of case-specific factors, including the particular regions and industries involved.59
Notably, the Benczkowski Memorandum also states that the Criminal Division of the DOJ should only favour the imposition of a monitor when there is a ‘demonstrated need for, and a clear benefit’ from the monitorship relative to the ‘projected costs and burdens’ it will create.60 As noted earlier, the defence bar read this as a marked shift away from monitorships, a reading that current Deputy Attorney General Lisa Monaco has now explicitly disavowed.61 Benczkowski himself addressed this impression in a keynote address in April 2019: ‘Put simply, this guidance was not meant to do away with monitors – it was meant to focus our prosecutors’ determination on the appropriate factors so that monitors are imposed only where necessary and under the terms and scope that is appropriate for that given case.’62 In the wake of this guidance, the DOJ has entered into plea agreements requiring tailored monitorships to address the issues at hand, as demonstrated by Walmart’s recent settlement, discussed further below. The DOJ also seems willing to adopt quasi-monitorship structures, where a full-blown monitorship is ill-suited.63 At the same time, some prominent settlements of corporate criminal liability, most notably that of the DOJ with Goldman Sachs regarding its involvement in the 1MDB scandal,64 did not involve the imposition of a monitor, presumably because Goldman Sachs successfully argued that it already had an effective compliance programme in place.
Note that even corporations registered under the laws of a foreign country are subject to DOJ monitorships, provided the United States has jurisdiction over the corporation’s misconduct. Indeed, in recent years in the United States, monitors have been imposed on foreign offenders with increased frequency, many in relation to alleged violations of the FCPA.65 Notably, nine of the 10 largest FCPA settlements to date involve non-US companies and six of them required a corporate monitor.66
Similar tests are applied in the United Kingdom.67 The Code sets out some important considerations for the appointment of a monitor, including whether the company already has a ‘genuinely proactive and effective corporate compliance programme’ and whether the appointment would be fair, reasonable and proportionate in all the circumstances.68
As in the United States, there is likely to be a particular focus on the degree of culpability of the management, especially if that management is still in place. Where the management has been entirely replaced, or where misconduct has been self-reported, there may be less need for an extended monitorship (see, for example, the observations made by the court in Innospec).69 Moreover, and again in light of the comments in Innospec, the United Kingdom is likely to apply a special focus to matters of cost-effectiveness. Much is likely to turn on an analysis of what is fair, reasonable and proportionate in the circumstances of the specific proposed monitorship.
33.4 Selecting a monitor
The selection of the monitor is often the most controversial aspect of monitorships, as claims of cronyism abound. As outlined by the Morford Memorandum, the government should ensure that the monitor is highly qualified, does not have any conflict of interests (either with the government or the corporation), and will instil public confidence in the monitorship process.70 The Benczkowski Memorandum attempts to standardise the selection process by creating a Standing Committee on the Selection of Monitors (the Standing Committee).71 The Standing Committee comprises (1) the Deputy Assistant Attorney General with supervisory responsibility for the Fraud Section, who also serves as the chair of the Standing Committee, (2) the Chief of the Fraud Section (or other relevant Section), and (3) the Deputy Designated Agency Ethics Official for the Criminal Division.72 To the extent any of these individuals are unable to serve, they may designate a replacement. To the extent further replacements are necessary for any given case, the chair of the Standing Committee may appoint them.73 The Standing Committee is expected to continue under Attorney General Merrick Garland.
The ABA Standards suggest that both parties ‘have a significant role in the selection process’, enumerate multiple selection criteria, and outline mandatory and potential exclusions.74 To this end, the Benczkowski Memorandum provides for the corporation to recommend three qualified candidates through a written proposal. The proposal should provide a description of the candidates’ qualifications and credentials; certification that the candidates have no current or future affiliation with the corporation and no conflict of interest in serving as the monitor; and a statement identifying the corporation’s first choice to serve as monitor.75 The Criminal Division attorneys handling the matter and their supervisors assess the candidates according to the factors detailed in the Benczkowski Memorandum, and recommend one of the candidates to the Standing Committee.76 The Standing Committee votes on the recommended candidate and forwards their acceptance or rejection to the Assistant Attorney General of the Criminal Division, who must review and consider the recommendation (and cannot unilaterally accept or veto it).77 Pursuant to this process, the Assistant Attorney General may request additional information from the Standing Committee and may interview the proposed candidate. He or she then notes disagreement or concurrence with the proposed candidate before sending the decision to the next step.78 As a further layer of review, all monitor candidates selected pursuant to DPAs, NPAs and plea agreements must be approved by the Office of the Deputy Attorney General.79
One issue with past selection methods is that they have not resulted in a diverse monitor pool.80 For example, between 2004 and 2018, only three women and three non-white attorneys (all male) have been chosen by the DOJ to serve as FCPA monitors, even though there have been more than 45 settlements involving FCPA monitors during the same period.81 The DOJ appears to be alive to this issue. On 30 April 2018, the DOJ and a US-based subsidiary of Panasonic entered into a DPA to resolve FCPA violations, under which the company agreed to a two-year monitorship.82 The DOJ included a provision in the DPA that stated: ‘Monitor selections shall be made in keeping with the Department’s commitment to diversity and inclusion.’83 The DPA also includes various provisions that enable the DOJ to broaden the group of candidates from which it will select the monitor.84 While the DOJ cannot consider non-merit-based factors such as race and gender when choosing the most-qualified candidate, these provisions help ensure that the pool from which the DOJ makes its selection is more diverse. A DOJ spokesperson indicated that the above quoted language was added to the Criminal Division’s standard agreements in January 2017,85 and therefore it will likely be a recurring feature in the department’s DPAs. It remains to be seen whether the protocols established by the Benczkowski Memorandum will help create a more diverse monitor pool. However, the one corporate monitorship established so far in 2021 has a woman as one of its corporate monitors, sparking some optimism for future diversity.86
There is also an open question as to judicial oversight of the selection process. In March 2017, the DOJ reached a plea agreement with ZTE for conspiring to violate export control laws, under which ZTE would plead guilty to three criminal charges and, as part of the sentence, be subject to a three-year monitorship, with the monitor selected by the DOJ ‘in its sole discretion’ from a pool of candidates proposed by ZTE.87 In an unprecedented move, the court overseeing the matter – the District Court for the Northern District of Texas – required the parties to amend the terms of the plea agreement to impose a monitor of its own selection and to increase judicial oversight over the monitorship.88 Specifically, the plea agreement was amended to state that James M Stanton would be appointed as ZTE’s monitor,89 that ‘the Monitor is a judicial adjunct pursuant to Federal Rule of Civil Procedure 53’90 and that ‘[a]ll reports, submissions, or other materials encompassed by this agreement will be filed [with the Court]’.91 The appointment of Mr Stanton, a lawyer in private practice and a former Texas state judge, was seen by some as particularly unusual given his lack of monitorship experience.92 Notably, ZTE’s monitorship was imposed as part of a plea agreement subject to court review and approval. Accordingly, the court had the opportunity to amend the terms of the agreement before approving the plea. It remains to be seen whether courts will take as active a role in crafting the terms of monitorships imposed as part of DPAs and NPAs, which do not require the court’s approval.93
In the United Kingdom, a slightly different appointment procedure has been laid down by the Code. As part of the negotiations surrounding a DPA in the United Kingdom, the company must provide the prosecuting authority and the court with details of three potential monitors, including their qualifications, their estimated costs and any links with the relevant company. The company should then indicate their preferred monitor of the three, stating the reasons for their preference. This choice will ordinarily be accepted by the prosecuting authority and court, except where a conflict of interest or a lack of relevant experience has been identified.94
In terms of eligibility, the monitor must be independent from the company, and thus former employees, clients and close acquaintances are likely ineligible. Additionally, as the requirements of the monitorship will differ case by case, the monitor should be selected based on how well his or her qualifications pair with the requirements of the relevant monitorship.95 For example, the DPA between the DOJ and Panasonic lists the minimum contemplated qualifications of a monitor as (1) ‘sufficient independence’ from Panasonic, (2) ‘demonstrated expertise with respect to the FCPA and other applicable anti-corruption laws, including experience counseling on FCPA issues’, (3) ‘experience designing and/or reviewing corporate compliance policies, procedures and internal controls, including FCPA and anti-corruption policies, procedures, and internal controls’, and (4) ‘ability to access and deploy resources necessary to discharge the Monitor’s duties’ under the agreement.96
In global settlements, both US and UK authorities increasingly see the value of appointing a monitor experienced in the laws of the relevant jurisdiction.97 Although the Morford Memorandum suggests that non-attorney experts ‘such as accountants, technical or scientific experts, and compliance experts’ may be better qualified for certain monitorships, in practice, monitors in the United States are predominantly lawyers, and often have prosecutorial experience.98
Note, however, the requirements of the monitorship can evolve over its duration, and the appointed monitor may prove incompatible with the corporation. In that case, the government may replace the monitor, who is also free to resign. As one example of a rather tumultuous monitorship, Western Union went through four monitors as part of a 2010 settlement for failing to comply with anti-money laundering laws.99
To avoid such situations, third-party organisations have devoted themselves to promoting the use, quality and efficiency of monitors.100 For example, the International Association of Independent Corporate Monitors – whose board is itself composed of many former monitors – offers resources and training to professionals, and has established a Code of Professional Conduct to serve as a template for best standards and practices.101
33.5 The role of the monitor
33.5.1 Scope of the monitorship
The scope of the monitorship should be tailored to the circumstances of each case, with the ultimate goal of reducing the risk of recurrence of the corporation’s misconduct.102 Therefore, the monitor’s role should normally include a mandate for oversight, review and proposed modification of a company’s compliance programme to facilitate rehabilitation of existing misconduct and deterrence of future wrongdoing.103 Accordingly, the monitor may be required to assist with structural changes, as well as help alter corporate culture and normative expectations.104 In the United Kingdom, a list of items and procedures that the monitor may wish to consider as part of its monitoring programme is set out in the Code.105
Following the Benczkowski Memorandum, appropriate tailoring has become increasingly important and gives parties the opportunity to think carefully about the shape the monitorship should take, but it remains to be seen whether the DOJ under President Biden will continue to emphasise narrow tailoring.106 In Walmart’s June 2019 settlement with the DOJ over FCPA violations, the company agreed to a monitorship whose mandate was narrowed both by geography (to four countries and the company’s headquarters) and subject matter (to specified Key Risk Areas).107 The agreement specifically stated: ‘The Monitor shall not conduct a comprehensive review of all business lines, all business activities, or all countries.’108 Likewise, Ericsson and The Bank of Nova Scotia both entered into DPAs in the past two years – Ericsson over FCPA violations and The Bank of Nova Scotia over fraudulent trading practices – and each DPA limited the role of the monitor as such: ‘[T]he Monitor is not expected to conduct a comprehensive review of all business lines, all business activities, or all markets.’109
The monitor is an independent third party and does not serve as an employee or agent of either the corporation or the government.110 Likewise, the monitor does not have an attorney–client relationship with either the corporation or the government. Nonetheless, it is critical for the monitor to have an open dialogue with, and co-operation from, the corporation and the government throughout the duration of the monitorship, which may include ‘iterative work plans, planning meetings prior to any substantive work, and mid-review meetings’.111 The parties should also stipulate what, if any, role the government or court should play in resolving disputes that may arise between the monitor and the corporation.112
Though the monitor does not take on a prosecutorial function, he or she may nonetheless uncover continuing or undisclosed misconduct. The monitorship agreement ‘should clearly identify any types of previously undisclosed or new misconduct that the monitor will be required to report directly to the [government]’. And, on the other hand, the agreement should identify any misconduct that the monitor can, in its discretion, report to the government, the corporation or both.113
33.5.2 Duration of the monitorship
Monitorships can range from months to several years. The duration of the monitorship will in large part depend on the scope of the monitorship, and in particular the extent of the problems found and the necessary remedial measures.114 When negotiating duration, the parties should be mindful of, inter alia, the ‘nature and seriousness of the underlying misconduct’, the ‘pervasiveness and duration of the misconduct’, the complicity of senior management, the ‘corporation’s history of similar misconduct’, the corporate culture, the ‘scale and complexity of any remedial measures contemplated by the agreement, including the size of the entity or business unit at issue’, and the current ‘stage of design and implementation of remedial measures’.115
Another issue to consider is the terms under which the monitorship may be extended. Some monitorship agreements, particularly those that are supervised by the courts, provide for extensions where certain milestones have not yet been met. Where judging the achievement of those milestones is within the monitor’s purview, the monitor may have an incentive to declare the milestones incomplete so that the term may be extended. In other cases, the monitorship agreement will permit the government to extend the monitorship at its discretion if the corporation has not satisfied its obligations under the settlement, and provide for early termination if the corporation can demonstrate ‘a change in circumstances sufficient to eliminate the need for a monitor’.116 For example, in 2016 Odebrecht entered into a plea agreement with the DOJ to resolve FCPA violations, which included the largest corruption fine ever at that time.117 Part of the plea deal required Odebrecht to retain a monitor for three years and to adopt and implement an effective compliance and ethics programme.118 The agreement scheduled the monitorship to expire on 20 February 2020; however, the DOJ determined that Odebrecht failed to fulfil its terms.119 First, Odebrecht failed to adopt and implement the monitor’s recommendations and to allow the monitor to complete the monitorship.120 Second, Odebrecht failed to implement and maintain a compliance and ethics programme.121 As a result, the DOJ extended the monitorship to 16 November 2020 – an additional 270 days.122 In the United Kingdom, this ability to extend monitorships has been formally recognised in the Code, subject to the extended term of the monitorship not exceeding the length of the DPA itself.123
Hybrid monitorships – in which the monitor serves for approximately 18 months and the corporation self-reports for the following 18 months – are also becoming increasingly common, especially in the context of FCPA investigations.124 As a further nuance, the DOJ has, in some instances, agreed to defer to a pre-existing monitorship in lieu of establishing its own monitorship. As one example, the December 2015 settlement between Alstom and the DOJ, for various FCPA violations, required that Alstom be subject to an independent monitor. However, Alstom was already subject to a monitor in connection with a 2012 settlement with the World Bank. Rather than implement a second monitor, the DOJ agreed to defer to the existing World Bank-appointed monitor, provided that, inter alia, Alstom self-report to the DOJ ‘at no less than twelve-month intervals during a three-year term’.125
Rolls-Royce reached a similar resolution in its January 2017 settlement with US, UK and Brazilian authorities over bribery and corruption charges (and, in the United States, FCPA charges). At the time, Rolls-Royce already had an independent monitor – Lord Gold – who was appointed to review the company’s anti-bribery and corruption compliance in connection with a 2013 settlement with the SFO. Though the company’s 2017 DPA with the SFO did not impose a second monitor, it did require Rolls-Royce, inter alia, to procure a further report from Lord Gold outlining recommendations for change and produce a written plan of how it would implement these recommendations.126 Likewise, the company’s DPA with the DOJ did not implement a further monitor, but did require the company to report to the DOJ at least once a year for the next three years and to produce a series of reports.127 When the SFO applied to the English Court for approval of the DPA, the senior judge who heard that application, Sir Brian Leveson, President of the Queen’s Bench Division, expressly referred to the appointment of Lord Gold and the ongoing monitoring process as important factors indicating that Rolls-Royce had properly addressed issues of corporate compliance; this made the DPA (as opposed to criminal prosecution) an appropriate outcome.128
The 2019 Serco Geografix DPA took into consideration the fact that the parent company, Serco Group, had adopted an ongoing corporate renewal programme in 2013, which had been approved by the UK government, to improve assurance mechanisms and working practices within all companies in the group. In the approved judgment, Justice Davis said that this amounted to a significant remedial measure.129
33.5.3 Creating a work plan
Under the ABA Standards, the monitor should draft a detailed work plan at the outset of the monitorship, with input from the corporation and the government.130 This is also a requirement of the UK regime under the Code, which stipulates that a work plan should be prepared even before the monitor’s appointment is finally approved.131 The work plan will ordinarily include an overview of the monitor’s role and objectives, a description of the corporation’s policies and procedures to be evaluated, a list of documents the monitor seeks to review, and a list of persons the monitor seeks to interview. The work plan should also include a proposed timeline for reaching certain milestones, such as a review of documents concerning the corporation’s compliance programme, interviews with senior management, the board of directors and audit committee, and periodic reports of the monitor’s findings.132 In the United Kingdom, the work plan is required to set out provisions for costs and even to state with what frequency the monitor intends to report to the prosecutor.133
Not only does a detailed work plan help control costs and increase transparency, but it also helps prepare all parties for the monitorship.134 Accordingly, the corporation will have a better understanding of what can be expected, and the act of preparing the work plan helps the monitor become familiar with the company’s culture and risk tolerance. Further, a detailed work plan helps ensure that the monitor’s expectations for the corporation are reasonable and that the government is comfortable with the monitor’s approach.135
33.5.4 Reviewing documents and interviewing witnesses
To serve as an effective monitor and issue tailored recommendations to the corporation, the monitor must understand the corporation and its business. To develop this understanding, the monitor must have wide access to the documents and information deemed reasonably necessary to carry out the monitorship.136 A recurring problem, however, is that given the monitor’s independence, corporations are hesitant to disclose sensitive information. Under the ABA Standards, the corporation is not required to provide documents covered by the attorney–client or work-product privilege, or documents for which disclosure would be ‘inconsistent with applicable law’.137 A similar approach is adopted under the UK Code, which requires the company to grant the monitor ‘complete access to all relevant aspects of its business during the course of the monitoring period’, but does not affect the company’s right to assert legal professional privilege over relevant documents.138
It may also be necessary for the monitor to interview personnel, from low-level employees to senior management. The monitorship agreement should ordinarily address issues of employee rights that could arise during the monitorship, including privacy rights and the right to counsel – issues that take on added complexity where the monitor’s review is cross-border. Ordinarily, the monitor should inform interviewees of his or her identity and explain why information is being collected. The monitor should also inform interviewees whether they are the target of the monitor’s investigation and of their right to have counsel present during the interview. Where an employee chooses to exercise the right to counsel, the monitor must respect that decision.139
The monitor may find it advisable to inform interviewees of the degree to which the information being provided will remain confidential and what, if anything, the monitor is required to do with that information. In some circumstances, such as when information would otherwise be hard to extract, it may be appropriate for the monitor to have the authority to collect information confidentially to protect its sources.140
33.5.5 Issuing recommendations and reports
During the course of the monitorship, the corporation and monitor should work together to develop recommendations for improvement of the corporation’s compliance programme and to prevent repeated corporate misconduct. The recommendations should be mindful of local laws concerning, for example, data privacy and privilege. Depending on the scope and duration of the monitorship, the monitor may summarise his or her findings and recommendations in periodic reports to the government or court, or issue a single report at the end of the monitorship.141 As negative findings in the report have the potential to significantly harm the corporation, in some circumstances the monitor may provide the corporation with a preliminary draft and invite comments.142 Ultimately, however, the report is issued by the monitor alone, and must reflect the monitor’s honest conclusions and recommendations.
Where the corporation disagrees with one of the monitor’s recommendations, the corporation may reject it within a reasonable time, provided the government is informed. The government may consider this rejection when evaluating whether the corporation has fulfilled its obligations under the settlement.143 Under the Grindler Memorandum, where a corporation rejects a monitor’s recommendation on the basis of cost, it should provide a written proposal of ‘an alternative policy, procedure, or system designed to achieve the same objective or purpose’.144
In the United Kingdom, the confidentiality of a monitor’s reports and correspondence is expressly recognised in the Code, and its disclosure is restricted to the company, the prosecuting authority and the court (except as otherwise permitted by law).145 Similarly in the United States, the government routinely denies Freedom of Information Act requests filed by news outlets for the production of monitor reports.146 However, the public’s right of access to such reports has been litigated in relation to the deferred prosecution agreement between the DOJ and HSBC.147
By way of background, in 2012, HSBC reached a US$1.9 billion settlement with the government and secured a five-year DPA for HSBC’s failure to comply with anti-money laundering laws and US sanctions.148 In an unusual turn of events, the court approved the DPA on the condition that the court could continue to exercise ‘supervisory’ control over the case.149 A monitor was appointed as part of the settlement and issued a 1,000-page report in January 2015, a copy of which was filed under seal with the court. Thereafter, an HSBC mortgage customer asked the court to unseal the report so he could determine whether HSBC continued to engage in ‘unsafe and unsound business practices’.150 The lower court held that the report qualified as a ‘judicial record’ that should be filed publicly, and that ‘the public has a First Amendment right to see the Report’, though HSBC and the government could suggest redactions and parts to remain under seal.151 HSBC and the government opposed the unsealing, claiming it ‘could provide a “road map” for criminals seeking to launder money’.152 HSBC’s lawyer said the court’s order also called into question assurances given to foreign regulators who had provided information to the monitor on condition the report be kept secret.153 On 12 July 2017, the United States Court of Appeals for the Second Circuit reversed the lower court’s decision noting that ‘a district court’s role vis-à-vis a DPA is limited to arraigning the defendant, granting a speedy trial waiver if the DPA does not represent an improper attempt to circumvent the speedy trial clock, and adjudicating motions or disputes as they arise’.154 Given the limited supervisory role of courts in the DPA context, the Second Circuit held that a monitor’s report is not a judicial record because it is not ‘relevant to the performance of the judicial function’.155 The holding, which relies upon and is consistent with the DC Circuit Court of Appeals’ decision in United States v. Fokker Services BV, limits both a district court’s initial judicial review of a DPA and its subsequent oversight of the DPA’s execution.156
The District Court for the District of Columbia made a similar ruling in 100Reporters LLC v. United States Department of Justice, concerning monitor reports issued in the wake of Siemens’ 2008 settlement with the United States and Germany. There, reporters sued to obtain the reports under the Freedom of Information Act (FOIA). In a March 2017 decision, the court acknowledged that significant portions of the report may be exempt from production under FOIA – for example, because they contain ‘classic attorney work-product’ and ‘information [that] cuts to the core of Siemens’ business’, on which a competitor could rely to Siemens’ detriment – but the court was not prepared to find that all information should be so shielded.157
Given the remaining uncertainty over the confidentiality of the monitor’s report, it has become best practice – as confirmed by ABA Standard 24-4.3(4) – for the government and the corporation to determine whether reports will be made public when negotiating the settlement agreement:
To perform its duties, the monitor needs access to unprivileged, confidential and proprietary business information of the corporation and communications among the corporation, the monitor and the government need to be candid and complete over an extended period.
Recognising that corporate information included in monitor reports may be used unfairly by competitors and others to disadvantage the corporation, DPAs and NPAs typically reflect the parties’ intentions to maintain the confidentiality of monitor reports.158
Where a proposed settlement agreement instituting a monitorship lacks such explicit proviso for confidentiality, counsel should seek to revise and include it.
33.6 Costs and other considerations
Monitorships can be extremely expensive, with monitors collecting multimillion-dollar fees, to be paid for by the corporation (and ultimately its shareholders).159 For example, Ericsson recently disclosed that it had set aside US$58 million to cover the costs of its impending monitorship.160 Critics note that the rise in monitorships has created ‘a lucrative cottage industry made up of former prosecutors and small consulting firms’, some of which even offer expertise in assisting corporations monitor their monitors.161 Others argue that the cost of the monitorship will be offset against the fines levied on the corporation and that the imposition of a monitor may help sway the government in favour of reduced fines.162
The ultimate cost of the monitorship will largely depend on the scope and duration of the monitorship. Cost will also be influenced by the complexity of the settlement agreement, the state of the corporation’s existing compliance programme, and the geographic markets and industries in which the corporation operates. The monitor should take these various factors into consideration when providing the corporation with a projected budget. The monitor and the corporation should also consider and agree on an hourly rate or a fixed rate, any applicable rate adjustments and a potential fee cap. Further, to increase transparency and mitigate the risk of conflicts, the monitor should provide regular updates on the costs being incurred and expected to be incurred.163
As one example of the issues that can arise because of costs, in 2014, Apple moved to disqualify its antitrust monitor for what it viewed as excessive billing and unprofessional conduct where the monitor, inter alia, had charged a rate of US$1,000 per hour in fees.164 The motion was denied by the Southern District of New York in an order affirmed by the Second Circuit, but the Second Circuit noted that the issues raised had ‘considerable resonance because the fairness and integrity of the courts can be compromised by inadequate constraint on a monitor’s aggressive use of judicial power’.165 The monetary cost of corporate monitorships to the affected business was one of the two guiding principles that Trump-era Assistant Attorney General Brian Benczkowski noted should determine the imposition of such a monitorship in his 2018 memorandum.
Since their first applications during the 1990s, the use of monitors has rapidly expanded across industries and offences: banks, energy companies, unions, car manufacturers and fire departments have all been (or currently are) subject to oversight by monitors. Implemented to address a myriad of wrongs ranging from fraud and racketeering to discriminatory hiring practices, monitorships were in many ways viewed as panaceas.
Rising costs and increasing concerns about their efficacy have resulted in far greater scrutiny of all proposed monitorships. Where the past two decades represent an expansion in the breadth of cases where monitors were contemplated, the next two are likely to focus on and refine that scope. The ongoing debates over whether monitors’ reports should be public, the degree to which monitors are truly independent, and how monitors should be selected will result not only in additional litigation, but will force an evolution in how monitorships are used as settlement tools. The issues identified throughout this chapter are live controversies, each likely to distil and develop the body of case law governing monitorships, ultimately resulting in a body of jurisprudence that imposes default standards of disclosure, transparency, control and authority on monitors, the government and defendants alike.
1 Robin Barclay QC and Nico Leslie are members of Fountain Court Chambers. Christopher J Morvillo and Celeste Koeleveld are partners, and Meredith George is an associate, at Clifford Chance US LLP.
2 In 2014, for instance, the Department of Justice (DOJ) entered into a civil settlement with Citigroup that included a monitorship provision to address Citigroup’s false representations to investors regarding its residential mortgage-backed securities. See DOJ press release, ‘Federal and State Partners Secure Record $7 Billion Global Settlement with Citigroup for Misleading Investors About Securities Containing Toxic Mortgages’ (14 Jul. 2014). Monitors may also be used in private cases, especially where there are concerns that misconduct may reoccur or an institution’s culture needs to be remodelled to ensure future compliance. See, e.g., Athletics Integrity Agreement between the National Collegiate Athletic Association and The Big Ten Conference, and the Pennsylvania State University (29 Aug. 2012), available at www.psu.edu/ur/2012/Athletics_Integrity_Agreement.pdf; NCAA, Former Sen. Mitchell Selected as Penn State Athletics Integrity Monitor (1 August 2012), www.ncaa.org/about/resources/media-center/news/former-sen-mitchell-selected-penn-state-athletics-integrity.
3 The Environmental Protection Agency and Securities and Exchange Commission (SEC) (among many others) also use monitors as part of settlements. See, e.g., Environmental Protection Agency News Release, Duke Energy Subsidiaries Plead Guilty and Sentenced for Clean Water Act Crimes (14 May 2015) (noting that various Duke Energy subsidiaries would be ‘monitored by an independent court[-]appointed monitor’); DOJ press release, ‘Taiwan-Based AU Optronics Corporation Sentenced to Pay $500 Million Criminal Fine for Role in LCD Price-Fixing Conspiracy’ (20 September 2012) (discussing a court-appointed monitor in the antitrust matter against AU Optronics Corporation); Seth Schiesel and Simon Romero, ‘WorldCom Strikes a Deal with SEC’, N.Y. Times (27 Nov. 2002), www.nytimes.com/2002/11/27/business/worldcom-strikes-a-deal-with-sec.html (discussing WorldCom’s settlement with the SEC, which included a monitorship).
4 As part of the World Bank Sanctions Procedures, an independent monitor may be required for parties seeking to remain active with the Bank. World Bank Sanctions Procedures § 9.03 (15 Apr. 2012), available at https://www.worldbank.org/content/dam/documents/sanctions/other-documents/osd/WBGSanctions_Procedures_April2012_Final.pdf.
5 See, e.g., NCAA Appointed Integrity Monitor, supra note 2, at 1. Additionally, monitors are frequently appointed in lawsuits between private plaintiffs and the government. For example, a monitor was appointed as part of the City of New York’s settlement with private plaintiffs regarding the police department’s discriminatory enforcement of anti-trespassing rules. Memorandum Opinion and Order at 3 n. 8, Davis v. City of New York, No. 10 Civ. 0699 (S.D.N.Y. 28 Apr. 2015).
6 Unless otherwise specified, references herein to ‘monitors’ or ‘monitorships’ concern DOJ/United States Attorney’s Offices (USAO) corporate monitorships.
7 DPAs and NPAs, while similar in that they are both pretrial settlement options available to the DOJ/USAO, have different collateral consequences for corporate defendants. With a DPA, the DOJ files a criminal information, which under the DPA the DOJ agrees to dismiss after a term of months or years if the corporate defendant complies with all other terms of the settlement. DPAs are, by virtue of being filed with a court, publicly available and therefore subject corporate defendants to adverse public relations and scrutiny. By contrast, with a NPA, the government agrees not to bring charges against the corporate defendant if it complies with the terms of the settlement; NPAs are not required to be disclosed, though they frequently are by the corporate defendant and the DOJ. Because NPAs do not involve the courts, they tend to be far more flexible and desirable for corporate defendants than DPAs.
8 See US Gov’t Accountability Off., GAO-10-260T, Prosecutors Adhered to Guidance in Selecting Monitors for Deferred Prosecution and Non-Prosecution Agreements, But DOJ Could Better Communicate Its Role in Resolving Conflicts (2009).
9 See James C McKinley, ‘Con Ed Fined and Sentenced to Monitoring for Asbestos Cover-Up’, N.Y. Times (22 Apr. 1995), www.nytimes.com/1995/04/22/nyregion/con-ed-fined-and-sentenced-to-monitoring-for-asbestos-cover-up.html. Note, the DOJ was not the first government agency to use monitors. Monitors were used as early as 1978 by the SEC. SEC News Digest, Issue 80-71 at 3 (10 Apr. 1980), available at https://www.sec.gov/news/digest/1980/dig041080.pdf (noting that in SEC v. Page Airways, Inc., the defendant agreed to ‘retain a Review Person to evaluate the methods and procedures followed in this investigation’).
10 Amy Walsh, ‘Is the Opaque World of Corporate Monitorships Becoming More Transparent?’, Bus. L. Today (Dec. 2015), https://www.americanbar.org/groups/business_law/publications/blt/2015/12/08_walsh/.
11 Memorandum from Craig S Morford, Deputy Att’y Gen., to All Component Heads and US Att’ys, Selection and Use of Monitors in Deferred Prosecution Agreements (7 Mar. 2008) (Morford Memorandum).
12 Memorandum from Lanny A Breuer, Assistant Att’y Gen., to All Criminal Div. Personnel, Selection of Monitors in Criminal Division Matters (24 Jun. 2009).
13 Memorandum from Gary G Grindler, Deputy Att’y Gen., Additional Guidance on the Use of Monitors in Deferred Prosecution Agreements and Non-Prosecution Agreements with Corporations (25 May 2010) (Grindler Memorandum).
14 Memorandum From Brian A Benczkowski, Assistant Att’y Gen., Selection of Monitors in Criminal Division Matters (11 Oct. 2018) (Benczkowski Memorandum).
15 Brian A Benczkowski, Assistant Att’y Gen., Remarks at Global Investigations Review Live New York (8 Oct. 2019), available at https://www.justice.gov/opa/speech/assistant-attorney-general-brian-benczkowski-delivers-remarks-global-investigations.
16 Lisa O Monaco, Deputy Att’y Gen., Keynote Address on White-Collar Crime (28 Oct. 2019), available at https://www.justice.gov/opa/speech/deputy-attorney-general-lisa-o-monaco-gives-keynote-address-abas-36th-national-institute.
17 See List of Independent Compliance Monitors for Active Fraud Section Monitorship, U.S. Dep’t of Justice, https://www.justice.gov/criminal-fraud/strategy-policy-and-training-unit/monitorships (updated 27 May 2021). This public listing also signals the DOJ’s view that monitorships will remain a bulwark of its enforcement policies.
18 Lisa O Monaco, Deputy Att’y Gen., Keynote Address on White-Collar Crime, supra note 16. See also infra Section 33.3.
19 ABA Standards for Monitors (standards adopted in August 2015).
20 Walsh, supra note 10. The ABA Standards provide a much more detailed discussion of best practices and considerations for the principles articulated in the DOJ guidance.
21 For example, after a district court in the Southern District of New York found that Apple violated the Sherman Antitrust Act, the court ordered that Apple be subject to a compliance monitor. Apple challenged the appointment both before the district court and, thereafter, the Second Circuit Court of Appeals, alleging, inter alia, that the appointment violated the constitutional separation of powers. See United States v. Apple Inc., 787 F.3d 131, 136 (2d Cir. 2015). As but one example of the alleged constitutional violation, Apple highlighted that after it had moved the district court for a stay of the injunction appointing the monitor, the monitor ‘coordinated with the plaintiffs . . . and submitted an affidavit as an integral part of the opposition papers.’ Id. at 134, 138. The district court found that the monitor’s actions did not evidence the monitor’s prejudice against Apple, and though the Second Circuit concurred, it was far more critical of the monitor’s conduct: ‘It is certainly remarkable that an arm of the court would litigate on the side of a party in connection with an application to the court he serves.’ Id. at 138. The Second Circuit also noted that the monitor’s submission on behalf of the plaintiffs ‘was the opposite of best practice for a court-appointed monitor’. Id.
22 Marieke Breijer, ‘ABA London: Keep monitor reports private’, Global Investigations Review (13 Oct.2015), http://globalinvestigationsreview.com/article/1024106/aba-london-monitor-reports-private.
23 See further Jo Rickards and Johanna Walsh, ‘DPA corporate monitorships in the UK’, Global Investigations Review (21 Sep. 2015), http://globalinvestigationsreview.com/article/1018143/dpa-corporate-monitorships-uk.
24 Later and on his retirement as a judge, he became a senior adviser to the Director of the Serious Fraud Office.
25 See R v. Innospec Limited  Crim LR 665.
26 Lord Chief Justice of England and Wales 2013–2017.
27 R v. Innospec Limited  Crim LR 665 at ss. 48–49.
28 See the SFO’s press release describing the circumstances of this settlement, which arose
because of the publisher’s unlawful practices in Kenya and Tanzania: https://www.sfo.gov.uk/2012/07/03/oxford-publishing-ltd-pay-almost-1-9-million-settlement-admitting-unlawful-conduct-east-african-operations/.
29 See Crime and Courts Act 2013, Schedule 17, Part I, s.5(3)(e).
30 See, in particular, DPA Code of Practice, para. 7, headed ‘Terms’.
31 See SFO press release, https://www.sfo.gov.uk/2015/11/30/sfo-agrees-first-uk-dpa-with-standard-bank/.
33 See SFO v. Standard Bank Plc  Lloyd’s Rep FC 102 at para. 2.
34 Id. at para. 22.
35 See SFO press release, https://www.sfo.gov.uk/2016/07/08/sfo-secures-second-dpa/.
36 See SFO v. XYZ Ltd, unreported, 24 June 2016, at para. 64.
37 See FCA Final Notice to Tesco Stores Ltd dated 28 March 2017, at s. 4.10. The DPA was later approved by Leveson P at a hearing on 10 April 2017 and reporting restrictions were lifted
in January 2019 following the acquittal of three individuals, https://www.sfo.gov.uk/2019/01/23/deferred-prosecution-agreement-between-the-sfo-and-tesco-published/.
38 See the DPA between Serco Geografix Ltd and the Serious Fraud Office, 2 July 2019, https://www.sfo.gov.uk/download/deferred-prosecution-agreement-serco-geografix-ltd-sfo/ at para. 5(ii)(b)(i) and (iii) and Serious Fraud Office v. Serco Geografix Ltd  Lloyd’s Rep FC 518.
39 See SFO v. Airbus SE, unreported, 31 January 2020 at para. 79, per Dame Victoria Sharp P.
40 See SFO v. G4S Care and Justice Services (UK) Ltd, unreported, 17 July 2020 at para. 43, per Davis J.
41 See also the words of the Director of the SFO in a press release dated 17 July 2020: ‘G4S C&J and its parent company, G4S plc – a significant government supplier – will be subjected to unprecedented, multi-year scrutiny and assurance’, at https://www.sfo.gov.uk/2020/07/17/sfo-receives-final-approval-for-dpa-with-g4s-care-justice-services-uk-ltd/.
42 Keynote speech on Future SFO Enforcement at New York University School of Law (17 Oct. 2018), https://wp.nyu.edu/compliance_enforcement/2018/10/16/director-of-the-serious-fraud-office-lisa-osofsky-keynote-on-future-sfo-enforcement/.
43 Director of the Serious Fraud Office v. Amec Foster Wheeler Energy Limited  Lloyd’s Rep. FC Plus 27.
44 See https://www.sfo.gov.uk/2021/07/20/sfo-secures-two-dpas-with-companies-for
45 Director of the Serious Fraud Office v. Amec Foster Wheeler Energy Limited  Lloyd’s Rep. FC Plus 27.
46 See ‘Is a Corporate Monitor Necessary?’, Corp. Crime Rep. (8 May 2013),
47 Rod Rosenstein, Deputy Attorney General, Remarks at the 34th International Conference on the Foreign Corrupt Practices Act (29 Nov. 2017).
48 Justice Manual, US Dep’t of Justice, § 9-47.120 (last updated November 2019).
50 Kelly Swanson, ‘DOJ expanding use of FCPA declination policy principles’, Global Investigations Review (2 Mar. 2018), https://globalinvestigationsreview.com/article/1166274/doj-expanding-use-of-fcpa-declination-policy-principles.
51 Deputy Attorney General Sally Quillian Yates’s September 2015 memorandum, ‘Individual Accountability for Corporate Wrongdoing’ [Yates Memorandum], reinforces the importance of internal risk assessment and compliance monitoring. As promulgated, the Yates Memorandum requires early and complete self-reporting if a corporation wishes to obtain co-operation credit. Corporations are thus highly incentivised to self-report.
52 Justice Manual, US Dep’t of Justice, § 9-47.120 (last updated November 2019).
53 Evaluation of Corporate Compliance Programs, U.S. Dep’t of Justice (Jun. 2020), https://www.justice.gov/criminal-fraud/page/file/937501/download.
54 A Resource Guide to the US Foreign Corrupt Practices Act, Second Edition, U.S. Dep’t of Justice and U.S. Securities Exch. Comm’n (Jul. 2020), https://www.justice.gov/criminal-fraud/file/1292051/download. The Second Edition was the first substantive update since the Resource Guide’s publication in 2012.
55 Id. at 73–74; Evaluation of Corporate Compliance Programs, supra note 53, at 1, 15.
56 Morford Memorandum, supra note 11, at 2.
57 Benczkowski Memorandum, supra note 14, at 2.
59 Commentators have noted that monitorships may be appropriate where companies have faced significant cybersecurity breaches, such as Yahoo!, where a recent breach resulted in the theft of data from more than one billion accounts. See Jacob S Frenkel and Justin L Root, ‘Analysis: Cyber-Monitoring: The Next Frontier’ (7 Mar. 2017), http://www.dickinson-wright.com/-/media/files/news/2017/03/analysis-cyber-monitoring-the-next-frontier.pdf?la=en. In such cases, the severity of the breach and the complexity of the problem are two factors that may well have a bearing on a decision to impose a monitor.
60 Benczkowski Memorandum, supra note 14, at 2. See also Deputy Assistant Att’y Gen. Matthew S Miner Remarks at the 29th Annual National Institute on Health Care Fraud, New Orleans (9 May 2019), available at https://www.justice.gov/opa/speech/deputy-assistant-attorney-general-matthew-s-miner-gives-remarks-29th-annual-national (noting the ‘bottom line’ is that the ‘Criminal Division should favor the imposition of a monitor only where there is a demonstrated need for, and clear benefit to be derived from, a monitorship relative to the projected costs and burdens’).
61 Lisa O Monaco, Deputy Att’y Gen., Keynote Address on White-Collar Crime, supra note 16. See infra Section 33.3.
62 Assistant Att’y Gen. Brian A Benczkowski Keynote Address at the Ethics and Compliance Initiative 2019 Annual Impact Conference, Dallas, Texas, 30 April 2019, https://www.justice.gov/opa/speech/assistant-attorney-general-brian-benczkowski-delivers-keynote-address-ethics-and; see also Adam Dobrik, ‘Criminal division chief plays down talk of monitorship demise’, Global Investigations Review (8 March 2019), available at https://globalinvestigationsreview.com/article/jac/1181316/criminal-division-chief-plays-down-talk-of-monitorship-demise (quoting Benczkowski: ‘There were many who thought [the Benczkowski Memorandum] reflected a sort of Shakespearean policy of first, let’s kill all the monitors. But that’s not what it was meant to do. . . . In fact, it was meant to provide greater clarity both to companies but also to our prosecutors to ensure that when they do recommend the appointment of a monitor that they are doing so for the right reasons and with the right scope.’).
63 In July 2019, Facebook entered into a record-breaking US$5 billion settlement with the Federal Trade Commission (FTC) and DOJ over data privacy claims. The consent order requires Facebook to appoint an ‘independent assessor’, chosen by Facebook but approved by the FTC and DOJ, to monitor its compliance with the terms of the order for a 20-year term. Plaintiff’s Consent Motion for Entry of Stipulated Order for Civil Penalty, Monetary Judgment, and Injunctive Relief and Memorandum in Support at 5, United States v. Facebook, Inc., No. 19-cv-02184 (D.D.C. 24 Jul. 2019); Stipulated Order for Civil Penalty, Monetary Judgment, and Injunctive Relief at 4, United States v. Facebook, Inc., No. 19-cv-02184 (D.D.C. 24 Jul. 2019). The independent assessor must, inter alia, conduct an initial and biennial assessment of Facebook’s privacy programme, to be shared with the FTC and DOJ, and attend quarterly meetings with a newly established independent privacy committee of the board of directors, both with and without management present, to discuss privacy risks. Decision and Order at VIII.F, X.A.5, In re Facebook, Inc., Docket No. C-4365 (F.T.C. 24 Jul. 2019).
65 See SEC press release, ‘VimpelCom to Pay $795 Million in Global Settlement for FCPA Violations’ (18 Feb. 2016), https://www.sec.gov/news/pressrelease/2016-34.html (noting that the SEC imposed a monitor on Dutch company VimpelCom as part of the parties’ settlement to resolve VimpelCom’s FCPA violations); Independent Monitor of Takata and the Coordinated Remedy Program, Takata Monitor, www.takatamonitor.org/ (Japanese company Takata agreeing to a monitor for its manufacture and sale of ammonium nitrate airbags in connection with its settlement with the US National Highway Traffic Safety Administration).
66 (1) Airbus Agrees to Pay over $3.9 Billion in Global Penalties [$2.09 Billion with the DOJ] to Resolve Foreign Bribery and ITAR Case, U.S. Dep’t of Justice (31 Jan. 2020), https://www.justice.gov/opa/pr/airbus-agrees-pay-over-39-billion-global-penalties-resolve-foreign-bribery-and-itar-case (settlement included monitorship); (2) Ericsson Agrees to Pay Over $1 Billion to Resolve FCPA Case, U.S. Dep’t of Justice (6 Dec. 2019), https://www.justice.gov/opa/pr/ericsson-agrees-pay-over-1-billion-resolve-fcpa-case (settlement included monitorship); (3) Mobile Telesystems Pjsc and Its Uzbek Subsidiary Enter into Resolutions of $850 Million with the Department of Justice for Paying Bribes in Uzbekistan, U.S. Dep’t of Justice (7 Mar. 2019), https://www.justice.gov/opa/pr/telia-company-ab-and-its-uzbek-subsidiaryenter-global-foreign-bribery-resolution-more-965 (settlement included monitorship); (4) VimpelCom Limited and Unitel LLC Enter into Global Foreign Bribery Resolution of More Than $795 Million; United States Seeks $850 Million Forfeiture in Corrupt Proceeds of Bribery Scheme, U.S. Dep’t of Justice (18 Feb. 2016), https://www.justice.gov/opa/pr/vimpelcom-limited-and-unitel-llc-enter-global-foreign-bribery-resolution-more-795-million (settlement included monitorship); (5) Alstom Pleads Guilty and Agrees to Pay $772 Million Criminal Penalty to Resolve Foreign Bribery Charges, U.S. Dep’t of Justice (22 Dec. 2014), https://www.justice.gov/opa/pr/alstom-pleads-guilty-and-agrees-pay-772-million-criminal-penalty-resolve-foreign-bribery (settlement included monitorship); (6) Siemens AG and Three Subsidiaries Plead Guilty to Foreign Corrupt Practices Act Violations and Agree to Pay $450 Million in Combined Criminal Fines, U.S. Dep’t of Justice (15 Dec. 2008), https://www.justice.gov/archive/opa/pr/2008/December/08-crm-1105.html (settlement included monitorship); (7) Petróleo Brasileiro S.A. – Petrobras Agrees to Pay More Than $850 Million for FCPA Violations, U.S. Dep’t of Justice (27 Sep. 2018); (8) Société Générale S.A. Agrees to Pay $860 Million in Criminal Penalties for Bribing Gaddafi-Era Libyan Officials and Manipulating LIBOR Rate, U.S. Dep’t of Justice (4 Jun. 2018), https://www.justice.gov/opa/pr/soci-t-g-n-rale-sa-agrees-pay-860-million-criminal-penalties-bribing-gaddafi-era-libyan; (9) Telia Company AB and Its Uzbek Subsidiary Enter Into a Global Foreign Bribery Resolution of More Than $965 Million for Corrupt Payments in Uzbekistan, U.S. Dep’t of Justice (21 Sep. 2017), https://www.justice.gov/opa/pr/telia-company-ab-and-its-uzbek-subsidiary-enter-global-foreign-bribery-resolution-more-965.
68 See, in particular, DPA Code of Practice, para. 7.11.
69 R v. Innospec Limited  Crim LR 665 at ss.48–49.
70 Morford Memorandum, supra note 11, at 3.
71 Benczkowski Memorandum, supra note 14, at 5.
72 Id. at 3–4.
73 Id. at 3.
74 ABA Standards for Monitors, §§ 24-2.1; 24-2.4.; 24-2.4(3)–(4).
75 Benczkowski Memorandum, supra note 14, at 5.
76 Id. at 5–7. Factors for consideration include the candidates’ credentials, experience and expertise, degree of objectivity and independence from the corporation, adequacy of resources to discharge responsibilities and any other relevant factors, as determined by the reviewing attorneys.
77 Id. at 7–8.
79 Id. at 8.
80 Dylan Tokar, ‘Women and minorities lose out in FCPA monitor selection process’, Global Investigations Review (1 Feb. 2018), https://globalinvestigationsreview.com/article/jac/1153265/women-and-minorities-lose-out-in-fcpa-monitor-selection-process.
81 Id. These statistics were made available after a court battle fought by a Global Investigations Review reporter. The reporter filed a lawsuit in December 2016, seeking the names of monitor candidates considered for 15 companies involved in compliance investigations, and
the names of the DOJ attorneys involved in the selection process. In March 2018, he prevailed, when the District Court for the District of Columbia ruled that the public’s interest
in learning the candidates’ identities outweighed the government’s privacy interest. See
Tokar v. U.S. Dep’t of Justice, No. 16-2410, 2018 WL 1542320 (D.D.C. 29 Mar. 2018); Jody
Godoy, ‘DOJ Sued by Reporter Seeking FCPA Monitor Records’, Law360 (9 Dec. 2016),
https://www.law360.com/articles/871052/doj-sued-by-reporter-seeking-fcpa-monitor-records. Recently, that reporter also secured a settlement for attorneys’ fees from the DOJ, bringing the nearly five-year public records battle to a close. Courtney Douglas, Reporters Committee reaches settlement with Justice Department after 5-year FOIA battle, Reporters Committee (17 July 2020), https://www.rcfp.org/tokar-doj-foia-settlement/.
82 Dep’t of Justice Deferred Prosecution Agreement with Panasonic Avionics Corp. (30 Apr. 2018), available at https://www.justice.gov/opa/press-release/file/1058466/download.
83 Id. at 12.
84 Id. (‘If the Fraud Section determines, in its sole discretion, that any of the candidates are not, in fact, qualified to serve as the Monitor, or if the Fraud Section, in its sole discretion, is not satisfied with the candidates proposed, the Fraud Section reserves the right to request that the company nominate additional candidates. In the event the Fraud Section rejects any proposed monitors, the Company shall propose additional candidates . . . so that three qualified candidates are proposed.’).
85 Clara Hudson, ‘Lawyers laud criminal division’s diversity provision for monitors’, Global Investigations Review (3 May 2018), https://globalinvestigationsreview.com/article/jac/1168991/lawyers-laud-criminal-divisions-diversity-provision-for-monitors.
86 See List of Independent Compliance Monitors for Active Fraud Section Monitorship, U.S. Dep’t of Justice, https://www.justice.gov/criminal-fraud/strategy-policy-and-training-unit/monitorships (updated 27 May 2021) (stating that the corporate monitors established in 2021 for The Bank of Nova Scotia are Rita Molesworth and William Stellmach).
87 Plea Agreement at Attachment A ¶¶ 1–2, United States v. ZTE Corp., No. 17-0120-K (N.D. Tex. 7 Mar. 2017) (‘[T]he Company will propose to the Department three candidates to serve as the Monitor. . . . The Department retains the right, in its sole discretion, to accept or reject the Monitor candidates proposed by the Company.’).
88 The process for selecting the monitor and the terms of the monitorship were outlined in Attachment A to the Plea Agreement. The court subsequently amended Attachment A but left the remainder of the Plea Agreement intact. See Attachment A (Modified) Independent Corporate Compliance Monitor, United States v. ZTE Corp., No. 17-0120-K (N.D. Tex. 22 Mar. 2017). See also Rearraignment Hearing, United States v. ZTE Corp., No. 17-0120-K (N.D. Tex. 22 Mar. 2017) (‘Here’s what the agreement is as I understand it: It would be a sentence of three years’ probation on each count, to run concurrently, with an independent corporate compliance monitor appointed by me, by the Court, which is – I have chosen Mr. James Stanton; or if something happens to him or if I choose to change, that would be who it would be, as set out in Attachment A as modified today.’).
89 Attachment A (Modified) Independent Corporate Compliance Monitor ¶ 1, United States v. ZTE Corp., No. 17-0120-K (N.D. Tex. 22 Mar. 2017) (‘ZTE Corporation . . . agrees to engage James M. Stanton as an independent corporate monitor’).
90 Id. ¶ 6 (emphasis added).
91 Id. ¶ 13.
92 See Sue Reisinger, ‘In Rare Move, Judge Imposes Own Monitor in ZTE Plea Deal’, The American Lawyer (29 Mar. 2017), http://www.americanlawyer.com/id=1202782436926/In-Rare-Move-Judge-Imposes-Own-Monitor-in-ZTE-Plea-Deal?mcode=0&curindex=0&curpage=ALL (noting that James Stanton is a civil and personal injury lawyer with no prior experience of acting as a monitor and no significant criminal experience, albeit, per his resume, he has served as a special master and arbitrator in six civil cases).
93 See United States v. Fokker Services BV, 818 F.3d 733, 741 (D.C. Cir. 2016).
94 See, in particular, DPA Code of Practice, paras. 7.15–7.17.
95 See Benczkowski Memorandum, supra note 14, at 2.
96 Dep’t of Justice Deferred Prosecution Agreement with Panasonic Avionics Corp., supra note 72, at 11–12.
97 See infra notes 126–128 and accompanying text discussing Rolls-Royce’s monitor, British lawyer Lord Gold.
98 One study found that half of all monitors appointed in connection with DPAs and NPAs since 2001 have been former prosecutors, leading some critics to describe the monitoring industry as a ‘full employment act for former federal prosecutors’. See Alison Frankel, ‘DOJ should end secret selection process for corporate watchdogs’, Reuters Blog (14 Jul. 2014), http://blogs.reuters.com/alison-frankel/2014/07/14/doj-should-end-secret-selection-process-for-corporate-watchdogs/; Steven Davidoff Solomon, ‘In Corporate Monitor, a Well-Paying Job But Unknown Results’, NY Times: Dealbook (15 Apr. 2014), http://dealbook.nytimes.com/2014/04/15/in-corporate-monitor-a-well-paying-job-but-unknown-results/. As but one recent example, the former Deputy Chief in the Fraud Section of the Criminal Division of the DOJ was appointed to serve as a monitor for Odebrecht as
part of its guilty plea for FCPA violations. See Jody Godoy, ‘DOJ Taking $24m Haircut on Odebrecht’s $2.6B FCPA Fine’, Law360 (12 Apr. 2017), https://www.law360.com/articles/912549/doj-taking-24m-haircut-on-odebrecht-s-2-6b-fcpa-fine; Biography of Charles E Duross, Morrison Foerster, https://www.mofo.com/people/charles-duross.html.
99 Rachel Louise Ensign and Max Colchester, ‘Meet the Private Watchdogs Who Police Financial Institutions’, The Wall Street J. (30 Aug. 2015), www.wsj.com/articles/meet-the-private-watchdogs-who-police-financial-institutions-1440983917. On 9 June 2017, a court accepted the monitor’s final report, thereby ending Western Union’s monitorship. See The Western Union Company, Form 8-K, filed 9 June 2017.
100 International Association of Independent Corporate Monitors, ‘About Us’, at http://iaicm.org/about-independent-corporate-monitors/ (describing the mission/purpose of the organisation and discussing the Code of Professional Conduct) (last accessed 24 August 2021).
101 Id. (touting its members as having the ‘breadth and depth of relevant skills, knowledge, and experience, together with reputation of character, to effectively serve as [monitors]’). See also Thomas Fox, ‘IAICM Shine a Light on Corporate Monitors’, JD Supra, 8 March 2017, http://www.jdsupra.com/legalnews/iaicm-shine-a-light-on-corporate-85994/. Membership is comprised of a ‘distinguished panel of current and former corporate monitors, retired judges, and one former FBI agent’.
102 Morford Memorandum, supra note 11, at 5.
103 See, e.g., Dep’t of Justice Deferred Prosecution Agreement with Avon Products, Inc., 15 December 2014, available at https://www.sec.gov/Archives/edgar/data/8868/000000886814000073/exhibit992dpa.htm (‘the Monitor will evaluate, in the manner set forth below, the effectiveness of the internal accounting controls, record-keeping, and financial reporting policies and procedures of the Company as they relate to the Company’s current and ongoing compliance with the FCPA’).
104 Critics complain that ‘[l]ittle is publicly disclosed about what specifically they are supposed to accomplish [and] what they discover in their examinations’. Ensign and Colchester, supra note 99.
105 See, in particular, DPA Code of Practice, para. 7.21.
106 See supra notes 55 and 56 and accompanying text.
107 Dep’t of Justice Non-Prosecution Agreement with Walmart, Inc., Attachment C at ¶ 2, 20 June 2019, available at https://www.justice.gov/opa/press-release/file/1175791/download. The monitor’s mandate was limited to an assessment of the ‘Key Risk Areas’, defined as ‘anti-corruption-related internal auditing controls related to anti-corruption, record-keeping, and financial reporting policies and procedures of the Company as they relate to permits and licensing, real estate development and construction . . . donations . . . and third-party intermediaries’, with several explicit carve-outs. The monitor’s mandate was further limited to four countries, as well as Walmart’s headquarters in Arkansas. Id.
108 Id. at ¶ 8.
109 Dep’t of Justice Deferred Prosecution Agreement with Ericsson, Attachment D at ¶ 8, 6 December 2019, available at https://www.justice.gov/opa/press-release/file/1272151/download; Dep’t of Justice Deferred Prosecution Agreement with Bank of Nova Scotia, Attachment D at ¶ 8, 19 August 2020, available at https://www.justice.gov/opa/press-release/file/1306141/download (emphasis added).
110 Notably, some corporations have taken to hiring their own internal monitors following the government’s implementation of a monitor. For example, as part of Western Union’s 2010 settlement, Western Union received a monitor. Independently, Western Union also hired a consultant, leading to what in effect was a ‘dual system of internal monitors – one stipulated by the settlement and the other hired by the money-transfer firm’. Ensign and Colchester, supra note 99.
111 F Joseph Warin, Michael S Diamant and Veronica S Root, ‘Somebody’s Watching Me: FCPA Monitorships and How They Can Work Better’, 13 U. Pa. J. Bus. L. 321, 364 (2011), available at http://scholarship.law.upenn.edu/jbl/vol13/iss2/1.
112 Grindler Memorandum, supra note 13, § II.
113 Morford Memorandum, supra note 11, at 7. Critically, undisclosed or continuing misconduct may invalidate the terms of the settlement and lead to an extension of the term and scope of the monitorship.
114 Id., at 7–8.
115 Id. at 7. See Benczkowski Keynote Address at the Ethics and Compliance Initiative 2019 Annual Impact Conference, supra note 62 (noting that a monitorship limited to two years was appropriate as part of Fresenius Medical Care’s FCPA settlement, because the company ‘had made a number of improvements to its compliance program but had not yet fully tested that program’).
116 Morford Memorandum, supra note 11, at 8 (‘For example, if a corporation ceased operations in the area that was the subject of the agreement, a monitor may no longer be necessary. Similarly, if a corporation is purchased by or merges with another entity that has an effective ethics and compliance program, it may be prudent to terminate a monitorship.’).
117 Letter advising the Court of the parties’ agreement to extend the term of the plea agreement, United States v. Odebrecht S.A., No. 16-cr-643 (RJD) (E.D.N.Y. 29 Jan. 2020), ECF 170; Clara Hudson, ‘Odebrecht failed to fulfil monitorship obligations, DOJ says’, Global Investigations Review (3 February 2020), https://globalinvestigationsreview.com/article/jac/1213971/odebrecht-%E2%80%9Cfailed-to-fulfil%E2%80%9D-monitorship-obligations-doj-says.
118 Letter advising the Court of the parties’ agreement to extend the term of the plea agreement, Odebrecht S.A., No. 16-cr-643 (RJD).
122 Id. Similarly, after Credit Suisse admitted to aiding US tax evasion, the New York State Department of Financial Services appointed a monitor for what was anticipated to be a two-year monitorship. However, shortly after the monitorship began in October 2014, a tolling period was triggered because Credit Suisse could not produce information at the pace and volume required by the monitor. After more than three years of monitorship, the Department of Financial Services entered a consent order requiring Credit Suisse to engage an independent consultant for an additional year. John Letzing, ‘Credit Suisse’s Tardiness Likely to Extend Monitor’s Sojourn’, Wall Street J. (6 Jan. 2016), www.wsj.com/articles/credit-suisses-tardiness-likely-to-extend-monitors-sojourn-1452084986; N.Y. Dep’t of Fin. Services Consent Order, In the Matter of Credit Suisse AG (13 Nov. 2017), available at https://www.dfs.ny.gov/system/files/documents/2020/03/ea171113_credit_suisse.pdf.
123 See DPA Code of Practice, para. 7.19.
124 FCPA Digest, ‘Recent Trends and Patterns in the Enforcement of the Foreign Corrupt Practices Act’ at 2, 6, Shearman & Sterling (6 Jan. 2014), available at www.shearman.com/~/media/Files/Services/FCPA/2014/FCPADigestTPFCPA010614.pdf. For example, the DOJ’s DPA with Panasonic required a two-year monitorship, after which Panasonic was required to undertake follow-up reviews for the remainder of the agreement. Dep’t of Justice Deferred Prosecution Agreement with Panasonic Avionics Corp. at 12–13, 30 April 2018, available at https://www.justice.gov/opa/press-release/file/1058466/download.
125 Dylan Tokar, ‘With Alstom Monitor Agreement, DOJ Tries Something New’, Global Investigations Review (4 Feb. 2015), available at http://globalinvestigationsreview.com/article/1023537/with-alstom -monitor-agreement-doj-tries-something-new.
126 Deferred Prosecution Agreement between the SFO and Rolls-Royce, paras. 25–34, available at http://iaicm.org/wp-content/uploads/formidable/9/Rolls-Royce-SFO-DPA-17Jan2017.pdf.
127 Deferred Prosecution Agreement at 4–5, D-1, United States v. Rolls-Royce plc, No. 16-0247 (S) (S.D. Ohio, 20 Dec. 2016) (‘Based on the Company’s remediation and the state of its compliance program, and the Company’s agreement to report to the Fraud Section and the Office as set forth in Attachment D to this Agreement, the Fraud Section and the Office determined that an independent compliance monitor was unnecessary[.]’).
128 Serious Fraud Office v. Rolls-Royce plc  Lloyd’s Rep FC 249 at paras. 43–47 and 61–64.
129 Serious Fraud Office v. Serco Geografix Limited  Lloyd’s Rep FC 518 at para. 25.
130 If disclosing the work plan to the company would limit the monitor’s effectiveness, however, the parties should consider an alternative arrangement. See ABA Standards for Monitors, § 24-3.3(3).
131 See DPA Code of Practice, para. 7.18.
132 Jason T Wright, ‘The Corporate Compliance Monitor’s Role in Regulatory Settlement Agreements’, Stout (1 Mar. 2014), https://www.stout.com/en/insights/article/corporate-compliance-monitors-role-regulatory-settlement-agreement.
133 See DPA Code of Practice, para. 7.18.
134 See Warin, supra note 111, at 360 (noting that the work plan also serves as a ‘gloss on the settlement agreement to be applied in subsequent years of the monitorship’).
135 Wright, supra note 132.
136 See Ensign and Colchester, supra note 99 (noting that the monitorship involved more than 3,500 meetings with HSBC staffers, 11,500 document requests and over 2 million pages of documents).
137 ABA Standards for Monitors, § 24-4.2(1)(a)–(2)(a). Despite the monitor’s independence, the monitor still has a duty to the corporation by nature of the appointment. Thus, the monitor cannot use proprietary or confidential information obtained during the monitorship for any purpose other than in furtherance of the monitorship. Where proprietary information is disclosed, the monitor and corporation should work together to ensure this information remains confidential. The parties should also stipulate how the monitor is to return any confidential or proprietary documents upon completion of the monitorship.
138 See DPA Code of Practice, s.7.14.
139 Except in limited circumstances, a company is not required to provide counsel or pay for counsel for employees being interviewed.
140 ABA Standards for Monitors, § 24-4.2(4)(d).
141 Morford Memorandum, supra note 11, at 6.
142 ABA Standards for Monitors, § 24-4.3(1)(d). Giving the corporation the opportunity to review a draft report may improve the quality of the report, as the corporation can correct any errors and, where applicable, provide evidence to rebut the monitor’s negative findings.
143 Morford Memorandum, supra note 11, at 6. For example, after Standard Charter settled charges that it disguised transactions that could have violated US sanctions, two monitors were appointed as well as one ‘independent consultant’. The monitors’ findings that inadequate controls were used led to an additional $300 million fine. Ensign and Colchester, supra note 99.
144 Grindler Memorandum, supra note 13, § II.
145 See DPA Code of Practice, para. 7.20.
146 Ensign and Colchester, supra note 99.
147 The HSBC matter represents the most public instance of a party seeking access to a monitor’s report; however, it is not the only such example. See In re Depuy Orthopaedics, Inc. Pinnacle Hip Implant Prod. Liab. Litig., No. 11 MD 2244, 2013 WL 2091715 (N.D. Tex. 15 May 2013) (ordering disclosure of monitor’s report in a product liability matter).
148 In December 2017, the DOJ found that HSBC had successfully addressed the issues related to its case and sought to dismiss. Evan Weinberger, ‘DOJ Seeks Dismissal of HSBC Money Laundering Case’, Law360 (12 Dec. 2017), https://www.law360.com/articles/993914/doj-seeks-dismissal-of-hsbc-money-laundering-case.
149 See Christie Smythe, ‘Judge Lets Sun Shine on Secret HSBC Money Laundering Report’, Bloomberg (29 Jan. 2016), www.bloomberg.com/news/articles/2016-01-29/judge-lets-sun-shine-on-secret-hsbc-report-on-money-laundering.
150 Nate Raymond, ‘HSBC money laundering report’s release likely delayed: U.S. judge’, Reuters (10 Feb. 2016), www.reuters.com/article/us-hsbc-moneylaundering-idUSKCN0VI28H. See United States v. HSBC Bank USA NA, No. 12 CR 763 (JG), 2016 WL 347670, at *1, *6 (E.D.N.Y. 28 Jan. 2016), motion to certify appeal denied, No. 12-0763, 2016 WL 2593925 (E.D.N.Y. 4 May 2016) (inviting the parties to suggest further redactions to the report).
151 HSBC Bank USA NA, 2016 WL 34760, at *1, *6. ZTE’s monitor reports may be particularly susceptible to this type of argument, given that the plea agreement as amended by Judge Kinkeade refers to the monitor as a ‘judicial adjunct’ and provides that all monitor reports be filed with the court, albeit under seal and subject to in-camera review. See supra notes 87–92 and accompanying text.
152 Raymond, supra note 150.
154 United States v. HSBC Bank USA, N.A., 863 F.3d 125, 129 (2d Cir. 2017).
155 Id. at 137.
156 See United States v. Fokker Services B.V., 818 F.3d 733 (D.D.C. 2016).
157 100Reporters LLC v. U.S. Dep’t of Justice, No. 14-1264-RC, at 3, 32, 58 (D.D.C. 31 Mar. 2017) (finding that the DOJ had justified withholding portions of the report under certain exemptions to FOIA, but had not justified the withholding of all portions of the report or demonstrated that the report could not be segregated for purposes of partial production).
158 Karen F Green and Timothy D Saunders, ‘Minding the Monitor: Disclosure of Corporate Monitor Reports to Third Parties’, Bloomberg BNA (25 Mar. 2014).
159 Both the Morford Memorandum and the Grindler Memorandum counsel the need for prosecutors to be mindful of the costs of monitors and their potential impact on the corporation when negotiating settlements. Grindler Memorandum, supra note 13, § II (noting that the government ‘should help to instill public confidence in the Department’s use of monitors, including the Department’s mindfulness of the costs of a monitor and their impact on a corporation’s operations’); Morford Memorandum, supra note 11, at 2 (noting that prosecutors must be mindful of ‘the cost of a monitor and impact on the operations of a corporation’).
160 Adam Dobrik, ‘DOJ picks Ericsson monitor’, Global Investigations Review (11 May 2020), https://globalinvestigationsreview.com/article/jac/1226647/doj-picks-ericsson-monitor.
161 Rachel Louise Ensign, ‘Judge Rules HSBC’s Outside Monitor’s Secret Report Should be Made Public’, The Wall Street J. (29 Jan. 2016), www.wsj.com/articles/judge-rules-hsbcs-outside-monitors-secret-report-should-be-made-public-1454086003; see also Ensign and Colchester, supra note 99.
162 Whereas fines are usually due in one lump sum, payments for monitors are commonly billed monthly. See Wright, supra note 132 (‘More often than not, however, this cost is far less than what the company would otherwise pay in fines, possible debarment, or legal fees in defending an enforcement action through trial.’); Patricia M Sulzbach, ‘Independent Corporate Monitors: A Company’s Friend or Foe?’, ABA White Collar Crime Comm. Newsletter (18 Apr. 2013).
163 See also ABA Standards for Monitors, § 24-3.4.
164 United States v. Apple, Inc., 992 F. Supp. 2d 263 (S.D.N.Y. 2014).
165 United States v. Apple, Inc., 787 F.3d 131, 133–34 (2d Cir. 2015).