This week, in a five-part podcast series, I am exploring the role of corporate monitorships in compliance and some of the key issues which companies and compliance professionals may face in dealing with monitors. I am joined in this exploration by Vincent DiCianni, founder and President of AMI and Eric Feldman, Senior Vice President and Managing Director of Corporate Ethics and Compliance Programs for Affiliated Monitors, Inc. (AMI), who is the sponsor for this series. Today, we consider what is a pre-settlement monitorship and how it can be such a powerful tool for the compliance professional.
Feldman explained that most generally, a “pre-settlement monitorship is an organization using an independent body to conduct any kind of a third-party review or assessment.” It can also be considered as a proactive monitorship. It involves a company desiring to assess its implementation of a compliance and ethics program on a proactive basis. Such a monitorship does more than simply focus on whether there is a compliance program in place but more fully assesses its effectiveness. This assessment can be used by a wide variety of parties, such as the corporation itself, with its stakeholders, with regulators or even with the public to demonstrate compliance with a wide variety of issues.
Feldman explained that a key piece of the pre-settlement monitorship is to assess the company’s culture of compliance. Using such a proactive monitorship can help an organization to assess not only where they might be at this point in time but also work to create a road map to improve and strengthen their culture of compliance and ethics. Finally, as Feldman noted, “Another reason for doing a pre-settlement monitorship might be when a company wants to explicitly demonstrate its due diligence to law enforcement or regulators should something occur in the future that would result in action against the company.”
He noted German enforcement authorities are now assessing if companies engage in sufficient investigations of not only whom they are doing business; which is traditional third-party due diligence, but these same authorities are inquiring if a company is putting the same effort into assessing itself. The pre-settlement monitorship is an excellent mechanism to do so. He stated, “in Germany there have there has been a move on the part of the governments to take into account all due diligence activities that a company has taken in the past which would include a pre-settlement kind of monitorship when there is any fine or penalty or action on any issue against the company in the United States.”
Another way to consider it might be as a “preemptive strike against more punitive action on the part of government agencies”. Feldman related that his company, Affiliated Monitors has had instances where companies subject to an action with one level of government, such as a US Attorney’s Office in one area of the country, will use the pre-settlement monitorship to avoid being suspended or barred by the federal government and from federal government contracts. The pre-settlement monitorship performed a complete review, then made recommendations for remediations. This led to positive resolution with the government in the form of no suspension or debarment.
When viewed in the light of the three prongs of any best practices compliance program, prevent, detect and remediate, the power of a pre-settlement monitorship comes more clearly into focus. A monitorship was traditionally viewed as an after-the-fact piece of an enforcement action. However through the pre-settlement monitorship, the tool becomes not only proactive but prescriptive as you are using as an ongoing monitoring solution. It is even more powerful because of the independent nature of the monitor, in bringing an unbiased eye to a compliance program.
Another use of the pre-settlement monitorship is in the mergers and acquisition arena. Feldman noted, “We have had situations where companies will, as part of the merger and acquisition pre-acquisition due diligence process, will hire an independent third-party monitor to review the target company to ensure that they in fact have the right kind of ethics and compliance posture and corporate ethical culture to be able to fully integrate into their organization if closing occurs.” Once again, this scenario speaks to the breadth and scope of the pre-settlement monitorship as a tool.
Feldman concluded that it is critical that the monitor bring real value through the monitorship. He said the monitorship should provide insight through using a variety of investigative techniques, including interviews, document reviews and forensic auditing. All of this can provide solid information to not only a Chief Compliance Officer (CCO) but also the leadership of an organization.
For more information on how an independent monitor can help improve your company’s ethics and compliance program, visit our sponsor Affiliated Monitors at www.affiliatedmonitors.com.