As initially reported yesterday by the FCPA
Professor, there is an invaluable article out, recently published in the
University of Pennsylvania Journal Of Business, entitled "Somebody's
Watching Me: FCPA Monitorships and How They Can Work Better" by Gibson Dunn & Crutcher attorneys Joseph Warin, Michael Diamant, and Veronica Root. This article
is a 'must read' for any attorney working in the Foreign Corrupt Practices Act
(FCPA) arena, whether in private practice or in-house counsel.
In a section entitled, "What an Effective FCPA
Monitorship Looks Like" the authors posit that the "benchmark for any
monitor's success is fulfilling the terms of the applicable settlement
agreements." The authors identify five key components which help to bring a
monitorship to a successful conclusion.
1. The Settlement
Agreements Constitute the Monitor's Bible
The initial starting point for any monitorship is the
company's agreement(s) with the Department of Justice (DOJ) and Securities and
Exchange Commission (SEC). These settlement agreements will set forth the
specific components of the monitorship including length of monitorship, number
of monitor compliance reviews, certifications required, nature and structure of
fieldwork and any work product which the monitor must submit to the government.
All of these should be reflected in the monitor's work plan, which should be
thoroughly vetted and agreed to by all parties to the settlement agreements.
The authors point out the key is trust, and setting expectations, and then not
exceeding those expectations, is an important step for all parties.
2. The Monitor's Work
Must Reflect Knowledge of the Business
More than simply being a technical expert in a compliance
program, a FCPA monitor must be able to understand the overall business, in the
context of its compliance program. Without an understanding of the business a
monitor cannot create an appropriate risk profile or design internal controls
to manage any such risks. A monitor should fundamentally change a business
model only as a last resort; the monitor should try to work with the ongoing
business to make recommendations within the company's current structure.
3. A Detailed Work
Plan Creates Trust
The authors discuss, in several places, the need for
trust between the company and the monitor. The building block for this is the
monitor's work plan. The authors propose that the work plan include the
The authors conclude this section by noting that the more
detailed a monitor's work plan, the easier it will be for all to follow it and
to understand their respective obligations.
4. The Monitor's
Report Should Set Forth the Scope of the Review and Any Recommendations
The authors point out that the monitor should fully
record the areas of the company which they have concentrated on and include
their methodology. If there are conclusions which lead to evaluations,
all such work needs to be fully documented. However, most importantly, there
should be recommendations, including the time frame for implementation of the
recommendations, together with an evidentiary basis for said recommendations.
This will be the road map for the company going forward, this section of the
monitor's report should have "the utmost clarity in explaining the contours of,
rationale for, and evidence supporting a set of concrete, specific, and
5. Cooperation is
The monitor should strive, whenever possible, to have a
cooperative attitude with the company. An adversarial attitude does not benefit
anyone or any party to the process. To facilitate this, there must be clear
direction from the very top of the company that it will provide full
cooperation, so that the monitor can perform the tasks assigned. There should
be a primary point of contact between the company and the monitor and there
should be frequent telephone conferences and face-to-face meetings to ensure
full cooperation. As the authors note, "the goal should be no surprises for
either the monitor or the company, so constant communication is imperative and
should include interactive work plans, planning meetings prior to any
substantive work, and mid-review meetings, to name a few."
We certainly applaud the authors for setting all of these
factors out in their article. The highlights discussed in this blog are a very
small portion of the overall article and we recommend the entire article as a
'must read' for any FCPA practitioner.
Visit the FCPA Compliance and Ethics Blog,
hosted by Thomas Fox, for more commentary on FCPA compliance, indemnities and
other forms of risk management for a worldwide energy practice, tax issues
faced by multi-national US companies, insurance coverage issues and protection
of trade secrets.
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© Thomas R. Fox, 2011
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