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Presented by: Bart Schwartz, Esq.
Chairman
Guidepost Solutions LLC
10th
Annual Compliance Ethics Institute
Society of Corp...
 Monitor, IPSIG, Trustee and others
 1985/86-New York City concrete industry
 Labor Unions
 Prosecution and Monitor
 ...
 It is an oversight and teaching function designed
to serve the public interest by establishing best
practices at a troub...
 Should not be a form of punishment
 Should not be a cop
 Should not be a way to avoid a difficult
regulatory decision
...
 Long term oversight
 Supplements government resources
 Frees up government resources
 Maintains jobs and products/ser...
 Change and/or improve culture
 Build a system which outlasts Monitor
 Be vigilant
 Do not limit oversight to narrow i...
 Voluntary alternative to adjudication following
the filing of a formal changing document by the
government
 Entered int...
 Non-Prosecution Agreement
 An agreement not to prosecute, so no formal charges
are filed by the government
 Under the ...
Source: Gibson Dunn & Crutcher
Du
9
© Guidepost Solutions LLC 2011
Source: Gibson Dunn & Crutcher 10
© Guidepost Solutions LLC 2011
 Serve the Public Interest by providing
 Long Term Oversight
 Supplementing or freeing up government
resources
 Mainta...
 DOJ system - March 7, 2008 and May 25, 2010
 Pre-approved list
 Veto power only
 Combinations
 Skill sets
 Industry...
 Negotiated by the subject and the
government, without input from the
Monitor
 Generally includes a scope which may be
q...
 Term and internal deadlines
 Recitation of related matters e.g., DAP
 Representations
 Due diligence for new hires
 ...
 Protection of propriety information
 Monitor reports
 Sale of Company/Unit
 Determination of violation
 Consequences...
 Will the Monitor be able to deal with both government
and corporate constituencies?
 Now there’s an outsider in my busi...
 Understand the Monitor’s responsibilities and
requirements
Does the Monitor have to submit a work plan to the
regulator...
 Designate company response team as a resource for the
Monitor
 Appoint a key contact
 Include individuals from IT, Int...
19© Guidepost Solutions LLC 2011
 Handling sensitive or covert investigations
May be governed by the contract
Often gives Monitor flexibility to inquire...
 The monitored entity
 Rarely a budget in contract; therefore Monitor has
a responsibility to be fair and reasonable.
 ...
 Case by case
 Monitor’s need to teach
 Leave behind trained personnel
 IT
 Internal Audit
 Embedding in each other’...
 Constituencies
 Informants
 Experts
 Cooperating Witness
 Form a team
Have advisors you can turn to when needed
 F...
 Talk to the various constituencies
Government
Management
Victims
 Understand expectations
 Review complaints, indic...
 Understand the Entity and How it Operates
 Business must be conducted ethically
 Rules must make sense in that context...
 Depends-examples
Report writing
Investigative process
 Failure to connect could compromise results
Poor training tec...
 Tone at the Top tested
 You know what is going on
 People talk to you
 Confidential discussions
 More informed judgm...
 Lack of problems when Monitor is there is not
proof of success.
 True test is after Monitor leaves.
28© Guidepost Solut...
 If problems arise during the course of the
monitorship - either self-reported or discovered
by the Monitor – address the...
 While the Monitor is still there, engage
him/her in sustaining good practices and
developing them into best practices.
...
OUTSIZED PROBLEMS FROM UNDERSIZED
UNITS
IRRATIONAL COMFORT WITH RISK
CONFLICTS BETWEEN H.R. AND LEGAL V.
COMPLIANCE
THE PL...
RISK ANALYSIS FOR RESOURCES
ALLOCATION
TRAINING FATIGUE
TONE ALL OVER
(WHERE THE TOP IS DEPENDS UPON WHERE YOU ARE)
CONFID...
THE ABILITY TO IDENTIFY ISSUES
INVESTIGATIONS
More Than You Think
Dangers
Building Respect for Results
DUMPING GROUNDS
...
SUPPORT FUNCTIONS NEED TO UNDERSTAND
THEIR CRITICAL CONTRIBUTIONS
VENDORS NEED TO UNDERSTAND THEIR
CRITICAL CONTRIBUTIONS
...
To Work To Create A Culture In Which:
 Employees expect legal and ethical behavior of
themselves, their colleagues and th...
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[805] Inside The Mind Of An Independent Corporate Monitor SCCE Compliance & Ethics Institute 2011

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[805] Inside The Mind Of An Independent Corporate Monitor SCCE Compliance & Ethics Institute 2011

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[805] Inside The Mind Of An Independent Corporate Monitor SCCE Compliance & Ethics Institute 2011

  1. 1. Presented by: Bart Schwartz, Esq. Chairman Guidepost Solutions LLC 10th Annual Compliance Ethics Institute Society of Corporate Compliance and Ethics Las Vegas, Nevada September 13, 2011 © Guidepost Solutions LLC 2011
  2. 2.  Monitor, IPSIG, Trustee and others  1985/86-New York City concrete industry  Labor Unions  Prosecution and Monitor  Deferred Prosecution Agreement and Monitor  Voluntary Monitor  Process Monitor/Integrity Monitor  Financial Monitor  Sentencing Guidelines 2© Guidepost Solutions LLC 2011
  3. 3.  It is an oversight and teaching function designed to serve the public interest by establishing best practices at a troubled or vulnerable entity.  An Independent Private Sector Inspector General (IPSIG) is an independent, private sector firm with legal, auditing, investigative, management and loss prevention skills employed by an organization (voluntarily or by compulsory process) to ensure compliance with relevant laws and regulations, and to deter, prevent, uncover and report unethical and illegal conduct by, within and against. 3© Guidepost Solutions LLC 2011
  4. 4.  Should not be a form of punishment  Should not be a cop  Should not be a way to avoid a difficult regulatory decision  Should not be a way around a defective case  Should not be a “gotcha” 4© Guidepost Solutions LLC 2011
  5. 5.  Long term oversight  Supplements government resources  Frees up government resources  Maintains jobs and products/services  Elevates industry shareholders  Protects innocent shareholders  Deterrence  Early warning system for government 5© Guidepost Solutions LLC 2011
  6. 6.  Change and/or improve culture  Build a system which outlasts Monitor  Be vigilant  Do not limit oversight to narrow issues or only to issue(s) which caused appointment of Monitor  Broad impact 6© Guidepost Solutions LLC 2011
  7. 7.  Voluntary alternative to adjudication following the filing of a formal changing document by the government  Entered into between a prosecutor and defendant  Grants relief in return for defendant’s adherence to certain requirements, e.g. fines, corporate reforms, cooperation, appointment of an independent monitor/expert/consultant  Fulfilling requirements results in dismissal of charges 7© Guidepost Solutions LLC 2011
  8. 8.  Non-Prosecution Agreement  An agreement not to prosecute, so no formal charges are filed by the government  Under the agreement the defendant may be required to pay fines, cooperate, institute reforms, or retain an independent monitor or expert  Prosecution with monitor 8© Guidepost Solutions LLC 2011
  9. 9. Source: Gibson Dunn & Crutcher Du 9 © Guidepost Solutions LLC 2011
  10. 10. Source: Gibson Dunn & Crutcher 10 © Guidepost Solutions LLC 2011
  11. 11.  Serve the Public Interest by providing  Long Term Oversight  Supplementing or freeing up government resources  Maintaining jobs, products/services  Elevating industry standards  Protecting innocent shareholders  Deterrence  Early warning system for the government 11© Guidepost Solutions LLC 2011
  12. 12.  DOJ system - March 7, 2008 and May 25, 2010  Pre-approved list  Veto power only  Combinations  Skill sets  Industry expertise  Investigative  Management  Prior monitorships  Teacher  Facilitator  Disciplinarian  Sometimes, even a cheerleader 12© Guidepost Solutions LLC 2011
  13. 13.  Negotiated by the subject and the government, without input from the Monitor  Generally includes a scope which may be quite detailed  May state what is NOT within the Monitor’s jurisdiction 13© Guidepost Solutions LLC 2011
  14. 14.  Term and internal deadlines  Recitation of related matters e.g., DAP  Representations  Due diligence for new hires  Code of conduct and training  Retention of Monitor  Funding of Monitor  Secrecy of bills  Duties and responsibilities of Monitor  Privilege issues 14© Guidepost Solutions LLC 2011
  15. 15.  Protection of propriety information  Monitor reports  Sale of Company/Unit  Determination of violation  Consequences of violation  Indemnity  Removal or replacement of Monitor 15© Guidepost Solutions LLC 2011
  16. 16.  Will the Monitor be able to deal with both government and corporate constituencies?  Now there’s an outsider in my business!  Can we “confide” in the Monitor?  It looks like the Monitor has a “blank check” – Where will he go, what will he look at?  Can the Monitor distinguish between bad conduct and mistakes or misjudgments?  Will the Monitor understand and appreciate our business needs?  How much will this cost? 16© Guidepost Solutions LLC 2011
  17. 17.  Understand the Monitor’s responsibilities and requirements Does the Monitor have to submit a work plan to the regulators? What other reporting requirements does the Monitor have? What is the timeline for reporting?  Initial meeting-setting the tone Understand the Monitor’s approach to the engagement Not all monitors are alike 17© Guidepost Solutions LLC 2011
  18. 18.  Designate company response team as a resource for the Monitor  Appoint a key contact  Include individuals from IT, Internal Audit, Legal and other functions on the team in order to be able to respond quickly to requests and meet the needs of the Monitor  Open communications at all times  Inform the company of the need to cooperate and reinforce message periodically  Have regular interactions with the Monitor and his/her team  Consider periodic status meetings to discuss the Monitor’s ongoing requirements  Keep appraised of the Monitor’s level of satisfaction with the company’s cooperation 18© Guidepost Solutions LLC 2011
  19. 19. 19© Guidepost Solutions LLC 2011
  20. 20.  Handling sensitive or covert investigations May be governed by the contract Often gives Monitor flexibility to inquire before notifying government, but sometimes Monitor concludes it is important for government to know immediately This gives government option to take over inquiry at earliest stage  Communication with government 20© Guidepost Solutions LLC 2011
  21. 21.  The monitored entity  Rarely a budget in contract; therefore Monitor has a responsibility to be fair and reasonable.  Usually a procedure for entity to challenge costs, but that is a tough position to put the entity in. Another reason why Monitor must be fair.  Fixed Fee v. hourly: Minority View – fixed fee acceptable Discrete tasks such as writing a code of conduct Should not have fixed fee for investigations 21© Guidepost Solutions LLC 2011
  22. 22.  Case by case  Monitor’s need to teach  Leave behind trained personnel  IT  Internal Audit  Embedding in each other’s teams for focused audits or similar 22© Guidepost Solutions LLC 2011
  23. 23.  Constituencies  Informants  Experts  Cooperating Witness  Form a team Have advisors you can turn to when needed  Former Employees  “800 Number” complaints 23© Guidepost Solutions LLC 2011
  24. 24.  Talk to the various constituencies Government Management Victims  Understand expectations  Review complaints, indictments, submissions, depositions, trail testimony or whatever will give you a background and understanding  Almost every Monitorship begins with writing or reviewing a Code of Conduct and ensuring its implementation 24© Guidepost Solutions LLC 2011
  25. 25.  Understand the Entity and How it Operates  Business must be conducted ethically  Rules must make sense in that context  “Foolish rules” undermine respect for entire program and invite failure  Tools  Audit  Interview  Surveillance  Undercovers  Union?  Due diligence  Odd Places  Procurement  Risk Profiles of departments of units 25© Guidepost Solutions LLC 2011
  26. 26.  Depends-examples Report writing Investigative process  Failure to connect could compromise results Poor training techniques 26© Guidepost Solutions LLC 2011
  27. 27.  Tone at the Top tested  You know what is going on  People talk to you  Confidential discussions  More informed judgments  Respect for them and the process  Problems surface  Comfort level so that discussions are genuine 27© Guidepost Solutions LLC 2011
  28. 28.  Lack of problems when Monitor is there is not proof of success.  True test is after Monitor leaves. 28© Guidepost Solutions LLC 2011
  29. 29.  If problems arise during the course of the monitorship - either self-reported or discovered by the Monitor – address them immediately, openly and comprehensively.  Demonstrate willingness to correct and discipline if appropriate.  Consider using the problems as a “lessons learned” communication to employees. 29© Guidepost Solutions LLC 2011
  30. 30.  While the Monitor is still there, engage him/her in sustaining good practices and developing them into best practices.  Use the Monitor’s experience with other companies and industries to help fashion a compliance program and culture that will become embedded in everyday activities. 30© Guidepost Solutions LLC 2011
  31. 31. OUTSIZED PROBLEMS FROM UNDERSIZED UNITS IRRATIONAL COMFORT WITH RISK CONFLICTS BETWEEN H.R. AND LEGAL V. COMPLIANCE THE PLUTO THEORY OF COMPLIANCE - INCENTIVES FOCUS ON BUSINESS UNITS – NOT JUST COMPLIANCE 31© Guidepost Solutions LLC 2011
  32. 32. RISK ANALYSIS FOR RESOURCES ALLOCATION TRAINING FATIGUE TONE ALL OVER (WHERE THE TOP IS DEPENDS UPON WHERE YOU ARE) CONFIDENCE TO SPEAK UP AND ASK QUESTIONS 32© Guidepost Solutions LLC 2011
  33. 33. THE ABILITY TO IDENTIFY ISSUES INVESTIGATIONS More Than You Think Dangers Building Respect for Results DUMPING GROUNDS CONSISTENT POLICIES AND LEGACY POLICIES 33© Guidepost Solutions LLC 2011
  34. 34. SUPPORT FUNCTIONS NEED TO UNDERSTAND THEIR CRITICAL CONTRIBUTIONS VENDORS NEED TO UNDERSTAND THEIR CRITICAL CONTRIBUTIONS CODE OF CONDUCT 34© Guidepost Solutions LLC 2011
  35. 35. To Work To Create A Culture In Which:  Employees expect legal and ethical behavior of themselves, their colleagues and their counterparties.  Employees are able to identify and recognize legal and ethical hazards when they arise.  Employees have the tools, training and resources to make the right decisions and the confidence to seek advice. 35© Guidepost Solutions LLC 2011

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