New DOJ Guidance on the Use of Corporate Monitors Reinforces The Importance of An Effective Corporate Compliance Program

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By: Lisa A. Mantella, Esq.

Corporate monitors have long been used by federal courts as a tool to keep watch over rogue corporations. On October 12, 2018, Assistant Attorney General Brian Benczkowski announced the Department of Justice’s (“DOJ”) new approach on the imposition of corporate monitors.[1] The guidelines reinforce the importance of an effective corporate compliance program.

Corporate monitors can be put in place as part of terms of a deferred prosecution agreement (“DPA”), non-prosecution agreement (“NPA”), or a plea agreement between Criminal Division of the DOJ and a corporation. An independent monitor is selected to oversee the corporation’s compliance with the terms of the agreement. They can be used either as a criminal sanction or in place of a criminal sanction and are responsible for assessing and reporting to the government agency on the effectiveness of a corporation’s compliance program and ensure that there are processes in place which prevent the reoccurrence of the criminal behavior that gave rise to the underlying crime.

Monitors have been an effective tool in forcing companies to direct attention and resources to addressing compliance and ethics deficiencies rather than costly trials. However, they also bring significant disruption and financial strain on a company.

Assistant Attorney General Brian Benczkowski’s recent memorandum seeks to slow the growing role of monitors and consequently, the inherent intrusion that a monitor brings to a corporation. The memo unveiled new limitations that would require the corporate watchdogs to be appointed “only as necessary,” and never as a “punitive measure.”[2] “Where a corporation’s compliance program and controls are demonstrated to be effective and appropriately resourced at the time of resolution, a monitor will likely not be necessary.”[3]

The memorandum offers the following considerations for Criminal Division attorneys when determining whether a corporate monitor will be beneficial:

  1. whether the underlying misconduct involved the manipulation of corporate books and records or the exploitation of an inadequate compliance program or internal controls systems;
  2. whether the misconduct at issue was pervasive across the business organization or approved or facilitated by senior management;
  3. whether the corporation has made significant investments in, and improvements to, its corporate compliance program and internal control systems; and
  4. whether remedial improvements to the compliance program and internal controls have been tested to demonstrate that they would prevent or detect similar misconduct in the future.[4]

The Benczkowksi memo underscores the importance of having a robust corporate compliance program and appropriate procedures in place. The memo, while outlining changes in how and when a monitor will be appointed, highlights the fact that the state of a company’s compliance program at the time of the wrongdoing, will continue to be a critical factor in the Justice Department’s procedure for resolving corporate criminal matters.

If you have questions about this memorandum and corporate compliance programs, please contact Lisa A. Mantella. Lisa is Counsel with Leech Tishman and is based in the firm’s Pittsburgh office. She is a member of Leech Tishman’s Litigation, Internal Investigations, and Embezzlement Practice Groups. She can be reached at 412.261.1600 or lmantella@leechtishman.com. 

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[1] See U.S. Dep’t of Justice, Remarks of Assistant Attorney General Brian A. Benczkowski, “Assistant Attorney General Brian A. Benczkowski Delivers Remarks at NYU School of Law Program on Corporate Compliance and Enforcement Conference on Achieving Effective Compliance” (Oct. 12, 2018), https://www.justice.gov/opa/speech/assistant-attorney-general-brian-benczkowski-delivers-remarks-nyu-school-law-program.

[2] See Assistant Attorney General of the United States, Memorandum re Selection of Monitors in Criminal Division Matters (Oct. 11, 2018), https://www.justice.gov/opa/speech/file/1100531/download

[3] Id at 2.

[4] Id at 2.