For this white paper, I visited with Vin DiCianni, CEO and founder of Affiliated Monitors, Inc. (AMI) as a retrospective of the company’s first 15 years, which sponsored a podcast series celebrating this anniversary. This 15-year sweep is much more than simply the history of AMI; it details the rise of independent monitors in the US at multiple levels: the federal government, state agencies and local authorities as well as internationally.
AMI has been at the forefront of not only the use of independent monitors but also the dramatic growth of the compliance and ethics profession over the past 15 year. This paper discusses both the history of the rise of independent monitors as well as the government’s embrace of corporate compliance and ethics programs.
I. DiCianni's Idea
DiCianni began formulating the idea of an independent monitor when he observed a series of corporate punishments which he believed did not fit the crime. As a white-collar defense lawyer in the 1990s, DiCianni saw that there was only two ways a state regulator could go if someone was convicted of a transgression such as billing mistakes or similar regulatory violations. The licensed professional would either be convicted and have their state license suspended or revoked or there would be no prosecution. DiCianni viewed this as “a death sentence” for a licensed professional. He added, “It just seemed wrong to me, but there was nothing that was out there. For about seven, eight years, this idea just percolated in my head about doing something to create these alternative sanctions, if you will, on the probationary side of things. So that a doctor or the practitioner could get better.”
The reality is that license revocation or suspension for relatively minor regulatory infractions does no good for any of the parties involved. It unfairly and harshly penalized the defendant. It penalized the public interest by removing a valuable service provider from bringing those skills to address a public need. Finally, it penalized the regulator whose interest was not always punishment but in remediation in fostering practitioners to understand and practice within a jurisdiction’s regulatory scheme.
From this point, DiCianni was able to convince some state regulators in Massachusetts to try this third way of having an independent monitor step in and assess whether a professional, who had run afoul of a regulatory scheme, could be rehabilitated via a probationary structure. He then I reached out to a number of folks in the Boston area. Some of them were regulators, some were attorneys who represented folks before the state boards, some were acting state attorneys general and some were in business. With this idea coming to fruition, the next step for DiCianni was to create a business organization to fill this niche.
One of the first things that DiCianni established with AMI was both integrity and professionalism in the company’s monitorship roles. The integrity comes from the independence that your organization can bring to the monitorship process. DiCianni said that one of the key reasons for success of a monitor is true impendence. Previously, a state regulatory board might appoint one of its own to become the monitor. In reality they were simply the “eyes and ears of the board.” Conversely, if the monitor is the best friend of the recalcitrant party, DiCianni noted, “then there’s a clear bias and lack of objectivity and neutrality to the process. AMI was able to bring itself in as a true neutral. The professionalism is the subject matter expertise you can bring to bear on a monitorship. Having both of these two ingredients was key for AMI to successfully establish itself with regulators.”
DiCianni said that another key feature of a successful monitorship is around education. A monitor is not there simply to represent the interests of a regulator, on a punitive basis. The monitor can also work to help educate a person or organization on how to better meet their regulatory obligations beyond simply meeting the base letter of the law. In other words, moving beyond simply a check-the-box program. All of these concepts had to be explained, literally again and again to regulators. DiCianni said, “It is talking to them, explaining to them what you do, telling them sort of the benefits of what they’re getting here and then showing them some of the examples of how monitoring works.” He spent “a lot of time sort of building some ground swell of support for the concept of the independent monitor.”
II. The Early Days
DiCianni said the initial model for an independent monitor he came from a number of special Commissions that were created by New York City to address improprieties by construction contractors in building public schools in New York City. Out of those Commissions arose the concept of Independent Private Sector Inspector General (IPSIG) and the model was to bring accounting, legal, and engineering skills into the oversight of construction contractors who were about to lose a contract because of some type of violation of the terms of the contract. This IPSIG model was used to provide oversight for these contractors so that the buildings needed could get built.
However, this IPSIG model was very intrusive, with the monitor literally in the back pocket of the contractor reviewing accounting records, engineering drawing and contracts on an almost continuous basis. DiCianni envisioned a less intrusive, more collaborative model. Yet he noted it took time to convince all the relevant parties, the regulators, defense counsel and companies of the effectiveness of this approach. He said there were three key factors in this process.
The first was to convince the regulators that a truly independent monitor not only had advantages but would work. A second factor was that many government agencies and state oversight boards did not want to put the licensed companies and persons out of business because the government and people in a state needed the services. For instance, in many ways it may hurt more than help to shut down a hospital or a physician’s practice for regulatory violations, particularly if the violations are not life-threatening to patients. Finally, during this time there were economic pressures which caused cut-backs to funding and the regulators simply did not have the head count to fulfill the oversight role that an independent monitor can perform.
Similarly, DiCianni needed to convince white collar defense lawyers of the efficacy of an independent monitor. He said that for “defense attorneys like myself, this was an idea that gave them something to negotiate with for their client before the regulatory agencies. One of the sort of benefits, for defense attorneys, is that they now had something that they could use to leverage with regulatory agencies as opposed to just being confronted with your client’s going to be suspended for five years.” Moreover, under this remedial approach, the recalcitrant party would agree to pay the cost of the independent monitor. When the defense counsel recognized the benefit that an independent monitor could bring to their clients, they became advocates for the independent monitorships with the regulators.
I asked DiCianni if there were any areas of significant push back from regulators or others in the early days of AMI. He responded that, although it was really not push back on the independent monitor concept, there were some instances where the regulators desired to use the independent monitor in a manner wholly inappropriate to the overall concept. This was in the realm where a regulator desired the independent monitor to act as the investigative arm of the regulator, continuing to investigate the company or person after the resolution had been agreed to and signed off on by all parties.
DiCianni mentioned two other areas of pushback. The first was around the cost of the monitorship, which is borne by the company. Here he noted that setting expectations is critical, particularly through a workplan. The second was what he termed as “opening the kimono” as many companies were initially reluctant to share documents, information and even employees with a monitor. Here DiCianni said the key was a well-structured Corporate Integrity Agreement (CIA) or Deferred Prosecution Agreement (DPA) which laid out with specificity the rights and obligations of all parties to the resolution agreement: the regulators, the party (ies) and the independent monitor.
III. The Expansion of Independent Monitors
DiCianni noted that the use of independent monitors has greatly expanded over the life of AMI. This expansion has been at all levels of domestic government: in the federal sector, in the state arena and down to the municipal level. It has also expanded into the international sphere as well as the private sector. The US Department of Justice (DOJ) began using monitors in the early 2000s around money-laundering (AML) prosecutions. Independent monitors were used by a wide variety of other federal agencies, from the Department of Transportation (DOT) to the Department of Defense (DOD).
AMI has provided independent monitorships in a wide variety of situations, including AML prosecutions at the federal level. At the state level one of the earliest was in Massachusetts, involving the Big Dig in Boston Harbor. At the municipal level, there have been independent monitorships around public schools and even pension plans. AMI’s work has extended into areas as diverse as prisons to alcoholic beverage regulatory issues. The subject matter expertise of AMI can have different focus, working with different levels of government. In the federal focus, there is compliance and ethics concentration, with state regulators the monitorship may be more focused on businesses meeting their regulatory obligations and with municipalities, the focus may be more around contract issues of procurement and execution.
I was intrigued by the structure of an independent monitor and how broad the work is to the various types of matters. DiCianni noted that independent monitors come “in all shapes and sizes, you could work on a gigantic international or multinational company to a midsize or small size company down to individuals. So each case is very different. Each case will have a certain set of conditions or criteria for the monitor.” He further explained this is why a well-crafted settlement agreement is required as it will detail the rights and obligations of all parties. It might lay out the requirements for the monitor and should lay out the reporting schedule and other items or issues the parties must consider going forward.
I asked DiCianni if he could provide an example of an independent monitorship which tied all these elements together. He related that AMI acted an independent monitor in a civil rights case out of New York City a number of years ago. Based upon this work “AMI received a call from the New York State Attorney General’s (AG) office. They had a small manufacturing company on Long Island which had hired and employed all disabled people. The company got into hot water with the state EEOC function for equal employment of violations. The state AG’s office was in a quandary, as it did not want to close down one of the last manufacturing company’s in this particular city on Long Island. However, the AG had to deal with these realistic problems that the company was having in the EEOC realm. AMI came up with a model under which the company implemented an ethics and compliance program for the state’s EEOC. Some of the elements included a hotline, AMI put on EEOC training for the staff and the management team. AMI then monitored the company for a period of time, to ensure the solution desired by all parties was obtained.”
Another example involved a railroad company that “got in trouble for some unauthorized activity on the billing under a contract. AMI was required to understand not only what had happened, how it had occurred from the root cause standpoint. From this root cause analysis, AMI was able to detail some of the deficiencies in the company’s control and create the monitorship around those issues.” The bottom line, as DiCianni stated, is that “we’re very comfortable monitoring almost any situation because of our years of experience doing it.”
IV. The Marriage of Independent Monitors and C&E Programs
The marriage of independent monitors and compliance and ethics programs has been facilitated through the evolution away from strict regulatory compliance to a more ethics-based compliance has been one of the most significant advancements in independent monitors over the history of AMI. Early on in the history of AMI, the company had independent monitorships in the health care industry around such issues as billing and coding. From there, AMI began to address other issues such as codes of conduct and conflicts of interest. So AMI was well suited to move into a more direct ethics-based compliance independent monitorship as the first decade progressed.
In the late part of the past decade AMI began to move into more Department of Defense (DOD) independent monitorships around suspension and debarment. Inspector Generals (IGs) in the DOD were very much focused on the ethics side of compliance in the oversight of companies which were going through the suspension and debarment process. Administratively, these IGs would use the suspension and debarment rules to have companies demonstrate they met the requirement under the applicable Federal Acquisition Regulation (FAR) that they were presently responsible contractors. In the eyes of many IGs, presently responsible included ethical considerations.
These ethical considers would include such issues as whether a company had installed a code of ethics, was there training on a compliance and ethics program, was there a disciplinary process and investigative tools that included a reporting hotline. DiCianni said “we were beginning to see lots of different agencies picking up on the elements of a compliance and ethics program. It was then picked up by other government officials and other federal regulators. Now it has become the norm”. This led to quite a bit of monitoring not just focused on legal compliance or regulatory compliance, but now has all of these elements of ethics and codes of ethics and compliance requirements.
DiCianni said that over the life of AMI there have been two Memos released by the Department of Justice (DOJ) which have directly impacted the selection of independent monitors and their application. The first was the Morford Memo, released in 2008. In this Memo, the selection criteria for independent monitors was first laid out, including the need for subject matter expertise and independence and integrity of the monitor.
The second was the Benczkowski Memo, released in 2018. The Benczkowski Memo talks discusses limiting the use of monitors to or only certain situations where they might be warranted. However it does give a company the incentive to go out and evaluate their own ethics and compliance programs, compelling them to strengthen those programs so that if they are ever confronted with an investigation or a self-disclosure to the DOJ, the company can demonstrate it has a strong compliance and ethics program and perhaps get special consideration.
As DiCianni noted, this type of proactive work is “really a good part of our work today. Helping companies evaluate their programs to see if they have a certain weaknesses.” DiCianni sees Benczkowski Memo as another impetus for AMI “to get out there and let people and let companies know that you don't have to do it on your own. There are entities out there that can help them strengthen their programs.” He concluded by stating, “I think each memo in its own way had some impact on us.”
V. Final Reflections on 15 Years
We concluded with DiCianni reflecting on where AMI has been, where it may be going and what he is most proud of regarding the 15th anniversary of the founding of AMI.
There have been a couple of themes articulated by DiCianni over this podcast series. One has been the independence and integrity of AMI throughout its history. In 2004 and the early days of AMI, these were the two things that AMI had to sell to a wide variety of stakeholders, from regulators to white collar defense lawyers to companies. DiCianni stated, this has “been something that has been very conscious on our part, to maintain our independence. We are not a law firm so we don't compete with other law firms. We're not investigators, so we're not doing the legwork part of the investigation. We are not expert witnesses. We have stayed in, I'll call it, our swim lanes.” This has allowed AMI to focus on one thing and one thing only, which is to provide “great independent monitoring services and to providing proactive assessments that use the skills that we've learned as monitors, to meet regulatory requirements.” This “professionalism, integrity, independence, which is in our bloodstream has helped us greatly.”
Equally interesting has been the evolution in the thinking of the regulators around the role of an independent monitor. When the role began in the past decade it was very much about regulatory compliance. This evolved to legal compliance, eventually moving to ethics-based compliance. Now with the Benczkowski Memo, it is proactive compliance.
I asked DiCianni what he was most proud of from the creation of AMI in 2004 up through the 15th anniversary. He said there were three things. The first is that he was able to take an idea, the need for an independent monitor, and germinate it into an ongoing, successful and viable business concern. He stated, “I know the one thing that sort of stands out to me is the fact that I was able to take an idea that I had and it just was rolling around in my head for those years and to be able to put it into the form of a company. From there I was able to create a brand for the organization. I’m very proud of that and that’s something that I can take to my grave and say I did something that sort of made a difference.”
The second was through the work of AMI, DiCianni has helped not only companies become more robust around ethics and compliance but AMI has helped them become better run organizations. He said, “the fact that we really have helped a lot of companies. We’ve just wrapped up a few matters, and we get these unsolicited comments by our clients and when they say you’ve made, we didn’t want to have a monitor, but you made us a better company. That makes you feel great. It really does. Because we do provide great services. We do try to meet that mandate of helping the company get better. And when you do that, that’s been very fulfilling.” The final thing that DiCianni mentioned was the people of AMI. He said, “The last thing that I’m proud of is that I have a remarkable team of people. I have a great team of people dedicated and passionate about the work that we do. So that makes me very proud. We never know what the next day is going to bring. And so there’s a level of uncertainty, which is a good thing because you never know what the next case could be. So again, Tom, it’s been a great 15 years and I’m really looking forward to more of this.”
The story of DiCianni and the history of AMI demonstrates that innovation can come in many ways, shapes and forms. DiCianni and AMI led the way by creating a business model centered around independent monitorships. It continues to do so today.
