Not Your Father’s Monitor – Bethany Hengsbach on White Collar Enforcement and Defense

Thomas Fox
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Compliance Evangelist

In October, Deputy Attorney General (DAG) Lisa O. Monaco gave a Keynote Address at ABA’s 36th National Institute on White Collar Crime (Monaco Speech). Her remarks reframed a discussion about the uses of, reasons for and perceptions on independent monitors and monitorships. I asked Affiliated Monitors Inc. (AMI) founder Vin DiCianni for his thoughts around the remarks on monitors. He said, “For Affiliated Monitors this refreshed approach by DAG Monaco highlights the seriousness which businesses must place on the investment in their programs and in addressing what has for some been a negative experience with a monitor. For those who might be the subject of a monitorship, DAG Monaco recognized that the negativity that has sometimes surrounded monitorships as being punitive, should be seen in a different light bringing value, pointing a way forward and as a solution which has had great success in resolving matters.”

Monaco’s remarks should be studied by every compliance professional as they portend a very large change in the way the Department of Justice (DOJ) will utilize monitors going forward. Over this podcast series, sponsored by AMI, we will consider why DAG Monaco’s remarks herald a new era for monitorships. We will consider Monaco’s remarks from a variety of perspectives. Bethany Hengsbach will consider this change in monitorships from the white-collar enforcement and defense perspective. Mikhail Reider-Gordon will look at global aspects of the new DOJ monitor’s focus. Cristina Revelo will discuss how ethics and compliance (E&C) assessments help drive more compliant companies. Jesse Caplan brings his views on the twin topics of antitrust and healthcare compliance. We will conclude the series with Vin DiCianni who will look at where monitorships are going in 2022 and beyond. In Part 1, Bethany Hengsbach, Managing Director of Global Corporate Compliance, looks at the speech from the perspective of white-collar enforcement and defense.

Hengsbach was present for the Monaco Speech. She noted that while the remarks were a bit of a surprise because of their content and their timing, she did not believe they were a change in policy but “going back to the way things had been for a long time. And obviously, you know, she specifically rescinds certain guidance from the past specifically with respect to monitors” [Benczkowski Memo]. Moreover, the Monaco Speech emphasized the “non-punitive” nature of monitorships. The DOJ views the imposition of independent monitors as appropriate to do so in order to satisfy itself that a company is living up to its compliance and disclosure obligations under a settlement agreement. Hengsbach believes this is “a recognition of the role, that monitors play in fostering an environment of compliance, not just as a penalty, or even as a component of NDA or a DPA or a plea agreement, but really as a tool to incentivize compliant conduct on the front end.”

The Monaco Speech really drove home the message that monitorships do not have to be a negative experience. Here Hengsbach believes “it is incumbent upon the independent monitorship community understand that our role is not to play the ‘gotcha’. It’s to lend a helping hand to the company to say, this is the way forward. This is the way out of this difficult situation.” A monitorship can be used to build a stronger, more compliant company that has better relationships with regulators. Hengsbach added, “the change in policy is important but I think it’s incumbent also upon monitors themselves to really react to this, to this change in policy and ensure that monitors, are not viewed in a punitive way, because in many ways I think that was earned.”

Hengsbach concluded by considering the third component of the Monaco Speech, recidivism. Obviously, this is something the DOJ is very concerned about, both in the Foreign Corrupt Practices Act (FCPA) context as well as other white collar enforcement actions. A more proactive use of monitors can help keep the company from becoming a recidivist during the pendency of a Deferred Prosecution Agreement (DPA) or Non-Prosecution Agreement (NPA) or other form of settlement agreement through putting in a more robust compliance program to prevent and detect compliance violations. A monitorship also acts to expand the reach of the DOJ to also stop recidivist conduct.

The one other area I wanted to visit with Hengsbach about was related to DAG Monaco’s remarks about recidivism. If you draw a line back to monitorships, monitors can be used in yet another way, in addition to the non-punitive manner, in addition to extending the DOJs reach through the use of the tool of the monitorship, it could actually help to prevent future corruption, because we do have recidivous in the FCPA world, or we have it had in the past. How can the use of a monitorship keep a company from a coming of recidivists, from getting into more trouble, having additional financial penalties or other burdens put upon them as well?

Hengsbach has represented a recidivist corporation. She stated, “the issue of recidivism is real. I think that since then it has become unfortunately much more common. What we need to keep in mind here is what the Monaco Speech said about culture.” For it is through installing and maintaining a culture of compliance that you fix ongoing problems, particularly when it comes to corruption is to change the culture. Hengsbach believes this is a key reason why there are “repeat offenders in the FCPA world, because the fixes that are put in place are extremely narrow and geared at logistics or operations and not culture.”

What really drives compliance is real changes in culture. Hengsbach believes this is “an area in which monitors can be extremely useful. We have engagements now where we are exclusively focused on culture and companies, really smart companies, realize that cultural issues are the canary in the coal mine, oftentimes for real enforcement problems.” Hengsbach concluded, “this shift in policy to use monitors to prevent recidivism is fantastic. Especially when you take into account the impact that we as monitors can have on culture.”

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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