The Corporate Monitor Boomlet
23 Corporate Crime Reporter 46(12), November 28, 2009

What do James Cole, Aaron Marcu, George Stamboulidis, David Kelley, Debra Yang, James Doty, William Pendergast, Jan Handzlik, Neil Getnick, Richard Breeden, Timothy Dickinson, Saul Pilchen, Danforth Newcomb, Stephen Fishbein, and John Ashcroft have in common?

They have all been corporate monitors.

Appointed by the Justice Department to oversee and enforce various deferred and non-prosecution agreements.

How do we know?

The list of corporate monitors was recently published on the House Judiciary Committee’s web site.

Not including four that have been appointed since March of 2008.

(The Justice Department didn’t get back to us as to who those individuals might be.)

Two additional monitors will be appointed soon.

The Government Accountability Office released a report last week on corporate monitors.

The title of the report: “Corporate Crime: Prosecutors Adhered to Guidance in Selecting Monitors for Deferred Prosecution and Non-Prosecution Agreements, but DOJ Could Better Communicate Its Role in Resolving Conflicts.”

The GAO found that there have been 45 monitors.

GAO interviewed representatives from 13 companies that had monitors.

More than half of the company reps raised concerns about the monitors cost, scope and amount of work completed.

Some companies paid $8,000 a month for their monitors.

Others paid $2.1 million per month.

The GAO surveyed eight companies on the cost of their monitorships.

These reported costs were: $38.7 million; $12 million; $9.2 million; $5.7 million; $3.9 million; $3 million; $2.7 million; and $200,000.

Danforth Newcomb of Sherman & Sterling in New York was the monitor for York International in a recent Foreign Corrupt Practices Act case.

Newcomb says that fees are only the tip of the iceberg when it comes to the costs of monitors.

“If the monitor recommends that the company completely change its philosophy of compliance, that may be a very expensive proposition – much more expensive than the cost of the monitor per se,” Newcomb told Corporate Crime Reporter in an interview last week.

Newcomb is uncomfortable with the glare of publicity on corporate monitors.

“I’m not sure what the balance should be,” Newcomb said. “Being a monitor, I know how hard it is for this three legged stool to operate – for the company to be satisfied, for the government to be satisfied, and for the monitors to satisfy both of his constituencies properly. Add to that the glare of publicity, and it detracts or is likely to detract from most of those relationships.”

“I’m not saying they should be confidential – there is no attorney client privilege. If somebody did a bad job, misbehaved, or had a problem – I don’t think that is something that should be shielded.”

“But at the same time, it’s a very delicate relationship that probably benefits from a certain amount of lack of public attention.”

Newcomb says that when you are appointed to be a monitor, the Fraud Section at the Department of Justice “expects a work plan.”

“One part of a work plan clearly is – where are you going to go where, and what you are going to do,” Newcomb said.

“The early monitorships – which came out of corrupt unions – were more intrusive than the more recent monitorships, which are much more focused on developing an enhanced compliance program to prevent the kind of violation that is the subject of the deferred prosecution agreement.”

“Early monitorships were more – sit in the office and watch every transaction – because that is what happened in connection with some of the corrupt union cases.”
Could we conclude from what you just said that the monitorships for corrupt unions are tougher than the monitorships for corrupt corporations?

“Object to the question,” Newcomb shoots back. “It assumes facts not in evidence.”

“In the corrupt union cases, there was a significant question as to whether or not the leadership of the union, and its entire structure, was capable of performing well.”

“In most FCPA cases, you don’t have the board of directors and senior management involved in any way. There may be some problem with a unit, or a portion of a unit, or more frequently, an occasional transaction.”

[For a complete transcript of the Interview with Danforth Newcomb, see 23 Corporate Crime Reporter 46(12), print edition only.]



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