Working at the Justice Department as its first ever compliance counsel expert, Hui Chen encountered a high-profile monitorship of a company that garnered one of the highest criminal penalties in Department of Justice history. (She won’t name the company.)

“The monitor selected by the company came from a small, independent entity formed specifically for that monitorship,” she writes with Todd Haugh in a recently published law review article titled Remaking Monitorships: A First Principles Approach to Monitor Effectiveness (2025 University of Illinois Law Review 109). 

“The monitor had never previously been involved in any corporate monitorship and struggled to understand the rules and boundaries of the engagement. The monitor retained as his counsel a lawyer whose specialty was estate law and who had no prior experience with federal criminal law.” 

“The monitor and his counsel treated both the company and the Fraud Section as hostile adversaries throughout the monitorship, going so far as to secretly record their meetings at the Department of Justice.” 

When Chen inquired among colleagues as to how a monitorship of this magnitude had been assigned to someone with obviously lacking qualifications, “the responses were surprising,” she says. 

“Precisely because of the magnitude of the case, many more qualified individuals and firms had been retained by the company in the litigation process and, therefore, were conflicted out of the monitorship,” Haugh and Chen write. “This shows just how different the policy ideals enumerated in Department of Justice memos can be from real-world practice: the bigger the case, the smaller the pool of qualified candidates. The result, as seen throughout recent history, was a monitorship mired in controversy.”

Recently, Chen, along with Zach Coseglia, founded CDE Advisors. (CDE stands for Culture, Data, Ethics.)

“There was another case where, in my opinion, the monitorship failed,” Chen told Corporate Crime Reporter in an interview last week. “And the prosecutor on the case agreed with me. But the monitor didn’t think so. And it was allowed to pass. What was the Department of Justice prosecutor supposed to do? Go to court and say – we think this company failed its monitorship. And the monitor says – I don’t think so. How is the court supposed to rule on that?” 

Which monitorship was that?

“I cannot disclose that unfortunately. I do still remember to this day that monitor smiling as the prosecutor and I sit across the table from the monitor asking – how could you pass this with all of these problems? He just sat there smiling and says  – I think it’s fine.” 

“Over the past two decades, federal prosecutors have made increasing use of corporate monitors,” Chen and Haugh wrote recently in the Washington Post. “Prosecutors like them because they can work from the inside to remake company culture. Companies tolerate them because agreeing to a monitor is better than the uncertainty of a criminal trial. Law and consulting firms fight to be selected as monitors because they make incredible amounts of money from the fees the companies they monitor must pay them.”

“All this creates a morass of misaligned incentives that has weakened the ability of monitorships to achieve their most critical goal: reducing corporate wrongdoing in the long term. Add to that a lack of transparency as to how monitors are selected, how they do their work and what they are paid.”

“The system is so broken that there isn’t even a clear standard for judging whether a monitorship has worked. There will be no way, at the end of its monitorship, to objectively determine whether Boeing has become more ethical and able to better prevent misconduct.”

In their paper, Chen and Haugh propose a series of reforms. 

First, transparency in how monitors are selected and do their jobs is key. 

“Monitors should be selected based on proven expertise in creating industry-specific behavioral change within organizations, not based on private connections to those making the monitor selection,” they write. “The current system creates a black box around the selection of monitor candidates, causing the hoarding of information and loss of institutional knowledge once the monitorship ceases.”

Second, monitor compensation should be reformed away from hourly compensation and toward a structure that incentivizes proven and measurable outcomes. 

“Private practitioner monitors paid by the companies they are monitoring are not incentivized to work efficiently or in the public’s best interest, leading to frequent fee disputes, over and underenforcement of compliance, and lack of innovation.” 

Third, there needs to be a consistent methodology to guide the conduct of monitorships.

“The credibility of the monitorship system is jeopardized when the approach and standards of monitorships vary wildly from one monitor engagement to the next.” 

Fourth, the success of a monitorship must be defined in concrete, measurable terms and evidenced by data. 

“This means data collection and analysis in all aspects of monitorships must be improved. Monitors must start by understanding what data sources are indicative of an organization’s performance in the areas being monitored, and then mine those sources for feedback.”

“Determining whether there has been a behavioral change in an organization depends on testing by the monitor – establishing a baseline, introducing a compliance intervention, and then testing again to see if conduct risk has been lessened.”

Chen and Haugh say that the reforms can most realistically be accomplished “by creating an interagency and interdisciplinary Office of Monitorships – the idea being to create more professionalization of the monitor function, to serve as a hub of innovation in the monitorship and compliance space, and to reduce the negative incentives on monitor effectiveness. While we are mindful of the potential drawbacks of such a structure, we see it as the best way to achieve the laudable goals of monitorships – ones that have been faltering for decades.”   

We interviewed Mike Koehler last month and he makes the point that there really hasn’t been that much FCPA enforcement over the past decade. He crunched the numbers and found that there have been on average, seven FCPA enforcement actions brought by the Department.

“I haven’t crunched the numbers myself. But in my latest article, I write that the FCPA industry has been using the threat of enforcement as its primary sales tactic. That fear of the FCPA has been grossly exaggerated by the FCPA industry. I have always said that.”

Koehler refers to it as FCPA Inc. You refer to it as the FCPA industry. Those are the attorneys who enforce and defend against this law. They spin through the revolving door together. And it’s a lucrative practice.

Why are corporations vulnerable to this sales pitch? They know it’s hype.

“I’m not sure they know the numbers. I speak with chief compliance officers. And when I give them more of a reality check on what the Department’s FCPA enforcement is really like, they seem shocked and surprised. I’m not sure they do know what the numbers are.”

“I point this out because I have serious concerns about this being the motivation for companies to do compliance. I choose not to use fear as a motivation to get people to comply. It’s the wrong reason.”

What’s the right reason?

“Because you want to. I often ask compliance officers when I meet with them – if the Justice Department stopped enforcing the FCPA, would you still have a compliance program? Do you the company, do you the individual, do you want to stop bribery? And if you want to stop bribery, I wouldn’t make a distinction between foreign and domestic, first of all. Bribery is bribery. Do you want to stop bribery? You stop bribery irrespective of enforcement. You do it because you want to.”

Why did you choose to put culture, data and ethics in the title of your firm’s name?

“That’s what we believe in, that’s what we do. We help companies improve their culture, improve their use of data and improve their ethical guidance in the company. We found that these are the three words that describe what we believe in and what we do.”

How do you think that this whole deregulatory philosophy and policy, including dismantling entire federal agencies like the Consumer Financial Protection Bureau (CFPB) is going to impact the corporations who are your clients? How will it affect what it will do on a day to day basis?

“Everybody is scrambling. Things are changing on a daily if not hourly basis. They are all trying to figure out what the impact will be. They fired a group of federal employees, some of whom were working on bird flu, some of whom keep our nuclear arsenals. And now they are scrambling to hire them back.” 

We ran a story in 2022 titled – Hui Chen on the State of Corporate Compliance. And you painted a pretty dismal picture back then. Have things changed in the last couple of years and whether corporate compliance has gotten better or worse?

“Corporate compliance officers are becoming more aware of the need to be data driven. That is a significant improvement. Increasingly, the compliance profession is far more aware of the need to use data in their work than they were four or five years ago. That is a significant improvement.”

“Over the past six or seven years, it has improved.”

Let’s look at the 1,000 major corporations in the United States. All of them probably have a compliance program. What percentage of those programs would get the Hui Chen stamp of approval?

“I don’t do stamps of approval. Every program, even if it’s good today, if it doesn’t keep up, may not be good tomorrow.” 

When you were at the Justice Department, wasn’t that your job? You would advise the Justice Department on whether a corporation under investigation had adequate compliance programs. 

“Understand, that’s a pass/fail. Stamp of approval is a different thing.”

What’s the difference between pass and stamp of approval?

“Stamp of approval means – I think you are good.”

What does pass mean?

“Pass means it could be an A or it could be a D.”

How many of the top 1,000 corporations would pass?

“I could not say. I’m a data driven person. I do not have that data.” 

I’m looking for your sense. Here’s the reason I’m asking this. There is a dispute among people who study corporate crime and wrongdoing. Some say it’s a rotten system. Others say there are some rotten apples.

“It’s somewhere in between. I hesitate to use words like – rotten system. That’s a big statement.”

“When you look at the entire corporate system, you are looking at things like the regulatory environment, the overall economic activities, and geopolitical realities. I just wouldn’t go to a rotten system unless you can define to me what you mean by system.”

“I also do think we are beyond a few rotten apples. It’s somewhere in between. Human nature is such that if there is a shortcut, a lot of people will take it.”

“On one extreme, your entire business model is a fraud. That’s one extreme. And then you have the other extreme of a company that overall has sound governance, has principles it tries to uphold and yet it is going to encounter employees that stray.”

“If you put a middle line between those two extremes, I would say they fall on the side of people who are trying to have sound governance, uphold their principles and sometimes encounter individuals who stray from the collective ideal. I would put them in that half rather than the other half.” 

Let’s look at a major American company who has conscientious compliance officers but are having a hard time doing their jobs because of roadblocks put in their way by higher ups within the company. How often do you come across that scenario?

“There are different levels of discomfort. You will get compliance officers who say – I’m really uncomfortable and just about to walk out the door. Or – I would walk out the door if I could afford to. Or they will be straight out fired.” 

“That is not as common. We are talking about a spectrum here. That’s one side of the spectrum. The other extreme is – I have a very supportive senior management and board. They support what I do. They are very interested in what I do. Those are equally rare.” 

“The majority situation is somewhere in between. They will say – senior management supports what I do, but there are limitations on the resources they give me to do my job. I don’t get everything I want. I don’t feel supported one hundred percent of the time. But at least fifty percent of the time I feel supported.” 

“The vast majority falls somewhere in the middle.”

[For the complete q/a format Interview with Hui Chen 39 Corporate Crime Reporter 9, March 3, 2025, print edition only.]