Deferred Prosecution Agreements, Working with an Independent Monitor and Getting Beneficial Results Presented by: Bart M Schwartz Global Compliance Symposium,

Deferred Prosecution Agreements, Working with an Independent

Monitor and Getting Beneficial Results

Presented by: Bart M Schwartz

Global Compliance Symposium, Washington, D.C. Dow Jones

April 1, 2011

© Guidepost Solutions LLC 2011

What is a Deferred Prosecution Agreement?

Voluntary alternative to adjudication following the filing of a formal charging document by the government

Entered into between a prosecutor and defendant Grants relief in return for defendant’s adherence to certain

requirements, e.g. fines, corporate reforms, cooperation, appointment of an independent monitor/expert/consultant

Fulfilling requirements results in dismissal of charges

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Variations on the DPA

Non-Prosecution Agreement An agreement not to prosecute, so no formal charges are filed by the

government Under the agreement the defendant may be required to pay fines,

cooperate institute reforms, or retain an independent monitor or expert

Prosecution with monitor

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Source: Gibson Dunn & Crutcher

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Source: Gibson Dunn & Crutcher 5

Why does the government appoint a

Monitor? Serve the Public Interest by providing

Long Term Oversight Supplementing or freeing up government resources Maintaining jobs, products/service Elevating industry standards Protecting innocent shareholders Deterrence Early warning system for the government

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Goals of the Monitorship

Change and/or improve culture Create a system which outlasts the Monitor Be vigilant Do not limit oversight to narrow issues Seek to have a broad impact on the organization

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Selecting the Monitor DOJ system- March 7, 2008 Pre-approved list Veto power only Combinations Skill sets

Industry expertise Investigative Management Prior monitorships Teacher Facilitator Disciplinarian Sometimes, even a cheerleader

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Monitor’s “Contract”

Negotiated by the subject and the government, without input from the Monitor

Generally includes a scope which may be quite detailed May state what is NOT within the Monitor’s jurisdiction

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Elements of a typical contract

Term and internal deadlines Recitation of related matters e.g., DPA Representations Due diligence for new hires Code of conduct and training Retention of Monitor Funding of Monitor Secrecy of bills Duties and responsibilities of Monitor Privilege issues

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Elements of a typical contract cont’d.

Protection of propriety information Monitor reports Sale of Company/Unit Determination of violation Consequences of violation Indemnity Removal or replacement of Monitor

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The Monitor is coming!

Will the Monitor be able to deal with both government and corporate constituencies?

Now there’s an outsider in my business! Can we “confide” in the Monitor? It looks like the Monitor has a “blank check”- Where will he go, what will he

look at? Can the Monitor distinguish between bad conduct and mistakes or

misjudgments? Will the Monitor understand and appreciate our business needs? How much will this cost?!

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How to work with the Monitor

Understand the Monitor’s responsibilities and requirements Does the Monitor’s have to submit a work plan to the regulators? What other reporting requirements does the Monitor have? What is the timeline for reporting?

Initial meeting-setting the tone Understand the Monitor’s approach to the engagement. Not all monitors are alike.

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How to work with the Monitor cont’d.

Designate a company response team as a resource for the Monitor Appoint a key contact. Include individuals from IT, Internal Audit, Legal and other functions on the

team in order to be able to respond quickly to requests and meet the needs of the Monitor.

Open communications at all times Inform the company of the need to cooperate and reinforce message

periodically. Have regular interactions with the Monitor and his/her team. Consider periodic status meetings to discuss the Monitor’s ongoing

requirements. Keep apprised of the Monitor’s level of satisfaction with the company’s

cooperation.

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How to work with the Monitor cont’d.

Share corporate resources with the Monitor as appropriate Collaborations with Internal Audit for specific reviews

Cost Savings Training Knowledge

Possible involvement of Legal in ad hoc investigations IT assistance in investigations and other monitoring activity

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Overcoming bumps in the road

If problems arise during the course of the monitorship-either self-reported or discovered by the Monitor-address them immediately, openly and comprehensively.

Demonstrate willingness to correct and discipline if appropriate.

Consider using the problems as a “lessons learned” communication to employees.

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Winding down but not out

While the Monitor is still engage him/her in sustaining good practices and developing them into best practices.

Use the Monitor’s experience with other companies and industries to help fashion a compliance program and culture that will become embedded in everyday activities.

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Outsized Problems from Undersized Units

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Irrational Comfort with Risk

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Battling H.R. and Legal

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The Pluto Theory of Compliance - Incentives

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Focus on Business Units Not Compliance

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Risk Analysis for Resource Allocation

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Training Fatigue

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Tone All Over Where The Top Is Depends Upon Where You Are

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Confidence To Speak Up and Ask Questions

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Ability to Identify Issues

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Investigations

More Than You Think Dangers Building Respect for Results

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Dumping Grounds

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Consistent Policies and Legacy Policies

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Straight Talk

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Compliance Knowledgeable About The Business

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Movement From Compliance to Business and In The Other Direction

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Compensation Link

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Sharing Best Practices

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Support Functions Need To Understand Their Critical Contributions

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Vendors Need To Understand Their Critical Contributions

Code of Conduct

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Goals

To Work To Create A Culture In Which:

Employees expect legal and ethical behavior of themselves, their colleagues and their counterpartiesEmployees are able to identify and recognize legal and ethical hazards when they ariseEmployees have the tools , training and resources to make the right decisions and the confidence to seek advice

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