The Department of Justice on Oct. 11 issued revised guidance to establish standards, policies, and procedures for the selection of monitors in matters being handled by Criminal Division attorneys.

“The goal of the new guidance is to further refine the factors that go into the determination of whether a monitor is needed, as well as clarify and refine the monitor selection process,” Assistant Attorney General Brian Benczkowski said in remarks at an NYU School of Law Program on Corporate Compliance and Enforcement Conference.

Last year, while speaking at another PCCE event, Deputy Attorney General Rod Rosenstein proclaimed that the Department would be actively reviewing a wide range of existing corporate enforcement policies. “Consistent with this directive, we have been reviewing our monitorship policies and procedures since my arrival,” Benczkowski said.

He announced that the new policy supersedes guidance contained in the 2009 Breuer Memorandum regarding the selection of corporate monitors, but it does not replace prior guidance contained in the 2008 memorandum issued by then-Acting Deputy Attorney General Craig Morford. “Rather, the new policy supplements the Morford Memo,” Benczkowski said. At the time, the Morford Memo was the agency’s first effort to formalize internal guidance on the selection of monitors and the execution of their duties.

Unlike the Morford Memorandum, which applied by its terms only to deferred prosecution and non-prosecution agreements, “our new memorandum makes clear that the Criminal Division also will apply the same principles to court-approved plea agreements that impose a monitor,” Benczkowski explained.

The Justice Department approached the new policy “with the foundational principle that the imposition of a corporate monitor is never meant to be punitive,” Benczkowski said. “It should occur only as necessary to ensure compliance with the terms of a corporate resolution and to prevent future misconduct. That approach is consistent with our longstanding practice of imposing corporate monitors as the exception, not the rule.”

Most resolutions do not involve a monitor. “Our new policy explicitly recognizes that, ‘the imposition of a monitor will not be necessary in many corporate criminal resolutions, and the scope of any monitorship should be appropriately tailored to address the specific issues and concerns that created the need for the monitor.’”

Factors considered

In making their determination, Criminal Division attorneys must consider a number factors, including the type of misconduct—such as whether it involved the manipulation of books and records or the exploitation of inadequate internal controls and compliance programs. Attorneys also will assess the pervasiveness of the conduct and whether it involved senior management.

Other factors to consider include any investments and improvements a company has made to its corporate compliance program and internal control systems, and whether remedial measures have been tested for the ability to prevent or detect similar misconduct in the future, Benczkowski noted. Similarly, the policy takes into consideration whether the misconduct took place in an inadequate compliance environment that no longer exists. Notably, the new policy also considers whether misconduct took place under different corporate leadership and recognizes the unique risks and compliance challenges in each region and industry in which a company operates.

In terms of whether a monitor is necessary, the policy directs Criminal Division attorneys to also consider both the financial costs to a company, as well as unnecessary burdens to the business’s operations. “We believe this pragmatic approach to monitorships will ensure that we continue to carefully evaluate each case, based on specific facts and after a careful assessment of a company’s corporate compliance program at the time of resolution,” Benczkowski said. “This means not only determining whether the program is adequate on its face, but also how its effectiveness has and will continue to be tested.”

Selection process

The policy also addresses the selection process for corporate monitors. “Our goal here is to ensure that the process is fair, ensures the selection of the best candidate, and avoids even the perception of any conflicts of interest. For this reason, the Division’s monitor selection committee will continue to include an ethics official from the Criminal Division,” Benczkowski said.

“We want to ensure that businesses and the public are confident in the selection process, avoiding any suggestion that monitors are chosen for inappropriate reasons, including personal relationships or past employment in the Department,” he added.

Finally, the policy recognizes that unique circumstances may arise that require departing from the policy’s procedures. This may occur when working a case jointly with a U.S. Attorney’s Office, Benczkowski said, that may have different policies and procedures, “in which case the policy provides for some flexibility, with any departures from the policy subject to certain approvals by Criminal Division leadership. Ultimately, a monitor should benefit the company, its employees, shareholders, and the public by effectively furthering the goal of preventing and detecting future misconduct.”

Post-monitorship

“[O]nce a monitor is selected and installed, our work at the Department is far from over. We take seriously our burden of ensuring that monitorships are being carried out properly and effectively. In particular, it is incumbent on our prosecutors to ensure that monitors are operating within the appropriate scope of their mandate. Monitorships should never be expanded or extended for any illegitimate reason.”

Although the contractual agreement ultimately is between a monitor and the company, the Department is there “to act as a referee of sorts where needed, consistent with the governing agreement.” If a company that is subject to a monitor encounters problems, it should feel comfortable approaching the Department.

“While we do not want to encourage frivolous claims, we absolutely want to know of any legitimate concerns regarding the authorized scope of the monitorship, cost, or team size. If a company wants to raise its hand with an issue, we are here to listen.

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