|  | | 2007 News and Press Releases | | |
HEADLINE NEWS:
How Companies Are Managing With Monitorships
Douglas Jensen
Law.com. December 12, 2007
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EXCERPT: Imagine that you represent, as outside or in-house counsel, a publicly traded corporation that has recently fallen under the specter of a government investigation. Your internal investigation has revealed accounting misconduct on the part of several employees that will almost certainly result in their indictment. You receive a call from the chief of the Financial Crimes Unit in your jurisdiction's U.S. Attorneys' Office, who informs you that the misconduct went beyond the actions of a few rogue employees and permeated the core of the corporation's business. The prosecutor indicates that she could easily obtain an indictment of the corporation itself, but is willing to consider another, less onerous alternative: entry into a deferred prosecution agreement or perhaps even a nonprosecution agreement. By entering into and then honoring such an agreement, your client would avoid indictment, but in exchange must agree to implement remedial measures -- among them the appointment of an independent monitor with responsibility for overseeing the corporation's business for the next three years. What, she asks, is your response? The above scenario, almost unheard of for mainstream corporations 15 years ago, has played out with increasing frequency during the current decade. While the deferred prosecution agreement has long been employed as an alternative to criminal prosecution of certain select individuals, in the wake of the corporate scandals that marked the beginning of the decade -- Enron, WorldCom and Adelphia Communications, among others -- the U.S. Department of Justice has begun to apply it to corporations as well. The list of corporations that have recently agreed to monitorships in connection with a deferred prosecution or nonprosecution agreement includes AOL Time Warner, KPMG, Bristol-Myers Squibb, Monsanto Co., HealthSouth Corp., Mellon Financial Corp. and ITT Corp. Supporters of monitorships argue that they provide a mechanism for insuring that corporations fully address the problems that led to their investigation while avoiding the unintended collateral consequences that flow from the criminal indictment and prosecution of a corporation -- destruction of the corporation's business, massive loss of jobs and corresponding damage to the economy. Critics contend that the government is over-reaching, both by calling for monitorships in cases where they are not warranted and imbuing monitors -- often, former prosecutors or judges -- with an inappropriate degree of authority over businesses with which they have little familiarity. In order to evaluate these competing claims, though, it is critical to understand exactly what monitorships entail and how they are being applied in practice. |
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