Article By Martin Milita
Like-minded States Attorneys’ General (AGs) are increasingly aggressive and increasingly working together. In some cases, as with immigration, they are directly challenging the federal government. The Obama Administration faced AG challenges to many of its policy priorities, including the Affordable Care Act, various environmental regulations and the Dodd-Frank financial law.
But the federal government is not the only target. AGs have also targeted corporations ranging from Google to the nation’s largest banks, energy and gaming entities. AG’s often aggressively pursue businesses for regulatory violations, sometimes seeking the revocation of operating privileges- a commercial death penalty. AG-led lawsuits have become a crucial part of the American regulatory landscape, particularly since their resolution often involves millions (even billions) in fines and new regulatory requirements for the targeted industries. Thus, complicated regulatory and legal systems have created the need to rely upon external gatekeepers to detect and prevent organizational misconduct.
Gatekeepers, known by a variety of names including Monitors, external compliance officers and Independent Private Sector Inspectors General (“IPSIGs”), have become a common judicial, regulatory, and conflict resolution tool (hereafter “Monitor” or “Monitors”). In most instances, a Monitor is installed by agreement between a company or other public or private entity and the government. The agreement between the parties (the “Agreement”), often resulting from some concern about fraud, misconduct, or regulatory violation, enables the monitored organization to mitigate, suspend or avoid government actions or penalties, such as debarment, administrative charges, or indictment, through the monitored organization’s (“Host Organization” or “Host”) commitment to perform the actions enumerated in the Agreement.
The need for and rise of the modern-day monitorship is an outgrowth of three related phenomena: (i) the evolution of the use of traditional, court-appointed agents, (ii) an increase in the complexity of regulatory and legal requirements facing organizations, and (iii) the use of external gatekeepers to assist organizations in their efforts to comply with a more challenging and demanding regulatory environment.
Once in place, a Monitor may serve a variety of functions. These frequently involve remedial measures within the Host Organization’s corporate compliance and ethics program, but vary greatly in accordance with the underlying issues giving rise to the Agreement. For example, the Monitor may advise an organization on the implementation of a compliance program, audit the organization’s compliance with its Agreement with the Government, investigate the organization’s compliance with law, as well as acting to reduce waste, abuse, and fraud and increase the Host Organization’s economy, efficiency, and effectiveness. In some cases, the efforts of Monitors may be intended to result in a change to the Host Organization’s cultural environment.
Although Monitors may serve these and other functions, they have certain central features in common, including being independent of both the Government and the Host Organization, and having an obligation to report to the court, the Government, or both, concerning the Host Organization’s conduct.
Modern-Day Monitorships are an important tool within compliance and remediation efforts at organizations that have failed to adhere to legal and regulatory requirements. Future articles will explore their use and potential impact on efforts at achieving greater compliance and improved ethicality within firms.
Categories: Politics & Elections