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

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  • Slide 1
  • 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
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  • 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 defendants adherence to certain requirements, e.g. fines, corporate reforms, cooperation, appointment of an independent monitor/expert/consultant Fulfilling requirements results in dismissal of charges 2
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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 3
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  • Source: Gibson Dunn & Crutcher 4
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  • 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 6
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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 7
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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 8
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  • Monitors 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 Monitors jurisdiction 9
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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 10
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  • Elements of a typical contract contd. Protection of propriety information Monitor reports Sale of Company/Unit Determination of violation Consequences of violation Indemnity Removal or replacement of Monitor 11
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  • The Monitor is coming! Will the Monitor be able to deal with both government and corporate constituencies? Now theres 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?! 12
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  • How to work with the Monitor Understand the Monitors responsibilities and requirements Does the Monitors 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 Monitors approach to the engagement. Not all monitors are alike. 13
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  • How to work with the Monitor contd. 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 Monitors ongoing requirements. Keep apprised of the Monitors level of satisfaction with the companys cooperation. 14
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  • How to work with the Monitor contd. 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 15
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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. 16
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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 Monitors experience with other companies and industries to help fashion a compliance program and culture that will become embedded in everyday activities. 17
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  • Outsized Problems from Undersized Units 18
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  • Irrational Comfort with Risk 19
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  • Battling H.R. and Legal 20
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  • The Pluto Theory of Compliance - Incentives 21
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  • Focus on Business Units Not Compliance 22
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  • Risk Analysis for Resource Allocation 23
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  • Training Fatigue 24
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  • Tone All Over Where The Top Is Depends Upon Where You Are 25
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  • Confidence To Speak Up and Ask Questions 26
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  • Ability to Identify Issues 27
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  • Investigations More Than You Think Dangers Building Respect for Results 28
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  • Dumping Grounds 29
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  • Consistent Policies and Legacy Policies 30
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  • Straight Talk 31
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  • Compliance Knowledgeable About The Business 32
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  • Movement From Compliance to Business and In The Other Direction 33
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  • Compensation Link 34
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  • Sharing Best Practices 35
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  • Support Functions Need To Understand Their Critical Contributions 36
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  • Vendors Need To Understand Their Critical Contributions Code of Conduct 37
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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 counterparties Employees are able to identify and recognize legal and ethical hazards when they arise Employees have the tools, training and resources to make the right decisions and the confidence to seek advice 38
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