Printed book or E-book containing Commentaries to these Standards can also be purchased.
Monitors, known by a variety of names including external compliance officers and Independent Private Sector Inspectors General (IPSIGs), have become a common judicial, regulatory, and conflict resolution tool. In most instances, a Monitor is installed by agreement between a company or other public or private entity (referred to in these standards as the Host Organization) and a state or federal government department or agency (The Government). The agreement between the parties (the Agreement), often resulting from some concern about fraud, misconduct, or regulatory violation, often enables the host organization to mitigate, suspend or avoid government actions or penalties, such as debarment, administrative charges, or indictment, through the host organization’s commitment to perform the actions enumerated in the Agreement.
In some cases, the Monitor may be imposed by a court as a condition of probation or as part of a civil remedial action or settlement. Typically, the Host Organization will enter into an Engagement Letter (Engagement Letter) with the Monitor setting forth the responsibilities and authorities of the Monitor and obligations of the Host Organization.
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. These Standards provide guidance both to court-ordered Monitors and to Monitors installed by Agreement between the Government and the monitored entity, distinguishing between the two circumstances as appropriate.
A host organization may also voluntarily enter into an Engagement Letter with a Monitor in order to ensure or measure the host organization’s compliance with laws, regulations, and codes of conduct. While these standards will almost always be applicable to a Monitor engaged voluntarily, the lack of an Agreement with the Government or a Court Order technically takes such a situation outside the definitions as used herein.
Part I: Definitions
For purposes of these standards:
A. “Agreement” means an agreement between the Host Organization and the Government in which the Host Organization agrees to utilize the services of a Monitor and which establishes the scope of the monitorship.
B. “Compliance Program” means the system of policies and procedures implemented by the Host Organization to encourage ethical behavior and to reasonably prevent, detect, and respond to misconduct by employees or agents of the organization.
C. “Court Order” means an administrative or court order that provides for the Host Organization to utilize the services of a Monitor.
D. “Engagement Letter” means the contract between the Host Organization and the Monitor entered into in connection with the Agreement or Court Order.
E. “Financial Interest” means any material financial interest that could potentially be affected by the financial decisions of, or the successes or failings of, the Host Organization, whether held directly or indirectly or by a family member. The interest is material if it is of sufficient value that a reasonable person might believe it has the capacity to affect one’s judgment in serving as a Monitor.
F. “Government” means (1) a public department or agency; or (2) any other entity that has oversight over the Host Organization due to regulatory authority, contractual agreement, or court order.
G. “Host Organization” means the organization that engages the Monitor.
H. “Monitor” means a person or entity:
- Engaged by a Host Organization pursuant to a Court Order or an Agreement and Engagement Letter;
- Who is independent of both the Host Organization and the Government;
- Whose selection is approved by the Government or ordered by a court; and
- Whose responsibilities and authority are established by Court Order or by the terms of the Agreement and the Engagement Letter.
I. “Monitorship Team” means those individuals or organizations engaged by, and operating under the authority and supervision of, the Monitor in assisting in the discharge of the duties of the Monitor as described in the Court Order or the Agreement. The Team includes, inter alia, employees, subcontractors, and consultants engaged by the Monitor.
J. “Work Plan” means a written analysis of the responsibilities and authority of the Monitor and how the Monitor intends to fulfill those responsibilities and exercise that authority. To the extent possible, the Work Plan should outline the specific tasks to be undertaken and a realistic timeline for each to be completed.
The Government, Host Organization, and court, for Monitors appointed subject to a Court Order, should consider what qualifications are necessary for a Monitor to effectively conduct the monitorship based on the specific facts and circumstances of the matter. The Monitor selection process should ensure that the Monitor is a highly competent person or entity for the specific assignment and that the Monitor possesses the qualifications set forth under these standards. Absent extraordinary circumstances, both the Host Organization and the Government should be allowed to have a significant role in the selection process.
Standard 24-2.2 Candidate Pool
The selection process should encourage consideration of a broad range of Monitor candidates that should not be artificially limited by demographic, professional, and geographic factors. When possible, the Government should announce the decision to select a Monitor so that appropriate persons or entities may submit indications of interest.
Standard 24-2.3 Pre-qualified Monitor Pool
It may be appropriate for the Government to establish, and update on a regular basis, a pre-qualified pool of Monitors who are capable of handling an expected Monitor role where:
1. The Government expects the Monitors to have substantially similar assignments;
2. The Government expects that the timely selection of a Monitor will be of significant importance; or
3. The Government determines that there is a need to be able to provide names of potential Monitors to Host Organizations when requested.
When determining the necessary qualifications of the Monitor and when reviewing Monitor candidates, the following factors should be considered:
a) The integrity, credibility and professionalism of the Monitor.
b) The expertise or experience in the industry or specific subject matter of the monitorship.
c) The relevant skills and experience necessary to discharge the duties of the Monitor as described in the Court Order or the Agreement.
d) The expected structure of the Monitorship Team and the ability of the Monitor to access and deploy resources as necessary to discharge the duties of the Monitor as described in the Court Order or the Agreement.
e) The commitment to serving as the Monitor for the entire monitorship term.
a) The Monitor’s cost structure for the Monitorship Team.
b) The Monitor’s projected costs to discharge the duties of the Monitor as described in the Court Order or the Agreement.
c) Any other costs expected to be imposed on the Host Organization by reason of a particular Monitor’s selection.
The following persons should not be permitted to serve as Monitors:
a) Former Government employees who, while employed by the Government, were involved in the matter giving rise to the monitorship.
b) Any person who was involved in, supervised persons involved in, or otherwise had responsibility over the activity giving rise to the monitorship.
c) Any person who was involved in structuring, reviewing, supervising, or providing advice regarding the Compliance Program or the internal controls related to the wrongdoing and in place at the time of the wrongdoing, where an objective review of that Compliance Program or system of internal controls pursuant to the Monitor’s mandate might reasonably call into question the efficacy and value of that work or the implementation thereof.
d) Any person who provided non-monitoring legal or other professional services to the Host Organization relating to the activity giving rise to the monitorship.
e) Any person who has a Financial Interest related to the Host Organization.
4. Potential Exclusions
When determining the severity of the following potential conflicts of interest and the extent to which each could impair, or be perceived to impair, the Monitor’s judgment or independence, as balanced against the qualifications of that Monitor, the following factors should be considered:
a) Prior, non-Monitor work with the Host Organization that was unrelated to the activity, or the investigation of the activity, giving rise to the monitorship, with appropriate consideration given to the significance and nature of the work, and the time period during which the work occurred.
b) Prior Monitor work for the Host Organization, including independent monitoring work initiated by the Host Organization in response to the discovery of the wrongful acts that gave rise to the monitorship or work as a private sector inspector general.
c) Prior affiliation with a firm that provided legal or other professional services to the Host Organization during the time of that affiliation.
d) Any other factor that could bias or impair, or be perceived to bias or impair, the Monitor’s judgment, objectivity or independence.
The Monitor should ascertain whether it, or any member of the Monitorship Team, has any potential conflicts of interest. The Monitor should disclose any identified conflicts of interest to the Government, Host Organization, and court, within adequate time for those parties to consider whether the potential conflict requires or warrants exclusion under these standards.
The Court Order or the Agreement and the Engagement Letter should clearly define the responsibilities and authority of the Monitor, Host Organization, and Government, and the goals and scope of the monitorship. The Court Order or the Agreement should state a length of time and projected resources necessary for the monitorship, which should be adequate to achieve its goals. The Government, Host Organization, and Monitor should commit, for the duration of the monitorship, the time and resources required by the monitorship.
Monitorships imposed by Court Order may be modified, extended, or terminated early to the extent permitted by the court, after hearing from the Government, the Host Organization, and the Monitor.
a) Substantive Modifications
When the monitorship is established by Agreement, the Agreement should provide that any modifications should be in writing and agreed to by the Government, Monitor, and Host Organization. The Agreement should specify the process and conditions, under which the Host Organization, the Government and the monitor may seek modifications of the scope or nature of the monitorship,
The Agreement may allow for extensions to the monitorship. The Agreement should state the criteria for determining when an extension is appropriate, state how to determine when those criteria are met, require that there is a clearly articulated reason for the extension, and create a process for resolving any objections by the Host Organization.
c) Early Termination
The Agreement should allow, and state the criteria for, a Monitor to recommend granting an early termination and for the Host Organization to apply for early termination. The Agreement should require that the Monitor or Host Organization provide a clearly articulated reason for early termination before it is granted. If the Agreement does not address early termination, and the Monitor or Host Organization believes that the monitorship is no longer beneficial to the Host Organization and that the Host Organization has met its obligations under the terms of the Agreement, then the Monitor may recommend early termination or the Host Organization may apply for early termination.
1. The Court Order or the Agreement ordinarily should require that the Monitor create a Work Plan at the outset of the monitorship, and that it be developed in consultation with the Host Organization and Government.
2. When the Monitor is required to make material changes to the Work Plan, either due to changing circumstances, new information, or modifications to the Court Order, the Agreement, or the Engagement Letter, the Monitor should disclose the changes to the Government, and, if appropriate, to the Host Organization.
3. If disclosure of the Work Plan, or any subsequent changes to it, to the Host Organization would hinder a Monitor’s ability to effectively perform its duties under the Agreement, then selected aspects of the Work Plan may be disclosed to the Government only.
During the selection and approval process, prospective Monitors should provide a reasonable estimate of fees and expenses, including the use of third party resources, expected to be incurred to achieve the objectives of the monitorship.
a) The Monitor should incur only costs that are reasonably necessary for carrying out the monitorship. Where appropriate, the Monitor should look to utilize the Host Organization’s resources to reduce costs.
b) During the course of the monitorship, if fees and expenses are expected materially to exceed estimates, and if appropriate and practicable, the Monitor should inform the Host Organization before incurring those expenses. If the increase in fees and expenses is due to investigative aspects of the monitorship and the Monitor determines it is not appropriate to disclose these changes to the Host Organization, then the Monitor should consult with the Government, and if appointed pursuant to Court Order, the court, as soon as practicable.
c) The Court Order or Engagement Letter should provide for payment to the Monitor for its reasonable costs and time if the Monitor is required to testify or perform some other function related to the monitorship not otherwise addressed.
a) The Monitor should maintain records that accurately reflect the work performed and the fees and expenses incurred.
b) The Monitor should prepare and issue invoices to the Host Organization that are sufficiently detailed to provide an understanding of the type of work performed and the expenses incurred, unless the parties agreed otherwise or disclosure of detailed invoices would hinder a Monitor’s ability to effectively perform its duties under the Court Order or the Agreement.
For Monitors appointed subject to a Court Order, the Order should provide that any dispute over fees and expenses will be resolved by the court. For Monitorships established by Agreement, the Agreement and/or the Engagement Letter should set forth a dispute resolution process to resolve disputes over fees and expenses that takes into account the Government's interest in the secrecy of investigations and the Host Organization's interest in the protection of proprietary or confidential information.
Where appropriate, The Court Order, the Agreement, or the Engagement Letter may provide for the creation of a replenishing fund that would cover expected periodic fees and expenses of the Monitorship Team.
Standard 24-3.5 Public Disclosure of Fees and Expenses
Unless otherwise required by law, the Host Organization should have discretion not to disclose to the public the Monitor’s fees and expenses incurred during the monitorship.
The Monitor is independent of both the Host Organization and the Government. To be independent, the Monitor should be impartial and objective in all of its activities, and avoid any conduct that may impair, or appear to impair, the Monitor’s impartiality and objectivity. The Monitor should not allow the prospect of future monitorship engagements or other economic considerations to influence its independence.
a) Except for reasonable fees and expenses, the Monitor should not accept anything of value from the Host Organization, unless the value is nominal or it mitigates costs to the Host Organization.
b) The Monitor should agree not to provide, or offer to provide, any services to the Host Organization for a period of at least one year from the date the monitorship is terminated, other than serving in a monitoring role not objected to by the Government. During the course of the monitorship, the Monitor and Host Organization may not discuss the possibility of future employment, including serving in a monitoring role.
c) Any expansion of the Monitor’s duties that increases the compensation of the Monitor should be in compliance with the Court Order or the Agreement as modified under these Standards.
Each member of a Monitorship Team should be familiar with and responsive to the professional codes, rules and/or governing legislation of its profession; should comply with such, and should promptly seek professional guidance when a compliance question arises.
The Monitor should take reasonable measures to ensure that members of the Monitorship Team comply with the relevant provisions of these standards.
Standard 24-4.2 Access to Records, Persons and Information
a) The Monitor should have access to all information that is reasonably necessary to fulfill the duties of the Court Order or the Agreement, as determined by the Monitor.
b) The Court Order or the Agreement should clearly state the types of information and records to be made available to the Monitor, and how and under what circumstances the Host Organization is required to give access to certain individuals for interviews with the Monitor, including, among others, employees, past employees, vendors, and subcontractors.
a) Notwithstanding subsection (1), the Host Organization should not be required to disclose information that is subject to the attorney-client privilege or the attorney work-product doctrine, or the disclosure of which would otherwise be inconsistent with applicable law.
b) Monitors should respect the Host Organization’s proprietary and confidential information and take reasonable measures to protect that information. The Monitor should not use the Host Organization’s proprietary and confidential information for personal gain or for any purpose beyond the scope of the monitorship.
c) The Engagement Letter should specify the process, at the termination of the monitorship, for the Monitor to return to the Host Organization any confidential information that is the property of the Host Organization and is not required to be maintained by the Court Order or the Agreement, by applicable law, or by any other provision of these standards.
For Monitors appointed subject to a Court Order, the order should specify that the court will resolve any dispute as to the Monitor's access to information. For Monitorships established by Agreement, the Agreement and/or Engagement Letter should specify a process for resolving any disputes as to the Monitor's access to information that takes into account the Government's interest in the secrecy of investigations and the Host Organization's interest in the protection of proprietary or confidential information.
a) The Court Order, the Agreement, or the Engagement Letter should address issues of employee rights that may arise during the monitorship, including, but not limited to, privacy rights and the right to counsel. In addition, Monitors should familiarize themselves with rights of employees of the Host Organization that may not have been addressed in the Agreement or the Engagement Letter.
b) Unless such disclosure would hinder the Monitor’s ability to effectively perform its duties under the Court Order or the Agreement, the Monitor should fully disclose its identity during interviews, and if appropriate have available documentation that establishes the Monitor’s status and authority. The Monitor should inform the interviewee why it is collecting the information, and what the Monitor is authorized or required to do with the information.
c) Monitors should respect a represented employee's right to counsel, and if the employee, whether represented or unrepresented, is a subject or target of a Monitor's investigation, the employee should be made aware of this status and should be provided the opportunity to have counsel present at the interview. Monitors should not suggest to the Host Organization that the employee should receive any adverse treatment solely as a consequence of the employee's decision to have counsel present during the interview. This provision does not apply if the employee is not aware that the Monitor is interviewing the employee, such as during the course of an undercover investigation.
d) The Court Order or the Agreement should afford the Monitor sufficient authority to collect information confidentially, or otherwise protect the identity of persons providing information, as deemed appropriate by the Monitor.
e) The Monitor should inform employees of the level of confidentiality afforded them, if any, when providing information to the Monitor and that:
i) Statements given to the Monitor do not constitute notice to the Host Organization on those matters;
ii) Statements given to the Monitor are not privileged communications; and
iii) Statements given to the Monitor may be disclosed to the Government.
a) The Court Order or the Agreement should require the Monitor to submit to the Government and the court, for Monitors appointed subject to a Court Order, scheduled, written reports that state the Monitor’s findings, conclusions, and recommendations.
b) The Court Order or the Agreement should specify the form and frequency of the Monitor’s written reports. The requirements on frequency should balance the Government’s need to be informed against the costs of creating the reports or otherwise impairing the efficiency of the monitorship.
c) The Court Order or the Agreement should state if, and when, the Host Organization may receive a copy of the final written report, as well as any preliminary drafts of the report.
d) The Monitor is responsible for the report. Unless otherwise stated in the Court Order or the Agreement, or otherwise inappropriate, the Monitor may allow the Host Organization and the Government to make suggested changes to the report or produce evidence that challenges the Monitor’s preliminary findings, but neither the Host Organization nor the Government has or should be given the authority to modify the Monitor’s report.
a) The Court Order or the Agreement should authorize the Monitor to communicate freely with the Government for purposes of discussing any aspect of the monitorship.
b) Notwithstanding subsection (a), due to the time and expense necessary to draft formal, written reports, the Monitor should produce interim reports only if the Court Order or the Agreement provides for them.
c) The Court Order or the Agreement should specify the types of communications that must be disclosed to the Host Organization.
a) The Court Order or the Agreement should specify the types of observed or discovered wrongdoing that the Monitor should report and specify when and how the wrongdoing should be reported to the Host Organization, the Government, or both.
b) The Monitor should have the discretion to determine whether observed or discovered misconduct that is not specified in the Court Order or the Agreement, and is unrelated to the subject matter of the monitorship, should be reported to the Government, the Host Organization, or both.
a) The Court Order or the Agreement should state whether the Monitor’s report is to be confidential or whether it is to be made available to the public, in part or in whole. For reports that are to remain confidential, the Government may decide whether other government agencies or departments may have access to the report, unless the Court Order or the Agreement provides otherwise. Any government agency or department that receives the report should keep it confidential. Unless the Government objects or the Court Order or the Agreement provides otherwise, the Host Organization should have the right to disclose to third parties any written report it receives.
b) If a written report may be publicly disclosed or provided to third parties, the Monitor should consult with the Government and Host Organization, or if appointed by a court, the court, for purposes of protecting against the disclosure of sensitive or disparaging information concerning individuals who may be named in the report, and the disclosure of proprietary, confidential, or competitive business information.
The Monitor’s findings and conclusions should be determined fairly, objectively and impartially, and based on relevant evidence. The Monitor should state the factual basis of all findings and conclusions, and maintain records sufficient to show that factual basis, including any material facts that do not support the Monitor’s findings and conclusions.
If after issuing a report the Monitor determines that it contains material errors or inaccuracies, then the Monitor should formally notify all recipients of the report.
The Monitor’s recommendations should be pragmatic, reasonable, and designed to achieve the objectives of the Court Order or the Agreement. When developing recommendations, the Monitor should, as appropriate, consider such factors as the length of time required to implement the recommendations, costs, existing internal controls and Compliance Programs, the culture of the organization, the likelihood of the recommendations to be sustainable post-monitorship, and their impact on the Host Organization’s operations.
Absent exceptional circumstances, the Monitor should work cooperatively with the Host Organization in developing recommendations. The Monitor should consider the Host Organization’s existing plans, recommendations, and concerns. The Monitor should consider any reasonable changes proposed or made by the Host Organization, and if rejecting a proposal, the Monitor should articulate the reasons for the rejection.
The Court Order or the Agreement should specify a process by which the Host Organization or Government may challenge any of the Monitor’s findings, conclusions, or recommendations. The Monitor should in good faith attempt to resolve any differences with the Host Organization or Government on the necessity of implementing any of the Monitor’s recommendations.
Standard 24-4.5 Indemnification
The Court Order, Agreement, or Engagement Letter should specify the conditions under which the Host Organization must indemnify and hold harmless the Monitor from claims arising from the Monitor’s performance of its duties under the Court Order or the Agreement.
Standard 24-4.6 Withdrawal
1. The Court Order, Agreement, or Engagement Letter should address the circumstances under which the Monitor could or should withdraw from the monitorship. The Engagement Letter should address the withdrawal process, notice, timing, disclosure, and other implications of withdrawal, including financial matters.
2. If during the course of the monitorship, the Monitor develops or discovers a Financial Interest or any other conflict of interest that impairs the Monitor’s independence, the Monitor should provide full disclosure. Following full disclosure, the Monitor should begin the withdrawal process unless the conflict of interest is cured, or is waived by the Host Organization and the Government, and where appropriate the waiver is approved by the court.
3. The Monitor should begin the withdrawal process if the Monitor determines that it does not have and cannot obtain the expertise, resources, or ability necessary to conduct the monitorship effectively and within the appropriate time frame.
4. The Monitor may begin the withdrawal process if the Host Organization fails to compensate the Monitor in compliance with the Court Order, the Agreement, or the Engagement Letter, or the Host Organization acts in a manner that prevents the Monitor from appropriately fulfilling its obligations under the Court Order or the Agreement.
5. The Monitor should confer with the Government and the Host Organization, and provide the reasons for the proposed withdrawal.
6. The Court Order or the Agreement should state the process for selecting a new Monitor in the event that the existing Monitor withdraws. That process should seek to minimize the costs to the Host Organization and the disruption of the monitorship.
Standard 24-4.7 Removal of the Monitor
a) Where a Monitor has been appointed subject to an Agreement, the Agreement should give only the Government the power to remove a Monitor.
b) The Agreement should establish a process for the Government to raise any concerns about the performance of the Monitor with the Host Organization and the Monitor before initiating the removal process. The process should allow the Host Organization and the Monitor to respond to any performance concerns and, where appropriate, allow the Monitor to cure any performance deficiencies before removing the Monitor.
c) The Government may require removal of the Monitor if the Monitor fails to conduct the monitorship effectively, fails to comply with the Agreement or these standards, , or is no longer qualified.. The Government’s exercise of discretion should not be arbitrary, capricious, or otherwise an abuse of discretion. The Government should consider any negative impacts the removal or threat of removal would have on the Host Organization or on the independence of the Monitor.
d) The Agreement should establish a process for the Host Organization to raise concerns about the performance or qualifications of the Monitor to the Government.
e) The Agreement should state the process for selecting a new Monitor in the event that the existing Monitor is removed. The process should seek to minimize the costs to the Host Organization and the disruption of the monitorship.
Where the Monitor has been appointed subject to a Court Order, only the court may remove the Monitor, on its own motion or pursuant to an application by the Government or the Host Organization. The court’s removal determination should be guided by the considerations in subsection G (1).
1. The Government should evaluate the effectiveness of each of its ongoing monitorships on a regular basis, and should meet separately with both the Monitor and the Host Organization to discuss concerns or suggestions for improvement.
2. The Government should compare similar ongoing monitorships on a regular basis to explore the possibility of common issues that it should address or best practices it can share.
3. At the conclusion of a monitorship, the Government should evaluate the effectiveness of the monitorship, including the performance of the Monitor. The results of that analysis should be used in the consideration of that Monitor for future assignments and by the Government in designing future monitorships.