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Telling And Inexcusable

Compliance monitors as a condition of resolving a Foreign Corrupt Practices Act enforcement action are:

(a) a necessary post-enforcement action condition of settlement because the conduct at issue in the enforcement action suggests that the company had deficient internal controls and/or an inadequate committment to FCPA compliance; or

(b) a unncessary, reactionary, more form over substance post-enforcement action condition of settlement that borders on a government required transfer of shareholder wealth to FCPA Inc.

If (a) is the correct response, and if a company’s internal controls are so deficient and if the company so lacks a genuine committment to FCPA compliance, it would seem that a compliance monitor should actually begin work as soon as the ink is dry on the resolution documents.

However, that rarely happens and the delay between when a compliance monitor actually begins work is telling.

For instance and as highlighted in this previous post regarding the Faro Technologies enforcement action, it took the DOJ and the company two years from the date of the enforcement action to agree on a compliance monitor.

While the next example has a way to go to reach two years, the same thing is currently happening in regards to the Diebold monitor.

As highlighted in this prior post, on October 22, 2013 Diebold agreed to resolve related DOJ and SEC enforcement actions.  Pursuant to the DPA, Diebold was required to engage a compliance monitor for “a period of not less than 18 months from the date the monitor is selected.”  As stated in the DPA, selection of the monitor shall be “prompt” and the DPA stated that the DOJ and Diebold “will use their best efforts to complete the [monitor] selection process within 60 days” of executing the DPA.

Despite this language, 60 days have passed.  90 days have passed.  Still no Diebold monitor.

Rather, Diebold’s VP Global Finance and Principal Financial Officer stated in the company’s February 13th earnings call as follows:  we “are in the process of working with the government agencies to identify the compliance monitor.”

This is telling and goes directly to the introductory question regarding the need and necessity of corporate monitors in many FCPA enforcement actions.

It is also inexcusable.

If the DOJ wants its FCPA enforcement program to be viewed as credible and effective by the business community, it owes the business community an obligation not to proceed at a glacial pace.  For instance, the gray cloud of FCPA scrutiny often lingers far too long (2-4 years tends to be the average from the point of first disclosure to any actual enforcement action with 6-8 years not uncommon).  When cooperation is the name of the game, and because of this black-letter legal concepts such as statute of limitations do not matter, this is the end result.  The revolving door that has come to infect DOJ and SEC FCPA enforcement also contributes to the glacial pace.

Likewise, if the DOJ wants its FCPA enforcement program to be viewed as credible and effective by the business community, monitors must be appointed promptly after an enforcement action as monitors represent costs, risks, and uncertainty.

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