Speaker 0 00:00:05 Hello, and welcome to integrity through compliance AMI business success series. My name is Brenda Morris and I'm a managing director, corporate compliance and business oversight. This podcast was created by seasoned compliance experts at affiliated monitors to speak practically to your business needs. During the series you will hear from Amies experts in corporate compliance, healthcare government contracts, antitrust manufacturing, education, and more who provide their observations on industry trends, gear to raise your awareness and to protect your brand. So grab a cup of coffee and join us as we guide you and your business to integrity through compliance. Welcome to today's podcast episode today, we'll be speaking with two of our AMI experts, senior vice-president, Eric Feldman and managing director Mikael Ryder Gordon. Our discussion today will focus on the concept of independent monitoring. What is it, how does it come about and what industries should expect going in 2021 under a new administration? So before we go too far, I would like to hear from Eric and Mikael. So Eric, would you first, would you introduce yourself and tell us what you do at AMI?
Speaker 1 00:01:26 Sure. Thanks Brenda. Yes, I'm Eric Feldman. I am senior vice president and the managing director for corporate ethics and compliance programs. And basically what that means is that I serve as an independent monitor and proactive evaluator of corporate ethics programs and compliance programs. Either those required by a government agreement, such as a DOJ deferred prosecution agreement or an admin agreement or proactively when a company asks us to come in and assess the effectiveness of programs, I've served as a lead monitor on a number of both large and small engagements over about the last 10 years or so.
Speaker 2 00:02:15 Thank you, Brenda. I'm Mikhail Ryder Gordon. I'm managing director of institutional ethics and integrity at affiliated monitors. I won't repeat what Eric just said, but yes, that's a, that's a perfect description of what I do. I also serve as an independent monitor and conduct proactive assessments, and really with the idea that it's to help a company's compliance program or an organization's compliance program, really to bring it about to a level consistent with international best practices
Speaker 0 00:02:48 And Mikayla's being shy because she has a host of expertise, but I think it is important to bring out that she has expertise in cybersecurity as well as data. So those are huge hot topics and they are, I will toot your horn for you.
Speaker 2 00:03:06 Thank you.
Speaker 0 00:03:08 So, Eric, can you just bring us up to speed a little bit in tell us what trends you saw in 2020? Sure.
Speaker 1 00:03:17 We're off a little bit by talking about independent monitoring. So we're all talking on the same wavelength and the audience understands. So an independent monitor is essentially an independent third party that has no conflicts with the matter or the company at hand that's asked to come in and assess whether a company is abiding by its agreement with a government agency or regulator. Most people think about deferred prosecution agreements that the department of justice level, as where you see these very large celebrated cases with some highly visible monitoring figures. And they think that that's all monitoring is the HSBC's or the BPS or Volkswagen or large organizations when actually monitoring is used as a way to ensure compliance with the agreements at every level of government it's done with DOJ, it's done with federal regulatory agencies like the federal communications commission, federal trade commission, every suspending, and debarring official when the us government uses monitors for their administrative agreements, very actively in the department of defense agencies and state attorneys general have increasingly used monitors to resolve matters. And we can go into to some of those as well and everything right down to medical boards and pharmacy and chiropractic boards that want to ensure that their regulated members don't lose their licenses. This is an alternative monitoring is an alternative resolution to any kind of a regulatory or enforcement problem.
Speaker 0 00:05:16 I think you could add to it as well.
Speaker 2 00:05:18 Yeah. I want to say monitoring's found in so many other settings and I'll add, for instance, the world bank group uses monitors. So yeah, as Eric mentioned, local state federal regulatory bodies have of all sizes around all sectors, but I want to add international and, you know, I think there's a misperception that this is a strictly a us tool monitoring, but the international angle is very interesting because again, when we look at some recent cases and I think Eric and I are going to talk about this a little bit about what we saw in 2020, there is clear evidence that other countries have been quietly assigning monitors either for time or are now beginning to embrace the concept of the value the monitors can bring in resolving corporate matters. I can think of at least seven countries, including the U S that use deploying monitors and settlement agreements, right?
Speaker 2 00:06:11 So you've got us, you have Brazil, France, UK, Canada, under it's for mediation agreements Australia. But beyond that, there are at least 21 countries right now that have embedded within their resolution systems. The enablement of the appointment of a compliance monitor with another three that have similar mechanisms under another form of prosecution. So really just with respect to corporate bribery settlements, and that doesn't begin to touch all the other sectors and areas. You've got 24 countries right now, actively using monitors and for multinationals can think that's fairly telling and also something important for them to be aware of.
Speaker 0 00:06:55 And I think it's important for industries to remember that it's not just the federal corrupt practices act. This goes beyond and with global settlements industries need to be aware of that because the us is going to be working hand in hand with other countries to come about with these agreements.
Speaker 2 00:07:15 Yeah. I mean, we saw that with society Generale, you know, that was the 2018 case, but it was the first time that the French anti-corruption agency author was using the CJ. I pay law, which from getting 2016, but it was the first use of that in a foreign bribery case. And it was the first time we saw a coordinated resolution between the French authorities and DOJ, and now OFA has taken to assigning monitors, not without some regularity, it worked and they kept doing it. Um, you know, fast forward to 2020, we saw the Airbus settlement, right. And this time it was France Britain and the U S right. So you had Airbus's violations of the respect of bribery laws up in to UKBA and FCPA, but also U S I tar violations. And what was really unique about the Airbus case this past year is that offer under the sea ship is the one imposing the monitor and the UK and us under their respective DPA's will not. So the French will be monitoring air balls,
Speaker 0 00:08:27 Huge, and everyone should be aware. And Eric, you were about to say something.
Speaker 1 00:08:31 Yeah. You know, there are several, I guess, incentives for other countries to jump into this, the French, as I recall, in some of the conferences that I've been to European compliance conferences, the French were getting, I guess, tired of the fact that the us was going after French companies and getting the fines and penalties, the big settlement dollars assigning monitor. And it became a us matter instead of a French enforcement matter. And their attitude was it's a French company. Why shouldn't we be getting the benefits since the actual crime reflects back on our country, we should be able to enforce it. And I think the countries around the world that realizing that a monitor and a lot of people don't realize this, a monitor doesn't work for the government agency, the monitor is not paid by the government. It's not a cost that the taxpayer bears it is the monitored entity that pays the price of monitoring. So essentially the government gets a free service to ensure that a company is complying with whatever agreement did agreed to. There was no other way for them to really know whether compliance exists and beyond compliance monitor is able to evaluate how effective their ethics and compliance program is because at least in the U S model, the objective overall is for the company to develop policies, procedures, controls, and a compliance program that will help prevent the issue from reoccurring.
Speaker 0 00:10:16 And I think that's a really important point, Eric, because we want to emphasize that this is independent monitoring. The goal is not a gotcha. The goal is to make the company or the entity better. That is the goal.
Speaker 1 00:10:32 And it's unfortunate because I do see, in some cases, both in the U S and worldwide, although the international use of monitoring is still, you know, and it's developing stage that when people who are involved in enforcement become monitors, they often have not always, but often have an enforcement viewpoint and enforcement look at things. And their objective may not be stated that they're going to find more problems, but that really is what they're looking for. They're in there as if they're doing an investigation or as if the initial investigation was still ongoing. And we're very careful here to be sure that we're not investigators. We may have done investigations in past lives, but we're not doing an investigation. We are there solely to look at the remedial actions and compliance with the agreement. The investigation is over by the time we
Speaker 0 00:11:34 That's important, but Kyle, would you talk to us a little bit about the statistics that you've found?
Speaker 2 00:11:40 Oh, sure. I mean, I want to highlight another interesting case back here in the U S from 2020, as we spoke about this is beyond FCPA. And in my mind, the Whitford worldwide settlement with treasury for OFAC violations is really interesting because this goes back to Eric's point about the value that a monitor can bring. And he touched
Speaker 3 00:12:03 On Proactiv and what
Speaker 2 00:12:05 Was intriguing about the Whitford settlement this past year. And they were cookware coating manufacturer that ran a foul of Iranian sanctions. But what was interesting was
Speaker 3 00:12:14 Mitigating factors in the subtle
Speaker 2 00:12:17 One was the fact that Whitford had appointed proactively to monitors, an independent, external compliance monitor, who was responsible for auditing Whitford's compliance with the us sanctions export controls, and they report directly to the corporate board of directors, and then an internal compliance monitor who was responsible for executing implementation of the recommendations made by the external compliance monitor, including corrective actions. And because of that, the settlement was considerably less than would have been anticipated. And that to me tells right there a great story that illustrates the value that monitors bring. And we think about statistics. I mean, I think you have to go back under the Obama administration criminal cases against companies continued to decline that had begun under the Bush two administration. But if you look at those numbers relative to the Trump administration, I think we can expect to see a significant increase under Bush too.
Speaker 2 00:13:18 You know, there may be 1600 plus criminal cases against companies under Obama was an excess of 1400 under Trump. It was only 383 cases. So it's reasonable to say that white collar crime prosecutions, right. Even if they went up a hundred percent under Biden, that would still be much lower than past decades, but it would be a significant increase. And in the last few days of the Trump administration, we saw several very large cases settle quickly in our, and I'm thinking of Boeing, JP Morgan, chase, Deutsche bank, again, Ticketmaster, you know, they took relatively lighter deals, I think, but somewhat, I think out of fear of revitalized DOJ under Biden, right? There's good reason to suspect that in the mind to those companies, there was benefit in not protracting the settlement discussions into the Biden administration. We've seen DPA's and MBAs in the U S have continued to increase in the Bush years.
Speaker 2 00:14:17 They may be made up some 3% of cases, but by the time we completed the Trump administration, that form of resolution had risen over 20%. So, you know, guilty pleas have all declined under Bush two all the way through the Trump administration, you know, dropping from some 86% to 50%. But I think a number of contributing factors we'll see plea deals rise under Biden. Prosecutors increased reliance on DPA's and PA's is being questioned because we're not seeing that commensurate drop in corporate abuses. So we don't know fully want the administration and the AGS going to prioritize, but I expect we'll see some political pressure that get to spur some tougher settlement agreements and maybe even some legislation.
Speaker 1 00:15:04 And to underscore what you're saying, Kyle, I think that because of the pandemic since last March, because federal court operations have been disrupted and investigations have been somewhat disruptive, that there is going to be a significant backlog. There is a significant backlog of cases that are going to come to fruition during the Biden administration. So the numbers, I think, are not only going to increase, I think it's going to be substantial. That's my prognostication. The other thing is that under the Obama administration, the eight's memo focused on individual accountability. And we saw an increase in individuals being held accountable for the actions of their companies. In addition to the company itself, which provided an opportunity for the company to cough up the individual responsible and cut a deal that like everything else seems to have diminished under the last administration. Yet, I was at a conference where rod Rosenstein, when he was the Agee said very clearly that if companies want to be treated like victims, they need to act like victims and go after the individuals who were responsible. So I think that that philosophy never changed acting on it did change over the last few years and I would fully expect like you do that. You're going to see a resurgence because look at DOJ is being populated with, I think, a lot of Obama era folks. And so I think we're going to see the same basic philosophy. I think DOJ priorities, which a lot of them were focused on things like immigration in the last administration that those prosecutorial priorities are going to shift back to things like fraud and corporate crime.
Speaker 2 00:17:02 And I want to pick up on something you mentioned earlier, which is state AGS. What we saw in this last administration whilst numbers went down with DOJ. I think what we saw though, was a flexing of muscles by state AGS and also them realizing and embracing the concept of imposition of monitors in a variety of settings, right from MNA activity to antitrust from financial oversight to data privacy violations, right. We saw state AGS really step up and take on some of the largest cases. And many times that included the imposition of a monitor as part of that settlement agreement. And I don't see reason for them to stop now. I don't think we're going to them suddenly scale back. It just because there may be renewed focus on fraud at the federal level. I think rather they've seen what they can do, and they've been pleased with the results. And I think they're going to continue in that direction.
Speaker 1 00:18:05 They've gotten a taste of it. They liked that taste, you know, and, and they're going to continue. I, I hear where I am. We're both of us are in California. I think that the ag has sort of led the pack, particularly in the antitrust area and healthcare going after companies. And I don't see that letting up at the state level and healthcare will probably be at the pointy end of that sphere.
Speaker 2 00:18:30 I mean, we saw a few years back FTC impose monitor on Aqua facts for its information security program, but we've seen similar provisions. I mean, we saw it with the Uber settlement out of the New York state AGS, and we've seen it with several other data, privacy breaches, large, large breaches at state level. And I think that tells us this is definitely a trend. And they realize the value of that ongoing independent assessment for a number of years, until they're confident that consumers data has been essentially re-secured
Speaker 0 00:19:08 Tell me, where do you see then given all that's happened with COVID all the changes in our lives going into 2021, what predictions or what takeaways do you see what industries are going to be most effective?
Speaker 1 00:19:22 I think that consumer protection is going to be showcased, you know, in addition to corporate fraud in general, when you look at the intention of the CFPB and, uh, how it was neutered over the last few years under the Biden administration, the new leadership that was just put in, there was a nod to Elizabeth Warren and the progressive wing of the democratic party, which really wants to see a CFPB with teeth. And so I think we're going to see a very aggressive federal government going after consumer fraud cases, everything from education to healthcare and the pandemic. My Lord take a look at the amount of money that has been thrown out there. And DOJ has already begun to prosecute cases of fraud and the payroll protection program administered by the small business administration. You have a new IgG, the special IgG for pandemic recovery that is completely staffed up and funded, and they're doing investigations and they have task forces with the us attorney's offices around the country. So I think there's going to be a lot of emphasis in that if another bill passes this week or the next week, which it will one way or the other, there's going to be more money being thrown out there for COVID relief as is always the case. A lot of that's going to be defrauded. So I think we're going to see lots of enforcement action in that area. Yeah.
Speaker 2 00:21:02 I would concur with that. I think we're going to see it also at the state level again for state-level pandemic assistance, as well as consumer protection. Again, back to data privacy, not to, you know, flog a dead horse here, but, you know, we have these mass HIPAA violations. We have mass data privacy breaches, and I think as state beef up those laws, like the CCPA, we're going to see greater enforcement there and also antitrust at the state level. I think we're going to see more actions and concerted actions by multiple state AGS together.
Speaker 0 00:21:42 What about internationally, like with supply chain and being an issue and those kinds of things?
Speaker 2 00:21:47 I think absolutely. I think international, I touched on how many countries already have in place mechanisms for monitors as part of their settlement agreements. But I think we're also going to see heavy scrutiny of supply chains, fraud, and even cross border activity. I think we're going to see absolute heightened focus on that. I mean, we're already seeing some of the border disputes with supply chain around COVID vaccines in the EU, but I think we are going to see a heightened enforcement globally, greater global coordination. I think we're going to see more around money laundering a lot more. I mean, we saw that case in Switzerland just a few months back where again, a monitor was part of the settlement agreement, but rather unusually, this was a Swiss regulator. I imposing on a bank for AML violations. And I think we're going to see more of that.
Speaker 0 00:22:49 Yeah. And you know what, Miguel, I really do agree with you about the cross border collaboration. I saw more of that happening and then COVID kind of popped up, but every country wants to collaborate with each other because it's easier now. It doesn't make sense to hide the ball. You know, let's collaborate and share the information and that's something that wasn't done a lot, but now it makes the game easier when you do it.
Speaker 2 00:23:14 Yeah. We saw with one MDB, there were 27 separate jurisdictions, all coordinating with one another and they wouldn't have gotten nearly as far as I have, if they hadn't shared that information and coordinated with one another, I think that's definitely a trend. That's it's not going to be a trend. It's just going to be the new normal,
Speaker 0 00:23:33 What is right. So Eric give us two takeaways that you would suggest to companies, entities, industries of what they should do to prepare for 2021. And then I'm going to ask them kind of the same questions.
Speaker 1 00:23:47 Okay. Well, number one, read the DOJ guidance on evaluation of corporate compliance programs. And the questions that are asked in there, ask yourselves that question about your program. Are you meeting the expectations of enforcement on the kind of compliance program that you should have because that may help to mitigate what could happen with more aggressive enforcement that I think is number one, number two is listen to your employees because we're seeing more whistleblower complaints, incredible number of whistleblower complaints going directly to the sec. So people can get big rewards. And that's happened since the beginning of the pandemic, much easier for people when management is not looking over their shoulder to blow the whistle in essence, companies are in competition with the sec for the loyalty of their employees and encourage your employees to speak up to you. So you can resolve any issues that were like,
Speaker 0 00:24:58 That's great. Well, Kyle, you have, uh, two key takeaways for us.
Speaker 2 00:25:02 I'm going to expand that into the international arena with increased whistleblower protection laws in numerous jurisdictions and a greater awareness of the power of whistleblowing in these other countries. I think again, pay attention to your employees and be cognizant of what you hear on the ground. You know, talk to, uh, folks broadly across your institution. You know, don't rely on just the top coterie of folks to tell you what's going on further out in the reaches.
Speaker 0 00:25:35 Well, this has been really helpful. And I think practical advice for folks, I just want to tell the audience that we will have another episode with the same panelists and they're going to be talking about how to avoid a monitor. So, I mean, I think it's something worth talking about, because again, it's affiliated monitors is one of the oldest monitoring companies, uh, in the U S and I think you guys done over 800, um, independent monitors. There's not a lot of folks out there that can say that monitoring is their only line of work, but AMI does. And it behooves us as a business to make sure that industries know what the government is looking for and how they can protect themselves in a proactive way. So I think it's a discussion worth having, and I really do think you two are the best people to do it.
Speaker 0 00:26:26 So thank you so much for being here today and we look forward to the next time. Thank you, Brenda. Thank you, Brenda. Thank you for joining affiliated monitors podcast, integrity through compliance, analyze business success series today's is just a sample of the subject matter expertise captured by AMI compliance professionals. Go to our
[email protected] to view the comprehensive list of industry and in-house talent. AMI has available to enhance professional and business integrity programs and controls. Also connect with us on LinkedIn to receive updates and trends in the areas of enforcement and compliance. If you have any questions about today's podcast or would like to learn more, please contact
[email protected]. Our affiliated monitors podcast, production team of Dolores. SIADH our compliance associate Dan Barton, our editor and podcast music composer, and me Brenda Morris, managing director for her compliance and business oversight. Look forward to you joining us again for our next installment of integrity through compliance, AMI business success series.
