In the relatively short but significant history of deferred prosecution agreements (DPAs) and non-prosecution agreements (NPAs), imposition of an independent monitor has typically been an all-or-nothing proposition. A monitor was either required for the entire term of the agreement (usually three years), or a monitor was not required at all. Recent enforcement actions, however, signal an increased willingness to compromise on the all-or-nothing approach. In two recent FCPA-related settlements in the medical devices industry in February and March 2013, and in the manufacturing industry in October 2013, DOJ adopted a “hybrid” approach to monitoring. The DPAs entered in each settlement imposed a compliance monitorship whereby the company must retain an independent monitor for an 18-month period and then self-monitor and report its compliance with the agreement for the remaining 18 months of the DPA. The agreements also provided DOJ discretion to reduce or extend the monitor’s term (a provision infrequently included in previous DPAs and NPAs).
Although the “hybrid” approach to corporate monitoring is not new, recent comments by Charles Duross, DOJ’s FCPA unit deputy chief, suggest it is here to stay. In his remarks last month at the American Conference Institute’s 30th International Conference on the Foreign Corrupt Practices Act, Duross noted that DOJ is employing greater flexibility with respect to corporate monitors and will continue to implement the hybrid approach. When combined with DOJ’s detailed guidance on the selection and use of monitors found in its so-called “Morford Memo” (2008) and “Grindler Memo” (2010), the hybrid monitor approach offers counsel a significant opportunity to advocate for their clients and lessen the burden and cost of complying with the rigorous terms of DPAs or NPAs. More importantly, it rewards companies that heavily invest in post-enforcement compliance and remediation that are designed to detect and correct the types of misconduct that resulted in the underlying criminal action.
While notable in and of itself, this evolution of law enforcement thinking with respect to the use of monitors is a reminder that the DPA and NPA approach to resolving white collar matters is a relatively young philosophy. This philosophy is subject to further development through advocacy and actual experience derived from a growing population of completed DPAs and NPAs. Practitioners should remain mindful that there is ample room for driving further evolution with practical and creative thinking.
The McGuireWoods Guest Blogger is Brandon M. Santos, an associate based in McGuireWoods LLP’s Richmond office who advises and defends corporate and individual clients facing regulatory, administrative and criminal investigations.
This article originally appeared on the McGuireWoods blog Subject to Inquiry, which provides commentary on white collar, congressional, SEC, energy enforcement and other government inquiries.