Gallet Dreyer & Berkey, LLP | The Role Of An Independent Monitor In Saving Your Company From A Criminal Investigation
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The Role Of An Independent Monitor In Saving Your Company From A Criminal Investigation

3/10/2017 | By: Roger L. Stavis, Esq. | GDB 2017 Spring Newsletter
Even with the best of corporate practices and the best of intentions, business owners may nevertheless find their companies under investigation by one of the many state, federal, and city agencies empowered to investigate criminal conduct. One of the immutable principles of criminal law is that a corporate entity can be held criminally responsible for the acts of its agents and employees taken within the scope of their agency or employment. Even where corporate owners and executives are unaware of criminal conduct, the corporation may become the subject of a criminal investigation or even a prosecution. While corporations cannot be jailed, they can be subjected to crippling financial penalties. 

How can any company survive such a criminal investigation or prosecution? One solution may be to retain an independent integrity monitor. An independent integrity monitor is often a former prosecutor who specializes in such work.

Independent integrity monitors comprehensively examine a company’s financial records, operations, policies and procedures. They assist the company with drafting a code of ethics and specific “whistleblowing” procedures, such as a dedicated “hot line” to report wrongdoing. The independent integrity monitor will remain involved with the company throughout the course of the investigation and, sometimes, for a specified period of time thereafter. Their work is often “front loaded” and after the initial period of intense activity, the work of the independent monitor is more in the realm of auditing the policies and procedures put into place. For those businesses bidding on public work, the agencies involved maintain lists of preferred independent integrity monitors and, when requested, will often select one.

The retention of an independent monitor is an effective way to demonstrate that, while an employee might have committed a crime, the corporation itself is committed to rooting out the criminal conduct and putting policies in place that will prevent a repetition of such conduct. This is particularly true when the company proactively seeks out an independent monitor prior to any suggestion by the prosecutorial agency involved in investigating the company. Such a proactive move can have a significant impact on prosecutorial decisions regarding whether to prosecute or to defer prosecution of the company, as well as the amount of financial penalties to be imposed.

Equally important, the proactive retention of an independent integrity monitor will serve as a sure sign to clients and customers that the company is a responsible corporate citizen. This is especially important for companies that bid on public contracts. The agencies that solicit those bids may continue to award them to companies that are under investigation, provided those companies have independent integrity monitors in place.

The agencies will hold formal meetings with companies, referred to as “responsibility hearings” prior to awarding the bid. At a “responsibility hearing,” the company has the burden to establish that it is a responsible corporate citizen. The key to meeting that burden is the proactive retention of the independent integrity monitor. Clearly, there is a critical role to be played by experienced counsel in assisting any company through a criminal investigation and helping it not only to survive, but to flourish.