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The DOJ's Wrong Medicine For Monitors

Hearings by the U.S. House of Representatives' Subcommittee on Commercial and Administrative Law on "Deferred Prosecution: Should Corporate Settlement Agreements Be Without Guidelines?" are now underway. In advance of the hearings, the DOJ last week issued new internal guidelines on the selection and handling of monitors. Ellen Podgor at the White Collar Crime Prof Blog critiques the DOJ's guidelines in an excellent post here. Her conclusion: the problem now is too much DOJ discretion and control over the monitorships, so more of the same -- which is the essence of the DOJ's proposal -- is exactly the wrong medicine. Instead, federal legislation is needed to fix the problem.

This story, in case you've missed the background, started late last year. Five leading orthopedic device makers had been charged with bribing doctors in the U.S. to get their business. (Now they're being investigated for bribing doctors overseas in violation of the Foreign Corrupt Practices Act.) In September, New Jersey's U.S. Attorney Chris Christie used deferred prosecution agreements to settle the domestic cases. The terms required the appointment of compliance monitors -- private parties who police the corporations from the inside, report directly to the DOJ, and send their bills for doing so to the companies themselves.

For the orthopedic device makers, Mr. Christie's corporate monitors were ex-U.S. Attorney General John Ashcroft (Christie's former boss), former U.S. Attorney for the Central District of California Debra Yang, former New Jersey Attorney General David Samson, former U.S. Attorney for the Southern District of New York in Manhattan David N. Kelly, and former counsel to the Federal Trade Commission during the Reagan Administration John Carley. In other words, the monitors were people close to Mr. Christie. In Mr. Ashcroft's case, his monitorship could be worth as much as $52 million.

As we said in an earlier post, no matter how you spin it -- and Messrs. Christie and Ashcroft have been doing plenty of that -- the appointments have the appearance of impropriety. Peel away the PR and the best you can say is that there was some obvious cronyism going on. The worst you can say is that the DOJ created a scheme by which U.S. Attorneys can extract millions of dollars from wrongdoers and funnel the money to former bosses, friends and political allies.

Of 31 cases last year involving deferred prosecution agreements and monitors, 12 were for violations of the Foreign Corrupt Practices Act, 10 for health care and food and drug industry offenses, 3 for commodities fraud, 2 for banking secrecy, 2 for internet gaming and 2 for other fraud.

View prior posts about monitors here.

Full post as published by The FCPA Blog on March 11, 2008 (boomark / email).