Public Reporting of Monitorship Outcomes

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When a corporation is involved in widespread or pervasive misconduct, courts, regulators, or prosecutors often require the firm to seek help from an independent third party, known as a monitor, to supervise the firm's efforts to rectify the situation. Veronica Root Martinez asserts that, upon the completion of all monitorships, the public should be provided with a comprehensive report that outlines whether the firm has successfully addressed the issues at hand or not.

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Institution: Duke University

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When a corporation is involved in widespread or pervasive misconduct, courts, regulators, or prosecutors often require the firm to seek help from an independent third party, known as a monitor, to supervise the firm’s efforts to rectify the situation. Veronica Root Martinez asserts that, upon the completion of all monitorships, the public should be provided with a comprehensive report that outlines whether the firm has successfully addressed the issues at hand or not.

Image courtesy of interviewee. December 22, 2023

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This video video is a detailed exploration of the concept of monitorships, which are independent outsiders appointed to oversee organizational remediation efforts after wrongdoing is identified, particularly in cases of corruption or misconduct. The speaker, having studied monitorships for about a decade, explains that these monitors serve various entities, including governmental agencies like the Department of Justice and the Federal Trade Commission.

Monitorships can take different forms, such as enforcement monitorships, where monitors ensure a company fulfills specific tasks, and corporate compliance monitorships, where monitors help organizations identify compliance failures and implement necessary reforms. The relationship between monitors, the organizations, and regulatory bodies is complex, involving oversight, accountability, and transparency. The transparency of monitorship reports has evolved, especially when monitors are used outside the courtroom, potentially limiting public access.

The speaker advocates for mandatory public reports at the conclusion of monitorships to improve transparency and hold organizations accountable for their remediation efforts. These reports should be succinct and accessible to the public, detailing the success or failure of the compliance efforts. Suggestions include enforcing this requirement through regulations from the SEC and the Office of Management and Budget for public and private firms, respectively.

Furthermore, the speaker emphasizes the importance of monitoring the effectiveness of these remediation efforts, citing empirical studies showing corporate recidivism. Overall, they argue for a balanced approach that allows for accountability while recognizing the challenges presented by diverse regulatory frameworks and the need for monitors to maintain their reputations and incentivize effective compliance.

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X-TIMESTAMP-MAP:LOCAL=00:00:00.000,MPEGTS=900000

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I've been studying monitors

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and monitorships for about a decade.

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Uh, I first encountered the use

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of monitors actually when I was in private practice,

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and we use monitors when there is some sort of widespread

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or significant corruption found within an organization.

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Um, so the question

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that often arises when you find some sort

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of important misconduct is, does the organization on its own

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have the competence to remedy and respond to the misconduct?

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And if a determination is made either by the court,

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a regulator or a prosecutor, that oversight over

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that remediation effort would be helpful.

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Then a monitor is often tasked with responsibility

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for overseeing that process.

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Um, as I've defined it in my own scholarship,

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a monitor is an independent private outsider employed

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after an institution is found to have engaged in wrongdoing

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and who effectuates remediation

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of the institution's misconduct

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and who provides information to outside actors

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about the status of the institution's remediation effort.

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The outside actors are often, the court,

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or it might be an enforcement agency like the Department

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of Justice or the Serious Fraud Office, or,

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and sometimes, and sometimes the public.

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Uh, so monitors are utilized by a variety of actors.

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Um, as I said, they, they actually arise out of,

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a traditional, a traditional use of the court, the DOJ.

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Um, in the, in the US we see the Department of Health

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and Human Services use them.

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The Federal Trade Commission has used them.

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The securities and exchange communities,

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commission has used them.

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So just a plethora of governmental actors, to use them

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to ensure that firms are engaged in

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effective remediation efforts.

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Um, importantly, remediation can take,

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a variety of forms.

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So this could be from,

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effectuating detailed mandates from a court

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or government regulator, to creating a,

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a brand new compliance program that often requires some back

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and forth with the monitor and the organization.

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Um, and the use of monitors,

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like the rate at which they are utilized, hi has ebbed

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and flowed, I'd say over the past 15 to 20 years.

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Um, but, but they remain constant.

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Um, and whether it's, we, we've seen them used

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for Volkswagen

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after it was found to have been engaged in hiding,

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true emission practices.

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Um, we've also seen it,

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a monitor levied against HSBC when they had ineffective

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anti-money laundering protocols.

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We've even seen, seen them in the environmental context.

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So Carnival Cruise Line had a monitor as a result

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of repeated violations of environmental laws in regulations.

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Um, so we really see the use of monitors across a variety

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of regulatory and legal areas

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and, being encouraged to be implemented by a variety

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of legal, actors.

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The classic use of a monitor,

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Is actually something that a court would've used

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to help the court in effectuating its own mandates.

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So, within the states, we would think about kind of the,

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the desegregation orders, in the 1950s and sixties.

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And so you would have, you know, maybe a municipality

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or something that's not doing what

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the court thinks that they should be doing.

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And oversight for the court, for the judge themselves

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to effectuate the oversight would've been very

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costly in terms of time.

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And so the judge would appoint someone else

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to do that oversight.

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So monitors are an outgrowth of things like special masters.

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And so traditionally you would have some sort

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of formal adjudication in a court,

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and then the court would order that a monitor

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or a special master oversee some sort of effort.

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Um, and that kind

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of classic ideal over time became, it evolved.

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Um, and so,

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after the holder memo was issued in the 19, in 1999,

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within the, in the, in the states,

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we saw this increase in corporate

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enforcement activity by the government.

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And so the next iteration of the use of monitors

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outside the court context was just from the DOJ.

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And so the DOJ would say, we want you,

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we want this company to do the following things

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because of the misconduct they engaged in.

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And so then they're, they say, we want a private

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outsider to oversee this.

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The DOJ doesn't wanna use its

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resources to be doing the oversight.

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And so then a monitor would be utilized.

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And those sorts of monitorships,

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which I call enforcement monitorships, are when the DOJ has,

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let's say a list, we want the, the firm

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to do the following 10 things.

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And so the monitor is there kind of checking the boxes,

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okay, you, you told them

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to hire new staff, they've done that.

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You've told them to, fire this, this executive.

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They've done that. So they're just kind of checking the box.

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That would be an enforcement monitorship.

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And then the next iteration is

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what I would call the corporate compliance monitorship.

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And in that iteration,

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and that's what we really see quite a bit today

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in settlement agreements between DOJ or the SEC

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and in large corporations is we know

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that there's been some sort of significant failure,

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that there was some sort of compliance failure.

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And the DOJ wants there to be out outside oversight

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to make sure that the remediation effort goes well,

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but we don't know exactly what they need to fix, right?

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So part in that, in this instance,

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the corporate compliance monitor is coming in

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and working with the company

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and determining, okay, what are the full deficiencies

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with the compliance program?

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And what sort of reforms would need to be put into place so

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that this sort of misconduct doesn't occur again.

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So it's, they're not checking a box.

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They're almost helping to create what boxes will need

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to be checked going forward.

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And that requires a, a great deal of coordination

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with the firm and the monitor.

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And then they do some reporting out to, the agency.

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Um, and then the final iteration,

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that we've seen in monitor ships is

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what I've called a modern fort ordered monitorship.

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Um, and so there, the court is taking aspects

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of the corporate compliance monitor ship

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where the court doesn't know exactly what the firm needs

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to do, but they firm knows that there needs

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to be a remediation effort

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and the firm wants to have an agent,

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so in this case a monitor to oversee it for the court

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and give reporting back to the court.

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Um, and so it's, again, it's not a check the box

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'cause they don't know exactly what the boxes are

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to be checked,

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but it is, a monitorship where there is this, again,

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independent oversight that's going on.

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Um, but in that case, the monitor

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is actually an agent of the court.

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So those are the four types of monitorships

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that I have observed in my work.

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Um, and,

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they function slightly different

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in a slightly different way.

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Um, but they, but they all have the commonality of the,

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of the four factors that I outlined at the beginning,

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which is that you have this private,

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independent outsider who's coming in

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to oversee the remediation effort

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and, to help the, organization figure out

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what they need to do going forward.

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And it's employed

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after the institution has been found

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to have engaged in wrongdoing.

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This really matters

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because sometimes people think about monitors

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and they think that a monitor is a gatekeeper,

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and a monitor is not a gatekeeper,

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a gatekeeper we use on the front end.

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We say, how can we stop the misconduct from occurring at all

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and how can we prevent it from occurring?

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So that's like a gatekeeper.

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So like an auditor is a gatekeeper.

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Um, the monitor comes into play

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after we know misconduct has occurred,

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and they're really a mediator.

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They're saying, okay, how do we remediate this? Well?

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Um, and so that's kind of how things have evolved over time.

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When we were talking about the evolution of monitorships,

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we've also seen an evolution in how confidentiality

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and transparency occur.

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So when a monitorship is the result of a court order,

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the monitor is the agent of the court.

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And that means the monitor's reports are judicial records.

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And in the states, judicial records tend to be transparent.

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It's relatively hard to put things under seal.

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You have to have a really good reason.

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And so if this is so a traditional court ordered monitor,

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every report would be public.

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So actually in Volkswagen,

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because Volkswagen was resolved as part of a, a part

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of the case was resolved in a criminal guilty plea, that

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part of the monitorship, I think had to be public,

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because of how it was coming through and

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because the court was actually ordering

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that the monitorship occur.

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Um, and so all of that would be confidential.

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It would be transparent. We would just be able to go over

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to the court's docket and pull out the monitorship reports.

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When the monitor ship began to be used by agencies

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outside of the oversight of the court, the trans,

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the transparency and confidentiality norms shifted.

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So the transparency

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of the reports in the court ordered context are just

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because we have to have transparency of court

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of judicial records, once the court is no longer a player,

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you don't have to have the same sort.

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Transparency is no longer required.

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And now transparency becomes a negotiating point.

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And so the organization, the corporations tend

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to resist having the reports turned over

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and they say that they're resisting it

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because they say that they're concerned with things like,

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well, we might have trade secret information

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that will end up in the monitorship report.

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And if it's like a bank, they might be concerned about

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customer information, they might say, we're required

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to keep this information confidential,

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the monitor can't now take it in and,

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and turn it over to the public.

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So those are the stated concerns that, come through.

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The unstated concerns from corporations

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are likely things like if the monitor's report is turned

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over to the public, then we are gonna have,

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then we're gonna be providing a blueprint

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to plaintiff's attorneys that might, file,

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litigation against us.

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So a civil litigation against us

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that's not brought from the government civil litigation,

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is not as predictable as the sort of outcomes

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that you might have if you're in a

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negotiation with the government.

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And firms tend to find that very distasteful.

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And so as agencies have started to use monitorships,

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this transparency, confidentiality concern has flipped.

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And so while things were being used by courts

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and there are still court ordered monitorships, we,

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where we can go onto the docket

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and just pull off the full report,

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but outside of the court ordered context,

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we do not get any transparency monitors.

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monitorship reports are tend not to be disclosed

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and corporations when someone tries to get disclosure.

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So it's often like, say a reporter will intervene in a case

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and try and get access to the monitors reports.

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Um, both the corporation will fight very hard against that,

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the turning over the reports.

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But so will the DOJ.

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So will the government, the government will also say

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that the the reports shouldn't be turned over.

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Um, now you, there are several sets of reports.

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There are usually, there's usually a final report at the

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conclusion of the monitorship,

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but there are interim reports as well.

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Um, so in the HSVC case, a reporter was attempting

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to get an interim report

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and the monitor in that case put in an affidavit

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and said, if you allow my interim reports to be disclosed

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to the public, it will have a chilling effect on my ability

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to work with members of the organization

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to get the information that I need in order to come up

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with a set of recommendations we need,

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to fix this compliance program.

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And so there are, I think, good arguments

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for why the reports need to be confidential.

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Um, but even more than that, I think

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that if there was a broad, like if we just said

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that the reports can be several hundred of pages,

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if we were to say, okay, all monitorship reports what,

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what we have now, the status quo, if we were to say that

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what we have now is instantly gonna be made public,

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the amount of negotiation from the corporations about

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whether or not they're gonna agree to a monitorship,

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their incentives will shift.

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Um, and so you're, it's gonna be harder.

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The, the corporations will, move a, a bit,

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will be a bit more strident in, in attempting

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to get a monitorship.

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Now they might not be successful.

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Um, but also I,

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and I think that this is what would really happen is

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that we'd, there's nothing

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that requires these reports to be written.

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And so what you would see is

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we'd stop getting written reports.

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So instead of saying, we're gonna have an interim report

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every six months or once a year,

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what you're gonna have is an interim meeting.

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And so then the reports would just,

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the written documents would just end up disappearing.

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And we've seen this sort of behavior in other contexts,

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where things that used to be in writing

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just aren't in writing anymore

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because then when somebody tries to get access to it,

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they can say, well, actually,

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there's no written report to give you.

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And so I think, so to me, it would be unsatisfactory to try

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and change the status, the current status quo

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by just saying, well, all reports need to be made public.

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The reports would either change or they would go away

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because it is, it's too easy to judge.

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Um, and so, so anyway,

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but the, that's how things have changed over time,

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and that's part of what the concern is

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with the reports themselves.

13:13.315 --> 13:16.605
I'll also note, you know, it can be difficult.

13:18.585 --> 13:21.445
It can be difficult to, it's been difficult

13:21.445 --> 13:22.925
to create oversight norms

13:23.265 --> 13:25.125
and disclosure norms in the space, in part

13:25.125 --> 13:27.445
because it's so many diverse regulatory areas.

13:27.825 --> 13:29.925
So you're having, they have all these different agencies

13:29.925 --> 13:34.485
who use 'em, but also, the actors that serve

13:34.485 --> 13:36.125
as monitors are also diverse.

13:36.345 --> 13:37.805
So they're often lawyers,

13:38.385 --> 13:40.805
but they're not lawyers engaged in the practice of law.

13:41.155 --> 13:43.965
They're lawyers engaged in this other sort of effort.

13:44.905 --> 13:48.965
And because of that, they are not subject to the rules

13:48.985 --> 13:50.445
of professional responsibility

13:50.715 --> 13:53.205
because it's not actually the practice of law.

13:53.985 --> 13:56.125
And then, but you also have monitors who are accountants,

13:56.345 --> 13:58.045
but again, the accountants who are serving

13:58.145 --> 14:01.445
as monitors are not engaged in classic like auditing work.

14:01.985 --> 14:03.805
And so they're also a little bit

14:03.805 --> 14:05.805
outside their normal professional norms.

14:06.145 --> 14:09.045
And so one of the, so one thing you might think is, well,

14:09.265 --> 14:11.765
we can just regulate all the lawyers and it'll be fine,

14:12.505 --> 14:14.125
but not all monitors are lawyers

14:14.505 --> 14:17.845
and the way in which a monitorship arises, the,

14:17.905 --> 14:19.845
the monitor is not providing legal advice.

14:20.505 --> 14:22.885
Um, it's providing this other type of advice.

14:22.905 --> 14:25.045
And so it's not, they're not engaged in the practice of law.

14:25.045 --> 14:26.445
So there's all these things that have made it,

14:26.765 --> 14:29.125
challenging to figure out how to get more information

14:29.125 --> 14:32.485
to the public, but also how to over oversee,

14:32.545 --> 14:34.125
the monitors and monitorships themselves.

14:34.545 --> 14:35.925
So we've had this conundrum.

14:36.105 --> 14:37.965
So we can't regulate the monitors themselves

14:37.965 --> 14:40.125
because there are different sorts of actors.

14:40.665 --> 14:43.685
Um, it's also hard to come up with particular rules

14:43.875 --> 14:45.245
because it's happening across

14:45.765 --> 14:47.045
reg different regulatory areas.

14:47.785 --> 14:50.405
Um, and, and then also the, the confidentiality

14:50.405 --> 14:53.765
and transparency issues, as I said earlier, they'd be,

14:53.765 --> 14:56.445
they'd be relatively easy to dodge in different respects.

14:57.025 --> 14:59.325
Um, and so the challenge was

14:59.905 --> 15:04.365
how do you figure out some sort of kind of omnibus fix

15:04.875 --> 15:07.765
that would allow more information to get to the public?

15:08.425 --> 15:10.725
Um, because these are, these tend to be issues

15:10.725 --> 15:13.725
of public concern when a monitorship when a monitor is

15:13.885 --> 15:17.805
imposed, without, you know,

15:17.865 --> 15:21.165
coming up against these, these hurdles that I've outlined.

15:21.585 --> 15:23.365
And so one of the things that I realized was

15:23.365 --> 15:26.485
that all monitors, regardless of type, regardless

15:26.505 --> 15:27.845
of regulatory or legal area,

15:27.965 --> 15:30.205
where they're being implemented, regardless of the agency

15:30.225 --> 15:32.445
or court, who wants the monitor to be doing the work,

15:33.425 --> 15:36.685
all monitors, gather, analyze, assess,

15:37.065 --> 15:38.645
and disseminate information.

15:39.225 --> 15:42.445
And so this insight creates an opportunity for a bit

15:42.445 --> 15:44.405
of end run regulation of the monitors themselves.

15:45.265 --> 15:46.845
Um, instead of regulating them,

15:47.265 --> 15:50.445
we can regulate them the actually the information the

15:50.445 --> 15:51.605
monitor distributes.

15:52.625 --> 15:54.365
Now I've already, I've, as I said,

15:54.445 --> 15:57.365
I I don't think just making the status quo reports public

15:57.365 --> 15:59.405
would work because I think the reports would change.

15:59.945 --> 16:02.755
So instead, I suggest that

16:03.425 --> 16:07.155
when monitor ships occur that there has, that,

16:07.155 --> 16:11.195
there must be a public report at the end of the monitorship.

16:11.455 --> 16:13.115
So the monitors would still do those sorts

16:13.115 --> 16:16.235
of reports they do now that we would get an additional

16:16.335 --> 16:17.915
report shorter.

16:18.615 --> 16:22.235
Um, that tell that is focused on was the remediation effort

16:22.235 --> 16:25.955
during the monitorship term successful or not.

16:26.455 --> 16:27.635
And so then the question is,

16:27.975 --> 16:29.555
how would we get this public report?

16:30.175 --> 16:34.115
Um, so I have two interventions I suggest in the paper.

16:34.865 --> 16:35.955
Neither is perfect.

16:36.255 --> 16:37.755
Um, they're both, they're both kind

16:37.755 --> 16:39.115
of second best interventions.

16:39.115 --> 16:40.715
The best intervention would be some sort

16:40.715 --> 16:41.995
of congressional legislation.

16:42.775 --> 16:47.595
Um, congress, you know, it seems kind of difficult sometimes

16:47.615 --> 16:49.315
for congress to pass legislation.

16:49.335 --> 16:51.395
And so I've, you know, so the best intervention would be

16:51.395 --> 16:53.075
legislation, but I moved past that.

16:53.235 --> 16:54.515
'cause I think there are some, maybe some

16:54.815 --> 16:55.955
easier paths forward.

16:56.455 --> 16:59.595
Um, so the first would be that the SEC

17:00.365 --> 17:04.555
could require all public firms who enter into a monitorship

17:04.735 --> 17:06.195
as a result of a court order

17:06.335 --> 17:10.235
or a negotiated settlement agreement to include as a term

17:10.235 --> 17:13.275
of the monitor's engagement letter that they prepare

17:13.335 --> 17:14.555
and issue a public report.

17:14.945 --> 17:17.075
Okay, so the public firms would have,

17:17.075 --> 17:19.035
so the SEC would be telling the pub, the public firms

17:19.155 --> 17:22.195
that they need to have the monitor that they engage

17:22.195 --> 17:23.715
with do this public report.

17:23.735 --> 17:27.395
Now, importantly, the monitors, the monitors are often,

17:27.735 --> 17:31.955
imposed by a court order or a settlement agreement,

17:32.175 --> 17:34.795
but the entity paying the monitors is the

17:34.795 --> 17:36.275
monitored firm, right?

17:36.575 --> 17:38.435
And so what this intervention is doing,

17:38.435 --> 17:40.275
saying you're paying this individual,

17:40.615 --> 17:42.795
you're gonna enter into terms with that individual,

17:42.795 --> 17:44.595
there are gonna be terms that you have to enter into

17:44.595 --> 17:47.075
with the monitor between the corporation and the monitor.

17:47.455 --> 17:49.125
And one of those terms needs to be, be

17:49.275 --> 17:50.405
that the monitor is going

17:50.405 --> 17:52.165
to issue a public report at the end

17:52.505 --> 17:53.885
of the remediation effort.

17:54.505 --> 17:58.045
Um, the limitation of this proposal is

17:58.045 --> 17:59.885
that it only covers public firms,

18:00.585 --> 18:03.845
and we definitely see monitorships being levied

18:04.265 --> 18:06.365
as against non-public firms as well.

18:06.985 --> 18:09.365
Um, but this would capture a lot of the sort

18:09.365 --> 18:10.645
of settlement agreements we're seeing

18:10.645 --> 18:14.085
between governmental actors and corporate firms today.

18:14.985 --> 18:18.285
Um, the other to, to try to supplement this

18:18.385 --> 18:21.885
and to, to think about the reality that not all firms who,

18:22.145 --> 18:24.805
enter into monitorships are public firms

18:25.585 --> 18:29.085
is I also propose that the OMB, so the Office of Management

18:29.085 --> 18:32.445
and Budget, require executive agencies

18:32.945 --> 18:34.925
who enter into agreements with organizations

18:34.945 --> 18:37.485
to resolve misconduct that require the retention

18:37.505 --> 18:39.285
of a monitor to include as a term

18:39.285 --> 18:42.085
of the settlement agreement that the monitor will prepare

18:42.145 --> 18:44.045
and issue a public report at the conclusion

18:44.045 --> 18:45.205
of the monitorship term.

18:45.385 --> 18:46.885
So they're basically the same intervention.

18:47.035 --> 18:49.485
It's just happening in a slightly different way.

18:50.515 --> 18:53.205
That side of the proposal should be able to get

18:53.225 --> 18:54.565
to non-public firms.

18:55.745 --> 18:57.045
Um, and it's

18:57.045 --> 18:58.405
because it's telling the agency

18:58.405 --> 19:00.005
how they're supposed to be negotiating.

19:00.145 --> 19:01.525
And most of these mon, a lot

19:01.525 --> 19:04.285
of these monitorships are coming out of,

19:04.535 --> 19:06.085
negotiated settlement agreements.

19:06.625 --> 19:09.325
Um, this obviously doesn't cover any court ordered

19:09.325 --> 19:11.645
monitorships, but court ordered monitorships tend

19:11.645 --> 19:13.925
to be public anyway, so we should be okay there.

19:14.465 --> 19:18.885
Um, now what would I want to see in a public report?

19:19.545 --> 19:22.445
Uh, so there are a few things that I'd really like

19:22.445 --> 19:23.445
to see in a public report.

19:24.185 --> 19:27.245
Um, first, as I said, monitors are ha the people

19:27.265 --> 19:30.245
who are engaged as the monitors, those actors

19:30.825 --> 19:33.165
are hap are doing their work in a regulatory vacuum.

19:33.655 --> 19:35.165
There is no, no entity

19:35.265 --> 19:39.345
or thing that is in charge of regulating monitors.

19:40.085 --> 19:43.025
And so one of the things, and, and,

19:43.025 --> 19:46.745
and in other work I've argued that the main kind of lever

19:46.815 --> 19:48.745
that is regulating, that is serving

19:48.745 --> 19:51.745
to regulate monitor conduct is really their own reputation.

19:52.205 --> 19:54.585
So they have reputational interests in

19:54.585 --> 19:55.705
making sure that they do a good job.

19:56.405 --> 19:58.425
One, these are very profitable engagements,

19:58.485 --> 20:00.145
and so they wanna be able to do them again.

20:00.445 --> 20:01.785
And so they wanna have, do a good job

20:01.785 --> 20:02.905
from the government's perspective.

20:03.325 --> 20:06.745
Um, but two, because they're very profitable engagements and

20:06.745 --> 20:08.745
because of how monitorships are appointed,

20:09.055 --> 20:12.425
they also want to be part of the slate of folks

20:12.445 --> 20:15.625
who are proposed by the corporations to be the monitors.

20:15.625 --> 20:17.905
So the monitor's reputation matters quite a bit.

20:18.135 --> 20:20.265
Well, if we're gonna fully leverage the monitor's

20:20.265 --> 20:23.825
reputation, then the monitor's identity should be public,

20:24.365 --> 20:26.385
and that actually isn't always true.

20:27.085 --> 20:29.985
And so part of the report would be to say who is the monitor

20:30.165 --> 20:31.985
or what is the entity that is serving as the monitor,

20:32.225 --> 20:33.865
although it tends to be an individual and

20:33.865 --> 20:36.745
that then has a team from another, entity.

20:37.125 --> 20:39.665
So who is the monitor? What is their ident identity?

20:39.725 --> 20:41.945
Trying to really harness that reputational concern.

20:42.765 --> 20:44.545
It would also be great if the monitor had

20:44.545 --> 20:45.705
to attest to something.

20:45.765 --> 20:48.285
So for example, monitor is attesting to whether

20:48.285 --> 20:50.205
or not they think the remediation effort was

20:50.305 --> 20:51.725
or was not significant.

20:52.465 --> 20:53.845
Um, we've seen,

20:53.945 --> 20:57.845
recent work on the at attestation from the DOJ, so right,

20:57.845 --> 20:59.965
the, the most recent iter iteration of

20:59.965 --> 21:02.285
that is they're requiring corporate compliance officers

21:02.285 --> 21:04.845
to provide some attestations about the status

21:04.905 --> 21:06.165
of compliance programs.

21:06.185 --> 21:07.845
So this would be kind of similar to that.

21:08.465 --> 21:11.805
Um, and in addition to kind

21:11.805 --> 21:13.085
of giving the monitors identity

21:13.145 --> 21:14.605
and requiring an attestation,

21:15.005 --> 21:17.045
I think it would be great if we have some sort

21:17.045 --> 21:19.005
of standardization about what sort

21:19.005 --> 21:21.645
of information the public is gonna receive about the report.

21:22.105 --> 21:24.645
So for example, we should have standardization about

21:24.645 --> 21:25.765
when the report is issued.

21:26.005 --> 21:27.645
I think it should be issued shortly

21:27.645 --> 21:29.285
after the conclusion of the monitorship.

21:29.625 --> 21:33.965
Um, I, I agree with the, with the monitor in the HSBC case,

21:33.995 --> 21:36.685
that interim reporting could create a chilling effect.

21:36.705 --> 21:38.805
And so I'm not in favor of interim reporting,

21:38.805 --> 21:39.925
but I think at the end we

21:39.925 --> 21:41.045
should be able to get an accounting.

21:41.625 --> 21:45.845
Um, we should also focus the content on the firm's success

21:46.265 --> 21:48.805
or failure at the remediation effort undertaken.

21:48.805 --> 21:51.685
Like we should get more details about what's going on when

21:51.685 --> 21:54.845
monitorships are entered into, we get this really, we tend

21:54.865 --> 21:57.765
to get this really flashy press release from the

21:57.765 --> 21:58.845
governmental agency that says,

21:59.105 --> 22:01.325
we have entered into this negotiated settlement agreement

22:01.515 --> 22:03.605
with this firm because they've engaged in a following,

22:03.605 --> 22:05.325
they're alleged to have been engaged in the following

22:05.335 --> 22:07.445
misconduct, and now they're gonna have the appointment

22:07.445 --> 22:09.885
of the monitor as well as whatever else they've agreed to.

22:10.745 --> 22:13.285
Um, we don't get the same splashy stuff at the end.

22:13.545 --> 22:16.205
At the end. We tend to get a one line disclosure

22:17.025 --> 22:18.565
in, securities filing.

22:19.145 --> 22:22.605
And so part of what this report is doing is giving us a

22:22.605 --> 22:23.805
little more information at the end,

22:23.835 --> 22:25.045
just like the public is getting

22:25.045 --> 22:26.405
information at the beginning.

22:26.945 --> 22:29.885
Um, in terms of the content of the report, again,

22:29.885 --> 22:31.405
I wanna focus on the remediation effort,

22:31.505 --> 22:34.365
but I also want it to be written for the public.

22:34.905 --> 22:38.445
So when I do read the, the court ordered monitorship report,

22:38.585 --> 22:41.205
so when I can pull the report off the docket, they tend

22:41.205 --> 22:42.885
to be a a few hundred, a couple hundred

22:42.985 --> 22:46.005
to a few hundred pages, and they can be kind of technical

22:46.465 --> 22:48.165
and maybe difficult to,

22:48.755 --> 22:50.605
they can sometimes be difficult to parse through.

22:51.535 --> 22:54.675
And so I wanna a report that's not as long, that's,

22:54.695 --> 22:57.555
that's short, shorter, maybe,

22:58.285 --> 23:00.115
maybe like 20 pages, right?

23:00.225 --> 23:03.835
That tells us about the remediation effort,

23:03.855 --> 23:05.035
but tells it in a way

23:05.035 --> 23:06.635
that's really accessible to the public.

23:07.175 --> 23:09.635
The idea here is let's create another report

23:10.065 --> 23:11.995
that the public can better understand

23:12.575 --> 23:15.355
so the public has a better appreciation of

23:15.465 --> 23:19.195
what their mediation effort was and how it was successful

23:19.615 --> 23:21.715
and what we should expect going forward.

23:22.335 --> 23:25.355
Um, importantly since I published my this article,

23:25.805 --> 23:27.475
there has been some empirical work done

23:27.475 --> 23:28.635
by some researchers in the,

23:28.635 --> 23:30.915
in a business school about monitorship

23:30.915 --> 23:32.755
effectiveness after the fact.

23:32.895 --> 23:34.995
So after like, so the Monitorship has concluded,

23:35.855 --> 23:37.755
is the firm in a better situation, do we see

23:37.755 --> 23:39.315
what I'm gonna call corporate recidivism?

23:39.655 --> 23:40.875
And what they found is that we are

23:40.875 --> 23:41.995
seeing corporate recidivism.

23:42.625 --> 23:44.515
Part of why I think the interventions

23:44.515 --> 23:48.085
that I'm suggesting in my paper are important is

23:48.085 --> 23:50.445
because I think it's important that the monitor, not

23:50.445 --> 23:52.765
that the monitor have some skin in the game

23:53.695 --> 23:57.615
about the success of the firm long term as well

23:57.615 --> 24:00.375
as the firm having some skin in the game about

24:00.375 --> 24:01.415
their success long term.

24:02.075 --> 24:05.095
Um, because, and so we're, what we're doing is we're saying

24:05.995 --> 24:08.535
the dis a disclosure of this type of the firm says,

24:09.275 --> 24:11.815
or the firm or a report the firm puts out that the,

24:11.815 --> 24:15.375
that they've gotten the monitor to, to create says, Hey,

24:15.555 --> 24:17.415
we have this really great compliance program.

24:17.555 --> 24:20.055
Now we're in a much better, space to do

24:20.365 --> 24:22.335
what we're supposed to do in the anti-money laundering

24:22.335 --> 24:23.615
context or the anti-trust context.

24:24.005 --> 24:26.135
Well, if it turns out like six months later that

24:26.135 --> 24:27.615
that wasn't true,

24:27.675 --> 24:30.335
you've actually created a really powerful opportunity

24:30.875 --> 24:34.455
for third party litigation, to say, well, y'all said

24:34.455 --> 24:37.095
that you had done a better job, but did you?

24:37.155 --> 24:39.335
And so I think, anyway, so I think it helps create the right

24:39.335 --> 24:41.695
set of incentives as well

24:41.755 --> 24:44.215
as providing the public better access to

24:44.215 --> 24:45.535
what actually occurred in these,

24:45.675 --> 24:47.175
in these issues of public concern.

24:47.755 --> 24:49.095
So I think, you know, any sort

24:49.095 --> 24:50.615
of proposal is gonna have kind

24:50.615 --> 24:52.535
of its benefits and its drawbacks.

24:52.555 --> 24:54.575
So I think the question I got the most

24:55.315 --> 24:57.495
as I was presenting this piece and, and,

24:57.515 --> 25:00.695
and talking to folks about it, it was, well,

25:01.275 --> 25:03.495
if you create this requirement for there

25:03.495 --> 25:06.815
to be a public report, will it decrease the amount

25:06.815 --> 25:08.295
of monitor ships we're going to see?

25:08.955 --> 25:10.615
And I think that that's a fair idea,

25:10.875 --> 25:12.855
but I also think it's important to remember

25:13.245 --> 25:15.735
that we don't use monitor ships all of the time

25:16.595 --> 25:19.615
we use monitor ships when there has been widespread

25:19.645 --> 25:21.775
significant pervasive misconduct,

25:22.505 --> 25:26.175
which means we're using monitorships when the facts are not

25:27.155 --> 25:29.735
in, when the facts that the

25:30.235 --> 25:32.855
for the corporation aren't great, they're bad facts,

25:33.035 --> 25:35.455
and they, and they tend to wanna enter into these settlement

25:35.455 --> 25:38.495
agreements and the settlement agreements are negotiated.

25:38.595 --> 25:39.615
And so you could say

25:39.615 --> 25:42.135
that maybe they're gonna decide to take it to trial.

25:42.595 --> 25:44.335
We haven't really seen that very often.

25:45.115 --> 25:47.415
Um, corporations tend to want to settle.

25:48.195 --> 25:51.295
Um, and so to me, the question of whether

25:51.295 --> 25:52.895
or not you really are able

25:52.895 --> 25:55.015
to get the public reporting mandate

25:55.195 --> 25:56.895
and to have a public reporting mandate

25:57.835 --> 26:02.095
and still have monitorships is a question about the court

26:02.235 --> 26:05.215
or the regulator or the agency, the DOJ,

26:05.215 --> 26:06.895
the prosecutor on the other side,

26:06.915 --> 26:08.495
and how aggressive they're willing to be.

26:09.195 --> 26:12.655
My own view is that we see a little bit of cyclical,

26:13.165 --> 26:17.735
there's a little cyclical nature of the type of the, the,

26:17.795 --> 26:19.615
the political party of administrations and,

26:19.675 --> 26:22.055
and how aggressive they tend to be on corporate enforcement.

26:22.435 --> 26:25.695
So just like we tend to see, certain administrations,

26:25.835 --> 26:29.015
Dimi kind of pull back on regulation.

26:29.635 --> 26:32.055
So the, the rep, if a Republican administration wants

26:32.255 --> 26:34.695
to pull back on regulatory interventions,

26:34.765 --> 26:36.295
they also might wanna pull back on

26:36.295 --> 26:37.375
enforcement and vice versa.

26:37.995 --> 26:41.455
The but the, the, the upside though is that the folks

26:41.475 --> 26:42.975
who are negotiating these agreements

26:43.200 --> 26:44.530
Tend not to be the political people.

26:44.955 --> 26:47.485
They tend to be the line prosecutors, like, so the folks

26:47.485 --> 26:51.445
who plan on being at DOJ or SEC for 10, 15, 20 years.

26:51.945 --> 26:54.005
And those folks don't have the same sort of incentive

26:54.065 --> 26:56.125
to be responding to political pressure.

26:56.625 --> 26:59.725
And they're gonna be focused on is this significant?

26:59.905 --> 27:02.045
Is this pervasive, is this widespread?

27:02.665 --> 27:03.925
And is is, and

27:03.925 --> 27:07.405
and do I trust the firm to really clean this up on its own?

27:07.625 --> 27:10.005
Or do I need to have some assurances from a third party?

27:10.345 --> 27:12.525
And I think that those non-political people are gonna be

27:12.525 --> 27:17.085
less, kind of swayed to the, the, the, the,

27:17.085 --> 27:19.125
the changes in administration,

27:19.125 --> 27:20.805
that we might see in other instances.

27:20.905 --> 27:23.245
So I do think that there is some, some real room here

27:23.245 --> 27:24.205
for this to be successful.

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