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More On The Monitors

Ah, Spring. And the corporate compliance monitors are back in the news. Here’s what’s happening:

It’s an annual event. Democrats in Congress have re-introduced a bill from last year to regulate the way monitors are selected, paid and held accountable. The Project on Government Oversight has a nice report here. The retitled “Accountability in Deferred Prosecution Act of 2009” can be downloaded here.

Two of the bill’s sponsors are from New Jersey, where the big flap about monitors first started. In late 2007, New Jersey’s U.S. Attorney Chris Christie used deferred prosecution agreements to settle domestic bribery charges against orthopedic device makers. To monitor their compliance, he selected former U.S. Attorney General John Ashcroft, 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.

Sticker shock. The monitors were seen as being close to Christie. On top of that, his ex-boss John Ashcroft’s monitorship had a price tag of $28 million to $52 million for 18 months of work. Democratic lawmakers (and plenty of Republicans) were unhappy to learn that federal prosecutors, acting alone, could tap party big shots and friends for such lucrative (part-time) posts. In early 2008, Congress launched investigations into all aspects of the monitors — their appointment, pay, oversight and reporting responsibilities — and even whether deferred prosecution agreements make sense in the first place. The hearings ended without any action by the Congress.

Where are they now? The orthopedic device makers completed their deferred prosecution agreements a couple of weeks ago. In their September 2007 settlements, they together paid $310 million to resolve charges that they bribed U.S. doctors to buy their products. After that, the Justice Department and the Securities and Exchange Commission began investigating whether the companies also gave kick-backs to overseas doctors employed by government-owned hospitals. Such payments could violate the Foreign Corrupt Practices Act. Biomet Inc., Stryker Corp., Zimmer Holdings Inc., Smith & Nephew plc and Medtronic Inc. disclosed FCPA investigations during 2007 and Wright Medical reported a similar investigation in June 2008.

Christie, meanwhile, resigned as New Jersey’s U.S. Attorney in November 2008 and is running for governor as a Republican. In recent days he’s had to defend his anti-corruption image against charges concerning the monitor appointments. The AP’s report is here. “At issue,” the AP says, “is Christie’s acceptance of campaign cash from Herbert Stern, a former monitor for the state’s medical and dental school, and his choice of two other monitors with whom he had prior ties: John Ashcroft, the former U.S. attorney general and Christie’s old Justice Department boss, and David Kelley, a former U.S. attorney in Manhattan who investigated a stock fraud case involving Christie’s younger brother, Todd, but declined to prosecute him.” Christie, 46, says he’s done nothing wrong.

Don’t need ’em, don’t want ’em. The always-resourceful Corporate Crime Reporter has a neat story dated April 3, 2009 titled, Guess Which U.S. Attorney Doesn’t Do Corporate Deferred Prosecution Agreements? It’s Philadelphia. Linda Dale Hoffa, the office’s Criminal Division chief since 1984, said this:

We haven’t done [deferred prosecution agreements] because we think it’s better to make a clear bright line decision that we are prosecuting or not prosecuting. There is either sufficient evidence to prosecute or not to prosecute. A deferred prosecution agreement can be more of a gray area. If the crime is serious enough, and it is warranted, then we will bring a prosecution. It’s not a written policy. But it has been the practice in our office.

She also said it’s the same with non-prosecution agreements. Either the office makes a decision to prosecute or to decline to prosecute, in which case “we close our file.”

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