Jun 2010 , Vol. VI, No.1

Independent Monitors: Increased Use And Heightened Standards

Builders and Contractors Exchange
Weekly Bulletin: 29 june 2010

Independent Monitors: Increased Use And Heightened Standards
By: Katharina K. Brekke Powers*

With more frequency in the last several years, the federal government has been requiring companies who have violated fraud statutes to engage an independent monitor as a condition to avoid criminal prosecution or to continue their eligibility for future government contracts. The government is utilizing independent monitors more frequently because they can provide expert independent oversight to ensure a company’s responsibility and accountability, particularly with respect to government contractors.

Traditionally, when a company was faced with the requirement to engage an independent monitor, it would find a convenient resource such as an attorney who could provide the required minimal oversight. However, federal agencies have now developed stricter guidelines and expectations for independent monitors.  A common set of characteristics has evolved for monitors, including that they be completely independent, have a detailed scope of work, be an expertise on the subject at hand, and be able to interact effectively with the government.

In March of 2008, the Acting Deputy Attorney General, Craig S. Monford, published a memorandum presenting some principles for effective utilization of independent monitors. The monitor should be selected based on his merits, should be an independent third party, and should not be an agent of the company or the government. The monitor’s primary responsibility should be to monitor a company’s progress in reducing the risk of recurrence of misconduct, and his responsibilities should not be broader than necessary to reduce the risk of recurrence of misconduct.  The monitor should make periodic written reports to both the government and the company, including any steps taken by the company under his recommendation and any new misconduct by the company.  The duration of the monitor’s term should be tailored to the problems of the particular company, and an agreement for an independent monitor should provide for an extension of monitoring at the discretion of the government. 

Independent monitors allow contractors to continue to do business after fraudulent misconduct while providing strict monitoring of corrective and compliance action to the satisfaction of the federal government. Because of their success, their use is only expected to increase in the future.

* The  author wishes to acknowledge the research and assistance of Ellis Pretlow, law clerk at Vandeventer Black, Summer 2010