Luck, Ties Drive Lucrative Big Law Corporate Monitoring for U.S.

Irina Baranova

The Biden administration’s interest in imposing more corporate monitorships has white-collar attorneys hustling for a lucrative gig for which luck and connections matter as much as qualifications.

The role can mean substantial billings for Big Law attorneys appointed by the Justice Department to probe lawbreaking companies post-settlement, correcting their compliance systems to prevent recurring misconduct. Costs can easily reach tens of millions of dollars and possibly nine figures for particularly lengthy and complex monitorships.

The first challenge is learning the opportunity exists: The imposition of a monitor is commonly made public only after someone is chosen. DOJ makes the selection from a list of three candidates provided to the department by the company to be monitored. Lawyers, consultants or accountants vying for the job have to convince corporate defense teams they won’t be too tough and prove to the government that they won’t be too soft.

“I’m not saying it’s a crapshoot, but there’s not a normal pipeline based on pure merit and you simply apply,” said Charles Duross, a Morrison & Foerster partner who the department picked in 2017 to monitor Odebrecht when the Brazilian construction behemoth pleaded guilty in a major fraud scandal.

“Maybe there’s some skill to it, but there’s also just a lot of luck and networking,” added Duross, who also managed 17 monitorships in his tenure as Justice Department Fraud Section supervisor.

The government enforcement tool is disliked by companies, but has also prompted ethical questions about whether businesses manage to game the selections and who benefits from the opaque monitorship process.

The department’s reliance on monitorships plummeted during the Trump administration. Biden’s Deputy Attorney General Lisa Monaco pledged in October that they’d be back in play, making good on her word in a pair of corporate plea deals late last year. Monaco also signaled the department may overhaul the selection process.

How it Works

The monitor selection process varies case-to-case, but attorneys with firsthand experience say it usually begins when the company negotiating a resolution with DOJ initiates discreet outreach to candidates drawn from their defense attorneys’ network of contacts.

They’ll interview attorneys—or sometimes consultants and accountants—in the months before a settlement is made public. The company must eventually submit a slate of three finalists to DOJ, which makes the final decision.

Lawyers whose firms are already representing the company get conflicted out of consideration.

“It oftentimes does come down to being at the right place at the right time,” said Fry Wernick, a Vinson & Elkins partner who counseled MoneyGram International through the completion of a monitorship last year after previously overseeing monitors as a DOJ Fraud Section manager.

“Lightning does have to strike,” Wernick added, “but then you still have to present your case as to why you’re the right fit.”

Those fortunate to get appointed are granted wide latitude to build a team of up to dozens of lawyers and other professionals. They gain unfettered access to interview employees and review sensitive documents, while traveling to company locations across the globe. Monitors periodically report back to DOJ on their progress in ensuring the corporation’s compliance system will prevent recidivism.

The company picks up the tab, yet has next to no control over the billable hours.

In the legal profession, this affords a rare degree of autonomy and stature that’s otherwise reserved for a judge.

Yet the deterrence tool also generates complaints about all three parties involved: monitors accused of racking up exorbitant fees by investigating outside their scope; DOJ officials perceived as rewarding close colleagues with monitorships when they leave for the private sector; and corporations accused of gaming the system by selecting a slate of three trusted allies.

Being Strategic

Attorneys wishing to take advantage of the latest monitorship pendulum swing recognize their ability to control the outcome has constraints.

Well-known former federal prosecutors have a significant advantage but still may need to position themselves to stand out within the the constantly-swelling pool of former DOJ lawyers now in private practice.

“You always have to be strategic in this business because it’s so competitive,” said WilmerHale partner Ronald Machen, a former U.S. Attorney for the District of Columbia.

Machen, who was DOJ’s choice in 2017 as monitor for Tenet Healthcare Corporation, floated the idea of tracking large investigations when they’re reported publicly, before timing outreach to in-house or outside counsel when the case is close to settling.

“However, indicating your interest in serving as a monitor is a long way from being selected,” Machen said.

That can be prove especially true for those who’ve never had the job.

“That’s one of the criticisms. There were a few of us in it” who kept getting appointed, said Michael Cherkasky, CEO of international risk management firm Exiger LLC and a multiple-time monitorship recipient.

“It’s fair to say it’s hard to break into that,” said Cherkasky, who in 2016 was the DOJ-appointed monitor for HSBC—a sweeping assignment to clean up the bank charged with laundering Mexican drug cartel money.

Pushing Back

The challenges in getting picked are compounded when the interested candidate is a women or a minority, said Sandra Moser, a former DOJ Fraud Section chief.

Moser cited Global Investigation Review data showing that from 2004-2018, white men received 40 monitorships stemming from breaches of the Foreign Corrupt Practices Act, compared with three women and three non-white men. Machen, who is Black, was monitoring a company for violating the Anti-Kickback Statute.

Now a partner at Morgan Lewis, Moser sits on a Women’s White Collar Defense Association subcommittee that launched in 2020 to get more women and people of color in the monitorship mix.

“How do you get interviewed? It’s not a democracy,” Moser said. “Generally you don’t get to call them up and say, ‘I’d like to be considered,’ because the process is not public. Now, in the rare circumstance you know one is on the horizon you can, and people should.”

“You would have to have inside information,” Moser said, “and then put yourself out there and call up.”

Changes in Store

Other lawyers describe a selection process they say has improved significantly, ensuring that those tapped have integrity even if the buddy system gave them a boost.

“I wouldn’t say it’s a who you know thing at all; it’s what you can bring to the table,” said Kwame Manley, a former federal prosecutor in Maryland who was later tapped by the Justice Department to monitor a Panasonic Corp. subsidiary. He’s now a partner at Paul Hastings, which is on a short list of firms—including Gibson Dunn and Jenner & Block—that have practice groups devoted to monitorships.

The selection process Manley described as “very detailed” might still be primed for revisions.

Lisa Monaco, DOJ’s No. 2 official, announced last fall that monitorship selection is one of the subjects that an internal advisory group will consider when recommending corporate crime enforcement changes.

As her department continues to prioritize cracking down on corporate misconduct with an eye toward unleashing monitors on those with broken compliance mechanisms, Big Law will be watching its every move.

“Similar to how things work with an investigation or litigation matter,” Wernick said, “every week another big matter pops up, and a number of qualified attorneys are chasing after it.”

—With Ruiqi Chen

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