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TRANSPARENCY AND INTEGRITY IN 

CORPORATE MONITORING 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

COMMERCIAL AND ADMINISTRATIVE LAW 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

NOVEMBER 19, 2009 

Serial No. 111–64 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 

(II) 

COMMITTEE ON THE JUDICIARY 

JOHN CONYERS, JR., Michigan, Chairman 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

WILLIAM D. DELAHUNT, Massachusetts 

ROBERT WEXLER, Florida 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO PIERLUISI, Puerto Rico 

MIKE QUIGLEY, Illinois 

JUDY CHU, California 

LUIS V. GUTIERREZ, Illinois 

TAMMY BALDWIN, Wisconsin 

CHARLES A. GONZALEZ, Texas 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

LINDA T. SA ́ NCHEZ, California 

DEBBIE WASSERMAN SCHULTZ, Florida 

DANIEL MAFFEI, New York 

LAMAR SMITH, Texas 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

DANIEL E. LUNGREN, California 

DARRELL E. ISSA, California 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TOM ROONEY, Florida 

GREGG HARPER, Mississippi 

PERRY APELBAUM, Majority Staff Director and Chief Counsel 

SEAN MCLAUGHLIN, Minority Chief of Staff and General Counsel 

SUBCOMMITTEE ON COMMERCIAL AND ADMINISTRATIVE LAW

STEVE COHEN, Tennessee, Chairman 

WILLIAM D. DELAHUNT, Massachusetts 

MELVIN L. WATT, North Carolina 

DANIEL MAFFEI, New York 

ZOE LOFGREN, California 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

JOHN CONYERS, JR., Michigan 

JUDY CHU, California 

TRENT FRANKS, Arizona 

JIM JORDAN, Ohio 

HOWARD COBLE, North Carolina 

DARRELL E. ISSA, California 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

MICHONE JOHNSON, Chief Counsel 

DANIEL FLORES, Minority Counsel 

(III) 

C O N T E N T S 

NOVEMBER 19, 2009 

Page 

OPENING STATEMENTS 

The Honorable Steve Cohen, a Representative in Congress from the State 

of Tennessee, and Chairman, Subcommittee on Commercial and Administrative Law ........................................................................................................... 1 

The Honorable Trent Franks, a Representative in Congress from the State 

of Arizona, and Ranking Member, Subcommittee on Commercial and Administrative Law .................................................................................................. 2 

The Honorable John Conyers, Jr., a Representative in Congress from the 

State of Michigan, and Chairman, Committee on the Judiciary, and Member, Subcommittee on Commercial and Administrative Law ........................... 4 

WITNESSES 

Mr. Anthony Barkow, Executive Director, Center on the Administration of 

Criminal Law, New York University School of Law 

Oral Testimony ..................................................................................................... 6 

Prepared Statement ............................................................................................. 9 

Ms. Eileen R. Larence, Director of Homeland Security and Justice, U.S. 

Government Accountability Office 

Oral Testimony ..................................................................................................... 32 

Prepared Statement ............................................................................................. 34 

Mr. Gil M. Soffer, Partner, Katten Muchin Rosenman, LLP 

Oral Testimony ..................................................................................................... 55 

Prepared Statement ............................................................................................. 57 

Mr. Brandon L. Garrett, Associate Professor of Law, University of Virginia 

School of Law 

Oral Testimony ..................................................................................................... 64 

Prepared Statement ............................................................................................. 67 

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Prepared Statement of the Honorable John Conyers, Jr., a Representative 

in Congress from the State of Michigan, Chairman, Committee on the 

Judiciary, and Member, Subcommittee on Commercial and Administrative 

Law ........................................................................................................................ 4 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Material submitted by the Honorable Steve Cohen, a Representative in Congress from the State of Tennessee, and Chairman, Subcommittee on Commercial and Administrative Law ........................................................................ 96 

(1) 

TRANSPARENCY AND INTEGRITY IN 

CORPORATE MONITORING 

THURSDAY, NOVEMBER 19, 2009 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON COMMERCIAL

AND ADMINISTRATIVE LAW, COMMITTEE ON THE JUDICIARY, Washington, DC. 

The Subcommittee met, pursuant to notice, at 11:10 a.m., in 

room 2141, Rayburn House Office Building, the Honorable Steve 

Cohen (Chairman of the Subcommittee) presiding. 

Present: Representatives Cohen, Conyers, Johnson, Franks, and 

Coble. 

Staff present: (Majority) Carol Chodroff, Counsel; Adam Russell, 

Professional Staff Member; and (Minority) Zachary Somers, Counsel. 

Mr. COHEN. Good morning. This hearing of the Committee on the 

Judiciary Subcommittee on Commercial Administrative Law will 

now come to order. Without objection, the Chair will be authorized 

to declare a recess of the hearing, and I will now recognize myself 

for a brief statement. 

This morning the subcommittee revisits the selection and use of 

independent corporate monitorships, an issue that was first raised 

in the 110th Congress. This issue was considered again in this 

Congress in a hearing on the use of deferred or non-prosecution 

agreements, a.k.a. DPAs, in criminal cases involving criminal corporate defendants. 

With the growth in the use of corporate deferred and non-prosecution agreements in the last decade, it became evident over time 

that there were no meaningful standards governing when the government could or should enter into such agreements or what the 

scope of such agreements should be. Even more troubling was the 

complete lack of guidance with respect to the selection and use of 

and the compensation for corporate monitors to implement such 

agreements. 

The absence of standards governing how corporate monitors were 

to be selected and what the scope of their authority led to disturbing suspicions of abuse. Caesar’s wife came into our Committee 

once again with issues concerning the propriety of appointment of 

certain individuals and the multi-million dollars that they received. 

One notorious example, which we explored in our previous hearings, was the Zimmer case. That is when Caesar’s wife was very 

disturbed. U.S. Attorney then, now governor-to-be Christopher 

2 

Christie, selected former Attorney General John Ashcroft to serve 

as a corporate monitor, for which Mr. Ashcroft collected a fee of up 

to or in the neighborhood of or resembling or within the margin of 

error of $52 million. A tidy sum, it could pay for some drycleaning 

for Mrs. Caesar’s robes. 

The circumstances surrounding his appointment and service as a 

monitor were not made public at the time of his selection, and no 

provision was ever made for oversight or accountability concerning 

his performance as monitor. This lack of transparency was troubling to our subcommittee and to the corporate world and to the 

public, as articulated in several articles and media reports. That 

was Caesar himself, yes. 

These concerns prompted the subcommittee to hold hearings on 

this issue and to request the Government Accountability Office to 

investigate the matter. Their report will be released in the next few 

weeks, and I look forward to learning what the Government Accountability Office discovered. 

The Department of Justice has also provided some guidance with 

respect to the selection of corporate monitors. Although I appreciate the steps they have taken, they are not etched in stone or 

statute, and more, therefore, is needed. There must be a fundamental change in the monitoring process so that we can ensure 

greater transparency and integrity and safeguard against the 

abuses or appearance of abuse in the past. 

The perception of unfairness and cronyism undermines governmental authority and integrity in the judicial justice process, and 

the selection of corporate monitors to oversee pretrial agreements 

must be fair, and it must be perceived as fair. Public trust and confidence are essential elements of an effective justice system. Sometimes the appearance of justice is just as important as justice itself, 

the reality thereof. 

Congress has a critical role to play in this area, and I believe the 

guidance governing the selection and use of corporate monitors 

should be codified in Federal statute, therefore not leaving it to the 

whims and caprices of future Administrations. 

Accordingly, I have drafted, or had drafted, the Transparency 

and Integrity in Corporate Monitoring Act, which will protect 

against actual and perceived conflicts of interest with respect to 

Federal prosecutors who leave the U.S. attorney’s office to work as 

corporate monitors. I believe this bill will fill an important gap in 

providing accountability and transparency and avoiding abuse with 

respect to the selection and use of corporate monitors. 

There are revolving doors in most areas of government, in most 

states as well as Federal systems, and a revolving door is not a bad 

thing, for if you move with it, you don’t get hit on the rear as you 

leave. I look forward to discussing these corporate monitoring 

issues and thank our witnesses for being here today. 

I now recognize my colleague, Mr. Franks, the distinguished 

Ranking Member of the Subcommittee from the State of Arizona, 

for his opening remarks. 

Mr. FRANKS. Well, thank you, Mr. Chairman. 

I thank all of you for being here. 

Mr. Chairman, deferred prosecution agreements are an invaluable tool in the Justice Department’s arsenal for combating corVerDate Aug 31 2005 10:30 Mar 30, 2010 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6601 H:\WORK\COMM\111909\53640.000 HJUD1 PsN: 53640
3 

porate crime. These agreements allow the government to achieve 

all the benefits of a criminal prosecution without subjecting the 

companies, their employers, their employees and shareholders to 

the collateral consequences of a prosecution and conviction. 

In contrast to the far more rigid criminal sentencing process, deferred prosecution agreements permit the Justice Department and 

corporate defendants to work together in a more flexible environment to remedy past violations and prevent future illegal conduct. 

They serve to rehabilitate the company, root out illegal and unethical conduct, discipline culpable employees, help promote good citizen corporate citizenship going forward, and they allow prosecutors to achieve more than they could through the court-imposed 

fines and restrictions alone. 

The benefits of deferred prosecution agreements have been recognized by Bush I, Clinton, Bush II and Obama Justice Departments. 

In some cases part of an effect of a deferred prosecution agreement 

is the use of a corporate monitor to oversee the implementation of 

and compliance with the agreement’s provisions. 

Corporate monitors help ensure that companies institute meaningful changes and develop the best compliance programs possible. 

Additionally, corporate monitors can verify that companies are fulfilling the obligations of the deferred prosecution agreement to a 

much greater extent than the department could accomplish on its 

own. 

Now, despite the benefits of corporate monitors, their use has engendered criticism in recent years in the press and from some 

Members on the other side of the aisle. Much of this criticism was 

levied, in my opinion, to an attempt to derail the gubernatorial 

campaign of former New Jersey U.S. Attorney Chris Christie. 

As hearings before the subcommittee demonstrated, however, the 

criticism of Governor-elect Christie’s use of corporate monitors was 

unjustified. Yet we are here today to consider whether legislation 

is needed to avoid conflicts of interest in the appointment of compliance monitors. 

And honestly, I do believe the case has been made that congressional legislation is needed. I think that it is not needed in this 

area. I don’t see the case. It is not to say that I believe that the 

appointment of corporate monitor should be ungoverned. I just 

don’t think there is credible reason to believe that Justice Department has or has not or cannot develop sufficient internal regulatory guidance on the appointment of corporate monitors. 

It seems to be an area where we are majoring on a minor, and 

maybe taking the risk of having to minor on majors. Over the past 

10 years since the initial Holder memo on deferred prosecution 

agreements, the department has continually fine-tuned its rules for 

these agreements. 

And at this point, I think the Nation’s corporate law enforcement 

goals would be best served by continuing to leave it to the department to ensure transparency and integrity in corporate monitoring. 

We do not need to unnecessarily tie the department’s hands with 

legislation at this point, in my opinion. 

So in closing, let me just say that I find it disappointing that the 

Committee is once again revisiting the subject of the appointment 

of corporate monitors when we have yet to take a look at the 

4 

Obama administration’s appointment of countless policy czars. Certainly, these czars, who are not subject to Senate confirmation, 

wield far greater power than any corporate monitor. 

And I hope that in future the Chairman will direct this Committee’s oversight efforts to these constitutionally questionable, yet 

highly powerful czars to the same degree that we have investigated 

corporate monitors. 

And I look forward to the witnesses’ testimony, and I thank the 

Chairman and yield back the balance of my time. 

Mr. COHEN. Thank you, Mr. Franks. And as soon as the Chairman gives me jurisdiction over czars, right now we are just dealing 

with, like, you know, Roman times and their wives, but once we 

get up to czarist Russia and the Chairman gives me that authority, 

well, we might look into that. 

Mr. Chairman, is that something you would like to get into— 

czarist Russia? 

Mr. CONYERS. Would that jurisdiction come to your Committee? 

Mr. COHEN. I tend to doubt it. 

Mr. CONYERS. Well, if it doesn’t—— 

Mr. COHEN. Commercial and—well, that was kind of a commercial. That was infomercial against the Obama campaign, so it could 

be considered commercial. 

Mr. CONYERS. If it would come to your Committee, I would be 

more disinclined to—— 

Mr. COHEN. Moving right along with our bombastic review, 

thank you, Mr. Chairman. 

I thank the gentleman from Arizona for his statement. 

I now recognize Mr. Conyers, the distinguished Chairman of this 

Committee, distinguished Member of this subcommittee, and a icon 

and lion in the legislative world of the United States of America. 

Mr. CONYERS. Thank you, Chairman Cohen, Mr. Frank, Ranking 

Member. 

I have asked for the notebooks. Mr. Christie left the hearing 

rather abruptly the last time, and I just wanted to try to refresh 

my memory to see if there could be any useful purpose in asking 

him to rejoin the Committee. And I will put my statement in the 

record. Thank you. 

[The prepared statement of Mr. Conyers follows:] 

PREPARED STATEMENT OF THE HONORABLE JOHN CONYERS, JR., A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF MICHIGAN, CHAIRMAN, COMMITTEE ON THE JUDICIARY, AND MEMBER, SUBCOMMITTEE ON COMMERCIAL AND ADMINISTRATIVE LAW

Today’s hearing will focus on the selection and use of independent corporate monitors to oversee deferred prosecution and non-prosecution agreements. 

In January of 2008, media reports detailing questionable appointments of independent monitors by the Justice Department under the prior Administration began 

to surface. In response, the Judiciary Committee conducted an investigation into the 

Department’s use of deferred prosecution and non-prosecution agreements. 

We soon learned that the lack of guidelines in this area had led to vast discrepancies across jurisdictions in the terms of agreements and in the selection of corporate monitors to oversee them. 

To address these concerns, the Department issued guidelines on monitor selection 

in March 2008, and mandated the collection and tracking of these agreements. 

Last fall, the Government Accountability Office commenced an examination of the 

Department’s use and oversight of deferred prosecution agreements and non-prosecution agreements, including a focus on the selection and use of corporate monitors. 

5 

I understand that report is due to be released by mid-December. I look forward 

to reading the report, and to hearing testimony from our GAO witness and our other 

witnesses this morning. 

I am pleased to hear that, by most accounts, there has been positive progress in 

this Administration with respect to greater transparency, uniformity, and accountability in this area. 

It is important to consider, however, what more remains to be done, and what 

role Congress can and should play in terms of codifying guidance to ensure greater 

transparency and fairness in the process. 

There are three key areas I would like to focus on in particular today. 

First, whether the guidelines issued last year by the Department in the 

Morford Memorandum are sufficient for providing accountability, transparency, and uniformity. 

As a reminder, on the eve of this Subcommittee’s March 2008 hearing on corporate settlement agreements, the Justice Department issued a memorandum from 

then-Acting Deputy Attorney General Craig S. Morford to the heads of Department 

components and United States Attorneys, regarding the selection and use of monitors in deferred prosecution agreements and non-prosecution agreements with corporations. 

This memorandum articulated nine principles covering three areas: (1) the selection of monitors, (2) the scope of their responsibilities, and (3) the duration of 

monitorships. 

It also advised prosecutors to consider both a monitor’s potential benefits to the 

corporation and to the public, as well as a monitor’s cost and impact on corporate 

operations. 

While I applaud the Department for developing these guidelines, I would like to 

hear today about whether they quelled the controversy by ensuring sufficient accountability, transparency, and fairness. 

As we discussed at the last hearing, the guidance does not address whether a deferred prosecution agreement or a non-prosecution agreement should be used, or 

how the agreements should be structured. 

Also, it fails to rein in the tremendous leverage that the government and the monitor have over the corporation entering into an agreement. 

Corporations facing criminal prosecution are faced with a very difficult choice: 

they can either risk a conviction and a possible corporate death sentence after trial, 

or be coerced into accepting the terms and fees the monitor and prosecutor dictate. 

It is important for us to remember that, no matter how helpful the Morford 

Memorandum guidance might be, it is only internal Department of Justice guidance. 

It is not binding in any court of law. 

The second area we should examine concerns the compliance of prosecutors with the Morford Memorandum guidelines. For example, I want to know: 

Who are the monitors who have been selected since the Morford Memorandum 

was issued? 

What is the prior professional experience of these monitors? 

Have there been actual, potential or perceived conflicts of interest in the selection 

of monitors since the Morford Memorandum was issued? 

I would also like to hear whether adherence to those guidelines has been documented. It is one thing to claim compliance; it is another thing to demonstrate it. 

I don’t wish to steal our GAO witness Ms. Larence’s thunder, but she has been 

working diligently on the GAO’s report, and I anticipate she will be able to shed 

some light on the compliance issue, and what still remains unaddressed. 

I would also like to explore whether we even have enough information at this 

point to determine whether the Morford Memorandum guidance is sufficient. 

From what I understand, since 2008 there have only been four deferred prosecution agreements and non-prosecution agreements that have resulted in the appointment of corporate monitors. 

Are four cases enough to give us an accurate picture of whether the abuse or the 

appearance of abuse in the system has been completely eliminated? 

Finally, the third area I want to examine is the role of Congress in ensuring transparency and integrity in the selection and use of corporate monitors. 

Although the Morford Memorandum is clearly a positive step, codification of that 

guidance might be necessary to ensure the continuation of positive progress, and to 

prevent future abuses. 

In the last two hearings, we discussed New Jersey U.S. Attorney (and now Governor-elect) Christopher Christie’s appointment of former Attorney General John 

Ashcroft to be a corporate monitor in the Zimmer Holdings case, which was very 

troubling. 

6 

That appointment was made without public notice, without any bidding, and without any input from a neutral judge or the company subject to the monitoring. 

Mr. Ashcroft reportedly received $52 million for 18 months of work as a result 

of this appointment—fees that were apparently non-negotiable. 

In light of the fact that Mr. Ashcroft supervised Mr. Christie when he was Attorney General, this arrangement presented the strong appearance of cronyism. 

Last May, The New York Times reported that at least 30 of the 41 monitors appointed in deferred prosecution agreements since 1994 were former government officials, and 23 were former prosecutors. 

Congressional action might be warranted to ensure that such cronyism—or the 

appearance of it—does not happen in future cases. 

I also understand that the Chair of this Subcommittee, Steve Cohen, plans to introduce legislation to create greater transparency and integrity in the appointment 

of corporate monitors. 

I hope that today’s testimony will illustrate the best path forward for Congress 

and the Justice Department to ensure that the corruption of the past stays in the 

past, and that the selection and use of corporate monitors will be transparent and 

fair, in this new Administration and beyond. 

I thank the witnesses for coming today, and I look forward to your testimony 

about this important issue. 

Mr. COHEN. Thank you, Mr. Chairman. 

Other Members’ opening statements will be included in the 

record. 

Now I would like to welcome the witnesses for today’s hearing 

and thank you for your willingness to participate. Without objection, your written statement will be placed in the record. We have 

asked you to limit your remarks to 5 minutes. There is a lighting 

system there. It starts with the green light. After 4 minutes it 

turns yellow, and then after 1 more minute it turns red. And at 

that time you should try to conclude your remarks. 

After each witness has presented his or her testimony, subcommittee Members will be permitted to ask questions under the 

same 5-minute limitation, although it won’t be as strictly enforced. 

Our first witness is Mr. Anthony Barkow. Mr. Barkow is an executive director of the Center on the Administration of Criminal Law, 

NYU School of Law. Prior to establishing the center in 2008, he 

was assistant United States attorney in the Southern District of 

New York, where he primarily prosecuted terrorism and white-collar criminal cases. From 1998 through 2002, Mr. Barkow was assistant United States attorney for the District of Columbia, and 

from 1996 to 1998 he was trial attorney in the attorney general’s 

honors program, the Department of Justice’s Office of Consumer 

Litigation. 

Mr. Barkow, we appreciate your service and appreciate your 

being with us. And would you proceed with your testimony? 

TESTIMONY OF ANTHONY S. BARKOW, EXECUTIVE DIRECTOR, 

CENTER ON THE ADMINISTRATION OF CRIMINAL LAW, NEW 

YORK UNIVERSITY SCHOOL OF LAW 

Mr. BARKOW. Thank you, Chairman Cohen. Chairman Cohen, 

Ranking Member Frank and Chairman Conyers and Members of 

the Subcommittee, thank you for inviting me to testify before you 

today. It is an honor to appear before you to discuss these issues. 

I would like to discuss briefly why I think that this proposed legislation is beneficial and offer three suggestions for possible improvement. The proposed legislation would take steps to fill a gap 

7 

in the current law that governs the post-employment activity of 

former Federal prosecutors. 

Current law prohibits former DOJ employees from litigating the 

same matters in which they personally and substantially participated while in government service. However, current law does not 

expressly prohibit a former prosecutor from serving as a monitor 

for a company that he himself investigated and prosecuted, nor 

does it clearly prohibit a former prosecutor from serving in a 

monitorship that arose out of a deferred prosecution or non-prosecution agreement that she herself negotiated. The proposed legislation remedies these gaps. 

This proposed legislation is important for several reasons. First, 

it would target the problem of revolving door monitoring employment and the perception of self-dealing by prosecutors. Actual selfdealing, of course, is corrupt and criminal, but public confidence in 

government is undermined even by the mere appearance of selfdealing. 

If it looks like there is a revolving door between government 

service as a prosecutor and a monitorship for a private company, 

there is a real danger that it will foster public cynicism about government by feeding the public’s belief that government actors are 

not always looking out for the public’s interest, but rather their 

own. Even if government actors are not in fact corrupt, the perception of corruption in government activities has a dispiriting and 

corroding effect. 

Under current law, there is a risk that prosecutors who have 

worked on a DPA or NPA will later serve as monitors because of 

DOJ’s power to select those monitors and the fact that monitors are 

often DOJ or SEC alumni. After searching public documents, I am 

unaware of any monitors who have been appointed who previously 

worked on the same matter that they later monitored. Nonetheless, 

the proposed legislation would impose prophylactic measures that 

would eliminate the possibility of such appointments. 

Second, the proposed legislation would be appropriately tailored 

to address this danger. If an apparent scrivener’s error that I will 

mention in a moment is corrected—or would be corrected—the proposed legislation would bar former prosecutors from acting as or 

working for a monitor only on the same matters in which they 

worked while in government. Former prosecutors could still serve 

as monitors, as long as they had no involvement with the investigation or prosecution of the company subject to the DPA or NPA. 

Third, the proposed legislation appropriately would apply not 

only to U.S. attorneys, but also to AUSAs. Given that the proposal’s primary policy benefit would be to prevent actual self-dealing and to avoid any appearance of impropriety, no substantive distinction should be made between political appointees and those 

who serve under them. 

Report of an award of a lucrative monitorship in a no-bid contract would have an equally deleterious effect on public confidence, 

whether it identified the contract recipient as a U.S. attorney who 

oversaw the prosecution that created the employment opportunity 

as it would if the contract recipient were the AUSA who handled 

the prosecution from day to day. 

8 

Fourth, the proposed legislation would find analogues in other 

areas, which I discuss further in my written testimony. 

Fifth, the proposed legislation would have few significant costs. 

It would not reduce the actual quality of monitoring. The supply 

of available monitors would still include the thousands of former 

prosecutors who had not previously worked on the particular case, 

as well as people with experience in corporate America, independent private sector inspector generals or others, who in many 

situations might in fact be better monitors than former prosecutors. 

I have three brief suggestions for the subcommittee’s consideration. First, the subcommittee may want to consider whether the 

time period of the proposed bar should be lengthened. The most 

analogous current provision to the legislative proposal is the prohibition on advocacy and representation in the same matter in which 

the former government employee participated. That prohibition is 

permanent. Similarly, the justifications for the proposed legislation 

do not seem to diminish with the passage of time. 

Second, the subcommittee may want to consider whether the 

scope of the persons covered under the proposed legislation should 

be expanded. As it is currently being considered, it would apply 

only to former prosecutors of U.S. attorneys offices, but not to 

former political appointees or other lawyers in main Justice, who 

may also work on NPAs or DPAs as monitors. There is no apparent 

reason to exempt DOJ’s criminal division, which is responsible for 

more than one-third of monitor appointments or top DOJ officials 

from these prohibitions. 

Third and finally, the proposed legislation has what appears to 

be a scrivener’s error that I recommend correcting that makes it 

overbroad in one respect. The proposal would bar monitorships 

arising out of DPAs only to which a former employee has a connection, but would bar monitorships arising out of any NPA, whether 

the former employee has any connection to the underlying matter 

or not. 

Thank you again for allowing me to testify and to share my 

thoughts on these issues. I would be happy to answer any questions that you might have. 

[The prepared statement of Mr. Barkow follows:] 

9 

PREPARED STATEMENT OF ANTHONY S. BARKOW


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Mr. COHEN. Thank you, Mr. Barkow. I appreciate your observing 

the red light. And recently deceased and former person that sat at 

that chair, Mr. William Safire, would have appreciated your testimony as well, I think. 

Our second witness is Ms. Eileen Larence. Is it Lawrence or 

Larence? 

Ms. LARENCE. Larence. 

Mr. COHEN. Larence? Ms. Larence currently serves as director 

for homeland security and justice issues at the U.S. Government 

Accountability Office. In this capacity she manages congressional 

requests to assess the various law enforcement and DOJ issues as 

well as state of terrorism related information sharing since 9/11. 

Ms. Larence, will you begin your testimony? 

TESTIMONY OF EILEEN R. LARENCE, DIRECTOR OF HOMELAND SECURITY AND JUSTICE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Ms. LARENCE. Chairman Cohen, Ranking Member Franks and 

Chairman Conyers, I am pleased to provide the results of our ongoing review of Department of Justice practices in using deferred and 

non-prosecution agreements rather than prosecution to address 

some corporate crime. 

My testimony today will focus more specifically on the department’s use of independent monitors to ensure company compliance 

with these agreements. Concerns about monitors and their independence have been raised, especially when U.S. attorney offices 

require companies to hire certain monitors, such as former Attorney General Ashcroft. 

For our work, we interviewed or surveyed companies, monitors 

and department officials on their views about how monitors are selected, what experience the monitors have, and how companies can 

resolve concerns about their monitors. In 40 cases to date, Justice 

has required the companies hire and pay an independent monitor. 

Justice does this when it does not have the time, resources or requisite technical expertise to conduct the monitoring, among other 

reasons. 

Companies usually, but not always, play some part in identifying 

and selecting monitors, although Justice approves the ultimate decision. Company and Justice officials say they typically use personal knowledge and colleague recommendations to identify monitors and are usually looking for expertise, including former Justice 

experience or certain legal or industry knowledge, as well as assurance that the monitor is free of any conflict of interest. 

In March 2008 Deputy Attorney General Morford issued guidelines calling for the department and companies to collaborate on selecting monitors and to ensure they are qualified and did not have 

conflicts, among other things. Each litigating unit is to use an internal committee to select monitors and obtain the deputy attorney 

general’s approval on this decision. 

Justice has selected four monitors since the memo and complied 

with these guidelines in each case. However, Justice does not always document its compliance, and in June testimony to you, we 

recommended that Justice do so to ensure accountability. In response, since August, Justice now requires that the Office of the 

33 

Deputy Attorney General use a checklist showing compliance with 

the guidelines. 

So what experience did the monitors provide? Companies have 

hired 42 individual monitors so far, and more than half had previously worked with Justice, although only a few were selected 

within 3 years of leaving the department. Eight worked in the 

same Justice unit that issued the DPA or NPA. The remaining 

monitors had experience in state or local government, the private 

sector, and other Federal entities and agencies, among other areas. 

Eight of 13 company representatives we contacted, most of whom 

had monitors who worked with Justice, valued and did not have 

concerns about the monitor’s Justice experience. But five representatives, including several whose monitors worked at Justice, said 

this experience could appear to compromise the independence, although they did not have this concern with their individual monitor. The Criminal Division requires monitors and others to certify 

they are free of conflicts, which could be one way to address concerns about favoritism. 

Finally, we looked at how companies resolve concerns about their 

monitors. Seven of 13 raised concerns about the scope and performance of their monitors, three about the monitor’s total compensation, and three about the monitor’s rates, which range from about 

$300 to $900 an hour for companies in our survey. 

But some companies were not certain how they could resolve 

these concerns or what role Justice could play in this. Justice officials said the department could help in some instances, but would 

be limited, once a company and a monitor signed a contract, since 

Justice is not a party to that contract. Justice officials said it would 

then generally be up to the company to ensure the monitor is performing. 

Justice also said companies could incorporate the monitor requirements spelled out in the DPA or NPA into the monitor’s contract and include a provision to terminate the contract if the monitor didn’t perform. But only one of 13 companies we surveyed had 

such a provision. And it is not certain what leverage companies 

may have to include one, given that Justice ultimately selects monitors. 

The fraud section of the Criminal Division and at least one U.S. 

attorneys office include in the DPA or NPA itself an explanation 

of the role they will play in resolving specific monitor concerns. We 

are recommending that the attorney general direct all litigating 

components and use the training offices to do this, depending on 

the facts and circumstances of each case. 

Mr. Chairman, that concludes my statement, and I would be 

happy to answer any questions. 

[The prepared statement of Ms. Larence follows:] 

34 

PREPARED STATEMENT OF EILEEN R. LARENCE


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Mr. COHEN. Thank you very much. 

Those annoying bells mean we are supposed to vote, but the 15- 

minute vote really becomes like a 20-minute vote, so we can probably get both of your testimonies in, if you are nice with the red 

light, and I get this introduction done quickly. 

Our third witness is Mr. Gil—is it Soffer? 

Mr. SOFFER. Yes. 

Mr. COHEN. Soffer, co-chair of the firm of Katten Muchin 

Rosenman—white collar. He joined the firm in August 2000, 6 


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years Federal prosecutor prior to that, concentrates his practice in 

white-collar criminal litigation, corporate fraud litigation, corporate 

investigations, insurance litigation and anti-fraud, counsel to the 

deputy attorney general in D.C., and shortly thereafter appointed 

as associate deputy general. 

During his year-long term with the Department of Justice, he 

has played an integral part in drafting the department’s corporate 

monitor principles and corporate charging principles and provided 

training on the latter policy to U.S. attorneys offices nationwide, 

previously served in DOJ as assistant U.S. attorney in Chicago 

from 1994 to 2000. 

Will you proceed with your testimony, Mr. Soffer? 

TESTIMONY OF GIL M. SOFFER, PARTNER, 

KATTEN MUCHIN ROSENMAN, LLP 

Mr. SOFFER. Yes, thank you. Chairman Cohen, Ranking Member 

Franks and Chairman Conyers, thank you very much for the opportunity to testify today about an issue of great importance to 

prosecutors, corporations and the public alike. 

As you mentioned, I served last year as associate deputy attorney 

general, and in that capacity I have played a role in formulating 

the department’s corporate monitor principles. We had one overarching goal in mind with respect to the selection of monitors, and 

that was to formulate a selection process designed to produce both 

a high-quality and conflict-free corporate monitor. I believe the department’s corporate monitor principles achieve that goal. 

The very first principle goes to the matter before the subcommittee today. Simply put, principle number one is designed to 

ensure integrity in monitor selection. It lays out several key requirements toward that end. 

First, government lawyers involved in the selection process must 

comply with all existing conflict of laws guidelines—conflict of interest guidelines. Second, the government must establish a committee to review monitor candidates. And third, the deputy attorney general’s office must approve the selection of the monitor. 

Principle one also directs that monitors be selected, where possible, from a pool of at least three qualified candidates. Now, these 

requirements have teeth. That is particularly true with respect to 

concerns over perceived cronyism by a prosecutor’s office. Requiring 

that monitors be vetted by a committee diminishes the influence of 

any one person over the selection process, be that a U.S. attorney 

or assistant attorney general or even a line prosecutor. 

Likewise, requiring that monitors be selected, if possible, from a 

pool of candidates makes it even less likely that monitors will be 

cherry-picked by government officials seeking to reward friends or 

former colleagues. 

Even more significant, requiring the approval of the Office of the 

Deputy Attorney General provides an extraordinary check and balance against the selection of monitors for inappropriate reasons. 

And I use the word ‘‘extraordinary’’ without exaggeration. There 

are few matters at the department that require consultation with 

the deputy attorney general’s office. There are even fewer that require the approval of the deputy attorney general’s office, and there 

are fewer still that require approval on individual criminal cases. 

56 

Now, I have seen the proposed legislation that would restrict the 

ability of former prosecutors to serve as monitors on cases in which 

they were involved while employed by the government. A limitation 

of this sort would certainly mitigate the perception that government lawyers might choose to work on a given case with the intent 

of angling for a monitorship after their government service expires. 

It would also reduce the appearance of favoritism in the selection 

of monitors. 

These are worthy goals, and in fact they would complement the 

precautions that are already set forth in the department’s monitor 

principles. But even assuming that such restrictions are appropriate, the question remains who should impose them and when. 

Legislation has many virtues, including the force of law, the imprimatur of this body, and a permanence unlike any guidance that 

the executive branch can issue. But it also poses a risk where the 

practices in question are evolving and where a sufficient record of 

experience has not yet developed on which to fashion immutable 

policy. In such matters care must be taken to avoid imposing an 

inflexible set of rules that may fit one type of case, but that restrict 

the ability of prosecutors and corporations alike to handle other 

cases with maximum effectiveness. 

Now, there are clearly sound arguments in favor of imposing a 

cooling off period on government lawyers before they become eligible to serve as monitors. It is not inconceivable, though, that an 

unusual case would warrant the involvement of a former prosecutor with experience in the same matter. All parties would arguably benefit from having a monitor with knowledge of the matter 

at hand and from the efficiencies that such a monitor would bring 

to the engagement. 

Alternatively, even if the monitor herself did not work on the 

same matter previously, she might wish to partner with the former 

prosecutor who did for the purpose of accelerating her own learning 

curve and tapping into the expertise of her partner. 

Now, it may well be that any benefits of this sort simply are outweighed by the problems created by engaging former prosecutor as 

monitors on the same matters they handled while in government 

service, but that issue has not arisen in any monitor engagements 

to date. 

Over time, as more cases involving monitors develop, principle 

one may require adjustment to ensure that its purposes are satisfied. At that point, the department, in the exercise of its law enforcement authority and with its ability to fine-tune any changes 

that may be appropriate for existing policy, would be well suited 

to make any necessary modifications. At present, however, the department’s corporate monitor principles appear to have worked. 

I thank you again for the opportunity, and I look forward to any 

questions that may be asked. 

[The prepared statement of Mr. Soffer follows:] 

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PREPARED STATEMENT OF GIL M. SOFFER


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Mr. COHEN. Thank you, Mr. Soffer. 

Although I believe we probably could get Professor Garrett’s testimony in and get to vote on time, counsel has suggested that probably we should go ahead and amble up there and save Professor 


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Garrett for when we come back, which should be give or take 30 

minutes. 

This isn’t an attempt to, like, freeze you and make it difficult to 

kick the field goal. We are not calling a timeout for that reason. 

We are just calling a recess so we can amble up there. And we will 

recess and come back. Thank you. 

[Recess.] 

Mr. COHEN. We are back. And our next witness will be Professor 

Garrett—Mr. Garrett. Professor Brandon L. Garrett, UVA Law 

School faculty and 2005 was associate professor, area is research 

and publication, include criminal procedure, wrongful convictions, 

habeas corpus, corporate crimes, civil rights, civil procedure, con 

law, and new forms of public governance. Prior to joining the UVA 

school, he worked as an associate at Cochran, Neufeld & Scheck. 

NSS project? Good. So should New York City. 

Wrongful conviction, DNA exoneration, and police brutality 

cases. I just got the book with all the exonerated. Very nice. 

Professor Garrett, will you proceed with your testimony? 

Mr. GARRETT. Thank you, Chairman Cohen, Ranking Member 

Franks and distinguished Members of the Subcommittee, for the 

opportunity to testify before you. 

Mr. COHEN. Apparently, you have to push the button. Thank you. 

Mr. GARRETT. It is pushed. 

Mr. COHEN. You should draw it close to you. 

Mr. GARRETT. Draw it closer. 

Mr. COHEN. You have to embrace it. 

TESTIMONY OF BRANDON L. GARRETT, ASSOCIATE PROFESSOR OF LAW, UNIVERSITY OF VIRGINIA SCHOOL OF LAW 

Mr. GARRETT. Thank you. I will keep it very close to my mouth. 

I am an associate professor of law at the University of Virginia 

School of Law. My scholarship focuses on criminal procedure, and 

I have studied the growing phenomena of Federal organizational 

prosecution agreements. 

Federal prosecutors have adopted what is a creative and forwardlooking approach to corporate prosecutions by entering agreements 

designed to avoid dire consequences of an indictment while implementing what I have called structural reforms. Attention to these 

complex agreements is largely because of their national importance, and this subcommittee has played a crucial role by examining these agreements. 

In response to scrutiny of monitor selection practices, in March 

2008, as we have heard, the Department of Justice issued new internal guidelines. Those guidelines are useful. However, they do 

not go far enough. The GAO has suggested that the guidelines be 

supplemented, and I am encouraged that the DOJ is apparently in 

the process of reconsidering those guidelines, perhaps to some extent. 

Since the 1990’s, but mostly the past decade, Federal prosecutors 

have entered more than 120 pre-indictment prosecution agreements, typically labeled as deferred or non-prosecution agreements. 

Of those, at least 48 required the firm to retain an independent 

monitor. 

65 

Most agreements also include detailed provisions for the creation 

or improvement of compliance programs, and monitors are tasked 

with supervising the implementation of compliance measures, often 

in very large corporations and over a period of many months and 

years. They do not possess duties to shareholders, nor do they represent the firm or prosecutors. They are independent, and they 

wield enormous influence and power, particularly where their duties are often broadly defined. 

The selection of these powerful monitors is the subject of some 

concern. Most agreements provide that the prosecutor primarily select the monitor, perhaps with input from the firm. I have argued 

that a judicial role in selecting the monitor could avoid any lingering perception that these highly lucrative positions could be 

awarded as political plums. In only a handful of cases, however, did 

a court select the monitor. 

Existing regulations do bar the appearance of favoritism or providing favorable or preferential treatment. On the other hand, 

those prohibitions do not specifically address employment of former 

prosecutors. The proposed legislation does address that problem. 

Putting potential conflicts to one side, we should also be skeptical 

that a former prosecutor is always necessarily the right choice, particularly one who recently left government service or lacks extensive compliance or industry experience. Strong familiarity with the 

industry and with implementation and analysis of corporate compliance is a crucial qualification. We should consider other ethical 

and professional obligations of these monitors as well. 

Monitors should be committed to evenhandedness and a neutral 

evaluation of the evidence. They should adhere to the scope of their 

retention agreement. They should be impartial. They should be efficient and prompt. They should be not just competent generalists, 

but have strong familiarity with the industry and experience and 

with best practices for implementing compliance. 

Proposed additions to the American Bar Association rules of professional conduct would create additional and far more detailed obligations for third-party neutrals. And another model for an effort 

to adopt such a set of professional standards for monitors is in 

their organization of independent private secretary inspectors general, or IPSIGs. 

Another important area for further inquiry is the fees charged by 

monitors. I take it that the GAO is examining this issue. Their preliminary report highlights how firms may have little recourse, 

should the monitor not exercise sound billing judgment. One advantage of judicial oversight would be to permit the court to periodically review billing or respond to any complaints. 

Finally, the effectiveness of monitors remains unexamined. From 

the outside we can’t tell whether monitoring is ineffectual, effective, or excessive and overly burdensome. Few agreements required, as per the United States Sentencing Guidelines, that a 

compliance program be itself continually and carefully evaluated. 

As the Guidelines recognize, simply creating a compliance program is not enough, if no one is rigorously auditing its effectiveness. Absent such ongoing assessments, we can’t be confident that 

a compliance program is not a mere paper program. And this is not 

a hypothetical problem. Last year we had an instance of a repeat 

66 

violator, a firm that pleaded guilty to a violation of a prior deferred 

prosecution agreement. 

Improved guidelines regarding selection of monitors will be a 

useful first step. However, the need for ever more complicated 

guidelines could be avoided by simply involving courts not just in 

selecting the monitor, but in approving agreements, evaluating 

monitors’ effectiveness, and adjudicating any disputes regarding 

implementation or a claim of a breach. Federal courts already do 

this. They supervise similar efforts during organizational probation. 

So I hope that this subcommittee, the GAO and the DOJ continue to examine corporate prosecutions and potential improvements and as well as reforms. And I thank you for the opportunity 

to speak. I look forward to any questions. 

[The prepared statement of Mr. Garrett follows:] 

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PREPARED STATEMENT OF BRANDON L. GARRETT


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Mr. COHEN. Thank you, Professor Garrett. I appreciate your testimony. 

And we will now have opportunities for Members to ask questions, and I will begin by recognizing myself. 

The—and I hate to use this phrase, but in a way I want to use 

the phrase, because it is the right phrase, even when it might be 

interpreted incorrectly, the 300-pound elephant that is in the room, 

a little-bitty elephant. What is it? A 3,000-pound elephant? Is that 

was it is? A 3,000-pound elephant. It is the Christie situation. 

And—— 

Mr. FRANKS. Back off here, buddy. [Laughter.] 

Mr. COHEN. You said he was three—— 

Mr. FRANKS. Don’t throw your weight around here. 

Mr. COHEN. I can see the story now. Franks says he is 2,700 

pounds heavier. 

There was a lady in his office, Ms. Brown, and she was—the New 

York Times wrote about this; this is why it is the elephant—former 

assistant U.S. attorney. And she resigned her office and got involved in some things, and she took a job with a law firm that represented one of the companies that had a monitor in a deferred 

prosecution agreement. She went to work for this firm that represented DePuy Orthopedics Inc., one of five companies identified 

as a target in this litigation of kickbacks among the makers of artificial hips and knees. 

My question to the panel—I guess I will start with Mr. Barkow 

and go just down the line—do you think that there should be a limitation on an assistant U.S. attorney going to work for a law firm 

that represented a monitor in a—not a monitor, but represented a 

company that was monitored, that she or he had something to do 

with the selection of the monitor or the decision to have a DPA? 

Mr. BARKOW. Mr. Chairman, without having thought deeply 

about this, my initial reaction to that is no. 

I think that, first of all, there is in current law a prohibition on 

a person while in government employment, and including DOJ, 

working on a matter while negotiating a plan with a particular 

company or with a law firm that has an interest or financial interest in matters that they are working on. So while the AUSA or 

Federal prosecutor would be working in government, they wouldn’t 

be able to work on a case that the ultimate future employer was 

involved in. 

When a former prosecutor ultimately lands at a law firm that is 

actually working on matters before their former office, I think that 

wall procedures whereby those former prosecutors could be kept 

from working on a particular matter—at first blush, I would think 

that those are probably sufficient, but this is an initial reaction 

without having studied this that deeply. 

Mr. COHEN. Thank you. 

Ms. Larence? 

Ms. LARENCE. Well, what we can speak to is what we found during the course of our audit is that the selecting committees themselves, as well as the approval from the deputy attorney general, 

require that they scrutinize whether or not the monitor has a conflict of interest, and so there are internal controls in the current 

79 

process that Justice uses to try to ensure against those kinds of 

concerns. 

Mr. COHEN. Mr. Soffer? What is your thought as a former prosecuting or U.S. attorney, and I guess it could extend to a criminal 

case, if you had made a deal, made an offer? But I don’t—you 

know, should there be some kind of line there—some, 6 months, 1 

year, something? 

Mr. SOFFER. Well, let me begin by saying I second Mr. Barkow, 

and I only come to it from the perspective of a partner at a firm 

who hires people out of government and was just rehired himself 

some 9 months ago. 

Anytime a new matter comes into the firm that touches on any 

work involving the Department of Justice, I am asked, ‘‘Did you 

have anything to do this matter?’’ If the answer is yes, a very solid 

and very high wall is built so that I don’t touch it, I don’t go near 

it, I am not consulted. In no way do I play any role in it. 

I think I—first, that is the standard approach, I think. And I do 

believe it has been effective, just judging from my own experience. 

Mr. COHEN. I am trying to recall, and I should. There was something in Los Angeles with one of the U.S. attorneys, and they came 

up in the firing of the U.S. attorneys that—— 

What was it—did a—— 

Yes, Ms. Yang. And she took a job with a law firm, left, that 

was—— 

Where it was stated the firm had some litigation before them? 

Mr. FRANKS. Gibson Dunn you are thinking of, maybe? 

Mr. COHEN. Maybe. 

Mr. FRANKS. Was this Ms. Yang? 

Mr. COHEN. You know the situation? What was that? Do you 

want to brief that for me and give me the issue? 

Mr. SOFFER. All I knew is that Ms. Yang went to Gibson Dunn. 

Mr. COHEN. But didn’t Gibson Dunn have some action going on 

when she—— 

Mr. SOFFER. I don’t know. 

Mr. COHEN. Professor Garrett? 

Mr. GARRETT. I believe she is a monitor or was a monitor in 

these agreements. 

But I mostly want to second what Tony Barkow said, that existing rules do, you know, provide that one can’t be acting as a government employee to further an interest in future employment. 

And, you know, conflicts rules might prevent one from working on 

matters in which one, you know, might conflict with one’s former 

role representing a client being the government. 

Monitors are sort of a special situation, because they don’t have 

a client. They are not representing anyone. They are not providing 

legal advice. They are acting like third-party neutrals. 

I also think that there is really a separate issue where unless 

someone had extensive, you know, compliance experience or, you 

know, doing corporate governance work before becoming a prosecutor, someone who recently left a job as a prosecutor really may 

not be the right person. And they may not have industry experience or the kind of skills that you need to really administer something, which is incredibly complex. 

80 

To build a compliance program, to measure its effectiveness— 

that is a very difficult work, and you really would want someone 

who had that kind of specialized experience and not someone who 

is new to that kind of industry work. 

Mr. COHEN. I am going to take it one further step, and then we 

are going to yield to Mr. Franks. 

Last year the New York Times reported at least 30 of the 41 

monitors appointed under deferred prosecution agreements since 

1994 were government officials, and 23 were former Federal prosecutor. Would you find that strange? 

Mr. GARRETT. The data that I have collected gibes with that. Certainly, many of these monitors have been former prosecutors. And 

from what the GAO tells us, it is not strange at all, because it is 

the prosecutors, the current prosecutors, who are primarily involved in this selection. 

And when you don’t have an open process where talented and 

qualified people can apply, if you are depending on word-of-mouth, 

you know, you would expect that former colleagues would be the 

ones who would have a leg up in a word-of-mouth process, which 

maybe is a reason that the entire selection should be made more 

transparent. 

Mr. COHEN. And, Mr. Soffer, you said something about the suggestion that U.S. attorneys might not be skilled in certain areas 

and therefore they needed these monitors. But if they weren’t skill 

when they were prosecutors, how do they get skilled when they are 

former prosecutors? 

Mr. SOFFER. Well, I would say that one of the—a key thought behind our promulgation of these guidelines when I was in the department was precisely that. It will not always be the case that a 

former prosecutor is the right choice. Let me begin with that. And 

I think there is some large number of monitors who in fact did not 

have prior ties with the department. 

But the second observation is former prosecutors do have a skill 

which, I think, is very useful in monitoring, and that is particularly 

after, frankly, they enter private practice and then get into the 

business of internal investigations, they become expert at conducting internal investigations, and they become expert at ferreting 

out wrongdoing, identifying wrongdoing, devising ways to correct 

wrongdoing. And so they do bring that skill to an engagement. 

If it is a complex or esoteric industry or some subject matter 

which is not within their ken, then it does make sense for them, 

and they often do partner up with experts, such as corporate lawyers often do or criminal lawyers often do when they engage Ernst 

& Young or Price Waterhouse or other forensic accountants, just to 

cite one example, to assist them with the difficult subject matter. 

So they do bring a skill. It may not be a skill that encompasses all 

that is required, and for that reason they may partner with others. 

Mr. COHEN. Thank you, sir. 

I now yield to Mr. Franks for his questioning. 

Mr. FRANKS. Well, thank you, Mr. Chairman. 

Mr. Soffer, I will start with you, sir. Can you illustrate an example or even a hypothetical as to what the impediments to effective 

compliance monitoring would be if Congress passed legislation to 

limit the department’s authority to select former U.S. attorneys or 

81 

assistant U.S. attorneys to serve as compliance monitors? In other 

words, what would be—what are the impediments that would be 

created if we legislate in this direction? 

Mr. SOFFER. Well, I see two problems, essentially. The first is 

conceptual. The second is a more practical one. 

The conceptual problem is that I think it involves an encroachment on turf and that constitutionally the department’s—that is 

constitutionally the executive branch’s, because fundamentally the 

selection and use of a monitor involves making decisions about 

prosecution and whether there should be prosecution and how to 

resolve a case short of prosecution, which is at its core an executive 

function. That is a conceptual problem. 

More practically, I believe there would be situations where you 

would very much want as a monitor, as a corporation, as the government, to engage someone who had previously served in government service, I think for just the reasons that I was just articulating to the Chairman. 

And finally, I would just note beware of the law of unintended 

consequences. And here is an example. One of the considerations 

that we tossed about in thinking about these guidelines is whether 

there should be a bar against monitors who had a prior relationship with the corporation. 

Now, at first blush it might conclude, well, of course, someone 

who had a prior relationship with the corporation ought not serve 

as a monitor, because that suggests conflicts. But we wanted to 

allow for the possibility that the corporation may have engaged a 

lawyer or an outsider, a monitor prior, previously, who came to 

know the compliance program, who perhaps launched the compliance program, and therefore it made a great deal of sense to continue using as a monitor. 

And I see from the GAO’s report that there is at least one such 

case just like that, where the corporation and the government 

agreed to engage a monitor who had a prior relationship with the 

corporation, the point being you don’t know what you are going to 

get when you pass a very broad and far-reaching piece of legislation or bar. You may have circumstances that you don’t want to 

rule out. 

Mr. FRANKS. So do you believe that, at a minimum at least, that 

we should allow more time for the department to gain the experience under the Morford memo and inform us about the results of 

their experience in that regard before we proceed to consider legislation? 

Mr. SOFFER. I do, but I want to make clear it may be that the 

suggestions that are built into this legislation are very sound policy. There is no question they could be. But let us find out. Let us 

not look for a solution in search of a problem. 

Mr. FRANKS. Okay. Is it your perspective that the department’s 

efforts to formulate guidance designed to ensure the integrity and 

transparency and the selection of corporate monitors—do you think 

that those efforts have been successful? 

Mr. SOFFER. Well, I do, and I think that is borne out by the 

GAO’s report, which finds that since the promulgation of those 

guidelines, the department has abided by and complied with those 

principles. 

82 

Mr. FRANKS. Well, thank you, sir. I appreciate your testimony. 

Ms. Larence, I guess I would sort of take off the same general 

idea there. Based on your work studying the selection of compliance monitors, do you have any reason to believe that the Justice 

Department will not follow its own guidance and procedures with 

regard to compliance monitors or deferred prosecution agreements 

in general? 

Ms. LARENCE. Well, it has found to date of the four monitors selected since the Morford memo, all four did comply with the guidelines, and I think if Justice responds to a recommendation to make 

sure they have transparency and accountability that they are complying with those guidelines, that will also help. 

I did want to note that of those four monitors, three did have 

former Justice experience in their backgrounds, but on average it 

had been anywhere from 18 to 20 some years since they had been 

employed at the department. 

Mr. FRANKS. Thank you. 

Mr. Barkow, don’t you believe that there are perhaps benefits to 

leaving the guidelines for the use and selection of compliance monitors up to the department rather than setting them into stone 

through legislation? Do you think there is any advantage there? 

Mr. BARKOW. I think that it is certainly possible that the Department of Justice might promulgate rules and regulations that address this, but I guess I would point out that most of the rules that 

I discussed in my written testimony and that I mentioned here 

today are congressionally enacted and presidentially signed laws. 

They are statutes. And I see this network of laws that govern postgovernment service employment as arising in significant part out 

of congressional action, so I think it is appropriate for Congress to 

set the terms of post-employment, post-government service employment for executive branch and other government officials. 

Mr. FRANKS. All right. Well, thank you. 

Well, let the record show that when I mentioned the 300-pounds 

as rather small for an elephant, that there was no other entendre 

involved, okay? 

Mr. COHEN. Thank you, Mr. Franks. 

And now to Mr. Johnson, the distinguished Chairman of the subcommittee On constitutional law—not constitutional law—courts 

and antitrust, from the State of Georgia. 

Mr. JOHNSON. Thank you, Mr. Chairman. And thank you for 

holding this hearing. 

Mr. Soffer, you said something that kind of got mine attention, 

and you said legislation on this issue could become a solution to a 

problem that—or a solution looking for a problem. 

But, you know, I must respectfully take issue. I think that the 

public sees how the government has coddled these firms, particularly financial services firms, and how we have, due to lack of regulation, allowed these firms to become too big to fail. And that is a 

issue that Chairman Cohen’s CAL Committee, as well as my subcommittee on competition policy, we have been looking at. 

And I think the American people probably assume that, if they 

knew anything about these deferred prosecution agreements, I 

would think if they knew that I would assume they would be thinking that these kinds of agreements are monitored by the courts, 

83 

and there is a criteria that is established that would allow for certain firms to have the benefit of the deferred prosecution agreement. 

How many of these deferred competition—excuse me, deferred 

prosecution agreements been invoked? When was the first one that 

was done? And how much money has been charged in fees by the 

firms that are given the work of monitoring? 

And also whether or not there are any—I know a lot of people 

assume that African-American or minority law firms are not capable of handling business on this level, but I would take issue with 

that. There are a lot of people who have come out of large firms, 

worked in this area, and know exactly how to perform on something like this. Is there—and if you would give me a number of minority firms that have gotten some of this business? 

Mr. SOFFER. Let me begin with the third question and agree 

wholeheartedly with the notion that it is entirely unsupportable to 

believe that African-American owned firms or minority owned firms 

are not up to the task of this work. 

As to the question of have there been any and how many? I don’t 

know. 

Mr. JOHNSON. Does anybody else on the panel know? 

Okay. That is a problem. 

And by the way, are these financial services firms generally that 

get these deferred prosecution agreements? 

Mr. SOFFER. Are those that get deferred prosecution agreements 

generally financial services firms? I don’t think so, because they 

have fallen in several areas, including health care, foreign corrupt 

practices, and other areas, frankly, one of my co-panelists probably 

can speak to even more directly than I. But my recollection is that 

the majority are not financial services firms. 

Mr. JOHNSON. How would the public ever be able to validate 

what you just said? 

Mr. SOFFER. Well, there are actually—— 

Mr. JOHNSON. I am still wanting those numbers, too, in responses to my other questions. 

Mr. SOFFER. We have a record of virtually every, if not every deferred prosecution agreement that has been issued. And in fact, my 

co-panelist to my left, Professor Garrett, has assembled a list of 

those on a Web site. So you can actually have access to those, and 

we can see what those agreements provide. 

Mr. JOHNSON. Some are done prior to indictment. Others are 

done after indictment. If the deferred prosecution agreement is entered into prior to indictment, is there any way for the public to 

be able to assess the numbers of those and which firms got the 

work? Any transparency? 

Mr. SOFFER. I believe there is transparency as to deferred prosecution agreements, which by definition at some point involve the 

filing of charges and in almost every instance the filing or publication of the document that represents the agreement. 

With respect to some number of non-prosecution agreements, it 

may be that there is not disclosure of those agreements to the public at large. And I must confess to being at something of a disadvantage. I am no longer in the department, so I can’t track this 

information, but I believe that is accurate. 

84 

Mr. JOHNSON. All right. And anyone else is—please feel free to 

respond to any of the questions that I have posed. 

Ms. LARENCE. I have some data for you, sir. The first agreement 

that we track started in 1993, and to date there have been 152 of 

those. 

In terms of transparency, GAO was able to identify the monitors 

that were selected in 46 of the 48 cases, and we were able to look 

at the background, publicly available information about the backgrounds of those monitors, and so we could see their employment 

history. So that type of information is available. 

But we also found, similar to what Mr. Soffer said, a deferred 

prosecution agreement would be available because of the filings in 

court, but it is unclear to what extent non-prosecution agreements 

are publicly available. 

Mr. JOHNSON. Do we have numbers on how many deferred prosecution agreements were entered into prior to indictment? And 

could that be the reason why you were only able to get information 

on—what—48 of the 152 deferred prosecutions—or the GAO, that 

they looked at? 

Ms. LARENCE. Sorry, sir. I just wanted to clarify. There were 152 

agreements in total. Of those 152 agreements, 48 of them required 

a monitor. And the department has selected 46 monitors to date. 

There’s still two cases that they haven’t selected, so we were able 

to obtain publicly available information on all 46 of the monitors. 

Mr. JOHNSON. Okay. I understand. 

Ms. LARENCE. I don’t have a response, sir, to your earlier question about pre-indictment. 

Mr. COHEN. Thank you. 

We will do a second round, and I will obviously start. 

We are looking at two areas of legislation, which I would like 

your help on. One is the idea of having a more transparent and 

check and balance type of system in selecting the monitors. And 

the other is the question on the revolving door. 

And so, you know, Mr. Soffer, you said these are executive, and 

it is a system of balances and checks in the government. But, as 

Mr. Barkow mentioned, most of the prohibitions on revolving doors 

are statutory. And there are other statutory limitations on executive power. And if you don’t have some type—I mean the executive—— 

It is an interesting situation here. We have got a Member here 

on the Republican side, who is more or less defending and saying 

we don’t want to restrict the Obama administration from all these 

situations, and yet we have got Democrats that think, well, it 

would be a good idea to have general restrictions, because it is, you 

know, get goose and gander. 

And, you know, I just—don’t you think that there has to be—the 

legislative has to find ways, because whether it is Obama or whether it is Bush, the executive has a tendency to take care of their 

own. That is just politics and human nature. 

And there should be some way that there is a check and balance 

on that natural tendency to try to take care of either friends who 

are prosecutors or friends who have contributed or whatever. You 

don’t see that as a necessary part of the system? 

85 

Mr. SOFFER. Well, you know, I do as a general matter see that 

as an important part of the system, but I think here we are dealing 

with a very unusual circumstance, almost sui generis. And that is, 

a, it is in the realm of criminal prosecution, which is a different 

animal to begin with. So many of the dimensions of criminal prosecution are not transparent. There is an exquisite sensitivity, in 

fact, to if not secrecy, at least to confidentiality in the criminal 

process. 

And it is also, perhaps more than any other function, a core function of the executive branch. So I would argue that it is a slightly 

different scenario than the norm in that there has to be a greater 

sensitivity to imposing requirements on a process that is fundamentally prosecutive. 

Mr. COHEN. Well, like probation—the executive can decide to 

give probation, but nevertheless the probation system and the option is created by the Congress. 

Mr. SOFFER. That is true. Of course, there are many features of 

the probation system which are also not for public view, including 

reports provided by the probation officer to the court that the public cannot see. 

So again, as a conceptual matter, I don’t disagree with you, Mr. 

Chairman. But when it comes to the selection of a monitor himself 

or herself, because it is so much fundamentally a part of the prosecutor decision, I just think great care has to be taken. 

Mr. COHEN. What about the idea of the judge being involved in 

it? I mean that is, again, the judge is a judicial official. 

Mr. SOFFER. Yes. 

Mr. COHEN. You don’t get into the—I know the prosecutor is the 

executive, but the judge has got ultimate discretion over the case, 

and when it comes into that type of situation, the judge is who is— 

you know, don’t you see that it may be good for the judge to check 

off on something as a check and balance? 

Mr. SOFFER. Here, too, I would be very cautious, because the— 

first, as a practical matter, to involve judges in proceedings that 

have not yet ripened into a court matter, and after all, some of 

what we are talking about here are negotiations between the government and a defendant or a target that may never reach the 

point of a plea agreement, of criminal charges being filed and pursued, so you already involve judges stepping beyond the normal 

bounds. 

As a practical matter, too, that may impose serious delays. 

Judges are very good at what they do, but they are very overloaded. And to present more matters to them, which would involve 

and would have to involve, if they are going to do the job right, a 

careful look at who the monitors are, what the facts of the case are, 

what are the needs of the case, what are the qualifications of these 

monitors, could impose a serious delay. 

Mr. COHEN. Professor Garrett, what about the executive having 

total autonomy here? 

Mr. GARRETT. I respectfully disagree with—I do disagree with 

Mr. Soffer. I think that having courts involved would make sense 

and would actually simplify the process. You know, there are some 

agreements where judges were involved in the selection of the monVerDate Aug 31 2005 10:30 Mar 30, 2010 Jkt 000000 PO 00000 Frm 00089 Fmt 6633 Sfmt 6601 H:\WORK\COMM\111909\53640.000 HJUD1 PsN: 53640
86 

itor. There were only three of them, but it wasn’t a burdensome, 

cumbersome process, really. 

The firm submitted a few names. The prosecutor submitted a few 

names. And I think in at least one the regulatory agency submitted 

names of people they thought would be qualified. And the judge 

picked the one that seemed the most appropriate. 

You know, given the number of agreements that we have each 

year—you know, in the 20’s in a good year; there have been 14 so 

far this year—we are not talking about an enormous number of 

agreements that would impose a substantial burden on the judiciary. 

And this is not a fundamentally prosecution driven decision here. 

There are many, many contexts in which courts are the ones that 

appoint a special master or a monitor as part of a corporate probation agreement like you mentioned, Mr. Chairman. So this is already the type of decision that is often made by a judge and not 

by a prosecutor. 

You know, the only issue would come up in non-prosecution 

agreements where no document is filed with the court, and for a 

court to be involved, they would have to be pursued as deferred 

prosecution agreements, because there there at least is a charging 

document filed. 

Mr. COHEN. Mr. Barkow, do you have a thought? 

Mr. BARKOW. Yes, Mr. Chairman. I think that it is important to 

keep in mind that prosecutors today in the criminal justice system, 

particularly the Federal system, have a great deal of what would 

ordinarily be viewed as regulatory power. Ninety-five percent or 

more of defendants in criminal cases plea. The pleas are largely 

driven by prosecutive charging decisions because of the penalties 

that apply and the incentives that are provided to defendants to 

plead guilty rather than go to trial. 

And it is no different in the corporate arena. In fact, it may even 

be a more extreme example, as I discussed in some more detail in 

my written testimony. And so prosecutors have tremendous power 

to put a case in a corporate defendant, or potential corporate defendant, in a situation where they really, acting rationally, need to 

accept one of these deferred prosecution or non-prosecution agreements, and they need to accede to the appointment of a monitor. 

And I think that that is really akin to classic regulatory activity. 

And when we look at regulatory activity, we are concerned about 

the appearance of self-dealing. We are concerned about the revolving door. And so I think that congressional oversight over the activities of executive branch officials who are involved in regulatory 

activities is very important. 

Mr. COHEN. Under Mr. Soffer’s theory, you would have no check 

and balance. I mean this is an executive function. They can just decide we are going to give you a call. Hey, we got this thing, and 

we maybe can handle this in a little bit different way, and here is 

who is going to be your monitor. And here we do it, and there is 

no check and balance. It is as if they think they are being gouged 

or overly scrutinized. 

Mr. BARKOW. I think that is right, Mr. Chairman. I mean there 

are certain areas where the executive needs more authority and 

needs to have more discretion. I don’t think that this is one of 

87 

them, where it is necessary to the carrying out of the executive 

function. 

Mr. COHEN. Thank you. 

I now yield to the defender of the Administration, Mr. Franks. 

Mr. FRANKS. So, Mr. Soffer, you talked about the divisions between the executive branch and the judicial branch and the—even 

maybe in this case—the legislative branch. That is something we 

try not to talk about too much—the Constitution in the Judiciary 

Committee. It is kind of been a hands-off subject most of the time. 

But isn’t there a separation of powers issue with involving judges 

in the process? I mean can you expand that and tell us why? 

Mr. SOFFER. Well, there is. And I begin by—I began by observing 

a separation of powers issue even with this branch. But there certainly is with involving judges. Again, judges are entrusted with 

the job of adjudicating disputes. They do that. They do it well. And 

only they can do it. 

Prosecutors are entrusted with the job of law enforcement, which 

includes within it the decision about whom to prosecute, how to 

prosecute, whether to prosecute. And so the key question simply 

becomes, in my view, what are we talking about here? 

Is the selection of a monitor more akin to an adjudication of a 

dispute between two rival parties, or is it more akin to a question 

of how to resolve a criminal case and how best to do it and through 

what mechanism to do it? And I submit that it is the latter, rather 

than the former. And because it is the latter, it is at its core an 

executive function, not a judicial one. 

Mr. FRANKS. Well, you may have probably figured out that I 

agree with you. But, you know, whenever we bring the judge and, 

you know, usually in the regular judicial process, if it were a judicial matter, there would be some type of, you know, oversight of 

another judge. 

I mean what would be the review in this setting, if the legislation passed as written? If the judge, say, made a decision on a monitor that some of the participants disagreed with, would there be 

the standard judicial review process? Or would the legislation lock 

it in? 

Mr. SOFFER. If this legislation passed now, it would have the 

force of laws. I don’t know what review process there would be. It 

would—— 

Mr. FRANKS. I am talking about the judge’s action under the legislation. If the judge chose a monitor that someone didn’t like, do 

you just go ahead and review that? I mean would we be able to appeal that judge’s decision? 

Mr. SOFFER. And it is hard to know, frankly, because there is no 

process that is laid out for that issue. 

Mr. FRANKS. I think that was really my point. 

Mr. SOFFER. Oh. 

Mr. FRANKS. But from your perspective, how well—the department’s deferred non-prosecution agreements—how well have they 

worked over the years? Given the track record of the criminal justice system in general, how—do you think these stick out like a 

sore thumb somehow, or an 800-pound gorilla or anything like 

that? 

88 

Mr. SOFFER. Yes, I—no, I don’t. I think they have worked well. 

And it is worth remembering what was the impetus behind these, 

or certainly behind their expanded use. And that was the prospect 

of an Arthur Andersen, just to be blunt. 

To prosecute a corporation, if the choice is between declining and 

prosecuting, and the fact, say, you really need to prosecute, because 

there was some wrongdoing here, and that is your only choice as 

a prosecutor, and you prosecute, you potentially bring down a corporation, and you harm shareholders and pensioners and the public 

and employees. 

That is not a result anyone should want, so deferred prosecution 

agreements, non-prosecution agreements really do hit the middle 

ground, which is critical, because it both observes law enforcement 

needs and the needs of the public. 

Mr. FRANKS. Well, I mean I think everyone here wants to try to 

arrive at the most just, you know, place. But I agree with you these 

monitors and the deferred prosecution agreements put another tool 

in the hands of law enforcement in a way that I believe can serve 

the overall cause of justice pretty significantly, especially in these 

complex corporate involvements. 

And I guess I—if it is all right, Ms. Larence, let me just ask you 

one question. 

And then I will yield back, Mr. Chairman. 

The main problem you identify in your written testimony seems 

to be with regard to the lack of clarity in the Justice Department’s 

role in resolving disputes between the company and the monitor. 

How would you suggest that the department address that concern? 

Ms. LARENCE. We are making a recommendation to the department that they require the litigating units in U.S. attorney offices 

to clearly specify in the DPA or NPA itself the role that the Justice 

Department will take in that specific case, what kinds of conflicts 

do they feel they can address and what process the company can 

use to raise these concerns to Justice so that the company knows 

at the beginning whether they can look to Justice for help on these 

issues or not. 

Mr. FRANKS. Well, thank you. 

Mr. Chairman, sometimes, you know, it is amazing how perspectives change depending on what the subject is and which side 

which party is on. But, you know, a lot of times we have the debate 

as to, say, drug users, where they get caught abusing drugs. And 

a lot of times those on the Democrat side of the aisle say that, well, 

we need to have the ability to put them in treatment with the 

threat of prosecution later. But I actually think there is a place for 

that. I really do. 

But, you know, seems like we are kind of switching roles here 

a little bit. There is a tremendous place for these deferred prosecution agreements. They offer a new tool, and I think that to push 

them more in the direction of—a litigious—to try to press it into 

litigation is not a good move, unless there was some major problem 

with where we are right now, and I just don’t see that. So I have 

already expressed that, and I yield back. 

Mr. COHEN. Thank you, Mr. Franks. And I am not against deferred prosecution agreements or drug users who—whether they 

89 

are on the radio or not—having an opportunity to clean up their 

act. Either way, it is fine with me. 

But I do think there needs to be some controlling of the system 

to make sure that people are selected for the right reasons to be 

the monitors. And I don’t think that having a judge involved or 

some other way to make sure that there are not cronyism involved 

is an important thing to make this system work. 

Mr. Barkow, Ms. Larence indicated only four monitors have been 

selected after the guidelines of the Morford memorandum, since it 

took effect. And the selection process was documented in only two 

of those cases. 

In light of that, please respond to this statement Mr. Soffer 

made—or his written testimony—‘‘The Justice Department’s effort 

to formulate guidance designed to ensure integrity and transparency in the selection process appears to have worked.’’ How do 

we know it has worked, when we have only had two cases? 

Mr. BARKOW. I think it—Mr. Chairman, I think it is hard to tell. 

The GAO report discussed almost exclusively monitorships that 

were entered into before the writing of the Morford memo, and it 

revealed that in those instances DOJ essentially selected the monitors and that DOJ selected those monitors largely from a pool of 

people that the decision-makers themselves knew. 

And as of the time of the GAO report, written report, there were 

two, and now I guess there are four. And so I don’t know that we 

have sufficient data to really determine exactly how the Morford 

memo is working. But as I pointed out, the Morford memo itself 

may not have been intended to, but it doesn’t actually target exactly what this proposed legislation might target. 

Mr. COHEN. Mr. Soffer, the fifth requirement of the first principle 

in the Morford memorandum is that corporations should agree not 

to employ or become affiliated with the monitor for at least a year 

after the monitorship expires. If that makes sense, why doesn’t it 

make sense that an AUSA shouldn’t go to work for a monitor for 

a year? 

Mr. SOFFER. Well, two observations. The first is the impetus behind that restriction our suggestion is that you don’t want the possibility that the monitor, while working as a monitor, was all along 

angling for employment by the corporation afterwards. 

Mr. COHEN. Right. 

Mr. SOFFER. And understood. And there is no question that animates the same concern that we have been discussing today, which 

is don’t we worry that an AUSA will likewise be so motivated? The 

short answer is it may well be so in policy, and I want to come 

back to that point. 

I am not disagreeing that there is validity to these concerns and 

that it may be appropriate to impose that restriction. My point is 

simply that it hasn’t reached the level now where it is clear that 

it is a problem or that it would be a problem. And if it does reach 

that point, then let the department do exactly what it is done in 

these principles, which is to formulate a suggestion and to put it 

out as guidance. There is no reason why it can’t do the same if the 

issue arises in this outher context. 

90 

Mr. COHEN. Well, let me ask you this. We started out appointing 

these monitors in what year—1994, 1996? When did we start with 

DPAs and monitors? 

Mr. SOFFER. DPAs started in 1993, 1994. I can’t recall when the 

first monitor was selected. 

Mr. COHEN. But whatever. It has been a while ago. 

Mr. SOFFER. It has been a while. 

Mr. COHEN. And when was the Morford memorandum issued? 

Mr. SOFFER. March of 2008. 

Mr. COHEN. So we relied on the Clinton administration and the 

Bush administration to monitor themselves, and yet they didn’t do 

it till 2008. The legislative branch might have been slumbering in 

not coming up with something, or maybe they proposed something 

that made this all of a sudden become a front burner issue for the 

Justice Department. 

But if the Justice Department has come up with the Morford 

memorandum—let us assume they hadn’t, because they hadn’t 

done it in the previous umpteen years—should the legislative, even 

if they think—and you think the Morford memorandum is a good 

thing—— 

Mr. SOFFER. I do. 

Mr. COHEN. Well, should the legislature not say we want to pass 

such a law? We should just wait on the U.S. attorney to do it and 

the attorney general? And if the attorney general doesn’t do it, 

well, that is their business. They are not doing it. So we think it 

is good government, we think it is a grand thing, but they are not 

doing it, so we are not going to do it. That is not—doesn’t make 

sense, does it? 

Mr. SOFFER. Well, I think, put in those terms, no, it doesn’t make 

sense. I think—— 

Mr. COHEN. That is enough. [Laughter.] 

Go ahead. 

Mr. SOFFER. No, I think that the Morford—candidly, the Morford 

memo had its genesis at a time when there was some concern 

about one particular instance. What I worry about is it is an example of bad facts making bad laws, lawyers like to say. 

The Morford memo—although, frankly, not spurred entirely by 

that incident—nevertheless arose around the same time. It tried to 

look beyond just the moment and tried to take into account all relevant principles and tried to consider all possible permutations 

down the road. 

What I worry about is that if we take that same incident, and 

we were moved by the moment to pass legislation—which is fundamentally immutable; it takes an act of Congress to undo an act 

of Congress—then we are going to regret what we have done. 

And if there is no pressing need to do it, because the monitors 

are in effect and because—or rather, the principles are in effect 

and because at least on the—granted, it is not a great body of evidence thus far, but on what we know, it has worked, or the department has abided by, then I don’t think we take the next step and 

make it immutable. 

Mr. COHEN. I am going to ask one more question. 

I didn’t see Mr. Johnson come in before I started asking questions, and I apologize to you for that. 

91 

But he brought up the issue about the fees that have been paid 

some of the monitors, and the Ashcroft is the 800-pound gorilla— 

and $52 million. Have any of you all looked at that or had any opportunity—maybe Ms. Larence—to look at exactly what he 

charged? And you said $300 to $900 an hour is a typical fee. 

Ms. LARENCE. We surveyed—— 

Mr. COHEN. Shouldn’t somebody monitor the dollar amount? I 

mean that corporations are kind of afraid. This person has got 

them, you know, in their grip, and they can’t question the charges. 

Shouldn’t there be kind of an omsbudsperson? 

Mr. SOFFER. Well, let me just offer a plug, then, for Ms. 

Larence’s report, which included—at least the earlier report, or it 

is actually the most recent—a recommendation that the department make clear its role in the deferred prosecution agreements 

and make clear its role in serving as an ombudsman between the 

corporation and the monitor and in seeking to resolve disputes. It 

is an excellent recommendation. That is one I believe the department is likely to follow. 

Mr. COHEN. And did you—Ms. Larence, do you want to—you are 

all going to be saved in a few minutes by the buzzer, but do you 

have any—want to follow up on that all? 

Ms. LARENCE. We did survey a number of monitors. And of the 

13 that we surveyed, they reported that the hourly fees ranged 

from $300 to $900 an hour. We did not have access to the Zimmer 

agreement to be able to look at the charges in that individual case. 

Mr. COHEN. Does anybody have familiarity with the Zimmer 

agreement? 

Professor? 

Mr. GARRETT. I think this subcommittee tried that without success, to get more information about the billing and that agreement. 

My understanding was that what the subcommittee found out was 

that it was a retainer, and so there wasn’t hourly billing records. 

And so that again raises the question of what recourse the company has if a monitor isn’t exercising good judgment in terms of 

billing or if there is a retainer that at the outset seems excessive. 

Ms. LARENCE. We do know in that case that the company did go 

to the U.S. attorney office to raise concerns about the fees, but the 

U.S. attorney office sort of said you need to work it out between 

the monitor, and the company felt like they had obviously no leverage to do that, so they did feel like they didn’t have an avenue in 

that case. 

Mr. COHEN. Right. 

Mr. Soffer, don’t you think there needs to be somebody out there 

to be the good guy or the good girl? 

Mr. SOFFER. Well, if now we are talking about engaging, for example, a judge for the purpose of flyspecking agreements for the legitimacy of the fees that are being charged and to moderate disputes in real time as that goes forward, I think we really are 

trodding too much—we are demanding too much of judges, and I 

think we are encroaching too much on the executive function. I 

think we are imposing delays. 

And so I come back to Ms. Larence’s suggestion in her report 

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ment of Justice, if there are genuine disputes about fees or other 

issues. 

Mr. COHEN. But it didn’t work. The U.S. attorney told them, ‘‘Go 

work it out. I am not getting—I am not going to mess with this. 

You go work it out with the firm.’’ And they tried the firm. The 

monitor had gone and—the firm had gone to the monitor, and they 

couldn’t work it out. It never happened. 

And they are just kind of—and I have had consultations with a 

couple of these folks, and they just say they have no choice. And 

some of the expenses are outlandish. Doesn’t the Congress have a 

duty to represent these corporate interests? I mean I know some 

people don’t care about corporations, but some people do. 

Mr. SOFFER. Oh, I represent them, and I care deeply about them. 

But I don’t think that their interests are ill served or underserved 

by the current structure. My experience has been they are not shy 

about expressing their concerns. 

And the scenario that we are now describing obviously predated 

the Morford memo, and it certainly has predated the GAO’s directive, or recommendation rather, that the department consider inserting itself more aggressively. So I think it may be a different 

picture going forward. 

Mr. COHEN. Mr. Johnson, with apologies for overlooking you, you 

are recognized. 

Mr. JOHNSON. Thank you, Mr. Chairman. 

These deferred prosecution agreements—I don’t disagree with 

them in principle. I think that prosecutors should have that ability 

to use when legitimately necessary. And insofar as criminal cases 

go, I have always thought that it is a great idea for prosecutions 

to be deferred for first offenders, should it be a logical and useful 

step and in society’s best interests. 

And by the way, all of those types of agreements are subject to 

public records, although you may not be able to get pre-sentence 

investigation reports. But you go to the clerk’s office, and you can 

find out all about these kinds of agreements. 

And I believe that there should be the same kind of mechanism 

on the top end. When I say the top end, I mean the corporations 

that can afford to pay a $7 million fee of a monitor. And so my purpose today is just simply to raise some issues that legislation may 

need to address. 

Can you tell me—and I know that deferred prosecution agreements are entered into to maintain stability of a company that is 

could be the non-financial or financial that has a crucial role in the 

American and perhaps world economy. Are there any other purposes that you see as legitimate for these agreements to be invoked? 

Mr. Garrett? Professor Garrett? 

Mr. GARRETT. Yes, I mean many of the companies that have been 

subject to these agreements were large corporations that have, you 

know, public importance. And I think, you know, the department 

has said that one of the purposes of these agreements is to focus 

sort of in a forward-looking way on creating reforms to make sure 

that whatever the misconduct that was, that it didn’t repeat. 

And so that is a laudable purpose, and I suppose the notion is 

simply punishing the firm, fining the firm may not be sufficient if 

93 

reforms aren’t in place, and second, that an indictment and the 

consequences that could flow from an indictment or conviction 

might be overkill, over deterrence, and they might indeed cause an 

Andersen-type situation. 

Mr. JOHNSON. Don’t you think that that is a good thing, if a too 

big to fail entity is brought to justice and given the death penalty, 

if you will, strapped in an electric chair, fried to death like we had 

here in Virginia this week? Or their choice could be to do the—you 

know, the—of the poison peel kind of thing in being executed. But 

don’t you think it is good for the public to see that this large entity 

is not above the law? 

Mr. GARRETT. You know, I suppose that is what the organizational prosecution guidelines, the Thompson memo, was about. Not 

all companies receive these agreements. There are certainly still 

plenty of corporations that are indicted and sign plea agreements. 

Some of those plea agreements require the imposition of monitors 

just like deferred prosecution agreements do, except the company 

then has the consequence of that conviction. 

Mr. JOHNSON. Well, certainly, and once they are indicted, that 

becomes public information, unless it is under seal, which does not 

occur in the overwhelming majority of cases, correct? 

Mr. GARRETT. It certainly has been a struggle sometimes to get 

copies of some of these deferred and non-prosecution agreements. 

I think in particular because of the work of this subcommittee, the 

department has made them public, and it has been much easier 

lately to get copies of them. 

But what you also bring up in terms of just making sure that the 

work of sort of remedying misconduct occurs in fact, you know, we 

really do want to make sure that not only are appropriate monitors 

being selected, but we want to make sure that they are really doing 

their jobs effectively so that we don’t have any more misconduct in 

these organizations. 

And so I am also concerned not about monitors just doing too 

much work or billing too much, but you want there to be some 

check if the monitor is not doing enough. And that is something we 

don’t know about. I think that is something that the GAO may be 

looking at. But we want to really be sure that these monitors are 

effective. And I don’t know what sort of assessment is being done 

so that we can have some sense that these monitors really are 

doing effective work. 

Mr. JOHNSON. Thank you. And I really do believe that this kind 

of business that is sent to law firms to become deferred prosecution 

monitors should be opened up to minority firms. I have a feeling 

that it is not. 

Thank you. 

Mr. COHEN. Thank you. 

Professor Garrett, you said that you thought that this agreement 

memorandum came about after the subcommittee started its work. 

Did you say that? Or maybe it was Mr. Soffer in his written testimony. 

Mr. Soffer, you were there. You were there when the memorandum came about. What case was it or what subcommittee hearing triggered this? 

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Mr. SOFFER. It actually preceded the subcommittee hearing. So 

as I recall the sequence of events, some time in the early to mid, 

perhaps, 2007, the department began its work considering whether 

monitor principles would be appropriate. In November, I think it 

was, of 2008 the now governor or Governor-elect Chris Christie situation came into full view. And then it was in March of—November 2007, I am sorry—March of 2008 that the principles were promulgated, and then very shortly thereafter there was the first 

hearing on this matter. 

Mr. COHEN. Well, I thank each of you for coming and giving your 

testimony. I think we have had a great panel. We have all learned 

a lot, and we will try to—if you have any other thoughts you would 

like to submit, we would appreciate it in helping us to come 

through with our legislation or where we should go. 

Without objection, Members have five legislative days to submit 

any additional written questions to you, which we would forward 

to you and ask you to answer as promptly as possible. They will 

be made part of the record. Without objection, the record will remain open for 5 legislative days for the submission of any other 

materials. 

And I thank everyone for their time and patience. 

The hearing of the Subcommittee of Commercial and Administrative Law is promptly adjourned. 

[Whereupon, at 1:21 p.m., the subcommittee was adjourned.] 

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A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD

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MATERIAL SUBMITTED BY THE HONORABLE STEVE COHEN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TENNESSEE, AND CHAIRMAN, SUBCOMMITTEE ON COMMERCIAL AND ADMINISTRATIVE LAW


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