Corporate Crime: Preliminary Observations on DOJ's Use and Oversight of Deferred Prosecution and Non-Prosecution Agreements
Published: 2009-06-25T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Recent cases of corporate fraud and mismanagement heighten the Department of Justice's (DOJ) need to appropriately punish and deter corporate crime. Recently, DOJ has made more use of deferred prosecution and non-prosecution agreements (DPAs and NPAs), in which prosecutors may require company reform, among other things, in exchange for deferring prosecution, and may also require companies to hire an independent monitor to oversee compliance. This testimony provides preliminary observations on (1) factors DOJ considers when deciding whether to enter into a DPA or NPA and setting the terms of the agreements, (2) methods DOJ uses to oversee companies' compliance, (3) processes by which monitors are selected, and (4) companies' perspectives regarding the costs and role of the monitor. It also includes the results of GAO's recently completed work on DOJ's efforts to document the monitor selection process (discussed in objective 3). GAO reviewed DOJ guidance and 57 of the 140 agreements negotiated from 1993 (when the first 2 were signed) through May 2009; and interviewed DOJ officials, officials from 17 companies, and 6 monitors. While not generalizable, these results provide insight into decisions about DPAs and NPAs.
section_title: What GAO Found
paragraphs: Prosecutors in all 13 DOJ offices with whom GAO spoke said that they based their decision on whether to enter into a DPA or NPA on DOJ's principles for prosecuting business organizations, particularly those related to the company's willingness to cooperate, collateral consequences to innocent parties, and remedial measures taken by the company. However, prosecutors differed in their willingness to use DPAs or NPAs. In addition, prosecutors' varying perceptions of what constitutes a DPA or NPA has led to inconsistencies in how the agreements are labeled. In March 2008, DOJ issued guidance defining DPAs and NPAs, but this guidance is not consistently followed, in part because not all DOJ offices view it as mandatory. DOJ plans to determine the need to take additional steps to require consistency in the use of the labels DPA and NPA. While DOJ and companies generally negotiated the terms of DPAs and NPAs--such as monetary payments and compliance requirements--DOJ also considered other factors in its decisions, such as monetary gains to the company as a result of the criminal misconduct. To ensure that companies were complying with the terms of the DPAs and NPAs, DOJ employed several oversight mechanisms, including the use of independent monitors, coordination with regulatory agencies, and other means. Of the 57 agreements GAO reviewed, 26 required the company to hire, at its own expense, an independent monitor. In the remaining agreements, DOJ relied, among other things, on reports from regulatory agencies or from monitors hired by companies under separate agreements with these agencies, and company certifications of compliance. For the DPAs and NPAs GAO reviewed, even though DOJ was not a party to the contracts between companies and monitors, DOJ typically selected the monitor, and its decisions were generally made collaboratively among DOJ and company officials. Monitor candidates were typically identified through DOJ or company officials' personal knowledge or recommendations from colleagues and associates. In March 2008, DOJ issued guidance stating that for monitor selection to be collaborative and merit-based, committees should consider the candidates and the selection must be approved by the Deputy Attorney General. However, because DOJ does not require documentation of the process used or the reasons for particular monitor selection decisions, it will be difficult for DOJ to validate whether its monitor selection guidance-which, in part, is intended to instill public confidence-is adhered to. Some company officials GAO spoke with reported that they had little leverage to address concerns about the amount and scope of the monitors' work and, therefore, would like DOJ to assist them. GAO in its ongoing work will assess this and other issues about the use and oversight of DPAs and NPAs.

section_title: Letter
paragraphs: I appreciate the opportunity to participate in today’s hearing to discuss the  Department of Justice’s (DOJ) use and oversight of deferred prosecution  and non-prosecution agreements. According to DOJ, one of its chief  missions is to ensure the integrity of the nation’s business organizations  and protect the public from corporate corruption. Recent high-profile  cases of fraud and mismanagement in the financial services sector have  heightened the need for the government to determine the most  appropriate tools it can use to punish and deter corporate crime. Federal  prosecutors continue to prosecute company executives and employees, as  well as companies themselves, for crimes such as tax evasion, securities  fraud, health care fraud, and bribery of foreign officials, among others.  However, over the past decade, DOJ has recognized the potential harmful  effects that criminally prosecuting a company can have on investors,  employees, pensioners, and customers who were uninvolved in the  company’s criminal behavior. The failure of the accounting firm Arthur  Andersen, and the associated loss of thousands of jobs following its  indictment and conviction for obstruction of justice for destroying Enron- related records, has been offered as a prime example of the potentially  harmful effects of criminally prosecuting a company. To avoid serious  harm to innocent third parties, DOJ guidance allows prosecutors to  negotiate agreements that may require companies to institute or reform  corporate ethics and compliance programs, pay restitution to victims, and  cooperate with ongoing investigations of individuals in exchange for  prosecutors deferring the decision to prosecute. These types of  agreements have been referred to as deferred prosecution (DPA) and non- prosecution (NPA) agreements. As part of these agreements, prosecutors  may also require a company to hire, at its own expense, an independent  monitor to oversee the company’s compliance with the agreement. Based  on our analysis of DOJ data, DOJ has made more frequent use of DPAs and  NPAs in recent years, entering into 3 agreements in 2002 compared to 41  agreements in 2007 and 22 agreements in 2008.
DOJ views DPAs and NPAs as appropriate tools to use in cases where the  goals of punishing and deterring criminal behavior, providing restitution to  victims, and reforming otherwise law-abiding companies can be achieved  without criminal prosecution. The use of these tools, however, is not  without controversy. Some commentators view the use of DPAs and NPAs  as encouraging disrespect for the law and failing to deter corporate crime.  Others have suggested that the threat of an indictment gives prosecutors  excessive power by which they can force companies to agree to highly  unfavorable terms to avoid criminal prosecution.
Considering the balance that DOJ must achieve when determining the  most appropriate way in which to address corporate misconduct, my  testimony today includes preliminary observations on (1) the factors DOJ  considers when deciding whether to enter into a DPA or NPA and setting  the terms of the agreements, (2) the methods DOJ uses to oversee  companies’ compliance with DPAs and NPAs, (3) the process by which  independent monitors are selected, and (4) companies’ perspectives  regarding the costs and responsibilities of the monitors. My comments are  based on our ongoing review of DPAs and NPAs requested by you as well  as the Chairman of the Senate Judiciary Committee, Patrick Leahy; the  Chairman of the House Judiciary Committee, John Conyers; Congressman  Frank Pallone, Jr.; Congressman Bill Pascrell, Jr.; and Congresswoman  Linda T. Sanchez. The final results of this review will be issued later this  year. My comments also include the results of our recently completed  work related to DOJ’s efforts in documenting the monitor selection  process (which is discussed as part of objective three above).
To address our objectives, we reviewed DOJ guidance regarding the  prosecution of business entities and the selection and use of independent  monitors. To date, we also reviewed the terms of 57 of the 140 agreements  we have identified that were negotiated from 1993 (when the first 2 were  signed) through May 2009. The specific terms we reviewed include the  monetary penalty imposed, the duration of the agreement, the compliance  program required, and the reporting requirements for the company, and, if  applicable, the independent monitor. We discussed these 57 agreements  with DOJ, and compared the processes that DOJ used when entering into  and overseeing these agreements with criteria in standards for internal  control in the federal government relating to appropriate documentation  of transactions and prior GAO work that suggests documenting the  reasons for selecting monitors avoids the appearance of favoritism.  We  interviewed officials from 13 DOJ offices that are responsible for  prosecuting criminal cases, including DOJ’s Criminal Division and 12 U.S.  Attorneys Offices. We selected the Criminal Division because it had  negotiated the vast majority of agreements entered into by prosecutors at  DOJ headquarters, and we selected 12 specific U.S. Attorneys Offices  because they were the only ones that had negotiated at least 2 agreements,  of which at least 1 had been completed. To date, we have also interviewed  representatives of 17 of the 25 companies that signed DPAs or NPAs that  met the following criteria: the agreement required the company to improve  or institute an ethics or compliance program; the agreement had been  completed; and we had discussed the agreement with DOJ. Fifteen of  these 25 companies were also required to hire an independent monitor,  and, to date, we have interviewed 6 of these monitors. Since we  determined which DOJ officials, company representatives, and monitors to  interview based on a nonprobability sample, the information we obtained  from these interviews is not generalizable to all DOJ litigating units and all  companies and monitors involved in DPAs and NPAs. However, the  interviews provided insights into the negotiation and implementation of  DPAs and NPAs.
We conducted this performance audit from September 2008 to June 2009  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our objectives.
In summary, DOJ prosecutors with whom we spoke have based their  decisions on whether to enter into a DPA or an NPA and setting the terms  of these agreements on the Principles of Federal Prosecution of Business  Organizations—which includes guidance, for example, on factoring in a  company’s cooperation and collateral consequences that may result from  prosecution—as well as input from companies and regulatory agencies  and other factors. In addition, 10 of the 13 DOJ offices we included in our  review have made efforts to be transparent in their decision making by  issuing press releases that explain the reasons why they entered into these  agreements. However, prosecutors differed in their willingness to use  DPAs or NPAs. For instance, 3 of the 13 DOJ offices exclusively entered  into DPAs, and a prosecutor from 1 of these offices asserted that entering  into an NPA would be too lenient on the company. In addition, different  perspectives among DOJ officials regarding the definition of DPAs and  NPAs has led to inconsistent labeling of the agreements. For example, DOJ  offices differ in whether they consistently file agreements they refer to as  DPAs and the associated criminal charges in court, a key distinguishing  factor that is of concern to companies which prefer to enter into NPAs  because formal charges are not filed with the court. DOJ issued guidance  in March 2008 that defined DPAs as agreements that are filed in court and  NPAs as agreements that are not. However, of the 27 DPAs and NPAs  entered into since DOJ issued this guidance, 3 are not labeled in  accordance with the guidance and 7 are labeled as something other than  DPA or NPA; one reason for this is that not all DOJ offices view this  guidance as mandatory. DOJ plans to determine whether there is a need to  take additional steps to require consistency in the use of labels across  offices. We will continue to assess prosecutors’ willingness to use DPAs or  NPAs as part of our ongoing work.
Furthermore, to help ensure that companies were complying with the  terms of the DPAs and NPAs, DOJ employed several oversight  mechanisms, including requiring companies to hire an independent  monitor, who in most cases would periodically report to DOJ on the  company’s progress; or relying upon a monitor who was already hired by  the company as part of a civil or administrative agreement reached with a  federal regulatory agency. Although DOJ was not a party to the contracts  between companies and monitors, DOJ generally took the lead in selecting  and approving the monitors. DOJ’s process for selecting monitors typically  involved collaboration among DOJ and company officials, and monitor  candidates were generally identified as a result of these officials’ personal  knowledge of individuals whose reputations suggested they would be  effective monitors, or recommendations given to these officials by  colleagues and professional associates who were familiar with  monitorship requirements. DOJ issued guidance in March 2008 to help  ensure that the monitor selection process is collaborative and the  selection is based on merit; this guidance also requires prosecutors to  obtain Deputy Attorney General approval for the monitor selection. While  the guidance established policies for the selection of independent  monitors, it does not require documentation of the process used or the  reasons for particular monitor selection decisions. Internal control  standards require that significant events, which could include how and  why monitors are selected, be clearly documented and the documentation  be readily available for examination. In addition, our prior work suggests  that documenting the reasons for selecting a particular monitor avoids the  appearance of favoritism. Without requiring documentation, it will be  difficult for DOJ to validate whether its monitors have been selected in a  manner that is consistent with the guidance. Moreover, documenting its  process and reasons for selecting monitors could enhance DOJ’s ability to  instill public confidence in the monitor selection process.
While most of the companies we interviewed were satisfied with the  monitor selections, officials from 6 of the 12 companies we have spoken  with thus far that were required to hire a monitor took issue with the  scope of the monitor’s work, which seemed too expansive, thus making  the overall cost of the monitorship higher than the companies expected.  Four of these companies did not feel as if they had enough leverage to  address this issue with the monitors because, for example, the companies  felt that the monitors’ roles and responsibilities were not always clearly  defined in the DPA or NPA, thus limiting the basis on which companies  could assert that the monitor had expanded the scope of work. Some  companies preferred that DOJ assist them in addressing any concerns they  had about monitors. We have not yet been able to obtain the perspectives  of DOJ and monitors regarding these concerns, but plan to do so in our  ongoing review.
To enhance DOJ’s ability to ensure that monitors are selected according to  DOJ’s guidelines, we recommend that the Deputy Attorney General adopt  internal procedures to document both the process used and reasons for  monitor selection decisions. We requested comments on a draft of this  statement from DOJ. DOJ did not provide official written comments to  include in the statement. However, in an email sent to us on June 18, 2009,  DOJ stated that the department agreed with our recommendation. DOJ  also provided technical comments, which we incorporated into the  statement, as appropriate.
subsections: section_title: DOJ Based the Use and Terms of DPAs and NPAs on Principles of Federal Prosecution and Other Factors, but Prosecutors’ Different Perspectives on DPAs and NPAs Led to Inconsistent Use and Labeling
paragraphs: DOJ prosecutors cited the Principles of Federal Prosecution of Business  Organizations as a major factor in their decision on entering into a DPA or  an NPA, and considered other factors, such as the Federal Sentencing  Guidelines, in determining the terms of these agreements. Prosecutors  also said that they generally negotiated these decisions with companies.  However, in making these decisions, prosecutors differed in their  willingness to use DPAs or NPAs. In addition, prosecutors’ different  perspectives on the definitions of DPAs and NPAs led to inconsistencies in  how they labeled the agreements. DOJ plans to determine the need to  require consistency in the use of the labels DPA and NPA.
subsections: section_title: DOJ Prosecutors Cited Principles of Federal Prosecution as Influential in Their Decision on Entering into a DPA or NPA but Were Inconsistent in their Use and Labeling of Agreements
paragraphs: Prosecutors in all 13 DOJ offices we included in our review consistently  said that they based their decision on whether to enter into a DPA or NPA  rather than prosecute the company or decline to do so on the Principles of  Federal Prosecution of Business Organizations. First issued in 1999, these  principles are DOJ’s guidance to federal prosecutors on investigating,  charging, and negotiating a plea or other agreement with respect to  corporate crimes. The principles instruct prosecutors to consider nine  factors when determining how to treat a corporation suspected of criminal  misconduct and provide a number of actions prosecutors may take,  including declining to prosecute, entering into a DPA or NPA, or criminally  prosecuting, the corporation. The principles also include guidance on  when the nine factors most appropriately apply. The factors, and examples  of the manner in which they influence prosecutors’ choice of action, are  shown in figure 1 below.
While the prosecutors with whom we spoke said that many of these  factors may have influenced their decision on entering into a DPA or NPA  in each case, they most frequently cited the company’s cooperation with  the investigation, the collateral consequences of a criminal prosecution,  and any remedial measures the company had taken or planned to take as  most important in their decision on entering into a DPA or NPA. For  instance, one prosecutor told us that the company’s cooperation is an  important factor in cases involving violations of the Foreign Corrupt  Practices Act because obtaining the evidence from foreign countries in  these types of cases is a cumbersome and lengthy process that could take  up to 10 years. However, with the company’s cooperation, which may  entail assisting DOJ in tracing bribe payments through multiple overseas  accounts, DOJ may be able to obtain the evidence it needs in a matter of  weeks. With regard to collateral consequences, some DOJ prosecutors  explained, for example, that the potential harm that prosecution and  conviction of health care companies can have on innocent third parties  may be a key factor in their decision on entering into a DPA or NPA with  these kinds of companies. Federal law provides for health care companies  convicted of certain crimes to be debarred from—or no longer eligible to  participate in—federal health care programs. Prosecutors in one office  said that they chose to enter into DPAs and an NPA simultaneously with  five orthopedic device companies that provided kickbacks to physicians  because, combined, these companies comprised the vast majority of the  market for hip and knee replacements; therefore, conviction and  debarment of these companies would have severely limited doctor and  patient access to replacement hips and knees. In terms of remedial  measures, prosecutors cited enhancements companies made to their  compliance programs, the termination of employees responsible for the  wrongdoing, and the company’s willingness to make payments to the  victims of the crime as influential in their decision on entering into a DPA  or NPA, rather than prosecute.
Our preliminary analysis suggests that officials from many of the DOJ  offices we met with have made efforts to be transparent about the basis  for their decisions on entering into DPAs or NPAs. For example, 10 of the  13 DOJ offices issued press releases explaining how they applied the  Principles of Federal Prosecution of Business Organizations when  deciding whether to enter into these agreements. According to an official  in the Criminal Division’s Fraud section, its policy is to issue press  releases upon entering into DPAs and NPAs with companies related to the  Foreign Corrupt Practices Act, which helps to increase transparency. As  part of our ongoing review, we will determine the extent to which DOJ  offices have additional policies—including supervisory review and  documentation of the reasons for their decisions to enter into a DPA or  NPA—that promote transparency and accountability regarding these  agreements.
DOJ’s reliance on the Principles of Federal Prosecution of Business  Organizations was also apparent to many of the companies involved in the  DPAs and NPAs. Ten of the 17 company officials with whom we spoke as  of June 5, 2009, said that they were aware that DOJ based its decision on  whether to enter into a DPA or NPA on the factors articulated in the  Principles of Federal Prosecution of Business Organizations. Moreover,  officials from 6 of these 10 companies reported making presentations to  DOJ based on the nine factors in order to influence prosecutors’ decisions  on using agreements in their cases, although companies generally reported  that the prosecutors made the ultimate decision about whether to enter  into a DPA or an NPA.
DOJ prosecutors also made decisions about which of these agreements— DPA versus NPA—the office would enter into. A commonly accepted  distinction between these two types of agreements is that a DPA involves  the filing of a charging document with the court, while, for an NPA,  charges are not filed with the court. Officials from 12 of the 17 companies  with whom we spoke preferred an NPA, largely because they viewed NPAs  as more advantageous from a public relations perspective for the  company. Some of these officials explained that, because a charge is not  filed in court in association with an NPA, companies are able to report that  they were not charged or prosecuted in the case; a DPA, on the other  hand, involves the filing of charges in court, which can result in greater  negative publicity for the company.
In choosing between a DPA and an NPA, prosecutors most frequently  reported considering the same factors they did when deciding whether to  enter into an agreement at all—namely, cooperation, collateral  consequences, and the companies’ remedial actions. For example,  prosecutors at 6 of the 13 DOJ offices said that they considered the  company’s cooperation in their investigation when deciding between a  DPA and an NPA. Prosecutors from one DOJ office said that once the  company learned it was the target of the office’s investigation, its lawyers  immediately called the office seeking to cooperate and continued to  cooperate extensively throughout the office’s ensuing 3-year investigation,  remaining in daily contact with the office and assisting in its investigation.  As a result, the DOJ office chose to enter into an NPA rather than a DPA  with the company. Not all of the 13 DOJ offices we included in our review  reported entering into both types of agreements. For instance, 3 of the 13  DOJ offices we included in our study, including one section of the  Criminal Division, exclusively entered into DPAs with companies. A  prosecutor from one of these offices said that he did not consider entering  into NPAs in any of its cases because he viewed NPAs as too lenient on the  company. We will continue to assess this issue as part of our ongoing  work.
Officials from 11 of the 17 companies with whom we spoke said that the  decision between a DPA and an NPA was exclusively made by DOJ, and  officials from 4 of these companies reported that DOJ’s reasons for  choosing between a DPA and an NPA were not made clear. On the other  hand, officials from 4 other companies said that the decision was a result  of negotiations between DOJ and the company. Companies’ opinions  varied on whether guidelines for choosing between a DPA and an NPA  would be beneficial. Officials from 5 of the 17 companies we interviewed  said that such guidelines would assist the companies in negotiating  between a DPA and an NPA with DOJ, whereas officials from three  companies believed that guidelines would make DOJ’s decision between a  DPA and an NPA more transparent to the company. Officials from 6  companies cited reasons why guidelines may not be useful, such as  concerns that such guidelines may not address the unique circumstances  of each case, would not be binding on DOJ prosecutors, and were not  necessary because DOJ’s rationale for choosing a DPA versus an NPA was  made clear to the company. Prosecutors at 4 of the 13 offices we spoke  with stated that these guidelines would not be beneficial because they  need the flexibility to choose between a DPA and an NPA based on the  unique circumstances of each case.
In addition, prosecutors differ in whether they called their agreements  DPAs and NPAs. For example, prosecutors from 2 of the 13 offices with  whom we spoke told us that they are reluctant to file agreements in court  because of their understanding that some judges do not want the case to  be open on their dockets for the length of the deferral period. While  prosecutors from one of these offices called the agreements it did not file  in court NPAs, the other office still labeled its agreements DPAs because it  viewed DPAs as agreements in which the company admits guilt, regardless  of whether charges are filed in court. Recognizing the inconsistent use of  the labels DPA and NPA, in March 2008, then Acting Deputy Attorney  General Craig Morford issued a memorandum—also known as the  “Morford Memo”—which stated that a DPA is typically predicated on the  filing of both a formal charging document and the agreement with the  appropriate court, while an NPA is an agreement maintained by the  parties, rather than being filed with the court. The Morford Memo also  states that clear and consistent use of these terms will help DOJ more  effectively identify and share best practices and track the use of DPAs and  NPAs. However, based on our analysis of the agreements entered into  after DOJ issued this guidance, not all the agreements were labeled in  accordance with the definitions provided. Of the 27 agreements entered  into after DOJ issued this guidance, 20 were labeled as DPAs or NPAs in  the agreement or the press release announcing the agreement. Of these 20  agreements, 3 were not labeled in accordance with the definitions in the  guidance. The remaining 7 agreements were labeled as agreement, case  disposition agreement, or pretrial diversion agreement. One reason for the  differences in the manner in which agreements are labeled is that not all  prosecutors believe that the use of the definitions of DPAs and NPAs in  the guidance is mandatory. For instance, a prosecutor at one office told us  that the office believed that the definitions were provided only for the  purposes of reading the Morford Memo and not as guidance for labeling  DPAs and NPAs going forward, while a prosecutor at another office  believed that the Morford Memo was intended as mandatory guidance on  the use of the definitions of DPAs and NPAs in the future. According to the  Office of the Deputy Attorney General, DOJ intends for the definitions in  the Morford Memo to be mandatory and followed consistently by  prosecutors for the purpose of internal reporting and tracking of these  agreements. However, DOJ does not intend for the definitions to inhibit  prosecutors’ ability to externally label these agreements in accordance  with the unique circumstances of a particular case or the practices and  preferences of a particular DOJ office, company, or judge. For instance,  the company may prefer that an agreement be labeled as “agreement”  rather than “deferred prosecution agreement” because companies believe  this label is less severe. Thus, the prosecutor may negotiate with the  company over the external label. Regardless of the external label on the  agreement, DOJ intends for prosecutors to track the agreement either as a  DPA or NPA in accordance with Morford Memo definitions. In addition,  DOJ is aware that there may be agreements that share some of the  elements of DPAs and NPAs but may not readily fit the Morford Memo  definitions—for instance, the Office of the Deputy Attorney General  explained that in one case the company had already been indicted on  some of the criminal charges associated with the agreement prior to the  agreement being reached, but had not been indicted on other charges  associated with the agreement, and therefore it was not clear whether the  agreement fit the definition of a DPA—in which charges are filed—or an  NPA—in which charges are not filed. Taking into account external  circumstances such as these, DOJ plans to determine whether there is a  need to take additional steps to require the use of the definitions, to  ensure consistency in the use of labels across offices.
section_title: DOJ Considers Input from Company Negotiations and Other Factors, such as the Sentencing Guidelines, When Setting the Terms of DPAs and NPAs
paragraphs: Prosecutors in 11 of the 13 offices and officials from 14 of the 17  companies with whom we spoke reported that they negotiated at least one  of the terms in their DPAs and NPAs, including monetary payments to  victims or the government, the duration of the agreement, or compliance  program requirements, as well as additional terms, such as monetary  donations to foundations or educational institutions. Furthermore,  according to prosecutors in all 13 DOJ offices, they considered other  factors, such as guidance provided in the Federal Sentencing Guidelines  or the terms included in other DPAs or NPAs as examples, when  determining the terms of their agreements.
Monetary payments: Of the 57 DPAs and NPAs we reviewed, 45 required  monetary payments—which may include restitution to victims of the  crime, forfeiture of the proceeds of the crime, and monetary penalties  imposed by DOJ—ranging from $30,000 to $615 million. While the  remaining 12 agreements did not require such payments, in 3 agreements  the companies were required to make payments to organizations or  individuals that were not directly affected by the crime; for 7 agreements  the company had already agreed to make payments as part of a separate  agreement with another agency or DOJ division, such as the Securities and  Exchange Commission or DOJ’s Civil Division; and for 1 agreement, two of  the company’s subsidiaries had already agreed to make monetary  payments as part of a plea agreement and a DPA. In the remaining  agreement, the company was not required to make a payment and did not  enter into a civil settlement in order to obtain release from its civil liability  in the case. In setting the payment amounts in DPAs and NPAs,  prosecutors reported that they considered the following: (1) the section of  the Federal Sentencing Guidelines on determining fines for business  organizations, which includes consideration of the seriousness of the  offense, culpability of the organization, and the company’s cooperation,  among other factors; (2) monetary gains to the company or losses to its  victims as a result of its crime; and (3) the company’s ability to pay.  Prosecutors in 6 of the 12 offices with whom we spoke whose DPAs and  NPAs included monetary payments reported that they negotiated the  monetary payments with the other party.  While representatives of 7 of  the 13 companies we interviewed that were required to make monetary  payments told us that they were able to negotiate the monetary payment  with DOJ, representatives of 4 companies told us that they were not able  to negotiate the payment. Representatives from 2 of these companies did  not express concern over the lack of negotiation—1 said that DOJ’s  reasons for setting the payment were made clear to the company, while  the other said that the company had no reason to question the payment  figure DOJ set. One of these companies reported that DOJ did not provide  its rationale for the monetary payment, and the remaining company did  not provide opinions about the process by which the payment was set.
Duration: The durations of DPAs and NPAs have ranged from 3 months  to 5 years. Prosecutors at 9 of the 13 DOJ offices with whom we spoke  based the duration of the agreement on the amount of time they believed  was necessary for the company to correct the problems underlying the  criminal conduct. For instance, one prosecutor said that the company was  replacing its old computer billing system, which had overbilled a federal  agency, resulting in the criminal conduct underlying the DPA. The  prosecutor set the duration at 27 months in order to allow the company to  install the new billing system and ensure it was functioning appropriately,  and not continuing to overbill the agency. Prosecutors at 5 of the 13  offices we visited also reported that they negotiated with companies over  the duration of the agreement. On the other hand, companies that had  agreements with 5 other DOJ offices told us that they did not negotiate the  duration, although none of these companies expressed concern over the  duration of the agreement. For instance, an official from one of these  companies said that the company would have preferred a shorter duration,  but was satisfied with the duration DOJ set. Prosecutors in 3 DOJ offices  also told us that they considered the duration of other DPAs or NPAs as  examples when setting the duration of their agreements.
Compliance program requirements: Forty-five of the 57 DPAs and  NPAs we reviewed included requirements that the company improve or  enhance its compliance program, while 12 did not include this type of  requirement. According to prosecutors in 6 of the 13 DOJ offices we met  with, they required companies to enhance or implement a compliance  program in order to reform the company, prevent further misconduct, or  help establish and publicize a compliance program standard for the  industry. In deciding not to include compliance requirements,  prosecutors reported that they considered whether the company that  committed the wrongdoing could engage in such criminal conduct again.  For instance, one prosecutor said that a compliance program was not  required as part of an agreement because the company’s violations  occurred during its participation in the United Nation’s Oil-for-Food  Program, which was no longer in existence when the agreement was  signed. In addition, prosecutors were aware that 2 of the companies  involved in DPAs or NPAs that did not include compliance program  requirements had entered into agreements with other regulatory agencies  that did include such requirements. When developing compliance  requirements in DPAs and NPAs, prosecutors most commonly (8 of 13  offices) worked with regulatory agencies with relevant jurisdiction over  the companies—such as Immigration and Customs Enforcement for issues  related to the hiring of illegal immigrants, the Environmental Protection  Agency for environmental crimes, or the Securities and Exchange  Commission for issues involving accounting and financial fraud—to  develop the compliance requirements included in the agreement. Several  prosecutors and company officials also reported that they negotiated over  the compliance requirements in the DPA or NPA. For instance, one  company official said that DOJ initially developed the compliance program  requirements, but when the company raised concerns about the  practicality and effectiveness of the requirements, DOJ worked with the  company to revise them. In the end, the official felt that the company’s  enhanced program was a best practice in the industry.
Extraordinary restitution: DPAs and NPAs have also included  additional terms, such as payments or services to organizations or  individuals not directly affected by the crime; these payments are  sometimes referred to as extraordinary restitution. Of the 57 DPAs and  NPAs we reviewed, 4 included such terms. Prosecutors and companies  with whom we spoke about these provisions generally reported that the  provisions were determined through negotiations between the two parties.  In addition, these prosecutors were supportive of including extraordinary  restitution provisions in DPAs and NPAs because, for example, they  believe such terms can help improve the availability of services in the  community and prevent similar misconduct from occurring in the future,  not just within the company, but in a larger context. For instance, 1 DPA  required the organization to provide uncompensated medical care to the  state’s residents, while an NPA required the company to provide funding  for a not-for-profit organization to support projects designed to improve  the quality and affordability of health care services in the state. Another  DPA required a company that had not complied with water treatment  regulations to provide an endowment of $1 million to the U.S. Coast Guard  Academy for the purposes of enhancing the study of maritime  environmental enforcement, with an emphasis on compliance,  enforcement, and ethics issues. In May 2008, DOJ issued guidance  prohibiting the use of terms requiring payments to charitable, educational,  community, or other organizations or individuals that are not the victims  of the criminal activity or are not providing services to redress the harm  caused by the criminal conduct because the use of such terms could create  actual or perceived conflicts of interest or other ethical issues. Based on  our preliminary analysis, none of the 25 DPAs and NPAs that were entered  into since this guidance was issued required companies to make payments  or perform services for individuals or organizations that were not directly  harmed by the crime.
While most company officials stated that they had input into, or were able  to negotiate over, whether to enter into a DPA or NPA and the terms of the  agreements, officials from nine of these companies reported that DOJ had  greater power in the negotiations than the company because, for instance,  if the negotiations were not successful, DOJ could have proceeded with  prosecution. However, prosecutors at 4 of the 13 offices with whom we  spoke noted that if companies had concerns about the terms of their DPAs  or NPAs, they could express them to their office, or appeal them to a  higher level within DOJ. Representatives from six companies expressed  reluctance to appeal any concerns they had with the terms of the  agreement. Officials from two of these companies explained that appealing  to a higher level in DOJ could negatively affect their interactions with the  prosecutors involved in the case. On the other hand, officials from four  companies told us that they would have been comfortable appealing the  terms, if needed. As part of our ongoing review, we will continue to  assess the extent of the companies’ role in setting the terms of the  agreements and obtain DOJ’s perspective on this issue.
section_title: DOJ Oversaw Companies’ Compliance through the Use of Independent Monitors, Coordination with Regulatory Agencies, and Other Means
paragraphs: In 26 of the 57 DPAs or NPAs we have reviewed to date, prosecutors  required that the company hire, at its own expense, an independent  monitor to assist the company in establishing a compliance program,  review the effectiveness of a company’s internal control measures, and  otherwise meet the terms of the agreements. In the remaining cases, DOJ  coordinated with the relevant regulatory agency already monitoring or  overseeing the company, or used other means, such as requiring  companies to certify their compliance, to ensure the terms were met.
When deciding whether a monitor was needed to help oversee the  development or operations of a company’s compliance program, DOJ  considered factors such as the availability of DOJ resources for this  oversight, the level of expertise among DOJ prosecutors to monitor  compliance in more technical or complex areas, and existing regulatory  oversight. Of the 13 DOJ offices we met with, 10 utilized monitors.
Prosecutors in four of these nine offices cited as a reason for requiring an  independent monitor the limited time and resources their offices had to  oversee a company’s compliance program, make appropriate  recommendations, and reform the company’s compliance behavior,  whereas monitors often have an entire staff available to them to perform  these activities. Prosecutors in five of the nine DOJ offices we met with  that had utilized monitors, cited as a reason for requiring an independent  monitor the limited expertise the office had in overseeing company  compliance in a particular area of misconduct. For example, prosecutors  in one office stated that part of the company’s wrongdoing dealt with  commodities trading, and while they did not have this background, the  monitor selected by the office had commodities trading experts on his  staff. Other prosecutors cited the need for technical expertise regarding  misconduct in a particular geographic region to oversee company  compliance effectively—resources and skills which DOJ prosecutors did  not have—as the reason to require that a company hire a monitor.
In 22 of the 26 agreements requiring an independent monitor, the monitor  was required to file written reports with DOJ prosecutors. The frequency  of reporting to DOJ prosecutors varied by agreement, with 13 monitors  required to report every 3 or 4 months; 2 monitors required to file  semiannual reports; 5 monitors required to file annual reports or an initial  report with annual or semiannual follow-up reports; 1 monitor required to  report within 120 days of entering into the agreement; and 1 monitor  required to report no later than 45 days and 90 days after the  commencement of the agreement, on or before 90 prior to termination of  the agreement and at such other times as designated by DOJ. For two of  the three agreements overseen by an independent monitor where the  agreement did not specifically require written reports, the prosecutors we  spoke with said that they typically met frequently with the monitor  themselves to discuss the company’s progress towards fulfilling the  agreements. We have not assessed whether the monitors’ reports were  filed in a timely fashion or covered the elements required by the  agreements, but plan to obtain information on monitor reporting as part of  our ongoing review.
In one instance, the district court judge also received the reports filed with  federal prosecutors by the independent monitor because, in that district,  the office typically involved the court in the selection of the independent  monitor, and the judge had issued an order requiring quarterly reporting to  the court. We are in the process of collecting information from federal  judges who have been involved with DPAs to determine the extent to  which judges received monitor reports, or assessments of these reports  provided by DOJ, in their oversight of DPAs.
In 18 of the 57 agreements we reviewed to date, there was a requirement  for companies to make improvements to existing ethics and compliance  programs or implement new programs, but there was no requirement for  companies to hire an independent monitor to review the effectiveness of  these programs or the companies’ compliance with the terms of the  agreement. In 4 cases, the company had signed a civil or administrative  agreement with a federal regulatory agency as part of a settlement related  to the underlying criminal misconduct, which required the company to  hire an independent consultant, review organization or compliance officer.  In such cases, DOJ officials said that they depended on the reports of  these regulatory monitors or the regulatory agency to assure themselves of  companies’ compliance in part to avoid unnecessary duplication. In the  other 14 cases, where the company had not signed a settlement agreement  with a regulatory agency requiring an independent monitor, DOJ officials  stated that they used other methods to determine companies’ compliance  with the agreement. In 9 of the 14 cases, they stated that they depended on  the regulatory agency to inform them if, in the course of its regulatory  oversight, the agency discovered the company was violating any of the  provisions of the agreement. For example, in 2 DPAs we reviewed where  financial institutions failed to maintain effective anti-money laundering  programs, DOJ prosecutors said that they communicated frequently with  financial regulators, reviewed reports submitted to the regulators, and  spoke to the regulators before the agreements were completed. In the  remaining 5 cases, the prosecutors said they reviewed documents  submitted by the company or depended on the companies to self-certify  that they had complied with the provisions of the agreement.
For the remaining 12 of the 57 agreements that did not require companies  to improve or expand ethics and compliance programs, DOJ offices  conducted oversight through various mechanisms, including:    Assuring that monetary penalties or restitution payments were paid in  full. For example, an accounting firm agreed to make restitution  payments to a fund established to repay wronged investors, and to pay  an administrator to administer the fund. The administrator provided  reports to the office on the names of victims that received payments  from the fund, and the amount received.
Assuring that the company cooperated with DOJ in continuing  investigations, including responding to information requests from  federal prosecutors. For example, an energy trading company in a DPA  with one office agreed to continue to cooperate with federal  prosecutors by providing information relevant to ongoing  investigations in the natural gas industry.
Requiring the company to certify that it had followed certain  requirements in the agreement. For example, one pharmaceutical  company was required to certify that it had not filled prescriptions for  off-label uses of one of its drugs. In that case, the prosecutors stated  that it would be easy to examine the company’s prescription records at  the end of the agreement to determine if the certification was accurate,  and if not, the company would additionally be liable for falsely  certifying compliance.
section_title: Prosecutors We Contacted Varied in the Extent to which They Involved Companies in the Monitor Selection Process, and DOJ Does Not Require Documentation of the Process and Reasons for Selecting Monitors, Making It Difficult to Determine whether Monitor Selection Guidance Is Followed
paragraphs: We reviewed 26 agreements that required the company to hire a monitor.  Although DOJ was not a party to the contracts between companies and  monitors, DOJ generally took the lead in approving the monitors.  Specifically, according to officials in the 10 DOJ offices we contacted that  entered into DPAs and NPAs that required monitors, DOJ had the final say  in selecting the monitor for all but one of these agreements. However,  according to these officials, the monitors were not selected by any one  individual; rather, the decision was made among several DOJ officials and,  in most instances, companies were able to provide input to DOJ on who  the monitor should be, although the extent of company involvement  varied.
For 12 of the agreements we reviewed, DOJ prosecutors said that the  companies proposed a single monitor or a list of several monitors from  which DOJ could choose. In all of these cases, DOJ officials said they  were able to select an appropriate monitor for the DPA or NPA based  on the company’s suggestions.
For three of the agreements we reviewed, DOJ prosecutors said that  they and the company developed separate lists of monitor candidates,  shared their lists with one another, and worked together to choose the  monitor.
For seven of these agreements, DOJ prosecutors said that they chose  the monitor. For five of the seven agreements, according to DOJ  officials, the prosecutors selected the monitors and later provided the  companies with the opportunity to meet with the selected individual.  According to the prosecutors, they gave companies the option to  object to DOJ’s monitor selection, but none of the companies did so.  However, our preliminary work suggests that at least one company  reported that they did not have this opportunity. For one of these  agreements, DOJ officials said that they sought the companies’ input  on monitor qualifications before making their selection. For another of  these agreements, it was unclear whether the company had any  discussion with DOJ regarding monitor qualifications before DOJ  selected the monitor.
For the agreements we reviewed where DOJ officials identified monitor  candidates, the selection processes employed across these offices were  similar. DOJ officials generally stated that in these instances, they  identified monitor candidates based on their personal knowledge of  individuals whose reputations suggest they would be effective monitors,  or through recommendations from colleagues or professional associates  who were familiar with requirements of a monitorship. After identifying  several candidates, the prosecutors established a committee, which  generally consisted of individuals such as the prosecutors involved in the  case, the DOJ office section chief, and sometimes the Chief Assistant U.S.  Attorney or a Deputy U.S. Attorney. The committees were responsible for  evaluating the candidates and selecting a monitor. Prosecutors said they  evaluated candidates based on whether they had any conflicts of interest  with the company and their qualifications and expertise in a particular  area.
Officials from the five companies we interviewed who identified monitor  candidates for DOJ approval used a similar process as DOJ. For example,  officials from one company reached out to their associates who they  believed could help them identify individuals who would be effective  monitors. Company officials said that they were looking for a monitor with  experience working with DOJ and knowledge of the specific area of law  that the company violated. From these suggestions, the company  developed a list of candidates to interview, and based on the results of the  interviews, generated a shorter list of candidates from which DOJ would  choose the monitor.
In selecting the monitors, DOJ sometimes sought input from federal  regulatory agencies. According to prosecutors in DOJ’s Criminal Division,  it is not uncommon for the division to collaborate with agencies such as  the Securities and Exchange Commission to select a monitor to serve  under agreements both agencies have reached with a company,  particularly if the agreements contain similar requirements for the  company. The prosecutors said having two different monitors could be  cost-prohibitive and result in duplication of effort.
Courts were rarely involved in monitor selection. Of the 26 agreements we  reviewed that had monitor requirements, 2 required court approval of the  selected monitor. One of the 13 DOJ offices included in our review has a  formal monitor selection policy. According to the prosecutors in this  office, court involvement in monitor selection limits the possibility of  favoritism in monitor selection by the office. The policy requires  prosecutors to compile a list of potential monitor candidates and submit  the list to the court, where a district judge would then appoint a monitor  from this list. We plan to solicit input on court involvement from the  judiciary as a part of our ongoing review.
When we asked DOJ officials, company representatives, and monitors  about other methods to prevent the appearance of favoritism in monitor  selection, such as developing a national list of prescreened monitors from  which DOJ would make its selection, they identified both advantages and  disadvantages. Some of the advantages identified were (1) assurance that  the monitors have been prescreened and are considered qualified by the  government, (2) increased consistency in the monitor selection process,  and (3) the ability to expedite the monitor selection process. The  disadvantages they cited were (1) not all of the monitors on the list would  have the specific expertise required for certain cases, such as commodities  trading expertise; (2) based on their own experiences searching for  monitors, it is likely that many of the monitors on a prescreened list will  have conflicts of interest with the companies—such as the monitor having  previously provided services for the company in an unrelated matter; (3)  use of the list would limit company input in monitor selection; and (4) use  of the list may actually increase the likelihood of favoritism because DOJ  officials could populate the list with their associates, and could exclude  other qualified monitor candidates. As a part of our ongoing work, we will  continue to identify other models that aim to reduce favoritism in monitor  selection. For example, one company official with whom we spoke cited  the International Association of Independent Private Sector Inspectors  General (IAIPSIG) as a possible model for developing a national pool of  monitors. Members of this association are individuals or private sector  firms with legal, auditing, investigative, and management skills who are  available to be employed by an organization to ensure compliance with  relevant laws and regulations. According to IAIPSIG, members—who may  be retained by the government to prevent fraud in contracting and by  private firms conducting internal investigations—must also adhere to the  principles and standards in IAIPSIG’s code of ethics which require, among  other things, that its members remain independent of both the monitored  entity and the entity to which it is reporting, and refrain from accepting or  performing work involving an actual or potential conflict of interest.
In March 2008, the Acting Deputy Attorney General issued the Morford  Memo to help ensure that the monitor selection process is collaborative,  results in the selection of a highly qualified monitor suitable for the  assignment, avoids potential and actual conflicts of interest, and is carried  out in a manner that instills public confidence. The guidance requires  U.S. Attorneys Offices and other DOJ litigation divisions to establish ad  hoc or standing committees, consisting of the office’s ethics advisor,  criminal or section chief, and at least one other experienced prosecutor to  consider the candidates for each monitorship. DOJ components are also  reminded to follow federal conflict of interest guidelines and to check  monitor candidates for potential conflict of interest relationships with the  company. In addition, the names of all selected monitors must be  submitted to the Office of the Deputy Attorney General for final approval.  According to the Senior Counsel to the Deputy Attorney General, this  approval is required in order to ensure public integrity in the monitor  selection process.
While the Morford Memo established policies and guidance for the  selection of independent monitors, including that the Office of the Deputy  Attorney General approve the monitor selection, the memo does not  require documentation of the process used and the reasons for selecting a  specific monitor. Standards for internal control in the federal government  state that all transactions and significant events, which could include the  selection of monitors, should be clearly documented and that the  documentation be readily available for examination. In addition, our prior  work suggests that documenting the reasons for selecting a particular  monitor helps avoid the appearance of favoritism and verify that selection  processes and practices were followed. Since the release of the Morford  Memo, we have identified two DPAs and NPAs that DOJ entered into for  which monitors have been selected. According to the Office of the  Deputy Attorney General, which is responsible for approving monitor  selections, the United States Attorneys Offices involved in these two cases  submitted e-mails to predecessors in the Office of the Deputy Attorney  General regarding their proposed monitor selections. DOJ provided us  with a summary of the correspondence from the prosecutors seeking  Deputy Attorney General approval. While the correspondence in one case  included information describing how prosecutors adhered to the  processes required by DOJ guidance, the correspondence in the other case  did not. For instance, the correspondence did not describe the  membership of the committee that considered the monitor candidate. In  addition, because the approval of one of the monitors was relayed via  telephone and no documentation was readily available at the Office of the  Deputy Attorney General, DOJ officials had to reach out to the individuals  who were involved in the telephone call to obtain information regarding  the monitor’s approval. As this example demonstrates, without requiring  documentation of the process used and the reasons for selecting a  particular monitor, it may be difficult for DOJ to validate whether its  monitors have been selected and approved across DOJ offices in a manner  that is consistent with the Morford Memo, which established monitor  selection principles intended to instill public confidence.
In commenting on a draft of this report in June 2009, the Office of the  Deputy Attorney General agreed that documenting the process used and  reasons for monitor selection would be beneficial. However, because the  office has not had to approve any monitor selections since the presidential  transition in January 2009, the office did not believe it was in a position to  determine exactly what internal procedures should be adopted to  document the monitor selection process until it had reviewed more  selection proposals. From January 2009 through May 2009, DOJ had four  ongoing agreements that required the appointment of a monitor where, to  date, the monitors have not yet been selected. We expect that when the  Office of the Deputy Attorney General reviews the monitor proposals for  these agreements, once they are submitted, the office will be in a better  position to establish procedures for documenting monitor selection  decisions.
section_title: Companies We Contacted Reported that Monitors Generally Charged Their Customary Rates but Raised Concerns about Scope of Monitors’ Work; Companies Would Like DOJ to Help Them Address Issues with Monitors
paragraphs: Of the 12 companies we have met with so far for which DOJ required a  monitor, 6 told us that they did not have any concerns about the rate  charged by the monitor, 3 expressed concern that the monitor’s rate was  high, and the remaining 3 did not comment on the monitor’s rate.  Officials from 6 of the 12 companies perceived that the monitors were  either charging their customary rates or, in two additional cases, lower  rates because the companies could not afford the customary rates. While  the companies we met with generally did not express concern about the  monitors’ rates, they reported concerns with other aspects of the  monitorship that affected the overall compensation to the monitor.  Specifically, 6 of the 12 companies raised concerns about the scope of the  monitor’s responsibilities or the amount of work completed by the  monitor; and four of the six companies reported that they did not feel they  could adequately address their concerns by discussing them with the  monitors. For instance, 1 company said that the monitor had a large  number of staff assisting him on the engagement, and he and his staff  attended more meetings than the company felt was necessary, some of  which were unrelated to the monitor responsibilities delineated in the  agreement. As a result, the company believes that the overall cost of the  monitorship was higher than it needed to be. While the company  reportedly tried to negotiate with the monitor over the scope of work and  number of staff involved, the company stated that the monitor was  generally unwilling to make changes. The company did not feel that there  was a mechanism at DOJ whereby it could raise concerns regarding  monitor costs because the costs were not delineated in the agreement.  Instead, the costs were identified in an agreement between the company  and the monitor and, therefore, DOJ was not responsible for overseeing  the costs of the monitorship. Another company reported that its monitor  did not complete the work required in the agreement in the first phase of  the monitorship, which necessitated the monitor completing more work  than the company anticipated in the final phase of the monitorship. This  led to unexpectedly high costs in the final phase. The company official  believed it was DOJ’s responsibility, not the company’s, to address this  issue because the monitor had failed to complete the requirements DOJ  had delineated in the agreement. As part of our ongoing review, we plan to  obtain the perspectives of DOJ officials and monitors, in addition to  companies, regarding the amount and scope of the monitors’ work and the  most appropriate mechanisms companies can use to address any concerns  they may have related to this issue.
Two company officials reported that they had little leverage to negotiate  fees, monitoring costs, or the monitor’s roles and responsibilities with the  monitor because the monitor had the ability to find that the company was  not in compliance with the DPA or NPA. Officials from three companies  suggested that DOJ should play a larger role in helping companies address  concerns with their monitors. For example, one company official said that  DOJ may need to develop a mechanism for companies to raise issues  regarding their monitors without fear of retribution, while another  company official suggested that DOJ meet routinely with the company to  allow for a conversation between the company and DOJ about the  monitoring relationship. Two companies felt that having a sense of the  potential overall costs at the beginning of the monitorship, such as  developing a work plan and estimated costs, would be beneficial for  companies. For instance, one of these officials said that this would help  establish clear expectations for the monitor and minimize unanticipated  costs. DOJ has taken some actions which may address these concerns. In 2  of the 26 DPAs or NPAs we discussed with DOJ that had monitoring  requirements, the monitor was required to submit a work plan prior to the  monitor’s first review of the company. Additionally, an official in the  Criminal Division Fraud Section said that it is the section’s general  practice to meet with the monitor to discuss the monitor’s work plan. The  Morford Memo also instructs DOJ prosecutors to tailor the scope of the  monitor’s duties to address the misconduct in each specific case, which  the memo indicates may align the expense of the monitorship with the  failure that led to the company’s misconduct covered by the agreement.  However, we have not yet been able to evaluate how these actions may  address companies’ concerns. We will continue to obtain information on  the ways in which company concerns regarding the monitors’  responsibilities and workload can be addressed.
We are conducting a survey of companies to solicit more comprehensive  information on monitors’ fees, total compensation and roles and  responsibilities, as well as the companies’ perceptions of the monitor costs  in relation to the work performed. We will integrate these survey results  into our final report. In addition, we are continuing to assess the potential  need for additional guidance or other improvements in the use of DPAs  and NPAs in our ongoing work.
section_title: Conclusions
paragraphs: One of DOJ’s chief missions is to ensure the integrity of the nation’s  business organizations and protect the public from corporate corruption.  DOJ has increasingly employed the tools of DPAs and NPAs in order to  carry out this mission, and has recognized the potential long-term benefits  to the company and the public of assigning an independent monitor to  oversee implementation of a DPA or NPA. On the other hand, DOJ has also  acknowledged concerns about the cost to the company of hiring a monitor  and perceived favoritism in the selection of monitors, and thus the  resultant need to instill public confidence in the monitor selection process.  DOJ has made efforts to allay these concerns by issuing guidance requiring  prosecutors to create committees to consider monitor candidates;   evaluate potential conflicts of interest the monitor may have with the  government and the company; and obtain approval of selected candidates  from the Office of the Deputy Attorney General. Nevertheless, more could  be done to avoid the appearance of favoritism. Requiring that the process  and reasons for selecting a specific monitor be documented would assist  DOJ in validating that monitors were chosen in accordance with DOJ’s  guidance that is intended to help assure the public that monitors were  chosen based on their merits and through a collaborative process.
We are continuing to assess the potential need for additional guidance or  other improvements in the use of DPAs and NPAs in our ongoing work.
section_title: Recommendation for Executive Action
paragraphs: To enhance DOJ’s ability to ensure that monitors are selected according to  DOJ’s guidelines, we recommend that the Deputy Attorney General adopt  internal procedures to document both the process used and reasons for  monitor selection decisions.
section_title: Agency Comments and Our Evaluation
paragraphs: We requested comments on a draft of this statement from DOJ. DOJ did  not provide official written comments to include in the statement.  However, in an email sent to us on June 18, 2009, DOJ stated that the  department agreed with our recommendation. DOJ also provided technical  comments, which we incorporated into the statement, as appropriate.
section_title: GAO Contact and Staff Acknowledgments
paragraphs: For questions about this statement, please contact Eileen R. Larence at  (202) 512-8777 or larencee@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. Individuals making key contributions to this statement  include Kristy N. Brown, Jill Evancho, Tom Jessor, Danielle Pakdaman,  and Janet Temko as well as Katherine Davis, Sarah Kaczmarek, Amanda  Miller, Janay Sam, and Mandana Yousefi.
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