Veronica Root Martinez is Professor of Law at the Duke University School of Law. This post is based on her paper, recently published in the Harvard Law Review.
When a company engages in misconduct, questions often arise over whether the company should handle its own remediation effort without outside oversight and assistance. For the most egregious misconduct—conduct that is significant, pervasive, or widespread—a monitorship is often imposed by the court or via a settlement agreement between the firm and the government. For instance, in 2012, HSBC Bank USA N.A. and HSBC Holdings plc (collectively, “HSBC”) entered into a deferred prosecution agreement with the Department of Justice due to issues with their money-laundering program and due diligence practices. As part of the agreement, HSBC entered into a corporate compliance monitorship for a period of five years. The HSBC monitor, as is true with most monitors, was required to provide regular reporting to the government and the firm, but those reports, like most monitor reports, remained unavailable to the public.
However, the question of whether, and to what degree, monitors’ reports should be available to the public is hotly contested. In the case of HSBC, the company, the DOJ, and the monitor all objected to the release of information to the public, stating that it would impede the monitor’s effectiveness. Moreover, the monitor expressed concerns that releasing an interim report might create a “chilling effect” on his ability to work with HSBC employees during the balance of the monitorship. Ultimately, the Second Circuit blocked public access to the monitor’s report.
