Subject: What Is Integrity Monitoring?
From: "K2 Intelligence" <[email-masked]>
To: "Hunter" <[email-masked]>
Date: Thu, 14 Mar 2013 21:44:48 +0000

March Newsletter

** Dear Friends,
------------------------------------------------------------

There are number of new faces around K2 Intelligence this month. You may have read about Linda Fairstein joining the firm (http://blogs.wsj.com/corporate-intelligence/2013/03/07/the-business-of-scandal-prevention/) . I also want to tell you more about our new colleagues Brian Cairl and Anne Cheney below. In the meantime, many clients and acquaintances have asked me to define integrity monitoring for them in the wake of our merging Thacher Associates into the K2 family.

So let me try to sketch out a brief explanation:

Essential but Compromised

When a company is compromised by an ethical lapse—employees might be caught making or taking bribes, management could have failed to comply with regulations, or fraud might have been committed in the course of doing business—the enterprise need not be prevented from engaging in its valuable and sometimes essential work.

Any institution that wants to protect its reputation and bottom line while engaging with one of these compromised companies can require the vendor to hire an independent integrity monitor to ensure that all work is performed to the highest ethical standards.

Toby Thacher and Joseph DeLuca created this field in response to corruption in New York City’s building trades in the early 1990s. In the past decade, the constituency benefitting from integrity monitors has changed. Today, banks, insurance companies, pension funds, and private equity firms who finance nine- or ten-figure construction projects will want to be sure that integrity monitors are hired by the contractors.  Those monitors will root out fraud but measure for productivity and efficiency too.

Accounting firms and owner’s representatives oversee many things, like tracking expenses, on a large construction project. But they do not recognize on site the many schemes that come out of the building trades. They don’t seek out—and have little experience preventing, detecting, and remediating—fraud, waste, and abuse.

Integrity Monitoring Goes Beyond Construction

The success of integrity monitoring in construction has led to a broader use of the idea in other contexts where the courts, law enforcement, and regulators recognize a greater value to stemming corruption than extracting punishment.

Integrity monitors have been used in a wide range of industries allowing corporations like Siemens, BNY Mellon, Texaco, Bovis Lend Lease, AIG (and even institutions like the Penn State football program) to continue to operate despite serious lapses. Integrity monitors can be imposed by court order or as part of deferred prosecution or non-prosecution agreements. They can be mandated by government agencies, self-imposed, or they can be required by private enterprises that want to enjoy the reputational benefit of knowing their large project has oversight.

How Thacher Associates Does Integrity Monitoring

Thacher Associates is committed to creating oversight that does not interfere with the complex and time-sensitive projects that engage integrity monitors. Using a multi-disciplinary team of lawyers, accountants, engineers, and environmental experts, Thacher analyzes a project for specific risks and then designs controls with the client’s cooperation and participation to contain that risk. Thacher’s team then regularly monitors those controls.

Thacher’s analysis may begin with screening of contractors and sub-contractors employed on a project or by a company. That screening eliminates firms that can damage a project’s reputation, finances or objectives. Then Thacher can also design a code of ethics specific to the work involved and incorporate integrity provisions into all contracts entered into for the project. These provisions can include enhanced auditing, subcontractor approval, certification of non-collusive bidding and pre-certification of vendors. Finally, forensic teams from Thacher Associates scrutinize invoices, change orders, and on-site work practices.

Where We Go from Here

Integrity monitors have already been required in recent settlements with financial institutions like Standard & Chartered Bank. We believe this solution will be used more in the future across a broader range of violations and industries as government seeks private solutions to oversight.

We also believe that corporations have just begun to see the value of requiring integrity monitors on projects where their presence will generate cost savings in excess of fees and provide additional reputational and operational dividends.

Welcome Brian and Anne

Two new Managing Directors have joined our New York office from Kroll Advisory Solutions.

Brian Cairl has an extensive background in corporate investigations, including playing important roles in Kroll's monitoring of the Long Island private carting industry as well as unions and construction projects in New York, New Jersey, and Connecticut. Prior to joining Kroll, Brian was a Senior Special Investigator and Firearms Instructor for New York State's Attorney General's Medical Fraud Control Unit.

Anne Cheney joins us as Director of Research. She has a decade's experience in investigations and research. Prior to joining Kroll she worked as a journalist and is the author of the book, Body Brokers: Inside America's Underground Trade in Human Remains, an expose of the body parts trade in the United States.

Get In Touch
If you would like a detailed presentation of Thacher’s work or simply have a question, please feel free to get in touch with Toby (mailto:[email-masked]?subject=)  Thacher (mailto:[email-masked]?subject=Newsletter) , Joe DeLuca (mailto:[email-masked]?subject=Thacher%20Newsletter)  or contact me directly (mailto:[email-masked]?subject=Thacher%20Newsletter) .

Best,

Jeremy M. Kroll
CEO and President
K2 Intelligence, LLC (http://www.k2intelligence.com/)
212.694.7000

K2Intelligence.com (http://www.k2intelligence.com/)
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