New York partner George Stamboulidis, head of the firm's White Collar Defense and Corporate Investigations practice group, was quoted in a September 20 Corporate Counsel article, "Someone to Watch Over Me," which also appeared on Law.com.
The article focuses on corporate monitors, who, according to the article, are experts, usually lawyers, appointed by a government agency or judge on the city, state or federal level to temporarily oversee a company or organization accused of wrongdoing. Monitors may also be required when a company is accused of a federal crime and has signed a deferred or nonprosecution agreement to avoid trial. First used by the Justice Department (DOJ) in 1994, monitors are a relatively new device in criminal law enforcement.
Commenting on the fact that the companies or organizations pay the full cost of a monitor, Stamboulidis, a former federal prosecutor who has been appointed a monitor by the DOJ in three cases, including his current role as monitor at the Bank of New York Mellon Corp., said that monitors are not really that expensive, but the alternatives can be. Cost of a monitorship pales in comparison to the expense of civil litigation, Stamboulidis said, or to the cost of fighting for your company's life after an indictment.
Stamboulidis was in a unique situation when Mellon Bank merged with the Bank of New York (BNY) on July 1. According to the article, both companies were in three-year nonprosecution agreements that required monitors. BNY already had Stamboulidis in place as its monitor and Mellon had to accept Stamboulidis as part of the merger deal, but was still required to have its own monitor. However, the two banks and the two U.S. Attorney Offices involved reached an agreement where Mellon accepted Stamboulidis, and the combined company answers to only one monitor. Stamboulidis will remain on the job, he said, until Mellon's agreement runs out in August of 2009.
According to Stamboulidis, the "Mellon lesson" is that each company should carefully negotiate language in a prosecution agreement to cover what happens during mergers or acquisitions. This is especially true, he said, if the company plans to sell off a relatively small unit, so that the buyer doesn't get stuck with terms of the prosecution agreement, including a monitor.