Corporate Monitorships and the Lack of Transparency

A Washington Post article today on "monitorships," described by the paper as "unusual contracts in which an outsider comes into a troubled company with vast power to expose corruption and change business practices," reveals the degree to which the Bush Administration has sought to both conceal corporate wrongdoing while simultaneously increasing the scope and pervasiveness of its "no-bid contract" preferences.
Former Republican Chairman of the SEC (Securities and Exchange Commission) Richard Breeden, whom the Post describes as having "engineered a nearly complete overhaul at WorldCom after its top executives faced criminal charges in one of the largest fraud schemes in the nation's history," said "people should be very careful to make sure that monitorships do not become political plums. The key is the person who is monitor has to have a very good understanding of the business they're dealing in."
It's perfectly understandable, then, that former Attorney General John Ashcroft was named by one-time subordinate US Attorney General Christopher Christie to "monitor" an Indiana maker of knee and hip implants. And Ashcroft's expertise with medical implant procedures? Why, that was gained, says the Post, this way: "To prepare for the assignment and learn more about the business, Ashcroft said he recently watched as a replacement knee made by Zimmer was implanted in a cadaver." Voila! Thus is an expert made!
Apart from that obvious "appearance of impropriety," a larger question of legal and public transparency afforded by the actual process of litigation remains unaddressed. If there has been evidence of corporate wrongdoing of publicly traded companies, how do such monitorships remedy damage done to shareholders? If, in the case of Zimmer Holdings (accused of making kickbacks to practitioners), monitorships have foreclosed the ability of patients to seek damages, well, that's certainly one way of getting "tort reform" without fighting any legislative battles.
Yet Ashcroft asks and answers, "we have a cooperative agreement between prosecutors and a vital industry, and the expense is born by the industry and not the public. What's wrong with that picture? There isn't anything wrong with that picture."
Here's one thing wrong: "With no public notice and no bidding, the company awarded Mr. Ashcroft an 18-month contract worth $28 million to $52 million," according to the New York Times.
It comes as no surprise that House Judiciary Committee Chairman John Conyers (D-MI), in a letter to Attorney General Michael Mukasey, requested information on the "practice of deferred prosecution agreeements ... which directly affect billions of dollars in corporate business as well as the livelihoods of millions of Americans employed by these corporations [and] have been completely shielded from review by either the Legislative or Judicial branches of government."
Senate Judiciary Committee Chairman Patrick Leahy (D-VT) wrote a similar letter to Mukasey in which he requested "a list of all contracts, including dollar amounts, awarded since 2001 to outside lawyers retained by companies for monitoring compliance with out-of-court settlements reached in criminal investigations between companies and the Department. Please also explain the procedure followed to select the person or firm monitoring compliance."
Obviously, the absence of transparency affects more than citizens and shareholders; it affects even the Legislative branch of government.