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 and measure for productivity and efficiency as well.
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, or 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, and 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 nonprosecution agreements. They can be mandated by government agencies, be self-imposed, or 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 multidisciplinary 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 subcontractors 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 noncollusive 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.