The FCPA Professor, Mike Koehler, asked an interesting question on his blog yesterday: "Is BAE's Monitor Independent?"

As discussed here by Corporate Counsel, BAE Systems was under investigation for six years for alleged bribes paid to Saudi officials and others. It was never charged with any violation of the Foreign Corrupt Practices Act, but instead pleaded guilty on March 1, 2010 to a charge of "conspiring to commit offenses against the United States." It also agreed to pay a $400 million fine and to hire a corporate monitor (to be approved by the DOJ) with the responsibility of assessing and monitoring BAE's compliance with the various terms of the plea agreement. The plea agreement specifically requires the monitor to be sufficiently "independent" from BAE to ensure effective and impartial performance of the monitor's duties.

But is the newly-appointed monitor, David Gold of law firm Herbert Smith in the UK, independent? As Koehler observes, not only is BAE a client of the Herbert Smith law firm, but so is Saudi Prince Bandar - "the person at the epicenter of BAE's alleged Saudi bribery scheme - the same bribery scheme that makes up the bulk of the DOJ's bribery, yet no bribery allegations against BAE."

As a practical matter, there is no indication that Gold himself has ever represented BAE, and Herbert Smith has stated that it "has taken appropriate measures to ensure that his appointment does not give rise to any conflict of interest issues or prejudice the firm's ability to continue to act for the company." Perception-wise, at least, I would think that a monitor who is not employed by a law firm that has multiple clients involved in the underlying alleged conduct would be a far "cleaner" choice.

Two former SEC Enforcement lawyers with whom I discussed this had similar reactions. Richard Wallace, a partner at Foley & Lardner, said that the selection of Gold "seems to go over the top in terms of being flexible in the definition of independent." Christopher Robertson, a partner at Seyfarth Shaw, commented that despite the measures promised by Herbert Smith to avoid conflicts of interest, "it comes down to optics, and whether public perception is an important factor, or whether the key driver is assuring future compliance. Robertson added that "in addition, it certainly could put Gold in a compromised position if any legal work by his firm is implicated in the measures he implements, or the firm is asked to implement those measures."