• The Yates Memo: The U.S. Department of Justice Guide to Fighting Corporate Wrongdoing
  • August 23, 2016 | Author: Gary Schwab
  • Law Firm: Heyl, Royster, Voelker & Allen Professional Corporation - Springfield Office
  • The Yates Memo issued by the U.S. Department of Justice (DOJ) on September 9, 2015, sets forth six key steps for DOJ attorneys to take in both civil and criminal investigations of corporate misconduct. It focuses on individual accountability to combat corporate misconduct as that is seen as one of the most effective ways to deter future illegal activity, incentivize changes in corporate behavior, ensure that all proper parties are held responsible for their actions, and promote public confidence in the justice system. The six key steps are as follows:

    1. To be eligible for any cooperation credit, corporations must provide all relevant facts about the individuals involved in corporate misconduct.

    In order to receive any consideration for cooperation, the company must disclose all relevant facts about individual misconduct and cannot pick and choose what facts to disclose. If a company declines to learn of such facts or to provide the DOJ with complete factual information about individual wrongdoers, its cooperation will not be considered a mitigating factor at the time of sentencing. Once a company meets the threshold requirement of providing all relevant facts, the extent of the cooperation credit will depend upon traditionally applied factors in making that assessment such as timeliness of the cooperation, the diligence, thoroughness, and speed of the internal investigation, and the proactive nature of the cooperation. This condition of cooperation applies equally to corporations seeking to cooperate in civil matters such as in cases brought under the False Claims Act, 31 U.S.C. § 3729(a)(2). The “all or nothing” approach to cooperation credit has received the most attention of those commenting upon the Yates Memo.

    2. Both criminal and civil corporate investigations should focus on individuals from the inception of the investigation.

    DOJ attorneys are being instructed to focus on individual wrongdoing from the very beginning of any investigation of corporate misconduct with that being deemed the most effective way to force a disclosure of facts and the extent of any misconduct which might lead to civil or criminal charges not only against the corporation but also against culpable individuals.

    3. DOJ’s criminal and civil attorneys handling corporate investigations should be in routine communication with one another.

    By having the DOJ’s civil and criminal prosecutors, together with agency attorneys, all working together, the full range of the government’s potential remedies can be considered and that will promote the most thorough and appropriate resolution in every case. Criminal prosecutors are instructed to notify civil attorneys as early as possible of any potential individual’s civil liability. If a decision is made not to pursue a criminal action against an individual, the criminal prosecutors are instructed to confer with their civil counterparts regarding whether any civil action should be taken. Likewise, if civil prosecutors find an individual who they believe should be subject to criminal prosecution, they are instructed to refer that matter to the criminal prosecutors regardless of the current civil corporate investigation.

    4. Absent extraordinary circumstances, no corporate resolution will provide protection from criminal or civil liability for any individuals.

    The DOJ prosecutors are now instructed that they should not agree to a corporate resolution that includes an agreement to dismiss charges against, or provide immunity for, individual officers or employees. The same principal holds true in civil corporate matters. Any release of an individual from criminal or civil liability due to extraordinary circumstances must be personally approved in writing by the relevant Assistant Attorney General or United States Attorney.

    5. Corporate cases should not be resolved without a clear plan to resolve related individual cases before the statute of limitations expires and declinations as to individuals in such cases must be memorialized.


    So, if the investigation of individual misconduct has not concluded by the time that authorization is sought to resolve the civil or criminal case against the corporation, the prosecutors now must set forth a written plan including a discussion of the potentially liable individuals, a description of the status of the investigation regarding their conduct, what investigative work needs to be done, and a proposal on how to bring that matter to resolution before the end of any statute of limitations period. Because investigations of corporations can be lengthy and complex and take years to complete, it was previously not uncommon for individuals to wait until after the corporate case was resolved with the hope that, in the meantime, the statute of limitations’ period would expire for them to be held individually liable. Now, that will be less likely as civil and criminal prosecutors must develop a plan for holding the individual liable within the time frame allowed.

    6. Civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual’s ability to pay.

    Since civil enforcement efforts are designed not only to recoup government money but also to hold wrongdoers accountable, and to deter future wrongdoing, DOJ’s attorneys are being instructed that just because an individual may not have sufficient assets or income to satisfy a significant judgment should not control the decision on whether a lawsuit should be brought against him. Civil prosecutors are being instructed to take into account whether the person’s misconduct was serious and actionable and are also being advised to take into account the individual’s past history and the circumstances leading to the commission of the misconduct, the needs of the communities being served and federal resources and priorities.

    The DOJ’s focus on individual accountability for corporate wrongdoing creates potential conflicts of interest and the following problems and issues for evaluation and consideration:

    (a) Corporations seeking cooperation credits may not be inclined to give their employees the benefit of the doubt and report facts suggesting individual misconduct, thereby exposing their employees to criminal or civil liability where the facts are less than clear cut.

    (b) On the other hand, if a corporation decides not to cooperate or fails to disclose all facts by picking and choosing what facts to disclose, it risks being subjected to penalties and not receiving any cooperation credit, if found guilty.

    (c) While companies are only required to disclose facts, and not legal conclusions or opinions protected by the attorney-client or work product privileges, the process of making those disclosures without waiving those privileges may prove to be difficult.

    (d) Knowing that the DOJ is keen on pursuing individual liability, employees may refuse to share information or disclose what they know in fear of being turned in by their employer to the DOJ for possible civil or criminal prosecution.

    (e) Should a company agree to pay the attorneys’ fees of its individual employees in an effort to show that it is concerned about their interests? If so, is there a way to recoup those fees if the individual is later found civilly or criminally liable for any wrongdoing.

    (f) When interviewing employees, corporate counsel are required to give Upjohn warnings explaining to the employees that the company’s attorneys are not representing them but rather the company, and make it clear that there is no attorney-client privilege between the company’s attorneys and those individuals in the event that they make any admissions of wrongdoing. Since the Yates Memo encourages companies to turn over evidence implicating individual employees in corporate misconduct, the giving of Upjohn warnings to those employees becomes even more important.

    (g) Corporations may want to think twice before deciding to have their counsel jointly represent the corporation and its employees in governmental investigations as counsel may be provided privileged information from an individual employee which will create a potentially unwaivable conflict of interest which will prevent the company from providing that information to the DOJ and risk the loss of cooperation credit.

    (h) The company should consider whether to recommend separate counsel for individual employees facing potential criminal liability. Without separate counsel, individuals may not fully cooperate; however, if the individual is guilty, he may be advised by separate counsel to not cooperate, thereby inhibiting the company’s ability to provide a full and final disclosure of all relevant facts.

    (i) If individual employees retain separate counsel, the individual’s attorneys may seek information and documentation from the corporation which the company may be reluctant to share out of a concern that by doing so, it will receive less cooperation credit from the government, if subsequently found civilly or criminally liable.