The DOJ Wants Heads on Sticks (Officially): What You Need to Know About the Yates Memo
Recently, several Gentry Locke lawyers attended the second Annual ABA Southeastern White Collar Crime Conference outside of Atlanta, Georgia. The timing of this year’s conference proved to be fortuitous as Deputy Attorney General Sally Yates issued a new Department of Justice (DOJ) memo on September 9, 2015 regarding individual accountability for corporate wrongdoing. Members of the Bench and Bar alike offered different views of how the Yates memo will impact corporate government investigations.Despite the differing opinions, one consensus emerged: at least in the near term, the Yates memo will lead to more individual prosecutions and naming individuals in civil actions, sometimes in lieu of corporate allegations.
For any company that engages in any sort of regulated activity, from ensuring fair wages to government contracts, the Yates memo cannot be ignored. Below is the summary of the key points and some observations about the memo:
- For a corporation to be eligible for any cooperation credit (e.g., brownie points) in civil or criminal proceedings, corporations must provide to the DOJ all relevant facts about the individuals involved in the corporate misconduct.
- While not entirely new, this declaration of cooperation credit focuses on a holistic approach. Corporations cannot receive any cooperation credit if they fail to give up the goods on individual actors, whether they be low level employees or top executives. This principle is aimed specifically at ensuring that corporate decision makers reveal information on employees regardless of an employee’s position; namely, executives. These principles also apply in the context of civil cases, particularly False Claims Act cases.
- Both criminal and civil corporate investigations should focus on individuals from the inception of the investigation.
- While this principle is not new, the DOJ’s pronouncement is a clear statement that individuals are always the key focus of investigations and will be from the very beginning of any sort of civil or criminal investigation.
- Criminal and civil attorneys handling corporate investigations should be in routine communication with one another.
- While coordination is not uncommon both on the civil and criminal front by the DOJ and its related agencies, this overt statement in the Yates memo begs the question of whether or not there will be more opportunities for defense counsel to attack civil or criminal investigations for sharing information or coordinating to a degree that impinges upon notions of keeping parallel investigations separate. It is yet to be seen how courts will apply this principle given the fact that there are wide-ranging court opinions about when investigations are unlawfully commingled versus where the line is for proper sharing of information between civil and criminal attorneys within the DOJ and its related agencies.
- Absent extraordinary circumstances, no corporate resolution will provide protection from criminal or civil liability for any individuals.
- Achtung! Attention! Atención! Aandacht! Attenzione!: Any release of criminal or civil liability due to extraordinary circumstances must be personally approved in writing by the Assistant Attorney General or the US Attorney supervising the case. This may be a game changer. While the concept is not new, the DOJ has formally introduced a policy requiring line assistants to seek written authorization to make a decision about releasing individuals in the context of a civil or criminal case. This could have a profound impact on pre-indictment negotiations and pretrial negotiations in both civil and criminal cases. While it is unclear how the DOJ will apply this principle, it is imperative to seek early advice whenever your company is facing civil or criminal allegations by a government agency.
- 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.
- Related to the 4th principle noted above, the DOJ now requires a written memorandum explaining why a decision has been made to not bring a civil or criminal charge against an individual who committed misconduct and this memo must be approved by the US Attorney or Assistant Attorney General whose office handled the investigation. This provision also provides that tolling agreements for corporations should be the rare exception and not the norm.
- 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.
- This provision has the most impact in the area of False Claims Act cases. In civil cases, many decisions about what parties to include take into consideration whether a party has the ability to pay. In the context of False Claims Act cases and other civil cases before the DOJ, civil attorneys should consider factors such as whether the person’s misconduct was serious, whether it is actionable, whether the admissible evidence will probably be sufficient to obtain and sustain a judgment and whether pursuing the action reflects an important federal interest. Including individuals that have no ability to pay, based on other considerations, can certainly have a significant impact in settlement negotiations in civil cases and indeed could impact preparations for trial.
Many principles in the Yates memo are not new. But, as with any written policy that is disseminated to all attorneys at the world’s largest law firm (the DOJ), people are sure to take notice. In the near term, we can expect immediate uncertainty to infiltrate into current civil and criminal investigations and cases. Over the long term, however, it is unclear whether or not the Yates memo will have any profound, lasting impact. While most lawyers are well aware that individuals are always prized over corporate entities, the Yates memo is the new Attorney General’s first bite at addressing criticisms directed at the DOJ for failure to adequately address individual and corporate wrongdoing, both civilly and criminally, in the wake of the financial crisis of 2008.
So what are the final parting words?
- If you’re a corporation, be ready to devote the time and resources to an internal investigation and be ready to throw employees under the bus if it serves the corporation’s interest; and
- If you’re an employee in a corporation that is being investigated civilly or criminally, lawyer up and walk the fine line between placating the government and your employer.