DOJ announces tough new approach to the investigation and prosecution of corporate officers and employees.
On September 9, in a major change to its approach to the investigation of alleged corporate crime, the US Department of Justice (DOJ) announced a series of new policy directives that prioritize the investigation and prosecution of individual corporate officers and employees in addition to the companies themselves. US Deputy Attorney General Sally Quillian Yates issued a memorandum detailing a six-step plan to strengthen the DOJ's pursuit of individual corporate wrongdoers in both criminal and civil contexts (the Yates Memo). The Yates Memo reflects a very aggressive new stance by the DOJ in regards to white-collar crime in corporate America.
The six steps outlined in the Yates Memo are as follows:
- "All or nothing" cooperation
requirement—The DOJ's corporate charging
guidelines—the Principles of Federal Prosecution of Business
Organizations—will be revised to require companies to
completely disclose all relevant facts about individual misconduct
in order to be eligible for any cooperation credit.
Such credit can be the key factor in negotiating a non-prosecution
or deferred prosecution agreement, as well as in gaining favorable
consideration at sentencing. DOJ attorneys are directed to
"vigorously review" information provided by companies to
ensure that it is complete and does not seek to minimize the
involvement of any individual, regardless of position, status, or
seniority. As Yates told the New York Times, it will no
longer be sufficient for companies to offer up the low-level
officers—what she called "the vice president in charge
of going to jail"—as a token of cooperation. Nor can
companies simply plead ignorance; as Yates stated in a speech at
New York University (NYU) School of Law the following day,
"[i]f they don't know who is responsible, they will need
to find out" through an internal investigation in order to
receive cooperation credit. This "all or nothing"
cooperation requirement applies equally in criminal and civil
investigations, including when companies seek reduced damages under
the False Claims Act. Moreover, full disclosure can be made a
continuing obligation in any plea or settlement agreement, such
that the company's failure to provide information about
culpable individuals even after resolution of the company's
case may be considered a material breach and result in revocation
of the agreement or stipulated penalties.
- Build cases against individuals from the
beginning—In both the criminal and civil contexts,
DOJ attorneys investigating corporate misconduct will focus from
the inception of an investigation on building a case against
culpable individuals as well as the company itself.
- Increased civil/criminal communication and parallel
investigations—Civil and criminal attorneys handling
corporate investigations will communicate and consult with each
other regarding potential individual liability, declinations, and
the early pursuit of parallel criminal and civil investigations of
individual misconduct.
- High hurdles to resolve corporate case without action
against individuals—Absent extraordinary
circumstances, which must be approved by the relevant Assistant
Attorney General or United States Attorney, no civil or criminal
case resolution between the DOJ and a company may include an
agreement to dismiss charges, release claims, or provide immunity
for individual officers and employees.
- Corporate settlements must address investigations
against individuals—When seeking authorization to
resolve a criminal or civil case against a company before the
investigation of individual misconduct has been completed, DOJ
attorneys must present in their authorization memorandum a
description of the current status of that investigation and a plan
to bring the matter to a resolution before the expiration of the
statute of limitations. Where a decision is made not to bring civil
or criminal claims against culpable individuals, the reasons for
that declination must be presented to and approved by the relevant
Assistant Attorney General or United States Attorney, or their
designees.
- Corporate individuals' inability to pay fines and penalties no longer will result in automatic declinations—Finally, in a change to the DOJ's civil enforcement strategy, civil attorneys will no longer focus solely on an individual's ability to pay a significant monetary judgment when deciding whether to pursue actions against individual corporate wrongdoers. The Yates Memo recognizes that the government objectives of deterring individual misconduct and holding individual wrongdoers accountable are equally as important as the objective of recovering money.
Conclusion
The very aggressive stance announced in the Yates Memo can be read as an attempt by the DOJ to outsource the criminal and civil investigation of white-collar crime to the corporations themselves. By setting forth an "all or nothing," black-and-white standard for corporate cooperation that focuses on potentially culpable individuals, the DOJ believes that it will achieve a shortcut around the "painstaking review" it otherwise would have to conduct. No longer will corporations be able to receive some level of credit (e.g., a non-prosecution agreement, a deferred prosecution agreement, or reduced fines and penalties) for voluntarily disclosing improper corporate practices. Now, unless the corporation also identifies every culpable individual at every level of the company, it will receive no credit at all for the voluntary disclosure.
As Ms. Yates has stated: "It's all or nothing." She even went so far in her NYU speech as to analogize corporate criminal investigations to drug trafficking investigations (in which cooperators are required to provide information about the cartel boss as well as the street-level dealers), stating that "[a] corporation should get no special treatment as a cooperator simply because the crimes took place behind a desk."
New Factors for Corporations to Consider
Going forward, corporations contemplating voluntary disclosures will have to weigh the following new factors in addition to those traditionally considered:
- The time and expense of an internal investigation that will be required to determine all culpable people involved in the alleged wrongdoing
- The possibility that the corporation will receive no credit for its efforts if the DOJ finds any culpable individuals who have not been fully disclosed or, even more concerning, refuses credit where they disagree with a company's good faith assessment of culpability
- The fact that corporate cooperation only ends when the DOJ says it ends, not with the resolution of the corporation's case
- The increased likelihood of parallel civil and criminal proceedings
- The increased likelihood of civil suits against individuals
A Change That Will Affect Federal Law Enforcement Across the Board
The Yates Memo was sent not only to the 93 United States Attorney Offices nationwide, but also to the Criminal, Civil, Antitrust, Environment and Natural Resources, National Security, and Tax Divisions of the DOJ. Thus, there will be no aspect of federal law enforcement that will remain unaffected by the Yates Memo.
This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter.