Department of Justice’s Pursuit of Individual Criminal Liability for Corporate Misconduct: The Yates Memo

Department of Justice’s Pursuit of Individual Criminal Liability for Corporate Misconduct: The Yates Memo

By Frank E. Sheeder

Cooperation credit is a critical issue for corporations that become embroiled in investigations or enforcement activity. In both the criminal and civil contexts, it is the only way to mitigate the financial impact of corporate wrongdoing. It can mean the difference between surviving a government investigation and staying in business at all. Now, the corporation’s very existence could hinge on its ability—and willingness—to turn in its leaders and other personnel.

Background

The Department of Justice (DOJ) has made many headlines recently with the promulgation of a September 9, 2015 Memorandum from Deputy Attorney General Sally Quillian Yates to all DOJ attorneys (the Yates Memo). The Yates Memo announced a DOJ initiative to hold individuals responsible for corporate misdeeds, both criminal and civil. Although the Yates Memo does not change any laws or tools available to government attorneys, this policy emphasis poses significant challenges for organizations and those who work for them. It is the first major policy pronouncement in this realm under the recently appointed Attorney General.

The Yates Memo is the most recent in a series of DOJ memoranda that began in 1999 with the Holder Memo, which related to bringing criminal charges against corporations. The DOJ’s approach evolved with the Thompson Memo (2003), the McNulty Memo (2006), and the Filip Memo (2008). The principles that emerged werre placed in the United States Attorney’s Manual in the Principles of Federal Prosecution of Business Organizations. Government attorneys are required to adhere to the policies set forth in those Memos, the United States Attorney’s Manual, and now the Yates Memo. These pronouncements also provide insight and guidance for corporations addressing potential organizational wrongdoing, internal investigations, privileges and protections from discovery, dealings with the government, and compliance activities.

Although the DOJ announced the principles in the Yates Memo as if they were new, they do not involve any new laws or tools. Rather, those principles support a broad-based DOJ policy initiative aimed at deterring corporate misconduct by putting individuals at risk of criminal prosecution or civil action. In fact, the Assistant Attorney General for the Criminal Division, Leslie Caldwell, publicly foreshadowed this policy earlier this year: “If you choose to cooperate with us, we expect that you will provide us with those facts, be they good or bad. Importantly, that includes facts about individuals responsible for the misconduct, no matter how high their rank may be.” That statement is now official DOJ policy, and the United States Attorney’s Manual will be updated to reflect this emphasis.

The Yates Memo was apparently developed in response to issues in the financial services industry, but it is not limited to that sector. The Yates Memo makes no distinctions about particular kinds of entities or activities. Rather, it applies to all of the DOJ’s civil and criminal investigation and enforcement efforts. It is also notable that while a DOJ  workgroup developed the Yates Memo, the DOJ apparently did not consult the corporate defense bar before promulgating it. This is of concern because, as the DOJ acknowledged in the Yates Memo, “The Department makes these changes recognizing the challenges they may present.” In reality, the aggressive policies in the Yates Memo pose many difficulties for organizations that are trying to do the right thing.

•  The DOJ has made it a priority to hold individuals accountable for organizational misdeeds – both civil and criminal.

•  The DOJ has sent a message of deterrence to corporate leaders and their governing bodies.

•  This policy shift will present a number of challenges for organizations that are trying to do the right thing.

•  This development should be communicated to the board and senior leaders.

•  Prudent organizations will respond by enhancing their compliance programs.

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DOJ’s pursuit of individual liability for corporate misconduct: the Yates Memo


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