DOJ Pursues Individuals For Corporate Wrongdoing

Nov 10, 2015 | Blog

A recent memorandum from Sally Quillian Yates, Deputy Attorney General and the second most senior official at the Department of Justice (“DOJ”), endeavors to alter DOJ policy by focusing on the need to hold individual wrongdoers liable for corporate transgressions (“Yates Memorandum”). The outset of the Yates Memorandum includes the following ominous paragraph:

One of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing. Such accountability is important for several reasons: it deters future illegal activity, it incentivizes changes in corporate behavior, it ensures that the proper parties are held responsible for their actions, and it promotes the public’s confidence in our justice system.

After making clear that it is meant to address both criminal and civil investigations and actions, the Yates Memorandum goes on to highlight six topics that, going forward, must be addressed to ensure that individuals responsible for corporate wrongdoing are held accountable.

Disclosure Of Wrongdoers And Relevant Facts To Get Cooperation Credit

The Yates Memorandum provides that “[i]n order for a company to receive any consideration for cooperation under the Principles of Federal Prosecution of Business Organizations, the company must completely disclose to the Department all relevant facts about individual misconduct.” It further clarifies that “the company must identify all individuals involved in or responsible for the misconduct at issue, regardless of their position, status or seniority, and provide the Department all facts relating to that misconduct.” If a corporation omits any wrongdoers or pertinent facts in its disclosure, it will forfeit any credit for cooperation and, as the Yates Memorandum makes clear, any cooperation-related reduction at sentencing. It would appear that in order to receive any credit for cooperation at this juncture, the scope and depth of corporate internal investigations will need to dramatically increase.

Focus On Individuals From Investigation’s Inception

Government attorneys are directed to focus on individual wrongdoing from the outset of an investigation to: (i) pursue from the beginning the “most efficient and effective way to determine the facts and extent of any corporate misconduct;” (ii) encourage cooperation by lower level employees and, in turn, obtain information about those higher up in the corporate hierarchy; and (iii) ensure that any eventual resolution of an investigation holds individual wrongdoers accountable.

Communication Between Criminal And Civil Attorneys

Criminal and civil government attorneys and instructed to communicate continuously to ensure that the full measure of penalties for wrongdoing are being pursued at every juncture.

No Immunity For Individual Wrongdoers Absent Extraordinary Circumstances

The Yates Memorandum provides, in perhaps its most troublesome edict, that “[b]ecause of the importance of holding responsible individuals to account, absent extraordinary circumstances of approved departmental policy …, Department lawyers should not agree to a corporate resolution that includes an agreement to dismiss charges against, or provide immunity for, individual officers or employees.” Indeed, emphasizing the gravity of this directive, all declinations or grants of immunity must now be approved in writing by the relevant Assistant Attorney General or United States Attorney.

Need To Include Clear Plan As To Individuals When Resolving Corporate Cases

Prior to resolving any action against a corporation, government attorneys are directed to address, in writing, potentially liable individuals and the resolution of actions as to them, including the need for tolling agreements.

Consideration Of An Individual’s Ability To Pay Not Dispositive

While the potential inability of an individual defendant to satisfy any eventual civil judgment remains a relevant factor in determining whether to proceed with litigation, government attorneys are cautioned that the twin goal of “accountability for and deterrence of individual misconduct” is just as important.

The tension resulting from the directives set forth in the Yates Memorandum is obvious — the individual corporate officers and employees involved in wrongdoing and now required to provide complete disclosure are the same ones who will likely be prosecuted to the full extent of the law as a result of such disclosure. Indeed, for this reason, the Yates Memorandum may, in practice, lead to reduced disclosure and cooperation.

Barton LLP attorneys have decades of experience dealing with criminal and civil governmental investigations and corporate compliance. For further information, please contact Abe Mastbaum.