The US Department of Justice ("DOJ"), in a memorandum issued to all federal prosecutors on Wednesday September 9, 2015, directed prosecutors to focus on seeking accountability from culpable individuals in their investigations of corporate wrongdoing. Additionally, the memorandum emphasized that corporations would be required to provide evidence concerning the individuals responsible for wrongdoing, and would receive no cooperation credit if they refused.
The memorandum, authored by Deputy Attorney General Sally Q. Yates (the "Yates memo"), states that "effective immediately, we have revised our policy guidance to require that if a company wants any credit for cooperation, any credit at all, it must identify all individuals involved in the wrongdoing, regardless of their position, status or seniority in the company, and provide all relevant facts about their misconduct."
Yates discussed the memorandum's contents in an interview with the New York Times, and at a speech on Thursday September 10, 2015 at New York University. She said that "corporations can only commit crimes through flesh-and-blood people" and that it is only fair that responsible individuals are held accountable for their wrongdoing.
The Yates memo, which applies to criminal and civil matters, sets forth six steps to ensure that individuals are dealt with in matters of corporate wrongdoing and asks that prosecutors "fully leverage [their] resources to identify culpable individuals." The six steps are as follows:
- In order to qualify for any cooperation credit, corporations must provide the DOJ with all relevant facts relating to individuals' responsibility for wrongdoing.
- Investigations should focus on individuals from the inception of the investigation, and not, as has sometimes been the case, after the case against the corporation has been completed.
- Civil DOJ attorneys and criminal prosecutors conducting a corporate investigation should be in routine communication with each other.
- Absent extraordinary circumstances or approved department policy, the DOJ will not release culpable individuals from liability when resolving a matter with a corporation.
- The DOJ should not resolve matters with a corporation without a clear plan to resolve individual cases in the same matter. The DOJ should have a record detailing why civil claims or criminal charges are not brought against individuals, and these decisions must be approved by the relevant United States Attorney or Assistant Attorney General.
- Civil DOJ attorneys should focus on individuals and consider bringing claims against individuals without overly considering the individual's ability to pay. The Yates memo makes it clear that the aim of recovering as much money as possible is not to take priority over the aim of accountability and deterrence of individual misconduct; both are equally important.
The Yates memo states that this focus on individual accountability is important because it deters future illegal activity, it incentivizes changes in corporate behavior, it holds the proper parties responsible for their actions and it promotes the public's confidence in the justice system.
Yates also said that corporations that pick and choose what is disclosed to the DOJ, or which do not provide information about individuals when asked, will not receive cooperation credit from the DOJ, even partial credit. In order to get a reward for voluntary disclosure or cooperation, the corporation must "give up the individuals, no matter where they sit within the company."
Yates' NYU speech suggests that the DOJ will seek to impose a duty on corporations to investigate individual wrongdoing if they want to receive cooperation credit. Yates said that "the rules have just changed", that corporations must give up individuals and that "corporations [cannot] plead ignorance. If they don’t know who is responsible, they will need to find out. If they want any cooperation credit, they will need to investigate and identify the responsible parties, then provide all non-privileged evidence implicating those individuals."
In addition, corporations will not be given credit if they give up low-ranking employees in a bid to protect senior executives. Yates said that a corporation will not be given cooperation credit "where they just offer up the vice-president in charge of going to jail."
The DOJ has long been criticized for entering into arrangements with corporations whereby the corporations pay large fines, sometimes without admitting misconduct, and responsible individuals are not prosecuted at all. The Yates memorandum follows on from a series of recent speeches by senior DOJ officials where they emphasized the need for individual accountability and explained that corporations must, as a condition of receiving cooperation credit, provide information concerning culpable individuals. In a sense, every investigation into corporate wrongdoing by necessity must involve an evaluation of both corporate and individual wrongdoing. This memorandum, by the second highest ranking officer at the Department of Justice, is simply the latest pronouncement that the prosecution of individual wrongdoing will be a focus of DOJ investigations. Whether it will be true in practice, as prosecutors grapple with proof problems in individual cases, remains to be seen.