The “Yates Memo,” which instructs United States prosecutors to focus on individual wrongdoers when investigating or prosecuting alleged corporate misconduct, garnered significant attention from the compliance community, executives, directors, and their counsel when it was released last year. Many observers have suggested that the enunciation of this policy shifted the playing field for corporate defendants. That was the verdict of a recent panel of in-house counsel and former Department of Justice chiefs reviewing the Yates Memo’s impact over the last year. Although Canadian governments have not adopted a similar policy, companies, executives, and directors in Canada should take notice of these developments and be ready to tackle the challenges that they will face if an employee is targeted by law enforcement.
Yates Memo: The First Year
The Yates Memo, authored by Deputy Attorney General Sally Yates, was issued on September 29, 2015. As we noted at the time, the memorandum tells prosecutors to focus on securing evidence against individuals, as opposed to their corporate employers, responsible for alleged corporate wrongdoing. The memorandum also provides that corporations must hand over all relevant facts about individuals involved in the alleged misconduct if they want to be eligible for any cooperation credit.
Recently, panelists discussed the impact of the Yates Memo at the Association of Corporate Counsel’s 2016 Annual Meeting (reported on here). A year on, they concluded, the Yates Memo has transferred leverage to the government by putting the spectre of individual liability front and centre, and by requiring that companies help prove the case against them. The Yates Memo also raises the stakes for the relationship between a company and any implicated employee: as one panelist commented, it makes it even more important that the employee understand that the corporation’s counsel do not represent them personally. On the whole, the Yates Memo is expected to continue to have a significant effect into the future.
The Canadian Context
While governments in Canada have not adopted any official policy resembling the Yates Memo, its effects remain relevant for Canadian companies and executives. In the first place, Canadian companies doing business in the U.S. may be targeted by that jurisdiction’s law enforcement.
Further, there is some evidence of increased enforcement activities against individuals in Canada, for instance under the Corruption of Foreign Public Officials Act (CFPOA). The CFPOA, which was enacted in 1998, had been used against corporate defendants only for most of its history. However, an individual was tried and convicted under that legislation for the first time in 2013, in a decision reported at R v Karigar. And, in a report filed in February this year, Global Affairs Canada revealed that there are currently 11 individual defendants facing charges under the CFPOA, compared with just one corporate defendant.
Governments around the world have become increasingly focused on individuals actors in cases involving alleged corporate misconduct. The Yates Memo is just one example of that trend, albeit a very high-profile one.
As a result, it is imperative that companies be ready to tackle the challenges they will have to face if their employees are targeted by law enforcement. Companies should be aware of the fact that they may have to provide information on the wrongdoing of their employees. Any affected employees may need to retain independent legal counsel from the outset, and any investigations should be conducted independently of implicated personnel. If any information is shared, it should only be done under a common interest agreement so as to maintain privilege. And companies that learn of potential misconduct should be ready to take proactive steps and to undertake thorough internal investigations into allegations of wrongdoing, which may be necessary to appease law enforcement.