DOJ “Yates Memo” and release of 20-year study of white collar prosecutions suggest major changes in the way white collar crime is prosecuted and defended.

Two separate news items, each released on Sept. 10, 2015, are well worth noting by all practitioners of white collar criminal defense, general counsel for corporations, business executives and employees and, indeed, the general public.

The first news item, which has received the most media attention, is the new Department of Justice memo titled, “Individual Accountability for Corporate Wrongdoing.” The memo, authored by Deputy Attorney General Sally Quillian Yates and addressed to all of the divisions of the U.S. Department of Justice as well as every U.S. Attorney in the nation, has received a great deal of media coverage (e.g., a front page article in the New York Times). The Yates Memo, as it will no doubt be known, seeks to do nothing less than redirect all federal prosecutors, civil and criminal, to focus their efforts to an unprecedented degree on individual corporate executives and employees.

The Yates Memo also redefines the standard corporations seeking “cooperation credit” from the DOJ as part of resolving federal investigations will have to meet. These changes may dramatically raise the personal risks for all such individuals while also placing new pressure on any corporation DOJ attorneys opt to target. Attorneys attempting to defend and give counsel to such corporations and individuals will need to take these new policies into account.

The second important news item — much less noticed in the mainstream media — is a report about a recent study researchers at Syracuse University conducted that relied upon Department of Justice statistics. The Syracuse Study found a truly stunning overall decline in federal white collar criminal prosecutions, more than 36 percent over the past 20 years. The Syracuse Study also noted that this downward trend, at least up to now, appears to be continuing.

The Syracuse Study’s finding of an unprecedented drop in the number of white collar prosecutions, in juxtaposition with the Yates Memo’s newly minted far more aggressive approach to white collar cases, portends that large and potentially ominous changes are in store for all businesses and business people. The picture presented is of a white collar criminal prosecution landscape that has been at historically low levels of late, but which is primed to soon become much more active in ways not seen before.

Each news item deserves more examination.

Syracuse Study

As noted, the Syracuse Study, which was originally released in April 2015 but only reported in major news media now, looked at DOJ white collar prosecutorial statistics going back 20 years to reach their conclusion about the precipitous drop in such prosecutions. Indeed, the study noted that the downward trend appears to be ongoing, with current statistics suggesting that 2015 white collar prosecutions are projected to be 12.3 percent lower than the 2014 figure and are down 29.1 percent from five years ago.

The Syracuse Study identifies two possible explanations for the precipitous drop in white collar prosecutions. First, they note that the amount of federal resources devoted to investigating white collar crime has shrunk over the years, including a 15 percent drop since 2011 in the number of Department of Justice employees engaged in white collar investigations and prosecutions.

A second explanation the Syracuse researchers advance is potentially even more intriguing. They posit that the decline in white collar criminal prosecutions at the federal level may also be the result of more attorneys and law firms around the country engaging in more proactive, preventive lawyering on behalf of those engaged in business activities that might be targeted for white collar criminal investigations. Thus, they suspect, many prosecutions likely have been avoided altogether by early and effective attorney representation.

This observation by the Syracuse researchers validates the model of legal representation adopted by a small but growing number of otherwise traditional white collar practitioners around the country, including Greensfelder, Hemker & Gale’s Government Interaction & White Collar Practice Group. These practitioners seek to work with clients likely to have interactions with the government to prepare in advance for any problem and, when possible, take steps to avoid the kinds of situations that can lead to white collar criminal prosecutions. The Syracuse researchers’ observation of the impact of such forward-looking legal representation is significant.

The Yates Memo

Whether the Department of Justice was aware of, or considered, the results of the Syracuse University study before they issued the Yates Memo is unknown. What is clear is that the DOJ has decided to take a significantly more aggressive position regarding federal prosecutions for white collar crime. Only time will tell whether the DOJ’s aggressive new stance will reverse the current historically low level of federal white collar prosecutions identified by the Syracuse Study. But, of key importance, the Yates Memo elevates the investigation and prosecution of individual corporate employees to the first rank of importance for all federal criminal and civil attorneys.

While it would be an overstatement to suggest that the Yates Memo represents a complete break with prior DOJ policy, it is important to note that it is unmistakably intended to send a very clear message that individual criminal prosecutions are to be given a higher priority and, in fact, any federal prosecutor anywhere in the country bringing a white collar case that does not include charges against individuals will have a heavy burden of justifying that decision to her or his superiors in Washington. Moreover, corporations must now deal with the reality that to gain cooperation credit from the DOJ, they will be expected to provide a perhaps unprecedented degree of information to the government about their own employees.

The Yates Memo identifies what it describes as “six key steps to strengthen our pursuit of individual corporate wrongdoing:”

  1. Corporations may only receive “cooperation credit” if they provide to the DOJ all information in their possession regarding individuals who are potentially responsible for misconduct;
  2. All criminal and civil corporate investigations should focus on individuals from the beginning of the investigation;
  3. Criminal and civil DOJ attorneys working on a corporate investigation should be in “routine communication” with one another throughout the investigation;
  4. “Absent extraordinary circumstances or approved departmental policy” the DOJ will not release individuals from civil or criminal liability when resolving a matter with a corporation;
  5. DOJ attorneys are instructed to not resolve matters with corporations without a clear plan regarding individual cases and any decision to decline to pursue individuals in such cases will have to be “memorialized;” and
  6. Civil attorneys should “consistently focus on individuals” and evaluate whether to bring suit against an individual based on considerations not including whether the individual in question has any ability to pay any civil judgment that is obtained.

The Yates Memo describe these “six key steps” in greater detail over approximately seven single-spaced pages, but the import of the “six key steps” is clear: Corporate individuals are now a priority target. In any event, while a detailed analysis of the entire memo is beyond the scope of this blog posting, some initial observations may be useful.

First, as is well known, the DOJ has received significant criticism since the so-called “economic collapse” for allegedly being too ready to be content with monetary settlements with large corporations while not pursuing prosecutions of specific corporate employees. How much of this criticism is warranted by the reality of the facts and the law is a matter for reasonable debate, but the magnitude of the criticism is undeniable.

Second, the Yates Memo is clearly intended to respond to this criticism. Whether this very public move on the part of the DOJ represents the beginning of a radically changed prosecution practice in white collar cases, or is mere window dressing designed to appease the critics, remains to be seen. However, anyone who has ever worked for the Department of Justice as an attorney would recognize that given the unambiguous marching orders contained in the Yates Memo, every DOJ attorney in the country is now on notice that their bosses want them to go out and prosecute individuals in white collar cases and that if they fail to do so, they will likely have some explaining to do.

Third, every corporation in the country, and every one of their general counsel, is now on notice that if they come under DOJ scrutiny, they will be faced with unprecedented pressure to provide evidence to the government against their own individual employees. Specifically, the DOJ’s insistence that to gain credit for cooperating with a government investigation, the corporation must disclose “all information” it has about its employees has profound implications for how internal investigations should be conducted. As the Yates Memo makes clear, the DOJ attorneys will define what “all information” means in this context, and so corporations will be pressured to independently gather information about which of their employees are responsible for whatever the government is investigating if the corporation wants to get cooperation credit. Also, it appears that a corporation’s ability to protect its employees and “carve them into” settlements with the government may now be severely limited. In addition, and very troubling, is the fact that the potential implications for the future status of attorney-client privilege in such investigations will be numerous and potentially profound. It is hard to imagine that changes wrought by the Yates Memo will not dramatically alter how corporations respond to government investigations and how corporate individual employees choose to cooperate during the course of internal investigations.

Indeed, in a speech at New York University School of Law on the same day that the Yates Memo was released, Deputy Attorney General Yates herself noted that these changes in policy by the DOJ may very well lead to fewer settlements of federal white collar investigations and more trials. Yates’ comments are as good a confirmation as there could be that the Yates Memo raises significant issues for corporations, their general counsel, individual corporate employees and the outside white collar attorneys who advise them all and may very well lead to explosive changes in white collar prosecutions.