Why it matters: On September 9, 2015, Deputy Attorney General Sally Quillian Yates issued a memo to all DOJ department heads and U.S. Attorneys which detailed the Government's new policy centered on accountability for the individuals who are alleged to have perpetrated corporate misconduct. The memo, entitled "Individual Accountability for Corporate Wrongdoing," details the "six key steps" the government will now take going forward "to strengthen our pursuit of individual corporate wrongdoing." Accountability for individuals in corporate investigations has long been a stated goal of the DOJ, and Deputy Attorney General Yates's September 9 memo makes it official.
Detailed discussion: On September 9, 2015, Deputy Attorney General Sally Quillian Yates issued an internal memo, entitled "Individual Accountability for Corporate Wrongdoing (Yates Memo), which detailed the "six key steps" the DOJ is instituting to ensure that, in both criminal and civil corporate investigations going forward, individuals accused of corporate misconduct will also be held accountable. As Deputy Attorney General Yates said when speaking about the new policy in a speech at NYU School of Law the next day, "[c]rime is crime. And it is our obligation at the Justice Department to ensure that we are holding lawbreakers accountable regardless of whether they commit their crimes on the street corner or in the boardroom. In the white-collar context, that means pursuing not just corporate entities, but also the individuals through which these corporations act."
The six steps detailed in the Yates Memo are described as a combination of new measures that reflect "policy shifts" as well as those that "reflect best practices that are already employed by many federal prosecutors," and they apply to both criminal and civil investigations conducted by the DOJ. They are summarized as follows:
- In order to qualify for any mitigating cooperation credit with the DOJ in a corporate investigation, corporations must provide the DOJ with all relevant facts relating to the individuals responsible for the misconduct. The Yates Memo makes clear that "[c]ompanies cannot pick and choose what facts to disclose. That is, to be eligible for any credit for cooperation, the company must identify all individuals involved in or responsible for the misconduct at issue, regardless of their position, status or seniority, and provide to the Department all facts relating to that misconduct."
- The DOJ will focus on individuals from the inception of any criminal or civil corporate investigation. According to the Yates Memo, this will accomplish multiple goals: "First, we maximize our ability to ferret out the full extent of corporate misconduct. Because a corporation only acts through individuals, investigating the conduct of individuals is the most efficient and effective way to determine the facts and extent of any corporate misconduct. Second, by focusing our investigation on individuals, we can increase the likelihood that individuals with knowledge of the corporate misconduct will cooperate with the investigation and provide information against individuals higher up the corporate hierarchy. Third, by focusing on individuals from the very beginning of an investigation, we maximize the chances that the final resolution of an investigation uncovering the misconduct will include civil or criminal charges against not just the corporation but against culpable individuals as well."
- DOJ attorneys handling criminal and civil corporate investigations will routinely communicate with each other from the beginning of their investigations. The Yates Memo provides that "the Department has long recognized the importance of parallel development of civil and criminal proceedings… Department attorneys should be alert for circumstances where concurrent criminal and civil investigations of individual misconduct should be pursued. Coordination in this regard should happen early, even if it is not certain that a civil or criminal disposition will be the end result for the individuals or the company."
- When resolving an investigation with a corporation, the DOJ will not release culpable individuals from civil or criminal liability except under "extraordinary circumstances" or in the case of "approved departmental policy" (specifically referencing the Antitrust Division's Corporate Leniency Policy). Per the Yates Memo, if resolution is reached with a corporation prior to reaching resolution with the individual wrongdoers, the ability to pursue the individuals criminally or civilly must be preserved. Furthermore, "[a]ny such release of criminal or civil liability due to extraordinary circumstances must be personally approved in writing by the relevant Assistant Attorney General or United States Attorney."
- Related to Step #4, DOJ attorneys will not resolve matters with a corporation without a "clear plan" to resolve related individual criminal or civil matters prior to expiration of the applicable statute of limitations, and any declinations as to such individuals must be in writing and similarly approved by the relevant U.S. Attorney or Assistant Attorney General.
- In deciding whether to pursue civil action against an individual in a corporate investigation, the DOJ civil attorneys must focus on factors beyond the individual's ability to pay. The Yates Memo recognizes that, in civil investigations, the "twin aims" of returning the maximum amount of purloined funds to the "public fisc" on the one hand and individual accountability and deterrence on the other may at times conflict. However, the fact that an individual may not have sufficient funds to satisfy a judgment should not control the decision of whether to pursue civil action against him or her and any assessment must also take into account factors "such as the individual's misconduct and past history and the circumstances relating to the commission of the misconduct, the needs of the communities we serve, and federal resources and priorities."
It remains to be seen whether the DOJ's new policy regarding individual accountability for corporate misconduct will be effective. Deputy Attorney General Yates recognized this in her speech at NYU School of Law, stating that "[w]e make these changes recognizing the challenges that they may present. Some corporations may decide, for example, that the benefits of consideration for cooperation with DOJ are not worth the costs of coughing up the high-level executives who perpetrated the misconduct. Less corporate cooperation could mean fewer settlements and potentially smaller overall recoveries by the government. In addition, individuals facing long prison terms or large civil penalties may be more inclined to roll the dice before a jury and consequently, we could see fewer guilty pleas. Only time will tell. But if that's what happens, so be it. Our mission here is not to recover the largest amount of money from the greatest number of corporations; our job is to seek accountability from those who break our laws and victimize our citizens. It's the only way to truly deter corporate wrongdoing."
See here to read the DOJ's 9/10/15 press release, entitled "Deputy Attorney General Sally Quillian Yates Delivers Remarks at New York University School of Law Announcing New Policy on Individual Liability in Matters of Corporate Wrongdoing."
See here to read the DOJ's 9/9/15 memo, entitled "Individual Accountability for Corporate Wrongdoing."