The U.S. Department of Justice (DOJ) has announced guidelines designed to hold individual corporate wrongdoers accountable for misconduct. In what has been dubbed “The Yates Memo,” Deputy Attorney General Sally Quillian Yates told DOJ personnel that “Americans should never believe, even incorrectly, that one’s criminal activity will go unpunished simply because it was committed on the behalf of a corporation.”¹
With the Yates Memo, DOJ hopes to intensify companies’ cooperation in criminal and civil investigations.
The memo outlines “six key steps”: (1) to qualify for any cooperation credit, corporations must turn over to the government all relevant facts relating to individuals responsible for misconduct; (2) corporate investigations are to focus on individuals from the start; (3) criminal and civil government attorneys handling corporate investigations should communicate with one another, a principle commonly known as parallel enforcement; (4) absent extraordinary circumstances or approved policy, the Department will not release culpable individuals from civil or criminal liability when resolving a matter with a corporation; (5) DOJ attorneys should not settle with a corporation without a clear plan to resolve related individual cases, and should memorialize any decisions not to prosecute those individuals; and (6) civil government attorneys should focus on individuals as well as the company and evaluate whether to sue those individuals regardless of their ability to pay.
In a nutshell, the Yates Memo directs civil and criminal attorneys to “focus on individual wrongdoing from the very beginning of any investigation of corporate misconduct” thereby maximizing the chances of civil and criminal charges based on the misconduct of not only the corporation but also the culpable individuals. Parallel criminal and civil investigations are also encouraged.
The Yates Memo’s focus on cooperation credit is not new. DOJ guidelines have historically considered the timeliness of a company’s cooperation, diligence, thoroughness, and speed of the internal investigation, etc. when assessing cooperation credit. What is novel about the Yates Memo is that it takes cooperation against individuals from merely a considered factor to a threshold requirement.
The increased focus on individual accountability and cooperation appears to put the issue of waiving attorney privilege and work product protection back on the table. The August 2008 Filip Memo (also known as the Principles of Federal Prosecution of Business Organizations) prohibited DOJ attorneys from requesting the results of an internal investigation, acknowledging that to do so could exert undue pressure on companies and their attorneys to waive legal privileges. The Yates Memo’s cooperation requirement obliges companies to rethink withholding information on the basis of privilege, lest their omissions be construed as withholding “complete factual information.” It remains unclear how the DOJ will treat such assertions of privilege, but companies should use caution in deciding what to share or hold back, especially when that information suggests potential culpability of targets for prosecution.
Commentators on the Yates Memo point out that it does not depart from long-standing DOJ policy or practice. Yet, the articulation of this new guidance formalizes DOJ’s intent to focus on individual prosecutions as part of investigations into corporate misconduct.
Still, the spirit behind the Yates Memo has not yet resulted in prosecution of any individuals connected with the General Motors ignition switch investigation, despite GM’s $1 billion criminal plea deal announced last week. The GM charges stem from government findings that engineers, attorneys, and mid-level corporate executives allowed a deadly ignition-switch defect to linger for more than a decade or failed to report serious defects. GM has also settled more than half of all death and personal injury lawsuits in the ongoing multidistrict litigation and a shareholder class action in two civil settlements that will result in a $575 million charge in the third quarter. U.S. Attorney Preet Bharara signaled that individual criminal charges may also be on the horizon, stating “Criminal intent can be hard to prove. But if there is a case to bring, we will bring it. We have made determinations as to some [individuals] but not to all . . . We’re not done, and it remains possible that we will charge an individual.”