Much has been written in the last days regarding the “Yates Memorandum” and whether it will truly mark the beginning of individual responsibility for corporate fraud or whether it is just more of the same, in a different format. The Yates Memo refers to the Sept. 9, 2015, memorandum issued by Deputy Attorney General Sally Yates titled "Individual Accountability for Corporate Wrongdoing."
During the financial crisis, the public was outraged by corporations agreeing to deferred prosecutions or even pleading guilty and paying significant fines, while very few corporate officers or individuals were ever convicted. There are many factors that make prosecuting individuals for corporate actions difficult, including the fact that many individuals may be involved in isolated parts of the wrongdoing without any one person having full knowledge of the wrongdoing. However, the Yates Memo seeks to make it clear that individuals will also be a focus of all investigations. As stated in the memo, “one of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing.”
The memo is designed to set forth the Department of Justice’s (DOJ) position on holding individuals responsible for criminal or civil wrongdoings by corporations. The memo outlines six guidelines for holding individuals accountable for corporate wrongdoing:
- In order to qualify for any cooperation credit, corporations must provide to the DOJ all relevant facts relating to the individuals responsible for the misconduct.
- Criminal and civil corporate investigations should focus on individuals from the inception of the investigation.
- Criminal and civil attorneys handling corporate investigations should be in routine communication with one another.
- Absent extraordinary circumstances or approved departmental policy, the DOJ will not release culpable individuals from civil or criminal liability when resolving a matter with a corporation.
- DOJ attorneys should not resolve matters with a corporation without a clear plan to resolve related individual cases and should memorialize any declinations as to individuals in such cases.
- Civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual's ability to pay.
The key takeaways from the memo are that prompt and full disclosure of relevant facts and responsible individuals are required in order for a corporation to be entitled to any credit for cooperation, whether in sentencing or otherwise. Thorough and timely internal investigations are still required to receive credit, but it is imperative that individual actors be included in the findings from the investigation. The memo does acknowledge that some of the findings may be limited by the bounds of legal or statutory privilege. The DOJ will be focusing on the individuals from the beginning, not just as an afterthought, and it will not issue blanket releases for the corporation and its officers and employees. In fact, the memo makes it clear that in some instances there may even be a duty of continued cooperation against individuals in certain corporate plea agreements.
Is the Yates Memo really something new or is it just a more public announcement of existing practice? The answer to both questions is “yes.” Deputy Attorney General Yates stated that some of the measures are new, but others are seen as best practices. Moreover, her goal in publishing the memo was to create a consistent standard when holding individuals responsible for illegal corporate conduct. For corporations, now is the time to capitalize on the public’s concern about individual culpability and to update compliance programs and related training tools and materials to adjust to the realities of the Yates Memo.