On November 29, 2018, Deputy Attorney General Rod J. Rosenstein announced changes to the U.S. Department of Justice (“DOJ”) policy regarding the investigation of individuals involved in corporate wrongdoing. Although Rosenstein emphasized that pursuing individual wrongdoers remains a “top priority,” the revised policy gives new leeway for companies and prosecutors to focus their investigative efforts on individuals who were “substantially involved” in the misconduct, rather than on every corporate employee who played some role.
Prior to this change, under the “Individual Accountability” policy announced in 2015 by then-Deputy Attorney General Sally Yates and known as the “Yates Memo,” DOJ required companies seeking leniency for cooperation to provide “all relevant facts about the individuals involved in corporate misconduct.” Rosenstein announced last year that he “generally agree[d]” with the motivations behind the Yates Memo, but that the policy was under review.
The new policy announced by Rosenstein this week, and incorporated into the Justice Manual—itself renamed and revamped a month ago—maintains the connection between a corporation’s desire to obtain cooperation credit and its provision of evidence about the responsible employees, but takes a less absolutist approach. In particular, it recognizes that companies face resource restrictions when working to identify every individual who played a role, however minor, in corporate misconduct—particularly where the alleged violations “involved activities throughout the company over a long period of time.” The revised policy incorporates those realities into its guidelines for criminal investigations and civil claims.
- Criminal Investigations: With regard to criminal matters, the revised policy narrows the scope of individuals that a company must identify and report to DOJ in order to be eligible for cooperation credit. It requires companies to “identify all individuals substantially involved in or responsible for the misconduct at issue.” The prior policy, by contrast, required the identification of “all individualsinvolved in or responsible for the misconduct.” As Rosenstein observed in his speech announcing the change, DOJ “want[s] to focus on the individuals who play significant roles in setting a company on a course of criminal conduct.” In addition, the updated policy more explicitly allows a company to receive cooperation credit even if it cannot “identify all relevant individuals or provide complete factual information,” as long as the company undertakes a good faith effort to fully cooperate. As Rosenstein explained, companies are “encouraged to have full and frank discussions with prosecutors about how to gather the relevant facts.”
- Civil Claims: The changes in the civil context are more sweeping. As in the criminal context, the new policy requires a company only to identify “all individuals substantially involved in or responsible for the misconduct” to be eligible for maximum cooperation credit in civil cases. But the policy now also permits partial credit for companies in civil cases so long as they “honestly” and “meaningfully” assist the government’s investigation, and provided that they “identify all wrongdoing by senior officials, including members of senior management or the board of directors.” Moreover, the new policy also drops the provision added by the Yates Memo that “[d]eterminations as to whether to bring suit against an individual should not be based solely on the individual’s ability to pay a judgment”—thus permitting civil prosecutors to focus more of their firepower on civil claims that may result in a financial benefit for the government, rather than solely to establish accountability for corporate wrongdoing.
Looking ahead, there are important practical implications for companies who find themselves under criminal investigation or facing potential civil claims:
On the criminal side, these changes should make it easier for DOJ and companies to resolve allegations of criminal wrongdoing by giving them leeway to negotiate once the government has sufficient evidence to understand the misconduct and the company’s liability for it, without running down the identity and involvement of every employee with a possible connection to the conduct. The population of employees who are neither “substantially involved in [nor] responsible” for the misconduct are by definition not likely to be targets for individual prosecution, so the changes to the policy further the practical interests of both prosecutors and companies without undermining the central goal of the Department’s individual accountability initiative. One issue sure to spark debate between defense counsel and prosecutors, however, is what it means for an employee to be “substantially involved” in wrongdoing, and where the line falls in a given case between essential cooperation and unnecessary investigation. In addition, to the extent that the policy still requires the provision of all information regarding those “responsible” for the misconduct, defense counsel may find themselves in more discussions with prosecutors about whether the facts establish culpability by particular employees; under the old policy, the duty to provide facts about all involved employees could obviate the need for company counsel to weigh in on that issue.
Finally, one notable omission from the new policy is the lack of any change to the Department’s FCPA Corporate Enforcement Policy, which still requires companies to disclose “all relevant facts about all individuals involved”—with no “substantial” modifier—in order to receive full cooperation credit under that policy. Whether this is a purposeful distinction or simply an oversight on the part of DOJ remains to be seen, but this distinction is striking given that Rosenstein announced the new policy at a conference about the FCPA.
On the civil side, the revisions will likely result in even fewer civil claims being brought against corporate employees. DOJ civil attorneys now have the discretion to award credit to companies along a spectrum of cooperation, instead of the previous “all or nothing” approach mandated by the Yates Memo. Moreover, as noted above, the civil components may now place greater weight on an individual’s ability to pay in deciding whether to pursue claims against that individual. Rosenstein explained that DOJ should not, as a general matter, “spend time pursuing civil litigation that is unlikely to yield any benefit; not while other worthy cases are competing for our attention.”
Overall, the policy changes are likely to benefit companies by providing more flexibility to DOJ prosecutors to resolve corporate investigations. To a greater degree than before, corporate defense counsel should be able to obtain full cooperation credit by conducting good-faith investigations that turn over the relevant stones rather than by inspecting every pebble.