On Monday, November 16, 2015, Deputy Attorney General Sally Q. Yates delivered remarks at an American Bar Association meeting in Washington on money laundering enforcement and again reinforced the directive from the so-called Yates memo to target individuals as part of the DOJ’s corporate enforcement strategy. We previously issued a summary and analysis of the Yates memo, which can be found here. These revisions put additional pressure on companies to waive the attorney-client privilege that protects its internal investigations.
During her remarks, Yates revealed that the DOJ is issuing three revisions to the United States Attorney’s Manual (USAM) to further implement the goal of prosecuting individuals. The USAM gives guidance to Department prosecutors nationwide, and substantive changes to it are infrequent. Yates confirmed that they made “these revisions as a way of telling the world about our priorities and our values, so that others know what to expect when the Justice Department comes knocking.”
The first set of revisions involve the Principles of Federal Prosecution of Business Organizations that advise prosecutors on what factors they must consider when determining whether to bring charges against a company. The revised factors and guidance emphasize individual accountability and “list a variety of steps that prosecutors are expected to take to maximize the opportunity to achieve that goal.” The core of Yates’ changes focuses on how corporate cooperation is defined. Yates reiterated that “if a company wants credit for cooperating – any credit at all – it must provide all non-privileged information about individual wrongdoing. Companies seeking cooperation credit are expected to do investigations that are timely, appropriately thorough and independent and report to the government all relevant facts about all individuals involved, no matter where they fall in the corporate hierarchy.” Yates further noted that timing is an important aspect of cooperation and disclosure should be as early as possible, even if the company does not yet have all of the facts.
According to Yates, the concept of corporate cooperation is nothing new, but the consequence of not cooperating is. Previously, if companies failed to disclose all facts about individuals, they could still receive some credit. Now, providing complete information regarding specific individuals and any involvement they had in the wrongdoing is a mandatory component and must be provided before any cooperation credit will be considered. While this complete disclosure concept may give many pause because often companies cannot get a complete picture of the wrongdoing, Yates noted that in instances where a company does not have access to the evidence or is not legally able to hand it over, the company needs to raise those issues with the prosecutor.
The second revision to the USAM involves the title giving prosecutors guidance on civil matters. There is now a new section on enforcing claims against individuals in corporate matters. The new section includes many of the same rules applied to criminal cases. Specifically, it contains directives for civil attorneys to follow the same principles of prosecutorial discretion that guide the criminal prosecutors. Civil attorneys are expressly instructed that “an individual’s ability to pay cannot be the sole determinative factor in making decisions about whether to pursue individual misconduct.” Yates further explained that the revision “acknowledges that our mission in civil corporate cases is not just to recover money. It is also to redress and deter misconduct.”
The third area of revisions to the USAM involves the section on civil parallel proceedings to criminal investigations and seeks to require greater cooperation between criminal and civil prosecutors to further the Department’s goal of holding individuals accountable when investigating corporations.
During her remarks, Yates affirmed that the attorney-client privilege remains intact, but distinguished between facts and legal advice. Yates expects all relevant facts to be turned over, even if those facts were discovered during a privileged investigation.
The practical implications of the Yates memo and the revisions to the USAM put new pressures on companies to waive the attorney-client privilege attached to internal investigations. When employees become aware that a company must, not may, turn over culpable individuals to the Department in order to get credit for cooperation, they may well be more likely to demand their own counsel and be less willing to cooperate with the company’s investigation, even when cooperation is required under their employment contracts or employee handbook. Corporate counsel, adhering to their ethical rules, will be more likely to agree to the employee’s demand for their own attorney. Once represented, employees will be less likely to enter into joint defense agreements given that corporate counsel will be looking to hold individuals responsible for wrongdoing in order to obtain cooperation credit for their client.
These revisions could have the ironic effect of making it more difficult for companies and the government to determine what happened and who is responsible. The result would be a lose-lose: With less cooperation from employees, the government would not get the information it needs to hold individuals accountable, and the company would not be able to receive cooperation credit even though it has done everything in its power to determine the facts. With no cooperation credit, the price to settle a matter will go up, and more companies could face criminal charges.