After receiving significant criticism on the Department of Justice’s failure to prosecute corporate executives involved in the financial crisis in 2008, Sally Yates, the Deputy Attorney General issued a seven page memo emphasizing “fighting corporate fraud and other misconduct is a top priority” and set out guiding principles for all federal criminal and civil prosecutors to follow (commonly called the “Yates Memo”).
While the memo reiterates many factors that are already taken into consideration by DOJ prosecutors during civil and criminal investigations, the memo adds several new points of emphasis:
1. Change in Determining Eligibility for Corporate Sentencing Mitigation Credit
Obtaining credit for corporations who cooperate with government investigations will only be considered if the corporation provides all relevant facts about individuals involved in corporate misconduct. This change will require corporations to fully investigate and disclose all individuals they determine have criminal liability. Otherwise, a corporation will no longer be able to receive “credit” (i.e. reduced sentencing consideration) when working out a criminal resolution.
2. Civil Corporate Investigations will Focus on Individual Liability from Inception
While criminal investigations have always focused on both corporate and individual liability, civil investigations have usually focused solely on corporate liability. The civil division is now being directed to focus on individuals from the inception of the investigation. Furthermore, the ability of the individual to pay a fine will no longer be a consideration when determining whether to pursue a civil suit. The focus on individual civil liability is a key change from prior policy.
3. Corporate Resolutions Can No Longer Provide Protection to Individuals
Previously, corporations could sometimes reach resolutions that would dismiss charges or provide immunity for corporate individuals. Absent extraordinary circumstances, corporate resolutions can no longer provide protection from criminal or civil liability for any individuals.
4. Changes are Effective Immediately
The changes and focused guidance are effective immediately. Therefore, any current civil or criminal investigation as well as future matters will be impacted by this memorandum. The “Yates Memo” will be incorporated into the U.S. Attorney’s Manual Principles of Federal Prosecution of Business Organizations and become policy for the foreseeable future.
Undertaking internal investigations will create new challenges for corporate executives and their legal counsel under these newly announced DOJ policies.