On November 29, 2018, the US Department of Justice (DOJ) modified prior guidance on individual liability for corporate misconduct by affording federal prosecutors discretion to focus on “individuals who play significant roles in setting a company on a course of criminal conduct.” This relaxes the standard for cooperation credit previously described in the September 9, 2015, memorandum titled “Individual Accountability for Corporate Wrongdoing” (commonly known as the “Yates Memorandum”).
The Yates Memorandum required corporations to provide “all relevant facts about the individuals involved” in the misconduct, irrespective of position, status, or seniority, to be “eligible for any cooperation credit.” This emphasis on individual misconduct created a tension for directors and officers deciding whether to self-report, as the policy did not offer leniency for the individuals’ misconduct. Now, the DOJ has revised the Justice Manual to only require disclosure of all relevant facts about “all individuals substantially involved in or responsible for the misconduct” (emphasis added).
On Thursday, November 29, 2018, Deputy Attorney General Rod J. Rosenstein expounded on the revised requirements. Under the modified policy, a company must “identify all wrongdoing by senior officials, including members of senior management or the board of directors” to receive any credit. To “earn maximum credit,” a company must identify all those substantially involved in the misconduct. Even if a company is unable to provide all facts, a company may still receive cooperation credit if it makes a good faith effort to cooperate and explains why it cannot provide the requested information. Cooperation credit may still be available “when the company and the government want to resolve the matter even though they disagree about the scope of the misconduct” (emphasis added).
According to Rosenstein, the revised policy benefits both the government and corporations. Policies must be practical “in the real world of limited investigative resources,” and “[c]orporate cases often penalize innocent employees and shareholders.” Rosenstein encouraged “full and frank discussions with prosecutors” in determining how to best gather the facts and resolve cases. Rosenstein presented his remarks at the American Conference Institute’s 35th International Conference on the Foreign Corrupt Practices Act (FCPA). However, he did not expressly tie the “substantially involved” standard to FCPA investigations. It remains unclear how the new policy intersects with the FCPA Corporate Enforcement Policy, which currently still appears to require a company to disclose “all relevant facts about all individuals involved in the violation” to receive voluntary self-disclosure credit.
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Under the new policy, there may be more opportunity to limit the scope of an investigation while still receiving maximum cooperation credit. However, it is unclear what conduct rises to the level of substantial involvement. Companies who disclose misconduct should be prepared to engage in meaningful discussions with the DOJ about the parameters of the investigation to confirm that they are best positioned to receive cooperation credit.