Archive for the ‘Enforcement Agency Policy’ Category

Friday Roundup

Friday, September 25th, 2015

Roundup2More on the Yates Memo, scrutiny alerts, survey says, and FCPA reform.  It’s all here in the Friday roundup.

More on the Yates Memo

Once again a private company has marketed a public official to drive attendance to its paid event.

Earlier this week, Assistant Attorney General Leslie Caldwell delivered this speech reiterating various aspects of the “Yates Memo.” Caldwell stated:

“[O]ur focus on individuals stems from the reality that corporations act through human beings, and that justice usually requires identifying those responsible for criminal conduct and holding them personally accountable.  Prosecuting the corporate entity, and imposing a fine and other impersonal conditions, simply is not enough – in most instances – to fully punish and, more importantly, deter corporate misconduct.”

Regarding the cooperation credit aspects of the “Yates Memo,” Caldwell stated:

“We recognize, however, that a company cannot provide what it does not have.  And we understand that some investigations – despite their thoroughness – will not bear fruit.  Where a company truly is unable to identify the culpable individuals following an appropriately tailored and thorough investigation, but provides the government with the relevant facts and otherwise assists us in obtaining evidence, the company will be eligible for cooperation credit.  We will make efforts to credit, not penalize, diligent investigations.  On the flip side, we will carefully scrutinize and test a company’s claims that it could not identify or uncover evidence regarding the culpable individuals, particularly if we are able to do so ourselves.

As I have said before, it is not our intent to outsource our investigation of corporate wrongdoing to companies and their outside advisors.  As in the past, we will not sit idle, waiting for a company to conduct or complete its investigation.  Regardless of a company’s cooperation, federal agents and prosecutors will conduct thorough investigations.  If, through this process, we are able to identify the culpable individuals when the company itself did not do so, as well as evidence that would support the charging and prosecution of those individuals, we will assess whether that evidence truly was unavailable to the company.

We, of course, recognize that we sometimes can obtain evidence that a company cannot.  We often can obtain from third parties evidence that is not available to the company.  Also, we know that a company may not be able to interview former employees who refuse to cooperate in a company investigation.  Those same employees may provide information to us, whether voluntarily or through compulsory process.  Likewise, there are times when, for strategic reasons, we may ask that the company stand down from pursing a particular line of inquiry.  If so, the company will not be penalized for failing to identify facts subsequently discovered by government investigators.”

Caldwell also answered questions after the speech.  It appears that this Q&A was recorded and the same private company put the Q&A behind its paywall.

It’s just plain wrong that a private company is selling the words of public officials. It ought to stop.

Scrutiny Alerts


As highlighted here, in 2010 as part of the CustomsGate enforcement actions, Transocean resolved a $20.7 million FCPA enforcement action (involving a DOJ and SEC component) concerning alleged conduct in Nigeria.

Bloomberg reports:

“Transocean Ltd., the world’s largest offshore rig contractor, is being linked for the first time to the corruption probe of Petroleo Brasileiro SA, the state-owned energy giant at the center of Brazil’s biggest corporate scandal. A former executive at Brazil’s state-run oil company has testified to receiving what he says were payments made by someone claiming to be a Transocean agent in exchange for a rig-operation contract from Petrobras.”


This CBCNews report goes in-depth regarding new allegations in a civil suit concerning SNC-Lavalin. According to the article:

“Top executives for years endorsed bribes and lavish gifts — including a yacht and even prostitutes — to win contracts from Libya’s Gadhafi regime.”

To cement ties, [the complaint] alleges specific SNC executives signed off on or approved numerous favours to help Gadhafi, including:

  • providing SNC staff and hiring university professor as tutors;
  • helping to obtain a Canadian visa;
  • considering appointing Saadi Gadhafi an SNC vice-president;
  • officially sponsoring his Italian Serie A professional soccer team.

One of the largest expenses included the purchase of a Palmer Johnson yacht worth $38 million for Saadi Gadhafi ”organized and validated by CFO Laramée and approved by the then CEO Lamarre.” Saadi Gadhafi visited Canada in 2008, and SNC Lavalin picked up the bill — more than $2 million.”

Survey Says

KPMG recently conducted a worldwide online survey of corporate risk leaders to find out the strengths and weaknesses of their companies’ programs to combat bribery and corruption.  According to the survey responses:

“There is a sharp increase in the proportion of respondents who say they are highly challenged by the issue of Anti-Bribery Compliance (ABC) compared with a survey KPMG conducted four years earlier.

As companies continue to globalize, management of third parties poses the greatest challenge in executing ABC programs.

Despite the difficulty of monitoring their business dealings with third parties, more than one third of the respondents do not formally identify high-risk third parties. More than half of those respondents with right to-audit clauses over third parties have not exercised the right.

ABC considerations are accorded too low a priority by companies preparing to acquire, or merge with, other corporations across borders.

Respondents complain they lack the resources to manage ABC risk.

A top-down risk assessment would help companies set priorities, but executives admit that an ABC risk assessment is one of their companies’ top challenges.

Data analytics is an increasingly important and cost-effective tool to assess ABC controls. Yet only a quarter of respondents use data analysis to identify violations and, of those that do so, less than half continuously monitor data to spot potential violations.”

FCPA Reform

The U.S. Chamber of Commerce recently released this document outlining its policy priorities. Included in the lengthy document was the following:  ”work to reform the Foreign Corrupt Practices Act by supporting changes to enforcement practices.”


A good weekend to all.


And The Apple Goes To …

Wednesday, September 23rd, 2015

applepicFall.  The colors are changing and the apples are crisp.

Fitting of the season, the FCPA Professor apple award goes to Matthew Fishbein (Debevoise & Plimpton).

Since the release of the Yates Memo, I’ve commented more than once that those who think the Yates Memo represented something new are misinformed.

Fishbein (who previously served in the U.S. Attorney’s Office for the Southern District of New York as Chief Assistant U.S. Attorney and Chief of the Criminal Division, among other DOJ positions) surely is not among this category.

Indeed, three weeks prior to release of the Yates Memo, Fishbein wrote this article and picks an orchard.

“[T]he lack of individual prosecutions [in most DOJ corporate enforcement actions] is the inevitable consequence of making a potential criminal case out of every news story where something bad occurs. While the needs and interests of companies often lead them to enter into settlements even where there is little evidence that a crime actually was committed, individuals are more likely to test the government’s case – especially if that case rests on questionable footing. This article discusses the context in which corporations cooperate with the government and suggests that the DOJ’s increased emphasis on cooperation against individuals may undermine corporate defense counsel’s ability to obtain or recommend their client’s cooperation in the many marginal cases where evidence of criminal conduct is lacking.

A number of recent statements by top DOJ officials suggest that their explanation for the lack of individual prosecutions is that companies are largely to blame. The DOJ has suggested that by dragging their feet instead of actively cooperating – for example, by hiding behind over-expansive interpretations of foreign data privacy laws or allowing culpable employees to leave the country – companies effectively have put up roadblocks to the prosecution of individuals.

While there may be some examples of companies holding back in their cooperation, a corporation’s conduct during the course of a government investigation is rarely the reason that individuals are not prosecuted. Rather, individuals are not prosecuted for the conduct companies admit because, in many marginal cases, there is insufficient evidence that a crime actually occurred. Why would a company enter into a criminal settlement where the underlying conduct does not give rise to a crime? The answer is simple: companies frequently determine that a “bad” settlement may be a better resolution than a drawn out, litigated victory. And as prosecutors have grown to appreciate the great leverage they hold over corporate entities, they have exercised this leverage in the pursuit of increasingly marginal cases. They do so, in part, because the risk is minimal (the prosecutor’s case is unlikely to be challenged in court) and the reward is great (the corporations pay enormous penalties).

Prosecutors have considerably less leverage over individuals, who, facing the possibility of incarceration and financial devastation in the event of a criminal conviction, are more likely to test the government’s case and put the government at risk of a high-profile loss. Given the extreme public pressure to bring charges against individuals in connection with the financial crisis, it stands to reason that if prosecutors could prove cases against corporate executives, they would bring those cases in a heartbeat. Indeed, Attorney General Holder recently acknowledged that the lack of individual prosecutions in the wake of the financial crisis was “not for lack of trying.”

Faced with a largely unsuccessful record in the pursuit of individual prosecutions after the financial crisis, it appears that, going forward, the DOJ is going to try even harder. According to a senior DOJ official, “[t]he prosecution of individuals – including corporate executives – for white-collar crimes is at the very top of the Criminal Division’s priority list.” Consistent with this goal, a number of DOJ officials have explained that “true cooperation” with a government investigation requires that the corporation identify culpable individuals and provide the government with evidence that implicates them. Without such evidence of individual culpability, corporations will not receive full cooperation credit, even if they do all of the things that traditionally have been viewed as the hallmarks of robust cooperation such as volunteering information not otherwise known to the government, providing documents and witnesses outside the government’s subpoena power, and making productions and disclosures in a timely manner.


The DOJ’s corporate cooperation policy is in some ways a double-edged sword. In cases where there is clear-cut evidence of wrongdoing, the DOJ’s policy on cooperation makes good sense and should be relatively straightforward in its application: in order to obtain full cooperation credit, it makes sense that companies should have to identify and disclose the information relevant to individual misconduct. This requirement is consistent with the government’s policy on providing cooperation credit for individuals who substantially assist in the prosecution of others. However, the policy presents a real dilemma for companies responding to the marginal, gray-area cases described above, where the company may for business reasons want to reach a settlement even where it has strong defenses, but the absence of evidence of individual culpability may preclude it from receiving the benefits of “full cooperation.”

In these kinds of cases, defense counsel is left facing a host of difficult questions. If a company should make “securing evidence of individual culpability the focus of [its] investigative efforts,” what is it to do when that evidence does not exist? If a company targets its internal investigation toward developing cases against individuals, should individuals be provided with counsel at the outset? If true cooperation “requires identifying the individuals actually responsible for the misconduct,” can a company “truly cooperate” when there are no such responsible individuals? If, in order to receive “full cooperation credit,” a company should emphasize its efforts to obtain evidence of individual culpability, can it still receive “full credit” when those efforts are fruitless? And if securing evidence of individual culpability is a “primary focus” when the government weighs the Filip Factors, will a company be subject to harsher charging decisions or settlement terms simply because no such evidence exists?

Taken together, these questions suggest that a policy designed to incentivize cooperation may have the perverse effect of deterring it: if a company knows that it cannot receive full cooperation credit, it may decide that it is not worth the effort to try; and if individuals know that companies are incentivized to obtain evidence against them, they may be far less willing to cooperate during internal investigations.

Moreover, under the DOJ’s cooperation policy, companies seeking to resolve criminal investigations in marginal cases may actually be penalized when their individual employees did not engage in criminal conduct. In such cases, defense counsel may consider challenging prosecutors to identify what aspect of their investigation was lacking or what evidence of individual culpability should have been uncovered. DOJ officials have said that the government will conduct its own investigations to “pressure test” a company’s internal investigation. If the government’s test reveals no flaws in the company’s investigation, will the government still not provide full cooperation credit?

The DOJ’s policy on cooperation is unlikely to solve the problem that it was likely designed to address, i.e., the lack of individual prosecutions. Although there may be an increase in individual prosecutions in cases of clear wrongdoing, the DOJ’s policy is unlikely to have an impact on the marginal cases, where companies often settle in spite of the evidence – not because of it.

While the needs and interests of companies in reaching settlements have allowed the government to obtain larger and larger settlements in cases where the facts and law likely would not permit them to succeed with a jury, the government must live with the fact that no amount of company cooperation will turn facts that do not provide a basis for individual prosecutions into facts that do. The government either has to accept this – and continue along the path of corporate settlements without individual prosecutions – or stop pursuing investigations and accepting settlements where there are no individuals who have actually committed crimes.”

[The FCPA Apple Award recognizes informed, candid, and fresh thought-leadership on the Foreign Corrupt Practices Act or related topics. There is no prize, medal or plaque awarded to the FCPA Professor Apple Award recipient. Just recognition by a leading FCPA website visited by a diverse group of readers around the world. There is no nomination procedure for the Apple Award. If you are writing something informed, candid and fresh about the FCPA or related topics, chances are high that I will find your work during my daily searches for FCPA content.]

Avoid Trial At All Costs!

Tuesday, September 22nd, 2015

CallFearToday’s post is from Paul Calli and Chas Short of Calli Law based in Miami.

Calli and Short, along with their former partner Steve Bronis, successfully represented Stephen Giordanella, the first person acquitted at trial in the Africa Sting case, briefly represented Patrick Joseph in the Haiti Teleco FCPA prosecution, before Joseph elected to cooperate with DOJ to avoid trial and hired different attorneys, and have counselled publicly traded companies doing business abroad, on the FCPA .


At least, that’s the apparent directive if you’re a DOJ prosecutor tasked with trying to win the ever-elusive conviction against an individual DOJ claims violated the FCPA.

Earlier this month, Deputy Attorney General Sally Yates issued a memorandum titled “Individual Accountability for Corporate Wrongdoing.”

Taking into consideration the Department of Justice’s dismal rate of failure when put to its burden of proof in FCPA enforcement actions (see here for the article titled “What Percentage of DOJ FCPA Losses is Acceptable” and here for the most recent example) Ms. Yates’ memo could easily be titled “Government Strategy for Extracting Cooperation and Guilty Pleas from Individuals Against Whom DOJ Lacks Sufficient Evidence of Criminality When a Neutral Federal Judge Will Likely Reject the Deficient Investigation and Prosecution, by Deputizing Corporate Employers Who Stand to Lose Everything To Entice and Incentivize Those Publicly Traded Companies to Partner With DOJ and Manufacture Prosecutions That Result In Guilty Pleas So DOJ Can Falsely Claim a Successful Conviction Rate Against Individuals By Diluting its Many Trial Losses With Pleas of Convenience.”

The proposed title is a little wordy, but it seems more transparent and accurate.  The title could be shortened to “DOJ’s FCPA Cooperation Playbook.”

Not surprisingly, after suffering so many embarrassing losses in failed prosecutions against individuals over the past 10 years, DOJ is looking for a quick fix.  The Yates Memo discusses the government’s view of how prosecutors, DOJ civil attorneys, and lawyers who represent companies that cooperate with government investigations should be looking at a number of issues regarding individual and corporate culpability.

We focus our discussion here on the Yates Memo’s statements about companies identifying “all individuals involved in or responsible for” misconduct in order to get “any” cooperation credit.

It’s important to recognize that the “guidelines” or “best practices” discussed in the Yates Memo do not supply anything in the way of hard guidance. The principles discussed are much the same as in prior memoranda and the Yates memo is in many ways a self-serving puff piece (those inclined to be more charitable to our often-overreaching government might call it “rhetoric”).

That’s not to say the Yates Memo is meaningless – it reiterates government interest in pursuing individuals as well as corporations for alleged misconduct.  More importantly, the Memo provides a clear indication that the DOJ has learned its lessons from a decade of overwhelmingly failed prosecutions against individuals and has shifted its strategy.   The Memo makes plain DOJ’s focus regarding prosecuting individuals will shift from trying to prove its case in an open trial, before a neutral judge, pursuant to our adversary system of Justice, where the accused can fight back with counsel, before a jury, to the closed door plea meetings held in the bowels of DOJ that lack transparency, precedent or any deterrent effect to individuals who may find themselves implicated in an FCPA investigation in the future.

The Yates Memo memorializes the government’s ardor for pinning a tin badge to corporations and requiring increasing levels of cooperation in order for the government to unilaterally deem that cooperation valuable. The memo is full of statements like:

“To be eligible for any cooperation credit, corporations must provide to the Department all relevant facts about the individuals involved in corporate misconduct.” (Emphasis in original).

“[T]o be eligible for any credit for cooperation, the company must identify all individuals involved in or responsible for the misconduct at issue, regardless of their position, status, or seniority, and provide to the Department all facts relating to that misconduct.”

“If a company seeking cooperation credit declines to learn of such facts or to provide the Department with complete factual information about individual wrongdoers, its cooperation will not be considered a mitigating factor . . . .”

Once a company meets the threshold requirement of providing all relevant facts with respect to individuals, it will be eligible for consideration for cooperation credit.”

The current FCPA enforcement environment focuses in large part on investigations of large corporations that end in non-prosecution and deferred prosecution agreements. The process is non-public, and the government press releases that follow agreements tell only the government view of the facts. Accordingly, there is a lack of transparency and predictability of outcomes for corporations that consider cooperating with government investigations.

The Yates Memo introduces more uncertainty regarding what concrete investigative steps a corporation must make to satisfy the government and highlights the potential risks if the government thinks the corporation should have done more. There’s a clear risk, for example, that the government might view a choice not to engage in certain investigative steps as “declining[ing] to learn” of relevant facts. The language of the Yates Memo provides prosecutors with more excuses or talking points for saying that the corporation has not done enough. This of course is always the risk of cooperation and calls to mind the saying that one can’t be “a little pregnant.”

In setting these fuzzy but tough-sounding standards, the Yates memo underscores why individuals and corporations should consider holding the government to its burden of proof and going to trial. In FCPA cases, a plea and cooperation should not be the default position.

In FCPA trials, individuals often win and the government has been frequently embarrassed (see for example the recent Sigelman trial and the failed “Africa Sting” enforcement action). We are hard pressed to identify an area of white collar enforcement where there is a bigger gap between the theories that support pleas or deferred/non-prosecution agreements versus the kind of facts for which the government can obtain convictions at trial. The price of cooperation continues to be high for companies and, if you accept the Yates memo on in its face, those costs are likely to be higher now.

The Yates Memo’s discussion of cooperation is a reminder to individual businesspeople that in many investigations, the lawyers representing the company are not your friends. As with all cooperation, there is a tremendous pressure to point fingers – regardless of the truth – a pressure that the Yates Memo adds to.   Individuals confronted with the pressure outlined in the government’s new cooperation playbook should consider the downside to the government’s diminution of our Constitutional adversary system of justice effectuated by the government’s “shock and awe” pretrial tactics designed to avoid trial.

Trial is the great equalizer.  Everyone knows that people plead guilty when they are not guilty to avoid the risk of possibly serving a more lengthy jail sentence should DOJ get lucky a second time in an FCPA trial and win. But agreeing to plead guilty, become a federal convicted felon, and serve time in prison where you should not do so, without putting the government to its burden of proof, might well be a decision a person may regret for the rest of their lives.

A person facing the trial decision must work hard to confront the fear of the unknown that is trial – and not allow DOJ to succeed in exploiting that fear to extract a guilty plea that absolves the government of the responsibility of proving its case.

Coercion and cooperation are dangerous.  In the instance where an individual accused of FCPA violations pleads guilty because, like Richard Bistrong, he is actually guilty, wrist-slap probationary sentences reward criminality and deter law-abiding behavior.  As the Honorable Richard Leon stated when rejecting DOJ’s plea for probation and no jail for its criminal partner Bistrong in the DOJ’s failed Africa Sting case, “We certainly don’t want the moral of the story to be: Steal big. Violate the law big. Cooperate big. Probation.” (See here).

Individuals accused of FCPA crimes should consider trial, at all costs.  After all, just ask these persons who the DOJ formerly dubbed “Corporate Wrong-doers,” and who sent the DOJ packing and walked away vindicated.

  • Stephen Giordanella
  • Patrick Caldwell
  • John Godsey
  • Andrew Bigelow
  • Pankesh Patel
  • John Weir
  • Lee Tolleson
  • John Mushriqui
  • Jeana Mushriqui
  • Mark Morales
  • Helmie Ashiblie
  • Yochanan Cohen
  • Amaro Goncalves
  • Saul Mishkin
  • David Painter
  • Lee Wares
  • Ofer Paz
  • Israel Weisler
  • Michael Sacks
  • Jonathan Spiller
  • Haim Geri
  • Daniel Alvirez
  • John O’Shea
  • Si Chan Wooh
  • Keith Lindsey
  • Steve Lee
  • John Iacobucci
  • Ronald Schultz
  • Alfredo Duran
  • John Blondek
  • Vernon Tull
  • Arthur Klein
  • Thomas Spangenberg
  • George McLean

What Others Are Saying About The “Yates Memo”

Thursday, September 17th, 2015

SoapboxSince its release last week (see here for the original post), much has been written about the “Yates Memo.”

Much of this commentary has simply regurgitated the DOJ’s position as if the policy announcement (much of it old news to those informed) of a political actor represented a big deal. Other commentary used the Yates Memo simply as a hook to market legal and compliance services.

Other commentary however has actually engaged in an analysis of the “Yates Memo” and this post highlights commentary that caught my eye.

Consistent with my own initial commentary, many commentators – including former high-ranking DOJ officials – have noted that the focus of the Yates Memo on individual enforcement actions is nothing new.


This Debevoise & Plimpton Client Alert states:

“As with most policy developments of this nature, the distribution of the Yates Memorandum poses both risks and opportunities for companies and individuals alike, and its actual impact will be seen only when it is implemented.

If taken seriously, and those firms and individuals potentially subject to investigation by DOJ should assume it will be, the Yates Memorandum could alter the outcomes in certain cases by increasing the cost of cooperation, accelerating the timetables under which internal investigations must be completed, and deterring individuals within companies from cooperating to the extent they have previously.

But at the same time, by causing DOJ to focus early – and, at a minimum, at the time when a corporate resolution is definitively proposed – on whether and how individuals can and should be prosecuted, DOJ’s new focus could deter DOJ from the pattern of coercing large-scale monetary settlements from those individuals’ employers in cases in which marginal theories of liability based on novel applications of the law or weak evidence form the basis of a settlement.


At first glance, the Yates Memorandum is unlikely to lead to a sea change in the pattern seen recently in criminal prosecutions of individuals in white collar prosecutions. First and foremost, in most criminal cases the government must prove that the defendant knowingly and intentionally violated the law.3 This often creates a significant problem for prosecutors. As the Yates Memorandum acknowledges, “[i]n large corporations, where responsibility can be diffuse and decisions are made at various levels, it can be difficult to determine if someone possessed the knowledge and criminal intent necessary to establish their guilt beyond a reasonable doubt.”

While knowledge and intent requirements apply equally to charges against corporations and individuals, DOJ has, at times, circumvented the need to prove these elements in enforcement actions against companies by entering into corporate settlements, in which companies enter into plea agreements or Deferred or Non-Prosecution Agreements, under which they agree to pay substantial fines, and admit to detailed statements of wrongdoing.

But while companies may have reasons to enter into such settlements, even in marginal cases, individuals often do not. Prosecutors are fully aware that in gray area cases, where the evidence is thin or the legal theory is novel or weak, many defendants will risk trial rather than plead guilty to even relatively “minor” charges, so as to avoid potential incarceration, financial ruin and personal humiliation. Therefore, if DOJ determines to prosecute an individual, its allegations will likely be scrutinized by a neutral fact finder, which, of course, might result in DOJ failing to prove the facts to the satisfaction of a judge or jury – even in situations in which the company has admitted to those facts as part of its settlement agreement. Because of this fundamental dynamic in which corporations are far more likely to settle a DOJ proceeding than are individuals, there are serious doubts about whether the Yates Memorandum can, even if implemented as intended, achieve a greater number of convictions of (or civil judgments against) individuals, which the Memorandum candidly acknowledges.


Important additional questions will also arise as to how, systemically, the DOJ’s new guidance will influence the dynamic of white collar enforcement and the process of internal investigations conducted by companies seeking to cooperate with the government and/or discharge their duties to shareholders and other stakeholders. On the one hand, the Yates Memorandum makes clear that cooperation credit, which can lead to significant reductions in potential fine or penalty amounts, will now come at a potentially steeper price. To deliver “actionable evidence” of individual wrongdoing within the statute of limitations, moreover, internal investigation plans are likely to require accelerating a number

of steps that previously could be delayed. And, in accelerating those steps, it is entirely possible that the kind of sustained, organized investigative effort that, in the past, might have led to greater understanding of what led to a particular event of alleged wrongdoing will be less likely to occur. Individuals, who will now face a greater risk of prosecution, might be less willing to cooperate, and the kinds of reforms and remediation possible under prior policy may become more difficult to achieve. In this respect, the Yates Memorandum could have unanticipated outcomes that lead to less robust compliance responses in some cases, and less evidence coming to light in others. In acknowledging that some companies may not choose to cooperate in the face of DOJ’s new demands, the Yates Memorandum acknowledges this possibility, but not its full significance.

But the Yates Memorandum may restrain DOJ from some of the more controversial practices of recent years in which large monetary settlements have been extracted from corporations based on marginal legal or factual theories. By focusing new attention on the situation in which no individuals are prosecuted, the Yates Memorandum could well lead DOJ to focus more intently on the reasons why no individuals are charged, including the lack of the kind of evidence necessary to lead a judge or jury to find guilt beyond a reasonable doubt or liability under a civil law standard. If the DOJ’s true desire is to achieve genuine and fair parallel outcomes for employees and the companies for whom they work, the lack of evidence to charge individuals should likewise lead to a conclusion that the company should not be pursued, at least under most laws. Because, as the Yates Memorandum emphasizes, corporations act through their employees and agents, and, generally speaking, cannot be found guilty or held liable unless at least one director, officer, employee, or agent is liable himself or herself, the Yates Memorandum may bring balance back to the world of enforcement against firms, and reduce the number of cases in which companies might be coerced to settle what is otherwise a winnable case.”

This Covington & Burling alert (written under the names of, among others, former Attorney General Eric Holder, former Assistant Attorney General of the Criminal Division Lanny Breuer and former Acting Assistant Attorney General of the Criminal Division Mythili Raman) states:

“In criminal matters, the effect of DOJ’s policy announcement is hard to predict and may not represent a significant change. For example, the guidance on cooperation credit does not appear to represent a departure from current practice. To be sure, the Deputy Attorney General stated … that the memorandum represents a “substantial shift from our prior practice,” and added that “we’re not going to let corporations plead ignorance.” Yet the memorandum reflects practices that are already employed by numerous DOJ components and U.S. Attorneys’ offices, and reflects prior DOJ guidance, such as a September 2014 speech by Criminal Division leadership declaring that “[v]oluntary disclosure of corporate misconduct does not constitute true cooperation, if the company avoids identifying the individuals who are criminally responsible. Even the identification of culpable individuals is not true cooperation, if the company fails to locate and provide facts and evidence at their disposal that implicate those individuals.”

This Morrison & Foerster alert (written under the name of, among others, former Senior Deputy DOJ Chief of the Fraud Section James  Koukios) states:

“Although designed to spur companies to cooperate more completely against their officers and employees, [the Yates Memo policy on cooperation] may actually turn out to be a disincentive to corporate cooperation. Companies must now weigh the risk that DOJ will, at the conclusion of a lengthy, expensive, and intrusive investigation, conclude that the cooperation has not been complete enough to pass the threshold for cooperation credit. For example, one can imagine a situation where a company, acting in good faith, determines based on the evidence available to it that a particular individual was not “involved in or responsible for the misconduct at issue,” but DOJ determines, based on a difference of opinion or perhaps evidence uniquely available to it (like personal emails obtained by a search warrant, individual bank records obtained by a grand jury subpoena, or immunized testimony), that he or she was involved. In this situation, has the company failed to meet the Yates standard of identifying and providing evidence against a wrongdoer? Will it be seen as having “decline[d] to learn” of an individual’s wrongdoing? And, if so, does that really mean the company will get zero cooperation credit? Faced with this “all or nothing” possibility, some companies may now choose to forego the burdens of cooperation and simply respond to subpoena requests if called upon. Raising the stakes of the game this high may convince some that it’s simply not worth playing.”

This Sidley Austin update (written under the name of, among others, former Deputy Attorney General James Cole) states:

“The principal thrust of the new guidance—the requirement that a self-reporting company seeking cooperation credit make a full disclosure to the DOJ, particularly by identifying culpable individuals—expands on the already-existing DOJ practices in criminal cases. In distinguishing between cases in which companies have been punished severely and ones in which companies have received lenient treatment, the DOJ has already emphasized the significance of a company’s disclosures regarding corporate officers involved in wrongdoing.”

This McGuire Woods alert (co-authored by former Deputy Attorney General and Acting Attorney General George Terwilliger) states:

“While cast and emphasized as new policy, [the steps in the Yates Memo] are substantively part and parcel of DOJ’s longstanding standard operating procedures and expectations in white collar cases. The notion of targeting individuals for prosecution has been a stated goal expressed by numerous DOJ officials in recent years …”.


“It should not be news to anyone inside or outside a corporation that federal prosecutors are being asked to identify and prosecute individual executives and managers for their roles in corporate misconduct. However, the Yates Memo provides a telling insight into DOJ’s current policy objective: reach the highest-level business leaders through cooperation deals with lower-ranking executives. The risk with that emphasis is two-fold: (1) lower-level personnel, pressed to deliver something of evidentiary and/or investigative value against higher-ups, could feel pressured to give prosecutors what they want, rather than the less helpful truth they may have; and (2) counsel conducting internal corporate investigations may see less cooperation from executives who fear implicating themselves in suspected wrongdoing or who will hold what they know as a chip with which to bargain with prosecutors.

That kind of chilling effect could significantly impact federal prosecutors who have come to be heavily reliant on corporate cooperation and the results of internal investigations as part of the Department’s white collar enforcement program. As a result, DOJ could find itself facing an increasing amount of the “painstaking reviews” the Yates Memo seeks to avoid.”


The Yates Memo comes at a time when corporations, particularly in the financial services industry, have been particularly vilified and feel under siege by a barrage of seriatim investigations and efforts by new or newly ambitious regulatory bodies to expand their reach and stretch the limits of their oversight authority. Settlements where the government has demanded hundreds of millions to billions of dollars are now routine. Some of the funds extracted have not gone to the Treasury, but rather have been used to fund social program objectives and other endeavors that many view as far from the fines, penalties and/or restitution traditionally imposed in connection with criminal prosecutions and civil enforcement sanctions.

Further, such extended monetary aspects of these settlements raise the specter of a small-town “speed trap”-type factor driving government settlement demands. That is cause for legitimate concern in the business community, especially where many of these settlements are premised not on unmistakable evidence of fraud or other criminal misconduct, but rather seem to be premised on questionable theories of legal liability propounded in the context of the exercise of the government’s tremendous leverage when threatening criminal prosecution. DOJ’s desire to more “fully leverage its resources” by targeting individuals at the very least raises a risk that its hunger for results will cause it to lose sight of the importance of fairness and balance in white collar investigations.

The Yates Memo inflames that concern by observing that cases against individuals do not provide “as robust a monetary return on the Department’s investment” as corporate enforcement actions. As unintentional as it may be, DOJ should expect that those carefully considering that statement may view it as cynical confirmation of their suspicions that DOJ has a revenue-driven motive for some aspects of its enforcement policy.”

This Gibson Dunn publication states:

“The high-profile roll-out of the Yates Memorandum–above-the-fold coverage in major newspapers, a speech by Yates at New York University–obscures the fact that DOJ leaders, at increasingly higher levels of seniority, have been making similar statements for months, even years …”


[T]he Yates Memorandum acknowledges, but does not address, how difficult individual prosecutions in corporate cases are–not only because of the difficulty in obtaining evidence, but also because it is profoundly difficult to determine whether any identified conduct does, in fact, violate federal laws.  More unpredictable will be the effect on corporate behavior. The scale of internal investigations may increase as more intense scrutiny is focused on individuals at the outset. Vigorous investigations of this sort can negatively affect morale within companies, and employees who refuse to cooperate may cause investigations to falter or stall.  Moreover, internal investigations often must deal with historical conduct – frequently in the very distant past and with former employees – and overseas activities that present a host of legal and practical challenges.  The Yates Memorandum may well affect a corporation’s analysis as to how vigorously, or widely, potential misconduct should be investigated where the consequences of not being able to identify culpable individuals could be dire. As a result, it may result in an all-or-nothing approach to cooperation, with many corporations electing to take the latter path.  All of this may temper a corporation’s enthusiasm to self-report potential misconduct.

Thus, corporations that decline to engage in such investigations, or–more problematically–those that are unable to find suitable evidence of individual wrongdoing despite the existence of some systemic problem (which is often the case given how action, intent, and conduct can be diffused throughout a corporation), may decline to cooperate entirely. The Yates Memorandum, consequently, may have an unintended chilling effect on corporate cooperation.”

This Vinson & Elkins post states:

“[The Yates Memo] surely will have ramifications for both individuals and companies that come under DOJ investigation, but they may be most pronounced for individuals involved in misconduct who now face a “Hobson’s choice” of cooperating with their company’s internal investigation, which could increase their own personal risk, or refusing to cooperate at all and risk losing their jobs. Putting individuals to this choice may drive a wedge between the company and the individual and significantly hamper the company’s ability to conduct its internal investigation, which could then limit the company’s ability to cooperate by sharing its findings with the government.”

This Sheppard Mullin post states:

“[Is the Yates Memo] anything really new?  Many experienced practitioners would argue definitely not. For decades, federal prosecutors have focused on bringing charges against the highest level company executives. Almost universally, they hold the opinion that the only way to truly deter corporate crime is to jail executives, the more senior the better. And we all know that corporations can act only through individuals. Anyone who has ever held the post of Assistant United States Attorney—as this author did in the mid-1980’s—or has defended federal criminal investigations knows that among the very first questions in a discussion of cooperation will be: “You understand that full cooperation against individuals will be required, will you be providing information against Mr./Ms. X, Y and Z?”  In the Foreign Corrupt Practices Act area, Assistant Attorney General Leslie Caldwell has made this point every single time she has spoken in public.

So why the memorandum and the highly publicized speech?  Several reasons come to mind: (1) the American public has felt that DOJ has been soft on Wall Street executives; (2) this memorandum gives corporate defense counsel a very clear statement to show clients who are considering cooperation; and (3) the formal internal procedures ensure that federal white collar prosecutors account for their investigations and dispositions of individuals within a corporate crime setting.  Maybe it also gives prosecutors an additional talking point with defense counsel for individuals: “Sorry, DOJ policies tie my hands. I have to go after your client.”

Might this policy result in significantly more prosecutions of individuals?  Doubtful.  Senior executives and other individuals have always been in DOJ’s crosshairs.”

This Alston & Bird advisory states:

“[T]he Yates Memo raises many questions that will need clarification.

What happens if a company does not agree with the DOJ’s assessment that wrongdoing has occurred? Under the new policy, will the company not be viewed as “cooperating” even when it has provided full and complete information to the DOJ as part of its investigation? In other words, if the company does not agree with the DOJ’s view of the facts and the culpability of the individuals involved, is it not cooperating? If so, cooperation with a DOJ investigation does not mean “cooperating” in any normal sense of the term. Rather, it would mean that—in addition to providing full and complete factual information to the government about the conduct at issue—the company must agree with the DOJ’s view of the facts and theory of prosecution and not attempt to offer a factual defense on behalf of the individuals the DOJ views as culpable.”

The Yates Memo

Friday, September 11th, 2015

YatesSeptember has traditionally been an active month for Department of Justice policy statements and speeches.

Keeping this tradition alive, earlier this week DOJ Deputy Attorney General Sally Yates delivered this speech and released this memo titled “Individual Accountability for Corporate Wrongdoing” (hereafter the “Yates Memo”).  (See here for the video of the speech).

While many will likely view the Yates Memo as articulating new DOJ policy it really does not.

Rather, the Yates Memo continues the DOJ’s rhetoric as to the importance of individual prosecutions and is substantively similar to this September 2014 speech delivered by then Principal Deputy Attorney General Marshall Miller and this September 2014 speech delivered by then Attorney General Eric Holder.

In any event, the Yates Memo has already attracted substantial press (see herehere and here for instance) and will no doubt be the focus of numerous law firm client alerts in the near future.  The Yates Memo is the latest in a long-line of DOJ policy memos. (See here for the 1999 “Holder Memo,” here for 2003 “Thompson Memo,” here for the 2006 “McNulty Memo” and here for the 2008 “Filip Memo”).

The Yates Memo repeats the following DOJ rhetoric:

“One of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing. Such accountability is important for several reasons: it deters future illegal activity, it incentivizes changes in corporate behavior, it ensures that the proper parties are held responsible for their actions, and it promotes the public’s confidence in our justice system.”

This is rhetoric because the reality is that few DOJ corporate enforcement actions result in any related charges against company employees.  In the FCPA context, as noted in this prior post, between 2008-2014, 75% of DOJ corporate enforcement actions have not (at least yet) resulted in any DOJ charges against company employees.

The Yates Memo then states as follows.

“There are, however, many substantial challenges unique to pursuing individuals for corporate misdeeds. In large corporations, where responsibility can be diffuse and decisions are made at various levels, it can be difficult to determine if someone possessed the knowledge and criminal intent necessary to establish their guilt beyond a reasonable doubt. This is particularly true when determining the culpability of high-level executives, who may be insulated from the day-to-day activity in which the misconduct occurs. As a result, investigators often must reconstruct what happened based on a painstaking review of corporate documents, which can number in the millions, and which may be difficult to collect due to legal restrictions.

These challenges make it all the more important that the Department fully leverage its resources to identify culpable individuals al all levels in corporate cases. To address these challenges, the Department convened a working group of senior attorneys from Department components and the United States Attorney community with significant experience in this area. The working group examined how the Department approaches corporate investigations, and identified areas in which it can amend its policies and practices in order to most effectively pursue the individuals responsible for corporate wrongs. This memo is a product of the working group’s discussions.

The measures described in this memo arc steps that should be taken in any investigation of corporate misconduct. Some of these measures are new, while others reflect best practices that are already employed by many federal prosecutors. Fundamentally, this memo is designed to ensure that all attorneys across the Department are consistent in our best efforts to hold to account the individuals responsible for illegal corporate conduct.

The guidance in this memo will also apply to civil corporate matters. In addition to recovering assets, civil enforcement actions serve to redress misconduct and deter future wrongdoing. Thus, civil attorneys investigating corporate wrongdoing should maintain a focus on the responsible individuals, recognizing that holding them to account is an important part of protecting the public fisc in the long term.

The guidance in this memo reflects six key steps to strengthen our pursuit of individual corporate wrongdoing, some of which reflect policy shifts and each of which is described in greater detail below: (l) in order to qualify for any cooperation credit, corporations must provide to the Department all relevant facts relating to the individuals responsible for the misconduct; (2) criminal and civil corporate investigations should focus on individuals from the inception of the investigation; (3) criminal and civil attorneys handling corporate investigations should be in routine communication with one another; ( 4) absent extraordinary circumstances or approved departmental policy, the Department will not release culpable individuals from civil or criminal liability when resolving a matter with a corporation; (5) Department 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; and (6) 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 remainder of this post highlights specifics in the Yates Memo as to the above six topics and includes in italics portions of Yates’s speech relevant to the specific topic.

The Yates Memo states:

1. To be eligible for anv cooperation credit, corporations must provide to the Department all relevant facts about the individuals involved in corporate misconduct.

In order for a company to receive any consideration for cooperation under the Principles of Federal Prosecution of Business Organizations, the company must completely disclose to the Department all relevant facts about individual misconduct. Companies cannot pick and choose what facts to disclose. That is, to be eligible for any credit for cooperation, the company must identify all individuals involved in or responsible for the misconduct at issue, regardless of their position, status or seniority, and provide to the Department all facts relating to that misconduct. If a company seeking cooperation credit declines to learn of such facts or to provide the Department with complete factual information about individual wrongdoers, its cooperation will not be considered a mitigating factor pursuant to USAM 9-28.700 el seq. Once a company meets the threshold requirement of providing all relevant facts with respect to individuals, it will be eligible for consideration for cooperation credit. The extent of that cooperation credit will depend on all the various factors that have traditionally applied in making this assessment (e.g., the timeliness of the cooperation, the diligence, thoroughness, and speed of the internal investigation, the proactive nature of the cooperation, etc.).

This condition of cooperation applies equally to corporations seeking to cooperate in civil matters; a company under civil investigation must provide to the Dcpaiiment all relevant facts about individual misconduct in order to receive any consideration in the negotiation. For example, the Department’s position on “full cooperation” under the False Claims Act, 31 U.S.C. § 3729(a)(2), will be that, at a minimum, all relevant facts about responsible individuals must be provided.

The requirement that companies cooperate completely as to individuals, within the bounds of the law and legal privileges, see USAM 9-28.700 to 9-28.760, docs not mean that Department attorneys should wait for the company to deliver the information about individual wrongdoers and then merely accept what companies provide. To the contrary, Department attorneys should be proactivcly investigating individLtals at every step of the process – before, during, and after any corporate cooperation. Department attorneys should vigorously review any information provided by companies and compare it to the results of their own investigation, in order to best ensure that the information provided is indeed complete and docs not seek to minimize the behavior or role of any individual or group of individuals.

Department attorneys should strive to obtain from the company as much information as possible about responsible individuals before resolving the corporate case. But there may be instances where the company’s continued cooperation with respect to individuals will be necessary post-resolution. In these circumstances, the plea or settlement agreement should include a provision that requires the company to provide information about all culpable individuals and that is explicit enough so that a failure to provide the information results iu specific consequences, such as stipulated penalties and/or a material breach.”

In her speech, Yates stated:

“[T]o the average guy on the street, this might not sound like a big deal.  But those of you active in the white-collar area will recognize it as a substantial shift from our prior practice.  While we have long emphasized the importance of identifying culpable individuals, until now, companies could cooperate with the government by voluntarily disclosing improper corporate practices, but then stop short of identifying who engaged in the wrongdoing and what exactly they did.  While the companies weren’t entitled to full credit for cooperation, they could still get credit for what they did do and that credit could be enough to avoid indictment.

The rules have just changed.  Effective today, if a company wants any consideration for its cooperation, it must give up the individuals, no matter where they sit within the company.  And we’re not going to let corporations plead ignorance.  If they don’t know who is responsible, they will need to find out.  If they want any cooperation credit, they will need to investigate and identify the responsible parties, then provide all non-privileged evidence implicating those individuals.

While this is new for the corporate world, there’s nothing radical about the concept.  It’s the same rule we apply to cooperators in any other type of criminal investigation.  A drug trafficker can decide to flip against his co-conspirators.  He can proffer to the government the full scope of the criminal scheme.  He can take the stand for the government and testify against a dozen street-level dealers.  But if he has information about the cartel boss and declines to share it, we rip up his cooperation agreement and he serves his full sentence.  The same is true here.  A corporation should get no special treatment as a cooperator simply because the crimes took place behind a desk.

This new cooperation requirement does not mean that DOJ will sit back and wait for the company to deliver the information about individual wrongdoers and then merely accept what companies provide.  To the contrary, department attorneys will be actively investigating individuals at every step of the process – before, during and after any corporate cooperation.  Department attorneys will be vigorously testing information provided by companies and comparing it to the results of our own investigation to ensure that it is indeed complete and that it doesn’t seek to minimize the role of any one person or group of individuals.

Building on this point, a company should not assume that its cooperation ends as soon as it settles its case with the government.  Going forward, corporate plea agreements and settlement agreements will include a provision that requires the companies to continue providing relevant information to the government about any individuals implicated in the wrongdoing.  A company’s failure to continue cooperating against individuals will be considered a material breach of the agreement and grounds for revocation or stipulated penalties.

And one final note on this point.  The purpose of this policy is to better identify responsible individuals, not to burden corporations with longer or more expensive internal investigations than necessary.  We are not asking companies to “boil the ocean,” so to speak, and embark upon a multimillion-dollar investigation every time they learn about misconduct.  We expect thorough investigations tailored to the scope of the wrongdoing.  So for all the defense lawyers in the room – and I know there are plenty of you – keep this in mind.  If you are representing a corporation and there’s a question about the scope of what’s required, you can do what many defense attorneys do now – pick up the phone and discuss it with the prosecutor.”

The Yates Memo states:

2. Both criminal and civil corporate investigations should focus on individuals from the inception of the investigation.

Both criminal and civil attorneys should focus on individual wrongdoing from the very beginning of any investigation of corporate misconduct. By focusing on building cases against individual wrongdoers from the inception of an investigation, we accomplish multiple goals. First, we maximize our ability to ferret out the full extent of corporate misconduct. Because a corporation only acts through individuals, investigating the conduct of individuals is the most efficient and effective way to determine the facts and extent of any corporate misconduct. Second, by focusing our investigation on individuals, we can increase the likelihood that individuals with knowledge of the corporate misconduct will cooperate with the investigation and provide information against individuals higher up the corporate hierarchy. Third, by focusing on individuals from the very beginning of an investigation, we maximize the chances that the final resolution of an investigation uncovering the misconduct will include civil or criminal charges against not just the corporation but against culpable individuals as well.

In her speech, Yates stated:

“One of the things we have learned from experience is that it is extremely difficult to build a case against individuals, civil or criminal, unless we focus on individuals from the very beginning.  For example, if an investigation starts as a civil inquiry into the company and interviews are conducted and documents gathered with a focus on corporate liability, it is often challenging for our attorneys to then go back at the conclusion of the civil matter and build a criminal case against individuals.  This is particularly true not only because of the sheer passage of time, but also because individual criminal liability often hinges on proving a level of criminal intent much more demanding than what was required in the civil case.

To address this problem, the department yesterday instructed its attorneys that, going forward, they are to focus on individuals from the start of an investigation, regardless of whether the investigation begins civilly or criminally. Moreover, once a case is underway, the inquiry into individual misconduct can and should proceed in tandem with the broader corporate investigation.  Delays in the corporate case will no longer suffice as a reason to delay pursuit of the individuals involved.”

The Yates Memo states:

3. Criminal and civil attorneys handling corporate investigations should be in routine communication with one another.

Early and regular communication between civil attorneys and criminal prosecutors handling corporate investigations can be crucial to our ability to effectively pursue individuals in these matters. Consultation between the Department’s civil and criminal attorneys, together with agency attorneys, permits consideration of the full range of the government’s potential remedies (including incarceration, fines, penalties, damages, restitution to victims, asset seizure, civil and criminal forfeiture, and exclusion, suspension and debarment) and promotes the most thorough and appropriate resolution in every case. That is why the Department has long recognized the importance of parallel development of civil and criminal proceedings. See USAM 1-12.000.

Criminal attorneys handling corporate investigations should notify civil attorneys as early as permissible of conduct that might give rise to potential individual civil liability, even if criminal liability continues to be sought. Further, ifthcre is a decision not to pursue a criminal action against an individual – due to questions of intent or burcleu of prool~ for example ­ criminal attorneys should confer with their civil counterparts so that they may make an assessment under applicable civil statutes and consistent with this guidance. Likewise, if civil attorneys believe that an individual identified in the course of their corporate investigation should be subject to a criminal inquiry, that matter should promptly be referred to criminal prosecutors, regardless ofthe current status ofthe civil corporate investigation.

Department attorneys should be alert for circumstances where concurrent criminal and civil investigations of individual misconduct should be pursued. Coordination in this regard should happen early, even if it is not certain that a civil or criminal disposition will be the end result for the individuals or the company.

In her speech, Yates stated:

“The best way to ensure that criminal prosecutors don’t need to go back and build a new case after the civil attorneys finish their inquiry – or vice versa – is to make sure that everyone’s talking to each other from the very beginning.  And so we are directing our civil and criminal attorneys to collaborate to the full extent permitted by law at all stages of the investigation.  The Department of Justice has access to a wide range of enforcement remedies – from civil penalties to lengthy prison sentences – and the only way to leverage our full authority is by ensuring early and regular communication.  To make sure nothing slips through the cracks, we’re formalizing these lines of communication.  Going forward, regardless of whether a corporate case begins as a civil or criminal inquiry, the DOJ attorneys initially handling the matter will be responsible for notifying the “other side of the house” about the investigation.  As the case proceeds, civil and criminal attorneys will be in regular contact.  If prosecutors decide not to bring criminal charges against individuals, they will need to notify their civil counterparts, who can make an independent assessment of civil liability.  And if civil attorneys identify individuals during their investigation who should be subject to a criminal inquiry, they will be expected to promptly refer the matter to criminal prosecutors, regardless of the current status of the civil corporate investigation.”

The Yates Memo states:

4. Absent extraordinary circumstances, no corporate resolution will provide protection from criminal or civil liability for any individuals.

There may be instances where the Department reaches a resolution with the company before resolving matters with responsible individuals. In these circumstances, Department attorneys should take care to preserve the ability to pursue these individuals. Because of the importance of holding responsible individuals to account, absent extraordinary circumstances or approved departmental policy such as the Antitrust Division’s Corporate Leniency Policy, Department lawyers should not agree to a corporate resolution that includes an agreement to dismiss charges against, or provide immunity for, individual officers or employees. The same principle holds true in civil corporate matters; absent extraordinary circumstances, the United States should not release claims related to the liability of individuals based on corporate settlement releases. Any such release of criminal or civil liability clue to extraordinary circumstances must be personally approved in writing by the relevant Assistant Attorney General or United States Attorney.

5. Corporate cases should uot be resolved without a clear plan to resolve related individual cases before the statute of limitations expires and declinations as to individuals in such cases must be memorialized.

If the investigation of individual misconduct has not concluded by the time authorization is sought to resolve the case against the corporation, the prosecution or corporate authorization memorandum should include a discussion of the potentially liable individuals, a description of the current status of the investigation regarding their conduct and the investigative work that remains to be done, and an investigative plan to bring the matter to resolution prior to the end of any statute of limitations period. If a decision is made at the conclusion of the investigation not to bring civil claims or criminal charges against the individuals who committed the misconduct, the reasons for that determination must be memorialized and approved by the United States Attorney or Assistant Attorney General whose office handled the investigation, or their designees.

Delays in the corporate investigation should not affect the Department’s ability to pursue potentially culpable individuals. While every effort should be made to resolve a corporate matter within the statutorily allotted time, and tolling agreements should be the rare exception, in situations where it is anticipated that a tolling agreement is nevertheless unavoidable and necessary, all efforts should be made either to resolve the matter against culpable individuals before the limitations period expires or to preserve the ability to charge individuals by tolling the limitations period by agreement or court order.

In her speech, Yates stated:

“The fourth and fifth policies relate to how we resolve cases.  As I mentioned earlier, delays in corporate investigations should not delay our ability or willingness to resolve related cases against individuals.  In most instances, this will mean that we resolve cases with individuals before or at the same time that we resolve the matter against the corporation.  If, however, DOJ attorneys decide it is necessary to resolve the corporate case first, they will only be permitted to do so once they have demonstrated a clear plan to their supervisors for resolving the related individual cases – promptly and before the statute of limitations expires.  If at the conclusion of the investigation the DOJ attorneys decide not to bring charges against individuals, they will be expected to memorialize their justification and then obtain approval from the U.S. Attorney or the Assistant Attorney General overseeing the investigation.  Likewise, we are instructing our attorneys that they should not release individuals from civil or criminal liability when resolving a matter with corporation, except under the rarest of circumstances.  When such circumstances do arise, the litigating attorneys will be required to obtain written approval from the relevant U.S. Attorney or Assistant Attorney General.  We will be monitoring these approval processes closely, in no small part so we can more readily identify whatever trends are limiting our ability to pursue individual cases.”

The Yates Memo states:

6. 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 Department’s civil enforcement efforts are designed not only to return government money to the public fisc, but also to hold the wrongdoers accountable and to deter future wrongdoing. These twin aims – of recovering as much money as possible, on the one hand, and of accountability for and deterrence of individual misconduct, on the other – are equally important. In certain circumstances, though, these dual goals can be in apparent tension with one another, for example, when it comes to the question of whether to pursue civil actions against individual corporate wrongdoers who may not have the necessary financial resources to pay a significant judgment.

Pursuit of civil actions against culpable individuals should not be governed solely by those individuals’ ability to pay. In other words, the fact that an individual may not have sufficient resources to satisfy a significant judgment should not control the decision on whether to bring suit. Rather, in deciding whether to file a civil action against an individual, Department attorneys should consider factors such as whether the person’s misconduct was serious, whether it is actionable, whether the admissible evidence will probably be sufficient to obtain and sustain a judgment, and whether pursuing the action reflects an important federal interest. Just as our prosecutors do when making charging decisions, civil attorneys should make individualized assessments in deciding whether to bring a case, taking into account numerous factors, such as the individual’s misconduct and past history and the circumstances relating to the commission of the misconduct, the needs of the communities we serve, and federal resources and priorities.

Although in the short term certain cases against individuals may not provide as robust a monetary return on the Department’s investment, pursuing individual actions in civil corporate matters will result in significant long-term deterrence. Only by seeking to hold individuals accountable in view of all of the factors above can the Department ensure that it is doing everything in its power to minimize corporate fraud, and, over the course of time, minimize losses to the public fisc through fraud.

In her speech Yates stated:

“Sixth and final, we’re broadening the focus of our civil enforcement strategy.  Generally speaking, when a criminal prosecutor is deciding whether to charge an individual, he or she consults with the department’s principles of federal prosecution, which lays out various considerations, including the nature and seriousness of the offense and the impact of the crime on its victims.  While some of our civil litigators have routinely pursued individuals, others have not – primarily because they have focused on the likelihood of financial recovery from their investigative targets.  This was an understandable practice, given that monetary sanctions are the most common form of relief in civil case, but it naturally prioritized large-scale corporate investigations over civil enforcement actions against the individuals who perpetrated the wrongdoing.

There is real value, however, in bringing civil cases against individuals who engage in corporate misconduct, even if that value cannot always be measured in dollars and cents.  Civil enforcement actions, like criminal prosecutions, hold wrongdoers accountable for their actions and deter future wrongdoing.  While we may not be able to satisfy the entire judgment with an individual’s resources, if that individual is liable, we can take what they have and ensure that they don’t benefit from their wrongdoing.  These individual civil judgments will also become part of corporate wrongdoers’ resumes that will follow them throughout their careers.  And by holding individuals accountable, we can change corporate culture to appropriately recognize the full costs of wrongdoing, rather than treating liability as a cost of doing business – a change that will protect public resources over the long term.

Beyond that, our civil attorneys recognize that they have an obligation to protect not only the public fisc, but also the public itself.  So, going forward we will be pursuing civil actions against corporate wrongdoers even if those wrongdoers don’t have the financial resources to satisfy a significant money judgment.  And our civil lawyers will be looking at factors similar to those considered by our criminal prosecutors, such as the individual’s misconduct, past history and the circumstances relating to the commission of the misconduct, in deciding whether to bring suit.  An individual’s financial resources will be only one consideration in that assessment, rather than a determinative factor.

We are going to continually reexamine our practices to ensure that we’re doing everything we can to hold corporate wrongdoers accountable.  Despite this, there will still be cases where we don’t have the evidence necessary to establish an individual’s criminal intent beyond a reasonable doubt.  And regardless of public demand, we will never bring charges against anyone unless we are satisfied that the individual is in fact guilty of a crime.  That is the core of our responsibility and promise to the American people.  And I should be clear: while these policy shifts are effective immediately, the public won’t see the impact of these steps over night.  Some of these policies will affect cases that are only beginning now and may take years to become public.  In the coming weeks and months, we’ll be providing additional training and guidance to our prosecutors to help them take full advantage of these policy shifts.  Next week, for example, I will be convening a national training conference in Washington for experienced white collar prosecutors and civil litigators from across the department to discuss these new policies and other practical ways to enhance our efforts to hold corporate wrongdoers accountable.”

In concluding her speech, Yates stated:

“We make these changes recognizing the challenges that they may present.  Some corporations may decide, for example, that the benefits of consideration for cooperation with DOJ are not worth the costs of coughing up the high-level executives who perpetrated the misconduct.  Less corporate cooperation could mean fewer settlements and potentially smaller overall recoveries by the government.  In addition, individuals facing long prison terms or large civil penalties may be more inclined to roll the dice before a jury and consequently, we could see fewer guilty pleas.

Only time will tell.  But if that’s what happens, so be it.  Our mission here is not to recover the largest amount of money from the greatest number of corporations; our job is to seek accountability from those who break our laws and victimize our citizens.  It’s the only way to truly deter corporate wrongdoing.

At the Department of Justice, our ability to fulfill our responsibilities – to advocate for victims, to vigorously pursue misconduct, to seek justice in all its forms – depends on public confidence in the institutions we represent.  But the public’s confidence is not something to be assumed or expected; it is something that we must earn and be vigilant in maintaining over time.  We do that by relentlessly pursuing wrongdoing, no matter who those wrongdoers may be.  The men and women of the Department of Justice have always embraced this challenge, as both an opportunity and a privilege and once again, we embrace the task presented here.  There is one system of justice, demanding that all be held accountable when laws are broken.  We look forward to the work that will be required as we seek greater accountability from those who use corporations to lie, cheat and steal.  It won’t always be easy, but we’re ready for it.  Our nation and its citizens deserve nothing less.”