September 22nd, 2015

Avoid Trial At All Costs!

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
Posted by Mike Koehler at 12:03 am. Post Categories: DOJEnforcement Agency PolicyGuest Posts

September 21st, 2015

Where Does The Truth Lie?

TruthIf the DOJ and/or SEC make allegations in a Foreign Corrupt Practices Act enforcement action, and a risk averse corporation agrees to resolve the enforcement action in the absence of judicial scrutiny, does that mean the allegations are true?

Not necessarily.

For instance, a component of the 2014 HP enforcement action (see here and here for prior posts) involved DOJ and SEC allegations concerning business conduct in Mexico.

In this NPA, the DOJ alleged that HP Mexico indirectly made cash payments to a Pemex Chief Information Officer. In this administrative order, the SEC alleged the same thing.

Pemex raises money from private investors, including those in the U.S., and thus every year files an annual report with the SEC. The company’s most recent annual report states as follows concerning the allegations in the DOJ and SEC FCPA enforcement action.

“On April 9, 2014, the SEC issued an order imposing sanctions against Hewlett-Packard Company (or HP) based on its findings that HP’s subsidiaries in Mexico, Russia and Poland made improper payments to certain public officials in order to obtain public contracts in violation of the U.S. Foreign Corrupt Practices Act. In the case related to Mexico, the sanctions related in part to allegations that [HP Mexico] paid a Mexican information-technology and consulting company more than U.S. $1 million to win a software and licensing contract with [Pemex] worth approximately U.S. $6 million. The SEC’s order alleged that a former officer of [Pemex] received a portion of the HP subsidiary’s unlawful payment to the consulting company. The Internal Control Body of [Pemex] concluded its investigation after finding no improper payment.”

Where does the truth lie?

The public will likely never know, but this much is true.

The DOJ and SEC allegations, while accepted by a risk averse company, were not subjected to any judicial scrutiny. Moreover, there are no consequences to the DOJ and SEC should the allegations not be accurate and there is no accountability for untrue statements.

On the other hand, Pemex’s statement are contained in an SEC filing and are thus statements to the market. The consequences to Pemex should its statements not be true can be securities fraud actionable under Section 10(b) and Rule 10b-5 for making untrue statements of material facts.  Such actions could be brought by, among other plaintiffs, the SEC and shareholders.

To the extent the DOJ and SEC allegations in the HP Mexico are not accurate, it would be the first time agreed to allegations in a corporate FCPA enforcement action fall apart when subjected to scrutiny.

As highlighted in this prior post, in 2010, Innospec agreed to pay approximately $26 million to resolve DOJ and SEC enforcement actions. The conduct was wide-ranging in that the enforcement action involved alleged violations of U.S. sanctions regarding doing business in Cuba in addition to alleged conduct in violation of the FCPA.  Even as to the FCPA conduct, the enforcement action was wide-ranging and included typical Iraq Oil-for-Food allegations found in a number of previous enforcement actions (i.e. inflated commission payments to an agent which were then used to pay kickbacks to the government of Iraq) as well as alleged conduct in Indonesia.

The bulk of the enforcement action though concerned DOJ allegations that Ousama Naaman (Innospec’s agent in Iraq) paid various bribes to officials in Iraq’s Ministry of Oil (“MoO”) to “ensure” that a competitor’s product “failed a field trial test and therefore would not be used by the MoO” as well as other allegations that Naaman paid other bribes to officials of the MoO to obtain and retain contracts with MoO on Innospec’s behalf.

The DOJ’s criminal information alleged (or perhaps merely assumed) a casual connection between the alleged bribes and the failed field test, as well as two specific contracts: a 2004 Long Term Purchase Agreement (“LTPA”) and a 2008 Long Term Purchase Agreement.

However, in a U.K. civil proceeding, Innospec denied that bribes or the promise of bribes induced the 2004 LTPA, lead to the requirement of the field test or its result, or induced the 2008 LTPA.  Innospec argued that despite its admissions in the FCPA enforcement actions, the “court must look carefully and analytically at the evidence there is as to what bribes were paid and promised and when and whether any bribes paid or promised actually led to a decision different from that which would have been made anyway.”

The U.K. court held approximately 15 days of hearings with multiple witnesses to actually determine if there was a casual link between the alleged bribe payments or other benefits that Innospec obtained. The end result of this process is that the U.K. court did not find any casual links and indeed found false certain allegations in the DOJ’s FCPA enforcement action.

Posted by Mike Koehler at 12:03 am. Post Categories: H-P

September 18th, 2015

Friday Roundup

Roundup2DOJ compliance counsel identified, additional lenient PetroTiger exec sentences, scrutiny alerts and updates, and for the reading stack. It’s all here in the Friday roundup.

DOJ Compliance Counsel

As highlighted in this previous post, last month word spread that “the [DOJ] is hiring a compliance counsel who will help prosecutors determine whether companies facing corruption allegations are victims of rogue employees or willfully blind.”

According to this Global Investigations Review article:

“According to two people familiar with the matter, the US Department of Justice (DoJ) has hired Hui Chen, Standard Chartered’s former head of anti-bribery and corruption compliance, as its new compliance counsel. [...] Before joining Standard Chartered, Chen served as an assistant general counsel at US pharmaceutical company Pfizer between June 2010 and September 2013. In this position, she oversaw the drug-maker’s internal investigations in the Asia-Pacific region, and also led compliance reviews in Latin America, Europe and the Middle East. Chen previously worked for Microsoft for 13 years, serving first in the intellectual property litigation team and later as a compliance officer in China. During the 1990s, Chen worked as a DoJ trial lawyer in Washington, DC, and as an assistant US attorney in Brooklyn.”

PetroTiger Exec Sentences

The DOJ’s FCPA enforcement action against former PetroTiger executives has concluded with additional thuds.

By way of background, the DOJ’s prosecution of Joseph Sigelman fell apart after a key cooperating witness acknowledged giving false testimony. The DOJ effectively pulled its case although Sigelman did plead guilty to substantially reduced charges.  In sentencing Sigelman to probation, Judge Joseph Irenas (D.N.J.) blasted the DOJ.  (See here for the prior post).

Recently, Judge Irenas sentenced the two remaining defendants in the case: Gregory Weisman and Knut Hammarskjold.

Weisman was sentenced to two years probation and ordered to pay a $30,000 fine.  Hammarskjold was likewise sentenced to two years probation and ordered to pay a $15,000 fine as well as approximately $106,000 in restitution for the benefit of PetroTiger.

According to a media source: “before pronouncing the sentence[s], Judge Irenas said he had to reflect the reality that the ultimate sentence here is influenced by the Sigelman case.”

Scrutiny Alerts and Updates

NextEra Energy

In the “you don’t see this everyday” category, as indicated in this press release, it appears someone hired a public relations company to issue a release stating:

“[C]omplaints were [recently] filed with the United States Department of Justice regarding the conduct of NextEra Energy Inc. and RES Americas subsidiaries under the Foreign Corrupt Practices Act related to each company’s attempts to win renewable energy contracts in Addington Highlands, Ontario and North Frontenac, Ontario, from the Government of Ontario through the Independent Electricity System Operator.”


The company which has been under FCPA scrutiny since 2011 recently disclosed:

“As initially disclosed in our Annual Report on Form 10-K for the fiscal year ended July 31, 2011, we identified certain transactions involving our Danish subsidiary BK Medical ApS, or BK Medical, and certain of its foreign distributors, with respect to which we have raised questions concerning compliance with law, including Danish law and the U.S. Foreign Corrupt Practices Act, and our business policies. We have commenced discussions with the Securities and Exchange Commission concerning the resolution of the SEC inquiry into the matter and have proposed a payment of $1.6 million in settlement of such inquiry. During the three months ended July 31, 2015, we accrued a $1.6 million charge in connection with our settlement proposal. We are uncertain whether the U.S. Department of Justice or the Danish Government will seek to impose any sanctions or penalties against us and have not engaged in settlement discussions with either of these entities. There can be no assurance that we will enter into any settlement with the SEC, the DOJ or the Danish Government, and the cost of any settlements or other resolutions of these matters could materially exceed our accruals.”

Listening In

A fruitful source of unscripted, “real-person” talk about FCPA issues is earnings conference calls and other investor calls.  A recent Expeditors (a global logistics company headquartered in Seattle, Washington) investor day conference call caught me eye.

During the call, an analyst asked:  ”Do you see any limits to, whether it’s Europe or Africa or any other geographies, where maybe that’s a difficult – that’s a barrier that kind of prevents as much growth or marketplace capture as you would like, that there’s maybe less receptivity to that?”

Jeff Musser, Senior V.P. and CFO stated:

“When we look at other markets [besides Europe], some of the challenges that we have seen in other markets really have nothing to do with our model and how we roll out our model. The bigger concerns are compliance in some of those markets.So you look at places like Africa, you look at places like Russia. There’s tremendous pressure on us and on our customers to deal with things like the Foreign Corrupt Practices Act. We may — as we decide to go into those markets, we may have to do it in a little bit different way that incentivizes the right behavior and drives the right thing, so those are things that are in the back of our mind as we start thinking about these markets. We don’t think that we are limited in these markets. It just may take a little bit different approach.”

For the Reading Stack

Consistent with my own observations in “The Facade of FCPA Enforcement” (2010) and numerous articles and posts thereafter, Brian Whisler (Baker & McKenzie) writes in “Why DOJ Struggles to Convict Individuals in FCPA Cases” as follows.

“Given the enormous litigation and reputational risk, companies are generally averse to contesting criminal charges at trial. As a result, the FCPA practice has primarily evolved through a series of corporate settlement agreements, over which courts have little to no supervision and in which the burden of proof for evidentiary purposes has less impact. The relative absence of case law in the field has meant that the Justice Department has been able to advance expansive views regarding the scope and applicability of the FCPA, largely unhindered by skeptical juries and contrary case law. However, these settlements carry little to no precedential value, and if individual prosecutions multiply as the Justice Department has promised, then prosecutors will increasingly be held to the high burden of proof and forced to defend their theories before judges. It is already clear that the Justice Department will face difficulties in advancing some of its more aggressive theories in court. Last month, a federal judge rejected the Justice Department’s contention that a nonresident foreign national who worked for a U.S. company’s foreign affiliate could be convicted of conspiracy to violate the FCPA based on traditional accomplice liability theories. See United States v. Lawrence Hoskins, 3:12cr238 (D. Conn. Aug. 13, 2015). Instead, the Justice Department must show that the defendant acted as an agent for the U.S. company itself, a harder task given the defendant’s lack of a direct relationship to the U.S. company. Over the last few years, the Justice Department has used increasingly expansive views of conspiracy and accomplice liability to assert jurisdiction over potentially improper payments paid by employees and agents of foreign subsidiaries and affiliates of U.S.-listed companies. As a result, companies have routinely entered into massive FCPA settlements regarding conduct that has only minimal connections to the United States, U.S. citizens or even U.S. companies. The court’s ruling may ultimately encourage other nonresident foreign nationals, and corporations that only face exposure due to the conduct of their foreign affiliates’ employees, to resist settling future charges with the government. Hoskins is likely to be one of a number of adverse legal rulings regarding the scope of the FCPA if the Justice Department maintains its commitment to increase individual FCPA prosecutions. Adverse case law seems to beget more adverse case law for the DOJ; Hoskins heavily relied on the reasoning of one of the other rare FCPA cases to go to trial, United States v. Castle, 925 F.2d 831 (5th Cir. 1991), which rejected prosecutors’ efforts to charge officials who accept bribes under the FCPA.”


A good weekend to all.

Posted by Mike Koehler at 12:03 am. Post Categories: Analogic Corp.DOJFCPA SentencesGregory WeismanIndividual Enforcement ActionKnut HammarskjoldListening InNextEra Energy

September 17th, 2015

What Others Are Saying About The “Yates Memo”

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.”

Posted by Mike Koehler at 12:03 am. Post Categories: Enforcement Agency Policy

September 16th, 2015

Registration Opens For The FCPA Institute – Miami (Jan. 14-15, 2016)

FCPA InstituteSince its launch in July 2014, the FCPA Institute has elevated the substantive knowledge and practical skills of lawyers, accountants, compliance professionals and business executives from around the world.

After successful events in Milwaukee (July 2014), Miami (January 2015), Houston (May 2015), and Washington, D.C. (August 2015), the FCPA Institute is next making another stop in Miami on January 14-15, 2016 and will be hosted by Hogan Lovells.

The FCPA Institute is different from other FCPA conferences as information is presented in an integrated and cohesive manner by an expert instructor with FCPA practice and teaching experience.  Moreover, the FCPA Institute promotes active learning by participants through issue-spotting video exercises, skills exercises, small-group discussions, and the sharing of real-world practices and experiences.

To best facilitate the unique learning experience that the FCPA Institute represents, attendance at each FCPA Institute is capped at 30 participants. Click here to learn more about the FCPA Institute and to register for the Miami event.

At the end of the FCPA Institute, participants can elect to have their knowledge assessed and can earn a certificate of completion upon passing a written assessment tool.  In this way, successful completion of the FCPA Institute represents a value-added credential for professional development. In addition, attorneys who complete the FCPA Institute may be eligible to receive Continuing Legal Education (“CLE”) credits.

Institute LogosLeading law firms and companies across a variety of industry sectors have chosen the FCPA Institute to elevate the FCPA knowledge and practical skills of their employees.

Representatives from the organizations at left have attended the FCPA Institute and set forth below is a sampling of what FCPA Institute “graduates” have said about their experience.


“Unlike other FCPA conferences where one leaves with a spinning head and unanswered questions, I left the FCPA Institute with a firm understanding of the nuts and bolts of the FCPA, the ability to spot issues, and knowledge of where resources can be found that offer guidance in resolving an issue.  The limited class size of the FCPA Institute ensured that all questions were answered and the interactive discussion among other compliance professionals was fantastic.” (Rob Foster, In-House Counsel, Oil and Gas Company)

“The FCPA Institute was one of the best professional development investments of time and money that I have made since law school. The combination of black letter law and practical insight was invaluable. I would highly recommend the FCPA Institute to any professional who has compliance, ethics, legal or international business responsibilities.” (Norm Keith, Partner, Fasken Martineau, Toronto).

“The FCPA Institute is very different than other FCPA conferences I have attended.  It was interactive, engaging, thought-provoking and at the completion of the Institute I left feeling like I had really learned something new and useful for my job.  The FCPA Institute is a must-attend for all compliance folks (in-house or external).” (Robert Wieck, CPA, CIA, CFE, Forensic Audit Senior Manager, Oracle Corporation)

The FCPA Institute is a top-flight conference that offers an insightful, comprehensive review of the FCPA enforcement landscape.  Professor Koehler’s focus on developing practical skills in an intimate setting really sets it apart from other FCPA conferences.  One of the best features of the FCPA Institute is its diversity of participants and the ability to learn alongside in-house counsel, company executives and finance professionals. (Blair Albom, Associate, Debevoise & Plimpton)

“The FCPA Institute was a professionally enriching experience and substantially increased my understanding of the FCPA and its enforcement. Professor Koehler’s extensive insight and practical experience lends a unique view to analyzing enforcement actions and learning compliance best practices. I highly recommend the FCPA Institute to practitioners from all career stages.” (Sherbir Panag, MZM Legal, Mumbia, India)

“The FCPA Institute provided an in-depth look into the various forces that have shaped, and that are shaping, FCPA enforcement.  The diverse group of participants provided unique insight into how, at a practical level, various professionals evaluate risk and deal with FCPA issues on a day-to-day basis.  The small group setting, the interactive nature of the event, and the skills assessment test all set the FCPA Institute apart from other FCPA conferences or panel-based events.” (John Turlais, Senior Counsel, Foley & Lardner)

Posted by Mike Koehler at 12:01 am. Post Categories: Uncategorized