On September 9, 2015, the U.S. Department of Justice (DOJ) announced that it is refocusing its efforts on individual accountability in civil and criminal investigations of corporate misconduct. The policy change has ramifications for companies' officers and employees as well as counsel involved in internal or government investigations. The policy applies broadly to financial services, healthcare, manufacturing and other industries alike and will be enforced by all divisions of the DOJ, including civil, criminal, anti-trust, tax and environmental.
Deputy Attorney General Sally Quillian Yates explained in her memorandum (Yates Memo) that companies will have a greater responsibility to provide information to the DOJ if they want to receive credit for their cooperation. Under the Yates Memo, the DOJ will revise several internal guidance documents relied upon by the DOJ attorneys in the prosecution of companies.
One key feature of the policy is that companies will be required to assist the DOJ's efforts in identifying and prosecuting culpable individuals so that the company can get credit for cooperating in the investigation. Though branded a new policy, this plan to prosecute individuals is a reiteration, with less flexibility, of DOJ's longstanding approach.
In October 2014, Assistant Attorney General Leslie R. Caldwell foreshadowed this policy shift with remarks she gave focusing on how the DOJ can get companies to cooperate in ongoing investigations, including investigations of responsible individuals. She announced, "[t]he prosecution of culpable individuals—including corporate executives—for their criminal wrongdoing continues to be a high priority for the [DOJ]" (Caldwell Speech, October 1, 2014, Atlanta, GA).
The DOJ identified four reasons for instituting the policy "change": (1) pursuing individuals will deter future illegal activity; (2) the policy incentivizes change to corporate behavior; (3) it will ensure that proper parties are held accountable for their actions; and (4) it will promote the public's confidence in the justice system. This rationale is not new—rather, it affirms established DOJ objectives. The DOJ has articulated six ways in which the DOJ will enforce the new policy in civil and criminal matters. Deputy Attorney General Yates expanded on these actions in a speech delivered on September 10, 2015.
- To be eligible for any cooperation credit, corporations must provide the DOJ with all relevant facts about the individuals involved "regardless of their position, status or seniority in the company" and provide all relevant facts about their misconduct. (Yates Speech, September 10, 2015, New York, NY)
- Government investigations should focus on individuals from the inception of the investigation "regardless of whether the investigation begins civilly or criminally." (Yates Speech)
- Civil and criminal attorneys at the DOJ will be directed to "collaborate [with each other] to the full extent permitted by law at all stages of the investigation" so that "criminal prosecutors don't need to go back and build a new case after the civil attorneys finish their inquiry—or vice versa." (Yates Speech)
- Absent extraordinary circumstances, no resolution of a corporate investigation will provide protection from criminal or civil liability for any individuals.
- Corporate cases should not be resolved without a clear plan to resolve related individual cases before the statute of limitation expires; any declinations as to individuals in such cases must be memorialized.
- 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.
In order to get cooperation credit in a DOJ investigation, the company must determine the employee responsible for the wrongdoing and disclose all non-privileged evidence. There will be "[n]o more partial credit for [company] cooperation that does [not] include information about individuals" (Yates Speech). For example, in the civil context, in order to qualify for reduced damages provisions under the False Claims Act, a company must identify culpable individuals as well as produce material facts relating to the individuals' involvement in the corporate violations. In a criminal matter, a prerequisite of cooperation is disclosure of information, potentially including employee statements.
Additionally, a company's disclosure obligations will not end at the resolution of the corporate investigation; going forward, corporate plea and settlement agreements must include a provision that companies will continue to provide relevant information regarding individuals implicated in the wrongdoing. Failure to cooperate will be considered a material breach of the agreement and grounds for revocation or application of stipulated penalties.
This policy, which applies to all new and ongoing investigations and is not limited to Wall Street, raises significant concerns. For companies and employees, the policy underscores the importance of deciding early on when separate counsel for employees is needed. It also raises an issue of whether employee interviews and other potential attorney/client information will become a part of a disclosure to DOJ. While the policy refers to using only "non-privileged" information, critical information is often derived from potentially privileged employee interviews during the course of internal investigations.
It remains to be seen why this "new" policy was announced because it has been DOJ's established position to hold individuals accountable as well as companies. The six outlined changes in implementing this policy could make internal investigations longer and more difficult to resolve as officers and employees will be unwilling to provide information, especially without the presence of their counsel for fear that they will be subject to individual liability. The DOJ's harsher tone certainly raises concerns for companies subject to civil and criminal investigations.
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