DOJ’s Yates Memo
Focus on holding individuals responsible in corporate investigations
In what appears to be a renewed energy and focus on holding individual employees, not just their corporations, accountable for violating the law, on September 9 the Department of Justice issued what is being referred to as the Yates Memo. The memo, titled “Individual Accountability for Corporate Wrongdoing
” and authored by Deputy Attorney General Sally Quillian Yates, was distributed to all US Attorneys across the country, as well as to the Director of the FBI and other Federal government prosecutors. Ms. Yates states that “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 memo clearly instructs Federal government prosecutors in both civil and criminal investigations to fully leverage resources to “identify culpable individuals at all levels in corporate cases.” It is clear that the government intends to send a strong message to corporate executives that there is a renewed focus on individual (and in particular C-Suite) accountability.
The Yates Memo sets forth six key steps the government intends to follow to strengthen pursuit of individual accountability in both currently pending and future investigations:
To be eligible for any cooperation credit, corporations must provide to the Department all relevant facts about the individuals involved in corporate misconduct.
Both criminal and civil corporate investigations should focus on individuals from the inception of the investigation.
Criminal and civil attorneys handling corporate investigations should be in routine communication with one another.
Absent extraordinary circumstances, no corporate resolution 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 limitations expires and 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.
Going forward what we can expect is that prosecutors and civil enforcement agencies will feel emboldened to focus on individuals at early stages in an investigation and will seek detailed information from the company about who was involved in decision-making. Likely, we will also see the government asking for additional details and specifics from the company’s internal investigation, which can resurrect similar challenges to the attorney-client privilege that companies once faced under the Department’s Thompson Memo. It may also make it more difficult for a company to resolve an investigation and, in any event, the time to resolution may be extended because the government may not be willing to settle with the company before it concludes its investigation of individuals.
While it remains to be seen what the long-term impact of the Yates Memo will be, it is clear that the government intends to keep the pressure on individuals within companies to feel personal risk for corporate actions. Companies are wise to create or continue to maintain a strong compliance program, which is continuously evaluated for areas of improvement, and which includes robust policies, employee training, means for employees to “report up” concerns, investigations of potential policy violations, and appropriate remedial actions. Likewise, dedicating adequate financial and human resources to support that compliance program and having strong management and Board support and oversight of the program can help demonstrate that corporate executives are serious about compliance.
One potential result of the Yates Memo is that individual employees and officers of an entity under investigation may be quicker to demand their own counsel and indemnification for legal costs. If the government truly focuses on individual liability, the potential need for separate personal counsel and the possibility of multiple settlements will more quickly erode D&O policy limits. Moreover, with individuals targeted, the specter of prison sentences may result in more trials (and their attendant cost). Thus, D&O policy limits should be revisited. Finally, the Yates memo underscores the need to pay careful attention to provisions related to coverage for internal and external investigations. For a more complete discussion of investigation insurance, see http://www.icemiller.com/ice-on-fire-insights/publications/investigation-insurance/.
This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.