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How the Yates Memo Has Changed Government Investigations Into Corporate Misconduct

White Collar Criminal Defense By Harvey Binnall PLLC - 2018/05/31 at 08:59am

On September 15, 2015, the Yates Memorandum (“Yates Memo”) was issued by the Department of Justice (DOJ), signaling a sea-change in government policy towards investigation and prosecution of corporate fraud.  Specifically, the Yates Memo was intended to push individual accountability as a guiding policy moving forward — many industry observers noted that the Yates Memo was something of a reaction to widespread, negative public sentiment surrounding the failure of government prosecutors to punish individual wrongdoers in the wake of the 2008 financial crisis.

This new emphasis on individual accountability has had a substantial impact on how corporations (and their potentially liable employees) approach government investigations and has forced white collar criminal defense attorneys to evolve and adapt to new concerns.

The Six Key Steps Outlined in the Yates Memo

The “individual accountability policy” outlined in the Yates Memo is based on the implementation of six key steps:

Cooperation Credit Requires Disclosure

The DOJ provides credit (in enforcement proceedings) to individuals and companies who work with investigators in a cooperative manner.  These cooperation credits can be used to reduce the civil and criminal penalties associated with corporate misconduct.

After the issuance of the Yates Memo, cooperation credits will no longer be divvied out to individuals or entities that fail to disclose any and all relevant facts relating to the misconduct at-issue.  Importantly, this obligation is affirmative — defendants must actively look for relevant information and disclose it to government investigators as soon as practicable.

Focus on Individual Misconduct

With the Yates Memo, the DOJ intended to create a bottom-up policy with regard to investigations of corporate misconduct.  From the very beginning of the investigation, the investigation will focus on individuals, with the goal of obtaining sufficient documentary evidence (through cooperative disclosure) to prosecute.

Opening Communication Between Civil and Criminal Attorneys

Civil and criminal attorneys (working for the DOJ) are expected to keep the lines of communication open between them, thus minimizing the “friction” between these internal divisions.

Corporate Immunity Cannot Be Granted to Culpable Individuals

Employers are not permitted to shield potentially culpable employees from liability through various corporate resolutions.  For example, a corporation cannot negotiate a settlement compromise (with the government) that absolves their employees of civil or criminal liability for their individual misconduct.

Prosecutors Must Have a Plan for Resolving Individual Cases

Prosecutors must “follow through” with all individual cases, even if the corporate case is resolved.  There must be a clear plan in place for pursuing (and resolving) individual cases of misconduct.

Civil Attorneys Should Take on an Individual Accountability Perspective

Civil DOJ attorneys are expected to apply the same principles as criminal attorneys working for the DOJ and should prioritize matters related to individual liability.

The Impact of the Yates Memo

Before the Yates Memo, the DOJ frequently resolved large corporate fraud and misconduct investigations by forcing a settlement.  Corporations would negotiate the settlement compromise to the best of their ability and secure immunity for key individuals (who might otherwise be deemed culpable were prosecutors to pursue these individuals).  This was all possible thanks to the top-down approach utilized by DOJ investigators.  In a corporate setting, decision-making is rarely concentrated on a single person.  Proving criminal intent was an enormous challenge given the lack of documentary evidence, and the dispersed nature of corporate decision-making.

The Yates Memo emphasizes a bottom-up approach — one of individual accountability.  This renewed focus is psychologically strategic.  In the corporation, individuals are the primary targets (not the entity itself).  Faced with the real possibility of criminal and civil penalties, they are incentivized through cooperation credits to disclose any and all facts they are aware of that might point to the liability of others within the organization.

Are individuals really at-risk, however?

Despite the change in policy, government investigations face continuing hurdles when it comes to establishing individual liability.  Many post-Yates cases have yielded familiar results: a corporate settlement is reached, and individuals are able to avoid significant liability.  For the white collar criminal defendant, of course, this is a very good thing — the evidentiary standard is sufficiently high that even with the change in policy, it is possible to avoid liability due to the lack of documentary evidence establishing criminal intent.

What has changed, ultimately, is the ease with which individuals could previously escape liability.  The Yates Memo has created a rather hostile environment within investigated companies, as there are substantial “conflict of interest” issues, thanks in part to the new disclosure incentives.  As such, it is critical that potentially culpable individuals seek independent counsel from the very beginning of the DOJ investigation.

Speak to an Experienced Alexandria White Collar Defense Attorney for Further Guidance

Harvey & Binnall, PLLC is a boutique litigation firm located in Alexandria, VA.  We represent a range of corporate clients — both individuals and entities — in white collar criminal defense actions, and we have experience successfully navigating the challenges associated with DOJ investigations into white collar criminal wrongdoing.  Our commitment to comprehensive legal representation means that we are well-equipped to either negotiate a favorable compromise with government prosecutors or take the case to trial (if need be).

Call (703) 888-1943 or submit an online form today to schedule a consultation with an experienced Alexandria white collar defense attorney here at Harvey & Binnall, PLLC.  Our attorneys have appeared in multiple jurisdictions, including Virginia, Maryland, and Washington DC, among others.  We look forward to assisting you.