This week, Deputy Attorney General Sally Q. Yates delivered remarks at the New York City Bar Association reflecting on the eight months since the release of the "Yates Memo," or as Deputy AG Yates prefers, the "Individual Accountability Policy" ("the Policy"). The Policy's release in September 2015 followed prolonged criticism over a perceived lack of prosecution of individuals responsible for corporate misconduct. Aimed at increasing prosecutions of such individuals, the Policy outlined six directives to prosecutors, which we covered in an earlier post.
In providing her observations about how the Policy has been interpreted and implemented, Deputy AG Yates responded both to early commentators who thought the sky was falling and to those who interpreted the Policy to be business as usual. The truth, she reported, is "somewhere in the middle." Here are 10 takeaways from those observations:
- The Justice Department's goal is not to "collect corporate heads" but instead "to get to the bottom of who did what and if there are culpable individuals, hold them accountable." Yates said that companies don't have to serve up what she called "the vice president in charge of going to jail" to get cooperation credit. DOJ may grant credit even when a company cannot identify the culpable parties so long as the company has conducted an "appropriately tailored investigation and truly did everything they could reasonably be expected to do [...]."
- Companies need only provide the facts relating to individual employees; they don't have to make a legal conclusion about whether an employee is culpable. The Department will come to its own conclusions about criminal or civil exposure for company employees.
- Cooperating with the Policy does not require companies to waive attorney-client privilege, and it is not intended to in any way roll back protections already in place. Yates emphasized the Department's position that it is only looking for facts, and that pressure to waive attorney-client privilege would be an "unintended consequence" of the Policy. She welcomed the defense bar to make reports of any such consequences. But she said that companies cannot — in the name of privilege — pick and choose which facts to provide.
- Rather than deciding not to cooperate, companies appear to be tailoring their cooperation to the Policy, including by providing prosecutors with 'Yates Binders,' i.e. collections of the relevant emails of individuals being interviewed.
- The Department has been hearing that the policy is effecting positive changes in companies as compliance officers have reported that the Department's focus on individuals has incentivized adherence to best practices and higher standards. Yates said that the Policy is having a deterrent effect.
- Civil and criminal prosecutors are now focused on individuals from the beginning of their investigations, rather than identifying individuals after the investigation is complete.
- Early emphasis on individuals in civil investigations marks a significantly broadened approach to civil enforcement. Formerly, civil prosecutors chose to pursue individuals, in part, based on whether they could contribute meaningfully to the overall amount of money collected. The new approach, Yates said, recognizes the importance of deterrence and that the Department's "obligation is about more than recovering the most money from the greatest number of companies."
- Early emphasis on individuals in civil investigations has a strategic benefit for criminal investigations. In light of the fact that "complex corporate fraud cases often begin as civil litigations," said Yates, civil investigations that focus on individuals from the get-go will save criminal prosecutors from having to re-do an investigation that was not initially conducted with an eye toward individual responsibility.
- The Policy has inspired changes in the Antitrust Division's individual 'carve out' decisions. The Antitrust Division is "revamping" procedures to ensure companies are identifying individuals early on by erring on the side of carving individuals out of prosecution protection agreements.
- The Justice Department's effort to focus on individuals is joined by other agencies and regulatory bodies. As examples, Yates pointed to the Financial Crimes Enforcement Network's first ever suit to enforce a civil penalty and financial institution ban against an individual as well as a newly introduced congressional bill targeting corporate individuals responsible for money laundering.
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