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The Yates Memo: Unanswered Questions


More emphasis is now placed on the targeting of individual decision-makers within a corporation under investigation.

© FabioBalbi /ISTOCK/THINKSTOCK

Here we go again! First, it was the Holder Memorandum (1999); next it was the Thompson Memorandum (2003); then, the Thompson Memorandum was clarified by the McCallum Memorandum (2005); then, the McCallum Memorandum was replaced by the McNulty Memorandum (2006); the McNulty Memorandum was refined by the Filip Memorandum (2008); and now, the current Deputy Attorney General – Sally Quillian Yates – has issued her own memorandum altering the Department of Justice’s rules governing the investigation and prosecution of business organizations. The changes are potentially profound and raise many questions for corporations and businesses that find themselves in the crosshairs of a Justice Department investigation.

The Yates Memorandum[1], as it inevitably will be called despite Department of Justice protests to the contrary, substantially alters some long-held policies and practices in federal investigations and prosecutions. More emphasis is now placed on the targeting of individual decision-makers within a corporation under investigation. Prosecutors must now begin their effort with an individual target, and the corporation will get no credit for cooperating without delivering its people up on a silver platter.

The Yates Memorandum alters Department of Justice policy in six important ways:

  1. Corporations must provide both criminal and civil investigators and prosecutors all relevant facts in order to be eligible for any credit for cooperation. Henceforth, the Department will “demand” the identification of all involved individuals, will insist on continued cooperation against individuals even after the corporation has resolved the matter as to itself, and will require the production of all relevant facts about responsible individuals. The memo touches on the issue of privilege only by instructing prosecutors that the “requirement that companies cooperate completely as to individuals, within the bounds of the law and legal privileges” does not absolve the prosecutors of their responsibility to independently investigate. Prosecutors are admonished not to “merely accept what companies provide.”
  2. Both criminal and civil corporate investigations should focus on individuals from the inception of the investigation. This requirement is designed, according to the Memorandum, to focus investigative efforts on individuals as the most effective way to ferret out corporate misconduct, increase the likelihood of cooperation by knowledgeable insiders (by using the threat of prosecution as leverage to make them talk) and increase the likelihood that the investigation will result in the charging of individuals and not just the corporation itself.
  3. Criminal and civil attorneys within the Department are urged to have early and regular consultation and to coordinate their work where possible. This, the memo states, will permit consideration of a fuller range of possible remedies and settlement options to include incarceration, fines, penalties, damages, restitution to victims, asset seizure, civil and criminal forfeiture, and exclusion, suspension and debarment.
  4. Absent extraordinary circumstances, no corporate resolution will provide protection for criminal or civil liability for any individuals. In other words, prosecutors will rarely be able to accept a corporate plea or other resolution but let culpable individuals avoid prosecution or civil liability for their legally cognizable conduct.
  5. 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. This provision is essentially a mirror image of requirement number 2 above. The Department’s priority clearly will be individual prosecutions, and this provision is designed to prevent the corporation from running out the clock on individual prosecutions. And, it incorporates the supervisory approval requirements for declination of individual prosecutions reminiscent of previous policies.
  6. 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 any judgment that might be obtained. Here the Department clearly abandons any “ability to pay” analysis by saying that “the fact that an individual may not have sufficient resources to satisfy a significant judgment should not control the decision on whether to bring suit.”
This latest DAG pronouncement, like its predecessors, leaves many questions unanswered. And, like its predecessors, it imposes many hurdles for corporate America and for clients and prospective clients:
  • The Memorandum fails to address the Department’s approach going forward as to attorney-client and work product privileges, the single most controversial issue in the long history of the policy pronouncements. It only passingly references the “bounds of the law and legal privileges” and references sections 9-28.700 through 9-28.760 of the United States Attorneys Manual, which it earlier announces will be revised. So, real questions remain about whether the Department will respect those privileges and how it will view waivers, or the decision not to waive, by a corporate target. Corporations and their counsel must carefully navigate any request for cooperation and must understand the prosecutor’s approach on this issue when making a decision about whether and how to cooperate.
  • The Department has drawn some very bright line rules with respect to its evaluation of cooperation: the corporation must disclose all relevant facts, name all involved individuals, and require the production of all relevant information. And, further, prosecutors are warned not to generally accept a corporation’s representations regarding the extent of its effort to find relevant facts and information concerning the scope of the wrongdoing.
  • The single-minded focus on individual prosecutions, and the requirement that both criminal and civil investigations target individuals from the outset, impose a standard that may actually chill prosecutions. Significant questions arise as to whether this will create an atmosphere within corporations that discourages cooperation and that places the corporation at odds with its agents and employees from the beginning.
  • Related to the focus on individuals will be the adequacy of warnings given by corporate counsel to individual employees when talking with them during internal investigations. These warnings, known as Upjohn Warnings, clarify for employees that counsel represents the corporation and not the employees individually.[2]
  • But, now, questions arise as to the scope of those warnings. For example, must corporate counsel now advise employees that the attorney represents only the corporation, that the corporation is looking to cooperate in order to resolve this matter and that it will provide the details of any interview directly to the Government in order to ensure that it is deemed to have cooperated fully under the Yates Memorandum? Certainly, such warnings may chill any effort to get to the bottom of the problem within the corporation.
  • In recent years the Department has resolved a number of complex cases through the use of Deferred Prosecution and Non-Prosecution Agreements. These tools have been useful in resolving criminal and civil issues while allowing the subject corporations to acknowledge wrongdoing, restructure, revise procedures and survive. The Memorandum is silent as to how these tools may be used, and they are not among the settlement options listed where the Memorandum encourages criminal and civil attorneys within the Department to cooperate more closely with each other.
  • By clearly setting forth the principle that settlement of corporate liability does not necessarily settle individual liability, the Memorandum raises real questions about when a corporation or other business entity might consider a matter concluded so that it may return to a focus on its business.
  • Finally, the directive that one’s ability to pay “should not control the decision on whether to bring [a civil] suit” raises real issues about the use of limited federal resources against individuals who likely cannot satisfy a judgment against them and who, therefore, are unlikely to be able to pay for a defense to the claims brought against them. Do we really want a Government willing to sue its own citizens even when it knows they cannot possibly pay if they lose?
To read more about the history of the Department of Justice's treatment of corporations click here (PDF).

[1] Memorandum from Sally Quillian Yates, Deputy Att’y Gen., U.S. Dep’t of Justice to Heads of Dep’t Components, U.S. Attorneys, regarding Individual Accountability for Corporate Wrongdoing (Sept. 9, 2015), available at http://www.justice.gov/dag/file/769036/download.

[2] The frequently used term “Upjohn warning” derives from Upjohn Co. v. United States, 449 U.S. 383 (1981). Upjohn did not actually involve an issue directly related to an Upjohn warning. Rather, Upjohn provided a flexible framework to identify when employee communications with corporate counsel qualify as protected attorney-client exchanges.

Bobby Higdon and John S. Davis are partners with Williams Mullen. The article first appeared on the firm’s website at http://www.williamsmullen.com/news/yates-memo-department-justice-attempts-refocus-corporate-investigations-individual-wrongdoers-both, and was reposted with permission.