17 September 2015
On September 9, 2015, the US Department of Justice (DOJ) issued a memorandum detailing new policies that prioritize the prosecution of corporate individuals and encourage corporations to turn over evidence against their executives. The policies take effect immediately, though they are not expected to impact investigations that are already far along.
The memorandum, authored by Deputy Attorney General Sally Q. Yates, carries symbolic value for a DOJ that has received significant negative press in recent years for its dearth of prosecutions against company executives. Though the DOJ eventually sought and obtained very large sanctions against some companies responsible for the 2008 financial crisis, it chose not to prosecute any of the individuals who were responsible for the underlying conduct. These decisions received significant backlash from both Congress and consumer advocate groups,1 and the DOJ’s memorandum appears to be an effort to address that criticism while also holding those who commit white collar crime responsible on an individual level.
The memorandum involves six major guidelines: (1) to be eligible for any cooperation credit, corporations must provide to the DOJ all relevant facts about the individuals involved in corporate misconduct; (2) criminal and civil corporate investigations should focus on individuals from the inception of the investigation; (3) criminal and civil attorneys handling corporate investigations should be routinely in communication with one another; (4) absent extraordinary circumstances or approved departmental policy, the DOJ will not release culpable individuals from civil or criminal liability when resolving a matter with a corporation; (5) DOJ attorneys should not resolve matters with a corporation without a clear plan to resolve related individual cases, and should memorialize any declinations as to individuals in such cases; and (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.
This signals a major shift in the DOJ’s usual white collar crime litigation strategy. The DOJ has broad jurisdiction to prosecute and, until now, would normally not turn its attention to individuals until after reaching a corporate settlement, oftentimes leaving corporate individuals unpunished altogether. Now, however, the new policy purports to focus on corporate individuals from the beginning of an investigation and not to release culpable individuals from civil or criminal liability absent extraordinary circumstances.
One of the immediate implications flowing from this policy shift is a more stark conflict that will invariably arise between corporations that want to demonstrate cooperation and individual officers and employees who are at risk of prosecution. Because of this, from a practical standpoint, company employees may now be less likely to cooperate with a company’s internal investigation when they know that a company can curry favor with prosecutors by pointing the finger at corporate individuals.
Another issue is whether and/or how much to disclose regarding the results of internal investigations. This question has been a tension point in the past and resulted in prior aggressive actions on the part of prosecutors to both compel the waiver of the privilege and questions about the payment of attorneys’ fees for officers and employees who were targets of grand jury investigation. While the DOJ changed its policies with the so-called Filip memo to avoid inappropriate prosecutorial pressure regarding waiver and indemnification of grand jury targets, these issues will necessarily be implicated by the new DOJ policy.
Implementing the DOJ’s new policy to focus on individuals in corporate investigations will be no small undertaking. White collar investigations and prosecutions normally are quite resource intensive. To accomplish the objectives outlined in its memorandum, the DOJ will have to find a way to devote significantly more resources to white collar prosecutions while facing severe budgetary pressures and pursuing other pressing priorities such as cybersecurity, national security and violent crime. Given such constraints and recent prosecution trends, it may be some time before the results of this new policy are widely seen.1
See, for example “The Case of the Missing White-Collar Criminal,” online at http://www.bloombergview.com/articles/2014-06-22/the-case-of-the-missing-white-collar-criminal