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Polsinelli - Labor and Employment Government Investigations and Compliance - Civil and Criminal


September 2015


DOJ Reaffirms Commitment to Prosecuting Individuals, Toughens Expectation for Corporate Response







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Lauren P. DeSantis-Then



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W. Taylor McNeill



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Edward F. Novak

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The U.S. Department of Justice (DOJ) recently issued a memorandum ("The Yates memo") on September 9, 2015 by Deputy Attorney General Sally Yates, reaffirming the Government's commitment to prosecuting individuals. Say good-bye to the days of resolving an investigation with only a corporate monetary penalty: the DOJ wants some hands to slap and is going after individuals.

As part of its narrowing focus on individual accountability, DOJ has outlined six separate steps it will take to corral corporate internal investigations, increase communication between criminal and civil arms of the same investigation, and bring suit against all relevant parties at the outset of charges. While the substance of the Yates memo is far from groundbreaking, DAG Yates indicated that DOJ's approach under the new policy will be "all or nothing," suggesting that the policy could result in fewer settlements and more jury trials for those companies that do not meet DOJ's stringent cooperation standards. Indeed, the Yates memo expressly acknowledges that this new policy presents challenges for both the Government and corporations.

Regardless of how the policy announced in the Yates memo is applied, corporations are now formally on notice of what will be expected of them if they wish to receive credit for their cooperation in DOJ's prosecution of corporation officers. If nothing else, the Yates memo will likely serve as a new deterrent to combat fraud.

DOJ is taking six steps to coax companies into naming names:

  1. To qualify for cooperation credit, corporations must provide to DOJ all relevant facts relating to the individuals responsible for the misconduct. Under DOJ's Principles of Federal Prosecution of Business Organizations, corporations must fully disclose all relevant facts about individual wrongdoing, in hopes of lessening their liability or avoiding prosecution altogether. Corporations will be expected to identify all individuals involved in or responsible for the misconduct at issue, regardless of the individuals' position, status, or seniority within the corporation, and provide all facts about the misconduct. The Yates memo specifically extends this principle to civil cases brought under the False Claims Act, 31 U.S.C. § 3729(a)(2), stating that "full cooperation" under the FCA's reduced damages provision will require, at minimum, that all relevant facts about responsible damages are disclosed to DOJ. Importantly, in a speech formally announcing this policy on September 10, 2015, Yates explained that DOJ will not accept as an excuse the argument that the corporation has not yet conducted a complete investigation. In short, corporations will be expected to conduct a robust internal investigation and disclose all relevant facts about the responsibility of individuals.
  1. Criminal and civil investigations should focus on individuals from the inception of the investigation. Doing so, according to the Yates memo, will allow DOJ to fully discover the extent of corporate misconduct and will increase the likelihood that individuals with knowledge of the misconduct will cooperate with the investigation and provide information against individuals higher up in the corporate hierarchy.
  1. Criminal and civil attorneys handling corporate investigations should be in routine communication with one another. While increasingly common in recent years, DOJ will continue to devote resources from both the civil and criminal divisions when investigating potential corporate misconduct. Such parallel proceedings provide DOJ with a full panoply of remedies, including incarceration, fines, penalties, damages, asset seizure, civil and criminal forfeiture, and exclusion, suspension, and debarment.
  1. Absent extraordinary circumstances, DOJ will not release responsible individuals from civil or criminal liability when resolving a matter with a corporation. In the event DOJ resolves a matter with a company before resolving matters with responsible individuals, DOJ will preserve its ability to pursue these individuals.
  1. DOJ attorneys should not resolve matters with a corporation without a clear plan to resolve related individual cases and should memorialize any decisions not to pursue individual liability in such cases. For example, plea and settlement agreements could include a discussion of the potentially culpable individuals, a description of the status of the investigation regarding their conduct, and the investigative plan to ensure the matter is resolved in a timely manner. The approval of the United States Attorney or Assistant Attorney General whose office is handling the investigation will be required for all decisions declining to pursue civil or criminal liability for individual wrongdoers.
  1. DOJ civil enforcement attorneys should focus on bringing suits against individuals as well as companies. In short, DOJ's focus on individual wrongdoing extends beyond the criminal context to civil proceedings, including FCA qui tam actions. While an individual's ability to pay a civil judgment is traditionally a controlling factor in deciding whether to bring suit, the Yates memo makes clear that other considerations, such as the seriousness of the individual's misconduct and the individual's past history, are equally important. In addition to returning government money to the public fisc, civil enforcement proceedings, particularly those against individuals, can result in long-term deterrence of individual misconduct in the corporate context.

The Yates memo is clear in its awareness that the approach under the new policy will present challenges for both the Government and corporations. For example, the Yates memo presumes that a company will even agree with the DOJ's conclusion that illegal conduct took place. In other words, how can a corporation identify all individuals involved in or responsible for the misconduct at issue – and therefore receive cooperation credit and possibly avoid prosecution – if, after a robust investigation, the corporation reasonably concludes that there was no illegal conduct, individual or otherwise? At the same time, individuals, now squarely in DOJ's crosshairs, have little incentive to cooperate with a corporate or government investigation. These are just some of the challenges that are sure to arise as DOJ's policy is applied in practice.

For More Information

For additional information on how the Yates memo may impact your business objectives, please contact the authors or your Polsinelli attorney.











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