There is certainly no shortage of articles dissecting and analyzing the U.S. Department of Justice’s most recent pronouncement of its approach to prosecuting errant corporations and culpable individuals who operate within their structures. Here, however, we try to determine whether and to what extent it is helpful to determine a policy trajectory based upon previous Deputy Attorney General (DAG) memoranda, what the trajectory might be, and more importantly, how it will affect our client corporations and their officers.
Does the adage “past is prologue” hold here? The answer is probably a mixed one.
Department of Justice prosecutions in the wake of the financial crisis resulted in record-breaking settlements and penalties against corporations but, for the most part, without notable prison time for the leaders of culpable corporations. The recently released “Yates Memo” (authored by current Deputy Attorney General Sally Yates) seeks to clearly and unambiguously refocus prosecution efforts more than ever toward corporate executives, officers, and employees going forward. This unmistakable and emphatic focus on individuals raises questions as to the practical applications of its policies, the direction and fundamental nature of future federal prosecutions in the corporate arena, and such ancillary questions as whether and to what extent political philosophy will affect charging decisions.
In seeking to determine if a discernible trajectory exists, past DOJ memos, with their changing focuses, are worth looking back on. The memos, beginning with the 1999 Holder Memo, contain factors for prosecutors to consider when charging a corporation. In early memos, much of the attention focused on the giving of credit for the corporation’s “cooperation” in the investigation of corporate agents. This concept of crafting specific policy to motivate corporations as well as their officers and counsel to assist rather than resist an investigation—most notably, the waiver of attorney-client privilege in exchange for credit— continued thereafter and remained a central theme.
Several factors, however, contributed to the change in the emphasis on cooperation credit in general and, most notably, efforts to leverage waiver of the attorney-client privilege in particular. These included the decision in United States v. Stein by the U.S. Second Circuit Court of Appeals, congressional pressure in the mid-2000s, and of course, several changes in DAGs and their appointing administrations.
The most recent DAG memo, the Yates Memo, titled “Individual Accountability for Corporate Wrongdoing,” contains six principles articulating factors which drive DOJ’s approach to investigating/charging corporate crimes. Importantly, no less than five of the six principles (all save paragraph 3) emphasize individual liability.
The Yates Memo states: “One of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing.” Ultimately, this philosophy is very much a two-edged sword. It is undeniable that DOJ has made it a clear matter of policy to focus, wherever possible, on culpable individuals in the context of corporate criminal and civil enforcement matters. Depending upon the specific facts of the case, this could expose executives, officers, and management team officials to individual prosecution for conduct beyond either their knowledge or participation or both. The potential for this type of prosecution complicates and makes infinitely more difficult the defense of such matters. In other cases, however, there may be historically compliant companies with robust prevention, detection, and reporting mechanisms, whose “rogue individuals” are charged, and there is, of course, a much different result than the former.
Where should we expect the charging policies to go from here…and perhaps more importantly, what do we expect to be the result of this newly-enhanced focus on individuals? To date, all policy iterations have sought to give corporate entities credit for timely and complete cooperation. Political and public ideals will certainly affect – at least in theory – the DOJ emphasis (or lack thereof) on individual accountability versus corporate liability. But the practical challenges may have the greatest effect. Even with a strong, stridently-articulated policy, it will not be easy for DOJ to achieve its goals of both massive economic sanctions and landing culpable executives in prison, all aimed at deterrence.
It is important for us to do everything in our power to ascertain how revised iterations of DOJ policy will play out in changing the landscape. That’s what we’re trying to do here. As a practical matter, however, for those of us who represent corporate clients in the marketplace and who are committed to providing them with the counsel, advice, training, models, affirmative programs and tools to fully comply with a panoply of complex and onerous U.S. laws and regulations – even if we’re correct in identifying where the government is going—we can ill afford to rely too heavily on guesswork about precisely what investigators and prosecutors care most about. The intelligence changes, but the battlefield and its dangers change little.
Law360.com published a full version of this article on January 3, 2016.
 United States v. Stein, 541 F.3d 130 (2d Cir. N.Y. 2008)