Burr & Forman

03.11.2016   |   Articles / Publications

InsideCounsel: The Yates Memo: Its Impact On the Prosecution of Corporations and Individual Defendants

In an article published on March 11, 2016, Benjamin Coulter provides insight on the Yates Memo and its impact on the prosecution of corporations and individual defendants.

On Sept. 9, 2015, Deputy Attorney General Sally Yates issued the memo in an effort to earn the public’s confidence by pursuing, punishing and deterring individuals involved in corporate wrongdoing. Coulter explains the six specific points of instruction outlined in the memo on how prosecutors and civil litigators working for the DOJ should handle these cases. As the DOJ continues to pursue individual wrongdoers, “companies and individuals would be wise to adjust their expectations and approaches to investigations accordingly,” says Coulter.

The Yates Memo: Its Impact on the Prosecution of Corporations and Individual Defendants

By Benjamin B. Coulter


On September 9, 2015, Deputy Attorney General (DAG) Sally Quillian Yates issued a memo entitled “Individual Accountability for Corporate Wrongdoing” to all of the Department of Justice’s (DOJ) prosecutors and civil litigators. Known as the Yates Memo, this directive signaled a new priority in the DOJ’s pursuit of corporate wrongdoing – a priority of pursuing, punishing and deterring individual wrongdoers.

It is believed by many to be a response to criticism that few individuals, or at least few executives, were held accountable for the decisions that allowed the financial crisis of 2007-2009, and the Great Recession as a whole, to occur. As DAG Yates put it, the memo was part of an effort to earn the public’s confidence by “relentlessly pursuing wrongdoing, no matter who those wrongdoers may be.”

The memo provided guidance with six specific points of instruction to prosecutors and civil litigators working for the DOJ:

(l) in order to qualify for any cooperation credit, corporations must provide to the Department all relevant facts relating to the individuals responsible for the 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 in routine communication with one another;

(4) absent extraordinary circumstances or approved departmental policy, the Department will not release culpable individuals from civil or criminal liability when resolving a matter with a corporation;

(5) Department 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.

Each of these directives is designed to increase focus by the DOJ on the pursuit of individual wrongdoers believed to be involved in corporate wrongdoing.

The first directive, ending “partial credit” for corporate cooperation with the DOJ, is perhaps the biggest policy change. Previously, corporations facing scrutiny for fraud could receive cooperation credit by disclosing corporate wrongdoing but not identifying the individual wrongdoers. In DAG Yates’ words, “[t]he rules have now changed.” Corporations wishing to receive credit for cooperating with the government must take steps to identify and disclose the identities of individual wrongdoers. This means businesses under scrutiny for, e.g., alleged violations of the False Claims Act (mentioned specifically in the memo and DAG Yates’ speech) must do the work necessary to identify individual wrongdoers and must share that information with the government.

While conceding that a business need not “boil the ocean” and engage in enormously costly and full-scale investigations every time it learns of any wrongdoing, DAG Yates nevertheless made clear that the expectation is that a business discovering wrongdoing cannot simply plead ignorance or adopt an ostrich-like position towards individual wrongdoing. As DAG Yates reiterated in a November 2015 speech, “if a company wants credit for cooperating – any credit at all – it must provide all non-privileged information about individual wrongdoing” and companies must “do investigations that are timely, appropriately thorough and independent, and report to the government all relevant facts about all individuals involved, no matter where they fall in the corporate hierarchy.” This adjustment to the “Filip Factors” changes the calculation for any company facing allegations of wrongdoing and emphasizes the importance of a well-thought-out investigation.

The second directive is that criminal and civil investigations should focus on individual wrongdoers from the start of an investigation. According to DAG Yates, the DOJ’s investigations of individuals have previously suffered because they focused early on the easier aspect of the investigation or the broader corporate investigation. This made it tougher to build cases against individuals due to the passage of time and other developments, further deemphasizing the investigation of individuals. According to DAG Yates, the pursuit of individuals should start at the beginning of a case and should proceed even during delays in a corresponding corporate case.

The third directive is that the civil side and the criminal side of the DOJ should communicate with each other early and often. Prosecutors should inform the civil investigators of their findings and intentions, and civil investigators should do the same for the “other side of the house.” As DAG Yates noted, this relates closely to the second directive and means that any lawyer representing a company or individual should consider both criminal and civil issues to be in play from the beginning.

The fourth and fifth directive relate to the DOJ’s resolution strategy. Initially, absent extraordinary circumstances, the DOJ will not release individuals from liability on the basis of the corporate resolution of a matter. The fifth directive relates closely. While individuals may well have already concluded before a corporate resolution is reached, DAG Yates’ guidance means that “[i]f… DOJ attorneys decide it is necessary to resolve the corporate case first, they will only be permitted to do so once they have demonstrated a clear plan to their supervisors for resolving the related individual cases – promptly and before the statute of limitations expires.” And if government lawyers decide not to pursue individuals, they must document their decision to do so and “obtain approval from the U.S. Attorney or the Assistant Attorney General overseeing the investigation.” These directives should change the calculation for companies considering resolution with the government and what they can hope to gain through resolution.

The final directive is that civil attorneys should consistently focus on individuals (and the company) and consider more than the ability of the individual to pay. In her words, rather than focus only on the public fisc, the DOJ intends to pursue individuals on the basis that individual wrongdoers should be punished and deterred. It is further the intent of the DOJ that individuals not be allowed to retain any benefit of their alleged wrongdoing. This guidance, in accord with the other directives from the Yates memo, highlights that the DOJ will not be satisfied by merely recouping part or all of a loss. Companies and individuals can expect longer-lasting, more comprehensive investigations less centered on attempts to reach a financial resolution.

The true impact of the Yates memo will be measured over time, and commentators have pointed out that many of its concepts are not new. But its existence alone should communicate to companies and individuals facing investigations that the stakes and rules have changed. The DOJ has publicly committed itself to the pursuit of individual wrongdoers. Companies and individuals would be wise to adjust their expectations and approaches to investigations accordingly.

Ben Coulter is an attorney at Burr & Forman LLP practicing in the General Commercial Litigation Group. His practice primarily involves the defense of banks, credit unions, brokers and other financial institutions in securities litigation and other commercial matters. He also defends medical providers in medical malpractice actions and medical providers in litigation and regulatory matters. He may be reached at (205) 458-5420 or by email at bcoulter@burr.com.

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