DOJ announces changes to Yates Memo: companies seeking cooperation credit need not identify every person involved in misconduct, just those "substantially involved"


White Collar Alert


The US Department of Justice has announced changes that will allow companies seeking cooperation credit to focus their resources on identifying people who were the most central to the misconduct at issue. These revised policies are intended to be more practicable than the approach memorialized in the Yates Memo of 2015, which was summarized here.

After saying over a year ago that the Yates Memo was under review, Deputy Attorney General Rod J. Rosenstein announced the official shifts on November 29, 2018, during his Remarks at the American Conference Institute's 35th International Conference on the Foreign Corrupt Practices Act. They are now incorporated into the Justice Manual (formerly known as the United States Attorneys' Manual), including under Section 9-28.700.

Counted among the policies the Yates Memo had initiated was a threshold requirement for companies that wanted to receive any cooperation credit. Namely, those companies had to investigate and detail to DOJ "all relevant facts about the individuals involved in corporate misconduct."  On its face, and often as applied, the Yates Memo made no distinctions between Chief Operating Officers and individual sales personnel spread around the globe − to garner credit for cooperation, companies had to identify every person "involved" in the misconduct. According to Rosenstein in his recent announcement, there were unintended consequences of this absolutist approach. 

Rosenstein said that although it had "seemed like a great idea" to require companies to identify every person involved in misconduct before the companies could become eligible for cooperation credit, in practice this had caused delays and impeded possible resolutions. Rosenstein acknowledged that these challenges had already led to the requirement not being "strictly enforced in some cases."

In other circumstances (as we can attest), companies anxious to engage in discussions about resolutions admitting wrongdoing were rebuffed and directed to investigate more broadly and more deeply than they had already done, frustrating efforts to obtain prompt conclusions of their matters. 

Under the DOJ's revised policies, to receive cooperation credit in criminal investigations companies now "must identify all individuals substantially involved in or responsible for the misconduct at issue" and provide prosecutors with "all relevant facts relating to that misconduct." The phrase "substantially involved in or responsible for" is the key change from the broader "involved in" formulation of the Yates Memo. 

As a practical matter, there may be situations where many employees at a large corporation played relatively small roles in an illegal scheme. For instance, hundreds of individual salespersons could provide gifts to government purchasing agents abroad, or scores of backroom workers could make inaccurate or incomplete entries in banking records that have the effect of defeating sanctions filters. As Rosenstein noted:

When the government alleges violations that involve activities throughout the company over a long period of time, it is not practical to require the company to identify every employee who played any role in the conduct. That is particularly challenging when the company and the government want to resolve the matter even though they disagree about the scope of the misconduct. . . . Our policies need to work in the real world of limited investigative resources.

At its simplest level, the revised policy will enable companies to earn cooperation credit without having to "boil the ocean" in an effort to identify every single employee who has some degree of criminal culpability, but who are unlikely to be charged and who would not add anything significant to an understanding of the misconduct. 

In this respect, the revised policy makes clear that the focus should be on higher-ranking management "responsible" for the misconduct (even if the improper conduct was actually executed by many lower level employees), bringing the policy more in line with the Sentencing Guidelines approach to cooperation which has long emphasized the provision of information “sufficient …. to identify … the individual(s) responsible for the criminal conduct.”   See U.S.S.G. § 8C2.5(g), cmt. (n.13). 

Of course, in some cases a lower-level employee may be deemed "responsible" for the misconduct in a meaningful way, a potentiality that the new policy explicitly recognizes by stating that someone may be "substantially involved in or responsible for" criminal conduct "regardless of their position, status or seniority."  For this reason alone, there will continue to be debates about the necessary breadth and depth of investigations. But one can hope that the edited language, and the clear policy direction behind it, will give counsel for companies openings to argue that "enough is enough" and that DOJ possesses sufficient information to move forward to discussions of a resolution (including credit for cooperation).

The renewed focus on the efficiencies associated with identifying just those persons with substantial culpability will also extend into the realm of civil investigations. Rosenstein said that experience over the last three years showed that "the 'all or nothing' approach to cooperation . . . was counterproductive in civil cases."  Going forward, civil attorneys officially will have discretion − subject to supervisory review − to offer some cooperation credit so long as companies provide "meaningful assistance." As Rosenstein observed in discussing civil resolutions specifically, "we cannot afford to delay corporate resolutions because a bureaucratic rule suggests that companies need to continue investigating until they identify all involved employees and reach an agreement with the government about their roles."

Open questions and key takeaways for companies

At a fundamental level, the changes to the Yates Memo policy suggest that defense attorneys and DOJ prosecutors will have greater flexibility with respect to resolving investigations and reaching agreements on appropriate cooperation credit. In focusing on persons who were "substantially involved" in misconduct, rather than all persons, cooperating companies may be able to streamline the information collection and turnover process as appropriate and, just perhaps, reach faster resolutions to DOJ investigations. 

Curiously, the rollout did not address an ostensible conflict between this revised Yates Memo policy and DOJ's FCPA Corporate Enforcement Policy (the principles of which are now considered beyond FCPA contexts). The latter still uses broader language requiring that companies disclose "all relevant facts about all individuals involved in" misconduct. It is hard to imagine that a disjointed approach was really intended, but clarity awaits another day. 

What remains clear is that prosecuting and pursuing individual persons who are responsible for misconduct will remain a top DOJ priority, and changes to Yates Memo policies should not be interpreted to the contrary.  Anyone who latches on to the revised policies as a reason to turn a blind eye to possible involvement in misconduct by upper management, or to be less than forthcoming about such involvement in disclosures to DOJ, will rue that decision—as Rosenstein emphasized more than once. This means there is ongoing potential for tensions to arise between companies and their executives, and a continued incentive for sophisticated executives to request individual counsel early on in an investigation.

On its face, however, the new changes are clearly positive for companies embroiled in DOJ investigations. As with DOJ's recent policy revisions regarding monitorships (announced in October 2018 and discussed here) and discouraging "piling on" (announced in May 2018 remarks by Rosenstein), at minimum, the Yates Memo changes seem to give some additional leverage to company counsel as to the timing and substance of a resolution.

Find out more about the implications of the Yates Memo changes by contacting any of the authors.