What The Yates Memo Means For Federal Criminal And Civil Corporate Investigations

Posted On Friday, December 4, 2015
By: Marc S. Raspanti


In September of this year, the Deputy Attorney General of the United States, Sally Quinlan Yates, issued a memorandum (the now-famous “Yates Memo”) that sets forth various policies purportedly aimed at ensuring that culpable individuals are held responsible for corporate wrongdoing.[1]  Per the Yates Memo, both criminal and civil investigations will now focus on individuals – and not just corporations – from their inception.  Absent extraordinary circumstances, resolutions with corporations will no longer immunize individuals, who are typically high-level executives, from criminal or civil liability.  Corporations, in turn, are required to conduct appropriate internal investigations and provide all relevant facts about individuals involved in misconduct, if they are to receive any credit for cooperating with the government.  These guidelines seem to respond to Congress, which has long chided the Department of Justice (“DOJ”) for being too soft on culpable executives.

In public remarks just two weeks after the release of the Yates Memo, Assistant Attorney General Leslie Caldwell highlighted several previous cases as examples of how she expects the principles of the Yates Memo to be applied. [2] Among the cases she cited was the Foreign Corrupt Practices Act (“FCPA”) matter involving Alstom, S.A., the French power company, which was resolved in December 2014.  Alstom entered a plea of guilty to violating the FCPA and agreed to pay a penalty of $772 million.  Its Swiss subsidiary pleaded guilty to conspiracy to violate the anti-bribery provision of the FCPA, and two U.S.-based subsidiaries also admitted to conspiring to violate the FCPA and entered into Deferred Prosecution Agreements.  The Alstom investigation resulted in criminal charges against five individuals, including four corporate executives, in connection with the bribery scheme.  Assistant Attorney General Caldwell explained that the final global corporate resolution with Alstom was based, at least in part, on what she described as the company’s failure to voluntarily disclose the misconduct and its refusal to cooperate with the investigation until years later, after several company executives had been charged.

Significantly, the policy regarding cooperation credit will soon be memorialized in the United States Attorney’s Manual, which is the official compendium of policies and guidelines that prosecutors must follow in investigating and litigating cases.  In November, Deputy Attorney General Yates announced that the DOJ is revising its Principles of Federal Prosecution of Business Organization to reflect that providing all available and relevant facts about individual wrongdoers is now a threshold requirement to receive cooperation credit, as opposed to a factor that the government considers in determining whether and how much credit is appropriate.[3] Both criminal and civil prosecutors will be instructed to apply this new standard.   


Time will tell whether these policies will ultimately change the way the DOJ prosecutes white-collar criminal and civil cases.  The Department recently announced plans to add 10 prosecutors to the FCPA Unit, thereby increasing its ranks by 50%, a move that signals increased enforcement and perhaps the more aggressive pursuit of individuals.[4]  Deputy Attorney General Brent Snyder of the Antitrust Division touted the November 10 indictment of three Japanese auto parts executives for their alleged involvement in a bid-rigging conspiracy as “another reminder that antitrust violations are not just corporate offenses but also crimes by individuals. The Antitrust Division will continue to vigorously prosecute executives who orchestrate their companies’ efforts to break the law.”[5] According to the DOJ, the indictment of drug manufacturer Warner Chilcott’s former president for his alleged participation in a physician kickback scheme sends the same message: “The Department will continue to hold companies and responsible individuals accountable when they use improper incentives, like those alleged here, to promote their products.”[6]

Investigations in these matters, however, surely began long before the Yates Memo was issued, and, in any event, a few cases do not necessarily demonstrate a shift in focus for an organization as large and as complex  as the DOJ.  Indeed, skeptics will argue that agency officials have emphasized the need to target individuals since the aftermath of the 2008 banking collapse, but that the emphasis has had little effect in the way cases are prosecuted.  Moreover, former Deputy Attorney General James Cole has suggested that the government eventually will have to walk back its “all-or-nothing” approach to cooperation because the stringent standard for credit will discourage corporations from providing any assistance at all.[7]   

But, as former Deputy Attorney General Cole recognizes, any retreat likely would come in the future, given the emphasis the DOJ has put on the new policy prescriptions. Especially significant is the fact that the U.S. Attorney’s Manual was revised to incorporate the Yates Memo.  Many prosecutors refer to the Manual as “the Bible,” and they often cite its passages as justification for the decisions they make in litigating cases.  In light of these revisions, it would be prudent for companies and individuals alike to take the Yates Memo’s policies seriously.   


In particular, the Yates Memo and the corresponding revisions to the U.S. Attorney’s Manual should influence one significant threshold tactical decision: Whether and when corporations should hire separate, independent counsel to represent their directors, officers, or employee who may be implicated in an investigation of potential misconduct? In light of the new DOJ policies, this decision should be made at the inception of an internal investigation, or at least as soon as the potential misconduct of an individual is revealed. Failure to do so could result in myriad ethical and conflict concerns.

The Delaware indemnification statute, 8 Del. Gen. Corp. Law § 145, provides corporations with a broad right to indemnify against reasonably incurred attorneys’ fees any director, officer, employee, or agent “who was or is a party or is threatened to be made a party” to any legal proceeding.  Exercising the right to indemnify ensures that individuals subject to potential litigation have access to independent counsel, thus reducing the risk for troublesome conflicts of interest between individuals and the corporation.  Those conflicts are likely to arise early in the internal investigation, long before legal action is initiated or threatened, now that companies desiring cooperation credit are required to reasonably investigate potential misconduct and provide all relevant facts regarding individual wrongdoers.

Finally, corporations and individuals should keep in mind that the Yates Memo instructs prosecutors to focus on individuals from the very outset of a DOJ investigation. Thus, by the time the government notifies a corporation that it is being targeted for criminal or civil wrongdoing, the government may already believe that certain individuals are or may be culpable.  In such instances, it is imperative that both the corporation, in its own right, and any individuals who may be in the government’s crosshairs each secure separate and independent representation.  In that regard, the Yates Memo should not trigger panic among corporate executives, as it is consistent with principles that DOJ has observed for quite some time. Rather, the importance of making the decision to hire separate counsel for potential individual targets is consistent with an overall disciplined approach to government investigations that will increase the opportunity to mitigate risk under difficult circumstances.

[1] http://www.justice.gov/dag/file/769036/download

[2] http://www.justice.gov/opa/speech/assistant-attorney-general-leslie-r-caldwell-delivers-remarks-second-annual-global-0

[3] http://www.justice.gov/opa/speech/deputy-attorney-general-sally-quillian-yates-delivers-remarks-american-banking-0

[4] http://www.justice.gov/opa/speech/assistant-attorney-general-leslie-r-caldwell-delivers-remarks-american-conference

[5] http://www.justice.gov/opa/pr/three-japanese-auto-parts-executives-indicted-bid-rigging-conspiracy-involving-body-sealing

[6] http://www.justice.gov/opa/pr/warner-chilcott-agrees-plead-guilty-felony-health-care-fraud-scheme-and-pay-125-million

[7] http://www.bna.com/us-retreat-yates-n57982063844/


MARC S. RASPANTI is a founding partner of Pietragallo Gordon Alfano Bosick & Raspanti, LLP.  Following his tenure as a prosecutor, Mr. Raspanti has devoted more than 28 years to representing the interests of individuals and corporations in courts around the United States.  His experience includes defending against charges of healthcare fraud, political corruption, tax evasion, and alleged violations of antitrust laws and the FCPA.  For more information, please visit www.pietragallo.comor contact Mr. Raspanti at msr@pietragallo.com.

DOUGLAS E. ROBERTS is an associate in the Government Enforcement, Compliance, and White Collar Litigation Practice Group of Pietragallo Gordon Alfano Bosick & Raspanti, LLP.  Mr. Rosenblum’s experience includes working in the Federal Defenders Office, as well as in Private Practice litigating commercial and criminal cases.  Mr. Roberts may be contacted at der@pietragallo.com.