March 7, 2021

Volume XI, Number 66

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March 05, 2021

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March 04, 2021

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A Shift of Emphasis at the DOJ – the Yates Memo

On September 15, 2015, Deputy Attorney General Yates issued a memo shifting the focus of federal prosecutorial efforts with respect to corporate wrong-doing.

The memorandum encouraged DOJ prosecutors who identify corporate wrong-doing to shift the emphasis, at least in part, to the individuals who commit corporate wrong-doing, rather than focusing only on the entity. (This shift also will impact DOJ’s civil litigators, who will apply these criteria to decide whether a company respondent will get credit for “cooperating” both during a case, and even thereafter, and because the memo requires cooperation on these issues between criminal and civil DOJ attorneys.) It is quite common that a corporation accused of an improper act will address a threat of prosecution by agreeing to pay substantial fines, and by offering to undertake expensive remedial actions. This result has been defended on the grounds that the beneficiaries of the wrong-doing are the shareholders of the company that benefited from those improper acts.

However, some are of the view that in many instances the benefits of the conduct to investors have been small, and there is a sense that the people in a company who cause the company to do those bad things “buy” their way out of trouble using corporate funds to boost prosecutors’ recovery stats, while they escape personal punishment.  Shareholders pay the price, but those who caused the bad conduct get to keep the bonuses or other rewards they received before the conduct was identified, and do not suffer any punishment.

Companies conducting internal investigations, or subject to outside investigations, are likely to see the SEC and DOJ asking more questions about “who did it,” “who authorized it,” “who condoned it,” etc.  Counsel also may have to be more sensitive to actual or potential conflicts of interest when representing either an entity or its management in an investigation.

Please click here to view Deputy AG Yates’ comments which has a link to a PDF of the actual memo at the end.

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©2020 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume V, Number 287
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About this Author

Steven Feldstein, Greenberg Traurig Law Firm, Philadelphia, Corporate and Finance Law Attorney
Shareholder

Steven M. Felsenstein is an attorney in the Investment Regulation Practice and Co-Chair of the Financial Regulatory and Compliance Practice and focuses his practice on serving clients involved in financial services industries. He advises investment companies registered under the Investment Company Act of 1940, investment advisers registered under the Investment Advisers Act, and other administrators and service providers involved in the industry. Steven also represents broker-dealers and transfer agents registered under the Securities Exchange Act of 1934, and issuers of...

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