The “Yates Memo” Revisited: Pursuing Individuals Remains a DOJ Top Priority – Senior Management and Members of Boards of Directors in Focus
During a November 29, 2018 speech, Deputy Attorney General Rod Rosenstein announced changes to Department of Justice (“DOJ”) policy concerning individual accountability in corporate cases. The announcement followed the DOJ’s year-long review of its individual accountability policies and the September 2015 memorandum issued by then-Deputy Attorney General Sally Yates, commonly known as the “Yates Memo.”
While making clear that pursuing individuals responsible for corporate wrongdoing remains a top priority in every investigation conducted by DOJ, Mr. Rosenstein drew a substantial distinction between the treatment of individuals in criminal investigations and civil investigations.
In criminal cases, the revised policy provides that to receive cooperation credit, a company “must identify every individual who was substantially involved in or responsible for the criminal conduct.” Responding to concerns that it was inefficient to require companies to identify every employee involved irrespective of culpability, Mr. Rosenstein stated that DOJ’s focus will be on those who play “significant roles in setting a company on a course of criminal conduct.” He also noted that “investigations should not be delayed merely to collect information about individuals whose involvement was not substantial, and who are not likely to be prosecuted.” Importantly, Mr. Rosenstein made clear that if a company fails to work in good faith to identify substantially involved or responsible individuals, it would not receive any cooperation credit.
According to Mr. Rosenstein, “[c]ivil cases are different.” Recognizing that the primary purpose of civil enforcement is the recovery of money, Mr. Rosenstein noted that the “all or nothing” approach to civil cases espoused in the Yates Memo was simply not practical and, in some circumstances could be counterproductive. In those matters where criminal culpability is not in question, the revised policy recognizes a need for flexibility.
The most significant aspect of this revision is the focus on senior officials in the company, including members of “senior management or the board of directors.” In civil matters, entities are expected to identify all wrongdoing by these individuals. Indeed, Mr. Rosenstein noted that if companies make any effort to hide misconduct by senior leaders, they “will not be eligible for any [cooperation] credit.” Companies that want to receive “maximum credit” must “identify every individual person who was substantially involved in or responsible for the misconduct.”
The revised policy also provides DOJ lawyers with the flexibility to provide “partial credit” for companies that seek to cooperate with the government. For instance, in situations where a company “honestly” and “meaningfully” provides “valuable assistance” to the government, the revised policy envisions the ability to award at least partial credit, even if the company does not agree with the government about every employee’s individual liability. According to Mr. Rosenstein, when credit is all or nothing, resolution of cases can be delayed without any resultant benefit.
Additionally, in settling civil cases post-Yates, the DOJ has routinely refused to include releases for individuals regardless of culpability. The revised policy returns to the pre-Yates practice of allowing DOJ’s civil attorneys the discretion to negotiate individual releases in cases where additional investigation of those individuals is not warranted “with appropriate supervisory approval.”
Finally, the Yates Memo stated that DOJ would not consider an individual’s ability to pay a civil settlement or judgment as part of its decision whether or not to pursue that individual. Going forward, the revised policy permits DOJ attorneys to consider “ability to pay” issues in deciding whether or not to pursue a civil judgment against an individual. According to Mr. Rosenstein, this commonsense change has been made so that DOJ civil attorneys are not wasting valuable resources pursuing individuals from whom there is no realistic source of recovery.
While noting that it is “revising” current policy, DOJ has made clear that the pursuit of individuals, whether in criminal or civil investigations, remains a top priority. The specific identification in civil cases of the actions of senior management, including members of a company’s board of directors, is significant and should be top of mind for entities operating in the health care arena, where enforcement efforts are so routinely focused—whether by the government directly or through the efforts of qui tam relators. This development suggests the continued need to focus compliance efforts throughout an organization and to ensure that its most senior leaders appreciate the spotlight that will be put on their activities.