Inside the Criminal Case: New playbook for prosecuting white collar crime

October 7, 2015

bell-gaerte-insideThere is a theme that permeates the news reporting of the 2008 financial crisis: no one went to jail as a consequence. In possible reaction to this theme, the U.S. Department of Justice recently issued a bulletin that has since been referred to as the “Yates Memo.”

In that memo, Deputy Attorney General Sally Quillian Yates issued a directive to the department to refine its focus in corporate investigations to include a more systematic targeting of “individuals who perpetrated the wrongdoing.” Recognizing that it is difficult to establish an individual’s specific knowledge of criminal activity in addition to criminal intent, the new emphasis seeks to give prosecutors additional leverage to hold the appropriate individuals accountable. The Yates Memo is explicit in its motive, scope and methodologies. As it is implemented, it will surely have a dramatic effect in how corporate investigations are handled by the DOJ and, therefore, how criminal defense counsel responds to the same. The purpose of this article is to provide an overview of what may prove to be a new era in investigating and prosecuting corporate crime.

Specifically, the memo identifies the following six focal points:

1. Corporations must affirmatively provide the department with all relevant facts relating to individual misconduct.

In order to receive any benefit for cooperating, a company must disclose everything. A company cannot “pick and choose” what facts to disclose in any manner whatsoever. The company must also affirmatively disclose all responsible individuals “regardless of their position, status and seniority, and provide the Department all facts relating to that misconduct.” At the same time, the Yates Memo directs investigators to concurrently “proactively investigat(e) individuals at every step of the process” and to compare those results with the information provided by the corporation.

2. All investigations should focus on both criminal and individual liability at the inception.

Because a “corporation only acts through individuals,” a focus that emphasizes individual wrongdoing ensures that the government is ferreting out the full extent of the misconduct. In addition, the redirected individual focus will also ensure that knowledgeable individuals will be more apt to cooperate with the investigation, presumably because of an increased concern with being prosecuted. Finally, and most obviously, this also ensures that the DOJ will “maximize the chances that the final resolution … will include civil or criminal charges against not just the corporation but against culpable individuals as well.”

3. The department’s civil and criminal attorneys should be in routine communication.

As a general issue, this aspect is more of an emphasis on something that is already occurring in most U.S. Attorneys’ offices. However, the Yates Memo also directs that investigations should not necessarily end if there is no criminal charge. From now on, should a federal criminal investigation be terminated due to an inability to prove criminal intent, or the inability to prove a case beyond a reasonable doubt, criminal attorneys from the department should explicitly “confer with their civil counterparts so that they make an assessment under applicable civil statutes … .”

4. Culpable individuals shall not be released from liability simply as a result of a corporate resolution absent extraordinary circumstances.

In the event of a corporate resolution of either civil or criminal investigations, absent extraordinary circumstances, the DOJ should explicitly agree to not dismiss charges against, nor provide immunity for, individual officers or employees. Department attorneys should “take care to preserve the ability to pursue these individuals.” Consequently, any agreements that waive prosecutions or dismiss charges against potentially culpable individuals must be personally approved in writing by the relevant assistant attorney general or United States attorney.

5. Criminal cases shall be resolved in conjunction with corporate matters.

If the corporate investigation is resolved before the ones focused on individual culpability, investigators must draft a discussion of the individuals who have liability, a description of their status, the work that still needs to be done, and a plan to have the investigation completed prior to the expiration of the statute of limitations. Consistent with prior sentiment, if individuals who committed misconduct are not the subject of criminal or civil charges, the reason for the determination must be explicit and approved by the United States attorney or assistant attorney general, or their appropriate designees.

6. Civil prosecutors should focus on individuals as well as a corporation and should not evaluate whether to pursue individual claims based strictly on the individual’s ability to pay.

The focus of civil prosecutors is no longer restricted to obtain restitution from financially solvent individual wrongdoers. Per the new directive, civil enforcement should also be pursued to “hold the wrongdoers accountable and to deter future wrongdoing.” Civil actions should not be determined “solely by those individuals’ ability to pay.” If the individual wrongdoer’s misconduct was serious, civil prosecutors should analyze the person’s past history and circumstances of the offense, the community’s needs and the government’s resources. While increased civil proceedings may not increase the government’s coffers, the new focus is intended to engender “significant long-term deterrence.”

The Yates Memo states that the changes are being made while “recognizing the challenge they present.” The shift in focus surely creates additional work for DOJ attorneys and staff, and additional funding equally as surely is not coming in the immediate future. What is clear is that the department is committed to the changes. The takeaway for attorneys engaged in defending these actions on a corporate or individual capacity is also clear: the players are the same, but there is a new playbook. The manner in which defense counsel responds to a federal investigation may no longer be as effective as it once was.•

James J. Bell and K. Michael Gaerte are attorneys with Bingham Greenebaum Doll LLP. They assist lawyers and judges with professional liability and legal ethics issues. They also practice in criminal defense and are regular speakers on criminal defense and ethics topics. They can be reached at jbell@bgdlegal.com or mgaerte@bgdlegal.com. The opinions expressed are those of the authors.


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