Yates Memo Revised – DOJ Steps Back From All-or-Nothing Approach to Corporate Cooperation Credit

December 5, 2018

The Justice Department’s revisions to the so-called “Yates Memo” continues a series of significant white collar enforcement policy changes. We hope this summary is helpful to businesses and their leaders in adjusting to these changes, which can have a profound effect on choices for companies and business leaders addressing white collar issues.
– George Terwilliger

More than three years after then-Deputy Attorney General Sally Yates authored a new Department of Justice policy regarding individual accountability in government investigations of corporate wrongdoing (the Yates Memo), the DOJ is once again set to change course. In a Nov. 29 speech setting out the latest iteration of the department’s approach to individuals and corporate cooperation, Deputy Attorney General Rod Rosenstein signaled that the DOJ will relax the rigid approach required by the Yates Memo and sensibly return flexibility and discretion to government investigators.

In the new policy announced by Rosenstein, the DOJ will:

  • continue to focus on individuals in its white collar investigations;
  • end the Yates Memo’s “all or nothing” approach and permit corporations to receive credit for their cooperation if they identify individuals who were significantly involved in or caused the criminal conduct; and
  • permit greater flexibility and discretion in awarding cooperation credit in civil cases.

Originally announced in September 2015, the Yates Memo established a new Department policy focusing on the investigation of individuals and creating new rules under which the DOJ would afford a corporation credit for its cooperation with an investigation. At its core, the Yates Memo required that corporations identify all individuals involved in any aspect of alleged misconduct, regardless of their status or seniority, in order for the corporation to receive any credit for its cooperation with the government. The threat of withheld cooperation credit on an all-or-nothing basis, plus the requirement that all potentially involved individuals be identified before a settlement could be finalized, gave the government significant leverage to demand that target companies bend to the prosecutors’ view of the world about individual employees’ culpability. Although not always fully applied in practice, the Yates Memo required its approach be implemented in both criminal and civil investigations. 

McGuireWoods has covered the Yates Memo from its inception, to its implications for various specific enforcement areas. To review, see Sept. 11, 2015, McGuireWoods alert “Unpacking the Yates Memo: What the ‘New’ DOJ Policy Really Means; and Subject to Inquiry posts from Feb. 17, 2016, “DOJ Fraud Section to Require Cooperation Certifications Before Corporate Settlement”; Feb. 25, 2017, “Key Takeaways From This Year’s Early FCPA Enforcement Actions”; and Oct. 31, 2016, “Identifying Enforcement Innovations to Prepare for the Post-Yates Enforcement Environment.”

Responding to both internal and external criticism of the Yates Memo’s approach, Rosenstein previewed the results of a Department review of the application of the Yates Memo and announced forthcoming changes to that policy. Rosenstein reiterated that fighting white collar crime remains a top priority for the DOJ and that pursuing individual wrongdoers also remains a top priority in every corporate investigation. However, he also noted the importance of imposing penalties on corporate entities in a timely and efficient way, allowing the government to recover fraudulent proceeds, reimburse victims, and deter future violations, while also rewarding companies that implemented effective compliance programs.

In light of that continued focus, the changes Rosenstein announced suggest a refocusing or retrenchment of the policy set out in the Yates Memo, rather than a complete reversal of course, at least with respect to criminal matters. A complete reversal should not be expected inasmuch as prosecuting responsible individuals has long been a focus in federal white collar cases.  Rosenstein emphasized that the “most important aspect” of the new policy was that, in order for a corporation to receive credit for cooperation, it “must identify all wrongdoing by senior officials, including members of senior management or the board of directors.” To that end, and in order to provide more flexibility in bringing criminal investigations to a resolution, the new policy permits government investigators to award credit for cooperation when a corporation identifies “the individuals who play significant roles in setting a company on a course of criminal conduct” (emphasis added).  In this regard, he stated that the DOJ wants “to know who authorized the misconduct, and what they knew about it.” Consistent with this goal, to be awarded maximum credit for cooperation under the new policy, a corporation “must identify every individual person who was substantially involved in or responsible for the misconduct.”

The new policy also repudiates the Yates Memo’s approach that treated criminal and civil investigations in a similar way. Rosenstein observed that the government’s objectives in these investigations are different; namely, in a civil investigation, the primary goal is to recover money from wrongdoers. In practice, the Yates Memo’s “all or nothing” approach was “counterproductive” to this goal. Therefore, the new policy allows DOJ attorneys to provide credit on a sliding scale based on the degree of cooperation provided by the company, e.g., where the parties cannot reach agreement about the identity or culpability of every employee potentially involved in misconduct. Therefore, the new policy will restore a measure of discretion to the department’s civil attorneys to “accept settlements that remedy the harm and deter future violations, so they can move on to other important cases.” 

Rosenstein reiterated the government’s interest in pursuing individual wrongdoers and emphasized that corporations that failed to cooperate in good faith or sought to conceal misconduct by their senior leaders would not receive any cooperation credit. Nonetheless, this new policy relaxes the Yates Memo’s stringent approach. Rosenstein positioned the new policy’s changes as responding to the impracticalities of the Yates Memo’s requirements, conceding that these requirements were unrealistic in practice. It remains to be seen whether the new policy will mark a change in the DOJ’s approach in a more reasonable direction or whether it will merely ratify the existing day-to-day enforcement regime. 

While loosening the restrictions demanded by the Yates Memo and, at least modestly, enhancing the options for companies that cooperate with government investigations, the new policy still leaves significant grounds for disagreement between the DOJ and corporate investigative targets, and substantial room for negotiating settlement terms. As the Department once again alters its focus on cooperation (an evolving effort, ongoing for nearly 20 years), it is essential for corporations facing government investigation to be well-advised by seasoned counsel able to appreciate what is at stake and to craft a strategy to best navigate the shifting shoals of DOJ policy.

McGuireWoods’ Government Investigations and White Collar Department is a nationally recognized team of nearly 60 attorneys representing Fortune 100 and other companies and individuals in the full range of civil and criminal investigations and enforcement matters at both the federal and state levels. Our senior team is composed of a deep bench of former federal officials, including a former Deputy Attorney General of the United States, former U.S. Attorneys, more than a dozen federal prosecutors, and an Associate Counsel to the President of the United States. Strategically centered in Washington, DC, our team was honored as a Law360 “Practice Group of the Year,” and has earned the trust of international companies and individuals in some of the most notable enforcement matters over the last decade. For more information about the breadth and capabilities of our practice, please contact the authors of this article.