17 May 2016 - Post by:Kurt Wolfe
Last September, the US Department of Justice released its Individual Accountability Policy—better known as the ‘Yates Memo‘—which outlines DOJ’s six-step plan for increasing the number of cases it brings against individuals who may be accountable for corporate wrongdoing.
The Yates Memo met with noticeable concern from many counsel and corporates who viewed the policy as a considerable change of course that could fundamentally alter the nature, scope, and cost of criminal investigations.
Last week, US Deputy Attorney General Sally Yates, who reluctantly lends her name to the Memo, offered her perspective on how the policy is ‘working so far in practice’. In a broad-ranging speech, Yates lamented the ‘world of client alerts and bar articles, where the cascading cavalcade of terribles is laid out in startling terms’. Such remonstrations, she insists, do not reflect ‘the world of real life—of real cases and real lawyers’. In practice, she says, the policy is working. It is bringing about positive changes both within the DOJ and outside the DOJ.
No need to ‘boil the ocean’
In a previous post, we assessed possible unintended consequences of the Yates Memo. The potential consequence that resonates most with many clients is the prospective uptick in investigation costs. In her recent speech, Ms. Yates sought to clarify DOJ’s expectations regarding the scope of internal investigations. Below we reconsider this potential consequence in light of her comments.
In describing the potential uptick in investigative costs, we advised that the Individual Accountability Policy does not require corporates to ‘boil the ocean’, though it may necessitate deeper dives with respect to certain aspects of a well-tailored investigation. Last week, Ms. Yates offered similar advice:
‘[The policy] does not mean companies are required to conduct overly broad investigations or embark on a years-long, multimillion dollar investigation every time a company learns of misconduct, or what I’ve heard described as “boiling the ocean.” On the contrary, we expect companies to carry out a thorough investigation tailored to the scope of the wrongdoing’.
As a ‘threshold cooperation credit requirement’, companies must provide facts relating to the conduct of individuals who may be accountable for corporate wrongdoing. DOJ wants specifics—they demand more than ‘mistakes were made’ presentations that decline to identify individuals who may be culpable for alleged wrongdoing. Simply put, companies must be forthcoming with known, non-privileged facts.
All the facts?
But when must a company have ‘all the facts’? And how long and hard must it search to find relevant information?
Companies needn’t be in a position to present all the relevant details the moment they open lines of communication with DOJ. Indeed, Ms. Yates explained:
‘a company [will not] be disqualified from receiving cooperation credit simply because it didn’t have all the facts lined up on the first day it began talking with us. Rather, we expect that cooperating companies will continue to turn over the information to the prosecutor as they receive it’.
Thus, the expectation isn’t that companies will have all the facts on day one, but that they will continue to provide relevant information as it is uncovered.
An appropriate investigative approach
Determining an appropriate investigative scope requires balancing various (sometimes competing) interests. The company’s interests in conducting an investigation in a minimally disruptive, discreet, and cost-effective way might, in some cases, appear to be at odds with the company’s equally compelling interest in obtaining maximum cooperation credit. And none of these interests may appear to align with DOJ’s interest in obtaining all relevant facts relating to the conduct of individuals.
Companies and their counsel might reconcile these seemingly incongruous interests by expanding their dialogue with prosecutors. In thinking about how to appropriately scope investigations, we previously commended Ms. Yates’ advice to ‘pick up the phone and discuss it with the prosecutor’. Prosecutors may, after all, be in the best position to help you scope—or prioritize—aspects of your investigative workflow. Ms. Yates underscored this point in her recent speech:
‘The determination of the appropriate scope and how to proceed is always case specific—it’s not possible to lay out hard and fast rules. Which is why, we’ve reiterated that if a company’s counsel has questions regarding scope, they should … contact the prosecutor directly and talk about it’.
Companies improve their chances of receiving maximum cooperation credit when prosecutors understand—and, better yet, buy into—the investigation plan. Coming to an understanding on scope, however, requires an open dialogue. It requires a degree of credibility that is hard won, and easily lost. The goal, as Ms. Yates puts it, is to demonstrate to prosecutors that the company ‘conducted an appropriately tailored investigation and truly did everything they could reasonably be expected to do to determine who did what’.
According to Ms. Yates, ‘[if they] simply can’t figure it out, they are not precluded from receiving cooperation credit’.
For many, Ms. Yates advice might only reiterate best practices that have been in place for years. Still, scoping investigations—and effectively balancing competing interests—is difficult. It might seem obvious that transparency, credibility, and dialogue are critical to putting your best foot forward with a regulator. But in the heat of an investigation, these aspects are sometimes lost. We would remind companies facing regulatory scrutiny to focus on these elements from day one—even if you don’t yet have all the facts.