Since at least the market crisis there has been a clamor to convict senior corporate officials of federal felonies – or at least name them in a civil law enforcement action by the SEC or another agency.  For years the Government investigated.  It brought a series of actions based on various theories.  Millions and billions of dollars were paid in fines by Wall Street banks and others.  The Government explained that the criminal prosecution of senior corporate officials is complex and difficult – the evidence to prove guilt of criminal activity beyond a reasonable doubt was not there.  The clamor continued.

Now the Government is shifting its approach to corporate investigations and prosecutions.  A memorandum authored by Deputy Attorney General Sally Quillian Yates entitled “Individual Accountability for Corporate Wrongdoing” refocuses Government law enforcement inquiries on individuals.   

The Yates Memo

The Yates Memo prioritizes the manner in which Government civil and criminal law enforcement investigations are conducted.  It begins by proclaiming that “One of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing . . . [accountability] it deters future illegal activity, it incentivizes changes in corporate behavior . . . and it promotes the public’s confidence in our justice system.”   

The Memo acknowledges the many challenges it calls “unique to pursuing individuals for corporate misdeeds.”  To address those challenges the DOJ convened a working group of senior attorneys.  From that group six principles were developed with supporting commentary:    

Principle 1:   “To be eligible for any cooperation credit, corporations must provide the Department all relevant facts about the individuals involved in corporate misconduct.” (emphasis original).  This means, according to the Memo, that companies “cannot pick and choose what facts to disclose.  That is, to be eligible for any credit for cooperation, the company must identify all individuals involved or responsible for the misconduct . . . “If the company “declines to learn of such facts” then it will not get cooperation credit.   This does not mean that DOJ attorneys should wait for the company to furnish the information, according to the Memo.  To the contrary, they should initiate their own inquiry, “proactively investigating individuals at every step . . .”This applies in civil and criminal cases. 

Principle 2: “Both criminal and civil corporate investigations should focus on individuals from the inception of the investigation.”  The goals achieved by taking this approach, according to the Memo, are:  a) maximizing the ability to “ferret out the full extent of corporate misconduct;” b) investigating the conduct of individuals is the “most efficient and effective way to determine the facts . . .;” c) by focusing on individuals the likelihood of cooperation with the inquiry by individuals is maximized; and d) the prospect of concluding with charges against the company and individuals is maximized.   

Principle 3: “Criminal and civil attorneys handling corporate investigations should be in routine communication with one another.”  This means that from the beginning DOJ criminal prosecutors should be in consultation with their civil counterparts and agency attorneys.  

Principle 4:  “Absent extraordinary circumstances, no corporate resolution will provide protection from criminal or civil liability for any individuals.”  While there may be instances where the DOJ resolves a matter with the company prior to reaching a resolution with individuals, the appropriate steps must be taken to preserve individual liability.  

Principle 5:  “Corporate cases should not be resolved without a clear plan to resolve related individual cases before the statute of limitations expires and declinations as to individuals in such cases must be memorialized.”  If the investigation of individual misconduct is not concluded by the time the corporate inquiry is concluded, the Memo requires that there be a plan to conclude the investigation as to the individuals within the statute of limitations.  If there are no charges against individuals being recommended, then “the reasons for that determination must be memorialized and approved . . .”  

Principle 6:  “Civil Attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual’s ability to pay.”  A key goal of the DOJ’s new approach is to hold individuals accountable.  Thus civil actions should be considered and not deterred by an inability of the individual to pay.   


Focusing on individuals is not new.  Crimes are committed by individuals, and corporate liability is only created by the acts of individuals who act on behalf of the entity.  Law enforcement authorities have always focused on individual conduct in corporate investigations.  Prior to the enactment of the Federal Sentencing Guidelines in the 1980’s, when it became profitable for the Department of Justice to prosecute corporations because of enormously enhanced fines, few corporations were prosecuted.   

Likewise, many of the other points made in the Yates Memo are also familiar.  For example, cooperation credit has long been conditioned on the company turning over the facts developed in its investigation, including those relating to culpable individuals.  Cooperation among law enforcement agencies is also standard operating procedure, often resulting in multiple investigations at once.

The memo does, however, raise concerns.  While the preamble acknowledges the difficulty of prosecuting senior corporate officials – largely reiterating years of DOJ statements – the Memo offers no new way, no new technique,  no secret formula for gathering evidence on individuals to gather evidence of criminal activity beyond a reasonable doubt.  

Rather, the only solution arising from the meeting of senior prosecutors seems to be to withhold any cooperation credit from a corporation unless it turns over the evidence on the individuals.  This, of course, presumes that there is such evidence.  It also presumes that the company and those who conducted the internal inquiry, the results of which are being given to the Government in the name of cooperation, are acting is less than good faith.  Yet the Sentencing Guidelines have always required such full and candid cooperation for the corporation to receive credit as a cooperator.   

This so-called new approach is reminiscent of one taken years ago in another memo on corporate prosecutions written by then Deputy AG Larry Thompson that resulted in prosecutors conditioning cooperation credit on waiving the attorney client privilege.  That approach ended in overreaching, not more effective law enforcement, with portions of the memo being held unconstitutional in U.S. v. Stein.   

If, of course, the Department has evidence that the company is not being forthcoming, it may be appropriate to withhold cooperation credit.  That credit should not, however, be denied based on an unproven assumption.  Such an approach will not foster the public confidence in law enforcement discussed in the Memo. 

Nevertheless, corporations involved in Government investigations must be prepared to deal with the impact of the Memo.  In seeking cooperation credit corporate investigators and the company will need to be prepared to answer the “who did it” question by naming names and supporting the statements with evidence.  If the company has not been able to develop the necessary evidence-- not a surprising result in view of the Government’s years of experience – the company must be prepared to demonstrate the reasons for its conclusions.  And, it should be prepared for the possible loss of all cooperation credit.  That will no doubt increase the difficulty of resolving the case.  

Ultimately a rigorous application of the Yates Memo may well undercut effective law enforcement.  Today the DOJ, as well as other law enforcement officials, repeatedly call for self-reporting and cooperation with law enforcement.  The denial of cooperation credit for good faith, well done corporate investigative results, may well deter cooperation.  That will not facilitate Government investigations as envisioned by the Yates Memo.  To the contrary, it may well undercut the sought-after public confidence while proving a point the Department has made for years – the evidence is frequently not there. 

The bottom line is that when companies are faced with a potential criminal issue:

  • Counsel experienced in criminal investigations and dealing with the DOJ should conduct the investigation of the potential issue; 
  • Counsel should conduct a complete and thorough investigation; 
  • The company should be prepared to take a full and open cooperative posture with the investigators and prosecutors.