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DOJ’s Back to School Message: “Companies, Turn in Your Employees; Individuals: We Are Coming After You.”

V&E Government Investigations and White Collar Criminal Defense Update E-communication, September 10, 2015

On September 9, a senior U.S. Department of Justice (DOJ) official raised the bar for companies seeking cooperation credit by announcing new directives for DOJ to require cooperating companies to give up their employees and for DOJ to focus enforcement efforts on individuals who in the past may otherwise have escaped liability.1 These directives are likely to work a sea change on how companies deal with individuals during internal investigations by putting them at odds with each other and disincentivizing individual cooperation.

The announcement came in a memorandum from Deputy Attorney General Sally Quillian Yates, who reports directly to Attorney General Loretta Lynch. The Yates memorandum discusses six steps aimed at strengthening the DOJ’s “pursuit of individual corporate wrongdoing.” Together, the steps instruct both criminal and civil DOJ attorneys to: conduct highly coordinated investigations where companies are not considered for any cooperation credit unless they completely disclose individual misconduct to the satisfaction of DOJ attorneys; communicate constantly with each other from inception of an investigation to maximize charges and claims against individuals; hold up corporate resolutions until individual actions can be resolved simultaneously or there is a plan for conclusion of the individual actions; and be increasingly aggressive in bringing civil claims against individuals. The most significant changes in DOJ policy are discussed below:

1. Corporations Must Provide Facts Regarding Involved Individuals to be Eligible for Any Cooperation Credit.

To even be considered for any cooperation credit in a criminal or civil matter, the company must identify for the DOJ all individuals involved in or responsible for the misconduct, regardless of their position, status or seniority, to the satisfaction of the DOJ. The DOJ also will proactively investigate individuals and compare its own findings to information provided by the company to ensure the company is not minimizing the involvement of any individual and has provided full information. DOJ attorneys are instructed to obtain from a company all information about individuals before the corporate resolution. In the rare instances where a company is expected to continue to provide information post-resolution, the company’s plea or settlement agreement should expressly require the company’s continued cooperation.

2. Criminal and Civil DOJ Attorneys Should Coordinate Efforts From Inception of Investigation.

While criminal and civil DOJ attorneys worked together in the past, the directive for them to work together and to focus on maximizing individual liability is new. So too is the directive that if DOJ Criminal declines to pursue criminal charges, they should “report” this to their civil counterparts, so that DOJ Civil can consider whether civil claims are appropriate, and in the reverse, if DOJ Civil concludes that criminal charges are merited, that they “report” this to their criminal counterparts. The guidelines direct DOJ attorneys to consider conducting concurrent criminal and civil investigations, which means that it may no longer be possible for defense counsel to sequence their dealings with the criminal and civil attorneys, where in the past they may have tried to first eliminate potential criminal liability and then turned to addressing potential civil liability.

3. DOJ Attorneys Must Resolve Corporate and Individual Cases Simultaneously or Delay Corporate Resolution Until There is a Plan for Resolution of Individual Cases.

The DOJ’s standard practice has been to focus its efforts on resolving cases against companies first, and then to focus on individuals. Instead, the DOJ must now look more broadly from the beginning, both at the company and individuals. When the DOJ decides not to take any action against an involved individual, the reasons for that determination must be memorialized and approved in a memorandum by a United States Attorney or Assistant Attorney General, thus holding the DOJ line attorneys accountable for their declination decisions. The guidelines also require the DOJ to be mindful of the statute of limitations by resolving matters before the limitations period runs or by obtaining tolling agreements, which will make it less likely that an individual could avoid liability through delay or even the simple passage of time and shifting of DOJ priorities.

4. DOJ Civil Attorneys Should Focus on Individuals and Consider the Deterrent Effect When Evaluating Whether to Bring Civil Claims.

Where DOJ Civil attorneys in the past may have declined to file a civil charge because the individual wrongdoer had no ability to pay a civil fine (and thus DOJ resources may have been put to better use elsewhere), they now must consider a number of other factors, such as the seriousness of the misconduct, the individual’s past history, the weight of the evidence, and whether pursuing the action reflects an important federal interest. The guidelines instruct DOJ Civil attorneys to look beyond the single individual’s case and consider whether the claim will further the DOJ’s aspirational goal of achieving significant long-term deterrence through individual cases over time.

What This Means For You:

This new guidance surely will have ramifications for both individuals and companies that come under DOJ investigation, but they may be most pronounced for individuals involved in misconduct who now face a “Hobson’s choice” of cooperating with their company’s internal investigation, which could increase their own personal risk, or refusing to cooperate at all and risk losing their jobs. Putting individuals to this choice may drive a wedge between the company and the individual and significantly hamper the company’s ability to conduct its internal investigation, which could then limit the company’s ability to cooperate by sharing its findings with the government.

Individuals may be doubly impacted because of the strong directive to DOJ Civil to bring civil claims where they may not have before. While the DOJ has increased its focus on bringing criminal actions against individuals in recent years,2 there has been no concerted effort to bring civil cases against individuals. For example, DOJ enforcement of the False Claims Act, Foreign Corrupt Practices Act, and antitrust laws is at an all-time high, but there has been little civil enforcement against individuals under these statutes. Indeed, the Yates memorandum expressly refers to the False Claims Act in its discussion of cooperation credit, signaling a potential ramp up of civil False Claims Act actions against individuals.

For more information, please contact Vinson & Elkins lawyers Matt Jacobs, Jeff Johnston, Bill LawlerAmy Riella, Craig SeebaldCliff Thau or John Wander. Visit our website to learn more about V&E's Government Investigations and White Collar Criminal Defense practice.

1 Memorandum from Deputy Att’y Gen. Sally Quillian Yates for All Assistant Att’ys Gen., et al., regarding Individual Accountability for Corporate Wrongdoing (Sept. 9, 2015); https://assets.documentcloud.org/documents/2393039/justice-dept-memo-on-corporate-wrongdoing.pdf

2 “As if FCA Treble Damages Weren't Trouble Enough: DOJ Intends to Mine FCA Cases for Criminal Investigations,” V&E False Claims Act Update E-communication (Sept. 19, 2014); http://www.velaw.com/Insights/As-if-FCA-Treble-Damages-Weren-t-Trouble-Enough--DOJ-Intends-to-Mine-FCA-Cases-for-Criminal-Investigations/

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.