During remarks at the American Banking Association and American Bar Association Money Laundering Enforcement Conference, Deputy Attorney General Sally Quillian Yates offered some insight on how Justice Department prosecutors are implementing the Yates Memo.
The Justice Department has taken a “big step forward on that front by issuing revisions to the U.S. Attorneys’ Manual (USAM),” which is “one of the most important documents within the Justice Department,” said Yates. “It is a handbook that contains guidance on everything from initiating an investigation to closing a case and it serves as the foundation for many of the key decisions that DOJ attorneys make during their work.”
“We don’t revise the USAM all that often and, when we do, it’s for something important,” added Yates. “We change the USAM when we want to make clear that a particular policy is at the heart of what all Department of Justice attorneys do and when we want to make sure that certain principles are embedded in the culture of our institution.”
The first set of new revisions focus on corporate criminal cases, more commonly known as the “Filip factors.” The revised factors now emphasize the importance in any corporate case of holding individual wrongdoers accountable and list a variety of steps prosecutors should take to achieve that goal.
To that end, the Justice Department is adding new language that “codifies a number of internal reporting and approval requirements, which are designed to ensure consistency across the Justice Department and allow us to keep track of how these policies are being implemented,” said Yates.
The very concept of receiving cooperation credit for giving non-privileged information about the conduct of individuals is nothing new. “What is new is the consequence of not doing it,” said Yates. “In the past, cooperation credit was a sliding scale of sorts, and companies could still receive at least some credit for cooperation, even if they failed to fully disclose all facts about individuals.”
“That’s changed now,” added Yates. “As the policy makes clear, providing complete information about individuals’ involvement in wrongdoing is a threshold hurdle that must be crossed before we’ll consider any cooperation credit.”
Nothing in the policy requires companies to waive attorney-client privilege, “but let’s be clear about what exactly the attorney-client privilege means,” said Yates. “Legal advice is privileged. Facts are not.”
If a law firm interviews a corporate employee during an investigation, for example, the notes and memos generated from that interview may be protected, at least in part, by attorney-client privilege. The company doesn’t need to produce the protected material to receive cooperation credit.
To earn cooperation credit, however, the company does need to produce all relevant facts –including the facts learned through those interviews—unless identical information has already been provided. “We will respect the privilege, but we will also expect companies to respect its boundaries and not to wrongly exploit its legitimate purpose by using it to shield non-privileged information from investigators,” said Yates.
Also, when it comes to cooperation, timing is of the essence. Companies should self-disclose as soon as possible, even if it doesn’t quite have all the facts yet.
“The new USAM language makes plain that a company won’t 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,” Yates said. “Rather, under those circumstances, we expect that cooperating companies will simply continue to turn over the information to the prosecutor as they receive it.”
Another important change to the USAM separates what used to be a single factor that covered both a corporation’s voluntary disclosure and its willingness to cooperate into two separate factors—one focused solely on the company’s timely and voluntary disclosure and the second on its cooperation, explained Yates.
“We made this change to emphasize that, while the concepts of voluntary disclosure and cooperation are related, they are distinct factors to be given separate consideration in charging decisions,” Yates said. “In recognition of the significant value early reporting holds for us, prompt voluntary disclosure by a company will be treated as an independent factor weighing in the company’s favor.”
In addition to amending the Filip factors, the Justice Department is revising two other portions of the USAM, including a new section in its civil actions chapter. “This new section includes many of the same rules that we’re applying to criminal cases,” said Yates.
Just as prosecutors are expected to focus on individuals from the beginning of the investigation, so must civil attorneys. “We allow them to resolve corporate cases only when there is a clear plan to pursue individuals, and we permit cooperation credit for companies only when they have provided all relevant non-privileged information about the individuals responsible,” said Yates.
This new civil section also expressly instructs civil attorneys that an individual’s ability to pay cannot be the sole determinative factor in making decisions about whether to pursue individual misconduct. “Just because wrongdoers are judgment-proof doesn’t mean they should escape all judgment,” said Yates.
The final area of revision is to the USAM section on parallel proceedings. “In particular, we are updating our long-standing policy on parallel proceedings to lay out specific steps criminal and civil attorneys handling white-collar matters should take with respect to communication and referrals from one side of the house to the other,” said Yates.
“We recognize that in the area of corporate wrongdoing, it is particularly important to have our criminal prosecutors and our civil attorneys working together,” said Yates. “This not only permits us to consider and make the fullest and most appropriate use of all the tools in our toolbox, it also ensures that in every case, we are reaching a resolution for both the individual and the corporation that is in the best interest of the public.”