On Nov. 29, Deputy Attorney General Rod Rosenstein, in remarks at the American Conference Institute’s 35th International Conference on the Foreign Corrupt Practices Act, unveiled what he referred to as “revised policy” governing corporate investigations in both criminal and civil cases. These changes have been incorporated into the Justice Manual (formerly known as the U.S. Attorneys’ Manual) under its “Value of Cooperation” principle, Section 9-28.700.
Regarding criminal cases, the revised policy relaxes requirements memorialized in the 2015 “Yates Memorandum,” which required companies to disclose “all” relevant facts about the individuals involved to be eligible for “any” cooperation credit. Such an “all or nothing” policy frayed the nerves of many a compliance officer and legal counsel, who feared that gaining cooperation credit would mean having to undertake unnecessarily broad, costly, and time-consuming internal investigations.
In announcing the policy changes, Rosenstein addressed those concerns in his remarks: “When the government alleges violations that involved activities throughout the company over a long period of time, it is not practical to require the company to identify every employee who played any role in the conduct. That is particularly challenging when the company and the government want to resolve the matter even though they disagree about the scope of the misconduct.”
“[W]e now make clear that investigations should not be delayed merely to collect information about individuals whose involvement was not substantial, and who are not likely to be prosecuted.”
Specifically, the revised policy makes clear that companies seeking cooperation credit in criminal cases “must identify every individual who was substantially involved in or responsible for the misconduct at issue,” regardless of their position, status, or seniority, “and provide to the Department all relevant facts relating to that misconduct.”
“[W]e now make clear that investigations should not be delayed merely to collect information about individuals whose involvement was not substantial, and who are not likely to be prosecuted.”
Deputy Attorney General Rod Rosenstein
The Department has been focused on pursuing individuals involved in corporate wrongdoing for a long time now, but the revised policy scales back the need for companies to focus on every individual. “We want to focus on the individuals who play significant roles in setting a company on a course of criminal conduct,” Rosenstein said. “We want to know who authorized the misconduct, and what they knew about it.”
In explaining the reason behind the change, Rosenstein acknowledged in his remarks that the prior policy “was not strictly enforced in some cases because it would have impeded resolutions and wasted resources.” He added that the Justice Department’s policies “need to work in the real world of limited investigative resources.”
The new policy changes “reflect valuable input from the Department’s criminal and civil lawyers, law enforcement agents, and private-sector stakeholders,” Rosenstein said.
From a compliance and legal standpoint, the revised policy still creates some uncertainties for any company conducting internal investigations and seeking cooperation credit, particularly because no clear-cut answer exists for which individuals are “substantially involved in or responsible for” misconduct. In that regard, it is best to heed Rosenstein’s advice that “companies that want to cooperate in exchange for credit are encouraged to have full and frank discussions with prosecutors about how to gather the relevant facts.”
Civil cases
The most significant changes between the former Yates Memo and the revised policy applies to civil cases, where the primary goal is to recover money. “When criminal liability is not at issue, our attorneys need flexibility to accept settlements that remedy the harm and deter future violations, so they can move on to other important cases,” Rosenstein said.
The idea that a company that engaged in a pattern of wrongdoing must always admit to “the civil liability of every individual employee as well as the company” to qualify for cooperation credit has proven to be “inefficient and pointless in practice,” Rosenstein said.
Under the principles of civil cases, the policy states, “to be eligible for cooperation credit in a civil corporate case, a corporation must provide meaningful assistance to the government’s investigation.” The revised policy, however, puts discretion back into the hands of civil attorneys.
In a civil False Claims Act case, for example, “a company might make a voluntary disclosure and provide valuable assistance that justifies some credit, even if the company is either unwilling to stipulate about which non-managerial employees are culpable, or eager to resolve the case without conducting a costly investigation to identify every individual who might face civil liability in theory, but in reality would not be sued personally,” Rosenstein said. “So, our attorneys may reward cooperation that meaningfully assisted the government’s civil investigation, without the need to agree about every employee with potential individual liability.”
Rosenstein stressed that the “most important aspect” of the policy is that “a company must identify all wrongdoing by senior officials, including members of senior management or the board of directors, if it wants to earn any credit for cooperating in a civil case. If a corporation wants to earn maximum credit, it must identify every individual person who was substantially involved in or responsible for the misconduct.”
All told, the revised policy is a positive development for the legal and compliance community, as it gives compliance officers and legal counsel a bit more leeway in resolving corporate misconduct cases, particularly pertaining to cases where companies make a genuine effort to cooperate but who don’t necessarily agree with government concerning an individual employee’s role in the misconduct.
As Rosenstein said, “corporate enforcement policies should encourage companies to implement improved compliance programs, to cooperate in our investigations, to resolve cases expeditiously, and to assist in identifying culpable individuals so that they also can be held accountable when appropriate.” Although it’s not always possible to achieve all those goals, he said, “the new policies strike a reasonable balance.”
Rosenstein concluded that the Department will monitor the results and will revisit policies if warranted.
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