DOJ Announces Policy Changes On Corporate Cooperation In Both Criminal And Civil Cases
Revised DOJ policies permit a more flexible approach to corporate cooperation in both civil and criminal matters.
On November 29, 2018, during a speech at the International Conference on the Foreign Corrupt Practices Act, U.S. Deputy Attorney General Rod Rosenstein announced changes to the Department of Justice’s (DOJ or the Department) policy regarding cooperation in both criminal and civil investigations. The revised policy modifies certain aspects of its predecessor policy, the DOJ Memorandum on Individual Accountability For Corporate Wrongdoing, which is commonly referred to as the Yates Memorandum. The revised policy introduces a more flexible and pragmatic approach to how a company may receive credit for cooperating with an investigation into corporate misconduct.
Pursuant to the Yates Memorandum, if a company wished to receive any credit for cooperation in a criminal case, the company was required to “provide to the Department all relevant facts about the individuals involved in corporate misconduct.” In his speech, Rosenstein observed that, although the requirement has surface appeal, it has proven impractical because there often arise situations where it is not feasible to demand that a company identify every employee who played any role in the wrongful conduct. For example, he cited cases in which “the routine activities of many employees” are alleged to be part of an illegal scheme and cases in which the illegal conduct is alleged to have occurred over a long period of time. According to Rosenstein, this provision of the Yates Memorandum can impede resolution of a criminal case “when the company and the government want to resolve the matter even though they disagree about the scope of the misconduct.” In fact, Rosenstein conceded that this policy had not been strictly followed by DOJ attorneys because in certain cases it would have “impeded resolutions and wasted resources.”
Accordingly, the revised policy reduces the burden on companies that wish to receive cooperation credit in criminal investigations. The revised policy does not require the company to identify all individuals involved, but instead mandates that the company need only identify those “substantially involved or responsible for” the criminal conduct.
Importantly, the revised policy also leaves the door open for a company that “is unable to identify all relevant individuals or provide complete factual information despite its good faith efforts to cooperate fully.” If, for example, “a company genuinely cannot get access to certain evidence or is legally prohibited from disclosing it to the government” cooperation credit may still be granted when the company meets its burden “of explaining the restrictions it is facing to the prosecutor.”
Despite this more flexible approach to cooperation, Rosenstein made clear that the Department’s focus remained on holding accountable those “individuals who play significant roles in setting a company on a course of criminal conduct.” If the Department determines that company is not cooperating in good faith to help DOJ identify those individuals, the company can expect no credit for cooperation.
In the civil context, the Yates Memorandum essentially required the same degree of cooperation from companies as was required in criminal cases. Rosenstein disavowed this approach, noting that “[c]ivil cases are different” because “[t]he primary goal of affirmative civil cases is to recover money.” According to Rosenstein, the “all or nothing” requirement for cooperation in civil cases had proven counterproductive and DOJ attorneys needed more flexibility to settle cases in furtherance of Department objectives.
The revised policy, therefore, permits some cooperation credit for a company that identifies “all wrongdoing by senior officials, including members of senior management or the board of directors.” If the company wishes to earn “maximum credit,” however, it must identify “every individual who was substantially involved in or responsible for the misconduct.” Thus, the revised policy eliminates the binary choice—credit or no credit—and provides civil DOJ attorneys some discretion to offer partial cooperation credit.
Rosenstein employed a False Claims Act hypothetical to illustrate how the new policy would be implemented:
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.
According to Rosenstein, under the new policy Department attorneys may reward meaningful cooperation that “meaningfully” assists the government without requiring the company and DOJ “to agree about every employee with potential liability.”
In sum, these revisions to DOJ cooperation policies demonstrate that the Department will continue to focus on investigating wrongdoing by senior company employees and by personnel who were substantially involved with the unlawful conduct. It is clear that the Department will continue to prioritize the prosecution of individuals in order to deter corporate misconduct. As Rosenstein emphasized, “[p]rosecuting crime is our tool, but our goal is deterring crime.”
In this climate, it is essential for companies to implement effective compliance programs with an eye toward avoiding DOJ scrutiny in the first place. When issues of potential misconduct do arise, however, a prompt and thorough response is crucial so that a company can be prepared to assess the behavior of its personnel, prepare for a potential investigation, and determine how best to assess the possibility of cooperation with DOJ.