The U.S. Chamber And the Yates Memo On DOJ Cooperation
Earlier this month Deputy AG Sally Yates defended her controversial memorandum on cooperation in remarks made before the New York City Bar Association White Collar Conference (here). The memo to which her name is attached redefined cooperation in terms of furnishing all the facts regarding the individuals who are responsible for wrongful conduct. Specifically, the Yates Memo requires that to earn any cooperation credit a company specifically identify those who are responsible for the conduct and furnish all the facts. Firms that fail to meet these requirements do not get cooperation credit.
The private bar has at times acted as if the “sky was falling,” according to the Deputy AG. In fact she asserted that the memo has had positive effects. Firms are making efforts to comply and other divisions of the DOJ are revamping their policies.
The U.S. Chamber’s Institute for Legal Reform may not think the “sky is falling” in the wake of the Yates memo. At the same time, its recent report on the new cooperation initiative is less than complimentary. “DOJ’s New Threshold for ‘Cooperation,’” May 2016 (here). The focus of the new policy, the Report notes, is to leverage corporate investigations to facilitate DOJ actions. In fact, the Report declares, the “new policy is likely to have a number of unintended consequences that will muddy what was traditionally a straightforward decision – whether to cooperate with a government investigation . . . Paradoxically, in seeking to make it easier to bring cases against culpable individuals in corporate investigations, the Department has complicated the mix for individuals, the corporate community – and ultimately, for the Department itself.” The new policy raises several serious concerns which include:
Decision to cooperate: The Yates memo adopts an all or nothing approach to cooperation – either all the facts about the individuals must be ferreted out and turned over to the Department or there is no cooperation credit. Since the decision must be made at the beginning of the investigation before the facts are known “it may be challenging for a business to evaluate whether to commit to cooperation, especially where the degree of criminal exposure – and the benefit derived from cooperation—are uncertain. After all, companies often evaluate decisions based on risk . . .” and those are difficult to assess at the beginning of an investigation.
Inhibit the corporate investigation: Corporate and in-house counsel, as well as any internal investigative team, may find themselves at the intersection of conflicting interests. On the one hand the firm is incentivized to root out wrongful conduct. On the other hand individual employees may be at odds with the view of the company. The firm may struggle to avoid creating a wedge between executives and corporate counsel during investigations. This can make conducting the investigation more difficult.
Fundamental rights: The DOJ’s effort to leverage corporate investigations presents fundamental issues regarding the rights of those involved in any corporate inquiry. For example, one critical question is the extent to which the firm has been “deputized,” a fact which has significant implications for those who are interviewed during the investigation. This also presents the company with difficult issues regarding the application of the Fifth Amendment privilege and Sixth Amendment right to counsel, at least to the extent its internal investigation has, in effect, become an instrument of the government rather than a self-reflective endeavor through which a firm seeks to identify a malady and root it out.
Privilege: The Yates memo expressly provides that the Department is not asking firms to waive privilege. Deputy AG Yates reiterated this point in her recent remarks. Nevertheless, there is at least an inherent tension here. While it is clear that the firm need not turn over privilege memoranda to earn cooperation credit, all the facts must be made available. That includes those from interviews. Yet typically the interviews during a corporate investigation are summarized in attorney notes. To meet the requirements of the Yates memo the firm will need to find some way to make the facts from the interviews available. The practical impact of this is that “’in many instances . . . you waive privilege,’ the Report notes, quoting Ms. Yate’s immediate predecessor, former Deputy AG James Cole.
In view of these issues, it is apparent that the Yates memo, and its approach to cooperation, presents significant issues for corporations seeking to cooperate with the DOJ and for the Department it self, the Report concludes.