Reflections on Deputy Attorney General Yates’ Published “Remarks” About Her Eponymous Memo

By James G. Thomas

As by now is well-known to the white collar defense bar, Deputy Attorney General Sally Yates last month issued a memorandum to all federal prosecutors entitled “Individual Accountability for Corporate Wrongdoing.”

The memorandum articulated as a matter of DOJ policy ‘six key steps’ to strengthen the Department’s ‘pursuit of individual corporate wrongdoing.’ The first and presumably most important of these steps provides that “in order to qualify for any cooperation credit, corporations must provide to the Department all relevant facts relating to the individuals responsible for the misconduct.”

Sections 9-28.700 through 9-28.760 of the “Principles of Federal Prosecution of Business Organizations” that appear in the U.S. Attorney’s Manual address “cooperation credit.” Cooperation credit is a mitigating factor that, in a best case scenario, can lead to the declination of an otherwise meritorious criminal prosecution.

The current version of these sections (all of which date back to August 2008) underscores the importance of disclosing relevant facts to the government, as reflected by the fact that the word “facts” appears some twenty-nine times in these sections (including headings and sub-headings). Of course, the disclosure of “facts” is hardly severable from the disclosure of “relevant actors” (including “senior executives”), as section 9-28.700A contemplates. Indeed, some well-informed commentators (and senior former federal prosecutors) have questioned whether the Yates Memo will really change anything. Dan Webb & Robb Adkins, What Will Really Change After the Yates Memo?, National Law Journal (Oct. 5, 2015).

For that reason, published remarks that Ms. Yates originally delivered at the NYU School of Law on September 10 (the day after the memo’s issuance) merit heightened attention. (The remarks are available on the Department’s website, www.justice.gov.)

Significantly, Ms. Yates herself described the memo as constituting a “substantial shift” from prior practice. According to Ms. Yates, “if a company wants credit for cooperation, any credit at all, it must identify all individuals involved in the wrongdoing, regardless of their position, status or seniority in the company . . . .”(Emphasis added.) She reiterated, “if a company wants any consideration for its cooperation, it must give up the individuals, no matter where they sit within the company. “In Ms. Yates’s words, “[t]he rules have just changed.”

In keeping with what Ms. Yates said, it bears emphasis that nothing like this language appears in the current versions of sections 9-28.700 through 9-28. 760.There is no suggestion in the existing language that “[i]t’s all or nothing,” as Ms. Yates summarized this revision in policy.

Ms. Yates further drove home her point with what we will refer to as the “drug dealer analogy”:

While this is new for the corporate world, there’s nothing radical about the concept. It’s the same rule we apply to cooperators in any other type of criminal investigation. A drug trafficker can decide to flip against his co-conspirators. He can proffer to the government the full scope of the criminal scheme. He can take the stand for the government and testify against a dozen street-level dealers. But if he has information about the cartel boss and declines to share it, we rip up his cooperation agreement and he serves his full sentence. The same is true here corporation should get no special treatment as a cooperator simply because the crimes took place behind a desk.

This is a disturbingly misplaced analogy. For present purposes, the difference between the hypothetical drug dealer and a corporation (some of whose agents may have engaged in criminal wrongdoing) is that the drug dealer knew everything he knew when he sat down for his proffer. A corporation, by contrast, may take months, maybe even years, to identify the malefactors within, and even then there can never be any guarantee that it has identified “all individuals engaged in the wrongdoing,” as Ms. Yates would have it.

While there is always room for the exceptional (i.e., unusually easy) case, the “drug dealer analogy” simply does not fit the corporate model. A corporation investigating internal wrongdoing will (or should be) acting through its outside counsel. Outside counsel will most typically be starting with no knowledge at all. The process virtually demands it. The entire investigation will constitute a “learning curve” for even the most capable of lawyers, with peaks and valleys along the way. And the role of sheer fortuity in the investigation process cannot be overstated. “Sometimes it’s better to be lucky than good.”

The “drug dealer analogy” is most fundamentally flawed, however, because it effectively requires corporate counsel to make qualitative judgments about the ultimate criminal culpability of individual employees. This is not an issue for the hypothetical drug dealer/cooperator with information about the “cartel boss”; the cartel boss is, by definition, a criminal. But questions of guilt are frequently quite nuanced in the world of white collar crime, where criminal liability more often than not turns on an individual’s knowledge and intent. While some cases will be clear-cut (e.g., the employee confesses, or the documentary evidence is overwhelming), many will not. The cases for or against the criminal liability of given individuals will inevitably lie on a continuum, with many shades of gray in the middle.

In the end, it is not and cannot be the role of outside corporate counsel to make comprehensive judgments about individual guilt in the manner that the Deputy Attorney General contemplates. As advocates for the company, with ethical obligations running only to it, corporate counsel are especially unsuited for this role. This is, in part, because the new DOJ policy, at least as Ms. Yates articulates it, tilts the scales in favor of corporate counsel “finding guilt” on the parts of individuals because it is in the company’s best interests to err in that direction to obtain cooperation credit (or, more precisely, avoid losing it). This is not a formula for arriving at reliable conclusions. Indeed, it makes them inherently suspect.

Which raises another issue. Taken to its logical extreme, the Yates Memorandum (as amplified by her September 10 remarks) tends to place corporate counsel in the role of de facto government agents (more colloquially, “cops”) at the very inception of an internal investigation. While this is an acceptable and perhaps even unavoidable role for corporate counsel to assume if and when the company has entered into a plea agreement, deferred prosecution agreement, or non-prosecution agreement, it can only sabotage the fact-finding process if assumed at the front end. Corporate officers and employees should never be under the illusion that the company’s lawyers represent their individual interests and will perpetually maintain the confidentiality of their communications (hence, “Upjohn warnings”), but it is another thing entirely when the word gets out (as it will) that the company and its lawyers are effectively in league with the government and even incentivized to produce scalps. Only the bravest (or, more likely, uncounseled) of employees are likely to cooperate under such circumstances.

Perhaps most fundamentally, however, the new policy is bad policy because it requires corporate counsel to form opinions about individual culpability instead of just sticking to the facts. It is the role of federal prosecutors to take a set of facts and make the critical judgment as to whether “the admissible evidence will probably be sufficient to obtain and sustain a conviction . . ..” USAM 9-27.220A (“Principles of Federal Prosecution”). This is how it should be, because the prosecutor is much better-positioned (with subpoena power, search warrants, and access to cooperating witnesses, among other resources) to see the “big picture” of a case. Corporate counsel’s window will always be narrower and, for that reason, less informed.

In summary, it is our conclusion that the new “all or nothing” DOJ policy, as exemplified by the “drug dealer analogy,” is unworkable. As contemplated by existing DOJ policy, corporate counsel can ferret out and communicate facts, but they should not be compelled to form opinions about individual guilt upon pain of losing cooperation credit. The drug dealer analogy, if followed in the corporate context, manifests unsound policy.

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