Tag: Yates Memo

Making the Yates Memo Work: Two Reform Proposals

October 7th, 2015

The Yates Memo is all the rage. DOJ is saber-rattling at various CLE events and bloggers are holding forth on what it actually means. But wanting isn't getting. The question remaining is how to make sure that the company coughs up, or an investigation reveals, wrongdoing that occurred at the highest levels.

Here are two modest reform proposals I offer free of charge to the DOJ and FBI, based on my own experience defending individuals and. far less often, companies under investigation.

1. Modify Standard DOJ Proffer Letters. Mid-level corporate employees often possess very damaging information about those higher up the food chain. But these same mid-level employees can themselves be the subjects or targets of DOJ. At some point the employees are given the opportunity to proffer in front of the lead prosecutor. But the standard DOJ Proffer Agreement is riddled with loopholes. Assume that the proffer session does not result in a plea or immunity agreement and the employee is indicted. The primary loophole allows the government to use the proffered statement against the client at trial if the statement is in any way inconsistent with the defense presented. That's not much protection, which is why most seasoned white collar attorneys will not let a client with exposure proffer in front of DOJ. Thus, DOJ loses valuable information. DOJ should offer true non-Kastigar immunity for the information revealed in its proffer sessions. Nothing is lost by doing this, but much can be gained.

2. Demand Independent Internal Investigations. The first question every prosecutor should ask the corporation's outside attorney who is conducting an internal investigation or tendering an internal investigation report to DOJ is, "What is your reporting chain?" If outside counsel is not reporting to the Audit Committee or some other independent entity within the corporation there is absolutely no assurance that culpable upper management will be identified. Management can edit the final report and its conclusions to protect top executives and throw lower level employees to the DOJ wolves. Meanwhile, employees are less likely to truthfully cooperate with the internal investigation if they think the boss is reviewing interview reports every night after drinks. I am astounded at how often internal investigations are reported right up the chain of command at small and large publicly traded companies. DOJ prosecutors can make it clear that the procedural independence of the internal investigation will affect how the company is treated.

(wisenberg)
Just Who is Under that DOJ Bus?

September 22nd, 2015

You are the CEO, General Counsel, or Audit Committee of a big publicly traded company. Some whistleblower dimes the company out to the SEC and DOJ. It seems very likely that a crime has been committed. Class action lawsuits, qui tam complaints, and DOJ and SEC investigations are a foregone conclusion. What are you gonna do? Tell the SEC and DOJ to f… off? No, you are going to commence your own internal investigation and promise to cooperate with the government by sharing your Investigative Report's essential findings. And if the internal investigation reveals that some of your employees acted illegally, you will promise to serve them up to the DOJ. This is the reality in today's business and legal environment. A corporate entity owes no particular duty to an employee who commits fraud. Professor Podgor's complaint here and here that both the old (Filip) and new (Yates) DOJ policies encourage companies to throw their employees under the bus is certainly true. But to the companies involved it makes a lot of sense. Tell the DOJ that it's on its own and what will happen? You will still get hit with costly and onerous document requests and a federal criminal investigation that you cannot control. The publicity is awful and when it all hits the fan you can't even say that you are cooperating with DOJ. You've got a real mess and a pissed off prosecutor. To some extent, becoming a government quasi-agent is inevitable in this scenario.

The more interesting question to me is: "Who gets thrown under the bus?" Former SEC Enforcement Chief Robert Khuzami complained years ago that too many outside counsel with longstanding ties to a given corporation's leadership are willing to sacrifice mid-level employees to the government sledgehammer, letting the big boys go scot-free. That was true then. It's true now. Until the DOJ shows a willingness and ability to seriously investigate and prosecute a company's top leadership, when it is clearly called for, no memos, speeches, or other fanfare will mean diddly squat.

Yes, the occasional CEO finds himself/herself in the crosshairs and the occasional internal investigation results in a CEO resignation. But in the vast majority of cases it is middle management that gets slow roasted by both the company and an all-too-willing DOJ. Trust me. It happens. If the policies announced in the Yates Memo have any chance of changing this dynamic, so much the better.

Meanwhile, are there any concrete things the Department can do to change the situation? More on that in a future post.

(wisenberg)

Tag: Yates Memo

Making the Yates Memo Work: Two Reform Proposals

Just Who is Under that DOJ Bus?