Vimbai Chikomo Jan. 8, 2016, 9:00am


WASHINGTON (Legal Newsline) - In September, the Department of Justice issued guidance for increased focus on individual culpability in corporate crime.

The memorandum, issued on Sep. 9 by Deputy Attorney General Sally Q. Yates, established six new policy directives to help the Department of Justice hold individuals involved in corporate misconduct accountable for the wrongdoing. The directives would be in addition to fines and sanctions against a corporation.

“At first glance, the Yates memo has immediate application to corporate America,” said Matt DeVries, a Nashville-based construction lawyer with Burr & Forman LLP and author of www.bestpracticesconstructionlaw.com.

“However, government contractors are obligated to investigate and many times disclose violations of fraud, conflict of interest, or bribery. This is one of the issues in the federal contracting arena where the Yates Memo will provide additional application,” he said.

DeVries explained that the Yates Memo may affect how a contractor drafts a mandatory disclosure, knowing that it will be reviewed by the Department of Justice.

“The disclosure should take into account the information related to individual misconduct, which is important if the government contractor seeks cooperation credit from the DOJ," he said.

"In the end, government contractors should assess and revise their internal investigation procedures to comply with the Yates Memo requirements."

First, the Yates Memo calls for complete disclosure of individuals as a requirement for any corporation credit; whereas in the past, the Department of Justice sometimes gave partial cooperation credit without entire details on individuals involved.

Additionally, the DOJ proposes that its attorneys be instructed to investigate individuals from the very beginning of any investigation and add whether a company provides “continued cooperation with respect to individuals” as a required condition for any plea or settlement agreement.

In addition, the memo calls for: increased employee communication and alliance between the criminal and civil sectors, “absent extraordinary circumstances” – meaning the DOJ should not agree to any corporate resolution that provides immunity to potentially culpable individuals, a detailed plan by the DOJ to resolve open investigations of individuals when the case against the corporation is resolved.

Also, it calls for civil attorneys to also focus on issues like individual accountability and deterrence, instead of relying solely on the defendant’s ability to pay.

DeVries doesn’t think the increased focus on individual culpability described in the Yates Memo would serve as a deterrent for companies seeking government contracts. “Rather, it should compel a company to learn and follow the law when dealing with the government,” he said.

As for what prompted the new rules listed in the Yates Memo, DeVries said that the Department of Justice made a commitment long ago to address corporate misconduct by holding individuals criminally and civilly liable.

“Many people believe that deterrence in this realm is best achieved by prosecuting individuals. I believe the Yates Memo constituted, at least in part, the DOJs response to public criticism that corporations are not doing enough to avoid misconduct and hold those individuals within the company responsible for wrongdoing,” DeVries concluded.

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