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Government Announces “Substantial Shift” in Filip Factors for Rewarding Corporate Cooperation with Government Investigations

九月 15, 2015

 

On September 9, 2015, in a memorandum authored by Deputy Attorney General Sally Quillian Yates entitled “Individual Accountability for Corporate Wrongdoing” (“Sept. 9 Memo”), the United States Department of Justice announced changes to its guidance regarding how DOJ treats corporations cooperating with its investigations. See Principles of Federal Prosecution of Business Organizations, USAM 9-28.700 et seq. (sometimes referred to as “Filip Factors”). Yates explained and further clarified the changes in remarks made at the New York University School of Law on September 10, 2015 (“Sept. 10 Remarks”), observing that the changes are “a substantial shift from our prior practice.” Sept. 10 Remarks at 3.

“Give Up the Individuals”

The most significant change announced is that companies hoping to receive “any credit, any credit at all” for cooperating with the government must “give up the individuals”— all of them. See Sept. 10 Remarks at 3. No longer will companies get credit for identifying those most responsible for possibly illegal actions; instead, companies must disclose everyone “involved in” any kind of illegal activity, “no matter where they sit within the company,” and no matter how far removed from the conduct. Sept. 10 Remarks at 3. Yates explained, “If they don’t know who is responsible, they will need to find out.” Sept. 10 Remarks at 3. Failure to do so may be deemed as having “decline[d] to learn of such facts” or having failed to provide the government “with complete factual information about individual wrongdoers,” which will cause the government to find the company ineligible for cooperation credit. Sept. 9 Memo at 3. In other words, Yates said, companies may not “plead ignorance”; they must “investigate and identify the responsible parties, then provide all non-privileged evidence implicating those individuals.” Sept. 10 Remarks at 3.

“It’s All or Nothing”

Similarly, the Sept. 9 Memo insists that cooperating companies “completely disclose” “all relevant facts” about alleged misconduct. Sept. 9 Memo at 3 (emphasis added). Failure to disclose a “relevant fact” means that a company will receive no credit for cooperation. Sept. 9 Memo at 3. Yates emphasized: “No more picking and choosing what gets disclosed.” Sept. 10 Remarks at 3. The government has not defined what constitutes a “relevant fact,” but Yates made clear that it is “all or nothing.” Sept. 10 Remarks at 3.

Aggressive and Coordinated Use of Civil Remedies and Lawsuits

The government also reaffirmed its commitment to begin “early and regular communication” between its criminal prosecutors and civil attorneys in order to consider the “full range” of the government’s remedies against those accused. Although the Sept. 9 Memo makes reference to DOJ’s policy on parallel civil and criminal proceedings and the limits on sharing grand jury information (Sept. 9 Memo at 5, citing USAM 1-12.000), much care will need to be taken, among both government and private attorneys, to ensure these clear firewalls are not breached as the government enforces this new policy.

DOJ also intends to pursue civil remedies against individuals even if such individuals “may not have sufficient resources to satisfy a significant judgment.” Sept. 10 Remarks at 5. In DOJ’s view, “there is real value” in civil charges against individuals, “even if that value cannot be measured in dollars and cents.” Sept. 10 Remarks at 5. The government will “take what they have” from individuals and ensure that “corporate wrongdoers’ resumes” reflect their wrongdoing and “follow them throughout their careers” (Sept. 10 Remarks at 6).

“It’s Not Over Till It’s Over”

Additionally, the September 9 Memo reemphasized the government’s insistence that companies engage in “continued cooperation,” even after the corporate case is resolved, enforceable through provisions the government may mandate as part of plea agreements or settlements. Sept. 9 Memo at 4. As Yates explained: “Going forward, corporate plea agreements and settlement agreements will include a provision that requires the companies to continue providing relevant information to the government about any individuals implicated in the wrongdoing.” Sept. 10 Remarks at 3 (emphasis added). Perceived failure to continually cooperate may be deemed a material breach of a plea agreement. See Sept. 9 Memo at 4. As Assistant Attorney General Leslie Caldwell said in remarks at the ACAMS Anti-Money Laundering & Financial Crime Conference on March 16, 2015, “the Criminal Division will not hesitate to tear up a DPA or NPA” and take action if it perceives a failure to cooperate. See March 16 Remarks at 6.

“Your Supervisor is Watching”

If an individual prosecutor wishes to proceed only against a corporation and not individuals, she must obtain the written approval of her U.S. Attorney or relevant Assistant Attorney General. Sept. 9 Memo at 5. The practical implication of this directive is that defense counsel will inevitably need to seek more “up the chain” meetings with supervisors at DOJ or US Attorneys’ Offices.

Ramifications

  • The most significant impact on companies is that those wishing to cooperate will have to promptly conduct broad internal investigations that place immediate focus on identifying every individual possibly involved and every “relevant” fact. Although Yates stated that these changes do not ask companies to “boil the ocean” and are not intended to “burden corporations with longer or more expensive internal investigations than necessary” (Sept. 10 Remarks at 3), the changes likely will do just that. It will no longer suffice for cooperation credit for companies to provide the government with its most readily available knowledge; instead, the company must learn of all facts and individuals involved to get any credit, and the duty to investigate continues after any settlement.
  • Who decides what is “relevant” and what kind of investigation is “enough”? Those terms are not further explained in the Sept. 9 Memo or in Yates’s Sept. 10 Remarks, so companies may find themselves at the mercy of individual prosecutors’ interpretations, however expansive. Again, given that an individual prosecutor must seek written approval to resolve a case without charging individuals, this will mean more trips for defense counsel to go “up the chain” at DOJ or U.S. Attorneys’ Offices.
  • The focus on “naming names” from the beginning may affect the dynamic between individual employees under scrutiny and their employers. Employees may begin asking for separate legal counsel earlier in the process of investigations. Some employees may refuse to be interviewed at all, assuming the company’s interest is not aligned with their own. And if more employees refuse to be interviewed, companies will need to think carefully about how accommodating (or not) to be in response. Of course, having to obtain information from employees through their counsel may impede the company’s ability to swiftly provide the government with evidence about individual culpability. To that extent, DOJ’s heavy hand here may be in part self-defeating.
  • As Yates acknowledges, some companies may decide “that the benefits of consideration for cooperation with DOJ are not worth the cost of coughing up the high-level executives who perpetrated the misconduct” and “individuals facing long prison terms or large civil penalties may be more inclined to roll the dice before a jury. . . .” Sept. 10 Remarks at 6.
  • Tolling agreements are “the rare exception,” and prosecutors are urged to bring charges within the statute of limitations. See Sept. 9 Memo at 6. The good side of this is that government investigations may not be dragged on indefinitely. The bad side is that it might result in a company not being able to conduct the kind of immediate, in-depth internal investigation the government appears to expect, running the risk that the company will get no credit for cooperation.
  • Although prosecutors still are not permitted to seek privilege waivers (see USAM 9-28.710), some companies nonetheless will likely feel pressure to disclose the full results of any internal investigation to the government while others may feel the need to fight any possibility of waiver. Regardless, companies should take care to protect information pursuant to a protective order under Federal Rule of Evidence 502(d).


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