On Wednesday September 9, 2015, the U.S. Department of Justice (“DOJ” or the “Department”) issued a memorandum entitled “Individual Accountability For Corporate Wrongdoing” (the “Memo”) outlining specific policy measures intended to empower U.S. prosecutors further in their pursuit of individuals alleged to be involved in corporate wrongdoing. The Memo is termed “guidance” by the Department, but nevertheless appears to set out clear directives to federal prosecutors and, as a practical matter, adds several weapons to the arsenal DOJ can use to flush out and prosecute individual wrongdoers implicated in corporate misconduct. The Memo follows criticism the DOJ has received following the recent economic crisis that it was insufficiently aggressive in prosecuting malfeasance at financial institutions.

In light of this new guidance, corporate actors and executives should be prepared to face increased scrutiny during corporate investigations, whether they involve the U.S. Foreign Corrupt Practices Act, various securities and healthcare fraud-and-abuse laws, or the False Claims Act.

Specifically, the Memo from Sally Quillian Yates, Deputy Attorney General, is addressed to the heads of every major criminal and civil investigative and enforcement agency in the U.S. government and directs that “[t]he measures described in this memo are steps that should be taken in any investigation of corporate misconduct.”1 The six directions discussed in the Memo are:

  • (1) To qualify for any cooperation credit, corporations must provide the DOJ all relevant facts relating to the individuals responsible for the misconduct;
  • (2) both criminal and civil corporate investigations should focus on individuals from the outset of the investigation;
  • (3) the criminal and civil attorneys handling a corporate investigation should routinely be in communication with each other;
  • (4) absent “extraordinary circumstances” or approved departmental policy, individuals will receive no release from civil or criminal liability as part of the DOJ’s resolution of investigations involving corporate wrongdoing;2
  • (5) DOJ attorneys are admonished not to resolve corporate matters without a plan to resolve related individual matters and to memorialize any declinations as to individuals in such cases; and
  • (6) the Department’s civil enforcement attorneys are directed to focus consistently on individuals in addition to the company and to evaluate whether to bring suit against an individual based on factors other than the individual’s ability to pay.

The Memo details the DOJ’s reasoning and position regarding each of the above six elements as follows:

  1. To Qualify for ANYCooperation Credit, Corporations Must Provide the DOJ All Relevant Facts About Individuals Involved in Corporate Wrongdoing.
    Once a company has been charged with a criminal offense, the DOJ relies on the U.S. Federal Sentencing Guidelines to calculate applicable fines. When entities cooperate with the DOJ, the Guidelines provide a reduction in their culpability score. However, the new policy outlined in the Memo exerts pressure on entities to provide the DOJ with the identity of all individuals responsible for the misconduct at issue, regardless of their position within the company, and all facts related to those individuals. If an entity does not provide all relevant facts with respect to individuals, the Memo makes clear that the entity will not be eligible for consideration for a cooperation-related reduction at sentencing.3 This is a departure from the DOJ’s prior policy of providing partial credit for cooperation for voluntary disclosure of improper corporate practices without identifying individuals engaged in wrongdoing. As Ms. Yates, the author of the Memo, said recently at the New York University School of Law, if the corporation cooperating with the government wants cooperation credit and they “don’t know who is responsible, they will need to find out.”4

    In instances in which the corporate investigation is resolved prior to that of the relevant individual, the Memo suggests that the corporation’s cooperation with the government with respect to the individuals does not end. According to the directives in the Memo, the corporate settlement agreement or plea agreement should require the company to continue to cooperate with respect to the investigation of individuals, or else face potential penalties or other consequences for breach of agreement.
  2. Criminal and Civil Corporate Investigations Should Focus on Individuals from the Outset.
    The Department instructs DOJ attorneys to focus on individuals from the start of any corporate investigation and lists three reasons in the Memo for doing so. First, the Memo states that a focus on individuals is the most effective way to investigate the full extent of the corporate wrongdoing”[b]ecause a corporation only acts through individuals.”5 Second, focusing a corporate investigation on individuals will increase the likelihood that other individuals will cooperate with the investigation and provide critical information about wrongdoing. Third, focusing on the individuals will increase resolutions of not just corporate cases, but cases against individuals, too.
  3. Criminal and Civil Attorneys Handling Corporate Investigations Should be in Routine Communications with One Another.
    To best ensure that both criminal and civil corporate investigations focus on individuals from the beginning of the respective investigations, the Memo calls for early communications between the civil and criminal divisions regarding the possibility of parallel investigations against individuals involved in corporate wrongdoing. The Memo gives particular mention to the resulting greater potential for bringing a larger range of possible individual penalties to bear, including incarceration and asset seizure, among several other potentially concurrent options for penalizing individuals involved in an entity’s illegal activities.
  4. No Corporate Resolution Will Provide Protection for Individuals Absent Extraordinary Circumstances.
    Where a resolution of a corporate case occurs prior to settlement against any individuals, the Memo requires that the DOJ take care to preserve the ability of the department to pursue the individuals. Therefore, unless there is an approved and therefore official departmental policy or a particularly extraordinary circumstance, the memorandum instructs DOJ attorneys not to release individuals from criminal or civil liability when resolving the related corporate matter.
  5. No Corporate Case Will be Resolved Without a Clear Plan To Resolve Related Individual Cases Before the Statute of Limitations Expires, and Declinations as to Individuals must Be Memorialized.
    In instances in which the corporate case resolves prior to cases against individuals, the Memo orders the corporate settlement agreements or plea agreements to include (1) a discussion of the potentially liable individuals and a description of the status of investigations relating to the individuals and (2) a plan to resolve those cases before the relevant statute of limitations expires. If the DOJ ultimately decides not to bring a case against the individual, the Memo directs the DOJ to memorialize that determination and obtain approval by the U.S. Attorney or the Assistant Attorney General handling the case.
  6. Civil Attorneys Are Directed to Focus on Individuals Accused of Corporate Wrongdoing Without Regard to the Individual’s Ability to Pay.
    The Memo highlights that the DOJ’s civil enforcement efforts have two aims: (1) to return government money to the U.S. Treasury and (2) to hold wrongdoers accountable and thereby deter future wrongdoing. It is noted in the Memo that certain of the Department’s civil litigators have failed to pursue individuals where there is a low likelihood of financial recovery, and this approach is specifically rejected. The Memo stresses that both goals – pursuit of individuals responsible for corporate wrongdoing and appropriately penalizing those individuals – are separately, but equally, important. Therefore, in deciding whether to pursue civil actions against individuals, the Memo instructs government civil attorneys to take into account several factors beyond an individual’s ability to satisfy a judgment, particularly (1) the nature and seriousness of the misconduct at issue; (2) whether the case is actionable; (3) whether there is sufficient admissible evidence to obtain a judgment; and (4) the nature of the federal interest. Although these individual civil judgments may not be a moneymaker for the DOJ, they will ensure that individuals do not benefit from their wrongdoing.

Key Takeaways

While the Memo is characterized as guidance for the DOJ, unless there is further qualification, its strong wording and stated rationales at least initially indicate that the impact of the Memo within the Department will be such that the steps discussed will be seen as required protocol. Corporate employees and management, particularly senior management, should therefore be prepared to face markedly increased scrutiny during and following corporate investigations. In addition, corporations themselves will find it much more difficult to enter into “global” settlements that resolve their own liabilities and those of their officer, directors, and employees.

The Memo may also inform healthcare fraud investigations, which have increasingly scrutinized the individuals responsible for alleged improper practices. Illustrating this trend, in June the government announced criminal enforcement actions against 243 individuals across the country relating to $712 million in alleged fraudulent billing, making it the largest criminal healthcare fraud takedown in history.

The best protection against individual liability for corporate wrongdoing, particularly at the board and officer level, is for those individuals charged with responsibility for corporate compliance to ensure that effective programs, systems, and protocols are in place to prevent and detect wrongdoing and misuse of corporate assets in the first instance. Senior management should ensure that the following are and remain part of the company structure and process:

  • Continuously, at reasonable intervals, review and update the company’s compliance policies and program;
  • Provide adequate training on the revised programs. This includes translations appropriate to the relevant population of corporate employees and depending on the risk evaluation, may include face to face training;
  • Insure that all new employees in relevant positions are adequately trained as they are onboarded;6
  • Consider obtaining an independent and updated risk assessment of the company’s compliance profile; and
  • Act quickly and appropriately to respond to reports of potential misconduct and have clear systems and protocols in place for doing so. This includes (a) determining the level of investigation of the report necessary, (b) determining under the company’s protocol who is to initially conduct the investigation, (c) whether the investigation rises to a level that would indicate independent outside counsel should be involved; (d) when concluded, determine necessary remediation as needed; and (e) ensure full and adequate documentation of all steps taken and reasoning for the remediation implemented.

1 Memorandum from Sally Quillian Yates, Deputy Attorney General on Individual Accountability for Corporate Wrongdoing to DOJ Prosecutors (Sept. 9, 2015) available at [hereinafter “Memo”]

2 This does not mean that following corporate resolution, there would not be the possibility of separate resolutions with individuals that may involve some discharge of liability if the Department were to deem that appropriate under the circumstances.

3 The Memo does not address how this impacts, if at all, the Department’s current position regarding requests for waiver of privilege. It remains to be seen whether the DOJ intends, under the tenets of the Memo, to reassess its current position and establish a more aggressive posture on privilege waivers than that which has been in place in the recent past.

4 DOJ Press Release, Deputy Attorney General Sally Quillian Yates Delivers Remarks at New York University School of Law Announcing New Policy on Individual Liability in Matters of Corporate Wrongdoing (September 10, 2015), available at

5 Memo, supra note 1 at 4.

6 Of course, initially, the company should ensure that it has reasonable and risk-based compliance policies and procedures in place in all areas in which the company is regulated by law.