U.S. Will Retreat on Yates Memo, Former DOJ Official Predicts

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By Chris Bruce

Nov. 20 — The U.S. government will back away from an “all-or-nothing” approach under new prosecution guidelines requiring companies in the cross-hairs to report individual wrongdoing before receiving credit for cooperation, a former Justice Department official said Nov. 20.

In the past, the government has sought help from private companies to understand complex industrywide misconduct, such as Libor, foreign exchange and other matters, according to former Deputy U.S. Attorney General James M. Cole, now a partner in the Washington, D.C., offices of Sidley Austin.

But under the all-or-nothing approach — one of several planks in the September memo by current Deputy U.S. Attorney General Sally Quillian Yates — companies approached by the government for help may have little incentive to cooperate, Cole told an American Bar Association meeting.

Under the memo, he said, a company will get no credit unless it produces all of the information it has about its own people, and likely will say no to government requests for assistance.

“I think over time, the government's going to realize this and they're going to start to retreat from this all-or-nothing approach,” he said, adding that the change may take time and prove difficult given the high profile the government has given to the new guidelines.

Memo Marks Shift

The Justice Department released its new guidelines in September, saying companies facing criminal probes must give the government information about individual misconduct to win reduced penalties (176 BBD, 9/11/15).

Cole and others stressed that the focus on targeting individuals is, by itself, nothing new. The Justice Department has always put a premium on pursuing individual wrongdoers when possible and appropriate, they said.

Even so, the memo marks a significant shift in stated policy, coming as it did after criticism that the government has reached sizable settlements with large corporations while not pursuing individuals said to be responsible for misconduct.

Many of those cases are difficult to prosecute because of highly complex subject matter, such as “financial rocket science,” health care matters and other issues, he said.

Attorney-Client Privilege

Among other points, Cole also said the Yates memo will, in practice, operate to effect waivers of the attorney-client privilege. Normally, he said, in-house investigations are designed to be shielded by the privilege.

But assertion of the privilege at the time when information is communicated requires an intention for the information to remain confidential, according to Cole.

And if the information is collected under the government's admonition to produce it, Cole said, “it may not be privileged to begin with.”

Plaintiffs' lawyers will demand disclosure, saying the privilege has been waived, or that it never existed, Cole predicted.

“You're going to see this all the time,” said Cole, who was joined by Philip Khinda, a partner with Steptoe & Johnson in Washington, D.C.

Lawyers for Everyone

A separate Nov. 20 ABA panel also focused on the Yates memo, with lawyers agreeing that it will encourage individual employees to seek their own legal counsel, sometimes before responding to basic requests for information.

“More employees are just going to demand that they have to have a lawyer,” said Joan Meyer, who chairs the compliance, investigations and government enforcement practice with Baker McKenzie in Washington, D.C.

She was joined by Margaret Cassidy of Cassidy Law in Washington, D.C., and Baker McKenzie Associate Maria McMahon.

Cole and Khinda also said employees will want their own legal advice, with Khinda adding that separate legal counsel for directors and senior managers will mean significant new outlays.

Corporate counsel will quickly find they can't confuse representation of the board or the company with representation of individual directors or managers, he said.

“The only thing you can really do, and it's going to cost companies more, is to get them lawyers,” Khinda said.

To contact the reporter on this story: Chris Bruce in Washington at cbruce@bna.com

To contact the editor responsible for this story: Seth Stern at sstern@bna.com

For More Information 
The Yates memo is at http://src.bna.com/bbY.