Yates Memo Is Driving Corporate Investigations

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By Michael J. Bologna

April 29 — The so-called “Yates memo” describing the Department of Justice policy that seeks to hold individuals criminally and civilly responsible in instances of corporate malfeasance is already having an impact in cases under investigation, a DOJ attorney told securities practitioners April 29.

Julie Porter, chief of the criminal division in the Office of the U.S. Attorney for the Northern District of Illinois, said corporations should pay close attention to a memo issued by Deputy Attorney General Sally Yates last September that directs federal prosecutors engaged in investigations of corporate misconduct to hold individuals in the organization accountable for their misdeeds (176 SLD, 9/11/15).

Porter, speaking during Northwestern University School of Law's Ray Garrett Jr. Corporate and Securities Law Institute in Chicago, said the policy is already affecting the way federal prosecutors conduct investigations in the securities and futures arenas and the way corporations are responding to the government.

“It is already having an impact on civil cases making their way through the Department of Justice,” she said. “I think the memo serves as a significant caution that corporations need to take these issues of transparency and accountability very, very seriously.”

All or Nothing

Porter noted that a key feature of the policy emphasizes that corporations at the center of investigations will only receive cooperation credit from the department if they fully disclose information about the wrongdoing.

“One of the things I think is most remarkable about the Yates memo is what the deputy attorney general described as ‘all or nothing’—if you don’t give us everything you have, you get zero credit for cooperation,” she said.

In line with this view, Porter said corporations under investigation need to: conduct robust internal investigations of misconduct; identify the individuals engaged in misconduct and characterize their misdeeds; fully disclose all relevant information to the Justice Department and the Securities and Exchange Commission; and fully cooperate with the government’s investigation.

Spilling the Beans

Pravin Rao, a partner with Perkins Coie LLP in Chicago and a former Assistant U.S. Attorney, said the new policy has caused his clients to focus more quickly on the conduct of individuals within the organization during investigations.

“The Yates memo has led to companies coming in and spilling the beans on individuals, and finding individual culpability,” Rao said during the same panel discussion. “There has been a slight shift in internal investigations. The focus has been: let’s get to the truth; let’s remediate the problem; let’s make sure we’re not making misstatements to the public; let’s make sure our filings are correct.”

To contact the reporter on this story: Michael J. Bologna in Chicago at mbologna@bna.com

To contact the editor responsible for this story: Phyllis Diamond at pdiamond@bna.com