Yates Memo Could Mean Costlier Cases for States

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By Che Odom

Dec. 1 — State prosecutors may start expecting the same level of corporate cooperation their federal counterparts demand under the Justice Department's Yates memorandum, current and former attorneys general said Dec. 1.

However, they added that the DOJ's new focus on individual liability may prevent quick and profitable settlements for cash-strapped states.

Most state attorneys general prefer to bring cases in cooperation with the federal government because those cases often lead to early settlements without much work on the state's part, said J.B. Van Hollen, a former Wisconsin attorney general who now is senior counsel in BGR Group's Washington office.

“They get their names in the headlines for protecting consumers and get part of the pot,” Van Hollen said. “The Yates memo may slow that down a little and make that more difficult.”

Van Hollen and others discussed Deputy U.S. Attorney General Sally Quillian Yates's Sept. 9 memo at a King & Spalding LLP webinar.

Individual Wrongdoers 

Under the memo's new approach, only companies that disclose information about individual wrongdoing may be eligible for lesser penalties in exchange for their cooperation. These changes reportedly are in response to criticisms of the government for failing to punish wrongdoers in the financial crisis.

The process of reaching a settlement becomes more difficult and time-consuming with the additional effort of getting at who actually committed the wrongful acts, Van Hollen said.

States to Benefit, Too

States also want to uncover individual liability and will benefit from the push for more information, said Gary Grindler, a partner with King & Spalding's government investigations practice group in Washington.

Grindler said he is waiting to see whether the new policy chills the willingness of corporate officers and others to be interviewed during internal investigations.

Corporate counsel must warn officers or other employees that they don't have the same expectation of confidentiality in speaking with the counsel for the company that they would with their own attorneys, Grindler said.

“With any investigation now, the Upjohn warnings that you give to witnesses may have to be modified to make it clear or to advise the witness that there is a greater chance that the information will be shared with the Department of Justice and maybe state attorneys general,” he said.

Won't Apply Often

Georgia Attorney General Samuel Olens said that he doesn't see a “Yates situation” arising at the state level very often, because states, which often prosecute False Claims Act cases, will focus their resources on companies.

However, states will steer toward individuals when companies rack up repeated violations, he said.

“Generally, I don't see” state attorneys general moving in that “added direction unless there are very specific facts that demonstrate you really have to go after the individual actors rather than simply the corporation,” he said.

To contact the reporter on this story: Che Odom in Washington at codom@bna.com

To contact the editor responsible for this story: Yin Wilczek at ywilczek@bna.com