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DOJ Issues Guidance On Pursuing Individual Accountability For Corporate Wrongdoing

By Keil J. Ritterpusch, Esq., Senior Associate

In a memorandum and accompanying speech in September 2015, U.S. Deputy Attorney General Sally Quillian Yates, the Department of Justice (“DOJ”) announced a major new initiative designed to target and pursue “accountability from the individuals” who “perpetrate corporate wrongdoing.”   The memorandum is published at

This DOJ memorandum provides insight into a new initiative within the Obama Administration for the investigation of wrong-doing by corporate entities, with the aim of pursuing investigations and civil and criminal actions against individuals within companies who are responsible for corporations committing violations of U.S. laws and/or regulations, including the Arms Export Control Act (“AECA”), the International Traffic in Arms Regulations (“ITAR”), the Export Administration Act (“EAA”), the Export Administration Regulations (“EAR”), the Office of Foreign Asset Control (“OFAC”) Regulations, and the Foreign Trade Regulations (“FTR”). While the DOJ memorandum does not expressly pertain to export compliance activities of companies, the memorandum applies generally to any law enforcement activity that may involve the DOJ or law/regulatory enforcement personnel, including personnel working for the Departments of State and Commerce, U.S. Customs and Border Protection, and the U.S. Census Bureau.

Specifically, the DOJ memorandum provides six specific policy instructions to DOJ attorneys, both in Washington D.C. and the U.S. Attorneys’ Offices, on the investigation and resolution of criminal and civil enforcement matters involving corporations and their employees. The memorandum applies to alleged violations of any U.S. law or regulation by corporations and the pursuit of actions/investigations against key employees of the corporations. Media reports described the memorandum as the first major policy announcement by the new Attorney General, Loretta E. Lynch.

As a foundational matter, the DOJ memorandum acknowledged the substantial challenges to pursuing individuals who “perpetrate corporate wrongdoing.” Deputy Attorney General Yates further stated in a speech regarding the policy: “These cases can present unique challenges for DOJ’s agents and attorneys: there are complex corporate hierarchies, enormous volumes of electronic documents, and a variety of legal and practical challenges that can limit access to the evidence we need.”[1]  Deputy Attorney General Yates further explained that “In modern corporations, where responsibility is often diffuse, it can be extremely difficult to identify the single person or group of people who possessed the knowledge or criminal intent necessary to establish proof beyond a reasonable doubt. This is particularly true of high-level executives, who are often insulated from the day-to-day activity in which the misconduct occurs.”

The DOJ memorandum cites the following six steps in pursuit of individual corporate wrongdoing:

Where a corporation’s continued cooperation is necessary post-resolution, the “plea or settlement agreement should include a provision that requires the company to provide information about all culpable individuals and that is explicit enough so that a failure to provide the information results in specific consequences, such as stipulated penalties and/or a material breach.”

Any such release of criminal or civil liability must be due to “extraordinary circumstances” and must be “personally approved in writing by the relevant Assistant Attorney General or United States Attorney.” There may also be exceptions for approved Departmental policies such as the Antitrust Division’s Corporate Leniency Policy.

If, at the conclusion of the investigation, a decision is made not to bring civil claims or criminal charges against individuals, the reasons for that decision must also be memorialized and approved by the U.S. Attorney or relevant Assistant Attorney General.

Implications of the DOJ Policy

While the DOJ memorandum is not binding law, it is a source of practical guidance for DOJ attorneys and law enforcement agents and will involve several changes to the U.S. Attorneys’ Manual and other Departmental guidance. It remains to be seen how significant a change these policy directives will have on individual prosecutions and corporate civil and criminal resolutions.

However, one thing is clear: DOJ is trying to send a message to the public and to agents and prosecutors across the country that punishment and deterrence of unlawful conduct will not be served unless individuals, as well as companies, are held accountable for corporate wrongdoing.

We view the memorandum as reflecting a significant change in DOJ policy for civil cases, though not as much in criminal cases. This makes the new policy particularly pertinent in civil agency, law enforcement, and DOJ enforcement of cases involving civil/regulatory matters.

Deputy Attorney General Yates specifically declared in her speech announcing the new policy that the memorandum represents a “substantial shift from our prior practice,” providing that “we’re not going to let corporations plead ignorance.” Yet the memorandum reflects practices that are already employed by numerous DOJ components and U.S. Attorneys’ offices, and reflects prior DOJ guidance, such as a September 2014 speech by Criminal Division leadership declaring that “Voluntary disclosure of corporate misconduct does not constitute true cooperationif the company avoids identifying the individuals who are criminally responsible. Even the identification of culpable individuals is not true cooperation, if the company fails to locate and provide facts and evidence at their disposal that implicate those individuals.”[2]

In regulatory cases, the memorandum appears to have a pronounced effect. Its apparent prohibition on the release of individual liability within corporate settlement agreements may complicate the negotiation and execution of corporate resolutions. In certain civil settlement agreements, for example, DOJ has agreed to release employees from at least civil liability. Yet the new guidance would appear to mark a shift in this practice, providing that “absent extraordinary circumstances, the United States should not release claims related to the liability of individuals based on corporate settlement releases,” and that any such releases must be personally approved in writing by the relevant Assistant Attorney General or U.S. Attorney.

The memorandum may also produce increased civil enforcement action against present and former company employees, even if the individual has few resources to satisfy any demand, judgment, or claim for payment.

It appears that “purely civil” corporate investigations may become less likely, and that clients ought to consider whether and how criminal prosecutors may become involved in such investigations. As noted above, the guidance requires civil and criminal attorneys to be in “routine” communication with one another throughout an investigation. The major lasting impact of these policy changes may in fact be increased civil enforcement, as opposed to additional individual criminal guilty pleas.

As the Deputy Attorney General acknowledged in her speech: “Less corporate cooperation could mean fewer settlements and potentially smaller overall recoveries by the government. However, individuals facing long prison terms or large civil penalties may be more inclined to roll the dice before a jury. Therefore, we could see fewer guilty pleas.

Implication for Regulatory Investigations

Only time will tell as to how the DOJ policy will affect investigations in regulatory matters, particularly in export compliance matters. There is clear direction from the Departments of State and Commerce and the Census Bureau for parties who have violated the ITAR, the EAR, or the FTR to self-disclose their violations. However, although stipulated in the regulations to name the parties involved, it has not industry practice to name the individual persons within the company who were involved with unauthorized conduct under the relevant regulations. With this new DOJ policy, though, it appears that companies will be expected to provide specifics on who within the company were involved with pertinent violations of regulatory requirements.

While the DOJ memorandum expressly applies to the investigation of criminal and civil violations by the DOJ community, it is not clear that the investigators at the Departments of State and Commerce, U.S. Customs and Border Protection, or the U.S. Census Bureau are mandated to follow the dictates of the DOJ memorandum. Nevertheless, for any violation of applicable export laws where DOJ becomes involved with an investigation, it is clear that DOJ will be pursuing investigations of key persons within companies who were responsible for the violations of applicable export rules.

As such, we recommend that companies involved with investigations of export violations fully disclose the names of individuals involved with purported violations of export rules, as well as the applicable managers and senior level executives overseeing compliance, to the government agencies involved with enforcing the violations. Only by doing so will corporations be able to limit or lessen their criminal liability for misconduct.

[1] 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

[2] See text of speech given by Principal Deputy Assistant Attorney General for the Criminal Division Marshall L. Miller on September 17, 2014: