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The US Department of Justice (“DoJ”) has issued a memorandum to Federal Prosecutors on Individual Accountability for Corporate Wrongdoing (“the Yates memo”). It is widely regarded as the DoJ’s response to criticism that they tend to prosecute companies rather than individuals in contrast to the criticism often levelled at their English counterparts at the SFO.
Coughing up the individuals
Sally Yates summarised the essence of her memo last week when she said “We mean it when we say, ‘You have got to cough up the individuals’”. The Yates memo sets out six key steps to strengthen the DoJ pursuit of individual corporate wrongdoing, although critics have said that it is nothing more than a restatement of existing ambition and approach. The key points are that to qualify for any cooperation credit, companies must provide to the DoJ all relevant facts relating to the individuals responsible for the misconduct; the DoJ’s criminal and civil corporate investigations should focus on individuals from inception; there should be better communication between criminal and civil DoJ lawyers handling corporate investigations; culpable individuals will not usually be released from civil or criminal liability when resolving a matter with a company; and DoJ lawyers should not resolve matters with a corporation without a clear plan to resolve individual cases, and should formally record the reasons for any decision not to proceed against the individuals.
Companies that meet these requirements could also qualify for a deferred prosecution agreement (DPA) or non-prosecution agreement.
The DoJ is responding to criticism that it prosecutes companies over senior individuals. This is the inverse of criticism the SFO has faced in the past for not prosecuting enough companies. This contrasting position is in part due to the differences in the respective laws on corporate criminal liability. The US model of vicarious liability means that the DOJ can prosecute companies based on lower level offending without having to prosecute senior executives while the identification principle in the UK means that the SFO cannot prosecute a company unless they can prosecute successfully the directing mind of that company. In a timely speech last week, David Green, the Director of the SFO, called for a move away from the UK model of corporate criminal liability towards the US model saying “if the public interest, in terms of public confidence, demands more prosecutions of corporates, then such change is surely necessary”.
Would the Yates memo make a difference in the UK?
At the heart of the Yates memo is the need to prosecute individuals as well as corporates with the incentive of credit for companies that fully disclose all facts relating to the individuals at the start. This is essentially already the position here as can be seen in the joint SFO, CPS and RCPO Guidance on Corporate Prosecutions which states that prosecution of a company should not be seen as a substitute for the prosecution of criminally culpable individuals.
Corporate cooperation, and credit for that cooperation, is already a key feature in the SFO’s approach to prosecutions and DPAs. The most significant additional public interest factor tending against the prosecution of companies is cooperation and whether the company has disclosed sufficient information about the offending to the SFO. The DPA Code of Practice makes clear that in self-reporting, a company must not withhold material that would jeopardise an effective investigation and, where appropriate, prosecution of culpable individuals. A company that withholds information about key individuals will not be considered a cooperative company and will be less likely to be invited to enter into a DPA, and therefore more likely to be prosecuted.
Will the Yates memo have any effect on the UK?
The Yates memo is largely a restatement of best practice but it demonstrates a renewed and determined focus on individuals and will encourage companies that are in two minds about coughing up senior individuals, if they won’t get any cooperation credit without doing so.
We have seen a greater focus on international cooperation between prosecuting agencies in investigations into bribery and other financial crime. This means that that any renewed effort to prosecute individuals in the US is bound to have an impact in the UK on global investigations, but the extent of that impact, and whether it is really just form over substance remains to be seen.
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