In a speech delivered on November 29, 2018, Deputy Attorney General Rod Rosenstein announced changes to the Justice Manual regarding cooperation credit for companies facing criminal and civil investigations.1 These changes limit the Yates Memo’s2 requirement that a corporation disclose “all relevant facts about the individuals involved in corporate misconduct” before it is eligible for cooperation credit and provides possible relief to some companies facing investigation from the Department of Justice (DOJ).
In an attempt to create policies that “work in the real world,” Rosenstein announced two amendments to the Yates Memo’s requirements. First, instead of requiring a company to identify every individual involved in corporate misconduct, “a company seeking cooperation credit in criminal cases must identify every individual who was substantially involved in or responsible for the criminal conduct.” Second, on the civil side, Rosenstein announced that the DOJ is giving its civil attorneys discretion to grant cooperation credit if a company provided honest and meaningful assistance to the government’s investigation.
The updated language has four key features:
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Companies facing criminal charges are no longer required to provide the DOJ with all relevant facts and persons. Instead, a company need only provide all relevant facts related to individuals “substantially involved in or responsible for” the alleged wrongdoing.
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DOJ civil attorneys now have discretion to award partial cooperation credit if a company provides meaningful and honest assistance to the DOJ’s investigation.
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Companies seeking cooperation credit for civil charges must at least provide all facts about all senior executives and board members involved in an allegedly illegal scheme.
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Only full disclosure of all individuals “substantially involved or responsible for” the misconduct will qualify a company for full cooperation credit in a civil investigation.
Rosenstein’s update is a welcome change for companies facing investigations or prosecutions from the DOJ. The new “substantially involved” language relieves companies from needless investigations into only tangentially related conduct, and the return to discretion for civil attorneys should lead to easier and faster settlements. Overall, companies should view these updates as a step forward in creating logical and fair investigations into alleged corporate wrongdoing but should exercise caution as the DOJ determines how these updates will affect their practice and procedure in corporate investigations.
Criminal Investigations Should Be Easier to Respond to, but Uncertainty Remains
The updated language resolves a significant concern for companies that have become familiar with the Yates Memo. Before the update, companies expended significant cost and effort trying to identify persons who might have been only remotely related to allegedly illegal conduct. Further, they risked losing the benefit of cooperation credit if they missed just one relevant employee, even if that employee was only remotely involved in allegedly illegal behavior and faced no prospect of civil or criminal prosecution.
The update addresses these illogical risks and the wasted resources required to engage in an overbroad internal investigation. Companies investigating alleged corporate wrongdoing should now be able to concentrate their resources on identifying culpable parties without fear that the government will deny them cooperation credit based on reasonable limitations of scope. Moreover, companies also now have room to push back against extensive requests from the DOJ by citing the new language’s “substantially involved” limitation.
However, because the DOJ has not defined “substantial involvement,” the update to the Yates Memo also comes with some uncertainty. In a criminal matter, a company’s cooperation credit depends on its accurate understanding of that term.
While he did not offer a definitive explanation, Rosenstein shed some light on who the DOJ will consider “substantially involved” in an allegedly illegal scheme. He stressed that the DOJ wants companies to identify “individuals who play a significant role in setting a company on a course of criminal conduct.” He also made clear that individuals outside of the C-suite and the board room can still be “substantially involved” in allegedly criminal schemes.
Rosenstein’s speech and previous DOJ enforcement actions suggest that the “substantially involved” language has focused inquiry into the most culpable persons. Again, this is a welcome clarification for companies contemplating cooperation with the DOJ. However, companies facing a criminal probe would be wise to be expansive in identifying “substantially involved” persons until the DOJ makes that term’s meaning clear.
DOJ Civil Attorneys’ Return to Discretion Signal Easier Settlements in the Future
On the civil side of government enforcement, Rosenstein announced that honest and meaningful assistance from a company could qualify the company for partial cooperation credit. This again represents a shift from the Yates Memo’s “all or nothing” approach. For maximum credit, the company must provide all those individuals who were “substantially involved” in the wrongdoing. However, Rosenstein made clear that a company need not provide even all “substantially involved” individuals before it is eligible for partial credit.
The update should mean that companies can settle with the DOJ more easily and fairly. As Rosenstein observed, the changes to the civil enforcement side are an attempt to create “realistic internal guidance” for the DOJ. These changes should allow DOJ attorneys more space to negotiate and settle with companies.
Takeaways for Companies Facing Possible DOJ Enforcement
The updates to the Justice Manual are a welcome step towards more fairness in investigations by the DOJ. However, companies should not ignore the continued risks and burdens associated with government investigations or expect these updates to revolutionize how the DOJ conducts business. In fact, as Rosenstein himself hinted, these changes arguably bring the language in the Justice Manual in conformity with practices as they were being carried out in the prior regime.
Because the “substantially involved” language remains undefined, cooperation credit is probably still dependent on the discretion of DOJ attorneys. While identifying “substantially involved” individuals is less onerous than identifying “all relevant facts about the individuals involved in corporate misconduct,” companies should be cautious about failing to identify persons, particularly in a criminal context.
Additionally, it remains to be seen how DOJ attorneys will exercise their enhanced discretion. Discretion for government attorneys can sometimes mean uncertainty for companies. We anticipate additional guidance from the DOJ and heightened understanding through empirical evidence of these policies in practice in the days to come.
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