Yates, AG Sessions and Individual Criminal Prosecutions

Michael Volkov
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In recent speeches, the Attorney General (here) and an Principal Deputy Assistant Attorney General (here) in the Criminal Division reconfirmed DOJ’s support for enforcement of the FCPA. No one should be surprised by their respective statements. As I have said all along, the new administration will not make any significant changes in FCPA enforcement, except for tweaking the FCPA Pilot Program to increase possibilities for a declination.

Contrary to all the hand-wringers out there, the Justice Department and the FBI have lined up resources, ongoing investigations and international cooperation relationships directed toward continuing, and possibly increasing, FCPA enforcement.

In reassuring compliance professionals at his recent speech, Attorney General Sessions reiterated DOJ’s continued focus on individual prosecutions. The Yates Memorandum, which was adopted in late 2015, requires cooperating companies to provide to the government all relevant information concerning culpable individuals in order to qualify for cooperation benefits.

The Yates Memorandum has had no appreciable impact on FCPA enforcement of culpable individuals. As many have pointed out, FCPA enforcement of individuals coupled with corporate prosecutions have not yet occurred. The PDVSA criminal prosecutions in Houston, Texas and the December 2016 enforcement against various individuals relating to aviation services between Texas and Mexico do not qualify under the Yates Memo requirements. The classic FCPA enforcement action involves a major corporate settlement after conducting a lengthy and intensive internal investigation. These are the cases that cry out for individual prosecutions.

When you look across the wreckage of corporate FCPA enforcement actions, there are numerous cases where individuals could have been prosecuted but for some reasons they were not (as of today). These include VimpelCom, Och-Ziff, Embraer, and one of the more outrageous cases from 2015, Avon.

Outside of the FCPA context, however, it is easier to spot the impact of the Yates Memorandum. The General Motors settlement for defective ignition switches did not include prosecution of any culpable individuals, despite the fact that several individuals could have been prosecuted. The General Motors case was resolved several weeks right after adoption of the Yates Memorandum.

In contrast to the General Motors case, the VW and Takata criminal cases brought by the Justice Department included prosecution of culpable individual officers. VW paid criminal and civil penalties totaling $4.3 billion. DOJ indicted six corporate officers as part of the alleged conspiracy to evade emission device testing.

In the Takata case, the company paid approximately $1 billion for a criminal conspiracy to hide airbag safety malfunctions. DOJ indicted three officers for criminal cases.

In the absence of the Yates Memorandum, it is questionable whether DOJ would have indicted the nine corporate officers charged in the VW and Takata cases. If anything, the GM case, like the Takata case, resulted in death of innocent consumers who made the mistake of purchasing a vehicle with the ignition switch or airbag problems.

With the exception of FCPA prosecutions, the Yates Memorandum appears to have had an impact on the number of criminal prosecutions. A more careful calculation of criminal cases is needed to confirm what impact the Yates Memorandum has had. The objective of the Yates Memorandum makes sense – to maximize deterrence against criminal conduct by prosecuting individuals for such conduct and imposing significant punishment.

Some have challenged the Yates Memorandum as more show than real substance, suggesting that there has been no real impact in the number of criminal prosecutions. Critics have also suggested that imposing the burdens of the Yates Memorandum may chill corporate cooperation in criminal cases for fear of not meeting the high-bar for cooperation set by the Yates Memorandum.

Whether these criticisms are valid, DOJ needs to measure the impact of the Yates Memorandum and provide transparency on its efforts to increase accountability of criminally culpable individuals.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Michael Volkov, The Volkov Law Group | Attorney Advertising

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