Internal Investigations in the Era of the Yates Memo

Article, Corporate CounselJune 2016

Legal / Investigation

To say that much has been said and written about the Yates Memo would be an understatement. But it still remains to be seen what effect the Memo, released by Deputy Attorney General Sally Quillian Yates on September 9, 2015, will have on corporate America.

As published in Corporate Counsel, June 10, 2016.

To say that much has been said and written about the Yates Memo would be an understatement. But it still remains to be seen what effect the Memo, released by Deputy Attorney General Sally Quillian Yates on September 9, 2015, will have on corporate America.

For all intents and purposes, guidance provided to Department of Justice Attorneys (DOJ) through the Memo is to place equal (if not greater) emphasis on an individual’s accountability in a corporate investigation as on the corporation itself. Further, consideration of the corporation’s cooperation credit will be heavily influenced by the corporation’s efforts to provide information to the DOJ about the individual(s) involved in the investigation.

One avenue that has not been overly discussed is how the Memo could affect the actual conduct of internal investigations and its impact on the employer/employee relationship.

Does the DOJ Now Expect Corporate America to Do Its Job?

There is little question that the Memo was a direct result of criticism of the DOJ for not prosecuting more individuals as a result of the financial crisis. Now, rather than building prosecutions the old fashioned way - seeking out good cases and conducting thorough investigations through the use of subpoenas, search warrants, wire taps, informants, surveillance, whistleblowers and cooperators - the DOJ will apparently demand that companies do it for them. This new approach will affect not only the conduct of investigations, but also the relationship between employees and employers caught in the DOJ’s crosshairs.

The Employer/Employee Relationship Is Further Eroded

First the SEC created its whistleblower program that arguably encourages whistleblowers to report alleged misconduct directly to the SEC rather than first reporting it through their company’s ethics and compliance channels. If that hasn’t strained the employer/employee relationship enough, the government has now taken the position with the Yates Memo that a company must seek out and report “all relevant facts” regarding culpable employees in an investigation in order to qualify for any cooperation credit (Yates Memo emphasis). Employee cooperation in connection with internal investigations, often an essential part of any effective investigation, may become a thing of the past as more employees seek legal advice before agreeing to cooperate (whether they are culpable for something or not).

Effect on the Investigative Process

Potential effects on the investigative process as a result of the memo can be categorized into the following buckets:

The goal of any internal investigation is to thoroughly flesh out the allegations of wrongdoing and we don’t see that changing as a result of the Memo. However, we do believe that there will be greater hurdles in securing cooperation from employees. Will the so-called Upjohn warnings need to be adjusted to advise employees that the information they provide will likely be turned over to the government? Will employees need to be advised that information they provide could lead to their own criminal and/or civil culpability?

The investigation process may also be hampered by the need to remove potentially culpable employees from the investigation reporting chain. Normally, culpability is assessed at the end of an investigation when all facts are known, but the Yates Memo makes it clear that individuals’ civil and criminal culpability should be assessed throughout an investigation. To comply with the Memo, do companies need to exclude key executives from investigations into their reporting structures even when there is no evidence of their involvement at the outset?

We believe that some companies may be tempted to report to the government earlier than they would otherwise in an attempt to obtain maximum cooperation credit. This could lead to information being provided to the government which hasn’t been adequately vetted through a complete investigation and potentially causes adverse consequences for both the company and any employees identified as “culpable.” It remains to be seen how a prosecutor, intent on securing a conviction, will evaluate exculpatory information for a previously identified “culpable” employee.

Negotiating a settlement with the government will likely require much more art than science. Agreement must be reached on the quality of information the company has provided and on the number of suspected “culpable” employees identified for the government. Since each situation will be different, company counsel will be faced with making a persuasive argument that the company has fulfilled its obligation to “provide all relevant facts about the individuals involved in corporate misconduct.”

The overall cost of internal investigations has grown over the years and we believe that this trend will continue as companies seek maximum leniency by gathering as much information as they can to present individuals to the government. Additionally, employees who believe they may have some culpability will likely ask the company to provide them with counsel on the company’s dime earlier in the process than they would have before the Yates Memo was released. These factors will add to the overall cost of an investigation.


The full impact of the Yates Memo remains to be seen. Many commentators have noted that the Department of Justice has had to walk back similar policy memos in the past due to public outcry or judicial challenges (see the Thompson and McNulty memos). Whether the Yates memo meets a similar fate or not, there can be no doubt that it has changed the relationship between the Department of Justice, the corporate targets of its investigations and the employees who may be caught in the middle.

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