The Yates Memo: Looking for 'Individual Accountability' in All the Wrong Places Article

• Author: Katrice Bridges Copeland
• Position: Professor of Law, Penn State Law, The Pennsylvania State University, B.S., The University of Illinois; J.D., The University of Michigan Law School
• Pages: 1897-1927

The Yates Memo: Looking for “Individual Accountability” in All the Wrong Places Katrice Bridges Copeland * ABSTRACT: The Department of Justice has received a great deal of criticism for its failure to prosecute both corporations and individuals involved in corporate fraud. In an effort to quiet some of that criticism, on September 9, 2015, then Deputy Attorney General Sally Q. Yates issued a policy entitled, “Individual Accountability for Corporate Wrongdoing,” or the “Yates Memo,” as it has been called. The main thrust of the Yates Memo is that in order for a corporation to receive any credit for cooperating with the government and obtain leniency in the form of a deferred prosecution agreement, the corporation must not only conduct an internal investigation and turn over the results, but it must also point the finger at culpable employees. The Yates Memo puts a particular emphasis on the need to hold high-level officials responsible for misconduct. This Article argues that the Yates Memo is a misguided attempt to further put law enforcement responsibilities on the backs of corporations rather than the Department of Justice. In addition, the Yates Memo jeopardizes the corporation’s ability to conduct effective internal investigations into corporate wrongdoing because it threatens both the corporate attorney-client privilege and the relationship between employers and employees. This Article maintains that if the Department of Justice truly wants to find “individual accountability,” it must stop relying on corporations and conduct its own investigations. Furthermore, if the Department of Justice wants to obtain criminal convictions of high-level executives, there may be a need for new legislation that holds high-level executives accountable for the criminal misdeeds of their subordinates. I. INTRODUCTION ........................................................................... 1898 II. BACKGROUND ............................................................................. 1901 * Professor of Law, Penn State Law, The Pennsylvania State University, B.S., The University of Illinois; J.D., The University of Michigan Law School. For helpful comments on this project, I thank the participants of the Mid-Atlantic People of Color Conference at American University Washington College of Law, the Seton Hall Faculty Colloquium, and the Lutie Lytle Black Women Law Professors Conference. I am grateful to Brett Atanasio, Penn State Law Class of 2017, for research assistance. 1898 IOWA LAW REVIEW [Vol. 102:1897 A. I NTERNAL I NVESTIGATIONS , DPA S , AND THE C ULTURE OF W AIVER ................................................................................ 1902 B. T HE Y ATES M EMO ................................................................. 1906 III. THE YATES MEMO CREATES NEW PROBLEMS FOR THE DOJ ....... 1908 A. T HE P ROBLEM OF W AIVER ..................................................... 1910 1. When is the Attorney–Client Privilege Waived? ........ 1911 2. The Problems of Waiver in the Yates Memo ............. 1915 B. T HE P ROBLEMS IN E MPLOYER –E MPLOYEE R ELATIONSHIPS ..... 1916 IV. THE YATES MEMO IS NOT THE ANSWER ...................................... 1922 A. T HE G OVERNMENT M UST C ONDUCT ITS O WN I NVESTIGATION ..................................................................... 1923 B. A L EGISLATIVE S OLUTION W OULD BE M ORE E FFECTIVE ........... 1925 V. CONCLUSION .............................................................................. 1926 I. INTRODUCTION Over the past several years, the idea of individual criminal accountability for corporate misconduct, or even corporate criminal liability, has been illusory. The Department of Justice (“DOJ”) has locked itself into the practice of having corporations do the difficult and expensive work of conducting internal investigations and turning over the results of those investigations to the DOJ. 1 The DOJ calls this cooperation and rewards a corporation’s assistance with a deferred prosecution agreement (“DPA”). 2 A DPA permits a company to save its reputation by avoiding a criminal trial or indictment. 3 Instead, the DOJ files charges but holds them in abeyance for a period of years in exchange for the corporation paying a large fine and agreeing to stringent compliance measures. 4 The practice of entering into DPAs rather than indicting corporations, however, has led to a great deal of criticism of the DOJ. Critics claim that DPAs are an ineffective deterrent for corporations and that the best way to deter corporations is instead through individual prosecutions for corporate misconduct. 5 In particular, there has been a public 1 . See infra Part II (detailing the evolution of the DOJ’s corporate investigations). 2. David M. Uhlmann, Deferred Prosecution and Non-Prosecution Agreements and the Erosion of Corporate Criminal Liability , 72 MD. L. REV. 1295, 1301 n.43 (2013). 3 . Id. 4. Christopher A. Wray & Robert K. Hur, Corporate Criminal Prosecution in a Post-Enron World: The Thompson Memo in Theory and Practice , 43 AM. CRIM. L. REV. 1095, 1104–05 (2006). 5 . See, e.g. , Julie R. O’Sullivan, How Prosecutors Apply the “Federal Prosecutions of Corporations” Charging Policy in the Era of Deferred Prosecutions, and What That Means for the Purposes of the Federal Criminal Sanction , 51 AM. CRIM. L. REV. 29, 30–31 (2014) (arguing that DPAs “are not demonstrably better” than individual convictions in furthering the goals of criminal enforcement, including deterrence); Uhlmann, supra note 2, at 1298–99. 2017] THE YATES MEMO 1899 outcry over the fact that, while the financial system collapsed in 2008 due to fraudulent practices, the government has failed to hold individuals criminally accountable for the misconduct. 6 In short, many people have asserted that the DOJ is too soft on corporate crime. In response to this criticism, the DOJ issued its newest corporate charging guidelines on September 9, 2015. Importantly, the policy, entitled, “Individual Accountability for Corporate Wrongdoing,” or the “Yates Memo,” does not focus on when Assistant U.S. Attorneys should bring criminal charges against corporations. 7 Instead, the focus is on prosecuting individuals within the corporate entity and explains that “[o]ne of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing.” 8 In essence, the Yates Memo doubles down on the DOJ’s policy of resolving corporate misconduct through DPAs and non-prosecution agreements (“NPA”) and directs prosecutors to bring individual criminal prosecutions. This shift from corporate to individual accountability is, in some ways, a natural evolution from the previous policy. The previous policy, the 2008 version of the Principles of Federal Prosecution of Business Organizations, 9 explained that the “[p]rosecution of a corporation is not a substitute for the prosecution of criminally culpable individuals within or without the corporation.” 10 Furthermore, the 2008 version of the guidelines spoke of the need to resolve a corporate criminal case through the use of non-prosecution and deferred prosecution agreements when the collateral consequences of conviction, such as the impact on employees, investors, and customers, outweighed the benefit of a criminal prosecution. 11 In those instances, the 2008 guidelines explained that 6. OFFICE OF SENATOR ELIZABETH WARREN, RIGGED JUSTICE: 2016: HOW WEAK ENFORCEMENT LETS CORPORATE OFFENDERS OFF EASY 4 (2016), http://www.warren.senate.gov/files/documents/ Rigged_Justice_2016.pdf (arguing that although lax enforcement can be the result of statutory limitations, it often is the result of the failure to effectively use the tools already available); Ben Protess & Jessica Silver-Greenberg, Two Giant Banks, Seen as Immune, Become Targets , N.Y. TIMES: DEALBOOK (Apr. 29, 2014, 8:40 PM), http://dealbook.nytimes.com/2014/04/29/u-s-close-to-bringing-criminal-charges-against-big-banks (“A lack of criminal prosecutions of banks and their leaders fueled a public outcry over the perception that Wall Street giants are ‘too big to jail.’”). 7. Memorandum from Sally Quillian Yates, Deputy Att’y Gen., U.S. Dep’t of Justice to All U.S. Att’ys et al., Individual Accountability for Corporate Wrongdoing (Sept. 9, 2015) [hereinafter Yates Memo] (on file with author). 8 . Id. at 1. The changes in the Yates Memo have now been worked into the Principles of Federal Prosecution of Business Organizations, which is part of the U.S. Attorneys’ Manual. See 9-28.000— Principles of Federal Prosecution of Business Organizations , U.S. DEP’T OF JUSTICE, https://www.justice. gov/usam/usam-9-28000-principles-federal-prosecution-business-organizations (last visited Apr. 9, 2017) [hereinafter U.S. Attorneys’ Manual]. 9. U.S. DEP’T OF JUSTICE, U.S. ATTORNEYS’ MANUAL: PRINCIPLES OF FEDERAL PROSECUTION OF BUSINESS ORGANIZATIONS § 9-28.000–28.1300 (2008) [hereinafter 2008 U.S. ATTORNEYS’ MANUAL], http://www.justice.gov/sites/default/files/opa/legacy/2008/08/28/corp-charging-guidelines.pdf. 10 . Id. § 9-28.200(B). 11 . Id. § 9-28.1000. 1900 IOWA LAW REVIEW [Vol. 102:1897 the non-prosecution and deferred prosecution agreements should be designed “to promote compliance with applicable law and to prevent recidivism.” 12 Both the Yates Memo and the 2008 guidelines cite deterrence as the justification for pursuing criminal charges against individuals and corporations, respectively. 13 There is certainly no easy answer to the question of whether individual or corporate criminal accountability is the more effective deterrent. Thus, the challenge for the DOJ in striking the correct balance between the two while protecting the public from the collateral consequences of a corporate criminal conviction cannot be overstated. The DOJ’s issuance of the Yates Memo, however, signals its belief that the focus should be on individual criminal accountability. Yet even if one...