Yates Memo

Early and Often: DOJ Tells Companies to Cooperate Early or Pay the Price

An important issue for companies and their executives that are the subject of an investigation by the federal government is whether, and how early, to cooperate.

On September 27, 2016, Principal Deputy Associate Attorney General Bill Baer delivered remarks at the Society of Corporate Compliance and Ethics Conference, where he laid out in some detail his views on the value of early cooperation with the federal government in financial cases, and the consequences for waiting. As the number 3 attorney in the Department of Justice who is charged with overseeing civil litigation, antitrust, and other large divisions, Baer’s words are significant, and are a further gloss on the so-called “Yates Memo”, which Deputy Attorney General Sally Yates released last September, detailing DOJ’s guidance on individual accountability for corporate wrongdoing.

Speaking specifically about cases against banks and the fallout from protracted litigation involving residential mortgage-backed securities, Baer said those cases could have been resolved more quickly if only the financial institutions “had decided early to cooperate.” Consequently, “each [institution] paid a lot more than it would have if it had cooperated early on.” Recalling that many of these same institutions had nonetheless sought “significant cooperation credit,” Baer stated that DOJ “dismissed the arguments quickly because they so lacked merit.”

So how early is early enough, and how can your company get credit for cooperating? Baer elaborated on recent “internal” guidance he has provided to his attorneys in civil enforcement matters.

READ MORE

The Carrot and the Stick: The SEC’s First Deferred Prosecution Agreement with an Individual in an FCPA Case

In a move that highlights both the increased focus on holding individuals accountable and the  credit that can be earned through cooperation, the U.S. Securities and Exchange Commission (“SEC”) announced last week that, for the first time, it entered into a deferred prosecution agreement (“DPA”) with an individual allegedly involved in a Foreign Corrupt Practices Act (“FCPA”) case.  On February 16, 2016, the SEC announced a DPA with Yu Kai Yuan, a former employee of software company PTC Inc.’s Chinese subsidiaries.  The SEC agreed to defer civil FCPA charges against Yu for three years in recognition of his cooperation during the SEC’s investigation.  PTC also reached a settlement with the SEC, in which the company agreed to disgorge $11.8 million.  Prior to the Yu DPA, the SEC had entered into one DPA with an individual in November 2013, in a matter involving a hedge fund manager allegedly stealing investor assets.  However, never before this time was a DPA with the SEC related to an FCPA case.

READ MORE