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Guidelines reward employer cooperation in corporate wrongdoing cases


The U.S. Department of Justice has revised its guidance handbook to reflect its policy of pursuing individual corporate wrongdoers, says the deputy attorney general who announced the policy in a September memo.

The revisions to the United States Attorney’s Manual “now emphasize the primacy in any corporate case of holding individual wrongdoers accountable and lists a variety of steps that prosecutors are expected to take to maximize the opportunity to achieve that goal,” said Deputy Attorney General Sally Quillian Yates in remarks prepared for delivery Monday before the American Banking Association and American Bar Association’s Money Laundering Enforcement Conference in Washington.

The department’s policy of pursuing individual corporate wrongdoers in addition to their firms has led to concern by industry observers that this could ultimately lead to higher rates for directors and officers liability insurance because of a likely increase in investigative and defense costs.

“The new rule in the revised factors is exactly how I laid it out two months ago,” said Ms. Yates. “If a company wants credit for cooperating — any credit at all — it must provide all nonprivileged information about individual wrongdoing. Companies seeking cooperation credit are expected to do investigations that are timely, appropriately thorough and independent and report to the government all relevant facts about all individuals involved, no matter where they fall in the corporate hierarchy.”

Ms. Yates said that in the past, “cooperation credit was a sliding scale of sorts, and companies could still receive at least some credit for cooperation even if they failed to fully disclose all facts about individuals.”

“That’s changed now. As the policy makes clear, providing complete information about individuals’ involvement in wrongdoing is a threshold hurdle that must be crossed before we’ll consider any cooperation credit.”

Ms. Yates said the department is also revising the manual to lay out specific steps criminal and civil attorneys that handle white-collar matters should take with respect to communications and referrals “from one side of the house to the other.”

“Some have speculated that the new policy may mean that fewer companies cooperate with the government because of some perception that the new standard is too difficult to meet,” said Ms. Yates.

“I suppose that may happen, but I’m not convinced,” she said. “I have a hard time imagining that it will truly be in a company’s best interest to forgo the substantial benefits accorded for cooperation solely to avoid having to provide all the facts about individual conduct.

“That would seem to be a particularly difficult call for the board of directors of a publicly traded company given the fiduciary duty to the shareholders,” Ms. Yates said in her prepared remarks.

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