Securities Litigation

Speaking to a November 16 Money Laundering conference jointly sponsored by the American Banking and Bar Associations, Deputy AG Sally Yates unveiled revisions to the Department of Justice's U.S. Attorneys' Manual ("USAM"). The revisions implement the new focus on individual wrongdoing in the corporate criminal context first announced September 9 in the "Yates Memo." The revisions principally involve (1) the Filip Factors, (2) extend the Yates Memo to civil investigations, and (3) address coordination in parallel proceedings.

1. Filip Factor Revisions.

Chapter 9-28.000, "Principles of Federal Prosecution of Business Organizations," is known as the "Filip factors." The main revisions are: § 9-28.010 New "Foundational Principles" stressing focus on individual accountability. § 9-28.210 A new section, "Focus on Individual Wrongdoers," stressing pursuit of individual culpability as a separate issue for evaluation, apart from corporate resolution and discussing the low bar for the "benefit" prong of criminal respondeat superior liability. § 9-28.700 Revisions to the Cooperation section, providing:

In order for a company to receive any consideration for cooperation under this section, the company must identify all individuals involved in or responsible for the misconduct at issue, regardless of their position, status or seniority, and provide to the Department all facts relating to that misconduct. If a company seeking cooperation credit declines to learn of such facts or to provide the Department with complete factual information about the individuals involved, its cooperation will not be considered a mitigating factor under this section.

Id. (emph. added). The basic cooperation principles are not new, but as Yates emphasized in her address:

What is new is the consequence of not doing it. 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.

(emph. added). Additionally, the revisions encourage corporate disclosures early and often - on a rolling basis - valuing corporate cooperation over the life of an internal investigation over awaiting a completed "report." See Sec. 9-28.700 n. 1. § 9-28.720 A revised section on Disclosure of Relevant Facts, focusing on factual disclosures, while preserving the privilege so long as it is not used to shield facts. § 9-28.900 A new section on Voluntary Disclosure to bring self-reporting into line with similar provisions of other federal and regulatory agencies (e.g. SEC). § 9-28.1100 & -1200 Revised sections on Alternatives to beef up DOJ emphasis on considering NPAs and DPAs, or civil or regulatory enforcement actions, as alternatives to criminal indictment or declination. § 9-28.1300 A new section requiring consideration of whether individual prosecutions satisfy prosecutorial goals when determining whether to charge a corporation.

2. Civil

The revisions adopt wholly new chapter, § 4-3.100, applying the Yates Memo to civil corporate investigations, and stressing that ability to pay should not be the sole factor in considering civil actions.

3. Coordination in Parallel proceedings

The revisions add a paragraph to § 1.12.000 [and in § 4-3.100(3)] stressing the importance of early and frequent communication between civil, criminal and agency attorneys to ensure appropriate proceedings or other response regarding individuals involved in corporate wrongdoing. We discussed the Yates Memo here. The USAM is here. Thomas K. Potter, III (tpotter@burr.com) is a partner in the Securities Litigation Practice Group at Burr & Forman, LLP. Tom is licensed in Tennessee, Texas and Louisiana. He has over 29 years' experience representing financial institutions in litigation, regulatory and compliance matters. See attorney profile. © 2015 by Thomas K. Potter, III (all rights reserved).