Enforcement Trends: DOJ Changes to Yates Memo Make It Easier for Labs to Get Credit for Cooperating with Investigators

For the past five years, the DOJ has followed an enforcement policy designed to hold directors, officers and other top corporate officials responsible for the wrongdoing their companies commit. Last November, the agency announced some subtle but highly significant modifications to that policy, referred to as the “Yates Memo” after the document that inaugurated it. Bottom line on top: The DOJ is lowering the threshold that labs and other investigation targets must meet to receive cooperation credit in resolving investigations. Specifically, the agency is abandoning its previous “all or nothing” approach to cooperation. Here’s an explanation of the change and what it may mean to you.

The Yates Memorandum

In September 2015, then Deputy Attorney General Sally Quillian Yates issued a memo calling on DOJ attorneys to bring charges against not just corporations that commit violations but also the individual leaders of the company who are responsible for those transgressions. (For more on the Yates Memo, see Lab Compliance Insider (LCA), Feb. 22, 2017.) The memo represented a major shift in federal enforcement policy that had wide-ranging impact. The Yates Memo also outlines the procedures for prosecutors to follow in achieving that objective, including during the investigation phase of the case. Specifically, the Yates Memo provided:

  • Healthcare and other entities should no longer qualify for leniency based on cooperating with law enforcement unless they provide the government “all relevant facts relating to the individuals responsible for the misconduct.” (Translation: If a lab wants a break, it basically has to throw responsible lab officials under the bus.);
  • Absent “extraordinary circumstances,” DOJ settlements with healthcare and other entities should not release culpable individuals from civil or criminal liability when resolving a matter with an entity. (Translation: Lab officials must fend for themselves and can’t piggyback on the lab’s settlement agreement.);
  • Civil suits for money damages should be brought against individual defendants without regard to their ability to pay. (Translation: Being broke and uninsured won’t get lab officials off the hook.)

Pitting Labs against Their Leaders

In the aftermath of the Yates Memo’s issuance, the DOJ has pressured healthcare and other entities to turn on their executives/directors/managers in exchange for leniency. This included inserting into settlement agreements a “cooperation clause” requiring the settling entity to:

  • Fully cooperate with investigations into the allegations covered in the settlement, including into “individuals and entities” that the settlement doesn’t release from liability;
  • Make “former directors, officers and employees available for interviews and testimony”; and
  • Give the government non-privileged documents relating to the conduct covered in the settlement.

A Kinder, Gentler Cooperation Policy

During a November speech, Deputy Attorney General Rod Rosenstein acknowledged the shortcomings of this “all or nothing” approach. Expecting an entity to “admit the civil liability of every individual employee” involved in the wrongdoing to qualify for cooperation credit is “inefficient and pointless in practice,” according to Rosenstein. Instead, entities will be expected to identify only those individuals who were “substantially involved in or responsible for the misconduct.” To qualify for any cooperation credit in a civil case, entities now “must identify all wrongdoing by senior officials, including members of senior management or the board of directors.”

Practical Impact

As Rosenstein acknowledged in his speech, the prior policy wasn’t strictly followed in many cases because it would have impeded resolution and wasted resources. The new policy is thus just an acknowledgement of reality.

Labs still must “identify every individual who was substantially involved in or responsible for the criminal conduct” to receive cooperation credit. But they don’t have to expend time and resources identifying and collecting information about individuals who aren’t substantially involved in the misconduct and who are unlikely to be prosecuted.

The new DOJ policy also gives more discretion to prosecutors in civil cases, specifically, discretion to accept settlements that remedy the harm and deter future violations, as well as to offer partial cooperation credit to corporations.

The DOJ policy change means that labs can focus on addressing the misconduct at issue and limit their focus to the key employees who were responsible. Under the new policy, labs can also earn cooperation credit even when they can’t provide evidence on all relevant individual wrongdoers, whether for legal reasons or because they “genuinely cannot get access to certain evidence.” Caveat: To get credit in these situations, the lab must be able to adequately explain the impediments and restrictions to DOJ.

Takeaway: Shielding Top Officials Is Still Not an Option

Be careful not to interpret these policy changes as meaning you can protect lab executives and employees who are responsible for wrongdoing. The new policy makes it clear that DOJ attorneys may refuse to award cooperation credit “to any corporation that conceals misconduct by members of senior management or the board of directors, or otherwise demonstrates a lack of good faith in its representations.”


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