Impact of the Yates Memo on Midwest Corporations


The U.S. Department of Justice (DOJ), through Deputy Attorney General Sally Yates, recently issued guidance to all federal prosecutors making it clear that prosecuting corporate fraud and the individuals allegedly responsible for committing the fraud, will be a top priority for new Attorney General Loretta Lynch. Most of the recent analysis of the Yates memo has focused on the impact it will have in places, such as the Southern District of New York, which continues to handle some of the nation’s largest corporate fraud investigations. The purpose of this article, however, is to provide insight into how the Yates memo is most likely to be interpreted and applied here in the Midwest.


Much of the initial reaction to the Yates memo was that this was really much ado about nothing. Some skeptics even argued that the memo was likely more about public relations and displaying a tough persona rather than actual policy. We strongly disagree.

It is unusual for a United States attorney and all of her prosecutors to receive a memo from the Deputy Attorney General. A memo from DOJ leadership often signals a significant policy change and that was certainly the case with the Yates memo. We also believe that federal districts in the Midwest that handle fewer corporate fraud investigations than the larger districts on the east and west coast are more likely to strictly adhere to the Yates memo, thus making the impact more significant.


Force more disclosure from corporations about individuals. Historically, the federal government showed leniency to companies that cooperated with investigations. The Yates memo endorses this concept, but recommends more of an all-or nothing approach. Rather than recognizing shades of cooperation, the DOJ will only extend cooperation credit to a company providing “all relevant facts about the individuals in corporate misconduct.” Gone are the days of selectively revealing information to shield key employees or failing to discover and disclose discoverable facts. To earn credit, companies must obtain and provide relevant facts and information on all individuals, regardless of position, status or seniority.

Corporations located in federal districts with fewer corporate fraud cases should be particularly concerned and thoroughly investigate by taking certain steps:

• They should hire an independent internal investigation team with corporate fraud experience who can provide privileged guidance to the company.

• They should communicate effectively with the investigators through their legal team. Their counsel should help identify the information that must be turned over to investigators.

• They should establish the parameters of both the internal and governmental investigations. A strong internal investigation, much like a governmental investigation, is not a fishing expedition. It is important to establish parameters to minimize both the costs and disruption to the company.

By doing so, a corporation can show good faith in its obligation to provide all relevant facts while also ensuring they have experienced counsel protecting their interests.

Focus on individuals earlier. The Yates memo recommends an intensified focus on individuals early in investigations. It allows the DOJ to “maximize [its] ability to ferret out the full extent of corporate misconduct” and “increase the likelihood that individuals with knowledge of the corporate misconduct will cooperate with the investigation.” Thus, the DOJ will investigate more individuals employed at lower levels earlier and more thoroughly than previously. Those districts that handle fewer cases will likely rely on this recommendation necessitating earlier and longer retention of counsel. One key aspect of this provision to note is that more employees may also be seeking individual counsel in the early stages of an investigation.

Hold individuals accountable. One significant shift in approach concerns the ability of a corporation to shield individuals. The Yates memo advises that, except in rare situations, the DOJ will not exonerate individuals by virtue of a resolution with the corporation. The offices strictly adhering to the memo’s recommendations will build cases by more zealously focusing on individuals, thus limiting a company’s ability to protect its employees. Moreover, fraud investigations are more likely to include charges against individuals and settlements between the DOJ and corporations are less likely to afford individual protection.

Disregard an individual’s ability to pay. In the past, the government did not pursue individuals thought unable to pay. No more. The Yates memo advises changing that approach: “Civil attorneys should consistently focus on individuals, as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual’s ability to pay.” The rationale is that large fines may deter bad behavior, even if the person is unable to pay. As a result, the DOJ will pursue individuals, even if chances of collection are remote. This significantly raises the stakes for an individual who may now face very significant fines.


Clients and their counsel working in the Midwest should expect a heightened focus on individuals in white collar cases. If the time comes, it will be imperative to put together an experienced legal team early in the investigative process that can provide privileged advice to the company and establish the parameters of the internal and governmental investigation. The stakes have never been higher for companies or their employees.    Timothy Q. Purdon 

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