Dear Readers:
In June 2016, I
reported how the U.S. Department of Justice (DOJ) planned on implementing its Yates policy of stressing the
accountability of corporate executives and employees in False Claims Act (FCA)
cases. In FCA investigations of corporate wrongdoing, DOJ’s Yates policy instructed its attorneys to
“focus on both the company and individuals who may be responsible for bad
conduct” and, charged its attorneys in any investigation of corporate
misconduct to proceed “in tandem” with an inquiry into individual misconduct. Indeed,
DOJ stated that settlements of FCA claims with corporations will not end DOJ’s
“inquiry into whether and which individuals will be pursued.” DOJ went so far
as to claim that it was “threshold requirement” for any corporate defendant
seeking “credit” for its “cooperation” in settling a FCA case to “disclose all facts related to individuals involved in the wrongdoing.” (emphasis
added).
As with many of its
initiatives, DOJ’s Yates policy
sounded good in theory: pursue every
avenue of corporate and individual civil liability. I predicted, however, that
as a result of the new focus on individual accountability, “FCA investigations
and cases are likely to become more complicated.” In fact, I wondered if “DOJ
and U.S. Attorneys will follow through in promoting this policy of individual
accountability given that FCA investigations and cases often move quite slowly
and this policy will require more time and substantial resources to enforce.”
And, I was right.
Two years later, Deputy Attorney General Rod Rosenstein (“Rosenstein”) announced “common sense reforms” in applying the Yates policy stressing individual accountability in civil cases. “Civil cases,” Rosenstein pointed
out, “are different” than criminal cases.
The “primary goal of civil affirmative cases,” such as FCA cases, are to
“recover money,” and as a result DOJ needs to use its resources “efficiently.”
To that end, Rosenstein observed that the “all or nothing approach to [awarding]
cooperation” for civil cases was “counterproductive.” “[O]ur attorneys,”
Rosenstein explained, “need flexibility to accept settlements that remedy the
harm and deter future violations, so they can move on to other important
cases.” In a seldom seen acknowledgement by DOJ of how things should work in
the real world, Rosenstein noted that “[o]ur civil litigators simply cannot take
the time to pursue civil cases against every individual employee who may be
liable for misconduct and we cannot afford to delay corporate resolutions
because a bureaucratic rule suggests that companies need to continue investigating until they identify all involved employees and reach an agreement with the
government about their roles.”
So what does this mean?
In part, the revised Yates policy is
intended to restore “some of the discretion that [DOJ] civil attorneys traditionally
exercised” though with “supervisory review,” of course. Also, in part, it means
that companies no longer need to cooperate to the Nth degree in order to obtain
any credit for their cooperation. To be sure, the gold standard for obtaining
“maximum credit” remains that a corporate defendant must “identify every
individual . . . substantially involved in or responsible for the misconduct.” But,
whereas that was the requirement for a corporate defendant to receive any credit under the previous Yates policy, now DOJ counsel may award
some credit as long as a “company honestly did meaningfully assist the
government’s investigation.” Of course, the other extreme from the gold
standard for which no credit will be awarded are companies who seek to “conceal
wrongdoing by senior officials” or who fail to “act in good faith.”
Rosenstein
provided an example of how this new policy might be applied in an FCA case. A
defendant who made a “voluntary disclosure” to DOJ and provided “valuable
assistance” is entitled to “some credit even if the company is unwilling to
stipulate about which non-managerial employees are culpable or . . . to
identify every individual who might face civil liability in theory, but in
reality would not be sued personally.”
Again, in an
uncharacteristic admission as to how things really work at U.S. Attorney’s
offices, Rosenstein acknowledged that the “civil policy was not strictly
enforced in many cases” and that as a result he prefers “realistic internal
guidance.”
Finally, DOJ’s new
pragmatism endorses considering “an individual’s ability to pay in deciding
whether to pursue a civil judgment.” DOJ does not want its “attorneys to spend
time pursuing civil litigation that is unlikely to yield any benefit; not while
other worthy cases are competing for [its] attention.” Translating this for the
defendant, being broke really can be a benefit when the government is trying to
determine whether to pursue FCA liability against your individual client.
Rosenstein is to be
commended for this change which takes into account -- for once – the “practical
implications of [DOJ] policies” and whether a policy actually “inhibit[s]” or
promotes DOJ’s goals. His enthusiasm for
such a change of policy, I suspect, comes from serving as a U.S. Attorney in a
medium sized district (Maryland) over many years. DOJ priorities, mandates, and initiatives frequently
enjoin U.S. Attorneys to investigate every last detail or person who could
possibly be responsible, even on the civil side. Being 100% faithful to the letter and spirit
of such mandates, as I am sure Rosenstein experienced, is frequently an
impossible task, if your goal is to
keep pace with the pressing number of cases, criminal and civil, that continually
come before a U.S. Attorney. “Common
sense” policies that restore discretion to line assistants and that promote realistic
goals in FCA cases are long overdue.
A.
Brian Albritton
December
18, 2018
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