September 11, 2015

White Collar Litigation Alert: Department of Justice Issues Memorandum to Federal Prosecutors Regarding Individual Accountability for Corporate Wrongdoing


For some time, government law enforcement officials have been commenting publicly that we should expect to see more cases against individuals arising out of investigations of alleged fraud by corporations.  For example, in September 2014, then-Attorney General Eric Holder stated that, “when it comes to financial fraud, the department recognizes the inherent value of bringing enforcement actions against individuals, as opposed to simply the companies that employ them.”[1]  Earlier this year, Mr. Holder asked United States Attorneys to review case files related to the 2008 financial crisis to determine whether they could bring civil or criminal cases against individual corporate employees.[2] 

Putting several concrete principles behind its desire to bring cases against culpable individuals, the Department of Justice (the “Department”) on September 9, 2015 issued a memorandum entitled “Individual Accountability for Corporate Wrongdoing” (the “Guidelines”), which provides guidance to federal prosecutors as to “steps that should be taken in any investigation of corporate misconduct” to “identify culpable individuals at all levels in corporate cases.”[3]  The product of a working group of senior Department attorneys, the Guidelines – authored by Deputy Attorney General Sally Quillian Yates – focus on individual accountability in order to “deter[] future illegal activity,” “incentivize[] changes in corporate behavior,” “ensure[] that the proper parties are held responsible for their actions” and “promote[] the public’s confidence in our justice system.”  Notably, the Guidelines reflect a desire to hold individuals accountable in both civil and criminal investigations of corporate wrongdoing. 

The Department recognized the “substantial challenges” in pursuing cases against individuals, especially in establishing knowledge and criminal intent of high-level executives who may be insulated from day-to-day activities.  Nevertheless, the Guidelines exhort both civil and criminal prosecutors to think early and often about identifying culpable individuals and bringing cases, including civil actions against individuals who may have limited ability to satisfy a significant judgment.  The Guidelines also warn corporations that cooperation will be measured on whether the corporation disclosed all facts about individual misconduct when discussing their investigations with the government.  Notably, the Guidelines make clear that a corporation that fails to provide all relevant facts about individuals involved in misconduct will be ineligible for any cooperation credit. 

Summary of the Guidelines

The Guidelines, which will apply to all future Department investigations of corporate misconduct as well as (where practicable) matters pending as of September 9, outline six principles to “strengthen our pursuit of individual corporate wrongdoing.”  Those principles, some of which reflect new areas of focus for the Department whereas others memorialize existing “best practices” of federal prosecutors, are summarized below.

First, for a corporation to receive any consideration for cooperation credit per the Principles of Federal Prosecution of Business Organizations, it “must identify all individuals involved in or responsible for the misconduct at issue” – regardless of where within the corporate hierarchy they sit – and “provide to the Department all facts relating to that misconduct” (emphasis added).  This condition also applies to corporations seeking cooperation credit when negotiating a civil settlement.  The Guidelines note as an example that “full cooperation” under the False Claims Act, 31 U.S.C. § 3729(a)(2), for purposes of reduced damages will require, at the very least, that the corporation provide “all relevant facts about responsible individuals.”  The Guidelines also direct prosecutors to “proactively investigate individuals at every step of the process” and not wait for or rely on information provided by the corporation about responsible employees.  

Notably, the Guidelines also state that prosecutors should obtain as much information as possible about individuals before resolving a case, and may require a corporation to continue cooperation after resolution.  In the latter circumstance, prosecutors should include in a plea or settlement agreement a provision that: (1) requires the corporation to disclose information about responsible individuals; and (2) provides for specific consequences – such as stipulated penalties and/or a material breach – for the corporation’s failure to disclose that information.

Second, both criminal and civil investigations should focus on individual wrongdoers from the outset of an investigation.  Per the Guidelines, an early focus on individuals: is the best way of determining the nature and scope of corporate wrongdoing, can increase the likelihood that individuals will cooperate with the investigation and share information against more senior corporate employees and maximizes the chances that individuals – and not just the corporation – will be civilly or criminally charged as a result of the investigation. 

Third, criminal and civil prosecutors should communicate with each other early and often during investigations.  They should alert each other when they believe it would be appropriate to pursue concurrent criminal and civil investigations of individuals or when they believe criminal liability should be pursued against an individual facing a civil inquiry (and vice versa).[4] 

Fourth, to the extent the Department reaches a resolution with a corporation but has not yet resolved matters as to individual employees, the Guidelines urge prosecutors to preserve the Department’s ability to pursue those individuals.  Specifically, absent extraordinary circumstances (which would, in any event, require written approval from the relevant Assistant Attorney General or United States Attorney), prosecutors should not agree to a corporate resolution that either dismisses charges against or provides immunity for individual employees in a criminal matter or releases claims related to the individuals’ liability in a civil matter. 

Fifth, if the investigation of individuals is not over by the time prosecutors seek authorization from the Department to resolve the corporate matter, prosecutors should include in their memorandum to the Department information about the individuals they believe are potentially liable, including the status of the investigation regarding those individuals and a plan to resolve the investigation of those individuals before the statute of limitations expires.  And, if prosecutors decide at the end of the matter not to bring civil claims or criminal charges against the individuals, they must memorialize their reasons for that decision, which must then be approved by the relevant United States Attorney or Assistant Attorney General (or their designees).  The Guidelines also caution prosecutors that in matters where a tolling agreement is used to extend the investigatory period for a corporation, prosecutors should either resolve their investigation as to the individuals within the statute of limitations period or make sure to toll the limitations period for individual prosecutions by agreement or court order.

Sixth, the Guidelines state that “[p]ursuit of civil actions against culpable individuals should not be governed solely by those individuals’ ability to pay” a significant judgment.  Instead, prosecutors should consider factors such as the seriousness of the individual’s misconduct, whether the misconduct is actionable, “whether the admissible evidence will probably be sufficient to obtain and sustain a judgment” and whether filing suit against the individual “reflects an important federal interest.”  The Guidelines note that individual actions can result in significant long-term deterrence even if they do not provide “as robust a monetary return on the Department’s investment.” 


Although the Guidelines are not binding on federal prosecutors, and in some ways reiterate prior Department pronouncements and existing practices, the increased focus on individuals from the inception of an investigation through (and even beyond) resolution has important implications for defendants and targets of government inquiries. 

For example, for corporations seeking to gain cooperation credit by turning over the facts uncovered in their internal investigation, there will likely be even more pressure on them to include with their factual findings a “who’s who” of individuals responsible for any corporate misdeeds.  This, in turn, may deter cooperation by individuals within the corporation when they realize that any admissions of misconduct (which may not otherwise be uncovered) may land them on a list provided to the government.  Significantly, the Guidelines make clear that the emphasis on individual responsibility is not limited to criminal matters.  The same provisions apply to civil investigations, such as those under the False Claims Act.  Given the increased likelihood that the company may have to “name names” after its investigation, company counsel should be even more vigilant in guarding against potential ethical conflicts between the company and its employees during all stages of the internal investigation.

In addition, the Guidelines could affect the nature of settlement discussions between corporate defendants and the government.  The direction that prosecutors “strive to obtain from the company as much information as possible about responsible individuals before resolving the corporate case” could add a new dimension to settlement negotiations.  Additionally, there could be obligations in a plea or settlement agreement for the company to continue to provide information about individuals even after resolution of the matter.

Finally, the Guidelines are noteworthy for what they do not include.  While the Department’s track record of rewarding cooperation is well established in other contexts (such as antitrust and FCPA enforcement), here, the Department has passed on the opportunity to define cooperation credit, thereby allowing the debate about the value of cooperation to continue.       


[1] Attorney General Holder Remarks on Financial Fraud Prosecutions at NYU School of Law, September 17, 2014, available at

[2] National Press Club Luncheon with Eric Holder, Attorney General of the United States, February 17, 2015, available at (at 51:52-54:15).

[3] Memorandum from Sally Quillian Yates, Deputy Attorney General, United States Department of Justice (September 9, 2015), available at

[4] As noted in the Guidelines, the United States Attorneys’ Manual already includes a provision regarding prosecutors’ coordination in parallel criminal and civil proceedings.  See USAM 1-12.000.

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