One Year After the Yates Memorandum

In September, 2015, the U.S. Department of Justice issued a policy directive dubbed the “Yates Memorandum,” in reference to its author, Deputy Attorney General Sally Quillian Yates. It declared that “one of the most effective ways to contain corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing.” There have since been two notable settlements with executives: a $1 million settlement with the former CEO of Tuomey Healthcare System, and another involving North American Health Care Inc., in which the CEO and a senior vice president of the company agreed to pay $1 million and $500,000, respectively.

Companies that learn of potential legal violations in the post-memo era face important decisions about informing authorities. The first steps in an internal investigation often include interviewing executives and employees who potentially possess relevant information. In the past, preliminary interviews might be conducted by in-house counsel, or the company’s regular outside counsel, but the Yates Memorandum’s instruction pertaining to “cooperation credit” raises the potential for conflicts between the company’s counsel and the individuals being interviewed. Counsel need to consider these conflicts from the beginning of an investigation and, where appropriate, arrange separate counsel for the company and for individuals.

The DOJ is actively following the directives in the Yates Memorandum, and it is imperative that corporate executives and their counsel understand the potentially high stakes ramifications of these directives in the day-to-day conduct of their business.