DOJ Corporate Enforcement Guidelines Are Placing Individual Defendants Between a Rock and a Whirlpool

DOJ's current policy follows decades of guidance memos by several Deputy Attorneys General that have continuously increased the benefits for corporations to cooperate with investigations while increasing the pressure and penalties on individuals. Most recently, the 2015 Yates Memo emphasized that “in order to qualify for any cooperation credit, corporations must provide to the Department all relevant facts relating to the individuals responsible for the misconduct.” Memorandum from Deputy Attorney General Sally Quillian Yates on Individual Accountability for Corporate Wrongdoing (Yates Memo) (Sept. 9, 2015). The Yates Memo also instructed prosecutors to “focus on individuals from the inception of the investigation,” and “not release culpable individuals from civil or criminal liability when resolving a matter with a corporation.” In doing so, DOJ sought to “increase the likelihood that individuals with knowledge of the corporate misconduct will cooperate with the investigation and provide information against individuals higher up the corporate hierarchy.” Current DOJ policy, implemented by Rosenstein, thus built upon these developments by further incentivizing corporations to cooperate by making credit easier to obtain through disclosure on individuals with “substantial involvement” in the wrongful conduct. Supra, note ii.

DOJ's Cooperation Policies Outsource Investigations to the Targeted Corporations

The practical consequence of DOJ's corporate enforcement policy is that as soon as a company interested in cooperation credit identifies a potential compliance issue, it must go into full cooperation mode. That means hiring outside counsel to conduct an investigation, gathering relevant documents, interviewing witnesses, and providing all pertinent evidence to the government about individuals involved in the conduct at issue. In other words, DOJ incentivizes a targeted company to serve as an unofficial prosecutor — effectively outsourcing the government's investigation — in exchange for a non-prosecution or deferred prosecution agreement.

In particular, to obtain maximum credit, the government encourages companies to provide summaries of interviews by company counsel and to assist in making employees available for DOJ interviews regardless of their employment status or whether they are located overseas and potentially not otherwise subject to U.S. jurisdiction.

Employees May Be Coerced Into Waiving Fifth Amendment Rights 

As a consequence of DOJ's corporate enforcement policy, companies may pressure their employees to cooperate with DOJ's investigations by directing them to submit to company and DOJ interviews or otherwise face termination. The Supreme Court recognized this duress in Garrity v. New Jersey, where it held that the government violates public employees' Fifth Amendment right against self-incrimination when it presents them with a choice between submitting to a government interview and job forfeiture — placing them “between the rock and the whirlpool.” 385 U.S. at 496. In United States v. Stein, Judge Lewis A. Kaplan in the S.D.N.Y. extended this holding to private employees where DOJ explicitly conditioned a company's cooperation credit on pressuring its employees to submit to DOJ interviews or lose their jobs. 440 F. Supp. 2d 315, 337-38 (S.D.N.Y. 2006). Stein involved a criminal prosecution of KPMG employees regarding alleged illegal tax shelters. The Second Circuit affirmed the decision, but only based on the threat to cut off legal fees without reaching the threats to terminate employment. See, United States v. Stein, 541 F.3d 130, 136 (2d Cir. 2008).