During recent speeches Deputy Attorney General Sally Yates and SEC Enforcement Division head Andrew Ceresney announced changes to the processes the DOJ and the SEC will use to decide if a company will receive “cooperation credit.” Both agencies have indicated that any decision regarding cooperation credit will hinge on whether the company has self-disclosed the violation and helped the government identify and hold accountable individual wrongdoers at the company.
The DOJ’s new process, set out in revisions to the United States Attorney’s Manual (USAM), raises the standard to receive cooperation credit. Reemphasizing the DOJ’s renewed focus on prosecuting individuals, Deputy Attorney General Yates announced updates to the “Filip factors,” formally known as the “principles of federal prosecution of business organizations.” The revised factors “emphasize the primacy in any corporate case of holding individual wrongdoers accountable ...” Yates said that the DOJ expects companies to conduct “timely, appropriately thorough, and independent” investigations. To receive any cooperation credit, a corporation must also disclose “all non-privileged information about individual wrongdoing” to the DOJ. Partial cooperation credit will no longer be available to companies that withhold information on individuals.
Deputy AG Yates urged companies to “come in as early as [they] possibly can, even if [they don’t] quite have all the facts yet,” because “the new USAM language makes plain that a company won’t be disqualified from receiving cooperation credit simply because it didn’t have all the facts lined up on the first day …” Yates also explained that under the new rules “timely and voluntary disclosure” and “cooperation” are now considered “distinct factors to be given separate consideration in charging decisions.”
A day after Yates’s speech, the head of enforcement at the SEC, Andrew Ceresney, announced a cooperation policy that mirrors DOJ’s. He said that “a company must self-report misconduct in order to be eligible for the [Enforcement] Division to recommend a [deferred prosecution agreement or non-prosecution agreement] to the Commission in an FCPA case.” Ceresney said the goal of the new policy is to incentivize firms to “promptly report FCPA misconduct.” Ceresney believes that companies who fail to self-disclose are “gambling,” because their violations may be disclosed to the SEC by whistleblowers or through the Commission’s independent investigation.
Ceresney noted that the SEC has long rewarded cooperation, and said the Commission’s handling of past cases should “send the message loud and clear that the SEC will reward self-reporting and cooperation with significant benefits.” To support this proposition, Ceresney pointed out that this year for the first time the Commission agreed not to seek any penalty against a company, Goodyear, due to its “significant cooperation.” Like the DOJ, Ceresney said the SEC will continue focusing on holding individuals accountable.
The speeches from Deputy Yates and Ceresney follow previous announcements that the DOJ is putting additional resources behind its effort to hold individuals accountable for corporate wrongdoing. The Federal Bureau of Investigation plans to establish three new “international corruption squads” with dozens of special agents in New York, Washington, and Los Angeles, and the DOJ has announced plans to increase the size of its FCPA unit 50% by adding approximately a dozen prosecutors.
The changes to the USAM that Deputy AG Yates announced may lead to longer investigations with more individuals demanding their own counsel paid for by the company. Following Delaware law, most companies’ bylaws reimburse corporate officers for legal fees incurred representing them in investigations or civil litigation. These changes may also affect companies’ and individuals’ decisions regarding entry into joint defense agreements.
Read the full text of Deputy Attorney General Yates’s speech here; read the full text of SEC Director of Enforcement Andrew Ceresney’s speech here.