Acting Associate Attorney General Bill Baer discussed the application of the "Yates Memorandum" in the context of civil False Claims Act ("FCA") matters in a speech on June 9, 2016 at the ABA's 11th National Institution on Civil False Claims Act and Qui Tam Enforcement. Baer discussed liability for individuals, and cooperation by companies.
DOJ Focus on Liability for Individuals
In his comments, Baer focused on DOJ's commitment to hold individuals accountable under the FCA, and not just corporations. Baer said that there is no longer a presumption that DOJ will release individuals from FCA liability when their organization reaches a settlement with the government; in a "departure from past practice," that "presumption is flipped in the other direction." Baer commented that this new practice by DOJ in assessing liability for individuals "focuses the mind. It sensitizes individuals to the cost of engaging in, or turning a blind eye to, corporate misconduct."
According to Baer's comments, DOJ attorneys will focus on individuals at the outset of an investigation so the inquiry into individuals "proceeds in tandem with the underlying corporate investigation." In the event an individual gets a pass, enforcement attorneys must memorialize their recommendation. Baer explained these requirements amount to DOJ "disciplining" itself to evaluate individual culpability throughout FCA investigations.
As Baer acknowledged, this focus on individuals is a departure from past practices by DOJ. Companies confronting FCA issues must continue to assess all aspects of liability, to include responsible individuals. Based on Baer's comments, company settlements that release individuals from liability may prove difficult based on DOJ's new approach.
Cooperation Credit
To the extent a company seeks cooperation credit from the government, Baer described efforts taken by companies that would be considered: make its officers and employees available to the government; direct the government to specific evidence; disclose findings from internal investigations; and make "detailed and complete admissions." Although he emphasized that nothing in the individual accountability policy requires waiver of the attorney-client privilege, Baer made clear that companies seeking full cooperation credit are required to provide the government with "all facts about all individuals involved."
How much benefit will flow to the company that fully cooperates? On this question, Baer said that "there is no magic formula" but DOJ "will use its significant enforcement discretion in FCA matters to recognize that cooperation." He went a bit further, and said DOJ would account for cooperation "to resolve matters for less than the matters" where cooperation is absent.
Baer's pronouncement about cooperation, and the benefits that flow from it, are not new. And the absence of a clear statement of how cooperation will be rewarded leaves much room for discussion.
Baer's comments make one thing clear: the Yates Memorandum will be applied by DOJ in FCA matters. But questions remain on how the Yates Memorandum will be applied in the FCA context. For example, unlike a criminal case, the FCA provides statutory protections to whistleblowers. What happens if the company's internal investigation yields evidence that the whistleblower is culpable, and the company terminates that whistleblower—who also happens to be the source of information that led to the FCA inquiry in the first place? The FCA likewise has been interpreted in certain contexts to apply to regulatory violations—though the law and regulations may be subject to differing interpretations. In this subjective context, what does the Yates Memorandum contemplate that a company should do?
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