On September, 9, 2015, the U.S. Department of Justice had issued a new memorandum authored by Deputy Attorney General Sally Quillian Yates entitled “Individual Accountability for Corporate Wrongdoing”. The memo refocuses government enforcement inquiries on individuals and sees “accountability from the individuals who perpetrated the wrongdoing as one of the most efficient ways to combat corporate misconduct. Such accountability is important for several reasons: it deters future illegal activity, it incentivizes changes in corporate behavior, it ensures that the proper parties are held responsible for their actions, and it promotes the public’s confidence in justice system.” Together with the FBI announcement on increasing its resources to fight oversees corruption in the beginning of 2015, individual enforcement of the FCPA worldwide, including inter alia Ukraine, is likely to become more feasible and spreading.
The memo provides for six key ingredients to strengthen the pursuit of individual corporate wrongdoing:
(1) To be eligible for any cooperation credit, corporations must provide to the Department all relevant facts about the individuals involved in corporate misconduct.
(2) Both criminal and civil corporate investigations should focus on individuals from the inception of the investigation.
(3) Criminal and civil attorneys handling corporate investigations should be in routine communication with one another.
(4) Absent extraordinary circumstances, no corporate resolution will provide protection from criminal or civil liability for any individual.
(5) Corporate cases should not be resolved without a clear plan to resolve related individual cases before the statute of limitations expires and declinations as to individuals in such cases must be memorialized.
(6) Civil attorneys should consistently focus on individuals as well as company and evaluate whether to bring suit against an individual based on consideration beyond that individual ability to pay.
Yates memo is likely to cause two controversial impacts worldwide. In particular, one of the objectives of Yates Memo is reach the highest-level business executives through cooperation deals with lower-ranking officials. The risk with that emphasis is two-fold: (1) lower-level personnel feeling pressure from the prosecution might deliver what the prosecutors want, rather than the less helpful truth they may have; and (2) counsel conducting internal corporate investigations might experience less cooperation from executives who do not want to put at an increased risk of jail themselves or their colleagues.
Furthermore, according to Yates speech and video of the speech: “some corporations may decide, for example, that the benefits of consideration for cooperation with DOJ are not worth the costs of coughing up the high-level executives who perpetrated the misconduct. Less corporate cooperation could mean fewer settlements and potentially smaller overall recoveries by the government. In addition, individuals facing long prison terms or large civil penalties may be more inclined to roll the dice before a jury and consequently, we could see fewer guilty pleas.”
However, one certain positive impact of the Yates memo is that under the threat of being prosecuted for wrongdoings they have done or observed company management is likely to become more focused on compliance issues. Moreover, it will remain pivotal for businesses to develop full and comprehensive set of compliance policies and practices, including:
Implementation of robust compliance programs designed to deter, identify and remediate violations;
Efficient and permanent employee training programs;
Extensive management support of compliance efforts and prompt management response to the escalated issues; and
Reporting mechanisms ensuring compliant operation of the business.
As such, while increased prosecution of individuals is unlikely to bring more enforcement within the area of corporate bribery, its deterrence effect is more than promising. Increased efforts of U.S. authorities aimed on individual prosecution as well as chasing oversees bribery, emphasize the importance of strong compliance worldwide, especially in high corruption-risk jurisdictions, including Ukraine.
Volodymyr Grabchak is a legal counsel with an international FMCG company, responsible, inter alia for anti-corruption compliance issues in Ukraine and Moldova. He got his law degree in Ukraine and LL.M. degree in the Netherlands.
Volodymyr is attorney at law admitted to Ukrainian Bar and a member of the International Bar Association (IBA).