DOJ Takes Aim at Responsible Individuals in Corporate Investigations
U.S. Deputy Attorney General Sally Quillian Yates recently announced new instructions for attorneys at the U.S. Department of Justice (DOJ), outlining in a memorandum the DOJ’s policies with respect to civil and criminal enforcement actions against responsible individuals in corporate investigations. The policy announcement underscores that the federal government is increasingly focused on deterring responsible individuals from engaging in misconduct, in addition to recovering misappropriated funds from the deep pockets of the corporations they control. The announcement is particularly relevant to officers and employees of healthcare providers as the DOJ continues to focus its efforts on pursuit of criminal and civil False Claims Act cases in the healthcare industry. DOJ attorneys are instructed to take certain steps, representing both new policies and existing best practices, to strengthen pursuit of individuals in such corporate investigations.
Two of the instructions in the memorandum relate to how the DOJ’s resolution in actions against corporations will affect responsible individuals. First, to be eligible for any cooperation credit under the Principles of Federal Prosecution of Business Organizations, corporations must now “identify all individuals involved in or responsible for the misconduct at issue, regardless of their position, status or seniority, and provide to the [DOJ] all facts relating to the misconduct.” The memorandum further provides that corporations will be required to disclose all relevant facts about responsible individuals under the DOJ’s position on “full cooperation” under the False Claims Act. DOJ attorneys are instructed to take proactive steps to investigate individuals in corporate matters and validate information provided by corporations with respect to responsible individuals. If continued cooperation is necessary after resolution of the underlying corporate criminal or civil action, DOJ attorneys are expected to include such obligations in the plea or settlement agreement and provide for appropriate consequences if the corporation fails to provide the required information. It will be critical for corporations to negotiate clear post-resolution obligations in these situations.
Second, absent extraordinary circumstances, no corporate resolution will release any individuals from criminal or civil liability. Historically, many settlements under the False Claims Act have released corporate officers and employees from civil liability for the covered conduct. While uncertainty remains as to what facts constitute “extraordinary circumstances,” this instruction appears to be designed to make it more difficult for corporations to obtain releases for individuals in such settlements.
Recognizing that corporate misconduct is the result of individual actions, the memorandum also instructs criminal and civil DOJ attorneys to focus on individual wrongdoing from the beginning of an investigation. Additionally, criminal and civil attorneys are instructed to communicate regularly and consult with agency attorneys, such as attorneys for the U.S. Department of Health and Human Services Office of Inspector General, to promote “the most thorough and appropriate resolution in every case.” In the past, prosecutors frequently waited to meaningfully involve their civil counterparts until the DOJ declined criminal pursuit of the action.
Moreover, civil attorneys are instructed to promptly refer responsible individuals to their criminal counterparts even if the corporate investigation remains civil in nature. The memorandum builds on this instruction and provides that the resolution of corporate cases should include a “clear plan to resolve related individual cases before the statute of limitations expires.” If at the end of the corporate investigation it is decided not to bring civil or criminal actions against the individuals responsible for the misconduct, the justification for such decision must be documented in writing and approved by the U.S. Attorney or Assistant Attorney General, as applicable.
Finally, the memorandum emphasizes that civil attorneys should consider factors other than the potential financial recovery when deciding whether to pursue a civil enforcement action against a responsible individual. The DOJ recognizes that while individual cases may not result in a “robust monetary return on the [DOJ’s] investment,” such deterrence efforts are expected to “minimize the losses to the public fisc through fraud” over the long term.