Department of Justice Issues Guidance to Federal Prosecutors Working in Corporate Fraud Investigations

The Department of Justice has been concerned with the rising trends of healthcare, defense, and contractor fraud against the U.S. government. Many of these cases involve large corporate conglomerates with multinational field offices and a global presence. Investigating and prosecuting these complex entities under the False Claims Act and other fraud statutes has proven increasingly difficult, particularly if a whistleblower is facing consistent obstacles in gathering information and evidence.

On September 9, 2015, the DOJ issued a memorandum with several points of guidance designed to help attorneys facilitate cases that deal with large corporations on issues of fraud and other matters with both civil and criminal significance.[1. “DOJ issues guidance to prosecutors to facilitate individual prosecutions in corporate investigations,” Lexology, September 15, 2015, http://www.lexology.com/library/detail.aspx?g=fb9b7186-b6fb-4081-91e6-ebcd17f92233] This memorandum – being called the Yates Memorandum after Deputy Attorney General Sally Yates – provides prosecutors with a clearer framework on how to approach corporate compliance issues and describes the parameters within which prosecutors should work when negotiating settlements with corporations.

DOJ highlights six main guidance points

The following is a breakdown of the DOJ’s six main points of advice to prosecutors working on cases with corporations accused of fraud, as outlined in the Yates Memorandum. The Department of Justice requires that prosecutors and government employees immediately apply these six principles to all pending and future investigations.

#1: Corporations are required to provide information about accused employees, so ask for it. To be eligible for any sort of credit for cooperation, a company must provide thorough information identifying individuals directly involved in the corporate fraud matter. More specifically, the company must “identify all individuals involved in or responsible for the misconduct at issue, regardless of their position, status, or seniority.”

#2: Focus on individuals, not whole corporations. Prosecutors should be prepared to focus on individuals, as opposed to the corporation as a whole, from “the inception of the investigation.” With this guidance point, the DOJ highlighted the fact that corporations work directly through individuals, so focusing on individuals is the most direct way to determine misconduct.

#3: Help criminal and civil investigations work together. If a matter involves both criminal and civil misconduct – as is often the case in False Claims Act cases – the criminal and civil investigative teams should be in direct contact throughout the course of the investigation.

#4: Avoid scot-free settlements. Except in rare cases, prosecutors should not offer corporations any sort of settlement agreement that dismisses charges against the accused, or limits or immunizes specific individuals from liability.

#5: Don’t execute a corporate resolution without a clear plan to address individual liability. If the corporation itself has reached a settlement with the government prior to individual settlements with culpable employees, the corporate settlement must make mention of forthcoming individual settlements with individuals directly involved in the fraud. If at the conclusion of individual investigations the government opts to not pursue civil or criminal sanctions, it must state why in a memorandum to accompany the corporate resolution.

#6: Don’t let ability to pay influence the case. Prosecutors and the government should not consider an individual’s ability to pay a settlement when determining whether to pursue that individual for damages or criminal penalties.

Contact Berger Montague today

If you are considering a whistleblower lawsuit and have information regarding the individuals responsible for the alleged misconduct, please do not hesitate to contact Berger Montague today.