In a memo released on Wednesday, September 9, 2015, followed by a major policy address on Thursday, September 10, 2015, by Deputy Attorney General (DAG) Sally Q. Yates, the Department of Justice (DOJ) issued new guidance regarding individual accountability for corporate wrongdoing. The memo articulates several changes to DOJ policy. Although some of its major points largely reflect and expand upon existing practices regarding the investigation and prosecution of corporate wrongdoing, other aspects of the memo introduce new challenges for corporate internal investigations—particularly with regard to the ability to protect privileged information while still receiving credit for cooperating with a government investigation. A Sidley Update with a more detailed discussion of this issue can be accessed here.
Late last month, in Patrick v. Commissioner, No. 14-2190, _ F. 3d __ (7th Cir. Aug. 26, 2015), the Court of Appeals for the Seventh Circuit unanimously affirmed a United States Tax Court opinion as to the characterization of a qui tam award received by a relator. The Seventh Circuit held, as had the Tax Court, that the award constituted ordinary income rather than capital gain and thus was subject to tax at the highest individual rate rather than the preferential (lower) capital gain rate. Previously, this characterization issue had only been addressed by one other federal circuit, the Ninth, in Alderson v. United States, 686 F.3d 791 (9th Cir. 2012).