Acting DOJ Associate AG Discusses Application of Yates Memo to Civil Enforcement Actions
The principles in the Yates Memo expressly extend to both criminal and civil enforcement matters (as discussed further here), but when it comes to cooperation credit, the application of these principles in the civil and criminal contexts is not on equal footing. Criminal matters are resolved in the context of the federal sentencing guidelines, which incorporate a clear framework for applying credit for cooperation. Credit for cooperation in the civil context is far more nebulous, which can create the perception that the benefits will not outweigh the costs. Last week, DOJ’s newly appointed acting Associate Attorney General, Bill Baer, addressed these concerns and offered insight into DOJ’s application of the Yates Memo principles to civil enforcement matters.
Baer began by noting that while the Yates Memo verbalized certain longstanding DOJ practices, in other respects it breaks new ground. For example, Baer acknowledged that the Yates Memo “flips” the former presumption that a corporate settlement would also include a release as to individual directors and officers. One of the oft-cited changes instituted by the Yates Memo is the “threshold requirement” of full disclosure of all relevant facts in order for companies to receive any cooperation credit. Baer explained that this requirement reflects both practical necessities—“how can a company claim to ‘cooperate’ while withholding information that is basic to understanding what happened within the organization”—and also symbolic—because complete disclosure “signifies that the corporation is truly committed to the transparency that is fundamental to the cooperation process.”
Baer also offered DOJ’s views on what “genuine cooperation” requires. Companies seeking to attain cooperation credit must move beyond merely complying with the law and responding to subpoenas. Instead, companies must provide “prompt, no slow-walking, and fulsome, no hiding the ball, responses to government requests for information.” Baer emphasized the role companies play in not simply providing all facts, but going a step further such as by making current employees available for interviews, “disclosing facts gathered during an internal investigation,” or “identifying opportunities to obtain evidence not in the possession of the organization.” One recent example Baer offered was of “a hospital system that conducted and provided us with the results of a comprehensive audit of its false billings.”
Baer underscored not only the substance of expected disclosures under a corporate posture of cooperation, but also the timing. He reiterated that companies “should come in as early as [they] possibly can,” emphasizing that DOJ welcomes supplementary disclosures as companies grow to learn all the facts. Moreover, he explained that “maximum credit will be reserved for situations where the company not only fully cooperates but also voluntarily discloses” new issues.
In closing, Baer acknowledged “there is no magic formula” for companies to calculate the tangible benefits of cooperation in civil matters. He also described the “unique challenges” of incorporating cooperation credit into FCA settlements. Such cases, he explained, often present complex questions around damages and regardless of cooperation, the ultimate financial resolution must still “ensure that we [at DOJ] are fulfilling both the remedial and deterrent purposes of” the FCA. However, Baer characterized DOJ as “committed to taking into account the disclosures and other cooperation provided by defendants and to resolve matters for less than the matters would otherwise have settled.” He also encouraged companies to pursue cooperation credit if for no other reason than to achieve the “collateral benefits” of cooperation, including a speedier resolution and establishing that the company’s culture can be trusted to continue providing services to the federal government.
A copy of Baer’s speech, as prepared for delivery at the ABA’s annual National Institute on Civil False Claims Act and Qui Tam Enforcement, is available here.