Last month, former federal prosecutor Paul Monnin penned an article titled — Why the Yates Memo Is Constitutionally Suspect.
Monnin is a partner at Paul Hastings based in Atlanta, Georgia.
“Stung by criticism of its failure to prosecute individuals in the wake of the financial crisis, the Justice Department dramatically sharpened its corporate cooperation policy by issuing the Yates Memo on September 9, 2015,” Monnin and Paul Hastings associate Eric Stolze wrote. “It is now official Department of Justice policy that a company is entitled to no cooperation credit unless it has disclosed, to the government’s satisfaction, “all relevant facts about the individuals involved in corporate misconduct.”
“The potential for constitutional abuse presented by the Yates Memo is substantial – particularly when companies happen to disagree with the government, yet are pressured to coerce employees to speak about alleged ‘wrongdoing’ to preserve their employers’ existence.”
“Not only can the Yates Memo have a destabilizing impact on corporate decision-making, it may also affect the integrity of federal prosecutions, as counsel for charged individuals pursue discovery of pre-indictment interaction between the Department of Justice and their clients’ former employers.”
In an interview with Corporate Crime Reporter last week, Monnin explained how a constitutional challenge to the Yates memo might play out.
Monnin explained that “there is no Fifth Amendment right unless there is state action involved in securing the self-incriminating statement.”
“The defendant would have to show a merger of the corporate investigation and the criminal investigation such that when an individual without counsel was speaking to a corporate interrogator, he was effectively speaking to the government,” Monnin said.
“The only time that is going to be a successful motion is if the government is saying — we have a pretty mature investigation that we are conducting here, we are well aware of the facts, all we are trying to do is get statements as opposed to developing factual information.”
Monnin said that the Yates memo “will have a good effect in the majority of cases where the government are gathering evidence.”
“There will be an increasing amount of cooperation which will result in more real time prosecution,” Monnin said. “And that’s something that is good for all of us. That is a very good effect of the formalization that comes with the Yates memo.”
“But there is going to be a category of cases in which senior corporate officials will say — had I known more about what my status was in an investigation, I would have gotten a lawyer and I certainly would not have disclosed anything to inside or outside counsel for the company. That doesn’t get you all the way there. And it may be when those motions are brought to suppress statements and to suppress evidence that those motions are dismissed out of hand. But if the individual defendant is able to show — I knew the company was speaking to the government for an extended period of time before it became time for me to be interviewed or if the individual defendant is able to establish more of an agency relationship between the government and corporate counsel, you may be able to get to an evidentiary hearing.”
What about the recent law review article — The Corporation as Snitch: Yates Memo May Lead to Leniency for Corporate Criminals by Elizabeth Joh and Thomas Joo. They write that “in some cases, the new cooperation policy’s emphasis on individual prosecutions could itself result in leniency — prosecutors may award excessively generous credit to corporations in order to build cases against individuals.”
Then they write — “The board that speaks for the corporation is likely to protect its own,” they write. “An offer of leniency toward the corporate entity is unlikely to entice CEOs and other board members to incriminate themselves. If corporate leaders implicate anyone at all, they will most likely be lower-level agents.”
“I don’t know that I agree with that,” Monnin said. “Most of the clients I represent that involve potential corporate liability, the client usually is a group of independent directors or the audit committee. What the government is looking for in conducting these investigations are institutionalized individual targets. General counsel, CFOs, CEOs.”
“The government policy is now saying — we will work with you in terms of preservation of the entity. We understand that there are all kinds of collateral consequences that go along with a federal criminal indictment of an entity. You may be debarred from government programs. You may lose access to government insurance. You may go out of business and a lot of innocent individuals will be put out on the street and it will destroy shareholder value.”
“In my experience, the audit committee members or the special committee members are very cognizant of the idea that their principal objective is to protect the corporation as an entity and the stakeholders. If that means disclosing and providing information on culpable C-Suite individuals, so be it.”
“You are seeing a great development within the Justice Department — you are starting to see younger prosecutors who have been corporate outside counsel. They are sensitive to the idea of who is the client and what are the incentives for the various clients involved. What are the company’s incentives? What are the individual’s incentives?”
“I haven’t found it to be the case that companies are unwilling to disclose evidence in relation to C-Suite misconduct.”
[For the complete q/a transcript interview with Paul Monnin, see 30 Corporate Crime Reporter 9(12), February 29, 2016, print edition only.]