How the Yates Memorandum may Affect Corporations

A Department of Justice memo may make compliance during federal inquiries more difficult without identifying individual responsibility.

Corporations in Statesville, North Carolina, that may not have felt the impact of the financial crisis in 2008 may still experience some of the backlash after a recent U.S. Department of Justice memo.

Issued by Deputy Attorney General Sally Yates, the memorandum is an attempt to address the criticism the DOJ received over the lack of consequences for the CEOs and other individual executives who may have made decisions that led to the crisis, according to Wells Fargo.

Higher Costs of Cooperation

Yahoo News reports that corporations will be given more incentive to disclose evidence of individual illegal activities, although they may not be as easily achieved.

In the past, providing a limited amount of information has resulted in fewer charges and lower penalties for white collar crimes. However, under the new procedures, only full disclosure would count toward this relief. While this should keep corporations from shielding high level executives from discovery, it may also prove difficult or impossible to accomplish.

The former U.S. deputy attorney general points out that because a company will be responsible for uncovering all relevant information about the actions of those who are responsible, the potential for receiving credit for cooperation is much lower, according to the American Bar Association.

The activity necessary for gathering the information may raise the cost of cooperation even further, as well as the consequences of having the case open and unresolved for a longer period of time.

Proactive Measures

While an ounce of prevention may save companies money in the long run, it can also raise current expenses. However, corporations may want to consider the advice of Wells Fargo in evaluating the transparency of their organization to lessen the likelihood of coming under federal scrutiny in the first place for alleged criminal activities.

Investigations involve careful review of hundreds of thousands of documents. Corporations can expedite any inquiry process by implementing an easily navigable and thorough documentation system. They may also prevent an executive or an employee from being able to take advantage of a weakness in the system.

To further reduce the risk of criminal activity within the organization, every level of management should have the support of administration to identify and address issues as soon as they are brought to light.

A knowledgeable criminal defense attorney can often provide the legal advice a corporation needs to comply with federal guidelines before a problem develops. Any company that receives notice that an investigation is pending will need experienced representation throughout the process to ensure that no civil or criminal penalties are levied against the company.