Dueling Perspectives on Compliance & Yates Memo

There we were—me, the Lawyer from a large law firm in the United States, and the Ethics Consultant who works with large companies here and in Europe. We were talking about the Yates Memo, and its possible consequences for companies under investigation by the Justice Department.

First, a refresher for anyone unfamiliar with the Yates Memo: it was issued last year by Deputy Attorney General Sally Yates, and explains what the Justice Department expects from companies under investigation if those companies want full credit for cooperation. The main point of the memo is that the Justice Department wants companies to divulge every bit of information they have on any individuals who might be the target of a Justice Department probe. Whatever you know, whatever information you might have collected—turn it over to the feds. That’s what you need to do if you want to protect your company as much as possible.

I can’t say I’m comfortable with that policy. My fear is that if the Justice Department is using the memo to pressure companies for full cooperation, then the companies will go to extraordinary lengths to give that full cooperation—and possibly too far, at the expense of a person’s right not to incriminate himself.

For example, a company might demand that an employee confess everything he knows, even if that incriminates him, or else the employee gets fired for non-cooperation. Or the company could start grilling the employee for information that puts him in jeopardy with law enforcement, and deny that employee the right to counsel at the same time.

Those tactics are heavy-handed, but not illegal; you only have the right to counsel and Fifth Amendment protections against self-incrimination with the government, when facing criminal charges. You don’t have any rights like that at all in a corporate investigation. So at least in theory, the Justice Department could use the Yates Memo to pressure a company to strong-arm you, the vulnerable employee—and do an end-run around constitutional protections you would otherwise have.

That’s my fear, anyway. I outlined my thinking to my friend the Lawyer, and asked: are those fears legitimate?

The Lawyer paused and then answered with a qualified yes. He didn’t think abuses like that were rampant, and perhaps the Yates Memo is still too new to answer my question definitively. He did not know of any court cases raising my strong-arm point, but he conceded that the scenario is possible.

Then my friend the Ethics Consultant spoke up—why would that be a bad thing, anyway?

questionThe Consultant saw the whole issue quite differently. The Yates Memo, he said, only instructs companies to do what they should want to do already: get to the truth about misconduct. If your organization truly values good conduct, then it should be unafraid to do what’s necessary to discover all it can about possible bad conduct. If that means threatening to fire an employee who won’t cooperate, fine. You probably don’t want that sort of person on the payroll anyway. And if you retreat from asking employees tough questions or tolerate them stonewalling you, your ethics culture might not be as strong as you believe.

The Consultant’s point is a good one, but I wonder whether that approach will make for some mighty short internal investigations, too. Yes, the company will be able to demonstrate that it did its best, per the Yates Memo requirement—but we could also see more employees clam up anyway and risk getting fired. That might well be an employee’s better move, especially if cooperating in an internal investigation means the employee might face serious criminal penalties, liability in civil litigation, or loss of professional license.

Could that employee then claim in court that the company and the Justice Department violated his rights at least in substance, if not in process? I don’t know, but I look forward to the fact pattern that lets us find out.

The Ethics Consultant did raise another excellent point: that the difference in perspectives here underlines just how challenging it is to build a strong, enterprise-wide culture of compliance. His default position (and the position most corporate ethics functions probably take as well) is that the company should follow through on its ethical standards, even if that’s hard to do—and lord knows, standing your ground and firing uncooperative employees can be hard. Meanwhile, my friend the Lawyer’s default position is to consider the Yates Memo in terms of legal liability and technicality; and he’s correct to think that way, too, because that’s his job.

The tricky part for ethics & compliance officers is that many times, like your job title says, your default position is supposed to straddle both worlds. That makes for a pretty grey area—but then, grey areas are what makes ethics & compliance so fun.

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