Canada: Individual Accountability For Corporate Wrongdoing: A Perspective From United States Practice As Reflected In The Yates Memorandum

On September 9, 2015, Deputy Attorney General Sally Yates of the United States Department of Justice ("DOJ") issued a memorandum entitled "Individual Accountability for Corporate Wrongdoing" (the "Yates Memorandum") to provide clear guidance to federal prosecutors on how to treat individuals and assess their culpability in investigations of criminal and civil corporate misconduct, particularly in the aftermath of the 2008 financial crisis.

The Yates Memorandum indicates that while some of the measures it describes for investigating corporate misconduct are new, many others reflect best practices already employed by federal prosecutors. However, it strongly emphasizes the necessity of early investigation of individual wrongdoing as part of an overall investigation of corporate wrongdoing, and makes the obtaining of any cooperation credit for corporations conditional on what the corporation itself has done to uncover individual wrongdoing of its executives and other employees.

These aspects of the Yates Memorandum, particularly the strong language used and the articulation of these requirements for the conduct of internal investigations and credit for cooperation by corporations, are causing many prominent U.S. white collar criminal defence lawyers to consider whether they may need to reappraise how they will advise, in the future, corporations and individuals who are being investigated by the DOJ for civil and criminal wrongdoing.

In the case of Canadian corporations that do business in the United States, and for their Canadian executives (whether they are U.S. nationals or of other nationality), the Yates Memorandum serves as a reminder of the severe difficulties in striving carefully for the right balance when steering between the implications of actions taken under the U.S. and Canadian legal systems, which will now become even more challenging.

The Requirements

The Yates Memorandum sets out the following six steps, some of which reflect policy shifts, to strengthen the pursuit of corporate wrongdoing:

  1. To be eligible for any credit for cooperating in criminal or civil investigations, corporations now must "identify all individuals involved in or responsible for the misconduct at issue, regardless of their position, status or seniority, and provide to the Department all facts relating to that misconduct". This is a threshold requirement that must be met before prosecutors will be permitted to decide on the extent of any cooperation credit.
  2. Prosecutors will be required to focus on individual wrongdoing from the start of any investigation of corporate wrongdoing.
  3. Civil and criminal prosecutors pursuing corporate wrongdoing will be required to communicate with each other regularly and consider developing and coordinating civil and criminal proceedings.
  4. In the absence of extraordinary circumstances or approved department policy, prosecutors will not release culpable individuals from civil or criminal liability when seeking a resolution with a corporation.
  5. Before resolving corporate criminal or civil liability, prosecutors will be required to have a clear investigative plan to resolve related individual cases. Moreover, any decision not to pursue an individual who has committed the alleged misconduct must be memorialized and approved.
  6. Civil attorneys deciding whether to bring suit against individuals will be required to consistently focus on issues beyond the individual's ability to pay a prospective penalty to factors such as whether the misconduct was serious and/or actionable, whether the evidence will likely be sufficient to obtain and sustain a judgment, and whether it is in the federal interest to pursue an action.


Though not entirely new, the guidance articulated in the Yates Memorandum is relevant to Canadian corporations carrying on activities in the United States given that the DOJ may assert jurisdiction over any corporation that has a presence in the United States or where there exists other jurisdictional connection to the United States. Corporations over whom the United States might assert jurisdiction should be aware of at least five potential implications of the Yates Memorandum.

First, the Yates Memorandum reinforces the existence of a conflict of interest between a corporation and its employees who may now be subject to greater scrutiny in a DOJ investigation of criminal or civil wrongdoing. In the past, while many employees were willing (notwithstanding being advised of a conflict of interest) to work with the same counsel as that representing the corporation, or agreed to a pooling arrangement for several employees being represented by a different counsel from that representing the corporation, there is now heightened existence of conflict of interest from the outset of any internal investigation. This is because corporations will be under greater pressure (and incentivized) to provide specific information about individuals in exchange for leniency for the corporation in plea and settlement discussions. In the result, it will not only be prudent but necessary for corporations to advise their potentially implicated employees to retain independent counsel early in an investigative process.

Second, given that senior officers and other employees of the corporation will be under scrutiny from the outset of an internal investigation, it will now be even more so essential for the Board of Directors or Audit Committee of the corporation to engage an independent external counsel in an investigation at a relatively early stage. This is to ensure the General Counsel's office is not put in a difficult position of conflict of interest or seen as lacking in independence due to having to scrutinize activities of other fellow executives and company employees.

Third, the requirement to provide "all relevant facts" in exchange for cooperation credit will require corporations to undertake (even more) timely, independent, thorough and well-documented internal investigations, since declining to learn of facts is not an excuse for providing inadequate disclosure.

Fourth, obtaining the cooperation of executives and other employees of the company will prove to be more challenging, and difficult negotiations concerning indemnity for costs for legal representations and mutual cooperation will require considerable skill and judgment from external counsel for both the corporation and the employees.

Fifth, for Canadian corporations, the potential for Canadian criminal liability exposure for its executives and the corporation, when extending cooperation to the U.S. prosecutors in order to obtain cooperation credit, will likely require in some cases involvement of experienced teams of U.S. and Canadian lawyers representing the corporation and the individuals.


All of the difficult implications of the Yates Memorandum are yet to be completely understood and fully discussed by experienced white collar criminal defence lawyers practicing on both sides of the Canada-U.S. border.

However, corporations and their employees should remain on notice that the greater emphasis on pursuit of white collar crimes, including under statutes such as the U.S. Foreign Corrupt Practices Act and the Canadian Corruption of Foreign Public Officials Act, will require even further focus on ensuring legal compliance at all levels within a corporation. Furthermore, immediate and appropriate responses to whistleblower allegations of possible wrongdoing by corporate executives and the corporation will, in light of the requirements of the Yates Memorandum, be ever more so critical for obtaining cooperation credit from the enforcement authorities.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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