U.S. Department of Justice May Leverage "Cooperation Credit" to Obtain Foreign-Based Evidence

November 23, 2015

By Thomas P. O'Brien, Daniel Prince & Brian S. Kaewert

Recent guidance by the United States Department of Justice (“DOJ”) reveals that the government may leverage “cooperation credit” under the “Principles of Federal Prosecution of Business Organizations”[1] (authored by former Deputy Attorney General Mark Filip, i.e., the “Filip Memorandum”) to obtain foreign-based information that is outside the scope of a federal grand jury subpoena. And, while this issue was recently previewed in the anti-corruption and anti-bribery context, there is no reason to believe that it may be so limited going forward.

In September, the DOJ released new policy guidance regarding its intent to incentivize changes in corporate culture by investigating and/or prosecuting culpable individuals. The linchpin of that guidance, announced by Deputy Attorney General Sally Q. Yates in a memorandum entitled “Individual Accountability for Corporate Wrongdoing” (the “Yates Memorandum”), is the DOJ’s express linkage of any “cooperation credit” for an organizational defendant to the disclosure—by the company to the government—of “all relevant facts about individual misconduct” and “all individuals involved in or responsible for the misconduct at issue” (emphasis added).[2]

The Yates Memorandum amended the Filip Memorandum with respect to cooperation credits. That is, to emphasize the significance of holding individual wrongdoers accountable for corporate misconduct, prosecutors may not consider a reduction or elimination of penalties for cooperating organizational defendants unless the company conducts a thorough investigation into the scope of the wrongdoing, identifies potentially culpable wrongdoers (including executives), and timely provides the DOJ with all relevant facts concerning the same.

Prosecutors, corporate business and legal professionals, and members of the defense bar continue to consider the import of the Yates Memorandum, both as a general matter and, according to recent public statements, in connection with the production of foreign-based documents and information that might be outside the scope of a federal grand jury subpoena. Put another way, because a federal grand jury subpoena may only be served in the United States (or on a United States national or resident in a foreign country),[3] there is a question regarding whether the government may obtain overseas evidence that it otherwise may not be able to access as a feature of a company’s cooperation under the Yates Memorandum.

The risk is unique given the inherent tension between the government’s recent demand for all information and facts related to wrongdoing and a corporation’s eligibility for cooperation credit, particularly where critical emails or documents may be located in foreign jurisdictions that are outside the scope of compulsory process. The DOJ acknowledged this issue on November 17, 2015, when Assistant Attorney General Leslie R. Caldwell delivered remarks during the American Conference Institute’s 32nd Annual International Conference on the Foreign Corrupt Practices Act.[4] In addressing the Yates Memorandum, Assistant Attorney General Caldwell explained that “[i]n addition to identifying the individuals involved, full cooperation includes providing timely updates on the status of the internal investigation, making officers and employees available for interviews—to the extent this is within the company’s control—and proactive document production, especially for evidence located in foreign countries” (emphasis added).[5]

Fully aware of the difficulties the DOJ faces in obtaining some foreign-based evidence,[6] it is unlikely that the Assistant Attorney General’s emphasis on such evidence lacks significance. Indeed, the process for obtaining foreign-based evidence may become less complicated to the extent prosecutors condition cooperation credit on the production of information that is housed overseas, including, for example, by a foreign affiliate. This scenario could apply in FCPA cases and to a variety of subject matters, such as, for instance, trade secret theft/economic espionage (18 U.S.C. § 1832 et seq.), money laundering (18 U.S.C. § 1956 et seq.), obstruction of justice (18 U.S.C. §§ 1001 and 1510), or, in any matter in which foreign-based documents are at issue.

This is a challenging terrain with a number of issues that might be considered, not the least of which are the following:

Data Privacy Laws. While a company might desire to cooperate with the Government by producing all information related to the alleged misconduct, there is a potential that local data privacy laws could restrict the company’s ability to do so with respect to foreign-based information. If so, would the defendant still be eligible for cooperation credit under the Yates Memorandum? The DOJ appears to have acknowledged that circumstances do exist where companies may be under a legal obligation not to turn over evidence, but Assistant Attorney General Caldwell cautioned that the burden would be on the company to prove that it is prohibited by law from making the contemplated disclosure.[7] Further, Assistant Attorney General Caldwell referenced “workarounds” that may help to facilitate the review of information by the government, but the company would be obligated to identify potential solutions.
Attorney-Client Privilege and/or Attorney-Work Product Protection. The DOJ has made clear that if a company wants any cooperation credit, it must investigate potential wrongdoing and disclose all relevant facts about all individuals involved, no matter where such individuals fall within the corporate hierarchy. Indeed, in her remarks during the American Banking Association and American Bar Association Money Laundering Enforcement Conference on November 16, 2015, Deputy Attorney General Yates affirmed that cooperation credit would not be available for organizational defendants absent “complete information about individuals’ involvement in wrongdoing[.]”[8] Deputy Attorney General Yates clarified that, while interview notes and memoranda may be privileged, to earn cooperation credit, the underlying facts would need to be revealed to prosecutors: “[L]egal advice is privileged. Facts are not.”[9]
Potential for Related Civil Litigation. Another issue arises with respect to whether the disclosure of foreign-based information to the government—incident to a company’s cooperation obligations under the Yates Memorandum—might impact existing or potential litigation. For example, once produced to the DOJ, would a FOIA request submitted by an adverse litigant, business competitor, or other stakeholder/representative lead to the further disclosure of foreign-based information? While the DOJ would have to determine its response to such request, and there may be provisions for requesting confidential treatment of information produced to the government, the issue necessarily must be considered when weighing the “cost” of cooperation.

In summary, it seems likely that the government may leverage cooperation credit under the Yates Memorandum to seek foreign-based information that is outside the scope of a federal grand jury subpoena. We expect that this issue will receive more attention going forward in regards to a variety of subject matter. That said, companies faced with questions pertaining to cooperation credit and related issues (as provided above) are best served by consulting with competent counsel who have experience handling white collar and cross-border matters.

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[1] Mem. from Deputy Att’y Gen’l Mark Filip to Heads of Dep’t Components, United States Att’ys, “Principles of Federal Prosecution of Business Organizations,” dated Aug. 28, 2008, available at http://www.justice.gov/sites/default/files/dag/legacy/2008/11/03/dag-memo-08282008.pdf (the “Filip Memorandum”). The Filip Memorandum, which has been set forth in the United States Attorney’s Manual at § 9-28.000 et seq., is binding on federal prosecutors within the DOJ.

[2] Mem. from Deputy Att’y Gen’l Sally Q. Yates to the Ass’t Att’y Gen’l, Antitrust Div., et al., “Individual Accountability for Corporate Wrongdoing” (“Yates Memorandum”), dated Sep. 9, 2015, at 3, available at http://www.justice.gov/dag/file/769036/download.

[3] See, e.g., 28 U.S.C. § 1783 and Fed. R. Crim. P. 17(e)(2); see also United States v. Moussaoui, 382 F.3d 453, 462–63 (4th Cir. 2004) (noting the “well established and undisputed principle that the process power of the district court does not extend to foreign nationals abroad”).

[4] “Assistant Attorney General Leslie R. Caldwell Delivers Remarks at American Conference Institute’s 32nd Annual International Conference on Foreign Corrupt Practices Act,” Nov. 17, 2015, available at http://www.justice.gov/opa/speech/assistant-attorney-general-leslie-r-caldwell-delivers-remarks-american-conference.

[5] Id.

[6] The government may be able to obtain foreign-based information pursuant to a mutual legal assistance treaty (“MLAT”) assuming, for example, that an MLAT exists between the United States and the requested state and that the requested state agrees to produce information in response to the request. Even so, this process may be time-consuming.

[7] Id.

[8] “Deputy Attorney General Sally Quillian Yates Delivers Remarks at American Banking Association and American Bar Association Money Laundering Enforcement Conference,” Nov. 16. 2015 (“Yates ABA Remarks”), available at http://www.justice.gov/opa/speech/deputy-attorney-general-sally-quillian-yates-delivers-remarks-american-banking-0.

[9] Id.

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