This article was republished with permission from Michael Volkov’s blog, Corruption, Crime & Compliance.
The Justice Department’s recent Yates memorandum on individual accountability is a significant event. Sure, you can always find members of the FCPA Paparazzi who will discount the memo, or relegate it to a mere “political” statement. That view is unfortunate and ignores the real implications of the Yates memo. Such a viewpoint also shows how little members of the FCPA Paparazzi understand the true inner workings of the Justice Department.
In certain circumstances when a company is cooperating with the Justice Department, a corporation will conduct an internal investigation to present to the DOJ as evidence of its cooperation. The DOJ has final authority to review, conduct an additional investigation to supplement the internal investigation, approve of the findings and pressure-test the investigation. In practice, corporate internal investigations, usually conducted by outside counsel, form the basis for much of an enforcement action.
With the dramatic sea change from the Yates memorandum, I predict (and fully expect) individuals who end up being prosecuted (civilly or criminally) to challenge more aspects of the corporate internal investigation. As companies conduct internal investigations under the “supervision and direction” of DOJ prosecutors, defendants will seek access to internal investigation documents and notes and seek to portray outside counsel as agents of DOJ prosecutors.
I recognize that this will be a real stretch, but I expect there to be more litigation in this area, under which defendants will claim they need access to such materials in order to adequately defend themselves.
We are starting to see more litigation in this area and I expect this to grow. The Bridgegate defendants in New Jersey are currently litigating access to documents, information and metadata related to an internal investigation conducted by outside counsel.
A second and even more significant trend may occur when defendants claim that outside counsel, acting as agents of the government, failed to follow certain procedural and substantive rules applicable to the government. Consider the question as to whether or not a company counsel properly administered Upjohn warnings to employees before interviewing them. If the government seeks to use a statement made by a specific witness who was not properly advised under Upjohn, a trial judge may very well prohibit the government from using such a statement.
Additionally, issues surrounding the attorney-client privilege may become even more significant when an individual defendant may seek to pierce the privilege claiming that the company failed to preserve the privilege or is asserting privilege claims that are not adequately justified.
All of this is to suggest that with increases in individual prosecutions, everyone should expect more challenges to corporate internal investigations. As a consequence, the stakes may be even higher when companies enlist outside counsel to conduct an internal investigation or when the company relies on in-house counsel and investigators to conduct the investigation.
As the issues surrounding the “outsourcing” of corporate criminal investigations continue to crop up, eventually trial judges will become suspect over the process and will bend over backwards to protect the rights of individual defendants. Over the next five years, you can expect to see more decisions from trial judges giving access to internal investigation documents and materials, and eventually applying specific defined standards for internal investigations when such information is directly used by the government in a civil or criminal prosecution.
There are many other issues that have to be considered when an internal investigation is launched with an eye toward cooperating with the government. Because of the increased focus on identifying culpable individuals, internal investigators have to be careful to wall off potential subjects of the investigation, preserve the attorney-client privilege, reconsider when and how to interview individuals who are suspected of engaging in wrongdoing and apply strict standards to protect against claims of violating defendants’ rights, in the event that the government prosecutes individual defendants.
Michael Volkov is the CEO of The Volkov Law Group LLC, where he provides compliance, internal investigation and white collar defense services. He can be reached at 
