ACC/Drake University Corporate Counsel Forum The DOJ’s New Enforcement Landscape from the Perspective of a Former U.S. Attorney ACC/Drake University Corporate Counsel Forum Nick Klinefeldt June 3, 2016

The Yates Memo “[N]othing discourages corporate criminal activity like the prospect of people going to prison.” Deputy Attorney General Sally Yates announcing new Department of Justice Guidance regarding individual accountability for corporate misconduct on September 10, 2015, aka “The Yates Memo”

The Yates Memo – Six Steps Cooperation credit only available if companies provide “all relevant facts” about individuals involved in corporate misconduct Criminal & civil investigations should focus on individuals at outset Criminal & civil attorneys should be in routine communication with one another No more releases/immunity for individuals from criminal and civil liability as part of corporate settlement Corporate cases cannot be resolved without clear plan for resolving related individual cases before statute of limitation expires Individual ability to pay no longer a threshold factor in civil cases

Impact on Internal Investigations Takeway#1: Internal investigation findings will be second-guessed, so cooperation must be full and complete “Department attorneys will be vigorously testing information provided by companies and comparing it to the results of our own investigation to ensure that it is indeed complete and that it doesn’t seek to minimize the role of any one person or group of individuals.” DAG Sally Yates, September 10, 2015 (emphasis added) Proactive vs. reactive cooperation Cooperation is “all or nothing” when it comes to individuals

Impact on Internal Investigations Takeway #2: Getting “all the relevant facts” about individual misconduct will be even more difficult Diffuse nature of the corporate structure Even DOJ, despite its best efforts, has been unable to identify individual wrongdoers in many cases Internal investigations will be less efficient and more costly Scope and duration will increase More employees asking for counsel

Impact on Internal Investigations Scope and duration of investigations may increase DAG Sally Yates: doesn’t expect companies to “boil the ocean” in their investigation, but if they don’t, will their findings satisfy DOJ? How do you assess the scope of your investigation? E.g., if you identify an issue in US, did you have to investigate abroad?

Impact on Internal Investigations Lawyering up, early and often Increased focus on individuals = more requests for counsel Both in criminal and civil cases More lawyers = less efficiency Potential issues with more requests for counsel Prepared to terminate upon request for counsel? What are criteria for separate counsel? Indemnified v. non-indemnified Pool counsel?

Potentials Pitfalls: Warnings & Agreements Upjohn warnings: should employees now be warned about potential disclosure of their information to government? Properly given and memorialized Should employees now be warned about potential disclosure to the government? Is the government already investigating conduct? Is it likely that the witnesses’ information will be disclosed to government? Joint Defense Agreements What about information regarding individual misconduct obtained from JDA? Communication with current employees who have individual counsel

Potential Pitfalls: Lack of Independence State Actor/Agency Issues: If you’re cooperating with the government, don’t take any actions that suggest you’re acting as its agent, including: Asking government for approval/disapproval about the steps you take in your investigation Asking government which documents to review Asking government which witnesses to interview, and what questions to ask Inviting government agents to your witness interviews Bottom-line: When cooperating, be polite and courteous with the government, but always maintain your investigation’s independence

Potential Pitfalls: Privilege & Work Product Conducting the interview Use of outside counsel Have a witness Memorializing the interview Explain work product Not a verbatim transcript Disclosure to the government Cooperation without waiving the privilege Civil discovery requests Selective waiver

Corporate Issues Code of conduct D&O insurance policy Requirements to report wrongdoing and cooperate with internal investigations But will there be a chilling effect with incentive to disclose individual misconduct? D&O insurance policy Is coverage amount sufficient? Does protection begin upon commencement of investigation?