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Posts Tagged ‘Federal prosecution’

How Should Compliance Process Integrate the Yates Memorandum?

Thursday, September 29th, 2016

Compliance Process and the Yates Memorandum?

Yates Memorandum Compliance Investigation ProcessThe controversial Yates memorandum is one of the most significant policy changes to ever come out of the Department of Justice.  Companies in virtually every industry should be examining their practices in view of the significant shift in emphasis of Federal prosecutors.

Here are a few points that suggest actions that should be taken by compliance officers and other corporate officers in reaction with the new Federal policy.

1.     The Yates memorandum is a “board-worthy” issue.  Board members and upper management must all be advised of the new DOJ position and the impact on their responsibilities and the compliance process.  The stakes involved in corporate wrongdoing have clearly been raised by Federal prosecutors.  This is serious business.

2.     Significant committees should be advised and integrate these principles into their activities.

3.     Internal investigation process must be amended in a number of ways, some specific to new steps that are required to be taken and to stress the importance of investigating individual wrongdoing.

4.     The process and flow of addressing internal investigations must be reviewed and in many cases revised to meet the new requirements.  A new triage step must be added to the analysis of the investigation process to determine whether there is any potential individual wrongdoing that should be investigated and disclosed.

5.     The dynamics between lower level wrongdoers and the company may be changed because of the increased probability of individual prosecution and the need for the company to disclose all information relating to individual liability.   This will require companies to investigate employees much more frequently.

6.     The need to assure that UpJohn warnings are provided to employees who may have individual liability is increased.  This should be reflected with specific provisions in the investigation process.   It is critical that evidence obtained through internal investigation not be “contaminated” by not giving proper notifications to subjects.  Contamination of evidence could have a negative impact on eligibility for cooperation credit from Federal prosecutors.

7.     Investigation process and procedures need to be reviewed and made air tight.  Detailed investigation steps should be laid out in the investigation policy and supporting documents.  The UpJohn process should be memorialized in investigation policies and procedures to reflect the need for companies to take more intense actions to investigate employees.  No specific changes are required in the UpJohn process, but the process must be well defined and systematized.  Many companies do not specifically address the need to give UpJohn warnings in their investigation policies.

8.     Investigation reports must cover each and every potential subject of the investigation and all relevant information should be disclosed in the report.   The investigation of each potential subject must be taken to a conclusion regarding potential individual wrongdoing.

9.    Yates requires a complicated privilege analysis which should also be considered for inclusion in policies and procedures.  Clarification provided by Federal prosecutors following issuance of the initial Yates Memorandum provides a degree of guidance about what information can be privileged and what cannot.

10.     Broad knowledge of the new Federal focus on individual accountability should be provided within the organization.  Employees and contractors should be advised of the new investigation policies and processes that will apply if an investigation is necessary.  All should understand what will occur if they become the subject of a Federal or internal investigation.

11.    Corporate liability will be influenced by the compliance process, tone from the top, effectiveness of the compliance process and other indications of an effective compliance program.  Individual liability will be largely based on the elements of the potential infraction.  Investigation process must include an analysis of the elements of the potential infraction with respect to each potential subject of an investigation.  Investigation reports and forms should be adjusted to assure that these standards are consistently maintained.  Evidence should be organized and attributed to each applicable subject in support of investigative conclusions.

12.    Compliance officers must educate individuals within the organization regarding the seriousness of these developments.  The best outcome is that individuals will take their role in preventing wrongdoing more seriously and will proactively operate in a manner that makes it unlikely that wrongdoing will ever occur.

For more information regarding the Yates Memorandum and other compliance and health law issues, stay tuned to our blog.

New Federal Prosecution Standards Require Revisions to Investigation Policies

Tuesday, September 27th, 2016

Impact of the Yates Memorandum on Civil Enforcement Liability

Yate Investigation Policy RevisionThe infamous Yates Memorandum revised Federal prosecutorial policy to place more of a focus on individual wrongdoing. Federal prosecutors now have clear directions from the top of the DOJ to consider individual liability prior to resolving any investigation or reaching settlement with respect to corporate wrongdoing. The Yates memorandum extends beyond federal agents who are considering criminal charges against companys or individuals. The Memorandum specifically states that the concept of consideration of individual liability should extend to governmental subdivisions that are responsible for assessing potential civil liability, monetary penalties, program exclusion and other remedies short of criminal prosecution. Government actors are compelled to consider individual monetary responsibility regardless of whether or not the individual has the ability to satisfy the potential award.

Clearly the stakes have gone up for individuals who are involved in companies that commit wrongdoing. In order to receive benefits of having cooperated with governmental investigators, a company must provide all information relevant to individual liability. This requires the company to conduct a robust internal investigation of all potential subjects and to bring the investigation to resolution with respect to each such individual. As a practical matter, when allegations of wrondoing are made, a company investigation will need to broadly consider potential wrongdoing of any employee for which there is any reasonable basis to believe may have been involved in wrongdoing. The incentive of the company will be to be overly broad in its consideration of potential investigatory subjects. This means that corporate employees are exposed to a much higher risk of coming onto the radar of a possible internal investigation. If the individual raises to the level of being a possible “subject,” the investigation will go even further.

In effect, Federal policy regarding prosecution and civil remedies has placed the company’s compliance program in the position of having to broadly consider potential wrongdoing of its employees whenever issues are identified. This is not only to avoid potential criminal exposure, but also to mitigate potential claims for civil liability under the False Claims Act, monetary penalty regulations and other possible civil exposure. This change in Federal policy has a number of impacts on the compliance and ethics program of the company. Of primary importance is the process that is used by the company to investigate employees and contractors who are potential individual wrongdoers. In the past, corporate employees could normally rely on not being the target of criminal or civil liability because the focus was largely on corporate liability. Investigation policies were naturally geared toward gathering information from employees who were more or less alligned with the interests of the company. This dynamic has now changed. A company will much more frequently be in a position of having to hunt for individual wrongdoing and disclosing that wrongdoing to governmental investigators as a condition of receiving cooperation benefits.

This makes it significantly more important for the compliance program to include detailed and standardized processes for conducting internal investigations and reporting the results. Frankly, most compliance investigation policies are not adequately robust to mitigate risk under the new Federal enforcement regimen. Company compliance officers should be reviewing their investigation policies now to bring them up to the standards that are required under the new Federal policy. The standardized investigation process should be defined in detail. There should be detailed requirements for providing corporate “Upjohn” warnings to employees who are questioned. Guidelines for maintaining privilege should also be considered among other items.

Perhaps most importantly, companies should not be lulled into thinking that nothing has changed. The change in federal enforcement policy is an issue that must be brought to corporate management, compliance committees, and the board of directors. In short, this is a “board-worthy” issue that requires action to be taken to at least review, and in most cases make significant revisions, to investigation policies and perhaps other aspects of the corporation’s compliance program.

John Fisher, CHC, CCEP

John H. Fisher

Health Care Counsel
Ruder Ware, L.L.S.C.
500 First Street, Suite 8000
P.O. Box 8050
Wausau, WI 54402-8050

Tel 715.845.4336
Fax 715.845.2718

Ruder Ware is a member of Meritas Law Firms Worldwide

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