December 3, 2018

DOJ Eases “Cooperation Credit” Requirements

In a recent speech, Deputy AG Rod Rosenstein announced changes to the DOJ’s policy regarding individual accountability & cooperation credit in corporate investigations. The intro from this Morgan Lewis memo summarizes the revised policy (we’re posting memos in our “White Collar” Practice Area):

US Deputy Attorney General Rod J. Rosenstein recently announced that in every corporate investigation, the US Department of Justice will make it a top priority to pursue individuals responsible for corporate wrongdoing. This revised policy also modifies the expectations for corporate targets seeking cooperation credit in criminal and civil investigations. Cooperation credit for corporate targets of criminal investigations remains “all or nothing,” while cooperation credit will be available in degrees for corporate targets in civil investigations.

While cooperation credit is “all or none” in criminal investigations, the revised policy takes a less demanding view of what “all or none” means. The memo says that under the policy laid out in the Yates Memo, cooperation credit would not be given unless the company provided all relevant information about any individuals involved, regardless of culpability. In contrast, the new policy requires companies to undertake a good faith effort to identify “every individual who was substantially involved in or responsible for the criminal conduct.”

In civil investigations, all relevant information about any senior officials involved in the misconduct must be provided if the company wants any credit – and it must meet the same standard applicable to criminal investigations if it wants maximum credit. But if the company’s investigative efforts fall short, it can still receive some credit for cooperation if its actions “meaningfully assist the government’s civil investigation.”

Brexit: Speak-Up or Watch Out?

According to this recent WSJ article, SEC Chair Jay Clayton isn’t thrilled about the level of disclosure he’s seeing about the potential impact of Brexit:

The SEC is sharpening its focus on corporate disclosures about the risks associated with the U.K.’s exit from the European Union, Chairman Jay Clayton told company controllers and accountants during a conference on Monday. “My personal view is that the potential impact of Brexit has been understated,” Mr. Clayton said, speaking at the Current Financial Reporting Issues Conference, hosted by professional organization Financial Executives International in New York. “I would expect companies to be looking at this closely and sharing their views with the investment community,” Mr. Clayton added.

This recent blog from Cydney Posner flags a Brexit issue that could cause problems for some companies:

For some companies, one of the most significant issues will be whether they will need to relocate to EU-based banks financial arrangements, such as syndicated loans, swaps and other derivatives, that are currently located at banks in London. That could be a costly, time-consuming and paper-intensive process. As reported in this WSJ article, “regulations that currently cover the City of London, the heart of the U.K.’s and Europe’s financial industry, may stop applying as early as March 2019. That could make it necessary to relocate thousands of financial products used by corporates to an EU-based financial entity.”

Cydney notes that determining whether this is a live issue will depend on the final terms of a Brexit deal (or non-deal). At this point, it’s still anybody’s guess as to what those terms will be.

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John Jenkins