Skip to main content

Health Care Enforcement Review and 2017 Outlook: Yates Memo in Action

Happy New Year! As we kick off 2017, our Health Care Enforcement Defense team brings you its annual review of key government policies, regulations, and enforcement actions in 2016, and the impact these trends are expected to have on enforcement in the year ahead. We start with a look at the Yates Memo and the uptick in the prosecution of individuals that has occurred since its publication.  Stay tuned for the rest of our series and an invitation to our annual webinar, Health Care Enforcement Review & 2017 Outlook, on Wednesday, January 25 at 1:00 p.m. ET.

In the year since the Department of Justice (DOJ) issued what is known as the Yates Memo, we have already seen that it in fact dictated actual change in DOJ enforcement policy.  While the long-held DOJ goal of charging individuals has not changed, the Yates Memo formalizes the requirement that federal prosecutors focus on identifying and pursuing potentially culpable individuals, and it establishes internal oversight mechanisms to ensure that they do.  In support of that reinvigorated goal and as intended, according to Deputy Attorney General Yates, the Yates Memo has changed the behavior of companies that learn of potential wrongdoing.  Companies have to make early and important decisions about how they conduct internal investigations, and they must quickly decide whether to disclose to the government – perhaps even before any conclusions are reached – to secure the greatest cooperation credit.

The government has long sought to prosecute culpable individuals and as Deputy Attorney General Yates discussed in a recent speech, because corporations commit crimes through the actions of individuals, the threat of going to jail is what “changes the calculus as employees and executives decide whether to participate in an illegal scheme.”  But as the government is well aware, despite the overall high conviction rate in criminal cases brought, the evidence required to prove criminal intent and get convictions in cases of corporate wrongdoing is often lacking.

In two recent examples of individuals who went to trial in criminal health care enforcement cases after issuance of the Yates Memo, the government failed to obtain convictions on the major counts.

Carl Reichel, former president of specialty drug maker Warner Chilcott, was acquitted of a single count of conspiracy to violate the federal Anti-Kickback Statute in a trial this past summer..] The company pled guilty  within weeks of the Yates Memo’s issuance the prior fall.  Because the deal with the company had likely been in the works for some time, the Yates Memo may not have had a significant impact on the outcome.

In another post-Yates Memo trial, Acclarent’s former CEO, William Facteau, was convicted of misdemeanor misbranding counts but acquitted of all fourteen felony counts of conspiracy, wire fraud, and felony misbranding.  The government announced a settlement of False Claims Act allegations with the company two days after the jury verdict and in its press release cited various mitigating steps taken by Acclarent’s parent company and vaguely stated that the parent company “also cooperated with the government’s investigation.”

The extent of the cooperation provided in either case is unclear but what is clear is that the government will maximize its use of cooperation credit as leverage against companies to get the evidence it needs to convict individuals, as encouraged by the Yates Memo.  Any company settling with DOJ’s Criminal or Civil Division should expect the government to require ongoing cooperation and identification of individuals who participated in any wrongdoing as a condition of the resolution.   The indictments in December of six former employees of Insys Pharmaceuticals most likely reflect the Yates Memo in action.  The former employees, including the CEO and other high level executives, are alleged to have engaged in a RICO conspiracy to bribe physicians to overprescribe the company’s fentanyl-based drug.  No charges were brought against the company, which released a statement saying, as expected, that it was cooperating with all relevant authorities in ongoing investigations.

Since issuing the Yates Memo, the DOJ’s top brass on both the civil and criminal sides have offered further illumination in speeches in which they have emphasized certain aspects of the Yates Memo and provided progress reports on its impact so far.  For example, Deputy Attorney General Yates commented recently that “[t]he sky hasn’t fallen . . . [i]nstead, we’re getting exactly what we wanted – companies showing up to their first meeting with the government with information about who did what, and our prosecutors are using that information both to build cases against individuals and to ensure that the companies are being properly credited for their cooperation at the end of the investigation.”

Deputy Attorney General Yates and others have repeatedly stressed the key requirement of the Memo that the threshold for any cooperation credit is providing all relevant facts about all individuals involved in misconduct from the top to the bottom of the company hierarchy.  In recent speeches, officials have emphasized the fact that not all cooperation is equal.  Following the Yates Memo, the DOJ revised the Principles of Federal Prosecution of Business Organizations (also known as the Filip Memo) and broke cooperation out into two distinct factors to be considered independently in prosecutors’ charging decisions.  A corporation’s willingness to cooperate in general is considered distinctly from the timeliness and voluntariness of its cooperation.  As Deputy Attorney General Yates stressed recently, “we increased the difference between the credit a corporation receives for voluntary self-disclosure and the credit it gets if the company was aware of wrongdoing but failed to cooperate until after the government came knocking.”

For in-house counsel who learn of potential wrongdoing, time is short to maximize cooperation credit.  The critical questions are whether the conduct should be reported and when.  In an FAQ published recently by the DOJ to provide further guidance, the government “encourages early voluntary disclosure of criminal wrongdoing.”  It instructs that “[o]nce a company has made a preliminary assessment that criminal conduct has likely occurred, it should promptly report the matter to the government if it desires mitigation credit for voluntary self-disclosure.”  In a race with possible whistleblowers, there may not be time to reach conclusions if the company wishes to maximize the credit potential.

As investigations that were begun or substantially developed in the Yates Era get closer to resolution or indictment, the government will want to make positive examples of companies that did what the Memo intends.  As an incentive to others, the government will seek to highlight the benefits of prompt voluntary disclosure and cooperation.  Until the benefit is clear, general counsel may continue to believe that the known risks of disclosure are worse than the unknown risk that the wrongdoing will ever be detected by the government.

In addition to the prompt cooperation calculus, counsel conducting investigations must keep the government’s expectations foremost in their minds.  Investigating counsel must preserve the ability to cooperate to the greatest extent by giving robust Upjohn warnings to interviewees and taking care to draw clear lines in joint defense agreements about may be done with information learned pursuant to those agreements.  While DOJ is typically careful not to encroach upon the attorney- client privilege or probe about the existence of joint defense agreements, the Yates Memo FAQ takes aim and directs that a “corporation may wish to avoid putting itself in the position of being disabled, by virtue of a particular joint defense or similar agreement, from providing some relevant facts to the government and thereby limiting its ability to seek such cooperation credit.”  The message: enter joint defense agreements at your peril.  Counsel for companies and individuals must be clear when entering into written agreements and when conducting interviews about whether the interview is taking place pursuant to a joint defense agreement or for purposes of potential cooperation and a strong Upjohn warning must be given.

In 2017 we will continue to monitor the impact of the Yates Memo and the differences in behavior on both the government and defense side that it requires.

Subscribe To Viewpoints


Eoin P. Beirne

Member / Co-chair, White Collar Defense and Government Investigations Practice

Eóin P. Beirne is co-chair of Mintz’s White Collar Defense and Government Investigations group. He guides clients from a wide range of industries through federal and state investigations and enforcement proceedings.