By David Hechler
When a group of regulators and in-house lawyers got together on April 3, the subject of cooperation came up frequently during their conversation. Nineteen months after the Yates Memorandum, the topic was still very much on their minds.
Winston Paes, chief of the Business and Securities Fraud Section of the U.S. Attorney’s Office for the Eastern District of New York, said his office has always looked at the culpability of individuals as well as companies. The Yates Memo just changed the perspective a bit. He called it a “recalibration of cooperation” that “redefined what true cooperation means.”
Dawn Haghighi, general counsel of PCV Murcor Real Estate, sounded a little less comfortable with this new perspective. In-house lawyers sometimes are seen by their colleagues as an arm of law enforcement, she said.
Brian Michael picked up this theme. Michael, deputy general counsel for 21st Century Fox and group chief compliance officer for Fox Networks Group, said in-house counsel have been “trying to walk the Upjohn line of cooperation,” referring to the 1981 Supreme Court decision that said in-house lawyers represent the company, not its employees, and should warn employees interviewed during an internal investigation that the company may decide to waive the attorney-client privilege and turn over information they provide to third parties, including law enforcement.
“But Yates has pushed the line,” Michael added. Executives are now worried that they will be “unfairly targeted.”
Kathleen McGovern saw things differently. The senior deputy chief at the U.S. Department of Justice’s Criminal Division, Fraud Section, McGovern didn’t see any real change in the way things work. “I don’t know how to prosecute corporations without looking at individuals,” she said. And if companies choose to cooperate, they are greeted with the same expectations as individuals who make that offer: They have to tell everything they know.
The occasion for this exchange was not, of course, a coffee klatch at Starbucks. They had gathered for a 90-minute panel discussion on the “new financial regulatory landscape” at the Association of Corporate Counsel’s midyear meeting in New York. Rounding out the panel were Tony Alexis, assistant director for enforcement at the Consumer Financial Protection Bureau (CFPB); Seth Stern, deputy news director at Bloomberg BNA; and Ronald Machen, the former U.S. attorney for the District of Columbia and now a partner at Wilmer Cutler Pickering Hale and Dorr LLP. The conversation began with a disclaimer: they were speaking for themselves, not on behalf of their employers.
Early on, the CFPB’s Alexis was asked about the status of his agency, which has been under fire from Republicans basically since it was created with the passage of Dodd-Frank, but has been under much greater pressure since the last election. Alexis acknowledged that the agency has never been fully staffed, but no one is telling them to get ready to pack up.
Later, when the talk turned to the different styles of defense lawyers, he had a bone to pick with aggressive young lawyers. “Macho litigators” come in and they don’t know your rules and they don’t know the law. Suddenly they find themselves in court – not in a position of strength – and they didn’t have to land there, he said.
McGovern has experienced the same thing. A Lawyer who comes at you with a sledge hammer, she said, “makes you want to push back.” Another lawyer who says conciliatory things and then raises questions about the law makes you want to go back and check, she added.
Fox’s Michael, who was an assistant U.S. attorney himself early in his career, said it’s not quite so clear which lawyer you want to hire. “You want both,” he said, depending on the case. And depending on how management views it as well.
Near the end of the session, the discussion turned almost upbeat as Machen steered them to the subject of compliance. During his own DOJ days, Machen said, there wasn’t nearly as much focus on compliance. He asked Paes from the Eastern District if he’s seen a substantial uptick in this area. He has, the prosecutor said, and he attributes that in part to the hiring of Hui Chen as the Fraud Section’s full-time compliance counsel. She’s a real expert in this area, Paes said.
She’s also been good for companies, Michael added, because she can recognize, and credit, good programs.
Paes agreed. But Chen has also pushed companies to take it one step further. It’s good to have a solid program, but having the law department test it to determine its effectiveness is what she’s really looking for, Paes noted.