Canadian Lawyer InHouse

51 CANADIANLAWYERMAG.COM/INHOUSE SEPTEMBER 2016 AT A CONFERENCE on white-collar crime in New York this spring, the deputy attorney general of the United States tried to clarify the intent behind a directive that was widely known by her last name, instead of its actual title, the Individual Account- ability Policy. The directive, announced by the U.S. Department of Justice in the fall of 2015, set out a higher threshold for credit for co-operation in cases of alleged corporate wrongdoing. All the facts about individual conduct within a company must be provided to authorities to receive credit, Sally Yates explained in her widely reported speech back in May. "We just want the facts. Our goal is to uncover the truth," said Yates. She stressed that it was not, as some had suggested, a pressure tactic to get corporations to waive privilege or offer up a scapegoat — "a vice president in charge of going to jail," as Yates described the fear. The policy announcement, widely re- ferred to as the Yates Memo, was issued at a time when there continues to be public sentiment that individual corporate wrong- doers are rarely punished. The potential impact of the Yates Memo has also sparked widespread commentary not only in the U.S. but here in Canada. Even for compa- nies that do not have U.S. operations, there have been questions raised about whether the spirit of the memo will be adopted by regulators and prosecutors in this country. For companies in the fi nancial services sector, the balancing act is to ensure that if internal investigations uncover wrongdo- ing, there is compliance with regulators, yet at the same time the risks fi nancially and to reputation are minimized. Added to this mix is a potential divergence of interests between a company and a senior employee if there are admissions of wrongdoing to a regulator. At a minimum, the context behind the Yates Memo is something that should be looked at by Canadian corporations and their legal departments, says John Jason, of counsel at Norton Rose Fulbright LLP. "It is something that the top of the house should be concerned about. The world is a very different place now. People are angry," says Jason, who was formerly deputy general counsel and chief compliance offi cer at a major Canadian bank. There is increased pressure on regulators, both in the U.S. and Canada, to prosecute individuals within major companies "to demonstrate they are hearing people," Jason suggests. Even for corporations without U.S. op- erations, the philosophy behind the Yates Memo might have an impact in Canada, says Janice Wright, a securities defence lawyer at Wright Temelini LLP in Toronto. "I think it would be naïve to believe that the legal trends in the U.S. will not have any infl u- ence on what happens in Canada," she says. Given this climate, it raises questions about the appropriate steps to take when an internal investigation has revealed that there has been either an inadvertent failure to comply with regulations or intentional wrongdoing. Co-operation with a regulator at an early stage may often be the best course of action, says John Fabello, a senior member of the litigation and class action defence practices at Torys LLP in Toronto. If the facts sup- port co-operation, then what he calls the "old school" approach of giving just a bit of information to a regulator is unlikely to be effective. "If you do a thorough job, staff will not be inclined to go off on a wild goose chase," he says. "The overarching rule is to be transparent. Don't lie in the weeds," says Fabello. He states that regulators are more likely to agree to narrow the issues under investigation if it appears that a company has been co-operative and upfront about the facts uncovered in its own internal probe. As well, he says that if a company has been I n d u s t r y S p o t l i g h t Minimizing risk in an investigation of wrongdoing Even for companies that do not have U.S. operations, there have been questions raised about whether the spirit of the Yates memo will be adopted in this country. BY SHANNON KARI

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