Increasing D&O Criminal Exposures: Insurance and Indemnification Issues

In response to recent criticisms, federal law enforcement authorities are now investigating with greater frequency and vigor potential criminal charges against directors and officers in a variety of contexts.

Most notably, on September 9, 2015, deputy attorney general Sally Quillian Yates issued a memorandum to all Assistant U.S. Attorneys and other key agencies which sets forth the federal government’s focus on individual criminal accountability for corporate wrongdoing. In the so-called Yates Memorandum, the Department of Justice recognized that “[o]ne of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing” and that it is “important that the Department fully leverage its resources to identify culpable individuals at all levels in corporate cases.”

The cornerstone of the policies and procedures set forth in the Yates Memorandum (which have now been incorporated into the U.S. Attorneys’ Manual) is that in order for a company which is targeted in a federal investigation to gain any credit for cooperation with the government, the company must provide to the DOJ “all relevant facts relating to the individuals responsible for the misconduct.” In other words, a company is now highly motivated to disclose to federal investigators the identify and “all relevant facts” relating to directors, officers and other individuals arguably responsible for the company’s alleged wrongdoing, thereby creating a huge conflict between the company and those potentially responsible individuals.

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Dan Bailey
Service Affiliation
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