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The Yates Memo, Corporate Wrongdoing and Middle Market Companies - JMBM Corporate Defense Attorney Anthony Pacheco

Published on Nov 19, 2015

Jeffer Mangels internal investigations and corporate defense lawyer, Anthony Pacheco, asks the question, “Will the Yates Memo, along with new focus on individual accountability in corporate investigations, spread from Wall Street to middle market companies?” Pacheco says yes, then explains how the U.S. judicial system, as well as emerging technology, will play a role in increasing state and local investigations through industry sectors.

I'm Anthony Pacheco. I'd like to talk to you about new developments at the Department of Justice, and how they might affect middle market companies and smaller companies and entities.

The question is: Will the new changes by the Department of Justice in focusing on the prosecution and investigation of individuals and companies for misconduct affect the middle market? Will that affect smaller companies? The answer is yes, and here's why.

I think there are some commentators out there that think that there may be a greater focus on publicly traded companies; that there may be a greater focus on only the very large companies and individuals at those companies. I think it's a mistake to think of it that way, because that new announcement is from the Department of Justice. Federal prosecutors will be more keenly focused on white collar matters at larger companies all throughout the country. But there are other prosecutors and other entities who are involved in this type of investigation when it comes to business crimes.

You've got, for example, the various attorneys general throughout the state. In each individual state, they are the highest ranking member of law enforcement. And all of them are going to be keenly interested in a whole variety of different companies and their conduct, whether it's very large, middle market, or small. So nothing's going to change there with those prosecutors in the individual states. Make no bones about it, they are coordinating their efforts. The National Association of Attorneys General, they get together, they have national task forces, and they attack business crimes throughout the country jointly, together.

We also have local prosecutors. We have district attorneys who have the ability to prosecute various business crimes. You have city attorneys who also have a variety of different statutes. There's an overabundance, frankly, of statutes and regulations that permit prosecutors to investigate criminal events at companies. None of that is necessarily going to change, even though the Department of Justice is probably going to focus more keenly on larger companies and individuals at those larger companies.

But there's another development, and that is that technology is playing a very, very big hand here. That will affect the middle market and that will affect smaller companies. For example, prosecutors now are more frequently using big data to investigate criminal cases. They're looking for connections and cognitive connections between different conduct that exist in the data, and these patterns of individual conduct. It's not going to be limited only to larger companies. It's going to extend to middle market and smaller companies where big data is going to be used. They refer to it as Watson-like technologies that use predictive coding and analytics to be able to investigate matters. That's going to make the life of prosecutors–federal, state, local–much easier, and I think it's going to also broaden their ability to look at the middle market more closely, and also to look at smaller companies like LLCs more closely.

There's also a greater emphasis in industry sectors, and I think that sector isn't going to be limited to just the main players in the industry. It's going to be focused very heavily on smaller entities as well–for example, in healthcare. I don't think that anyone on the prosecutorial side is going to focus just on the larger companies. I think they're going to focus on the misconduct in the industry to try to shape the industry conduct. And I think these new tools, like the new analytics, and even some of the older tools that will be used more heavily, like wire taps and those types of devices that are very intrusive, will be used on a whole variety of cases, large or small. There's unfortunately no comfort for the middle market or for smaller companies with these latest developments at the U.S. Department of Justice.

As questions come up, if you're interested in talking about these issues, call me, Anthony Pacheco. Thank you.