Publications

The government's ever-evolving response to the United States financial crisis has come full circle, as civil Justice Department Attorneys seek to rely on legislation enacted to protect financial institutions from fraud to sue those very same institutions. Recently, the United States Attorney's Office for the Southern District of New York has initiated a number of law suits under the "obscure" Financial Institutions Reform Recovery Enforcement Act (FIRREA). FIRREA was enacted in 1989 in response to the massive failure of almost half of America's savings and loan institutions. In its 24 year history, the law typically has been used to bring suit against officers and directors of failed institutions. The government now seeks to expand the statute's reach to include the institutions themselves. [...]

In recent years, pharmaceutical companies have faced criminal investigations and charges in regard to alleged off-label marketing of prescription drugs and kickbacks to doctors. For this reason, the filing last month of two civil cases against Novartis was noteworthy and may aid defense lawyers in their efforts to oppose criminal charges being filed against clients in the health care industry. [...]

Three times over the past four years, the IRS has given taxpayers with undisclosed offshore accounts the opportunity to come clean and avoid prosecution. While the most recent offer – the 2012 Offshore Voluntary Disclosure Program (OVDP) – remains open indefinitely, the IRS's recent decision to disqualify approximately 50 taxpayers who disclosed Bank Leumi accounts could undermine the program's continued success. [...]

I almost feel sorry for Mary Jo White, the Chairman of the SEC, and Andrew Ceresney and George Canellos, soon to be Co-Directors of the SEC’s Division of Enforcement. Four days after Ms. White was sworn in, Gretchen Morgenson of the New York Times was reminding Ms White on page one of the Times' Sunday Business Section that time was running out on the SEC's ability to bring cases based on "questionable practices and disclosures arising from the mortgage bust of 2008." [...]

The news is out! There's a buzz in the blogosphere. It's trending on Twitter. The Securities and Exchange Commission has authorized the use of social media channels for the disclosure of material, non-public information. In a Report of Investigation released earlier this month, announcing that its Division of Enforcement determined not to pursue an enforcement action against Netflix, Inc. and its Chief Executive Officer Reed Hastings, the SEC provided guidance regarding how issuers using social media channels to disseminate material non-public information may comply with Regulation FD and the Commission's August 2008 Guidance on the Use of Company Web Sites. [...]

Two decisions do not ordinarily a trend make. But when New York federal judges author two circuit court opinions, issued within approximately three months of each other, dismissing mail fraud claims for failing to satisfy the "mailing" requirement, it is worth noting. [...]

Vagueness is a common problem in white-collar criminal cases. In many instances the line between legal and illegal conduct is blurry at best. This means that someone could face prosecution, a damaged reputation, loss of livelihood and prison time for conduct he or she did not know, and could not reasonably have known, was criminal. [...]

Several months ago, I raised the question of why the large-scale accounting fraud cases of the type that had been so prevalent in the early 2000s were no longer a staple for either federal prosecutors or the SEC. In so doing, I was not the only one to have noted a dramatic shift away from such cases towards investigations involving Ponzi [...]

On February 1, 2013, the Centers for Medicare and Medicaid Services (CMS) published the long-delayed final rule that is intended to implement the Physician Payments Sunshine provisions that were included in the Patient Protection and Affordable Care Act. Under these provisions, which were passed in March 2010 and were originally due to be implemented in 2012, doctors and teaching hospitals will be required to report the payments that they receive from pharmaceutical and device manufacturers, with the stated goal being to shed light on the financial relationships between physicians and the industry. [...]

Earlier this week, Harvard University acknowledged the fact that, in the wake of last summer's cheating scandal that rocked the campus, it had secretly searched the e-mail accounts of 16 Resident Deans. The e-mail search was undertaken last August in an effort to determine who had leaked to the media a "confidential" internal e-mail regarding the cheating and also to determine whether any personal student information had been leaked. Harvard did not acknowledge the fact that it had searched the e-mails until this week, seven months after the searches and only after the Boston Globe broke the story. In the days since Harvard’s surreptitious e-mail search became public, the University has fallen under enormous criticism from faculty, administrators and privacy advocates, all of whom feel blindsided and violated by the University's unannounced and undisclosed search of electronic data. But Harvard's approach highlights the interesting and complex issues surrounding the competing concerns companies and institutions have in both conducting thorough internal investigations while, simultaneously, protecting the privacy interests of their employees in the digital age. [...]

On Tuesday, March 5, the SEC’s insider trading case against billionaire Dallas Mavericks owner Mark Cuban took a new twist when a federal district court in Texas declined to end the 2008 civil enforcement action. The SEC alleges that Cuban engaged in insider trading when he sold 600,000 shares of Mamma.com Inc., a company in which he was the largest shareholder, after learning the company intended to offer a private investment in public equity (PIPE). Although the Court characterized the evidence against Cuban as “spotty,” “brief,” and “ambiguous,” it nevertheless concluded that the case should be allowed to proceed to trial because, according to the Court, certain understandings that Cuban would not disclose or trade based upon confidential information he received, may have been “implicit” in the communications between Cuban and company insiders. Unfortunately, the Court’s decision, a self-proclaimed “close” call, further muddies the waters of insider trading law. [...]

The law requires the SEC to bring enforcement actions seeking penalties against individuals who violate the securities laws within five years. The Supreme Court issued a unanimous ruling today that rejects the SEC’s argument that the five year clock begins to tick when they discover any alleged wrongdoing rather than the date on which the wrongdoing was committed. The author previously has suggested that the application of the SEC’s proposed "fraud discovery rule" by a government agency charged with investigation and enforcement would be counter-productive and effectively would eliminate the five year statute of limitations. To put this into context, [...]

The Fifth Amendment dictates that no person "shall be compelled in any criminal case to be a witness against himself." While most non-lawyers (and many lawyers) might assume that this simple edict means the government cannot force an individual to produce incriminatory documents, the law is far more muddled. And lawyers representing taxpayers with undisclosed offshore accounts are asking the United States Supreme Court to clarify the scope of the privilege against self-incrimination in this important context. [...]

The President's nomination of Mary Jo White to become Chairman of the SEC has generated reservations as well as praise. Naysayers wonder whether her years in private practice representing banks and bankers, including J.P. Morgan Chase, Kenneth Lewis of Bank of America andJohn Mack of Morgan Stanley, will make it impossible for her to “switch sides” and hold financial companies accountable for violations of the law. [...]

To state that the federal RICO statue has long since slipped the bounds of Congress’s original intent is hardly a novel observation. Although the U.S. Attorney’s Manual points out that "the purpose of the RICO statute is 'the elimination of the infiltration of organized crime and racketeering into legitimate organizations,'" the very same paragraph of the Manual proclaims that "the statute is sufficiently broad to encompass illegal activities relating to any enterprise affecting interstate or foreign commerce." The varied range of successful federal prosecutions premised on the RICO statute only proves the point, and numerous industries, including health care, have thus come within the statute's reach. [...]

The criminal justice system – particularly at sentencing – necessarily puts an unflattering light on those who have committed crimes. Prosecutors correctly inform the sentencing court of the bad deeds that resulted in the defendant’s conviction. Probation Officers also traditionally focus on the crime, and ignore (or give short shrift) to the defendant’s good deeds. [...]

President Obama's recent naming of Mary Jo White to be Chairman of the SEC has been greeted with praise from almost all quarters. But because she is best known for her highly successful tenure as a federal prosecutor, in response to the news of her current appointment, some have raised questions about, as the New York Times put it, her “command of Wall Street arcana” because “[r]egulatory chiefs are often market experts or academics.” [...]

2012 was a big year in the government's pursuit of white collar crime. 2013 – the five year anniversary of the financial crisis – brings new legislators, new regulators, and the possibility that a looming statute of limitations may compel authorities to act or forever abandon certain investigations that arose as a result of the economic crisis. Nevertheless, the landscape of white collar enforcement and financial regulation in the coming year is likely to look familiar. [...]

Early last month, Netflix disclosed the fact that it and its Chief Executive Officer, Reed Hastings, had received “Wells Notices” from the Staff of the Securities and Exchange Commission. Those Wells Notices threatened civil claims and cease and desist proceedings against the company and Mr. Hastings predicated on Mr. Hastings' June 2012 Twitter post touting the fact that Netflix users had streamed more than 1 billion hours of video that month. The SEC believes that Mr. Hastings' post potentially violated SEC Regulation Fair Disclosure (Regulation FD), which requires companies and their representatives to disclose material nonpublic information through the filing of a Form 8-K [...]

Over the past year, the National Labor Relations Board has issued a series of decisions that have significantly expanded the rights of non-supervisory employees, including non-unionized employees, to discuss information that many employers would consider confidential, and even post this confidential information on social media sites. This expansion includes an employee's right to discuss the content of investigative interviews, even when an employer directs an employee to keep the interview confidential. Although the NLRB has yet to directly opine on the subject, these decisions may have serious implications for the corporate attorney-client privilege. [...]

President Obama and Speaker Boehner’s discussions aimed at avoiding the fiscal cliff will almost certainly result in the government collecting more taxes: either by increasing the rates paid by upper-income Americans, by closing loopholes that favor the wealthy, or a combination of the two. Both sides of this debate invoke “fairness” in support of their position, but based on the dialogue (or lack thereof) in Washington, it appears that fairness, like beauty, is in the eye of the beholder. [...]

As sentences in insider trading cases have grown longer, insider trading has continued, apparently at historically high rates, with increasingly longer sentences being meted out. However, the longer sentences do not appear to deter insider trading. What does deter insider trading is the likelihood of getting caught. And the likelihood of getting caught is largely a function of Congressional funding of investigations and prosecutions of white collar crime. [...]

The Court of Appeals for the Second Circuit sent shockwaves through the pharmaceutical industry with its decision in United States v. Caronia. Alfred Caronia was a pharmaceutical sales representative convicted of a misdemeanor conspiracy to introduce a misbranded drug. When promoting Xyrem, a prescription narcolepsy drug, Caronia made comments to a doctor about various uses of the drug that had not been approved by the Food and Drug Administration. The government did not contest at trial the truthfulness of the comments to the doctor. Though it was, and is, lawful and common for doctors to prescribe medication "off-label" [...]

Whether referred to as electronic medical records, electronic health records, or electronic patient records, there is no doubting the tremendous potential benefits that the digitization of medical data holds for the health care industry and the public at large. EMRs can make a patient’s medical information readily accessible to a range of treating professionals, whether for routine visits or emergencies in which a patient cannot personally provide the critical information practitioners require. EMRs also permit doctors to preserve information [...]

The Department of Justice and Securities Exchange Commission loudly have trumpeted victories achieved in their renewed battle against insider trading and Wall Street malfeasance, repeatedly warning that there are more cases to come. Just yesterday, the United States Attorney for the Southern District of New York announced “the most lucrative insider trading scheme ever charged” against a former portfolio manager of the well-known hedge fund, SAC Capital Advisors. [...]

The Securities Exchange Commission’s Annual Report on the Dodd-Frank Whistleblower Program for Fiscal Year 2012 (the “Report”), released yesterday, reveals a number of things. The SEC has received a lot of tips, complaints, and referrals: A total of 3,001 in fiscal year 2012 with the lowest number (166) in November 2011 and the highest number (313) in May 2012. Those tips, complaints, and referrals came from [...]

For defense lawyers of a certain vintage, the early 2000s were a veritable golden age for accounting fraud cases. The marquee cases and investigations of the day – Enron, Computer Associates, Xerox, Adelphia, WorldCom, and Royal Ahold, among many others – were big, complex, and resource-intensive. They also were interesting and nuanced. And while many did result in guilty verdicts or onerous SEC settlements, [...]

The price of doing financial business in the United States has just gone up. The Department of Justice is taking a new tack in its efforts to track and prosecute money laundering that occurs through financial institutions. Rather than focusing on money laundering that results from substantive criminal violations [...]

April 15 is commonly viewed as “Tax Day” in the United States, but approximately 11 million taxpayers take advantage of the automatic extension that allows them to file their returns by October 15. While many taxpayers file for this six month extension because of unavoidable delays in obtaining information from third parties, for some taxpayers the decision to “go on extension” [...]

Under the “misappropriation theory” of insider trading, a person violates the securities laws by breaching a fiduciary duty to keep information confidential. But what happens when the entity to whom the fiduciary duty was owed concludes, after the fact, that the person at issue did not violate any fiduciary duty? Can the SEC still sue that person for insider trading? [...]

While there may be truth to the old saying that there are “lies, damn lies, and statistics,” the use of claims data to detect fraud in the health care industry has often been thought to be beyond reproach. Data mining techniques and investigations that stem from billing anomalies have been the bread and butter of the federal government’s Medicare Fraud Strike Force; prosecutions that have arisen from claims data have resulted in significant prison sentences for those convicted of defrauding public health care programs and private insurers; and press releases issued by Department of Justice officials trumpet the importance of claims data [...]

The recent announcement that the IRS granted a $104 million whistleblower award to convicted former UBS banker Bradley Birkenfeld generated front-page news coverage. Birkenfeld, the U.S.-bred former private banker who provided the government with detailed information regarding a program catering to U.S. taxpayers seeking to hide assets in Swiss accounts, may be correct in proclaiming himself  “the most famous whistleblower in the world.” As has been discussed in detail elsewhere, [...]

Over the past several years, it has become commonplace to hear the general public and pundits alike grouse about the lack of criminal prosecutions or regulatory enforcement proceedings arising out of the financial dislocations of 2007 and 2008. There are many reasonable responses to these complaints, and almost all of them – as representatives of the Department of Justice and SEC emphasized in recent media statements – start with the actual facts and evidence. Not surprisingly, [...]

On Monday, a jury convicted Doug Whitman of insider trading, extending the government’s unbeaten streak in its recent sweeping crackdown on insider trading, which has resulted in more than 75 convictions and guilty pleas. In this recent round of insider trading cases, brought by the United States Attorney’s Office for the Southern District of New York beginning in 2009, juries have rejected practically every defense proffered by defendants. In the case against hedge fund billionaire Raj Rajaratnam, the jury rejected [...]

As the “will he or won’t he” controversy continues to swirl around demands that Mitt Romney release multiple years of his federal income tax returns, some commentators have speculated that Governor Romney’s reluctance to produce those returns relates to his Swiss bank account. Some have gone so far as to suggest that Governor Romney may have failed to disclose that account on his original returns and [...]

Drawing conclusions as to precise reasons for the result of any particular trial is notoriously difficult and subjective, even for those who sat through the proceeding in the courtroom. But the coincidental timing of the verdicts in three high profile federal criminal trials – the acquittal of Roger Clemens, the effective acquittal of John Edwards [...]

In the more than 36 years I have practiced criminal defense law, I have had many occasions to represent people who, out of self-interest, chose to cooperate with law enforcement against others in order to avoid criminal prosecution or obtain leniency. Often, the choice to cooperate is a difficult one in which the client weighs [...]

Less than a week ago, in testimony before Congress, a representative of the United States Department of Health and Human Services (“HHS”) offered a strikingly negative assessment of the reliability of data that the government uses to detect fraud in the Medicaid program. As HHS Regional Inspector General Ann Maxwell stated to the House Committee [...]

This past weekend’s New York Times cover story describing the dramatic rise in identity thieves targeting the United States Treasury is old news to tax practitioners. In my January 25, 2012 post, I discussed the National Taxpayer Advocate’s lament regarding the IRS’s need for additional funding. While that post focused on the impact underfunding has [...]

A closely watched white collar criminal case poses an interesting question in a challenging context: just how egregious do a juror’s lies during jury selection have to be in order to warrant a new trial? United States v. Daugerdas is the third and final of a series of criminal prosecutions brought by federal prosecutors against partners [...]

Last week, the New York Times ran an editorial entitled “Justice and Open Files.” The gist of the editorial was that prosecutors should provide more and earlier pre-trial discovery to defense lawyers than they currently do in order to make the criminal justice system fairer and more reliable. Discovery in criminal cases traditionally includes all [...]

Most American taxpayers would not consider the IRS to be underfunded, let alone the IRS’s need for more resources to be the most serious problem they face. Given the growing “tax gap” (i.e., the amount of all unpaid tax liabilities), however, a persuasive case can be made that the government should invest more [...]

60 Minutes recently televised an interview with President Obama in which the President was asked to comment on the lack of criminal prosecutions relating to the financial crisis. In an earlier 60 Minutes piece, Lanny Breuer, the Assistant Attorney General for the Criminal Division of the Department of [...]