Publications

02.27.15 | Blog Posts

A Small Barracuda in a Big Pond: New York’s Department of Financial Services

The Insider: White Collar Defense and Securities Enforcement

World-wide financial institutions take notice – New York has a new regulator on the scene. Newsweek describes him as “body-slamming” one of the world’s largest banks, “the man the banks fear most.” The Wall Street Journal has labeled him “one of Wall Street’s most dogged pursuers.” American Banker characterizes him as “pushing the envelope” of bank regulation. In three years on the job, this regulator and the new agency he rules have extracted more than $3 billion in fines from global banks. In a speech he delivered at Columbia University this Wednesday, the regulator made clear that, in all likelihood, these headline-grabbing events are just a sign of things to come. [...]

Related Lawyers: Robert J. Anello

02.18.15 | Articles

Recurring Challenges to Privilege and Work Product Doctrine

New York Law Journal

In this article, we discuss three recent decisions by judges of the U.S. District Court for the Southern District of New York which expose some common misconceptions regarding the attorney-client privilege and work product doctrine and offer some valuable guidance for those litigating privilege and work product disputes.

Related Lawyers: Judith L. Mogul, Edward M. Spiro

02.12.15 | Blog Posts

The Surprise Cost of Whistleblowing

The Insider: White Collar Defense and Securities Enforcement

On February 3, 2015, in United States v. Huron Consulting Group, Inc., U.S. District Judge Jed S. Rakoff, took the unusual – but not unprecedented – step of ordering a False Claims Act (“FCA”) relator to pay thousands of dollars of costs to the prevailing defendants Huron Consulting Group, Inc. and Empire Health Choice Assurance, Inc. This opinion highlights the financial dangers faced by individuals who try to blow the whistle on potentially illegal behavior. [...]

Related Lawyers: Catherine M. Foti

02.04.15 | Articles

Waning Influence of Sentencing Guidelines in White-Collar Cases

New York Law Journal

The restoration of sentencing judges’ discretion in the post-Booker era has rendered the federal sentencing guidelines—widely perceived as unduly punitive—less important in the white-collar context. Statistics confirm that courts increasingly have chosen to impose non-guideline sentences and, in some recent high profile cases, even the prosecution has proposed sentences below the guideline range. The U.S. Sentencing Commission recently has responded to complaints about the guidelines’ application by proposing a series of amendments to the guidelines governing economic crimes. We discuss all of this in our latest New York Law Journal article.

Related Lawyers: Robert J. Anello, Richard F. Albert

01.29.15 | Articles

Internal Revenue Service Budget Cuts Spell Trouble

New York Law Journal

According to its mission statement, the Internal Revenue Service’s goal is “to provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.” Over the past few years, the IRS has had to fulfill this mission with shrinking resources, and National Taxpayer Advocate Nina E. Olson has noted that “the budget environment of the last five years has brought about a devastating erosion of taxpayer service, harming taxpayers individually and collectively.” In this article, we discuss concerns that the additional cuts implemented as part of the recent budget deal will undermine both revenue collection and the fair enforcement of the Internal Revenue Code. 

Related Lawyers: Jeremy H. Temkin

01.09.15 | Articles

Implications of Second Circuit Reversal of Insider Trading Convictions

New York Law Journal

The Department of Justice has brought few high-profile criminal cases against individuals arising from the 2008-2009 financial crisis. The department’s cases have tended to charge large financial institutions, not senior officials. A number of the high-profile cases arising from the collapse of mortgage-backed securities have resulted in civil, not criminal, charges and settlements. And the typical sanction has been the payment of substantial (often multi-billion dollar) sums to the government, not imprisonment.

Related Lawyers: Elkan Abramowitz, Jonathan S. Sack

01.08.15 | Blog Posts

The Year in White-Collar Crime: A Look Back Helps Us See Ahead

The Insider: White Collar Defense and Securities Enforcement

The Justice Department’s white-collar agenda in 2014 was marked by skyrocketing corporate settlements and continued reliance on deferred and non-prosecution agreements, coupled with compliance monitors. Several significant decisions with long-term implications for white-collar cases also were issued by federal courts in 2014. A look at the Justice Department’s approach and these decisions offer a clue as to what to expect in white-collar cases in 2015. [...]

Related Lawyers: Robert J. Anello

12.18.14 | Articles

Practical Observations by Judges on the Scope of Discovery

New York Law Journal

In the last several months, judges of the U.S. District Court for the Southern District of New York have issued a number of rulings on discovery disputes that offer both pragmatic resolution of the dispute at hand and broader, instructive commentary on the scope of permissible discovery. These rulings make clear that Southern District judges are increasingly losing patience with discovery for discovery’s sake. This article discusses several of those opinions.

Related Lawyers: Edward M. Spiro, Judith L. Mogul

12.17.14 | Blog Posts

The Barko v. KBR Privilege Battle Continues

The Insider: White Collar Defense and Securities Enforcement

A high-profile qui tam suit against Kellogg, Brown & Root and Halliburton continues to generate important case law relating to the scope of attorney-client privilege and work product protection given to internal investigations.

In the lawsuit, arising out of alleged false claims to the government under Iraq reconstruction-related contracts, federal judge James S. Gwin in Washington, D.C. held, in March 2014, that internal investigation materials were not protected by the attorney-client privilege because the investigation had been conducted as a matter of regular company policy by internal compliance personnel and as required by federal law. (I wrote about Judge Gwin’s ruling in a blog entitled “When Is An Internal Investigation Not Privileged.”) The defendants appealed the ruling, which led to a unanimous decision three months later in In Re: Kellogg Brown & Root, Inc., No. 14-5055 (D.C. Cir. June 27, 2014), in which the U.S. Court of Appeals for the D.C. Circuit vacated the district court decision, holding that an internal investigation is privileged so long as “one of the significant purposes” of the investigation is to obtain or provide legal advice. The Court of Appeals remanded the case to the District Court for further proceedings. (I discussed the D.C. Circuit’s opinion in “D.C. Circuit Upholds Claim of Corporate Attorney-Client Privilege.”) That ruling is now subject to a petition for certiorari to the Supreme Court. [...]

Related Lawyers: Jonathan S. Sack

12.03.14 | Articles

Missing Fish, Obstruction Statute and Prosecutorial Discretion

New York Law Journal

White-collar criminal practitioners spend much of their time arguing about how prosecutors should exercise their discretion in making charging decisions, often against the backdrop of broad and uncertain criminal statutes. When the Supreme Court grapples with the same issue, however, significant new criminal law doctrine may emerge. That potential became apparent most recently during the oral argument of Yates v. United States, the peculiar case of a fisherman prosecuted for obstruction of justice under the Sarbanes-Oxley Act for throwing undersized fish back into the sea. In this article, we discuss this case, the critical comments the justices directed toward the government regarding its exercise of prosecutorial discretion, and potential judicial remedies.

Related Lawyers: Richard F. Albert, Robert J. Anello

12.01.14 | Blog Posts

Prosecuting Individuals for Financial Crimes - Some Questionable Recent Ideas

The Insider: White Collar Defense and Securities Enforcement

The government must be very sensitive about all the criticism it has been getting, from Congress, some judges and others, for not prosecuting more individuals for financial crimes. Perhaps in response, senior government officials have given a series of speeches since September declaring the commitment of the Justice Department to such prosecutions.

White-collar defense lawyers know that individuals are investigated and prosecuted all the time, so in some ways the recent speeches don’t tell us very much. But the speeches introduce a few ideas that raise concern that, perhaps, the government’s sensitivity is generating some questionable proposals. [...]

Related Lawyers: Jonathan S. Sack

11.21.14 | Articles

Redefined Role of Profit in Economic Substance Doctrine

New York Law Journal

Learned Hand famously opined that “[a]ny one may so arrange his affairs that his taxes shall be as low as possible.” There is, however, a line between legitimate tax avoidance and illegal tax evasion and, in drawing that line, the IRS has long challenged attempts by taxpayers to reduce their tax liability by executing transactions that lack economic substance. In this article, I discuss the increasing focus of the economic substance doctrine on the proportionality between the potential profits to be derived from a transaction and the corresponding tax benefits, as well as the effect this changing focus will have on future cases.

Related Lawyers: Jeremy H. Temkin

11.10.14 | Blog Posts

Social Media for Attorneys: Good Business or Ethical Minefield?

The Insider: White Collar Defense and Securities Enforcement

Social media websites allow anyone — or more accurately everyone — to communicate and share ideas and opinions with a wide-ranging audience. Websites like Facebook, Twitter, YouTube and LinkedIn provide an extraordinary means for professional and personal networking and self-promotion, and for researching personal and professional contacts. In previous blog posts, I addressed ethical perils for lawyers who access social media websites to research potential jurors and for lawyers who advise clients concerning the propriety of removing potentially incriminating and discoverable material from social media websites. This post addresses yet another category of ethical pitfalls for lawyers who use social media: The risk of violating the ethical rules that govern attorney advertising by using social media for professional self-promotion. [...]

Related Lawyers: Catherine M. Foti

11.04.14 | Articles

Corporations and Risks of Mandatory Disclosures to the Government

New York Law Journal

One of the axioms of white-collar practice today is that companies, especially public companies, do not litigate against criminal and civil enforcement authorities, except in rare circumstances. In this article, we discuss two trends that may make the already constrained position of companies even more difficult in terms of increased exposure to liability and reduced opportunities to mitigate the terms of settlement.

Related Lawyers: Elkan Abramowitz, Jonathan S. Sack

10.23.14 | Blog Posts

Eyes Wide Shut: Recent Second Circuit Concurrence Continues Debate on Conscious Avoidance Doctrine

The Insider: White Collar Defense and Securities Enforcement

The legal doctrine of “conscious avoidance,” which provides that a defendant who deliberately shields himself from clear evidence of critical facts is considered equally liable as one who has actual knowledge, continues to provoke debate. The doctrine, also referred to as “willful blindness,” can be critical in complex white-collar criminal cases, where the defendant’s awareness of others’ wrongful conduct is commonly a central issue. We recently addressed the doctrine in an article following the March 2014 conviction of five former employees of Bernard Madoff after a trial that turned almost entirely on the question whether the defendants had knowledge of Madoff’s illegal Ponzi scheme. More recently, Second Circuit Judge Pierre Leval issued a concurring opinion in United States v. Fofanah that provides a detailed and thought-provoking analysis of Second Circuit law regarding when it is appropriate to give a conscious avoidance charge to a jury. The opinion provides no comfort to those concerned that the doctrine is overused and threatens to permit juries to convict on a less culpable mental state than required by statute. [...]

Related Lawyers: Richard F. Albert

10.21.14 | Articles

Recent Rule 45 Developments: Notice and Geographic Limits

New York Law Journal

In this article, we discuss recent SDNY cases addressing the 2013 amendments to Federal Rule of Civil Procedure 45. These amendments were designed to simplify and clarify the scope and mechanics of pre-trial and trial subpoenas. 

Related Lawyers: Judith L. Mogul, Edward M. Spiro

10.15.14 | Blog Posts

Corporate State of Mind in Securities Cases: The Sixth Circuit Blazes a New Trail

The Insider: White Collar Defense and Securities Enforcement

Analysis of the corporate mens rea is, by definition, contrived and one with which federal courts have struggled. Unlike instances where an individual is charged with securities fraud, determining the “thinking” or “knowledge” of an artificial entity, sometimes comprised of thousands of disparate employees throughout the world, is a difficult theoretical undertaking. Until last Friday, corporate scienter generally was assessed by reference to one of two established approaches: traditional respondeat superior, where the company stands in the shoes of the relevant actors; or collective knowledge, where a company is charged with the knowledge of any of its agents, even those who may not have committed the offending conduct. [...]

Related Lawyers: Robert J. Anello

10.07.14 | Articles

SEC’s Possible Reality: All Enforcement Actions Filed Within Five Years

New York Law Journal

Enforcement actions seeking penalties long have been subject to the five-year statute of limitations set forth in 28 U.S.C. §2462. For years, the SEC has sought not to be tied down by a strict five-year limitation by arguing that the clock does not start to run until the alleged fraud is discovered by the agency—a position flatly rejected by the U.S. Supreme Court last year. The last arrow in the SEC’s quiver to avoid the five-year statute has been its argument that when it seeks so-called “equitable” remedies, like injunctions and disgorgement, the limitations period contained in Section 2462 is inapplicable. This final effort to avoid statutory time constraints also may be doomed. SEC v. Graham, a recent decision from the Southern District of Florida, if upheld, would require the SEC timely to investigate and file all enforcement actions regardless of the remedy sought. In this article, we discuss this case and other recent cases, and evaluate the role a change in §2462 would play in future cases.

Related Lawyers: Robert J. Anello, Richard F. Albert

10.01.14 | Blog Posts

Amid the Sunshine, Controversy Lingers: The Release of CMS's "Open Payments" System

The Insider: White Collar Defense and Securities Enforcement

In a March 2013 post on the Insider blog, we noted the issuance by the Centers for Medicare and Medicaid Services (CMS) of a long-awaited final rule mandating the collection of information regarding payments that drug and device manufacturers have made to physicians and teaching hospitals. As we noted in the post, the rule was promulgated pursuant to the “Physician Payments Sunshine” provisions that were part of the Affordable Care Act, and the goal of the rule was to provide transparency into the financial relationships that exist between physicians and industry. In a preliminary effort to assess the potential utility of the payment data that was to be released, our post reviewed the “Dollars for Docs” database that the investigative entity ProPublica maintains on its website, and found that while the ProPublica database provides extensive and noteworthy information, it perhaps raises more questions than it answers about the monetary relationships between medical professionals on the one hand, and manufacturers on the other. [...]

Related Lawyers: Robert M. Radick

09/19/14 | Articles

IRS Summons Enforcement After 'United States v. Clarke'

New York Law Journal

IRS agents conducting audits have the power to issue summonses requiring taxpayers and third parties to produce documents and testify under oath. In a summons enforcement action, the recipient of a summons can avoid providing the requested evidence by showing that the summons was issued for an improper purpose. This past term, the U.S. Supreme Court decided what showing a party must make to obtain an evidentiary hearing as to the propriety of a summons, concluding that the party must “plausibly rais[e] an inference of bad faith.” This article discusses the Court’s decision in United States v. Clarke and addresses the potentially significant questions that remain open.

Related Lawyers: Jeremy H. Temkin


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