09.17.20 | Articles, Books & Journals

IRS Summonses: No Reasonable Basis Required

New York Law Journal

The Internal Revenue Service has broad statutory authority to examine “any books, papers, records, or other data which may be relevant or material to [an] inquiry” and, as the Supreme Court has noted, “can investigate merely on suspicion that the law is being violated, or even just because it wants assurance that it is not.” The IRS exercises its authority by issuing summonses in the course of administrative investigations of taxpayers’ civil or criminal liability. In our latest article, we discuss Byers v. United States, a recent decision by the United States Court of Appeals for the Sixth Circuit that highlights the differences between the low threshold that courts apply in deciding motions to quash summonses addressed to third parties and the more rigorous standard applied in deciding whether to authorize the issuance of John Doe summonses through which the IRS obtains data on a class of otherwise unidentified persons. While the taxpayer in Byers was ultimately unsuccessful in quashing the summonses at issue, the case is a good reminder of the importance of counsel thinking creatively about potential objections that can be asserted on behalf of their clients. I hope you find this article of interest. Stay healthy and safe!

Related Lawyer: Jeremy H. Temkin

09.15.20 | Blog Posts

Zooming In On The Flaws Of Virtual Court

The Insider: White Collar Defense and Securities Enforcement

During the Covid-19 pandemic, with some notable exceptions, the bar has generally applauded the efforts of courts around the country to suspend in-person appearances and make court “virtual” to the extent possible. In video-courtrooms throughout the United States, courts now conduct status conferences, oral arguments, and even trials on video-conferencing platforms like Zoom. Some commentators have even called for court appearances to remain virtual post-pandemic. Although this new adjudicative medium may provide a certain ease of access for attorneys and litigants in many areas of the law, not to mention some cost savings, criminal defendants should remain wary. Previous studies in the bail and immigration contexts in particular suggest that virtual court can prejudice defendants the most. [...]

Related Lawyers: Brian A. Jacobs, Ryan McMenamin

09.08.20 | Blog Posts

Who Watches The Store? Drastic Decline Of Corporate Monitors Under Trump

The Insider: White Collar Defense and Securities Enforcement

The recent settlement by Herbalife Nutrition Ltd. with the Securities and Exchange Commission, the U.S. Department of Justice, and the U.S. Attorney’s Office for the Southern District of New York totaling over $123 million is the latest in a string of enforcement actions under the Trump Administration that identified violations of the Foreign Corrupt Practices Act but noticeably did not also impose an independent corporate compliance monitor. Herbalife neatly illustrates the recent paradigm shift inside the DOJ, as the stipulated facts and extensive nature of the illicit scheme outlined in the deferred prosecution agreement are of the caliber that in previous days likely would have led to the imposition of an independent monitor. The decision not to impose one here was said to be due in part to the company’s cooperation and remedial efforts by the time of resolution. Even if the company’s cooperation and remedial efforts contributed to the government’s decision not to insist on a monitor, that decision likely was also part of a concerted effort by the current administration to sideline the use of monitorships generally. [...]

Related Lawyers: Robert J. Anello, Thaddeus R. Kleckley

09.04.20 | Articles, Books & Journals

Recent Guidance Reinforces DOJ Approach to Corporate White-Collar Investigations

New York Law Journal

Over the summer, the Department of Justice issued two important documents for white-collar prosecutors and defense counsel. The first, in June, updated prior guidance on how federal prosecutors should analyze an organization’s compliance programs. The second, in July, updated the “Resource Guide to the US Foreign Corrupt Practices Act” originally issued in 2012. In this article, we discuss key takeaways from these documents and conclude that the two documents mark the continuity in recent years in DOJ’s policies toward corporate white-collar enforcement.

Related Lawyers: Elkan Abramowitz, Jonathan S. Sack

08.18.20 | Articles, Books & Journals

Discovery of Absent Class Members Prior to Class Certification

New York Law Journal

The named plaintiffs in a putative class action must offer affirmative evidence—beyond just the allegations in their complaint—sufficient to satisfy each of the elements of Federal Rule of Civil Procedure 23, and the defendants often will seek to rebut that evidence at the class certification stage. In our latest article, we analyze Southern District Judge Lewis J. Liman’s recent decision in Fishon v. Peloton Interactive, permitting the defendant to depose putative class members who are not named plaintiffs for purposes of developing its defense to class certification.

Related Lawyers: Edward M. Spiro, Christopher B. Harwood

08.13.20 | Blog Posts

IRS Takes Aim At High-Income Non-Filers. Will It Cut The ‘Tax Gap’?

The Insider: White Collar Defense and Securities Enforcement

Even before the deficit exploded as a result of the Covid-19 pandemic, the federal government was running annual deficits approaching a trillion dollars due to substantial increases in spending that were not offset by additional tax revenue. One perpetual cause of shortfalls in tax revenues is the so-called tax gap, which purports to represent the difference between taxes that are owed and taxes that are paid. Last fall, I wrote about a September 2019 report in which the IRS concluded that the tax gap for 2011 through 2013 was $441 billion per year. In that report, the IRS attributed $39 billion of that shortfall to non-filers, and the IRS is now targeting that source of incremental revenue by pursuing high-income non-filers. [...]

Related Lawyer: Jeremy H. Temkin

08.13.20 | Articles, Books & Journals

FIFA Decision Confirms Long Arm of Honest Services Fraud

New York Law Journal

The government’s lead role in the prosecution of corruption within FIFA, the organization governing international soccer, may be a paradigmatic example of U.S. law enforcement acting as the world’s policeman, pursuing wrongdoing with little apparent connection to the land of baseball, hot dogs and apple pie. In this article, we analyze the Second Circuit’s recent decision in United States v. Napout, and discuss how its holding illustrates that the FCPA is not the only card the government can play to prosecute foreign bribery, with little regard to whether such conduct violates foreign law. 

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

08.04.20 | Articles, Books & Journals

Lessons from the Insider Trading Prohibition Act After Its Likely Demise In the Senate

Business Crimes Bulletin

After a long and winding road, the House voted to pass insider trading reform on December 5, 2019 with 410 yeas against only 13 nays. But the bill quickly vanished in the Senate after it was referred to the Committee on Banking, Housing, and Urban Affairs. By all accounts, insider trading reform is likely a dead letter for the foreseeable future. In this article, we highlight the strengths and weaknesses of the ITPA and conclude that those involved in drafting the next insider trading bill would do well to keep the lessons of the failed ITPA in mind when a new chance for reform comes around.

Related Lawyer: Telemachus P. Kasulis

07.17.20 | Articles, Books & Journals

Public and Private Honest Services Fraud: Are They Diverging?

New York Law Journal

Since the Supreme Court’s decision in McDonnell v. United States, 136 S. Ct. 2355 (2016), the “official act” has been a hotly contested issue in public corruption prosecutions. McDonnell has led defendants to argue that the “official act” requirement applies to other crimes – not simply honest services fraud and Hobbs Act violations – and to private, not just public, corruption. In this article, we discuss cases that have addressed this question, focusing on a recent decision from Chief Judge Colleen McMahon in the Southern District of New York.

Related Lawyers: Elkan Abramowitz, Jonathan S. Sack

07.16.20 | Articles, Books & Journals

Should a Client File an Amended Tax Return?

New York Law Journal

From time to time, tax professionals learn that a client previously filed a false return, either as a result of an innocent mistake or due to fraud. While a taxpayer is under is no legal obligation to correct a previously filed return, there are often good reasons to do so. In this article, we discuss factors to be considered in advising a client as to whether to amend a return, including the applicable standards of conduct and alternatives available when the initial return fraudulently underreported income or overstated deductions. We also highlight the care that must be taken in deciding whether the benefits of amending returns warrant the risk of making admissions that could color any subsequent criminal prosecution and conclude by noting that, because Form 1040-X requires a taxpayer to swear under penalties of perjury that the amended return is complete and accurate, a client cannot correct one error on the originally filed return without curing all such errors.

Related Lawyer: Jeremy H. Temkin

06.30.20 | Blog Posts

DOJ’s Updated Guidance for Evaluating Corporate Compliance Programs

The Insider: White Collar Defense and Securities Enforcement

In early June, the Department of Justice Criminal Division released without fanfare updated guidance to be used by federal prosecutors in the evaluation of corporate compliance programs. The new guidance, “Evaluation of Corporate Compliance Programs” (“2020 Guidance”), which revised guidance issued in 2017 and 2019, retains much of the substance of the 2019 document, and according to Assistant Attorney General Brian Benczkowski, “reflects additions based on our own experience and important feedback from the business and compliance communities.” [...]

Related Lawyer: Jonathan S. Sack

06.23.20 | Blog Posts

Have Friday Nights replaced Saturday for 'Massacres'? Trump's Stealthy Attempts to Undermine Justice

The Insider: White Collar Defense and Securities Enforcement

Some still remember waking to the news following one fateful evening – October 20, 1973, when then-President Richard Nixon, embroiled in the Watergate scandal, ordered the U.S. Attorney General Elliot Richardson to fire the special prosecutor appointed to investigate the events. Richardson refused and resigned in protest. Nixon then went to the Deputy Attorney General, William Ruckelshaus, who also refused and resigned. Nixon, having lost both of his Attorneys General, ordered the Solicitor General of the United States, Robert Bork, to fire the special prosecutor. After being sworn in as acting Attorney General, Bork did just that. This historic news, which broke the next day, quickly was dubbed the “Saturday Night Massacre” – and President Nixon’s popularity would never recover. Within a year, he would resign. [...]

Related Lawyers: Robert J. Anello, Thaddeus R. Kleckley

06.16.20 | Articles, Books & Journals

The Limits of Withholding Expert-Generated Materials

New York Law Journal

In this article, we discuss Southern District Magistrate Judge Gabriel W. Gorenstein’s recent decision in Hernandez v. The Office of the Commissioner of Baseball, in which he rejected plaintiff’s claim that a memorandum that his expert had prepared in advance of the expert’s deposition—on his own accord and absent any instruction from counsel—qualified for protection as a draft report or an expert-attorney communication. Although the 2010 amendments to Rule 26 have given counsel the ability to withhold many expert-generated materials, Judge Gorenstein’s decision demonstrates that courts will insist that the withheld materials in fact qualify as draft reports or expert-attorney communications.

Related Lawyers: Christopher B. Harwood, Edward M. Spiro

06.10.20 | Articles, Books & Journals

Bridgegate - Open Questions After Supreme Court Narrows Fraud Statutes

New York Law Journal

Federal prosecutors often cannot resist the attractions of broadly worded “catch-all” fraud statutes like the one prohibiting wire fraud. From time to time, however, the Supreme Court has rebuffed efforts to further expand the boundaries of these crimes. In our latest article, we discuss the Court’s reversal of the “Bridgegate”-related convictions of two senior New Jersey officials, and the decision’s impact on other high-profile pending fraud prosecutions such as the NCAA basketball case. We conclude that although the Bridgegate decision did not definitively resolve the controversial issue whether what has become known as the “right to control” constitutes "property" under the federal fraud statutes, the opinion takes its place among Supreme Court decisions reining in prosecutors’ expansive readings of these laws.

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

06.03.20 | Blog Posts

Can Tax Amnesty Programs Cure State Budget Woes?

The Insider: White Collar Defense and Securities Enforcement

Beyond the horrific human toll, the COVID-19 pandemic has wreaked havoc on state finances and created massive budget gaps. The National Conference of State Legislatures reports that more than half of states are projecting revenue shortfalls as high as 30%. Because the vast majority of states have constitutionally or statutorily mandated balanced budget provisions, governors and state legislatures are searching for ways to fill their deficits, with the most likely source of additional revenues – increased tax rates – being especially unpalatable and unproductive during a severe economic downturn. [...]     

Related Lawyer: Jeremy H. Temkin

05.31.20 | Blog Posts

Quorum-tine: How COVID-19 Affects the Validity of Federal Grand Jury Document Subpoenas

The Insider: White Collar Defense and Securities Enforcement

Since COVID-19 began to spread across the United States, federal grand juries in districts around the country have stopped meeting, but prosecutors have continued to issue grand jury subpoenas, including in high-profile investigations. Without sitting grand juries, however, do prosecutors still retain the subpoena power? The answer is unclear, and anyone who receives a subpoena these days should take a close look at its validity. [...]

Related Lawyer: Brian A. Jacobs

05.28.20 | Articles, Books & Journals

Limiting Victims’ Rights: The Eleventh Circuit Reads the CVRA Narrowly

New York Law Journal

The life, and death, of Jeffrey Epstein has captured the attention of the legal community and broader public. The latest legal twist in the story is a decision by the Eleventh Circuit in In re Wild, 955 F.3d 1196 (11th Cir. 2020), which held that federal prosecutors did not have an obligation to inform, and consult with, Epstein’s victims regarding their decision not to prosecute Epstein for sex trafficking. In our latest article, we summarize the federal Crime Victims’ Rights Act and discuss the majority, concurring and dissenting opinions of the divided Eleventh Circuit.

Related Lawyers: Elkan Abramowitz, Jonathan S. Sack

05.26.20 | Blog Posts

How Senators May Have Avoided Insider Trading Charges

The Insider: White Collar Defense and Securities Enforcement

Yesterday, reporters revealed the Department of Justice had discontinued the investigations into coronavirus-related trading by Senators Kelly Loeffler, James Inhofe, and Dianne Feinstein (whose holdings are in a blind trust). The three Senators each had sold—and in Senator Loeffler’s case, bought—large amounts of stock the same day or soon after a confidential senatorial briefing on January 24 by the CDC’s Director and Dr. Anthony Fauci. Prosecutors’ apparent direct communication of this result to the senators is somewhat unusual; ordinary defendants rarely get the security of knowing so promptly that the government has declined a case. The news also comes on the heels of reports that Department of Justice recently took control over these investigations from the Southern District of New York, raising the specter that this quick decision indicates further politicization of DOJ’s mission, or at minimum indicates continued erosion of Main Justice’s traditional deference to local U.S. Attorneys’ Offices. [...]

Related Lawyers: Robert J. Anello, A. Dennis Dillon

05.21.20 | Articles, Books & Journals

Financial Considerations for Sentencing in Federal Tax Prosecutions

New York Law Journal

In addition to time in prison, defendants convicted of financial crimes in federal court face fines and restitution. While the focus of most sentencing hearings is the length of any period of incarceration to be imposed, defense counsel must also consider and address the substantial monetary penalties that may be applicable. In our latest article, we review the recent decision of the United States Court of Appeals for the Second Circuit in United States v. Adams, which addressed the availability and extent of restitution and fines in criminal tax cases, and conclude that while defense counsel frequently have to “pick their battles” at sentencing, they need to be mindful of their clients’ financial exposure. 

Related Lawyer: Jeremy H. Temkin

05.14.20 | Articles, Books & Journals

Employment Agreements Under (Dis)stress

New York Law Journal

Many businesses are facing the need to reduce costs as a result of the coronavirus and its economic impact. For many businesses, that means cutting salaries sharply. For an individual with an employment contract, a substantial cut in pay could implicate a number of rights under that contract. In this article, we consider the circumstances under which a cut in pay might amount to a de facto or constructive termination which gives rise to a claim for severance and other benefits under an employment agreement. We hope you find the article of interest.

Related Lawyers: Jonathan S. Sack, A. Dennis Dillon

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