Publications

09.20.18 | Articles

‘United States v. Sertich’: Affirmative Obligations of Taxpayers

New York Law Journal

Under the Internal Revenue Code, employers are responsible for accounting for and paying over to the IRS taxes that they withhold from their employees. In United States v. Sertich, the United States Court of Appeals for the Fifth Circuit held that an employer who willfully fails either to account for or to pay over such taxes commits a felony under 26 U.S.C. § 7202. In this article, we address Sertich’s holding that, while Section 7202 lists a series of acts using the conjunctive “and,” the statute imposes mandatory obligations, all of which must be affirmatively fulfilled. Sertich is also noteworthy in its discussion of the government’s heightened burden of proving willfulness in criminal tax cases.   

Related Lawyer: Jeremy H. Temkin

8/21/2018 | Articles

In 'Ambac,' Judge Attempts to Make Sense of New York's Economic Loss Rule

New York Law Journal

New York’s economic loss rule, which acts as a check on asserting tort claims for purely economic damages, has long confounded practitioners. The rule, intended to preserve the distinction between contract and tort law and to protect defendants from disproportionate damages, has its most straightforward application in products liability and construction cases, but has been applied in a broad array of cases. In this article, we discuss a recent SDNY decision by Judge William H. Pauley III in Ambac v. U.S. Bank, which arises in the context of an RMBS case, but provides an interesting and informative lens for viewing the interplay between contract and breach of fiduciary duty claims under New York law.

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

8/16/2018 | Articles

Life After 'Booker': Insights From Federal Sentencing Data

New York Law Journal

Following the Supreme Court’s landmark 2005 decision in United States v. Booker, which transformed the United States Sentencing Guidelines from mandatory to advisory, the question of how sentencing judges would exercise their restored discretion has been a matter of great interest. In this article, we highlight insights from recent sentencing statistics and conclude that the data support the continuation of welcome trends: district courts exercising their restored discretion to tailor sentences individually, with increased regional differences and courts in the Second Circuit taking a leading role in mitigating the excessive harshness of the fraud guidelines.

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

7/19/2018 | Articles

The Full-Payment Rule Strikes Hard: A Look at a Recent Decision

New York Law Journal

It has long been settled law that a taxpayer challenging a tax deficiency assessed by the Internal Revenue Service in federal district court is required to “pay first and litigate later.” While taxpayers can obtain pre-payment review of such deficiencies in Tax Court, a recent decision by the United States Court of Appeals for the Second Circuit in Larson v. United States applied the so-called “full-payment rule” to preclude any judicial review of a civil penalty in excess of $60 million. In this article, we discuss this decision, its application of the full-payment rule, and potential impact on taxpayers.  

Related Lawyer: Jeremy H. Temkin

07.09.18 | Articles

Back to the Future: Criminal Insider Trading Under Title 18

New York Law Journal

In recent decades, the government has brought charges for illegal insider trading primarily under the securities laws, chiefly Section 10 of the Securities Exchange Act and Rule 10b-5. In this article, we discuss the recent SDNY prosecution in United States v. Blaszczak et al., in which the government charged insider trading schemes in violation of not only Rule 10b-5 but also Section 1348 of Title 18. We discuss the implications of the outcome at trial: acquittals on the Rule 10b-5 charges but convictions on the Section 1348 charges – even though the charges related to the same securities trading. 

Related Lawyers: Elkan Abramowitz, Jonathan S. Sack

06.26.18 | Blog Posts

Justices Call Foul on SEC’s Home Court Advantage

The Insider: White Collar Defense and Securities Enforcement

After the passage of the Dodd-Frank Act in 2010, the Securities and Exchange Commission increasingly began to rely on internal administrative proceedings in lieu of filing federal court cases for securities fraud violations. This allowed the agency to avoid a sometimes rigorous federal court system and retain what some believed was an unnecessary “home court” advantage by trying cases before an administrative law judge appointed by SEC staff that litigated before it. The Supreme Court’s opinion issued last week in Lucia v. SEC – a case in which the government’s position flipped with the change of administrations – calls into question the validity of reliance by the SEC, and perhaps other federal agencies, on ALJs. [...]

Related Lawyer: Robert J. Anello

06.21.18 | Blog Posts

Getting to Zero: A Hidden Variable Behind Cooperation Rates?

The Insider: White Collar Defense and Securities Enforcement

The United States Sentencing Commission publishes massive sourcebooks of federal sentencing statistics each year, which are available online going back to 1996. The sourcebooks contain numerous charts showing aggregate sentencing trends in federal cases throughout the United States, as well as charts showing a more limited number of sentencing trends on a district-by-district basis. The recently-published 2017 sourcebook contains a surprising number: 223. That’s the number of defendants who were sentenced as cooperators (with a 5K1.1 letter) in the Southern District of New York in 2017. The number is surprising because over the past 15 years, sentencing laws and practices have changed in ways that, to some degree, have reduced defendants’ incentives to cooperate, and the national cooperation rate has steadily fallen (from about 10,000 defendants a year in 2002 (or 17.4% of defendants) to about 7,000 defendants a year in 2017 (or about 10.8% of defendants)). And yet, the number of cooperators in the S.D.N.Y. last year—223—is exactly the same as the number of cooperators sentenced in the S.D.N.Y. fifteen years earlier in 2002: 223. (The percentage of defendants cooperating in the S.D.N.Y. in 2002 and 2017 is also about the same – between 15-16% of all defendants.) Why has the S.D.N.Y. cooperation rate remained at this level when the national data shows a decrease in the frequency of cooperation? A closer look at this question highlights an important factor for courts and counsel to consider in connection with cooperator sentencings. [...]

Related Lawyer: Brian A. Jacobs

06.19.18 | Articles

The Standard for Extending Discovery Deadlines

New York Law Journal

Last month Magistrate Judge Katharine H. Parker issued an interesting decision in City of Almaty, Kazakhstan v. Ablyazov. In this article, we highlight Judge Parker’s decision, which discusses the impact of the proportionality requirements in the Federal Rules of Civil Procedure on extension of discovery deadlines and articulates a five-factor balancing test to apply when considering requests to extend discovery. 

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

06.08.18 | Articles

Sessions' Justice Department's Pragmatic Approach to Corporate Accountability

New York Law Journal

Many of the administration’s enforcement priorities may raise serious concerns for criminal defense lawyers and other champions of legal rights. In this article, however, we discuss the “anti-piling on” policy announced by Deputy Attorney General Rod Rosenstein, which is intended to reduce the perceived unfairness of repeated punishments for corporate misconduct. The policy bespeaks a welcome change in DOJ leadership’s attitude toward corporate accountability, but how the policy will be applied in individual cases remains to be seen.

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

06.05.18 | Articles

When Is a Bid or Offer a 'Spoof'?

Business Crimes Bulletin

Following the government’s first criminal conviction for spoofing in United States v. Coscia, questions remain about what makes a commodity futures trader’s conduct illegal instead of a legitimate trading strategy. In this article, we analyze the confusion faced by commodity futures traders in assessing whether their trading strategies constitute illegal spoofing, examine whether the Commodity Futures Trading Commission (CFTC) and Seventh Circuit have provided sufficient guidance on the distinction between spoofing and legitimate trading activity, and highlight why the Supreme Court’s recent decision to deny Coscia’s petition for writ of certiorari will have significant consequences for the many spoofing actions currently pending before the courts, as well as for commodity futures trading in general.

Related Lawyers: Jodi Misher Peikin, Brent M. Tunis

05.17.18 | Articles

Beyond 'Marinello': Other Newly Relevant Obstacles to Criminal Tax Obstruction Cases

New York Law Journal

While the United States Supreme Court’s recent decision in Marinello v. United States may rightly be viewed as a bulwark against prosecutorial overreaching in tax cases, in his recent decision in United States v. Doyle, Judge Andrew Carter of the United States District Court for the Southern District of New York addressed evidentiary issues arising out of the government’s pursuit of tax obstruction charges in light of Marinello. In this article, we discuss how Judge Carter’s decision in Doyle not only shines an interesting light on post-Marinello litigation under section 7212(a), but also presents a cautionary tale to lawyers who make factual representations on behalf of their clients.

Related Lawyer: Jeremy H. Temkin

05.14.18 | Articles

Insider Trading, or Trading by an Insider?

New York Law Journal

Employees of public companies routinely have confidential information about the businesses of their employers. Because that information is sometimes “material” under the securities laws, opportunities to engage in insider trading are not uncommon. In this article, we discuss recent civil and criminal charges brought against Jun Ying, a former Equifax IT staff member, for trading in Equifax stock after concluding, without being expressly told, that Equifax had suffered a major data breach. The charges raise interesting questions as to when information should be deemed material for purposes of insider trading enforcement.

Related Lawyers: Elkan Abramowitz, Jonathan S. Sack

05.07.18 | Articles

Marinello v. United States: SCOTUS Reins In the Tax Division

For The Defense

In Marinello v. United States, the Supreme Court rejected the government’s broad interpretation of the Omnibus Clause of the tax obstruction statute, 26 U.S.C. § 7212(a), thereby handing the white-collar defense bar an important victory. In this article, we discuss Marinello and conclude that it continues the Court’s efforts to cabin broadly-worded criminal statutes. By narrowing the scope of § 7212(a), Marinello provides defense lawyers with yet another tool to represent their clients and to push back against seemingly unbounded prosecutorial discretion.

Related Lawyers: Jeremy H. Temkin, Miriam L. Glaser

04.18.18 | Blog Posts

The Stormy Raid of Cohen's Office Strengthens the Attorney-Client Privilege

The Insider: White Collar Defense and Securities Enforcement

Despite tweets proclaiming the death of the attorney-client privilege, the government’s recent seizure of items from Michael Cohen, Trump’s personal attorney, actually serves to preserve and engender respect for the attorney-client privilege by demonstrating the limits of the privilege. The privilege is just that – a privilege, not a right – and the highly-publicized search of Cohen’s office, home, and hotel room reassures the public that an individual cannot hide behind the attorney-client privilege simply because they place an “Esq.” after their name. Even assuming the privilege applies in this case – which given recent revelations of the nature of the lawyer’s activity is debatable – the crime-fraud exception may well “trump” the privilege. That exception, which applies when a client or the lawyer seeks to use the attorney’s services or advice to commit wrongdoing, prevents the cloak of privilege from concealing communications engaged in for fraudulent or illegal purposes. Contrary to recent partisan declarations, this limit on the privilege, in addition to the procedural and legal safeguards that the government must navigate to seize materials from an attorney, insures public trust in the role of lawyers and the appropriate role of the privilege. If lawyers expect to continue to hold a trusted role in society, the proper contours of the important privilege with which they are entrusted needs to be understood and guarded. The crime-fraud exception prevents the exploitation of the attorney-client privilege, which would undermine the public’s respect for the privilege. [...]

Related Lawyer: Robert J. Anello

04.17.18 | Articles

Enforcement of Settlement Agreements – A Case in Point

New York Law Journal

Entering into a settlement agreement does not always mark the end of a litigation. A host of issues may arise in enforcing settlement agreements, as the recent decision in United States v. Prevezon Holdings makes clear. In this article, we discuss Southern District Judge William H. Pauley III’s detailed analysis in Prevezon, which provides valuable insights for counsel negotiating and seeking to enforce settlement agreements.

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

04.03.18 | Articles

My Lawyer Said It Was OK: 'Scully' and Defending Based on Reliance on Counsel

New York Law Journal

Good faith reliance on counsel can be a critical line of defense in white-collar prosecutions, but defendants seeking to assert it often face skepticism and procedural hurdles borne of an unduly narrow view of the doctrine. One example is the district court’s ruling in United States v. Scully, and the Second Circuit’s recent opinion reversing that ruling offers useful guidance. In this article, we discuss Scully and other relevant decisions, including case law supporting the so-called “involvement of counsel” defense.

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

03.29.18 | Blog Posts

Where Do Search Warrants Come From?

The Insider: White Collar Defense and Securities Enforcement

On February 27, 2018, the Supreme Court heard oral argument in United States v. Microsoft Corporation. The central issue in the case – which is now likely moot in light of the passage of the CLOUD Act last week – is whether a United States-based provider of email services must disclose, pursuant to a warrant issued under the Stored Communications Act (“SCA”), digital material stored on servers abroad. Beyond this issue, however, the oral argument in Microsoft also touched on a statutory ambiguity relating to data stored here in the United States, the resolution of which could have important implications for federal criminal investigations. […]

Related Lawyer: Brian A. Jacobs

03.22.18 | Blog Posts

Different Results for Citigroup and Wells Fargo Derivative Claims

The Insider: White Collar Defense and Securities Enforcement

Following a spate of regulatory investigations and settlements, a shareholder derivative action was filed against Citigroup’s directors and officers, claiming that they had failed to meet their obligation to “oversee company employees’ compliance with law” under the landmark In re Caremark International Inc. Derivative Litigation decision. At first blush, the case deals with issues very similar to those considered in a separate shareholder derivative suit against Wells Fargo & Company, in which a federal district court in May and October 2017 denied motions to dismiss and permitted discovery to proceed – the subject of a separate blog post. However, in the Citigroup case (Oklahoma Firefighters Pension & Retirement System v. Corbat et al.), the Delaware Chancery Court granted the defendants’ motion to dismiss and then denied a plaintiff motion to reopen the case. It is instructive to consider the Chancery Court’s analysis in the Citigroup case and to contrast the allegations there with the issues in the Wells Fargo case. […]

Related Lawyer: Jonathan S. Sack

03.21.18 | Articles

'Menendez' Decision Clarifies Issues in Public Corruption Cases

New York Law Journal

Attention has shifted in recent years from prosecutions of insider trading to high-profile charges of public corruption. In this article, we discuss Senior District Judge William H. Walls’s dismissal of campaign finance related counts in United States v. Menendez, followed by dismissal of the remaining counts at the government’s request. Judge Walls’s thoughtful analysis provides useful guidance to prosecutors and defense counsel in future public corruption cases.

Related Lawyers: Elkan Abramowitz, Jonathan S. Sack

03.15.18 | Articles

Deterrence in an Age of Dwindling Enforcement

New York Law Journal

The Tax Division of the Department of Justice has long sought to maximize the impact of criminal prosecutions by focusing its limited resources on a small number of high-profile offenders in the hopes that publicity regarding such prosecutions will lead others to comply with their tax obligations. As a logical extension of this principle, it is commonly accepted that general deterrence is a significant consideration in sentencing convicted tax offenders. In this article, we discuss how the recent reductions in the Internal Revenue Service’s enforcement budget has negatively affected the number of tax investigations and prosecutions, heightening questions regarding the fairness of ratcheting sentences of convicted tax offenders even higher to offset the loss of deterrence resulting from reduced enforcement activity.

Related Lawyer: Jeremy H. Temkin


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