07.15.21 | Blog Posts

Digital Art May Be Next In The SEC’s Crosshairs

The Insider: White Collar Defense and Securities Enforcement

Like many other things, art and collectibles have gone digital. This year has seen explosive growth for NFTs, with NFT sales for 2021 already exceeding $2.5 billion. With the growing market for NFTs comes innovation, most notably the emergence of f-NFTs (“fractional non-fungible tokens”).  Where financial innovation goes, the SEC is bound to follow. F-NFTs are no exception. Although perhaps not intending to rain on the creative parade, in March 2021 comments, SEC Commissioner Hester M. Peirce sounded a note of caution, warning creators of f-NFTs to be careful that they are not creating securities that would be subject to regulation ... 

Related Lawyer: Robert J. Anello

07.14.21 | Articles, Books & Journals

Will CIC Services Open the Floodgates to Tax Challenges?

New York Law Journal

Under the Anti-Injunction Act, 26 U.S.C. § 7421(a), taxpayers are barred from bringing suits “for the purpose of restraining the assessment or collection of any tax.”  Accordingly, a taxpayer wishing to challenge a tax provision is generally required either to pay the tax and bring a suit seeking a refund in federal district court or dispute an assessment in Tax Court. In this article, “Will CIC Services Open the Floodgates to Tax Challenges,” we analyze the Supreme Court’s recent decision in CIC Services, LLC v. Internal Revenue Service, which unanimously rejected the government’s invocation of the Anti-Injunction Act to preclude a challenge to an IRS Notice requiring both taxpayers and their advisors to disclose information regarding micro-captive insurance transactions.

Related Lawyer: Jeremy H. Temkin

07.09.21 | Blog Posts

Companies Better Not Tread On Whistleblowers’ Right To Report

The Insider: White Collar Defense and Securities Enforcement

Guggenheim Securities, LLC recently was fined $208,912 by the Securities and Exchange Commission for its policies prohibiting employees from contacting regulators without prior approval from the company’s legal or compliance departments ...

Related Lawyer: Catherine M. Foti

07.08.21 | Articles, Books & Journals

Congress Requires DOJ To Report on Deferred Prosecution Agreements

New York Law Journal

In the wake of the financial crisis of 2008, federal white-collar criminal enforcement faced harsh criticism.  One of the chief targets of critics was the corporate Deferred Prosecution Agreement (DPA), under which a company is charged with criminal wrongdoing but not required to enter a guilty plea.  In this article, “Congress Requires DOJ to Report on Deferred Prosecution Agreements,” we discuss the practical and policy implications of a little noticed new provision which signals Congress’s heightened interest in the use of DPAs as an enforcement tool.

Related Lawyers: Elkan Abramowitz, Jonathan S. Sack

06.28.21 | Articles, Books & Journals

A Warning About ‘Upjohn’ Warnings: A Word of Caution for Individual Employees

New York Law Journal

When conducting an employee interview as part of an internal investigation, corporate counsel typically warns the employee that counsel represents the employer and not the employee—but what if corporate counsel does not provide such an Upjohn warning? In this article, we discuss the current state of the law as reflected in cases in which employees have challenged the use of statements made to corporate counsel, and observe that the remedy afforded to an employee who did not receive an Upjohn warning is often lacking.

Related Lawyers: Robert M. Radick, Rusty Feldman

06.23.21 | Newsletters

SEC Upends Classification of SPAC-Issued Stock Warrants

As explained elsewhere, the Special-Purpose Acquisition Company (“SPAC”) has been the subject of significant market activity, with the use of SPACs skyrocketing for several months before recently falling back to Earth. Despite the recent dip in SPAC use, according to data from Dealogic, U.S. SPACs had raised over $100 billion in 2021 alone, with the value of SPAC mergers surpassing $260 billion. In recent months, however, the number of SPACs going public has dropped precipitously, dropping from 116 listings in March down to just 18 in April and 19 in May.  

Related Lawyers: Robert J. Anello, Brian A. Jacobs, Anthony Sampson

06.16.21 | Blog Posts

Eleventh Circuit En Banc Ruling Fails To Resolve Key Issue Regarding Victims’ Right To Confer With Prosecutors

The Insider: White Collar Defense and Securities Enforcement

The Crime Victims’ Rights Act gives “crime victims” a right to “confer” with government attorneys and to be “reasonably heard” in the course of federal criminal prosecutions. The Act calls on federal courts to “ensure” that victims are “afforded” these rights. (See Abramowitz and Sack, “Victims’ Rights and White Collar Defense,” New York Law Journal (July 11, 2017)). An important procedural issue has arisen under the CVRA: when does a victim’s right to confer arise – before charges are filed in court, or only afterward...

Related Lawyer: Jonathan S. Sack

06.15.21 | Articles, Books & Journals

Limited-Scope Representations in Civil Cases

New York Law Journal

Traditionally, when an attorney appears on behalf of a client in a matter, federal courts have required that the attorney represent the client in all respects. In civil cases, however, courts have begun to recognize the value of limited-scope representations—i.e., representations when an attorney represents a client for only a portion of a case. In this article, we analyze Judge Jed S. Rakoff’s recent decision in Villar v. City of New York where he authorized a limited-scope representation to allow an attorney to appear solely to assist the pro se plaintiff in settlement negotiations.

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

06.09.21 | Articles, Books & Journals

Hey SIRI, Does the Fifth Amendment Protect My Passcode?

New York Law Journal

The application of the Fifth Amendment to law enforcement demands for cellphone passcodes has developed into a constitutional quagmire for the lower courts. With the Supreme Court resisting opportunities for specific guidance, right now the application of the right against self-incrimination to this overwhelmingly important modern technology depends heavily on the state or federal jurisdiction where a person is located. We explore the issue in this article: “Hey SIRI, Does the Fifth Amendment Protect My Passcode?”

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

05.26.21 | Blog Posts

Crypto Goes Corporate: Litigation Sure To Follow

The Insider: White Collar Defense and Securities Enforcement

Until recently, cryptocurrencies appeared to be far from the kind of institutionally sound investments that would be attractive to CFOs looking to diversify a corporate portfolio.  Once seen as gimmicks for unsophisticated retail investors, many of whom purchased cryptocurrencies based on obscure internet nomenclature, nonsensical children’s songs, or even notable hip-hop artists, few would expect the notoriously volatile electronic currencies to find their way into corporate treasuries.  The joke appears to be over, or perhaps is just beginning to turn stale.  As executives have sought to stash excess corporate cash into electronic currencies, the novelty assets are now an increasingly popular option to add to corporate ledgers.  With this expansion into uncharted territory, however, comes additional risks, from both private litigation and regulatory scrutiny.  Likewise, as with any novel asset, CFOs must balance their desire to invest creatively with the concerns of wary shareholders.  On these fronts, cryptocurrencies present potential pitfalls for those charged with charting companies through modern-day legal and regulatory shoals...

Related Lawyers: Robert J. Anello, Anthony Sampson

05.20.21 | Articles, Books & Journals

Non-Willful FBAR Penalties: A (Temporary) Reprieve for Taxpayers?

New York Law Journal

For over a dozen years, the IRS and the DOJ have targeted the use of offshore accounts to evade U.S. income taxes. Last month, in testimony before Congress, IRS Commissioner Charles P. Rettig made it clear that this crackdown on offshore tax evasion will continue unabated. While most of the attention in this area focuses on the risk of criminal prosecution and substantial financial penalties faced by taxpayers who willfully violate their FBAR obligations, some FBAR violations are due to negligence or a good faith mistake, as opposed to willful conduct. In this article, we discuss the Ninth Circuit’s recent decision in United States v. Boyd, in which a split panel rejected the IRS’s imposition of non-willful FBAR penalties on a per-account basis, and instead limited the IRS to imposing a single $10,000 penalty per year. This important decision provides a useful roadmap for practitioners representing taxpayers as additional Courts of Appeal weigh in on the scope of non-willful FBAR penalties in the coming months.

Related Lawyer: Jeremy H. Temkin

05.12.21 | Articles, Books & Journals

Non-Disclosure Agreements and Insider Trading: The Second Circuit Clarifies the Scope of Criminal Liability

New York Law Journal

The law of insider trading, while derived from Section 10(b) of the Securities Exchange Act of 1934, has largely been defined and shaped by federal court decisions. In this article, we discuss two recent Second Circuit decisions which further define the scope of liability for insider trading. In United States v. Chow and United States v. Kosinski, the Court held that breach of a contractual non-disclosure obligation is equivalent to a breach of fiduciary duty for purposes of insider trading liability. We consider how these decisions may reflect a tension with mail and wire fraud case law, which resists treating a contract breach as a basis for criminal liability.

Related Lawyers: Elkan Abramowitz, Jonathan S. Sack

04.29.21 | Blog Posts

President Biden To The IRS: Resources Are On The Way

The Insider: White Collar Defense and Securities Enforcement

While the IRS postponed “Tax Day” from April 15 to May 17 this year, tax enforcement has received substantial attention in recent weeks culminating in President Biden’s proposal to boost the IRS’s budget (previewed here and here). The desire to make a massive investment in the IRS is attributable to three interrelated issues: concerns regarding how to pay for the Biden administration’s domestic priorities; substantial increases in estimates of the so-called tax gap, which reflects the difference between the amount of taxes that are owed and taxes that are collected; and the perennial hope that revenue shortfalls can be filled through increased enforcement. While it is tempting to view increased enforcement as a panacea to cure budget shortfalls, it is important to be clear-eyed about just how much additional revenue can really be raised and how quickly the floodgates will open. [...]

Related Lawyers: Jeremy H. Temkin, Mary Vitale

04.20.21 | Articles, Books & Journals

Thorny Issues Raised by Third-Party Discovery in Arbitration

New York Law Journal

Third-party discovery can raise thorny legal issues in arbitration, particularly where the third parties and the arbitrator are located in different jurisdictions. In this article, we analyze Judge Jed S. Rakoff’s recent decision in Broumand v. Joseph, a subpoena enforcement proceeding where out-of-state third parties successfully resisted arbitral subpoenas. Broumand flags key issues for practitioners seeking third-party discovery in arbitration.

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

04.19.21 | Blog Posts

New Legislation May Portend Wave of Anti-Money Laundering Enforcement

The Insider: White Collar Defense and Securities Enforcement

January was not a quiet month in D.C. An outgoing president refused to concede the election, a mob stormed the Capitol, and a new President eventually was inaugurated. Amidst the chaos, one might be forgiven for overlooking what is likely to be the most consequential change in federal anti-money laundering laws in a generation: the Corporate Transparency Act. [...]

Related Lawyers: Robert J. Anello, Adam Bradlow

04.15.21 | Blog Posts

The Man On The Street And The Layperson With Common Sense

The Insider: White Collar Defense and Securities Enforcement

For many years, purportedly to preserve its renowned sense of collegiality, the Second Circuit heard fewer cases en banc than any other circuit court. On March 2, 2021, however, the Second Circuit issued an en banc opinion that could prove to be a harbinger of a new era featuring more en bancs and potentially less collegiality. In United States v. Scott, the en banc Second Circuit overturned a prior panel decision and held that New York first-degree manslaughter is a categorial crime of violence under the federal Armed Career Criminal Act (“ACCA”), which can trigger significant mandatory minimum sentences. Others have summarized the opinion elsewhere, and the holding itself is not particularly surprising. What is surprising, however, is the unusually harsh language that jumps out at a handful of moments in the majority and dissenting opinions. [...]

Related Lawyers: Brian A. Jacobs, Bronwyn Roantree

04.07.21 | Articles, Books & Journals

Congress Poised to End Use of Acquitted Conduct at Sentencing

New York Law Journal

For years, the defense bar has criticized courts’ ability to sentence defendants based on conduct for which a jury of their peers has acquitted them. As we explain in our latest article, although the Supreme Court has hesitated to review this arguably unconstitutional practice, Congress has taken up the torch with a new bipartisan bill that would ban it. The jury is still “out” on whether the bill will become law, but its introduction is a welcome sign of Congressional interest in preserving the jury’s crucial role as a bulwark of liberty.

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

03.18.21 | Articles, Books & Journals

Civil FBAR Penalty Litigation: No Reprieve for Taxpayers

New York Law Journal

In the dozen years since the UBS Deferred Prosecution Agreement, the government has aggressively pursued taxpayers who maintained undisclosed offshore accounts. While over 56,000 taxpayers have cured their historical non-compliance through Offshore Voluntary Disclosure Programs or Initiatives offered by the IRS, approximately 100 have faced criminal investigation and prosecution, while others were subject to IRS audits, which carry the risk of substantial civil penalties. In this article, I explore recent decisions by the United States Court of Appeals for the Third Circuit in Bedrosian v. United States and the Fourth Circuit in United States v. Horowitz and conclude that these and other cases reflect judicial antagonism to taxpayers’ attempting to avoid or limit civil penalties.

Related Lawyer: Jeremy H. Temkin

03.08.21 | Articles, Books & Journals

Where’s the Quid? DOJ Tests the Limits of Public Corruption Law

New York Law Journal

Proof of a “quid pro quo” is central to federal public corruption prosecutions. Recent high-profile cases have tended to focus on the “quo” part of the equation – the official act taken by a public official. Two recent federal prosecutions, in Ohio and Illinois, have drawn attention to the “quid” – the thing of value a public official receives in return for a corrupt official act. In this article, we consider what these two prosecutions may say about the outer limits of federal public corruption law.

Related Lawyers: Elkan Abramowitz, Jonathan S. Sack

03.08.21 | Blog Posts

Commissioner Rettig on the State of the IRS

The Insider: White Collar Defense and Securities Enforcement

In October 2018, after a long career representing taxpayers in civil and criminal tax controversies, Charles Rettig was sworn in as the 49th Commissioner of the Internal Revenue Service. Within 18 months of taking the helm, Commissioner Rettig faced a once in a lifetime pandemic that wreaked havoc on the entire country. [...]

Related Lawyer: Jeremy H. Temkin

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