Publications

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

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

03.08.18 | Blog Posts

Prosecuting Corporations: NOT High on Administration’s To Do List

The Insider: White Collar Defense and Securities Enforcement

After a year of conjecture about the Trump administration’s approach to white-collar crime, the Justice Department has reinforced speculation of a relatively hands-off approach to corporate prosecutions. While asserting that it will hold individuals accountable for corporate criminal behavior, Justice Department leaders have stated that they will not “employ the hammer of criminal enforcement to extract unfair settlements” from corporate entities. In pursuit of that strategy, at the end of last year, federal prosecutors announced an initiative for leniency in Foreign Corrupt Practices Act cases where a corporation voluntarily discloses conduct in violation of the FCPA and cooperates with the government. Recently, the government displayed an intention to apply this policy outside of the FCPA context as well. [...]

Related Lawyer: Robert J. Anello

02.23.18 | Blog Posts

Dodd-Frank's Anti-Retaliation Protections Apply Only to Whistleblowers Who Report to the SEC

The Insider: White Collar Defense and Securities Enforcement

In Digital Realty Trust, Inc. v. Somers, a 9-0 opinion by Justice Ginsburg issued February 21, 2018, the Supreme Court held that the anti-retaliation provisions of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act do not extend to employees who have reported internally but extend only to employees who have reported suspected securities law violations to the Securities and Exchange Commission. The Supreme Court's decision reversed the Ninth Circuit, and resolved a longtime circuit split. The Fifth Circuit has held that employees must provide information to the SEC while the Ninth and Second Circuits held that reporting internally is enough for employees to qualify for Dodd-Frank Act's anti-retaliation protections. [...]

Related Lawyer: Catherine M. Foti

02.20.18 | Blog Posts

Something Rotten in Denmark? The International Criminalization of Drug Advertising

The Insider: White Collar Defense and Securities Enforcement

Sometimes, when it comes to drafting posts for The Insider, a little digging can turn up remarkable results. This week’s post demonstrates the point, as it originates from short news stories that appeared recently in two journals that may not be so well known: Medwatch, based in Copenhagen, and Stat, headquartered in Boston. Both sites cover the pharmaceutical and health care industries, and both deserve considerable appreciation, because what they have uncovered is alarming and even disturbing: in the pharmaceutical industry, despite a recent increase in legal protections, you can still go to prison for posting truthful statements on social media about government-approved prescription medications. [...]

Related Lawyer: Robert M. Radick

01.10.18 | Blog Posts

Bitcoin Buyers Beware: The IRS Has Your Number

The Insider: White Collar Defense and Securities Enforcement

As the number and variety of cryptocurrencies on the market continue to grow, so does the scrutiny by government regulators. As noted in my prior post, the Federal Bureau of Investigation, Securities and Exchange Commission, and the Commodities Futures Trading Commission have developed units focused on cyber-threats, as have numerous foreign governments. Most recently, the Internal Revenue Service has joined the mix by investigating the ways in which taxpayers do – and more importantly, do not – report virtual currency transactions. Now Congress has gotten in on the action by amending the tax code to close a loophole that allowed cryptocurrency owners to exchange digital currencies without reporting the transactions on their tax returns. 2018 is likely to be a year of uncertainty for owners of cryptocurrencies, which may account in part for the double digit decline in the value of Bitcoins at the end of December. [...]

Related Lawyer: Robert J. Anello

12.20.17 | Blog Posts

An Unexpected Critique of the Grand Jury Subpoena Power

The Insider: White Collar Defense and Securities Enforcement

On November 29, 2017, the Supreme Court heard oral argument in Carpenter v. United States, which presents the question of whether the federal government must, under the Fourth Amendment, obtain a warrant before getting historical cell-site location records from cell phone service providers. Broadly speaking, the government argued that it did not need to obtain a warrant because individuals do not have a reasonable expectation of privacy in business records held by third parties (in this case, the cell service providers). Carpenter countered that the warrantless collection of data revealing people’s long-term movements so violates reasonable expectations of privacy that a warrant is required, notwithstanding that the data is possessed by third parties. [...]

Related Lawyer: Brian A. Jacobs

11.30.17 | Blog Posts

Wells Fargo Litigation Highlights Directors’ Obligation to Establish and Monitor Corporate Compliance

The Insider: White Collar Defense and Securities Enforcement

Fallout from the unauthorized opening of bank and credit card accounts at Wells Fargo has been immense. Thousands of employees, including the CEO, have lost their jobs, and several long-serving directors were forced to resign. The bank has thus far paid about $185 million in penalties and reportedly has reached and received preliminary approval for a proposed $142 million class-action settlement to compensate customers for accounts opened without their permission. Wells Fargo still faces ongoing investigations by the Department of Justice and Securities and Exchange Commission. [...]

Related Lawyer: Jonathan S. Sack

11.01.17 | Blog Posts

Let the Cyber Wars Begin: Federal Regulators Prepare Their Arsenal

The Insider: White Collar Defense and Securities Enforcement

Federal agencies have begun arming themselves for war against cybercrime. By the nanosecond, the ubiquitous Internet and related technology offer endless opportunities for wrongdoing. Notorious Russian hackers meddled in companies that manufactured and sold voter registration software and voting equipment to influence last year’s Presidential election. In September 2017, credit reporting company Equifax announced that sensitive financial data of over 143 million consumers had been hacked, exposing customers to identity theft. A Brooklyn man has been sued for operating a bitcoin Ponzi scheme to acquire $600,000 in unregistered fraudulent investments. The share prices of publicly traded companies have been manipulated through fake news shared and tweeted on social media. The speed of online innovation and the increase of online engagement makes it increasingly difficult to keep track of the latest digital developments, let alone any potential misuse of such technology. The annual cost of global cybercrime is predicted to double from $3 trillion in 2015 to $6 trillion in 2021. In response, federal regulators have started new units and initiatives to combat misconduct in the cyber world. [...]

Related Lawyer: Robert J. Anello

10.23.17 | Blog Posts

The Role of Publicity in Sentencing

The Insider: White Collar Defense and Securities Enforcement

Should defendants in cases that attract press coverage be given longer sentences than defendants in cases that pass unnoticed? The knee jerk response of anyone familiar with the basic principle of equality under the law would likely be a resounding “no.” And yet, as some recent cases have starkly demonstrated, courts can and do consider a defendant’s level of notoriety as a factor weighing in favor of harsher punishment. [...]

Related Lawyer: Brian A. Jacobs

10.19.17 | Blog Posts

Using Techniques Honed Prosecuting Gangs to Investigate Wrongdoing in the Commodities Markets

The Insider: White Collar Defense and Securities Enforcement

At New York University last month, James McDonald, Director of Enforcement of the Commodity Futures Trading Commission (“CFTC”), announced the CFTC’s publication of an “Updated Advisory on Self Reporting and Cooperation” (“Updated Advisory”). The Updated Advisory supplemented two January 2017 Enforcement Advisories, by “providing additional information regarding voluntary disclosures and the substantial credit companies and individuals can expect from the [CFTC] if they voluntarily disclose misconduct and fully cooperate with the [CFTC’s] investigation.” The January 2017 Advisories, entitled “Cooperation Factors in Enforcement Division Sanction Recommendations for Companies” and “Cooperation Factors in Sanction Recommendations for Individuals” had detailed factors that the Enforcement Division may consider to assess the quality and value of cooperation. But, they offered little insight about precisely what is required to obtain mitigation credit and what companies and individuals who meet the requirements can expect. The Updated Advisory was intended to provide “greater transparency” about what the Enforcement Division requires and what companies and individuals who self-report, cooperate, and remediate can expect. [...]

Related Lawyer: Catherine M. Foti

09.06.17 | Blog Posts

Letter on Insider Trading from a Confused Wall Streeter

The Insider: White Collar Defense and Securities Enforcement

To Whom It May Concern:

I am a conscientious professional investment adviser. For years I have carefully followed legislation, judicial decisions, and news reports regarding the law of insider trading. I make every effort to stay abreast of the latest developments so that I can fulfill my fiduciary obligation to act in the best interest of my clients and optimize their returns while, at the same time, avoiding any violation of the law against trading on inside information. The latest decisions by the United States Supreme Court and the highest federal court that covers the area that includes Wall Street have left me paralyzed with uncertainty. I increasingly am afraid that diligent review, analysis, and investigation on behalf of my clients will land me before the SEC or worse yet a defendant in a criminal case. The law of insider trading has never been defined by Congress and increasingly I have become aware that federal judges cannot agree on what it is. In particular, when determining whether a violation has occurred, courts have been battling over whether when information is shared by an insider, he or she must receive a personal benefit and what constitutes such a benefit. Can someone help me out?! [...]

Related Lawyer: Robert J. Anello

08.16.17 | Blog Posts

The Manafort Raid and the Privilege Fights To Come

The Insider: White Collar Defense and Securities Enforcement

Last week, multiple media sources reported that as part of Special Counsel Robert Mueller’s Russia inquiry, investigators executed a court-authorized search warrant at the Alexandria, Virginia home of Paul J. Manafort, President Trump’s former campaign chairman. Shortly after these reports surfaced, John Dowd, who represents President Trump in the Russia inquiry, sent an email to at least one Wall Street Journal reporter calling the raid a “gross abuse of the judicial process” more akin to methods “found and employed in Russia not America.” Mr. Dowd also suggested that problems with the raid could lead to a “Motion to Suppress the fruits of the search.” It will likely be many months before a court could be called upon to decide a suppression motion, but Mr. Dowd’s comments give clues as some issues that might arise on such a motion, and also highlight challenges facing the Special Counsel. [...]

Related Lawyer: Brian A. Jacobs

07.20.17 | Blog Posts

Second Circuit Sends Shivers Down DOJ’s Spine: Compelled Foreign Testimony Invalidates Prosecution

The Insider: White Collar Defense and Securities Enforcement

Yesterday, a monkey wrench was thrown into the DOJ’s ever-increasing, multi-jurisdictional cooperation in white collar cases. In United States v. Allen, the U.S. Court of Appeals for the Second Circuit held that the prohibition against the use and derivative use of a defendant’s compelled testimony – the Kastigar protections – applied even when the testimony was required by UK regulators in a joint U.S.- UK investigation. Despite prosecutors’ best efforts to avoid their investigation being tainted by statements compelled by UK regulators, the Second Circuit overturned a conviction and dismissed an indictment where a witness had reviewed the defendant’s compelled testimony. Thus, where multiple countries are investigating the same allegations of misconduct, a subject forced to provide evidence in a foreign country cannot have that testimony used in a prosecution against him in the United States – at least in the Second Circuit. Because common U.S. investigation partners, like the UK, regularly utilize compelled testimony in connection with their investigations, the DOJ now has to navigate a minefield when exchanging information with international partners. [...]

Related Lawyers: Robert J. Anello, Kostya Lantsman

07.11.17 | Blog Posts

Chronicle of Disgorgement’s Death Foretold: Kokesh v. SEC

The Insider: White Collar Defense and Securities Enforcement

For several decades, the Securities and Exchange Commission routinely has sought and obtained from the federal courts orders directing defendants to return the ill-gotten gains of their securities law violations. Such disgorgement recoveries have become a billion dollar industry for the SEC. A footnote in Justice Sonia Sotomayor’s recent opinion in Kokesh v. SEC – the agency’s second straight significant loss before the High Court – may foreshadow a view by the Court that disgorgement is not a remedy routinely available to the SEC. [...]

Related Lawyer: Robert J. Anello

06.30.17 | Blog Posts

Does “Meaningful Use” Mean Widespread Abuse? – HHS-OIG’s Review of EHR Incentive Payments

The Insider: White Collar Defense and Securities Enforcement

In 2009, as part of the HITECH Act, the federal government funded an incentive program by which health care providers who implemented and used electronic health records (“EHRs”) for their patients were able to receive significant financial benefits. The incentive program, which provided for potentially substantial payments to medical providers who engage in the “meaningful use” of EHRs, was premised on the view that the jettisoning of paper records, and the adoption and use of electronic medical records, was likely to improve the quality of patient care, improve patient safety, and reduce health care costs. But, from the very outset, entities such as the Government Accountability Office also made note of a darker side to the incentive program – namely, the potential that the program would be subject to fraud and abuse, and the need for significant oversight to ensure the integrity of payments made under the program’s auspices. [...]

Related Lawyer: Robert M. Radick

05.16.17 | Blog Posts

What Crimes Was Comey’s FBI Investigating: Hacking, Campaign Violations, Taxes – or Even Treason?

The Insider: White Collar Defense and Securities Enforcement

The headlines are bursting with speculation about President Trump’s seemingly sudden firing of FBI Director James B. Comey. The administration’s rationale has shifted. Whether Comey was dismissed because the administration was unnerved by his dogged pursuit of the Russian hacking issue, because he mishandled the investigation of Hillary Clinton’s private email server, or because Trump disliked Comey’s recent testimony before the Senate Judiciary Committee, the timing of Comey’s firing – in the midst of the FBI’s investigation of Russian meddling in the recent national election – raises eyebrows and a few questions. This blog does not attempt to answer questions of judgment or politics, but will help shed a light on the various Russian investigation-related crimes Comey and the FBI may have been investigating. [...]

Related Lawyer: Robert J. Anello

05.01.17 | Blog Posts

A Cloud Over the Microsoft Warrant Case

The Insider: White Collar Defense and Securities Enforcement

Almost a year ago, the Second Circuit held that Microsoft had no obligation to produce to the government—in response to a court-issued warrant—customer emails that were stored on a server located in Ireland. In so ruling, the Second Circuit found that the Stored Communications Act (“SCA”), under which the warrant was issued, cannot be applied extraterritorially, and thus can only be relied on to authorize warrants to seize data stored in the United States. The opinion remains binding law in the Second Circuit, and has been the basis on which other service providers (including Google and Yahoo!) have refused to provide data to federal prosecutors not only in the Second Circuit, but throughout the United States as well. [...]

Related Lawyer: Brian A. Jacobs

04.26.17 | Blog Posts

A Heart-to-Heart from the Hackers: Cyber-Vulnerabilities in Cardiac Devices

The Insider: White Collar Defense and Securities Enforcement

Just over a year ago, our blog took note of a governmental letter that powerfully underscored the dangers of cyberattacks in the healthcare industry. The letter, which then-Senator Barbara Boxer had sent to FBI Director James Comey, discussed the serious risks that hospitals and other institutional health care providers face from cyberattacks, ransomware, and a range of other malicious efforts to infiltrate their networks. Senator Boxer’s letter sought Director Comey’s input on how hospitals in particular could protect themselves from a growing number of instances in which hackers used malware to block access to crucial patient data, and the letter also sought information about the FBI’s response to such threats. As we noted in our blog, Senator Boxer’s letter served a valuable public good – it drove home the growing concerns about cybersecurity among healthcare providers, and the dilemmas that healthcare providers face in assessing whether to make ransom payments in response to a cyberattack. Further, as our prior blog post discussed, Senator Boxer’s letter indirectly served to call attention to the ways in which cybersecurity insurance could provide hospitals with a valuable or even essential means of managing their escalating cybersecurity risks. [...]

Related Lawyer: Robert M. Radick


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