12.31.69 | Blog Posts

09.18.19 | Blog Posts

Employee Liability for Corporate Misconduct – Elizabeth Warren Style: Can Negligence Become Criminal?

The Insider: White Collar Defense and Securities Enforcement

Since the last financial crisis and the resulting increased scrutiny on business entities, companies involved in suspected corporate misconduct repeatedly have paid massive fines to resolve criminal charges. Alongside high-profile announcements by the government of multi-million- and billion-dollar recoveries has been a near constant refrain from politicians and commentators that prosecutors have been lax in pursuing individuals in connection with large corporate malfeasance. [...]

Related Lawyer: Robert J. Anello

08.14.19 | Blog Posts

All Defendants Are Created Equal Under The Bail Reform Act – or Are They?

The Insider: White Collar Defense and Securities Enforcement

On August 1, 2019, the Second Circuit Court of Appeals jumped into the fray of what has been a growing debate about the right under the federal Bail Reform Act for individuals facing indictment to create conditions for release that only the wealthiest of defendants can even contemplate, including paying for their own home detention service. In a highly unusual opinion, in the case of United States v. Boustani, the Circuit held that the Bail Reform Act “does not permit a two-tiered bail system in which defendants of lesser means are detained pending trial while wealthy defendants are released to self-funded private jails.” Although the Second Circuit’s “all created equal” pronouncement may be laudable, it is inconsistent with the plain meaning of the Act and unnecessary given the facts of Boustani. As I explain in my prior blog post, “Too Rich to Bail?,” the Bail Reform Act requires that, in each case, courts conduct an individualized assessment of the charges against the defendant as well as the weight of the evidence and the defendant’s underlying history and circumstances, to determine whether any conditions exist that would assure the defendant’s appearance in court. Thus, the Act is inequitable by its very terms. This blog discusses the Circuit’s Boustani opinion and whether the Circuit, in reaching the issue of equitable treatment, misconstrued the Act’s text. [...]

Related Lawyer: Catherine M. Foti

08.06.19 | Blog Posts

The Tax Man Taps the Brakes on Digital Currency Expansion

The Insider: White Collar Defense and Securities Enforcement

In June 2019, Facebook and a consortium of 28 founding members including Visa, Mastercard, PayPal, Uber Technologies, Inc., and eBay announced the launch in 2020 of a new digital currency called Libra, promoted as “a simple global currency and financial infrastructure that empowers billions of people.” In a White Paper introducing Libra, the consortium promises accessibility to the 1.7 billion adults globally who remain outside the financial system but who have access to mobile phones and the internet and pledges trustworthiness and support for “collaborating and innovating with the financial sector, including regulators.” Yet Libra’s global reach and potential for misuse has alarmed U.S. regulators and central bankers worldwide. At a July 11, 2019 Senate Banking Committee hearing, Federal Reserve Chair Jerome Powell expressed concern that no single regulator currently has authority to oversee Libra, stating that “Libra raises a lot of serious concerns, . . . [including] privacy, money laundering, consumer protection, [and] financial stability.” Treasury Secretary Steven Mnuchin, in a White House press briefing on July 15, 2019, acknowledged the great interest in Libra and other cryptocurrencies but voiced Treasury’s serious concern “regarding the growing misuse of virtual currencies by money launderers, terrorist financiers, and other bad players.” Concerns have also been articulated by private citizens. In an Opinion piece published by the Financial Times on June 21, 2019, Facebook co-founder Chris Hughes warned that Libra will permit companies that will put their private interests ahead of public ones to exercise monetary control and will “disrupt and weaken nation states by enabling people to move out of unstable local currencies and into a currency denominated in dollars and euros and managed by corporations.” [...]

Related Lawyer: Jeremy H. Temkin

07.19.19 | Blog Posts

The Vanishing of Federal Sentencing Decisions

The Insider: White Collar Defense and Securities Enforcement

In civil cases, the most important decisions that federal district judges make typically are recorded in the form of written opinions that are collected in the Federal Supplement, widely available for free online, and available in searchable databases on Westlaw and LexisNexis, among other places. In criminal cases, by contrast, some of the most important decisions that federal district judges make—regarding what sentences to impose—are, in the vast majority of cases, lost in the ether of PACER, where they are available only to those who know precisely where to look. This state of affairs is far from ideal for prosecutors, defense attorneys, and district judges, and it is patently unfair for criminal defendants themselves. [...]

Related Lawyer: Brian A. Jacobs

06.05.19 | Blog Posts

Insiders Report on the State of the IRS

The Insider: White Collar Defense and Securities Enforcement

On May 28, the Commissioner of the Small Business/Self-Employed (“SB/SE”) Division, the National Taxpayer Advocate (“NTA”) and the Chief of IRS Criminal Investigation (“CI”) provided their insider perspectives on the current state of the IRS at a town hall held at the New York City Bar Association. Each of these executives gave insights into the challenges facing the Service. [...]

Related Lawyer: Jeremy H. Temkin

05.22.19 | Blog Posts

How Many Company Employees Can Fit Into a White-Collar Lawyer's Pool?

The Insider: White Collar Defense and Securities Enforcement

State and federal prosecutors often are suspicious and critical of efforts by a company under criminal investigation to control costs and centralize knowledge by establishing “pool counsel” to represent employees who may be called upon to be witnesses. As a result, government attorneys frequently attempt to dissuade potential witnesses (current/former employees, officers, or agents of the subject organization) from agreeing to be represented by an attorney hired by their company to concurrently represent a group of similarly situated individuals. A recent ethics opinion issued by the Committee on Professional Ethics of the Association of the Bar of the City of New York, chaired by renowned ethics expert Professor Bruce Green, makes clear that although pool counsel must evaluate a number of ethical considerations, such representation often is reasonable, practical, and desirable. Hopefully, at least in New York, the Committee’s thoughtful and insightful analysis will allay prosecutors’ undue concerns. [...]

Related Lawyer: Robert J. Anello

05.15.19 | Blog Posts

The Proper Treatment of Fraud Victims in Federal White Collar Prosecutions

The Insider: White Collar Defense and Securities Enforcement

In white collar cases, federal prosecutors around the country reflexively file—and district courts routinely grant—motions seeking to bar defense counsel from making arguments, introducing evidence, or pursuing cross-examination regarding a fraud victim’s carelessness in dealing with the defendant. Any such argument or evidence, prosecutors generally argue, should be precluded as irrelevant, under Rule 401 of the Federal Rules of Evidence, on the ground that a victim’s lack of caution and diligence is no defense to fraud. Although these motions find support in well-established precedent, there are several reasons why courts should view them with a bit of skepticism, and should give defense counsel more latitude in exploring, particularly through cross-examination, the behavior of fraud victims. [...]

Related Lawyer: Brian A. Jacobs

05.13.19 | Blog Posts

Will the Rise of Originalism Spell the End of Gay Rights Under Title VII?

The Insider: White Collar Defense and Securities Enforcement

With the arrival of Justices Neil Gorsuch and Brett Kavanaugh to the Supreme Court, almost half of the justices now subscribe to originalism—the view that vague constitutional provisions mean what they were originally understood to mean when they were enacted. While originalism figures prominently in debates about constitutional interpretation (for example, originalists claim that Roe v. Wade must be wrong because nobody alive in 1791 believed the Bill of Rights protected the right to have an abortion), originalism is seldom discussed in the context of statutory interpretation. That will likely change in the upcoming Supreme Court term, as the Court agreed on April 22 to review the Second Circuit’s en banc decision in Zarda v. Altitude Express—a decidedly non-originalist decision. In Zarda, notwithstanding that no one thought Title VII prohibited discrimination based on sexual orientation when the law passed in 1964, the Second Circuit held that Title VII prohibits just such discrimination. [...]

Related Lawyer: Catherine M. Foti

04.23.19 | Blog Posts

Top 10 Crimes Mueller’s Report Considers

The Insider: White Collar Defense and Securities Enforcement

The long-awaited Mueller Report provides a detailed picture of the wide variety of crimes investigated by the Special Counsel’s Office, many of which resulted in indictments or guilty pleas, and, in the case of President Trump, a suggestion that Congress may review the legality of obstructive acts. Although Mueller declined to make a final determination regarding President Trump’s criminal liability, contrary to assertions from the administration, the investigation did not exonerate Trump. Instead, the report identified multiple instances of what may be considered obstructive conduct by the President. Citing limitations on its role as an arm of the Justice Department, the Special Counsel’s Office referred determination of the question of whether Trump obstructed justice to Congress. [...]

Related Lawyer: Robert J. Anello

03.06.19 | Blog Posts

From Teapot Dome to Trump: How Congress Investigates Criminal Scandals

The Insider: White Collar Defense and Securities Enforcement

Since the House passed a resolution in 1792 to investigate the defeat of the United States Army at the hands of American Indians in Ohio (known as St. Clair’s Defeat), Congress has investigated hundreds of instances of possible misconduct by members of the executive branch. Today’s news is rife with reports of congressional investigations into potential obstruction of justice and more serious substantive crimes by President Trump and his immediate circle. Inevitably, the paths of congressional and criminal investigations into this type of misconduct overlap. History shows that this intersection can be fruitful, frustrating, and fraught with pitfalls. [...]

Related Lawyer: Robert J. Anello

02.20.19 | Blog Posts

Too Rich To Bail?

The Insider: White Collar Defense and Securities Enforcement

Recently, a federal judge in Brooklyn questioned whether the Bail Reform Act permits “disparate treatment based on wealth,” and denied bail to a high-net worth defendant who proposed a package that included home detention secured by privately-funded guards. In United States v. Boustani, U.S. District Judge William F. Kuntz II rejected the bail package proposed by Jean Boustani, an international businessman at the center of a $2 billion alleged fraud, bribery, and money laundering scheme that the government claims caused “staggering” losses to foreign and American investors and “devastated” the economy of Mozambique. In addition to what courts have called the “private prison” concept, Boustani’s proposed bail package included a $20 million personal recognizance bond secured by $1 million cash, and the surrender of travel documents by Boustani and his wife. [...]

Related Lawyer: Catherine M. Foti

02.15.19 | Blog Posts

Peremptories And Prejudice: The Striking Role Of Employment Status In Jury Selection

The Insider: White Collar Defense and Securities Enforcement

It is a truth universally acknowledged, that a trial lawyer in possession of limited information about prospective jurors, may exercise strikes based on a juror’s employment status. Criminal prosecutors may strike jurors who are unemployed, in the belief that such jurors may be less socially connected, less accustomed to following rules, less experienced in making serious decisions (such as voting for conviction), and thereby potentially biased against the government and in favor of the defendant. Criminal defense lawyers, meanwhile, may strike jurors who are employed, for the inverse reasons. And in civil cases, as one commentator wrote, “[j]ury consultants consistently report that,” among other things, “long-term, unemployed people . . . tend to favor the plaintiff’s position.” Employment status can be an entirely reasonable reason for a trial lawyer to strike a prospective juror. At the same time, however, employment status can at times be misused by trial lawyers as a pretext to strike a juror when the real reason is the juror’s membership in a so-called cognizable group, such as a racial minority. In order to distinguish between a permissible and impermissible strike, judges should engage in extraordinarily careful fact-finding and analysis, as the stakes for both the lawyers and the parties run high. [...]

Related Lawyer: Brian A. Jacobs

01.23.19 | Blog Posts

The Harmless Error Standard on a Silver Platter

The Insider: White Collar Defense and Securities Enforcement

In United States v. Stewart, in a 2-1 decision, the Second Circuit vacated defendant Sean Stewart’s insider-trading conviction, holding that the district court erroneously excluded a key piece of impeachment evidence and that this error could not be excused as harmless. Although the opinion focused on the admissibility of evidence that impeaches hearsay statements, the majority’s defense-friendly application of the harmless error standard could have a greater impact in future criminal appeals. [...]

Related Lawyer: Brian A. Jacobs

12.19.18 | Blog Posts

Naughty or Nice: Is Trump's Hint of a Gift of a Pardon to Manafort Obstruction of Justice?

The Insider: White Collar Defense and Securities Enforcement

According to various media reports, President Trump’s Christmas list may include the gift of a pardon to his former campaign chairman, Paul Manafort. Many critics claim that the mere suggestion of a pardon to Manafort amounts to an obstruction of justice. The law on whether and when the nation’s chief law enforcer can be said to engage in obstruction is unsettled, although what is clear is that the president’s constitutional authority is not limitless. Other presidents have exercised their absolute power to pardon in questionable ways, but the question on everyone’s mind lately is whether Trump’s dangle of a pardon to Manafort, as distinguished from the act of pardoning, may constitute an obstructionist act. [...]

Related Lawyer: Robert J. Anello

10.15.18 | Blog Posts

Rethinking Corporate Monitors: DOJ Tells Companies to Mind Their Own Business

The Insider: White Collar Defense and Securities Enforcement

Since about the early 2000s, corporate monitors have become a go-to weapon for the Justice Department in its battle against business crime. Imposition of such monitors often results in the disruption of companies’ activities and expenditures of millions of corporate dollars – that might otherwise go to benefit shareholders. In line with its more business-friendly approach, Attorney General Jeff Sessions’ Department of Justice has signaled a retreat from such intrusion on businesses’ operations. Last Friday, Brian A. Benczkowski, the Assistant Attorney General in charge of the Justice Department’s Criminal Division, delivered a speech at New York University School of Law revealing this change in the Department’s approach to the use of corporate monitors. [...]

Related Lawyer: Robert J. Anello

09.26.18 | Blog Posts

Corporate Health Care Fraud Prosecutions in the Trump Administration: It Ain’t Over Til It’s Over

The Insider: White Collar Defense and Securities Enforcement

As we near the two-year point since the election of Donald J. Trump to the White House, the topic of white collar crime continues to dominate the public conversation – but the conversation in fact consists of two distinctly separate streams of dialogue. The first, and plainly more prominent, relates to the conduct of the Trump administration itself. The Special Counsel investigation regarding Russian intervention in the 2016 election, the prosecution of Michael Cohen for violating campaign finance laws, Paul Manafort’s decision to cooperate with the Special Counsel following his trial conviction on counts of bank fraud and tax fraud, and the investigation of President Trump for a host of potential crimes – all of these matters have rightfully earned headlines and generated tremendous public attention. But a second stream of dialogue, while less present in the mainstream media, is nonetheless of significant importance as well. Indeed, it is this second topic – namely, how aggressively the Trump Administration’s Department of Justice will pursue investigations into white collar crime in general, and health care fraud in particular – that is understandably a subject of much import to the corporations and individuals whose conduct may be the focus of government scrutiny. [...]

Related Lawyer: Robert M. Radick

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

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

04.10.17 | Blog Posts

Will Sexual Orientation Finally Be a Protected Class?

The Insider: White Collar Defense and Securities Enforcement

In a groundbreaking decision in Hively v. Ivy Tech Community College of Indiana, the United States Court of Appeals for the Seventh Circuit, sitting en banc, held that discrimination based on sexual orientation is a form of sex discrimination and thus prohibited by Title VII of the Civil Rights Act of 1964. Title VII makes it unlawful for employers to discriminate on the basis of a person’s “race, color, religion, sex or national origin . . .” In an 8-3 decision by Judge Diane Wood, the Seventh Circuit overruled its own prior decision and precedent and broke with every other federal appellate court that has ruled on this issue. [...]

Related Lawyer: Catherine M. Foti

03.15.17 | Blog Posts

Trump Not Only Victim of Leaks: Courts Are Handcuffed in Responding to FBI Leaks

The Insider: White Collar Defense and Securities Enforcement

The Trump White House feels besieged by near-constant leaks. The divulged inside stories have ranged from the trivial, such as rumors that President Trump enjoys watching the news in his bathrobe, to the more consequential, such as revelations connecting Trump advisers to Russian intelligence. The resulting atmosphere of suspicion culminated in Trump’s tweets earlier this month alleging that former President Obama ordered the “tapping” of then-candidate Trump’s “wires” at Trump Tower during the Presidential election. [...]

Related Lawyer: Robert J. Anello

03.13.17 | Blog Posts

DOJ Announces It Will Extend FCPA “Pilot Program”

The Insider: White Collar Defense and Securities Enforcement

The Department of Justice (“DOJ”), Fraud Section’s guidance for Foreign Corrupt Practices Act (“FCPA”) investigations and prosecutions, commonly referred to as the “Pilot Program,” will remain in place when the one-year pilot period ends on April 5. The extension was announced on March 10, 2017 by Acting Assistant Attorney General Kenneth A. Blanco in a speech at the American Bar Association’s National Institute on White Collar Crime. Blanco explained that when the Pilot Program expires, the DOJ will evaluate its “utility and efficacy” to determine “whether to extend it, and what revisions, if any, we should make to it” and stated that “[t]he program will continue in full force until we reach a final decision on those issues.” [...]

Related Lawyer: Jonathan S. Sack

03.08.17 | Blog Posts

When is a Tweet an Official Act?

The Insider: White Collar Defense and Securities Enforcement

Twitter has come to play a central role in political discourse. Just last week, during a Supreme Court argument in a First Amendment case, Justice Kagan observed that “everybody uses Twitter”:  In addition to “the President,” Justice Kagan explained, “[a]ll 50 governors, all 100 senators, [and] every member of the House has a Twitter account,” which has made Twitter a “crucially important channel of political communication.” [...]

Related Lawyer: Brian A. Jacobs

02.13.17 | Blog Posts

Recent Case Law on the Appointment of SEC Administrative Law Judges

The Insider: White Collar Defense and Securities Enforcement

The Securities and Exchange Commission (“SEC”) brings enforcement actions in two ways: by filing a complaint in federal district court, or by filing an administrative action before an SEC administrative court headed by an SEC administrative law judge (“ALJ”). The SEC has discretion over the jurisdiction in which they will bring the action. [...]

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02.03.17 | Blog Posts

Was President Trump’s Decision to Tell Sally Yates “You're Fired” a Retaliatory Employment Action?

The Insider: White Collar Defense and Securities Enforcement

Pursuant to the Whistleblower Protection Enhancement Act (WPEA), signed by President Barack Obama in 2012, U.S. government employees have a statutory right to "blow the whistle" without suffering retaliation. The WPEA protects federal employees who disclose violations of laws, rules, or regulations and mismanagement, except when such disclosures are specifically prohibited by law or required by Executive order to "be kept secret in the interest of national defense or the conduct of foreign affairs." An independent federal agency, the Office of Special Counsel, has the authority to investigate the "prohibited personnel practices" enumerated in the WPEA and also serves as a conduit for evaluating whistleblower disclosures. [...]

Related Lawyer: Catherine M. Foti

01.19.17 | Blog Posts

How Will the New Administration Prosecute Businesses?

The Insider: White Collar Defense and Securities Enforcement

A pervasive sense of uncertainty about America under the President set to be sworn in tomorrow has extended into almost every aspect of life. Perhaps due to his own past and lack of transparency, speculation abounds about potential changes to white-collar prosecution priorities and securities enforcement under a Trump administration. Anticipating what kind of impact a Trump presidency will have on white-collar criminal practice is largely guesswork given the new leader’s tendency towards imprecision. A look at Trump’s statements and actions to date, as well as his appointees, however, may provide some limited insight. [...]

Related Lawyer: Robert J. Anello

12.21.16 | Blog Posts

How the Clinton Email Warrant May Have Violated DOJ Policy

The Insider: White Collar Defense and Securities Enforcement

Yesterday at noon, a warrant was unsealed in which a United States Magistrate Judge approved the FBI’s application to search a laptop apparently belonging to Anthony Weiner for any potentially classified emails from Hillary Clinton. Commentators have since raised multiple questions about the warrant, including whether it adequately demonstrated probable cause that Mr. Weiner’s laptop contained evidence of a crime. One question that has not received any attention, however, is whether the DOJ violated its own strict and detailed policy that covers, among other things, search warrants on property belonging to "members of the news media"—a category that surely includes Anthony Weiner, who has worked over the years for multiple news outlets. Had the DOJ followed its own policy, the warrant may never have been approved, or at least may have been delayed until after the election. To the extent the DOJ did not follow its policy, this failure could add substantial fuel to the argument by those who claim that the warrant was a “meritless” attempt by the FBI to influence the 2016 presidential election. [...]

Related Lawyer: Brian A. Jacobs

11.09.16 | Blog Posts

Can A President (Trump) Be Prosecuted Based Upon Allegations Of Past Misconduct?

The Insider: White Collar Defense and Securities Enforcement

At long last, it’s November 9, and the nation has an answer to the question of who will serve as its next President. Although this should bring a measure of relief, a feeling of uncertainty remains. What lies ahead for our nation under the leadership of Donald Trump, billionaire reality television star who invented the chant “Lock Her Up”? What happens to unresolved allegations of federal tax liability and sexual assault? Does the theoretical specter of possible indictment and criminal trial or impeachment loom for President-elect Trump? [...]

Related Lawyer: Robert J. Anello

11.01.16 | Blog Posts

A Circuit Split Over 1,000 Words

The Insider: White Collar Defense and Securities Enforcement

Two weeks ago, as reported by Howard Bashman at How Appealing, the Second Circuit joined the Seventh, Ninth, and Federal Circuits on an issue that is dividing the Courts of Appeals:  Whether to reduce the word limits for federal appellate briefs by 1,000 words.  In particular, these circuits have all indicated their intention to opt out of a change to the Federal Rules of Appellate Procedure, which otherwise goes into effect on December 1 this year, reducing the word limit for principal briefs on appeal from 14,000 to 13,000 words.  As mundane as this dispute may sound, the fact that these particular circuits—some of the country’s busiest—have gone to the trouble to deviate from the impending rule change in order to continue to allow for longer briefs deserves careful attention for what it may signal. [...]

Related Lawyer: Brian A. Jacobs

10.03.16 | Blog Posts

Ethics Advice from Law Firms’ In-House General Counsels Need Not Be Disclosed to Clients

The Insider: White Collar Defense and Securities Enforcement

During the course of representing clients, lawyers often encounter ethical conundrums not easily solved without analyzing the rules governing the practice of law in their jurisdiction. There is a continuum of the means by which lawyers seek such advice. On one end, they confer informally with their partners or co-counsel. On the other end, lawyers retain ethics specialists from outside their firms. In the middle, firms formally designate an “in-house” counsel responsible for advising the firm’s lawyers on ethics and other issues that may create liability for the firm. From the perspective of maintaining privilege over these types of communications, casual conversations are extremely risky. Consulting outside counsel is the safest route, but for financial reasons and for convenience, many lawyers may believe that the best course of action is consulting their firm’s formally designated “in-house” counsel. However, the dangers of this approach were highlighted with the decision by a New York trial judge in December 2014 ordering the disclosure of ethics advice given to three attorneys by their firm’s in-house general counsel. Although that decision has been reversed by the Appellate Division, First Department, a review of both decisions is instructive for attorneys deciding when and how to seek advice on the course of action to take to comply with their ethical obligations. [...]

Related Lawyer: Catherine M. Foti

09.28.16 | Blog Posts

Prosecutions from the Financial Crisis: When Is It Safe to Come Out of the Woods?

The Insider: White Collar Defense and Securities Enforcement

Florian Homm, a German hedge fund manager prosecuted by the United States for wrongdoing in connection with the financial crisis, fled Europe in 2008 under cover of darkness on a private plane with cash stuffed in his underwear. He hid out in South America for five years – the length of the statute of limitations generally applicable to most United States federal criminal cases. When he emerged and trumpeted his return to high society in 2013, believing that the statute of limitations on any possible United States criminal claims against him had run, he was arrested in Italy on U.S. federal fraud charges. [...]

Related Lawyer: Robert J. Anello

08.03.16 | Blog Posts

The Microsoft Warrant Case: Unintended Consequences of the Second Circuit's Ruling

The Insider: White Collar Defense and Securities Enforcement

In a long-awaited ruling in a case in which the government had served a warrant on Microsoft demanding the production of customer emails, the Second Circuit held in July that Microsoft had no obligation to produce customer emails because they were stored on a server located in Ireland. Some privacy groups cheered the decision, while others cautioned that the opinion’s focus on the location where data is stored could have negative consequences for privacy rights and the internet generally, as it could make user data more easily obtainable when the relevant servers are located in countries that may impose less stringent safeguards than exist in the U.S. Aside from privacy concerns, others warned the opinion could make it harder for law enforcement to investigate criminal activity. For example, Law Professor Orin Kerr wrote in a tweet: “Want to stymie U.S. law enforcement? Store your data in the cloud fragmented over many locations outside U.S.” And, in a concurring opinion, Judge Lynch urged Congress to take action to modernize the law, a call echoed by commentary following the decision. [...]

Related Lawyer: Brian A. Jacobs

07.14.16 | Blog Posts

SCOTUS Quid Pro Quo Analysis in McDonnell May Broadly Affect Bribery and Insider Trading Prosecutions

The Insider: White Collar Defense and Securities Enforcement

Last month’s decision from the Supreme Court in McDonnell v. United States takes federal prosecutors to task for applying federal criminal corruption laws in too broad a manner. The Court’s decision makes clear that distasteful or offensive conduct does not necessarily rise to the level of criminality. The Court’s insistence on a “specific and focused” benefit suggests that the government may have to rethink prosecutions ranging from all forms of bribery as well as insider trading. [...]

Related Lawyer: Robert J. Anello

07.12.16 | Blog Posts

Recent Trials Highlight DOJ's Challenges in Prosecuting Individuals for Corporate Misconduct

The Insider: White Collar Defense and Securities Enforcement

Since the 2008 financial crisis, the Department of Justice has faced criticism for not aggressively prosecuting individuals and companies for alleged wrongdoing. The Department has acknowledged and addressed this criticism in speeches and policy statements, notably the September 2015 Yates Memorandum, which declared a heightened commitment to prosecuting individuals for white-collar crimes and, as I have written elsewhere, a heightened expectation of corporate cooperation in the investigation of employee conduct. [...]

Related Lawyer: Jonathan S. Sack

06.01.16 | Blog Posts

Insider Trading, Official Corruption, and Their Common Roots in Fraud

The Insider: White Collar Defense and Securities Enforcement

Insider trading and official corruption prosecutions—two of the cornerstones of recent white-collar enforcement efforts by the Department of Justice—have both generated sufficient doctrinal confusion to land them on the Supreme Court’s docket this year and next. This past April, the Court heard the appeal of former Virginia Governor Bob McDonnell from his corruption conviction, and next term, the Court is set to hear Bassam Salman’s appeal from his insider trading conviction. On the surface, these cases have little in common: McDonnell concerns what constitutes a sufficient “official action” to trigger criminal liability under anti-corruption laws, and Salman concerns what constitutes a sufficient “personal benefit” to trigger criminal liability under insider trading precedent. But beneath the surface, the legal doctrines at issue are related, in that both official corruption and insider trading cases are rooted in theories of fraud. Further, one of the fundamental principles of fraud—that a material misrepresentation is an element of the crime—could provide important guidance as to how these cases and others might be resolved. [...]

Related Lawyer: Brian A. Jacobs

05.06.16 | Blog Posts

FCPA Pilot Program: Missing the Big Picture

The Insider: White Collar Defense and Securities Enforcement

For decades, the government has been trying to incentivize companies to self-report illegal activity by dangling the carrot of reduced punishment. The Justice Department’s one-year Foreign Corrupt Practices Act “pilot program,” announced on April 5, 2016, is the latest iteration of this enforcement technique. Although a valiant effort to formalize a practice known to white collar practitioners, the program does not address some of the more significant variables that are of importance to corporate decision makers. [...]

Related Lawyer: Robert J. Anello

04.14.16 | Blog Posts

Ransomware, Cyberattacks, and Hacking in the Health Care Industry: Lessons from a Letter to the FBI

The Insider: White Collar Defense and Securities Enforcement

The last several weeks have brought a host of alarming revelations regarding the vulnerability of some of the most confidential data that corporations and legal entities maintain on their servers. Most notably, the story of the so-called “Panama Papers” continues to attract substantial media attention, as the theft of approximately 2.6 terabytes of data from the Panamaian law firm Mossack Fonseca, and its disclosure to the International Consortium of Investigative Journalists, has already caused the resignation of one international leader and threaten the fates of several more. Perhaps less provocative, but no less significant, is a recent Wall Street Journal article reporting that hackers illegally accessed the computer networks at some of the most respected and prestigious law firms in the United States, apparently for the purpose of stealing confidential information that in turn can facilitate insider trading. [...]

Related Lawyer: Robert M. Radick

04.05.16 | Blog Posts

Why Do Federal Agents Still Take Interview Notes by Hand?

The Insider: White Collar Defense and Securities Enforcement

Anyone who has attended a law school lecture in the last decade knows this sight: row after row of students typing on laptops, each taking down a nearly verbatim transcript. At the same time, anyone who has attended a witness interview—a proffer—in a federal criminal investigation in the last decade knows this sight: a group of Assistant U.S. Attorneys and law enforcement agents, all asking questions, while a single agent takes down occasional notes by hand on a yellow pad. Student notes can impact grades; agent notes can put people in jail. Yet the typed student notes will almost invariably be more complete than the handwritten agent notes. Why are law students taking better notes than federal agents? [...]

Related Lawyer: Brian A. Jacobs

03.28.16 | Blog Posts

Charging Too Many Counts Hurts Prosecutions

The Insider: White Collar Defense and Securities Enforcement

In a recent criminal case in New York County in which I was involved, the District Attorney’s Office charged one of the defendants with 106 counts – 105 felonies and one misdemeanor (two other defendants were charged with over 100 counts each). The case was a complex fraud case and the prosecution charged violations of five different statutes: (1) scheme to defraud in the first degree (one count), (2) grand larceny in the first degree (15 counts), (3) falsifying business records in the first degree (88 counts), (4) the Martin Act (the New York securities fraud statute) (one count), and (5) conspiracy in the fifth degree (one count – a misdemeanor). [...]

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02.17.16 | Blog Posts

GSK and the U.K.’s Competition and Markets Authority: A New Agency Arrives in Health Care Enforcement

The Insider: White Collar Defense and Securities Enforcement

It does not take much these days to notice that law enforcement has gone global. The transnational nature of prosecutions, enforcement actions, and regulatory proceedings can be seen in a host of recent cases. The prosecution of the FIFA scandal, for example, involves not just the U.S. Department of Justice but also the active participation of the Swiss authorities, and the governments of Costa Rica and Colombia have recently announced their own independent investigations. Similarly, the alleged manipulation of interbank lending rates has led to prosecutions by the United Kingdom’s Serious Fraud Office and the U.S. Department of Justice, as well as actions by a less well-known enforcement agency, Japan’s Financial Services Agency. And as this blog noted over two years ago, the Chinese Ministry of Public Security led an investigation into Glaxo Smith Kline’s alleged bribing of officials and doctors to utilize the company’s drugs, which ultimately resulted in a $500 million corporate fine and a suspended sentence for a Glaxo executive who otherwise would have been relegated to a Chinese prison. [...]

Related Lawyer: Robert M. Radick

02.10.16 | Blog Posts

Non-Prosecution Agreements: Reserved for VIPs?

The Insider: White Collar Defense and Securities Enforcement

Should individuals who cooperate with the government in high-profile cases get better deals than individuals who cooperate in cases that do not make the headlines? The rules laid out in the Department of Justice’s U.S. Attorney’s Manual suggest that the answer—at least in the government’s view—is “yes.” [...]

Related Lawyer: Brian A. Jacobs

01.20.16 | Blog Posts

Mixed Messages When Courts Issue a Stern Warning to Prosecutors

The Insider: White Collar Defense and Securities Enforcement

Much has been written over the past few years about prosecutors’ violations of Brady v. Maryland, the Supreme Court case which held that prosecutors must turn over exculpatory material to the defense in time for the defense to use such material. There is a controversy about whether such Brady violations are an epidemic or an aberration. Often, litigation over Brady violations will focus on whether the violation was deliberate or accidental, although Brady violations occur even when the prosecutor acts in good faith. [...]

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01.15.16 | Blog Posts

LinkedIn for Lawyers: Newly Issued Ethical Guidance Makes Social Media Use Less Risky

The Insider: White Collar Defense and Securities Enforcement

The ethics guidance interpreting "Attorney Advertising" rules in the social media context continues to evolve, but this time the evolution appears to be for the better, taking into account the realities of the growing use of social media. As you may recall, early last year, the New York County Lawyers Association ("NYCLA") weighed in on the ethical implications for lawyers using LinkedIn and suggested that attorneys using the self-proclaimed “World’s Largest Professional Network” needed to beware that their posts on that site, even the most casual, did not run afoul of the attorney advertising rules. Now, however, a recently published Formal Opinion of the Committee on Professional Ethics of the Association of the Bar of the City of New York ("City Bar") has called into question the scope and applicability of the NYCLA opinion, recognizing that use of ethic rules developed for a pre-social media world in a post-social media context may be akin to attempting to fit a square peg into a round hole. As the City Bar acknowledged: the current attorney advertising rules "defy easy extension to the digital world and, in particular, to social media content." The difficulty of applying the rules of ethics to lawyers' social media activities, however, has not stopped lawyers from using social media websites -- particularly LinkedIn -- for professional self-promotion. The new City Bar opinion, however, sets forth a test that might make it easier for attorneys to navigate their responsibilities while continuing to document their achievements, both personal and professional on the internet. [...]

Related Lawyer: Catherine M. Foti

01.13.16 | Blog Posts

Added Penalties for Worker Safety Violations: The Other Yates Memorandum

The Insider: White Collar Defense and Securities Enforcement

In September 2015, Department of Justice Deputy Attorney General Sally Quillian Yates issued a memorandum instructing federal prosecutors to step-up individual prosecutions for corporate wrongdoing. The much-discussed “Yates Memorandum” was issued in response to criticism that federal prosecutors had been lax in prosecuting individual executives for crimes committed during the 2008 financial crisis and has garnered a lot of attention from practitioners and commentators. White-collar lawyers and their corporate clients also should be aware of the “other” Yates Memorandum quietly issued at the end of 2015, announcing that federal prosecutors will look for ways to charge a variety of felonies in routine worker safety cases to take advantage of the greater penalties available under environmental and other criminal laws. [...]

Related Lawyer: Robert J. Anello

12.16.15 | Blog Posts

United States v. Bert: The Second Circuit’s Newfound Need for Speed?

The Insider: White Collar Defense and Securities Enforcement

In September 2015, a divided panel of the Second Circuit took the drastic step of ordering the reversal of defendant Raheem Bert’s conviction for firearms offenses and the dismissal of his indictment with prejudice due to an inadvertent violation of the Speedy Trial Act.* The panel’s decision, written by Circuit Judge Rosemary S. Pooler and joined by Circuit Judge Peter W. Hall—over a dissent by Circuit Judge Dennis Jacobs—explained this result by referencing the need to vindicate the Speedy Trial Act’s “purpose of expeditiously bringing criminal cases to trial,” and found that “[b]arring reprosecution in this case will have a more positive and substantial impact upon the administration of justice—and most certainly on improved administration of the Speedy Trial Act—than would permitting the prosecution to proceed.” [...]

* Update: On February 9, 2016, subsequent to the publication of this blog post, the Second Circuit withdrew its original opinion in United States v. Bert and issued a new opinion. Just as in the original opinion, Judge Pooler wrote for herself and for Judge Hall, while Judge Jacobs dissented. In this new opinion, however, instead of taking what my original post called the “drastic step” of ordering the reversal of Bert’s conviction and the dismissal of his indictment with prejudice, the majority took the more modest step of remanding Bert’s case so that the district court could make additional factual findings regarding the speedy trial delay. Nevertheless, as Judge Jacobs highlights in his dissent, in many respects, the majority’s instructions to the district court to make additional factual findings go beyond what had previously been legally required, and warrant close attention by counsel in future cases.

Related Lawyer: Brian A. Jacobs

12.10.15 | Blog Posts

Latest International Assault on Attorney-Client Privilege Causes Headaches for Corporations' Lawyers

The Insider: White Collar Defense and Securities Enforcement

When dealing with international investigations, counsel for corporations must navigate a variety of issues relating to the attorney-client privilege. By now, many experienced white-collar lawyers are aware of the vagaries of the rules applicable to in-house counsel (in many European jurisdictions, the privilege does not apply to communications with them), but recent pronouncements by United Kingdom authorities prodding companies to forego the protection of the privilege in connection with internal investigations have introduced a new twist into the mix. The approach to the corporate attorney-client privilege taken in the United Kingdom is symptomatic of a relatively negative view of the privilege articulated by many European regulators and courts. [...]

Related Lawyer: Robert J. Anello

10.22.15 | Blog Posts

Upcoming Federal Sentencing Reform Offers Little Benefit for White Collar Defendants

The Insider: White Collar Defense and Securities Enforcement

Likely to sate the public’s appetite to punish perpetrators of financial crimes, in recent years Congress and the United States Sentencing Commission (USSC) have created a scheme where individuals convicted of white collar crimes serve long sentences and, thereafter, are saddled with a lifetime of disabilities that often are out of proportion to the venality of their conduct or the legitimate goals of our criminal justice system. For years, the length of sentences in white collar cases largely has been determined by the United States Sentencing Guidelines almost-singular focus on “loss” as the key factor in economic crimes, which obscures the myriad other factors that affect a defendant’s true culpability in an individual case and often results in unduly punitive results. In some cases, relatively low-level and ministerial employees faced life sentences in prison because the guidelines did not properly account for their role in the scheme. In others, defendants faced decades-long sentences for activity that was more “farcical than dangerous” simply because the “intended loss” of their “ridiculous” scheme numbered in the billions of dollars. [...]

Related Lawyer: Robert J. Anello

09.10.15 | Blog Posts

Second Circuit Rules Dodd-Frank Protects Whistleblowers Who Report Internally

The Insider: White Collar Defense and Securities Enforcement

In a much-anticipated opinion, a divided panel of the Second Circuit Court of Appeals held in Berman v. Neo@Ogilvy LLC, that whistleblowers who report wrongdoing internally, but not to the Securities and Exchange Commission ("SEC"), are protected by the anti-retaliation provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank"). [...]

Related Lawyer: Catherine M. Foti

09.08.15 | Blog Posts

Addressing the SEC’s Administrative “Home Court” Advantage in Enforcement Proceedings

The Insider: White Collar Defense and Securities Enforcement

A recent decision from the Seventh Circuit Court of Appeals highlights the ongoing debate regarding the Securities and Exchange Commission’s continued pursuit of administrative enforcement proceedings for securities violations. In Bebo v. SEC, a panel of the Seventh Circuit held that federal courts do not have jurisdiction to hear claims regarding the constitutionality of the SEC’s administrative hearing process and forum until all administrative remedies have been exhausted. The breadth and number of constitutional challenges raised by individuals subject to the SEC’s administrative process, however, signal that it may be time for the agency or Congress to make some changes. [...]

Related Lawyer: Robert J. Anello

09.01.15 | Blog Posts

Dog Days for the SEC

The Insider: White Collar Defense and Securities Enforcement

This summer has been a hot one for the Securities and Exchange Commission (“SEC”). In particular over the past couple of months, the SEC has been busy promoting and defending its rules and practices in front of federal courts across the country, including defending the constitutionality of the Commission’s administrative enforcement proceedings in various circuits, while venturing further into the morass of cases grappling with the definition of who is a “whistleblower” entitled to the anti-retaliation protections of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) by issuing an Interpretive Release on the issue “clarifying” its position. Whether the SEC’s positions will ultimately triumph is not clear but the SEC is fighting hard to protect its interpretation of Dodd Frank. [...]

Related Lawyer: Catherine M. Foti

08.17.15 | Blog Posts

Whistleblowers Who Take Company Documents May Risk Criminal Prosecution

The Insider: White Collar Defense and Securities Enforcement

Federal law now protects whistleblowers in many instances from retaliation and encourages them, through financial incentives, to bring qui tam lawsuits and report possible wrongdoing to the SEC and IRS. In this fashion, the law turns company employees into potential confidential informants. As informants, employees have a powerful incentive to provide federal authorities secretly with business-related information (including documents) that a company would ordinarily consider confidential and strictly for internal use. The regime of whistleblower law expects and even promotes such conduct – though at least one recent state case demonstrates that taking an employer’s confidential information, when it is done for private purposes, still violates the law. [...]

Related Lawyer: Jonathan S. Sack

07.27.15 | Blog Posts

Interpol: How to Catch a Thief – International Style

The Insider: White Collar Defense and Securities Enforcement

In my last blog post, I discussed the federal government’s increased focus on criminal activity that occurs overseas and the recent high-profile indictment filed by the Justice Department against nine FIFA officials. On June 3, 2015, INTERPOL, the world’s largest international police organization, issued Red Notices for six of the FIFA defendants. Red Notices issued by INTERPOL are the closest thing to an international arrest warrant. The FIFA cases present an opportunity to examine the work of INTERPOL and the significance of the notices it issues. [...]

Related Lawyer: Robert J. Anello

06.19.15 | Blog Posts

SEC, the Whistleblowers' "Advocate"

The Insider: White Collar Defense and Securities Enforcement

After the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law in 2010, speculation abounded as to whether the ambitious whistleblower bounty program would succeed and about how the Securities and Exchange Commission would support the program. But, in the four years since the bounty program became effective, the SEC has proved that it will do what it takes to make the program successful, including awarding payments totaling over $50 million to whistleblowers; appearing as amicus curiae in support of whistleblowers seeking protection under Dodd Frank’s anti-retaliation provisions; and pursuing companies that retaliate against whistleblowers or attempt to prevent whistleblowers from bringing tips to the SEC. In fact in a recent speech, SEC Chair Mary Jo White dubbed the SEC “the whistleblower’s advocate.” [...]

Related Lawyer: Catherine M. Foti

06.08.15 | Blog Posts

FI-FA Fo Fum: Who Gets to Prosecute Non-Americans

The Insider: White Collar Defense and Securities Enforcement

America seemingly has found a new product to export – its criminal justice system. Many recent high profile criminal cases brought by the Justice Department, including a multi-billion dollar settlement with Swiss bank Credit Suisse for its banking practices in Switzerland and a number of other recent financial industry prosecutions and Foreign Corrupt Practices Act cases, have centered around activity that has occurred mainly overseas. The United States asserts its jurisdiction in these cases because the American banking system or its capital markets and exchanges were somehow involved. [...]

Related Lawyer: Robert J. Anello

05.28.15 | Blog Posts

Deferred Prosecution Agreements - The Going Gets Tougher

The Insider: White Collar Defense and Securities Enforcement

Deferred Prosecution Agreements with the Department of Justice (DPAs) have been a powerful tool of federal white-collar criminal enforcement for a number of years. At the same time, DPAs have been attacked from many sides – judges, elected officials and commentators – for being too lenient on companies and too frequently used in lieu of prosecutions of individuals, as I have discussed in recent posts.

In a series of recent speeches Assistant Attorney General Leslie Caldwell has given a thoughtful defense of DPAs, explaining the basic merits of DPAs (and Non-Prosecution Agreements, or NPAs), while also responding to critics of such agreements. In speeches at the ACAMS Anti-Money Laundering & Financial Crime Conference in March and at NYU on April 14 and 17, AAG Caldwell described DPAs and NPAs as "useful enforcement tools" that allow the Justice Department to "accomplish as much as, and sometimes even more than, [it] could from a criminal conviction." She explained, "[w]e can require that the banks cooperate with our ongoing investigations, particularly in our investigations of individuals. We can require that such compliance programs and cooperation be implemented worldwide, rather than just in the United States. We can require periodic reporting to a court that oversees the agreements for its terms." [...]

Related Lawyer: Jonathan S. Sack

04.23.15 | Blog Posts

Duka v. SEC Redux - SEC Holds Home Court Advantage for Another Round

The Insider: White Collar Defense and Securities Enforcement

Defendants widely view the SEC’s administrative courts as an unfavorable venue to square off against the SEC’s own enforcement staff. Accordingly, as the SEC has recently channeled enforcement proceedings away from the federal courts to its “home” courts, a number of defendants have brought federal court challenges attacking the administrative proceedings on a variety of grounds. Many such challenges have failed to reach the merits, as courts have accepted SEC arguments against the courts’ jurisdiction to interfere with an ongoing agency proceeding and found that defendants are limited to the ordinary post-hearing appellate process to obtain review. In a decision filed last week in Duka v. SEC, Southern District of New York Judge Richard N. Berman ruled that one such challenge seeking to stop an SEC administrative hearing cleared these preliminary hurdles, but ultimately did not make it across the finish line. [...]

Related Lawyer: Richard F. Albert

04.17.15 | Blog Posts

Big Brother Gets Bigger: Installing Independent Monitors Before a Settlement is Signed

The Insider: White Collar Defense and Securities Enforcement

Federal and state regulators frequently rely on independent compliance monitors to ensure that corporate wrongdoers follow-through on correcting the conduct that got them into trouble. Southern District of New York Judge Jed Rakoff has referred to a corporate monitor as both a “financial watchdog” and “an overseer who has initiated vast improvements in the company’s internal controls and corporate governance.” Typically installed as part of a settlement agreement between the government and those companies that have had legal and regulatory issues, the monitors assess and report back to the government on violations of the law and on the effectiveness of the corporation’s compliance and ethics programs. [...]

Related Lawyer: Robert J. Anello

03.26.15 | Blog Posts

Ethical Rules for Social Media Gain Clarity

The Insider: White Collar Defense and Securities Enforcement

On March 10, 2015, the New York County Lawyers Association ("NYCLA") weighed in on the ethical implications for lawyers who use social media websites for professional self-promotion. In Formal Opinion 748, NYCLA addressed the widespread use of LinkedIn and specifically examined (1) whether a LinkedIn profile is considered "Attorney Advertising;" (2) when it is appropriate for attorneys to accept endorsements and recommendations; and (3) what information attorneys should include and exclude from social media profiles. Although the NYCLA opinion does not resolve all open questions about the nature and extent of the information attorneys can post on LinkedIn without running afoul of the New York Rules of Professional Conduct, it answers significant questions left open by two Committees of the New York State Bar Association ("NYSBA"). [...]

Related Lawyer: Catherine M. Foti

03.12.15 | Blog Posts

Meet the Fokker: Continued Judicial Skepticism toward Deferred Prosecution Agreements

The Insider: White Collar Defense and Securities Enforcement

In recent years, the Department of Justice has come to rely on Deferred Prosecution Agreements (DPAs) to resolve many high-profile investigations of corporate wrongdoing. Under DPAs, criminal charges are filed in district court, and prosecution is deferred pending a corporate defendant’s fulfillment of remedial obligations, including payments to the government. [...]

Related Lawyer: Jonathan S. Sack

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 Lawyer: Robert J. Anello

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 Lawyer: Catherine M. Foti

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 Lawyer: Robert J. Anello

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 Lawyer: Jonathan S. Sack

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 Lawyer: Jonathan S. Sack

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 Lawyer: Catherine M. Foti

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 Lawyer: Richard F. Albert

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 Lawyer: Robert J. Anello

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 Lawyer: Robert M. Radick

09/12/2014 | Blog Posts

Did the Summer Shine Any Light on Dodd-Frank Whistleblower Land?

The Insider: White Collar Defense and Securities Enforcement

The summer saw a significant new development in the Securities and Exchange Commission's (“SEC”) whistleblower bounty program but failed to see any development on obtaining clarification as to the reach of the Dodd-Frank Act's whistleblower protection provision. While the SEC was busy finalizing the first-ever award to an employee working in the area of compliance, the courts were intent on taking a break from dealing with whistleblowing employees, and their SEC amici, to achieve clarity on the issue of whether reporting internally, but not to the SEC, is sufficient to fall within the protections of the Dodd-Frank Act’s anti-retaliation provision. [...]

Related Lawyer: Catherine M. Foti

08/27/2014 | Blog Posts

When The Government Chases the Tail of the Dog

The Insider: White Collar Defense and Securities Enforcement

Two recent white-collar cases are examples of a phenomenon that one tends to find when the defense is able to emerge victorious: a case with some core facts that simply do not fit the pattern of wrongdoing expected in the popular conception. The phenomenon is that of the case that trails behind, and that is missing the characteristics that ultimately matter most: the tail, not the dog. [...]

Related Lawyer: Richard F. Albert

08/20/2014 | Blog Posts

Be Careful Where You Whistle While You Work: Courts Impose Limits on Dodd-Frank's Protection for FCPA Whistleblowers

The Insider: White Collar Defense and Securities Enforcement

The Dodd-Frank Wall Street Reform and Consumer Protection Act was heralded as providing whistle-blowing employees protection from retaliation by their employers. In Liu v. Siemens AG, handed down last week, the Second Circuit limited the reach of the Act’s anti-retaliation protections to domestic whistleblowers. In doing so, the Court rejected a claim brought by a Taiwanese lawyer employed by a German corporation who disclosed suspected Foreign Corrupt Practice Act violations by the corporation’s Chinese subsidiary, finding that the relevant provisions of the Dodd-Frank Act did not apply “extraterritorially” [...]

Related Lawyer: Robert J. Anello

08.05.14 | Blog Posts

D.C. Circuit Upholds Claim Of Corporate Attorney-Client Privilege

The Insider: White Collar Defense and Securities Enforcement

A recent blog post addressed a noteworthy decision in United States ex rel. Barko v. Halliburton Co., No. 1:05-CV-1276, 2014 WL 1016784 (D.D.C. Mar. 6, 2014), which held that materials relating to an internal investigation were not protected by the attorney-client privilege. The decision was quickly seen as casting doubt on a company’s ability to conduct a privileged investigation of alleged employee misconduct. A petition for writ of mandamus to the Court of Appeals for the D.C. Circuit followed, along with amicus briefs by groups interested in protection of the privilege. [...]

Related Lawyer: Jonathan S. Sack

07.23.14 | Blog Posts

Big Brother Vs. Underfunded Enforcement

The Insider: White Collar Defense and Securities Enforcement

On July 5, 2014, in an opinion piece entitled “The Real Internal Revenue Scandal,” the editorial board of The New York Times noted that “every dollar spent on internal revenue service enforcement yields $6 in additional revenue.”

I suspect that the SEC would make the same claim, that for every dollar spent on staff attorneys in the Division of Enforcement, the SEC recovers a multiple of that number. [...]

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07.16.14 | Blog Posts

Medicaid Claims And Health Care Fraud: As The Data Flows, New Cracks Emerge

The Insider: White Collar Defense and Securities Enforcement

As we noted in two of our prior posts in the Insider blog, the government has long touted its ability to rely upon data mining as a means of detecting fraud in the federal health care system, and has initiated a host of investigations and prosecutions based on its analysis of claims data from the Medicare and Medicaid programs.  Yet any approach that relies on data mining rests on a fragile foundation, because the quality of the information upon which the government relies has often been in doubt.  As we explained in the first of our two prior posts on this topic, an HHS Regional Inspector General testified in June 2012 that much of the data used to identify overpayments and fraud is not “current, available, complete, [or] accurate.”  Subsequently, in a post from November 2012, we described the concerns that two United States Senators raised regarding the effectiveness of the “Fraud Prevention System Program” (“FPS”), which is intended to use “predictive analysis” to reduce fraud, waste, and abuse in the Medicare program. [...]

Related Lawyer: Robert M. Radick

07.03.14 | Blog Posts

The Second Circuit And The Separation Of Powers: Limiting Judicial Scrutiny Of SEC Settlements

The Insider: White Collar Defense and Securities Enforcement

On June 4, 2014, a three-judge panel of the Second Circuit Court of Appeals vacated a widely publicized 2011 decision by U.S. District Judge Jed Rakoff, which rejected a settlement between the U.S. Securities and Exchange Commission (“SEC”) and Citigroup Global Markets, Inc. (“Citigroup”).  The settlement resolved allegations that Citigroup had misled investors in connection with the structuring and marketing of a fund holding assets that were linked to subprime securities.  The settlement called for a civil penalty of $285 million but did not include admissions of fact or liability by Citigroup. [...]

Related Lawyer: Jonathan S. Sack

06.18.14 | Blog Posts

If You See Something, Say Something, But Maybe Only To The SEC

The Insider: White Collar Defense and Securities Enforcement

A debate has been raging in the courts over whether an employee who reports suspected misconduct only to his employer but not to the U.S. Securities and Exchange Commission (“SEC”) is a “whistleblower” entitled to the protection of the Anti-Retaliation Provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”). Last summer, in Asadi v. G.E. Energy (USA), L.L.C., the Fifth Circuit Court of Appeals – the only federal appellate court to address this issue –ruled that an employee who reported a potential Foreign Corrupt Practices Act (“FCPA”) violation to his employer was not a “whistleblower” because he did not “provide information relating to a violation of the securities laws to the SEC,” contradicting five federal district courts which had found internal reporting to be adequate. (I analyzed the Asadi opinion and its likely effect on internal reporting in “When Is A ‘Whistleblower’ Not Really A ’Whistleblower’?”). A few district courts have since adopted the Fifth Circuit’s interpretation, but most have concluded that, consistent with the SEC’s own rules, internal reporting is sufficient to implicate Dodd-Frank’s protections. [...]

Related Lawyer: Catherine M. Foti

05.22.14 | Blog Posts

Postcards From Paris To The U.S. – An Object Lesson For Those Who Favor Extraterritorial Jurisdiction By U.S. Courts And Regulators

The Insider: White Collar Defense and Securities Enforcement

This story comes to mind now because of the increasing influence of the United States on the world’s regulatory environment, imposing United States views of how things should be run on the rest of the world. This week, the Department of Justice announced that it had reached an agreement with Credit Suisse whereby Credit Suisse agreed to plead guilty to conspiracy to commit tax evasion in the United States and pay a penalty of $2.6 billion. Presumably, most of the conduct at issue took place outside of the United States. But because it had consequences in the United States, the United States government believed that it had the right to punish that conduct. [...]

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05.07.14 | Blog Posts

The British Are Coming: The Redcoats Get Serious About Prosecuting International White-Collar Crime

The Insider: White Collar Defense and Securities Enforcement

United States financial entities and their individual employees should be aware that a new sheriff is in town.  Last week, the United Kingdom’s Serious Fraud Office (SFO) brought criminal charges against three American bankers in connection with its ongoing investigation into the rigging of the interest rate benchmark known as LIBOR.  The SFO’s press release was two sentences in length: “Criminal proceedings by the Serious Fraud Office have commenced today against three former employees at Barclays Bank Plc . . . in connection with the manipulation of LIBOR.  It is alleged they conspired to defraud between 1 June 2005 and 31 August 2007.”  [...]

Related Lawyer: Robert J. Anello

04.30.14 | Blog Posts

Conducting Online Research Of Jurors Just Got Less Perilous – Or Did It?

The Insider: White Collar Defense and Securities Enforcement

Last week, the American Bar Association’s Committee on Ethics and Professional Responsibility (“ABA”) gave lawyers the go-ahead to scour jurors’ or potential jurors’ publicly available social-media accounts, blogs, and websites such as Facebook, LinkedIn and Twitter. Although lawyers might be expected to breathe a sigh of relief that they can now engage in conduct considered acceptable and expected for most other professions without the threat of professional discipline, the opinion actually adds to the confusion about how existing ethical rules are applied in the ever evolving world of social media. Indeed, just two and three years ago respectively, two different New York bar associations concluded that the conduct the ABA just approved could be considered a violation of New York’s Rules of Professional Conduct. Thus, whether and how an attorney can research his or her jury pool may depend entirely on where that jury is sitting. [...]

Related Lawyer: Catherine M. Foti

04.16.14 | Blog Posts

When Is An Internal Investigation Not Privileged?

The Insider: White Collar Defense and Securities Enforcement

Compliance programs have grown in importance along with the demands of new laws and regulations.  These programs are increasingly seen as vital to preventing corporate misconduct or, at least, mitigating sanctions if misconduct is found.

At the same time, company management needs to think through the scope of work assigned to compliance personnel, especially when questionable conduct is detected.  Under these circumstances, an important question should be addressed:  who should look into the misconduct – compliance staff or in-house or external legal counsel? [...]

Related Lawyer: Jonathan S. Sack

04.02.14 | Blog Posts

Punishment Without Cause: Disgorgement And Forfeiture Of Salary And Pensions

The Insider: White Collar Defense and Securities Enforcement

It has become popular among prosecutors and regulators in recent years to claim that officials who engaged in wrongdoing on the job should be forced to surrender every dollar earned on that job.  The U.S. Attorney for the Southern District of New York has issued a policy statement that his office will use federal forfeiture laws to seek to strip the pensions of state officials convicted on federal corruption charges.  Such policy mirrors the position often taken by SEC enforcement lawyers in seeking to disgorge all of the salary and bonuses earned by corporate officials found to have engaged in misdeeds.  The problem with these claims, both as a matter of law and as a matter of fairness, is that they most often fail the basic test of causation. [...]

Related Lawyer: Richard F. Albert

03.20.14 | Blog Posts

Medical Research Fraud And HHS's Office Of Research Integrity: Watching The Watchdog

The Insider: White Collar Defense and Securities Enforcement

Even for those who carefully follow legal developments in the health care fraud arena, the Department of Health and Human Service’s Office of Research Integrity (“ORI”) is an agency that rarely appears on the radar.  According to its website, ORI “oversees and directs Public Health Service (PHS) research integrity activities,” including the integrity of research projects funded by agencies such as the National Institutes of Health (“NIH”) and the Centers for Disease Control and Prevention.  ORI’s primary functions include such tasks as “monitoring” investigations that research institutions conduct when there are allegations of data falsification, and proposing administrative actions against medical researchers found to have fabricated the results of their studies. [...]

Related Lawyer: Robert M. Radick

03.13.14 | Blog Posts

Representing Clients In The Age Of Social Media Is Not As Easy As You Think

The Insider: White Collar Defense and Securities Enforcement

The proliferation of social media over the past decade has drastically changed how people communicate.  Without much thought, people publicly post detailed personal information and photographs documenting their whereabouts and moment-to-moment activities.  In the litigation context, the increase in use of social media has created enormous amounts of discovery material.  Most attorneys are well aware that the personal items and pictures posted on people’s social pages are ripe areas to learn about an opposing party, opposing counsel, potential witnesses, jurors and judges.  Law enforcement agencies too -- like the NYPD, which created a social media unit in 2011 -- are mining social media for information concerning past and prospective criminal activity.  Most laws and rules governing how attorneys may advise their clients concerning the handling of their personal information were developed in the pre-Facebook age.  But, the differences between social media and other forms of discoverable material have altered the legality of attorneys’ actions both substantively and ethically in ways that many attorneys would not expect and in ways that conflict with their experience and instincts.  One problematic – and largely unanswered – question is what advice an attorney can legally and ethically give to a client who has posted potentially incriminating or discoverable material on a social media website. [...]

Related Lawyer: Catherine M. Foti

03.06.14 | Blog Posts

Contorting The Law Of Disgorgement In Contorinis: Disgorging Ill-Gotten Gains That Were Never Gotten

The Insider: White Collar Defense and Securities Enforcement

For all the complexities inherent to securities enforcement litigation, the law of available remedies has been comparatively simple. There are monetary penalties, there are officer-and-director (or other) bars, and there is “disgorgement.” And while penalties are frequently pursued by the Securities and Exchange Commission’s enforcement Staff, and imposed by judges, based on an opaque hash of factors ranging from the seriousness of the offense to the defendant’s personal character and circumstances, demands for the disgorgement of ill-gotten gains traditionally have been straightforward in both theory and application. Because disgorgement ostensibly is not intended to be punitive, and its principal purpose is to prevent culpable defendants from retaining the financial benefits of their transgressions, disgorgement-related fights between the SEC and litigants historically have centered on fixing, and then forfeiting, the amounts actually received by defendants through their own wrongdoing. [...]

03.06.14 | Blog Posts

Destitute Before Proven Guilty: Supreme Court OKs Asset Seizure In White-Collar Cases That Bars Defendants' Ability To Retain Counsel

The Insider: White Collar Defense and Securities Enforcement

The Supreme Court’s February 25 decision in Kaley v. United States creates a significant hurdle for white-collar defendants seeking to retain qualified counsel to defend against the government’s allegations.  Ruling that defendants cannot, prior to trial, challenge a grand jury’s probable cause determination that allows the government to bar a defendant’s access to assets linked to the alleged crime, the Court’s decision, according to the dissent, allows the government “to initiate a prosecution and then, at its option, disarm its presumptively innocent opponent by depriving him of his counsel of choice – without even an opportunity to be heard.”  In cases such as Kaley, where the government convinced the grand jury to charge on a novel or untested theory, the result poses a particularly difficult challenge for a white-collar defendant. [...]

Related Lawyer: Robert J. Anello

02.12.14 | Blog Posts

Health Care Self-Disclosure Protocols – Is It Worth It To Self-Report?

The Insider: White Collar Defense and Securities Enforcement

In recent years the federal government has aggressively investigated and prosecuted pharmaceutical companies and health care providers for possible violations of anti-fraud, anti-kickback and other laws. These efforts have resulted in massive fines and financial penalties. [...]

Related Lawyer: Jonathan S. Sack

02.05.14 | Blog Posts

Extradition Italian Style: Knock, Knock, Knocking On Amanda Knox's Door

The Insider: White Collar Defense and Securities Enforcement

The ins-and-outs of extradition law increasingly are relevant as global commerce and international travel emerge as the norm, exposing citizens of one nation to the laws of other nations.  I previously have written on the process by which the United States typically seeks the return of fugitives to this country to stand trial.  Last week’s decision by an appellate court in Florence, Italy convicting American citizen Amanda Knox and her former boyfriend of the stabbing death of Knox’s roommate in 2007 raises questions regarding the flip side of the coin – how the United States government responds when another country seeks extradition of one of its citizens. [...]

Related Lawyer: Robert J. Anello

01.15.14 | Blog Posts

Out-Of-Balance: Basic Flaws In The Brady System

In recent years, the repeated, notable failures of the Brady disclosure regime by which prosecutors are required to produce evidence favorable to the accused in criminal cases have led to a cascade of criticism and growing calls for change.  A recent opinion by Chief Judge Alex Kozinski of the Ninth Circuit Court of Appeals, dissenting from the denial of review by the entire court in United States v. Olsen, opens with the memorable words: “There is an epidemic of Brady violations abroad in the land.  Only judges can put a stop to it.”  The forceful opinion, which provoked a number of editorials in leading newspapers,  provides an illustration of some of the basic flaws of the Brady disclosure system. [...]

Related Lawyer: Richard F. Albert

01.08.14 | Blog Posts

Stephen Cutler Has A Point About The Increasing Size Of Settlements

The Insider: White Collar Defense and Securities Enforcement

In late November, J.P. Morgan, the Justice Department and other agencies reached a $13 billion settlement over practices involving mortgage securities.  Three days later, J.P. Morgan’s General Counsel, Stephen Cutler, participated in a panel discussion hosted by a trade group named The Clearing House.  According to a November 25 article in the The Wall Street Journal, Mr. Cutler remarked, “At what point does this stop?,” referring to fines for J.P. Morgan and other banks. [...]

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12.23.13 | Blog Posts

Insider Trading And Conscious Avoidance: Handling The Government's Most Powerful Prosecutorial Tool

The Insider: White Collar Defense and Securities Enforcement

The recent conviction of Michael Steinberg, a former senior trader at SAC, highlights the power of the government to obtain a conviction when armed with the ability to have a jury charged on a conscious avoidance theory of fraud.  The case proceeded without any direct evidence establishing that Mr. Steinberg explicitly knew that the information provided to him was improper inside information. Sure, there was testimony that Mr. Steinberg wanted his assistant Jon Horvath to obtain “edgy” or “proprietary” information, but Horvath did not testify that Mr. Steinberg expressly directed him to improperly obtain confidential information nor was their evidence that demonstrated that Mr. Steinberg actually knew where and how Horvath obtained the information.  Indeed, Horvath conceded that Mr. Steinberg never told him to break the law in obtaining his trading information.   And, Mr. Steinberg was not the direct recipient of the information—he was five people removed from the source of the confidential information. [...]

Related Lawyer: Benjamin S. Fischer

12.11.13 | Blog Posts

Selective Waiver In The Second Circuit -- Is It Dead, Or Just Dying?

The Insider: White Collar Defense and Securities Enforcement

When the government launches an investigation of a company, senior management typically calls for an internal investigation of the facts and tries to cooperate by sharing with the government the information that is gathered.  At the same time, management wants to avoid producing that information, which is ordinarily protected by attorney-client privilege, in litigation brought by private claimants.  That is, the company seeks to make a “selective waiver” of the privilege. […]

Related Lawyer: Jonathan S. Sack

12.04.13 | Blog Posts

Should College Athletics Go Corporate?

The Insider: White Collar Defense and Securities Enforcement

Athletics can be an important part of the college experience, helping to build a sense of community and loyalty that can last a lifetime. While some have advocated paying college athletes to address the perceived hypocrisy of student-athletes generating millions in revenues in exchange for scholarships, that step will not mitigate many of the risks facing athletic departments. Rather, colleges and universities should follow the lead of corporate America and invest in their compliance programs in light of the potentially devastating impact of sanctions. [...]

Related Lawyer: Jeremy H. Temkin

11.20.13 | Blog Posts

The SEC's 2013 Whistleblower Report: Things Left Unsaid

The Insider: White Collar Defense and Securities Enforcement

Released late last week, the Securities and Exchange Commission’s 2013 Annual Report on the Dodd-Frank Whistleblower Program (the “Report”) revealed that the program has continued to grow in popularity. The Report, however, also reveals the seeds of what may become the program’s future tribulations.

As anticipated, the program certainly appears to be attracting more participants both at home and abroad. The SEC previously reported that it received 3,001 tips, complaints and referrals for fiscal year 2012. That number was up roughly 8%, for a total of 3,238 tips for fiscal year 2013, bringing the total number of tips from whistleblowers since the program’s inception in August 2011, to 6,573. Moreover, the number of those tips, complaints, and referrals which originated from abroad increased by almost 25% in fiscal year 2013 – from 324 in fiscal year 2012 to 404 in fiscal year 2013. The Report also demonstrated that the vast majority of the tips continue to come from generally the same states and countries as they did in 2012, with California, New York, Florida and Texas again leading the pack for the states, and China outpacing India (which fell to fifth place behind Russia this year) to take over the number three spot behind the leaders for the past two years, United Kingdom and Canada. [...]

Related Lawyer: Catherine M. Foti

11.13.13 | Blog Posts

The Anti-Kickback Statute And The Affordable Care Act: A Law Enforcement Tool Suddenly Goes Missing

The Insider: White Collar Defense and Securities Enforcement

With the aggressive pursuit of cases against the pharmaceutical and device industries (including the recent $2.2 billion settlement with Johnson & Johnson), the implementation of Medicare Fraud Strike Forces in major cities throughout the country, and an increase in the potential criminal penalties under the United States Sentencing Guidelines, the federal government’s determination to root out health care fraud has long seemed vigorous and unrelenting. The government has repeatedly touted its continuing dedication to fighting waste and abuse in health care, and has treated this dedication as part and parcel of its efforts to implement health care reform.  Indeed, in a press release issued after the enactment of the health-care reform law, the Department of Health and Human Services (HHS) proclaimed that joint efforts on the part of HHS and the Department of Justice to fight fraud and abuse in the health care industry “will continue to improve with the new tools and resources provided by the Affordable Care Act.” [...]

Related Lawyer: Robert M. Radick

11.06.13 | Blog Posts

Better News For White-Collar Defendants: Okatan Responds To The Supreme Court's Salinas Decision

The Insider: White Collar Defense and Securities Enforcement

The Supreme Court’s June 2013 decision United States v. Salinas raised a few eyebrows among white-collar practitioners because its focus on the need to expressly invoke the Fifth Amendment in order to obtain its protections had broad potential implications. In a recent decision, United States v. Okatan, the Second Circuit correctly answered the question the Supreme Court avoided in Salinas, and also confirmed the long accepted principle that asking for counsel is effective to invoke the Fifth Amendment. Although, like Salinas, Okatan was not a white-collar case, its reasoning and result will be welcome to anyone concerned about the rights of those facing law enforcement scrutiny in the business context, or any other. [...]

Related Lawyer: Richard F. Albert

10.30.13 | Blog Posts

First JPMorgan -- Now Rabobank Versus The United States: Taking One For The Team?

The Insider: White Collar Defense and Securities Enforcement

2013 marks the five-year anniversary of the financial crisis of 2008.  I noted in January that this would play a significant role in white-collar enforcement and regulation in 2013, forcing the government either to act or to abandon forever certain investigations related to the crisis because of the five-year statute of limitations for enforcement actions. In addition to the looming deadline, the government has had to deal with repeated criticism of its overall response to the financial crisis, specifically what some perceive as its poor track record in obtaining criminal convictions.  The government’s money laundering case against British bank HSBC serves as an example – the $1.9 billion settlement and deferred prosecution agreement (DPA) elicited cries that banks and financial institutions were perceived as “too big to jail” and prompted Congressional hearings on the subject. [...]

Related Lawyer: Robert J. Anello

10.09.13 | Blog Posts

More Incentives For Whistleblowers: New York Considers A New Law To Reward And Protect Whistleblowers

The Insider: White Collar Defense and Securities Enforcement

In recent years we have seen two trends of great importance to the conduct and defense of government investigations – one, the growth of state agency investigations of matters previously handled on the federal level, and two, the growth of whistleblowing as a basis for government investigations.  These two trends have come together in a proposed New York State law that would establish whistleblower bounties and protections for information given to the New York State Department of Financial Services (“DFS”) – a super agency formed in October 2011 to regulate banks and insurance companies in New York. [...]

Related Lawyer: Jonathan S. Sack

10.02.13 | Blog Posts

Employers Beware: Will The SEC Be A Safety Net For Terminated Whistleblowers?

The Insider: White Collar Defense and Securities Enforcement

Commentators, employers and especially whistleblowers have paid a tremendous amount of attention to the whistleblower bounty provisions of the Dodd-Frank Act.  Much less attention has been paid to an SEC rule implementing the anti-retaliation provisions of that Act, giving the SEC enforcement authority against employers who retaliate against their whistleblowing employees.  The SEC has not yet brought an enforcement action for retaliation, but recent statements by SEC officials indicate that the agency is looking for just such a case to test the bounds of its authority. […]

Related Lawyer: Catherine M. Foti

09.25.13 | Blog Posts

The DOJ Ratchets Up Its Crackdown On Swiss Bank Accounts

The Insider: White Collar Defense and Securities Enforcement

In my last post, I discussed the possibility that Bitcoins and other virtual currencies could replace Swiss bank accounts as the tax havens of the future.  Recent developments in the government’s war on offshore accounts suggest that taxpayers bent on avoiding detection of their assets will need to find a new vehicle soon.
 
The government’s aggressive steps to stamp out the use of bank accounts in Switzerland and other tax havens have been well documented, including here and here.  To summarize, in 2008, the government initiated a criminal investigation against Swiss banking giant, UBS.  This investigation ultimately led to a deferred prosecution agreement with UBS pursuant to which the bank paid $780 million and disclosed the identity of approximately 4,500 U.S. accountholders, as well as the criminal prosecution of one Swiss bank (Wegelin & Co.) and numerous taxpayers, bankers and other professionals. [...]

Related Lawyer: Jeremy H. Temkin

09.18.13 | Blog Posts

Protecting The Rich Or The Poor: The SEC Division Of Enforcement

The Insider: White Collar Defense and Securities Enforcement

Should the SEC devote more resources to supervising the activities of hedge funds in which sophisticated investors invest, or should it devote more resources to investment advisor fraud, where the victims are less able to fight back against wrongdoers?  What is the correct balance for the SEC’s use of its precious resources?

This very question was raised last week in a letter to SEC Chair Mary Jo White by Congressmen Jeb Hensarling (R-Tex) and Scott Garrett (R-NJ), acting respectively as Chairman of the House Committee on Financial Services and Chairman of the Subcommittee on Capital Markets and Government Sponsors Enterprises. […]

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09.11.13 | Blog Posts

The Supreme Court's Sekhar Decision: More Than A Pyrrhic Victory

The Insider: White Collar Defense and Securities Enforcement

Announced the same day as its path-breaking gay marriage decision, the Supreme Court’s ruling in Sekhar v. United States, addressing the definition of “property” for purposes of an extortion prosecution under the Hobbs Act, got a bit lost in the hubbub.  Both because the Hobbs Act is an important and oft-used weapon in the government’s arsenal, and because the decision appears to be part of a broader trend to cut back on some judge-made rules that have expanded the reach of statutes used to prosecute white-collar crime, the decision is worth a closer look. [...]

Related Lawyer: Richard F. Albert

09.03.13 | Blog Posts

What Happens Outside The USA, Stays Outside The USA: Reining In The Extraterritorial Reach Of Criminal Securities Laws

The Insider: White Collar Defense and Securities Enforcement

Criminal securities laws do not reach transactions that occur outside the United States. This is the conclusion of the Second Circuit Court of Appeals which last Friday applied the Supreme Court’s reasoning in Morrison v. National Australia Bank to criminal cases. In United States v. Vilar, the Second Circuit held that without specific authority from Congress to do so, the federal government cannot prosecute foreign activity.

Counsel for corporations conducting multinational business should take note – this decision marks a significant setback for United States prosecutors’ efforts to police global business conduct. Its effects will not only be felt in securities fraud cases, but may well extend to other cases involving international activity. In Vilar, Judge Jose A. Cabranes, writing for a unanimous panel, considered the validity of the convictions of Alberto Vilar and Gary Alan Tanaka, two prominent investment managers and advisers. Vilar and Tanaka were found guilty by a jury of lying to clients about the nature and quality of certain investments.  On appeal, the defendants argued that they could not be held criminally liable for securities fraud because the securities purchases at issue occurred outside the United States. [...]

Related Lawyer: Robert J. Anello

08.29.13 | Blog Posts

Sentences, Prosecutors, Costs, Oh My: A Conversation With A White Collar Bar Legend.

The Insider: White Collar Defense and Securities Enforcement

Lawrence S. Bader interviews his partner of many years, Paul R. Grand, who is one of the Bar’s leading white collar criminal defense attorneys, with extensive experience handling complex criminal and civil matters in state and federal trial and appellate courts throughout the country.  Paul  successfully defended Afshin Mohebbi, the former President of Qwest Communications International, Inc., in SEC v. Nacchio, et al. in the District of Colorado. He also defended Timothy Rigas, the former Chief Financial Officer of Adelphia Communications Corporation, in U.S. v. Rigas, et al. in the Southern District of New York.  And most recently Paul represented Anil Kumar, a key witness at the trial of Raj Rajaratnam, and successfully argued for a sentence of probation.

As a former Assistant U.S. Attorney for the Southern District of New York and Chief of its Securities Frauds Unit, and a defense lawyer for 43 years, Paul’s thoughts on the white collar defense practice and the cause of justice are always welcome.  Lawrence Bader has practiced law with Paul for 32 of those 43 years. [...]

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08.14.13 | Blog Posts

Goodbye Switzerland, Hello Bitcoins

The Insider: White Collar Defense and Securities Enforcement

Bitcoins are everywhere. Last week, a federal judge in Texas held that the virtual currency qualifies as a form of money and allowed the SEC to charge a promoter of a scheme to invest in bitcoins with violations of the federal securities laws. Earlier this week, the New York Department of Financial Services issued subpoenas to 22 virtual currency companies with an eye to determining whether the industry needs new regulations, and the Senate Homeland Security and Government Affairs Committee asked several federal agencies for information regarding their policies with respect to bitcoins and other virtual currencies. Combined, these actions will undoubtedly fuel calls to regulate the burgeoning virtual currency market, and the IRS will surely be getting in the action soon. [...]

Related Lawyer: Jeremy H. Temkin

08.07.13 | Blog Posts

When Is A 'Whistleblower' Not Really A 'Whistleblower'?

The Insider: White Collar Defense and Securities Enforcement

Question:  When is a “whistleblower” not really a “whistleblower”?
 
Answer:  When an employee reports potential misconduct only to his or her employer and that employer happens to be located in the Fifth Circuit.
 
Since the promulgation of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd Frank”), five federal district courts have held that employees who report suspected wrongdoing to upper management, but not to the U.S. Securities and Exchange Commission (“SEC”), are “whistleblowers” for purposes of the Act, entitled to the protection of Dodd Frank’s anti-retaliation provisions.  Going against the tide, in a recent ruling in Asadi v. G.E. Energy (USA), L.L.C., the Fifth Circuit Court of Appeals – the first Circuit Court to address this issue – has held exactly the opposite, ruling that an employee who reported a potential Foreign Corrupt Practices Act violation to his employer, G.E. Energy(USA), L.L.C., was not a “whistleblower” because he did not “provide information relating to a violation of the securities laws to the SEC.” [...]

Related Lawyer: Catherine M. Foti

07.31.13 | Blog Posts

A Plant Grows In Brooklyn: EDNY Judge Scrutinizes Deferred Prosecution Deal

The Insider: White Collar Defense and Securities Enforcement

A deferred prosecution agreement (“DPA”) has become a common means of resolving a federal criminal investigation of a company. Under a DPA, criminal charges against the company are filed in court, but prosecution of the case is deferred, while the company takes remedial measures agreed upon with the prosecutor. Everyone expects the charges to be dismissed down the road.  Until recently, federal courts have approved these deals with little or no scrutiny. [...]

Related Lawyer: Jonathan S. Sack

07.25.13 | Blog Posts

The Glaxo-China Bribery Scandal: A New Policeman Walks the Beat

The Insider: White Collar Defense and Securities Enforcement

When it comes to allegations of foreign bribery, what a difference a week can make.  Just over ten days ago, a new player in the world of international bribery – the Chinese Ministry of Public Security – announced that it was investigating senior executives in the Chinese division of British pharmaceutical company GlaxoSmithKline for allegedly offering bribes to officials and doctors in order to boost company sales.  GSK responded at the time with the respect and deference that one would anticipate, stating that it takes “all allegations of bribery and corruption seriously” and that it would fully cooperate with the Chinese authorities.  Regarding the merits of the allegations, however, GSK stated that the company had already conducted an investigation and “found no evidence of bribery or corruption of doctors or government officials.” [...]

Related Lawyer: Robert M. Radick

07.10.13 | Blog Posts

Not Your Average Asylum Seeker: Avoiding Extradition Snowden Style

Edward Snowden, the former technical contractor for the National Security Agency who caused quite a sensation by disclosing highly classified documents that reveal the existence and scope of the United States government’s system of monitoring Internet and telephone communications, is not your average asylum-seeker. Snowden has been charged with theft of government property and espionage. By the time the information held by Snowden was leaked to the world last month, he already had fled the United States and taken refuge in Hong Kong. When the United States sought Snowden’s return through its extradition treaty with Hong Kong, Hong Kong officials apparently chose to deal with the political hot potato Snowden has become by asking him to leave. Since June 23, Snowden has been holed up in an airport in Russia. Media reports indicate that Snowden is attempting to avoid extradition altogether by seeking asylum from at least 20 different countries. Although many observers are focused on whether Snowden qualifies for asylum, the question arises – if Snowden’s asylum application is accepted, will his case dilute the asylum process and the safety it provides to the vulnerable individuals who typically seek its protections. [...]

Related Lawyer: Robert J. Anello

06.27.13 | Blog Posts

Rajaratnam Appeal: Is Snowden Right That Big Brother Is Listening?

On Monday, the Second Circuit Court of Appeals in Manhattan affirmed the 2011 insider trading conviction of Raj Rajaratnam, founder of the Galleon Group hedge funds. The case against Rajaratnam, who is serving a sentence of 132 months imprisonment, was constructed using, among other evidence, 45 secretly recorded phone calls from Rajaratnam’s cell phone during which he shared confidential information about publicly traded companies. The trial court found that the government had acted with “reckless disregard for the truth” in obtaining permission to wiretap Rajaratnam’s phone. A unanimous three-judge panel of the Court of Appeals disagreed. The decision is significant, especially because the investigation into Rajaratnam’s behavior, which also implicated the former director of Goldman Sachs Rajat K. Gupta, is the most prominent example of the use of wiretaps typically associated with organized crime and drugs cases in white collar prosecutions. [...]

Related Lawyer: Robert J. Anello

06.26.13 | Blog Posts

Imagine This -- Détente Between the Right and the Left On Prison Reform!

The Insider: White Collar Defense and Securities Enforcement

Can you imagine political conservatives advocating prison reform? It is hard to imagine if you are old enough to remember the infamous Willie Horton ads from the 1988 U.S.Presidential race. Willie Horton was a convicted murderer who did not return from furlough, and ultimately committed assault, armed robbery and rage. The campaign of George H.W. Bush seized on the case of Willie Horton in an effort to portray Democratic candidate, Michael Dukakis, as soft on crime. [...]

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06.19.13 | Blog Posts

The Supreme Court's Decision in Salinas v. Texas: Implications for White Collar Investigations

The Insider: White Collar Defense and Securities Enforcement

At the outset of a white collar investigation, counsel will invariably advise the client that if a government investigator unexpectedly appears seeking to “just ask a few questions,” the client should politely decline and direct the investigator to counsel. Although the Supreme Court’s decision this past Monday, June 17, 2013 in Salinas v. Texas relates to police questioning in the context of a murder investigation, it has implications for this common aspect of white collar investigations. […]

Related Lawyer: Richard F. Albert

06.13.13 | Blog Posts

SOX And Whistleblowers - Any Fraud Will Do

The Insider: White Collar Defense and Securities Enforcement

Section 806 of the Sarbanes-Oxley Act (“SOX”) prohibits publicly-traded companies from retaliating against employees who report various acts of wrongdoing to their employers. Employers have consistently attempted to narrow the protections afforded employees under this section, arguing that SOX covers only reports of conduct amounting to a fraud on the company’s shareholders. Now, a recent Tenth Circuit opinion, Lockheed Martin Corp. v. Admin. Review Bd., U.S. Dep’t of Labor, 11-9524, 2013 WL 2398691 (10th Cir. June 4, 2013), has held that the employers’ narrow reading is wrong and that Section 806 is significantly broader, essentially finding that a report identifying any fraud or violation of an SEC regulation, even if it does not impact shareholders, triggers SOX’s protections. Although attorneys representing management have suggested that this opinion will not change the way employers deal with whistleblowers, it should. […]

Related Lawyer: Catherine M. Foti

05.29.13 | Blog Posts

Caronia And The First Amendment Defense To Off-Label Marketing: A Six Month Re-Assessment

The Insider: White Collar Defense and Securities Enforcement

When the Second Circuit issued its December 3, 2012 decision in United States v. Caronia, the opinion was proclaimed by many to signal a sea change in the prosecution of off-label promotion. Alfred Caronia, a former sales representative for the pharmaceutical company Orphan Medical, had been convicted at trial of conspiring to promote the drug Xyrem for uses not approved by the Food and Drug Administration ("FDA"). On appeal, Caronia advanced an argument that had been pursued by others for years, and had, in Caronia’s case, failed to persuade the district court: that the First Amendment protected his truthful promotion of a drug for indications not approved by the FDA. After over two years in which observers eagerly anticipated a ruling, the Second Circuit issued a two-to-one decision in which the majority vacated Caronia's conviction on the ground that it impermissibly criminalized protected speech and violated his First Amendment rights. [...]

Related Lawyer: Robert M. Radick

05.16.13 | Blog Posts

New Justice Department’s FIRREA Cases Against Banks: Holding The Victim Responsible

The Insider: White Collar Defense and Securities Enforcement

The government's ever-evolving response to the United States financial crisis has come full circle, as civil Justice Department Attorneys seek to rely on legislation enacted to protect financial institutions from fraud to sue those very same institutions. Recently, the United States Attorney's Office for the Southern District of New York has initiated a number of law suits under the "obscure" Financial Institutions Reform Recovery Enforcement Act (FIRREA). FIRREA was enacted in 1989 in response to the massive failure of almost half of America's savings and loan institutions. In its 24 year history, the law typically has been used to bring suit against officers and directors of failed institutions. The government now seeks to expand the statute's reach to include the institutions themselves. [...]

Related Lawyer: Robert J. Anello

05.09.13 | Blog Posts

Law Enforcement In The Health Care Industry: What Do New Cases Against Novartis Tell Us?

The Insider: White Collar Defense and Securities Enforcement

In recent years, pharmaceutical companies have faced criminal investigations and charges in regard to alleged off-label marketing of prescription drugs and kickbacks to doctors. For this reason, the filing last month of two civil cases against Novartis was noteworthy and may aid defense lawyers in their efforts to oppose criminal charges being filed against clients in the health care industry. [...]

Related Lawyer: Jonathan S. Sack

05.01.13 | Blog Posts

Bank Leumi Snafu Jeopardizes DOJ-IRS Offshore Enforcement Initiatives

The Insider: White Collar Defense and Securities Enforcement

Three times over the past four years, the IRS has given taxpayers with undisclosed offshore accounts the opportunity to come clean and avoid prosecution. While the most recent offer – the 2012 Offshore Voluntary Disclosure Program (OVDP) – remains open indefinitely, the IRS's recent decision to disqualify approximately 50 taxpayers who disclosed Bank Leumi accounts could undermine the program's continued success. [...]

Related Lawyer: Jeremy H. Temkin

04.23.13 | Blog Posts

Judging The SEC’s Division Of Enforcement With 20/20 Foresight

The Insider: White Collar Defense and Securities Enforcement

I almost feel sorry for Mary Jo White, the Chairman of the SEC, and Andrew Ceresney and George Canellos, soon to be Co-Directors of the SEC’s Division of Enforcement. Four days after Ms. White was sworn in, Gretchen Morgenson of the New York Times was reminding Ms White on page one of the Times' Sunday Business Section that time was running out on the SEC's ability to bring cases based on "questionable practices and disclosures arising from the mortgage bust of 2008." [...]

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04.17.13 | Blog Posts

Is The Medium The Message? Netflix’s Decision To Post Material Information On Social Media Channels

The Insider: White Collar Defense and Securities Enforcement

The news is out! There's a buzz in the blogosphere. It's trending on Twitter. The Securities and Exchange Commission has authorized the use of social media channels for the disclosure of material, non-public information. In a Report of Investigation released earlier this month, announcing that its Division of Enforcement determined not to pursue an enforcement action against Netflix, Inc. and its Chief Executive Officer Reed Hastings, the SEC provided guidance regarding how issuers using social media channels to disseminate material non-public information may comply with Regulation FD and the Commission's August 2008 Guidance on the Use of Company Web Sites. [...]

Related Lawyer: Catherine M. Foti

04.10.13 | Blog Posts

A Trend? Another Ruling That Mailing Does Not Support Mail Fraud

The Insider: White Collar Defense and Securities Enforcement

Two decisions do not ordinarily a trend make. But when New York federal judges author two circuit court opinions, issued within approximately three months of each other, dismissing mail fraud claims for failing to satisfy the "mailing" requirement, it is worth noting. [...]

Related Lawyer: Richard F. Albert

04.04.13 | Blog Posts

The Cahill Prosecution In Massachusetts: Vagueness Is Still A Problem After Skilling

The Insider: White Collar Defense and Securities Enforcement

Vagueness is a common problem in white-collar criminal cases. In many instances the line between legal and illegal conduct is blurry at best. This means that someone could face prosecution, a damaged reputation, loss of livelihood and prison time for conduct he or she did not know, and could not reasonably have known, was criminal. [...]

Related Lawyer: Jonathan S. Sack

03.28.13 | Blog Posts

Restatements Resurrected?: Accounting Fraud By The Numbers

The Insider: White Collar Defense and Securities Enforcement

Several months ago, I raised the question of why the large-scale accounting fraud cases of the type that had been so prevalent in the early 2000s were no longer a staple for either federal prosecutors or the SEC. In so doing, I was not the only one to have noted a dramatic shift away from such cases towards investigations involving Ponzi [...]

03.20.13 | Blog Posts

ProPublica's "Dollars for Docs": Will The Physician Payments Sunshine Provisions Clear The Haze?

The Insider: White Collar Defense and Securities Enforcement

On February 1, 2013, the Centers for Medicare and Medicaid Services (CMS) published the long-delayed final rule that is intended to implement the Physician Payments Sunshine provisions that were included in the Patient Protection and Affordable Care Act. Under these provisions, which were passed in March 2010 and were originally due to be implemented in 2012, doctors and teaching hospitals will be required to report the payments that they receive from pharmaceutical and device manufacturers, with the stated goal being to shed light on the financial relationships between physicians and the industry. [...]

Related Lawyer: Robert M. Radick

03.14.13 | Blog Posts

Harvard's Secret E-Mail Search: The Intersection of Internal Investigations and Digital Privacy

The Insider: White Collar Defense and Securities Enforcement

Earlier this week, Harvard University acknowledged the fact that, in the wake of last summer's cheating scandal that rocked the campus, it had secretly searched the e-mail accounts of 16 Resident Deans. The e-mail search was undertaken last August in an effort to determine who had leaked to the media a "confidential" internal e-mail regarding the cheating and also to determine whether any personal student information had been leaked. Harvard did not acknowledge the fact that it had searched the e-mails until this week, seven months after the searches and only after the Boston Globe broke the story. In the days since Harvard’s surreptitious e-mail search became public, the University has fallen under enormous criticism from faculty, administrators and privacy advocates, all of whom feel blindsided and violated by the University's unannounced and undisclosed search of electronic data. But Harvard's approach highlights the interesting and complex issues surrounding the competing concerns companies and institutions have in both conducting thorough internal investigations while, simultaneously, protecting the privacy interests of their employees in the digital age. [...]

Related Lawyer: Benjamin S. Fischer

03.07.13 | Blog Posts

Twists, Turns, PIPEs, And Screws: Insider Trading And Mark Cuban

The Insider: White Collar Defense and Securities Enforcement

On Tuesday, March 5, the SEC’s insider trading case against billionaire Dallas Mavericks owner Mark Cuban took a new twist when a federal district court in Texas declined to end the 2008 civil enforcement action. The SEC alleges that Cuban engaged in insider trading when he sold 600,000 shares of Mamma.com Inc., a company in which he was the largest shareholder, after learning the company intended to offer a private investment in public equity (PIPE). Although the Court characterized the evidence against Cuban as “spotty,” “brief,” and “ambiguous,” it nevertheless concluded that the case should be allowed to proceed to trial because, according to the Court, certain understandings that Cuban would not disclose or trade based upon confidential information he received, may have been “implicit” in the communications between Cuban and company insiders. Unfortunately, the Court’s decision, a self-proclaimed “close” call, further muddies the waters of insider trading law. [...]

Related Lawyer: Robert J. Anello

02.27.13 | Blog Posts

Required Records, The Act Of Production And Secret Offshore Accounts

The Insider: White Collar Defense and Securities Enforcement

The Fifth Amendment dictates that no person "shall be compelled in any criminal case to be a witness against himself." While most non-lawyers (and many lawyers) might assume that this simple edict means the government cannot force an individual to produce incriminatory documents, the law is far more muddled. And lawyers representing taxpayers with undisclosed offshore accounts are asking the United States Supreme Court to clarify the scope of the privilege against self-incrimination in this important context. [...]

Related Lawyer: Jeremy H. Temkin

02.27.13 | Blog Posts

Supreme Court in Gabelli: Clock Starts Ticking When Fraud Occurs, Not When It's Discovered

The Insider: White Collar Defense and Securities Enforcement

The law requires the SEC to bring enforcement actions seeking penalties against individuals who violate the securities laws within five years. The Supreme Court issued a unanimous ruling today that rejects the SEC’s argument that the five year clock begins to tick when they discover any alleged wrongdoing rather than the date on which the wrongdoing was committed. The author previously has suggested that the application of the SEC’s proposed "fraud discovery rule" by a government agency charged with investigation and enforcement would be counter-productive and effectively would eliminate the five year statute of limitations. To put this into context, [...]

Related Lawyer: Robert J. Anello

02.20.13 | Blog Posts

The Nomination Of Mary Jo White: More Than Just Politics

The Insider: White Collar Defense and Securities Enforcement

The President's nomination of Mary Jo White to become Chairman of the SEC has generated reservations as well as praise. Naysayers wonder whether her years in private practice representing banks and bankers, including J.P. Morgan Chase, Kenneth Lewis of Bank of America andJohn Mack of Morgan Stanley, will make it impossible for her to “switch sides” and hold financial companies accountable for violations of the law. [...]

Related Lawyer: Jonathan S. Sack

02.13.13 | Blog Posts

Down The RICO Rabbit Hole: John Reynolds And The Hospital For Special Surgery

The Insider: White Collar Defense and Securities Enforcement

To state that the federal RICO statue has long since slipped the bounds of Congress’s original intent is hardly a novel observation. Although the U.S. Attorney’s Manual points out that "the purpose of the RICO statute is 'the elimination of the infiltration of organized crime and racketeering into legitimate organizations,'" the very same paragraph of the Manual proclaims that "the statute is sufficiently broad to encompass illegal activities relating to any enterprise affecting interstate or foreign commerce." The varied range of successful federal prosecutions premised on the RICO statute only proves the point, and numerous industries, including health care, have thus come within the statute's reach. [...]

Related Lawyer: Robert M. Radick

02.06.13 | Blog Posts

Lance Armstrong – Rorschach Test

The Insider: White Collar Defense and Securities Enforcement

The criminal justice system – particularly at sentencing – necessarily puts an unflattering light on those who have committed crimes. Prosecutors correctly inform the sentencing court of the bad deeds that resulted in the defendant’s conviction. Probation Officers also traditionally focus on the crime, and ignore (or give short shrift) to the defendant’s good deeds. [...]

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01.30.13 | Blog Posts

Mary Jo White as SEC Chairman

The Insider: White Collar Defense and Securities Enforcement

President Obama's recent naming of Mary Jo White to be Chairman of the SEC has been greeted with praise from almost all quarters. But because she is best known for her highly successful tenure as a federal prosecutor, in response to the news of her current appointment, some have raised questions about, as the New York Times put it, her “command of Wall Street arcana” because “[r]egulatory chiefs are often market experts or academics.” [...]

Related Lawyer: Richard F. Albert

01.23.13 | Blog Posts

White Collar Practice In 2013: An Old Look For A New Year?

The Insider: White Collar Defense and Securities Enforcement

2012 was a big year in the government's pursuit of white collar crime. 2013 – the five year anniversary of the financial crisis – brings new legislators, new regulators, and the possibility that a looming statute of limitations may compel authorities to act or forever abandon certain investigations that arose as a result of the economic crisis. Nevertheless, the landscape of white collar enforcement and financial regulation in the coming year is likely to look familiar. [...]

Related Lawyer: Robert J. Anello

01.16.13 | Blog Posts

It's Time For The SEC To Join The Digital Age: Why The SEC's Attempted Crackdown On The Use Of Social Media Is Misguided

The Insider: White Collar Defense and Securities Enforcement

Early last month, Netflix disclosed the fact that it and its Chief Executive Officer, Reed Hastings, had received “Wells Notices” from the Staff of the Securities and Exchange Commission. Those Wells Notices threatened civil claims and cease and desist proceedings against the company and Mr. Hastings predicated on Mr. Hastings' June 2012 Twitter post touting the fact that Netflix users had streamed more than 1 billion hours of video that month. The SEC believes that Mr. Hastings' post potentially violated SEC Regulation Fair Disclosure (Regulation FD), which requires companies and their representatives to disclose material nonpublic information through the filing of a Form 8-K [...]

Related Lawyer: Benjamin S. Fischer

01.09.13 | Blog Posts

Will The NLRB’s Protection Of Water Cooler Conversations Trump A Company’s Right To Keep Its Investigations Confidential?

The Insider: White Collar Defense and Securities Enforcement

Over the past year, the National Labor Relations Board has issued a series of decisions that have significantly expanded the rights of non-supervisory employees, including non-unionized employees, to discuss information that many employers would consider confidential, and even post this confidential information on social media sites. This expansion includes an employee's right to discuss the content of investigative interviews, even when an employer directs an employee to keep the interview confidential. Although the NLRB has yet to directly opine on the subject, these decisions may have serious implications for the corporate attorney-client privilege. [...]

Related Lawyer: Catherine M. Foti

12.19.12 | Blog Posts

The Fiscal Cliff And A Call For A Simpler Internal Revenue Code

The Insider: White Collar Defense and Securities Enforcement

President Obama and Speaker Boehner’s discussions aimed at avoiding the fiscal cliff will almost certainly result in the government collecting more taxes: either by increasing the rates paid by upper-income Americans, by closing loopholes that favor the wealthy, or a combination of the two. Both sides of this debate invoke “fairness” in support of their position, but based on the dialogue (or lack thereof) in Washington, it appears that fairness, like beauty, is in the eye of the beholder. [...]

Related Lawyer: Jeremy H. Temkin

12.12.12 | Blog Posts

Is the Current Wave of Insider Trading Cases a Deterrent to Others?

The Insider: White Collar Defense and Securities Enforcement

As sentences in insider trading cases have grown longer, insider trading has continued, apparently at historically high rates, with increasingly longer sentences being meted out. However, the longer sentences do not appear to deter insider trading. What does deter insider trading is the likelihood of getting caught. And the likelihood of getting caught is largely a function of Congressional funding of investigations and prosecutions of white collar crime. [...]

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12.11.12 | Blog Posts

Does Misdemeanor Misbranding Survive Caronia?

The Insider: White Collar Defense and Securities Enforcement

The Court of Appeals for the Second Circuit sent shockwaves through the pharmaceutical industry with its decision in United States v. Caronia. Alfred Caronia was a pharmaceutical sales representative convicted of a misdemeanor conspiracy to introduce a misbranded drug. When promoting Xyrem, a prescription narcolepsy drug, Caronia made comments to a doctor about various uses of the drug that had not been approved by the Food and Drug Administration. The government did not contest at trial the truthfulness of the comments to the doctor. Though it was, and is, lawful and common for doctors to prescribe medication "off-label" [...]

Related Lawyer: Jonathan S. Sack

12.05.12 | Blog Posts

EMRs: The New Health Care Fraud Frontier?

The Insider: White Collar Defense and Securities Enforcement

Whether referred to as electronic medical records, electronic health records, or electronic patient records, there is no doubting the tremendous potential benefits that the digitization of medical data holds for the health care industry and the public at large. EMRs can make a patient’s medical information readily accessible to a range of treating professionals, whether for routine visits or emergencies in which a patient cannot personally provide the critical information practitioners require. EMRs also permit doctors to preserve information [...]

Related Lawyer: Robert M. Radick

11.21.12 | Blog Posts

The Government's War Against Financial Industry Crimes Continues with a Record-Breaking Insider Trading Case, But It's Still Too Soon to Declare a Winner

The Insider: White Collar Defense and Securities Enforcement

The Department of Justice and Securities Exchange Commission loudly have trumpeted victories achieved in their renewed battle against insider trading and Wall Street malfeasance, repeatedly warning that there are more cases to come. Just yesterday, the United States Attorney for the Southern District of New York announced “the most lucrative insider trading scheme ever charged” against a former portfolio manager of the well-known hedge fund, SAC Capital Advisors. [...]

Related Lawyer: Robert J. Anello

11.16.12 | Blog Posts

First Year Anniversary of the Dodd-Frank Whistleblower Program: Not Much More than Paper

The Insider: White Collar Defense and Securities Enforcement

The Securities Exchange Commission’s Annual Report on the Dodd-Frank Whistleblower Program for Fiscal Year 2012 (the “Report”), released yesterday, reveals a number of things. The SEC has received a lot of tips, complaints, and referrals: A total of 3,001 in fiscal year 2012 with the lowest number (166) in November 2011 and the highest number (313) in May 2012. Those tips, complaints, and referrals came from [...]

Related Lawyer: Catherine M. Foti

11.14.12 | Blog Posts

Accounting Fraud Cases Are Dead. Long Live Accounting Fraud Cases.

The Insider: White Collar Defense and Securities Enforcement

For defense lawyers of a certain vintage, the early 2000s were a veritable golden age for accounting fraud cases. The marquee cases and investigations of the day – Enron, Computer Associates, Xerox, Adelphia, WorldCom, and Royal Ahold, among many others – were big, complex, and resource-intensive. They also were interesting and nuanced. And while many did result in guilty verdicts or onerous SEC settlements, [...]

10.24.12 | Blog Posts

Financial Institutions: How Much More Will You Have to Spend on Anti-Money Laundering Programs to Avoid Criminal Prosecution?

The Insider: White Collar Defense and Securities Enforcement

The price of doing financial business in the United States has just gone up. The Department of Justice is taking a new tack in its efforts to track and prosecute money laundering that occurs through financial institutions. Rather than focusing on money laundering that results from substantive criminal violations [...]

Related Lawyer: Robert J. Anello

10.17.12 | Blog Posts

Filing Late Tax Returns: Reducing Penalties and the Risk of Prosecution

The Insider: White Collar Defense and Securities Enforcement

April 15 is commonly viewed as “Tax Day” in the United States, but approximately 11 million taxpayers take advantage of the automatic extension that allows them to file their returns by October 15. While many taxpayers file for this six month extension because of unavoidable delays in obtaining information from third parties, for some taxpayers the decision to “go on extension” [...]

Related Lawyer: Jeremy H. Temkin

10.03.12 | Blog Posts

Insider Trading: What Happens When the Victim Says That There Was No Crime?

The Insider: White Collar Defense and Securities Enforcement

Under the “misappropriation theory” of insider trading, a person violates the securities laws by breaching a fiduciary duty to keep information confidential. But what happens when the entity to whom the fiduciary duty was owed concludes, after the fact, that the person at issue did not violate any fiduciary duty? Can the SEC still sue that person for insider trading? [...]

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09.25.12 | Blog Posts

Claims Data and Health Care Fraud: The Controversy Continues

The Insider: White Collar Defense and Securities Enforcement

While there may be truth to the old saying that there are “lies, damn lies, and statistics,” the use of claims data to detect fraud in the health care industry has often been thought to be beyond reproach. Data mining techniques and investigations that stem from billing anomalies have been the bread and butter of the federal government’s Medicare Fraud Strike Force; prosecutions that have arisen from claims data have resulted in significant prison sentences for those convicted of defrauding public health care programs and private insurers; and press releases issued by Department of Justice officials trumpet the importance of claims data [...]

Related Lawyer: Robert M. Radick

09.19.12 | Blog Posts

Would $104 Million IRS Whistleblower Get Stiffed Under Dodd-Frank?

The Insider: White Collar Defense and Securities Enforcement

The recent announcement that the IRS granted a $104 million whistleblower award to convicted former UBS banker Bradley Birkenfeld generated front-page news coverage. Birkenfeld, the U.S.-bred former private banker who provided the government with detailed information regarding a program catering to U.S. taxpayers seeking to hide assets in Swiss accounts, may be correct in proclaiming himself  “the most famous whistleblower in the world.” As has been discussed in detail elsewhere, [...]

Related Lawyer: Richard F. Albert

09.05.12 | Blog Posts

Regulatory Enforcement and Criminal Investigations in a World of Limited Resources: Marginal Cases and Missed Opportunities

The Insider: White Collar Defense and Securities Enforcement

Over the past several years, it has become commonplace to hear the general public and pundits alike grouse about the lack of criminal prosecutions or regulatory enforcement proceedings arising out of the financial dislocations of 2007 and 2008. There are many reasonable responses to these complaints, and almost all of them – as representatives of the Department of Justice and SEC emphasized in recent media statements – start with the actual facts and evidence. Not surprisingly, [...]

08.23.12 | Blog Posts

Insider Trading: Are "Relationships of Trust and Confidence" the Last Line of Defense?

The Insider: White Collar Defense and Securities Enforcement

On Monday, a jury convicted Doug Whitman of insider trading, extending the government’s unbeaten streak in its recent sweeping crackdown on insider trading, which has resulted in more than 75 convictions and guilty pleas. In this recent round of insider trading cases, brought by the United States Attorney’s Office for the Southern District of New York beginning in 2009, juries have rejected practically every defense proffered by defendants. In the case against hedge fund billionaire Raj Rajaratnam, the jury rejected [...]

Related Lawyer: Benjamin S. Fischer

08.08.12 | Blog Posts

What Does The Flap Over Romney’s Tax Returns Suggest About Disclosure of His Swiss Account?

The Insider: White Collar Defense and Securities Enforcement

As the “will he or won’t he” controversy continues to swirl around demands that Mitt Romney release multiple years of his federal income tax returns, some commentators have speculated that Governor Romney’s reluctance to produce those returns relates to his Swiss bank account. Some have gone so far as to suggest that Governor Romney may have failed to disclose that account on his original returns and [...]

Related Lawyer: Jeremy H. Temkin

07.11.12 | Blog Posts

Some Reflections on Three Recent High Profile Trials: Clemens, Edwards and Gupta

The Insider: White Collar Defense and Securities Enforcement

Drawing conclusions as to precise reasons for the result of any particular trial is notoriously difficult and subjective, even for those who sat through the proceeding in the courtroom. But the coincidental timing of the verdicts in three high profile federal criminal trials – the acquittal of Roger Clemens, the effective acquittal of John Edwards [...]

Related Lawyer: Richard F. Albert

06.27.12 | Blog Posts

Why do people have a negative view of cooperators?

The Insider: White Collar Defense and Securities Enforcement

In the more than 36 years I have practiced criminal defense law, I have had many occasions to represent people who, out of self-interest, chose to cooperate with law enforcement against others in order to avoid criminal prosecution or obtain leniency. Often, the choice to cooperate is a difficult one in which the client weighs [...]

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06.14.12 | Blog Posts

Medicaid Claims Data: Is it Really Health Care Fraud?

The Insider: White Collar Defense and Securities Enforcement

Less than a week ago, in testimony before Congress, a representative of the United States Department of Health and Human Services (“HHS”) offered a strikingly negative assessment of the reliability of data that the government uses to detect fraud in the Medicaid program. As HHS Regional Inspector General Ann Maxwell stated to the House Committee [...]

Related Lawyer: Robert M. Radick

05.30.12 | Blog Posts

The Case for Investing in the IRS Part 2: Combating Identity Theft

The Insider: White Collar Defense and Securities Enforcement

This past weekend’s New York Times cover story describing the dramatic rise in identity thieves targeting the United States Treasury is old news to tax practitioners. In my January 25, 2012 post, I discussed the National Taxpayer Advocate’s lament regarding the IRS’s need for additional funding. While that post focused on the impact underfunding has [...]

Related Lawyer: Jeremy H. Temkin

05.16.12 | Blog Posts

In praise of Legal Aid lawyers (by a white collar criminal defense practitioner)

The Insider: White Collar Defense and Securities Enforcement

Who are some of society’s most under-appreciated members? Teachers always seem to be at the top of the list, and with good reason. We put our cherished children in their capable hands and pay them a fraction of what “professionals” like lawyers and doctors make. Teachers, however, have the pleasure of helping children learn, which [...]

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05.02.12 | Blog Posts

Jurors Behaving Badly

The Insider: White Collar Defense and Securities Enforcement

A closely watched white collar criminal case poses an interesting question in a challenging context: just how egregious do a juror’s lies during jury selection have to be in order to warrant a new trial? United States v. Daugerdas is the third and final of a series of criminal prosecutions brought by federal prosecutors against partners [...]

Related Lawyers: Richard F. Albert, Richard F. Albert

04.25.12 | Blog Posts

"Taking the Fifth" Between the Devil and the Deep Blue Sea

The Insider: White Collar Defense and Securities Enforcement

The rituals associated with asserting Fifth Amendment rights are, by now, familiar ones. We see them on television when crime show detectives issue Miranda warnings to the “perps” they are handcuffing and loading into squad cars. We see them when government officials or corporate executives are called before Congress to testify regarding illegal arms sales [...]

04.04.12 | Blog Posts

Tax Day 2012: Does The Government's P.R. Campaign Increase Compliance?

The Insider: White Collar Defense and Securities Enforcement

More than any other area of the criminal law, enforcement of the tax laws is associated with a specific date: April 15. Over the next two weeks, accountants will be working feverishly to complete their clients’ tax returns, millions of Americans will be filing their returns and, if history is any indication, the Tax Division [...]

Related Lawyer: Jeremy H. Temkin

03.20.12 | Blog Posts

What Does The Current Heightened Regulatory Environment Mean For Private Investment Funds?

The Insider: White Collar Defense and Securities Enforcement

Last week I attended the International Bar Association’s 13th Annual International Conference on Private Investment Funds in London, England. Heading into the conference, I was interested in gauging the private investment community’s response to the political and regulatory spotlight shining on both hedge funds and private equity funds. For the most part, the speakers and [...]

Related Lawyers: Benjamin S. Fischer, Benjamin S. Fischer

03.07.12 | Blog Posts

Policing Dishonest Prosecutors -- The Criminal Justice System's Oxymoron

The Insider: White Collar Defense and Securities Enforcement

Last week, the New York Times ran an editorial entitled “Justice and Open Files.” The gist of the editorial was that prosecutors should provide more and earlier pre-trial discovery to defense lawyers than they currently do in order to make the criminal justice system fairer and more reliable. Discovery in criminal cases traditionally includes all [...]

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02.21.12 | Blog Posts

Today's Common Investigative Side Effect: Getting Fired By Your Banker

The Insider: White Collar Defense and Securities Enforcement

Banks’ heightened concerns about their own exposure for facilitating client activities that could be claimed to constitute money laundering have resulted in what has become a very common new collateral consequence for individuals and small to mid-sized businesses that are touched by white collar criminal or regulatory investigations. There is a very high likelihood that [...]

Related Lawyers: Richard F. Albert, Richard F. Albert

01.25.12 | Blog Posts

The Case For Investing in the IRS

The Insider: White Collar Defense and Securities Enforcement

Most American taxpayers would not consider the IRS to be underfunded, let alone the IRS’s need for more resources to be the most serious problem they face. Given the growing “tax gap” (i.e., the amount of all unpaid tax liabilities), however, a persuasive case can be made that the government should invest more [...]

Related Lawyer: Jeremy H. Temkin

01.11.12 | Blog Posts

Offshore Voluntary Disclosure Part III -- Yet Another Last Chance for Taxpayers

The Insider: White Collar Defense and Securities Enforcement

The IRS just announced plans to reopen its Offshore Voluntary Disclosure Program (the “OVDP”) giving taxpayers a third “last” chance to come clean with their previously undisclosed offshore accounts. While the IRS’s two previous programs generated 33,000 disclosures and $4.4 billion in revenues, it is reasonable [...]

Related Lawyer: Jeremy H. Temkin

12.28.11 | Blog Posts

Has the DOJ Been Too Soft on White Collar Crime?

The Insider: White Collar Defense and Securities Enforcement

60 Minutes recently televised an interview with President Obama in which the President was asked to comment on the lack of criminal prosecutions relating to the financial crisis. In an earlier 60 Minutes piece, Lanny Breuer, the Assistant Attorney General for the Criminal Division of the Department of [...]

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12.13.11 | Blog Posts

Thoughts on the SEC’s Public Response to Judge Rakoff

The Insider: White Collar Defense and Securities Enforcement

The November 28, 2011 decision of Judge Jed S. Rakoff to reject the proposed settlement of the SEC’s enforcement action against Citigroup Global Markets, Inc. for alleged misdeeds in connection with a particular collateralized debt obligation (“CDO”) has been the subject of much attention. The [...]

Related Lawyer: Richard F. Albert

11.30.11 | Blog Posts

The Ghosts of Prosecutions Past: Cooperating Defendants and the Ravages of Time

The Insider: White Collar Defense and Securities Enforcement

As practitioners who have represented cooperating witnesses in complex, white-collar criminal cases can attest, the lifespan of such cases typically is measured in years. With occasional exceptions, cooperating witnesses often plead guilty at the outset of a case, but their sentencing is put off until after the trials [...]

11.16.11 | Blog Posts

The SEC Should Focus On Fraud, Not Negligence

The Insider: White Collar Defense and Securities Enforcement

In recent cases brought under sections 17(a)(2) and 17(a)(3) of the Securities Act, the Securities and Exchange Commission has alleged that there was fraudulent conduct but does not allege that the defendant acted with scienter. The Supreme Court has held that scienter -- the intent to defraud -- [...]

Related Lawyer: Lawrence Iason

11.09.11 | Blog Posts

Substituting “Moral Equivalence” for Actual Knowledge in Criminal Tax Cases

The Insider: White Collar Defense and Securities Enforcement

The “conscious avoidance” doctrine has long confounded criminal defense lawyers and their clients. In most criminal cases, the government need only prove the defendant knowingly engaged in the conduct at issue, not that he knew the conduct violated a specific law. This burden of proving criminal intent is often relaxed through [...]

Related Lawyer: Jeremy H. Temkin

10.19.11 | Blog Posts

Trying to Define ‘Fraud” Under Federal Criminal Law

The Insider: White Collar Defense and Securities Enforcement

In the past few years, Congress, the press and commentators have debated the wisdom of passing more federal criminal laws to deal with financial crime. However, lost in this debate is the fact that the current federal criminal laws dealing with white collar crime may already provide prosecutors with too [...]

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10.05.11 | Blog Posts

Fools Rush In: The Best Potential Whistleblowers Have the Most to Fear

The Insider: White Collar Defense and Securities Enforcement

The “bounty” program included in the securities whistleblower provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act has garnered a great deal of attention since the law’s July 2010 passage. These statutory provisions, which entitle whistleblowers to 10% to 30% of the sanctions exceeding $1 million collected by [...]

Related Lawyer: Richard F. Albert

09.21.11 | Blog Posts

Janus Capital Group Inc. v. First Derivative Traders and the Law of Unintended Consequences

The Insider: White Collar Defense and Securities Enforcement

They share common features and rely on some of the same statutes, but private securities claims and SEC enforcement actions often get a radically different reception in the courts. For some time now, the Supreme Court and lower appellate courts have been an unforgiving place for private securities litigants. By [...]

09.08.11 | Blog Posts

The SEC -- A Troubled Agency

The Insider: White Collar Defense and Securities Enforcement

The SEC has been faced with an unusually large number of problems recently. The SEC’s notorious failure to detect Bernie Madoff’s Ponzi scheme is even more distressing in view of the repeated warnings the SEC received about Madoff. The Commission’s Enforcement Division also failed to bring charges again Mark Stanford [...]

Related Lawyer: Lawrence Iason