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Government Enforcement Exposed - "The GEE"
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07 Sep 2016 SEC Changes Some of Its Procedural Rules After Constitutional Challenges

  In our last post, we discussed some of the constitutional challenges to the Securities and Exchange Commssion’s (SEC) in-house tribunal. Though these challenges have thus far been unsuccessful, they appear to have prompted the SEC to amend some of its rules of practice to address at least some of the criticisms leveled against its administrative proceedings.   One persistent criticism has been that the length of time from initiation of administrative proceedings through hearing is substantially too short. Previously, an ALJ’s initial decision had to be filed no more than 300 days from the service of the order instituting proceedings. However, the SEC has now increased the time between its initial filing in an enforcement action and the hearing (at least in “appropriate” cases)….

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02 Sep 2016 D.C. Circuit Affirms Constitutionality of SEC’s In-House Tribunals

  The U.S. Court of Appeals for the D.C. Circuit recently became the first appellate court to conclude that the U.S. Securities and Exchange Commission’s (SEC) in-house administrative tribunals are constitutional and do not violate the Appointments Clause.   The constitutionality of the SEC’s in-house administrative courts has been questioned repeatedly since the Dodd-Frank Act dramatically expanded the kinds of cases the SEC could litigate on its home turf and the kinds of remedies it could obtain there, including against entities the SEC does not traditionally regulate. Since Dodd-Frank, the SEC has made no bones about its increased attraction to litigating cases in-house that it previously brought in federal district court. The SEC benefits from a shorter timeframe from initiating the action to its conclusion,…

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29 Jul 2016 Second Circuit Confirms Privacy Rights and Territorial Limits of Search Warrants Under the Stored Communications Act

Recently, the U.S. Court of Appeals for the Second Circuit handed Microsoft and privacy advocates a landmark win limiting the “long arm of justice” to within the United States’ own borders.  In a highly anticipated ruling, the Second Circuit, In the Matter of a Warrant to Search a Certain E-mail Account Controlled and Maintained by Microsoft Corporation, unequivocally stated that the federal government cannot use a search warrant to compel a U.S. corporation to provide the email contents of its customers which are stored outside the U.S.   Historically, the Department of Justice (DOJ) interpreted its jurisdictional reach to have little or no boundaries.  For decades, companies have been required to produce documents and witnesses from overseas for ongoing criminal investigations simply by service of…

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19 Jul 2016 Did the Supreme Court Pave the Way for Court-Sanctioned Mass Hacking?

  In late April of this year, the U.S. Supreme Court adopted an amendment to Federal Rule of Criminal Procedure 41(b) that would allow judges to issue warrants permitting the FBI to access computers located outside the court’s jurisdiction. As many technology and privacy groups point out, this proposed change could have a remarkable effect on a judge’s ability to issue warrants, not to mention the severe impact on data privacy rights.   Deadline Looms for Congress to Act   Currently, Rule 41(b) only allows a court to issue search and seizure warrants for property located within the issuing court’s district. As proposed, the amendment would allow courts to issue warrants authorizing the FBI to remotely access and seize electronic media stored outside its district if:…

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12 Jul 2016 Prison Sentence for Responsible Corporate Actors Upheld

  On July 6, 2016, the U.S. Court of Appeals for the Eighth Circuit, by a 2-1 vote, held that corporate executives Austin “Jack” DeCoster, 81, and his son Peter DeCoster, 51, could be sentenced to terms of imprisonment for their failure to prevent or remedy violations of the federal food-safety laws pursuant to the Responsible Corporate Officer or “Park” Doctrine. The DeCosters were each sentenced to three months in prison and $100,000 fines following their guilty pleas to misdemeanor violations of 21 U.S.C. § 331(a) as “responsible corporate officers” of Quality Egg, LLC, under the Food Drug & Cosmetic Act (FDCA). In their appeal of the District Court’s sentencing order, the DeCosters argued their prison sentences were unconstitutional and, alternatively, that their sentences were…

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30 Jun 2016 What Happens in Europe, Stays in Europe? Applying RICO to Foreign Injury, Conduct

  Recently, the U.S. Supreme Court handed down its decision in RJR Nabisco, Inc. v. European Community, et. al., clarifying—in part—the extent to which injuries sustained outside the United States and racketeering acts committed abroad give rise to civil claims for violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-1964. The group most definitively affected as a result of the opinion is private RICO plaintiffs who have not suffered an injury inside the United States. For them, the decision forecloses the possibility of civil RICO recovery.   The case is also certain to be cited in forthcoming criminal RICO cases, since the Supreme Court analyzed the extraterritoriality of RICO’s substantive criminal conduct provisions using the same analysis as when it separately…

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28 Jun 2016 McDonnell Decision Indicates Supreme Court’s Desire to Limit Application of the Honest Services Fraud Statute

  On June 28, the Supreme Court issued its opinion in McDonnell v. United States, one of the most anticipated opinions of the October 2015 term for white collar practitioners. In the unanimous ruling in favor of former Virginia Gov. Bob McDonnell, the Court again limited application of the “honest services fraud” statute (18 U.S.C. § 1346), as applied through the federal bribery statute (18 U.S.C. § 201), making it harder to prosecute public officials on corruption charges. The decision holds that an “official act” sufficient for a bribery conviction requires more than “setting up a meeting, hosting an event, or calling an official.” At trial and on appeal, prosecutors had successfully argued that an “official act” included “nearly any activity by a public official.”…

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17 Jun 2016 Supreme Court Preserves Implied Certification Theory in Closely Watched False Claims Act Case

In the much-anticipated ruling on Universal Health Services Inc. v. United States ex rel. Escobar, the United States Supreme Court today held that False Claims Act liability can be predicated on an implied certification theory of liability.  (For the factual background and procedural history of the case, see our earlier blog post about the court’s grant of certiorari.) The court also clarified the materiality threshold that must be satisfied to pursue actionable claims under this theory, finding that materiality can be established with or without express language in the regulations that it is a condition of payment.   In upholding the theory of implied certification, the court addressed the situation under which a misleading omission could render a claim false or fraudulent, stating that when…

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12 May 2016 Internet Infamy: Criminal Registries and White Collar Crime

Implementing what the New York Times has dubbed “a scarlet letter of sorts on the state’s financial felons,” Utah has now finalized and published its online White Collar Crime Offender Registry.   Authorized by HB 378 of the Utah Legislature’s 2015 General Session, the Registry is publicly available online and includes offender photographs, physical descriptions and any known aliases.  The Registry encompasses all persons convicted of a second-degree felony since Dec. 31, 2005, for the following offenses: securities fraud, theft by deception, unlawful dealing of property by fiduciary, fraudulent insurance, mortgage fraud, communications fraud and money laundering.  A first-time offense secures an offender a place on the Registry for 10 years. A second offense earns another 10 years and a third offense places an offender…

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29 Apr 2016 Accounting Fraud Getting Increased Attention from the SEC and Class Action Counsel

Accounting and financial disclosure issues are increasingly becoming the focus of litigation – both with the Securities and Exchange Commission (SEC) and the plaintiffs’ class action bar – according to recent pronouncements from the SEC and a leading research firm that tracks securities class actions.   Last week, the SEC announced two financial fraud cases against companies and their former executives, accusing them of various accounting failures that gave investors inaccurate views of company finances. These cases appear to be among the fruits of the SEC’s Financial Reporting and Audit Task Force, created in 2013 to strengthen the SEC’s efforts to identify securities law violations relating to the preparation of financial statements, issuer reporting and disclosure and audit failures. The Task Force’s efforts have taken…

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