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Government Enforcement Exposed - "The GEE"
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30 Jun 2014 Six Things SEC Chair White Wants Directors to Know About How to Avoid Being on the Receiving End of an Enforcement Action

  After SEC Chair Mary Jo White announced last fall that the SEC’s enforcement program included a new focus “deficient gatekeepers,” such as directors,  and the SEC filed two separate cases against audit committee chairs in March (case 1 and case 2), directors of public companies could be forgiven for feeling as if they had targets on their backs.   Nevertheless, White told those attending the annual Stanford Directors’ College earlier this month that that focus and those recent cases “should not strike fear in the heart of a conscientious, diligent director.”  She then proceeded to outline what a director can do to qualify in the SEC’s eyes as one of those conscientious, diligent directors.   Make sure that the board and the CEO set the tone at…

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19 Jun 2014 IS THE SEC POISED TO BRING MORE ADMINISTRATIVE ENFORCEMENT ACTIONS IN WAKE OF INSIDER TRADING TRIAL COURT LOSSES?

  In recent remarks, SEC Enforcement Director Andrew Ceresney said the SEC may pursue more insider trading actions administratively. The statements came in the wake of several recent trial losses by the FCC in insider trading cases.   Insider trading administrative proceedings have been rare, but the 2010 Dodd-Frank Act enhanced the SEC’s administrative enforcement powers by allowing the SEC to obtain monetary penalties against individuals in administrative proceedings, making administrative actions against insider trading more attractive.   While Ceresney stressed that the trend towards more administrative enforcement proceedings was not in reaction to the SEC’s recent insider trading trial court losses, it signals a shift in venue that potentially could give the SEC procedural advantages, including expedited proceedings, discovery limitations and no option for…

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11 Jun 2014 REDUCING THE COST OF FCPA MONITORING

  FCPA settlements with the SEC and the DOJ increasingly require an offending company to allow an independent monitor to keep watch over internal compliance efforts for a specified period of time. Regulators admittedly see monitoring as a way to reduce recidivism of corporate crime and to protect the integrity of the market place. As many companies have come to learn though, this process can prove both intrusive and expensive. Indeed, at least one former DOJ official has acknowledged that fees for “runaway monitors” can exceed $50 million. There are, however, ways for companies to structure their monitoring relationships so as to minimize disruption and contain costs.   Negotiate a Cost-Effective Settlement Agreement   The settlement agreement is the guiding text for any effective monitorship….

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06 Jun 2014 BELATED VINDICATION FOR THE SEC’S (PRIOR) SETTLEMENT POLICY

In late 2011, Judge Jed Rakoff sent shockwaves through the securities enforcement bar and the SEC when he refused to approve the Commission’s settlement with Citigroup Global Markets in a settled action arising from Citigroup’s packaging and sale of residential mortgage backed securities in the early days of the financial meltdown. In a scathing decision, Judge Rakoff called the SEC’s settlement with Citigroup “worse than mindless” and “inherently dangerous” because the consent agreement included the SEC’s then-typical “no admit, no deny” provision, allowing Citigroup to pay about $285 million in disgorgement and penalties, without actually admitting it did anything wrong.  Wednesday, in a much-anticipated and long-delayed decision, the Second Circuit reversed Judge Rakoff.   When Judge Rakoff issued his decision, he was troubled by several…

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06 Jun 2014 Canadian Corruption of Foreign Officials Act Update: Three Takeaways from the Cryptometics Case

The Royal Canadian Mounted Police (the RCMP) recently announced charges against Robert Barra, Dario Bernini and Shailesh Govindra, three individuals connected with Cryptometrics Canada (Cryptometrics), a subsidiary of U.S.-based Cryptometrics Corporation (Cryptometrics USA), for violations of Section 3.1 of the Canadian Corruption of Foreign Officials Act (the CFPOA).  These charges relate to a failed scheme to bribe Indian officials to secure the award of a $100 million contract for facial recognition software, and come in the wake of the conviction and sentencing of Nazir Karigar, a Canadian citizen and former agent for Cryptometrics, for his involvement in the scheme.   The charges are significant for U.S. companies – particularly those doing business in Canada – for three reasons.   First, the charges were brought against…

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04 Jun 2014 “Gatekeepers” Beware: A New Tool of the SEC

  In a recent speech at Compliance Week 2014, the premier conference for corporate compliance officers and government regulators, Securities and Exchange Commissioner Kara M. Stein expressed disappointment in the lack of scrutiny and infrequency of enforcement cases brought against what she called the “gatekeepers” – i.e. compliance officers, accountants, auditors and—yes—attorneys.   In Stein’s opinion, failures by those tasked with maintaining and promoting corporate compliance have led to tragic financial losses that have harmed innocent individuals and threatened confidence in the markets. Stein targeted attorneys, stating they in particular are rarely prosecuted even though they are deeply entrenched in almost every decision and transaction a company makes. Stein argued that attorneys who facilitate fraud or provide poor legal advice are typically protected from liability…

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