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Government Enforcement Exposed - "The GEE"
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12 Jun 2017 U.S. Supreme Court Delivers Blow Limiting SEC Disgorgement Power

  In a unanimous opinion authored by Justice Sonia Sotomayor and issued on June 5, the U.S. Supreme Court reversed a decision of the U.S. Court of Appeals for the Tenth Circuit, holding that SEC disgorgement constitutes a penalty under 28 U.S.C. § 2462, thereby making such actions subject to the five-year limitations period for “an action, suit or proceeding for the enforcement of any civil fine, penalty or forfeiture.” In the case, Kokesh v. Securities and Exchange Commission , the court found the “SEC disgorgement… bears all the hallmarks of a penalty: It is imposed as a consequence of violating a public law and it is intended to deter, not compensate.”   The ruling resolves a circuit split and will have a far-reaching impact…

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15 Mar 2017 The Yates Memo – DOJ Issues Questions and Answers

  *This is the first in a series of blog posts that will examine seven FAQs issued by the DOJ in response to questions the Yates Memo raised. Check back frequently for more in depth analysis and best practices in response to these questions.   The U.S. Justice of Department (DOJ) nearly two years ago announced an uptick in its battle against corporate wrongdoing, taking the fight into boardrooms and offices in pursuit of individuals involved in corporate misconduct. The effort, announced in a memo authored by then-Deputy Attorney General Sally Yates, applied “new” guidance for both criminal and civil matters.   The memo identified four principal goals: (1) deterring future illegal activity; (2) incentivizing change in corporate behavior; (3) ensuring the proper parties are…

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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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07 Mar 2016 SEC Busts Tech Company for Bribing Chinese Officials

  On Feb. 16, the SEC announced settlement of parallel civil and criminal actions involving violations of the Foreign Corrupt Practices Act (FCPA) by Massachusetts-based tech company PTC, Inc. As part of the agreement, PTC and two Chinese subsidiaries agreed to pay more than $28 million in fines, interest and disgorgement for providing Chinese officials with vacations, improper gifts and entertainment that were disguised as legitimate business expenses. Specifically, PTC agreed to pay $13.6 million in disgorgement ($11.858 million) plus interest ($1.764 million) while its two Chinese subsidiaries agreed to pay a $14.54 million fine as part of a non-prosecution agreement.   In related action, the SEC also announced its first deferred prosecution agreement (DPA) with an individual involved in an FCPA investigation. Yu Kai…

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05 Nov 2015 “Hide No Harm Act Of 2015” Targets Employers, Directors and Officers

The 114th Congress has now taken up the policy recently announced by the Department of Justice (DOJ) through the Yates Memo. The Hide No Harm Act (S.2140) would impose criminal penalties upon corporate officers who fail to advise an appropriate federal agency of “serious danger associated with a product, service or business practice.” Corporate officers who fail to notify an appropriate agency of the federal government regarding any serious danger associated with a covered product, service or business practice within twenty-four hours of the individual receiving notice of such dangers could be punished by a fine and imprisonment for up to five (5) years. A fine imposed upon an individual for violating the Act “may not be paid, directly or indirectly, out of the assets…

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11 Sep 2015 JUSTICE DEPARTMENT POLICY CHANGE TARGETS CORPORATE EXECUTIVES

In a memo dated Sept. 9, 2015, the Justice Department announced that it will take the fight against corporate wrongdoing directly into the boardrooms and offices of businesses. Long stung by criticism that it has coddled corporate executives, the department’s new policies evidence a change in direction, one aimed squarely at individuals involved in corporate fraud and misconduct.   The memo, authored by Deputy Attorney General Sally Yates, applies this “new” guidance to both criminal and civil matters. In doing so, the department focuses on the notion that “one of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing.” In making this policy adjustment, the memo identifies four principal goals: (1) deterring future illegal activity;…

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23 Jun 2015 FALSE CLAIMS ACT: INCREASED PROSECUTIONS AND HIGHER SENTENCES

As Assistant Attorney General Leslie R. Caldwell warned last September, the Department of Justice has increased its “commitment to criminal investigations and prosecutions that stem from allegations in False Claims Act lawsuits.” The continued rise in criminal FCA investigations, combined with substantial sentences received by those Defendants, show that Caldwell’s pronouncement was not an empty promise. Recent cases exemplify a clear intent by DOJ to continue aggressive investigation and prosecution of FCA matters. When convictions are obtained, the government has sought and obtained significant sentences against both institutional and individual wrongdoers.   Riverside General Hospital (Riverside) in Houston, Texas, is one of the more recent examples of this increased prosecutorial fervor toward FCA violations in the healthcare arena. On June 9, 2015, the former President…

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29 May 2015 THE BENEFITS OF COOPERATION – HYPERDYNAMICS AVOIDS INDICTMENT

On May 21, 2015, the Department of Justice (DOJ) announced that it has closed its investigation involving Hyperdynamics Corporation regarding possible violations of the Foreign Corrupt Practices Act (FCPA). In doing so, Patrick Stokes, Deputy Chief of DOJ’s Fraud Section noted that “the Department values cooperation with investigations such as shown here.”   In September of 2013, Hyperdynamics received a subpoena from the DOJ seeking company records pertaining to its operations in Guinea, West Africa. The Guinean operations involved obtaining and retaining oil and gas concession rights off the coast of Guinea. The DOJ also inquired about Hyperdynamics’ relationship with various charitable organizations.   Hyperdynamics cooperated with the government during the investigation, conducted its own internal investigation into issues raised by investigators and provided information…

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23 Apr 2015 FCPA / BRAZIL: THE PERFECT STORM FOR ANTI-CORRUPTION ENFORCEMENT

With ever increasing pressure on its government to stamp out corruption, Brazil presents a “Perfect Storm” for Foreign Corrupt Practices Act (FCPA) / Anti-Corruption enforcement approaching the 2016 Olympics. Having the Olympic Games centered in Rio de Janeiro presents the perfect opportunity for Dilma Rousseff’s government to show that it takes enforcement of anti-corruption laws seriously. As such, companies should ensure their compliance initiatives are being vigorously updated and monitored. This is especially the case with regard to third-party relationships.   While passage of the Clean Companies Act (CCA) brought Brazil in line with an ever growing international consensus against corruption, the CCA has been sparingly enforced. Though the CCA penalizes both corporations and individuals for corrupt conduct, implementing regulations called for by its passage…

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16 Apr 2015 SENTENCING COMMISSION AMENDS FRAUD GUIDELINES

On April 9, 2015, the U.S. Sentencing Commission (Commission) adopted changes to the sentencing guidelines addressing fraud. In doing so, the Commission confronted previously held concerns regarding harm to victims, individual culpability for “bit” players in a fraud scheme and an individual offender’s intent.   These proposed adjustments to the guidelines include more significant penalties for white collar crimes that “resulted in substantial financial hardship to one or more victims,” and where “the defendant intentionally engaged in or caused the conduct constituting sophisticated means,” according to Commission materials. The proposed change, if adopted by Congress, would increase the severity of the offense by four levels at five or more victims (currently 50 or more victims), with an increase of six levels where 25 or more…

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