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Government Enforcement Exposed - "The GEE"
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01 May 2017 The Yates Memo – DOJ Issues Questions and Answers: Question 7

  *This is the eighth in a series of blog posts that examines seven FAQs issued by the DOJ in response to questions the Yates Memo raised. The seventh of these questions addresses receiving cooperation credit in a civil matter.   Question: Does the “all facts” cooperation requirement apply in civil matters as well?   Answer: Yes. If a company wishes to receive cooperation credit in a civil matter, it must disclose the relevant facts regarding the individuals involved in the misconduct.   In two speeches following the issuance of the Yates Memo, Bill Baer, who was an associate attorney general at the time, provided additional guidance on what the DOJ expects in terms of cooperation in civil matters.   First, on June 9, 2016, Baer identified…

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15 Jul 2015 NINTH CIRCUIT SLAPS BACK REMOTE TIPPEE’S NEWMAN DEFENSE

Last week, the Ninth Circuit, with opinion by Southern District of New York Judge Jed S. Rakoff, questioned how far remote tippee insider-trading defendants can stretch the Second Circuit’s Newman decision.   In United States v. Salman, the defendant appealed his conviction for conspiracy and insider trading, urging the court to find the evidence against him was insufficient under the Newman standard. The conviction arose from Salman’s trading on insider information through family connections. Salman’s future brother-in-law, Maher Kara, worked in a leading global bank’s healthcare investment banking group and shared insider information with his brother, Michael, who became Salman’s close friend and in turn shared that insider information with Salman. Michael urged Salman to “mirror-image” his trading, and Salman traded through a brokerage account…

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31 Mar 2015 THE FALLOUT FROM NEWMAN CONTINUES AS CONGRESS WEIGHS IN

As previously reported, the Newman decision caused turmoil in the world of insider trading and the fallout continues.   Earlier this month, prosecutors told a federal judge in Manhattan that Newman had invalidated the guilty plea for insider trading of John Johnson, former Wyoming Retirement System CIO, because the admissions he had made in 2013 were now insufficient to support the plea. Prosecutors were planning to prosecute if Johnson did not enter a new plea that would suffice under Newman.   Meanwhile, Congress has weighed in with three proposed bills that would statutorily define insider trading and eliminate the requirement under Newman that: the tippee know both that the tipper breached a duty of confidentiality and the tipper received a personal benefit of “some consequence.”…

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23 Jan 2015 THIRD CIRCUIT UPHOLDS SECURITIES FRAUD CONVICTION OF CANADIAN STOCK BROKER WHERE “IRREVOCABLE LIABILITY” FOR TRANSACTIONS OCCURRED IN THE UNITED STATES

On Jan. 20, 2015, the Third Circuit upheld former Canadian stockbroker George Georgiou’s securities fraud conviction under Section 10(b) of Securities Exchange Act, determining that the transactions were “domestic” under Section 10(b) of the Securities Exchange Act because “irrevocable liability” for the transactions occurred in the United States.   The opinion provides further clarification of the United States Supreme Court’s 2010 ruling in Morrison v. National Australia Bank Ltd. that Section 10(b) applies to deceptive conduct in (1) the purchase or sale of a security listed on an American stock exchange, or (2) the purchase or sale of any other security in the United States.   Georgiou had been convicted for manipulating the market of four United States stocks listed on the OTC Bulletin Board…

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21 Nov 2014 ASSISTANT ATTORNEY GENERAL URGES COMPANIES TO COOPERATE AND CONDUCT THOROUGH INTERNAL INVESTIGATIONS OF FCPA VIOLATIONS

In remarks prepared for the American Conference Institute’s 31st International Conference on the Foreign Corrupt Practices Act on Nov. 19, 2014, Assistant Attorney General Leslie R. Caldwell emphasized the DOJ’s recent successful prosecutions under the FCPA and urged companies to cooperate and conduct thorough internal investigations of FCPA violations.   Caldwell emphasized the DOJ’s aggressive prosecution of individuals and companies, citing more than 50 convictions of individuals since 2009 (25 of those since 2013) and resolution of cases against more than 50 companies with penalties in forfeiture of approximately $3 billion.   While the DOJ is more aggressively developing and prosecuting cases, Caldwell still called on companies to self-disclose and cooperate.  Caldwell emphasized that she meant a full and timely cooperation, saying, “We do not…

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30 Sep 2014 IS A NON-UNITED STATES CITIZEN WHO REFUSES TO LEAVE HIS HOME COUNTRY TO FACE FCPA CHARGES A FUGITIVE FROM JUSTICE?

South Korean citizen Han Young Kim has petitioned the United States Supreme Court for certiorari to resolve a circuit split regarding whether a non-United States citizen who refuses to come to the United States to face Foreign Corrupt Practices Act charges is a fugitive from justice.   Kim argues that because he lives in South Korea and did not flee the United States to South Korea, he should not be considered a fugitive.  The government’s position that Kim is a fugitive because he refuses to submit to extradition has kept Kim from having an opportunity to seek judicial review of his indictment or from attempting to reach a settlement, since the government will not negotiate with fugitives.   The Ninth Circuit Court of Appeals denied…

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07 Aug 2014 JUDGE RAKOFF CONTINUES TO QUESTION ADEQUACY OF JUDICIAL OVERSIGHT OF SEC

  On remand of his rejection of the proposed Consent Judgment between the SEC and Citigroup Global Markets, Judge Jed Rakoff of the United States District Court for the Southern District of New York expressed additional misgivings about effective judicial oversight of the SEC.   In his opinion issued August 5, 2014, Judge Rakoff noted that the Court of Appeals “who must be obeyed have spoken, and this Court’s duty is to faithfully fulfill that mandate.”  In faithfully fulfilling that mandate and approving the Consent Judgment, however, Judge Rakoff expressed his “fears that, as a result of the Court of Appeal’s decision, the settlements reached by governmental regulatory bodies and enforced by the judiciary’s contempt powers will in practice be subject to no meaningful oversight…

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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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29 Apr 2014 Is the Second Circuit About to Put the Brakes on the Government’s Pursuit of Insider Trading “Tippees”?

The Second Circuit Court of Appeals has raised questions about federal prosecutors’ burden to convict the recipient of confidential information of insider trading, suggesting the Court may adopt a “bright line” that would provide much-needed guidance to an ambiguous area of law.   At issue is the knowledge the government must prove to convict the recipient (or “tippee”), who often may be many layers removed from the initial disclosure of the confidential information.  Attorneys for former hedge fund managers Todd Newman and Anthony Chiasson have asked the Court to require the government to prove that the tippee must have known that the information was disclosed in exchange for a reward or “personal benefit.”  Federal prosecutors have argued for a broader definition, seeking to convict only…

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