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Government Enforcement Exposed - "The GEE"
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10 Sep 2014 DODD-FRANK WHISTLEBLOWER LITIGATION HEATING UP

  The past few months have been busy for courts and the SEC dealing with securities whistleblowers. The Supreme Court’s potentially landmark decision in Lawson v. FMR LLC back in March already seems like almost ancient history.  In that decision, the Supreme Court concluded that Sarbanes-Oxley’s whistleblower protection provision (18 U.S.C. §1514A) protected not simply employees of public companies but also employees of private contractors and subcontractors, like law firms, accounting firms, and the like, who worked for public companies. (And according to Justice Sotomayor’s dissent, it might even extend to housekeepers and gardeners of employees of public companies).   Since then, a lot has happened in the world of whistleblowers. Much of the activity has focused on Dodd-Frank’s whistleblower-protection provisions, rather than Sarbanes-Oxley. This…

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09 Sep 2014 Protecting Internal Investigations: The Indiana Supreme Court Weighs In

  As we wrote on August 22, 2014, corporate internal investigations may be harder to protect following the Delaware Supreme Court’s decision in Wal-Mart Stores, Inc. v. Indiana Electrical Workers Pension Trust Fund IBEW. A recent ruling from the Indiana Supreme Court, however, provides corporations a bit more certainty and suggests the state may be more business-friendly than Delaware.   The Indiana decision, TP Orthodontics, Inc. v. Kesling, hints at an expansion of what a corporation must disclose in their Special Litigation Committee (SLC) reports when shareholders contest the good-faith nature of the SLC’s investigation. At the same time, though, the Supreme Court refused to limit the application of the attorney-client privilege to such documents.   In TP Orthodontics,the Indiana Supreme Court reversed a Court…

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05 Sep 2014 Foreign Corrupt Practices Act – Keeping the Wolf at Bay

  Anti-bribery laws, including the United States’ own Foreign Corrupt Practices Act, seem to be becoming the stuff of Aesop’s Fables, with many asking whether the resounding alarm over bribery-exposure is akin to the cries of “wolf” by the shepherd boy. The alarm is real enough, however. The Securities and Exchange Commission and the Department of Justice have brought an average of 30 cases per year since 2005. These laws impact small and medium-sized companies and their executives, as well. In July 2014, Kara Brockmeyer, chief of the SEC Enforcement Division’s FCPA Unit explained that “small and medium-size businesses that want to enter into high-risk markets and expand their international sales” must be compliant with the FCPA.   So, if the wolf is really amongst…

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04 Sep 2014 U.S. House of Representatives Committee on the Judiciary: Over-Criminalization Task Force

  In July on this Blog, I suggested that the House Committee on the Judiciary’s bipartisan Over-Criminalization Task Force may be worth keeping an eye on. With that in mind, here is a bit of an update.   When the Task Force was re-authorized this past February, it was scheduled to conclude its work in early August 2014. Of course, early August has come and gone. So, you may be wondering whether there is anything new to report about the Task Force. It appears that the House Committee has not again re-authorized the Task Force since February, and that the Task Force has held its final hearing. A report by the Task Force may not be too long in coming, and it will be interesting…

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22 Aug 2014 The Wal-Mart Decision: Just How Big a Blow did the Delaware Supreme Court Deal to Corporations?

  In a much-anticipated decision, the Delaware Supreme Court recently affirmed a trial court holding that, in limited circumstances, a shareholder can obtain privileged corporate documents relating to a company’s internal investigation. While the opinion is groundbreaking in its adoption and affirmation of the “fiduciary exception” to the attorney-client privileged, corporations still retain several layers of protection against disclosure and likely have less reason to fear this decision than a cursory reading might suggest.   In Wal-Mart Stores, Inc. v. Indiana Electrical Workers Pension Trust Fund IBEW, the court held that a Walmart shareholder was entitled to review Wal-Mart’s privileged internal investigation documents relating to its FCPA investigation. The shareholder sought the documents through a Section 220 inquiry – which permits shareholder inspection of books…

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19 Aug 2014 Conviction of Private Investigators in China Further Complicates Anti-Corruption Compliance Efforts

  The recent convictions of Peter Humphrey and his wife and business partner Yu Yingzeng demonstrate the risks corporate investigation firms face in China when they obtain or pass on information on Chinese citizens. But perhaps even more alarming for U.S. companies is the effect of such prosecutions on their efforts to comply with the Foreign Corrupt Practices Act and other anti-corruption laws, as these types of convictions stand to have a chilling effect on both companies’ due diligence efforts and their internal investigations into allegations of bribery and fraud in China.   Mr. Humphrey, a British citizen, and Ms. Yu, a Chinese citizen, were convicted of trafficking in personal information of Chinese citizens between 2009 and 2013 through their company ChinaWhys. ChinaWhys, which still…

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15 Aug 2014 Regulators And Prosecutors Discuss Securities and Commodities Enforcement Priorities

  In late July, we attended a seminar at which David Glockner, the new Director of the Securities and Exchange Commission’s Chicago Regional Office, Scott Williamson, a Deputy Regional Counsel in the Commodity Futures Trading Commission’s Chicago Office, and Cliff Histed, an Assistant United States Attorney in the newly-formed Securities and Commodities Fraud Section in Chicago spoke. The three men shared their views on enforcement trends in the securities and commodities industry. It was an insightful discussion, from which we have distilled a few of the nuggets of wisdom they shared.   SEC Enforcement Priorities   To begin with, Mr. Glockner shared the SEC’s enforcement priorities. He emphasized (no surprise here) that the SEC’s traditional mission of investor protection remains paramount. Next, he alerted the…

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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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23 Jul 2014 BITCOIN – IS ANYONE IN CHARGE?

  Bitcoin, one of the best-known virtual currencies, has experienced some growing pains recently.  Once hailed by Bill Gates as a “techno tour de force,” 2014 has been less kind to this digital alternative to fiat currency. Earlier this year, Mt. Gox, one of the largest Bitcoin exchanges in the world, collapsed and filed for bankruptcy both in Japan, where it was based, and the United States. Allegations of fraud, mismanagement and outright theft of Bitcoins then worth more than $450 million have arisen in connection with the exchange platform’s collapse. More recently, the SEC filed a settled administrative action against Erik T. Voorhees, one of Bitcoin’s most outspoken proponents, for violating Section 5 of the Securities Act for publicly offering unregistered interests in two…

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21 Jul 2014 Reader Responds to Recent Law Judge Blog Post

  Recently, we posted an article about New Administrative Law Judges at the Securities and Exchange Commission. The article, if you have not read it, included our thoughts as to why the SEC is bulking up its administrative law bench. We posited a number of reasons the SEC might be trying to bring more cases in its administrative courts, including cases that it has historically filed in the United States District Courts. In response to that article, we heard from an administrative law judge, from another agency, who saw our article in the National Law Review. The Judge wrote us because “a few issues [we] raise[d] are worthy of clarification.” We have included some of the Judge’s comments here and provided our responses.   Before…

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