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Government Enforcement Exposed - "The GEE"
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18 Jul 2014 Corporations and Unreasonable Searches and Seizures: Does the Supreme Court’s Decision in Riley v. California Signal the Rebirth of the 4th Amendment in White Collar Cases?

There has been much attention paid to the Supreme Court’s recent decision in Riley v. California, Nos. 13-132 and 13-212 (June 25, 2014), and justifiably so. It was notable because it was a 9-0 decision in a criminal case – a rare occurrence in the Supreme Court’s history, especially for this deeply-divided Court. But it was also an important, landmark ruling for the Fourth Amendment and its protections against unreasonable searches and seizures.   In its narrowest interpretation, the Supreme Court’s decision in Riley rejected the argument made by law enforcement that cell phones could be searched without a valid warrant if they were seized at the time of arrest. The Supreme Court has repeatedly recognized that there are appropriate exceptions to the Fourth Amendment’s…

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

Regardless of what one may think about Congressional committees, or even Congress itself, the bipartisan Over-Criminalization Task Force may be worth keeping an eye on.   The Task Force was initiated in May 2013 and was re-authorized to continue its work in February of this year. When the Task Force was re-authorized, Bob Goodlatte (R-Va.), Chair of the House Judiciary Committee, said “Over the past few decades, the federal criminal code has expanded dramatically, creating an ever-increasing labyrinth of federal statutes and regulations, many of which impose criminal penalties without requiring that criminal intent be shown to establish guilt. We need to make sure our laws and regulations protect freedom, work as efficiently and fairly as possible, and do not duplicate state efforts. This Task…

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16 Jul 2014 The Gabelli Effect: How the Supreme Court’s Decision is Impacting Enforcement Actions

  The SEC suffered another high-profile loss this month, accepting a settlement with two executives accused of bribing foreign officials without obtaining any monetary penalties.  Such “no penalty” settlements may become increasingly common for the SEC as it continues to realize the effects of the Supreme Court’s holding in last year’s Gabelli v. SEC.   The widely-publicized Noble case involved alleged violations of the Foreign Corrupt Practices Act.  The SEC accused Noble, an oil services company, of paying hundreds of thousands of dollars in bribes to Nigerian officials between 2003 and 2007 in order to obtain certain rig permits and project extensions.  The SEC further alleged that company executives Mark Jackson and James Ruehlen contributed to this bribery scheme.  Under the Noble settlement, however, Jackson…

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15 Jul 2014 The Acquittal of Rengan Rajaratnum: A Precursor for Acquittals or No Action in Other “Remote Tippee” Cases?

The recent acquittal in the trial of Rengan Rajaratnum may be a harbinger of good tidings for future insider trading defendants. A key issue in some recent insider trading prosecutions, including this one, is whether the government is required to prove that the defendant/tippee (who received the tip) knew about the benefits provided to the tipper (who provided the tip). In a traditional insider trading case, this knowledge requirement is typically not difficult to prove because the defendant usually directly provided the insider with the benefit. But in some recent stock-tipping cases, prosecutors have pursued “remote tippees:” individuals that received a tip but have at least one layer between them and the insider.   The question of whether the knowledge requirement should be applied to…

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10 Jul 2014 New Administrative Law Judges at the SEC

  On June 30, 2014, Reuters reported that the SEC will be adding 2 new administrative law judges and three new lawyers to the administrative law staff — bringing the total number of judges to 5 and doubling the size of the clerk pool serving those judges. According to the Reuters article, the new judges were needed to “meet growing demand since the 2010 Dodd-Frank Wall Street reform law,” which gave the SEC new authority to impose civil penalties in traditional cease-and-desist administrative proceedings.  As far as that analysis goes, it makes sense — but is that really what is going on? There are at least two alternative motives: (i) the SEC is seeking a friendlier forum for certain insider-trading cases, as its record has…

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03 Jul 2014 Your Cell Phone – Riley v. California & the Post-Digital Privacy Era

  On June 25, 2014, a unanimous Supreme Court decided the case of Riley v. California, and in doing so, thrust the legal world into the post-digital privacy era. The Court held that the police may not search for and seize the digital contents of an individual’s cell phone or personal electronic device, incident to an arrest, without first obtaining a search warrant authorizing them to do so. The Court did, notably, carve out a possible exception to the warrant requirement when an “emergency” or “exigent circumstances” exist. Situations where evidence is about to be destroyed or a bomb about to be set off, may present a sufficiently heightened set of circumstances allowing the warrant requirement to be waived. This holding provides law enforcement officials across the country with guidance on how to…

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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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