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Government Enforcement Exposed - "The GEE"
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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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30 May 2014 Federal Appellate Court Adopts Broad Definition of “Instrumentality” as used in the Foreign Corrupt Practices Act

  In a ground-breaking decision, the United States Court of Appeals for the Eleventh Circuit has defined “instrumentality” under the Foreign Corrupt Practices Act (FCPA). Until now no federal appellate court had weighed in on a definition of “instrumentality,” leaving individuals and entities only the government’s interpretation of the statute for guidance.  Not surprisingly, the government’s interpretation of what constitutes an “instrumentality” of the state for purposes of a bribe to one of its officials or employees included state-owned or state-controlled entities.[1]   The Eleventh Circuit’s decision in United States v. Esquenazi, No. 11-15331 (May 16, 2014), in large part adopted the government’s interpretation, defining an “instrumentality” as “an entity controlled by the government of a foreign country that performs a function the controlling government…

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28 May 2014 Dear Department of Justice: Welcome to the “Modern Age”

  On May 12, 2014, Deputy Attorney General James Cole issued a memo to federal prosecutors, as well as several investigative offices (the FBI, DEA, ATF and U.S. Marshals Service) entitled “Policy Concerning Electronic recording of Statements.” The issuance of the memo is somewhat worthy of note because it was done with no fanfare or announcement by the Department, at the time. It is more worthy of note because it reflects a dramatic change in a many decades-long policy of the Department not to electronically record in-custody interviews. Attorney General Holder has described the change as a “sweeping new policy” and the Department announced the “significant policy shift concerning electronic recording of statements” in a May 22, 2014, press release, after several published reports on the…

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27 May 2014 CYBERCRIME & YOUR COMPANY – FAILING TO PREPARE = PREPARING TO FAIL, Part 2

Continuation of last week’s Cybercrime & Your Company – Failing to Prepare = Preparing to Fail, Part 1.   V. If Your Company Becomes the Next Victim   If your company becomes the next target/victim of cybercriminals, personal information of your employees and customers can be compromised. Sensitive and proprietary data can be stolen and sold to the highest bidder, usually one of your competitors. Financial resources can disappear and the reputation of your business can be ruined.   VI. Key Steps to Protect Your Computer System from the Cybercriminal   How can you protect your computer system from a cybercriminal, a digital terrorist, waiting to wreak havoc upon your company? Here are some key tips:  Ensure your employees set strong passwords, change them periodically and…

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22 May 2014 CYBERCRIME & YOUR COMPANY – FAILING TO PREPARE = PREPARING TO FAIL, Part 1

  1. The Threat “If you don’t lock your car, it’s vulnerable.  If you don’t’ secure your computer, it’s vulnerable.”   “Reduce your vulnerability, and you reduce the threat.”   Information on how to protect your computer.   There are over 2 billion people worldwide using the Internet.  An alarming number of these people make a decent living as cybercriminals.  In doing so, they cower behind the anonymity provided by the Internet.  They destroy lives.  They injure businesses and compromise the integrity of the global economy.   2. The Reality In a report recently released by the FBI’s Internet Crime Complaint Center (“IC3”), the agency disclosed that it had received 262,813 “consumer” complaints of suspected internet crime in 2013.  These complaints involved an adjusted dollar…

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20 May 2014 Quick Tip: CFTC to Make First Dodd-Frank Whistleblower Award

  The Commodity Futures Trading Commission plans to make its first whistle-blower award under the Dodd-Frank Wall Street Reform and Consumer Protection Act, with the recipient getting about $240,000 for exposing information about commodities law violations, Acting Director Mark Wetjen said in a May 20 statement.   The number of “high quality tips, complaints and referrals” received by CFTC continues to increase, Christopher Ehrman, head of agency’s Whistleblower Office, said in statement.  

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20 May 2014 District Court Bolsters the Five-Year Statute of Limitations Defense to SEC Civil Enforcement Actions

  A recent decision by a federal district court judge in the Southern District of Florida held that the five year statute of limitations in 28 U.S.C. § 2462 applies to civil enforcement actions by the Securities & Exchange Commission regardless of the relief requested.   The district court’s holding in SEC v. Graham, Case No. 4:13-10011 (S.D. Fla. Ruling May 12, 2014), is an important expansion of the US Supreme Court’s ruling in Gabelli v. SEC, 568 U.S. __ (2013). In Gabelli, the Supreme Court held that the five-year statute of limitations in section 2462 for the SEC to bring a civil enforcement action begins to tick when the fraud occurs, not when it is discovered. Since the Gabelli decision, the SEC has argued that the…

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