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Government Enforcement Exposed - "The GEE"
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09 Apr 2014 Alert: SEC creates team to examine private equity and hedge funds

  The SEC has created a dedicated team to examine and scrutinize private equity and hedge funds. According to Reuters, the SEC’s private fund team is led by Igor Rozenblit and Marc Wyatt, veterans of private equity and hedge funds respectively. The SEC’s private fund team will examine several areas in the private fund realm including asset valuation, fee structures and disclosures, and other communications with investors. Creation of this team follows the increased scrutiny on private funds that has occurred since passage of the 2010 Dodd-Frank law, which required many advisors to private funds to register with the SEC.  

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01 Apr 2014 ILLINOIS SUPREME COURT FINDS EAVESDROPPING LAW UNCONSTITUTIONAL, BUT DON’T TELL ROSE MARY WOODS JUST YET

  The Illinois Supreme Court has concluded in two recent cases that Illinois’s long-standing prohibition against recording conversations unless all parties consent to the conversation is unconstitutionally overbroad. The Court determined that the statute prohibited recording conversations that could not possibly be deemed private and potentially applied to numerous situations, like recording public interactions with law enforcement or government officials, which arguably impinged on the public’s First Amendment rights. For a more detailed account of the Court’s rulings and its potential impact in the employment arena, see the recent client alert published by the Firm’s Labor & Employment law group.   Whether these decisions have any lasting impact, though, remains to be seen. The Court did not conclude that the notion of a two-party consent…

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29 Mar 2014 Case to Watch – Chadbourne & Parke LLP v. Troice – Has the Supreme Court undermined the misappropriation theory of insider trading?

  In the recent decision by the United States Supreme Court, Chadbourne & Parke LLP v. Troice, the dissent suggested that the Supreme Court may have unwittingly undermined the misappropriation theory of insider trading liability. In that case, the Supreme Court, analyzing the Securities Litigation Uniform Standards Act of 1998, held that “[a] fraudulent misrepresentation or omission is not made ‘in connection with’” a security “unless it is material to a decision by one or more individuals (other than the fraudster) to buy or sell” the security. Under misappropriation theory, however, the fraudster’s omission plays no role in the decision by another individual to buy or sell a security. Consequently, Troice may vitiate misappropriation theory.   The opinion is available here.  

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28 Mar 2014 Honest Services Fraud, Ray Nagin & “Big Easy” Money

Through appellate and trial court decisions in United States v. Ring[1] and United States v. Nagin[2], federal prosecutors have been given greater power to charge and obtain convictions for Honest Services Fraud.  They are not bound to prove the existence of either an explicit quid pro quo or the actual acceptance of bribes to achieve conviction.  Emboldened by these cases, prosecutors are more likely to pursue businesses, lobbyists and individuals who operate in our complicated political world.    On February 12, 2014, a federal jury convicted former New Orleans Mayor Ray Nagin on 20 of 21 counts contained in a federal corruption indictment.  Included among the charges on which Nagin was found guilty were nine (9) counts of Honest Services Wire Fraud.  Nagin was indicted…

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25 Mar 2014 My Partner Left Me for the Government! DOJ’s First Opinion Procedure Release of 2014 Approves Buyout of Minority Shareholder-Turned-Government Official

On March 17, 2014, the Department of Justice issued FCPA Opinion Procedure Release 14-01, in which it approved a U.S. issuer’s buyout of a minority partner-turned-government-official’s interest in a foreign company.  In this case, the U.S. issuer was the majority shareholder in a foreign financial services company.  The minority shareholder was a foreign businessman.  The issuer and businessman had a contract that governed the procedure for the issuer’s buyout of the businessman’s interests in the event the businessman was appointed to a foreign government position.  The business ultimately did take a position with the foreign jurisdiction’s central monetary and banking agency, which was a long-time client of the issuer.  The issuer paid the businessman his bonus, severance, and benefits per the parties’ contract, but ran…

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20 Mar 2014 D.C. District Court Order Provides a Warning About Attorney-Client Privilege Protection for Internal Investigations

By Anne DePrez |   A decision earlier this month out of the United States District Court for the District of Columbia serves as a warning that the mere involvement of in-house counsel may not be enough to give attorney-client privilege protection to an internal investigation. In United States ex rel. Barko v. Halliburton Co., Cause No. 05-01276 (D.D.C. Mar. 6, 2014), defense contractor Kellogg, Brown and Root, Inc. (“KBR”) was ordered to produce materials from internal investigations conducted pursuant to its Code of Business Conduct (“COBC”). Because those investigations were conducted to comply with “regulatory law and corporate policy,” the court reasoned, the materials are not privileged.   Barko is a qui tam action brought by a former employee of KBR who alleged that…

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18 Mar 2014 Heightened SEC/DOJ FCPA Standards Offer Risks and Opportunities to Companies and Their Lawyers

By Patrick J. Cotter |    Kara Brockmeyer, the SEC’s Chief of the Foreign Corrupt Practice Act Unit, spoke during the recent “SEC Speaks” conference held in Washington, D.C., Feb. 21 and 22. Based on her remarks, practitioners can, we submit, arrive at some useful conclusions about  the  Government’s  current views as to what companies need to do to comply with the Foreign Corrupt Practice Act and, by implication, what companies and their lawyers are  currently failing to do. Smart companies and their lawyers can choose to benefit from these new and higher FCPA expectations by the government, or they can ignore the warning signs and eventually pay the price.   The SEC’s Brockmeyer began by stating that companies need to customize their FCPA compliance…

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17 Mar 2014 Is the FTC The Latest Weapon of Aggressive Short Sellers?

By Jacob Zipfel |    Christmas came early for hedge fund manager William Ackman. Since December 2012, Mr. Ackman has repeatedly called for an investigation into Herbalife Ltd., a maker and marketer of nutritional supplements. Mr. Ackman contends that Herbalife is a pyramid scheme. All the while, his company, Pershing Square Capital Management LP, has shorted Herbalife stock, betting approximately $1 billion on its fall.   On March 12, 2014, Herbalife acknowledged that it is under investigation by the FTC over allegations it is a pyramid scheme. Within a few hours, the company’s stock dropped about 15 percent.   The FTC’s investigation is the most recent step in Mr. Ackman’s rather unique crusade to bring down Herbalife. Mr. Ackman has assembled a large team, including…

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13 Mar 2014 Top 10 Takeaways from ABA White Collar Crime Conference 2014 (Part 2 of 2)

By Kathleen Matsoukas |   This is the second part of a two-part blog post. Part 1 can be accessed here: “Top 10 Takeaways from ABA White Collar Crime Conference 2014 (Part 1 of 2)”   6. Search warrants are being used in white collar cases more frequently than ever before. The task of educating a client what to do in the event of a government search warrant may be an uncomfortable one.  However, the willingness of the DOJ and SEC to use search warrants in white collar cases (and the fact that the government is not, as yet, obligated to use a “least intrusive alternative” approach) means that companies must have procedures in place in the rare event that the government does show up…

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12 Mar 2014 Top 10 Takeaways from ABA White Collar Crime Conference 2014 (Part 1 of 2)

By Kathleen Matsoukas |   Last week’s annual American Bar Association White Collar Crime conference offered helpful glimpses into some emerging issues and recent trends in government enforcement both at home and abroad.  Today and tomorrow, we feature the Top Ten takeaways from the conference for individuals, companies, and white collar practitioners as compiled by our partners in attendance.    1. The Department of Justice’s FCPA Unit is alive and well and plans to aggressively enforce the FCPA in 2014. Patrick Stokes, the new Chief of the DOJ’s FCPA unit, stated that he expects a number of “significant corporate resolutions” in 2014 and that the FCPA unit expects an increased budget in 2014.  He emphasized that the unit is working closely with foreign jurisdictions in order…

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