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Government Enforcement Exposed - "The GEE"
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29 Apr 2016 Accounting Fraud Getting Increased Attention from the SEC and Class Action Counsel

Accounting and financial disclosure issues are increasingly becoming the focus of litigation – both with the Securities and Exchange Commission (SEC) and the plaintiffs’ class action bar – according to recent pronouncements from the SEC and a leading research firm that tracks securities class actions.   Last week, the SEC announced two financial fraud cases against companies and their former executives, accusing them of various accounting failures that gave investors inaccurate views of company finances. These cases appear to be among the fruits of the SEC’s Financial Reporting and Audit Task Force, created in 2013 to strengthen the SEC’s efforts to identify securities law violations relating to the preparation of financial statements, issuer reporting and disclosure and audit failures. The Task Force’s efforts have taken…

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08 Apr 2016 Department of Justice Rolls Out FCPA Enforcement Pilot Program

On April 5, the Department of Justice (DOJ) issued a press release and accompanying memorandum detailing what it is terming a one-year FCPA “pilot program” as part of an effort to provide more transparency and guidance to companies on the benefits of self-disclosing FCPA violations and cooperating with government investigations. The memorandum sets out three components of the DOJ’s “enhanced FCPA enforcement strategy,” which are:   Increasing law enforcement resources for FCPA prosecutions by hiring 10 new prosecutors for the Fraud section’s FCPA unit; Strengthening coordination with foreign counterparts in order to share leads, documents and witnesses; and Establishing the pilot program to motivate companies to voluntarily self-disclose FCPA-related misconduct, cooperate and remediate.   The central theme of the enhanced strategy appears to be the…

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01 Apr 2016 DOJ Launches Targeted Elder Justice Task Forces

  On March 30, the Department of Justice (“DOJ”) announced the formal launch of 10 regional Elder Justice Task Forces designed to identify nursing homes and other long-term care (“LTC”) facilities that provide “grossly substandard care” to residents.   Similar to DOJ’s previously launched Medicare Fraud Strike Force and Health Care Fraud Prevention & Enforcement Action Team (“HEAT”) initiative, the newly created Elder Justice Task Forces will focus on coordination and information sharing among federal, state and local enforcement agencies to combat suspected cases of physical abuse and financial fraud. Each task force will consist of representatives from the U.S. Attorneys’ Offices, state Medicaid Fraud Control Units, state and local prosecutors’ offices, the Department of Health and Human Services, state Adult Protective Services agencies, Long-Term…

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24 Mar 2016 The Best Policy: Fifth Circuit Finds Prosecutorial Misconduct and Vindictiveness

  Giving credence to the adage that honesty is the best policy, a panel from the Fifth Circuit Court of Appeals in United States v. Dvorin affirmed the district court’s finding that the lead prosecutor “exhibited a reckless disregard for her duties and conducted the proceedings in an irresponsible manner” during a bank fraud prosecution by withholding material evidence concerning the credibility of a key government witness, and also by knowingly using false testimony to obtain a conviction. The panel also found that the government failed to overcome the presumption of prosecutorial vindictiveness because it added an additional forfeiture notice once forced to retry the case as a result of prosecutorial misconduct during the first trial.   In 2012, a grand jury indicted Jason Dvorin…

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23 Mar 2016 A New Approach: DOJ Antitrust Division in Wake of Yates Memo

  For more than five years, the Department of Justice’s (DOJ) Antitrust Division and the FBI have had the automotive parts industry under a microscope. In September 2015, the DOJ announced it would undertake a policy shift to focus more ardently on the investigation and prosecution of individuals responsible for company misconduct. This new policy shift may already be influencing the manner in which the Antitrust Division is conducting criminal investigations.   The ongoing federal investigation into price fixing, bid rigging, and other anticompetitive conduct has netted at least 38 corporate convictions, 58 indictments of corporate executives, and approximately $2.6 billion in criminal fines. Most recently, INOAC Corp., an auto parts supplier and major player in the advanced materials industry, pled guilty for conspiring to…

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10 Mar 2016 Watch What You Write, Watch What You Say

  While market manipulation cases typically involve circumstantial evidence, prosecutors are finding more sophisticated ways to get defendants’ direct statements into evidence. In market fraud cases, government prosecutors are required to prove a defendant’s state of mind (the criminal intent component of a case). Historically, they have done so based on what the defendant did under specific circumstances—something referred to as “circumstantial evidence.” For example, an insider trading case may turn on the circumstance that a corporate insider had earnings information on the date she sold large quantities of corporate stock. Or, a market manipulation case may turn on the trades a defendant entered into after receiving a specific phone call.   Another significant component of such cases is the defendant’s own notes and comments….

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08 Mar 2016 DOJ Leaves Much Unsaid After Announcing Need for Corporate Certifications to Finalize Settlements

  On Feb. 4, the Department of Justice’s (DOJ) Fraud Section announced it will start requiring companies involved in white-collar crime investigations to “certify” that it has disclosed all information regarding individuals involved in the alleged misconduct. According to the Wall Street Journal, this corporate certification will be required before the DOJ will finalize a settlement agreement with a company. The new certification process is still in the “development” stage, “according to the department, but it could be a written certification.” While the U.S. Attorney Manual already requires companies “identify all individuals involved in the misconduct” and disclose “all facts relating to the misconduct;” it does not require a formal, written certification as a prerequisite to finalize a settlement. See U.S.A.M. § 9-28.700.   The…

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07 Mar 2016 SEC Busts Tech Company for Bribing Chinese Officials

  On Feb. 16, the SEC announced settlement of parallel civil and criminal actions involving violations of the Foreign Corrupt Practices Act (FCPA) by Massachusetts-based tech company PTC, Inc. As part of the agreement, PTC and two Chinese subsidiaries agreed to pay more than $28 million in fines, interest and disgorgement for providing Chinese officials with vacations, improper gifts and entertainment that were disguised as legitimate business expenses. Specifically, PTC agreed to pay $13.6 million in disgorgement ($11.858 million) plus interest ($1.764 million) while its two Chinese subsidiaries agreed to pay a $14.54 million fine as part of a non-prosecution agreement.   In related action, the SEC also announced its first deferred prosecution agreement (DPA) with an individual involved in an FCPA investigation. Yu Kai…

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19 Feb 2016 Can the Government Unlock My Cell Phone? Part II: Federal Judge Says “Yes.” Federal Judge Orders Apple to Assist FBI in Unlocking iPhone

  Following up on our recent post exploring the federal government’s efforts to search cell phones, a U.S. magistrate judge recently issued an order requiring Apple Inc. to assist the Federal Bureau of Investigation (FBI) in unlocking an iPhone used by Syed Farook, one of the two individuals responsible for the mass shootings in San Bernardino, California.   During the execution of a search warrant of Farook’s vehicle, the FBI recovered a password-locked Apple iPhone 5C. See In re Search of an Apple IPhone Seized During the Execution of a Search Warrant on a Black Lexus IS300, California License Plate 35KGD203, No. 5:15-mj-00451, Dkt. No. 18 (C.D. Cal. Feb. 16, 2016). While the iPhone is actually owned by Farook’s former employer, San Bernardino County, which…

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08 Feb 2016 The “Other Yates Memo:” DOJ to Enhance Workplace Safety Violation Prosecutions by Tacking On More Severe Charges Where Possible

  On Sept. 9, 2015, Deputy Attorney General Sally Quillian Yates issued a memo pronouncing the Department of Justice’s (DOJ) reinvigorated strategy to “combat corporate misconduct” by targeting “the individuals who perpetrated the wrongdoing.” The memo became widely known as the “Yates Memo.” However, on Dec. 17, 2015, Yates issued another memo to all 93 U.S. attorneys that largely fell under the radar. While this “Other Yates Memo” has received less attention, it bears significant importance for corporations in patrolling work safety violations.   In the memo, Yates announced the DOJ’s intention to enhance the prosecution of work safety violations to increase deterrence. Work safety violations are typically misdemeanors punishable by a fine of no more than $10,000 and/or imprisonment for no more than six…

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