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Government Enforcement Exposed - "The GEE"
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08 Feb 2016 SEC Completes Municipal Underwriter “Enforcement Sweep”

We have previously reported on the SEC’s Municipalities Continuing Disclosure Cooperation (MCDC) Initiative, pursuant to which municipal securities issuers and underwriters could obtain favorable settlement terms if they self-reported any instances in which there had been inaccurate statements in a final official statement about continuing disclosure compliance. Last week, the SEC announced that it had completed the municipal underwriter “enforcement sweep” portion of that initiative with the filing of enforcement actions against another 14 underwriters. With the actions filed back in June 2015 and September 2015, this brings the total number of underwriting firms charged to 72, a number which represents, according to Andrew J. Ceresney, Director of the SEC’s Enforcement Division, 96 percent market share for municipal underwritings.   In the orders instituting cease…

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04 Feb 2016 Jury Hands Prosecutors First Loss in LIBOR Trials

  Following a four-month jury trial in London, a Southwark Crown Court jury acquitted six defendants of charges including fraud and conspiracy stemming from alleged manipulation of the London Interbank Offered Rate (LIBOR). While the acquittal represents a loss for British prosecutors, it does not appear likely to deter future LIBOR prosecutions in the United Kingdom or the United States.   Tasked with prosecuting serious or complex fraud, bribery and corruption crimes in the United Kingdom, the Serious Fraud Office (SFO) alleged that Colin Goodman, Danny Wilkinson, Terry Farr, James Gilmour, Noel Cryan, and Darrell Read—all former London-based brokers at financial services firms—conspired to fraudulently manipulate LIBOR rates. LIBOR—the average interest rate at which banks can borrow unsecured funds from one another in the London…

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01 Feb 2016 Can the Government Unlock My Cell Phone? Companies’ Heightened Security Features to Protect Customer Privacy Affects DOJ Investigations

  With contributions from Katie Matsoukas.   As the numbers of highly publicized data breaches have become more prevalent, companies continue to find new ways to secure private customer information. However, as companies become more successful at protecting their customers and reducing their own liability, the government’s ability to extract information on targets of criminal investigations has become more difficult. This tension between personal privacy and the federal government’s desire and ability to access private data during investigations through search warrants has now reached the federal courts.   During the execution of a search warrant on Jun Feng’s (Feng) residence, the government seized a password-locked Apple iPhone 5. See In re Order requiring Apple Inc. to Assist in the Execution of a Search Warrant Issued…

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20 Jan 2016 THE SUPREME COURT GRANTS CERTIORARI IN SALMAN

  Score one for the tea leaf readers. For the last past year, since the Second Circuit issued its watershed insider trading opinion in United States v. Newman, we have followed the fall-out from that decision and speculated whether the time was ripe for the Supreme Court to address this issue again. (See previous posts here.)  In the government’s petition for Supreme Court review, it argued that Newman gutted Dirks and created numerous negative consequences for the country’s financial markets.   Back in August, we suggested that the Court might choose not to grant certiorari in Newman because it appeared not to be an optimal vehicle for addressing whether insider trading can arise simply from a close family relationship between the insider and tippee.  We…

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06 Jan 2016 STARTING THE NEW YEAR WITH A CLEAN SLATE: INDIANA’S EXPUNGMENT STATUTE ENCOMPASSES SOME CIVIL FORFEITURES

  At the close of 2015, a divided Indiana Court of Appeals ruled that an individual with a civil forfeiture action that is related to a criminal conviction could seek to expunge not only the criminal records but the civil records based on the underlying conviction. This (albeit limited) development is important because of the increasing scrutiny on the use of civil forfeiture in the face of criticism over its inequities.  (See a previous Government Enforcement Exposed blog post on civil forfeiture here.)   Civil forfeiture actions often arise when the government locates money or items during an investigation or search based on alleged criminal activity. The case before the court was no exception.  In D.A. v. State of Indiana, D.A. sold cocaine to a…

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28 Dec 2015 U.S. Supreme Court to Decide the Validity of the False Claims Act’s Implied Certification Theory

The United States Supreme Court granted certiorari in the First Circuit case Universal Health Services, Inc. v. Escobar to decide the validity and application of the implied certification theory of the False Claims Act (FCA). The FCA imposes civil liability for knowingly presenting, or causing to be presented, a false or fraudulent claim to the government for payment or approval. Courts have recognized two types of FCA claims: those that are factually false and those that are legally false. Legally false claims are founded on a false certification of compliance with a federal statute, regulation or contractual requirement and are further categorized as either expressly or impliedly false. An expressly false certification may occur when a request for payment explicitly certifies compliance, whereas the doctrine…

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24 Nov 2015 DOJ Fraud Section Retains New Compliance Counsel

The Department of Justice (DOJ) Fraud Section recently retained Hui Chen as a full-time compliance expert reporting to the chief of the Fraud Section and the acting chief of the Strategy, Policy, and Training Unit in the Fraud Section. Formerly a federal prosecutor, Ms. Chen most recently served as global head for Anti-Bribery and Corruption at Standard Chartered Bank (SCB). Ms. Chen’s vita also includes her time as assistant general counsel in the Compliance Division of Pfizer, Inc., as well as significant in-house and compliance positions at Microsoft Corporation, to include Director of Legal Compliance for the Greater China Area.   Beginning Nov. 3, Ms. Chen “will provide expert guidance to Fraud Section prosecutors as they consider the enumerated factors in the United States Attorneys’…

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23 Nov 2015 Federal Prisoner Release: The First Step of a More Ambitious Plan

The Federal Bureau of Prisons has caused quite a stir recently due to its anticipated early release of an approximately 6,000 prisoners convicted of drug possession and/or drug trafficking crimes. Much of the debate between opponents and advocates of the mass release has focused on its impact on public safety. Yet, many of its critics are completely unaware of the fact that these events were set in motion more than a year ago, when the U.S. Sentencing Commission unanimously voted to amend the federal sentencing guidelines with respect to drug offenses. What may be even more troubling to critics of the Bureau and Commission’s actions is that this is likely only the first step toward a more ambitious reform – the elimination of mandatory minimum…

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16 Nov 2015 SEC Reduces Dodd-Frank Whistleblower Award for “Unreasonable Delay,” Announces Policy of “More Heavily” Punishing Delay After Award Program’s Implementation

Continuing our coverage of the SEC’s whistleblower award program, the SEC recently announced a notable award order. What is notable about this award is not the size of the bounty, but the fact the SEC reduced the award for “unreasonable delay” in reporting, stating for the first time that “the award could have been higher had this whistleblower not hesitated.”   As we have previously discussed, the Dodd-Frank Act’s whistleblower award program permits the SEC to award whistleblowers a bounty between 10 percent and 30 percent of an enforcement sanction. While this is not the first time the SEC reduced an award due to a claimant’s delay, the SEC had mitigated its prior reductions by noting the delays pre-dated the Dodd-Frank Act. Here, in contrast,…

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06 Nov 2015 Protected Activity and Individual Liability: Broadened Interpretations of the False Claims Act Anti-Retaliation Provision

The False Claims Act’s (FCA) anti-retaliation provision allows private whistleblowers to file an FCA complaint without retaliation from their employers. A series of 2015 decisions interpreting the recent amendments to the FCA indicate that courts have increasingly broadened their view as to which types of activities are protected under the anti-retaliation provisions and whom they may be brought against. The expansion of protected activities and persons covered requires corporate entities to be aware of the inevitable increase in anti-retaliation actions due to the broadened scope of the FCA’s whistleblower protections.   Prior to 2009, the anti-retaliation provisions protected only those acts done in furtherance of an FCA qui tam action. Protected activity included only that which provided an employer notice of possible litigation. The passage…

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