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Government Enforcement Exposed - "The GEE"
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11 Sep 2015 JUSTICE DEPARTMENT POLICY CHANGE TARGETS CORPORATE EXECUTIVES

In a memo dated Sept. 9, 2015, the Justice Department announced that it will take the fight against corporate wrongdoing directly into the boardrooms and offices of businesses. Long stung by criticism that it has coddled corporate executives, the department’s new policies evidence a change in direction, one aimed squarely at individuals involved in corporate fraud and misconduct.   The memo, authored by Deputy Attorney General Sally Yates, applies this “new” guidance to both criminal and civil matters. In doing so, the department focuses on the notion that “one of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing.” In making this policy adjustment, the memo identifies four principal goals: (1) deterring future illegal activity;…

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12 Aug 2015 What the DOJ Expects of ‘Effective’ Compliance Programs

If you have been keeping up with current U.S. Department of Justice (DOJ) antitrust investigations, you have no doubt noticed the hefty criminal fines that have been paid by violators of U.S. antitrust laws. In recent years, the United States government has literally collected billions of dollars in criminal fines. In light of the staggering fines, one important factor that antitrust practitioners should consider is the DOJ’s evaluation of a company’s compliance and ethics program. In theory, a company that pleads guilty to antitrust violations may be afforded a reduction in its culpability score if it can demonstrate that there was a compliance and ethics program in place at the time of the violation, and that the program was “effective” as defined by the U.S….

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11 Aug 2015 WHY NEWMAN MIGHT NOT BE HEADED TO THE SUPREME COURT

In the latest chapter of the United States v. Newman insider trading case, the Solicitor General recently filed its petition for writ of certiorari, asking the United States Supreme Court to hear the case. While the court is unlikely to decide on the government’s petition until the end of the year, the government’s petition may have actually diminished the chances that the Supreme Court will take the case.   As we have discussed previously, April 29, 2014; Dec. 23, 2014; and March 9, 2015, the Second Circuit held last year that an insider trading conviction requires that: (1) an insider tipper act for a “personal benefit” of financial consideration, or something at least akin to monetary gain; and (2) the remote tippee know that the…

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03 Aug 2015 Partial Victory for Blagojevich: Seventh Circuit Concludes Criminal Statutes Do Not Prohibit “Logrolling”

In mid-July, the Seventh Circuit reversed five of former Illinois Governor Rod Blagojevich’s 18 felony convictions. The court’s ruling may not be of much help to Blagojevich – the court noted that his sentence remains below guidelines – but it does have significant implications for public officials who face federal prosecution for “logrolling,” or trading one public act for another.   In 2008, Blagojevich infamously sought to benefit from his power to appoint a successor to Barack Obama’s soon-to-be vacated Senate seat. The Seventh Circuit focused on the government’s claim that Blagojevich offered to appoint Obama advisor Valerie Jarrett to the Senate in return for, alternatively, a Cabinet appointment or help obtaining a private-sector job.   The court found a critical difference between these two…

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15 Jul 2015 NINTH CIRCUIT SLAPS BACK REMOTE TIPPEE’S NEWMAN DEFENSE

Last week, the Ninth Circuit, with opinion by Southern District of New York Judge Jed S. Rakoff, questioned how far remote tippee insider-trading defendants can stretch the Second Circuit’s Newman decision.   In United States v. Salman, the defendant appealed his conviction for conspiracy and insider trading, urging the court to find the evidence against him was insufficient under the Newman standard. The conviction arose from Salman’s trading on insider information through family connections. Salman’s future brother-in-law, Maher Kara, worked in a leading global bank’s healthcare investment banking group and shared insider information with his brother, Michael, who became Salman’s close friend and in turn shared that insider information with Salman. Michael urged Salman to “mirror-image” his trading, and Salman traded through a brokerage account…

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25 Jun 2015 U.S. v. Sigelman: Another FCPA Enforcement Setback for the DOJ

On Monday, June 15, 2015, the criminal trial of Joseph Sigelman, a former co-chief executive of PetroTiger Ltd. came to an abrupt end when he pleaded guilty to a single count of conspiracy and, the following day, received a sentence of probation. Mr. Sigelman had faced a potential 20-year sentence for charges including alleged violations of the Foreign Corrupt Practices Act (FCPA). All charges except the guilty plea to a single count of conspiracy to violate the FCPA were dropped as a result of the plea. While the sudden conclusion to the Sigelman trial appears to have been brought on by a witness’s surprise change in testimony, it certainly appears to be the latest in a series of setbacks for the DOJ in its efforts…

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23 Jun 2015 FALSE CLAIMS ACT: INCREASED PROSECUTIONS AND HIGHER SENTENCES

As Assistant Attorney General Leslie R. Caldwell warned last September, the Department of Justice has increased its “commitment to criminal investigations and prosecutions that stem from allegations in False Claims Act lawsuits.” The continued rise in criminal FCA investigations, combined with substantial sentences received by those Defendants, show that Caldwell’s pronouncement was not an empty promise. Recent cases exemplify a clear intent by DOJ to continue aggressive investigation and prosecution of FCA matters. When convictions are obtained, the government has sought and obtained significant sentences against both institutional and individual wrongdoers.   Riverside General Hospital (Riverside) in Houston, Texas, is one of the more recent examples of this increased prosecutorial fervor toward FCA violations in the healthcare arena. On June 9, 2015, the former President…

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19 Jun 2015 The MCDC Orders: Everything is material

Pursuant to Rule 15c2-12 under the 1934 Act, official statements for municipal securities offerings are to contain a description of any time in the prior five years when the issuer failed to comply, “in all material respects,” with prior contractual commitments to provide continuing financial and operational disclosures. The SEC’s Division of Enforcement has taken the position that a failure to disclose such instances of material non-compliance in an official statement violates the federal securities laws.   In March 2014, the Division announced the Municipalities Continuing Disclosure Cooperation (MCDC) Initiative pursuant to which issuers and underwriters could obtain favorable settlement terms if they self-reported to the Division of Enforcement any instances in which there had been a materially inaccurate statement in a final official statement…

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08 Jun 2015 Justice Department Guidelines Seek to Focus Enforcement of Structuring Law on Most Serious Cases

Prosecutorial discretion is a powerful and necessary component of our justice system. Prosecutors exercise charging decisions with few limits and often use their charging discretion to extract valuable information from targets. Nevertheless, the Department of Justice (DOJ) has recently implemented a number of high-profile initiatives aimed at directing the exercise of prosecutorial discretion in a manner that focuses enforcement actions on the most serious violations of federal law.   One of the DOJ’s initiatives limits the use of asset forfeiture in connection with the federal structuring law found at 31 U.S.C. § 5324. The Bank Secrecy Act requires banks to report cash transactions over $10,000. The structuring law prohibits individuals from structuring banking transactions in order to evade that reporting requirement. Congress passed the law…

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05 Jun 2015 CFTC and CME Collaborate to Chase Alleged Spoofers

The Commodity Futures Trading Commission’s (CFTC) ongoing use of its new anti-spoofing authority (Section 4c(a)(5)(C) of the Commodity Exchange Act) demonstrates a heightened awareness by exchanges of efforts by market participants to rapidly enter and cancel trades in order to manipulate market prices. In May 2015, the CFTC filed a complaint (Complaint) in the Southern District of New York against two traders who allegedly engaged in spoofing by layering trades in the Gold and Silver futures on the Commodity Exchange, Inc. (COMEX). The case is noteworthy for several reasons.   The Complaint alleges that defendants Heet Khara and Nasim Salim “entered orders or layered multiple orders to encourage market participants to trade opposite … smaller orders on the opposite side of the book.”  Once the…

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