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Government Enforcement Exposed - "The GEE"
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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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05 Nov 2015 “Hide No Harm Act Of 2015” Targets Employers, Directors and Officers

The 114th Congress has now taken up the policy recently announced by the Department of Justice (DOJ) through the Yates Memo. The Hide No Harm Act (S.2140) would impose criminal penalties upon corporate officers who fail to advise an appropriate federal agency of “serious danger associated with a product, service or business practice.” Corporate officers who fail to notify an appropriate agency of the federal government regarding any serious danger associated with a covered product, service or business practice within twenty-four hours of the individual receiving notice of such dangers could be punished by a fine and imprisonment for up to five (5) years. A fine imposed upon an individual for violating the Act “may not be paid, directly or indirectly, out of the assets…

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27 Oct 2015 Update from the Coscia Trial

Yesterday, the United States began its prosecution of Michael Coscia of Panther Energy Trading LLC for allegedly engaging in “the crime of spoofing,” as prosecutors framed it. We have blogged about this case before (here and here) and discussed it in the media in the following outlets: Bloomberg News, Wall Street Journal Law Blog, Crain’s Chicago Business and the Chicago Tribune.   In his opening statement, Assistant United States Attorney Renato Mariotti tried to make high frequency trading rudimentary, understandable, and impactful for the jurors. He used very basic analogies and explanations, in order to build a simple case. According to Mariotti, Coscia manipulated markets by using two trading programs—“Flash Trader” and “Quote Trader”—to make it appear there was more supply or demand in the…

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08 Oct 2015 Regulation S-P Violation: Are You Prepared For A Cyber-Security Breach?

On Sept. 22, 2015, the Securities and Exchange Commission (SEC) announced the first violation by a registered investment advisor of the so-called Safeguards Rule (Regulation S-P) pertaining to the protection of personally identifiable information from cyber-attack.  This is the first instance of the SEC enforcing Regulation S-P against an investment advisor.   The Regulation, broadly speaking, requires broker-dealers, investment advisers and other financial firms to protect confidential customer information from unauthorized release to unaffiliated third parties. Included in Regulation S-P is the “Safeguard Rule” (Rule 30(a)), which requires financial institutions to, among other things, adopt written policies and procedures reasonably designed to protect customer information against cyber-attacks.  This raises the question:  Are you prepared for a cyber-attack (and the attendant liability)?   In its findings,…

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05 Oct 2015 REST IN PEACE, NEWMAN – SO WILL THE GOVERNMENT LAY DOWN IN SALMAN?

This morning, the U.S. Supreme Court finally put to an end to the government’s efforts to reverse the Second Circuit’s decision in United States v. Newman. As this blog predicted it might (August 11, 2015), the Supreme Court denied the government’s petition for writ of certiorari. As a result, the Second Circuit’s decision vacating the convictions of Newman and Chiasson stands. As is the court’s custom, it did not explain its decision.   As a result, if the government was not being hyperbolic in its petition for certiorari, the Second Circuit – home to most of the insider trading prosecutions in the country – has raised the bar for insider trading prosecutions higher than any other circuit in the country, created a standard that conflicts…

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28 Sep 2015 INSIDER TRADING AND ADMINISTRATIVE COURTS – MORE ON TWO HOT TOPICS THAT HAVE NOW CONVERGED

Since this blog began in January 2014, several topics have garnered substantial ink. These include: (1) the SEC’s apparent growing preference for litigating contested cases on their home turf, administratively, rather than in federal court. (June 19, 2014, July 10, 2014, May 26, 2015, May 22, 2015); and (2) the difficulties the government (both the SEC and DOJ) have encountered bringing insider trading cases and, in particular, the continuing saga of United States v. Newman, in which the DOJ’s petition for writ of certiorari is now pending before the United States Supreme Court. Both these issues continue to generate news, and they even converged recently.   SEC’s Administrative Law Courts   On the administrative court front, the SEC has been criticized repeatedly about the potential…

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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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