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Government Enforcement Exposed - "The GEE"
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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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29 May 2015 THE BENEFITS OF COOPERATION – HYPERDYNAMICS AVOIDS INDICTMENT

On May 21, 2015, the Department of Justice (DOJ) announced that it has closed its investigation involving Hyperdynamics Corporation regarding possible violations of the Foreign Corrupt Practices Act (FCPA). In doing so, Patrick Stokes, Deputy Chief of DOJ’s Fraud Section noted that “the Department values cooperation with investigations such as shown here.”   In September of 2013, Hyperdynamics received a subpoena from the DOJ seeking company records pertaining to its operations in Guinea, West Africa. The Guinean operations involved obtaining and retaining oil and gas concession rights off the coast of Guinea. The DOJ also inquired about Hyperdynamics’ relationship with various charitable organizations.   Hyperdynamics cooperated with the government during the investigation, conducted its own internal investigation into issues raised by investigators and provided information…

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28 May 2015 RENEWED GOVERNMENT INTERFERENCE IN ATTORNEY FEE ARRANGEMENTS?

For decades, employees who were not in a position to be covered by Director’s & Officer’s insurance have relied upon employment agreements or the simple generosity of their employer to pay legal fees associated with government investigations and prosecutions. Moreover, in an age where the Department of Justice’s jurisdictional reach seems to be growing by the minute, companies facing long-lasting and wide-reaching government investigations many times rely upon one single law firm to represent multiple employees who may be interviewed by the government or serve as a grand jury witness. The benefits to the company are obvious and numerous – the company does not have to pay an additional set of lawyers to familiarize themselves with the facts of the investigation and it is able…

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26 May 2015 THE SEC EXPLAINS ITS RATIONALE IN FORUM SELECTION IN CONTESTED CASES PART II – THE SEC’S GUIDANCE AND FURTHER QUESTIONS

Our post last week explained the background behind the growing concern regarding the potential home-court advantage the SEC may have in contested matters it litigates as in-house administrative proceedings rather than in federal district court. Since “in recent years an increasing percentage of enforcement actions have been filed as contested matters, as opposed to being fully settled at the outset,” and those figures are “expected to continue to grow,” as Chair Mary Jo White testified recently to Congress, the SEC’s choice of forum takes on increasing significance.   Against this backdrop, earlier this month, the SEC’s Enforcement Division issued a memorandum describing the factors the agency considers when deciding the proper forum in which to bring a contested action. The Commission began by saying it…

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22 May 2015 THE SEC EXPLAINS ITS RATIONALE IN FORUM SELECTION IN CONTESTED CASES Part I - Complaints About SEC's Forum Selection

  Earlier this month, after substantial criticism from defendants, practitioners, and even a federal judge, the SEC’s Enforcement Division issued its first formal guidance explaining how it determines whether to bring an enforcement action in federal district court before the SEC’s own administrative law judges. The Enforcement Division’s “guidance” makes clear that it leaves itself with substantial discretion to decide the appropriate forum in which to bring a contested case. Just as interesting, however, is what the SEC does not say factors into that decision. This post discusses some of the issues surrounding the SEC’s forum selection issues. Part II will address the agency’s just-published guidance to address those concerns.   By way of background, the SEC has long had the ability to choose the venue…

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05 May 2015 Extradition from Japan: The Gamble

It is no secret amongst criminal antitrust practitioners that the U.S. Department of Justice (DOJ) has had difficulty extraditing foreign nationals indicted for Sherman Act violations.  Indeed, the extradition process is complex and uncertain given the multitude of hurdles the DOJ faces when attempting to extradite a citizen of a sovereign country.   Japanese nationals are no exception. The reality is that Japanese law and extradition proceedings afford the Japanese government a huge amount of discretion as to whether or not to comply with an extradition request made by the United States government.  Interestingly, despite the nearly insurmountable challenges faced by the DOJ in extradition proceedings, a surprising number of Japanese executives and employees have acquiesced to the U.S. justice system, the result of which…

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28 Apr 2015 Self-Reporting: A Wise Strategy or Chasing Unicorns?

As we noted in an earlier post, Department of Justice (DOJ) representatives have been emphasizing this spring the financial benefits of cooperation. They did so again last week at the Practicing Law Institute’s Enforcement 2015: Perspectives from Government Agencies, during which enforcement officials from the DOJ, SEC, CFTC, FINRA and Consumer Financial Protection Bureau (CFPB) all pushed back last week against complaints that the benefits of self-reporting are illusory and the costs far too high.   Director of the SEC’s Division of Enforcement Andrew Ceresney claimed that significant benefits of self-reporting are evidenced by three FCPA settlements earlier this year: a disgorgement-only settlement with Goodyear, a deferred prosecution agreement with PBSJ Corporation and a settlement with FLIR Systems, Inc. which entailed only a “minimal penalty”…

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