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Government Enforcement Exposed - "The GEE"
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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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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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