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Government Enforcement Exposed - "The GEE"
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13 Apr 2015 Recent Enforcement Trends in the Commodity Markets (Part 1)

Last fall, Aitan Goelman – the Director of Enforcement for the Commodity Futures Trading Commission (Commission) – made two interesting points that appear to be indicative of enforcement trends. Specifically, he stated that: (i) real deterrent of market manipulation requires putting people in jail and (ii) the CFTC is going to start trying cases before administrative law judges. Jean Eaglesham, “CFTC Turns Toward Administrative Judges,” The Wall Street Journal (Nov. 9, 2014).   At a minimum, these two points demonstrate the beat cop’s resolve to triage all available resources in order to ensure the sanctity of the swaps and futures markets. At the outside, they define a troubling scenario in which administrative law judges with no trading experience will determine whether complex trading was or…

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10 Apr 2015 Uniform Fiduciary Standards on the Horizon for Brokers and RIAs

Brokers and registered investment advisors (RIAs) have long been held to differing standards. Generally speaking and barring special circumstances (e.g., discretionary authority for an account), brokers are not held to a fiduciary duty associated in connection with a customer’s account. In contrast, RIAs generally accept the fiduciary duty with regard to many elements of the account. Nevertheless, lawyers on both sides have fought for decades over where the exact contours should be drawn. The issue is even more cloudy when you consider potential distinctions between state law. But, as more and more brokers jump to the RIA business model, it appears the duties imposed on these two groups are about to be unified.   At the quarterly Investor Advisory Committee at SEC headquarters on April…

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31 Mar 2015 THE FALLOUT FROM NEWMAN CONTINUES AS CONGRESS WEIGHS IN

As previously reported, the Newman decision caused turmoil in the world of insider trading and the fallout continues.   Earlier this month, prosecutors told a federal judge in Manhattan that Newman had invalidated the guilty plea for insider trading of John Johnson, former Wyoming Retirement System CIO, because the admissions he had made in 2013 were now insufficient to support the plea. Prosecutors were planning to prosecute if Johnson did not enter a new plea that would suffice under Newman.   Meanwhile, Congress has weighed in with three proposed bills that would statutorily define insider trading and eliminate the requirement under Newman that: the tippee know both that the tipper breached a duty of confidentiality and the tipper received a personal benefit of “some consequence.”…

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18 Mar 2015 Top 10 Takeaways from ABA White Collar Crime Conference 2015 (Part 2)

Continuation of yesterday’s Part 1 of “Top 10 Takeaways from ABA White Collar Crime Conference 2015.”   6. Practitioners offer updated advice for settlement negotiations in corruption cases   Another panel that included former DOJ FCPA chief Chuck Duross addressed strategies for negotiating settlements in corruption cases. These practitioners advised that the company should send high-ranking client representatives (including, if possible, the CEO, CCO, and/or the Head of the Audit Committee) to meetings with DOJ to show the company cares about the matter. They relayed their experiences suggesting the DOJ and SEC are looking for, among other things, contrition from the company, internal discipline of those engaging in illegal conduct, and reasons why an independent monitor is not necessary. They are also looking for a…

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17 Mar 2015 Top 10 Takeaways from ABA White Collar Crime Conference 2015 (Part 1)

On March 4-6, the American Bar Association hosted its annual White Collar Crime conference in New Orleans. As we did in 2014 (here and here), today and Wednesday we will feature our “Top Ten” takeaways from the conference for individuals, companies and white collar practitioners as compiled by our partners in attendance.   Beware any false sense of security from a civil regulatory settlement   There was much discussion at the conference about the interplay between civil regulatory settlements and follow-up criminal investigations and charges. It is clear from recent trends that settling an investigation on the civil side – especially if settled with admissions – will not ward off a criminal investigation and may in fact facilitate one. Defense attorneys agreed that they are…

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09 Mar 2015 “HELLO, NEWMAN” — GOVERNMENT CONTINUES TO LITIGATE REVERSED INSIDER TRADING CONVICTIONS

The U.S. Attorney for the Southern District of New York, Preet Bharara, has decided not to go down without a fight. Following a Second Circuit panel’s reversal of Bharara’s signature achievement, the insider-trading convictions of former hedge fund managers Todd Newman and Anthony Chiasson, the U.S. Attorney’s office has petitioned the court for rehearing and rehearing en banc. The Securities and Exchange Commission has also weighed in on the U.S. Attorney’s side, arguing in an amicus brief that the panel seriously erred in its decision. Meanwhile, in other cases, particularly outside the Second Circuit, the Justice Department, and the SEC have argued strenuously that the Second Circuit’s panel decision should not be followed.   In the Second Circuit, the battle lines are being drawn. Bharara’s…

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04 Mar 2015 STANFORD RECEIVER WINS FIRST FRAUDULENT TRANSFER JURY TRIAL

In the Northern District of Texas, in mid-February, a jury handed down the first verdict in a fraudulent transfer case arising from the Robert Allen Stanford Ponzi scheme. Second only to Bernie Madoff’s Ponzi scheme in sheer scope and alleged losses, Stanford’s scheme purportedly cost defrauded investors over $7 billion before it finally unraveled in 2009. Stanford had offered investors high rates of return on supposedly secure certificates of deposit through Stanford International Bank and a Byzantine web of other, related international financial institutions. The litigation overseen by Roger Janvey, the Receiver appointed to unwind Stanford’s illegitimate empire and recover funds for defrauded investors, has resulted in a Supreme Court decision (Chadbourne & Park LLP v. Troice), dozens of reported cases, and scandalous allegations about…

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03 Mar 2015 SCOTUS Limits Definition of “Tangible Object” under Sarbanes-Oxley Act

The Supreme Court recently issued a decision in the case discussed in the December 2014 post “Prosecutorial Over-criminalization: Fishing for Guilty Pleas.” This case involved the conviction of Mr. Yates, a fisherman, who was found guilty of violating 18 U.S.C. §1519, the so-called “anti-shredding” provision of the Sarbanes-Oxley Act. A federal jury convicted Yates of destroying a tangible object with the intent to obstruct an investigation after he ordered his crew to discard some fish which fell short of the minimum legal size. The Eleventh Circuit upheld the ruling, finding that the phrase “tangible object” applied to fish.   The Supreme Court, in a 5-4 decision issued last week, overturned the Eleventh Circuit and ruled in favor of Mr. Yates. In its brief, the Government argued…

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27 Feb 2015 M&A DUE DILIGENCE FAILURES: FCPA & GOODYEAR

On Feb. 24, 2015, the SEC announced charges against Goodyear Tire & Rubber Company for violating the Foreign Corrupt Practices Act (FCPA). These charges involve Goodyear subsidiaries in Kenya and Angola paying bribes to government and private-sector workers in exchange for sales in each country. As a result, Goodyear was sanctioned $16.2 million by the SEC. The heart of the SEC’s investigation found that Goodyear violated books and records rules when officials of its African subsidiaries falsely recorded $3.2 million in bribes as legitimate expenses over a four (4) year period.   In charging and sanctioning Goodyear, the SEC found that Goodyear “did not prevent or detect these improper payments because it failed to implement adequate FCPA compliance controls at its subsidiaries in sub-Saharan Africa.”…

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25 Feb 2015 PART II – CORRUPTION ENFORCEMENT IN BRAZIL: WHAT DOES THE FUTURE HOLD?

The anti-corruption regulatory environment in Brazil has become more risky and complex during the CCA era. Do enforcement trends foreshadow eventual robust application of the CCA? The number of recent high profile cases brought against individuals in Brazil strongly suggests a climate with little tolerance for bribery. What was historically commonplace within Brazilian economic and political spheres may no longer be the norm. Indeed, in taking the oath of office for her second term as President on Jan. 1, 2015, Dilma Rousseff promised to embark on an anti-corruption crusade in response to the corruption scandal engulfing Petrobras. She went further in pledging to forward the Brazilian legislature an anti-corruption bill during the first half of 2015 and to lead the Brazilian political system in a…

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