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Government Enforcement Exposed - "The GEE"
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23 Feb 2015 PART I – CORRUPTION ENFORCEMENT IN BRAZIL: WHAT DOES IT LOOK LIKE?

Anti-corruption enforcement in Brazil has experienced an uptick over the past year. Enforcement of the Clean Companies Act (CCA) is having an impact in both the Brazilian business and political spheres. The future of Brazilian’s anti-corruption enforcement, together with anticipated new legislation and regulations in this area dictates that companies doing business in Brazil take heed and consider enhanced compliance efforts to ensure business activity stays within the bounds of the CCA and any expanded enforcement efforts.   While Brazil is the world’s fourth largest democracy, it has been saddled in recent years by multiple corruption scandals. Transition of the political landscape in Brazil to one of democracy in 1985 increased hope for greater transparency. Each of the six (6) presidential administrations since, however, has…

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03 Feb 2015 Checking in on the U.K.’s Serious Fraud Office

The last two months of 2014 were, as we noted, banner months for U.S. anti-corruption settlements, as the DOJ and SEC secured settlements totaling approximately $1 billion. But while the focus stateside was on the settlements secured by U.S. authorities, December 2014 also turned out to be a significant month for the U.K. Serious Fraud Office (SFO), which obtained two convictions under its anti-corruption laws. These convictions demonstrate that the SFO is backing up its promises of enforcement under its bribery laws and that we may see more action in 2015.   First, on Dec. 8, 2014, Gary West and Stuart Stone were convicted of individually violating the U.K. Bribery Act in connection with the operations of Sustainable Growth Group (SGG). This was the first…

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23 Jan 2015 THIRD CIRCUIT UPHOLDS SECURITIES FRAUD CONVICTION OF CANADIAN STOCK BROKER WHERE “IRREVOCABLE LIABILITY” FOR TRANSACTIONS OCCURRED IN THE UNITED STATES

On Jan. 20, 2015, the Third Circuit upheld former Canadian stockbroker George Georgiou’s securities fraud conviction under Section 10(b) of Securities Exchange Act, determining that the transactions were “domestic” under Section 10(b) of the Securities Exchange Act because “irrevocable liability” for the transactions occurred in the United States.   The opinion provides further clarification of the United States Supreme Court’s 2010 ruling in Morrison v. National Australia Bank Ltd. that Section 10(b) applies to deceptive conduct in (1) the purchase or sale of a security listed on an American stock exchange, or (2) the purchase or sale of any other security in the United States.   Georgiou had been convicted for manipulating the market of four United States stocks listed on the OTC Bulletin Board…

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22 Jan 2015 Chasing the Gatekeepers

In an earlier post on our Government Enforcement Exposed blog, we highlighted the Securities and Exchange Commission’s anticipated focus on cracking down on those they have referred to as “gatekeepers” – attorneys, auditors, accountants, compliance officers, and the like. As pointed out in our prior post, SEC Commissioners have stated in public speeches that they intended on using new rules and novel approaches to prosecute all responsible individuals involved in facilitating a securities violation.[i]   True to its word, the SEC recently announced that it was instituting administrative proceedings alleging fraud against an attorney and seven auditors for their peripheral role in an attempt by a Canadian-based attorney, John Briner, to effectuate a microcap pump-and-dump scheme. The recent charges stem from a stop order proceeding…

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08 Jan 2015 No Spoofing. No Kidding?

Both the Securities and Exchange Commission and the Commodity Futures Trading Commission have, for years, banned the use of manipulative trading devices. Indeed, if you asked most average market participants, they would have told you that trading practices like layering and spoofing—putting on buy and sell orders in different order types that allow a trader to move the market price without actually trading, in order to sell high and buy low—were manipulative devices. And, yet, it has taken until now for the two largest commodity exchanges (the CME Group and the ICE Futures U.S. Exchange) to come out and ban such blatantly manipulative trading.   In September 2014, the CME announced that it was specifically banning “disruptive market practices,” including spoofing and quote stuffing. Then,…

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02 Jan 2015 Year in Review: Government Enforcement/Financial Litigation Developments

This year we have seen a number of interesting and important developments in the world of government enforcement and financial/regulatory litigation. Here are our “Top 5:”   Wal-Mart permits the discovery of privileged internal investigation documents   As we discussed in August, the Wal-Mart decision out of the Delaware Supreme Court was significant because it made clear that the attorney-client and work product privileges are not impenetrable when it comes to internal investigations – at least not in Delaware. The Court, in formally adopting the Garner Doctrine, found that even when all parties agree that the privileges exist and apply, the privileges may be overcome and shareholders may be entitled to privileged documents if they can show “good cause.” While the decision was important and…

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23 Dec 2014 CRIMINAL INSIDER TRADING CONVICTIONS OVERTURNED IN FAR-REACHING RULING

In a stunning reversal that threatens Southern District of New York U.S. Attorney Preet Bharara’s signature achievement, the Second Circuit recently reversed the insider-trading convictions of former hedge fund managers Todd Newman and Anthony Chiasson. Over the last seven years, Bharara’s office has secured more than 80 convictions for insider trading. Many of those may now be imperiled by the appellate court’s decision, which appears to substantially raise the bar for what most be proved in an insider trading case.   Newman and Chiasson were “remote tippees,” individuals who allegedly received material inside information indirectly, and often several steps removed, from corporate insiders. Remote tippees were part of Mr. Bharara’s effort to aggressively push the envelope with respect to who might be liable for insider…

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22 Dec 2014 Still Waiting: House of Representatives Over-Criminalization Task Force Report

Over the past six months, we have been keeping a watchful eye on the U.S. House of Representatives Over-Criminalization Task Force and awaiting the results of their efforts. Since June 2013, the Task Force has held eight hearings to discuss a wide array of topics and to obtain expert testimony pertaining to the federal criminal code and the consequences of this country’s perpetually expanding federal criminal laws. The Task Force concluded its proceedings in early August 2014, but a report has not yet been issued. As we await the report, we anticipate some very interesting observations and recommendations from the Task Force – recommendations that may have a significant impact on the federal criminal landscape.   In its first session in June 2013, the Task…

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15 Dec 2014 DOJ Offers Opinion on Successor Liability Under FCPA

The Department of Justice recently issued Opinion Release 14-02, its second release of the year regarding the Foreign Corrupt Practices Act, and it offers valuable insight for any U.S. company looking to merge with or acquire a foreign entity. The opinion request came from a U.S. consumer products company that intends to acquire a foreign manufacturer with no direct sales or distribution contracts in the U.S. In the course of its pre-acquisition due diligence of the foreign company, the U.S. entity identified a number of likely improper payments to government officials, as well as substantial accounting and recordkeeping problems. In light of these identified concerns, the U.S. company set forth a plan to take remedial pre-acquisition measures and post-acquisition integration steps. The opinion request, however,…

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02 Dec 2014 Prosecutorial Over-criminalization: Fishing for Guilty Pleas

On November 5, 2014, the Supreme Court heard oral argument in a case involving a fisherman, Mr. Yates, who was convicted of violating the so-called “anti-shredding” provision of the Sarbanes-Oxley Act, which was passed in 2002 in the wake of the Enron scandal. The case arose from a 2007 search of the Miss Katie, Mr. Yates’ fishing vessel. A Florida state officer boarded the ship at sea and noticed fish that appeared less than 20 inches long, which was under the minimum legal size of grouper. The officer placed the smaller fish into a crate, issued Yates a citation, and ordered Yates to take the crate to port for seizure.   Instead, Yates ordered his crew to throw some of the smaller fish overboard. Officials…

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