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Government Enforcement Exposed - "The GEE"
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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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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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