Money Laundering Risks Aren’t Limited to Virtual Currency…

One key takeaway from the federal government’s shutdown of Liberty Reserve: virtual currency businesses aren’t the only ones who should be worrying about money laundering. From attorneys Kaitlyn Ferguson and Lauren Resnick at BakerHostetler: 

“The proliferation of money laundering through cyberspace is an increasing threat. Criminal organizations no longer have to rely on the physical transfer of suitcases of cash across borders to ‘clean’ the proceeds of their unlawful activities. As these organizations become more sophisticated in finding ways to bank their criminally derived proceeds outside of the regulated financial system, many crimes will become increasingly difficult to detect.

Companies utilizing technology to conduct their business activities, whether they are financial institutions, funds transfer processors or users of these services, must develop compliance controls to ensure they do not become vehicles for money laundering and are not doing business with such organizations. Facilitating money laundering has harsh consequences, and even the unwitting use of a money launderer such as Liberty Reserve can result in the freezing of a legitimate company’s assets or blockage from the U.S. financial system. Today, more than 74 countries have anti-money laundering statutes, and companies engaged in cross-border activity must ensure that their policies comply not only with the policies of the United States but also with the laws and regulations of other countries where they do business. Companies are advised to vet vendors and other service providers to identify suspicious activity in order to avoid criminal exposure for transaction activity that violates federal law and protect against the commercial consequences of doing business with an entity that becomes the target of government prosecution and forfeiture.”

Read the full update, Federal Government Expands AML Cybercrime Enforcement – BakerHostetler»

Maybe the Government Could Prosecute Your Trade Secret Theft…

Want to throw the book at an employee who walked out the door with your trade secrets? Here’s an idea: turn ‘em over to the feds. From attorneys Mona Amer and Mark Mermelstein at Orrick:

“You’ve just discovered that an employee who recently left your company took your company’s valuable trade secrets with him to his new employer.  What are your options?  The conventional approach is to file a lawsuit seeking an injunction, recovery of your trade secrets and recovery of damages, if possible.  That approach may not work in every situation.  For example, the employer may have trouble obtaining evidence, may perceive that civil litigation would not provide a sufficient deterrent to other potentially thieving employees, or may conclude it would not be cost-effective to sue the departed employee. There is another option, however – a criminal referral. 

This is what happened in the recently decided Nosal case that resulted in the conviction of former Korn/Ferry recruiter David Nosal on six counts of violating the federal Computer Fraud and Abuse Act.  The conviction, following a multi-year investigation, has Mr. Nosal looking at multiple years in prison and hundreds of thousands of dollars in fines.  The case was referred to the government by Korn/Ferry after a forensic audit of Nosal by Korn/Ferry and its outside counsel.”

Read the full update, Power Move: Referring Trade Secrets Theft To The Government For Criminal Prosecution – Orrick»

Are There Limits to the FCPA?

A recent Foreign Corrupt Practices Act ruling provides multinationals with an important insight on the limits of the FCPA, write Jennifer Beidel and Christopher Hall at law firm Saul Ewing:

“A $100 million bribery scheme and cover-up involving Siemens AG has resulted in very different outcomes for two company officials who faced charges under the Foreign Corrupt Practices Act (‘FCPA’). Former Siemens AG Managing Board Member Uriel Sharef must pay a $275,000 civil penalty for his conduct, the second largest penalty ever assessed in a case involving the FCPA. The other, Siemens Argentina CEO Herbert Steffen, had all claims against him dismissed.

At the crux of these contrasting rulings – both handed down this year by United States District Judge Shira A. Scheindlin – was prosecutors’ ability to establish whether the Siemens officials, who are both foreign nationals, had ‘minimum contact’ with the United States government in their dealings. These divergent results provide an opportunity to assess the role that ‘minimum contacts’ play in a determination of FCPA exposure for individuals subject to scrutiny by the Securities and Exchange Commission and Department of Justice.”

Read the full update, Second Highest Penalty in FCPA History Comes with a Caution from the Bench about the Limits of the Act’s Jurisdiction - Saul Ewing LLP»

Feds Take FCPA Fight to Wall Street

From Corporate Law Report:

U.S. regulators just took the fight against bribery and corruption to a new arena: Wall Street. Attorneys John Goselin and Mauro Wolfe of Duane Morris explain:

“On May 7, 2013, the U.S. Attorney’s Office for the Southern District of New York unsealed extraordinary criminal charges against two registered representatives of a U.S. broker-dealer and a high-level Venezuelan government official for engaging in a ‘Massive International Bribery Scheme.’ What makes this fraud scheme remarkable is that it involves the activities of a U.S. broker-dealer, its client, a foreign-owned and controlled bank, the Foreign Corrupt Practices Act and several suspicious transactions that potentially should have raised concerns—a perfect storm.”

Read the post in full»

Ranbaxy to Pay $500 Million for Adulterated Drugs

Generic drug maker Ranbaxy USA will pay $500 million to settle to seven felony charges in the “largest drug safety-related settlement with a generic manufacturer to date,” write attorneys at Skadden Arps: 

“… Ranbaxy admitted to manufacturing and distributing adulterated drugs made at two of Ranbaxy’s facilities in Ponta Sahib and Dewas, India, failing to file required reports with the U.S. Food and Drug Administration (FDA), and making material false statements to FDA. Ranbaxy Laboratories Limited’s press release following the settlement noted that the conduct at issue occurred several years ago and that Ranbaxy’s current management cooperated fully in the Department of Justice’s (DOJ) investigation. The settlement follows upon Ranbaxy’s 2012 Consent Decree of Permanent Injunction and represents the largest drug safety settlement to date with a generic drug manufacturer. The settlement also makes good on government threats to use criminal and civil enforcement tools, including the FCA, to address serious manufacturing violations…

The Ranbaxy settlement is significant in a number of respects. First, the $500 million total financial settlement represents the largest drug safety-related settlement with a generic manufacturer to date, and the seven felony guilty pleas are indicative of the severity of the allegations resolved. Second, the settlement has broader implications for DOJ and FDA enforcement trends: It makes good on repeated threats that the government intends to focus on manufacturing issues in addition to the advertising and promotion claims that have historically dominated drug and device manufacturer government investigations and settlements. Third, while there are strong legal arguments to the contrary, the settlement reflects DOJ’s belief that manufacturing and safety violations may be actionable under the civil False Claims Act.”

Read the full update, Ranbaxy Resolves Criminal and Civil Charges Through Record Settlement - Skadden, Arps, Slate, Meagher & Flom LLP»

Skilling Convinces Feds to Cut Prison Time

If at first you don’t succeed… Jeffrey Skilling of Enron fame has been trying for years to reduce his conspiracy, fraud, and insider trading sentence. And those efforts appear to have paid off, writes white collar-crime attorney Jeff Ifrah:

“Former Enron executive Jeffrey Skilling reportedly has negotiated a deal with federal prosecutors that is likely to result in a significant reduction of the prison sentence he will serve for his role in the collapse of Enron. Under the new agreement, Skilling faces between 14 and 17.5 years in prison — a 27 to 42 percent reduction relative to his previous sentence of 24 years. Apparently, Skilling’s aggressive defense wore prosecutors down in such a way that they are now willing to give up almost half of Skilling’s prison sentence to resolve the case once and for all.”

Read the update, More Enron Fallout: Skilling and DOJ Enter Agreement to Reduce Sentence - Jeff Ifrah»

Accused Inside Trader Extradited from Hong Kong to Face US Trial

Trent Martin, an Australian financial analyst accused by the Securities and Exchange Commission of insider trading while working in New York, will be extradited to the US for trial. From Joan Hon at law firm Reed Smith: 

“On January 4, 2012, Martin appeared in Hong Kong’s Eastern Magistrates Court, where he did not challenge the extradition order and signed the required consent. Martin has been charged with one count of conspiracy to commit securities fraud and one count of securities fraud. The conspiracy charge carries a maximum potential penalty of five years in prison and a fine of $250,000, or twice the gross gain or loss from the offense. The securities fraud charge carries a maximum penalty of 20 years in prison and a maximum fine of $5 million. Both are quite heavy consequences considering that Martin’s trades yielded him less than US$8,000 profit.”

Read the full update, Insider Trader Arrested in Hong Kong – First Such Extradition in a Decade - Reed Smith»

Should Wall Street Fear Mary Jo White?

Bloomberg Law’s Lee Pacchia talks with McDermott partner Rick Firestone, former Associate Director of the Securities and Exchange Commission’s Division of Enforcement, about Mary Jo White’s nomination to head up the SEC. Key takeaways:

• White would be the first SEC Chair with experience as a federal prosecutor, so under her tenure the agency should continue to remain very aggressive on enforcement
• White is not likely to end the trend of allowing defendants to settle lawsuits without admitting to wrongdoing, for practical reasons
• On the other hand, White may well push for increased financial penalties and sanctions for SEC violations

Watch the video, and get the full story

[Link: Should Wall Street Fear Mary Jo White?] 

LIBOR Prosecutions Could Spread in 2013

What’s on the horizon in the world of criminal antitrust prosecutions? From attorney Andrew Friedman of law firm Patton Boggs:

“The LIBOR rate-rigging investigation could be very active in 2013. Some banks have already agreed to massive fines arising from rigging interbank rates in ways that may have inflated the banks’ apparent financial strength during the 2008 economic crisis and beyond… Last year, UBS AG paid roughly $1.5 billion to settle allegations it conspired to rig lending rates, and Barclays paid $450 million in fines. The breadth of the LIBOR investigation and the recent news from RBS suggest that the investigation is far from over, and that this investigation will also yield significant prosecutions of individuals …” 

Read the full overview, Criminal Antitrust Update - January 2013 - Patton Boggs LLP»

False Claims Act: Recent Rulings May Limit Liability of Companies Accused of Wrongdoing

False Claims Act (FCA) actions against government contractors are on the rise, generating more than $9 billion in state and federal penalties for violations in fiscal year 2012. But the outcome of two recent rulings could limit the exposure of companies to the FCA, explains Steve Cave of law firm Womble Carlyle:

• In the first, a Maryland court found that “the FCA’s time frame to issue Civil Investigative Demands is limited to the period before commencing a civil proceeding.”
• In the second, the Fourth Circuit ruled that although “[t]he FCA imposes liability on ‘any person’ who knowingly tries to defraud the government, … state agencies are not considered persons under this law, according to recent rulings.”

Read the full update, A Reduction in the Utility of Civil Investigative Demands and the Interpretive Narrowing of “Person” under the False Claims Act - Womble Carlyle Sandridge & Rice, PLLC»