From Corporate Law Report:
The Department of Justice just announced that it recovered a record $4.9 billion from False Claims Act judgments and settlements in the 2012 fiscal year, and the trend is expected to continue.
From lawyers and law firms on JD Supra, three takeaways for businesses of all shapes and sizes…
Read the full post - False Claims Act Reaps Nearly $5 Billion for DOJ in 2012»
The United Kingdom’s Ministry of Justice is planning to introduce deferred prosecution agreements (DPAs) as a new tool for enforcing economic crime laws in England and Wales. From Gary DiBianco and Matthew Cowie (Skadden Arps):
“DPAs are viewed by the government as a necessary new tool for prosecutors such as the Serious Fraud Office (SFO) and the courts to bring serious and complex economic cases quickly, cost effectively and fairly to a conclusion. The government envisages that DPAs will be used primarily for corporations that cooperate with government investigations, and the government intends that DPAs will be made available for corporations in overseas corruption cases as well as other economic crimes.
The government’s response to the public consultation sets forth a model for DPAs that has some similarities to U.S. law and practice but involves earlier and greater judicial oversight than U.S. DPAs.”
Read the update, UK Government Set to Introduce Deferred Prosecution Agreements for Economic Crimes - Skadden, Arps, Slate, Meagher & Flom LLP»
Judge Jed Rakoff thinks the federal sentencing guidelines for white collar crimes are unfair, and he’s not afraid to say so in his sentencing ruling of convicted inside trader Rajat Gupta. From Ifrah Law:
“Judge Rakoff noted that the Sentencing Guidelines were ‘originally designed to moderate unwarranted disparities in federal sentencing’ on the theory that the Guidelines ‘would cause federal judges to impose for any given crime a sentence approximately equal to what empirical data showed was the average sentence previously imposed by federal judges for that crime.’ Of course, as the Supreme Court has already observed, the Guidelines deviated from this goal almost from the start…
Judge Rakoff went on to observe that the Guidelines applicable to white collar fraud likewise ‘appear to be more the product of speculation, whim, or abstract number-crunching than of any rigorous methodology,’ and that this ‘maximize[es] the risk of injustice.’ Noting the huge increases in the recommended Guidelines for fraud cases, Judge Rakoff noted that the resulting advisory ranges ‘are no longer tied to the mean of what federal judges had previously imposed for such crimes.’ Rather, these sentences ‘instead reflect an ever more draconian approach to white collar crime, unsupported by any empirical data.’”
Read the full update, Judge Rakoff and the Emperor’s New Clothes - Ifrah Law»
Think your company won’t get charged with Foreign Corrupt Practices Act violations? You might want to plan for it all the same. From the law firm of Gilbert LLP:
“In an era of high profile Wall Street prosecutions and shareholder derivative suits, the phrase ‘Foreign Corruption Practices Act’ surely should have corporate officers and executives deeply concerned and vigilant. Not so, according to a new survey in which 80% of public company executives and their directors said that it was unlikely they would be sued this year. This lack of concern is despite the fact that 25% of those same surveyed companies have already been sued, and that 2011 brought a record number of settlements for FCPA violations as well as a record number of enforcement actions against non-US individuals charged in the U.S. …
There are five strategies every director and executive should know about insurance and other risk-transfer instruments to protect their companies before, during, and after an FCPA investigation or related lawsuit. Ultimately, protection lies in the right business and insurance approach, and these five strategies can help lead executives in in the best ways to mitigate the financial consequences of the risks of FCPA investigations and related lawsuits.”
Read the update, The FCPA and Insurance Coverage: Five Strategies for Protecting Against the Financial Costs of an FCPA Claim - Gilbert LLP»
The Securities and Exchange Commission is authorized to bring civil actions against anyone “that knowingly provides substantial assistance” to a person who commits securities fraud. Thanks to a recent federal court ruling, the agency will have an easier time doing that. From law firm Quinn Emmanuel:
“… the Second Circuit rejected the argument that the SEC is required to plead or prove that an aider and abettor proximately caused the primary securities law violation. Instead, relying on a 75-year-old decision by Judge Learned Hand, the Court stated that once the government proves that a primary violation occurred and that the defendant had knowledge of it, the government need only prove that the defendant associated himself with the fraudulent scheme and sought to make it succeed. This relaxed standard will make it easier for the SEC to pursue enforcement actions against individuals who assist others in committing securities violations.”
Read the update, October 2012: White Collar Litigation Update - Quinn Emanuel Urquhart & Sullivan, LLP»
A recent district court ruling confirms that the federal government has a duty to preserve material evidence just like everyone else. From Eric Sitarchuk and Meredith Auten at law firm Morgan Lewis:
“In United States ex rel. Baker v. Community Health Systems, Inc., the U.S. District Court for the District of New Mexico upheld Magistrate Judge Alan Torgerson’s recommendation of sanctions against the federal government for failing to issue a timely and adequate litigation hold. The court held that sanctions were appropriate because the government’s actions resulted in the destruction of electronically stored information (ESI) that could have been helpful to Community Health Systems’ defense…
Magistrate Judge Torgerson applied the general spoliation rule that the duty to preserve documents arises once a party ‘reasonably anticipates litigation.’ Under this standard, he rejected the government’s argument that it could not have reasonably anticipated litigation until it received permission from the Department of Justice to intervene in the case. Instead, Magistrate Judge Torgerson found that the ‘Government’s intervention was reasonably foreseeable after receipt of defense counsel’s letter rejecting the Government’s offer of settlement on September 5, 2008.’ … The court agreed with Magistrate Judge Torgerson’s findings regarding the timing and adequacy of the government’s litigation hold.”
Read the full update, Government Sanctioned for Destruction of Documents - Morgan Lewis»
Officers and directors of public corporations are facing increasing scrutiny from the SEC, says White & Case trial lawyer Gregory Little in this interview with Richard Levick. Which means more prosecution is likely:
“… the SEC has also announced a willingness to pursue civil cases in which defendants are accused of negligence only. Traditionally, the SEC pursued individuals engaged in intentional misconduct leading to investor losses. By pursuing negligence-based claims, the SEC will increase the number of potential targets to include those who had no intent to deceive investors but simply did not act in a reasonable manner. If a business decision results in significant shareholder loss, there may be a tendency to view all actions and disclosures surrounding that decision as unreasonable. The bottom line is the SEC will potentially be bringing more claims with a significantly reduced burden of proof.”
Read the full interview, What’s Next in the Boardroom: Greg Little on Criminal and Civil Litigation and Investigations – Levick
As the 2013 proxy season ramps up, public companies are reminded of the new SEC reporting requirements contained in the recently enacted Iran Threat Reduction and Syria Human Rights Act (ITR Act). From law firm Skadden Arps:
“Companies that are required to provide the new disclosures will need to move quickly to ensure that they are ready to provide the new disclosures within the timetable for initial reporting. Companies also should be mindful of the fact that the conduct described in this part of the ITR Act may violate other U.S. laws — specifically the U.S. economic sanctions with respect to Iran, which include criminal penalties — and also may meet the criteria for the imposition of broader economic sanctions against the company.”
Read the full update, New Requirements for SEC Reporting Companies to Disclose Certain Iran-Related Activities and Transactions - Skadden, Arps, Slate, Meagher & Flom LLP»
It’s becoming an all-too-common story: corporate executive learns of an upcoming acquisition and tips off a friend, who buys stock in the target company. But this time there’s a twist. From law firm Morvillo Abramowitz:
“When the [stock purchase] received regulatory scrutiny, GE Capital conducted an internal investigation and concluded that no fiduciary duty had been violated. The SEC disagreed with that conclusion and sued based on the ‘misappropriation theory.’”
Can they do that? Yes, ruled the Second Circuit Court of Appeals:
“… finding that the SEC had raised material issues of fact for a jury to decide… The issue of fact that the Court of Appeals left to the jury was the substance of what [corporate executive Thomas] Strickland told [hedge fund manager Peter] Black in their key conversation. GE Capital’s internal investigation had concluded that Strickland had not told Black about the potential acquisition. However, as the Court of Appeals pointed out, there was circumstantial evidence to the contrary that the internal investigation did not have.”
Read the update, Insider Trading: What Happens When the Victim Says That There Was No Crime? - Morvillo, Abramowitz, Grand, Iason, Anello & Bohrer, P.C. »
Two separate bills designed to enhance protections for employees who report corporate misconduct were introduced into the House of Representatives earlier this month. From law firm McKenna Long & Aldridge:
“The first bill, the Non-Federal Employees Whistleblower Protection Act, H.R. 6406, was introduced by Jackie Speier (D-CA) and Todd Platts (R-PA). H.R. 6406 encourages contractor employees to report misconduct in the performance of contracts, grants, or other programs paid for with federal funds…
The second bill, the Private Sector Whistleblower Protection Streamlining Act of 2012, H.R. 6409, was introduced by Lynn Woolsey (D-CA), along with co-sponsors Dale Kildee (D-MI) and George Miller (D-CA). As with the Non-Federal Employees Whistleblower Protection Act discussed above, the Private Sector Whistleblower Protection Streamlining Act of 2012 enhances the protections against retaliation afforded to private sector whistleblowers.”
Read the full update, Proposed Legislation Seeks To Enhance Protections For Whistleblowers - McKenna Long & Aldridge LLP»
