On August 30, the U.S. House Select Committee to Investigate the January 6th Attack on the United States Capitol (“Select Committee”) issued requests to various companies to preserve phone records for hundreds of people whose records the committee may want to review. The letters identified records for, among others, current members of Congress, suggesting the Select Committee may issue subpoenas to these companies to obtain personal data for the specified lawmakers. Not surprisingly, news of the preservation requests ruffled some lawmakers’ feathers and prompted questions about the enforceability of any subpoenas the Select Committee may issue. Congressional inquiry, however, may not be lawmakers’ only concern...
Columns & Articles
This column has previously joined the widespread prognostication about what the advent of the Supreme Court’s new majority may mean for the evolution of the law. See Anello and Albert, “Implications of a More Conservative Supreme Court for White- Collar Practitioners,” New York Law Journal (Oct. 8, 2020). Although it is too early to render judgment, the court’s June 3, 2021 decision in Van Buren v. United States, 141 S. Ct. 1648 (2021), one of Justice Amy Coney Barrett’s first majority opinions and her first addressing criminal law as a member of the court, provides some clues. In narrowly construing a pro- vision of the Computer Fraud and Abuse Act of 1986 (CFAA) to avoid criminalizing “a breathtaking amount of commonplace computer activity,” Justice Barrett’s opinion likely will be welcomed by those concerned about overcriminalization and untethered prosecutorial discretion in the federal system.
Like many other things, art and collectibles have gone digital. This year has seen explosive growth for NFTs, with NFT sales for 2021 already exceeding $2.5 billion. With the growing market for NFTs comes innovation, most notably the emergence of f-NFTs (“fractional non-fungible tokens”). Where financial innovation goes, the SEC is bound to follow. F-NFTs are no exception. Although perhaps not intending to rain on the creative parade, in March 2021 comments, SEC Commissioner Hester M. Peirce sounded a note of caution, warning creators of f-NFTs to be careful that they are not creating securities that would be subject to regulation ...
The application of the Fifth Amendment to law enforcement demands for cellphone passcodes has developed into a constitutional quagmire for the lower courts. With the Supreme Court resisting opportunities for specific guidance, right now the application of the right against self-incrimination to this overwhelmingly important modern technology depends heavily on the state or federal jurisdiction where a person is located. We explore the issue in this article: “Hey SIRI, Does the Fifth Amendment Protect My Passcode?”
Until recently, cryptocurrencies appeared to be far from the kind of institutionally sound investments that would be attractive to CFOs looking to diversify a corporate portfolio. Once seen as gimmicks for unsophisticated retail investors, many of whom purchased cryptocurrencies based on obscure internet nomenclature, nonsensical children’s songs, or even notable hip-hop artists, few would expect the notoriously volatile electronic currencies to find their way into corporate treasuries. The joke appears to be over, or perhaps is just beginning to turn stale. As executives have sought to stash excess corporate cash into electronic currencies, the novelty assets are now an increasingly popular option to add to corporate ledgers. With this expansion into uncharted territory, however, comes additional risks, from both private litigation and regulatory scrutiny. Likewise, as with any novel asset, CFOs must balance their desire to invest creatively with the concerns of wary shareholders. On these fronts, cryptocurrencies present potential pitfalls for those charged with charting companies through modern-day legal and regulatory shoals...
January was not a quiet month in D.C. An outgoing president refused to concede the election, a mob stormed the Capitol, and a new President eventually was inaugurated. Amidst the chaos, one might be forgiven for overlooking what is likely to be the most consequential change in federal anti-money laundering laws in a generation: the Corporate Transparency Act. [...]
For years, the defense bar has criticized courts’ ability to sentence defendants based on conduct for which a jury of their peers has acquitted them. As we explain in our latest article, although the Supreme Court has hesitated to review this arguably unconstitutional practice, Congress has taken up the torch with a new bipartisan bill that would ban it. The jury is still “out” on whether the bill will become law, but its introduction is a welcome sign of Congressional interest in preserving the jury’s crucial role as a bulwark of liberty.
A once-derided investment vehicle, the SPAC is surging as investors turn the traditional IPO process on its head to streamline the public offering process and leverage a booming stock market. A company’s decision to assume the sometimes substantial undertaking to make an initial public offering (“IPO”) opens the floodgates to a deluge of regulatory obligations and disclosures about the details of its business operations. The payoff, however, can be vast; once the Company hits public markets, it has unparalleled access to capital and a bump in prestige. [...]
Not every incoming SEC Chair gets a welcome gift from Congress. While Wall Street has greeted Gary Gensler’s nomination with some trepidation, by contrast, as we describe in this article, “Congress’s Signing Bonus for Gensler: New Powers for His SEC,” legislators recently handed the SEC powerful new enforcement tools, in the form of longer statutes of limitations and new statutory disgorgement powers. Although defendants in SEC cases may challenge some applications of these new powers, the new law likely means a tougher road for those under SEC investigation as the Biden Administration takes charge in Washington.
Aside from worrying about being sued, individuals who spread the coronavirus also have to be concerned about being prosecuted. Dozens of Americans have been charged with coronavirus-related crimes since the beginning of the pandemic, ranging from people who have intentionally tried to infect others with Covid-19 to people who simply have disobeyed public health orders. Common criminal charges include making a terroristic threat, spreading a communicable disease, assault and battery, reckless endangerment, harassment, and disorderly conduct. [...]
Days before Thanksgiving, in a notable about-face, the government agreed that the Supreme Court should vacate a Second Circuit panel’s controversial insider trading decision in United States v. Blaszczak, accepting that Blaszczak’s holding that a government regulatory agency’s confidential information can constitute protectible “property” had been undermined by the Supreme Court’s subsequent decision in the George Washington Bridge case. But vacating Blaszczak would also erase the panel’s more controversial holding that the “personal benefit” test for insider trading does not apply to cases brought under the Title 18 fraud statutes, which would have significantly broadened the reach of criminal insider trading laws. In our article, “Days Seem Numbered for Circuit’s Controversial Insider Trading Decision,” we analyze the defendants’ petitions for Supreme Court review in Blazsczak discuss the implications of the government’s change in position.
No good deed goes unpunished. The Coronavirus Aid, Relief, and Economic Security (CARES) Act, which endeavors to give struggling small businesses free money, reportedly has been rife with abuse. In a noble rush to put emergency funds in the hands of Americans in need, the U.S. Small Business Administration (SBA) relaxed many federal loan safeguards, giving the unscrupulous the perfect opportunity for fraud. The U.S. Department of Justice already has begun investigating and prosecuting individuals who have attempted to steal CARES Act funds and has relied on tips from major financial institutions to do so. As new evidence comes to light in the coming months, we can expect DOJ to continue escalating its enforcement efforts. [...]
With the selection of Judge Amy Coney Barrett as the proposed replacement for liberal icon Justice Ruth Bader Ginsburg, a 6-3 conservative majority may shape the future direction of the Supreme Court’s jurisprudence. The generally accepted wisdom is that a more liberal Court equals a Court more protective of the rights of a criminal defendant. The color of the defendant’s “collar,” however, may make a significant difference. In this article, we discuss the Roberts Court and what has been described as the “White-Collar Paradox,” analyze Judge Amy Coney Barrett’s sparse record on the Seventh Circuit, and conclude that based on the prior voting habits of the conservative justices, white-collar criminal defendants may find the Court receptive to their arguments in ways that “blue-collar” defendants would not.
The recent settlement by Herbalife Nutrition Ltd. with the Securities and Exchange Commission, the U.S. Department of Justice, and the U.S. Attorney’s Office for the Southern District of New York totaling over $123 million is the latest in a string of enforcement actions under the Trump Administration that identified violations of the Foreign Corrupt Practices Act but noticeably did not also impose an independent corporate compliance monitor. Herbalife neatly illustrates the recent paradigm shift inside the DOJ, as the stipulated facts and extensive nature of the illicit scheme outlined in the deferred prosecution agreement are of the caliber that in previous days likely would have led to the imposition of an independent monitor. The decision not to impose one here was said to be due in part to the company’s cooperation and remedial efforts by the time of resolution. Even if the company’s cooperation and remedial efforts contributed to the government’s decision not to insist on a monitor, that decision likely was also part of a concerted effort by the current administration to sideline the use of monitorships generally. [...]
The government’s lead role in the prosecution of corruption within FIFA, the organization governing international soccer, may be a paradigmatic example of U.S. law enforcement acting as the world’s policeman, pursuing wrongdoing with little apparent connection to the land of baseball, hot dogs and apple pie. In this article, we analyze the Second Circuit’s recent decision in United States v. Napout, and discuss how its holding illustrates that the FCPA is not the only card the government can play to prosecute foreign bribery, with little regard to whether such conduct violates foreign law.
Have Friday Nights replaced Saturday for 'Massacres'? Trump's Stealthy Attempts to Undermine Justice
Some still remember waking to the news following one fateful evening – October 20, 1973, when then-President Richard Nixon, embroiled in the Watergate scandal, ordered the U.S. Attorney General Elliot Richardson to fire the special prosecutor appointed to investigate the events. Richardson refused and resigned in protest. Nixon then went to the Deputy Attorney General, William Ruckelshaus, who also refused and resigned. Nixon, having lost both of his Attorneys General, ordered the Solicitor General of the United States, Robert Bork, to fire the special prosecutor. After being sworn in as acting Attorney General, Bork did just that. This historic news, which broke the next day, quickly was dubbed the “Saturday Night Massacre” – and President Nixon’s popularity would never recover. Within a year, he would resign. [...]
Federal prosecutors often cannot resist the attractions of broadly worded “catch-all” fraud statutes like the one prohibiting wire fraud. From time to time, however, the Supreme Court has rebuffed efforts to further expand the boundaries of these crimes. In our latest article, we discuss the Court’s reversal of the “Bridgegate”-related convictions of two senior New Jersey officials, and the decision’s impact on other high-profile pending fraud prosecutions such as the NCAA basketball case. We conclude that although the Bridgegate decision did not definitively resolve the controversial issue whether what has become known as the “right to control” constitutes "property" under the federal fraud statutes, the opinion takes its place among Supreme Court decisions reining in prosecutors’ expansive readings of these laws.
Yesterday, reporters revealed the Department of Justice had discontinued the investigations into coronavirus-related trading by Senators Kelly Loeffler, James Inhofe, and Dianne Feinstein (whose holdings are in a blind trust). The three Senators each had sold—and in Senator Loeffler’s case, bought—large amounts of stock the same day or soon after a confidential senatorial briefing on January 24 by the CDC’s Director and Dr. Anthony Fauci. Prosecutors’ apparent direct communication of this result to the senators is somewhat unusual; ordinary defendants rarely get the security of knowing so promptly that the government has declined a case. The news also comes on the heels of reports that Department of Justice recently took control over these investigations from the Southern District of New York, raising the specter that this quick decision indicates further politicization of DOJ’s mission, or at minimum indicates continued erosion of Main Justice’s traditional deference to local U.S. Attorneys’ Offices. [...]
Sometimes defense counsel sees hard-won plea agreement concessions have limited impact on the court at sentencing, and the issue arises whether the prosecutor’s sentencing arguments went so far as to deny the defendant the benefit of his or her plea bargain. In our latest article, we discuss United States v. Wright, an appeal to the United States Court of Appeals for the Second Circuit brought by a co-defendant in the fraud prosecution of former sports radio personality Craig Carton, which presented the question whether though purporting to accept the terms of a plea agreement, a prosecutor’s advocacy may cross the line into a breach of that agreement. Although Wright’s withdrawal of the appeal leaves further development of this important area of criminal law to another day, in analyzing Wright and other key Second Circuit decisions, we conclude that Wright should serve as a cautionary tale to prosecutors who prefer to avoid claims of violating their own plea agreements.
On Monday the career prosecutors who handled the trial of the president’s friend and former campaign advisor, Roger Stone, recommended that the court sentence Stone, convicted in November of obstructing Congress and witness tampering, to 87 – 108 months in federal prison, the sentence called for by the federal sentencing guidelines. Less than twenty-four hours later, at 1:48 a.m., President Trump weighed in with a tweet about the recommendation: “This is a horrible and very unfair situation. The real crimes were on the other side, as nothing happens to them. Cannot allow this miscarriage of justice!” Putting aside, for a moment, the fact that the party on the “other side” in Mr. Stone’s case is none other than our own United States of America, with this tweet, the president attempted to put both thumbs on the scale in the criminal prosecution of his friend. What he missed unfortunately was the opportunity to focus legislators properly on the sometimes unduly harsh results of the sentencing guidelines in white collar cases. [...]
One of the key tools that white-collar attorneys regularly use to engage with prosecutors – the attorney proffer – often proceeds without any express agreement regarding what ground rules apply. In this article, we discuss the law around attorney proffers, highlight special considerations for corporate clients, and conclude that ample support exists for the longstanding custom and practice of using a careful attorney proffer as a means for necessary “frank discussion between defense counsel and prosecutor” without undue risk to either side.
2020 heralds significant and welcome changes in state criminal practice in New York. On April 1, 2019, New York State legislators passed sweeping criminal justice reform legislation altering the landscape for defendants accused of a crime in New York. Of the reforms which went into effect in the new year, the most significant for the white-collar practitioner are changes to the discovery requirements compelling the government to share information with an accused well in advance of trial. Lessening restrictions imposed on suspects waiting for trial, also will have an impact on defendants charged with non-violent white-collar crimes. [...]
Practitioners have observed a tension between criminal enforcement of the broadly written terms of the Sherman Antitrust Act of 1890 and the modern Supreme Court’s notions of statutory interpretation and due process. In this article, we analyze a recent certiorari petition filed in Sanchez et al. v. United States, which asks whether the operation of the per se rule in criminal antitrust cases violates the constitutional prohibition against instructing juries that certain facts presumptively establish an element of a crime. If the Court grants certiorari, Sanchez could provide an interesting test of the direction of the current Court’s criminal law jurisprudence and of its willingness to reconsider longstanding precedent.
President Trump’s use of Twitter to shape the narrative is notorious. True to form, he was tweeting fast and furious during the impeachment hearings. Negative testimony about the president’s interactions with Ukrainian leader Volodymyr Zelensky repeatedly incited his aggressive retorts, prompting speculation about whether his outbursts may be viewed as witness intimidation. Citing the First Amendment, Trump claims he is free to say what he pleases, including name-calling and denigrating witnesses. But is it criminal witness intimidation? [...]
When companies consider resolving an SEC enforcement action, they sometimes learn too late about so called “bad-boy” provisions that will inflict serious collateral consequences on their business unless the SEC provides a waiver. In this article, we discuss SEC Chairman Jay Clayton’s recently announced change in how the SEC will consider such waiver requests, which should rationalize the waiver process and provide greater certainty to companies and their shareholders regarding the consequences of enforcement settlements.
In January 2016, President Trump publicly announced that he would “absolutely” release his tax returns. Since that proclamation, Trump consistently has fought efforts to disclose those same returns. Continuing that trend, Trump has filed a federal complaint to enjoin a subpoena from Manhattan prosecutors that required Trump’s accountant to produce his tax returns. Through his lawsuit, Trump has staked out an unreasonably broad conception of presidential immunity that finds no support in the law—and contorts “policy” beyond recognition. Indeed, read literally, it could unreasonably suggest that even a President’s coconspirators could not be investigated, if to do so would touch on information about the President. [...]
Employee Liability for Corporate Misconduct – Elizabeth Warren Style: Can Negligence Become Criminal?
Since the last financial crisis and the resulting increased scrutiny on business entities, companies involved in suspected corporate misconduct repeatedly have paid massive fines to resolve criminal charges. Alongside high-profile announcements by the government of multi-million- and billion-dollar recoveries has been a near constant refrain from politicians and commentators that prosecutors have been lax in pursuing individuals in connection with large corporate malfeasance. [...]
In leading to the ouster of a former United Sates attorney from his cabinet position, the Jeffrey Epstein case drew attention to the Crime Victims’ Rights Act, the federal statute intended to guarantee victims a role in federal criminal proceedings. In this article, we analyze the statute and its role in the Epstein case, and address his victims’ effort to use the statute to invalidate a non-prosecution agreement —which although likely mooted by Epstein’s death—is of particular significance to white-collar practitioners and their clients.
Governments worldwide are attempting to restrict the use of encryption services like WhatsApp and Snapchat to allow a greater opportunity for surveillance. This Big-Brother-is-watching approach has met with resistance from public rights and civil liberty activists. In this article, we discuss the spectrum of the global response – including here in the United States – to the increased use of encrypted technologies and highlight encryption laws and policies of a number of countries. This digital tug-of-war has enormous implications for privacy and for our criminal justice system.
State and federal prosecutors often are suspicious and critical of efforts by a company under criminal investigation to control costs and centralize knowledge by establishing “pool counsel” to represent employees who may be called upon to be witnesses. As a result, government attorneys frequently attempt to dissuade potential witnesses (current/former employees, officers, or agents of the subject organization) from agreeing to be represented by an attorney hired by their company to concurrently represent a group of similarly situated individuals. A recent ethics opinion issued by the Committee on Professional Ethics of the Association of the Bar of the City of New York, chaired by renowned ethics expert Professor Bruce Green, makes clear that although pool counsel must evaluate a number of ethical considerations, such representation often is reasonable, practical, and desirable. Hopefully, at least in New York, the Committee’s thoughtful and insightful analysis will allay prosecutors’ undue concerns. [...]
In connection with several recent high-profile international cases, the Trump administration has implied that it sees law enforcement — or the lack of it — as a tool in its foreign policy arsenal. In this article, we discuss why maneuvering criminal prosecutions of individuals to influence foreign relations raises due process concerns. On the other hand, with respect to corporate prosecutions, which at their core are regulatory in nature, different considerations apply.
The long-awaited Mueller Report provides a detailed picture of the wide variety of crimes investigated by the Special Counsel’s Office, many of which resulted in indictments or guilty pleas, and, in the case of President Trump, a suggestion that Congress may review the legality of obstructive acts. Although Mueller declined to make a final determination regarding President Trump’s criminal liability, contrary to assertions from the administration, the investigation did not exonerate Trump. Instead, the report identified multiple instances of what may be considered obstructive conduct by the President. Citing limitations on its role as an arm of the Justice Department, the Special Counsel’s Office referred determination of the question of whether Trump obstructed justice to Congress. [...]
Two recent prosecutions in the foreign exchange (F/X) market raise questions about the use of general criminal statutes to regulate a trading practice that Congress, specialized regulators, and market rules have declined to prohibit. Both cases deal with a practice that bankers refer to as pre-positioning, which the government pejoratively labels “trading ahead” or “front running,” in the context of complex, multi-billion dollar F/X trades between sophisticated parties. In this article, we discuss the appeal of the conviction in one such case and the court’s dismissal of the charges in the other.
Since the House passed a resolution in 1792 to investigate the defeat of the United States Army at the hands of American Indians in Ohio (known as St. Clair’s Defeat), Congress has investigated hundreds of instances of possible misconduct by members of the executive branch. Today’s news is rife with reports of congressional investigations into potential obstruction of justice and more serious substantive crimes by President Trump and his immediate circle. Inevitably, the paths of congressional and criminal investigations into this type of misconduct overlap. History shows that this intersection can be fruitful, frustrating, and fraught with pitfalls. [...]
The halfway point of President Trump’s term offers an opportunity to examine and assess the impact of his administration on business-related prosecutions. In this article, we discuss the government’s shift in enforcement priorities, which focus on violent crimes, opioid cases, and most notably, immigration violations. We also highlight the decline not only in the number of traditional white-collar cases brought, but also in the amounts of fines and penalties imposed. Despite these numbers, however, the Trump Justice Department has remained aggressive and creative in its pursuit of individual wrongdoers in certain business-related areas, particularly in international corruption and foreign bribery.
According to various media reports, President Trump’s Christmas list may include the gift of a pardon to his former campaign chairman, Paul Manafort. Many critics claim that the mere suggestion of a pardon to Manafort amounts to an obstruction of justice. The law on whether and when the nation’s chief law enforcer can be said to engage in obstruction is unsettled, although what is clear is that the president’s constitutional authority is not limitless. Other presidents have exercised their absolute power to pardon in questionable ways, but the question on everyone’s mind lately is whether Trump’s dangle of a pardon to Manafort, as distinguished from the act of pardoning, may constitute an obstructionist act. [...]
The Justice Department’s prosecution of the 1Malaysia Development Berhad (1MDB) case illustrates how despite early predictions otherwise, Trump administration enforcement of the Foreign Corrupt Practices Act is alive and well. In this article, we discuss the 1MDB case and examine the extent to which the Justice Department will adhere to the Administration’s declared intent not to “employ the hammer of criminal enforcement to extract unfair settlements” from corporations where there is cooperation and evidence of a strong compliance structure.
Since about the early 2000s, corporate monitors have become a go-to weapon for the Justice Department in its battle against business crime. Imposition of such monitors often results in the disruption of companies’ activities and expenditures of millions of corporate dollars – that might otherwise go to benefit shareholders. In line with its more business-friendly approach, Attorney General Jeff Sessions’ Department of Justice has signaled a retreat from such intrusion on businesses’ operations. Last Friday, Brian A. Benczkowski, the Assistant Attorney General in charge of the Justice Department’s Criminal Division, delivered a speech at New York University School of Law revealing this change in the Department’s approach to the use of corporate monitors. [...]
Contrary to Hollywood’s fictionalized vision of our criminal justice system, a recent report from the National Association for Criminal Defense Lawyers confirms what many have recognized: trials are an endangered species. In this article, we discuss how the "trial penalty"-- the difference between the result a defendant may obtain by pleading guilty and the far harsher result that same defendant may receive if found guilty after trial -- has skewed our criminal justice system.
Congress has armed the government with an arsenal of weapons to extend limitations periods in white-collar cases that prosecutors have used in increasingly creative ways that are often difficult for defendants to predict. In this article, we examine the various tools at the government’s disposal, including mutual legal assistance treaties in cross-border matters; FIRREA’s ten-year statute of limitations for frauds “affecting” financial institutions; criminal conspiracy charges; tax crimes; and war-time extensions. We highlight a recent decision in United States v. Bogucki, a wire fraud prosecution, which is a prime example of how the government may lie in wait before launching hidden “time” bombs to lengthen the applicable limitations period.
Following the Supreme Court’s landmark 2005 decision in United States v. Booker, which transformed the United States Sentencing Guidelines from mandatory to advisory, the question of how sentencing judges would exercise their restored discretion has been a matter of great interest. In this article, we highlight insights from recent sentencing statistics and conclude that the data support the continuation of welcome trends: district courts exercising their restored discretion to tailor sentences individually, with increased regional differences and courts in the Second Circuit taking a leading role in mitigating the excessive harshness of the fraud guidelines.
After the passage of the Dodd-Frank Act in 2010, the Securities and Exchange Commission increasingly began to rely on internal administrative proceedings in lieu of filing federal court cases for securities fraud violations. This allowed the agency to avoid a sometimes rigorous federal court system and retain what some believed was an unnecessary “home court” advantage by trying cases before an administrative law judge appointed by SEC staff that litigated before it. The Supreme Court’s opinion issued last week in Lucia v. SEC – a case in which the government’s position flipped with the change of administrations – calls into question the validity of reliance by the SEC, and perhaps other federal agencies, on ALJs. [...]
Many of the administration’s enforcement priorities may raise serious concerns for criminal defense lawyers and other champions of legal rights. In this article, however, we discuss the “anti-piling on” policy announced by Deputy Attorney General Rod Rosenstein, which is intended to reduce the perceived unfairness of repeated punishments for corporate misconduct. The policy bespeaks a welcome change in DOJ leadership’s attitude toward corporate accountability, but how the policy will be applied in individual cases remains to be seen.
Despite tweets proclaiming the death of the attorney-client privilege, the government’s recent seizure of items from Michael Cohen, Trump’s personal attorney, actually serves to preserve and engender respect for the attorney-client privilege by demonstrating the limits of the privilege. The privilege is just that – a privilege, not a right – and the highly-publicized search of Cohen’s office, home, and hotel room reassures the public that an individual cannot hide behind the attorney-client privilege simply because they place an “Esq.” after their name. Even assuming the privilege applies in this case – which given recent revelations of the nature of the lawyer’s activity is debatable – the crime-fraud exception may well “trump” the privilege. That exception, which applies when a client or the lawyer seeks to use the attorney’s services or advice to commit wrongdoing, prevents the cloak of privilege from concealing communications engaged in for fraudulent or illegal purposes. Contrary to recent partisan declarations, this limit on the privilege, in addition to the procedural and legal safeguards that the government must navigate to seize materials from an attorney, insures public trust in the role of lawyers and the appropriate role of the privilege. If lawyers expect to continue to hold a trusted role in society, the proper contours of the important privilege with which they are entrusted needs to be understood and guarded. The crime-fraud exception prevents the exploitation of the attorney-client privilege, which would undermine the public’s respect for the privilege. [...]
Good faith reliance on counsel can be a critical line of defense in white-collar prosecutions, but defendants seeking to assert it often face skepticism and procedural hurdles borne of an unduly narrow view of the doctrine. One example is the district court’s ruling in United States v. Scully, and the Second Circuit’s recent opinion reversing that ruling offers useful guidance. In this article, we discuss Scully and other relevant decisions, including case law supporting the so-called “involvement of counsel” defense.
After a year of conjecture about the Trump administration’s approach to white-collar crime, the Justice Department has reinforced speculation of a relatively hands-off approach to corporate prosecutions. While asserting that it will hold individuals accountable for corporate criminal behavior, Justice Department leaders have stated that they will not “employ the hammer of criminal enforcement to extract unfair settlements” from corporate entities. In pursuit of that strategy, at the end of last year, federal prosecutors announced an initiative for leniency in Foreign Corrupt Practices Act cases where a corporation voluntarily discloses conduct in violation of the FCPA and cooperates with the government. Recently, the government displayed an intention to apply this policy outside of the FCPA context as well. [...]
The Trump administration is emphasizing individual rather than corporate liability in white collar investigations and has shifted the focus of criminal law enforcement toward some non-white collar priorities. In this article, we discuss how the move away from corporate criminal liability has been manifest in policy decisions by the Justice Department, highlight the transition of its staff, and discuss whether this shift in priorities is likely to result in a decrease in white collar investigations and prosecutions.
As the number and variety of cryptocurrencies on the market continue to grow, so does the scrutiny by government regulators. As noted in my prior post, the Federal Bureau of Investigation, Securities and Exchange Commission, and the Commodities Futures Trading Commission have developed units focused on cyber-threats, as have numerous foreign governments. Most recently, the Internal Revenue Service has joined the mix by investigating the ways in which taxpayers do – and more importantly, do not – report virtual currency transactions. Now Congress has gotten in on the action by amending the tax code to close a loophole that allowed cryptocurrency owners to exchange digital currencies without reporting the transactions on their tax returns. 2018 is likely to be a year of uncertainty for owners of cryptocurrencies, which may account in part for the double digit decline in the value of Bitcoins at the end of December. [...]
Mostly lost among the headlines regarding the charges brought by Special Counsel Robert Mueller against former Trump campaign chairman Paul Manafort was the simultaneous release of a court opinion compelling one of Manafort’s own lawyers to testify against him in the grand jury. In this article, we trace the history of the bar’s failed efforts to restrict the authority of federal prosecutors to issue this troubling type of subpoena, and discuss the D.C. district court’s decision affirming that authority in the Manafort case.
The cryptocurrency boom has been met with a fresh wave of regulatory and enforcement efforts by the SEC, DOJ, and beyond. Although these regulatory efforts are intended to address concerns about cryptocurrencies being subject to fraud and manipulation, or being used for money laundering, the agencies' responses complicate the growing use of these new technologies. In this article, we discuss the SEC’s crack down on Initial Coin Offerings, securities fraud liability implications, anti-money laundering efforts with respect to bitcoin and cryptocurrency exchanges, and the international response to the cryptocurrency boom.
Federal agencies have begun arming themselves for war against cybercrime. By the nanosecond, the ubiquitous Internet and related technology offer endless opportunities for wrongdoing. Notorious Russian hackers meddled in companies that manufactured and sold voter registration software and voting equipment to influence last year’s Presidential election. In September 2017, credit reporting company Equifax announced that sensitive financial data of over 143 million consumers had been hacked, exposing customers to identity theft. A Brooklyn man has been sued for operating a bitcoin Ponzi scheme to acquire $600,000 in unregistered fraudulent investments. The share prices of publicly traded companies have been manipulated through fake news shared and tweeted on social media. The speed of online innovation and the increase of online engagement makes it increasingly difficult to keep track of the latest digital developments, let alone any potential misuse of such technology. The annual cost of global cybercrime is predicted to double from $3 trillion in 2015 to $6 trillion in 2021. In response, federal regulators have started new units and initiatives to combat misconduct in the cyber world. [...]
Despite years or even decades of law abiding conduct, individuals with a criminal record face extraordinary hurdles in rebuilding their lives because of the significant collateral consequences of their conviction. In the past decade, many state lawmakers have enacted laws providing for expungement or sealing remedies. At the same time, federal legislation has taken a step backwards. In this article, we discuss judicial efforts to address this problem, which federal judges acknowledge requires a solution by Congress.
To Whom It May Concern:
I am a conscientious professional investment adviser. For years I have carefully followed legislation, judicial decisions, and news reports regarding the law of insider trading. I make every effort to stay abreast of the latest developments so that I can fulfill my fiduciary obligation to act in the best interest of my clients and optimize their returns while, at the same time, avoiding any violation of the law against trading on inside information. The latest decisions by the United States Supreme Court and the highest federal court that covers the area that includes Wall Street have left me paralyzed with uncertainty. I increasingly am afraid that diligent review, analysis, and investigation on behalf of my clients will land me before the SEC or worse yet a defendant in a criminal case. The law of insider trading has never been defined by Congress and increasingly I have become aware that federal judges cannot agree on what it is. In particular, when determining whether a violation has occurred, courts have been battling over whether when information is shared by an insider, he or she must receive a personal benefit and what constitutes such a benefit. Can someone help me out?! [...]
A recent high-profile Fourth Amendment victory for the defense in Southern District of New York case United States v. Wey provides an occasion to assess how courts are applying search and seizure precedents to today's “big data.” In this article, we consider Wey in light of other recent decisions in the Second Circuit. These cases demonstrate that the government’s tendency to use broadly-worded search warrants, combined with uncertainty regarding what meets the Fourth Amendment test of “reasonableness” for off-site reviews of electronic files, continues to raise vexing issues for prosecutors, defense counsel, and courts in white collar criminal cases.
Yesterday, a monkey wrench was thrown into the DOJ’s ever-increasing, multi-jurisdictional cooperation in white collar cases. In United States v. Allen, the U.S. Court of Appeals for the Second Circuit held that the prohibition against the use and derivative use of a defendant’s compelled testimony – the Kastigar protections – applied even when the testimony was required by UK regulators in a joint U.S.- UK investigation. Despite prosecutors’ best efforts to avoid their investigation being tainted by statements compelled by UK regulators, the Second Circuit overturned a conviction and dismissed an indictment where a witness had reviewed the defendant’s compelled testimony. Thus, where multiple countries are investigating the same allegations of misconduct, a subject forced to provide evidence in a foreign country cannot have that testimony used in a prosecution against him in the United States – at least in the Second Circuit. Because common U.S. investigation partners, like the UK, regularly utilize compelled testimony in connection with their investigations, the DOJ now has to navigate a minefield when exchanging information with international partners. [...]
For several decades, the Securities and Exchange Commission routinely has sought and obtained from the federal courts orders directing defendants to return the ill-gotten gains of their securities law violations. Such disgorgement recoveries have become a billion dollar industry for the SEC. A footnote in Justice Sonia Sotomayor’s recent opinion in Kokesh v. SEC – the agency’s second straight significant loss before the High Court – may foreshadow a view by the Court that disgorgement is not a remedy routinely available to the SEC. [...]
The start of a new presidential administration brings along changes to personnel, policies, and enforcement priorities, and during the transition period, counsel to businesses and individuals try to anticipate which way the enforcement wind will be blowing in order to best advise anxious clients. One high-stakes area of enforcement focus, the Foreign Corrupt Practices Act (FCPA), has been subject to much speculation in this regard. In this article, we highlight 5 reasons to think that corporations should continue to commit to FCPA compliance: early signs of the new regime foretell continued zealous enforcement; the limited impact of the FCPA on American companies’ competiveness overseas; enforcement efforts by other countries; expansion of anti-bribery statutes has led to increased cooperative partners for the U.S.; and business reasons alone may encourage strong compliance.
Corporations operating globally face significant uncertainty regarding their ability to maintain the confidentiality of their counsels’ activities, especially in the context of internal investigations. Recent events, including a raid of outside counsel’s office and a significant U.K. court decision, illustrate a troubling trend. In this article, we discuss why companies and their U.S. law firms must carefully consider the manner in which they conduct internal investigations abroad.
The headlines are bursting with speculation about President Trump’s seemingly sudden firing of FBI Director James B. Comey. The administration’s rationale has shifted. Whether Comey was dismissed because the administration was unnerved by his dogged pursuit of the Russian hacking issue, because he mishandled the investigation of Hillary Clinton’s private email server, or because Trump disliked Comey’s recent testimony before the Senate Judiciary Committee, the timing of Comey’s firing – in the midst of the FBI’s investigation of Russian meddling in the recent national election – raises eyebrows and a few questions. This blog does not attempt to answer questions of judgment or politics, but will help shed a light on the various Russian investigation-related crimes Comey and the FBI may have been investigating. [...]
After years of expressing frustration with the barriers to trial preparation in complex criminal cases, the organized defense bar has again called for revisions to Rule 16 of the Federal Rules of Criminal Procedure. Buoyed by a recognition among the judiciary that current practices must come to terms with the proliferation of electronically stored information, and by the Department of Justice's acceptance of the principle that amending the Rule would be useful, an amendment now appears likely. In this article, we highlight issues with the current Rule 16, review the proposals for amendment under consideration, and discuss their potential impact on trial preparation in complex white-collar cases.
The Trump White House feels besieged by near-constant leaks. The divulged inside stories have ranged from the trivial, such as rumors that President Trump enjoys watching the news in his bathrobe, to the more consequential, such as revelations connecting Trump advisers to Russian intelligence. The resulting atmosphere of suspicion culminated in Trump’s tweets earlier this month alleging that former President Obama ordered the “tapping” of then-candidate Trump’s “wires” at Trump Tower during the Presidential election. [...]
SEC Takes a Second Bite at Statute of Limitations Apple: Last month, the Supreme Court granted certiorari in Kokesh v. SEC to settle the issue of whether the so-called "fallback" five-year statute of limitations applies to SEC disgorgement claims. This article highlights the federal courts’ ongoing debate about the nature of the disgorgement remedy, and the potential impact of the Supreme Court’s decision on SEC enforcement proceedings.
Before her last stand refusing to enforce the Muslim Ban and subsequent firing, Sally Quillian Yates was best known for authoring the Yates Memorandum. This policy directive, released over a year ago in apparent response to criticism of the Department of Justice’s (“DOJ”) handling of cases related to the nation’s financial crisis, directed DOJ prosecutors to focus on holding individuals accountable through criminal prosecutions. Today, entities embroiled in criminal investigations continue to pay massive fines and plead guilty to criminal charges, but these investigations have led to few individual convictions. In this article, we discuss the differences between white collar corporate and individual prosecutions, explain how establishing individual criminal liability has proven difficult for prosecutors, and conclude that the Yates Memorandum may not materially alter the landscape. Thus, Yates may be remembered more for her letter refusing to enforce the Muslim Ban as unjust, not for the Yates Memorandum.
A pervasive sense of uncertainty about America under the President set to be sworn in tomorrow has extended into almost every aspect of life. Perhaps due to his own past and lack of transparency, speculation abounds about potential changes to white-collar prosecution priorities and securities enforcement under a Trump administration. Anticipating what kind of impact a Trump presidency will have on white-collar criminal practice is largely guesswork given the new leader’s tendency towards imprecision. A look at Trump’s statements and actions to date, as well as his appointees, however, may provide some limited insight. [...]
Over the years, a number of courts and practitioners have criticized the "fox guarding the chicken coop" procedure of allowing a government taint team to try to cull attorney-client privileged materials from seized documents. In this article, we discuss a recent case, U.S. v. DeLuca, that illustrates just what these skeptical courts and counsel have been concerned about.
At long last, it’s November 9, and the nation has an answer to the question of who will serve as its next President. Although this should bring a measure of relief, a feeling of uncertainty remains. What lies ahead for our nation under the leadership of Donald Trump, billionaire reality television star who invented the chant “Lock Her Up”? What happens to unresolved allegations of federal tax liability and sexual assault? Does the theoretical specter of possible indictment and criminal trial or impeachment loom for President-elect Trump? [...]
One of the most significant areas of U.S. law enforcement's extraterritorial expansion has been the Foreign Corrupt Practices Act (FCPA), a niche notable for untested legal theories because of the dearth of cases that actually are litigated. Now, however, in United States v. Hoskins, the U.S. Court of Appeals for the Second Circuit will determine the validity of prosecutors’ use of conspiracy and accomplice liability theories to expand their extraterritorial reach even beyond that of the underlying FCPA statute. In this article, we discuss Hoskins and the likely impact the Second Circuit’s decision will have beyond FCPA enforcement efforts.
Florian Homm, a German hedge fund manager prosecuted by the United States for wrongdoing in connection with the financial crisis, fled Europe in 2008 under cover of darkness on a private plane with cash stuffed in his underwear. He hid out in South America for five years – the length of the statute of limitations generally applicable to most United States federal criminal cases. When he emerged and trumpeted his return to high society in 2013, believing that the statute of limitations on any possible United States criminal claims against him had run, he was arrested in Italy on U.S. federal fraud charges. [...]
On September 23, 2016, Fordham Law Review published a special edition, Volume 85, Issue 1, in connection with the U.S. Court of Appeals for the Second Circuit’s 125th Anniversary. In honor of the celebration, Morvillo Abramowitz partner Robert J. Anello and associate Miriam L. Glaser contributed a chapter on white collar crime. Their article addresses six different areas of white collar law and procedure, which showcase the Second Circuit’s role as the nation’s compass in white collar criminal matters.
Click here to read full article.
The so-called Bridgegate scandal, in which New Jersey Governor Chris Christie's administration allegedly closed entrance lanes to the George Washington Bridge in September 2013 to create traffic jams in retribution for the mayor of Fort Lee's failure to endorse Christie, already has had a significant impact on a number of prominent careers, and perhaps even on our national politics. In this article, we discuss the recently argued appeal of a demand by the media for disclosure of the names of unindicted co-conspirators in the pending federal prosecution of two top Christie associates, and the possible influence the appeal may have on courts' future deference to the reputational interests of individuals implicated but not charged in prominent investigations.
SCOTUS Quid Pro Quo Analysis in McDonnell May Broadly Affect Bribery and Insider Trading Prosecutions
Last month’s decision from the Supreme Court in McDonnell v. United States takes federal prosecutors to task for applying federal criminal corruption laws in too broad a manner. The Court’s decision makes clear that distasteful or offensive conduct does not necessarily rise to the level of criminality. The Court’s insistence on a “specific and focused” benefit suggests that the government may have to rethink prosecutions ranging from all forms of bribery as well as insider trading. [...]
The Supreme Court’s 2015 Term promises significant developments for the white-collar bar. The court already has issued three decisions that are noteworthy for white-collar practitioners, with the most significant likely yet to come. In this article, we discuss the Supreme Court's recent white-collar decisions as well as cases to be decided in the upcoming year, and consider the impact of Justice Antonin Scalia’s absence.
For decades, the government has been trying to incentivize companies to self-report illegal activity by dangling the carrot of reduced punishment. The Justice Department’s one-year Foreign Corrupt Practices Act “pilot program,” announced on April 5, 2016, is the latest iteration of this enforcement technique. Although a valiant effort to formalize a practice known to white collar practitioners, the program does not address some of the more significant variables that are of importance to corporate decision makers. [...]
Because the federal sentencing guidelines applicable to fraud cases are widely acknowledged to be broken and dysfunctional, particularly in high-loss cases, sentencing judges may increasingly seek other sources to help guide their discretion. In this article, we discuss the thoughtful alternative framework offered by a blue-ribbon panel of judges, law professors and practitioners, and highlight recent court decisions applying those “shadow guidelines.”
The Supreme Court's grant of certiorari in the highly-publicized case of former Virginia Governor, Robert McDonnell, to examine the contours of a quid pro quo arrangement under federal law will have an impact on more than just federal political corruption prosecutions. A number of other federal criminal statutes, including the Anti-Kickback Enforcement Act and the Foreign Corrupt Practices Act, include a quid pro quo requirement. In this article, we discuss the McDonnell case and its implications.
In September 2015, Department of Justice Deputy Attorney General Sally Quillian Yates issued a memorandum instructing federal prosecutors to step-up individual prosecutions for corporate wrongdoing. The much-discussed “Yates Memorandum” was issued in response to criticism that federal prosecutors had been lax in prosecuting individual executives for crimes committed during the 2008 financial crisis and has garnered a lot of attention from practitioners and commentators. White-collar lawyers and their corporate clients also should be aware of the “other” Yates Memorandum quietly issued at the end of 2015, announcing that federal prosecutors will look for ways to charge a variety of felonies in routine worker safety cases to take advantage of the greater penalties available under environmental and other criminal laws. [...]
Latest International Assault on Attorney-Client Privilege Causes Headaches for Corporations' Lawyers
When dealing with international investigations, counsel for corporations must navigate a variety of issues relating to the attorney-client privilege. By now, many experienced white-collar lawyers are aware of the vagaries of the rules applicable to in-house counsel (in many European jurisdictions, the privilege does not apply to communications with them), but recent pronouncements by United Kingdom authorities prodding companies to forego the protection of the privilege in connection with internal investigations have introduced a new twist into the mix. The approach to the corporate attorney-client privilege taken in the United Kingdom is symptomatic of a relatively negative view of the privilege articulated by many European regulators and courts. [...]
Even without its catchy name, the relatively new crime of “spoofing” would seem to appeal to prosecutors seeking to tap into the populist desire for prison time for perceived financial chicanery and the view that high-speed trading has rigged the markets against regular participants. Not surprisingly, therefore, the conviction last month in United States v. Coscia, the first criminal trial on spoofing charges, has generated a good deal of attention. In this article, we discuss the Coscia trial and what it portends for future prosecutions in the realm of market manipulation.
Partner Robert J. Anello recently authored “White Collar Crime,” a chapter in the highly regarded treatise Commercial Litigation in New York State Courts, Fourth Edition. The treatise is a joint venture of Thomson Reuters and the New York County Lawyers’ Association and features the work of experts authors, including some of the best commercial litigators in New York.
Likely to sate the public’s appetite to punish perpetrators of financial crimes, in recent years Congress and the United States Sentencing Commission (USSC) have created a scheme where individuals convicted of white collar crimes serve long sentences and, thereafter, are saddled with a lifetime of disabilities that often are out of proportion to the venality of their conduct or the legitimate goals of our criminal justice system. For years, the length of sentences in white collar cases largely has been determined by the United States Sentencing Guidelines almost-singular focus on “loss” as the key factor in economic crimes, which obscures the myriad other factors that affect a defendant’s true culpability in an individual case and often results in unduly punitive results. In some cases, relatively low-level and ministerial employees faced life sentences in prison because the guidelines did not properly account for their role in the scheme. In others, defendants faced decades-long sentences for activity that was more “farcical than dangerous” simply because the “intended loss” of their “ridiculous” scheme numbered in the billions of dollars. [...]
Move over Holder, Thompson, McNulty, and Filip and make room for Yates. Taking its place in the parade of guidelines issued by Department of Justice leadership on the topic of policing corporate malfeasance comes a new entry from Deputy Attorney General Sally Quillian Yates. On Sept. 9, 2015, Yates issued a memorandum titled “Individual Accountability for Corporate Wrongdoing,” setting forth six guidelines for federal prosecutors in all future investigations of corporate wrongdoing. In this article, we discuss the Yates Memorandum and its possible effects on corporate investigations and white-collar practice.
A recent decision from the Seventh Circuit Court of Appeals highlights the ongoing debate regarding the Securities and Exchange Commission’s continued pursuit of administrative enforcement proceedings for securities violations. In Bebo v. SEC, a panel of the Seventh Circuit held that federal courts do not have jurisdiction to hear claims regarding the constitutionality of the SEC’s administrative hearing process and forum until all administrative remedies have been exhausted. The breadth and number of constitutional challenges raised by individuals subject to the SEC’s administrative process, however, signal that it may be time for the agency or Congress to make some changes. [...]
For some, the Ninth Circuit’s reversal of home run king Barry Bonds’ obstruction of justice conviction and the government’s recent decision to drop any further prosecution may prompt a reassessment of Bonds’ place in baseball history. For those who focus on white collar crime, the case presents another example of how the breadth of the federal obstruction laws makes them a nearly irresistible choice for prosecutors, and of the seemingly endless struggle of the courts to define appropriate limits on their reach. This article discusses the federal obstruction of justice statutes and the implications of the Bonds decision.
When delivering legal advice, lawyers attempt to provide informed guidance based on controlling law. Yet, when it comes to significant chunks of the white collar criminal and regulatory landscape, practitioners often are forced to provide advice based on professional “lore” derived from negotiated settlements rather than enacted laws or judicially established caselaw. In this two-part article, we discuss the lore that counsel must rely upon when tackling FCPA enforcement actions, as well as the downside of such reliance.
In my last blog post, I discussed the federal government’s increased focus on criminal activity that occurs overseas and the recent high-profile indictment filed by the Justice Department against nine FIFA officials. On June 3, 2015, INTERPOL, the world’s largest international police organization, issued Red Notices for six of the FIFA defendants. Red Notices issued by INTERPOL are the closest thing to an international arrest warrant. The FIFA cases present an opportunity to examine the work of INTERPOL and the significance of the notices it issues. [...]
America seemingly has found a new product to export – its criminal justice system. Many recent high profile criminal cases brought by the Justice Department, including a multi-billion dollar settlement with Swiss bank Credit Suisse for its banking practices in Switzerland and a number of other recent financial industry prosecutions and Foreign Corrupt Practices Act cases, have centered around activity that has occurred mainly overseas. The United States asserts its jurisdiction in these cases because the American banking system or its capital markets and exchanges were somehow involved. [...]
In this article, we discuss the recent guilty pleas by four major international banks—Citigroup, JPMorgan Chase, Barclays, and Royal Bank of Scotland—for the attempted manipulation of foreign exchange rates. Although the Department of Justice characterized the pleas as “historic resolutions,” in truth the government made significant efforts to blunt the effects of the criminal convictions by granting waivers to rules that would have restricted the banks’ ability to continue doing business in the United States—so-called “bad boy” provisions. We also discuss how these resolutions illustrate fundamental problems with the current framework for corporate criminal liability in the United States.
Federal and state regulators frequently rely on independent compliance monitors to ensure that corporate wrongdoers follow-through on correcting the conduct that got them into trouble. Southern District of New York Judge Jed Rakoff has referred to a corporate monitor as both a “financial watchdog” and “an overseer who has initiated vast improvements in the company’s internal controls and corporate governance.” Typically installed as part of a settlement agreement between the government and those companies that have had legal and regulatory issues, the monitors assess and report back to the government on violations of the law and on the effectiveness of the corporation’s compliance and ethics programs. [...]
In the wake of the 2010 Dodd-Frank Act’s broadening of the reach of SEC administrative enforcement proceedings, the agency undertook a major shift toward pursuing such proceedings instead of federal district court actions. Administrative proceedings, which are heard by judges employed by the Securities and Exchange Commission, are widely perceived to favor the agency. Indeed, recent data on the results of such proceedings reveal that the SEC has enjoyed a lopsided record of success, compared to its far more modest record in federal court trials. In this article, we discuss federal court challenges to the SEC’s initiation of administrative proceedings, including Duka v. SEC, in which Duka relies on recent Supreme Court precedent to assert an intriguing constitutional challenge to the status of SEC administrative law judges.
World-wide financial institutions take notice – New York has a new regulator on the scene. Newsweek describes him as “body-slamming” one of the world’s largest banks, “the man the banks fear most.” The Wall Street Journal has labeled him “one of Wall Street’s most dogged pursuers.” American Banker characterizes him as “pushing the envelope” of bank regulation. In three years on the job, this regulator and the new agency he rules have extracted more than $3 billion in fines from global banks. In a speech he delivered at Columbia University this Wednesday, the regulator made clear that, in all likelihood, these headline-grabbing events are just a sign of things to come. [...]
The restoration of sentencing judges’ discretion in the post-Booker era has rendered the federal sentencing guidelines—widely perceived as unduly punitive—less important in the white-collar context. Statistics confirm that courts increasingly have chosen to impose non-guideline sentences and, in some recent high profile cases, even the prosecution has proposed sentences below the guideline range. The U.S. Sentencing Commission recently has responded to complaints about the guidelines’ application by proposing a series of amendments to the guidelines governing economic crimes. We discuss all of this in our latest New York Law Journal article.
The Justice Department’s white-collar agenda in 2014 was marked by skyrocketing corporate settlements and continued reliance on deferred and non-prosecution agreements, coupled with compliance monitors. Several significant decisions with long-term implications for white-collar cases also were issued by federal courts in 2014. A look at the Justice Department’s approach and these decisions offer a clue as to what to expect in white-collar cases in 2015. [...]
White-collar criminal practitioners spend much of their time arguing about how prosecutors should exercise their discretion in making charging decisions, often against the backdrop of broad and uncertain criminal statutes. When the Supreme Court grapples with the same issue, however, significant new criminal law doctrine may emerge. That potential became apparent most recently during the oral argument of Yates v. United States, the peculiar case of a fisherman prosecuted for obstruction of justice under the Sarbanes-Oxley Act for throwing undersized fish back into the sea. In this article, we discuss this case, the critical comments the justices directed toward the government regarding its exercise of prosecutorial discretion, and potential judicial remedies.
Analysis of the corporate mens rea is, by definition, contrived and one with which federal courts have struggled. Unlike instances where an individual is charged with securities fraud, determining the “thinking” or “knowledge” of an artificial entity, sometimes comprised of thousands of disparate employees throughout the world, is a difficult theoretical undertaking. Until last Friday, corporate scienter generally was assessed by reference to one of two established approaches: traditional respondeat superior, where the company stands in the shoes of the relevant actors; or collective knowledge, where a company is charged with the knowledge of any of its agents, even those who may not have committed the offending conduct. [...]
Enforcement actions seeking penalties long have been subject to the five-year statute of limitations set forth in 28 U.S.C. §2462. For years, the SEC has sought not to be tied down by a strict five-year limitation by arguing that the clock does not start to run until the alleged fraud is discovered by the agency—a position flatly rejected by the U.S. Supreme Court last year. The last arrow in the SEC’s quiver to avoid the five-year statute has been its argument that when it seeks so-called “equitable” remedies, like injunctions and disgorgement, the limitations period contained in Section 2462 is inapplicable. This final effort to avoid statutory time constraints also may be doomed. SEC v. Graham, a recent decision from the Southern District of Florida, if upheld, would require the SEC timely to investigate and file all enforcement actions regardless of the remedy sought. In this article, we discuss this case and other recent cases, and evaluate the role a change in §2462 would play in future cases.
Be Careful Where You Whistle While You Work: Courts Impose Limits on Dodd-Frank's Protection for FCPA Whistleblowers
The Dodd-Frank Wall Street Reform and Consumer Protection Act was heralded as providing whistle-blowing employees protection from retaliation by their employers. In Liu v. Siemens AG, handed down last week, the Second Circuit limited the reach of the Act’s anti-retaliation protections to domestic whistleblowers. In doing so, the Court rejected a claim brought by a Taiwanese lawyer employed by a German corporation who disclosed suspected Foreign Corrupt Practice Act violations by the corporation’s Chinese subsidiary, finding that the relevant provisions of the Dodd-Frank Act did not apply “extraterritorially” [...]
Government searches of ever more sophisticated technology and ever vaster quantities of electronic data implicate ever increasing stakes for individual privacy. Recent decisions from the Supreme Court and the Second Circuit demonstrate that courts are recognizing these stakes, and may be beginning to breathe more life back into the Fourth Amendment after years of cutting back on its protections. This article takes a look at the Second Circuit's ruling in United States v. Ganias, which reversed a tax evasion conviction based on the government's improper off-site search of hard drives, and discusses related Fourth Amendment issues that pose particular challenges when the government seizes digital media.
The insider trading conviction of Galleon Group founder Raj Rajaratnam continues to ignite debate on the breadth of federal insider trading law. In affirming Rajaratnam’s conviction, the U.S. Court of Appeals for the Second Circuit relied on its precedent, broadly imposing criminal insider trading liability where a defendant has knowledge of insider information without evidence that he actually relied on the information in making a trade. That question, which is central to Rajaratnam’s petition for certiorari to the U.S. Supreme Court, is the topic of this article.
United States financial entities and their individual employees should be aware that a new sheriff is in town. Last week, the United Kingdom’s Serious Fraud Office (SFO) brought criminal charges against three American bankers in connection with its ongoing investigation into the rigging of the interest rate benchmark known as LIBOR. The SFO’s press release was two sentences in length: “Criminal proceedings by the Serious Fraud Office have commenced today against three former employees at Barclays Bank Plc . . . in connection with the manipulation of LIBOR. It is alleged they conspired to defraud between 1 June 2005 and 31 August 2007.” [...]
This article, “Conscious Avoidance: An Over-Used Doctrine,” discusses the problems engendered by court interpretations of the evidentiary foundation required for a conscious avoidance jury instruction in criminal cases.
Destitute Before Proven Guilty: Supreme Court OKs Asset Seizure In White-Collar Cases That Bars Defendants' Ability To Retain Counsel
The Supreme Court’s February 25 decision in Kaley v. United States creates a significant hurdle for white-collar defendants seeking to retain qualified counsel to defend against the government’s allegations. Ruling that defendants cannot, prior to trial, challenge a grand jury’s probable cause determination that allows the government to bar a defendant’s access to assets linked to the alleged crime, the Court’s decision, according to the dissent, allows the government “to initiate a prosecution and then, at its option, disarm its presumptively innocent opponent by depriving him of his counsel of choice – without even an opportunity to be heard.” In cases such as Kaley, where the government convinced the grand jury to charge on a novel or untested theory, the result poses a particularly difficult challenge for a white-collar defendant. [...]
The ins-and-outs of extradition law increasingly are relevant as global commerce and international travel emerge as the norm, exposing citizens of one nation to the laws of other nations. I previously have written on the process by which the United States typically seeks the return of fugitives to this country to stand trial. Last week’s decision by an appellate court in Florence, Italy convicting American citizen Amanda Knox and her former boyfriend of the stabbing death of Knox’s roommate in 2007 raises questions regarding the flip side of the coin – how the United States government responds when another country seeks extradition of one of its citizens. [...]
A criminal defendant's decision whether or not to take the stand at trial is one of the most pivotal. Declining to testify, particularly in insider trading cases, can be risky, but testifying can permit attack by otherwise inadmissible "prior bad act" evidence. This article discusses the Martoma prosecution, which illustrates how the government can seek to attack a defendant with "prior bad acts" even if he does not take the stand.
The second part of this Business Crimes Bulletin article examines the issues surrounding criminal forfeiture laws. The first article discusses the criminal forfeiture statute. The publication of part two coincides with the Supreme Court's ruling on February 25 in Kaley v. United States, which limits the ability of defendants to challenge a court's decision to freeze their assets before trial. The outcome of this closely watched case provides the government with another tool in its arsenal. An analysis of Kaley and its potential impact on white-collar cases and on the ability of defendants to hire counsel of their choice, is discusses in part two.
The increasingly aggressive use of criminal forfeiture has become a vital weapon in the federal prosecution of white-collar cases. Sometimes, however, the government's zealous pursuit of the supposed fruits of allegedly illegal conduct may run afoul of a defendant's constitutionally-protected right to counsel. That is the subject of part one of this Business Crimes Bulletin article, published in two parts.
This article, “Second Circuit to Resolve Split on Insider Trading,” examines an issue regarding the boundaries of insider trading law that has divided lower courts – whether a "tippee" must have knowledge that the insider received a personal benefit.
2013 marks the five-year anniversary of the financial crisis of 2008. I noted in January that this would play a significant role in white-collar enforcement and regulation in 2013, forcing the government either to act or to abandon forever certain investigations related to the crisis because of the five-year statute of limitations for enforcement actions. In addition to the looming deadline, the government has had to deal with repeated criticism of its overall response to the financial crisis, specifically what some perceive as its poor track record in obtaining criminal convictions. The government’s money laundering case against British bank HSBC serves as an example – the $1.9 billion settlement and deferred prosecution agreement (DPA) elicited cries that banks and financial institutions were perceived as “too big to jail” and prompted Congressional hearings on the subject. [...]
Sentences in white collar cases called for by the Sentencing Guidelines often are unduly severe. Courts and policy makers finally appear to be taking notice and a change may be afoot. This article, “Calls for Sanity in White-Collar Sentencing,” examines a powerful recent opinion from a judge on a Second Circuit panel that takes issue with courts' mechanical application of the Guidelines concept of “intended loss,” which greatly increases white collar sentences. The article also discusses the long over-due attention the Sentencing Commission is paying to the problem.
What Happens Outside The USA, Stays Outside The USA: Reining In The Extraterritorial Reach Of Criminal Securities Laws
Criminal securities laws do not reach transactions that occur outside the United States. This is the conclusion of the Second Circuit Court of Appeals which last Friday applied the Supreme Court’s reasoning in Morrison v. National Australia Bank to criminal cases. In United States v. Vilar, the Second Circuit held that without specific authority from Congress to do so, the federal government cannot prosecute foreign activity.
Counsel for corporations conducting multinational business should take note – this decision marks a significant setback for United States prosecutors’ efforts to police global business conduct. Its effects will not only be felt in securities fraud cases, but may well extend to other cases involving international activity. In Vilar, Judge Jose A. Cabranes, writing for a unanimous panel, considered the validity of the convictions of Alberto Vilar and Gary Alan Tanaka, two prominent investment managers and advisers. Vilar and Tanaka were found guilty by a jury of lying to clients about the nature and quality of certain investments. On appeal, the defendants argued that they could not be held criminally liable for securities fraud because the securities purchases at issue occurred outside the United States. [...]
This article examines the cooperation system and some notable complex white collar prosecutions that have fallen apart after cooperating witnesses have pled guility. It suggests a reexamination of the system with respect to such cases that should include consideration of adjustments to the standard jury instructions regarding cooperator testimony.
Edward Snowden, the former technical contractor for the National Security Agency who caused quite a sensation by disclosing highly classified documents that reveal the existence and scope of the United States government’s system of monitoring Internet and telephone communications, is not your average asylum-seeker. Snowden has been charged with theft of government property and espionage. By the time the information held by Snowden was leaked to the world last month, he already had fled the United States and taken refuge in Hong Kong. When the United States sought Snowden’s return through its extradition treaty with Hong Kong, Hong Kong officials apparently chose to deal with the political hot potato Snowden has become by asking him to leave. Since June 23, Snowden has been holed up in an airport in Russia. Media reports indicate that Snowden is attempting to avoid extradition altogether by seeking asylum from at least 20 different countries. Although many observers are focused on whether Snowden qualifies for asylum, the question arises – if Snowden’s asylum application is accepted, will his case dilute the asylum process and the safety it provides to the vulnerable individuals who typically seek its protections. [...]
On Monday, the Second Circuit Court of Appeals in Manhattan affirmed the 2011 insider trading conviction of Raj Rajaratnam, founder of the Galleon Group hedge funds. The case against Rajaratnam, who is serving a sentence of 132 months imprisonment, was constructed using, among other evidence, 45 secretly recorded phone calls from Rajaratnam’s cell phone during which he shared confidential information about publicly traded companies. The trial court found that the government had acted with “reckless disregard for the truth” in obtaining permission to wiretap Rajaratnam’s phone. A unanimous three-judge panel of the Court of Appeals disagreed. The decision is significant, especially because the investigation into Rajaratnam’s behavior, which also implicated the former director of Goldman Sachs Rajat K. Gupta, is the most prominent example of the use of wiretaps typically associated with organized crime and drugs cases in white collar prosecutions. [...]
This article discusses the problem of over criminalization and whether proposed remedies, including those that may be recommended by the House Judiciary Committee task force recently established to consider the issue, can be effective.
The government's ever-evolving response to the United States financial crisis has come full circle, as civil Justice Department Attorneys seek to rely on legislation enacted to protect financial institutions from fraud to sue those very same institutions. Recently, the United States Attorney's Office for the Southern District of New York has initiated a number of law suits under the "obscure" Financial Institutions Reform Recovery Enforcement Act (FIRREA). FIRREA was enacted in 1989 in response to the massive failure of almost half of America's savings and loan institutions. In its 24 year history, the law typically has been used to bring suit against officers and directors of failed institutions. The government now seeks to expand the statute's reach to include the institutions themselves. [...]
This article discusses the courts' treatment of criminal defendants' document subpoenas to third parties under Rule 17(c) of the Federal Rules of Criminal Procedure. Over the years, the practical utility of these subpoenas has been limited because courts have tended to hold them to the demanding standard that the Supreme Court utilized in United States v. Nixon, even though that standard arose in a different context. The article discusses how in recent decisions, however, courts have properly begun to depart from the rote application of the Nixon standard.
On Tuesday, March 5, the SEC’s insider trading case against billionaire Dallas Mavericks owner Mark Cuban took a new twist when a federal district court in Texas declined to end the 2008 civil enforcement action. The SEC alleges that Cuban engaged in insider trading when he sold 600,000 shares of Mamma.com Inc., a company in which he was the largest shareholder, after learning the company intended to offer a private investment in public equity (PIPE). Although the Court characterized the evidence against Cuban as “spotty,” “brief,” and “ambiguous,” it nevertheless concluded that the case should be allowed to proceed to trial because, according to the Court, certain understandings that Cuban would not disclose or trade based upon confidential information he received, may have been “implicit” in the communications between Cuban and company insiders. Unfortunately, the Court’s decision, a self-proclaimed “close” call, further muddies the waters of insider trading law. [...]
The law requires the SEC to bring enforcement actions seeking penalties against individuals who violate the securities laws within five years. The Supreme Court issued a unanimous ruling today that rejects the SEC’s argument that the five year clock begins to tick when they discover any alleged wrongdoing rather than the date on which the wrongdoing was committed. The author previously has suggested that the application of the SEC’s proposed "fraud discovery rule" by a government agency charged with investigation and enforcement would be counter-productive and effectively would eliminate the five year statute of limitations. To put this into context, [...]
The federal mail fraud statute is a broad catch-all criminal law that has been called the prosecutor's 'secret weapon.' It, however, is not without limits. This article discuss the history and jurisprudence of the mail fraud statute, and, in particular, a recent decision by the Ninth Circuit authored by none other than SDNY Judge Jed Rakoff, sitting by designation. In that case, United States v. Phillips, Judge Rakoff, who published a scholarly article on mail fraud before taking the bench, examined the requirement that the mailing be 'for the purpose of executing' the fraudulent scheme.
2012 was a big year in the government's pursuit of white collar crime. 2013 – the five year anniversary of the financial crisis – brings new legislators, new regulators, and the possibility that a looming statute of limitations may compel authorities to act or forever abandon certain investigations that arose as a result of the economic crisis. Nevertheless, the landscape of white collar enforcement and financial regulation in the coming year is likely to look familiar. [...]
Aggressive prosecutions of corporate misdeeds and complaints by the public that companies and their executives are not being punished enough both are in vogue. This article discusses the evolution of corporate criminal liability in the United States and the manner in which the government typically holds a corporation accountable for employee misconduct. The article concludes that the government's increased reliance on deferred prosecution agreements (DPAs) and non-prosecution agreements (NPAs) is reasonable given the harshness of judicially-created law deeming corporate entities criminally liable for the acts of even a few wrongdoers.
Although the "pioneering nature" of the use of wiretaps in the insider trading case of United States v. Rajaratnam has received a great deal of media attention, the statutory prerequisites to wiretapping have received little prior close legal scrutiny in white-collar cases. This article discusses the wiretap law's "necessity" requirement, which is intended to limit the government's use of wiretaps. The article suggests that the Second Circuit use the opportunity presented by Rajaratnam to define this requirement more rigorously than it has in prior decisions.
The Government's War Against Financial Industry Crimes Continues with a Record-Breaking Insider Trading Case, But It's Still Too Soon to Declare a Winner
The Department of Justice and Securities Exchange Commission loudly have trumpeted victories achieved in their renewed battle against insider trading and Wall Street malfeasance, repeatedly warning that there are more cases to come. Just yesterday, the United States Attorney for the Southern District of New York announced “the most lucrative insider trading scheme ever charged” against a former portfolio manager of the well-known hedge fund, SAC Capital Advisors. [...]
Financial Institutions: How Much More Will You Have to Spend on Anti-Money Laundering Programs to Avoid Criminal Prosecution?
The price of doing financial business in the United States has just gone up. The Department of Justice is taking a new tack in its efforts to track and prosecute money laundering that occurs through financial institutions. Rather than focusing on money laundering that results from substantive criminal violations [...]
Recent money laundering prosecutions illustrate nascent attempts to criminalize regulatory non-compliance by focusing on what the government believes are improper banking procedures or compliance weaknesses. Financial institutions long used to measuring their anti-money laundering program against the norms established by bank regulators will now have to consider whether their programs measure up to Justice Department standards, enforced by the threat of criminal prosecution. This article discusses new trends in anti-money laundering investigations, and what this means for the banking industry and other financial institutions.
A recent Second Circuit decision provides guidance against the practice of providing a copy of the indictment to the jury during deliberations. This article discusses issues presented by "speaking indictments," the court's decision in United States v. Esso, and its guidance, which is particularly apt in white collar cases.
Along with the increase in the application of white collar criminal laws of various countries to companies' international operations, multinational corporations facing international investigations have faced a confusing array of laws that govern the confidentiality of communications involving in-house and outside counsel. This article examines the myriad of laws that apply in the United States and abroad and offers strategies to maximize protection of the attorney client privilege.
Recent high-profile prosecutions of serial fraudsters like Bernard Madoff have fanned the flames of a debate regarding whether economic danger can be the basis for imposing detention to protect the financial safety of the community. This article discusses two recent district court opinions addressing misbehavior by white collar defendants while released on bail and the implications for defense attorneys.
The recent public release of federal sentencing data on a judge-specific basis has generated significant media attention. This article points out the flaws in some of the analysis of this new development.
Historically, courts have been reluctant to overturn a conviction on the grounds of juror misconduct. This article reviews recent decisions and pending matters helping to define the role of the courts in addressing juror misconduct.
Although the presumption of innocence is one of the bedrocks of our criminal justice system, quite often suspects are tried and condemned in the court of public opinion before even being charged in a court of law. This article discusses how to deal with the media, both tactically and ethically when a client is in the public eye, in order to rebalance a sometimes tilted playing field.
Extradition laws are of increasing relevance in white collar practice due to the cross-border nature of most business transactions. A related issue is the transfer of foreign citizens convicted in the United States to their home countries to serve their sentence and the real governmental benefits that attend such transfers. This article details the administration of such transfers in and out of the United States by the Justice Department's International Prison Transfer Unit.