On July 28, 2020, the U.S. Securities and Exchange Commission (SEC) accused six individuals and their companies with securities fraud in connection with two cannabis-related businesses in California that raised $25 million in an unregistered securities offering.  The SEC’s complaint was filed in the Central District of California and seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and civil penalties.

The SEC’s complaint alleges that the defendants misappropriated over $2.7 million of investors’ money and misleadingly promised a “guaranteed” annual return on investment of 100% or more. The purported scheme raised funds from 400 investors for a marijuana farm and a cannabidiol (CBD) extraction facility.

Securities-related litigation and enforcement is a growing risk for the burgeoning cannabis industry. Since 2017, the SEC has brought ten actions in federal court against cannabis companies in addition to this case. This latest filing reemphasizes the need for cannabis companies to provide truthful and complete information to current and potential investors. Companies in the cannabis industry should expect heightened scrutiny and would be well-served by focusing their efforts to ensure that any securities offerings and investor communications comply with applicable registration and disclosure regulations.

Ben Purser, chief risk officer for mortgage lender, Roundpoint Mortgage Servicing Corporation, and Barak Cohen, partner in Perkins Coie’s White Collar & Investigations practice and lead for the firm’s Commercial Litigation in Washington, D.C., discuss the challenges of legal compliance and risk in an industry that has been directly affected by two global financial crises in one decade. Ben has 34 years of experience in financial services, including service as chief audit executive in two public companies, chief compliance officer in the Troubled Asset Relief Program (TARP) at the U.S. Department of the Treasury, and chief risk officer at two different mortgage companies. Barak is a former corruption prosecutor who has both conducted government investigations in the financial services industry and represented clients in the industry. Drawing on their unique insider perspectives, Ben and Barak discuss the delicacy of balancing consumer needs against profitability, and whether regulators, particularly today, address or impede achieving this equilibrium. In the wide-ranging discussion, Ben and Barak touch on anticipated CARES Act investigations and how these may compare to TARP oversight; managing conflicting guidance from state and federal regulators; and predictions for imminent enforcement in the wake of the coronavirus stimulus funds. They cap their discussion with straightforward advice for companies in the industry that are navigating the uncharted path of legal compliance in the current global pandemic.

Listen to “Risks and Compliance Considerations for Lenders During a Financial Crisis” on Spreaker

On this episode of White Collar Briefly, Perkins Coie’s White Collar & Investigations practice attorneys Markus Funk and Lili Timmermann interview special guest (and colleague) retired Colorado Supreme Court Chief Justice Mike Bender. A true original, Justice Bender discusses far-ranging topics, including his important civil rights work in the 1960s, his challenging representation as a court-appointed attorney of white supremacist David Lane, who was charged with the 1984 murder of original “shock jock” Alan Berg, his move from his New York home to Colorado, his ascension to the bench, the inner workings of the Colorado Supreme Court, life in BigLaw, and tips for new and seasoned practitioners. We also examine the long-term impact of the pandemic on the practice of law and major changes in the art of advocacy over the past half-century.

Links: Apple, Google and Spotify

 

On June 22, 2020, the U.S. Supreme Court decided in Liu v. SEC that in an SEC civil proceeding a disgorgement award that does not exceed a wrongdoer’s profit and is awarded for victims is equitable relief permissible under the applicable statute. The opinion answers an important question left open by the Court in Kokesh v. SEC that disgorgement operates as a “penalty,” rendering claims for disgorgement subject to the five-year statute of limitations. See Supreme Court Reigns in SEC’s Disgorgement Power. Liu closes the door on speculation that the Court was poised to hold that the SEC did not have authority to seek disgorgement. Continue Reading SEC Can Recover Disgorgement, With Limits

Dave Eggers and Perkins Coie’s Firmwide White Collar & Investigations Chair (and former Chicago federal prosecutor) Markus Funk have a candid and probing conversation about today’s calls for fundamental criminal justice reform. Dave and Markus cover a wide range of topics, including why we need to fundamentally rethink the state’s treatment of suspects, defendants, and inmates; whether non-violent offenders like actress Lori Loughlin and Ponzi schemer Bernie Madoff ought to receive prison sentences; what it means to “defund” the police; the tragic George Floyd, Rayshard Brooks, Ariel Roman, and Ahmaud Arbery cases; how to improve law enforcement recruitment and training; whether it is time to reconsider arresting DUI, shoplifting, and other suspects in the absence of a threat to the public; the epidemic of criminalization and mass incarceration; the importance of empathy in law enforcement; qualified immunity; procedural justice and the need to ensure systemic legitimacy and creditworthiness; and the pros and cons of including imprisonment as part of an incremental punishment regime.

Listen to “A Conversation with Author Dave Eggers About Criminal Justice Reform” on Spreaker

Perkins Coie’s award-winning White Collar & Investigations practice has teamed up with the ABA’s Global Anti-Corruption Committee to launch a podcast series as an extension of our White Collar Briefly blog.

Our first five episodes, linked below, feature fascinating, candid conversations with a variety of special guests, including:

  • American “book of the year” author, editor, screenplay writer and publisher Dave Eggers
  • Joel Esquenazi (defendant in the high-profile US v. Esquenazi FCPA case)
  • Molson Coors’ Global Ethics & Compliance Chief Caroline McMichen
  • Chicago-based U.S. District Judge Virginia Kendall
  • University of Colorado COO (and former GC) Patrick O’Rourke
  • Avanos Medical Deputy GC Ross Mansbach

Note that all episodes are available on Spotify, Google Podcast, and Apple Podcast. Additionally, you can visit our blog and subscribe to receive each new podcast, including the highly-anticipated Dave Eggers podcast, in your inbox. Continue Reading Introducing the White Collar Briefly Podcast

The U.S. Department of Justice has updated its guidance on corporate compliance programs. In its update, the DOJ offers practitioners further insight on how the DOJ evaluates compliance programs by refining key terms and providing more context. The DOJ has made clear that compliance should not be thought of as a static exercise. Instead, any program needs to be evaluated and refreshed when additional data becomes available ensuring that the compliance program is robust and flexible. Armed with this newly refined direction, prosecutors have authority to reference official guidance when evaluating a corporation’s risk functions, and corporations would do well to take note. 

Read the full Perkins Update here:

In 2008, Congress passed the Troubled Asset Relief Program (TARP), which awarded approximately $700 billion in stimulus funds to companies reeling from one of the greatest financial crises to strike the U.S. The TARP included oversight provisions, particularly the creation of a Special Inspector General at Treasury and a Congressional Oversight Panel. Numerous investigations and prosecutions relating to stimulus fraud resulted, some of which continue to this day. The COVID-19 pandemic has the potential to present an even greater economic crisis for the U.S. When developing the recently passed Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which involves roughly $2 trillion in stimulus aid to businesses suffering from the effects of the COVID-19 pandemic, legislators looked to TARP for inspiration, including the incorporation of provisions for investigations and enforcement lifted almost verbatim from the TARP legislation.

Continue Reading Coronavirus Stimulus, Lessons and Predictions from TARP Insiders

The CFTC Division of Enforcement (Division) of the U.S. Commodity Futures Trading Commission (CFTC) issued new guidance (Guidance) on May 20, 2020, that reflects the considerations of the Division when recommending civil monetary penalties (CMPs) to the CFTC in enforcement actions. The Guidance—which marks the first CMP guidance published by the Division since the CFTC published penalty guidelines in 1994—will be incorporated into the CFTC’s enforcement manual and will be binding on all Division staff.

Read the full Update here.

A new $2 million SBA safe harbor for PPP loans appears to create a wide umbrella that substantially reduces the risk that adverse consequences will rain down and soak companies with loans in this category. Perkins Coie attorneys examine the May 13 guidance and say companies will continue to benefit from conducting a PPP “necessity” analysis.

Click here to read the full article published by Bloomberg Law.

Reproduced with permission. Published May 15, 2020. Copyright 2020 The Bureau of National Affairs, Inc. 800-372- 1033. For further use, please visit http://www.bna.com/copyright-permission-request/