On May 22, 2024, the Department of Justice (“DOJ”) made a groundbreaking announcement that it declined prosecution of a biochemical company based on the company’s prompt voluntary self-disclosure of an employee’s export control violation and the company’s “exceptional” cooperation with DOJ’s National Security Division (“NSD”), the DOJ subcomponent responsible for investigating and prosecuting economic sanctions and export control violations (among other national security-related matters).

This is the first declination the NSD has announced since issuing its new corporate enforcement policy (“NSD Enforcement Policy”) in March 2024.  As discussed in our prior articles, DOJ announced a shift last year toward prioritizing investigation and enforcement against corporations for economic sanctions and export control violations, with Deputy Attorney General Lisa Monaco famously announcing that “sanctions are the new FCPA” and declaring that corporate enforcement in these areas is now a top DOJ priority.  This declination provides valuable insight into how the NSD will handle corporate enforcement of these matters and, importantly, signals a willingness to give meaningful credit to companies that self-disclose and cooperate in the investigation of violations in this area.

Continue Reading First-Ever Declination Under DOJ NatSec Corporate Enforcement Policy: DOJ Signals Willingness to Meaningfully Credit Voluntarily Self-Disclosing and Cooperative Company Involved in Export Control Violations

During a keynote speech on March 7, 2024 at the American Bar Association’s National Institute on White Collar Crime, Deputy Attorney General Lisa Monaco announced that the Department of Justice (DOJ) will launch a pilot program offering financial incentives for individual whistleblowers to report corporate wrongdoing to the DOJ. According to DAG Monaco, the pilot program intends to use “carrots to wield larger sticks” on a full range of corporate misconduct and reinforces the DOJ’s commitment to implementing policies aimed at promoting cultures of corporate compliance. While DAG Monaco’s announcement invoked past images of law enforcement incentivizing reporters with “Wanted” posters, the anticipated pilot program will have significant ramifications on the future of companies’ existing internal compliance reporting channels.

Continue Reading Whistle While You Work: DOJ Announces Whistleblower Rewards Program

On January 10, 2024, the U.S. Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC) announced settlements with SAP SE (SAP), a German software company, to resolve allegations that SAP violated the U.S. Foreign Corrupt Practices Act (FCPA) by, among other things, making improper payments to government officials in South Africa and Indonesia to secure and retain software and services contracts with government entities. SAP agreed to pay the DOJ and the SEC over $220 million and entered into a three-year deferred prosecution agreement (DPA) with the DOJ. The U.S. regulators coordinated their resolutions with prosecutors in South Africa.

The resolutions provide insights into how the DOJ and the SEC are enforcing the FCPA and how corporations can reduce their FCPA liability.

Continue Reading Key Takeaways from SAP’s FCPA Resolutions with DOJ and SEC

The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has proposed new rules that would require anti-money laundering/countering the financing of terrorism (AML/CFT) programs for investment advisers.  The pdf is currently available, and will likely be replaced by the Federal Register version once published.  The final form of the rule, if adopted, remains to be determined, as does the compliance date.

Continue Reading The U.S. Department of Treasury, Financial Crimes Enforcement Network Proposes New and Expansive Anti-Money Laundering Rules For Investment Advisers

On November 20, 2023, a federal district court in the Northern District of California declined to grant summary judgment to the defendant in SEC v. Panuwat, the first-ever enforcement action by the U.S. Securities and Exchange Commission (the “SEC”) based on the novel insider trading theory of “shadow trading”—the use of one company’s inside information to trade in securities of another, similarly situated, but unrelated company.  The court previously declined to dismiss the case, signaling a potential expansion of insider trading enforcement.  The court’s summary judgment decision provides further guidance as to what may constitute impermissible shadow trading ahead of a trial scheduled for March 2024.

The case centers on Pfizer’s acquisition of Medivation, an oncology-focused biopharmaceutical company.  The defendant, Matthew Panuwat, worked at Medivation and allegedly learned the acquisition was imminent when Medivation’s CEO emailed Panuwat and other employees about the status of the sale process.  Seven minutes later, Panuwat purchased call options in another oncology-focused biopharmaceutical company, Incyte, which he later sold for a profit.  In its January 2022 decision denying Panuwat’s motion to dismiss, the court held that the SEC had adequately pleaded each of the required elements under the well-established “misappropriation theory” of insider trading: materiality, breach of duty, and scienter.  In its recent summary judgment decision, the court held that the SEC had shown genuine disputes of material fact concerning each of those elements and elaborated on materiality and breach of duty for purposes of the shadow trading theory.

Continue Reading Shadow Trading: With Trial Looming in SEC v. Panuwat, the SEC’s Latest Insider Trading Theory Takes Further Shape

On December 14, 2023, the U.S. Congress passed the Foreign Extortion Prevention Act (“FEPA”), one of the most important expansions of anti-corruption law in recent years and a key to expanding “demand-side” corruption enforcement. FEPA makes it unlawful for foreign officials to demand or accept bribes from U.S. persons or entities or from anyone if the foreign official is in the United States. FEPA operates in concert with its “supply-side” counterpart, the Foreign Corrupt Practices Act (“FCPA”), which prohibits paying bribes to foreign officials to assist in obtaining or retaining business.

It is highly likely that President Biden will soon sign FEPA into law, as the Biden administration has committed to working with “allies and partners on enacting legislation criminalizing the demand side of bribery, and enforcing new and existing laws” as part of its effort to make fighting corruption, including enhancing demand-side accountability, a priority.

Continue Reading U.S. Congress Passes FEPA To Address the “Demand-Side” of Bribery

At the recent 2023 Garrett Securities Law Institute Conference SEC panelists, including Erik Gerding, Director of the Division of Corporation Finance, reinforced how important it is for companies to assess emerging risks for materiality—particularly those risks stemming from Environmental, Social and Governance (ESG) issues and cybersecurity issues—and to ensure that those risks are appropriately disclosed to investors.

The SEC panelists further cautioned that disclosures related to emerging risks should not be generic disclosures based on industry-wide trends or risks, but instead should focus on the particular ESG or cybersecurity risk faced by the disclosing company. The SEC reiterated that disclosures regarding emerging risks must be specific enough for investors to appreciate the risks that the company is actually facing.

Continue Reading Disclosing Emerging Risks Top of Mind for the SEC

The Supreme Court of the United States has agreed to review an apparent circuit split over how long after a criminal conviction the United States can forfeit a criminal defendant’s property. In McIntosh v. United States the Court will review whether a district court may enter a criminal forfeiture order long after criminal proceedings have ended. How the Court resolves this issue will be important to future forfeiture cases, including those involving cryptocurrencies—an asset that over the last decade has been increasingly in the crosshairs of the government’s forfeiture powers.

Continue Reading Supreme Court to Decide the Limits of the Government’s Forfeiture Power

On November 1, 2023, significant amendments to the Federal Sentencing Guidelines went into effect after Congress took no action to veto the proposed amendments, which were adopted by the U.S. Sentencing Commission earlier this spring.  This marks the first time in five years that the Guidelines have been amended, in part due to the Commission having a lack of quorum from 2019 through 2022.

The newly effective amendments enact, among other things, a new Chapter Four guideline, which provides for a decrease of two offense levels for “zero-point offenders” (that is, defendants with no prior criminal history) and whose instant offense did not involve certain enumerated criteria.  In practical terms, this could mean months less of prison time, and tens of thousands of dollars less in fines, for zero-point offenders.  The amendment also could have a particularly meaningful impact on white collar criminal defendants who, in many cases, have no prior criminal history.

Continue Reading 2023 Amendments to Federal Sentencing Guidelines Now in Effect

The U.S. Department of Education (the “DOE”) recently concluded that the Newark, New Jersey public school district violated Title IX of the Education Amendments of 1972 (“Title IX”) by failing to implement proper policies and respond to reports of student-to-student and employee-to-student sexual harassment.

On August 28, 2023, the DOE and the school district entered into a Resolution Agreement in which the district committed to take certain steps to resolve the compliance issues identified by the DOE. In a Letter accompanying the Resolution, the DOE described nine violations of Title IX and its implementing regulations. While the Letter is not a formal statement of DOE policy, it provides some insights into the DOE’s analysis and review methodology that may help schools and other entities subject to Title IX better comply with the law and prepare for a potential DOE investigation.

Continue Reading DOE Resolution Requires Newark School District to Implement Robust Measures to Comply with Title IX