SEC Suffers Rare Loss in Insider Trading Case Before Agency Judge

Marking a rare loss for the Securities and Exchange Commission (SEC) in its favored administrative forum, SEC Administrative Law Judge (ALJ) James E. Grimes ruled against the agency on April 18, 2017, in In the Matter of Charles L. Hill, Jr.  Ironically, the SEC fought hard to keep the case in the administrative forum, after Respondent Hill filed an action in federal district court claiming the SEC’s “home court” forum was unconstitutional.  The district court enjoined the SEC, but the 11th Circuit vacated the district court’s order, and the case proceeded on the SEC’s administrative court.  There, the ALJ found the SEC’s circumstantial evidence not only to be insufficient, but fatally undermined by the credibility of witnesses who offered testimony favorable to Hill.

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SEC Disgorgement Power – Time Running Out?

On April 18, 2017, the U.S. Supreme Court heard oral argument in Kokesh v. Securities and Exchange Commission—a case which could determine whether the Securities and Exchange Commission’s power to disgorge ill-gotten gains is subject to a statute of limitations.  The SEC currently uses disgorgement as a tool to take in billions of dollars in payments annually from defendants in its enforcement actions.  Continue Reading

Has the DOJ Perspective on Corporate Compliance Evolved?: Three Ways the DOJ’s Recent Guidance Differs from the FCPA Resource Guide and U.S. Sentencing Guidelines

The U.S. Department of Justice (“DOJ”)’s Criminal Fraud Section recently issued guidance for corporate compliance programs in a document titled Evaluation of Corporate Compliance Programs (“Fraud Section Guidance”), which reflects a number of notable differences from prior guidance on similar issues. The Fraud Section Guidance contains a list of topics and questions used by the Fraud Section in evaluating corporate compliance programs. As several commentators have noted—and the Fraud Section acknowledges—many of the topics contained in this recent guidance are consistent with, among other things, the Resource Guide to the U.S. Foreign Corrupt Practices Act (“FCPA Guide”) and the current U.S. Sentencing Guidelines, both of which outline desired aspects of a corporate compliance program “best practices.” But it is the differences—areas where the DOJ has expanded on prior commentary—that may provide key insights into DOJ areas of concern.

Specifically, the Fraud Section Guidance provides more detail than prior guidance on three key topics, thereby providing companies with a roadmap for how to strengthen their compliance programs—at least from a DOJ perspective—through increased focus on (1) compliance functions, (2) training programs, and (3) testing of compliance programs. Continue Reading

SEC Chairman Nominee Jay Clayton Provides Insight on the Future of the SEC (Part 1)

President Donald Trump’s nominee for chairman of the U.S. Securities and Exchange Commission, Jay Clayton, testified before the Senate Banking Committee during his confirmation hearing on March 23, 2017.  In this two-part series, we recap the highlights of Clayton’s testimony regarding potential enforcement priorities and policy changes.

READ PART ONE HERE

March Madness in the Municipal Bond Market – A Focus on Gatekeepers

The month of March has brought with it the first-ever criminal municipal bond securities fraud conviction, the resolution of enforcement actions targeting banks and senior executives accused of shirking duties to oversee municipal bond issuances, and proposed rule amendments intended to improve municipal securities disclosures—continuing a trend of intensified regulatory enforcement that targets industry “gatekeepers” such as auditors, bond underwriters, and others that serve investor clients entering the municipal bond market.    Continue Reading

FCPA Pilot Program Extension Not Necessitate “Rush to Disclose”

On March 10, 2017, at the annual ABA White Collar Conference in Miami, Kenneth Blanco, Acting Assistant Attorney General for the DOJ’s Criminal Division, announced that the FCPA Pilot Program would stay in place beyond its current April 5, 2017 expiration date so the DOJ could “begin the process of evaluating the utility and the efficacy, whether to extend it and what revisions if any we should make to it.” Blanco went on to say: “The program will continue, however, in full force until we reach a final decision on those issues.”

Companies should not view this development as reason though to accelerate their self-disclosure analysis. In first announcing this program in April 2016, the DOJ was trying to incentivize companies to voluntarily disclose and remediate FCPA violations by offering up leniency in fines and other penalties as well as providing more transparency on its decision to decline certain cases. (See http://tinyurl.com/zrdeh2k for more about the program). However, some of these same incentives had routinely been found in settlements even before the program was piloted. And it’s not a sure thing that whatever comes next now—after the DOJ self-examination—would result in harsher fines or penalties even if a company held back from self-disclose after immediately discovering an FCPA issue. In fact, given the administration’s prior pronouncements on enforcing the FCPA (or not), it’s equally, if not all the more, likely that the next “program” could contain even more significant incentives for companies to proactively engage with the government. And more leniency may be in the offing, regardless of whether companies self-disclosed immediately or only had cooperation to offer where the DOJ had already independently learned of the possible FCPA violations.

In sum, the “rush to disclose” should not necessarily trump a company’s own full and measured internal evaluation of possible FCPA red flags. Until there is more clarity on the value the current DOJ places on cooperation with or without self-disclosure, the best approach remains to carefully assess whether there is truly something significant worth disclosing and to fully understand the myriad of consequences arising from such disclosure. This is the prudent course even in the face of the “blue light special” that appears to have just been announced.

DOJ Officials Offer Guidance for Food Company Execs Looking to Minimize Criminal Exposure

For many corporate executives in the food industry, the U.S. Department of Justice (DOJ’s) increasing focus on prosecuting “responsible corporate officers” under the criminal misdemeanor provision of the Food, Drug, and Cosmetic Act (FDCA) has warranted rapt attention, particularly in light of criminal investigations arising from nationwide contamination outbreaks at companies like ConAgra and Blue Bell Creameries.  Recent remarks by attorneys from the DOJ’s Consumer Protection Branch to industry audiences have underscored the government’s expectation that corporate food executives implement a “culture” of food-safety compliance in their companies, and provide timely, truthful responses to both formal and informal inquiries made by regulators at the Food & Drug Administration (FDA).

In December 2016, Principal Deputy Assistant Attorney General Benjamin Mizer addressed the Food and Drug Law Institute’s Enforcement, Litigation and Compliance Conference, reiterating the DOJ’s ability and determination to bring criminal charges in cases where companies sell contaminated products to consumers.  Separately, in remarks to the United Fresh Produce Association in September 2016, DOJ Assistant Director Jeffrey Steger provided a regulator’s viewpoint regarding several concrete ways that food companies can demonstrate their commitment to safety compliance. Continue Reading

Uncertainty Looms Over SEC Enforcement Staff

The air of uncertainty was palpable as current and former members of the U.S. Securities and Exchange Commission’s (SEC) Division of Enforcement spoke at the Securities Regulation Institute’s 44th Annual Conference in Coronado, California earlier this week.  Important questions went largely unanswered about the impact of the recent resignations of both SEC Chair Mary Jo White and Enforcement Director Andrew J. Ceresney, and the future direction of the enforcement program under the new presidential administration and proposed SEC Chair Jay Clayton.  SEC Enforcement staff in attendance steered clear of prognostications, and instead used the conference as an opportunity to reiterate the agency’s ongoing enforcement initiatives and successes from the past year. Continue Reading

Anti-Corruption Scrutiny in Mexico Expands

Mexico’s new anti-corruption system, which was signed into law by President Enrique Peña Nieto on July 18, 2016, builds on constitutional reforms passed in May 2015 and is designed to increase oversight of public officials to deter corruption at all levels of the Mexican government. The laws establish new responsibilities and stricter penalties applicable to public servants and all private parties (domestic and foreign) doing business in Mexico, and for the first time in Mexican legal history, applies to companies and the officers, directors, and employees acting on their behalf.  Coupled with last week’s unsealing of U.S. Department of Justice (DOJ) charges against six individuals who pleaded guilty in an aviation bribery scheme—including two Mexican public officials—Mexican government officials and corporate actors appear to be situated squarely within the enforcement cross-hairs of both U.S. and Mexican anti-corruption authorities as 2017 begins. Continue Reading

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