In the largest action brought under the Kleptocracy Asset Recovery Initiative, the DOJ seeks to recover over $1 billion in assets bought with laundered funds misappropriated from 1Malaysia Development Berhad (“1MDB”), a Malaysian sovereign wealth fund. 1MDB was created by the Malaysian government to promote economic development through international partnerships and foreign direct investment. The

Creating a circuit split that will likely be headed for resolution by the U.S. Supreme Court, the Second Circuit’s recent decision in Berman v. Neo@Ogilvy LLC expanded the Dodd-Frank Act’s anti-retaliation protections to include employees who were terminated by their companies after internally reporting to their employers concerns about potential violations of the federal securities laws.  The Fifth Circuit reached the opposite conclusion two years ago, in Asadi v. G.E. Energy (USA), L.L.C., holding that Dodd-Frank unambiguously defines “whistleblower” as someone who reports to the SEC.
Continue Reading Second Circuit: Dodd-Frank “Anti-Retaliation” Applies Even When Whistleblower-Employees Have Not Reported to the SEC

In a decision that embraces the use of modern-day technology to assist the trier of fact, the Ninth Circuit recently ruled that neither a Google Earth satellite image nor a program-generated digital “tack” of GPS coordinates placed on the satellite image is hearsay for purposes of proving a defendant’s location at the time of arrest.  Defendant Paciano Lizarraga-Tirado was convicted of illegally re-entering the United States as a previously removed alien.  He appealed the conviction, arguing that he was on the Mexico side of the U.S.-Mexico border at the time of his arrest.  At trial, one of the arresting Border Patrol agents testified that she recorded the GPS coordinates of the location of arrest using a handheld GPS device.  An exhibit of a Google Earth satellite image depicting the area of arrest and marked with a digital “tack” of the GPS coordinates provided by the arresting agent was admitted into evidence over the defendant’s objection that the image was hearsay. Hearsay–an out of court statement offered to prove the truth of the matter asserted–is inadmissible as evidence unless an exception applies because a witness should ideally testify under oath, in the presence of the trier of fact, and subject to cross-examination.
Continue Reading Ninth Circuit Rules that Google Earth Image and Location Marker Not Hearsay

In a rare move targeting an in-house compliance officer, the former Chief Compliance Officer of MoneyGram International Inc. has been assessed a $1 million civil penalty by the U.S. Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) for failing to implement and maintain an effective anti-money laundering (“AML”) program and for failing to file suspicious activity reports (“SARs”) with FinCEN, as required under the Bank Secrecy Act.  The U.S. Attorney’s Office for the Southern District of New York has filed a complaint to enforce the civil penalty and to enjoin the former CCO from employment in the financial industry.
Continue Reading Compliance Officer Assessed $1 Million Penalty for Program Failures

The U.S. Judicial Conference recently received public comments on proposed amendments to Federal Rule of Criminal Procedure 41 (the “Rule”), which would enlarge DOJ’s ability to remotely access, search, and seize electronically stored information (“ESI”).  Under the current Rule, a magistrate judge’s authority to issue warrants is limited to persons or property located within the district where the court sits, with few narrow exceptions.  Given the Rule’s territorial limit, DOJ has faced barriers in investigating and prosecuting Internet-based crimes where the computer’s location was unknown because of anonymizing tools, or where media and ESI were located in multiple districts or in the Cloud.

Under the proposed Rule, a magistrate judge would be authorized to issue warrants permitting the government to “use remote access to search electronic storage media and seize or copy electronically stored information located within or outside” the district where the court sits, in two possible scenarios.  One of these scenarios is DOJ investigations under the Computer Fraud and Abuse Act where the media to be searched are computers protected under the statute that are located in five or more districts.  The second scenario is where the location of the media or information has been “concealed through technological means.”  In these scenarios, the proposed Rule would allow the government to obtain warrants authorizing it to hack into computers and access ESI saved virtually anywhere in the United States, including in the Cloud.Continue Reading Expanded warrants to let DOJ remotely search and seize electronically stored information saved anywhere?

DOJ has announced that it will increase efforts to investigate and prosecute criminal actions under the False Claims Act.  In a recent address to the False Claims Act plaintiffs’ bar, Leslie R. Caldwell, Assistant Attorney General for the Criminal Division, described the Criminal Division’s recent successes in prosecuting healthcare and government procurement fraud and its

A federal grand jury in San Francisco indicted FedEx Corporation, FedEx Express, and FedEx Corporate Services, Inc. (collectively, “FedEx”) for its role in distributing controlled substances and prescription drugs for illegal internet pharmacies.  The 18-count superseding indictment charges FedEx with conspiring with two internet pharmaceutical rings (internet pharmacies, fulfillment centers, doctors) to distribute controlled substances such as Ambien and Diazepam on invalid prescriptions, or based only on the customers’ completion of an online questionnaire, without examination by a physician.  The Government alleges that FedEx knew that it was delivering drugs to dealers and addicts, some of whom overdosed and died, and some of whom were underage. If convicted, FedEx could pay a fine of up to twice the gross gains derived from the offenses, alleged to be approximately $820 million.  The criminal proceedings will help answer when, if ever, the Government can deputize shipping companies to police illegal activity in internet commerce.
Continue Reading FedEx Charged with Criminal Distribution in Crackdown on Prescription Drug Abuse

With the Second Circuit’s recent reaffirmation of the SEC’s substantial discretion in negotiating the terms of settlement—notably vacating Judge Jed Rakoff’s rejection of the proposed $285 million settlement in SEC v. Citigroup Global Markets, Inc.—eyes are turning to the decision’s immediate impact on at least one other high-stakes case:  a $602 million insider trading settlement between the SEC and CR Intrinsic Investors, an affiliate of S.A.C. Capital Advisors.  Similar to the SEC-Citigroup settlement, CR Intrinsic was not required to admit wrongdoing in settling the SEC’s charges.  Judge Victor Marrero had conditionally approved the settlement pending the outcome of the Citigroup appeal.  
Continue Reading Revisiting SEC Consent Decrees in the Wake of SEC v. Citigroup

The U.S. Supreme Court is set to decide the circumstances in which police may constitutionally search an arrestee’s cell phone without a warrant. On April 29, 2014, the Court heard arguments in two companion cases—Riley v. California and United States v. Wuriewhich occasion the Court to define the scope of the Fourth Amendment in the digital age and strike a balance between an individual’s interest in the privacy of his cell phone contents and law enforcement’s interests in police safety and preservation of evidence. In Riley, police seized David Leon Riley’s smart phone during a traffic stop for an expired licensed plate. Using photos, videos, and call logs obtained through a warrantless search of his phone, along with two hand guns found during a search of his car, police identified Riley as a member of a gang and placed him near the scene of a gang-related shooting that occurred a couple of weeks before his arrest. At trial, although no witness positively identified Riley as a participant in the shooting, the circumstantial evidence from the phone gave the jury enough evidence to convict him of shooting at an occupied vehicle, attempted murder, and assault with a semi-automatic weapon. In Wurie, police arrested Brima Wurie near the scene of a drug transaction and took him to the police station. While there, police seized two cell phones from Wurie. Police observed that one of the cell phones—a flip phone—was repeatedly receiving calls from “my house.” Without a warrant, the officers flipped open the phone, reviewed the call log, and traced the phone number to Wurie’s apartment. Police obtained a warrant to search Wurie’s apartment, where they found crack, marijuana, and other evidence of a drug crime. Wurie was convicted of distribution and possession with intent to distribute crack, and being a felon in possession of a firearm and ammunition. 
Continue Reading SCOTUS Hears Arguments in Warrantless Cell Phone Search Cases