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

On April 28, 2023, a federal court in Connecticut dismissed the United States Department of Justice (“DOJ”) Antitrust Division’s latest—and largest—criminal anti-poach case brought to trial. After a 15-day jury trial in United States v. Patel—but before the jury could deliberate—U.S. District Judge Victor A. Bolden granted the defendants’ joint motion for acquittal, finding that based on the evidence presented by the prosecutors, no reasonable juror could convict the six accused aerospace and staffing company executives of engaging in criminally anti-competitive behavior.

The acquittal marks the latest trial defeat for the DOJ, which began in 2020 to prosecute similar no-poach and wage-fixing deals under Section 1 of the Sherman Act but has yet to secure a jury conviction on these charges.

The Antitrust Division charged the Patel defendants in December 2021 with engaging in a long-running conspiracy to suppress competition and prevent labor costs from rising by agreeing not to recruit away from one another engineers and other skilled laborers working on aerospace projects. The defendants initially moved to dismiss the indictment, but the court denied that motion on the ground that the DOJ successfully alleged a per se conspiracy to restrict hiring and to allocate (or divide) labor markets to minimize competition—a theory of automatic liability typically reserved for the most obvious anti-competitive conduct. The case then proceeded to a jury trial in March 2023. After the government rested, the district court found that, even assuming defendants had agreed to restrict hiring, the prosecution had failed to establish per se anti-competitive conduct. Specifically, the evidence revealed that “the alleged agreement itself had so many exceptions that it could not be said to meaningfully allocate the labor market” and that “hiring among the relevant companies was commonplace” notwithstanding the agreement. Accordingly, the court granted the executives’ motion for acquittal before the case reached the jury.Continue Reading Antitrust Division Dealt Another Setback in No-Poach Prosecutions

On December 16, 2022, U.S. Attorney General Merrick Garland issued a memorandum (the Garland memo) to all federal prosecutors, reflecting a significant new policy regarding charging, pleas, and sentencing in federal criminal cases. The Garland memo replaces prior U.S. Department of Justice (DOJ) policy and applies to all federal criminal prosecutions initiated on or after January 17, 2023.

Under the new DOJ policy, federal prosecutors making charging decisions must consider whether the consequences of those charges for sentencing would yield a result that “is proportional to the seriousness of the defendant’s conduct, and . . . achieves such purposes of the criminal law as punishment, protection of the public, specific and general deterrence, and rehabilitation.”  The new policy makes clear that the goal of any prosecution is a sanction that is “sufficient, but not greater than necessary” to satisfy these considerations.  The Garland memo further provides that prosecutors should not file charges, or threaten to do so, simply to exert leverage to induce a plea.

The Garland memo reflects a continued departure from the prior administration’s policy, which provided that federal prosecutors “should charge and pursue the most serious, readily provable offense.”  The prior policy was revoked in January 2021 by then-acting U.S. Attorney General Monty Wilkinson.

The Garland memo, in short, appears to be embracing a policy of prosecutorial lenity, and could prove to be a useful tool going forward for the defense bar in plea negotiations and at sentencing.Continue Reading Garland Memo, Emphasizing Prosecutorial Lenity, Reflects Significant DOJ Policy Shift

The Supreme Court of the United States will decide an issue impacting charging decisions in criminal cases involving technology and where those cases are tried. Specifically, the Supreme Court will decide whether criminal defendants may be retried after they are convicted in the wrong “venue,” i.e., the location where the trial took place. This constitutional venue requirement—and the Supreme Court’s ultimate decision on the remedy for violating it—will influence future cases involving technology, where defendants, victims, servers, and resources used to commit the crime are often in different states or even nations.

In the case at issue, the defendant allegedly hacked into a company’s website, obtained certain trade secrets, and offered to sell those trade secrets through various posts on social media. As with many crimes involving technology today, numerous locations were involved: the defendant remained entirely within the Southern District of Alabama, the victim-company was in the Northern District of Florida, and the victim-company’s hacked servers were in the Middle District of Florida. But where to conduct the trial? Based on the location of the victim-company’s headquarters, the government decided (incorrectly) to indict the defendant in the Northern District of Florida, on three counts: violation of the Computer Fraud and Abuse Act, theft of trade secrets, and extortion. At the end of trial, the jury convicted the defendant of the latter two counts.

On appeal, the U.S. Court of Appeals for the Eleventh Circuit held that for the trade-secrets conviction “venue was not proper in the Northern District of Florida because [the defendant] never committed any essential conduct in that location.” To remedy this violation, the court had two options: (1) vacate the conviction, allowing the defendant to be retried in a (supposedly) proper forum, or (2) acquit the defendant of his conviction in the improper forum, which would bar his retrial in another forum under the U.S. Constitution’s Double Jeopardy Clause that prohibits giving “the government . . . a second chance at prosecution.” The 11th Circuit chose the first option, endorsing a remedy that effectively allows the government, when it chooses the wrong venue, to retry a defendant in  the correct venue.Continue Reading Venue Misstep Shows Complexity of Prosecuting Cybercrime: Supreme Court to Weigh In

The U.S. Department of Justice (DOJ) recently released new guidance announcing several policy changes to further strengthen and clarify its approach to prosecuting corporate crime. The guidance, released through a memorandum by Deputy Attorney General Lisa Monaco (the Monaco Memo), instructs prosecutors about factors to consider when evaluating corporate cooperation and compliance programs in the context of potential criminal resolutions.

Notably, the Monaco Memo advises that “prosecutors should consider whether the corporation has implemented effective policies and procedures governing the use of personal devices and third-party messaging platforms to ensure that business-related electronic data and communications are preserved.” This guidance is applicable to all third-party text and social media messaging platforms, and it is especially significant given the recent proliferation of business use of ephemeral messaging applications that provide an option to have messages automatically disappear from a recipient’s conversation history.

Companies would be wise to promptly review their business communications policies and procedures, in light of both possible DOJ oversight, as well as emerging privacy, security, and employment law scrutiny.Continue Reading Recent DOJ Guidance on Personal Devices and Third-Party Messaging Applications Applies to Any Company DOJ May Scrutinize

On October 18, 2022, the Department of Justice (DOJ) announced a guilty plea by Lafarge, S.A., a French building materials company, and its Syria-based subsidiary, for providing material support to designated Foreign Terrorist Organizations. The case represents the first criminal prosecution of a company for providing material support to terrorism and demonstrates that the agency is putting teeth behind its recent pronouncements that that it will prioritize national security-related investigations.

Last year, the DOJ announced that one of the agency’s top priorities was fighting corporate crime, with an enhanced focus on national security issues.  As Deputy Attorney General Lisa Monaco explained, “[c]orporate crime has an increasing national security dimension — from the new role of sanctions and export control cases to cyber vulnerabilities that open companies up to foreign attacks.” In September 2022, the DOJ updated its enforcement guidance, notably confirming that misconduct posing a grave threat to national security will be an aggravating factor in deciding whether to take enforcement action in corporate criminal matters. The Lafarge case and other recent enforcement actions highlight the DOJ’s commitment to these principles and portend heightened focus on prosecuting corporations whose compliance and oversight missteps result in threats to U.S. national security.Continue Reading DOJ Continues to Prioritize National Security-Related Cases with First Corporate Terrorism Support Prosecution

On September 15, 2022, Deputy Attorney General (DAG) Lisa Monaco, announced several significant policy updates impacting the U.S. Department of Justice’s (DOJ) enforcement practices for both corporations and individuals. Speaking to attendees at the NYU Program on Corporate Compliance and Enforcement (PCCE), DAG Monaco detailed a series of initiatives, some of which appear to have emerged from the Corporate Crime Advisory Group formed last fall to conduct a full-scale review of the DOJ’s corporate enforcement efforts. The DOJ simultaneously released a memorandum outlining the guidance announced by DAG Monaco. 

The new guidance bolsters enforcement priorities that DAG Monaco has emphasized over the past year. As discussed in further detail below, the Department’s policy updates are substantive and have significant ramifications on both the individual and corporate level, including: (1) continued focus on individual accountability; (2) enhanced policies to predictably reward voluntary self-disclosure; (3) further clarity on the impact of corporate recidivism considerations on negotiated resolutions with the DOJ; and (4) new metrics for evaluating effective corporate compliance, including compliance conscious compensation structures and policies on the use of personal devices and third party messaging applications.Continue Reading DOJ Announces Sweeping Policy Updates Targeting Corporate Criminal Enforcement and Individual Accountability

The DOJ recently garnered a win in its spoofing case against two precious metals traders who prosecutors alleged had engaged in widespread market manipulation and fraud through a practice known as “spoofing.” But the verdict is also in on the DOJ’s novel attempt utilize racketeering charges against traders accused of spoofing: the jury found the defendants not guilty of the alleged RICO violations. While the case highlights the DOJ’s continued crackdown on market manipulation schemes, it also illustrates the limits of the government’s reach.

Background

The DOJ’s case against the traders dates back to 2019, when prosecutors unveiled sweeping charges alleging that the traders had engaged in thousands of deceptive trading sequences for gold, silver, platinum, and palladium futures contracts between May 2008 and August 2016.  The DOJ alleged that by engaging in these practices, the traders violated the Commodity Exchange Act’s anti-spoofing provisions, which prohibit disruptive trading practices, including “bidding or offering with the intent to cancel the bid or offer before execution.” 

However, in addition to the usual spoofing and other financial crime-related offenses, the indictment charged the traders with a racketeering conspiracy.  When the indictment became public back in 2019, commentators predicted that the DOJ’s inclusion of RICO charges could make the government’s case simpler to prove.  Instead of convincing the jury through a complicated series of orders, cancellations, price movements, and trades (i.e., the typical evidence used to establish a pattern of spoofing), the path to conviction under the RICO Act was supposed to be more straightforward.  In this case, the indictment alleged that “the defendants and their co-conspirators were members of an enterprise—namely, the precious metals desk at [the bank]—and conducted the affairs of the desk through a pattern of racketeering activity, specifically, wire fraud affecting a financial institution and bank fraud.”Continue Reading DOJ Secures Spoofing Conviction, but Loses on Novel RICO Charges