In a recent decision showing how courts evaluate insider trading in the marital context, the First Circuit Court of Appeals affirmed a Massachusetts real estate investor’s conviction on insider trading securities fraud and related conspiracy offenses arising from his role in passing information he learned from his corporate insider wife to two of his friends.  The government’s theory of the case was that defendant Amit Kanodia violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 when he misappropriated material, nonpublic information obtained from his wife to whom he owed “a duty of trust and confidence that prohibit[ed] [him] from secretly using such information for [his] personal advantage.”  On appeal, Kanodia argued that there was insufficient evidence to show that a legal duty of trust and confidence arose between him and his wife because their marital relationship did not involve a history, pattern, or practice of sharing confidences.  The First Circuit, however, found that the government presented ample evidence for a jury to conclude that Kanodia and his wife shared confidences in the history of their marriage and also in their business and advisory relationships.  
Continue Reading First Circuit Considers a Spouse’s “Duty of Trust” to a Corporate Insider

Last month, the UK Serious Fraud Office (“SFO”) published non-binding, internal guidance expanding on its view of corporate cooperation in prosecutions. The guidance marks a notable departure from the SFO’s past reluctance to clarify its expectations for corporations seeking cooperation credit, while still making it clear that no outcome will be “guaranteed,” even for companies that have provided “full, robust” cooperation.  Rather, cooperation is just “one of many factors” that the SFO will consider when making a charging decision.
Continue Reading UK Regulator Sets High Bar for Corporate Cooperators

This series, written by recent in-house counsel and former federal prosecutors, aims to help in-house legal and compliance teams avoid the types of seemingly minor or inconsequential missteps that can lead to aggressive government responses, including parallel civil and criminal investigations.

In part two, the authors explain what to do when a search warrant

A Ninth Circuit panel recently issued a decision in United States v. Olson, affirming the conviction of the former Alaska executive director of the U.S. Department of Agriculture’s (“USDA”) Farm Service Agency for misprision of felony under 18 U.S.C. § 4. Specifically, the panel held that the former director was correctly convicted of misprision of felony “for concealing and failing to notify authorities of her business partner’s submission of false statements” to the USDA’s Rural Development Program in connection with a federal grant application.

In so holding, the Ninth Circuit provided critical clarification of the type of knowledge the government must prove to establish “misprision of felony.” Misprision of felony is one of the oldest federal crimes, and was first enacted in a “functionally identical” version as part of the Crimes Act of 1790.

Elements of “Misprision of Felony”

The panel affirmed the long-established federal rule that “[t]o establish misprision of a felony,” under 18 U.S.C. § 4, “the government must prove beyond a reasonable doubt: ‘(1) that the principal . . . committed and completed the felony alleged; (2) that the defendant had full knowledge of that fact; (3) that he failed to notify the authorities; and (4) that he took affirmative steps to conceal the crime of the principal.”

The panel, however, also provided additional clarification as to the knowledge element. It held for the first time that “the government must prove not only that the defendant knew the principal engaged in conduct that satisfies the essential elements of the underlying felony, but also that the defendant knew that the conduct was a felony.”
Continue Reading 9th Circuit Clarifies Elements of Misprision of Felony

In a controversial ruling, London’s High Court has held that interview notes and other documents created by outside legal counsel and forensic accountants as part of an internal investigation into foreign bribery allegations are not protected by the legal professional privilege.  While the appeals process is already underway, the May 8th decision by the Honourable Mrs Justice Andrews is a noteworthy victory for the U.K.’s Serious Fraud Office (SFO), an agency akin to the U.S. Department of Justice (DOJ).

Eurasian Natural Resources Corporation (ENRC), the U.K. division of a multinational mining conglomerate operating in the Middle East and Africa, is the subject of an ongoing SFO criminal investigation. At times, ENRC appears to have been in a cooperation posture with the SFO; but earlier this year, the SFO filed a petition seeking to force ENRC to produce documents the company claimed were privileged.  The London High Court agreed with the SFO, ruling that almost all of the documents at issue were not privileged and should be disclosed to the SFO.
Continue Reading U.K. Court Orders Disclosure of Internal Investigation Documents to Criminal Prosecutors

Technician replacing the screen of a used smartphone

At various times over the last several years, the DOJ has pushed for updates to the Electronic Communications Privacy Act (ECPA) that would include greater access to encrypted information stored on electronic devices. This week, FBI Director James Comey once again pressed for changes that would provide law enforcement with greater access to encrypted data,

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