The Federal Trade Commission (FTC) recently issued a new policy statement expanding its criminal referral policy. While the FTC’s authority is limited to civil enforcement, the agency aims to enhance its efforts to address misconduct the FTC uncovers that may trigger criminal sanctions for companies and individuals and make referrals to law enforcement when appropriate. The agency aims to deter potential criminal activity in both its consumer protection and competition arms.

In announcing its new policy statement, the FTC pointed to its existing efforts regarding criminal referrals, including 36 referrals this year to prosecutors from the FTC’s Criminal Liaison Unit and 840 formal requests for cooperation from criminal law enforcement partners over the past five years. The FTC reported that prosecutors relied on FTC information and support to charge 228 new defendants and obtained 283 new pleas or convictions over a five-year period.

On a going forward basis, the FTC has signaled that it will continue to prioritize the referral of potential criminal conduct and take steps to facilitate uptake of those cases by appropriate authorities. Specifically, the FTC pointed to four practices to forward the goals of the new policy statement:

  • Developing guidelines to ensure criminal law violations — particularly by major corporations and their executives — are identified by staff and promptly referred to criminal law enforcement agencies;
  • Convening regular meetings with federal, state, and local criminal authorities to facilitate coordination with FTC and law enforcement;
  • Offering further trainings for all law enforcement regarding the FTC’s Consumer Sentinel database system, which offers access to, and analysis of, millions of consumer complaints and fraud allegations submitted to the FTC; and
  • Publicly reporting the agency’s criminal referral efforts at regular intervals to highlight criminal prosecutions. The FTC will begin issuing regular public reports on its work detailing the number of referrals, the general nature of the alleged conduct involved, and, when appropriate, more detailed information concerning criminal enforcement actions that stem from Commission actions and investigations.


Continue Reading FTC Issues Policy Statement Aimed at Increasing Criminal Referrals for Corporations & Executives

Deputy Attorney General Lisa Monaco delivered an exacting message to the white-collar defense bar at the ABA’s 36th National Institute on White Collar Crime: the DOJ is stepping up its enforcement of corporate crime through several new initiatives. Speaking to an audience of white-collar criminal defense attorneys, DAG Monaco marched through a series of initiatives that will rollback more lenient enforcement policies adopted during the prior administration. This increase in enforcement will be buoyed by a surge of resources provided to DOJ prosecutors, including a new squad of FBI agents embedded in the DOJ’s Criminal Fraud Section—placing “agents and prosecutors in the same foxhole,” as DAG Monaco described it. As discussed in further detail below, these efforts have ramifications on both the individual and corporate level, including: (1) increased individual accountability; (2) a focus on corporate recidivism; and (3) greater scrutiny of corporate resolutions with the DOJ.

Focus on Individual Accountability. First, the DOJ is renewing its focus on holding individual actors responsible for corporate wrongdoing.  As such, DAG Monaco announced that the DOJ is reviving its policy that companies will only be eligible for cooperation credit in resolutions with the DOJ if they provide prosecutors with non-privileged information about all individuals involved in or responsible for the misconduct at issue—regardless of the individual’s position, status, or seniority. This pronouncement reverses the DOJ’s prior guidance, which allowed companies to receive cooperation credit for disclosing only those individuals “substantially involved” in the misconduct.
Continue Reading Corporate Compliance Crackdown: DOJ Announces New Enforcement Policies for Business Entities

In March 2019, the U.S. Department of Justice (DOJ) brought its “first-ever” criminal prosecution against two corporate executives under the Consumer Product Safety Act’s (CPSA) “failure to report” provision.  The two defendants, Simon Chu and Charley Loh, also face charges of wire fraud, conspiracy to commit wire fraud, conspiracy to fail to furnish information under the CPSA, and conspiracy to defraud the U.S. Consumer Product Safety Commission (CPSC).
Continue Reading Corporate Execs Indicted in First-Ever “Failure to Report” Consumer Safety Case

Following a week of trial proceedings in the case of defendant Jittesh Thakkar—a software programmer indicted in February 2018 on conspiracy and aiding and abetting charges related to a spoof trading scheme—the government’s case against Thakkar ended in a mistrial.  The jurors could not reach a unanimous verdict on the two aiding-and-abetting spoofing counts

In United States v. Hoskins, 902 F.3d 69 (2d Cir. 2018) the Second Circuit held that a non-resident foreign national cannot be criminally liable for aiding and abetting or conspiring to violate the FCPA unless the government can establish that such an individual acted as an agent of one of the categories of persons subject to liability as a principal.

Background

The DOJ charged Lawrence Hoskins, a British national and former Alstom UK executive based in Paris, with FCPA and money-laundering violations.  The government alleged that Hoskins had approved payments to consultants that were funneled to Indonesian officials to secure a $118 million infrastructure contract with a state-owned power company.  Hoskins was never physically present in the U.S., but he called and emailed alleged conspirators who themselves were present in the U.S., and Hoskins authorized payments from Alstom S.A. to the consultants, one of whom had a Maryland bank account.

Hoskins moved to dismiss charges alleging indirect FCPA violations—i.e., that he aided and abetted or conspired to violate the FCPA—arguing that he did not fall within the narrowly-circumscribed group of people for whom the FCPA prescribes liability: American companies, citizens, and their employees and agents, as well as foreign persons acting on American soil.  The lower court agreed with Hoskins and dismissed Count I of the indictment.  On appeal, the question for the Second Circuit was whether Hoskins could be charged as either a conspirator or an accomplice to the asserted FCPA violations, despite not falling within the categories of persons subject to liability as a principal.  The Second Circuit concluded that the statute’s text, combined with its legislative history and the presumption against extraterritoriality, compelled the conclusion that foreign nationals who act abroad and lack a direct connection to one of the categories of persons subject to principal FCPA liability cannot be liable as accomplices or conspirators.

Agency Liability Post-Hoskins

Hoskins creates some uncertainty regarding FCPA prosecutions of individuals or entities who could not be charged as principals. The decision creates a stronger jurisdictional defense for companies that are subject to DOJ or SEC actions solely based on their business association with a U.S. concern.  Under the Second Circuit opinion, it will take more than mere conspiracy or assistance to bring such entities within the scope of liability.

It is also likely that investigators will put more emphasis on developing evidence of agency relationships between principal violators and entities otherwise unreachable under Hoskins.  Indeed, the court in Hoskins held that the government could present agency evidence and pursue Hoskins as an agent of, for example, Alstom S.A.’s U.S.-based subsidiary.  Prosecutors may also attempt to broaden the traditional definitions of agency under the FCPA, particularly as agency theory becomes a critical link to reach now unreachable defendants.
Continue Reading Revisiting Agency Liability Under the FCPA Post-Hoskins

The DOJ recently took another step to encourage corporate self-disclosure for FCPA violations through the announcement of a new FCPA Enforcement Policy based on the eighteen month FCPA Pilot Program.  The DOJ’s Pilot Program proved to be successful—the FCPA Unit received over 30 voluntary disclosures in the 18-month period the Pilot was in place—compared to only 18 voluntary disclosures in the previous 18-month period, according to Deputy Attorney General Rosenstein.  The new Enforcement Policy contains many of the same incentives as the Pilot Program, with a few added benefits to sweeten the deal for corporations hoping to avoid hefty FCPA fines.

Presumption of Declination. Building on the cooperation credit offered under the Pilot Program—and barring aggravating circumstances—corporations will receive a presumption that the DOJ will resolve the case through a declination if they 1) voluntarily self-disclose; 2) fully cooperate; and 3) timely and appropriately remediate.  The Enforcement Policy delineates the DOJ’s expectations as to each of these requirements, many of which track the Pilot Program.  Evaluation of compliance programs, for example, will vary depending on the size and resources of a business and includes factors such as fostering a culture of compliance; dedicating sufficient resources to compliance activities; and ensuring that experienced compliance personnel have appropriate access to management and to the board.
Continue Reading DOJ Highlights Disclosure Incentives Under New FCPA Enforcement Policy

In an unprecedented move on June 14, 2017, Michigan’s Attorney General, Bill Schuette, charged five state officials with involuntary manslaughter, alleging that each had failed to address the city of Flint’s contaminated water issue that they knew was connected to the poisoning deaths of 12 individuals.  One of the charged officials, Michigan Department of