On June 22, 2020, the U.S. Supreme Court decided in Liu v. SEC that in an SEC civil proceeding a disgorgement award that does not exceed a wrongdoer’s profit and is awarded for victims is equitable relief permissible under the applicable statute. The opinion answers an important question left open by the Court in Kokesh v. SEC that disgorgement operates as a “penalty,” rendering claims for disgorgement subject to the five-year statute of limitations. See Supreme Court Reigns in SEC’s Disgorgement Power. Liu closes the door on speculation that the Court was poised to hold that the SEC did not have authority to seek disgorgement.
Continue Reading SEC Can Recover Disgorgement, With Limits

The CFTC Division of Enforcement (Division) of the U.S. Commodity Futures Trading Commission (CFTC) issued new guidance (Guidance) on May 20, 2020, that reflects the considerations of the Division when recommending civil monetary penalties (CMPs) to the CFTC in enforcement actions. The Guidance—which marks the first CMP guidance published by the Division since the CFTC

The U.S Department of Justice recently asked Congress to grant it emergency powers as the coronavirus outbreak begins to affect the timing of court proceedings and DOJ’s ability to conduct investigations. Perkins Coie attorneys explore DOJ’s request and the pandemic’s effects on the practice of white-collar criminal defense.

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Attorneys counseling companies on white collar matters are likely to have discovered crimes such as theft, bribery, and embezzlement committed by current and former employees, as well as by competitors. Such bad acts (and bad actors) are not regularly reported to law enforcement.

In fact, what prevents more widespread reporting is the understandable fear that

The U.S. Court of the Appeals for the Ninth Circuit recently held that criminal defendants who gain unlawful proceeds from certain offenses must pay back those proceeds—even when they no longer possess them.  More specifically, the government may obtain “personal money judgments” that can be satisfied through the defendants’ untainted (and currently unidentified or even future) assets.

This ruling—reaffirming prior case law recently called into question—will impact defendants in cases involving economic crimes and forfeiture.
Continue Reading Crime Doesn’t Pay, But Defendants Still Left with the Bill

The German Federal Ministry of Justice and Consumer Protection recently presented draft legislation to Parliament that could pose a marked shift in how corporate crimes are sanctioned in Germany.  If enacted, this draft legislation, titled the Corporate Sanctions Act (“CSA”), would permit the criminal prosecution and conviction of a corporate entity in circumstances where the entity’s directors or officers committed corporate crimes, and where the entity failed to take reasonable precautions to prevent employees or agents from engaging in criminal wrongdoing.  Companies based or doing business in Germany will be subject to the law.
Continue Reading Germany Proposes New Corporate Sanctions Act with Global Reach

The DOJ has raised the stakes in criminal spoofing enforcement, unveiling sweeping charges against three traders who allegedly conspired to manipulate the precious metals market.  While the DOJ’s involvement in spoofing enforcement—an area previously dominated by civil regulators and SROs—has become more commonplace, the DOJ is using a new tactic in this latest enforcement action.  In addition to the usual spoofing and other financial crime offenses, the indictment charges the traders with a racketeering conspiracy.  The DOJ’s reliance on RICO increases the possible penalties for spoofing, while also potentially making the government’s case simpler to prove.

A Potential New Era of Spoofing Enforcement

After obtaining mixed results in its previous spoofing trials, the DOJ appears to be retooling its approach.  Indeed, the indictment against these precious metals traders marks the first time the DOJ has alleged RICO violations against traders accused of spoofing electronic derivatives markets. Thus, while the alleged spoofing conduct may be familiar, the charges brought are significantly different and more serious than before.  And so are the potential penalties.  In addition to hefty incarceration sentences, RICO provides for the government to seek forfeiture of all proceeds derived from the racketeering activity.
Continue Reading DOJ Brings Novel RICO Charges Against Alleged Spoofers

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

Last month, attorneys from around the world descended upon Buenos Aires to tango with criminal justice and anti-corruption experts at the International Bar Association’s 22nd Annual Transnational Crime Conference.  Conference highlights included remarks from distinguished members of the Argentine government, including the Minister of Justice and Human Rights, President of the Financial Information Unit, and Supreme Court President.  These officials focused their comments on criminal justice reforms in Argentina, the role of regulators and the judiciary in establishing and inspiring confidence in the rule of law, and the hope that such efforts would improve Argentina’s reputation in the global fight against graft and corruption.

Panelists and attendees also discussed similar efforts across the globe, cross-border cooperation, and collateral issues to consider when representing clients subject to international anti-corruption inquiries or enforcement actions. Of note were discussions regarding the following:

Evolving Mechanisms for Detecting and Penalizing Corruption  

  1. Increased use of money laundering statutes and administrative remedies.

Although most anti-corruption laws around the world criminalize the payment of bribes to government officials, the receipt of bribes (passive bribery) is conspicuously absent from laws like the U.S. Foreign Corrupt Practices Act (“FCPA”).  As a result, beneficiaries of bribes have traditionally escaped FCPA liability.  However, panelists noted, recent years have seen an increase in anti-money laundering prosecutions and civil administrative actions targeting profits from corrupt dealings that otherwise fall outside the reach of traditional anti-bribery paradigms.  Using money laundering statutes, U.S. prosecutors were able to prosecute officials working for Venezuela’s state-owned energy company, Petroleos de Venezuela, S.A., who accepted bribes from several U.S. executives (themselves prosecuted under the FCPA).

Panelists noted that more than €2 billion in anti-money laundering fines were assessed globally in 2018 alone, calling banks not yet penalized for money laundering issues “the exception and not the norm.”  Another new norm is the decoupling of predicate offenses (i.e., conduct generating illegal proceeds) from allegations that such proceeds were in fact “laundered,” allowing prosecutors to bring intentional and negligent money laundering cases.  Panelists also warned that lawyers were being targeted more than ever as negligent money launderers, based on the sources of client payments.
Continue Reading Highlights from Transnational Crime Conference: Expanding Anti-Corruption Enforcement & Cross-Border Cooperation

Federal sentencing guidelines for economic crime have long been subject to criticism due to high dollar loss amounts that can produce eye-popping prison terms.

Adding to the fodder, a new report issued by the United States Sentencing Commission found that securities and investment fraud offenders received the longest average sentences under the U.S. Sentencing Guidelines—more than twice as long as the average sentence for all economic crime offenders.  The report, What Does Federal Economic Crime Really Look Like?, analyzes sentences imposed under § 2B1.1 of the Guidelines, which is the section that applies to most financial fraud cases, including those involving securities, bank, mail and wire fraud, money laundering, and conspiracy.

The report is chock full of data, but one of the Commission’s big-picture findings was that the average sentences for 29 categories of economic crime vary significantly.  Not surprisingly, the report ties these variations to certain guideline enhancements, including loss amounts.  For example, the report notes that in 2017, the median loss amount for securities and investment fraud was $2,105,620, a loss amount that corresponds to a 16-level increase under the Guidelines.  This enhancement is substantially higher than any other specific offense type analyzed in the report.
Continue Reading Securities Fraud Prison Sentences Highest Among Economic Crime, U.S. Sentencing Commission Reports