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

This week the Supreme Court trimmed the SEC’s power to seek disgorgement of unlawful gains by securities law violators by unanimously holding in Kokesh v. Securities and Exchange Commission that SEC disgorgement constitutes a penalty and such claims must be brought within five years of their accrual. This decision resolved the circuit split described in a previous post.

SEC Does Not Have Limitless Power to Impose Penalties

Kokesh involved the SEC’s effort to collect $34.9 million in disgorgement for conduct going back as far as 1995, and an additional $18.1 million in prejudgment interest. The Court noted that statutes of limitations are “vital to the welfare of society” and set a fixed date when exposure to Government enforcement efforts end.
Continue Reading Supreme Court Reins In SEC’s Disgorgement Power

The U.S. Department of Justice—widely criticized for the perceived lack of cases brought against corporate executives—issued a new directive yesterday to all U.S. Attorneys designed to hold more individuals accountable for illegal corporate conduct.   The memorandum, written by Deputy Attorney General Sally Quillian Yates, first acknowledges the challenges involved in pursuing individuals for corporate crimes, noting the difficulties in determining the culpability of high-level corporate executives who tend to be “insulated from the day-to-day activity in which the misconduct occurs.”  Yates then goes on to outline guidance designed to help prosecutors better address these challenges.
Continue Reading DOJ Memo to Prosecutors Calls for More Aggressive Pursuit of Corporate Executives

Last week, DOJ’s Assistant Attorney General Leslie Caldwell took to the Justice Department’s blog to rally support behind recent White House proposals that would bolster law enforcement tools for prosecuting those who create, sell or advertise malicious “spyware.”  Spyware refers to software that allows users to surreptitiously intercept communications on their victims’ electronic devices such as smartphones and computers.  Although prosecutors in the Eastern Division of Virginia recently brought criminal charges against a spyware seller—a case DOJ characterized as the first of its kind—Caldwell states that prosecutorial efforts have been hamstrung by an inability to seize criminal proceeds resulting from sales of spyware, as well as an inability to utilize money laundering charges to go after those who transfer funds across multiple overseas accounts in order to conceal profits from criminal spyware sales.  
Continue Reading Call to Arms from White House and DOJ on Spyware Sanctions

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

With nearly 97% of all federal convictions in 2013 secured through plea agreements, the Department of Justice announced yesterday that it will no longer ask criminal defendants who plead guilty to waive their right to appeal on the basis of ineffective assistance of counsel (IAC).  In a memorandum to all federal prosecutors, Deputy Attorney General James Cole instructed prosecutors to curtail the use of IAC waivers in future plea agreements, and to decline enforcement of existing waivers in certain cases—such as when ineffective assistance resulted in prejudice, or the claims raise an issue best resolved by the court. 
Continue Reading Waving Goodbye to IAC Waivers

Last week, U.S. District Court Judge Shira Scheindlin of the Southern District of New York ordered disgorgement of $187.7 million in U.S. Securities and Exchange Commission v. Wyly et al, and further estimated that the amount will balloon to between $300 million to $400 million after the SEC recalculates pre-judgment interest.  The award, to be paid by Sam Wyly and the estate of his brother Charles Wyly, was measured in part by calculating the amount of taxes that the Wylys should have paid on unlawful gains.  This is a case of first impression, as no court has ever approved this methodology for calculating unjust profits, and it has resulted in one of the largest SEC awards against individual defendants.
Continue Reading SEC Measures Unpaid Taxes to Achieve “Staggering” Disgorgement Award

Last week, the Financial Crimes Enforcement Network (FinCEN) permanently barred former casino staffer George Que from working at financial institutions for willfully violating the reporting requirements of the Bank Secrecy Act (BSA).  Que, the former VIP Services Manager at the Tinian Dynasty Hotel & Casino in the Northern Mariana Islands, also agreed to pay a

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

A former agent for mining company BSG Resources Ltd., Frederic Cilins, was sentenced Friday to 24 months in prison for obstructing a federal investigation into an alleged bribery and money laundering scheme.  The charges against Cilins stem from an FBI investigation into efforts to secure lucrative mining concessions in the Republic of Guinea.  According to