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 27, 2022, the United States Securities and Exchange Commission (SEC) announced a settlement with Oracle Corporation (Oracle) to resolve allegations that its subsidiaries in India, Turkey, and the United Arab Emirates violated the Foreign Corrupt Practices Act (FCPA) by creating off-the-books slush funds and using those slush funds to bribe foreign government officials.

Without admitting or denying the SEC’s findings, Oracle agreed to cease and desist from violating the anti-bribery, books and records, and accounting provisions of the FCPA and to pay approximately $8 million in disgorgement and a $15 million penalty.

Notably for both attorneys and companies, the SEC’s order provides insights into how to design an effective corporate compliance program to minimize legal risk, including FCPA risk.

The SEC’s Findings

The SEC found that, from at least 2014 to 2019, Oracle’s subsidiaries in India, Turkey, and the United Arab Emirates “used discount schemes and sham marketing reimbursement payments” to finance slush funds, which were held by Oracle’s “channel partners” (i.e., distributors and resellers) in those markets. The subsidiaries transacted through these channel partners during the relevant period under Oracle’s indirect sales model, by which channel partners sell Oracle products to end customers. According to the SEC, the subsidiaries and the complicit channel partners used the slush funds—which employees of the subsidiaries referred to as the “buffer,” “moneybox,” “pool,” and “wallet”—to bribe government officials in return for business. Specifically, the SEC determined that, among other things, (i) employees of Oracle Turkey and Oracle UAE used slush funds to pay for travel for government officials, including to Oracle’s annual technology conference in California; (ii) an Oracle Turkey employee directed cash bribes to government officials; (iii) an Oracle UAE employee paid approximately $130,000 in bribes to the chief technology officer of a state-owned entity (SOE) in return for six contracts in 2018 and 2019; (iv) Oracle India employees funneled $330,000 to an entity known for paying government officials; and (v) an Oracle India employee maintained a spreadsheet indicating that $67,000 was available to make payments to a government official.

Continue Reading Key Compliance Takeaways from Oracle’s $23M FCPA Settlement with the SEC

The U.S. Securities and Exchange Commission (SEC) is putting some muscle behind Regulation Best Interest (Reg BI). On June 16, 2022, nearly two years after Reg BI went into effect, the SEC filed its first federal lawsuit to enforce the rule against a broker-dealer and its registered representatives.

The SEC sued Western International Securities, Inc. (Western), a dually registered broker-dealer and investment advisor, along with five of its registered representatives, in the U.S. District Court for the Central District of California for allegedly violating Reg BI’s care obligation; the defendants allegedly recommended certain high-risk, speculative bonds to retail customers without themselves fully understanding the associated asset risks and without establishing how the investments served the customers’ best interests. The SEC also charged Western with violating its compliance obligation under Reg BI for allegedly failing to maintain adequate policies and procedures and other controls.

The fact that the SEC sued registered representatives — notwithstanding allegations that their firm had inadequate internal controls and policies —  is a strong statement that individuals must use their best judgment to make their own independent inquiries and determinations about the products they recommend to their clients. Registered representatives cannot hide behind their firm’s guidance and control failures to escape primary liability under Reg BI.

Continue Reading SEC’s First Reg BI Lawsuit Takes Strong Position on Individual Liability

On September 29, 2022, the Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued its highly anticipated Final Rule implementing the beneficial ownership information (“BOI”) reporting requirements of the Corporate Transparency Act (“CTA”) legislation. The Final Rule brings about the most significant revisions to the U.S. anti-money laundering/countering the financing of terrorism (“AML/CFT”) compliance framework in more than 20 years, implementing sweeping beneficial ownership disclosure requirements applicable to all U.S. companies and foreign companies doing business with or within the U.S.

The Final Rule generally tracks FinCEN’s earlier Proposed Rule from December 7, 2021, discussed in our prior article here, although there have been a few amendments to the earlier proposal. Below we provide a brief summary of key provisions and takeaways from the Final Rule, which goes into effect on January 1, 2024.

Continue Reading FinCEN Issues Highly Anticipated Final Rule on Beneficial Ownership Reporting under the Corporate Transparency Act

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.


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

In a criminal case against two former officers of Cognizant Technology Solutions Corp. (Cognizant), a New Jersey federal district court recently ordered Cognizant to produce unredacted internal interview memorandums and notes prepared by its outside counsel. The court found that the company had waived attorney-client privilege and work-product protection over those documents by disclosing the information contained in them to the U.S. Department of Justice (DOJ). The decision is a cautionary reminder to companies of the risk of waiving privilege when cooperating with the government.

Continue Reading Court Holds Oral Downloads of Witness Interviews Waive Corporate Privilege

JurorSearch CEO and Co-Founder Dan Johnson sits down with Perkins Coie White Collar & Investigations Partner Markus Funk to discuss some of the latest developments in jury selection. They talk about how customized software solutions can help prosecutors, civil litigators, and jury consultants collect and organize attorneys’ comments in real time while selecting jurors so they can craft voir dire questions to optimize potential juror selections and ward off unforeseen jury challenges down the road.

Listen to “Talking Jury Selection With JurorSearch CEO Dan Johnson” on Spreaker.

Note that all episodes are available on Apple PodcastGoogle Podcast, and Spotify.

The US Supreme Court in Ruan sided with doctors seeking a burden of proof higher than mere negligence in prosecutions for unlawful distribution of controlled substances. The decision represents a significant win for those worried about overcriminalization and the associated risk of losing the criminal law’s critical stigmatic impact, write Perkins Coie attorneys T. Markus Funk and Sean B. Solis.

The US Supreme Court issued a significant decision in its Controlled Substances Act (CSA) jurisprudence as applied to the nation’s opioid epidemic. At issue in Ruan v. United States was the requisite intent the government must prove to convict a physician under the CSA for the unlawful distribution of controlled substances.

In a significant win for the defense, specifically, and those concerned about imposing criminal liability based on mere negligence, more generally, the Supreme Court held that “[a]fter a [physician] produces evidence that he or she was authorized to dispense controlled substances” (a given in almost every case), “the Government must prove beyond a reasonable doubt that the defendant knew that he or she was acting in an unauthorized manner, or intended to do so.”

In reaching this holding, the high court unanimously rejected the government’s position. In its briefing, the government argued that it should be allowed to convict a physician merely by showing that he or she acted “objectively unreasonably” in misprescribing opioids. In other words, under the government’s requested standard, federal prosecutors would de facto only have to show that a prescribing physician acted with negligence. (Notably, this scienter requirement would be lower than the standard necessary to convict a drug trafficker for distributing heroin or cocaine—namely, “knowingly or intentionally.”)

Concerns about ever-expanding prosecutorial discretion and the erosion of the criminal law’s traditional “guilty mind” requirement have for good reason focused significant attention on the case.

Per the implementing regulations of 21 U.S.C. § 841(a)(1), a physician may lawfully prescribe controlled substances only if they are prescribed for “a legitimate medical purpose by an individual practitioner acting in the usual course of his professional practice.” Even a first-time offender could face decades in prison for misprescribing opioids in violation of the CSA.

The Government’s Case Against Ruan

In 2016, a federal grand jury returned an indictment charging Dr. Xiulu Ruan, a DEA-registered pain management physician, with, among other things, violating 21 U.S.C. §841(a)(1).

The government at trial presented evidence that Ruan and his business partner issued nearly 300,000 controlled substance prescriptions in a four-year period. Some of these prescriptions allegedly were signed without Ruan even seeing the patient. The government also presented evidence that he increased prescriptions of a biopharma company’s fentanyl drug a hundredfold after he and his business partner invested in it.

Ruan took the stand claiming that he, at all relevant times, honestly believed he was prescribing for a legitimate medical purpose. Ruan asked the district court to give the jury a defendant-friendly jury instruction ending with this statement: “If you find that [the] Defendant acted in good faith in dispensing or distributing a Controlled Substance, as charged in the indictment, then you must return a not guilty verdict.”

The district court rejected the instruction and instead instructed the jury that a controlled substance is prescribed “lawfully if the substance is prescribed by him in good faith as part of his medical treatment of a patient in accordance with the standard of medical practice generally recognized and accepted in the United States.”

Following a seven-week trial, Ruan was convicted of violating the CSA. He appealed, but the Eleventh Circuit affirmed his conviction, holding “[w]hether a defendant acts in the usual course of his professional practice must be evaluated based on an objective standard, not a subjective standard.”

SCOTUS Rejects DOJ’s Scienter Position

In reversing the Eleventh Circuit, the Supreme Court recognized that our system of justice, like most systems around the world, has traditionally (though not universally) operated on the proposition that a “vicious will” is necessary to establish a crime. See, e.g., Morissette v. United States.

This approach is driven by the belief that the stigma of a criminal sanction should be reserved for only those narrow categories of conduct representing the most significant deviations from the standard public morality and deserving of moral condemnation. Thus, when interpreting criminal statutes, the high court “start[s] from a longstanding presumption…that Congress intends to require a defendant to possess a culpable mental state.” Rehaif v. United States.

Here, in the case of a physician registered with the DEA to lawfully prescribe controlled substances, the only element of 21 U.S.C. §841(a)(1) to which moral judgment could attach is the act of prescribing the controlled substance “[e]xcept as authorized by this subchapter” —that is, for an illegitimate medical purpose. Making negligence the mens rea standard, however, would “criminalize a broad range of apparently innocent conduct,” including good faith medical prescribing error. See Liparota v. United States.

In Ruan, the Supreme Court applied the more robust “knowing or intentional” scienter requirement to the CSA to “diminish the risk of ‘overdeterrence,’ i.e., punishing acceptable and beneficial conduct that lies close to, but on the permissible side of, the criminal line.” This was particularly important since the CSA “imposes severe penalties upon those who violate it, including life imprisonment and fines up to $1 million.”

Ruan represents a significant win for those worried about overcriminalization and the associated risk of losing the criminal law’s critical stigmatic impact. Going forward, to sustain a conviction under the CSA, the government will be required to prove that a defendant knew or intended to prescribe controlled substances for an illegitimate medical purpose and outside the usual course of professional practice.

This article originally posted to Bloomberg Law.