On June 22, 2020 the Department of Justice Antitrust Division (Antitrust Division) and the Securities and Exchange Commission (SEC) announced that they had signed an interagency Memorandum of Understanding (MOU) to allow for more cooperation and communication between the two agencies.

Although these agencies have worked together in the past, this is the first time the Antitrust Division and the SEC have entered into a formal agreement. The agencies hope that this agreement will improve competition in the securities industry. As SEC Chairman Jay Clayton explained, “As competition is embedded in our securities laws, there are many policy areas where the missions of the SEC and DOJ’s Antitrust Division align, but where our respective areas of expertise differ. By formalizing the exchange of knowledge between our agencies, we aim to foster even greater collaboration and cooperation to ensure that we maintain the efficient and competitive markets that American investors rely on.”

Continue Reading New Cooperation Agreement Between the DOJ Antitrust Division and SEC

Amongst those who operate or act (whether voluntarily or not) within global law enforcement arenas, there has long been a tendency in some quarters to view the UK law enforcement landscape with less trepidation than that in the US.[1] For many years law enforcement agencies in the United States and particularly the US Department of Justice (DOJ) and Securities and Exchange Commission – exponentially better funded and resourced – have drawn the limelight with billion-dollar bribery-related settlements such as the $1.78 billion settlement with Brazilian petrochemicals company, Petrobras, and the $1.01 billion settlement with Swedish telecommunications company Telia. There are signs, however, that a confluence of factors is now resulting in an increasingly aggressive posture being taken by UK law enforcement bodies and those who discount the appetite, powers and ability of those bodies may do so at their own peril.

Of all the UK law enforcement agencies, none has faced more apparent recent criticism and calls for reform than the UK Serious Fraud Office (SFO), the agency charged with tackling the top level of serious or complex fraud, bribery and corruption. The collapse of the 2019 trial of two former Tesco directors accused of false accounting (with the trial judge declaring that “I concluded in certain crucial areas the prosecution case was so weak it should not be left for a jury’s consideration”) was a high profile setback for the SFO, as was both the 2020 acquittal of three Barclays executives accused of making illegal payments to Qatar and the collapse of the case against the bank itself. Whilst it continues to defend itself against allegations that it is unfit for purpose and that a complete overhaul of the agency is necessary, the attacks appear to be having an unwelcome consequence for those in the SFO’s eyesight; namely, whilst the SFO faces increased scrutiny and the pressure of bringing significant prosecutions, there is likely to be much less shirking of high-profile investigations and, once an investigation is open, it will bring all its powers and expertise to bear. Put simply, once an investigation is opened, the SFO will play to win.

Continue Reading Ramped-Up Powers, Performance Anxiety and Political Pressure: A Perfect Storm for UK Law Enforcement Agencies?

Facing an enforcement action arising from potential violations of US export controls and economic sanctions may mean a battle on two, if not three or four, fronts. Multiple agencies within the US government are responsible for oversight and enforcement of laws and regulations, with overlapping jurisdiction, but distinct requirements, potential penalties, and consequences for non-compliance. These agencies also have different authority, priorities, and powers.

Accordingly, a company should anticipate the real possibility that an investigation of these complex laws and regulations will involve more than one US government agency and develop a coordinated strategy to protect against collateral consequences of parallel proceedings.

In this series of blogs, we will set forth the following top five things you need to know about the possibility of multiple agency involvement in an investigation of export controls and/or sanctions:

  • The relevant agencies and regulations.
  • How the involvement of multiple agencies will impact the investigation.
  • Different agencies’ considerations of voluntary disclosures.
  • How to manage interagency communication.
  • How to manage global settlements and what can go wrong.

Continue Reading US Export Controls and Economic Sanctions Investigations: The Perils of Parallel Proceedings (Part 1 of 5)

The Second Circuit’s latest opinion in the FIFA bribery investigation – United States v. Napout (United States v. Napout, Nos. 18-2750 (L), 18-2820 (Con), __ F.3d__, 2020 WL 3406620 (2d Cir. June 22, 2020)) – wades into the murky waters of the extraterritorial reach of US fraud statutes and the inherent ambiguity continuing to plague the so-called right to “honest services.”

The US government’s expansive interpretation of its jurisdiction under various fraud statutes in cases involving only minimal, attenuated, links to US territory through US electronic mail systems, cellular phone networks, and bank wire transfers, coupled with the ubiquity of these facilities in modern commerce, substantially increases the risk that foreign entities and individuals may be forced into US criminal investigations.

The Second Circuit’s opinion in Napout, which was deferential to the district court’s findings, leaves room for future courts to reach a different outcome in similar cases.

Continue Reading The FIFA Bribery Case: US Jurisdiction Over Predominantly Foreign Conduct?

On June 22, the US Supreme Court weighed in on a question it explicitly left open in Kokesh v. SEC – whether, and to what extent, the Securities and Exchange Commission (SEC) in a civil enforcement action may seek “disgorgement” as “equitable relief that may be appropriate or necessary for the benefit of investors” under §78u(d)(5). In an 8-1 decision, the Court in Liu v. SEC concluded that a disgorgement order can indeed qualify as “equitable relief,” subject to certain limitations. The case has important implications for how the SEC may seek disgorgement remedies in the future under the US Foreign Corrupt Practices Act and in other securities-related actions.

For more on this topic, click here to read the full Client Alert.

The US Department of Justice (DOJ) Antitrust Division recently issued a deferred prosecution agreement (DPA) to Florida Cancer Specialists & Research Institute (FCS), an oncology center in Florida. FCS admitted to allocating medical and radiation oncology treatments provided to cancer patients in Southwest Florida. In addition, FCS had to pay a $100 million monetary penalty, the statutory maximum. This resolution raises two key issues the DOJ Antitrust Division has been focusing on over the last few years: (1) the use of DPAs to resolve cases, and (2) the interplay between the labor markets and antitrust violations.

Continue Reading DOJ Antitrust Division Enters into Another DPA with a Healthcare Company

Remarkably, we issued the advisory notice below a decade ago to serve as a guide for avoiding and managing the most sensitive matters before increasingly ambitious US state prosecutors – guidance that, following years of public corruption, pay-to-play and other high-profile financial matters, particularly in New York and California, is every bit as apt now as it was then. Replace Andrew Cuomo’s name with Letitia James (or any other of the active state AGs) and financial crisis with COVID crisis, and this notice could have been written yesterday. Idiosyncrasies still abound, as noted before, and each matter requires a bespoke solution to avoid unnecessary exposure, but these considerations are their best starting point.

* * * * *

Since the investment analyst conflict-of-interest cases and the mutual fund market timing scandals, federal law enforcement officials have been faulted for their lack of speed and oversight in addressing a variety of Wall Street matters. That criticism has become pronounced in the last year, particularly in view of the SEC’s missed opportunities regarding Bernard Madoff and the Department of Justice’s focus on international matters.

Given the openings presented by that void, a number of state prosecutors have stepped to the fore and become players on the national stage. Their success has been a product of their ability to move quickly and creatively in enforcing the law and applying their visions of proper corporate conduct, often launching investigations and settling matters against institutions far beyond the traditional range of their jurisdictions.

The Office of the New York Attorney General has become the model for this approach. Building on the expansive law enforcement endeavors of his predecessor, Attorney General Andrew Cuomo has taken the work of that office to new heights. As we should all remember, Mr. Cuomo ran for the office on the message that one of the central facets of the NYAG’s job is to enforce the law when the federal government cannot, or simply will not. He quickly made good on that promise after being elected, leading nationwide investigations and actions that reformed the student loan industry.

With a new Administration in Washington, however, many expect a strong resurgence in federal law enforcement; some predicting unprecedented efforts regarding financial and white-collar matters. While much remains to be seen, we are inclined to agree given the clear mandate of the 2008 election and the natural swing of the regulatory pendulum – especially given that a lack of regulatory oversight is widely viewed as a cause of our nation’s current financial crisis.

Leaders in the business community might be tempted, then, to focus on federal regulators going forward and expect state investigations to recede in importance. That is a temptation to resist. Now that state prosecutors and policymakers have seen what they can do, they are unlikely to relinquish their leadership roles.

New York is the leading case in point. As the financial crisis unfolded, Attorney General Cuomo has consistently led all enforcement authorities, state and federal, in exploring problems and finding solutions. For example, when the market for auction rate securities disappeared and investors could not sell, his office was the first to pursue claims that the risks associated with those securities were not properly disclosed. The result:  more than $60 billion in enforcement action settlements with Wall Street’s leading institutions. More recently, the NYAG has been investigating the use of federal bailout funds as well as the quality of corporate disclosures regarding executive compensation.

How is it that the New York Attorney General can claim jurisdiction over the use of federal bailout payments? Many have pondered that and other legal questions about the office’s use of its powers over the years. In dealing with the NYAG, however, those queries often prove to be beside the point.

The primary reason is Mr. Cuomo’s approach to these matters. He is, by experience, more policymaker than prosecutor, and the success of his investigations has turned not on matters of jurisdiction or the details of discovery, but on the end-game of whether the office believes something is amiss and, if so, how it should be remedied. Many fail to appreciate how dramatically that orientation can change the character and scope of an investigation by his office, and they miss important and often fleeting opportunities to mitigate and shape the way in which matters proceed and may be resolved.

His speed in taking action is the other leading reason. Indeed, the motto of the New York Attorney General’s Office is that it solves real problems in real time. To be sure, Mr. Cuomo and his staff have mastered the art of quickly finding plausible claims under state law as a means of exposing what they perceive to be questionable practices to public scrutiny. The resulting sprints often leave those unfamiliar with the workings of his office far behind and at a great disadvantage, frequently amidst a sea of bad press.

To stay apace, and to best protect themselves, we advise public companies and other leading institutions to anticipate where Mr. Cuomo and his office may be going next – and when he comes calling, to be ready to engage on the policy merits of corporate practices and conduct from the outset. While work of this kind takes great effort and foresight, in our experience, its return on investment is often beyond measure.

Securities litigation and enforcement activity often surge in times of crisis. Indeed, bedrock federal securities regulations were borne out of an extended crisis: the stock market crash of 1929 and the decade-long Great Depression that followed.

COVID-19 has already set off a wave of securities litigation. These private lawsuits and putative class actions have been based on allegedly misleading statements in securities filings and public statements. But issues surrounding proof in the COVID-19 era, including demonstrating the “price impact” of alleged misrepresentations for purposes of reliance and loss causation, limit the viability of these claims.

As public companies anticipate the next wave of securities activity they should expect limitations on private lawsuits to prompt the Securities and Exchange Commission (SEC) to ramp up civil enforcement. The Department of Justice (DOJ) may even launch related criminal investigations in high-profile cases.

We discuss below recent COVID-19-related securities litigation and enforcement trends, special issues with reliance and loss causation, and best practices to avoid the expected onslaught of SEC enforcement and DOJ investigations.

Continue Reading Securities Enforcement Activity in the COVID-19 Era: A Backstop to Private Securities Litigation

On May 20, 2020, panelists from the DOJ, SEC, and FBI participated in a virtual town hall to discuss the state of play of FCPA and healthcare fraud enforcement as the United States and the rest of the world navigate the wide-ranging challenges wrought by the COVID-19 pandemic.

Government panelists included:

  • Robert Zink (Chief of the Fraud Section, Criminal Division, DOJ);
  • Daniel Kahn (current Senior Deputy Chief of the Fraud Section, and former FCPA Unit Chief, DOJ);
  • Joe Beemsterboer (current Senior Deputy Chief of the Fraud Section, and former Chief of the Health Care Fraud Unit, DOJ);
  • Charles Cain (Chief of the FCPA Unit of the SEC’s Division of Enforcement); and
  • Leslie Bakschies (Unit Chief at the FBI).

Continue Reading Key Investigation and Compliance Take-Aways from May 20, 2020 DOJ, SEC, and FBI Joint Town Hall Discussing FCPA and Healthcare Fraud Enforcement Efforts During COVID-19 Emergency

Steptoe partners Lucinda Low and Brittany Prelogar co-authored the chapter “Incentives for Self-Reporting and Cooperation” in Negotiated Settlements in Bribery Cases: A Principled ApproachThis book, written by legal and policy professionals and academics, and published by Edward Elgar Publishing, analyzes the benefits and challenges of negotiated settlements as an enforcement mechanism in bribery cases while demonstrating the need for a more harmonized and principled approach to deterrence.