The US Department of Homeland Security’s Customs and Border Protection agency (CBP) announced on September 14 the issuance of five new withhold release orders (WROs) on entities allegedly using forced labor in or from China’s western Xinjiang Uyghur Autonomous Region (XUAR). The WROs bar the import into the United States of various goods alleged to be produced by forced, indentured, and convict labor (“Forced Labor”), including cotton, apparel, hair, and technology products.

CBP’s announcement is just the latest in a wider US government interagency effort to crack down on alleged human rights abuses related to ethnic minorities in XUAR. Companies are encouraged to take a fresh look at how their existing compliance programs address the risks of Forced Labor and related labor and human rights issues in their supply chains, as well as related economic sanctions and export controls risks.

For more information, click here to read the full client alert.

The DC Circuit issued an opinion in late August that could significantly disrupt decades of Congressional investigations practice. In Comm. on the Judiciary of United States House of Representatives v. McGahn, No. 19-5331, 2020 WL 5104869 (D.C. Cir. Aug. 31, 2020), the DC Circuit effectively put an end to the US House Judiciary Committee’s attempt to enforce judicially a subpoena against former White House Counsel Donald McGahn. Pending rehearing en banc and/or appeal,[1] the decision could eliminate the force and effect of subpoena authority—the authority underlying every House investigation.

For more information, click here to read the full client alert.

[1] House Democratic leaders have vowed to seek a rehearing en banc.

 

The Trump administration is considering a ban on US imports of Xinjiang-origin cotton and other products due to allegations of widespread forced labor. The scope of the possible restrictions has not been made public but credible reporting suggests that it could include cotton and tomato products from the Xinjiang Uyghur Autonomous Region (XUAR) or wider prohibitions covering cotton products from across China and third-countries relying on XUAR-sourced materials or labor.

XUAR produces an estimated 20% of the world’s cotton and 85% of China’s cotton. The far western province is also the site of alleged human rights violations, including the detention and internment of ethnic Uyghur and Turkic Muslim minorities, surveillance of local populations, and use of forced and prison labor from the XUAR.

A ban on Xinjiang-sourced cotton products could radically impact global supply chains and the apparel industry, and further escalate the US-China trade war. The Trump Administration has aggressively employed sanctions and export controls against Chinese officials and entities. This advisory discusses Customs and Border Protection’s processes for implementing and enforcing such an import ban, as well as related investigative and enforcement risks under customs, sanctions, export control, and other laws and regulations

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

The Department of Justice Antitrust Division’s investigation into price-fixing by generic drug companies continues to remain one of the Antitrust Division’s most active matters. This week the Antitrust Division announced that it had indicted Teva Pharmaceuticals USA Inc. (Teva), the seventh company to reach a resolution with the Antitrust Division in this investigation. Teva is one of the largest pharmaceutical companies in the world.

Teva Pharmaceuticals was charged for its role in three separate conspiracies to fix prices for generic drugs. Specifically, it alleges that Teva, in three separate conspiracies, engaged in the sharing with competitors of pricing information for certain generic drugs in advance of price increase announcements. The first alleged conspiracy involved pravastatin, which is a cholesterol medicine, and other generic drugs; the second alleged conspiracy involved drugs used to treat and manage arthritis, seizures, pain, skin conditions, and blood clots; and the third alleged conspiracy involved drugs used to treat brain cancer, cystic fibrosis, arthritis, and hypertension. The Antitrust Division alleges that the conspiracies lasted for a little over two years and began as early as May 2013 and lasted until around December 2015. The estimated amount of gain/loss for each conspiracy is $200 million, $75 million, and $75 million, respectively.

Continue Reading Another Generic Drug Company Accepts a Criminal Indictment Alleging Collusion

Please join Steptoe for an interactive discussion with Congressman Jamie Raskin and current and former senior staff from Capitol Hill and the Department of Justice on congressional and DOJ investigations into fraud and waste related to the CARES Act and COVID-19 relief funds.

Date: Monday, September 14, 2020

Time: 12:00 p.m. – 1:15 p.m. EDT

Register for the webinar here.

Investigations and enforcement actions have already begun, and companies and individual recipients of stimulus funds need to take defensive action and position themselves to demonstrate compliance and manage risk – even years after the COVID-19 pandemic ends.

To use current trends to help forecast your potential risk, it is critical to first understand the type of conduct Congress and DOJ are targeting today.

This panel will touch on these topics and more, including:

  • Criminal securities fraud prosecutions related to the COVID-19 pandemic
  • Limitations in the rollout of the SBA Paycheck Protection Program and how to ensure contracts are being awarded to those who are most in need
  • Potential areas for most COVID-19 related fraud and waste
  • How the lessons learned from TARP investigations will portend possible similarities for COVID-19 relief participants
  • How companies can manage enforcement and litigation risk by adopting good compliance practices

Speakers:

  • Jim Barnette, Partner in Steptoe’s Government Affairs & Public Policy Group, and former General Counsel, US House of Representatives Committee on Energy and Commerce
  • Patrick Linehan, Partner in Steptoe’s White-Collar and Securities Enforcement practice
  • Rep. Jamie Raskin, represents Maryland’s 8th Congressional District in the US House of Representatives and serves on the House Select Committee on the Coronavirus Crisis
  • Moderator Reem Sadik, Associate in Steptoe’s White-Collar and Securities Enforcement practice
  • Donald Sherman, Deputy Director, Citizens for Responsibility and Ethics in Washington (CREW); former Senior Counsel on the Senate Homeland Security and Governmental Affairs Committee; former Chief Oversight Counsel for Rep. Elijah Cummings, Ranking Member of the House Committee on Oversight and Government Reform
  • Justin Weitz, Assistant Chief, Securities and Financial Fraud Unit of the US Department of Justice’s Criminal Division, Fraud Section

Yet another prosecution alleging that an academic failed to report ties to China illustrates the government’s multi-agency focus on this issue and the costs and pressures imposed on U.S. universities.

A Texas A&M engineering professor and NASA researcher was arrested and charged with several crimes stemming from allegedly hiding his ties to Chinese companies and universities.[1] In a criminal complaint unsealed on August 23, 2020, the DOJ charged Zhengdong Cheng with making false statements, conspiracy, and wire fraud based on allegations that he willfully deceived NASA and Texas A&M in connection with obtaining a NASA research grant.[2] Federal law prohibits NASA from entering into collaboration or coordination with China or any Chines-owned company.[3]

The case against Cheng represents only a part of Texas A&M’s interactions with the government on this issue. Over a year ago, on June 13, 2019, the U.S. Department of Education sent letters to Texas A&M and Georgetown explaining that the agency believed the schools were not fully reporting all funding received from other countries, including China.[4] At that time, Texas A&M said in a statement that school officials “are reviewing it and hope to have this resolved soon.”[5]

Continue Reading Another Talents Program Indictment Underscores Importance of Strong Compliance Program and Cooperation with Law Enforcement

On August 18, 2020, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) published a statement outlining the agency’s approach to enforcement of the Bank Secrecy Act (“BSA”), including anti-money laundering (“AML”) regulations issued by FinCEN pursuant to the BSA.  As described in a press release accompanying the statement, the document “aims to provide clarity and transparency to [FinCEN’s] approach when contemplating compliance or enforcement actions against covered financial institutions that violate the BSA.”

This relatively brief statement apparently represents FinCEN’s first published guidance that comprehensibly identifies the agency’s enforcement priorities and policies, and it may reflect an effort by FinCEN to place more emphasis on its enforcement function.   The statement lacks the details of enforcement guidance published by other agencies on issues of trade and financial regulation, such as Treasury’s Office of Foreign Assets Control (“OFAC”).  While many of the topics covered by the FinCEN statement will be familiar to covered financial institutions, there are also a few noteworthy clarifications in the statement.

Continue Reading FinCEN Publishes Statement Setting Forth Agency’s Approach to BSA Enforcement

On March 5, 2019, federal prosecutors indicted Mikaela Sanford, former employee of Varsity Blues mastermind William “Rick” Singer, alleging a racketeering conspiracy between Sanford, two proctors for the ACT and SAT exams, and 12 coaches and officials from Georgetown University, the University of Southern California, the University of California, Los Angeles and Wake Forest University.[1] On August 7, 2020, Sanford agreed to plead guilty to one count of conspiracy to commit racketeering,[2] becoming the 7th individual to plead guilty to the charge.[3]

Five days later, US District Judge Nathaniel M. Gorton sentenced Morrie Tobin – the man who tipped off federal prosecutors to the Varsity Blues college admissions scheme – for his role in two unrelated securities fraud schemes.[4] According to federal prosecutors, Tobin alerted the government – during the government’s investigation into Tobin for securities fraud – that former Yale University women’s soccer coach Rudy Meredith sought a bribe in exchange for getting Tobin’s daughter into Yale. Although federal prosecutors did not charge Tobin in connection with the Varsity Blues scheme, Tobin’s sentencing hearing confirmed his identity as the Varsity Blues tipster in open court for the first time.[5]

Continue Reading Employee of Varsity Blues Mastermind William ‘Rick’ Singer and Varsity Blues Whistleblower Plead Guilty

In May 2020, the U.K. Financial Conduct Authority, the authority charged with regulating financial firms and maintaining the integrity of the financial markets in the United Kingdom, reported that whistleblowing reports to the Financial Conduct Authority on workplace culture issues in 2019 had increased by 35%. There is also evidence of an increase in whistleblowing reports made during the COVID-19 lockdown, with WhistleB, the Swedish-European provider of whistleblowing solutions, reporting an increase of 40% in the number of concerns raised by whistleblowers in Europe from January to May 2020. Similarly, in the United States, the Securities and Exchange Commission (SEC) reported a 35% increase in the number of whistleblower tips, complaints and referrals between mid-March and mid-May 2020. And although the filing of whistleblower complaints (also known as “qui tam” complaints) are reported to be down compared to the same time last year, the recent distribution of billions of dollars in federal money to companies (discussed further below) is sure to reverse that trend.

In addition, there have been a number of high-profile press reports of investigations and enforcement actions which were prompted by whistleblower reports, with perhaps the most significant recent example being that of Wirecard AG, the German payment processor and financial services provider at the center of a financial scandal in Germany. In June 2020, the company reported €1.9 billion in missing cash. It is reported that Germany’s financial watchdog (BaFin) received a tip-off from a whistleblower about alleged irregularities at Wirecard.

In the wake of the COVID-19 pandemic, a wave of whistleblower reports alleging misconduct in key areas is likely to be inevitable. Whether they come via a regulator, a government authority, the media or directly to the company, companies must be prepared properly to tackle these cases as and when they arise, as a failure to do so could prove fatal to companies that are already fighting to recover from the detrimental economic impact caused by COVID-19. This will undoubtedly be made more difficult as those who usually investigate the reports are not in the office physically to gather all of the facts and evidence using established procedures. Perhaps more than ever, companies should understand the risks posed to their businesses and be ready for the inevitable emergence of whistleblower reports.

We consider below some of the main areas where whistleblowing reports are predicted to increase, as well as how companies can prepare to ensure that they are in the best position to handle any future claims.

Continue Reading Whistleblowing and Internal Investigations

Federal prosecutors recently brought new indictments against U.S. academics in two separate cases involving alleged unreported ties to China. The Department of Justice moved forward its cases against the Harvard and University of Arkansas-affiliated professors as part of a broader push to combat what Assistant Attorney General for National Security John C. Demers referred to as “China’s targeting of research and academic collaborations within the United States in order to obtain U.S. technology illegally.”[1]

Both professors had ties to the Thousand Talents Program, a Chinese government program started in 2008 with the goal of improving China’s access to talent, research, and technology that the Department of Justice has been particularly focused on.[2]

Continue Reading DOJ Continues Its Aggressive Approach in Cases Involving Academics with China Ties