On June 15, 2022, the District Court for the Southern District of New York dealt a blow to former Citigroup Inc. (Citi) trader Rohan Ramchandani in his malicious prosecution lawsuit against his former employer. Magistrate Judge Stewart D. Aaron denied Ramchandani’s motion to compel Citi to produce attorney notes of DOJ meetings and other
Whistleblowing and Internal Investigations
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.…
New Cooperation Agreement Between the DOJ Antitrust Division and SEC
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.”…
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Securities Enforcement Activity in the COVID-19 Era: A Backstop to Private Securities Litigation
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.…
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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
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).
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European Public Prosecutor to Take EU Finance Fraudsters to Task?
According to the European Commission, fraud offences against the European Union (EU) budget cost the EU and its member states over €1 billion in losses in 2018, in addition to the annual losses of around €150 billion resulting from VAT fraud. With current criminal enforcement efforts across the EU apparently failing to effectively tackle such offences, the EU established the European Public Prosecutor’s Office (EPPO) to act as an independent and decentralized office with the power to investigate and prosecute crimes against the EU budget, such as fraud, corruption, misappropriation and cross-border VAT-related fraud.
Set to become fully operational in November 2020, based in Luxemburg, with its funding for 2020 increased by nearly 50%, the EPPO is expected to ramp up prosecutions of corporate crime concerning the EU’s financial interests and facilitate the recovery of misused EU funds. Previously, only national authorities could investigate and prosecute such offences within the scope of their own borders.…
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UK Regulatory and Law Enforcement, and COVID-19
UK law enforcement is not immune to the unprecedented levels of business disruption caused by COVID-19. While not all agencies have published specific guidance on how they propose to operate and conduct enforcement investigations during this crisis (including, for example, Her Majesty’s Revenue & Customs, the Serious Fraud Office, and the National Crime Agency), a…