Government Investigations & White Collar Crime (J)



 

The Government Investigations & White Collar Crime Specialty Group has been activated in response to extensive interest exhibited by TAGLaw members, especially in the U.S. and particularly since the passage of the Sarbanes Oxley legislation (also known as SARBOX or SOX.)


Meet the Co-chairs - TAGLAW


Hines, Melanie Ann
Berger Singerman LLP
mhines@bergersingerman.com


Meet the Co-chairs - TIAG


Ray, Dan CPA/CFF, CFE
Hemming Morse, LLP
rayd@hemming.com


Government Investigations & White Collar Crime (J)


Authors: Jason Ross, Amelia Marquis, Jonathan Feld

In 2015, the Department of Justice (“DOJ”) announced a more aggressive stance requiring individual accountability in civil and criminal investigations of corporate misconduct. This policy change, set forth in a memorandum issued by Deputy Attorney General Sally Quillian Yates (the “Yates Memo”), announced that companies seeking cooperation credit were required (1) to undertake their own investigations, (2) to identify all culpable individuals, and (3) to produce material facts or employee statements related to the individuals’ involvement in the corporate violations. Now, the DOJ is lessening this burden and shifting back towards its pre-Yates Memo discretionary policy.

Read more: Bringing Back Discretion: DOJ Announces Revisions to Current Policy Concerning Corporate Misconduct


On June 21, 2018, the Supreme Court issued its opinion in the matter of Lucia v. SEC, 585 U.S. ___ (2018), which held that administrative law judges of the U.S. Securities and Exchange Commission (SEC) are considered Inferior Officers of the United States, therefore subject to the Appointments Clause (Article II, Sec. 2) of the U.S. Constitution. The Supreme Court ruled in favor of Mr. Lucia, 7-2, agreeing with his position that Administrative Law Judges (ALJs) are officers of the United States because they are effectively being given judicial power. Accordingly, administrative law judges must be appointed by the President or other delegated officer pursuant to the requirements of Inferior Officers, rather than hired as federal employees, which had been standard practice for ALJs. Lucia called into question cases pending before all of the SEC’s ALJs, all five of whom were hired as federal employees and none of whom served in their positions pursuant to Inferior Officer appointment requirements. Because of that, and in advance of the Lucia opinion being issued, on November 30, 2017, the SEC ratified the appointments of all five of its ALJS and stayed ALJ-pending cases until the Supreme Court ruled on Lucia.

Read more: Deadline Looms for Pending Cases in Front of Administrative Law Judges, per SEC Orders


Ferdose al-Taie, Dallas-based senior counsel in Dykema’s Commercial Litigation group, authored the article “Anonymous Whistleblowers Make Millions for Reporting Their Own Companies to Federal Regulators,” for FOCUS, the quarterly newsletter of the Association of Corporate Counsel (ACC) South Central Texas Chapter.

In the article, al-Taie shines a light on the ins and outs of Dodd-Frank Whistleblower awards and who is eligible for consideration. Throughout the article, she defines key terminology and addresses man frequently asked questions about whistleblowers and companies.

Read the entire article.

 


In Lagos v. United States, 584 U.S. ___ (2018), the Supreme Court issued a unanimous ruling that limits the ability of corporate victims of fraud to seek reimbursement of legal fees for internal investigations. The case began when GE Capital discovered that Sergio Lagos falsified numerous invoices for his company, which he used as collateral to obtain tens of millions of dollars in loans from GE Capital. After Lagos was convicted of fraud, GE Capital sought reimbursement under the Mandatory Victims Restitution Act of 1996 (the “MVRA”) for roughly $5 million in expenses, related to: (1) the company’s internal investigation of Lagos’ fraudulent conduct; and (2) the company’s participation in bankruptcy proceedings related to Lagos’ company.

Read more: U.S. Supreme Court Decides Fraud Perpetrator is Not Required to Reimburse Victim for Costs of...


“Put his own interests above those of the company”

“Buried his head in the sand”

“May not have undertaken their duties in a fit and proper manner”

 

…. just a few quotes taken from recent proceedings against company officers.

Of course, these may be great soundbites for an article of this kind, but not words any executive would wish to  hear, not least when applied to the exercise of his or her corporate and/or fiduciary duties owed to a company.

 

Whether concerning health and safety failings, corporate governance, regulatory matters or fraud, we at DQ Advocates are seeing a clear trend - an increasing emphasis being placed on company officers and their lack of action or wilful blindness when it comes to criminal prosecutions.

Read more: Company Officers Under Increasing Scrutiny…but help is at hand