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Joon H. Kim’s practice focuses on white-collar criminal defense, internal corporate investigations, regulatory enforcement, and crisis management, as well as complex commercial litigation and arbitration.

On July 3, SEC Chairman Jay Clayton issued a statement signaling a policy change in SEC settlements and the consideration of applications for waiver of collateral consequences flowing from those settlements, such as the loss of certain significant procedural advantages in (or even outright exemption from) the securities registration process.[1]  In practice, this change could both streamline the process of settling enforcement actions with the SEC and provide additional certainty to settling entities, which, under the current regime, must decide whether to settle a matter before completing and knowing the outcome of negotiations over waivers.
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Last month, Representative Maxine Waters, Chair of the House Financial Services Committee, introduced a discussion draft of the “Bad Actor Disqualification Act of 2019” (the “Proposed Act”).  Similar to proposed legislation Rep. Waters introduced in 2015 and 2017, the effect of the Proposed Act, if passed, would be to dramatically increase the burdens on institutions

As discussed in our most recent blog post, on April 30, 2019, the Criminal Division of the U.S. Department of Justice (“DOJ” or “the Department”) announced updated guidance for the Criminal Division’s Evaluation of Corporate Compliance Programs (“the Guidance”).  The Guidance is relevant to the exercise of prosecutorial discretion in conducting an investigation of a corporation, determining whether to bring charges, negotiating plea or other agreements, applying sentencing guidelines and appointing monitors.[1]  The Guidance focuses on familiar factors: the adoption of a well-designed compliance program that addresses the greatest compliance risks to the company, the effective implementation of the company’s compliance policies and procedures, and the adequacy of the compliance program at the time of any misconduct and the response to that misconduct.  The Guidance makes clear that there is no one-size-fits-all compliance program and that primary responsibility for the compliance program will lie with senior and middle management and those in control functions.
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On April 30, 2019, the Criminal Division of the U.S. Department of Justice announced updated guidance for the Criminal Division’s Evaluation of Corporate Compliance Programs (“the Guidance”) in charging and resolving criminal cases.  This memorandum highlights key updates and discusses the themes present across versions of the Guidance.  Overall, this newest version places greater emphasis

As discussed in Cleary Gottlieb’s December 21, 2018 Alert Memorandum, on December 18, 2018, the U.S. Court of Appeals for the D.C. Circuit issued an important ruling in In re Grand Jury Subpoena, holding, inter alia, that foreign state-owned corporations are subject to criminal jurisdiction in the United States and upholding Special Counsel

On January 11, the Second Circuit Court of Appeals denied the appeal of Rajat Gupta, who was seeking to undo his insider trading conviction.  Relying on the Second Circuit’s decision in United States v. Newman, Gupta argued that—to satisfy the requirement that Gupta personally benefit from tipping inside information—the Government must show “a quid pro quo – in which [Gupta] receive[d] an ‘objective, consequential . . . gain of a pecuniary or similarly valuable nature.’”[1]  In other words—intangible benefits should not, standing alone, constitute a personal benefit sufficient to uphold a criminal conviction.  The Second Circuit rejected this argument, finding that the Supreme Court’s decisions in Dirks v. SEC and Salman v. United States foreclosed such a narrow definition of “benefit,” opting instead for a test that looked at “varying sets of circumstances”—including those that involve indirect, intangible, and nonquantifiable gains, such as an anticipated quid quo pro that can be inferred from an ongoing, business relationship—to satisfy the “personal benefit” test.[2]  This case is the latest in a line of decisions—in the Supreme Court, as well as the Second and Ninth Circuits—to reject defendants’ arguments for a narrow definition of the “personal benefit” element of insider trading law based on Newman.
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On December 18, 2018, the District of Columbia Circuit Court of Appeals issued an important ruling in In re Grand Jury Subpoena, holding that foreign state-owned corporations are subject to criminal jurisdiction in the United States and that the exceptions to sovereign immunity set forth in the Foreign Sovereign Immunities Act (the “FSIA”)[1] apply to criminal as well as to civil cases.[2]  The court also rejected the foreign sovereign entity’s argument that it should be excused from complying with a subpoena because doing so would violate the law of the respondent’s country of incorporation.  Although In re Grand Jury Subpoena arises in the context of enforcing a grand jury subpoena, its language and holding could potentially be extended to criminal prosecutions of a foreign state or state-owned entity.

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On August 2, 2018, the U.S. Commodity Futures Trading Commission (the “CFTC”) announced multiple whistleblower awards totaling more than $45 million.[1]  Although this is only the seventh such aggregate award announced by the CFTC since the inception of its whistleblower program in October 2011,[2] it is the Commission’s highest to date, and comes weeks after the agency’s announcement of two such awards last month.  This recent activity, which follows a two-year hiatus during which the CFTC did not grant any whistleblower awards, may signal the Commission’s renewed focus on touting the success of its whistleblower program as well as the conclusion of a number of major CFTC investigations.[3]  It is also in keeping with the Commission’s aggressive pace of enforcement actions in recent months.[4]
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On Monday, following two reversals of convictions, the U.S. Attorney’s Office for the District of Connecticut moved to dismiss the sole securities fraud claim remaining against former Jefferies bond trader, Jesse Litvak, bringing an end to the 5 1/2-year long case against him.[1]  During the case’s winding procedural path, the Government twice secured convictions against Litvak by jury trial—on the theory that Litvak’s alleged misstatements about his own costs and profit margins for residential mortgage-backed securities (“RMBS”) trades would have been material to the decision-making of a reasonable (and often sophisticated) investor-buyer.  And twice the Second Circuit overturned the convictions on narrow and technical grounds.  Notably, even while seeking to dismiss the remaining charge, the Government maintains in its filing that the Second Circuit’s decisions left undisturbed the soundness of its legal theories—namely that a broker-dealer’s misstatements relating to his own profits to sophisticated counterparties could satisfy the materiality requirement for securities fraud as a matter of law.[2]  Thus, notwithstanding the additional hurdles presented by the Second Circuit’s decisions, the Government’s decision not to pursue yet another trial against Litvak does not signal a death knell for all similar charges in the future, particularly those that are currently pending and arose as part of the Government’s RMBS probe.  But the somewhat torturous history of the Litvak case does highlight the difficulty for the Government in establishing the materiality of alleged misstatements made to sophisticated securities professionals who undertake their own analysis of trades.  Indeed, in many of these RMBS cases, the Government faced an uphill battle from the start, evidenced by its inability to secure convictions in many of them.
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The long-running criminal case against Jesse Litvak seems to have come to an end, with the U.S. Attorney’s Office for the District of Connecticut filing a motion yesterday seeking voluntary dismissal of the sole remaining charge.[1]  This action—which has resulted in the government twice obtaining a criminal conviction against Litvak, only to see both convictions overturned by the Second Circuit—raised somewhat novel questions of the materiality of information a broker-dealer provides about its own costs or profit margins to sophisticated counterparties.  Notably, even while seeking dismissal, the Government again reiterated its view that the legal theory it pursued, and which the Second Circuit twice appeared to credit, remains sound and (presumably) actionable in future cases.[2]
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