Corporate Enforcement

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On 21 February, the UK Financial Conduct Authority issued its first competition enforcement decision against three asset management firms. The FCA imposed fines totaling £414,900 for an infringement based on the sharing of strategic information on a bilateral basis during an IPO and a placing, shortly before share prices were set. The decision reflects increasing…

On February 15, 2019, the Securities and Exchange Commission (the “SEC”) announced that it had settled—on a no-admit, no-deny basis—with Cognizant Technology Solutions Corporation (“Cognizant”) for alleged violations of the Foreign Corrupt Practices Act (the “FCPA”) involving Cognizant’s former president and chief legal officer.[1] The same day, the Department of Justice (the “DOJ”) indicted the two former executives and the SEC filed a civil complaint seeking permanent injunctions, monetary penalties, and officer-and-director bars against them. The DOJ declined to prosecute Cognizant.[2] The DOJ’s declination was in part based on the fact that Cognizant quickly and voluntarily self-reported the conduct, and, as a result of that self-report, the DOJ was able to identify culpable individuals. This settlement reflects the DOJ demonstrating its continued commitment to its FCPA Corporate Enforcement Policy, under which the DOJ has committed to extending significant cooperation credit, up to and including declinations, to companies that provide meaningful assistance to further DOJ investigations. The resolution also reflects the DOJ’s “anti-piling on” policy in action, as the DOJ declination recognized the “adequacy of remedies such as civil or regulatory enforcement actions,” namely Cognizant’s resolution with the SEC, as a factor in declining to prosecute.[3]
Continue Reading DOJ Issues Twelfth Declination Letter Under FCPA Cooperation Policy

On January 29, 2019, the SEC announced four settlements with publicly-traded companies for failure to maintain adequate internal control over financial reporting.

None of the companies was charged with making false or inaccurate statements, either about its ICFR or otherwise; indeed, each had repeatedly disclosed material weaknesses in ICFR over many years.

These cases are…

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 December 26, 2018, the SEC announced settled charges against ADT Inc. after finding that ADT, in two earnings releases, gave undue emphasis to non-GAAP adjusted EBITDA figures because they identified the relevant GAAP measures only later and much less prominently.

Without admitting or denying the SEC’s factual or legal claims, ADT agreed to an…

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.
Continue Reading D.C. Circuit Rules in Special Counsel Mueller Investigation That State-Owned Corporations Are Subject to Criminal Jurisdiction in the United States

On November 15, 2018, the Division of Enforcement (the “Division”) of the U.S. Commodity Futures Trading Commission (“CFTC”) released its Annual Report on the Division of Enforcement (the “Report”), highlighting the enforcement division’s recent initiatives and reinforcing its focus on cooperation and self-reporting.  The Report provides a succinct overview of the Division’s enforcement priorities over the last year, discusses its overall enforcement philosophy, sets out key metrics about the cases brought in the last year, and highlights its key initiatives for the coming year.  While the Division’s priorities—preserving market integrity, protecting customers, promoting individual accountability, and increasing coordination with other regulators and criminal authorities—do not mark a departure from prior guidance, the Report does highlight the Division’s particular focus on individual accountability and a few target areas of enforcement. 
Continue Reading Virtual Currencies, Manipulation, Cooperation, and More: CFTC Enforcement Division’s 2018 Annual Report

There have been plenty of press reports about the SEC’s settlement with Elon Musk arising from his tweeting about taking Tesla private.  But the concurrent settlement with Tesla itself provides interesting lessons for disclosure and governance at public companies.

Tesla agreed to pay a $20 million penalty and agreed to several “undertakings” to strengthen its governance and controls including a requirement that it add two independent directors to its Board.  And, under his own settlement, Musk agreed to step down for three years as chairman of the Board of Directors, although he is allowed to continue as CEO. 
Continue Reading The Tesla Settlement – What It Means for Other Companies

On October 15, 2018, the U.S. Department of Health and Human Services, Office for Civil Rights (OCR) announced a $16 million settlement with Anthem, Inc. over alleged violations of federal privacy and security regulations under the Health Insurance Portability and Accountability Act (HIPAA).  The settlement resolves an investigation following a data breach that exposed protected health information of nearly 79 million people.  According to OCR, the incident is the largest health data breach to date in the United States and Anthem’s payment similarly represents the largest HIPAA settlement to date.  The settlement is consistent with OCR’s recent focus on enforcing regulatory requirements to conduct an accurate and thorough risk analysis and maintain appropriate mechanisms to monitor systems that contain protected health information and to control access to that information. It also highlights the agency’s distinct cybersecurity remediation approach.
Continue Reading The U.S. Department of Health And Human Services Settles With Anthem for Record $16M Over Alleged HIPAA Violations

Last month, Guatemalan President Jimmy Morales effectively shut down the operation of the UN-operated International Commission against Impunity in Guatemala (called by its Spanish initials, “CICIG”) by declining to renew its mandate past its September 2019 expiration date and by barring the head of CICIG, Iván Velásquez, from re-entering the country.  CICIG, a uniquely independent organ of the United Nations (“U.N.”), was created in 2007 to support and assist Guatemalan institutions in identifying, investigating, and prosecuting public corruption.  Over the past decade, it has investigated nearly 200 public officials, and its efforts led to the prosecution and ultimate resignation of former Guatemalan President, Otto Pérez Molina.[1] 
Continue Reading Anti-Corruption in Guatemala: A Critical Moment for CICIG