Corporate Enforcement

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On August 27, 2018, the Securities and Exchange Commission (“SEC”) announced a $34.5 million settlement with investment management firm Legg Mason, Inc. (“Legg Mason” or the “Company”) for violating the internal controls provision of the Foreign Corrupt Practices Act (“FCPA”) in connection with a scheme to bribe Libyan government officials to secure investments from Libyan state-owned financial institutions.[1]  The SEC settlement follows a June 2018 non-prosecution agreement between Legg Mason and the U.S. Department of Justice (“DOJ”) regarding the same conduct.[2]  Under the non-prosecution agreement, Legg Mason agreed to pay $64.2 million.  The Legg Mason settlements reflect the increased focus of U.S. authorities on coordinating with other authorities in imposing penalties on a company, including not “piling on,” and the continued enforcement of the FCPA, while highlighting the potential risks under the FCPA of not having proper controls in place for assessing use of third party intermediaries.
Continue Reading Legg Mason Settles FCPA Charge with SEC for $34.5 Million

When the U.S. Department of Justice opened an investigation against Volkswagen AG (“VW“) and its subsidiaries Audi AG (“Audi”) and Volkswagen Group of America, VW instructed an international law firm to conduct an internal investigation and to represent it (i.e., only VW) before the U.S. Department of Justice.  The lawyers, including German lawyers based in the firm’s Munich office, conducted the internal investigation throughout the Volkswagen group.  Audi, though not a client of the law firm, allowed the internal investigation within its sphere and accessed the internal investigation’s findings via VW.  In January 2017, VW and the U.S. Department of Justice concluded a plea agreement covering 2.0 liter diesel engines designed and produced by VW and installed in VW and Audi vehicles and 3.0 liter engines designed and produced by Audi and installed in VW vehicles.
Continue Reading German Federal Constitutional Court: Seizure of Documents Relating to an Internal Investigation at German Office of International Law Firm Found Not to Violate Constitutional Rights

Yesterday the U.S. Department of Justice (“DOJ”) announced a non-prosecution agreement (“NPA”) with a Hong Kong-based subsidiary of Credit Suisse Group AG arising out of the so-called “princelings” scandals of recent years—the practice of hiring unqualified, but politically-connected, relatives of Chinese officials to garner business from state-owned firms.[1]  Per Credit Suisse’s admissions, “bankers discussed and approved the hiring of close friends and family of Chinese officials in order to secure business,” resulting in $46 million “in profits from business mandates with Chinese” state-owned enterprises.  As part of the resolution, Credit Suisse agreed to a $47 million criminal penalty, to continue to cooperate with DOJ, and to enhance its compliance program, including adopting additional controls around hiring.  In addition, Credit Suisse agreed to pay nearly $25 million in disgorgement and $4.8 million in prejudgment interest to the Securities and Exchange Commission (“SEC”).  In its press release, DOJ stated that it was giving Credit Suisse a 15 percent discount from the bottom end of the U.S. Sentencing Guidelines for its cooperation in the investigation, while also (as discussed more below) noting steps the firm did not take that worked to limit the amount of such cooperation credit.  While this is hardly the first of the “princelings” cases, it does demonstrate DOJ’s continued commitment to the cooperation framework it laid out in its FCPA Corporate Enforcement Policy (“Enforcement Policy”) late last year.[2]
Continue Reading Recent Settlement Highlights Cooperation Parameters Under the Department of Justice’s FCPA Corporate Enforcement Policy

On June 25, 2018, the Second Circuit amended its opinion in United States v. Martoma, an insider trading case that has received significant attention as a vehicle to clarify the “personal benefit” element of tippee liability in insider trading cases in the Second Circuit.  While the Second Circuit again upheld the insider trading conviction of former S.A.C. Capital Advisors portfolio manager Mathew Martoma, this time it appears to have breathed life back into its “meaningfully close personal relationship” requirement for establishing insider trading liability against an individual who receives and trades on confidential information (a “tippee”).  Those  following the evolution of insider trading doctrine should pay close attention to lower courts’ interpretations of the “meaningfully close personal relationship” test, and what prosecutors must show to satisfy this requirement, in the wake of Martoma.
Continue Reading Second Circuit Potentially Revives Newman’s “Meaningfully Close Personal Relationship” Test, Amends Martoma Decision

On June 13, 2018, in its latest decision in a long-running litigation, the U.S. District Court for the District of Columbia considered the applicability of certain exemptions under the Freedom of Information Act (“FOIA”) to documents sought by journalists relating to the actions of the independent compliance monitor that Siemens AG was required to retain under the terms of its 2008 plea agreement for violations of the Foreign Corrupt Practices Act (the “FCPA”).  Broadly speaking, although the court concluded that portions of the documents that related to Siemens’ business operations and the DOJ’s analysis of the monitor’s activities were exempted from disclosure, the court also required the DOJ to produce other portions of those materials and to reevaluate, based on the court’s decision, whether additional materials had to be disclosed.  The decision, and the lengthy litigation over the application of FOIA to these materials, highlight the complexity of identifying the boundaries of the FOIA protection applicable to the typically sensitive and confidential information companies provide to compliance monitors and the risk that such information later will have to be disclosed once it is in the hands of the government. 
Continue Reading Recent District Court Decision on Applicability of FOIA to Siemens FCPA Monitorship Documents Provides Guidance on Scope of Possible Disclosures

A recent report in the Wall Street Journal, drawing on a source “familiar with the matter”, indicates that the Securities and Exchange Commission’s Division of Enforcement has launched a probe into whether certain issuers may have improperly rounded up their earnings per share to the next higher cent in quarterly reports. While the SEC has…

On June 12, 2018, in People v. Credit Suisse Sec. (USA) LLC the New York Court of Appeals dismissed the Attorney General’s Martin Act claim against Credit Suisse Securities (USA) LLC and affiliated entities on the grounds that this claim was barred by a three year statute of limitations. The Court of Appeals thus overruled…

On May 29, 2018, the U.S. Supreme Court issued an unanimous opinion in Lagos v. United States. Lagos presented the issue of whether costs incurred during and as a result of a corporate victim’s investigation (rather than a governmental investigation) must be reimbursed by a criminal defendant under the Mandatory Victims Restitution Act (“MVRA”).…

On June 4, 2018, the U.S. Department of Justice announced that Société Générale S.A. (“Société Générale”) and its wholly-owned subsidiary, SGA Société Générale Acceptance, N.V. (“SGA”), have agreed to pay over $1 billion in total penalties to U.S. and French authorities in connection with bribe payments to Libyan officials and manipulation of the London Interbank…

The Financial Conduct Authority and the Prudential Regulation Authority (together, the “Regulators”) have jointly fined Barclays’ CEO, Jes Staley, a total of £642,430. The fine was imposed for Mr Staley’s repeated attempts to uncover the identity of an anonymous whistleblower, which constituted a failure to act with the due skill, care and diligence the Regulators expect from a CEO. The case was observed with interest as the first brought by financial regulators under the UK’s Senior Managers Regime. The Regulators chose not to impose more severe sanctions (which could have involved the removal of Mr Staley from his role) after failing to find that Mr Staley was guilty of any deliberate wrongdoing.
Continue Reading UK Regulators Fine Barclays’ CEO for Errors of Judgement in Relation to Whistleblower