Corporate Enforcement

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On January 14, 2022, the United States District Court for the Northern District of California issued a decision in SEC v. Matthew Panuwat[1] validating the legal theory advanced by the Commission that trading in the securities of a competitor company could form the basis of an insider trading violation where the defendant learned that an acquisition of his employer was imminent.  In denying the defendant’s motion to dismiss the complaint, the court ruled that the SEC had sufficiently pled a claim, marking the first judicial decision concerning alleged insider trading in securities of a company based on material, nonpublic information (“MNPI”) about another company, a practice that has sometimes been referred to as “shadow trading.”   The court’s refusal to dismiss the SEC’s novel legal theory that trading on the basis of MNPI of one company to profit on a securities transaction involving a competitor constitutes actionable insider trading should be considered by companies and individuals as they assess trading decisions and policies.
Continue Reading SEC’s “Shadow Trading” Insider Trading Case Allowed to Proceed

The path was paved in 2021 for unprecedented tax developments in the coming years for large businesses, especially for multinationals and investment businesses operating across borders.
Continue Reading Taxes: Stepping up Enforcement and Ending the Global “Race to the Bottom”

2021 was a year of transition for white-collar criminal and regulatory enforcement. As courthouses reopened and trials resumed, newly-installed heads of law enforcement authorities looked to reset priorities and ramp up enforcement in the first year of the Biden administration. …
Continue Reading Priorities, Trends and Developments in Enforcement and Compliance

On October 28, 2021, Deputy Attorney General Lisa O. Monaco announced the administration’s first significant changes to the DOJ’s policies on corporate criminal enforcement, highlighting departures from Trump-era policies. The announcement focused on three corporate enforcement policy developments:

  1. Individuals and Corporate Misconduct: to be eligible for cooperation credit, companies must provide the DOJ with all

…

On September 2 and 3, 2021, the Securities and Exchange Commission (“SEC”) announced settlements with Pareteum Corporation (“Pareteum”) and Kraft Heinz Co.[1] (“KHC”) for accounting fraud following years of alleged accounting improprieties and financial restatements at both companies.  The underlying facts differed in significant ways, including with respect to the alleged involvement of senior executives, but both companies apparently received cooperation credit for their prompt and proactive remediation and cooperation with the SEC Division of Enforcement’s investigations.  The messaging in relation to the announcement of these cases and their timing, coming in the early days of new Enforcement Director Gurbir Grewal’s tenure, is instructive.  We expect the SEC to continue to focus on accounting fraud and to credit companies who provide cooperation in these challenging and resource-intensive investigations.  To see a meaningful increase in the frequency and nature of cooperation, the SEC would be well-served to provide even more explicit guidance on how cooperation results in improved settlement terms.  That said, these recent settlements are helpful in understanding the benefits of cooperation at this time.
Continue Reading Two Recent Settlements Highlight Heightened SEC Focus on Accounting Fraud and Potential Benefits of Cooperation

On July 29, 2021, the U.S. Attorney’s Office for the Southern District of New York unsealed a securities and wire fraud indictment against Trevor Milton, the founder and one-time chairman of Nikola Corporation (“Nikola”), a pre-revenue electric- and hydrogen-powered vehicle company which went public through a merger with a special-purpose acquisition company (“SPAC”).[1]  The Indictment alleges that Milton made deceptive, false, and misleading claims regarding Nikola’s products and technology, which were directed at retail investors through social media and television, print, and podcast interviews.  The SEC also filed a parallel civil action against Milton, alleging violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act, and which contends that Milton engaged in a “relentless public relations blitz” on social media and the popular press directed at “Robinhood investors” in order to inflate Nikola’s stock price.

These actions further confirm the heightened law enforcement and regulatory scrutiny of SPACs, as well as continuing interest by government authorities in protecting retail investors in so-called meme stocks.[2]
Continue Reading DOJ Indicts Founder of Nikola for Allegedly Defrauding Retail SPAC Investors

On July 13, 2021, the Securities and Exchange Commission (“SEC”) announced a major enforcement action related to a proposed merger between a special purpose acquisition company (“SPAC”) and a privately held target company (“Target”).  This followed numerous warnings by the SEC staff over several months of enhanced scrutiny of such transactions under the federal securities laws.[1]  The respondents, except for the Target’s CEO, settled the action by collectively agreeing to civil penalties of approximately $8 million and to certain equitable relief described below. [2]
Continue Reading SEC Brings SPAC Enforcement Action and Signals More to Come

On May 12, 2021, Telefonaktiebolaget LM Ericsson (“Ericsson”) announced that it had reached an agreement to settle a claim by a competitor, Nokia Corporation, for €80 million (approximately $97 million).[1]  Although Nokia’s complaint against Ericsson was not filed publicly, and therefore the details of the claim are not known, Ericsson’s announcement stated that “[t]he settlement relates to events that were the subject of a 2019 resolution with the U.S. Department of Justice (DOJ) and U.S. Securities and Exchange Commission (SEC) of investigations into Ericsson’s violations of the U.S. Foreign Corrupt Practices Act (FCPA).”[2]  This appears to be a rare instance in which a company that allegedly paid bribes to obtain business from a government entity agreed to compensate a competitor that lost out on the business opportunity as a result of the corrupt conduct, and demonstrates a further, significant risk of follow-on litigation relating to FCPA violations.
Continue Reading Recent Settlement Highlights Risk of Follow-On Litigation Related to FCPA Investigations

On April 29, 2021, the Securities and Exchange Commission (the “SEC”) announced settled charges against eight public companies that filed notifications of late filings on Form 12b-25 (more commonly known as “Form NT”) without disclosing in those filings a pending restatement or correction of financial statements.

These settlements are a reminder that filing a Form…

As discussed in our prior blog post, earlier this year the Supreme Court vacated and remanded the Second Circuit’s decision in a high-profile insider trading case, United States v. Blaszczak,[1] for reconsideration in light of the Supreme Court’s “Bridgegate” decision in Kelly v. United States.[2]  In Blaszczak, the Second Circuit had previously found that a government agency’s confidential pre-decisional information constituted “property” under Title 18, and that therefore the Blaszczak defendants had committed fraud under the applicable statutes when they obtained the information and traded on it.[3]  However, following that decision, the Supreme Court held in Kelly that a government regulatory interest did not constitute “property” for the purpose of Title 18 fraud statutes.[4]  The Blaszczak defendants filed a petition for certiorari, contending that the Second Circuit’s reading of Title 18 could not be reconciled with the Supreme Court’s holding.[5]  After the Blaszczak defendants filed their petition, the government consented to a remand to the Second Circuit.
Continue Reading DOJ Concedes Error In Title 18 Insider Trading Convictions After Supreme Court’s “Bridgegate” Decision