DOJ's 10 Hallmarks of a Good Compliance Program
In a speech at an ethics and compliance conference in Atlanta, GA, Leslie Caldwell, Assistant Attorney General for the Justice Department's Criminal Division, articulated 10 hallmarks of a good internal compliance program. Although the hallmarks were somewhat predictable (number one is "tone at the top"), Caldwell set forth several examples of actions to avoid (firing low-level employees but not their bosses, who may have directed the conduct) and actions to embrace (assigning responsibility to senior executives for implementing and overseeing a company's compliance program). She also gave suggestions on how a company can cooperate fully with the government, noting, for example, that withholding documents based on a broad reading of foreign data protection laws is likely to prevent full cooperation credit.
More DOJ Thoughts on Compliance
At yet another speech on ethics and compliance, Marshall Miller, Principal Deputy Assistant Attorney General for the Justice Department's Criminal Division, emphasized that a company's "culture of compliance" must extend beyond U.S. borders. Miller cited the cases brought against BNP Paribas, Credit Suisse, HSBC and Standard Chartered, in which foreign bank employees explicitly circumvented U.S.-based compliance policies. In that connection, Miller noted, even when a company has good compliance policies, failing to monitor or test adherence to those policies exposes the company to great risk. Miller also cited the case of Weatherford International, a Swiss oil company listed on the NYSE that pleaded guilty to violations of the FCPA and export control laws. One of the most glaring compliance problems, Miller noted, was Weatherford's failure to translate its compliance policy into languages other than English, despite having subsidiaries and operations in more than 100 countries around the world.
Conviction Based on "Russian Facebook" Page Vacated
On October 3, 2014, the U.S. Court of Appeals for the Second Circuit vacated the conviction of Aliaksandr Zhyltsou on charges of unlawfully transferring a false identification document. At trial, in support of its contention that Zhyltsou used the moniker "Azmadeuz," the government offered into evidence a printed copy of a webpage, which it claimed was Zhyltsou's profile page from VK.com, "the Russian equivalent of Facebook." Zhyltsou objected that the page had not been properly authenticated under Rule 901 of the Federal Rules of Evidence. The district court admitted the document over Zhyltsou's objection. The Second Circuit held that the district court erred because the government had not presented sufficient evidence that Zhyltsou had created the profile page or was responsible for its contents. The Second Circuit noted that the information contained on the profile page was general and known by individuals who may have had reasons to forge the page and attribute it to Zhyltsou, and that there was no evidence that identity verification was necessary to create a page with VK.
Challenges to Constitutionality of SEC ALJ Proceedings
Two lawsuits recently filed in the Southern District of New York argue that SEC administrative proceedings violate Article II of the U.S. Constitution, which provides that the "executive Power shall be vested in a President of the United States of America." In Stillwell v. SEC, the plaintiff argues that SEC Administrative Law Judges (ALJs) are executive branch officers within the meaning of Article II and thus may not be separated from presidential supervision and removal by more than one layer of tenure protection. In violation of that standard, the plaintiff argues, SEC ALJs enjoy two or more layers of tenure protection. In Peixoto v. SEC, the plaintiff makes the same constitutional argument, and further asserts that the SEC sued him administratively because it could not win at a jury trial in light of the weak evidence and novel application of the insider trading laws.
No Harm Required to Prove Honest-Services Fraud
The Seventh Circuit in United States v. Nayak defined the scope of prosecutions for private-sector honest-services fraud. Raghuveer Nayak pleaded guilty to mail fraud for bribing physicians in exchange for referrals to his outpatient surgery centers. In the plea agreement, the government agreed to let Nayak appeal the conviction and argue that "the indictment was legally insufficient because the government did not allege that his conduct caused or was intended to cause tangible harm to any of the referring physicians' patients." The government did not allege that Nayak's scheme resulted in any tangible harm to the patients in the form of either higher costs or inferior care. After noting that honest-services mail fraud focused on "the defendant's benefit" and not the victim's harm, the court rejected Nayak's argument. It held that "actual or intended tangible harm is not an element of the offense of honest-services mail fraud." Therefore, it affirmed.
Reality TV Can Be Taxing
The U.S. Attorney's Office for the District of New Jersey has its hands full with reality TV stars with tax problems. And some are faring better than others - for now. Teresa Giudice, who was a "Real Housewife of New Jersey," lost her bid to convert 12 months of her 15-month sentence for tax evasion from incarceration to home confinement. Meanwhile, Mike "The Situation" Sorrentino, who lived on "Jersey Shore," was released on $250,000 bail in advance of his tax-evasion trial due to begin in December. One thing is clear: If you are paid millions of dollars to be on a reality show, file accurate tax returns.
Dina Kapur Sanna and Carl A. Merino co-authored an article, "Long Arm of the Law: The Risk to U.S. Practitioners of Prosecution for Facilitating Foreign Tax Offenses," (subscription required) in the June 2017 issue of Trusts & Estates Magazine.
On June 15, Dina Kapur Sanna and Carl A. Merino moderated a discussion panel at the Cambridge International Wealth Advisors Forum 2.0 held in Lisbon about the role of wealth advisors as "gatekeepers" to the financial system and measures being implemented by different jurisdictions to combat money laundering and tax evasion, including obligations imposed on lawyers and other advisors.
Day Pitney Newsletter
Dan Wenner authored an article, "Inside the 1st Muni Bond Criminal Case," published by Law360.
On May 25, the Federal Bar Council held a CLE, entitled: "Second Circuit Appellate Advocacy Workshop," which was coordinated by Dan Wenner.
Stan Twardy, Elizabeth Latif and Eric Sussman were successful in having a federal judge dismiss a False Claims Act lawsuit against our client Sikorsky Aircraft Corp.
Danielle Corcione was quoted by Law360 in the article titled "Attys Dish on Escobar's FCA Impact One Year Later," in which she commented on the U.S. Supreme Court's decision one year ago in Universal Health Services v. Escobar and its impact on False Claims Act litigation.
Day Pitney Press Release
"Don't Panic, Don't Lie"; Steven Cash is quoted in the National Law Journal discussing how individuals should respond when they find themselves involved in criminal investigations.
Day Pitney Press Release