Posts Tagged ‘DOJ’

Too-Big-To-Fail Banks Not Guilty As Not Charged

Posted by June Rhee, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Friday March 28, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Nizan Geslevich Packin of the University of Pennsylvania Law School; Zicklin School of Business, Baruch College, City University of New York.

In the paper, Breaking Bad? Too-Big-To-Fail Banks Not Guilty As Not Charged, forthcoming in the Washington University Law Review, Vol. 91, No. 4, 2014, I focus on the benefits that the largest financial institutions receive because they are too-big-to-fail. Since the 2008 financial crisis, rating agencies, regulators, global organizations, and academics have argued that large banks receive significant competitive advantages because the market still perceives them as likely to be saved in a future financial crisis. The most significant advantage is a government implicit subsidy, which stems from this market perception and enables the largest banks to borrow at lower interest rates. And while government subsidies were the subject of a November 2013 Government Accounting Office report, in the paper I focus on a specific aspect of the benefits the largest banks receive: the economic advantages resulting from exempting the largest financial institutions from criminal statutes. I argue that this exemption—which has been widely discussed in the media over the last few years, following several scandals involving large financial institutions—not only contributes to the subsidies’ economic value, but also creates incentives for unethical and even criminal activity.

…continue reading: Too-Big-To-Fail Banks Not Guilty As Not Charged

Crisis Management Lesson from Toyota and GM: “It’s Our Problem the Moment We Hear About It”

Posted by Benjamin W. Heineman, Jr., Harvard Law School Program on Corporate Governance and Harvard Kennedy School of Government, on Thursday March 20, 2014 at 3:57 pm
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Editor’s Note: Ben W. Heineman, Jr. is a former GE senior vice president for law and public affairs and a senior fellow at Harvard University’s schools of law and government. This post is based on an article that appeared in the Harvard Business Review online, which is available here.

Delay in confronting crises is deadly. Corporate leaders must have processes for learning of important safety issues. Then they must seize control immediately and lead a systematic response. Crisis management is the ultimate stress test for the CEO and other top leaders of companies. The mantra for all leaders in crisis management must be: “It is our problem the moment we hear about it. We will be judged from that instant forward for everything we do—and don’t do.”

These are key lessons for leaders in all types of businesses from the front page stories about Toyota’s and GM’s separate, lengthy delays in responding promptly and fully to reports of deadly accidents possibly linked to product defects.

The news focus has been on regulatory investigations and enforcement relating to each company, but the ultimate question is why the company leaders didn’t forcefully address the possible defect issues when deaths started to occur.

…continue reading: Crisis Management Lesson from Toyota and GM: “It’s Our Problem the Moment We Hear About It”

The Alcoa FCPA Settlement: Are We Entering Strict Liability Anti-Bribery Regime?

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday February 5, 2014 at 9:14 am
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Editor’s Note: The following post comes to us from Gregory M. Williams, partner focusing on complex commercial litigation and arbitration and the Foreign Corrupt Practices Act at Wiley Rein LLP, and is based on a Wiley Rein article by Mr. Williams, Ralph J. Caccia, and Richard W. Smith.

“This Order contains no findings that an officer, director or employee of Alcoa knowingly engaged in the bribe scheme.”

There are several notable aspects of aluminum producer Alcoa, Inc.’s (“Alcoa”) recent FCPA settlement. The $384 million in penalties, forfeitures and disgorgement qualify as the fifth largest FCPA case to date. Further, it is remarkable that such a large monetary sanction was imposed when the criminal charges brought by the U.K. Serious Fraud Office against the consultant central to the alleged bribery scheme were dismissed on the grounds that there was no “realistic prospect of conviction.” Perhaps most striking, however, is the theory of parent corporate liability that the settlement reflects. Although there is no allegation that an Alcoa official participated in, or knew of, the improper payments made by its subsidiaries, the government held the parent corporation liable for FCPA anti-bribery violations under purported “agency” principles. Alcoa serves as an important marker in what appears to be a steady progression toward a strict liability FCPA regime.

…continue reading: The Alcoa FCPA Settlement: Are We Entering Strict Liability Anti-Bribery Regime?

White Collar and Regulatory Enforcement Trends in 2014

Editor’s Note: John F. Savarese and Wayne M. Carlin are partners in the Litigation Department of Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton firm memorandum by Mr. Savarese, Mr. Carlin, Ralph M. Levene, David Gruenstein, and David M. Murphy.

Last year, in our annual survey (discussed on the Forum here) of the white collar and regulatory enforcement landscape, we noted that the trend toward ever more aggressive prosecutions reflected a “gloomy picture” for large companies facing such investigations. Our assessment remains the same, as the pattern of imposing massive fines and extracting huge financial settlements from companies continued unabated in 2013. For example, on November 17, 2013, DOJ announced that it had reached a $13 billion settlement with JPMorgan to resolve claims arising out of the marketing and sale of residential mortgage-backed securities—the largest settlement with a single entity in American history. Johnson & Johnson agreed to pay more than $2.2 billion to resolve criminal and civil investigations into off-label drug marketing and the payment of kickbacks to doctors and pharmacists. Deutsche Bank agreed to pay $1.9 billion to settle claims by the Federal Housing Finance Agency that it made misleading disclosures about mortgage-backed securities sold to Fannie Mae and Freddie Mac. SAC Capital entered a guilty plea to insider trading charges and was subjected to a $1.8 billion financial penalty—the largest insider trading penalty in history. And in the fourth largest FCPA case ever, French oil company Total S.A. agreed to pay $398 million in penalties and disgorgement for bribing an Iranian official. Not to be outdone, the SEC announced that it had recovered a record $3.4 billion in monetary sanctions in the 2013 fiscal year.

…continue reading: White Collar and Regulatory Enforcement Trends in 2014

Who Is Responsible for Libor Rate-Fixing?

Posted by June Rhee, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday December 26, 2013 at 9:00 am
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Editor’s Note: The following post comes to us from Mark R. Patterson at Fordham University School of Law.

On December 4, the European Commission announced the imposition of €1.7 billion in fines on eight international banks for participation in cartels in euro- and yen-denominated interest-rate derivatives. The banks had conspired on submissions for euro and yen Libor rates, and the fines were imposed under European antitrust law. As EU Commissioner Joaquín Almunia said, “What is shocking about the LIBOR and EURIBOR scandals is not only the manipulation of benchmarks, which is being tackled by financial regulators worldwide, but also the collusion between banks who are supposed to be competing with each other.”

Commissioner Almunia’s comment might have been addressed specifically to U.S. antitrust enforcers. Although the Antitrust Division of the Department of Justice has been involved in some of the settlements that the department has reached with banks, to date none of those settlements has included antitrust liability. Instead, the banks have pled guilty or admitted liability only for fraud, even though the statements issued by the Justice Department when announcing the settlements describe just the sort of collusion to which Commissioner Almunia referred.

…continue reading: Who Is Responsible for Libor Rate-Fixing?

Credit Crisis Litigation Update: It is Settlement Time

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Saturday November 30, 2013 at 9:00 am
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Editor’s Note: The following post comes to us from Faten Sabry, Senior Vice President at NERA Economic Consulting, and is based on a NERA publication by Ms. Sabry, Eric Wang, and Joseph Mani; the full document, including footnotes, is available here.

It has been more than six years since the onset of the credit crisis and we have documented for the first time in the past few months a significant increase in the number and size of settlements. Meanwhile, the pace of new filings has slowed as housing markets continue to improve and delinquencies and defaults decline. However, litigation arising from the credit crisis is far from over.

In this post, we discuss the recent trends of settlement activity and review some of the major settlements in credit crisis litigation. We also discuss mortgage settlements that are related to repurchase demands mainly between mortgage sellers and Fannie Mae and Freddie Mac. We then examine the current trends in filings, including the types of claims made, the nature of defendants and plaintiffs in the litigation, and the financial products involved.

Our main findings, which are discussed in greater detail below, include the following:

…continue reading: Credit Crisis Litigation Update: It is Settlement Time

Court Curtails Territorial Reach of Criminal Liability Under Section 10(b)

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday September 11, 2013 at 8:56 am
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Editor’s Note: The following post comes to us from Jonathan R. Tuttle, partner in the litigation department at Debevoise & Plimpton LLP, and is based on a Debevoise & Plimpton client update.

On August 30, 2013, the United States Court of Appeals for the Second Circuit unanimously held that Section 10(b) of the Securities Exchange Act of 1934 (“Section 10(b)”) does not apply to extraterritorial conduct, “regardless of whether liability is sought criminally or civilly.” Interpreting the scope of the Supreme Court’s landmark ruling in Morrison v. National Australian Bank Ltd., [1] the Second Circuit’s significant decision in United States v. Vilar, et al. means that a criminal defendant may be convicted of fraud under Section 10(b) only if the defendant engaged in fraud “in connection with” a security listed on a United States exchange or a security “purchased or sold” in the United States. In reaching its conclusion, the court rejected the government’s attempts to distinguish criminal liability under Section 10(b) from the civil liability at issue in Morrison, holding that “[a] statute either applies extraterritorially or it does not, and once it is determined that a statute does not apply extraterritorially, the only question we must answer in the individual case is whether the relevant conduct occurred in the territory of a foreign sovereign.”

…continue reading: Court Curtails Territorial Reach of Criminal Liability Under Section 10(b)

2013 Mid-Year FCPA Update

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Saturday July 27, 2013 at 9:57 am
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Editor’s Note: The following post comes to us from Lisa A. Alfaro, partner at Gibson, Dunn & Crutcher LLP, and is based on a Gibson Dunn publication; the full publication, including international implications, is available here.

Significant FCPA developments continued apace during the first six months of 2013. After a relative downtick in 2012, the first half of 2013 saw criminal enforcement of the statute return to the robust levels of recent years. With approximately 60 devoted prosecutors and enforcement attorneys, whose efforts are frequently supplemented by their colleagues in the U.S. Attorneys’ and regional enforcement offices across the country, the Government’s efforts to enforce the statute have never been stronger.

This client update provides an overview of the Foreign Corrupt Practices Act (“FCPA”) as well as domestic and international cross-border anti-corruption enforcement, litigation, and policy developments from the first half of 2013. There is much for us to report—the last six months witnessed a series of judicial decisions that further define the FCPA’s scope, a plethora of enforcement actions, Corporate America’s response to the U.S. government’s Resource Guide to the U.S. Foreign Corrupt Practices Act, and increasingly vigorous anti-corruption enforcement and legislative activities from around the world.

FCPA Overview

The FCPA’s anti-bribery provisions make it illegal to corruptly offer or provide money or anything of value to officials of foreign governments or foreign political parties with the intent to obtain or retain business. These provisions apply to “issuers,” “domestic concerns,” and “agents” acting on behalf of issuers and domestic concerns, as well as to “any person” that violates the FCPA while in the territory of the United States. The term “issuer” covers any business entity that is registered under 15 U.S.C. § 78l or that is required to file reports under 15 U.S.C. § 78o(d). In this context, foreign issuers whose American Depository Receipts (“ADRs”) are listed on a U.S. exchange are “issuers” for purposes of the FCPA. The term “domestic concern” is even broader and includes any U.S. citizen, national, or resident, as well as any business entity that is organized under the laws of a U.S. state or that has its principal place of business in the United States.

…continue reading: 2013 Mid-Year FCPA Update

2013 Mid-Year Update on Corporate Deferred Prosecution and Non-Prosecution Agreements

Posted by Joseph Warin, Gibson, Dunn & Crutcher LLP, on Wednesday July 24, 2013 at 9:20 am
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Editor’s Note: Joseph Warin is partner and chair of the litigation department at the Washington D.C. office of Gibson, Dunn & Crutcher. The following post and is based on a Gibson Dunn client alert; the full publication, including footnotes and appendix, is available here.

Deferred Prosecution Agreements (“DPAs”) and Non-Prosecution Agreements (“NPAs”) (collectively, “agreements”) continue to be a consistent vehicle for prosecutors and companies alike in resolving allegations of corporate wrongdoing. In the two decades since their emergence as an alternative to the extremes of indictment and outright declination, DPAs and NPAs have risen in prominence, frequency, and scope. Such agreements are now a mainstay of the U.S. corporate enforcement regime, with the U.S. Department of Justice (“DOJ”) leading the way, and the U.S. Securities and Exchange Commission (“SEC”) recently expanding its use of this tool. These types of agreements have achieved official acceptance as a middle ground between exclusively civil enforcement (or even no enforcement action at all) and a criminal conviction and sentence. With the United Kingdom’s recent enactment of its own DPA legislation, the trend toward use of these alternative means for resolving allegations of corporate wrongdoing is poised to continue.

…continue reading: 2013 Mid-Year Update on Corporate Deferred Prosecution and Non-Prosecution Agreements

Cross Border Mergers & Acquisitions: Anti-Corruption Issues

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday April 11, 2013 at 9:22 am
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Editor’s Note: The following post comes to us from Bill Michael, partner, and co-chair of Mayer Brown LLP’s White Collar Defense & Compliance practice group, and Bill Kucera, partner in Mayer Brown’s Mergers & Acquisitions practice group.

Cross-border mergers and acquisitions can provide tremendous business opportunities for companies looking to expand globally. Reduced labor and operational costs, new technology and vast new markets for existing products are just some of the benefits companies look to take advantage of when considering entering new geographical areas. However, in analyzing cross-border deals M&A professionals must be conversant with the risk factors associated with the vigorous and cooperative anti-corruption efforts being taken by regulators around the world. While these anti-corruption efforts are increasingly legislated through many jurisdictions, the most significant attention remains focused on the efforts undertaken by the United States in this area.

…continue reading: Cross Border Mergers & Acquisitions: Anti-Corruption Issues

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