Federal Securities Law Blog : Federal Securities Lawyer & Attorney : Porter Wright Law Firm : Securities Exchange Law : Serving Ohio, Washington DC, Florida

Two recent posting in the blogosphere discuss the long-threatened Congressional efforts to roll back the impact of the Dodd–Frank Wall Street Reform and Consumer Protection Act. First, a post from Jim Hamilton's World of Securities Litigation discusses Congressional efforts to repeal specific regulations and pass fundamental and structural reform of the federal rulemaking system. Second, Broc Romanek of theCorporateCounsel.net Blog has a post which discusses the Whistleblower Improvement Act of 2011, which will require whistleblowers to report matters to his or her employer before reporting to the SEC.

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On August 23, 2011, the Government filed a Motion with Ninth Circuit Court of Appeals stating that it was dropping its appeal of the decision of District Court Judge George Wu to sentence Gerald and Patricia Green to only six months in prison following their conviction on FCPA charges. The Government had originally requested that the couple be sentenced to "a significant number of years" years, but later lowered their request to ten years. The couple has already served their six month sentences.

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On Wednesday, August 24, the SEC announced its latest result in its case relating to Galleon Management, this time obtaining a default judgment against Deep Shah, a former lodging industry analyst at Moody's. The Court entered a permanent injunction from future violations of Section 10(b) and Rules 10b-5, and disgorgement, prejudgment interest and civil penalty totaling over $34.5 million. The events involving Galleon Management, which had previously resulted in the criminal convictions of Raj Rajaratnam (discussed here) and Zvi Goffer (here), has also led to a number of settlements with the SEC.

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In a letter dated August 17, 2011, Senator Chuck Grassley (R. Iowa) of the Senate's Committee on the Judiciary, asked SEC Chairman Mary Schapiro whether the Commission has destroyed files relating to some of its more high-profile and controversial matters, such as its investigations of Bernie Madoff, Goldman Sachs, Bank of America, Lehman Brothers and others. Senator Grassley's inquiry is based on the allegations in a letter from Darcy Flynn, a thirteen-year veteran of the staff.

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The Commodity Futures Trading Commission has adopted its Final Rules to implement a whistleblower program mandated by the Dodd-Frank Act. The CFTC stated that it sought to harmonize its rules with those recently adopted by the SEC.

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Today, the Federal Securities Law Blog takes a look back at the last 30 days in the world of securities-related litigation in a new regular feature, which will appear on approximately the 15th of each month.

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The SEC announced that its Whistleblower Rules, adopted on May 25, 2011 became effective today and the Commission launched its new web page (here) for that particular office.  In addition, in his first speech since being appointed as Chief of the Office of the Whistleblower, Sean McKessey addressed some misunderstanding about certain hotly debated issues related to the whistleblower program.

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Following Standard & Poor's decision last Friday to downgrade the U.S. credit rating, there have been a couple of interesting articles regarding S & P and the SEC. An article from MarketWatch on Tuesday afternoon asked whether it would be appropriate for the Commission to investigate S & P regarding possible leaks of information on Friday prior to the credit rating announcement given the heavy trading volume that day. Meanwhile, a report from Reuters this morning said that S & P is resisting efforts from the SEC which would S & P to disclose "significant errors" in how it calculates its ratings.

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In the FCPA Sting Case, U.S. v. Goncalves, No. 09-cr-00335 (D.D.C.), which resulted in a mistrial last month for four of the 22 defendants (as discussed here), the Court has set a new schedule for the defendants, with four separate trials scheduled to begin between September 22, 2011 now and mid-May 2012. In the mean time, the Government defended its Indictment against a post-trial Rule 29 motion filed by the four defendants originally tried, arguing that the Court has already rejected the defense arguments and that the evidence at trial proved the existence of a conspiracy.

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On Friday, August 5, 2011, a Florida jury convicted Joel Esquenazi and Carlos Rodriguez, former executives of Terra Telecommunications Corporation, for their roles in a conspiracy to violate the FCPA and commit money laundering. U.S. v. Esquenazi, Case No. 09-cr-21010 (S.D. Fla. Filed Dec. 4, 2009), The convictions were the latest event in Government's aggressive prosecution of FCPA violations for bribes paid to Telecommunications D’Haiti S.A.M. ("Haiti Teleco"), a state-owned telecommunications company in Haiti.

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The SEC and Rajat Gupta have agreed to settle their dispute regarding the forum in which they should litigate the allegations of insider trading by the former Goldman Sachs director by dismissing the pending actions against each other. Specifically, the SEC has dismissed its Administrative Proceeding against Mr. Gupta alleging insider trading and the parties have advised Judge Jed Rakoff (who is presiding over the lawsuit filed in federal court in New York by Mr. Gutpa against the Commission) that they will be entering a Joint Stipulation of Dismissal. In doing so, the parties agreed that, if the SEC elects to bring action against Mr. Gupta, it will do so in federal court in New York and designate it as related to the other Galleon cases pending before Judge Rakoff.

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The Federal Securities Law Blog is pleased to announce its first e-Book: The "New Era" of FCPA Enforcement and How Defendants Are Fighting Back.

The e-Book discusses recent developments in three FCPA cases being litigated: the Lindsey Manufacturing case, the Carson case (both pending in California) and the "Shot Show" or FCPA Sting case (tried in federal court in D.C.). The e-Book focuses on the tactics and arguments being used by both the prosecution and the defense team in those cases.

The e-book is available here.

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On Monday, August 1, 2011, the SEC filed suit against eight defendants for making false statements in public filings regarding the status of the human clinical trials for the drug SF-1019 by Argyll Biotechnologies LLC. The statements did not disclose that the Food and Drug Administration had issued clinical holds on testing for the drug, which is derived from goat blood and was Argyll's sole product. In addition, three executives were charged with insider trading for selling shares of Immunosyn Corporation (the company which made the false filings) for $20 million during the same period. SEC v. Ferrone, No. 11-cv-05223 (N.D. Ill. Filed Aug. 1, 2011).

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