In a Motion filed this morning, the Government moved to dismiss with prejudice the Superseding Indictment against the remaining defendants in the FCPA Sting Case. In doing so, the Government cited the two mistrials, as well as the acquittal of three defendants, and other rulings in the case.
Continue Reading...On Friday, February 10, 2012, the U.S. Attorney for the Southern District of New York and the SEC announced charges against Douglas F. Whitman, the head portfolio manager at Whitman Capital, LLC, related to alleged insider trading. It is claimed that Mr. Whitman's friend and neighbor, Roomy Khan, provided Mr. Whitman with the same information that she provided Raj Rajaratnam of Galleon Management, who was convicted of insider trading in May 2011, sentenced to twelve years in prison and had a $92 million civil judgment imposed upon him.
Continue Reading...On Thursday, February 9 2012, prosecutors filed a motion in federal court in Texas requesting that the remaining charges against John O'Shea be dismissed. On January 16, 2012, the Court dismissed the FCPA charges against Mr. O'Shea, leaving one count of conspiring to violate the FCPA, four counts of money laundering and one count of creating a false document to obstruct the Government's investigation. Thursday's motion stated:
In light of the Court’s prior statements and rulings, as well as the resulting collateral estoppels issues associated with the Court’s judgment of acquittal, the government hereby moves pursuant to Rule 48(a) of the Federal Rules of Criminal Procedure to dismiss the remaining counts of the criminal Indictment against Mr. O’Shea with prejudice.
The motion was filed two days after the Government revealed that it was considering dropping charges in another FCPA case – the FCPA Sting case in Washington, DC.
A story from the Blog of the Legal Times states that prosecutors "are considering whether to abandon" the charges in the FCPA Sting Case in federal court in Washington, DC. Mike Scarcella's blog entry (available here) states that prosecutor Joey Lipton reported to Judge Richard Leon at a February 7, 2012 status conference that "Assistant Attorney General Lanny Breuer and U.S. Attorney Ronald Machen Jr. are examining the continued viability of the case," and a decision on whether the cases will continue will be made by February 21, 2012.
Continue Reading...On Monday, February 6, 2012, the SEC and DOJ resolved their respective investigations with a medical device company and its subsidiary by entering into settlements stemming from alleged bribes paid to doctors in Greece for more than a decade. The U.S. subsidiary, Smith & Nephew Inc., agreed to pay a $16.8 million fine as part of a deferred prosecution agreement with the DOJ, while the English parent company, Smith & Nephew plc, agreed to settle the SEC’s charges by paying more than $5.4 million in disgorgement and prejudgment interest.
Continue Reading...For those readers of the blog who are litigators or follow litigation issues, today's post from Professor Mike Koehler's FCPA Professor Blog has a real treat: a guest post from the foreman of the recently concluded trial in the FCPA Sting Case. The foreman provides a detailed description of the issues considered by the jurors during their lengthy deliberations in which they (1) reached a partial verdict as to two defendants; and (2) remained deadlocked as to three defendants, resulting in a mistrial. The post provides a rare insight into the deliberations of a jury during a FCPA criminal trial.
Continue Reading...On January 31, 2012, Judge Richard Leon declared a mistrial in the trial of the second group of defendants in the FCPA Sting case when the jury was unable to reach a verdict as to John and Jeana Mushriqui and Mark Morales. The mistrial occurred the day after the jury returned a partial verdict, finding two of the defendants not guilty. The result adds to the string of litigated FCPA cases where the Government has failed to secure (or maintain) a conviction in recent weeks.
Continue Reading...Four separate websites have reported this afternoon that two of the defendants in the FCPA Sting or "Shot Show" case have been acquitted and Judge Richard Leon has stated that he would declare a mistrial if the jury is unable to reach a verdict as to the remaining three defendants. Specifically, C. M. Matthews and Joseph Palazzolo of the Wall Street Journal, Professor Mike Koehler of the FCPA Professor Blog, Mary Jacoby of Main Justice and Richard Cassin of the FCPA Blog all reported this afternoon that the jury found Patrick Caldwell and John Godsey not guilty, but remained hung as to John and Jeana Mushriqui and Mark Morales.
Continue Reading...On Monday, January 23, 2012, the SEC announced that Diamondback Capital Management LLC ("Diamondback"), the Stamford, Connecticut-based hedge fund named as a defendant in the SEC's insider trading case last week (as discussed here), has agreed to settle charges with the Commission. Diamondback will pay more than $9 million as part of the settlement, which must be approved by Judge Paul G. Gardephe, a federal judge in New York. Diamondback has also entered a non-prosecution agreement with the U.S. Attorney’s Office for the Southern District of New York.
Continue Reading...Today, federal prosecutors and the SEC named seven fund managers and analysts as defendants in an insider trading scheme based on nonpublic information about Dell’s quarterly earnings and similar inside information regarding Nvidia Corporation. The U.S. Attorney called the trading in Dell shares the "largest insider trading scheme involving single stock charged to date." Three of the individuals pled guilty and are cooperating with the Government. The SEC's lawsuit also named two Connecticut-based hedge fund firms as defendants.
Continue Reading...On Monday, January 16, 2012, Judge Lynn Hughes granted defendant John O'Shea's motion for acquittal in the FCPA case, dismissing the FCPA charges case against him. According to a Press Release from defense counsel, Judge Lynn Hughes "found that the Government’s chief witness, … could not tie Mr. O’Shea to the alleged crimes. The judge found that O’Shea’s conduct, including efforts to renew an ABB-Esimex contract, was reasonably explained by lawful motives." The decision by Judge Hughes marks the second loss in less than two months for the Government in cases related to the Comisión Federal de Electricidad ("CFE") – Judge A, Howard Matz had previously vacated the guilty verdict in the Lindsey Manufacturing case, as discussed here. UPDATED (on January 19, 2012): While Judge Hughes' Order dismisses the 12 FCPA counts, the Judge has scheduled a status conference for the remaining counts (conspiracy, money laundering and creating a false document) for January 20, 2012.
Continue Reading...On Monday, January 9, 2012, Judge Richard Leon, who had already dismissed the central conspiracy count against six defendants in the FCPA Sting Case, was faced with an interesting question: if the conspiracy count was dismissed for insufficient evidence, should the trial continue when much of the evidence the Government has offered was based on the acts and statements of coconspirators who were not present at the trial? The Motion for a Mistrial filed by the defendants presently at trial argued that they were prejudiced by the evidence regarding the now-dismissed conspiracy count. Judge Leon denied the Motion, ruling that the trial will continue.
Continue Reading...According to media reports, the SEC decided last week that it will no longer allow defendants who plead guilty in criminal proceedings to settle parallel civil charges with the Commission by neither admitting or denying the allegations. At the present, the policy shift applies only in those cases where there has been an admission of guilt, not in cases where there has been no plea or if there is only civil proceedings.
Continue Reading...On January 3, 2012, Judge Lynn Hughes denied defendant John O'Shea's Motion to Dismiss the Indictment against him. Mr. O'Shea's Motion, which was filed in March 2011, argued that the Indictment failed to alleged that he bribed a "foreign official" because it only alleged that he bribed employees of a state-owned entity. Judge Hughes' decision marked the fifth time the argument has been rejected. The case against Mr. O'Shea is now set to go to trial on January 11, 2012.
Continue Reading...Today, the Federal Securities Litigation Blog continues its with its larger-than-usual blog entry examining the Top 10 securities litigation stories that were the most intriguing in 2011. As mentioned yesterday, like any sort of Top 10 list, not everyone will agree. Other bloggers will have their own lists with different stories. But on a personal basis, these stories that fascinated me – like a good book, I look forward to the next "chapter" in these stories in 2012.
Here's a quick headline look at the Top 5:
5. The SEC's Inspector General Reports on the Conduct of the Commission Staff.
4. Insider Trading at Galleon Management: Record-Setting Results.
3. The New Whistleblower Rules: Do I Tell Management Before I Tell The SEC?
2. The Lindsey Manufacturing Saga: The Verdict DOJ was "Fiercely Committed" to Obtaining is Vacated.
1. The Citigroup Case: Judge Rakoff's Decision and the Potential Impact on How SEC Cases Proceed.
These five stories are discussed in greater detail after the jump.
Continue Reading...Today and tomorrow, the Federal Securities Litigation Blog will take a break from discussing the most recent events and, with a larger-than-usual entry, examine the Top 10 securities litigation stories that were the most intriguing in 2011. Undoubtedly, others will be preparing similar lists and this is not intended to be a definitive or complete version. Instead, these are the stories that piqued my interest. Half of the list will be discussed today and the other half tomorrow.
Here's a quick headline look at the bottom half of the Top 10:
10. The D.C. Circuit Vacates SEC Exchange Rule 14a-11 Regarding Shareholders' Rights to Include Board Nominee on Proxy Materials.
9. The Jenkins Litigation: Settlement Negotiations in Clawback Case Collapse, But Are Ultimately Resolved.
8. The SEC's Director of the Division of Enforcement Now Has Authority To Issue Witness Immunity Orders.
7. Where is That File? The SEC Addresses Issues Related to the Destruction of Documents and Discovery Issues Relating to their Notes.
6. The FCPA Sting Case: One Hung Jury, One On-Going Trial, A Conspiracy Count Dismissed and More to Come.
These five stories are discussed in greater detail after the jump.
Continue Reading...On Thursday, December 22, 2011, Judge Richard Leon ruled on the Rule 29 Motions for Judgment of Acquittal in the FCPA Sting Case by dismissing Count 1 (on the grounds that there was not sufficient evidence to that the six defendants participated in the overarching conspiracy to violate the FCPA) as to all six defendants in Trial Group No. 2. In addition, Judge Leon dismissed the Government's case against defendant Stephen Giordanella in its entirety. The trial will resume on January 3, 2012 with the remaining five defendants having their opportunity to put on their defense. The rulings are considerable setback for the Government in what the Department of Justice called the first sting operation in an FCPA case.
Continue Reading...On Tuesday, December 13, 2011, the Department of Justice and the SEC brought charges against a group of former employees and agents of Siemens AG for FCPA violations based on an alleged decade-long scheme to bribe senior Argentine government officials to secure, implement and enforce a $1 billion contract with the Argentine government to produce national identity cards. In the words of Assistant Attorney General Lanny Breuer, "[t]his indictment reflects our commitment to holding individuals, as well as companies, accountable for violations of the FCPA." The authorities have been undoubtedly active in the FCPA area this year against individuals, securing a sentence of record length against a telecommunications executive in one case (as discussed here), but suffering setbacks in other cases, such as the hung jury in the first of several trials in the FCPA sting case against employees of companies in the military and law enforcement products industry (discussed here) and the recent decision by Judge Matz to vacate the convictions of executives of Lindsey Manufacturing (and the company itself) (as discussed here).
Continue Reading...In a December 9, 2011 Opinion, the D.C. Circuit affirmed a lower court's decision that the SEC was not required to produce the notes of its staff members taken during an investigation of two individuals who were subsequently Government witnesses in a criminal prosecution of another individual. The Court found that notes were privileged under the work product doctrine, but did not decide whether they were protected under the deliberative process privilege. The case in another example of matters where defendants in securities fraud cases have sought the production of the SEC's taken during its investigations – as discussed here, in his insider trading case, Mark Cuban has also sought the production of, among other things, the notes of the SEC attorneys taken during the investigations.
Continue Reading...On Thursday, December 8, 2011, the U.S. Attorney for the Central District of California announced that it had indicted the David Tamman, outside counsel for New Point Financial Services, of conspiring with the company's investment fund manager, who was also indicted, to obstruct an SEC investigation. The indictment alleges that that the two conspired to alter and backdate various documents, remove incriminating documents from investor files before they were produced, and provide false testimony to the SEC. Mr. Tamman joins the growing list of attorneys (such as the one discussed here) who are alleged to have taken elaborate efforts to conceal illegal activity, but end up being named as defendants in criminal cases nonetheless.
Continue Reading...On December 8, 2011, various government agencies announced that Wachovia Bank, N.A. has entered into a series of settlements with the SEC, the Department of Justice, the Office of the Comptroller of the Currency, the Internal Revenue Service, and 26 state attorneys general to pay $148 million related the bank's entry into fraudulent secret arrangements with bidding agents to rig at least 58 municipal bond reinvestment transactions in 25 states and Puerto Rico.
Continue Reading...On December 1, 2011, Judge A. Howard Matz entered an order granting the motion to dismiss filed by Lindsey Manufacturing Company, Keith Lindsey, Steve Lee in the criminal FCPA case against them. As discussed here, the Court announced its intention to do so at a hearing on November 29, 2011. In its Order, the Court said that the Government conducted a "sloppy, incomplete and notably over-zealous investigation … that was so flawed that the Government’s lawyers tried to prevent inquiry into it." The Court's decision was based, in part, on: the untruthful testimony of an FBI agent to the grand jury; the provision of false information in applications for search and seizure warrants; the improper review of e-mail communications between a defendant and her lawyer; the failure to comply with discovery obligations and other court rulings; and misrepresentations to the Court. The Court held that "the multiple acts of misconduct … undoubtedly affected the verdicts and thus substantially prejudiced" the Defendants, necessitating the decision – made with what the Court called "deep regret" – to vacate the convictions and dismiss the Superseding Indictment.
Continue Reading...At a hearing on November 29, 2011, Judge A. Howard Matz stated that he would be granting the motion to dismiss for prosecutorial misconduct filed by Lindsey Manufacturing Company (a privately-held company), its President Keith Lindsey, and its Vice President Steve Lee in the criminal FCPA case against them. Judge Matz prepared a tentative order which he shared with the parties and plans to issue a formal order on Wednesday, November 30, 2011. According to Edward Pettersson's article on Bloomberg.com, "[t]he judge cited government misconduct including providing false information to get a search warrant, making unauthorized searches and giving incorrect testimony to a grand jury." As a result, the May 2011 convictions of conspiracy and FCPA charges against the company and Messrs. Lindsey and Lee will be dismissed.
Continue Reading...The Federal Securities Law Blog is pleased to announce its second e-Book: "Insider Trading: A Look At Some Of The Key Civil And Criminal Cases In 2011."
The last few years have seen a remarkable number of insider trading cases brought by both the SEC and federal prosecutors. In the criminal cases, many Wall Street professionals and lawyers who have been very successful will now spend years in prison. On the civil side, the SEC has pursued defendants very aggressively, although in some cases, where the defendants have had the ability to fight back, they have vigorously defended themselves. This eBook will focus on several of these cases, the events in 2011 and discuss some of the trends that have developed.
First, we will look at the criminal cases by focusing on some of the Galleon Management and the "Expert Network" cases as examples where the prosecutors pursued, tried and convicted significant Wall Street players. We also will consider the cases involving Rajat Gupta (who was also part of the Galleon Management circle) including the administrative case against him, his suit against the SEC in federal court, the dismissal of both of those actions and the subsequent indictment and civil suit against him. Finally, we will examine the recent events in the SEC's case against Mark Cuban, which is worth watching closely because he has fought the SEC every step of the way, raising a number of theories and utilizing different tactics.
The e-book is available here.
On Tuesday, October 25, 2011, defendants Joel Esquenazi and Carlos Rodriguez, former executives of Terra Telecommunications Corporation who were convicted in August 2011 for their roles in a conspiracy to violate the FCPA and commit money laundering, were sentenced to 15 years and 7 years in prison, respectively. With respect to Mr. Esquenazi, a Press Release from the U.S. Attorney's Office for the Southern District of Florida pointed out that "[t]his is the longest sentence ever imposed in a case involving the Foreign Corrupt Practices Act."
Continue Reading...On Wednesday, October 26, 2011, both the SEC and the U.S. Attorney's Office for the Southern District of New York filed charges against Rajat Gupta, the former Managing Director of McKinsey & Company and board member at Goldman Sachs and Procter & Gamble. Mr. Gupta, who previously argued that an Administrative Proceeding brought by the SEC against him was unfair because he denied a trial before a jury will now have two opportunities to challenge the charges against him in Court.
Continue Reading...A pair of articles appeared this week that traced trends in particular areas of securities enforcement. The Wall Street Journal presented data showing an increase in the length of sentences in insider trading cases over the last eighteen years. A second article which appeared in Corporate Counsel suggested that the SEC's settlement of a case involving back-dated options "may have symbolized the end of an era."
Continue Reading...Today, in a case closely watched on Wall Street, Judge Richard Holwell sentenced Raj Rajaratnam, the Managing Member of Galleon Management, LLC, to Eleven years in prison. Although the sentence is the longest to date for anyone involved in the Galleon Group, it fell considerably short of the lengthy sentence sought by the Government.
Continue Reading...The SEC brought a case against Thomas Wu, the former CEO of United Commercial Bank, for misleading investors regarding the financial state of the bank during the 2008 financial crisis. Mr. Wu, who the SEC described as a "rising star in the banking industry," allegedly directed subordinates to conceal information regarding the true value of the bank's collateral and assets, understating the value by at least $65 million and causing as the United Commercial to be one of the ten largest bank failures during the recent financial crisis.
Continue Reading...A report on Monday, October 3 from Bloomberg Markets Magazine detailed a years-long scheme by Koch Industries, Inc. to make improper payments to win contracts in six countries – payments which the company admitted "constitute violations of criminal law." The article states that the Justice Department would not confirm or deny the existence of any investigation into the activities, but such an investigation seems likely given the articles description of events that may violate the FCPA or the laws regarding the Iran Trade Embargo.
Continue Reading...On Wednesday, September 21, two defendants who were convicted of conspiracy and insider trading charges in separate trials earlier this year were sentenced in federal court in New York. Zvi Goffer, who formerly worked at with the Schottenfeld Group LLC (part of Raj Rajaratnam's Galleon Group), was sentenced to ten years in prison, while Winifred Jiau, a consultant at Primary Global Research LLC (an expert networking firm), received a four year sentence. Like many of the recent high-profile insider trading cases, the Government's evidence included wiretapped telephone conversations between the participants in both cases. DOJ and the SEC continue to vigorously pursue and punish those participating in insider trading cases.
Continue Reading...There were two interesting news items this week regarding what the nation's regulators are doing to protect investors – one from the SEC and the other from the Department of Justice. The SEC announced that it "is in the process of re-establishing an Investor Advisory Committee," while Commissioner Luis A. Aguilar expressed disappointment that the Committee was not being re-established sooner. Meanwhile, the U.S. Department of Justice Office of the Inspector General issued an Audit Report criticizing the Complex Asset Team of the U.S. Marshals Service for its management of complex assets, including its handling of certain assets seized from Bernard Madoff.
Continue Reading...On Friday, September 9, the Department of Justice announced that it had entered into a Non-Prosecution Agreement with CSK Auto Corporation, a retailer of automotive parts and accessories which used to be publicly traded, to settle a criminal investigation into alleged securities law violations stemming from a corporate earnings manipulation and double-billing scheme. Under the terms of the agreement, CSK Auto will pay a $20.9 million penalty. The resolution of this matter is the latest in a series of matters being handled by both DOJ and the SEC regarding the events at CSK Auto.
Continue Reading...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.
Continue Reading...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.
Continue Reading...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.
Continue Reading...On Thursday, July 7, 2011, D.C. Federal Judge Richard Leon declared a mistrial in a criminal case against four defendants who were accused of conspiracy and FCPA violations when the jury was unable to reach an unanimous verdict on all charges. The case represented a setback for the Government, who had brought charges against 22 individuals based on a sting operation, the first of its kind to involve FCPA charges to be tried.
Continue Reading...On June 30, 2011, Lee Farkas, the former Chairman of Taylor Bean & Whitaker ("TBW"), was sentenced to 30 years in prison for his role the failure of his company and of Colonial Bank. While the sentence fell short of the Government's request for a sentence of 385 years, it is likely that the 58-year old Mr. Farkas will spend the rest of his life in jail.
Continue Reading...On Monday, a federal jury convicted a consultant at an expert networking firm, Winifred Jiau, of one count of conspiracy and one count of securities fraud for selling inside information she obtained through social relationships with sources from the finance departments at publicly traded companies. According to the U.S. Attorney, "Wini Jiau gave new meaning to the concept of social networking. She used and exploited friends at public companies for the purpose of obtaining, and then selling, inside information."
Continue Reading...Less than five weeks after the insider trading conviction of Raj Rajaratnam, prosecutors in New York, again using wiretapped telephone conversations, obtained a second significant conviction for insider trading, this time against Zvi Goffer and two other Wall Street professionals, who were found guilty on Monday of conspiracy and securities fraud charges.
Continue Reading...On Wednesday, May 18, Judge James Selna in California became the latest Judge to rule on the issue of whether the FCPA extended to payments made to employees of foreign state-owned companies. Judge Selna denied defendants' motion to dismiss in U.S. v. Carson, holding that "the question of whether state-owned companies qualify as instrumentalities under the FCPA is a question of fact." As a result, the issue will be presented to the jury.
Continue Reading...UPDATED on May 16, 2011 -- As mentioned previously, Lindsey Manufacturing Company (a privately-held company) was the first corporate defendant to be convicted after trial of FCPA charges (for conspiracy to violate the FCPA and five counts of FCPA violations based on payments to employees of the Comisión Federal de Electricidad ("CFE"), an electric utility company owned by the government of Mexico). Assistant Attorney General Lanny Breuer stated last fall that it was a "new era of FCPA enforcement." The Lindsey Manufacturing verdict and some of the arguments raised by the defense present some indication of exactly how aggressively these issues will be fought by the government and defendants alike.
Continue Reading...Today, in a case closely watched on Wall Street, a federal Jury in New York convicted Raj Rajaratnam, the Managing Member of Galleon Management, LLC, of five counts of conspiracy to commit securities fraud and nine counts of securities fraud, stemming from what prosecutors called "his involvement in the largest hedge fund insider trading scheme in history."
Prosecutors stated that Mr. Rajaratnam received non-public, material insider information through overlapping conspiracies from insiders and others at hedge funds, public companies, and investor relations firms, such as Goldman Sachs, Intel, IBM, McKinsey and others. Prosecutors argued that he then executed trades in the stock of public companies, including Goldman Sachs, Clearwire, Akamai, AMD, Intel, Polycom, and PeopleSupport. The evidence in the eight-week trial included numerous recordings of wiretapped phone calls between Mr. Rajaratnam and co-conspirators (many of whom pled guilty). According to media reports, defense counsel, who argued that Mr. Rajaratnam pieced together information from a variety of sources to reach a decision on investing, plans to appeal.
Each conspiracy conviction carries a maximum penalty of five years, while each insider trading charge carries a maximum of twenty years. Mr. Rajaratnam is scheduled to be sentenced on July 29, 2011.
On Tuesday, May 10, 2011, a federal jury convicted Lindsey Manufacturing Company (a privately-held company), its President Keith Lindsey, its Vice President Steve Lee and an intermediary, Angela Aguilar in an FCPA case. The charges were based on payments to employees of the Comisión Federal de Electricidad ("CFE"), an electric utility company owned by the government of Mexico, which were made in exchange for the CFE to award contracts to Lindsey Manufacturing. The case is notable for two different reasons: (1) Lindsey Manufacturing was the first corporate defendant to fully litigate FCPA charges through trial; and (2) Lindsey Manufacturing was one of the three recent cases where defendants raised the argument as to whether the FCPA extended to payments made to employees of foreign state-owned companies, an assertion which failed in this instance. UPDATE on May 16, 2011 – Professor Michael Koehler of the FCPA Professor Blog reports that Lindsey Manufacturing was NOT the first company to litigate an FCPA case all the way through trial: "That first occurred in 1990-1991 when Harris Corporation (and certain of its executives) prevailed in an FCPA trial."
Continue Reading...On Tuesday, April 19, 2011, in one of the first criminal trials arising out of the market crisis, a federal jury in Alexandria, Virginia convicted Lee Farkas of: one count of conspiracy to commit bank, wire and securities fraud; six counts of bank fraud; four counts of wire fraud; and three counts of securities fraud. The charges arose from Mr. Farkas' role in a $2.9 billion fraud scheme that led to the failure of Colonial Bank (which was one of the 25 largest banks in the United States in 2009), and Mr. Farkas' company, Taylor Bean & Whitaker ("TBW"), one of the largest privately held mortgage lending companies in 2009.
Continue Reading...On Thursday, March 17, 2011, the Wall Street Journal published an interview (available here, log-in required) with Mark Mendelsohn, the former Deputy Chief of the Fraud Section at DOJ, whose responsibilities included enforcement of the Foreign Corrupt Practices Act ("FCPA").
Mr. Mendelsohn, who left DOJ in 2010 to join Paul Weiss, discussed the future of FCPA enforcement. Highlights of the interview included:
• "The Dodd-Frank whistleblower provision is going to significantly change the game and create large financial incentives for whistleblowers to come forward to the SEC. We're going to see even more reporting to the government both by companies looking to get ahead of the whistleblowers and by whistleblowers. It will be a real challenge for the SEC and DOJ to keep up."
• "The rise in prosecutions of individuals I think is a trend that is here to stay and will continue to grow especially as the Justice Department and the SEC have more resources at their disposal."
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