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World’s top banks plead guilty to gaming foreign-currency markets

Scandal roiled the banking industry Wednesday as four of the world’s largest banks — Citigroup, JPMorgan Chase, Barclays and Royal Bank of Scotland — pleaded guilty to federal antitrust violations for conspiring to manipulate foreign-currency markets over the course of several years. The scheme involved collusion by traders at the various banks to fix the U.S. dollar – euro exchange rate by coordinating trades and agreeing not to buy or sell at certain times to protect one another’s trading positions.

The guilty pleas place the banks on probation and require them to pay criminal fines totaling more than $2.5 billion, in addition to billions more that they have agreed to pay to state and federal regulators. One of these penalties — a $925 million fine levied against Citigroup — is the largest single fine ever imposed for a violation of the Sherman Act (the federal statute that criminalizes price-fixing and other horizontal conspiracies among competing businesses). The guilty pleas were also historic in that they were entered by the banks’ parent companies rather than by subsidiaries — marking the first time since the Drexel Burnham Lambert scandal of the late 1980s that the primary banking unit of an American financial institution has pleaded guilty to criminal charges. …

FCPA officials point to dollars-and-cents benefits to self-disclosure and cooperation

High ranking officials in the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) said on March 12 that companies that fail to self-report overseas bribes will face tougher Foreign Criminal Practices Act (FCPA) fines.

While speaking at the Georgetown Law Center Corporate Counsel Institute in Washington, Patrick Stokes, deputy chief of the DOJ’s FCPA Division, and Kara Brockmeyer, the SEC FCPA chief, both cited real-life examples of how companies that did not self-report foreign bribes received significantly higher fines and penalties.

Stokes pointed to French conglomerate Alstom SA, which paid $772 million in fines, the largest FCPA fine in history, for an Asian bribery scheme. Stokes stated that if Alstom SA had come forward and cooperated with the an investigation, prosecutors would have sought as little as $207 million in penalties, representing a 73% reduction from the Federal Sentencing Guidelines. He stressed “measurable and clear” benefits of self-disclosure and cooperation and quipped “You don’t need a forensic accountant. You don’t need a law firm to do this.”…

SAC Capital Breaks Its Own Record, Settles Insider Trading Charges For $1.2 Billion

In March, an affiliate of SAC Capital agreed to a record high settlement of $616 million for charges of insider trading. As it turned out, the SEC was only getting started with the company and its owner, Steve Cohen. In July, both Cohen and SAC Capital were themselves indicted on insider trading.

Based on reports, SAC Capital agreed earlier this week to settle its charges for $1.2 billion, shattering the record again. In addition, the company agreed to plead guilty to each count in the indictment and close its investment advisory business. The indictment accused the company, among other things, of fostering a culture of insider trading, citing “institutional failure.”

As if setting a new record-high settlement wasn’t enough, the settlement terms give no shelter to Cohen, personally. The settlement states outright that it provides “no immunity from prosecution for any individual and does not restrict the government from charging any individual for any criminal offense.” By refusing to grant immunity to Cohen in this deal, the SEC confirmed that it will continue its civil investigation of the billionaire hedge fund manager and is even considering criminal charges in the future.

The settlement still needs to be approved by the federal court in New York. The hearing is scheduled for Friday. For more, Dealbook has a good analysis of the settlement.…

SEC Charges Pfizer and Wyeth with FCPA Violations

On August 7, 2012, the Securities and Exchange Commission (the “SEC”) charged Pfizer Inc. with violating the Foreign Corrupt Practices Act (“FCPA”).  The SEC Complaint alleges that employees and agents of Pfizer’s subsidiaries in Bulgaria, China, Croatia, Czech Republic, Italy, Kazakhstan, Russia, and Serbia made improper payments to foreign officials to obtain regulatory and formulary approvals, sales, and increased prescriptions for the company’s pharmaceutical products. The Complaint further alleged that there were efforts to conceal the bribery by improperly recording the transactions in accounting records as legitimate expenses for promotional activities, marketing, training, travel and entertainment, clinical trials, freight, conferences, and advertising.

The SEC filed a separate Complaint charging another pharmaceutical company that Pfizer acquired several years ago – Wyeth LLC – with its own FCPA violations. Pfizer and Wyeth agreed to separate settlements in which they will pay more than $45 million combined to settle their respective FCPA charges.…

Director of Enforcement Robert Khuzami testifies before Congress on the SEC’s “Neither-Admit-Nor-Deny” Settlement Policy

The past week has been a busy one for those following the debate over the SEC’s policy of accepting a settlement without an admission or denial of the facts. On Monday, the SEC and Citigroup filed their briefs defending the "neither-admit-nor-deny" policy in the appeal of Judge Rakoff’s Opinion and Order refusing to approve their settlement (as discussed here). On Thursday, May 17, 2012, Robert Khuzami appeared before the House Committee on Financial Services to testify about that very policy. In doing so, Mr. Khuzami discussed the Commission’s policy and approach to settling matters and defended the policy and the settlement in the Citigroup Global Markets litigation.…

The SEC v. Citigroup Appeal: SEC and Citigroup File Their Briefs Explaining Why Judge Rakoff’s Opinion Should Be Vacated

On Monday, May 14, 2012, both the SEC and the Citigroup Global Markets, Inc. filed their appellate briefs (available here and here) in the three consolidated appeals regarding Judge Jed Rakoff’s November 28, 2011 Opinion and Order rejecting the SEC’s proposed settlement with Citigroup. Both entities argued that Judge Rakoff committed error in his Opinion and Order, arguing, among other things, that it was contrary to well-established law to reject a consent settlement with a federal agency because it was not supported by admitted or judicially established facts. Both parties also argued that the settlement between them was fair, reasonable and adequate. A Brief in support of the district court’s position will be filed in August 2012.…

The SEC Settles a Case With an Executive at United Commercial Bank, But Gives Him Credit For His Substantial Assistance

On March 27, 2012, the SEC announced that it has sued John Cinderey, a former executive vice president at United Commercial Bank for aiding and abetting securities law violations relating to falsifying books and records and misleading the bank’s auditors. The Commission settled with Mr. Cinderey, who agreed to be permanently enjoined from violating provisions of the federal securities laws. The settlement reflected the credit given to Mr. Cinderey "for his substantial assistance in the investigation," along with his agreement to cooperate to assist in an ongoing related enforcement action.…

Citing The Example of an AXA Rosenberg Executive, the SEC Provides Regarding How Individuals May Receive Credit Under the SEC’s Cooperation Initiative

Normally, when the SEC posts a Litigation Release on its website, it announces a new case which it has filed, or settlement or judgment in a previously-announced case. One of the SEC’s Litigation Releases posted on March 19, 2012 was unique in that it did not announce any of those usual events, but instead was issued "to provide guidance regarding the circumstances under which individuals may receive credit as part of the SEC’s Cooperation Initiative." The announcement this week focused on the acts of a un-named (and un-charged) senior executive at AXA Rosenberg, an institutional money manager that specialized in quantitative investment strategies, who cooperated with the SEC, leading to charges regarding a material error in a computer code that was used to manage client assets.…

SEC v. Citigroup Global Markets: Second Circuit Stays District Court Proceedings For Duration of Appeal and Directs the Clerk to Appoint Counsel to Advocate Upholding the Judge Rakoff’s Ruling

This morning, the Second Circuit’s Motion Panel granted the SEC’s motion to stay the District Court proceedings in the litigation against Citigroup Global Markets, Inc. while the appellate court considers whether it should set aside Judge Rakoff’s decision refusing to approve the settlement between the parties. Specifically, the Court of Appeals found that the Commission and Citigroup "made a strong showing of likelihood of success" in either their appeals or petition for mandamus. The Court also stated that the SEC and Citigroup have shown "serious, perhaps irreparable, harm sufficient to justify grant of a stay." According to the Court, a stay would not substantially injure any other persons. The Court also found that the SEC’s "assessment of the importance of its settlement to the public interest" was entitled due deference. Because it granted the stay of the lower court proceedings, the Court also ruled that there was it was not necessary to expedite the appellate proceedings. Finally, the Court directed the Clerk of the Court "to appoint counsel, who will advocate for upholding the district court’s order."…

New York Times Article Finds Hundreds of Instances When the SEC Waives Certain Sanctions For Big Wall Street Institutions

An article in today’s New York Times reports that over the last decade a number of large Wall Street companies, including JPMorganChase, Goldman Sachs and Bank of America, have avoided certain punishments specifically aimed at fraud cases and continued to have certain advantages reserved for the most dependable companies. According to Edward Wyatt’s article, there have been "nearly 350 instances where the agency has given big Wall Street institutions and other financial companies a pass on those or other sanctions."…

SEC v. Koss Corporation: SEC’s Explanation Regarding Settlement Language “Satisfies” Judge Randa

In a letter dated February 1, 2012 to the parties, Judge Rudolph Randa stated that the SEC’s Brief responding to certain questions the Court had raised regarding the language of the proposed settlement with Koss Corporation ("Koss") and Michael Koss "largely satisfies the Court’s concerns." As a result, the SEC will avoid the issues it has faced in the Citigroup litigation, where Judge Jed Rakoff rejected the proposed settlement between the parties and the SEC has appealed. Judge Randa Court accepted the SEC’s offer to revise the judgments to specifically include language from the consent order, and said that, while he continued to question whether the judgments will be final judgments, he "will not withhold … approval based on that concern."…

SEC v. Koss Corporation: The Commission Responds to Judge Randa’s Questions Regarding the Whether the Proposed Settlement is Fair, Reasonable and Adequate

On Tuesday, January 24, 2012, the SEC filed a Memorandum which defended the proposed settlement with Koss Corporation ("Koss") and its CEO. The Commission’s Memorandum was filed after a Wisconsin federal judge, Rudolph Randa, issued a letter order on December 20, 2011, directing the Commission to "provide a written factual predicate for why it believes the Court should find that the proposed final judgments are fair, reasonable, adequate, and in the public interest," citing Judge Rakoff’s November 28, 2011 order in SEC v. Citigroup Global Markets, Inc. (discussed here). The issues in the Koss Corporation litigation do not include the "neither-admit-nor-deny" policy at the hear of Citigroup Global Markets, but focus on specific language in the proposed Judgments. The SEC’s Memorandum defends the provisions, while arguing that the language (which is similar to that used in other judgments) should not be changed.…

Business Roundtable Files an Amicus Brief in the Citigroup Litigation, Asking the Second Circuit To Reverse Judge Rakoff

On Thursday, January 12, 2012, Business Roundtable ("BRT"), the association of chief executive officers of leading U.S. companies, requested leave to file an Amicus Brief in the SEC v. Citigroup Global Markets, Inc. appeal, requesting that the Second Circuit reject the "potentially dangerous, approach to reviewing settlement agreements" in Judge Jed Rakoff’s November 28, 2011 decision in the lower court.…

SEC Changes Settlement Policy Impacting the “Neither-Admit-Nor-Deny” Standard in Cases With Parallel Criminal Proceedings

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.…

Judge Rakoff Issues a New Order Criticizing the SEC in the Citigroup Litigation as SEC Files A Petition for Writ of Mandamus and Submits Additional Briefing to the Second Circuit

The participants in the Citigroup litigation did not take much of a break during the holidays. As discussed here, on December 27, 2011, Judge Rakoff denied the SEC’s request to stay the litigation. As it turns out, the Commission did not even wait for that order – it appears that the SEC’s Motion for an Emergency Stay was filed with the Second Circuit before Judge Rakoff denied the similar motion in the District Court. That resulted in the Second Circuit’s Order for a temporary stay (also discussed here). On December 29, 2011, Judge Rakoff issued a Supplemental Order, stating that the SEC made a "materially misleading" statement to the Court of Appeals and accused the Commission of misleading him during the process in the District Court. On December 29, 2011, the SEC filed a petition for a Writ of Mandamus and on December 30, 2011, the SEC filed a Supplemental Brief with the Second Circuit, responding to Judge Rakoff’s statements by asserting that it [the Commission] was acting "in good faith."…

The Top 10 Most Intriguing Federal Securities Litigation Stories in 2011 (Part 2 of 2)

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.…

The Top 10 Most Intriguing Federal Securities Litigation Stories in 2011 (Part 1 of 2)

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.…

Second Circuit Grants Temporary Stay in Citigroup Case

On Wednesday, December 28, 2011, the Second Circuit Court of Appeals stayed the SEC’s case against Citigroup Global Markets, Inc. (which is before Judge Rakoff in New York). The appellate court received an emergency motion for a stay after Judge Rakoff denied the request made at the District Court level. That emergency motion is to be submitted to the Second Circuit’s motions panel on January 17, 2012. The appellate court ruled that "[i]n the interim, proceedings in the District Court are stayed until a ruling by the motions panel."…

SEC Moves to Stay The Proceedings Against Citigroup Pending the Appeal of Judge Rakoff’s Order

On Friday, December 16, 2011, the SEC filed a Motion in front of Judge Jed Rakoff, asking him to stay to proceedings which the Commission had brought against Citigroup Global Markets, Inc. while the SEC’s appeal is pending before the Second Circuit. On December 20, 2011, Citigroup filed a memorandum joining in the SEC’s Motion. Unless a stay is granted, the parties will be forced to litigate the matter before Judge Rakoff as part of a consolidated case with the SEC’s action against Brian Stoker. As discussed below, the motion to stay presented the SEC with another opportunity to argue why Judge Rakoff was wrong to reject the proposed settlement.…

U.S. Chamber of Commerce Issues Report Calling For Changes To “Transform” the SEC

In a 135-page report issued entitled "U.S. Securities and Exchange Commission: A Roadmap for Transformational Reform" issued on December 14, 2011, the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness expanded on the incremental changes it proposed in a 2009 report, saying that "extraordinary steps are needed to achieve change." The Report, which was authored by Jonathan Katz (who was Secretary of the SEC for twenty years) and was briefly discussed in our Monthly Review entry on December 15, contains 28 separate recommendations on how to reform the Commission as a whole, and specifically addresses the Division of Enforcement and the rulemaking process.…

Congress To Hold Hearings On SEC Practice of Settling Cases on a Neither-Admit-Nor-Deny Basis

On Friday, December 16, 2011, the House Committee on Financial Services announced that it "will hold a hearing next year to examine the practice by the Securities and Exchange Commission of settling cases with defendants that neither admit nor deny complaints made by the SEC." The decades-long practice has garnered a great deal of attention recently, particularly in light of Judge Jed Rakoff’s November 28, 2011 decision (discussed here) to reject the SEC’s settlement with Citigroup Global Markets, Inc. due to that very practice The exact timing of the Congressional Committee hearing has not been set, yet.…

The SEC Appeals Judge Rakoff’s Ruling Rejecting the Citigroup Settlement

On Thursday, December 15, 2011, the SEC appealed the Opinion and Order issued on November 28, 2011 by Judge Jed Rakoff rejecting the SEC’s proposed settlement with Citigroup Global Markets for $285 million (previously discussed here). In a statement, the Director of the Division of Enforcement, Robert Khuzami said that Judge Rakoff "committed legal error by announcing a new and unprecedented standard that inadvertently harms investors by depriving them of substantial, certain and immediate benefits."…

SEC Issues Statement Defending The Citigroup Settlement Rejected by the Court

Following yesterday’s sharply worded Opinion from Judge Rakoff rejecting the $285 million settlement with Citigroup Global Markets (discussed here), Robert Khuzami, the SEC Director of the Division of Enforcement, issued a statement (available here) claiming that Court "ignore[d] decades of established practice throughout federal agencies and decisions of the federal courts." Mr. Khuzami stated that the SEC respected the opinion, but it would "continue to review the court’s ruling and take those steps that best serve the interests of investors."…

Judge Rakoff Rejects Settlement in SEC v. Citigroup Global Markets as “neither fair, nor reasonable, nor adequate, nor in the public interest” and Sets Trial For Summer 2012

In a scathing Opinion and Order issued on Monday, November 28, 2011, Judge Jed Rakoff rejected the SEC proposed settlement with Citigroup Global Markets for $285 million, suggesting the SEC was hoping for "a quick headline" and finding "that the proposed Consent Judgment is neither fair, nor reasonable, nor adequate, nor in the public interest." Instead, the Judge consolidated the Citigroup case with a related matter, SEC v. Stoker , No. 11-civ-7388 (S.D.N.Y. Filed Oct. 19, 2011), and set a trial date of July 16, 2012. The decision could have a significant impact on how the SEC will approach and settle cases and what defendants who want to settle will be forced to consider.…

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