By Kevin Davis and Florencia Marotta-Wurgler
To what extent do firms collecting information from U.S. based consumers take advantage of the contractual flexibility afforded by the local regime or, instead, choose to follow the more rigid requirements of the European Union’s (EU) General Data Protection Regulation (GDPR)? The answers to these questions should inform assessments of both regimes. Continue reading
by Martin Lipton and William Savitt
Since the 1996 Caremark (PDF: 1.16 MB) decision, authored by the revered late Chancellor William Allen of the Delaware Court of Chancery, we have called the case to the attention of boards of directors to ease concern about personal liability resulting from derivative litigation claiming a board was negligent in failing to prevent a defective product or otherwise causing or failing to prevent the corporation to be liable for damages to a third party.
Caremark held that a board would be protected by the business judgment rule so long as it had implemented and monitored a system designed to identify risks and then deal with them. Emphasizing that it was a doctrine that would only rarely be invoked, Caremark, and cases following it, held that directors could face exposure only if their company “utterly failed” to implement a system for risk identification or if they intentionally “ignored a red flag”—that is, declined to deal with an identified risk. Continue reading
In May 2019, Chief Judge Colleen McMahon of the United States District Court for the Southern District of New York issued a noteworthy – and much-commented upon (PDF: 198 KB) – ruling with significant implications for the conduct of corporate internal investigations by outside law firms. United States v. Connolly, No. 16-CR-370 (S.D.N.Y. May 2, 2019). Judge McMahon’s basic holding was that if there is “extensive coordination” between lawyers conducting a corporate investigation and the prosecutor’s office with whom they are in discussions or negotiations, the lawyers’ acts are “fairly attributable to the government” under the reasoning of Garrity v. New Jersey, 385 U.S. 493 (1967), thus raising the question whether statements obtained by the lawyers have been “compelled” by state action and therefore cannot be used directly or indirectly to inculpate the declarants. The target of the court’s pointed criticism was basically the government: by extensive “outsourcing” of a criminal investigation, Judge McMahon warned, a prosecutor’s office risks procedural error that could imperil a prosecution. Judge McMahon’s opinion is also notable for a reason that has not been the subject of analysis and should be of grave concern to lawyers who conduct internal investigations internationally: under her reasoning, such lawyers face a real risk of criminal prosecution under what are known as “blocking statutes” in countries where the lawyers conduct interviews or otherwise gather evidence. Continue reading
by Christopher D. Frey, Roberto J. Gonzalez, Jeh Charles Johnson, Jonathan S. Kanter, Claudine Meredith-Goujon, Lorin L. Reisner, Jeannie S. Rhee, Richard C. Tarlowe, Alessandra Baniel-Stark, Daniel J. Klein, and Taylor C. Williams.
On October 21, 2019, the Federal Trade Commission (“FTC”) settled its first-ever complaint against a company for selling fake indicators of social media influence such as phony likes, follows, views, and subscribers to users on Twitter, LinkedIn, YouTube, Pinterest, Vine, and SoundCloud.[1] The company, Devumi LLC (“Devumi”), and its CEO, German Calas, Jr., settled the enforcement action with a $2.5 million fine.[2] The company was dissolved in 2018.[3] Reporting suggested that Devumi maintained an estimated stock of at least 3.5 million automated accounts, thousands of which used personal details of real social media users (who had not engaged Devumi’s clients with follows, likes, etc.), and that these accounts were used to generate the false indicators of social media influence.[4]
The FTC found, for example, that Devumi filled more than 58,000 orders for fake Twitter followers from a diverse set of buyers, including actors, athletes, musicians, investment professionals, lawyers, and experts who wanted to increase their appeal as influencers or otherwise boost their credibility.[5] Devumi filled over 800 orders for fake LinkedIn followers to marketing and public relations firms, consulting firms, and financial services companies, among others.[6] Continue reading
The Fraud Division of the U.S. Justice Department unsealed an indictment recently that charged three traders associated with a global U.S.-based bank with a racketeering conspiracy that involved alleged manipulation of the precious metals markets through “spoofing.” The indictment alleges numerous specific instances of spoofing, over an approximately eight-year period, intended to improperly affect prices for precious metals and related options. The U.S. Commodity Futures Trading Commission filed a parallel civil action against the three traders as well, likewise charging violations of commodities law reflecting attempts at market manipulation.
In announcing these charges, the head of DOJ’s Criminal Division, Brian Benczkowski, said this prosecution demonstrated the results of DOJ’s and the FBI’s increasing use of data analytics to develop prosecutorial leads. Speaking to reporters, Benczkowski said that he “expect[ed]to use it more in looking at other financial products and other trading behavior at desks at major financial institutions.” He emphasized that “[t]his is the type of case and the use of data that we expect to become the norm in the Criminal Division in the future.” Continue reading