Author Archives: Serina M. Vash

Do Heads Roll? An Empirical Analysis of CEO Turnover and Pay When the Corporation is Federally Prosecuted

by Brandon L. Garrett, Nan Li, and Shivaram Rajgopal

A company facing charges will present a “Chicken Little routine” describing the dire consequences of a prosecution for the company, then-U.S. Attorney for the Southern District of New York Preet Bharara famously explained.  Yet typically, after settling the criminal case, “the sky does not fall.”  Instead, Bharara maintained, all too often “the sky brightens,” the firm is seen as having put its problems behind it, and “the CEO even gets a raise.” Other commentators have been skeptical that prosecutions of a company alter behavior of high-level officers such as CEOs. To be sure, sometimes the CEO appears to be affected by a possible prosecution of the company.  The CEO of Wells Fargo recently stepped down before any criminal prosecution was initiated, after civil enforcement and high-profile Congressional hearings brought public attention to bear on unlawful sales tactics the bank used. Perhaps the  culture of not taking responsibility at the top is changing.  Or perhaps cases like that of the Wells Fargo CEO are salient examples only because it is so rare that a CEO is made accountable, in some measure, for corporate crimes. Continue reading →

UK Criminal Finances Act 2017

by Karolos Seeger, Alex Parker, Andrew Lee, Ceri Chave, and Ed Pearson

Overview

On 27 April 2017, the Criminal Finances Act 2017 (the “Act”) received Royal Assent. The Act has not yet come into force, but it is expected that this will take place by September 2017. It includes several provisions that will significantly affect the investigation and enforcement of corporate crime in the United Kingdom. The key features of the Act are: Continue reading →

Personal Liability for Compliance Officer in MoneyGram Settlement: Powerful Motivator or Chilling Deterrent?

by Erin Schrantz, Anouck Giovanola, and Justin Spiegel

On May 4, 2017, the U.S. Attorney’s Office for the Southern District of New York (“SDNY”) and the Financial Crimes Enforcement Network (“FinCEN”) announced the settlement of civil claims brought under the Bank Secrecy Act (“BSA”) against the former Chief Compliance Officer of MoneyGram International, Inc. (“MoneyGram”), Thomas Haider, stemming from MoneyGram’s failure to implement and maintain an effective anti-money laundering (“AML”) program or to timely file suspicious activity reports (“SARs”).[1]  The settlement represented the resolution of the first-ever suit filed by the federal government against an individual compliance officer in the finance industry,[2] and is likely to add fuel to increasing anxiety regarding the Department of Justice’s (“DOJ”) willingness to hold corporate executives liable for compliance failings. Continue reading →

Compliance: Reacting to and Preparing for Regulatory Change

by Nicole Stryker and Richard Girgenti

Compliance officers today face many challenges. The pace of regulatory change is swift and expectations globally are constantly changing. For example, while the Trump Administration has voiced plans to roll back regulations – particularly in the financial, healthcare and environmental arenas – many international and U.S. state regulators have said they may look to fill any gaps, making it hard for compliance officers to predict the net impact of these regulatory changes on their organizations. Brexit and other significant geopolitical developments further complicate the regulatory landscape. These regulatory fluctuations make it challenging for compliance officers to prioritize their compliance efforts. Continue reading →

DeCoster v. United States: Testing the Limits of the Responsible Corporate Officer Doctrine

by Jason Driscoll
 This post is the first part of a multi-part post by the author.

Over the last decade, the Food and Drug Administration and the Department of Justice have revived the use of the Responsible Corporate Officer (“RCO”) doctrine in an attempt to increase compliance with the Food, Drug, and Cosmetic Act (“FDCA”). Two recent cases—United States v. Purdue Frederick Co.[1] and United States v. Quality Egg, LLC[2]—illustrate the regulators’ new approach: impose strict criminal liability on individual corporate officers and seek enhanced sanctions in the name of effective deterrence. However, while the Supreme Court has upheld criminal fines premised on the RCO doctrine,[3] the Court has not yet opined on the legality of more serious penalties such as long-term debarment or imprisonment. The Court now has that opportunity. In DeCoster v. United States,[4] the Quality Egg defendants (Jack and Peter DeCoster) have filed cert. petitions asking the Court to review the lawfulness of their prison sentences and the RCO doctrine altogether. For anyone concerned about the expanding scope of corporate officer liability, this case could mark a turning point. Continue reading →

The SEC’s Enforcement Record against Auditors

by Simi Kedia, Urooj Khan, and Shivaram Rajgopal

Given the high incidence of financial misrepresentation over the past two decades, there is continued interest in understanding the contribution of different gatekeepers in deterring and detecting financial misrepresentation. There is little agreement, however, on the role and responsibility of these gatekeepers, especially that of the auditor.  On the one hand, the audit industry asserts that it is not possible for the auditor to detect intentional fraud by company executives.  On the other hand, is the view exemplified by Steven M. Cutler, former Director of the SEC’s Division of Enforcement, following the collapse of Enron: “While I believe the causes of this phenomenon [seemingly unprecedented corporate fraud] are multiple, a significant contributing factor was the laxity of the so-called gatekeepers — the accountants, lawyers, research analysts, board members and others controlling access to our capital markets. Perhaps foremost among these is the auditor.” Continue reading →

The Market for Global Anticorruption Enforcement

by Samuel W. Buell

The explosion in Foreign Corrupt Practices (FCPA) enforcement is a turning point for white collar practice to which many discussions on this blog owe their origins. For over two decades the FCPA rested mostly dormant. From 1977, when the statute was enacted, until 2000, the federal government pursued only fifty-two FCPA enforcement actions. No more than five such actions were brought in a single year, and in four of those years, zero actions were commenced. But then, at the beginning of the twenty-first century, U.S. prosecutors and securities enforcers eagerly embraced the statute, initiating 379 FCPA cases between 2001–2015,  reaching an annual high of 56 cases in 2010.[1]

In a new paper in Law & Contemporary Problems, my colleague Rachel Brewster and I offer a broad theoretical accounting for this dramatic development. It is an outside-in, inside-out story, featuring international organizations, policy makers, prosecutors and regulators, and the defense bar as the central characters responsible for awakening the FCPA and creating the robust anti-corruption enforcement regime that exists today. Continue reading →

Recent DOJ Speeches Promise Continuity in White-Collar Enforcement

by John F. Savarese, Marshall L. Miller, and Jonathan Siegel

Earlier this year, we noted (PDF: 239.60 KB) that it was difficult, if not impossible, at that point to predict with confidence how the new administration might change white-collar criminal law enforcement priorities and practices.  Three months later, however, some clearer signals are beginning to appear.  In a pair of speeches delivered last week, on April 18 and April 20, Acting Principal Deputy Assistant Attorney General Trevor McFadden, a Trump Administration appointee, gave strong indications that the Department of Justice will continue to engage in active white-collar criminal enforcement, without substantial changes in direction from the previous administration.  And in a speech yesterday, Attorney General Jeff Sessions promised continued prosecution of corporate fraud and misconduct and strong enforcement of the Foreign Corrupt Practices Act and other anti-corruption laws.

In his more detailed speeches, McFadden rejected what he called the “myth” that DOJ under AG Sessions was not interested in prosecuting white-collar crime.   Continue reading →

Yates Memo – Time for Reassessment?

by Sharon Oded

A year and a half ago, the DOJ changed the rules of the game with the introduction of a memorandum entitled “Individual Accountability for Corporate Wrongdoing” (known as the “Yates Memo”).[1] In a memorable announcement in September 2015 at the NYU School of Law, Sally Quillian Yates, then-Deputy Attorney General, decisively announced: “Effective today, if a company wants any consideration for its cooperation, it must give up the individuals, no matter where they sit within the company.”[2]

The Yates Memo continued a steady trend of strengthening enforcement against individual perpetrators involved in corporate fraud. Realizing the significant challenges faced by the DOJ in establishing individual liability for corporate wrongdoing, Yates Memo sought to enlist culpable corporations to assist the DOJ in pursuing individual offenders. Continue reading →

SEC Reboots Employment Agreements via Whistleblower Protections

by Eric Young and Brandon Lauria

Confidentiality and employment agreements have not historically been a matter of concern for the nation’s leading securities regulator.  However, since August, the SEC has settled eight enforcement actions involving allegations of improper conduct with respect to employment agreements as part of its efforts to encourage, protect and reward whistleblowers.  If this enforcement blitz surrounding Rule 21F-17 continues, it could ultimately change the terms of confidentiality provisions at a far ranging list of employers from publicly traded companies to financial institutions to government contractors.

What is SEC Rule 21F-17?  It is the 2011 regulation adopted by the SEC as part of the rules governing its Dodd-Frank Act authorized whistleblower program.  It prohibits, with a few small exceptions, “any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement ….”  17 C.F.R. 240.21F-17(a).  In short, it bars efforts to impede whistleblowers from reporting misconduct to the SEC. Continue reading →