Michael Buffer has been a ring announcer at boxing and wrestling matches for over 30 years. During the early part of this century, he made a certain phrase very, very popular with sports enthusiasts. Before any major boxing or wrestling event he stood in the center of the ring, wearing a tuxedo and bow tie, and bellowed his catch-phrase to the delight of the crowd. Because I doubt very much Chief Justice Roberts will start the October 5, 2016 argument in a similar fashion, even though it would be most fitting, I will borrow Mr. Buffer’s saying for this blog post. What constitutes personal benefit in insider trading cases is the title fight on Wednesday’s slate of SCOTUS bouts. Ladies and gentlemen … “Let’s get ready to rumble!” Continue reading
Author Archives: Serina M. Vash
Wells Fargo’s No-Contest Settlement: Leaving the Stage Coach with Broken Windows
by Daniel Alter
The Enforcement Action:
On September 8, 2016, the U.S. Consumer Financial Protection Bureau (“CFPB”), the U.S. Comptroller of the Currency (“OCC”), and the Los Angeles City Attorney (“LACA”) announced that they had settled regulatory enforcement and consumer protection actions against Wells Fargo Bank, NA (“Wells Fargo” or “Bank”),[1] the nation’s second largest bank.[2] As disclosed by the CFPB’s investigation, the nature and scope of the Bank’s misconduct was truly astounding.
The CFBP found that, over the course of more than five years, thousands of Wells Fargo employees had: (1) opened more than 1.5 million deposit accounts without client consent; (2) transferred funds between client accounts without client consent; (3) applied for almost 600,000 client credit cards without client consent; (4) issued client debit cards without client consent; and (5) enrolled clients in on-line banking services without client consent.[3] As a result of these unauthorized and abusive transactions, the Bank charged customers approximately $2 million in fraudulent deposit-account fees and more than $400,000 in fraudulent credit-card related fees.[4]
This widespread client deception was not driven, however, by the relatively de minimis revenue that it generated for Wells Fargo. Rather, the CFPB concluded that the Bank’s “employees engaged in [the misconduct] to satisfy sales goals and earn financial rewards under [the Bank’s] incentive compensation program.”[5] In all, Wells Fargo “terminated roughly 5300 employees” over five years “for engaging” in these schemes[6] – which is an astonishing number of dishonest personnel and nothing less than an internal compliance disaster. Continue reading
End Run Around Newman
There are two events driving and linking this post. First, the Supreme Court will hear argument in United States v. Salman (PDF: 97 KB) within the next few weeks, and second, the start of football season. Although these events don’t seem to go together, they do here. In the wake of United States v. Newman (PDF: 357 KB) (a precipitating factor in Salman making it to the High Court) the government seems to be employing an end run around the Newman Case.
For those non-football junkies out there, the end run is a play where the offense tries to get the defense to move one way, while the runner is moving in the opposite direction to evade the defense. In its most basic form an end run is an attempt to circumvent. Continue reading
What Does it Mean to be a Monitor?
Monitorships are utilized when misconduct is found within an organization, but what does it mean to be a monitor? In the past, I have spoken to monitors who insist that I don’t understand what it is they do, but what the conversations revealed over time is that the word monitor is used to encompass a great deal of similar, yet distinct, activity. Continue reading
Evolution of the CFTC’s Whistleblower Program
by Douglas K. Yatter, Yvette D. Valdez, and J. Ashley Weeks
Financial services firms and market participants face an ever-evolving landscape of regulatory programs designed to encourage and enable whistleblowers to report potential misconduct. On August 30, 2016, the US Commodity Futures Trading Commission (CFTC) published proposed amendments to its whistleblower program.[1] Drawing from the agency’s experience in administering its program over the past five years, as well as strides the US Securities and Exchange Commission (SEC) has made in administering its analogous program, the CFTC’s proposal aims to enhance the whistleblower review process and adopt new enforcement authority for whistleblower retaliation. Continue reading
Managerial Guilt
by Samuel W. Buell
The Justice Department, the defense bar, the academics, the public, and perhaps even the executive suites all agree: Corporate crime is a management problem. For abundant evidence that they are right one generally need look back only a few days—for example, to last week’s revelation that, to meet corporate sales targets, thousands of employees at Wells Fargo crammed millions of credit card and other accounts onto customers who didn’t want them.
Only a firm’s managers (by which I mean more than strictly the c-suite) are, after all, in a position to create the positive and negative incentives that will induce employees and other agents to refrain from breaking the law. Critically in the current American system of corporate criminal liability, only the managers have the authority to negotiate with prosecutors and regulators, including control over the decision whether to report law violations discovered by the firm. Continue reading
The Risks of De-Risking
by Julie Copeland and Mirella deRose
Over the past several years, financial institutions in the United States and abroad have increasingly engaged in a “slimming down” of their client base. They have done so by deciding not to accept certain types of clients ranging from individuals engaged in specific industries –such as trade merchants, precious metal dealers or “politically exposed persons” (a term of art to be discussed below) – to whole categories of businesses or entities such as money service businesses, charities and foreign banks. This trend, which is now commonly referred to as “de-risking,” has significant collateral consequences for those using the global financial network.This blog will discuss de-risking, its causes and consequences, and some of the solutions that have been proposed to address the unintended results of this practice.
Since the passage of the USA PATRIOT Act in 2001 in response to the September 11th terrorist attacks – some would argue even before that – regulators in the U.S. and elsewhere have singled out certain categories of individuals and entities that either are strictly forbidden to hold accounts with financial institutions or, more routinely, require enhanced reviews by the institutions in which the accounts are maintained. The first category of accounts – those that are forbidden – includes entities such as “shell banks,” which are foreign banks without a physical presence in any country. Pursuant to law, U.S. financial institutions may not maintain accounts for such entities. Continue reading
The Law of Large Numbers
All things come in cycles, and we are now far enough into the current cycle of corporate prosecutions and related regulatory enforcement actions to be able to reflect meaningfully on the amplification of major resolutions in the multi-billion dollar range. Perhaps we are even able to discern some principles. As lawyers handling government investigations, we are accustomed to having to derive principles in an important area of the law with undeveloped case law. On some of the most important issues that lawyers both for defendant companies and for the government confront, there is very little neutral guidance as to appropriate outcomes. Historically, the surest and most relevant guide has been to look to the major negotiated resolutions to determine the contours of the law on issues from sales of mortgages, to cartel conduct, to foreign corruption, to the extent of economic sanctions. But those guides are becoming less and less helpful. Continue reading
DOJ’s Expectations for Voluntary Disclosure and Cooperation: In Loco Parentis for Corporations?
by Lee G. Dunst
We are now almost one year in since the DOJ announced with much fanfare its repackaged approach to corporate cooperation in the Yates memo in September 2015, followed months later with the much-ballyhooed release of the FCPA Pilot Program in April 2016. These highly publicized pronouncements reinforced the perception of DOJ’s focus on proactive corporate cooperation and voluntary disclosure with the enticement of the alleged benefits for companies. At the same time, DOJ clearly has been engaged in a deliberate effort to tout the apparent benefits of corporate cooperation with its very public announcements in spring/summer 2016 of declinations of prosecutions in some circumstances (for example, Akamai, Johnson Controls and Nortek) and reduced penalties in other cases (such as Analogic/BK Medical), citing voluntary disclosures and cooperation as one of the primary reasons for leniency. Continue reading
The Stick that Never Was: Parsing the Yates Memo and the Revised Principles of Federal Prosecution of Business Organizations
by Miriam Baer
Addressing a full house of practitioners, scholars and government officials on September 10, 2015, Deputy Attorney General Sally Quillian Yates announced the Department of Justice’s latest efforts to pursue corporate executives who had violated the law. “Crime is crime,” Yates told her audience, and the Department was committed to “holding lawbreakers accountable regardless of whether they commit their crimes on the street corner or in the boardroom.”
To demonstrate this renewed vigor, Yates summarized her September 9, 2015 Memorandum, entitled “Individual Accountability for Corporate Wrongdoing,” which instantaneously became known as the Yates Memo (PDF: 449 KB). Several of its provisions were uncontroversial and were accepted without comment. The measure attracting most attention was the Department’s stance on corporate offenders seeking prosecutorial leniency. Continue reading