Court Chips Away at Privilege Protections for Cyber Forensic Reports

by Jim Pastore, Luke Dembosky, Jeremy Feigelson, Avi Gesser, Corey Goldstein, and Mengyi Xu

On January 12, Judge James Boasberg of the U.S. District Court for the District of Columbia granted plaintiff Guo Wengui’s motion to compel production of a report (the “Report”) —and related materials—prepared by forensic vendor Duff & Phelps in Guo’s lawsuit against the law firm that formerly represented him, Clark Hill, PLC (the “Firm”). See Wengui v. Clark Hill, PLC, No. 19-cv-3195 (JEB), 2021 WL 106417 (D.D.C. Jan. 12, 2021). The court rejected claims the Report was protected by the work-product doctrine and attorney-client privilege.

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DOJ Announces First Criminal Indictments for Labor Market Antitrust Violations

by Robert A. Atkins, Craig A. Benson, Andrew C. Finch, Aidan Synnott, and Maria Helen Keane

  • The Antitrust Division of the U.S. Department of Justice (DOJ) has announced the first criminal indictments for “no-poach” and wage-fixing agreements.
  • These indictments follow a change in policy announced by the DOJ several years ago to pursue such violations as criminal matters, and not merely civil violations.
  • Companies with antitrust compliance programs should consider reflecting in their training programs and monitoring mechanisms the DOJ’s stance that naked “no-poach” or wage-fixing agreements are subject to criminal prosecution, and might also consider instituting methods to identify and evaluate such agreements.

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Admissions of Guilt to the SEC under Chair Jay Clayton

by Giovanni Patti and Peter Robau

The U.S. Securities and Exchange Commission settles the overwhelming majority of its enforcement actions, most with consent decrees where the defendant “neither admits nor denies” wrongdoing.[1] The SEC has publicly defended its use of “neither admit nor deny” settlements, arguing they: (1) reduce the time and resources required to litigate a case, (2) expedite recovery for defrauded investors, and (3) protect defrauded investors by reducing the risk that the SEC will lose at trial.[2] As John Coffee recently noted, “[e]very few years, the issue is certain to be raised: Why does the SEC persist in ‘neither admit nor deny’ settlements, which allow an issuer to avoid acknowledging any misconduct?”[3] Continue reading →

Supreme Court Vacates Second Circuit Ruling Expanding Insider Trading Liability

by Reed Brodsky, Barry Goldsmith, and M. Jonathan Seibald

On January 11, 2021, the Supreme Court in a summary disposition vacated the U.S. Court of Appeals for the Second Circuit’s major insider trading decision in United States v. Blaszczak, 947 F.3d 19 (2d Cir. 2019), remanding the case to the Second Circuit for further consideration in light of the Supreme Court’s recent decision in Kelly v. United States, 140 S.Ct. 1565 (2020).  See Blaszczak v. United States, 2021 WL 78043 (Jan. 11, 2021); Olan v. United States, 2021 WL 78042 (Jan. 11, 2021).  The Supreme Court’s decision raises important questions regarding whether, and to what extent, the Second Circuit will retreat from the significant expansion of insider trading liability it enunciated in Blaszczak barely more than one year ago. Continue reading →

Second Circuit Affirms SEC’s Bank Secrecy Act Powers

by William R. Baker III, Douglas N. Greenburg, Benjamin A. Naftalis, Nabil Sabki, John J. Sikora Jr., Eric S. Volkman, Douglas K. Yatter, Timothy H. McCarten, and Hye Eun (Michelle) Cho

The Second Circuit’s recent decision gives the SEC the green light to continue enforcing broker-dealer compliance with the Bank Secrecy Act.

Key Points:

  • In U.S. Securities and Exchange Commission v. Alpine Securities Corp., the Second Circuit affirmed the SEC’s authority to require broker-dealers to comply with the BSA’s reporting and recordkeeping requirements, under Section 17(a) and Rule 17a-8 of the Securities Exchange Act of 1934 (Exchange Act).
  • The Alpine decision validates the SEC’s focus on broker-dealer AML programs. In anticipation of such scrutiny, broker-dealers and Chief Compliance Officers should evaluate whether their compliance programs satisfy existing anti-money laundering obligations, and particularly BSA reporting obligations.

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COVID-19: A Review of the Second Wave of Securities Fraud Enforcement Actions

by Michael G. Bongiorno, Christopher Davies, Jessica Lewis, Sierra Shear, and Hyun-Soo Lim

As COVID-19 has continued to spread across the United States, the Securities and Exchange Commission (SEC) has remained keenly focused on monitoring the market “for frauds, illicit schemes and other misconduct affecting U.S. investors relating to COVID-19.”[1] Since the SEC made its first statements related to COVID-19, described in our earlier alert, the SEC has reiterated and expanded on its guidance for public companies, emphasizing that it will pay attention to “how companies are disclosing the effects and risks of COVID-19 on their businesses, financial condition, and results of operations.”[2] Continue reading →

Congress Passes Anti-Money Laundering Legislation Banning Anonymous Shell Companies

by Andrew Weissmann, David Bitkower, Tali R. Leinwand, Sarah F. Weiss, E.K. McWilliams, and Wade A. Thomson

Last week, a law designed to thwart the use of US shell companies by drug traffickers, terrorists, foreign adversaries, and others seeking to shield the provenance of their funds cleared Congress with bipartisan support. The Senate joined the House in overriding President Donald Trump’s veto of the National Defense Authorization Act for Fiscal Year 2021 (NDAA), which includes a variety of reforms to anti-money laundering (AML) laws.

The key reform requires certain companies to disclose their ultimate owners to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), making it harder for certain criminals to manipulate shell companies to launder money or evade taxes.[1] Although the law has various loopholes, it enhances the government’s ability to detect and deter the use of shell companies to commit crime.

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United States Imposes Sanctions on Turkey under CAATSA Section 231 for Purchase of Russian Missile System

by H. Christopher Boehning, Jessica S. Carey,  Christopher D. Frey, Michael E. Gertzman, Roberto J. Gonzalez, Brad S. Karp, Mark F. Mendelsohn, Richard S. Elliott, Rachel Fiorill, Karen R. King, and Maria E. Eliot

On December 14, 2020, the U.S. imposed sanctions on the Republic of Turkey’s Presidency of Defense Industries (“SSB”) pursuant to Section 231 of the Countering America’s Adversaries Through Sanctions Act (“CAATSA”), which mandates the imposition of sanctions against non-U.S. persons who conduct “significant” transactions with Russia’s defense or intelligence sectors.[1] The U.S. State Department determined that SSB’s acquisition of a Russian S-400 surface-to-air missile from Rosoboronexport (“ROE”) qualified as a significant transaction under Section 231. Continue reading →

DOJ Brings First Criminal Wage-Fixing Prosecution

by Lisa M. Phelan, Eric J. Olson, and Megan E. Gerking

The Antitrust Division of the Department of Justice (“DOJ”) recently announced its first-ever criminal wage-fixing prosecution. The DOJ likely intends this case to be a wake-up call to companies, executives, and HR professionals, reinforcing that competition laws apply equally to wages paid to employees as they do to prices for goods and services. Companies and individuals should take note of this development, update their trainings and compliance programs as appropriate, and recognize that wage fixing could lead to federal criminal prosecution and even jail time.

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CNIL Issues Fines Totaling €135 Million in Landmark ePrivacy Directive Cases

by Gail Crawford, Myria Saarinen, Tim Wybitul, and Wolf-Tassilo Böhm

Between December 2019 and May 2020, the French data protection authority (CNIL) conducted multiple online investigations by visiting google.fr and amazon.fr, before launching a full-scale investigation into Google LLC, Google Ireland, and Amazon Europe Core. On 7 December 2020, the CNIL handed down two decisions, one against Google LLC (€60 million fine) and Google Ireland (€40 million fine), and another against Amazon Europe Core (€35 million fine). Contrary to a previous sanction against Google LLC, which was triggered by specific complaints about its practices, the CNIL’s decisions indicate that the investigations were launched sua sponte with the specific aim of controlling the companies’ cookie practices. Continue reading →