Don’t Tread on the SEC’s Whistleblower Program (Through Confidentiality Agreements)

Thomas KlebestreifenWhistleblowers are a problem for corporations and a boon for the SEC.

The SEC relies in part on whistleblowers to identify possible wrongdoing within publicly-traded companies. From the agency’s perspective, the employees and officers of a company are in the perfect position to report on their company’s securities violations.

KBR recently learned the hard way that any perceived effort to restrict employees from participating in the SEC’s whistleblower program will not be well received. Luckily for KBR, the penalty was slight: $130,000 fine and a mandated revision of its employee confidentiality policy.

Continue reading

Posted in SEC Settlement | Tagged , , | Leave a comment

When the Good Wife Faces Criminal Forfeiture: The Government’s Efforts to Seize a Spouse’s Assets after Conviction

business concept. money with handThe federal government’s aggressive approach to criminal forfeiture unquestionably targets innocent bystanders to crime. In fact, the law makes it easy—and profitable—for the government to do so. A recent high-profile insider trading case in New York is a prime example of the need to challenge the government’s forfeiture approach.

In February 2014, Mathew Martoma, a hedge fund trader who worked for an affiliate of SAC Capital Advisors, was convicted of insider trading. He was sentenced to nine years in prison. In September 2014, the court entered a Preliminary Order of Forfeiture for approximately $9.4 million. The order stated that the $9.4 million

represent[ed] the amount of proceeds obtained as a result of the offenses charged in Counts One through Three of the Indictment.

Basically the government contended that the forfeiture amount arose from an SAC-related bonus received by Mr. Martoma that resulted from his insider trading activity.

The problem for the government is that the assets that were ordered forfeited are arguably jointly owned by Mr. Martoma’s wife, Dr. Rosemary Martoma. She is challenging their forfeiture.

Continue reading

Posted in Criminal Forfeiture, Insider Trading | Leave a comment

A Brady Win for a Defendant–Finally (and Some Tips to Get Brady Material)

DisclosureThe conviction and sentence of a man in California were recently vacated when it was discovered that the government had improperly withheld exculpatory material from his defense team at trial. We read a lot of stories about the failures of Brady v. Maryland and the seeming inability — or lack of desire — of courts to free defendants or to sanction prosecutors who flagrantly violate the law. It is nice to report a win for a defendant as a change of pace–not to mention a win for an “unpopular” defendant who was accused of conspiracy to bomb federal property.

In Brady, the Supreme Court held that due process requires prosecutors to disclose to defendants any exculpatory evidence (evidence that is “favorable to the accused”) that could affect a conviction or sentence.

This seems like a simple rule. In reality, it is not. Continue reading

Posted in Conspiracy, Discovery/Brady, Reversal | Leave a comment

Free Speech Wins: Overbroad Massey Mine Gag Order Lifted

MasseyI have been writing about the stupendously overbroad gag order imposed sua sponte by the judge in the criminal trial of Donald Blankenship, former CEO of Massey Mine. Judge Irene Berger imposed it, several media organizations intervened to challenge it, she decided to keep it mostly in place, they petitioned for mandamus to the Fourth Circuit.

The Fourth Circuit agreed to hear the case on an expedited basis. It heard argument on March 2. Three days later, the decision was in—petition granted.

Translation: free speech wins.

Continue reading

Posted in First Amendment | Tagged | Leave a comment

A Cautionary Tale: Make Sure Your Investigator Follows The Law

Computer security conceptIn a white-collar case, the prosecutors have the FBI on their side. A private lawyer can’t call on armed agents to investigate a case. Hiring a good private investigator, then, can make all the difference. A skillful and diligent investigator can chase leads, discover key facts, find witnesses and gather the information necessary to build a case. But there is a risk if your investigator crosses the line into illegal conduct.

Earlier this month, charges were filed against Eric Saldarriaga. He is an investigator whose clients apparently include 20 New York City law firms. He pleaded guilty to conspiracy to hack into private email accounts to help his clients. (So far, no law firm has been charged.) These charges are a cautionary tale for every lawyer who hires an investigator.

Continue reading

Posted in Computer fraud, Ethics | Leave a comment

First-Ever Case Against Chief Compliance Officer For Failure To Implement Anti-Money Laundering Program at MoneyGram

moneygramA Chief Compliance Officer (CCO) ensures that the Board of Directors, management and employees comply with the rules and regulations of regulatory agencies and the company’s own policies and procedures. What happens, then, when the CCO is personally accused of wrongdoing?

The Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) recently sued MoneyGram International Inc.’s former CCO, Thomas Haider. FinCEN accuses Mr. Haider of having a direct role in MoneyGram’s failure to file required suspicious activity reports (SARs) and failure to implement an adequate Anti-Money Laundering (AML) system. MoneyGram entered into a 2012 deferred prosecution agreement over this conduct.

In this civil case against Mr. Haider, FinCEn seeks to collect a $1 million civil monetary penalty and to enjoin Haider from having a hand in running any financial institution within the United States for several years to “prevent future harm to the public.” It appears to be the first-ever case against a CCO for this kind of conduct.

Continue reading

Posted in civil case, Compliance, Money Laundering | Tagged , | Leave a comment

Collateral Damage: FCPA-Related Non-Prosecution Agreement for Hewlett-Packard Leads to Civil RICO Lawsuit

hp logoA non-prosecution agreement is a wonderful thing. But it may not mean the end of the woes for a company under government investigation.

Hewlett-Packard (HP), the California-based technology firm, and its Mexican subsidiary, HP Mexico, entered into an NPA with the Department of Justice in April 2014. The NPA arose out of allegations of HP’s foreign bribery in Mexico.

The NPA included a fairly lengthy statement of facts to which HP agreed. The facts in the NPA relate to Mexico but the NPA also references

related agreements between the Department and HP Co. or its subsidiaries concerning FCPA violations in Russia and Poland.
Eight months later, that statement of facts is the basis of a civil RICO lawsuit. In an interesting turn of events, the plaintiffs are the companies that received the “influencer fee” paid by HP.

Continue reading

Posted in civil case, FCPA, Non-Prosecution Agreement, RICO | Tagged | Leave a comment

“We Live in Coal Country”: A Questionable Rationale to Maintain a Broad Gag Order in Massey Mine Prosecution

Massey A few weeks ago, I wrote about the overly broad gag order imposed by a district court judge in West Virginia in the criminal case against former Massey CEO Don Blankenship.

After furious motion practice, including efforts by various media organizations to contest the order, Judge Irene Berger kept it in place. She limited its scope (somewhat) but maintains nearly complete control over whether key documents will be available to the public. She is effectively keeping this important case under wraps without good reason.

This is the wrong decision.

Continue reading

Posted in Gag order | Tagged | 1 Comment

Where Are They Now? An Update on Past Posts

Several of the cases I’ve featured in my posts over the last year have had significant developments or come to a close. It’s always interesting—and moderately depressing—to see how things turned out. Continue reading

Posted in Bribery, FCPA, Insider Trading, Plea Agreement, Sentencing, Uncategorized | Tagged | Leave a comment

Public Service Announcement: NACDL Needs Examples of “Trial Penalty” Cases

I promise a real post later this week (isn’t the anticipation killing you?), but, meanwhile, NACDL is looking for examples of cases involving a “trial penalty.”

For those of you who are unfamiliar with the term, a “trial penalty” is the price our clients pay for choosing to fight charges against them rather than immediately capitulate in a plea deal. For exercising their constitutional rights–and forcing the government to meet its burden of proof at trial–our clients routinely pay the price of a longer sentence in prison if they are found guilty.

In December 2013, Human Rights Watch issued a report about this topic in relation to drug cases. I can’t vouch for the numbers, but the report concludes that

Federal drug offenders convicted after trial receive sentences on average three times as long as those who accept a plea bargain

Scott Greenfield has written about it. Matt Kaiser too.

Continue reading

Posted in Plea Agreement | Tagged | Leave a comment