Another Insider Trading Court Decision: Making Life Easier for the Government

Handcuffed in suit.jpgBy Dan Portnov

2019 ended with Congress trying to tackle insider trading but 2020 begins with the Second Circuit Court of Appeals once again commanding center stage in defining the elements of the offense. In United States v. Blaszczak (issued on December 30, but no one was paying attention), the court considered insider trading charges based under a newer criminal securities fraud law: Title 18 Section 1348.

The Blaszcak decision made clear that the Second Circuit’s insider trading precedent—Dirks, Newman, et al.—only applied to insider trading cases brought under the 1934 Exchange Act (Title 15 Section 78a). As a result, prosecutions brought under § 1348 should be easier to prove than charges of insider trading in violation of Exchange Act Section 10 or Rule 10b-5 promulgated thereunder.

Continue reading

Posted in DOJ policy and practice, SEC Investigation, Securities fraud | Leave a comment

Year End Review: Big Firm News and the 5 Most Popular Posts in 2019 (Yours and Ours)

Top 10 LetterpressBy Sara Kropf

We had a big year at Law Office of Sara Kropf. The biggest news is that we don’t exist anymore.

Not to worry, though. Andrea Moseley joined the firm, and we are now Kropf Moseley PLLC. With three lawyers, we are practically a legal empire.

We’re still trying to convince Andrea to write for the blog, and hopefully she’ll do a post or two this year. Andrea handles white-collar criminal matters, as well as lawyer disciplinary work and civil litigation. She knows the Virginia courts backwards and forwards, including the always-intimidating EDVA.

Onwards! Let’s look back at which posts were the most read this year and the ones that we had the most fun writing.

Continue reading

Posted in Uncategorized | 1 Comment

Congress Tackles Insider Trading

Envelope money.jpgBy Dan Portnov

Not busy enough with impeachment in the run up to the holidays, the U.S. House of Representatives on December 5 passed a bipartisan bill to prohibit insider trading. The Insider Trading Prohibition Act passed by a vote of 410 to 13 and now awaits a Senate vote and then, if passed, a review by the President.

This is not the first time that Congress has sought to explicitly ban insider trading by statute. The bill still has a long way to go before it becomes law, but it does attempt to offer clarity to a body of law that has caused much hand-wringing from the defense bar over the past few years.

So, what does this bill say, and what would it mean to future insider trading prosecutions?

Continue reading

Posted in DOJ policy and practice, SEC Investigation, SEC policy and practice | Leave a comment

Michael Cohen’s Sentencing Reduction Request Reveals the Minuscule Bargaining Power of a Cooperating Defendant

unfair to fair on white paperBy Sara Kropf

Back in September 2018, I wrote about how Michael Cohen was pleading guilty without the benefit of a cooperation agreement. I said that it was possible that the government would later file a Rule 35 motion, seeking a reduction in his sentence based on his later cooperation.

I was about half right.

On December 11, 2019, Mr. Cohen filed a Rule 35 motion himself. He seeks a reduction of his 36-month sentence to a year-and-a-day sentence (or home confinement) or a hearing to “explore, evaluate and quantify the cooperation which Defendant Michael Cohen provided the United States Government.”

The affidavits provided with the motion reveal what white-collar (and non-white-collar) criminal defense lawyers already know: there is no bargaining power when you are a cooperating defendant.

It’s easy to get distracted by the rather colorful affidavit in support of the motion filed by Mr. Cohen’s lawyer, Roger Adler. It’s an entertaining read and devoid of the legalese that peppers typical briefs.

I was struck by how this case—unusual as it is—is truly indicative of how little bargaining power a cooperating defendant has against DOJ. It’s not a fair fight.

Continue reading

Posted in DOJ policy and practice, Sentencing | Tagged | 2 Comments

The Hoskins Prosecution Comes To An End

Judge gavel.jpgBy Dan Portnov

On Friday, November 8, 2019, Lawrence Hoskins was convicted of violating the Foreign Corrupt Practices Act.[1] The jury verdict, delivered on a Friday afternoon in Connecticut, barely made the national news (the bar has been set higher these days), but in the FCPA world it was a huge victory for the government. Hoskins was found guilty as an agent of a French company’s U.S. subsidiary. So why was this prosecution so important?

Continue reading

Posted in Conviction After Jury Trial, FCPA, Money Laundering, Trials | Leave a comment

Why Is DOJ Trying to Unfairly Disqualify Defense Counsel for “Conflicts”?

Group of hands with pointing fingerBy Sara Kropf

There seems to be a disturbing trend by Department of Justice attorneys to encourage defense counsel to disqualify themselves based on a supposed “conflict of interest” without disclosing to defense counsel why the prosecutor thinks a conflict exists.

Let me explain how this issue arises.

In a grand jury investigation involving a company, the government may be simultaneously investigating the company and some combination of its directors, officers, or employees. The company retains outside counsel to represent it in the investigation. As part of that retention, outside counsel conducts an internal investigation and interviews the key people to find out what happened.

That’s all simple enough.

But then the prosecutor says he wants to interview a particular director, one who doesn’t appear to have had a role in any potential wrongdoing. Can the same outside counsel represent the director during the interview?

Continue reading

Posted in DOJ policy and practice, Ethics | Leave a comment

DOJ Clarifies the Stakes for Corporate Wrongdoers

Suits talking.jpgBy Dan Portnov

You know that it’s been a busy month in law enforcement news when a speech and memo announcement by DOJ Criminal Division Assistant Attorney General (AAG) Brian Benczkowski concerning corporate criminal penalties arrives with little fanfare. It must be something about an impeachment inquiry, I guess.

On October 8th, AAG Benczkowski rolled out a memo detailing DOJ’s policy for corporations settling criminal charges that are unable to pay the attendant criminal fines.[1] Corporate poverty claims are not new, but the Benczkowski memo and its accompanying questionnaire[2] offer additional clarity and perhaps further incentive for cooperation.

Continue reading

Posted in DOJ policy and practice, DOJ Statements | 3 Comments

Does the Government Have to Turn Over FBI 302s in Discovery?

Writing correspondenceBy Sara Kropf

The government usually turns over interview memos, or FBI 302s, during discovery in a criminal case.

As I’ve written before, a 302 is a summary of a witness interview written by an FBI agent. It is in narrative form, sometimes has quotes in it (but more often does not). The witness does not get to review or correct it before it is finalized.

When you are preparing for trial in a criminal case, reviewing the statements made by potential witnesses for the government is absolutely critical. They are the best roadmap to understand how the government will prove its case at trial. They are also a way to learn about potentially helpful witnesses.

If the government resists turning over 302s in discovery, what are the possible avenues to force it to do so? There are three of them.

Continue reading

Posted in Discovery/Brady, DOJ policy and practice | Leave a comment

How an OIG Investigation Becomes a Criminal Investigation

Big magnifying glass.jpgThe following excerpt is from our upcoming e-book, A Guide to OIG Investigations for Federal Employees and Contractors. It’s filled with all sorts of useful information on the OIG investigations.

We chose this excerpt in light of recent news about the criminal prosecution of former Acting FBI Director Andrew McCabe as well as the recently declined prosecution of his predecessor, FBI Director James Comey.

If there is only one thing you take away from this book, it is that an OIG investigation can turn into a criminal investigation. In fact, the OIG agent who interviews you may actually be conducting not only an OIG investigation but a criminal investigation as well. At a minimum, that agent is trying to determine whether you committed a crime, as well as a violation of federal or agency-specific policy.

This may sound confusing and counter-intuitive. How can an employee of a federal agency investigate a criminal case? Isn’t that what the Department of Justice (“DOJ”) and its prosecutors do?

Continue reading

Posted in OIG investigations | 2 Comments

Calling DOJ’s Bluff: Why a Stand-Alone False Statement Charge Is the Sign of the Weak Prosecution

hand raises for two winning cards on a green poker tableBy Sara Kropf

On September 4, 2019, after just a few hours of deliberation, a jury in federal district court in Washington, DC found former White House counsel Gregory Craig not guilty of one count of making a false statement.

Mr. Craig had an excellent legal team and plenty of funds to pay them (he’s a former Skadden partner). Even that amazing group of lawyers couldn’t convince the Department of Justice not to indict him in the first place.

That’s because it’s notoriously easy for a prosecutor to charge someone with false statements. That said, any defense lawyer will tell you that when a prosecutor threatens a false statement charge—without an underlying substantive charge—the government has a weak case.

Continue reading

Posted in False statements | Leave a comment