Some have questioned the report’s main findings noting that CBP and ICE also spend significant resources conducting non-immigration related enforcement such as screening cargo at the nation’s ports and detecting counterfeit goods.  However, even after accounting for resources spent on cargo and goods, the statistics are no doubt staggering.  In addition, resources spent by other agencies involved in immigration-related enforcement are not included in the $18 billion figure (for example, USCIS, DOL, and DOJ OSC, not to mention state resources directed to immigration-related enforcement).  There is no question that there has been a significant increase in immigration enforcement in recent years.  Between 2005 and 2012, ICE’s funding alone increased from $3 billion to nearly $6 billion.  There is also no question that the level of  immigration enforcement seen in recent years will only continue.

E-Verify.   Be on the lookout for more states to mandate E-Verify for private employers in 2013, and E-Verify participation is expected to be a part of any comprehensive immigration reform.  In the meantime, employers in Georgia, North Carolina and Tennessee should pay particular attention to the upcoming 2013 E-Verify participation deadlines in those states:

• Georgia
  • Employers with more than 99 employees: deadline has passed
  • Employers with 11-99 employees: July 1, 2013
• North Carolina
  • Employers with more than 500 employees: deadline has passed
  • Employers with 100-499 employees: January 1, 2013
  • Employers with 25-99 employees: July 1, 2013
• Tennessee
  • Employers with more than 199 employees: deadline has passed
  • Employers with 6-199 employees: January 1, 2013

All employers who have not yet implemented E-Verify or who have only implemented E-Verify in certain states should review the relevant states’ requirements to determine whether they need to revise their E-Verify participation. 

New Form I-9.  Last, but not least, in addition to the increased enforcement, USCIS is expected to issue a new Form I-9 within the next few months after two rounds of comment period in 2012.  Overall, the proposed Form I-9 de-clutters the Form I-9’s content and leaves less room for error in completing the Form I-9.  However, implementation of the new I-9 will require additional training and tweaks to existing electronic systems (if implemented). As a reminder, the proposal is still in draft form and employers should continue to use the current Form I-9 until any changes are made permanent.

Since January 2011, FINRA has brought actions against at least five broker-dealers and ten individuals for either failing to conduct adequate due diligence into private placements or failing to implement adequate supervisory systems and procedures for private offerings.  These actions consistently involve the following shortcomings:

• Reviewing solely the issuer’s unverified and uncorroborated statements in the offering document;
• Failing to obtain or review the issuer’s financial statements;
• Failing to visit the issuer’s facilities or meet with its key personnel;
• Failing to research the background information on the offering’s officers;
• Failing to use the services of third-party due diligence providers; and
• Failing to identify in supervisory procedures the specific due diligence steps to be taken and firm personnel responsible for such steps.

FINRA requires that firms have written procedures outlining the steps it will undertake in conducting due diligence on its securities products.  These due diligence procedures should be designed to help firms understand the inherent risks of these products and to determine whether these products are suitable for its customers.  FINRA stated in a recent Letter of Acceptance, Waiver and Consent that “[d]etailed and robust written procedures are particularly important for private offerings, because there is no registration of the securities with the SEC and public information regarding the offering may be limited.”

Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, recently said the agency will continue its focus on sales of private placements to determine whether the selling firms fulfilled their responsibility to customers.  Broker-dealers should note FINRA’s fixation in this area.  If your firm engages in private placements, it would behoove you to assess whether your internal controls, supervisory systems and risk management practices properly address your due diligence obligations. 

Currently, broker-dealers and investment advisers are subject to different standards of care under federal law when providing investment advice about securities.  Investment advisers are regulated under the Investment Advisers Act of 1940 as fiduciaries who have a duty to serve the best interests of their clients, including an obligation not to subordinate clients’ interests to their own.  Broker-dealers, however, are regulated under the Securities Act of 1933 and the Securities Exchange Act of 1934, specific Exchange Act Rules, and FINRA Rules, among others.  Generally, broker-dealers are not subject to a statutory fiduciary duty, but rather a standard requiring suitability, fairness and transparency.

The Study’s Findings and Recommendations

-Uniform Fiduciary Standard – adoption of a standard of care “no less stringent than currently applied to investment advisers under [the] Advisers Act.”

-Harmonization of Regulation – SEC to engage in rulemaking to develop a more consistent regulatory regime.

The Opposition

Commissioners Casey and Paredes, in opposition to the Study, stated that it “does not identify whether retail investors are systematically being harmed or disadvantaged under one regulatory regime as compared to the other and, therefore, the Study lacks a basis to reasonably conclude that a uniform standard or harmonization would enhance investor protection.”  In three separate letters to the SEC, members of the U.S. House and Senate have urged the SEC to conduct a cost-benefit analysis of what changing the standard for broker-dealers will mean for investors.

As a result, it is unclear whether any new rules will ultimately result from the SEC’s Study.  However, we can be certain that they will not go into effect until late 2011, at the earliest.  At a recent Investment Company Institute (ICI) conference, a senior advisor to SEC Chairman Mary Schapiro and coordinator of the fiduciary study, Jennifer McHugh, said that SEC action will “likely occur later in the year.”  She added that the Commission had not formed a “rulemaking team” and continues to meet with outsiders “to get their reaction, rather than [move] straight to rulemaking.” 

Allison D. Charney contributed to this post. 

In a complaint filed December 20, the SEC alleges that Joseph M. Elles, an Executive VP of Sales at Carter from 2004 to 2009, fraudulently manipulated the dollar amount of discounts that Carter’s granted to its largest wholesale customer, and persuaded the company to defer the discounts to later reporting periods, leading to an understatement of Carter’s expenses and a material overstatement of its net income.  During that time, Elles allegedly realized gains from insider trading in shares of Carter’s common stock, resulting in a pre-tax profit of approximately $4.7 million.  The fraud was disclosed on October 27, 2009, leading to a 23.8% drop in the company’s share price.  

The non-prosecution agreement means that Carter’s will not be charged with violations of the federal securities laws related to Elles’ conduct.  In its press release, the SEC made the following observations:

• the alleged unlawful conduct was relatively isolated;
• Carter’s promptly self-reported the conduct to the SEC;
• Carter’s cooperation with the SEC was “exemplary and extensive,” and included a thorough, comprehensive internal investigation; and
• Carter’s took extensive and substantial remedial actions.

The agreement requires Carter’s to cooperate with the Commission during its investigation and subsequent proceedings, including utilizing its “best efforts” to secure the full cooperation of current and former employees, and that Carter’s provide full testimony, non-privileged documents, and other information.  Additionally, under the agreement Carter’s cannot deny the underlying conduct except in legal proceedings where the SEC is not a party. The agreement applies only to the SEC and not to other self-regulatory or governmental proceedings, although the SEC may use its discretion in forwarding a letter detailing the cooperation of the company. 

With this case, the SEC has provided a roadmap to using non-prosecution agreements in the future. Companies should take note.

Samantha E. Thompson authored this post.

Rorech was heralded as a groundbreaking test of the SEC’s resolve to leave no corner of the capital markets unregulated.  Involving sophisticated market participants trading in complex credit derivatives, the SEC’s litigation release announcing the action in May 2009 led with the headline “SEC Files First Credit Default Swap Insider Trading Case.”  The implication of this “first” of its kind was supposed to act as a message:  the SEC understands Wall Street’s sophisticated products and will prosecute wrongdoing involving them.  

The massive challenge facing the SEC in Rorech was whether it had jurisdiction to sue over misconduct involving credit default swaps.  This was a highly technical question of whether the CDS contracts at issue fell within the definition of a “securities-based swap agreement” under section 206B of the Gramm-Leach-Bliley Act.  The results of that analysis would in-turn have an impact on whether the CDS at issue could fall within Section 10(b) of the Securities Exchange Act as amended by the Commodity Futures Modernization Act.

According to Judge Koeltl, the threat actually facing the SEC’s case was not its subject matter jurisdiction, the reach of securities laws, or even the complexities of credit derivatives but rather old-fashioned sufficiency of the evidence.  After a three-week bench trial, the Court found that the SEC’s complaint was deficient with respect to every required element of an insider trading case as (1) the SEC failed to show any evidence that the underlying confidential information was true, let alone that Rorech could have possibly possessed it;  (2) no evidence was presented, even assuming the purportedly confidential information to be true, that the information would have been material to investors;  (3)  the evidence presented demonstrated that the allegedly “confidential” information may not have been confidential, as there was no requirement or expectation that the information would be kept confidential by any of the parties involved;  (4)  no evidence of “deceit” or unauthorized theft of information was presented as required in insider trading actions brought pursuant to the misappropriation theory; and (5) the SEC failed to show that Rorech had the necessary intent, or scienter, to be held liable for insider trading.

The Court also noted that the SEC was unable to offer “any” evidence of Rorech’s motive for violating the securities laws since nothing was presented regarding how sales of the bonds or CDS protection would impact his compensation. 

In the end, the “controversial” issue of whether the CDS contracts were subject to the antifraud provisions of the federal securities laws was a red herring.  The Court reached the conclusion that the derivatives at issue were “securities-based” and thus well within the jurisdiction of the SEC. 

There is no word yet on whether the SEC will appeal this decision 

Allison D. Charney contributed to this post.

The Bank Integrity Unit, as Mr. Breuer called it for short in a speech before a joint conference of the American Bankers’ Association and the American Bar Association, was established to focus criminal investigation and prosecution efforts on three types of money laundering violators: (1) financial institutions, including officers and other employees; (2) professional money launderers who service criminal organizations; and (3) persons engaged in money laundering using sophisticated techniques, such as virtual currency and mobile payment systems.  Mr. Breuer acknowledged that effective compliance programs are costly, but he stated that, considering the Justice Department’s record of going after banks – big and small – for inadequate AML compliance programs, it makes business sense for banks to get into compliance.

In light of the Justice Department’s deferred prosecution agreement with Wachovia Bank, N.A., in which Wachovia was required to pay $160 million in forfeited funds and civil monetary penalties in March 2010 for lapses in AML compliance, it is understandable that the Department would take every opportunity to remind financial institutions of their Bank Secrecy Act obligations.  However, no less an AML compliance authority than John Byrne, who, since 2010, has served as Executive Vice President of the Association of Certified Anti-Money Laundering Specialists (ACAMS), was taken aback by a warning of sorts issued by Mr. Breuer to the conference attendees.  Mr. Breuer stated that if there was one message he could leave with the audience, it would be that “financial institutions simply cannot cut corners on compliance [because] having a compliance program that works is worth it. . . . [and] failing to adopt and maintain a real compliance structure will have serious consequences.”  Mr. Byrne, who works closely with all types of financial institutions, wonders what prompted Mr. Breuer to fire such a “shot across the bows” at an industry that is so committed to AML compliance. 

Committed or not, financial institutions must acknowledge that the compliance obligation is a continuous one.  It requires, at a minimum, periodic risk assessments, training, recordkeeping, reporting, and audits, as well as necessary adjustments in order to keep pace with the criminals who would use the financial institution to commit crime and to conceal the origin of illicit funds.  The failure of CommunityONE Bank to take these steps led to criminal prosecution, culminating with an agreement deferring prosecution in the Western District of North Carolina.  In its deferred prosecution agreement, the bank agreed to pay restitution to victims of an investment fraud scheme run through the bank by an individual who was convicted of fraud in December 2010.

It is abundantly clear that the Justice Department is increasing its enforcement of Bank Secrecy Act requirements against financial institutions of all sizes.  As a result, banks and other financial institutions covered by the Bank Secrecy Act can no longer claim to be the victims of fraud under circumstances in which the underlying misconduct could have been detected, and perhaps even prevented, with a robust AML compliance program.

In the words of Anne Tompkins, the U.S. Attorney for the Western District of North Carolina, “Banks asleep at the switch need to wake up. . . .  [T]he Bank Secrecy Act applies to more than just drug and terrorist financing.”

Now that’s a warning.

Money laundering is, generally speaking, conduct that involves transporting, concealing, or avoiding reporting requirements in connection with the proceeds of a Specified Unlawful Activity (SUA) or property used to facilitate an SUA.  By definition, then, money laundering requires the existence of an underlying SUA, such as fraud.  So where there is fraud, there may be money laundering.  Financial institutions risk the non-detection of money laundering whenever they withhold information about potential fraud from AML analysts.  Failing to detect money laundering exposes them to further financial losses and regulatory scrutiny. 

Even where there is no known or suspected connection between a fraudulent transaction and money laundering, banks and other financial institutions still have a legal obligation to file a Suspicious Activity Report (SAR) relating to the fraud, assuming the transaction meets a minimal threshold.  The legal obligation (as well as the voluntary option) to file a SAR must be addressed in the written AML program and is subject to regulatory oversight by AML examiners.  Thus, it seems clear that financial institutions should integrate their AML and anti-fraud capabilities.

Since September 2008, when he spoke to the Florida Bankers Association, James H. Freis, Jr., Director of the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), has been extolling the virtues of understanding the intersection of AML and anti-fraud efforts and urging financial institutions to take a landscape approach toward compliance.  Director Freis has repeatedly made the point that, especially in this economic downturn where resources are scarce, corporate compliance departments can and should combine their AML and anti-fraud resources.

Recently, in a talk to the Institute of International Bankers, Director Freis stated that a robust AML program can pay for itself through the prevention and detection of fraud.  He explained that a recent study indicated that, in 2008, banks suffered $788 million in card fraud-related losses, $1 billion in check fraud-related losses, and another $100 million in ACH fraud-related losses.  Rather than accept this nearly $2 billion in annual losses as a cost of doing business, Director Freis suggested that banks would increase their detection and prevention of fraud, and therefore significantly cut their losses due to fraud, by more closely aligning their AML and anti-fraud functions.

AML and anti-fraud efforts should also be combined for purposes of taking full advantage of FinCEN’s voluntary information sharing program, which is authorized by section 314(b) of the USA PATRIOT Act of 2001.  Section 314(b) is a program in which financial institutions (and associations of financial institutions) are protected from liability when they share information with other financial institutions that may involve possible money laundering and terrorist financing.  Because money laundering requires an SUA as a predicate, FinCEN issued guidance reminding financial institutions that information may be shared under section 314(b) if financial institutions suspect that a questionable transaction may involve the proceeds of an SUA.  By sharing information under section 314(b), financial institutions can combat money laundering and terrorist financing while saving money on fraud prevention.

Financial institutions should not wait for a significant law enforcement or regulatory action to be taken before they integrate their AML and anti-fraud efforts.  Integration is a win-win proposition and now is the time to do it.

 On July 1, 2010, President Obama signed into law H.R. 2194, the “Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010” (“CISADA” or “the Act”).    CISADA follows and builds upon the recently-passed United Nations Security Council Resolution 1929, which imposed sanctions upon Iran for its ongoing illicit nuclear activities.  CISADA amends the Iran Sanctions Act and strengthens the sanctions regulations targeting Iran that are administered by OFAC.

 While U.S. companies have been prohibited from providing goods or services to Iran for some time, recently there has been increased attention focused on foreign companies, including overseas subsidiaries of U.S. companies, with substantial business ties to Iran’s energy sector.  The revenue from energy exports drives Iran’s economy and its ability to fund its nuclear program.  Deterring investments in Iran’s energy sector is therefore considered an important part of U.S. efforts to prevent Iran from acquiring nuclear weapons. 

Legislation passed in 1996 authorized the President to impose sanctions on any foreign entity that invested $20 million or more in Iran’s energy sector, but no Administration has used the power.  CISADA ratchets up the pressure on those doing business in Iran in several ways.  First, the Act now requires the imposition of sanctions and broadens the categories of transactions that trigger sanctions, focusing on companies that sell refined petroleum to Iran or assist Iran in developing its own domestic refining capacity.  While the President continues to have the power to waive the imposition of sanctions on foreign companies, there must be a determination that the waiver is “necessary to the U.S. national interest,” a higher standard than previously existed.  The Act also includes a waiver mechanism that the President may use to avoid sanctioning an overseas business if the government with primary jurisdiction over the business is “closely cooperating” with the United States in its efforts against Iran.

In response to the attention focused on foreign companies with substantial business ties to Iran, a number of state and local governments, universities, and pension and mutual funds have decided to divest from companies with significant operations in Iran.   The Act provides a legal framework by which state and local governments and certain other investors can carry out divestment.  Among other things, the Act recognizes the authority of state and local governments to divest from companies involved in investments of $20 million or more in Iran’s energy sector and sets standards for them to do so.  The Act also provides a safe harbor for changes of investment policies by private asset managers, and it expresses the sense of Congress that divestments do not constitute a breach of fiduciary duties under ERISA.

In addition to targeting the Iranian energy sector, the Act imposes significant new obligations and restrictions on financial institutions.  Pursuant to the Act, the Treasury Department has now issued regulations that prohibit, or impose strict conditions on, the opening or maintenance in the U.S. of a correspondent or payable-through account by a foreign financial institution that Treasury finds knowingly assists key Iranian banks or the Islamic Revolutionary Guard Corps (“IRGC”).  In a sign of the urgency felt within the government on all matters Iran-related, Treasury completed the regulations within half the time allotted under the Act.  They were released on August 16, 2010 and can be found here: http://edocket.access.gpo.gov/2010/2010-20238.htm.  Treasury intends to publish the names of the foreign financial institution subject to the prohibition in an appendix to the regulations.  A domestic bank that opens a prohibited account and the foreign bank that “attempts,” or “causes” the account to be opened both face substantial civil and criminal penalties. The regulations also make clear that foreign subsidiaries of U.S. financial institutions may not engage in any transaction with Specially Designated Nationals (http://www.treas.gov/offices/enforcement/ofac/sdn/) that are agents or affiliates of the IRGC. 

There is another set of regulations still to come:  Under the Act, Treasury must issue regulations that will require U.S. banks that maintain correspondent or payable-through accounts in the U.S. for foreign banks to take steps to ensure that the foreign banks are not engaging in prohibited activities through the accounts.  The Act does not set a time within which this set of regulations is to be issued, but one assumes they will be out soon.  Given the circumstances, banks subject to these regulations should pay close attention.

The Administration still intends to go forward with a trial, but it appears that the trial decision has become ensnared in complex negotiations with the Hill.  Politico recently reported that the White House is bargaining with Senator Lindsey Grahamin an attempt to forge a comprehensive deal on detainee policy. According to the article, in return for military trials for the 9/11 plotters, Graham would support congressional funding to establish a detention facility in Illinois for some current Guantanamo prisoners, reform of laws as to who is an enemy combatant, and a preventive detention statute.

According to press reports, the President initially asked Attorney General Holder to choose the site of the trial in an effort to maintain an independent Justice Department.  So a decision that was originally intended to be insulated from politics has now become entirely entangled in politics. The detainee issues that are being negotiated are extremely difficult to resolve (they have been under discussion for years), and there is no reason to think that a grand deal can be achieved with Senator Graham, let alone the whole Congress, anytime soon.  If the KSM trial decision won’t come until the other detainee issues are worked out, we are in for a long wait.

DOJ has traditionally resisted any political intrusion into its charging decisions.  Indeed, as part of that resistance, the staff in the Main Justice building spends lots of time and energy fighting off Congressional requests for information concerning pending investigations and prosecutions.  To be sure, the KSM case is different than the ordinary federal prosecution in lots of important ways and the trial decision deserves a full discussion.  But the current uncertain status of the KSM prosecution is another demonstration of the utility of the traditional DOJ approach.

With any luck, the trial question will be decoupled from the rest of the detainee issues and decided soon.  Whether the prosecution is in a military or civilian courtroom, it will take a long time to complete.  And however the KSM decision is resolved, I hope it yields a consensus on the way forward that will permit prosecutors to move in other terrorism cases without delay.

The honest services provision expands the federal mail and wire fraud statutes to proscribe any scheme or artifice to defraud another not only of tangible property, but also of “the intangible right of honest services.”  (18 U.S.C. § 1346.)  This broadly-phrased provision has become a favorite of prosecutors precisely because of its malleability.  Following Enron’s spectacular collapse, prosecutors indicted Skilling for, among other crimes, conspiring to commit honest services wire fraud by misrepresenting Enron’s financial health to inflate its stock price, thus depriving Enron of his “honest services.”  Skilling argued that this language was unconstitutionally vague and that it criminalized complex business decisions.

Although the Supreme Court acknowledged that Skilling’s argument had force, the Court declined to rule the statute unconstitutional.  Instead, the Court narrowly construed the law, holding that the law properly criminalizes only acts of bribery or kickback schemes.  In so holding, the Court rejected the government’s contention that the statute also proscribes undisclosed self-dealing by a public official or a private employee (yet the Court left open the door for Congress to amend the statute to “speak more clearly than it has”).

The Court found that Skilling did not violate the honest services provision because the government had not alleged that Skilling solicited or received bribes or kickbacks in connection with the alleged fraudulent scheme.  Because Skilling’s indictment alleged “honest services fraud” as one of three objects of the conspiracy for which he was convicted, the Court concluded that his conviction was “flawed,” and remanded the matter to the Fifth Circuit Court of Appeals to determine whether the error was “harmless” as to the conspiracy conviction and whether it tainted all of Skilling’s myriad other convictions.  Thus, it remains questionable whether Skilling’s victory will provide him any actual relief.

The Court’s ruling does, however, clearly undermine the continued viability of the honest services law.  Gone are the days when prosecutors can freely use the law as a means to introduce evidence of immoral or unethical behavior by public officials or private executives.  Now they will have to adduce evidence that those persons engaged in bribery or kickbacks – actual criminal violations.

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The Welliver court held that defendants intentionally disclosed and, therefore, waived their attorney-client privilege over communications they introduced as exhibits during a deposition of their compliance officer.  The court declined to require a broader subject matter waiver, however, finding that the disclosure was not made to gain a tactical advantage or in a “selective, misleading and unfair manner.” 

The court also held that defendants waived their attorney-client privilege for approximately 200 emails inadvertently produced during the SEC’s pre-suit investigation and in later discovery because defendants failed to identify a single step taken to prevent inadvertent error.  The court rejected defendants’ position that the SEC’s aggressive six-day timeframe for responding to the subpoenas should excuse the disclosure because defendants never asked to extend the production deadline or sought other arrangements to maintain the privilege. The court considered the following factors in reaching its conclusion:  (1) the reasonableness of the precautions taken to prevent inadvertent disclosure in light of the extent of the document production; (2) the number of inadvertent disclosures; (3) the extent of the disclosures; (4) the promptness of measures taken to remedy the problem; and (5) whether justice is served by relieving the party of its error.  The court stressed that “[p]arties must recognize there are potentially harmful consequences if they do not take even minimal precautions to prevent against the disclosure of privileged documents . . . .”

Finally, the court held that there was an implied waiver of the attorney-client privilege because defendants’ defenses put certain privileged communications at issue, and fairness required a broader subject-matter waiver to allow the SEC to investigate the underlying facts.

As a takeaway, implement reasonable procedures for identifying and redacting or withholding privileged materials when producing documents.  Check whether the particular agency has established protocols regarding inadvertent and purposeful productions of privileged documents and agreements related thereto, such as those set forth in the SEC Enforcement Manual.  During the review, running keyword searches for the names of attorneys and their law firms and pulling those documents for further review are useful precautionary measures.  In addition, consider seeking a reasonable extension of the production deadline if necessary to help avoid inadvertent disclosures.  Carefully document communications with the government regarding any changes or attempted changes to the production requirements.  Finally, seeking protections under an agreement or court order in the event of a disclosure are useful protective measures that demonstrate efforts to take reasonable precautions.

 The Committee…believes the time has come to engage in comprehensive review of the House’s conflicts standards so that they are clearer and more easily digested by the House community.

Based on the statement, it will be more important than even during future congresses for any entity that interacts with the Members of Congress and for congressional offices to establish protocols to avoid even the perception of a conflict of interest.  More on the Committee's findings and conclusions can be found at ethics.house.gov.  Happy Holidays!

This piece was authored by Elliot Berke and Bill Farah, Co-Chairs of the Political Law Group at McGuireWoods

The announcement comes as no surprise on the heels of MacBride’s widely-reported announcements over the last several months concerning the expansion of his office’s capabilities to tackle financial crime.

The new task force will enhance the Eastern District’s ability to prosecute major national financial fraud cases.  This is but one more step in the Eastern District’s apparent competition with the Southern District of New York for these high profile cases.  The Southern District has historically been the most prominentvenue for financial fraud cases, but the Eastern District has been ramping up its efforts over the last six months and appears ready to give the Southern District a run for its money.

Known as the “rocket docket” because its judges push cases forward on an extremely expedited schedule, and armed with new prosecutors with financial expertise, the Eastern District is poised to prosecute these high-profile financial fraud cases quickly and expertly.

The Eastern District can claim jurisdiction over almost all securities fraud and other financial fraud cases involving public companies because the reports those companies are required to file with the SEC are sent to the EDGAR computer server located in Alexandria, Virginia.

In addition, the Eastern District’s proximity to Main Justice, as well as the federal agencies that will participate in the new task force, will be key to its ability to pursue these investigations aggressively and efficiently. 

The public demanded action in response to the financial crisis and the government promised a swift and aggressive response.  The Eastern District’s announcement is the latest evidence of the government’s preparations to punish financial fraud with its full weight.

The Quarterly Report highlights other investigations that showcase the breadth of SIGTARP’s reach.  As part of a mortgage fraud interagency task force, SIGTARP is investigating potential fraud at Omni National Bank (before its failure and Government takeover) and whether it had an impact on Omni’s application for TARP funds under the Capital Purchase Program.  Notably, Omni never actually received those funds.  SIGTARP investigations have also resulted in bank fraud charges against Mount Vernon Money Center executives which are connected to TARP because some of the allegedly misappropriated funds came from institutions in which taxpayers are invested through TARP.  In another fraud and money laundering case, TARP is implicated because the indicted telemarketing firm operators “took advantage of the publicity surrounding the Administration’s mortgage modification efforts” under the TARP-funded Making Home Affordable initiative to induce customers to purchase modification services that were never provided. 

These investigations – launched from multiple agencies and aimed at a range of activity emanating from TARP assets – make clear that the enforcement landscape stretches far beyond obvious misuses of TARP funds.