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THE LATEST ON GOVERNMENT INQUIRIES AND ENFORCEMENT ACTIONS

Government Investigations and White Collar Litigation Group
Fraud, Deception and False Claims

Schemes that Deprive a Person of “Potentially Valuable Economic Information” – Punishable Under the Federal Wire Fraud Statute?

On Monday November 28, 2022, the U.S. Supreme Court heard oral arguments on Ciminelli v. United States. The Court will decide whether the “right-to-control” theory of fraud used by the Second Circuit is a valid basis for property fraud liability under the federal wire fraud statute. Courts and prosecutors have used the right-to-control theory to punish schemes which intend to deprive a victim of valuable information regarding an economic decision. Among other things, the ruling has implications for the expanding scope of federal fraud statutes as applied to undisclosed self-dealing and conflicts of interest. In oral arguments, the Court’s candid disapproval of the right-to-control theory sent a strong signal that this avenue under federal criminal laws for prosecuting “informational deprivation” in dealings may be about to close.

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Enforcement and Prosecution Policy and Trends

California Signs New Bill Prohibiting CA-based Tech Companies from Disclosing Data for State Abortion Investigations

Compliance with out of state investigative requests, like warrants, just got a little trickier for California companies. Under existing law, California technology and communications companies are required to produce specified user data in response to an out of state warrant as if that warrant was issued by a California court. But now there is one caveat—companies do not have to do so when the warrant relates to an out of state abortion investigation. On September 27, 2022, California Governor Gavin Newsom signed a bill (AB-1242) that, in part, prohibits technology and communications companies headquartered or incorporated in California from providing user data to out-of-state law enforcement or government entities investigating abortions that would be lawful under California law. The new law also prohibits California companies from assisting the out-of-state entities in investigating or enforcing abortion violations. For California corporations, the law acts as a shield against warrants, court orders, subpoenas, or other legal processes from states attempting to enforce abortion laws that conflict with California law.

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Financial Institution Regulation

At Long Last, FinCEN Issues Beneficial Ownership Information Reporting Rule

At long last, the Financial Crimes Enforcement Network (“FinCEN”) issued a final rule establishing a beneficial ownership information reporting requirement for corporations and companies both large and small. In its announcement earlier today, FinCEN explained that the rule will require most companies and corporations registered to do business in the United States to report information about their beneficial owners to FinCEN.

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Enforcement and Prosecution Policy and Trends, Securities and Commodities

SEC Speaks 2022: Ongoing Efforts to Restore Public Trust, Aggressive Enforcement Agenda

Securities and Exchange Commission officials highlighted a commitment to restoring trust in the agency and aggressive enforcement during the recent SEC Speaks conference.

See our alert for analysis of their comments and stated enforcement priorities, which addressed crypto markets, aggressive use of remedies, creditworthy cooperation, the Wells process, aggressive litigation, disgorgement efforts, municipal securities, gatekeeper responsibilities, and protection of whistleblowers.

Anti-Bribery and Corruption

Brazilian Airline to Pay Millions in Coordinated Foreign Bribery Resolution

On September 15, 2022, GOL Linhas Aéreas Inteligentes S.A. (GOL), Brazil’s second largest domestic airline, resolved long-running parallel investigations by the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC).

The São Paulo-based company, whose shares are traded on the New York Stock Exchange, consented to a cease-and-desist order with the SEC finding that it violated the anti-bribery, books and records, and internal accounting controls provisions of the Foreign Corrupt Practices Act (FCPA), and entered into a three-year deferred prosecution agreement (DPA) with DOJ to settle criminal charges for conspiracy to violate the anti-bribery and books and records provisions of the FCPA. The company will collectively pay $41.5 million in fines to the federal agencies and pay an additional $3.4 million in penalties and restitution to Brazilian authorities.

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Enforcement and Prosecution Policy and Trends

New DOJ Guidance on Corporate Criminal Enforcement

On Sept. 15, 2022, U.S. Deputy Attorney General Lisa Monaco announced important guidance and new actions from the U.S. Department of Justice (DOJ or the Department) on corporate criminal enforcement. Her remarks, delivered at the New York University School of Law, echoed those McGuireWoods covered last fall regarding DOJ’s increased focus on individual accountability and corporate policing.

In short, the remarks reveal that the Biden administration continues to take an aggressive policy stance on the investigation and prosecution of corporate crime. However, Monaco acknowledged the reality that its current enforcement numbers do not reflect that aggressive posture.

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Financial Institution Regulation

FinCEN Leader’s Remarks Focus on Securing Digital Identity

On September 7, 2022, Jimmy Kirby, the Acting Deputy Director of the Financial Crimes Enforcement Network (“FinCEN”), gave remarks during the 2022 Federal Identity Forum & Exposition (“FedID”) on the importance of securing digital identity.

In his opening comments, Kirby emphasized digital identity as “fundamental to the effectiveness of every financial institution’s AML/CFT program.”

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Immigration and Worksite Enforcement

Proposed Federal Rule Signals Remote Form I-9 Inspection of Employee Documents Will Likely Become Permanent Option

On August 18, 2022, the Department of Homeland Security (DHS) published a Proposed Rule titled Optional Alternatives to the Physical Document Examination Associated With Employment Eligibility Verification (Form I-9). The Proposed Rule would formalize the authority of the Secretary of Homeland Security to extend certain COVID-19 rules permitting remote inspection of employee documents presented for the Form I-9 and further explore alternative options to physical document examination procedures in the future.  The Proposed Rule comes on the heels of the shift to remote working and hybrid schedules that have become increasingly common.  DHS is accepting comments from the public on the Proposed Rule until October 17, 2022.

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Government Contracts

Department of Labor Proposes Rule Granting Government Contractor Employees Right of First Refusal

On July 15, the U.S. Department of Labor proposed a new regulation that would require successor government contractors to offer employees of predecessor contractors the first right of refusal for employment on certain contracts.

Read on for more information about the proposed regulation.

Fraud, Deception and False Claims

Pharmaceutical Manufacturer Agrees to $900 Million Dollar False Claims Act Settlement to Resolve Kickback Claims

On July 20th, on the eve of trial, Biogen Inc. agreed to pay $900 million dollars to settle claims that the company violated the False Claims Act (FCA) by allegedly paying improper consulting and speaker fees and providing lavish meals and entertainment (in violation of the Federal Anti-Kickback Statute (AKS)) to medical providers to induce them to prescribe its multiple sclerosis drugs Avonex, Tysabri, and Tecfidera.  The qui tam (or whistleblower) suit was filed in the District of Massachusetts in 2012 by former Biogen employee Michael Bawduniak and merged with multiple suits with similar allegations. The settlement is extraordinary in size, particularly in light of the United States’ decision declining to intervene in the suit, and highlights the risks associated with pharmaceutical and device manufacturers hiring providers as consultants and conducting speaker programs.

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