Subject to Inquiry

Subject to Inquiry

THE LATEST ON GOVERNMENT INQUIRIES AND ENFORCEMENT ACTIONS

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

Supreme Court to Review When DOJ May Dismiss Relator Suits

Last month, the Supreme Court granted certiorari in United States ex rel. Polansky v. Executive Health Resources, Inc., a case presenting the question whether the federal government forfeits the authority to dismiss False Claims Act (FCA) suits brought in its name if it first declines to intervene in them.

Continue reading our commentary on The FCA Insider.

Compliance

Department of Justice Criminal Chief Points to Prevention as Key Aspect of Corporate Compliance

The Assistant Attorney General and head of the Department of Justice’s Criminal Division recently sat for an interview with the Wall Street Journal where he provided important insight into the Department’s increased focus on corporate compliance.

Drawing on his experience in the U.S. Attorney’s office and as the Chief Compliance Officer at a Fortune 500 company, Polite described the importance of “prevention” and why investment in the preventative aspects of corporate compliance programs will be crucial to the Department’s overall efforts to fight corporate misconduct.  Recognizing the Department is well situated to expand on its current policies, the Assistant Attorney General underscored the realities and need for a wider approach in halting future violations: “Even if we tried to prosecute every instance of corporate wrongdoing that we can possibly achieve, it still wouldn’t be enough…. We have to invest in prevention as a department, and, frankly, as a society.”

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Fraud, Deception and False Claims, Government Contracts

DOJ and Aerojet Settle for $9 Million in Qui Tam Cybersecurity False Claims Act Case

On July 8, 2022, the U.S. Department of Justice announced a $9 million
settlement with federal government contractor Aerojet Rocketdyne, Inc. for
alleged violations of the False Claims Act in a case pending in the Eastern
District of California. The settlement results from alleged false
statements by Aerojet related to compliance with Department of Defense
cybersecurity requirements described in DoD Federal Acquisition Regulation
Supplement clause 252.204-7012 and National Aeronautics and Space
Administration Federal Acquisition Regulation Supplement clause
1852.204-76. The settlement further underscores DOJ’s commitment to FCA
enforcement actions involving cybersecurity considerations related to its
Civil Cyber-Fraud Initiative announced in October 2021. The settlement
serves as a clear reminder to contractors that DOJ and the plaintiffs’ qui tam bar are taking the Cyber-Fraud Initiative seriously.

Read on to learn why a close understanding of and adherence to federal
agency contractual cybersecurity requirements are important mandates for
the government contracting community broadly and the defense industrial
base in particular.

Fraud, Deception and False Claims

Court Holds U.S. Wire Fraud Statute Reaches Foreign Defendant’s Conduct

The federal wire fraud statute has a far-reaching scope, allowing prosecutors to go after conduct as varied as investor fraud to college admissions scandals. In late June, the Fourth Circuit U.S. Court of Appeals arguably broadened that scope even further by affirming a wire fraud conviction for a defendant who devised the scheme from Israel. Although the statute only applies domestically, the Fourth Circuit held that a foreign defendant can be convicted of wire fraud as long as U.S. wires were used to transmit the fraudulent messages.

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Enforcement and Prosecution Policy and Trends, Miscellaneous

DOJ’s Public Struggles with Electronic Evidence Highlights the Need for Counsel to Formally Demand Discovery Early and Often

DOJ’s dismissal last week of a Foreign Corrupt Practices Act case in Boston is the latest in a string of bad outcomes for the government due to discovery mishaps. While the government works to revise its discovery policies and seek resources to collect, review, and analyze the vast amount of electronic evidence attendant to nearly every federal criminal investigation, defense counsel should hold the government to account and formally demand discovery early and often.

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Enforcement and Prosecution Policy and Trends

Less is More? DOJ Signals Shift to More Targeted Evidence Collection

For a corporation receiving a grand jury subpoena, the most difficult (and expensive) part of a U.S. Department of Justice (DOJ) inquiry is often sifting through corporate data to find relevant material. That is proving to be increasingly burdensome to prosecutors as well—not just because it costs DOJ time and resources to review extensive data productions, but also because it can be a minefield for prosecutors trying to navigate disclosure requirements. A recent article from Bloomberg Law indicates DOJ is reconsidering how much electronic evidence it will collect going forward. This could bring relief to companies involved in federal inquiries, but could also mean DOJ will lean even more on companies to build its cases.

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Fraud, Deception and False Claims

Supreme Court Signals Interest in Clarifying Pleading Requirements in False Claims Act Suits

The U.S. Supreme Court soon will decide whether to tackle a longstanding question regarding the applicability of Federal Rule of Civil Procedure 9(b) pleading standards in False Claims Act suits. To satisfy the rule’s particularity requirement, plaintiffs generally have needed to detail specific false claims submitted by defendants. The question is whether plaintiffs instead may plead the submission of false claims more generally, without identifying specific claims, if they provide sufficient reliable indicia that false claims were submitted.

Read on for details about this issue, particularly salient in cases where the government declines intervention and the whistleblower, often the defendant’s former employee, may not have access to the relevant invoices at issue.

Enforcement and Prosecution Policy and Trends

Twitter to Pay $150M for Violating 2011 FTC Order Regarding Misrepresentation of its Privacy and Security Practices

On May 25, 2022, the Federal Trade Commission (FTC) announced that it, along with the Department of Justice, fined Twitter $150 million for violating a 2011 agreement the company had with the Commission. Under the 2011 FTC order, Twitter agreed that it would protect the integrity of nonpublic consumer information, including users’ phone numbers and email addresses. According to federal investigators, Twitter broke this promise.

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Financial Institution Regulation

CFPB’s New Interest in Examining Fintechs is Likely to Mean More Naming and Shaming by the Agency

On April 25, 2022, the Consumer Financial Protection Bureau (CFPB) announced that it will begin examining nonbank “covered persons” that it has determined pose risks to consumers. The CFPB has had this authority since its inception. The Dodd-Frank Act empowered the CFPB to examine this category of nonbanks, which might include fintech firms that are not otherwise subject to the CFPB’s supervision authority, such as social-media websites that offer payment-processing services to consumers. And in 2013, the CFPB adopted a rule for implementing its authority that requires the agency to follow certain procedures in determining whether a company poses risks to consumers.

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