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

Analysis of DOJ’s 2021 FCA Statistics and the Trends Therein

Last week, the U.S. Department of Justice (DOJ or Department) announced that it recovered over $5.6 billion under the False Claims Act (FCA) in Fiscal Year 2021.[1] That is a massive headline haul that is second only to the roughly $6 billion recovered under the FCA in FY 2014, when there were $3.1 billion in settlements with large banks and other financial institutions alleged to have made false statements to federally insured mortgage and loan programs. The FY 2021 recoveries are similarly inflated by a single $3 billion settlement. As indicated in our review of the 2020 FCA statistics, a $3 billion settlement with a pharmaceutical company that manufactures opioids (and several key individuals), was finalized three weeks after the end of FY 2020, on October 21, 2020. The net effect of this mega-settlement executed in early-FY 2021 was a slightly-deflated FY 2020 total recovery and a corresponding bump for FY 2021 recoveries.[2] Take out that settlement, which accounted for more than half of the FY 2021 recoveries, and the 2021 numbers look fairly pedestrian—slightly higher than FY 2020 recoveries but about 20% lower than the average recoveries from the last five years. Though the large wave of enforcement activity that many predicted would result from the change in administration and the massive spending associated with pandemic-relief efforts has yet to materialize, that may still occur once a new head of DOJ’s Civil Division is nominated and confirmed, and pandemic relief fund-related investigations mature.

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Enforcement and Prosecution Policy and Trends, Securities and Commodities

SEC Focus on Private Fund Advisers Continues With the Publication of EXAMS Risk Alert

On January 27, 2022, the Division of Examinations (“EXAMS”) of the U.S. Securities and Exchange Commission (“SEC”) published a Risk Alert with its Observations from Examinations of Private Fund Advisers. This Risk Alert is one of a series of signals of the SEC’s focus on private fund advisers under Chairman Gensler, including Form PF amendments proposed the day before the Risk Alert was published.

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Anti-Money Laundering

FinCEN’s Proposed Foreign Affiliate SAR Sharing Program — Key Considerations

On January 25, 2022, the Financial Crimes Enforcement Network (“FinCEN”) solicited commentary regarding its proposed rule that would create a time-limited pilot program to expand the ability of financial institutions to share Suspicious Activity Reports (“SARs”) and SAR-related information.  (See 31 U.S.C. § 5318(g)(8)).  The proposed program would permit a financial institution with a SAR reporting obligation to share, subject to certain specified limitations, SARs and related information with the institution’s foreign branches, subsidiaries, and affiliates.  The proposed rule would expand on previous guidance FinCEN issued in 2006 and 2010 regarding SAR sharing within organizations.

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Sanctions, Trade Embargo, and Export Controls

What Significant Russian Sanctions Could Look Like, and How to Prepare

RELATED UPDATES:
New Revelations in Ukraine Lead to Tightening Global Sanctions (April 8, 2022)
Western Companies Starting to Feel Impact of Russian Sanctions (March 24, 2022)
FinCEN Encourages “Increased Vigilance” and Highlights Red Flags for Evasion of Russian Sanctions including Use of Virtual Currency (March 16, 2022)
DOJ Launches “Task Force KleptoCapture” in Response to Russian Invasion (March 9, 2022)
U.S. and Allies Significantly Expand Sanctions and Related Restrictions on Russia and Belarus (Feb. 28, 2022)
Additional Sanctions on Russia and the Importance of Business Contingency Planning (Feb. 23, 2022)
Biden Administration Issues Initial Ukraine Sanctions (Feb. 22, 2022)


As the crisis on the Ukrainian border persists, companies with exposure to Russian markets and counterparties are being forced to reckon with the possibility that a Russian invasion of Ukraine could result in imposition of the most serious economic and trade sanctions ever imposed on Russia.  Such sanctions are being openly discussed and debated politically, and are the clearly preferred first response to any aggressive military moves Russia might make to cross the Ukrainian border in locations where Russian military assets have been staged over the last several weeks.  While obviously preferable to a global military conflict, efforts to sanction Russia to a level sufficient to reverse an incursion into Ukraine will have significant ripple effects throughout numerous industries and with numerous significant multinational organizations.

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Financial Institution Regulation, Securities and Commodities

2021 Brought SEC Focus on Crypto Exchanges and Lending Platforms

This past year, the U.S. Securities and Exchange Commission followed through on its commitment to aggressively enforce securities laws in digital assets markets. As a result, it sharpened its focus on cryptocurrency exchanges and lending products.

Read on for an overview and analysis of SEC activity in cryptocurrency and what to expect in 2022.


About McGuireWoods’ Securities Enforcement and Litigation Team

Our Securities Enforcement and Litigation Team is part of our elite Government Investigations and White Collar Litigation Department includes members of our nationally-recognized Financial Services Litigation Department and former senior SEC and FINRA enforcement attorneys and litigators, as well as high-level federal prosecutors. Our Team also leverages the deep experience of the Firm’s Securities and Capital Markets and Public Finance Departments to counsel clients on the full spectrum of regulatory, compliance, and business issues arising from a government examination, investigation, and litigation. Together, we routinely conduct internal investigations and audits, and advise clients on strengthening corporate compliance and supervisory programs to stay current with the regulators on examination and enforcement priorities and to prevent recurrence of potential securities laws violations. By working collaboratively, we ensure our clients receive well-tailored advice and a comprehensive defense team to handle the many complex issues presented in government inquiries.

Fraud, Deception and False Claims

Elizabeth Holmes of Theranos Found Guilty of Making False Representations to Investors

Elizabeth Holmes, founder of Theranos, was convicted of three counts of wire fraud and one count of conspiracy to commit wire fraud. The verdict follows a high-profile, fifteen-week trial in federal court in San Francisco.  Holmes was alleged to have defrauded investors, medical professionals, patients, and the public by exaggerating and making false statements about the accuracy of Theranos’s blood-testing technology. The government’s prosecution demonstrates the Department of Justice’s commitment to prosecuting white collar crime, particularly in the tech and healthcare industries.

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Fraud, Deception and False Claims

Another Circuit Weighs in on the Standard for Evaluating Government Motions to Dismiss False Claims Act Actions

In a recent opinion, the U.S. Court of Appeals for the Third Circuit weighed in on what standard to apply in reviewing government motions to dismiss False Claims Act actions. Read a new “FCA Insider” blog post for analysis of this decision and its implications for future cases after this summer’s three-way circuit split on the issue.


About McGuireWoods’ Government Investigations & White Collar Litigation Department
McGuireWoods’ Government Investigations & White Collar Litigation Department is a nationally recognized team of more than 80 attorneys representing Fortune 100 and other companies and individuals in the full range of civil and criminal investigations and enforcement matters, including litigation and action under the False Claims Act. Our False Claims Act team includes former federal prosecutors, and experienced civil and white collar criminal litigators with experience in this unique area of law. We also tap attorneys from the firm’s other practice groups and our subsidiary McGuireWoods Consulting LLC. Strategically centered in Washington, D.C., our Government Investigations & White Collar Litigation Department has been honored as a Law360 Practice Group of the Year and earned the trust of international companies and individuals through our representation in some of the most notable enforcement matters over the past decade. For more information on our False Claims Act practice, download our brochure: False Claims Act Investigations, Litigation and Enforcement.

Government Contracts

CMMC 2.0: Department of Defense Revamps Cybersecurity Maturity Model Certification Program

On November 4, 2021, the Department of Defense (DoD) announced significant changes to the strategic direction of the Cybersecurity Maturity Model Certification (CMMC) program.  Specifically, DoD stated that the goal of these changes is to simplify the CMMC standard and prioritize the protection of certain types of controlled defense information.  After a nine-month internal review by the Pentagon, DoD introduced CMMC 2.0, which clarifies contracting requirements, places greater emphasis on contractors that hold sensitive information, and suggests that the agency seeks to reinforce cooperation between DoD and industry in addressing evolving cyber threats.  The CMMC program changes condense the number of security tiers, allow contractors who do not hold Controlled Unclassified Information (CUI) to perform annual self-assessments, and permit remediation plans (known generally as Plans of Action and Milestones (or POA&Ms)) and waivers in limited circumstances.  However, a number of mandatory controls may not be subject to a POA&M prior to award, notwithstanding that other controls may be remediated within a clearly identified timeline.

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Securities and Commodities

SEC Advisory Fees Focus Continues as Reflected in Division of Examinations Risk Alert and Chair Gensler Comments

Recent comments from U.S. Securities and Exchange Commission (SEC) Chair Gensler at the Institutional Limited Partners Association Summit and an SEC Division of Examinations (EXAMS) Risk Alert published on the same day highlight the ongoing focus of the SEC on advisory fees, both in the institutional and retail spaces.

In Chair Gensler’s remarks, he expressed concern that private fund investors may not have enough transparent, consistent information regarding private fund fees to “make informed investment decisions.” While he cited previous Risk Alerts issued by EXAMS regarding private fund advisers and the increased regulations imposed on these advisers under the Dodd-Frank Act of 2010, Chair Gensler suggested that it was time to “bring more sunshine and competition to the private funds space.”

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Compliance, Enforcement and Prosecution Policy and Trends, Government Contracts

Webinar: OSHA ETS Employee COVID-19 Vaccination and Testing Mandates

New Requirements, Tips and Traps for Large Employers

November 10, 2021
Complimentary Webinar
1-2 p.m. (ET) | 12-1 p.m. (CT) | 10-11 a.m. (PT)

REGISTER NOW

On Nov. 4, 2021, the Occupational Safety and Health Administration (OSHA) issued an Emergency Temporary Standard (ETS) requiring employees of large employers either to get vaccinated or to test negative on a weekly basis. The ETS also requires large employers to provide employees with paid leave to get vaccinated and recover from vaccinations, and unvaccinated employees to wear a mask at work.

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