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The V&E Report
Insights in Government Enforcement and Investigations

Investigation Outsourcing: When Do Companies Become Arms of the State?

A recent decision by a district judge in the Southern District of New York demonstrates that when a company’s outside counsel conducts an investigation in connection with a government investigation of the company, the Government’s involvement in shaping, directing and relying upon that investigation will be closely scrutinized.1 If the Government cannot demonstrate that it has not simply “outsourced” its investigative function, the company and its outside counsel may be seen as tools of the Government and arms of the State.

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Updated DOJ Guidance Provides Useful Roadmap for Implementing and Enhancing Corporate Compliance Programs

On Tuesday, the U.S. Department of Justice released perhaps the most comprehensive guidance to date on how prosecutors evaluate the design, implementation, and effectiveness of corporate compliance programs in making charging decisions, framing sentencing recommendations, and determining whether on-going corporate compliance obligations, such as the imposition of a monitor, may be necessary as part of any enforcement resolution. In announcing the release of the Criminal Division’s Evaluation of Corporate Compliance Programs guidance document (“Guidance”), DOJ Criminal Division, Assistant Attorney General Brian A. Benczkowski explained that the updated guidance is intended to align the Fraud Section’s 2017 guidance with other Department instructions and legal standards, and to provide greater transparency into prosecutors’ assessments.

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DOJ Announces First Criminal Charges Against a Distributor in the Fight Against Opioids

Last week, the U.S. Department of Justice took an important step in the fight against opioid abuse, announcing the first criminal charges against a pharmaceutical distribution company for its part in perpetuating the opioid crisis by ignoring red flags of abuse. Charges were brought against Rochester Drug Co-Operative (“RDC”), one of the ten largest pharmaceutical distributors, and two of its executives.

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  • 24
  • April
  • 2019

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Government’s Filing of Complaint Against Private Equity Company Signals New Focus on Private Equity and Other Investors

In a new development in False Claims Act (“FCA”) litigation, the United States Department of Justice (“DOJ”) has filed a complaint-in-intervention naming, among other defendants, California-based private equity firm, Riordan, Lewis & Haden, Inc. (“RLH”). The lawsuit, United States ex rel. Medrano and Lopez v. Diabetic Care Rx, LLC dba Patient Care America, et. al., No. 15-CV-62617 (S.D. Fla.), was originally brought by two former employees of Diabetic Care Rx, LLC d/b/a Patient Care America (“PCA”) acting as relators, but as permitted under the FCA, the United States has intervened in the matter.

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Bid-Rigging Bonanza: DOJ Announces Criminal Charges in Three New Investigations

The Department of Justice (“DOJ”) ended its recent drought of new criminal antitrust cases by bringing bid-rigging charges under the Sherman Act against individuals in three separate cases over the past few weeks.1 These charges, two of which involve guilty pleas, are the first in each case, and confirm the Department’s continued prioritization of public bid-rigging cases and focus on individual accountability in the prosecution of criminal antitrust violations.

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If You Give A Cop Your Passcode... Court Considers Whether Using Voluntarily-Provided Codes Violates the Fourth Amendment

The Colorado Supreme Court held last week that when a defendant voluntarily disclosed his four-digit passcode for what he thought was a limited purpose and an officer used the code to search the defendant’s entire phone, it did not violate the Fourth Amendment. The court reasoned that the defendant “had no legitimate expectation of privacy in the digits of his passcode after providing them to [a police officer].”1

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  • 10
  • April
  • 2019

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Kokesh costs SEC nearly $1 Billion; DOJ and Congress React

In 2017, the SEC’s enforcement power faced a setback when, in Kokesh v. SEC,1 the Supreme Court curtailed its ability to seek disgorgement outside the five-year statute of limitations period for civil penalties.2 This was a blow to the agency because its Enforcement Division had relied heavily on its disgorgement power as a means to deter companies from wrongdoing by reclaiming all ill-gotten profits that result from it.

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Lorenzo v. SEC: Supreme Court Finds Liability For Knowingly Disseminating Misleading Misstatements (Even If “Made” By Someone Else)

The Supreme Court has now made clear that a person can be held liable for disseminating false or misleading statements with the intent to defraud, under SEC Rules 10b-5(a) and (c) even if the person did not “make” the false statement and even if the dissemination of the false or misleading statement was done at the direction of a superior.1

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Appellate Court Confirms that Steering Contracts to a Third Party Can Violate the Hobbs Act

The First Circuit Court of Appeals recently ruled that steering contracts to a third party may violate the federal prohibition against extortion — even where the extortionist receives no personal benefit. The case, United States v. Brissette, serves as a stark reminder of the breadth of conduct that can constitute “extortion” under the Hobbs Act.

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DENIED: SCOTUS Denies Cert. in Mueller’s Mystery Case

On Monday, March 25, 2019, in a brief order without any dissents, the Supreme Court denied certiorari in In re Grand Jury Subpoena,1 the case also known as the “Mueller Mystery Case” because the name of the party involved remains under seal by the courts. The Supreme Court’s order comes one day after Attorney General William Barr submitted his summary of the main conclusions from Special Counsel Robert Mueller’s investigation into Russian interference in the 2016 election.

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Giving Credit Where Credit is Due: University’s False Claims Act Settlement Highlights Importance of Proper Accounting Practices for Federal Award Recipients

On March 21, 2019, the Department of Justice (“DOJ”) announced that the University of Wisconsin-Madison (the “University”) agreed to pay $1.5 million to settle allegations that it had violated the False Claims Act (“FCA”) by failing to properly credit rebates and discounts to costs allocable to federal grants and awards obtained by the University. While cases involving defense contractors and Medicare or Medicaid providers tend to dominate FCA headlines, the University’s settlement serves as a reminder that the FCA applies to all recipients of federal grants and awards.

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