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The V&E Report
Insights in Government Enforcement and Investigations

Are Illegal Funds Fueling the Real Estate Market? Initiatives to Deter Money Laundering Lead to Increased Scrutiny and Higher Fines

On March 4, 2019, a British customs agency raided 50 real estate agencies and announced the largest fine ever imposed in the U.K. for money laundering violations in the real estate market. The fine, £215,000 (about $283,000), was issued to Countrywide estate agents for failing to conduct due diligence, proper verification and record keeping, and failing to ensure compliance with policies and controls in violation of U.K. money laundering regulations.

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Footnote Fodder: DOJ’s Modified FCPA Guidance Includes Footnote That Appears to be Responding to Criticism

Last week, the DOJ updated its guidance to the Foreign Corrupt Practices Act (“FCPA”) and in doing so tweaked its de-confliction advice. “De-confliction” is the practice of asking corporate counsel to delay interviewing an employee in an internal investigation to allow the DOJ to speak with the employee first.

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DOJ Updates FCPA Cooperation Credit Policy for M&A

Last week, the Department of Justice (“DOJ” or “Department”) made a series of changes to the 2017 FCPA Corporate Enforcement Policy (“Policy”) contained in the Justice Manual (until last year, known as the United States Attorneys’ Manual). These changes, which were first announced by Assistant Attorney General Brian Benczkowski on March 8, 2019 during the ABA White Collar Crime Conference, include rescinding the requirement that companies prohibit the use of disappearing messages applications, clarifying the Department’s “de-confliction” policy, and updating language to soften companies’ requirement to disclose facts about involved individuals consistent with a policy change announced in November 2018.

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Burn After Reading? — DOJ Loosens Previous Ban on Secretive Messaging Apps

DOJ has again modified its guidance regarding enforcement of the FCPA. Among the recent modifications is a loosening of the ban it had announced in 2017 on the use of disappearing messaging applications or software by companies hoping to receive cooperation credit under the Corporate Enforcement Policy. In 2017, DOJ had announced a policy that required companies wishing to receive full cooperation credit to “prohibit[] employees from using software that generates but does not appropriately retain business records or communications,” as part of prohibiting the destruction or deletion of business records.

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Recent FCPA Speeches Highlight and Defend DOJ Priorities

On March 7 and 8, 2019, Deputy Attorney General Rod Rosenstein and Assistant Attorney General Brian Benczkowski delivered separate speeches on developments in FCPA enforcement, highlighting that DOJ aims to make “corporate criminal enforcement more effective and efficient.”1 These statements effectively double-down on DOJ’s FCPA Corporate Enforcement Policy of trying to get companies to self report and cooperate by dangling the carrot of declinations, even in cases of serious wrongdoing.

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Insufficient Evidence Leads to Former Barclays Trader’s Acquittal Without a Jury

In a blow to the DOJ, on March 4, 2019, a Northern District of California district court dismissed all charges against former Barclays foreign currency options trader Robert Bogucki. The DOJ had charged Mr. Bogucki with six counts of wire fraud affecting a financial institution and one count of conspiracy to commit wire fraud affecting a financial institution, arising from his role in an alleged scheme to defraud Barclays client Hewlett-Packard Company (“HP”).1

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One for You, Two for Me — Cognizant FCPA Declination a Mixed Bag for Companies

In the first FCPA enforcement action of the 2019 season, DOJ issued a particularly lenient declination to Cognizant Technology Solutions Corporation, but required additional disgorgement beyond what the SEC could collect in its own parallel action and indicted two of the company’s most senior executives.

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CFTC Announces New Enforcement Advisory Relating to Foreign Corrupt Practices

On March 6, Director James M. McDonald of the U.S. Commodity Futures Trading Commission (“CFTC”) announced a new Enforcement Advisory at the American Bar Association’s National Institute on White Collar Crime, aimed at encouraging cooperation with CFTC investigations related to foreign corruption. Importantly, this new policy initiative suggests that the CFTC will begin more aggressively pursuing investigations related to foreign corruption that could affect U.S. markets, alongside Department of Justice (“DOJ”) and Securities and Exchange Commission (“SEC”) investigations into violations of the U.S. Foreign Corrupt Practices Act of 1977 (“FCPA”).

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Supreme Court To Review Expansive Interpretation of the Clean Water Act

The U.S. Supreme Court recently agreed to review the scope of the federal Clean Water Act (“CWA”), which prohibits the discharge of pollutants into navigable waters from any point source. The Court will review a case out of the Ninth Circuit, County of Maui v. Hawai’i Wildlife Fund et al., No. 18-260, which held that the CWA applied to groundwater originating from a point source when the groundwater flowed into navigable waters.

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  • 21
  • February
  • 2019

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U.S. Supreme Court Rules States Can’t Impose Excessive Fines

Yesterday, in Timbs v. Indiana, the U.S. Supreme Court ruled that the Eighth Amendment’s prohibition on excessive fines applies to the states. In an opinion drafted by Justice Ginsburg, the Court held the Excessive Fines Clause is “fundamental to our scheme of ordered liberty” with “deep roots in our history and tradition.”1 Until Timbs, the U.S. Constitution’s prohibition on excessive fines only applied to the federal government.

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  • 20
  • February
  • 2019

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Meet the New Fraud, Same as the Old Fraud: 10th Circuit Holds Anti-Fraud Provisions of Securities Act Once Again Apply Abroad

On January 24, 2019, the Tenth Circuit held in SEC v. Scoville that the antifraud provisions of the federal securities laws once again have extraterritorial application, providing the government new ammunition as it seeks to expand the reach of federal securities laws.1

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One Step too Far? The Chamber of Commerce Argues the DOJ Wrongly Used the Wire Fraud Statute to Combat Spoofing

Earlier this month, the U.S. Chamber of Commerce filed an amicus brief in an Illinois district court, arguing that the Department of Justice (“DOJ”) went too far in indicting two former Deutsche Bank employees with violations of the wire fraud statute, 18 U.S.C. § 1943. The amicus brief was filed in support of the defendants’ motion to dismiss the indictment. The Chamber filed the brief with two interest groups, the Bank Policy Institute and the Securities Industry and Financial Markets Association.

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  • 06
  • February
  • 2019

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#Youvebeenserved: Instagram Influencers Subpoenaed in Fyre Festival Bankruptcy

Last week, the trustee for Fyre Festival LLC’s bankruptcy estate received court authorization to serve subpoenas on 24 individuals and companies connected to the failed music festival, including agencies representing the social media influencers who were instrumental in promoting the event. Payments that these influencers received connected to the festival are now subject to scrutiny as the bankruptcy trustee pieces together the defunct company’s finances.

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