DOJ Instructs U.S. Attorneys on Prosecution of Corporate Executives

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There has been a lot of discussion about the prosecution of executives for corporate wrongdoing since the distribution of a memo last week issued by Sally Yates, Deputy AG, to the Department of Justice. The memo calls for the Justice Department to “fully leverage its resources to identify culpable individuals at all levels in corporate cases” and spells out six steps to be taken during civil corporate investigations to strengthen its pursuit of individuals.

The memo puts executives at corporations on notice that they will no longer get a free pass when their company writes a major check to settle the government’s investigation. Most importantly, it will not allow cooperation credits for corporations that do not identify the employees involved in the corporate misconduct.

One area where this could lead to more prosecutions is the Foreign Corrupt Practices Act. Cooperation credits are an important part of reducing FCPA penalties and companies will now have to disclose the individuals at fault in order to settle the SEC and DOJ investigations into bribery of foreign officials.

The U.S. Government has received a substantial amount of criticism for failing to prosecute the executives responsible for the financial crisis. In February, then Attorney General Eric Holder called for a 90 day review of executive conduct in any residential mortgage backed securities case for possible criminal or civil charges against them. Loretta Lynch took over the top spot at the Justice Department in April and this appears to be the opening salvo in an attempt to reverse course on this issue.

For whistleblowers, the Yates memo is unlikely to offer additional incentives since the decision to prosecute an individual will most likely be on top of any fine issued to the corporation. Traditionally, the fines against corporations have greatly exceeded individual penalties.

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SEC, DOJ Push Europe to Freeze $1 Billion in FCPA Probe of Telecoms

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A bribery investigation into the acquisition of business in Uzbekistan by mobile telecommunications businesses has led the U.S. to request asset freezes in Europe of more than $1 billion, according to the Wall Street Journal today. The companies at issue in the joint SEC and DOJ probe are Vimpelcom, Mobile Telesystems and TeliaSonera.

The law at issue is the Foreign Corrupt Practices Act. MBT and VIP fall within the law and are both regulated by the SEC because they have American Depository Receipt Shares trading on U.S. stock exchanges. Mobile Telesystems is an ADR trading on the New York Stock Exchange under the symbol MBT. Vimpelcom has an ADR trading on the NASDAQ under the stock ticker VIP. TeliaSonera delisted its securities about a decade ago but still may be covered under the FCPA’s various requirements for application to a company.

The allegations involve money funneled to a network controlled by the eldest daughter of the Uzbek President. Uzbekistan is a former Soviet Republic located in Central Asia near the Caspian Sea. According to media reports concerning the U.S. investigation, his daughter helped three companies gain access to the telecommunications market of 30 million people and received bribes through a network of companies run by intermediaries.

The U.S. investigation was disclosed last year. Various European authorities are also investigating the suspected corruption. The U.S. has asked Sweden and Switzerland to freeze assets held by parties being investigated. The U.S. is expected to also ask Ireland, Belgium and Luxembourg to freeze bank assets held in these countries.

Although there are no indications that there is a whistleblower in this case, this is exactly the type of case that might be brought based on information provided by a SEC whistleblower under the program established by Dodd-Frank.

Do you have questions about this area of the law? We have put together an informational guide for FCPA whistleblowers. If you have questions after reviewing it, one of our FCPA whistleblower attorneys will answer any remaining questions. We can assist you in reporting your evidence of bribery by a publicly traded company or other covered entity to the U.S. Government. Please contact an attorney via our contact form or call 1-800-590-4116.

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SEC Investigating Och-Ziff for FCPA Issues in African Mining

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The Securities and Exchange Commission and Justice Department are investigating possible violations of the Foreign Corrupt Practices Act (FCPA) by Och-Ziff Capital Management. According to reports, a portion of a $150 million investment in African mining in 2008 went to foreign officials in Zimbabwe.

The hedge fund is reportedly in discussions with the U.S. Government to settle its investigation into other business dealings it had from Libya to South Africa. The investigation has been going on for four years now but was only disclosed last year following a report in the Wall Street Journal. In an earnings call, the company said it was hopeful the investigation and legal expenses would be complete by the end of the year. They also said that an enforcement action was reasonably likely.

Och Ziff has run into other trouble recently as well. Last month, an adviser to Och-Ziff funds agreed to pay $4.25 million for providing inaccurate trade reporting data to prime brokers. The reporting error led to inaccuracies in both records provided to the SEC during investigations as well as the books of broker-dealers. The four brokerages relying on Oz Management data had 552 million shares inaccurately listed on their books and records. The inaccurate SEC reports stemmed from requests for market data by the Commission in connection with insider trading or manipulation investigations. In total, 14.4 million shares were incorrectly reported to the SEC. Among the issues identified was in the reporting of trades as either long or short sales.

Do you have questions about this area of the law? We have put together an informational guide for FCPA whistleblowers. If you have questions after reviewing it, one of our FCPA whistleblower attorneys will answer any remaining questions. We can assist you in reporting your evidence of bribery by a publicly traded company or other covered entity to the U.S. Government. Please contact an attorney via our contact form or call 1-800-590-4116.

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DOJ Hires Corporate Compliance Program Expert

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In the next few months, the DOJ will have a new member on the team evaluating corporate compliance programs for the determination of the appropriateness of prosecution and penalties under laws like the Foreign Corrupt Practices Act.

The Justice Department already has experts in subject matters such as accounting and forensics. The hiring of this candidate, who has been selected but is undergoing a background check, will be used in assisting the government’s determination of whether the company deserves a larger monetary penalty, or even no fine whatsoever, due to the ineffectiveness or strength of its compliance program.

The DOJ has previously told companies they will be rewarded under the FCPA for strong anti-corruption programs and the quick detection of improper payments through internal accounting controls. In a few different previous government declinations to prosecute under the FCPA, the DOJ has cited strong compliance efforts and self-reporting as reasons to not prosecute companies criminally.

Th creation of this position is likely in response to the growth in compliance programs at banks and large corporations. In order to avoid fines from regulators that are reaching into the billions of dollars, some banks are spending up to $4 billion a year to comply with laws and regulations. In early 2014, the Wall Street Journal called the Compliance Officer the hottest job in America.

Yet, even with the employment of more compliance professionals, companies are still violating the law. There have already been two awards to securities whistleblowers employed in a compliance or audit position. These individuals face a 120 day waiting period before they can become eligible for a reward when they report to the SEC whistleblower program.

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In the Battle Against Fraud, More and More Winners Emerge

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An aggressive push by the Department of Justice in the past year to investigate and prosecute false claims brings good news for prosecutors and qui tam plaintiffs.The federal government, as well as state governments, are recovering record amounts from successful civil qui tam settlements and judgments, and those rewards are in turn being passed on to whistleblowers.In the past two and a half years alone, $7.3 billion has been recovered in False Claims Act cases, and the Congressional Budget Office estimates that federal recovery in civil fraud cases will average $3 to 4 billion annually over the next ten years.

The number of filed qui tam cases is also at a record high, with 1341 pending cases under government seal as of January of this year and another 39 new FCA cases filed during the first quarter of 2011.This demonstrates that the DOJ is taking an aggressive stance against fraud.In a testimony before the Senate Committee on the Judiciary in January of this year, Assistant Attorney General for the Civil Division Tony West stated that the DOJ “has never been more aggressive–or more successful–in the anti-fraud battle as it has in the last two years.”

Legislation that was introduced in May 2011 would give more funding to the Department of Justice to investigate and prosecute False Claims Act cases.The federal (and state) governments are launching several campaigns to eliminate waste and cut down fraud in government departments and programs. Technology was recently developed to help eliminate Medicare fraud, and the Centers for Medicare & Medicaid have announced the implementation of this technology, which would analyze incoming Medicare claims to help detect fraud before payments are made.

The battle against fraud is at an all-time high and shows little signs of slowing down.

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If you have information concerning a fraud against the government, contact an attorney at The Young Law Group today for a FREE and CONFIDENTIAL consultation at 1-800-590-4116.

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