Wednesday, October 6, 2010

Upcoming Conferences

NACDL, George Mason Law School, Journal of Law, Economics & Policy, Overcriminalization 2.0, D.C. here and here

20th Annual National Seminar on the Federal Sentencing Guidelines - hold the date - May 4-6th - Buena Vista Palace Hotel & Spa in Orlando, Florida (more to come)

ABA Criminal Tax Fraud Conference, Dec. 2-3, 2010, San Francisco here

ABA, The Fourth Annual National Institute on Criminal Enforcement of Intellectual Property Rights, Nov. 5, 2010, San Francisco here

ABA, The Fifth Annual National Institute on Securities Fraud, October 7-8, New Orleans here 

Strafford Webinars & Teleconferences - Foreign Corrupt Practices Act in Sub-Saharan Africa -Compliance Strategies Given the Region's Unique Cultural and Governmental Intricacies - Oct. 7, here

ABA 2010 Fall Conference, Third Annual Sentencing and Reentry Institute and Criminal Justice Legal Educators Colloquim, Nov. 5, Washington, D.C. here  On November 4th there will be a White Collar Crime (WCC) Town Hall Meeting to discuss the latest developments in WCC practice.

ABA 3rd Annual National Institute on the Foreign Corrupt Practices Act, Oct. 21-22. Washington, D.C. here


October 6, 2010 in Conferences | Permalink | Comments (0) | TrackBack (0)

Tuesday, October 5, 2010

Government Investigations

A government investigation, especially one in the white collar sphere, is extremely difficult on the individual and his or her family.  It makes no difference which side one is on - the criminal defendant being investigated or the government investigating its own.  Everyone needs to recognize this. It is so very sad to see a headline that reads Prosecutor in Failed Ted Stevens Corruption Case KIlls Self (article by Erika Bolstad - McClatchy Newspapers)


October 5, 2010 in Investigations, Prosecutors | Permalink | Comments (0) | TrackBack (0)

Legislators and Lobbyists Charged in Alabama

Here is the Alabama Electronic Bingo Indictment, unsealed yesterday.


October 5, 2010 in Corruption, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Monday, October 4, 2010

What Is Insider Trading?

A Fifth Circuit Court of Appeals decision in the case of Securities Exchange Commission v. Mark Cuban ("a well known entrepreneur and current owner of the Dallas Mavericks and Landmark theaters) offers an interesting discussion of the scope of liability under the misappropriation theory, Unlike the district court that had dismissed the case, the fifth circuit elected to vacate and remand the case for further proceedings. Cuban was alleged to have "received confidential information from the CEO of, a Canadian search engine company in which Cuban was a large minority stakeholder. The court looking at the allegations from only the perspective of the SEC said that Cuban allegedly had "agreed to keep the information confidential, and acknowledged he could not trade on the information."  The issue for the court was whether "a simple confidentiality agreement [was sufficient] to create a duty to disclose or abstain from trading under the securities laws?"  

The Fifth Circuit stated that "[t]he allegations, taken in their entirety, provide more than a plausible basis to find that the understanding between the CEO and Cuban was that he was not to trade, that it was more than a simple confidentiality agreement." The court noted that "[g]iven the paucity of jurisprudence on the question of what constitutes a relationship of 'trust and confidence' and the inherently fact-bound nature of determining whether such a duty exists, we decline to first determine or place our thumb on the scale in the district court’s determination of its presence or to now draw the contours of any liability that it might bring, including the force of Rule 10b5-2(b)(1)." (citations omitted). So, the bottom line is that we have a lot more to learn about what constitutes insider trading.


October 4, 2010 in Judicial Opinions, Securities | Permalink | Comments (1) | TrackBack (0)

Hearing on “Reining in Overcriminalization: Assessing the Problems, Proposing Solutions”

NACDL (Tiffany Joslyn) and the Heritage Foundation (Brian Walsh) wrote a groundbreaking report titled, Without Intent: How Congress Is Eroding the Criminal Intent Requirement in Federal Law, that was the subject of a congressional hearing this past week.  I had the pleasure to provide testimony at that hearing (my testimony). Others testifying included, NACDL President Jim Lavine (testimony), Brian Walsh of the Heritage Foundation (testimony), former head of the Enron Task Force Andrew Weissmann (testimony) and law professor Stephen Smith (Notre Dame)(testimony).  Abner Schoenwetter (testimony) and former race car driver Bobby Unser (testimony) told of their experiences as victims of overcriminalization. The hearing before the House Judiciary Committee, Subcommittee of Crime, Terrorism and Homeland Security was the wonderful work of Subcommittee  Chairman Bobby Scott and Ranking Member Louie Gohmert.  It was also wonderful to see House Judiciary Committee Chairman John Conyers, Jr. participating in this hearing.

NACDL Press Release here


October 4, 2010 in Civil Enforcement, Enron, News, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Sunday, October 3, 2010

Commentary on Recent Decisions in the Second Circuit Related to International Matters

Kiobel v. Royal Dutch Petroleum - the Second Circuit looks at whether a corporation can be held liable under the Alien Tort Statute (ATS).  Circuit Judge Jose Cabranes in his decision asked "whether a plaintiff bringing an ATS suit against a corporation has alleged a violation of customary international law."  He holds "[t]he concept of corporate liability for violations of customary international law has not achieved universal recognition or acceptance as a norm in the relations of States with each other. Inasmuch as plaintiffs assert claims against corporations only, their complaint must be dismissed for lack of subject matter jurisdiction." (citation omitted).  Circuit Judge Leval, authoring a concurring opinion, agreed that the "claims pleaded against the Appellants must be dismissed," but noted that he could not join "the majority’s creation of an unprecedented concept of international law that exempts juridical persons from compliance with its rules. The majority’s rule conflicts with two centuries of federal precedent on the ATS, and deals a blow to the efforts of international law to protect human rights."

Commentary - One has to wonder whether this case can be used to show why corporate criminal liability should be treated differently on occasion from individual liability?

Norex Petroleum v. Acess Industries -  the Second Circuit looks at "whether a United States federal court can properly hear a claim under the Racketeer Influenced and Corrupt Organization Act ("RICO"), 18 U.S.C. § 1961 et seq, arising from allegations of a conspiracy which primarily involves foreign actors and foreign acts."  The court refers to the recent decision in Morrison v. National Australian Bank Ltd., 130 S. Ct. 2869 (2010) and holds, "that absent an express intention by Congress of extraterritorial effect, a statute applies only domestically."  The court notes that "RICO 'is silent as to any extraterritorial application.'" The court states that "Morrison wholeheartedly embraces application of the presumption against extraterritoriality, finding that 'unless there is the affirmative intention of the Congress clearly expressed to give a statute extraterritorial effect, we must presume it is primarily concerned with domestic conditions.'" (citations omitted).

Commentary - As RICO is both a criminal and civil statute, will this mean that prosecutors can not apply RICO extraterritorially? 


October 3, 2010 in International, Judicial Opinions | Permalink | Comments (0) | TrackBack (0)

Friday, October 1, 2010

NACDL's 6th Annual Defending the White Collar Case Seminar – “Passport, Please: Defending in an International Enforcement Climate,” Friday, October 1, 2010

Guest Blogger: Ellen C. Brotman, Partner, White Collar Crime & Government Investigations Department, Montgomery McCracken Walker & Rhoads (Philadelphia, PA)

Moderator: Abbe David Lowell

Panelists: Peter Binning, Charles E. Duross, Linda Friedman Ramirez, Mark F. Mendelsohn, Barry J. Pollack and David Schertler

It’s a small world after all and the last panel of the conference: “Passport, Please: Defending in an International Enforcement Climate” demonstrated the complexity of defending multi-national corporations and their officers in the new global business environment.  There were a lot of familiar themes with some unfamiliar twists and they were all revealed through the discussion of the hypo, summarized here:

Zurich Auto is a Swiss company that produces parts for customization of high-end automobiles.  It is headquartered in Zurich with an office in Amaz, the capital city of a very wealthy oil-producing country called Petrastan.  For its sales in Petrastan until 2008, the officials in the Petrastan Transportation Ministry added a 10% fee to Zurich’s invoices and then collected that fee from a separate bank account, set up with the help of Zurich Auto’s agent in Amaz, Barack Peres.  Barack has his own company, Barack Supplies, established in the Emirates of Tamir (E.T.) where Peres is a citizen.  He is also a dual citizen of France.  Peres made all the arrangements for the 10% fee being paid and was paid bonuses by Zurich Auto based on total sales he was able to arrange in this system.  In addition, Peres had some side arrangement with Petrastan officials where they exchanged gifts from time to time (e.g., vacation, jewelry, dinners, spending money).  Swiss law and French law make it illegal for anyone to pay a bribe or inducement to a public official in exchange for any official action and Swiss law requires Swiss companies to report accurately to Swiss tax and other authorities the revenue and expenses it collects and pays.  Zurich Auto never reported the additional 10% as income.

In 2007, the U.S. company U.S. Motors, a vehicle manufacturing company, acquired Zurich Auto.   As soon as U.S. Auto became aware of the 10% program in 2008, it stopped making such payments but, at the direction of its CFO Thomas Turner, it never reported on any of its S.E.C. or other filings either the payments that had been made by its now subsidiary before or after the acquisition.   In 2010, a Wall Street Journal articles revealed the long-standing 10% fee program that had been occurring on all products sold in Petrastan and mentioned Zurich Auto as one of two dozen companies involved.

The panel’s moderator, Abbe Lowell, acted as GC of U.S. Motors and reviewed with the panel the various issues that can come up, including: When do you go to the government and tell them you are aware of the problem? What do you tell them you’re doing about it? What is the scope of your document preservation letter, and who sends it? Do you conduct an internal investigation and do you include in house counsel? How does the issue of successor liability enter into your analysis? How do you account for the possibility of a whistleblower to the SEC? When do you have to make a decision about issuing a new SEC filing relating to material risk?

As is often the case here at the White Collar Conference, we had a representative from the Justice Department on the panel who emphasized that publicity about an FCPA problem of this nature would surely capture their attention and necessitate a phone call to the company if they hadn’t heard from them by Monday morning.  An interesting point made here was that any delay in contact would create a suspicion of the possibility of obstruction.

After a discussion of the corporate exposure, we turned to the issues facing the individuals: the seller of the company, the CFO of U.S. Autos and the agent in the foreign country.  This discussion raised the following issues:  Is the seller of the company still on the hook? And is he better off dealing with law enforcement authorities, in Switzerland or the U.S.?  We also turned to the ubiquitous question of who’s paying the individual’s bills because, of course, these individuals have exposure and need separate counsel.  This part of the discussion raised some familiar questions about joint defense agreements and advancement of fees, and whether outside counsel still have concerns that these arrangements won’t be perceived well by DOJ and may not be in the company’s best interests.  The DOJ representative denied that these factors would be taken into account, but it seemed to me that other panelists did not feel as sure.

The discussion then turned to some of  the specific issues created by the multi-national nature of the company and the investigation, including: Will the Swiss company and US Auto work together in gathering evidence? Is there a greater ability to protect documents in Europe, and can that be used to an American company’s advantage? An interesting comparison of punitive consequences was also briefly discussed.

The last topic that was discussed was the representation of foreign individuals, and whether and how to negotiate the service of any period of incarceration in their home countries.  The panel agreed that prisoner transfer issues can sometimes be worked out ahead of time, but it can’t happen until one’s client is in BOP custody.  At DOJ, the Office of Enforcement Operations is in charge of prisoner transfer operations, but an attendee noted that, as in many other situations, the agreement of the line assistant to these arrangements is critical.

This closes out another great NACDL conference on white collar issues.  To purchase the audio recording of this program, click here.  For more information, visit NACDL's White Collar page here.  


October 1, 2010 in Conferences, FCPA | Permalink | Comments (0) | TrackBack (0)

NACDL's 6th Annual Defending the White Collar Case Seminar – “Groundhog Day: What's New in White Collar Sentencing?,” Friday, October 1, 2010

Guest Blogger: Alan Silber, Walder Hayden & Brogan, P.A. (Roseland, NJ)

Panelists: Amy Baron-Evans and David Debold

This exciting panel deconstructed the Guidelines for loss and the various enhancements.  Amy and David’s presentation focused on how white collar Guidelines are one-dimensional—focusing on loss as the most relevant indicator of the seriousness of the offense, while it should be harm and culpability.  Culpability includes mitigating factors such as role in the offense, mental illness and the like.

Amy and David spent considerable time discussing in great detail a specific advocacy approach.  It begins with educating the judge about the purpose of the sentence, which starts with 18 USC § 3553 (a) factors.  Defenders should explain why the sentence we seek is “sufficient but not greater than necessary” (SBNGN) to satisfy the sentence purposes expressed in that statute.  Defenders should also explain why probation, home detention or a split sentence is appropriate, then calculate the range, advocating for the lowest possible sentence.  This should be done before you calculate the Guidelines so that if necessary to attack a correct calculation, the attack can be tied to how the Guideline, as it has evolved, no longer effectuates the statutory purpose of the sentence.  Both Amy and David suggested that we turn the tables and use avoidance of unwarranted disparity to the advantage of our clients.

The panel turned to how to specifically calculate loss and then to a deconstruction of the fraud and loss Guidelines.  The panelists focused on how to ensure that the loss amounts were reasonably foreseeable to your client and how to look for possible credits in application notes to mitigate loss (i.e., asset sale in mortgage fraud).  Both panelists pointed out that there are lessons to be learned from security cases on causation.  Second Circuit cases have imported the civil standard of legal cause, which can eliminate some loss that is calculated if only a “but for” standard is used.  Legal cause removes from the loss calculation losses that can be attributed to intervening and/or unexpected (unforeseeable) events.

The panel then turned to the deconstruction of the Guideline range after it has been calculated, pointing out that Gall teaches that when a Guideline is not the product of empirical data and experience, it is not an abuse of discretion to ignore it.  Guidelines are not the product of old empirical data implemented to avoid disparity.  Since 1984, sentences have become significantly more severe.  Amy and David’s presentation provided numerous specific sources for statistical resources on this issue and on how amendments to the Guidelines have been driven by politics rather than data. Of note, readers should review the latest model sentencing memo available at

It is impossible to capture the amount of practical advice dispensed by these practitioners and the sheer volume of material that could be applied to your practice. The program and materials will be available for purchase through NACDL’s office.


October 1, 2010 in Conferences, Sentencing | Permalink | Comments (0) | TrackBack (0)

NACDL's 6th Annual Defending the White Collar Case Seminar – “Evasion, Avoidance, or What? Ethically Navigating the Modern Tax Fraud Case Post-UBS,” Friday, October 1, 2010

Guest Blogger: Joseph D. Mancano, Pietragallo Gordon Alfano Bosick & Raspanti, LLP (Philadelphia, PA)

Panelists: Peter D. Hardy and Kathryn Keneally

Peter Hardy of Post & Schell and Kathryn Keneally of Fullbright & Jaworski presented on government enforcement initiatives and the voluntary disclosure program regarding Americans with off-shore bank accounts.  The DOJ and IRS initiative began in 2007 at when Igor Linikov pled guilty to tax evasion in connection with a $350 million undisclosed bank account at UBS in Switzerland.  He paid $52 million to the IRS, received probation and cooperated with the government.  Later, the person who serviced Linikov at UBS pled guilty, cooperated and received nearly four years in jail.

UBS entered into a deferred prosecution agreement with the government, paid $700 million in penalties and disclosed the names of 250 account holders of foreign accounts to the government. Since then, the U.S. and Swiss governments have entered into an agreement whereby Swiss financial institutions have agreed to turn over information to the U.S. regarding Americans who hold accounts in Swiss institutions.  As a result, the government is now prosecuting UBS account holders, although the cases have so far been few (only ten indicted), and the sentences have been relatively short.

Most practitioners may be unaware of the FBAR form that must be filed by a person who holds a foreign bank account containing greater than $10,000. Under Title 31 of the U.S. Code, a willful failure to file the form is a felony carrying a maximum sentence of five years.  The civil penalty for failing to file is also severe.  That penalty is 50% on the total assets in the account per year.  Besides the FBAR, IRS Form 1040 requires a taxpayer to disclose foreign bank accounts.  Failure to disclose the account on the Form 1040 is interpreted by the IRS as a false return, a felony.

To encourage voluntary compliance, and in recognition that people fall out of the system for various reasons, the IRS instituted the “Off-shore Voluntary Disclosure Initiative.”  Under this Program, the IRS guarantees a one-time penalty of 20% of the highest balance in the foreign account for the prior six years.  Those in the Program would, of course, have to file the FBAR and amend their tax returns to pick up the unreported income. Under this Program, 14,700 people came forward, which overwhelmed the system.  After an extension, the Program ended on October 15, 2009.  Thus, the IRS guarantee of the 20% penalty ended.

Although the Off-shore Program ended, the general IRS Voluntary Compliance Program regarding tax offenses still remains in effect. There are, however, some changes to this program implemented in connection with off-shore accounts. One such change is that the IRS developed an institutional position against so-called “quiet disclosure,” i.e., disclosing the omission by simply filing an amended return. 

Today, there is a great deal of uncertainty regarding the treatment of undisclosed off-shore accounts by DOJ and the IRS for people who missed the “Off-shore Voluntary Disclosure Program” deadline. Moreover, UBS is not the only foreign bank disclosing the names of account holders to the IRS.  News reports have revealed that HSBC and many others are doing the same. Now, white collar practitioners have to present clients with a choice of loss of their freedom versus the loss of the assets in their foreign accounts.  Such decisions will become more frequent as DOJ and the IRS ramp-up prosecutions. 


October 1, 2010 in Conferences, Tax | Permalink | Comments (0) | TrackBack (0)

NACDL's 6th Annual Defending the White Collar Case Seminar – “Making Ends Meet: Obtaining Insurance Advancement & Indemnity in White Collar Cases,” Friday, October 1, 2010

Guest Blogger: Rodger A. Heaton, Hinshaw & Culbertson, LLP (Chicago, IL)

Panelists: Evan A. Jenness and Lee H. Shidlofsky

In his “Advice to a Young Tradesman,” Benjamin Franklin included the time honored maxim that “time is money.”  If that is clear to anyone, it is clear to defense attorneys.  Evan Jenness, an NACDL Board member, and Lee Shidlofsky, offered helpful advice to defense practitioners interested in maximizing their ability to collect attorney fees from employers and insurers.  This third breakout session of the final morning of the seminar provided several tips for obtaining advancement and indemnity for defense costs from an insurance company during an investigation and any subsequent prosecution or enforcement action.  Jenness who practices in Santa Monica, CA, and Lee Shidlofsky of Austin, TX, addressed the issues thoroughly. 

Jenness first summarized the multiple sources of indemnification.  They include corporate charters and by-laws, partnership agreements, employment contracts, employer insurance policies, and severance agreements.  In some states, there are statutes requiring companies to indemnify (e.g., California) 

Jenness reminded the audience that advancement is separate from, though related to, indemnification.  Companies often try to avoid or delay advancing fees.  Clients are often asked for an undertaking requiring the employee to repay the company if the employee is ultimately convicted of a crime, and sometimes are even asked for security to make the undertaking enforceable.  Jenness encouraged challenges to those attempts on the basis that the company could have required a secured undertaking in its by-laws or employment contract. 

Jenness also encouraged defense attorneys who are unable to get a written promise from the company or its insurer to pay right away to challenge it immediately.  As backup protection against recalcitrance from the company, defense attorneys may need to include language in retention agreements requiring a retainer from the client to be used if initial efforts to get paid by the company and insurance company fail. 

Jenness discussed Delaware’s provision of nearly unlimited capacity for companies to indemnify employees and officers, and noted that even if an employee is employed at will, some states provide that advancement and indemnity are available. 

Jenness offered several pracice tips:  1) Don’t assume your client isn’t entitled to coverage under a D&O policy due to lower rank in the company.  Many policies are interpreted to cover lower ranking employees.  2) Find sample indemnity agreements by industry on the internet.  Use them in negotiating the terms of employment and severance contracts.  3) There is no requirement that you share work product and privileged information with the third party fee payer.  Redact bills that are forwarded to the third party payer.  If the company/carrier balks because they don’t know what they are being asked to pay for, then very narrow descriptions may have to be included. 

Shidlofsky reported that D&O policies are typically broad.  Just because a client is under investigation for criminal or intentional conduct and there are “bad conduct” exclusions in the policy, it does not mean there is no coverage.  And, most policies require a final determination of the bad conduct before coverage can be denied.  There may be coverage disputes, but they are worth fighting. 

Shidlofsky also offered a few key practice tips:  1) Provide notice to the insurer as soon as you obtain knowledge of the investigation.  Failure to provide prompt notice can result in reduced or no coverage. 2) Read the definitions of “loss” and “wrongful act” in the policies very carefully.  There is limited case law interpreting these terms, but the more modern trend in policies is to provide coverage even at the investigation stage.  Much litigation is underway on these issues.  3) Evaluate whether the policy requires advancement of fees and costs, or reimbursement only.  Absent clear language on this, many states require advancement of fees and costs. 

Effective defense efforts take time and, therefore, money.  With some tenacity and diligent searching through the sources of potential indemnification, you just might find enough money to do the job right. 


October 1, 2010 in Attorney Fees, Conferences, Defense Counsel | Permalink | Comments (0) | TrackBack (0)

NACDL's 6th Annual Defending the White Collar Case Seminar – “An SEC Makeover: Restructured, Refocused, and … Back in the Game?,” Friday, October 1, 2010

Guest Blogger: Chris Hall, Saul Ewing LLP (Philadelphia, PA)

Moderator: Gerald B. Lefcourt

Panelists: Susan Brune, Pamela Rogers Chepiga, Robert Khuzami, Eliot Spitzer and Richard M. Strassberg

What a panel.  Susan Brune kicked off the discussion with thoughts on whether the SEC’s new cooperation policy will work.  In her view, Bob Khuzami, as the SEC enforcement chief, will have to figure out how to make the SEC a bit more like a federal prosecutor’s office.  One of his new big weapons, however, gives her pause.  The SEC’s new cooperation scheme differs from the federal prosecution process, and some of the differences will impact the SEC’s effectiveness.  AUSAs, in her experience, have much more autonomy than SEC staff attorneys.  While they have to get supervisory approval to grant immunity or decline prosecution, the front office rarely reverses a line Assistant’s recommendation.  With the SEC, in contrast, you never know until the staff attorney completes a long, formal, and inscrutable process that ends with the Commission itself weighing in, and often with political factors at play.  And even then you don’t know.  The SEC’s practice of including lengthy recitations of alleged conduct in its Consent Orders—facts to which the defendant does not agree—risks inflaming the judge, inciting Article III activism, and prompting Courts to reject carefully crafted agreements.  This contrasts markedly with a sentencing hearing with a 5K motion by a USAO, where the federal prosecutor stands with your client shoulder to shoulder.

Rich Strassberg took the baton at that point and addressed the pitfalls of representing a client who has exposure to both the SEC and DOJ.  Most clients who work in the securities industry cannot, as a practical matter, assert their 5th Amendment right and also keep their jobs.  Clients may feel compelled to give testimony and effectively provide both the SEC and DOJ a roadmap for their investigations.  Rich also touched on the public’s clamor for enforcement action in the wake of the Commission’s failure to anticipate the perils from credit default swaps and derivatives.  The SEC’s perceived need to respond to the public’s furor with immediate action presents huge risks to clients.  Wall Street has moved way beyond the stock market.  The SEC needs to take the time to understand new markets, in Rich’s view, and to reflect on how complex industry norms inform the issue of criminal intent.  A rush to respond to perceived enforcement lapses will deprive market participants of the benefit of a fair investigation that reveals the true context in which market participants worked.  In short, the SEC has to work hard not to act too slowly, or too quickly, but to strike the balance just right.

Pam Rogers Chepiga then took the audience on a tour of the Dodd-Frank Act’s whistleblower provisions, the SEC’s prior rewards program--$159,000 paid out over 20 years—and the rulemaking process for the new rewards process on which the Commission will now embark.  She then posed the following big questions for the audience: do securities fraud allegations lend themselves to whistleblower programs due to the heightened intent requirement that applies?  Will the time and energy it takes to filter through leads drain agency resources from more important enforcement programs?  Will the financial incentives undermine well thought out corporate compliance programs?  And finally, how will defense attorneys counsel clients who have a choice between laying low and seeking a financial windfall?

Bob Khuzami attempted to address the concerns raised by the other panelists.  Judicial scrutiny is what it is.  The SEC, in his view, should be prepared to defend its charging decisions.  While he doesn’t relish headlines, and is concerned a bit sometimes that judges don’t fully understand how a case evolved, he calmly accepts the scrutiny as part of the job.

Cooperation and whistleblowers offer fundamental intelligence that brings forward higher quality information sooner.  The entire Commission supports these new initiatives and will not bog down approvals.  They have already agreed on the basic parameters:  wrongdoers won’t continue to work in industry; they also won’t keep the financial benefits they have wrought.  As to interactions with DOJ, he expects better communication at an earlier stage between the two agencies.

Fear not, moreover.  There will be no shortage of process; no rush to judgment under his watch.  Bob also credited the talented and sector-focused divisions within the SEC; they all will weigh in with their expertise on cooperation agreements and whistleblower rewards. 

The whistleblower program will not drain resources; it will serve as corollary to the SEC’s established office of market intelligence.  The program will also not undercut the need to encourage employees to “report up” via their in-house compliance programs.  The SEC will fashion financial incentives in a way that supports this valuable corporate compliance function, though Bob did not explain why (we will have to wait for the rules).

Eliot Spitzer then grabbed the microphone. Wall Street is rife with conflicts of interest, he noted.  The SEC cannot and should not wait for information to come in.  The Commission instead should anticipate.  The recent financial collapse, in his view, reflects an intellectual failure by regulators.  The solution?  Smart people at the SEC should think about problems before the public suffers.  Eliot cited mutual fund fees as a perfect example.  We know that these fees—suggested to amount to billions of dollars each year--hurt the middle class.  We have democratized investing through these funds; now the regulators have to make them transparent and fair.

No shortage of practical insight and forward looking thoughts from this group!


October 1, 2010 in Civil Enforcement, Civil Litigation, Conferences, SEC | Permalink | Comments (0) | TrackBack (0)