DOJ Reveals Data Team – Future of Enforcement

The 2017 Year in Review of the Department of Justice reveals a Data Analytics Team (the “Team”) for tracking healthcare fraud. The Healthcare Fraud Unit launched the Team in order to provide data mining expertise that efficiently detects healthcare fraud. This development demonstrates that data analytics is the future of enforcement. A fuller description of the Team and data mining is found on the Triage blog here.

Court’s Detailed Rejection of Plea Leads to New Bargain

Judge pronouncing sentence to manA recent blog post summarized an opinion in which a district court catalogued his reasons for rejecting a corporate “C” plea involving a pharmaceutical company.  Several developments have occurred since the court’s opinion including a plea and sentencing hearing scheduled for January 30, 2018. 

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DOJ Announces Revised FCPA Corporate Enforcement Policy

In late 2017, Deputy Attorney General Rosenstein announced a revised FCPA Corporate Enforcement Policy to be incorporated into the United States Attorneys’ Manual. With this revised policy, the Department of Justice (DOJ) aims to provide a level of certainty to companies in order to encourage voluntary disclosures of potential violations of the FCPA.

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Help Proposed for Anti-Money Laundering Deadline

Hanging $100 BillsAs the two-year deadline approaches, help is proposed to meet upcoming anti-money laundering compliance requirements. A recent draft bill aims to assist banks and other regulated entities in complying with one of the most significant anti-money laundering requirements of the Final Rules on Customer Due Diligence Requirements (the “Rules”). The proposal will assist banks, brokers or dealers in securities, mutual funds, and futures commission merchants and introducing brokers in commodities in implementing greater customer due diligence measures.

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The SEC’s New Year’s Resolutions: Retail Investors and Cybersecurity

An abstract design of a terminal display, warning about a cyber attack.

2018 arrived in the wake of big changes at the U.S. Securities and Exchange Commission (“the SEC”).  Jay Clayton was sworn in as Chairman of the Commission in May, naming Steve Peikin and Stephanie Avakian as Co-Directors of the Enforcement Division (the “Division”) in June.  As many do for the start of a new year, they have evaluated the Division’s priorities and promised a new focus.  According to a speech by Ms. Avakian late last year, we can expect the Division to direct its resources and attention to two priorities going forward:  the protection of retail investors and cybersecurity.

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DOJ Recovers $32.3 Million For Drug Pricing Despite Limited Role in FCA Case

The Department of Justice (DOJ) recently announced a False Claims Act (FCA) settlement with Kmart Corporation for $32.3 million.  The settlement is part of a global $59 million settlement; the relator will receive $9.3 million.

Former Kmart Employee Filed the Qui Tam

James Garbe, the relator, was employed by Kmart as a pharmacist from 2007 until 2010. The complaint originally filed in California was transferred to the Southern District of Illinois upon Kmart’s motion.  In his third amended complaint, the relator alleged that Kmart, which operates pharmacies in many of its stores, was “maintaining a dual and opportunistic pricing scheme for generic drugs, which allowed Kmart to claim and receive reimbursement from governmental prescription drug programs in excess of its ‘usual and customary’ prices.”

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CFTC Rewards for Cooperation Should Continue in 2018

2017 saw big changes regarding the way the Commodities Futures Trading Commission (“CFTC”) considers and rewards cooperation. In January, 2017, the CFTC issued two Enforcement Advisories (one for companies and one for individuals) outlining the new factors the Enforcement Division of the Commission will consider in evaluating cooperation by those under investigation.

In late September, the CFTC updated those guidelines to “provide greater transparency about what the Division requires from companies and individuals seeking mitigation credit.” Distinguishing its new policy from the original advisories, the update clarified that “the Division will reserve its recommendations for the most substantial reductions in civil monetary penalty for those instances where a company or individual has self-reported the misconduct and fully cooperated with the Division’s investigation and remediated.”

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US Departments of Justice and State Launch Intellectual Property Law Enforcement Coordinator Network

The US Departments of Justice and State recently launched the “IP Law Enforcement Coordinator Network” to focus on international trademark counterfeiting, copyright piracy and other forms of intellectual property rights infringement across the world, spanning all industry sectors. And while the components of the Network are not new, there is now renewed focus on these issues which could impact US and international corporations.

For more on the Network, visit our Global IP and Privacy Law Blog here.

Global Magnitsky Sanctions Target Human Rights Abuses and Public Corruption

The first designations of individuals and entities sanctioned pursuant to the Global Magnitsky Human Rights Accountability Act (“Global Magnitsky”) are expected shortly. Congress enacted Global Magnitsky in late 2016, authorizing the President to seize property from and deny visas to:

  1. Foreign parties responsible for gross human rights violations committed against individuals who seek to promote human rights or to expose illegal activity carried out by government officials, or
  2. Government officials responsible for, or complicit in, significant acts of corruption.

Foreign persons who have materially assisted the significant acts of corruption may also be sanctioned. Global Magnitsky expanded on the Russia and Moldova Jackson-Vanik Repeal and Sergei Magnitsky Rule of Law Accountability Act of 2012. The original sanctions targeted Russian officials alleged to have engaged in human rights violations and public corruption.

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Remediation and Cooperation Pay Off in SEC Settlement

The SEC often encourages self-reporting, cooperation, and remediation in speeches and policy statements. In a settled enforcement action announced today, the Commission made clear just how valuable those efforts can be, allowing a company to settle accounting controls and disclosure violations with no financial penalty whatsoever.

According to the SEC’s announcement, from 2012 to early 2016, the former CEO and CFO of Provectus Biopharmaceuticals, Inc. obtained millions of dollars from the company by using insufficient or non-existent expense documentation, causing the company to materially understate their compensation in annual reports and proxy statements. While the SEC order directs Provectus to cease and desist from committing any further accounting controls and disclosure violations, it notably imposes no financial penalty on the company. The SEC’s order states that it took into consideration Provectus’ prompt remedial acts and cooperation with the Commission, including (i) the retention of independent counsel and a forensic accounting firm to conduct an internal investigation; (ii) the replacement of the CFO and CEO accused of wrongdoing; (iii) the decision to hold the former executives accountable through legal process; (iv) the creation of new finance positions; (v) the hiring new auditing and bookkeeping firms; and (vi) the revamping of  internal control measures related to expense reimbursement. The SEC also credits the company for voluntarily sharing the findings of its internal investigation with the Commission, saving the Enforcement staff both time and resources.

The Provectus settlement is a good reminder for companies that prompt, thorough, and independent inquiry into potential wrongdoing, swift remedial action, and transparency with the Commission can substantially mitigate their SEC enforcement exposure in the end.