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    Pietragallo's White Collar Criminal Defense Group

    In today's environment, the government has never more aggressively regulated, investigated, pursued and prosecuted white collar crime. If you or your company becomes embroiled in any type of federal or state government investigation, you need experienced trial lawyers who have gone toe-to-toe with prosecutors and government agents.

    Archives by Category


    Bid Rigging A Government Agency Doesn’t Pay

    The Department of Justice’s Antitrust Division is a unique organization that wields its proverbial sword in both civil and criminal realms. Although less than a decade ago the Antitrust Division closed several of its field offices and consolidated personnel, recent investigations and prosecutions demonstrate that the Division is very much alive and well.

    The Division has recently been investigating a group of individuals involved in an online bid rigging scheme of the Government Services Administration’s (GSA) online public auction. So far 2 people have pled guilty and agreed to cooperate with the government in the prosecution of others.

    According to the Information filed by the United States Attorney’s Office in the District of Minnesota, Marshall Holland, who owned a Texas company that purchased computers to resell and recycle, along with Igor Yurkovetsky and others, conspired to rig and price fix the GSA’s online auction of used computers.

    The GSA auctions federal government assets it no longer uses, such as computers, via a platform called GSA Auctions. GSA Auctions assigns a sale-lot number to an item to be auctioned and Bidder numbers to bidders in order to maintain anonymity. The auction period is specified. The bidder with the highest bid, at the close of the bid, wins the bid. The Defendants were located in Texas, Missouri and Pennsylvania. The computers they purchased were located in different states, including Pennsylvania, and were then shipped to Texas and Pennsylvania. The GSA server is located in Minnesota, where the case was filed.

    According to the defendants’ Plea Agreement and Sentencing Stipulations, the conspiracy lasted approximately 6 years. They won bids totaling $93,000. The Antitrust Division alleged that the defendants suppressed and eliminated competition of the sale of the computers by agreeing:

    1. to designate which co-conspirator would submit the winning bid;
    2. to not compete against each other;
    3. to disclose each other’s Bidder number in order to monitor the bidding;
    4. to submit rigged bids on computers in 8 states;
    5. to split the computers among the conspirators.

    Igor Yurkovetsky pled guilty on September 24th to conspiracy to restrain interstate trade and commerce in violation of the Sherman Act. Marshall Holland pled guilty on April 10, 2019 to the same charges. Both defendants agreed to cooperate with the United States government in the prosecution of co-conspirators and both agreed to a United States Sentencing Guideline range of 8-14 months imprisonment, a fine of one to five percent of the volume of commerce with a minimum of  $20,000, restitution, and supervised release between one and three years. In addition, the Defendants may face debarment or suspension by states or federal agencies they do business with. 

    The mission of the Antitrust Division is “to promote economic competition through enforcing and providing guidance on antitrust laws and principles.” Clearly the government is cognizant of the volume of transactions that occur online each and every day. The Division does not focus solely on cases involving millions or billions of dollars. The Holland and Yurkovetsky cases broadcast to businesspeople and counsel alike that bid rigging, no matter what the dollar amount, is on the government’s radar.

    (USA v. Marshall Holland, United States District Court of Minnesota, Case No. 2019-cr-00065)

    (USA v. Igor Yurkovetsky, United States District Court of Minnesota, Case No. 2019-cr-00182)


    48 Arrested In Eastern Pennsylvania And New Jersey Involved In Health Care Fraud And Pill Mill Schemes

    A coordinated law enforcement effort among myriad federal, state and local law enforcement agencies in Pennsylvania and New Jersey resulted in the arrests of 48 defendants. Included in those arrested were doctors and medical professionals who, allegedly, submitted over $160 million in fraudulent insurance claims, caused losses of over $800 million and distributed over 3.25 million opioid pills. This law enforcement sweep reached across seven federal districts, including the Eastern District of Pennsylvania.

    In the Eastern District of Pennsylvania alone, 17 health care professionals were arrested on September 26 for allegedly submitting over $4 million in fraudulent claims and distributing over 738,000 oxycodone doses in pill mill clinics. Some doctors were charged with unlawful distribution of controlled substances for writing prescriptions that were outside the usual course of professional practice and not for legitimate medical purpose. According the Department of Justice, the FBI’s investigation revealed, that these medical doctors prescribed oxycodone to patients without examination or treatment. Defendants then knowingly submitted fraudulent claims to Medicare, health plans provided by the United States Office of Personnel Management (OPM) and Independent Blue Cross (IBC) for payment.

    In Philadelphia, one medical doctor, two unlicensed foreign medical school graduates and a nurse practitioner, were indicted on one count each of health care fraud and conspiracy  to distribute controlled substances for an alleged scheme which lasted 4 years. The medical doctor, Neil Anand, owned several non-pharmacy dispensaries which dispensed medications. He owned  Anand Medical Investment, Institute of Advanced Medical Surgery and Bucks County Spine and Pain Medicine. The indictment alleged that the dispensaries provided the patients with “goody bags” containing prescription medications based on the patient’s insurance coverage, not medications that the patients needed. It also alleged that the defendants did not provide doses or instruction for usage of the medications and required the patients to accept the medically unnecessary medications before the patient received the prescription of a Schedule II controlled substance. The indictment also alleges that the defendants failed to collect co-payments but required patients to sign a false statement stating that they paid their co-pays. The nurse-practitioner is alleged to have signed blank prescriptions and given them to the unlicensed defendants to prescribe Schedule-II controlled substances.  The indictment seeks the forfeiture of the gross proceeds traceable to the alleged criminal activity.

    The aggressive law enforcement actions were the result of an extensive collaborative effort of agencies with diverse expertise and focus in pursuing criminal and parallel civil actions against medical professionals and others in an effort curtail fraud and the illicit distribution of opioids. These agencies include: departments of the Health Care Fraud Unit in the Criminal Division’s Fraud Section, and the U.S. Attorney’s Offices  for the Eastern District of Pennsylvania and the District of New Jersey, known as the “Newark/Philadelphia Regional Medicare Fraud Strike Force” in addition to the FBI, Department of Health and Human Services – Office of Inspector General (HHS-OIG), United States Postal Service – Office of Inspector General (USPS-OIG), the Office of Personnel Management, the Pennsylvania Office of Attorney General, Drug Enforcement Administration, HHS-OIG, the Pennsylvania Department of State’s Bureau of Enforcement and Investigations, the Chester County District Attorney’s Office, the Eastown Township Police Department and the Philadelphia Police Department.

    In addition to those arrests mentioned above, 12 defendants were also charged with possession with intent to distribute a Schedule II controlled substance and aiding and abetting others in a scheme to defraud. These 12 defendants allegedly knowingly presented false prescriptions to several pharmacies in Pennsylvania and New Jersey and purchased oxycodone from complicit pharmacists paying a premium fee. They then distributed the pills. Those pharmacists have not yet been charged.

    The Department of Justice continues to aggressively prosecute those involved in the opioid crisis. Last week the Department of Justice announced charges against 58 defendants across four federal districts in Texas in a similar fraud scheme and illicit possession of controlled substance with intent to distribute. It is alleged that the Texas prosecutions resulted in a $66 million in losses and 6.2. million pills. 

    Click here to view additional indictments related to this case.


    Third Circuit Rejects Doctor’s Claim That Payments From Lab Were Rent, Not Bribes, in $100 Million Referral Scheme 

    Yesterday, the Third Circuit affirmed a doctor’s conviction for accepting bribes in exchange for referrals to New Jersey based lab Biodiagnostic Laboratory Services (BLS).  U.S. v. Thomas V. Savino, No. 18-2223 (3d Cir. 2019).  Doctor Thomas Savino allowed BLS to set up a blood drawing station in his solo medical practice in Staten Island, New York.  BLS paid Savino approximately $25,000 over the course of the arrangement, which lasted from August 2012 to April 2013.  

    The government, with the assistance of a BLS recruiter-turned-cooperating witness, alleged that those payments were bribes for Savino’s referrals to BLS for testing services.  Savino argued at trial that the money was rent payment for using his space, not bribes.  The jury didn’t buy it and convicted Savino in October 2017 of 10 counts relating to the scheme, including violations of the federal Anti-Kickback Statute, Travel Act Bribery, Honest Services Fraud, and related conspiracies. 

    On September 24, the Third Circuit agreed.  The Anti-Kickback Statute in 42 U.S.C. § 1320a-7b(b)(1)(A), it explained, required proof that that Savino (1) knowingly and willfully; (2) solicited or received any remuneration; (3) in return for referring any individual to a person for the furnishing of any item or service for which payment may be made in turn or in part under the Federal health care program.  The Court rejected Savino’s claim that evidence was insufficient to show that the payments were for referrals rather than rent.  It noted the “ample circumstantial evidence” the government presented at trial showing that Savino intended to accept bribes from BLS, including that:

    • Savino allowed BLS to operate the lab in his office without a written agreement in return for cash payments;
    • The lab had no public entrance – patients could only access the area where blood was drawn through Savino’s office;
    • In recorded conversations with the BLS recruiter, Savino “haggled over the payment scheme with a new potential lab, explaining that he had ‘good volume’ and could send them certain urine testing ‘that pa[id] tremendously well;’”
    • Savino accepted a $1,500 cash payment ostensibly from the new lab and offered to split monthly cash payments with the BLS recruiter if he could convince the company to do urine testing.

    The Third Circuit rejected Savino’s other arguments as well, namely that as a New York doctor he shouldn’t have been convicted in connection with the New Jersey bribery statute.  The Court countered that the scheme clearly had detrimental effects in New Jersey, as BLS was based there, the blood was shipped to and tested there, and the payments Savino received came from the state. 

    Dozens of other individuals have already been convicted in connection with this scheme, which led to approximately $375,000 in business for BLS and more than $10 million charged to Medicare and private insurers.  BLS pled guilty in 2016 to an information charging conspiracy to violate the Anti-Kickback Statute and the Federal Travel Act and one count of conspiracy to commit money laundering.


    The Broad Reach of the FCPA

    The Foreign Corrupt Practices Act (“FCPA”), codified in 15 U.S.C. §§ 78dd-1, et. seq., prohibits certain classes of persons and entities from paying foreign government officials to assist in obtaining or retaining business. Specifically, persons and entities may not corruptly use any means of instrumentality of interstate commerce in furtherance of any offer or payment of money or thing of value to any person, while knowing that the money offered is meant to influence a foreign official in his or her official capacity.

    Recently, the FCPA made headlines through its involvement in the prosecution of a bribery and money laundering scheme. Two Columbian businessmen – Alex Nain Saab Moran and Alvaro Pulido Vargas – allegedly bribed Venezuelan officials between 2011 and 2015 with payment for fake shipments of construction materials that were never sent to the country after securing a contract to build low-income housing. Funds exceeding $350 million travelled from Venezuela through the U.S. correspondent banking system, and Florida bank accounts collected approximately one half million dollars in tainted funds. 

    Because money laundering statutes prohibit the use of the U.S. banking system for transactions involving funds from specified unlawful activity, the government claimed jurisdiction over the case. Included within the money laundering statutes, according to the government’s indictment, are crimes against foreign governments and violations of the FCPA. Specific FCPA provisions criminalize actions taken in the U.S. to promote foreign bribery schemes. Thus, although Department of Justice (“DOJ”) prosecutors did not accuse Moran and Vargas of coming to the United States, their supposed involvement in a conspiracy with three other unnamed people – two of whom they allegedly conspired with in Miami during a meeting – subjected them to FCPA prosecution. Furthermore, prosecutors believe that these two individuals reimbursed another co-conspirator for “expenses” related to the scheme by wiring money to his Florida account. 

    Prosecutors charged Moran and Vargas with one count of conspiracy and seven counts of money laundering.  The Treasury’s Office of Foreign Assets Control (“OFAC”) also sanctioned them and several of their companies, contending that these men bribed their way into various other government contracts, including providing food for the country’s nutritional relief program. Moran and Vargas then allegedly inflated invoices to maximize profit, used payments for bribes, and imported food of poor quality for the program. OFAC sanctions also included eight other individuals, including Moran and Vargas family members, three stepsons of Venezuelan President Nicolas Maduro, and José Gregorio Vielma Mora, the former governor of the Venezuelan state of Táchira.

    Ultimately, the prosecution of Moran and Vargas demonstrates the virtually unlimited ability of the United States government to reach beyond its borders in prosecuting FCPA matters. With that in mind, DOJ prosecutors will likely continue casting a wide net over potential violators – even those who have never set foot on American soil.

    United States v. Alex Nain Saab Moran and Alvaro Pulido Vargas Indictment


    Don't Let Your Crisis Communications Damage Privilege 

    Corporations engaged in civil litigation or government investigations often need to address public relations resulting from their legal involvement, commonly referred to as “crisis communications.” Outside and in-house legal counsel and the corporate officers involved have always had to exercise considerable care to avoid potential waiver of attorney-client and attorney work product privileges. In a recent Opinion, the Pennsylvania Supreme Court provides important insights on these points. See Bousamra, M.D. v. Excela Health, et al., J-80-2018, 5 WAP 2018 Supreme Court of Pennsylvania Western District, (June 18, 2019).  

    What Happened
    In brief, Excela Health determined, with help from outside consultants, that a certain physician appeared to be performing medically unnecessary cardiac procedures. Excela retained outside counsel to assist with this investigation and to advise it on how to proceed. Excela also hired a public relations firm to assist it in disclosing any findings. 

    Outside counsel provided legal advice by email to Excela’s General Counsel as to whether it was legally appropriate to disclose the physician’s name in a press release, among other things. Excela’s General Counsel forwarded the outside counsel’s email to the owner of the public relations firm, who in turn forwarded that email to her employees assisting in the Excela work. Excela ultimately released the physician’s name as part of its press strategy and the physician sued Excela for, among other things, defamation.  

    The legal issue at the center of the Supreme Court’s Opinion is whether Excela waived the attorney-client and attorney work product privileges when its General Counsel forwarded the outside counsel’s email to the public relations firm.  

    The Result
    Attorney-Client Privilege – waived.

    The Pennsylvania Supreme Court determined that the attorney-client privilege over the email was waived when General Counsel forwarded it to the public relations firm. The Court acknowledged that in the modern practice of law, lawyers – particularly litigators – are involved in managing and utilizing media relations.  Accordingly, the Court recognized that certain situations may arise where public relations firms are necessary to provide insight, advice, or opinion on legal advice, but cautioned that the scope of those situations must remain “narrowly tailored.” The Court also cautioned that, in cases where the privilege has been found to apply when third parties were privy to attorney-client communications, the “third party’s receipt of confidential information was either solicited by the attorney, or necessary for the attorney to give legal advice.”  Id. at 29.

    The Supreme Court determined that the attorney-client privilege here was waived because:  
    1. the owner of the public relations firm was not capable of acting on Excela’s behalf, as she was not an officer, executive or director of Excela; and 
    2. the forwarding of the email by Excela’s General Counsel to the public relations firm was not done to facilitate a lawyer’s ability to give legal advice to Excela.  Id.
    Work Product Privilege – Remanded for further findings by the trial court.

    Excela also asserted the work product privilege over the email.  The Supreme Court definitively determined that the content of the email was work product of outside counsel.  The Court then engaged in an analysis to determine whether the disclosure of the work product email to Excela’s public relations firm effected a waiver of the work product privilege.  

    After extensive analysis, the Court concluded that the disclosure of the email to a third party outside the attorney-client relationship did not waive the attorney work product privilege. The Court determined that the purpose of the attorney work product privilege was to protect the attorney’s work product from adversaries or potential adversaries in the litigation, and held that the work product privilege is “waived when work product is shared with an adversary or disclosed [to a third party] in a manner which significantly increases the likelihood that an adversary or anticipated adversary will obtain it.” Id. at 16. The Court recognized that this determination required extensive factual findings and remanded the matter to the trial court. Id. at 19.

    The Take Away
    1. The Court reaffirmed that the attorney-client privilege is generally waived when a communication is shared with a third party;
    2. If an attorney needs the involvement of third party to facilitate legal advice to the client, then the attorney including that third party in the attorney-client communication would not constitute a waiver of the attorney-client privilege;
    3. The Court recognized that attorneys – particularly litigators – often need to seek the advice of public relations consultants [or other third parties] to advise their clients;
    4. The attorney and client should both be cautious when sharing attorney-client communications with public relations consultants, as the Supreme Court has made it clear that the scope of disclosure of attorney-client communications to such a third party must be narrowly tailored;
    5. To best protect the attorney client privilege, the attorney should request the involvement of the third party and make it clear that it is to assist the attorney in providing legal advice, before sharing privileged material;
    6. The attorney work product privilege will not be waived if the work product is shared with a third party, so long as all parties are cautious to ensure that an adversary or potential adversary would not obtain access to that work product.
    7. When securing the services of public relations consultants or other third parties, the client and/or attorney should make it clear in writing that the attorney work product being shared is confidential and cannot be shared with any other third party;
    8. Entities should put in place a crisis communications plan to ensure that only certain people within the organization are authorized to provide information to third parties, and that those people are trained when and how to do so;
    9. In-house legal departments at corporate entities should facilitate training for all their attorneys on the nuances of both the attorney-client and attorney work product privileges.
    This outline has been provided by Kevin E. Raphael who is a Partner at the Pietragallo Gordon Alfano Bosick & Raspanti, LLP Law Firm. Mr. Raphael works in the Philadelphia HQ of Pietragallo and travels all over the United States to assist clients in government investigations, responding to allegations of sexual misconduct, and other matters including business incidences that fall under the need for Crisis Communications. For more information, you can reach out to Mr. Raphael direct. 

    The Pennsylvania Wiretap Act - What Every Uber Driver and Rider Needs to Know

    A colleague and I had a conversation recently about Uber drivers and other ride-sharing platforms who are using ‘dash-cams’ to film the road ahead or passengers. These types of cameras protect drivers from claims of inappropriate conduct or dangerous driving and they’re starting to pop up in many vehicles.

    My colleague had “taken an Uber” and was on the phone with her husband when she entered the vehicle and did not realize there was a camera device - which was also capable of audio recording - in the car. 

    These details cannot be taken lightly by drivers (or passengers) because in the Keystone State, Pennsylvania requires “two-party consent.” This means that both parties to a private conversation must consent to the recording of that conversation. 

    Federal law and select states only require “one party consent,” allowing an individual to record a conversation without alerting the other participant but, in Pennsylvania, if you record someone without consent, you could be subject to a $1,000 fine.

    Pennsylvania was a “two-party consent state” and wanted to protect this status so on October 4, 1978, it enacted the “Wiretapping and Surveillance Control Act” (“the Act”). The Act, codified 18 Pa.C.S. §5701 et seq. provides that:

      “a person is guilty of a felony of the third degree if he: (1) intentionally intercepts, endeavors to intercept, or procures any other person to intercept or endeavor to intercept any wire, electronic or oral communication . . . .”  

    18 Pa.C.S. § 5703(1) also prevents individuals from intentionally disclosing or using the contents of a wire, electronic, or oral communication obtained through the interception of such a communication. See id. at § 5703(2)-(3).  

    Thus, three specific actions violate this statute: 
    (1) intentionally recording a conversation without the participants’ knowledge, 
    (2) disclosing the contents of the illegally-recorded conversation, or 
    (3) using the contents of the illegally-recorded conversation in some manner.  

    The Wiretap Act is not implicated when notice is given about the recording though so if you’re going to record people in the state of Pennsylvania you can do two things: (1) make an audio announcement in a phone call for an audio recording, and/or (2) place a sign that you are being recorded (as, for example, Uber drivers who are using dash-cams recording devices should do).

    Exceptions to The Act
    There are some exceptions to the Wiretap Act that would protect individuals from violating the law. For example, individuals may record conversations for investigative or law enforcement purposes or for emergencies within the police department, fire department, or county emergency center. See id. at 5704(2)-(3). Additionally, public utility personnel may record conversations to aid in receiving or dispatching emergency information, provided that a periodic warning alerts the conversation’s participants of the recording. Id. at 5704(6). Additional exceptions include, but are not limited to, the interception of calls made from inmates within prison or calls made from school buses for security purposes. Id. at 5704(14), (17).  

    What if you didn't know about PA’s Wiretap Act?
    Absence of knowledge about the Act can’t save you. In 2017, the Pennsylvania Superior Court interpreted the Wiretap Act in Commonwealth v. Cline, 177 A.3d 922 (Pa. Super. 2017). The Defendant in that case, charged with violating the Act, argued that he did not know it was illegal to secretly record a conference. Id. at 925-26. Ignorance of the law, however, was not a valid defense against a Wiretap Act charge. Id. at 926.  The court convicted defendant pursuant to § 5703 and sentenced him to a term of incarceration of eleven and a half to twenty-three months. Id. at 927.       

    The Takeaway
    The Pennsylvania Wiretap Act is something everyone should know about – especially Uber drivers who might be using recording devices [and passengers who are subject to recording]. Courts take violations of the Pennsylvania Wiretap Act very seriously. A third degree felony charge for a Wiretap Act violation carries a maximum penalty of seven years’ incarceration and a fifteen thousand dollar fine. Additionally, if you record someone without their consent, they could sue you and recover damages.

    So what about if you’re an Uber driver, you post a sign, and the rider doesn’t consent to be recorded?

    That’s a blog post for another day …

    John Schwab is a Partner at Pietragallo Gordon Alfano Bosick & Raspanti, LLP and practices in the areas of Government Enforcement & Compliance, White Collar Crime, and Cyber Liability & Technology Law. John has represented corporate and individual clients in a wide range of civil and criminal matters across both state and federal levels. Prior to his legal practice at Pietragallo, John served in the US Marine Corps as a Chief Trial Attorney. His experience on both sides of the table make him one of Pennsylvania’s most sought-after defense attorneys.

    Preventing FCPA Violations and Enforcement Actions with a Strong Corporate Compliance Program

    DOJ and SEC consider nine factors in deciding whether to pursue a criminal indictment against a corporation for FCPA violations, or to instead seek resolution by other means, including non-prosecution or a deferred prosecution agreement. This decision can have a huge impact on the stability, reputation, and future of a corporation.

    This post focuses on just one of the nine factors: The existence and effectiveness of a corporation’s compliance program. While the government does not have formulaic requirements for corporate compliance programs, it has offered guidance on the characteristics of programs that it considers most effective.

    Commitment from Senior Management and a Clearly Articulated Policy Against Corruption
    Senior executives must set the tone for a culture of compliance. They must send the message that compliance is mandatory and nonnegotiable, even if large (unlawful) profits are lost as a result.  

    Code of Conduct and Compliance Policies and Procedures
    A corporation’s code of conduct should be clear, concise, and accessible to everyone who conducts business on behalf of the company. For example, a corporation with employees around the globe should have its policies and procedures available in multiple languages. Corporate policies should outline responsibilities for compliance within the company, detail proper internal controls, and announce disciplinary procedures for violations.

    Oversight, Autonomy, and Resources
    Corporations must assign responsibility for oversight and implementation of its compliance program to someone with appropriate authority, adequate autonomy from management, and enough resources to ensure that the company’s compliance program is effective. Whether a corporation’s staffing in this regard is adequate will depend on the company’s size, structure, and risk profile.  

    Risk Assessment
    Not all transactions or relationships should be scrutinized in the same manner. Due diligence should be fact specific and should correspond with the level of risk involved in the transactions. DOJ will likely be more tolerant of an infraction in a low-risk area where the corporation has implemented a comprehensive, risk-based compliance program that devotes significant resources to areas that pose a higher risk, than it would be of an FCPA violation in a high-risk area that was not given enough attention and resources.  

    Training and Continuing Advice
    Compliance programs are not effective unless they are communicated throughout the organization. Corporate directors, officers, employees, agents, and business partners should receive periodic trainings on the company’s policies and procedures, applicable laws, and appropriate responses to various real-life scenarios.  

    Incentives and Disciplinary Measures
    DOJ and SEC will consider whether a company has appropriate and clear disciplinary procedures and whether they are applied reliably and promptly. In addition to punishing noncompliance, corporations should also consider rewarding compliance efforts with bonuses and opportunities for career advancement.

    Third-Party Due Diligence and Payments
    Though the degree of appropriate due diligence will vary, DOJ has noted that certain guiding principles always apply. First, companies should understand the qualifications of its third-party partners, including their reputations and relationships with foreign officials. Second, corporations should understand the business rationale for including the third-party in the transaction. Third, companies should consistently monitor third-party relationships, even after the initial due diligence is performed.  

    Confidential Reporting and Internal Investigation
    Companies should maintain mechanisms for reporting misconduct confidentially. An efficient and reliable system for investigating allegations should also be in place.  

    Continuous Improvement: Periodic Testing and Review
    A strong compliance program should evolve as the company changes over time. Changes in the business model, customers, area of operations, and the laws could impact the effectiveness of a corporate compliance program.  

    In sum, the government’s analysis of a corporation’s compliance program will look to answer three “common-sense” questions – 1) Is the program well designed? 2) Is it being applied in good faith? and 3) Does it work? Corporations should remember these points in developing, implementing, and updating compliance programs.

    Foreign Corrupt Practices Act in 2019

    As we enter 2019, the government’s enforcement of the Foreign Corrupt Practices Act (“FCPA”) shows no signs of slowing down. The U.S. Department of Justice and U.S. Securities and Exchange Commission have joint responsibility to enforce the FCPA. DOJ’s FCPA enforcement is handled through the Criminal Division’s Fraud Section. The SEC’s Enforcement Division has a specialized unit focusing on FCPA enforcement. Helpful resources on this topic include the DOJ’s Corporate Enforcement Policy found here and the SEC’s Resource Guide found here.

    FCPA enforcement can take a variety of forms.  As highlighted below, violations of the FCPA’s “books and records” provisions are often handled short of criminal charges, but FCPA bribery allegations are often handled via criminal charges. Here are a few of the governments resolutions in late 2018:
    • On November 27, 2018, Alejandero Andrade Cedeno, a Florida resident and former national treasurer of Venezuela, was sentenced to 10 years in prison based on his role in a billion dollar currency exchange and money laundering scheme. Andrade admitted to receiving over $1 billion in bribes in exchange for using his position as national treasurer of Venezuela to conduct currency exchange transactions at favorable rates for the Venezuelan government. He received cash, private jets, yachts, cars, and homes from the alleged co-conspirators. He agreed, through the plea agreement, to a forfeiture of a money judgment of $1 billion and all assets tied to the scheme. The case is being prosecuted in the U.S. District Court for the Southern District of Florida.
    • On October 30, 2018, Roger R. Boncy was charged in a superseding indictment for alleged participation in a scheme to bribe government officials in Haiti connected to a $84 million port development project and laundering of the associated funds. Boncy is a Spain resident with dual United States and Haiti citizenship. The indictment alleges that Bonci and an alleged co-conspirator, Joseph Baptiste, solicited bribes from undercover agents posing as potential investors in connection with the proposed port project. The undercover agents recorded a meeting at a Massachusetts hotel during which Boncy and Baptiste allegedly told agents they would funnel payments to Haitian officials through a non-profit entity controlled by Baptiste purporting to help impoverished residents of Haiti. The agents also intercepted telephone calls during which Boncy and Baptiste allegedly discussed bribing an aide to a Haitian official with a job on the port project in exchange for the aide’s help in obtaining authorization for the project. The case is being prosecuted in the U.S. District Court for the District of Massachusetts.
    • On September 27, 2018, DOJ announced non-prosecution agreements between United States and Brazilian authorities and Petroleo Brasilerio S.A. – Petrobas (Petrobas), a Brazilian state-owned energy company related to alleged violations of the FCPA for alleged “facilitating payments” to Brazilian politicians and political parties. DOJ alleged that high ranking members of Petrobas, including members of its Executive Board and Board of Directors, facilitated hundreds of millions of dollars in bribes and then “cooked the books” to conceal the bribe payments. Through the non-prosecution agreement with the U.S., Petrobas agreed to pay a criminal penalty of $853.2 million, a 25% discount off the low end of the applicable sentencing guidelines fine range based on the company’s full cooperation and remediation.
      At the same time, the SEC also reached an agreement with Petrobas through which it would pay to the SEC disgorgement and pre-judgment interest totaling $933.47 million. That amount will be reduced by any payment Petrobas makes to the class action settlement fund. The SEC matter is pending in the U.S. District Court for the Southern District of New York.
    With results such as these, the government undoubtedly views its return on investment of time and resources as positive. Knowledgeable and experienced counsel is critical in defending against such actions – not only for corporate entities, but for individuals as well.

    An Educational Institution’s Survival Guide for the Proposed Title IX Regulations

    What Happened?
    On November 16th, 2018, the Department of Education released its proposed revisions to the Title IX regulations, illustrating an overt emphasis on equal treatment of the complainant and respondent, and affirming Due Process rights for the respondent. The proposed changes suggest that, if the regulations are ratified in their current form, many educational institutions will need to revise their current Title IX policies and required procedures.

    The Rundown
    We address here some of the proposed changes that will substantively modify educational institutions’ Title IX obligations. Some proposed changes lessen the obligation on educational institutions, while other proposed changes significantly increase their Title IX obligations.

    The following guide consists of a list of some of the more significant changes in the proposed regulations. If enacted, educational institutions can use this guide to determine what, if any, changes will need to be made to bring their Title IX policies and procedures into compliance. We have rated each of the proposed changes below on a lesser obligation to greater obligation scale compared to the Obama Administration’s Title IX regulations.
    • Notice to the Institution – sexual harassment is defined more narrowly and an institution’s obligation to respond to allegations of sexual harassment commences only once an institution has “actual knowledge” of alleged violations.   lesser obligation
    • Required Response Limited to Campus-Sanctioned Programs or Activities – educational institutions only need to respond to complaints of misconduct that take place at a school “program or activity.”   lesser obligation
    • Who is Required to Report Allegations of a Title IX Violation – only certain employees of the educational institution trigger the obligation for the educational institution to respond to an alleged Title IX violation.   lesser obligation
    • Procedure Once an Institution Has Received Actual Knowledge – 
    (i) Treat complainants and respondents equitably;   same obligation
    (ii) Evaluate all relevant evidence, including both inculpatory and exculpatory evidence;   greater obligation
    (iii) Ensure that coordinators, investigators, or decision-makers do not have conflicts of interest or bias against either the complainant or respondent;   greater obligation
    (iv) Rely on the presumption that the respondent is not responsible for the alleged conduct unless proved otherwise at the conclusion of the grievance process;   greater obligation
    (v) Complete the grievance process reasonably promptly;    lesser obligation
    (vi) Describe the range of possible sanctions and remedies;   same obligation
    (vii) Describe the standard of evidence to be used to determine responsibility;  same obligation
    (viii) Describe the procedures and bases for appeal; and   same obligation
    (ix) Describe the range of supportive measures available.   same obligation
    • Ongoing Obligation to Provide Written Notice to Parties – institutions must provide written notice to the parties containing Title IX procedures and a detailed statement of the allegations. This obligation is ongoing, so if an institution learns of new information in the course of the investigation, the institution must provide written notice describing the new information to all interested parties.   greater obligation
    • Live Hearings for Institutions of Higher Learning – a meaningful change to the regulation requires institutions of higher learning, namely colleges and universities receiving federal funding, to include a live hearing as part of the Title IX process.    greater obligation
    • Investigative Report Requirement – at least ten days prior to a hearing, the institution needs to provide the parties with copies of an investigative report that details the relevant evidence.   greater obligation
    • Standard of Evidence in Hearings – the institution may use either the preponderance of the evidence standard or the clear and convincing evidence standard.  The preponderance of the evidence standard, however, may only be used if the institution uses that standard for all conduct violations that carry the same maximum disciplinary sanction.    greater obligation
    • Cross-Examination of the Complainant – most radically different from the current regulation is the proposed right for the respondent to cross-examine the complainant.  In line with the rationale of the current regulation, which is concerned with the complainant and the respondent confronting one another in a harassing, embarrassing, or volatile way, the proposed regulations contain procedural safeguards, such as only permitting a party’s advisor of choice to perform the cross-examination.  Of particular note, if a party or witness decides not to submit to cross-examination, the decision-maker may not rely on any statement of that witness in reaching an ultimate determination.   greater obligation
    • Preservation of Records for up to Three (3) Years    greater obligation
    • No More “Single-Investigator” Model – the decision-maker cannot be the same person as the Title IX Coordinator or the investigator, moving away from the current single-investigator model.   greater obligation
    • Requirement of a Final Report – Perhaps most drastic for those who will serve as decision-makers, the regulation, if passed, requires the decision-maker to draft a final determination following the hearing, essentially rendering an opinion for the record.    greater obligation
    • Penalty to Institutions for Lack of Compliance – under the proposed regulations, monetary fines are no longer a potential penalty for failing to comply with the regulations.  The potential penalty of the withdrawal of federal funding, however, remains.    lesser obligation
    • The Religious Exemption – the proposed regulation clarifies that the religious exemption does not require an educational institution to elect the religious exemption before an investigation takes place in order to invoke the exemption.   lesser obligation
    The Take Away – How We Can Help
    There are several changes in the proposed regulations that, if instituted as written, would require modifications to many current Title IX policies.  We can help with not only the revision of these policies, but also with the training of Title IX personnel to ensure full compliance throughout the Title IX process.  Further, we have substantial experience conducting Title IX investigations and preparing written investigative reports.  

    Given the potential requirements for a more formalized hearing structure, we can also provide guidance and advice to hearing panels and help formulate written determinations post-hearing.  Please let us know how we may otherwise assist you in ensuring compliance with the revised regulations should they ultimately become instituted.

    Our Team
    Kevin E. Raphael, Esq.
    Lourdes Sanchez Ridge, Esq.
    Christopher A. Iacono, Esq.
    Leslie A. Mariotti, Esq.
    Gabrielle I. Weiss, Esq.

    French National Bank Pays Huge Fine

    What Happened?
    On November 19, 2018, Société Générale, multinational investment bank and financial services company located in Paris, entered into a Deferred Prosecution Agreement (DPA) with the United States Attorney’s Office for the Southern District of New York (SDNY) and the Manhattan District Attorney’s Office (DA) and agreed to pay $1.34 billion for illegally sending payments through the United States financial system in violation of U.S. federal laws and New York state laws, making this the second largest fine to ever be imposed on a financial institution for economic sanctions violations.

    The Rundown
    Federal law prohibits U.S. financial institutions from performing transactions for certain persons, entities, and countries that are specified by the government in order to prevent terrorists, money launderers, and other criminals from gaining access to the U.S. banking system. Similarly, New York contains an additional state law that makes it unlawful to make or cause to make a false entry in business records when made with the intent to defraud. Under the same state law it is also illegal to prevent the making or cause the omission of a true entry in business records when made with the intent to defraud.

    From 2004 to 2010, Société Générale engaged in more than 9,000 transactions valued at $13 billion that violated laws regarding illegal and non-transparent transactions involving parties in countries subject to embargos or sanctions including Cuba, Iran, Libya, and Sudan. Société Générale wrote inaccurate interbank messages that accompanied each transaction in order to conceal its true illicit purpose and deceive the receiving bank into completing the transaction. These fabricated interbank messages caused the illegal transactions to be processed when they should have been rejected, blocked, or stopped for investigation. Some of these transactions stemmed from Société Générale’s 21 U.S. dollar credit facilities. 

    Under the DPA, Société Générale agreed to pay $717.2 million to the SDNY, $162.8 million to the DA, $325 million to the New York State Department of Financial Services, $81.3 million to the Board of Governors of the Federal Reserve System, and $53.9 million to U.S. Department of Treasury's Office of Foreign Assets Control.

    For the Record
    "Other banks should take heed: Enforcement of U.S. sanctions laws is, and will continue to be, a top priority of this office and our partner agencies," Manhattan U.S. Attorney Geoffrey S. Berman remarked in a statement on Monday.

    The Take Away
    While $1.34 billion is the second largest fine on a financial institution for economic sanctions violations to date, there were a significant number of mitigating factors the SDNY and DA considered when determining this amount. First, Société Générale ceased its illicit behavior before the SDNY’s and DA’s investigation commenced. Société Générale also substantially cooperated and contributed to the investigation, and accepted responsibility for its illegal conduct. Further, Société Générale voluntarily improved its sanctions compliance program. It increased the amount of employees working on sanctions compliance, boosted its compliance technology, tripled its compliance budget, reorganized its sanctions policies, and instituted biannual trainings for sanctions compliance.