In a significant development, the Department of Justice (DOJ) indicted 14 North Korean nationals on December 11, 2024 for their involvement in a sophisticated scheme to defraud U.S. companies and violate international sanctions. This case underscores the persistent threat posed by North Korean cyber actors who pose as residents of the U.S. and exploit global IT networks to funnel money back to the DPRK regime.Continue Reading DOJ Indicts 14 North Korean Nationals in Major Fraudulent IT Worker Scheme

A federal district court in the Middle District of Florida issued a decision on Sept. 30th that threatens the federal government’s continued reliance on the False Claims Act (“FCA”) as the most powerful weapon in the Department of Justice’s enforcement arsenal. U.S. District Judge Kathryn Kimball Mizelle threw out a case against a group of Medicare Advantage organizations and providers on the grounds that an individual whistleblower suing on behalf of the federal government under the FCA, often called a “relator” in a “qui tam” lawsuit, violates the U.S. Constitution’s “appointments clause.” The Court concluded that relators, who are acting on behalf of the federal government, must be considered officers of the government and appointed in a manner consistent with Constitutional requirements. See U.S. ex rel Zafirov v. Florida Medical Associates, LLC, No. 8:19-cv-1236, 2024 U.S. Dist. LEXIS 176626, ECF No. 346 (M.D. Fl. Sept. 30, 2024).Continue Reading FCA Whistleblowers – No More?

In an address this week to the Society of Corporate Compliance and Ethics, Principal Deputy Assistant Attorney General Nicole M. Argentieri of the Department of Justice’s (“DOJ”) Criminal Division, highlighted several updates relevant to corporate compliance programs, including the DOJ’s new whistleblower programs and incentives.Continue Reading DOJ Announces Changes to Guidance on Corporate Compliance Programs, Updates on Whistleblower Program

More than two years after announcing the first round of settlements in the ongoing “off-channel communications” probe, the SEC recently announced another round of settlements with 26 financial firms, totaling $390 million in fines. These most recent settlements are notable for two reasons: (1) they include the SEC’s second settlement with an entity operating solely as a registered investment adviser (“RIA”) with no associated broker-dealer, and (2) the SEC has again explicitly noted that companies that self-reported obtained lower fines.Continue Reading Latest Round of SEC “Off-Channel” Communications Settlements Highlights Risks for Investment Advisers and Benefits of Self-Reporting

On August 22, 2024, the United States Department of Justice (DOJ) filed a Complaint-In-Intervention (the “Complaint”) against the Georgia Institute of Technology (Georgia Tech) and Georgia Tech Research Corp. (GTRC). The 99-page DOJ Complaint alleges the defendants knowingly failed to meet contractual cybersecurity requirements in connection with various Department of Defense (DoD) contracts. The suit raises claims under the False Claims Act and federal common law (including fraud, negligent misrepresentation, breach of contract, unjust enrichment, and payment by mistake). This is the latest DOJ activity relating to its Civil Cyber Fraud Initiative (announced in October 2021), which we previously have written about here, here, and here.Continue Reading DOJ Sues Georgia Tech Entities for Cybersecurity Failures in the Latest Civil Cyber Fraud Initiative (CCFI) Activity

In December 2023, President Biden signed the new Foreign Extortion Prevention Act (FEPA), closing a gap in the Foreign Corrupt Practices Act (FCPA) by criminalizing the “demand side” of foreign bribery. While the FCPA prohibits offering or paying bribes to foreign government officials, the FEPA made it illegal for foreign officials to solicit or accept bribes from U.S. entities or individuals. Less than a year after its enactment, Congress has quietly passed significant amendments to the new law, with the stated goal of removing “inconsistencies between the language of the FCPA and the FEPA [b]ecause these statutes are intended to be complementary, with parts of them addressing the same problem.” See 170 Cong. Rec. H4656-02, H4657.Continue Reading Congress’s Recent “Technical” Amendments to the Foreign Extortion Prevention Act Change Key Aspects of the New Law

In Securities and Exchange Commission v. Jarkesy, No. 22-859, 2024 WL 3187811 (U.S. June 27, 2024), the United Stated Supreme Court (Roberts, C.J.) held that when the Securities and Exchange Commission (“SEC”) seeks civil penalties against a defendant for securities fraud, the Seventh Amendment of the United States Constitution entitles the defendant to a trial by jury. This decision was based upon the Court’s interpretation that the SEC’s antifraud provisions replicate common law fraud, and thus actions for violations of these provisions implicate the Seventh Amendment right. The Court determined that the “public rights” exception, which allows certain matters to be resolved outside of Article III courts without a jury, does not apply in this context because the action does not fall within the distinctive areas involving governmental prerogatives traditionally resolved without Article III adjudication. This ruling curtails the SEC’s authority to impose penalties for fraud, and could potentially affect the enforcement capabilities of agencies enforcing federal law.Continue Reading Supreme Court Limits SEC’s Enforcement Power to Penalize Fraud

A recent Ninth Circuit opinion instills the importance of raising an often overlooked defense in federal fraud cases: that the defendant’s misrepresentation did not affect the “nature of the bargain.” In United States v. Milheiser, the panel recently vacated six defendants’ convictions for mail fraud, holding that merely lying to influence a transaction does not rise to the level of fraud. Instead, a “lie must go to the nature of the bargain” to support a conviction.Continue Reading The Ninth Circuit Holds That a Lie Must Go to the Nature of the Bargain to Support Fraud Conviction

Over the last several years, the Securities and Exchange Commission (“SEC”) has been laser-focused on the use of so-called “off-channel communications” in the financial services industry. On the theory that employees’ use of personal devices and platforms (such as WhatsApp) to communicate about business violates the “books and records” requirements applicable to financial institutions, the regulator has conducted intrusive and extensive investigations. To respond to the SEC, many companies have required employees to have their personal cell phones copied and reviewed. Continue Reading What Private Equity Firms Need to Know About the Ongoing SEC Investigation of “Off-Channel” Communications

Just one day after Deputy Attorney General Lisa Monaco announced the U.S. Department of Justice’s (“DOJ’s” or “Department’s”) whistleblower pilot program on March 8, 2024, the DOJ’s Criminal Division highlighted its plans to apply the program in its fight against global corruption. Specifically, the Criminal Division described its plan to apply the new whistleblower initiatives to Foreign Corrupt Practices Act (“FCPA”) cases as part of its overarching priority of targeting the “most complex financial crimes and having the greatest possible impact on corporate conduct.”[1]Continue Reading DOJ Plans to Apply the New Whistleblower Rewards Pilot Program to FCPA Cases