Enforcement Action

"Enforcement Action" is written by Bruce Carton, a former senior counsel in the SEC's Division of Enforcement. A "blawg pioneer" (according to The Wall Street Journal), Carton was the creator of Securities Litigation Watch, a blog that he wrote for more than three years while he was vice president of ISS' Securities Class Action Services. He is now editor of Securities Docket, an online publication that tracks securities litigation and enforcement developments on a global basis. Carton welcomes questions, comments and statements from readers on enforcement and litigation issues; he can be reached via email at BCarton@complianceweek.com.

SEC Wraps Up Its 'Golden Goose' Insider Trading Case

May 16, 2013

Yesterday, four and a half years after the SEC filed its complaint in what is now known even by the agency as the "Golden Goose" case, the SEC announced that final settlements were reached with the last remaining defendants in the high-profile matter.
 

SEC Charges 'Imaginary' Cloud Computing Business with Financial Fraud

May 15, 2013

The SEC brings dozens of financial fraud cases each year. In most cases, there is (or was) an underlying business at the company involved and management is simply trying to make it look better than it really is through financial shenanigans. But sometimes the entire business is "imaginary."
 

SEC Enforcement Action and Report a Warning Shot to Municipalities on Disclosures

May 14, 2013

Last week's enforcement action against the City of Harrisburg, Pa., and accompanying Report of Investigation should serve as a warning to municipalities: beware making misleading statements about a municipality's financial condition outside of securities disclosure documents.
 

Harbinger Discloses Settlement With SEC Imposing Two-Year Bar on Philip Falcone

May 10, 2013

In June 2012, the SEC sued hedge fund adviser Philip Falcone and Harbinger Capital for alleged misconduct that it claimed resembled "the final exam in a graduate school course in how to operate a hedge fund unlawfully." This week a settlement was reached that, among other things, would bar Falcone from serving as an investment adviser for two years.
 

SEC's White Testifies Current Budget 'Not Sufficient,' Seeks 26% Increase

May 08, 2013

In her first testimony before Congress as SEC chairman, Mary Jo White made her case for why the SEC's budget should be increased by 26 percent in fiscal year 2014. White testified that the SEC's current budget was not sufficient to permit the SEC to properly enforce the securities laws "in a way that investors deserve and expect."
 

Must-Read: Vanity Fair's 'The Hunt for Steve Cohen'

May 06, 2013

"The Hunt for Steve Cohen" in the June 2013 issue of Vanity Fair is a terrific, in-depth look at the broad investigation conducted by Preet Bharara of the Southern District of New York into insider trading by hedge funds. It shows that while SAC Capital's Steve Cohen has not been named as a defendant in Bharara's massive sweep, Bharara is "getting closer to the biggest fish of them all."
 

Justice Department: $1.5 Billion Returned to Fraud Victims

May 03, 2013

Acting Assistant Attorney General Mythili Raman said in a recent speech that the Justice Department has returned more than $1.5 billion in forfeited assets to more than 400,000 crime victims since January 2012. The sum includes tens of millions of dollars returned to fraud victims from Enron, Qwest Communications, and more. Details inside.
 

SEC Enforcement's David Bergers Leaving Agency After 13 Years

May 02, 2013

The SEC announced today that David P. Bergers, Acting Deputy Director of the SEC's Enforcement Division and Director of the Boston Regional Office, will be leaving the SEC this spring after 13 years with the agency.
 

SAC's Cohen Pledges 'Zero Tolerance' for Insider Trading, Rolls Out Clawbacks

May 02, 2013

After months of being buffeted by news of SAC Capital employees charged with insider trading, the firm's founder, Steve Cohen, who is also the target of an insider-trading investigation, is trying to flip the script a bit. Cohen recently told investors that the firm would increase the compliance staff by 25 percent and institute a clawback program on deferred compensation. More inside.
 

Insider Trading Goes Mainstream, Part II: Bharara as Ahab, Steve Cohen as Moby Dick

May 01, 2013

The June issue of Vanity Fair takes the "Preet-as-pop-icon" movement one step further, with some interesting art that is almost guaranteed to end up on Bharara's office wall. The art for the VF article "The Hunt for Steve Cohen" depicts Bharara as Ahab and SAC Capital's billionaire founder Steve Cohen as Moby Dick.
 

e-Discovery Rules on the Brink of an Overhaul

April 26, 2013

The Federal Rules of Civil Procedure may soon get a major overhaul, including changes to e-discovery requirements. The proposed rules could effectively limit the scope of discovery, alleviating some of the e-discovery burdens often placed on companies and their in-house counsel. The move is a departure from past amendments that have broadened discovery obligations. More details inside.
 

U.K. Passes Crime and Courts Act

April 26, 2013

Deferred prosecution agreements are officially coming to the U.K. The Crime and Courts Act received Royal Assent in the British Parliament this week, giving the U.K. Serious Fraud Office the ability to offer companies DPAs in exchange for cooperation. The law also gives the SFO the power to impose larger fines on offenders. Details inside.
 

Kluger Asks Appeals Court to Reduce His Record 12-Year Sentence for Insider Trading

April 25, 2013

Yesterday in federal appeals court, attorney Matthew Kluger asked the court to reduce his record 12-year sentence and return the title of "longest sentence for insider trading" back to Raj Rajaratnam.
 

Jon Stewart Rains Down on Congress for Weakening STOCK Act

April 24, 2013

Earlier this month, Congress quietly repealed a key provision of the STOCK Act that applied to roughly 28,000 senior government officials. It was not quiet enough to escape notice by Comedy Central's Jon Stewart, however, who ridiculed Congress last night for weakening the STOCK Act in his standard, hilarious fashion.
 

SEC Enters First-Ever Non-Prosecution Agreement in FCPA Case

April 23, 2013

Last week the SEC announced a non-prosecution agreement with Ralph Lauren Corp. related to alleged bribes a subsidiary of the company paid to government officials in Argentina from 2005 to 2009. It is the first NPA that the SEC—which cited Ralph Lauren's self-reporting, cooperation, and agreement to enhance compliance programs—has entered into involving Foreign Corrupt Practices Act misconduct. More details inside.
 

SEC Names George Canellos and Andrew Ceresney Co-Directors of Enforcement Division

April 22, 2013

The SEC announced that Acting Director of Enforcement George Canellos will serve as a co-director of the Division of Enforcement, along with Andrew Ceresney, a partner at law firm Debevoise & Plimpton, where he worked with new SEC chairman Mary Jo White. It is believed to be the first time the role has been filled with two individuals.
 

News Corp. Reaches $139M Settlement With Shareholders

April 22, 2013

News Corp. reached a $139 million settlement this week with shareholders over the company's phone-hacking scandal and its acquisition of television production company Shine Group. Under the settlement, News Corp. also has agreed to enhance its global compliance structure and corporate governance program. Details inside.
 

Parker Drilling Reaches DPA With Justice Department

April 22, 2013

Parker Drilling Company last week reached an $11.6 million settlement with the Department of Justice over violations of the Foreign Corrupt Practices Act. The company's swift actions also earned it a deferred prosecution agreement. Inside, find out how Parker Drilling convinced the Justice Department to go easy.
 

Web Watch: Best of the Week Ending April 19

April 19, 2013

My picks for the most interesting recent columns and blog posts from around the web on the subjects of SEC enforcement and securities litigation, including a sudden burst of FCPA activity, the SEC's settlement policy and the "near-impossible" standard for proving auditor fraud.
 

Chairman White Reportedly Set On Ceresney as Next Enforcement Director

April 18, 2013

It is still not official, but Reuters is now reporting that Andrew Ceresney, said for over a month to be the leading candidate to follow Robert Khuzami as the SEC's next Director of Enforcement, will in fact be named to that post by Chairman Mary Jo White in the near future.
 

Supreme Court: Companies Are Not Liable in the U.S. for Abuses Abroad

April 18, 2013

The U.S. Supreme Court's ruling this week on the case of Kiobel v. Royal Dutch Shell Petroleum effectively ends corporate liability under the Alien Tort Claims Act for charges of human rights violations abroad. The court decided that companies can't be held liable in the United States for violations of international law in foreign countries under the ATC. More in the ruling inside.
 

Documentary Promises 'New and Shocking' Look at Madoff Scandal

April 17, 2013

The Tribeca Film Festival kicks off in New York City today, and includes an interesting-looking documentary called "In God We Trust" about the Bernard Madoff scandal. The film tells the story from the point of view of Eleanor Squillari, Madoff's personal secretary for decades.
 

Rogue Broker's 'Brazen, Ill-Conceived Scheme' Brings Down Conn. Brokerage Firm

April 16, 2013

The SEC alleges that on October 25, 2012, a registered representative named David Miller came to work at Rochdale Securities LLC and, by the end of the day, had taken the entire firm down through a very misguided scheme.
 

Justice Department Amends Carve-Out Practice Regarding Corporate Plea Agreements

April 12, 2013

The Department of Justice's Antitrust Division announced this week that it has amended the division's carve-out practices regarding corporate plea agreements. Details inside.
 

Before You Accept that Envelope Full of Cash In Exchange for Inside Info...

April 12, 2013

Before you accept that envelope stuffed with cash in exchange for inside information about public companies, just remember that sometimes it is a set-up. And the FBI is watching and taking photographs that, in short order, may become "Exhibit A" in the U.S. Attorney's Office criminal complaint against you for securities fraud.
 

Will Compliance Officers' New Favorite Tool Be ... Google Glass?

April 11, 2013

Is Google Glass, a wearable computer that looks like eyeglasses, the answer for compliance officers seeking to reduce the risks associated with rogue traders and other corporate ne'er-do-wells? Some say the device could be used by employers to monitor and record every move their employees make. Cue the privacy debate now.
 

'Sympathetic' Second Circuit Rules Against Madoff Victims in Suit vs. SEC

April 11, 2013

A "sympathetic" Second Circuit nonetheless becomes the second appeals court to rule against Madoff victims seeking to impose liability against the Securities and Exchange Commission for the agency's negligence in handling and investigating the Madoff Ponzi scheme. The Ninth Circuit and at least four lower courts have already ruled against the Madoff victims.
 

Report Shows Sharp Decline in Number of Accounting Class Actions

April 10, 2013

A report on securities class-action filings and settlements shows that the number of new accounting class actions filed in 2012 fell sharply to the lowest level in recent years. Accounting class-action settlements continue to represent a disproportionately high share of total settlement dollars, however. More findings inside.
 

'Rogue' Audit Partner Leads KPMG Resignations

April 09, 2013

Audit firm KPMG has fired one of the top audit partners in its Los Angeles office amid allegations of insider trading, and then resigned from two client companies, Herbalife and Skechers USA, ensnared in the scandal. Both the Justice Department and the Securities and Exchange Commission are now circling.
 

DOJ Discloses it May Reduce Former Enron CEO Skilling's Prison Sentence

April 05, 2013

The Justice Department disclosed last week that it is considering entering into a sentencing agreement with former Enron CEO Jeffrey Skilling that would reduce his sentence. In 2006, Skilling was convicted on fraud and conspiracy charges related to the fall of Enron and sentenced to 24 years in prison. Details inside.
 

Hedge Fund Survey Shows Misconduct Believed to be Widespread

April 04, 2013

A recent survey of hedge fund professionals indicates that misconduct is widespread in the industry and that a very large percentage of them are prepared to report wrongdoing to authorities. Such whistleblowing, however, might not do much good; more than half say the SEC is "ineffective in detecting, investigating, and prosecuting securities violations." More survey results inside.
 

Departing SEC Chair Schapiro Joins Other Former SEC Officials at Promontory Financial

April 02, 2013

Consulting firm Promontory Financial Group is becoming a sanctuary for former SEC chairmen and other senior officials. Most recently, Mary Schapiro, who stepped down last December, joined the firm as a managing director and chairman of its governance and markets practice. See the list of other notable SEC alumni already employed or affiliated with Promontory inside.
 

Lawmakers Demand Information on Cost of SEC's Pursuit of Gabelli Litigation

April 01, 2013

Two members of Congress question the SEC's use of limited resources to pursue the Gabelli appeal, and ask the agency for a full accounting of its hours and dollars spent litigating and appealing the case.
 

DOJ's Breuer Joins Covington & Burling as Vice Chair

March 28, 2013

Lanny A. Breuer, former Assistant AG for the Criminal Division at the DOJ, will be rejoining the law firm of Covington & Burling as Vice Chair of the firm. While ethics rules prohibit Breuer from entering an appearance in any DOJ matter for a client for two years, he may still counsel clients on DOJ matters "from behind the scenes."
 

DOJ and SEC Allege $27 Million Insider Trading Scheme

March 27, 2013

The DOJ and SEC alleged yesterday that inside information leaked by a former executive at Foundry Networks Inc. led to a $27 million insider trading scheme.
 

Web Watch: Best of the Week Ending March 22

March 22, 2013

My picks for the most interesting recent columns and blog posts from around the web on the subjects of SEC enforcement and securities litigation, including interesting takes on class actions against life sciences companies, the declining number of SEC cases, FCPA/Patriot Act enforcement, and the end of the FSA.
 

How to Make SEC Enforcement of Private Equity More Interesting

March 22, 2013

Usually the most "exciting" bit of promotion you see out of lawyers practicing in the SEC enforcement area is to author a client memo or article breaking down some new development. This slick video by WilmerHale's Jonathan Shapiro discussing a likely ramp-up by the SEC of private equity may signal a new type of thought leadership.
 

NoDoz: Early Birds Needed to Work at SEC

March 20, 2013

Want to work with Mary Jo White at the SEC? Be prepared to set your alarm clock to go off a few hours earlier than usual.
 

Former CalPERS CEO Indicted for Fraud, False Statements

March 19, 2013

Former CalPERS CEO Federico Buenrostro and a friend were indicted yesterday for a scheme that allegedly involved fabricating investor disclosure letters to help secure at least $14 million in fees for the friend's placement agent firm.
 

Wall Street Journal Reports Its Own Bribery Investigation

March 17, 2013

The Wall Street Journal reported over the weekend that the Justice Department investigated the paper last year for possible violations of the Foreign Corrupt Practices Act in China—one of the more memorable examples of self-disclosure in FCPA lore. No incidents of bribery are believed to have been found, but the rumor was the latest in a line of bribery-related headaches for News Corp. and CEO Rupert Murdoch.
 

SEC Announces Record $600 Million Insider Trading Settlement

March 15, 2013

The SEC's $600 million settlement with CR Intrinsic Investors, an affiliate of S.A.C. Capital Advisors, is the largest ever in an insider trading case. More details inside.
 

Levitt: Mary Jo White 'Tougher, More of a Fighter' Than Schapiro

March 13, 2013

Former SEC Chairman Arthur Levitt says Mary Jo White is a perfect fit for the SEC chairman position. Levitt believes that White is "tougher and more of a fighter" than Mary Schapiro, and may have achieved different results than Schapiro had she been the SEC chair the last four years.
 

SEC Brings Second-Ever Case Against a State for Public Pension Disclosures

March 11, 2013

Today's case charging Illinois with misleading municipal bond investors about the state's approach to funding its pension obligations is just the second of its kind, but probably will not ruffle too many feathers in the Land of Lincoln.
 

A Refreshing Perspective on the Revolving Door Issue

March 08, 2013

With a never-ending supply of cynicism and conspiracy theorists out there on the subject of the SEC, it is always refreshing and a bit surprising to come across commentary from other perspectives -- such as Prof. David Zaring's take on Mary Jo White and the "revolving door" issue.
 

New Name Surfaces as 'Leading Candidate' to Become Next SEC Enforcement Director

March 07, 2013

Andrew J. Ceresney, an external candidate with a long history of working with incoming SEC Chair Mary Jo White, is now reportedly a leading candidate to become the next Enforcement Director at the SEC.
 

Study Shows Even Greater Levels of M&A Litigation in 2012

March 07, 2013

Considering a merger or acquisition? Prepare for shareholder class-action litigation to follow the deal. Shareholder lawsuits accompanied 93 percent of proposed acquisitions valued at more than $100 million in 2012 and 95 percent of deals over $500 million, according to analysis by Cornerstone Research. The majority of such lawsuits (64 percent) were settled shortly after they were filed.
 

An FCPA Scholarship Smorgasbord

March 05, 2013

Check out the 14 free papers included in Volume 73 of the Ohio State Law Journal, which one FCPA expert says "likely represents the most extensive collection of FCPA scholarship between two covers."
 

Analysis: The Rising Costs of FCPA Investigations

March 04, 2013

What do Avon, Walmart, and News Corp. have in common? All have spent well over $100 million to investigate possible violations of the Foreign Corrupt Practices Act, and their costs are still rising. In recent filings with the Securities and Exchange Commission, these companies and others detailed the eye-popping sums they are spending on such investigations, including $600,000 a day at Walmart. More details inside.
 

Wal-Mart's $604,000 Per Day Legal Mess

March 01, 2013

Question of the Day: In its FY 2013, what did Wal-Mart pay an average of $604,000 in professional fees and expenses on per working day?
 

People Need to Stop Selling Earnings Info to Undercover FBI Agents

February 28, 2013

I thought it had been pretty well-established in the Bonnie Hoxie/Yonni Sebbag case in 2011 that selling stolen, pre-release earnings report information about a company was a foolish, "Go Directly to Jail"-type of offense. I guess not.
 
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