SEC Examination Priorities for the Newish Year
The National Examination Program (NEP) of the U.S. Securities
and Exchange Commission (SEC) released its Examination Priorities for 2013. The NEP's
goal is to aid both investors and registrants and "to support
the SEC's mission to protect investors, maintain fair, orderly,
and efficient markets, and facilitate capital formation." The
NEP listed the following initiatives for 2013: (1) fraud detection
and prevention; (2) corporate governance and enterprise risk
management; (3) conflicts of interest; and (4) the use of
technology in the capital markets.
Lobbying,
Bribing and the Fine Line of Honest-Services
Fraud
Tackling the ambiguity that can arise at the intersection of
lobbying and bribery, the U.S. Court of Appeals for the District of
Columbia Circuit in United States v. Ring clarified what the
government must prove to convict a lobbyist of honest-services
fraud. The court noted that "[t]he distinction between legal
lobbying and criminal conduct may be subtle, but...it spells the
difference between honest politics and criminal corruption."
Ring was a lobbyist who had relied on political campaign
contributions to not only curry favor with politicians but also to
treat some "to dinners, drinks, travel, concerts, and sporting
events." Some of the beneficiaries of such treats acted
favorably toward Ring and his clients. After conviction for
honest-services fraud, Ring appealed, claiming the district court
gave erroneous instructions. But the appeals court disagreed,
holding that the district court's instructions that "the
government had to show that Ring gave gifts with an 'intent
"to influence" an official act' by way of a corrupt
quid pro quo" were correct.
Trying
to Reinvent the Wheel
The Sixth Circuit in United States v. Howley upheld the
theft-of-trade-secrets convictions of two tire engineers who had
illegally photographed tires designed by Goodyear, in order to sell
the photos to a Chinese competitor. After conviction, the
defendants argued that the photographs they took did not constitute
trade secrets because Goodyear had not taken "reasonable
measures to keep the design of its tire-assembly machines
secret." The Sixth Circuit held that Goodyear had, by fencing
off the plant and requiring visitors to pass through a security
checkpoint. Unfortunately for the defendants, who had received
nonincarceratory sentences, the Sixth Circuit also vacated the
sentences and remanded because the district court failed to make
specific findings to justify its conclusion that the theft resulted
in no loss to Goodyear.
Not
Making a Statement--False or Otherwise
The Sixth Circuit also weighed in to the fray on a mortgage-fraud
conviction in United States v. Kurlemann. There, the
government prosecuted Kurlemann, a straw buyer in a complex
mortgage-fraud scheme, for making a false statement or report to a
bank to secure a loan, in violation of 18 U.S.C. 1014.
The allegation was that Kurlemann had failed to disclose that he
had borrowed the down payment from the seller. At trial, the
district court instructed the jury that a statement under the
statute is false when "it contains half-truth or when it
conceals a material fact." As the appeals court succinctly
stated, "That is not right." The court concluded that
under a statute criminalizing only "making a false or
fraudulent statement" and not "failing to disclose any
fact," making an omission or conveying a half-truth is not
actionable. But the ruling was not all good for Kurlemann because
the court affirmed his bankruptcy-fraud convictions.
Pushing
for More on the FCPA
The U.S. Chamber of Commerce and 32 other pro-business
organizations wrote a letter to the U.S.
Department of Justice (DOJ) and the SEC to ask for further
clarification on the Foreign Corrupt Practices Act (FCPA) in light
of the agencies' joint release of A Resource
Guide to the U.S. Foreign Corrupt Practices Act (Guide).
In the letter, the business organizations commend the DOJ and SEC
for publishing the Guide but seek further guidance on the
following issues: (1) how the DOJ and SEC will weigh in making
charging decisions the use of a robust and well-implemented
compliance program as well as voluntary disclosures; (2) the
definitions of "foreign official" and
"instrumentality"; (3) whether the Guide altered
the pre-existing standard for determining parent-subsidiary
liability for anti-bribery violations; (4) successor liability
against an acquiring company for pre-acquisition violations by an
acquired entity; (5) further definition of the mens rea standard
for corporate criminal liability for an FCPA violation; and (6)
examples of how declination decisions have been made.
Enforcement
of the FCPA Against Foreigners: Clear as
Mud
As we noted in last month's Roundup, Judge Richard
Sullivan of the U.S. District Court for the Southern District of
New York was considering the foreign defendants' motion to
dismiss an FCPA action because they claimed to have had
insufficient ties to the United States. Judge Sullivan denied their
motion on February 8 in SEC v.
Straub. By happenstance, Judge Shira Scheindlin of the
same court granted a similar motion on February 19 in SEC v.
Sharef, which was also an action against a foreigner for
violating the FCPA. The takeaway: Whether a foreigner can be haled
into court in the United States to answer for an alleged FCPA
violation is a fact-intensive inquiry.
Doing
the Hokey-Pokey at the SEC
The Project on Government Oversight (POGO) issued a report with the
descriptive title Dangerous Liaisons: Revolving Door at SEC Creates
Risk of Regulatory Capture. As one might guess, the report
assails the apparent practice of SEC attorneys leaving the
commission to enter the private sector and returning to the SEC
from the private sector. Senator Charles Grassley, R-Iowa, issued a
statement in
which he commended the POGO and agreed with the problems inherent
with this purported practice.
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