United States: White Collar Roundup - March 2014

No Right to Attack Asset Freeze by Challenging Probable Cause

In Kaley v. United States, the U.S. Supreme Court held that criminal defendants are not entitled to challenge an asset freeze by relitigating a grand jury's determination that probable cause exists to believe they committed the crimes charged. The defendants, Kerri and Brian Kaley, were charged with engaging in a scheme to steal prescription medical devices and resell them for profit. After the indictment, the prosecutors obtained a restraining order freezing the Kaleys' assets. The Kaleys asked the district court to lift the asset freeze so that they could pay their attorneys. The Kaleys did not dispute that the assets restrained were traceable to their conduct; instead, they argued that the indictment against them was "baseless." The district court upheld the restraining order, and the U.S. Court of Appeals for the Eleventh Circuit affirmed, holding that the Kaleys were not entitled to challenge the grand jury's probable cause determination at a hearing on the asset freeze. A divided Supreme Court agreed, holding that "[i]f judicial review of the grand jury's probable cause determination is not warranted (as we have so often held) to put a defendant on trial or place her in custody," the Court held, "then neither is it needed to freeze her property."

Disgorgement Order Can Include Profits Earned by Others

In a split decision, the Second Circuit in Securities and Exchange Commission v. Contorinis held that in an enforcement action by the Securities and Exchange Commission (SEC), an inside trader may be ordered to disgorge profits earned by others. In a separate criminal action, Joseph Contorinis was convicted of using inside information to trade on behalf of an investment fund of which he was managing director. Contorinis was sentenced to six years' imprisonment and ordered to forfeit $12.7 million. On appeal in the criminal case, the Second Circuit reversed the forfeiture order, holding that Contorinis did not have to forfeit money he never actually possessed. In the action brought by the SEC, however, the Second Circuit upheld an order requiring Contorinis to disgorge approximately $7.2 million, which included profits to the investment fund in which he traded rather than to Contorinis personally. The court likened the situation to one in which a tipper is responsible for the gains of his tippee even without direct economic benefit to the tipper. Because a purpose of disgorgement is to ensure that illegal actions do not unjustly enrich third parties, the Second Circuit held, one who obtains funds for others by trading on inside information can be forced to disgorge those funds as well.

Defendant Waived Argument He Pleaded Guilty to a Nonoffense

On appeal in United States v. Rubin, the defendant, Ira Rubin, argued that his conviction for conspiracy to violate the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) was invalid because the indictment against him alleged only that he engaged in "the activities of a financial transaction provider" that are expressly excluded from the definition of "business of betting or wagering" under the UIGEA. This defect in the indictment, Rubin argued, deprived the district court of jurisdiction to accept his guilty plea. The Second Circuit held that it need not reach Rubin's argument because the defect asserted by Rubin was nonjurisdictional and therefore could be, and was, waived by Rubin's guilty plea. The Second Circuit also noted in a footnote that Rubin failed to raise, and thus waived, "any argument that Rule 12(b)(3)(B) allows him to challenge for the first time on appeal that the Indictment fails to state an offense ? a non-jurisdictional challenge to the prosecution."

SEC Claims "Whistleblowers" Don't Have to Report to SEC

The SEC filed an amicus brief in Meng-Lin Liu v. Siemens AG, which is currently before the Second Circuit, arguing that an individual can qualify as a "whistleblower" for purposes of the Dodd-Frank anti-retaliation provisions even if the individual did not report to the SEC. Rather, the SEC argues, consistent with its clarifying rule, the anti-retaliation protections extend to anyone who engages in the whistleblowing activities described in Section 21F(h)(1)(A) of the Securities Exchange Act of 1934 irrespective of whether the individual makes a separate report to the SEC. According to the SEC, this reading will "maintain incentives for individuals to first report internally in appropriate circumstances." In Liu, Meng-Lin Liu alleged that Siemens had retaliated against him after he internally reported alleged corrupt practices by the company. The district court dismissed Liu's case on the grounds that the anti-retaliation provisions do not extend to Liu as an overseas whistleblower. The district court discussed but did not reach Siemens' argument that because Liu did not report to the SEC, he did not qualify as a whistleblower under the anti-retaliation provisions.

Wal-Mart Spent $282 Million in Pre-Enforcement FCPA Expenses in 2013

In a recent post on the "FCPA Professor" blog, Professor Michael Koehler notes that "pre-enforcement action professional fees and expenses are typically the most expensive aspect[s] of [Foreign Corrupt Practices Act (FCPA)] scrutiny." Koehler references Wal-Mart's earnings conference call on February 20, 2014, in which Wal-Mart reported spending $282 million in charges related to FCPA matters, including approximately $173 million for ongoing inquiries and investigations and $109 million for compliance and organizational enhancements. Wal-Mart also stated that it anticipated FCPA expenses for fiscal year 2014 to be between $200 million and $240 million.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions