March did not go out like a lamb for white-collar lawyers conducting internal investigations.  Late in the month, a purported "client" of Proskauer Rose - the former chief investment officer of Stanford Financial Group - sued the law firm and one of its partners for malpractice, claiming that their negligence led to the filing of a criminal charge against her.  Less than a week later, a federal judge in California referred the Irell & Manella firm to the State Bar for "appropriate discipline."  This is what can happen when lawyers represent corporations in connection with suspicions of wrongdoing, and simultaneously deal with, and arguably represent, officers of those corporations.  Althought the former Stanford executive withdrew her action without prejudice on April 9, 2009 (for reasons undoubtedly relating to the primacy of the criminal case), damage was still done and there are lessons to be learned.

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The second half of 2008 and early part of 2009 proved to be another watershed period for Foreign Corrupt Practices Act ("FCPA") and anti-corruption enforcement.  Although the pace of announced FCPA settlements and prosecutions slowed somewhat from the breakneck pace of early 2008, the sheer size of certain settlements and their attendant implications may prove to alter the way in which companies world-wide address anti-corruption issues.  Notably, the long-awaited December 2008 settlement between Siemens AG and U.S. and German regulators resulted in over $1.34 billion in combined fines (approximately $1.6 billion when including a previous settlement with German regulators), dwarfing the previous largest combined penalty of $44 million imposed on Baker Hughes in April 2007.  The settlements with Kellogg Brown & Root, Inc. and Halliburton Company (formerly operating together under Halliburton), announced in February 2009 and totaling a combined $579 million in criminal fines and disgorgement, confirms that the Siemens settlement was not an anomaly.

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On August 28, 2008, Deputy Attorney General Mark R. Filip released revised guidelines concerning the Principles of Federal Prosecution of Business Organizations (the "Filip Principles"). The Filip Principles, which replace guidelines previously issued by Deputy Attorney General Paul J. McNulty (the "McNulty Memorandum"), provide insight into the current tenor of the Justice Department, and are of utmost importance to business organizations and other interested parties in determining the most appropriate course of conduct in light of evidence or allegations of corporate wrongdoing and in structuring corporate compliance environments.

This Alert highlights certain of the significant differences between the Filip Principles and the McNulty Memorandum, including the treatment of attorney-client privilege in the context of cooperating with federal prosecutors and the continued ability of corporations to advance fees and expenses to corporate officials whose conduct is under review. The Filip Principles also emphasize the importance of thorough self-review and remediation by corporations when faced with potential wrongdoing, particularly in situations where a company may decide against self disclosure of that misconduct.

I hope that you find the attached Alert informative.

The first half of 2008 has seen no abatement in the continued trend of increasingly aggressive enforcement of the Foreign Corrupt Practices Act ("FCPA").  Indeed, there have already been more enforcement actions in the first half of 2008 than the annuyal total in any previous year other than 2007.  Moreover, although the record-setting $44 million combined penalty levied against Baker Hughes in April 2007 has yet to be eclipsed, there have been a number of very large penalties.  For example, in late 2007 and early 2008, Chevron Corporation and AB Volvo entered into Oil-for-Food related settlements of $30 million and $19.6 million, respectively.  In May 2008, Willbros Group, Inc. settled FCPA charges witht he Securities and Exchange Commission ("SEC") and Department of Justice ("DOJ") for a combined $32.3 million.  In fact, a government official has publicly speculated that a $100 million FCPA settlment may not be far off.

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Please click on the thumbnail to the right to find a new FCPA Alert that discusses the Department of Justice's recent Opinion Procedure Release 08-02, that provides important merger-related FCPA guidance. Consistent with other recent DOJ pronouncements and enforcement proceedings, Release 08-02 emphasizes the compelling importance of due diligence, this time in the acquisition context. Among other things, the Release also (a) emphasizes the critical need to remediate improper conduct, including through the termination of relationships with third parties and employees; (b) reiterates the DOJ's view as to the importance of self-disclosure; and (c) clarifies to some extent the DOJ's view of inherited liability in the acquisition context, including pre-existing joint ventures and business relationships.

The Washington Post and New York Times have articles on the results of a report issued by the Pew Center on the States, which found a Record-High Ratio of Americans in Prison, approximately 1 in 100 U.S. Adults Behind Bars.  You can find a copy of the report here.  That is extraordinary, especially when you consider that the US puts more people behind bars both in absolute (~2.3 million persons) and percentage (~1% of its population) numbers -- even more than China. 

As both articles point out, the cost of this retribution policy has caught up with the federal and state governments, with state governments spending on average approximately 7% of their budgets on corrections, or cumulatively spending nearly $50 billion per year.  That figure does not include the federal government's expenditures.  All of that money comes from taxpayers' pockets.  And that's just the economic costs; that doesn't even include the social costs of a perceived racially unjust system (see the figures comparing incarceration rates among various races in the articles).

Have all those promises by politicians of being "tough on crime" (i.e., increasing incarceration sentences) really paid off?  Is incarceration really the most (cost-/socially-)effective way of punishing people?  No one disputes that violent offenders should be kept behind bars.  However, it seems that putting non-violent offenders behind bars for extended periods of time not only punishes the offender, but also the community in terms of taxpayer dollars that could be spent on arguably better pursuits like education and healthcare.

A federal judge in San Francisco ordered Wikileaks.org to be shut down.  Wikileaks is a forum used to post leaked documents for public analysis in order to discourage unethical behavior by governments or corporations.  You can find an article about it in the New York Times here. 

While the case implicates freedom of speech and First Amendment issues, I find it amusing that the action was brought by a bank whose disgruntled ex-employee leaked documents revealing the bank's "trust structures used for asset hiding, money laundering and tax evasion."  The bank is Julius Baer Bank and Trust of the Cayman Islands.  I imagine they will have to revise their trust structures now, and will probably try to keep their employees more content. 

You can find a quick tutorial on money laundering here.

The Criminal Justice Section of the ABA is holding its 22nd Annual National Institute on White Collar Crime Conference at the Miami Marriott on March 5th, 6th & 7th.  Among the panel discussions is “Internal Investigations in an Age of Uncertainty: Where Do We Go from Here?”

Ed Little will be one of the speakers and expects some vigorous debate among the panelists, especially the DOJ representatives, given the written submission by Ed and Lisa Cahill – “Corporate Cooperation: Doing the Right Thing or Assisted Suicide?” – being published in the bound volume & CD available at the event.

The ABA expects record attendance at this annual event, and many law firms, accounting firms and investigative firms are hosting competing cocktail parties at various hotspots in South Beach.  (Regrettably there won’t be as many potential clients in attendance.)

For a downloadable PDF version of the written submission "Corporate Cooperation: Doing the Right Thing or Assisted Suicide?", please click the icon to the right.

The Corporate Crime Reporter reports having taken a survey of white-collar criminal defense attorneys concerning whether we favor preserving corporate criminal liability.  According to the results of the survey, 20% would eliminate it altogether.  Of the 80% who believe it should be retained, apparently many suggested that corporate criminal liability should be "restricted or narrowed."

A cynic might observe that the 20% number consists of in-house counsel and the 80% number outside counsel who, while they rightly want to see more sanity in the process, don't want to lose the business.

The Eleventh Circuit recently held that federal law governing forfeiture of substitute assets, 21 U.S.C. § 853(p), preempts the homestead exemption in the Florida Constitution.  United States v. Fleet, No. 06-12454 (11th Cir. Sept. 5, 2007).  After the money-laundering defendant was ordered, post-conviction, to forfeit $259,000 in cash he did not have, pursuant to 18 U.S.C. § 982, the feds went after his Florida home, which he jointly owned with his wife.