Reports

In-depth legal analysis of fraud issues by some of the country’s best practitioners. Subscribers to Financial Fraud Law have unlimited access to these comprehensive reports on the latest in fraud law litigation and best practices.

U.K. Anticorruption Update: The Bribery Bill in Parliament

On November 19, 2009, the British government submitted its long awaited Bribery Bill 2009-2010 (the “Bill”) into Parliament for its first reading in the House of Lords.  The aim of the Bill is to modernize and consolidate the U.K.’s bribery laws by creating general offenses of giving and receiving bribes (whether in the public or private sector), as well as a separate offense of bribing a foreign public official.  Most notably, the Bill introduces a strict liability offense for commercial organizations that fail to prevent bribery. Read more


Former Foreign Officials Charged in FCPA-Related Indictment

The Department of Justice’s accelerated pace of Foreign Corrupt Practices Act (“FCPA”) enforcement did not slow as 2009 came to a close.  On December 7, the U.S. Department of Justice (“DOJ”) unsealed an indictment against two executives, one consultant and two former foreign government officials in connection with alleged bribes related to discounts on telecommunications services in the Republic of Haiti.  The case is significant not only because it evidences continued aggressive FCPA prosecution of individuals, but also because of the charges against foreign officials themselves. Read more


SEC Unveils Specialized Units and New Cooperation Standards

The Securities and Exchange Commission (the “SEC”) recently announced several significant changes designed to strengthen its enforcement program and to respond to recent criticism concerning the agency’s purported failure to detect several highly publicized securities frauds, including the Madoff case. These changes included the appointment of chiefs to the Division of Enforcement’s newly created “Specialized Units,” and implementation of several procedures to encourage meaningful cooperation in SEC investigations. While these changes reflect the Enforcement Division’s continued focus on restoring its image as a premier law enforcement agency, the extent to which they impact future investigations remains uncertain. Read more


Madoff One Year Later: A Litigation Tsunami?

Bernie Madoff’s long running $65 billion dollar Ponzi game was exposed for all the world to see when he was arrested on December 11, 2008.  The end of the Madoff scheme signaled the start of a litigation storm that will employ armies of lawyers for many years to come.  Read more


Insider Trading: Rejuvenated Enforcement Efforts Suggest a Fresh Look at Compliance and Supervision

“There is a basic principle that governs our capital markets, and that is that there is one set of rules, and everyone is expected to play by that one set of rules.  That principle gives investors confidence that the markets are fair. Insider trading is a corruption of that basic principle.”1 

— SEC Division of Enforcement Director Robert Khuzami
(November 5, 2009)
Since their arrival at the Securities and Exchange Commission (“SEC”) early in 2009, Chairman Mary Schapiro and Division of Enforcement Director Robert Khuzami have each emphasized the importance of an aggressive SEC enforcement role.  After an initial flurry of activity designed to stamp out Ponzi schemes in the wake of the Bernard Madoff revelations, the Division in late 2009 sharpened its focus on combating insider trading.  Read more


Business “Roll-Ups”: Beware of Possible Fraud Risks

A “Roll-Up” is the name generally used for the merger and acquisition strategy of combining several smaller businesses in the same sector into a larger operation.  The motivation for the acquirer, who is often referred to as the sponsor or consolidator, is straightforward and can be summarized into four steps:

1.    Pay a low multiple of earnings for the acquisitions
2.    Realize synergies and cost savings by bringing many similar businesses together
3.    Package and sell the consolidated group at a higher multiple and higher projected profit margin
4.    Generate a sizeable return on the investment Read more


Regulating the Gatekeepers: An Analysis of the Regulation and Accountability of Credit Rating Agencies

Credit rating agencies have long been an important part of the United States capital markets system; yet they have occupied a rather odd role as relatively unofficial and unaccountable agencies upon which significant reliance is often placed.  This article focuses on the criticisms faced by these agencies, both generally and, more specifically, as related to the mortgage-backed securities crisis.  The article focuses on an analysis of proposed regulations and treatments put forth to deal with these constant criticisms, focusing on SEC amendments and proposals as well as a recent bill passed by the United States House of Representatives Financial Services Committee.  Read more


Raising the Bar

This article highlights that publicly traded business corporations and their directors have lost the confidence and trust of many, leading to an onslaught of proposed federal legislation which, if enacted, will catapult the federal government into the role of primary regulator of those companies and directors, which heretofore have been regulated under state law. This article further suggests that to stem this tide of federal intervention in an area central to our private enterprise system, U.S. public company directors must act promptly in a concerted, clear and convincing way to restore their credibility.  Read more


The IRS Pre-Filing Agreement Program and Deducting Government Settlements

Government settlements, including those under the False Claims Act (“FCA”) and Environmental Protection Agency (“EPA”) Supplemental or Beneficial Environmental Projects (“SEP”), may or may not be deductible for Federal income tax purposes, depending on whether the amounts paid are attributable to compensatory damages, fees, interest, etc., or represent fines or similar penalties.  Section 162(a) of the Internal Revenue Code allows business deductions for compensatory damages, fees, interest and other amounts in defending lawsuits and claims.  Read more


The Supreme Court Considers the “Inquiry Notice” Standard in Federal Securities Fraud Cases

The Supreme Court heard oral arguments on November 30 in Merck & Co, Inc. v. Reynolds,1 a case in which the Court may clarify what constitutes discovery of facts supporting a federal securities fraud claim for purposes of the statute of limitations.  Specifically, the Court in Reynolds is poised to resolve a circuit split concerning whether the Third Circuit erred in holding, in accord with the Ninth Circuit but in contrast to most of the other Courts of Appeals, that “under the ‘inquiry notice’ standard applicable to federal securities fraud claims, the statute of limitations does not begin to run until an investor receives evidence of scienter without the benefit of investigation.”2  Read more