On November 16, 2018, Matthew D. Lee will moderate a panel at the annual White Collar Practice seminar sponsored by the Pennsylvania Association of Criminal Defense Lawyers. With the Special Counsel’s high-profile indictments of Paul Manafort as context, Matt’s panel will address the latest developments in tax and money laundering cases, with a particular emphasis on the following:

  • The broadening scope of the international money laundering statute;
  • The Justice Department’s continuing crackdown on offshore tax evasion;
  • The future of tax obstruction prosecutions post-Marinello; and
  • Fifth Amendment issues in the context of income tax returns.

More details are available here.

Ian M. Comisky and Matthew D. Lee have authored a Journal of Taxation article entitled “IRS in the Offing? Marinello Limits Tax Obstruction Prosecutions.” In their article, Ian and Matt write that its recent decision in Marinello, the U.S. Supreme Court dealt taxpayers a rare win by significantly constraining the government’s ability to employ the criminal tax obstruction of justice statute. Construing the Section 7212(a) “Omnibus Clause,” which makes it a felony “corruptly or by force” to “endeavo[r] to obstruct or imped[e]… the due administration of [the Internal Revenue Code],” the Court rejected the notion that the statute covers “virtually all governmental efforts to collect taxes.” Concerned that the statute could reach, among other things, cash payments to a babysitter, the Court instead engrafted seemingly important nexus requirements to the statute. Specifically, the Court held that the provision requires specific interference with targeted governmental tax-related proceedings, “such as an investigation, an audit, or other targeted administrative action.” It will be up to the lower courts to determine the full scope of this limitation. You can read the full article here.

Reprinted with permission from the October 2018 edition of the Journal of Taxation.  

For more up-to-date coverage from Tax Controversy and Financial Crimes Report, please subscribe by clicking here.

Your company is under investigation. You hire outside counsel to debrief your employees about the allegations. But are the interviews privileged? Do you have to provide each employee with his or her own attorney?

The fourth episode of Matthew D. Lee’s new five-part podcast, “Federal Agents at the Door,” cuts through the confusion surrounding legal representation during an investigation. A partner in the firm’s White-Collar Criminal Defense & Regulatory Compliance Practice, Matt explains why it’s vitally important to make sure your employees also understand who’s representing whom.

Previous installments of Matt’s podcast provided an overview of federal investigations, discussed how to respond when agents arrive at your door and detailed important steps companies should take to preserve evidence.

If you prefer, download the transcript.

For more up-to-date coverage from Tax Controversy and Financial Crimes Report, please subscribe by clicking here.

Your company is under investigation. Or maybe you suspect it will be in the future. What should you do with its computer files, documents and other potential evidence? Here’s a hint: step away from the paper shredder.

In episode three of his new five-part podcast, “Federal Agents at the Door,” Matthew D. Lee explains your obligation to preserve evidence. Matt, a former Justice Department trial attorney and partner in Fox Rothschild’s White-Collar Criminal Defense & Regulatory Compliance Practice, tells you how to avoid facing obstruction of justice charges.

In Episode One: Target, Subject or Witness? Matt provided an overview and explained how your status in a probe should affect your overall response. In Episode Two: Responding to a Warrant, he outlined how to respond when investigators arrive at your door. Now, he discusses why it’s important to preserve paper and electronic documents, even before an investigation is launched.

If you prefer, download the transcript.

Our colleagues Matthew S. Adams and Jana Volante Walshak have authored a client alert about the Supreme Court’s recent decision in Carpenter v. United States, where the court held that cellphone location records deserve heightened protection, once again expanding the Fourth Amendment protections afforded to certain modern digital communications. And in doing so, the unusual five-justice majority led by Chief Justice Roberts has suggested a roadmap for white-collar defense lawyers to follow when strategizing their approaches to other high-tech cases. You can read their alert here.

For more up-to-date coverage from Tax Controversy and Financial Crimes Report, please subscribe by clicking here.

 

Your company is under investigation. Federal agents show up at your business looking for documents, computer files and other evidence. It’s a critical moment. What should you do?

Matthew D. Lee, a former Justice Department trial attorney and partner in Fox Rothschild’s White-Collar Criminal Defense & Regulatory Compliance Practice, explains your options in Episode Two of his this five-part podcast, “Federal Agents at the Door.” Matt tells you exactly what to expect and how to respond.

In Episode One, Target, Subject or Witness?, Matt provided an overview and explained how your status in a probe should affect your overall response. In this episode, Matt explains what to do when agents arrive at your place of business brandishing a warrant.

If you prefer, download the transcript.

For more up-to-date coverage from Tax Controversy and Financial Crimes Report, please subscribe by clicking here.

You’ve seen it on CNN. Scores of agents in matching jackets descend on a business or residence, hauling out boxes of documents, laptops and cell phones. How would you react?

Don’t panic. Matthew D. Lee has every aspect covered in his new five-part podcast: “Federal Agents at the Door.” A former Justice Department trial attorney, and partner in Fox Rothschild’s White-Collar Criminal Defense & Regulatory Compliance Practice, Matt knows what to expect and how to respond.

Episode One: Target, Subject or Witness? Matt provides an overview and explains how your status in a probe should affect your response.

If you prefer, download the transcript.

By Charles A. De Monaco, Matthew D. Lee and Jana Volante Walshak

Deputy Attorney General Rod Rosenstein unveiled a new Justice Department policy for resolving major corporate investigations last month at a speech to the New York City Bar White Collar Crime Institute.

The new policy encourages coordination among Justice Department components and other enforcement agencies in order to curb the practice of multiple government authorities imposing separate punishments on a corporate defendant for the same underlying conduct. Employing a football metaphor, Rosenstein said this new policy is meant to prevent “piling on,” which he described as “a player jumping on a pile of other players after the opponent is already tackled.”[1]

The goal of the policy is to enhance relationships with the Justice Department’s law enforcement partners in the United States and abroad, while avoiding what Rosenstein termed “unfair duplicative penalties.” And the Justice Department appears to have wasted little time in putting this policy into action, with the first such corporation resolutions of the new anti-“piling on” era announced this week, involving charges of foreign bribery and manipulation of the LIBOR interest rate.

Prior Instances of ‘Piling On’

Several corporate resolutions announced by the Justice Department over the last several years involved multiple penalties for the same underlying conduct which could be characterized as “piling on.” In 2012, international bank HSBC agreed to forfeit over $1.2 billion and enter into a deferred prosecution agreement with the Justice Department for violations of the Bank Secrecy Act, the International Emergency Economic Powers Act and the Trading with the Enemy Act.[2] In addition to the $1.2 billion forfeiture, HSBC agreed to pay $665 million in civil penalties for the same conduct to be apportioned among numerous other government agencies, including the Comptroller of the Currency, the Federal Reserve and the Treasury Department’s Financial Crimes Enforcement Network and Office of Foreign Assets Control.

In 2015, five global financial institutions pled guilty to charges that they conspired to manipulate currency prices in the foreign exchange market.[3] These banks paid a total of nearly $9 billion in fines to a long list of U.S. and foreign government agencies, including the Justice Department; the Federal Reserve; the Comptroller of the Currency; the New York State Department of Financial Services; the Commodity Futures Trading Commission; the United Kingdom’s Financial Conduct Authority; and the Swiss Financial Market Supervisory Authority.

The Justice Department’s New Corporate Resolution Policy

The Justice Department’s new anti-“piling on” policy has four key features. First, it reaffirms that the federal government’s criminal enforcement authority should not be used against a company for purposes unrelated to the investigation and prosecution of a possible crime. In particular, the Justice Department may not employ the threat of criminal prosecution solely to persuade a company to pay a larger settlement in a civil case.

Second, the policy addresses situations in which Justice Department attorneys in different components and offices may be seeking to resolve a corporate investigation based on the same misconduct. The new policy directs Department of Justice components to coordinate with one another, in order to achieve an overall equitable result. The coordination may include crediting and apportionment of financial penalties, fines and forfeitures, as well as other means of avoiding disproportionate punishment.

Third, the policy encourages Justice Department attorneys, when possible, to coordinate with other federal, state, local and foreign enforcement authorities seeking to resolve a case with a company for the same misconduct.

Finally, the new policy sets forth some factors that Department attorneys may evaluate in determining whether multiple penalties serve the interests of justice in a particular case. Factors identified in the policy that may guide this determination include the egregiousness of the wrongdoing; statutory mandates regarding penalties; the risk of delay in finalizing a resolution; and the adequacy and timeliness of a company’s disclosures and cooperation with the Justice Department. Rosenstein cautioned that under the new policy, the Justice Department may still seek penalties that may appear to be duplicative but are “essential to achieve justice and protect the public.” He also warned that a company’s cooperation with a different government agency or a foreign government is no substitute for cooperating with the Justice Department, and that his agency “will not look kindly on companies that come to the Department of Justice only after making inadequate disclosures to secure lenient penalties with other agencies or foreign governments.”

Rosenstein acknowledged that the new policy’s directive of cooperation is not a new idea. Certain Justice Department components and many U.S. Attorney’s Offices already coordinate with other federal agencies, including the Securities and Exchange Commission, the Commodities Futures Trading Commission, the Federal Reserve as well as authorities in other countries. For example, just a few months ago, the Justice Department’s Foreign Corrupt Practices Act unit announced a coordinated resolution with Brazil and Singapore.[4] The Justice Department’s Antitrust Division routinely cooperates with numerous foreign agencies in merger investigations, and its National Security Division works with the Treasury Department’s Office of Foreign Assets Control in investigations of sanctions and export control violations.

Rosenstein also reiterated that the Justice Department will continue to seek to identify and hold accountable culpable individuals in corporate investigations, a policy memorialized several years ago in the so-called “Yates Memorandum.” That policy document proclaimed that “[o]ne of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing.” Rosenstein explained that in corporate investigations, the primary question remains: “Who made the decision to set the company on a course of criminal conduct?”

Rosenstein also announced the creation of a “Working Group on Corporate Enforcement and Accountability” within the Justice Department. Designed to promote consistency in the Department’s white collar efforts, the Working Group includes Justice Department leadership and senior officials from the Federal Bureau of Investigation, the Criminal Division, the Civil Division, other litigating divisions involved in significant corporate investigations and the U.S. Attorney’s Offices. The Working Group will make internal recommendations about white collar crime, corporate compliance, and related issues.

Recent Examples

In a more recent speech, Rosenstein cited two recent examples of corporate resolutions that are consistent with the Justice Department’s new anti-“piling on” directive.[5]

First, in February 2018, the Justice Department announced that a U.S. subsidiary of an international bank pled guilty to obstructing its primary federal regulator by concealing deficiencies in its anti-money laundering program.[6] There, the bank agreed to forfeit nearly $370 million, and the Justice Department agreed that $50 million of that obligation was satisfied by the payment of civil penalties to the Office of the Comptroller of the Currency in a separate administrative action.

Next, in April 2018, the Justice Department and FBI announced a deferred prosecution agreement in an FCPA investigation of the subsidiary of a global electronics company.[7] In that case, the company paid a criminal penalty of $137 million. In a related proceeding, the SEC filed a cease-and-desist order against the company, which required the payment of $143 million in disgorgement for the same conduct. Rosenstein noted that the SEC agreed to forgo the imposition of penalties given the company’s agreement to pay a criminal penalty to the Justice Department.

And in early June, the Justice Department announced the first corporate resolutions since issuance of its new corporate resolution policy. First, a global bank headquartered in Paris and a wholly owned subsidiary agreed to pay more than $860 million to resolve charges in the United States and France involving bribery in Libya and manipulation of the LIBOR interest rate.[8] The financial institution also agreed to pay $475 million in regulatory penalties and disgorgement to the Commodity Futures Trading Commission in connection with the LIBOR scheme, and $293 million to French authorities in connection with the Libyan bribery scheme. In an apparent nod to the new policy discouraging “piling on,” the United States agreed to credit the $293 million French payment against the total U.S. criminal penalty for the bribery charges.

In a related case announced the same day, a U.S. investment management firm entered into a non-prosecution agreement and agreed to pay $64 million in criminal penalties and disgorgement to settle FCPA charges relating to bribery in Libya.[9] The $64 million payment includes approximately $33 million to be paid to the United States Treasury and disgorgement of approximately $32 million, which will be credited against disgorgement paid to other law enforcement agencies within the first year of the agreement.

Conclusion

While the Justice Department’s new corporate resolution policy appears to be a step in the right direction, it remains to be seen how well the Department will be able to coordinate resolutions with other enforcement agencies, particularly those at the state level as well as foreign counterparts. For example, there may well be instances in which other interested law enforcement agencies – such as state attorneys general – may be unwilling to accept a reduced, or coordinated, punishment from a corporate wrongdoer. Without written policies to prevent “piling on” by coordinate law enforcement agencies, the Justice Department may be unable to prevent imposition of “unfair duplicative penalties.”


[1] U.S. Department of Justice Press Release, “Deputy Attorney General Rod Rosenstein Delivers Remarks to the New York City Bar White Collar Crime Institute” (May 9, 2018).

[2] U.S. Department of Justice Press Release, “HSBC Holdings Plc. and HSBC Bank USA N.A. Admit to Anti-Money Laundering and Sanctions Violations, Forfeit $1.256 Billion in Deferred Prosecution Agreement” (Dec. 11, 2012).

[3] U.S. Department of Justice Press Release, “Five Major Banks Agree to Parent-Level Guilty Pleas” (May 20, 2015).

[4] U.S. Department of Justice Press Release, “Keppel Offshore & Marine Ltd. and U.S. Based Subsidiary Agree to Pay $422 Million in Global Penalties to Resolve Foreign Bribery Case” (Dec. 22, 2017).

[5] U.S. Department of Justice Press Release, “Deputy Attorney General Rod Rosenstein Delivers Remarks at the Bloomberg Law Leadership Forum” (May 23, 2018).

[6] U.S. Department of Justice Press Release, “Rabobank NA Pleads Guilty, Agrees to Pay Over $360 Million” (Feb. 7, 2018).

[7] U.S. Department of Justice Press Release, “Panasonic Avionics Corporation Agrees to Pay $137 Million to Resolve Foreign Corrupt Practices Act Charges” (Apr. 30, 2018).

[8] U.S. Department of Justice Press Release, “Société Générale S.A. Agrees to Pay $860 Million in Criminal Penalties for Bribing Gaddafi-Era Libyan Officials and Manipulating LIBOR Rate” (June 4, 2018).

[9] U.S. Department of Justice Press Release, “Legg Mason Inc. Agrees to Pay $64 Million in Criminal Penalties and Disgorgement to Resolve FCPA Charges Related to Bribery of Gaddafi-Era Libyan Officials” (June 4, 2018).