SEC magnifying glassThe prosecution of Martin Shkreli, whom the BBC has called “the most hated man in America,” reveals some important lessons about the Fourth Amendment protections against search and seizure in the digital corporate context: physical access to documents on a server may trump actual ownership of records. Continue Reading The Fourth Amendment Implications of Sharing Server Space

SEC magnifying glassRamapo, New York Town Supervisor Christopher St. Lawrence heads to trial this week on federal securities fraud charges. St. Lawrence is one of two city officials charged in the case; his codefendant N. Aaron Troodler pleaded guilty earlier last month. The SDNY U.S. Attorney’s Office promoted the Troodler conviction as the first time municipal bond fraud has been successfully prosecuted under federal securities laws. The St. Lawrence trial is expected to draw lots of attention; St. Lawrence is an elected official who has spent nearly two decades at the helm of his town. Continue Reading Municipal Bond Securities Fraud Case Heads to Trial

people talking at courthouseRecent corporate guilty pleas can be expected to have serious implications for the individual executives and employees alleged to have been involved in the conduct under scrutiny. But there are other factors at play in such cases that can make even more of a difference to the eventual outcomes for individuals than whether their corporate employer pleads guilty or pursues an alternative resolution. Key among these is the extent to which a cooperative relationship can be established between company counsel and individual counsel despite accusations of individual wrongdoing.

Read more in our article posted on Law360: Individual Defense in the Shadow of Corporate Guilty Pleas.

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In a company with a robust compliance culture, potential whistleblowers can express their concerns without fear of retribution. By contrast, the penalty for a culture that silences whistleblowers just got steeper.  Companies caught punishing those who raise red flags, especially when they turn out to be lawyers, could be forced to confront documents otherwise inadmissible against the company due to attorney-client privilege.  Continue Reading Revenge of the Whistle-blower: Possible Consequences of Compliance Failures

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On December 6, 2016, after nearly twenty years of silence on insider trading, the U.S. Supreme Court unanimously affirmed the Ninth Circuit in holding that prosecutors need not show that a tipster received a pecuniary or other tangible benefit for providing inside information where the insider and trader are close friends or relatives. Salman v. United States, U.S. Supreme Court Case No. 15-628.

Salman was convicted for trading on information received from his friend, Michael Kara, who had in turn received the information from his brother and Salman’s brother-in-law, Maher Kara, a former Citigroup investment banker. Although Salman was not the insider, he was convicted based on so-called “tippee liability,” where the insider discloses nonpublic information to an outsider (a “tippee”) who then trades on the basis of the information, as established by the Supreme Court in its landmark Dirks decision. Dirks v. S.E.C., 463 U.S. 646 (1983).  Under Dirks, a tippee can be liable for insider trading provided the insider received a “personal benefit” from tipping the information, which benefit may be inferred where the tipper receives something of value in exchange for the tip or “makes a gift of confidential information to a trading relative or friend.”

Continue Reading Insider Trading Conviction in First Insider Trading Case in Nearly Two Decades Affirmed by Supreme Court

The announcement that San Francisco private company Hampton Creek faces an SEC inquiry related to their alleged “buyback” program of vegan mayo comes as no shock. See reporting on Bloomberg. As soon as the facts were initially reported it seemed only a matter of time until the regulators, who have been looking for a poster child (or rather, a whole class of poster children) of private company enforcement in the Bay Area, swooped in. Continue Reading Developments in SEC Private Company Enforcement: Sophisticated VC’s in the Role of Victim

We noted with interest the latest moves by some Bay Area tech giants to permit their employees to sell restricted stock to help them realize the stock value as part of their compensation: See New York Times reporting here. It should come as no surprise that private company employees in our tech economy rely on their potential restricted stock value as an important part of their compensation package, and also their decision whether to work for, or stay working for, one of the “hot” pre-IPO companies (which are legion in Northern California). What may surprise private companies is that this kind of restricted stock sale by employees creates a very easy “in” for the SEC to bring a case should any hidden compliance failures or fraud later be revealed. Continue Reading Private Company Employee Stock Sales Highlight Hidden Dangers of Compliance Failures

Every day corporate entities and individuals in some parts of the world provide payments to foreign officials in exchange for business favors. While it may be a common feature of business in these places, this kind of activity is illegal under the Foreign Corrupt Practices Act (FCPA), which criminalizes various acts of bribery and related accounting fraud. The consequences for failing to comply with the FCPA are severe, and ensuring compliance can be especially difficult for start-up or relatively young companies growing rapidly and expanding into foreign markets before they can institute robust compliance systems. Continue Reading Minding the Compliance Gap in an Evolving FCPA Landscape

When the Volkswagen emissions scandal hit the press last year, we wondered which agency would manage the subsequent investigations. We are still waiting on the car company’s plan to remedy the emissions testing software and waiting to see if criminal charges will be filed—and if so, who specifically will be in the DOJ’s criminal crosshairs (DOJ filed a mammoth civil suit in January). The DOJ isn’t the only agency stepping up enforcement in the emissions space, however. This past week the SEC got in the emissions game on the security side, charging Navistar International with misleading investors in connection with their truck engine emissions. Continue Reading SEC Spotlight Hits Emissions Issues

The Securities and Exchange Commission organized an Advisory Committee on Small and Emerging Companies to provide the SEC with advice on its rules, regulations and policies as they relate to emerging privately held small businesses and publicly traded companies with less than $200 million in public market capitalization.   The Advisory Committee issued its recommendations to the SEC Chair, Mary Jo White back on September 23, 2015: Continue Reading SEC Looks to Ease Small Business Ability to Raise Capital