Corporate Crime

[vc_row css_animation="" row_type="row" use_row_as_full_screen_section="no" type="full_width" angled_section="no" text_align="left" background_image_as_pattern="without_pattern" z_index=""][vc_column][vc_empty_space height="60px"][vc_column_text] A Closer Look at the Foreign Corrupt Practices Act [/vc_column_text][vc_empty_space height="60px"][/vc_column][/vc_row][vc_row css_animation="" row_type="row" use_row_as_full_screen_section="no" type="full_width" angled_section="no" text_align="left" background_image_as_pattern="without_pattern"][vc_column][vc_column_text]In the last five years, news agencies have heightened their coverage of cases involving the Foreign Corrupt Practices Act (FCPA). You may have seen the headlines, “After Bribery Scandal, High-Level Departures at Walmart”[1] and “Wal-Mart Says Bribe Probe Cost $439 Million in Two Years,”[2] being covered within the last few years. The fact is Wal-Mart is only one of many large companies with allegations about FCPA violations. While Wal-Mart has been alleged to have bribed Mexican officers with $24 million for market expansion, neither the Department of Justice (DOJ) nor the Securities Exchange Commission (SEC) has brought formal charges against the corporation.[push h="10"] The FCPA, enacted in 1977, is a law intended to prohibit payments, bribes, and gifts to foreign officials, political parties, or party officials in obtaining or retaining business with foreign countries. To ensure compliance with this law, companies must maintain records over their internal affairs, especially those relating to transactions with foreign officials and parties. Despite these seemingly easy mandates, compliance by United States companies has proven to be one of the most difficult tasks for the corporate world.[push h="10"] Although this law has been around for almost four decades, only a handful of instances were ever investigated or charged before 2001. Since 9/11, well over a hundred companies and individuals have been charged or accused with violating the FCPA. This phenomenon is making the FCPA pivotal in how U.S. businesses and individuals interact with the global economy.[push h="10"] The DOJ and SEC jointly oversee compliance of these standards, and in 2010, the SEC created a specialized unit to better enforce compliance with the FCPA. With the same intentions, many companies are spending extensive amounts of money on preventive measures and committees to internally investigate and oversee compliance. These preventative and remedial measures, along with cooperation with the DOJ and SEC, allow for big companies to settle charges and evade criminal and civil penalties.[push h="10"] Yet, some companies are still facing charges of violating the FCPA. Recently, companies, like Goodyear Tire and Rubber Company, Avon Products, Inc., and Hewlett-Packard, have been charged with various forms of bribery.[3] The tire mogul, Goodyear Tire and Rubber Company, settled their case in 2015 for $16 million for paying bribes to expand tire sales in Kenya and Angola.[4] Similarly, beauty products label, Avon Products, Inc., settled for $135 in 2014 for bribery of Chinese officials in both payments and gifts.[5] Also, the technology company, Hewlett-Packard, paid $108 million in 2014 for making improper payments to government officials in three countries to obtain lucrative public contracts.[6][push h="10"] But, companies are not the only ones facing charges and investigations. In 2012, former Morgan Stanley executive Garth Peterson was charged with violating the FCPA, after he bribed Chinese officials into acquiring business and securing real estate investments for himself.[7] Eventually, he settled with the SEC for $250,000 in disgorgement, was permanently barred from the...

[vc_row css_animation="" row_type="row" use_row_as_full_screen_section="no" type="full_width" angled_section="no" text_align="left" background_image_as_pattern="without_pattern" z_index=""][vc_column][vc_empty_space height="60px"][vc_column_text] Bribery: “The Dangerous Gift” [/vc_column_text][vc_empty_space height="60px"][/vc_column][/vc_row][vc_row css_animation="" row_type="row" use_row_as_full_screen_section="no" type="full_width" angled_section="no" text_align="left" background_image_as_pattern="without_pattern"][vc_column][vc_column_text]You may have heard recently about the FIFA bribery scandal. These are only the latest developments in an ongoing narrative of corruption and fraud plaguing FIFA’s public image this summer.[push h="10"] The Department of Justice just indicted fourteen foreign soccer and business officials on bribery charges.[1] It claims the officials accepted bribes from sports marketing executives in exchange for broadcast rights to the World Cup. The Department of Justice claims FIFA’s broadcasting practice unfairly disadvantages other sports broadcasting executives.[push h="10"] The FIFA charges (and bribery accusations in general) bear witness to how hard it is to safely conduct business in an increasingly regulated society. Bribery prosecutions remind us to keep business and personal relationships separate.[push h="10"] But who, exactly, draws the line between a friendly gesture and a bribe?[push h="10"] The law of bribery straddles the public and the private. It might seem at first blush that a private agreement amongst soccer organizers and broadcasters should remain private. But favors exchanged among private parties can still count as bribery when federal funding or services are at stake.[push h="10"] Federal law makes it illegal for officials to accept or solicit things of value in connection with performing official duties.[2] It criminalizes bribery for private parties receiving federal funding.[3] But it also criminalizes bribery among private parties using federal services, like the mail.[4][push h="10"] The federal indictment against the FIFA officials alleges that they used wire services and the mail to accept and solicit bribes.[5] The Department of Justice argues that involving the U.S. Mail in the scheme was enough. Ultimately, it is bribery law’s broad scope that lets the Department of Justice indict foreign FIFA officials for their private business practices.[push h="10"] Recently, a jury found former Governor Bob McDonnell of Virginia and his wife guilty of bribery.[6] The governor received gifts from a vitamin company executive -- to the tune of a personalized Rolex and free golfing trips. In return, the governor hosted a party for the vitamin company at his residence. He encouraged a state university to conduct research on the company’s product. And he set up meetings between the company executive and key politicians.[push h="10"] In the end, the jury returned guilty verdicts against the governor and his wife.[push h="10"] McDonnell isn't the first governor to be convicted under this statute: just five years ago, Illinois governor Rod Blagojevic, was convicted on bribery charges when he tried to sell a congressional seat to the highest bidder.[7][push h="10"] But McDonnell's conviction stands for something more - the idea, increasingly gaining support among legal scholars, is that bribery law is being interpreted too broadly.[push h="10"] Some scholars appealed Mr. McDonnell’s verdict with amicus briefs on his behalf. They say Mr. McDonnell did not do anything to benefit his briber. They claim that reading the statute to criminalize Mr. McDonnell's behavior would criminalize a host of harmless exchanges that characterize politics – from accepting a meal to giving a birthday present.[push h="10"] Mr....

[vc_row css_animation="" row_type="row" use_row_as_full_screen_section="no" type="full_width" angled_section="no" text_align="left" background_image_as_pattern="without_pattern" z_index=""][vc_column][vc_empty_space height="60px"][vc_column_text] Channeling Illegal Profits through Money Laundering [/vc_column_text][vc_empty_space height="60px"][/vc_column][/vc_row][vc_row css_animation="" row_type="row" use_row_as_full_screen_section="no" type="full_width" angled_section="no" text_align="left" background_image_as_pattern="without_pattern"][vc_column][vc_column_text]The only reason to launder money is to allow the perpetrator of criminal activity to use the fruits of their crime (aka money). Although heavily perpetrated, this criminal offense became infamous after shows like HBO’s The Wire. This drama depicted how drug traffickers infiltrated their ill-gotten gains into businesses, and housing developments in Baltimore. However, despite popular conception, drug trafficking is only one of many crimes that lead to launderers attempting to cleanse their “dirty” money.[push h="20"] Money laundering is the intentional act of funneling money gained through criminal activity into a legitimate asset. This generally begins with acquiring the money through illicit activity. Then, the money is passed through a legitimate source to obscure the origin of the money and most times, mixed in with money legally obtained. Finally, the money is returned to the launderer in an indirect way.[push h="20"] To deter this kind of activity, Congress has passed two laws: the Bank Secrecy Act of 1970 and Money Laundering Control Act of 1986. The first, the Bank Secrecy Act, is meant to prevent money laundering by requiring banks to report money deposits over ten thousand dollars as an inherently suspicious activity. The second act, the Money Laundering Control Act, is meant to criminalize acts of money laundering.[push h="20"] Most of the people convicted of money laundering are individuals. But, these laws do apply to companies and corporations as well (e.g. HSBC recently fined $1.9B for laundering money for drug cartels as well as others discussed below).[1] While the whole point of money laundering is to conceal the proceeds of criminal activity, it is always subsequent to the financially fruitful criminal activity. Therefore, money laundering is associated with all kinds of crimes that produce financial gain, including: drug trafficking, embezzlement, extortion, fraud, public corruption, and organized crime.[push h="20"] Money laundering schemes can involve massive corporations as well as individuals working out of their homes. One of the largest violations of the Bank Secrecy Act in U.S. history was linked to Wachovia, now Wells Fargo.[2] In 2010, Wachovia was convicted of allowing cocaine smugglers to launder billions of dollars in wire transfers, traveller’s checks, and cash shipments through Mexican exchanges in Wachovia accounts.[3] Wachovia settled its case with the Justice Department for $160 million, after the allegations surfaced that the bank failed to control or detect the $240 billion transactions by Mexican drug traffickers.[4][push h="20"] Another recent large money laundering case involved the Bitcoin Exchange Company CEO, Charlie Shrem. He was convicted at the end of 2014 for laundering money for customers of the online drug bazaar, Silk Road.[5] Admittedly, he facilitated laundering with the help of another man, Robert Faiella, by trading cash for bitcoins anonymously in exchange for a cut.[6][push h="20"] While not all laundering activities involve billions of dollars and high profile companies and people, the regularity of money laundering produces thousands of investigations and charges every year. Most of...

[vc_row css_animation="" row_type="row" use_row_as_full_screen_section="no" type="full_width" angled_section="no" text_align="left" background_image_as_pattern="without_pattern" z_index=""][vc_column][vc_empty_space height="60px"][vc_column_text] Business Insurance, Embezzlement, and Minimizing Risk [/vc_column_text][vc_empty_space height="60px"][/vc_column][/vc_row][vc_row css_animation="" row_type="row" use_row_as_full_screen_section="no" type="full_width" angled_section="no" text_align="left" background_image_as_pattern="without_pattern"][vc_column][vc_column_text]On June 25, a federal court in California sentenced one of Gulfstream’s executives to eleven years in prison for embezzling company funds.[1][push h="20"] The Savannah-based private aircraft company hired Marvin Jay Caukin in 2000 and immediately put him in charge of finance and accounting for two of its facilities. Right away, Caukin asked friends and family for help setting up shell companies. He then used the shell companies to launder money he was pilfering from Gulfstream. By the time the authorities caught up with him in 2013, Caukin had bought two homes and used company money on escorts, jewelry, and luxury hotels.[push h="20"] Embezzlement occurs when someone entrusted with money withholds it for personal use. It is generally premeditated. The perpetrators, often entrusted to oversee significant financial decisions, can be meticulous. And because embezzlement can take place over a period of years, courts and affected companies often run into trouble figuring out the true extent of financial losses.[push h="20"] Aside from handing down its sentence, the court also ordered Mr. Caukin to forfeit his houses and reimburse Gulfstream for the $10 million he took from the company.[push h="20"] It will not be Mr. Caukin’s first time in prison. Just four months before applying to Gulfstream, he had been released after a three-year stint in federal prison for embezzling from another company.[push h="20"] In Gulfstream’s case, careful accounting and an outside audit paid off. It will recover at least some of the money Mr. Caukin stole.[push h="20"] But a conviction for embezzlement does not always entitle the victim to reimbursement. Sometimes, even when businesses try privately to minimize the risk of embezzlement, they make themselves more vulnerable. In fact, on June 22, the Eleventh Circuit court, sitting here in Atlanta, commented on the effect of embezzlement on business insurance.[push h="20"] In 2004, Martinez, Inc., a Birmingham building maintenance company, had created a position for an in-house accountant, instead of outsourcing the work. By 2006, Brenda Walters, their hire for the new position, was embezzling from the company. She used funds from Martinez’s bank accounts to cover personal expenses. By the time she was fired in 2011, she had become the corporation's CFO and CEO, and had stolen about $2 million.[2][push h="20"] Eventually, Martinez found out. It fired Walters. The government indicted her on criminal charges. Martinez was not concerned about recovering its money. Long before, it had taken out a policy with Scottsdale Indemnification, guaranteeing reimbursement for losses caused by employee theft of fraud.[push h="20"] But Scottsdale refused to pay out. The policy held applicants responsible for honestly reporting company financial practices. Their answers factored into the coverage Scottsdale offered. Walters, trying to cover up her embezzlement operation, had told Scottsdale she did not have access to company accounts. Scottsdale claimed that nullified the policy's criminal loss provision.[push h="20"] The Eleventh Circuit agreed.[3] Since Scottsdale relied on the truthfulness of the information Walters provided, it could not reasonably have...

[vc_row css_animation="" row_type="row" use_row_as_full_screen_section="no" type="full_width" angled_section="no" text_align="left" background_image_as_pattern="without_pattern" z_index=""][vc_column][vc_empty_space height="60px"][vc_column_text] What is Insider Trading? [/vc_column_text][vc_empty_space height="60px"][/vc_column][/vc_row][vc_row css_animation="" row_type="row" use_row_as_full_screen_section="no" type="full_width" angled_section="no" text_align="left" background_image_as_pattern="without_pattern"][vc_column][vc_column_text]“Insider Trading” is a nebulous subject that conjures up images of a jailed Martha Stewart (most likely in couture stripes). While there is such a thing as “legal” insider trading, the more interesting concept that we love to see in media involves “illegal” insider trading. Illegal insider trading is a simple concept. An employee who has a fiduciary duty to their company discloses the company’s non-public information regarding their stock to someone else. This other person then uses the non-public a/k/a insider information to buy or sell stock. Thus, making them some money. In legal terms, our Supreme Court calls this the “misappropriation theory”. The misappropriation theory defines insider trading as the “deceitful acquisition and misuse of information that properly belongs to persons to whom one owes a duty.” Then that misappropriated or insider information is given to friends, business associates, family members, and other "tippees" who trade the stock after receiving such information. This would especially include attorneys who buy or sell stock after learning non-public information from their corporate client. Now that we have a general understanding of insider trading, there is one extra wrinkle. The illegal insider trading we just talked about is only illegal when the tipper who disclosed this non-public information receives a “personal benefit.” This may mean getting paid cash, getting a nice bottle of wine or some other benefit (whatever that subjective term may mean to the SEC) for giving this information out. Likewise, the person getting the inside information also may not be held liable if he or she does not confer a benefit to the tipster. In simple terms, for insider trading to be illegal, you need a “tit for tat” scenario. This concept of what constitutes “personal benefit” is precisely what the Supreme Court is currently analyzing in Salman v. United States. In this case, Mr. Salman traded some stocks based on the nonpublic information his future brother-in-law gave to him. Was this a gift? Is the friendship between Mr. Salman and his future brother-in-law a personal benefit? Or is something more “tangible” required? We all await the ruling from our high court. Until we get a final ruling, that hot stock tip you got from a friend appears to be completely legal unless you buy that friend lunch or give them some type of personal benefit.[/vc_column_text][vc_empty_space height="30px"][/vc_column][/vc_row][vc_row css_animation="" row_type="row" use_row_as_full_screen_section="no" type="full_width" angled_section="no" text_align="left" background_image_as_pattern="without_pattern"][vc_column][vc_empty_space height="30px"][vc_column_text] Our Recent Blogs [/vc_column_text][vc_empty_space height="30px"][blog_slider info_position="info_in_bottom_always" blogs_shown="3" show_categories="no" show_date="no" show_comments="no" enable_navigation="enable_navigation"][/vc_column][/vc_row]...