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Tech, Data, Telecoms & Media
In a long-awaited decision, the Supreme Court was expected to provide greater clarity on the extent to which litigants can challenge the Federal Communications Commission's Telephone Consumer Protection Act interpretations in private litigation. However, instead of deciding that issue, the court vacated the Fourth Circuit's ruling and remanded the case for further development.
Senate Bill 220 was recently signed into law, making Nevada the first state to join California in granting consumers the right to opt out of the sale of their personal information. However, the new privacy law is significantly narrower than the California Consumer Privacy Act (CCPA). For example, it applies only to online activities, defines 'consumer' and 'sale' more narrowly and includes broad exceptions for financial institutions subject to the Gramm-Leach-Bliley Act.
Federal Communications Commission (FCC) Chair Ajit Pai recently announced plans to open a rulemaking proceeding to take a fresh look at the 5.9GHz band. In this new proceeding, the FCC will consider whether and how to allow sharing in the 5.9GHz band between dedicated short-range communication, gigabit Wi-Fi and cellular vehicle-to-everything technologies.
Several legislative proposals seeking to amend the California Consumer Privacy Act are moving forward following a recent hearing before the California Assembly's Committee on Privacy and Consumer Protection in which the bills were approved. The bills will advance to the assembly's Appropriations Committee before being voted on by the full assembly and potentially advancing to the California State Senate for consideration.
In 2018 California passed the California Consumer Privacy Act (CCPA), which seeks to give consumers additional safeguards regarding their personal information. The CCPA will become effective in January 2020 and may impact companies in the education sector, including large education technology companies. Regulated educational entities should be wary of the CCPA's key requirements, including the deletion of consumers' personal information on request.
One IoTa of consensus: bipartisan legislation to improve cybersecurity for internet-connected devicesUSA | 17 May 2019
Congress recently introduced a bipartisan proposal to enhance cybersecurity for the network of internet-connected devices, commonly known as the Internet of Things (IoT). The IoT Cybersecurity Improvement Act 2019 aims to establish baseline cybersecurity standards for IoT devices. It would also impose limits on the types of IoT device that the US government can purchase.
The Federal Trade Commission recently issued notices seeking public comment on proposed amendments to the regulations implementing the Gramm-Leach-Bliley Act, commonly known as the Safeguards Rule and the Privacy Rule. The proposed changes to the Safeguards Rule add a number of more detailed security requirements, whereas the proposed changes to the Privacy Rule focus on technical changes to align the rule with changes in law over the past decade.
The Federal Trade Commission (FTC) recently announced that it had settled with the operators of a video social networking app for a record civil penalty of $5.7 million under the Children's Online Privacy Protection Act. This action was notable not just for the penalty's size, but also because of the joint statement by two democratic commissioners that future FTC enforcement should seek to hold corporate officers and directors accountable for violations of consumer protection law.
The fallout from the recent cyber-attack against Sony Picture Entertainment has reinvigorated a debate about whether and when the US government should take responsibility for protecting private companies from cyber-attacks. It remains unclear whether the United States will use its prosecutorial powers to combat these types of cyber-attack or whether its responses will be robust enough to deter future cyber-attackers.
White Collar Crime
A court has expressed concern with the government's "routine outsourcing" of investigations to the targets of those investigations seeking cooperation credit. The court noted the corporate target's "uniquely coercive position" over its employees, who may also be potential targets of the investigation. The decision may profoundly affect the structure and scope of cooperation agreements between the government and the corporate targets of criminal investigations.
Updated DOJ guidance underscores importance of implementing truly effective corporate compliance programmesUSA | 13 May 2019
The Department of Justice (DOJ) recently confirmed the importance of implementing a robust compliance programme that is not only well designed, but also adaptable and able to function effectively. The DOJ's latest guidance makes clear that companies have a strong incentive to maintain an effective compliance programme. Most importantly, these programmes must be fully implemented, account for the structure and scope of a company's business and actually operate effectively.
Throughout 2018 the Department of Justice (DOJ) continued to ring the clarion call for cooperation and sought to provide some certainty, consistency and coordination regarding the incentives offered to companies that provide voluntary disclosures. In particular, the DOJ centralised its guidance memoranda into what is now known as the Justice Manual. The DOJ's goals were to identify redundancies, clarify ambiguities, eliminate surplus language and update the manual to reflect current law and practice.
Government attorneys now have additional discretion in False Claims Act civil cases to award cooperation credit to a corporation that meaningfully assists the investigation without necessarily identifying every individual person outside of senior management involved in the alleged misconduct. The new policy reflects the reality of modern corporate investigations and encourages realistic cooperation efforts without compromising the Department of Justice's policy of holding individuals accountable.
After the election of President Donald Trump, many observers wondered whether the US Department of Justice (DOJ) would change the way in which it enforces the Foreign Corrupt Practices Act. As the halfway point of Trump's first term in office approaches, it seems that the DOJ has not made any dramatic changes to the enforcement philosophy followed during prior administrations.
When a legal team needs to find the facts behind fraud and corruption allegations in a government investigation, technology can drive substantial new efficiencies. By filtering and evaluating vast amounts of information, artificial intelligence can effectively sort text messages, audio files, emails and other unstructured data into manageable groups; identify potential relationships between parties accused of fraud or corruption; and recognise patterns of frequency or timing, which may support a client's defence.
Compliance officers often report to the legal department or are staffed with qualified lawyers, making it difficult to distinguish when the compliance officer is serving in a legal capacity, rather than a compliance one. However, drawing a clear distinction between these functions, conducting internal investigations under the direction of counsel and making the legal purpose of communications or documents clear will make the best possible record to show that documents should be protected by privilege.
With few Foreign Corrupt Practices Act (FCPA) corruption investigations resolved under the Trump administration's watch, it is too early to weigh up how the administration will affect enforcement or settlements in the long term. On its face, the new FCPA Corporate Enforcement Policy signals a more business-friendly approach by removing the spectre of a monitor in many situations and by committing to a presumption of a declination in certain circumstances.
Companies now have even greater incentives to have strong, meaningful Foreign Corrupt Practices Act compliance programmes. When the deputy attorney general recently announced the new enforcement policy that will guide the US Department of Justice, he made it clear that the government wants to create incentives for companies to police themselves when it comes to bribery and corruption.
DOJ announces one of largest False Claims Act recoveries concerning government small-business programmesUSA | 02 October 2017
Two recent cases before the Department of Justice (DOJ) have sent a signal that the DOJ may become more proactive in combating small-business contracting fraud. These cases underscore the importance of ensuring that small-business eligibility representations are accurate, as the penalties for misrepresentation can be severe.
For energy, mining and resources companies, the cost of corruption – and getting caught – is real. Energy and mining companies, along with other resources companies, remain a major focus of bribery and corruption investigations worldwide. The government wields a potent weapon against bribery and corruption in the form of the Foreign Corrupt Practices Act.
In the past, compliance and remediation in the context of healthcare investigations were typically seen as afterthoughts. However, compliance efforts are now being more closely scrutinised by prosecutors. The Department of Justice recently issued an 11-part series of questions styled as guidance on corporate compliance programmes. Interestingly, it is a series of questions, not a series of answers. Companies are going to have to work the answers out themselves with their compliance departments and counsel.
In recent years, US and Western European military spending has decreased as military spending in other parts of the world has risen. As a result, aerospace, defence and government services companies increasingly rely on sales to foreign governments to grow business revenue and are thus at a more significant risk of investigation for violations of the Foreign Corrupt Practices Act.
To undergo a Foreign Corrupt Practices Act investigation entails significant risk. Since 2008 at least 10 corporations have agreed to pay more than $300 million in penalties to resolve such investigations. Defence costs associated with a global bribery or corruption investigation can also run into the millions before any penalties are assessed. A number of developments that emerged during 2016 will have broad implications for the coming year.
As the Senate prepares to confirm Senator Jeff Sessions as the new attorney general and to consider nominations for other high-level positions in the Justice Department, there are many questions – and few answers – about how the new leadership in the Justice Department will approach the prosecution of white collar crime during the Trump administration.
The Department of Justice (DOJ) recently announced a landmark resolution concerning violations of the Foreign Corrupt Practices Act. The DOJ and the Securities and Exchange Commission entered into a $413 million settlement with one of the world's largest hedge funds. This settlement indicates that the DOJ intends to enforce the act strictly with little regard for the industry involved or the financial consequences.
Since January 2009, the government has recovered more than $30 billion through False Claims Act cases, more than half of which was recovered from cases involving alleged fraud against federal healthcare programmes. False Claims Act cases are now more complex, lucrative and healthcare focused than ever – a far cry from the act's humble beginnings as a solution to the problem of fraudulent sales to the military during the American Civil War.
To understand how the government will regulate companies in the future, it is important to understand the problems it is currently trying to solve. In its efforts to enforce the Foreign Corrupt Practices Act, the US Justice Department faces a particularly difficult problem: how to incentivise companies to volunteer information about their own illegal conduct while retaining its ability to punish those companies for breaking the law.
With the publication of the Yates Memorandum, the Department of Justice has reinforced its focus on seeking accountability from individuals. Employees may thus be at greater risk from corporate investigations, particularly with respect to their work emails and other documents, and company counsel may receive more requests from individual counsel regarding the production of employees' documents.
The Yates Memorandum announced a new US Department of Justice (DOJ) policy that focuses DOJ attorneys on pursuing the individuals responsible for corporate wrongdoing. In considering the practical effects of the new policy, a question arises about the potential for it to increase the pressure on companies to provide legally privileged information to the DOJ in hopes of receiving cooperation credit.
The Department of Justice's (DOJ) Yates Memorandum aims to hold individuals, not just corporations, accountable for corporate misconduct, in response to criticism that it fails to punish executives who precipitate wrongdoing. However, it remains to be seen whether the policy will advance the DOJ's law enforcement interests or hinder them, as there may be unintended consequences for companies, employees and the DOJ itself.
The US Department of Justice recently announced a formal policy that provides for the vigorous prosecution of culpable individuals who are responsible for corporate wrongdoing, which is consistent with shifting trends in prosecution. An increased effort to prosecute high-ranking executives would result in significant changes to how investigations affect companies and how companies respond to investigations.
The recent Supreme Court decision in Kellogg Brown clarifies that the Wartime Suspension of Limitations Act will not toll the statute of limitations for civil claims during times of war or the authorisation of military force. This reverses the trend that had permitted the use of the act in civil False Claims Act matters and protects defendants from indefinite tolling in civil matters.
There are many subtle ways in which a law-abiding citizen can commit a federal felony under US law in a matter of minutes. The pressures of life can put people in situations where they take morally questionable actions that are prohibited by federal criminal law leading to criminal penalties. The average citizen should thus realise how broad US criminal law can be and how it can be applied to him or her.
Although the government has added new players to its line-up, the game seems to be the same in the world of Foreign Corruption Practices Act enforcement, as the Department of Justice (DOJ) and the Securities and Exchange Commission continued to push for strong enforcement in 2014. As in 2013, the DOJ continued to emphasise the importance of corporate compliance and cooperation with investigators.
The Supreme Court has steadily restricted the recovery available to civil litigants for conduct that occurred outside the United States and prosecutors have continued to push for the broad application of criminal laws to extraterritorial conduct, particularly in white collar criminal cases. Courts have only just begun to grapple with how to analyse whether a criminal statute applies extraterritorially.
The application of the fugitive disentitlement doctrine is an important issue that warrants Supreme Court review. It is an issue of fundamental fairness for both non-US citizens and the US Department of Justice. Both sides have reasonable and forceful arguments to make, and the future of the doctrine will have very real consequences for the US government and private citizens around the world.
The Delaware Supreme Court has issued a decision that may affect how US corporations conduct investigations and communicate with their attorneys. The decision adopted the fiduciary exception to attorney-client privilege, which allows shareholders access to a company's privileged communications when there is "good cause" to believe that management may have breached a fiduciary duty to the shareholders.
While companies can breathe a sigh of relief following the District of Columbia Circuit Court's recent unanimous ruling in In Re Kellogg Brown & Root, Inc, overturning the district court's decision in US, ex rel Barko v Halliburton Co, companies should take some precautions to reduce the risk of disclosure of privileged materials generated during internal investigations.
The US District Court for the District of Columbia recently issued an opinion that has the potential to disrupt the manner in which companies conduct compliance investigations, particularly in regulated sectors such as the defence industry. Although there are certain flaws in the court's reasoning, this decision – if widely adopted – could cause significant disruption in existing corporate compliance and investigation programmes.
An archaic World War II statute designed to give the federal government extra time to prosecute crimes during times of war has recently reared its head in the context of False Claims Act qui tam actions for the first time in over 50 years. The dramatic and far-reaching consequences of such a tolling of the limitations period for False Claims Act lawsuits have brought renewed attention to this peculiar statute.
The Foreign Corrupt Practices Act remained a key issue in 2013. The number of cases commenced under the act by the Department of Justice and the Securities and Exchange Commission was slightly above pace from the previous year, providing evidence of the agencies' continued commitment to aggressive pursuit of Foreign Corrupt Practices Act cases.
In December 2013 the Second Circuit issued a key decision that restricts the prosecution of cases where the US government aims to use routine payments within the limitations period to indict offences that should be time barred. In United States v Grimm the government charged three individuals with antitrust conspiracies more than five years after contracts were awarded.
It has been over two years since the US Securities and Exchange Commission (SEC) began operating its whistleblower programme, but substantial questions linger over its effectiveness and transparency. Only four whistleblower awards have been made in the programme's history and the SEC has not disclosed many details about those awards to the public. So has the programme been worth it?
Two New York judges and now a federal jury are making the Financial Institutions Reform Enforcement and Recovery Act required re-reading for banking attorneys. In recent opinions, the judges endorsed the claims filed under the act – a 1989 reform law now being applied by the Department of Justice to the aftermath of the late 2007 and 2008 meltdown in the housing and secondary mortgage market and other financial markets.