DOJ’s Focus on Pandemic Relief Fraud Continues

The Department of Justice made a major announcement last week that demonstrates that it is serious about finding those who defraud various COVID-19 relief programs and holding them accountable to the fullest extent of the law.

Over the course of the last three months alone, working in concert with numerous law enforcement partners, including the FBI and various Offices of Inspector General, DOJ brought more than 700 law enforcement actions of one kind or another. Criminal charges were filed against 371 defendants, 119 of whom pleaded guilty or were convicted at trial. Courts imposed more than $57 million in restitution. One hundred seventeen civil cases were filed, resulting in more than $10 million in judgments. Forfeitures exceeding $231 million were secured.

UAE Court Dismisses Request to Extradite the Gupta Brothers to South Africa

By Richard Gibbon, Sassi Riar and Collis Abrahams on August 18, 2023 Posted in Africa, OFAC, United Arab Emirates

In our previous post, here, we explained how the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) used its authority under the Global Magnitsky Human Rights Accountability Act (“GloMag”) to sanction brothers Ajay, Atul and Rajesh Gupta (the “Guptas”), and their business associate Salim Essa, effectively barring them from the U.S. financial system. OFAC took this action based on alleged massive corruption involving public funds and public office.

The UAE and South Africa ratified an extradition treaty in mid-2021.[1] Interpol subsequently issued red notices for the Guptas, and the UAE arrested Atul and Rajesh Gupta in mid-2022.[2] However, the Dubai Court of Appeal ruled earlier this year that the Guptas could not be extradited to South Africa because of the failure of the South African authorities to meet strict standards for legal documentation in the extradition treaty between the two countries.[3] In this post, we examine the Dubai Court of Appeal’s ruling and what it means for the South African authorities moving forward.

United States Departments of Treasury, Commerce, and Justice Issue “Tri-Seal” Compliance Note on Voluntary Self-Disclosures of Potential Violations

By Kevin McCart, Richard Gibbon, Rebecca Worthington, Sassi Riar and Malak Abbas on August 7, 2023 Posted in Compliance Program, corporate compliance, Courts, Department of Justice, Economic sanctions, OFAC, Office of Financial Sanctions Implementation, Sanctions, Sanctions, US Department of Justice, US Treasury

Earlier this year, we published a post on the first Tri-Seal Compliance Note (“First Note”) issued by the United States Department of Justice’s (“DOJ”) National Security Division (“NSD”), the Department of Commerce’s Bureau of Industry and Security (“BIS”), and the Department of the Treasury’s Office of Foreign Assets Control (“OFAC”).[1] When issuing the First Note, DOJ announced that the U.S. regulatory agencies would continue to release joint advisories on the enforcement of economic sanctions evasion, export control violations, and similar economic crimes.[2]

On July 26, 2023, NSD, BIS, and OFAC released their second Tri-Seal Compliance Note (“Second Note”) summarizing each department’s approach to their voluntary self-disclosure (“VSD”) policies.[3] The purpose of the Second Note is to encourage U.S. companies to voluntarily disclose and remediate potential administrative or criminal violations, and emphasize the importance of compliance with U.S sanctions, export controls, and other national security laws.[4] The departments encourage VSDs by offering relief to companies who voluntarily disclose potential violations, but also, in some instances, tightening the penalties for companies who do not disclose potential violations.[5]

Below, we set out each department’s approach to VSDs.

Live Event: Avoiding Litigation and Navigating Regulatory Challenges Amid Growing Privacy, Cybersecurity and Artificial Intelligence Scrutiny

By Squire Patton Boggs on August 4, 2023 Posted in Compliance Program, corporate compliance, Courts, cyberattack, cybersecurity, Data Protection & Privacy, Department of Justice, Federal Trade Commission, Securities Litigation and Enforcement, Technology, U.S. Congress, U.S. Securities and Exchange Commission, United States, US Department of Justice

Join subject matter experts across policy, litigation, and regulation for an engaging discussion around privacy, cybersecurity, and AI. This live event will be in our Washington DC office and will include perspectives from in-house leaders, a former FBI agent, an incident response forensic expert, world-class public policy experts, and our privacy and cybersecurity professionals. The half-day program will offer topic-focused panels, including:

Compliance and vendor management – Best practices for risk-management in the event of a vendor data breach, as well as overall privacy compliance, from a regulatory, litigation, and in-house perspective. The team will unpack the current vendor-management playing field and the top trends in 2023.
Cybersecurity incident planning and response – New laws and regulations are encouraging businesses to enhance their security protections. SPB’s cybersecurity team will join cybersecurity forensic expert PacketWatch to offer practical insights on preparing for today’s regulatory, legal and threat landscape; and how to respond effectively in the event of a cybersecurity incident.
Litigation and enforcement – Regulators are increasingly focused on cybersecurity issues and AI. This panel will discuss litigation trends and enforcement priorities across various regulatory agencies, including the Federal Trade Commission (FTC), Securities and Exchange Commission (SEC) and Department of Justice (DOJ). Former regulators, including Jeffrey Sallet, the prior associate deputy director of the FBI, and our litigation and enforcement experts will share insights on how to proactively approach a cyber-regulatory investigation, including best practices for responding to subpoenas and civil investigative demands. The panel will also address litigation challenges and negotiating resolutions with the relevant regulatory and law enforcement agencies.
Policy perspectives – Explore the opportunities and challenges that federal lawmakers face as they pursue policies that address the emerging technology of artificial intelligence (AI). As industry calls for a national legislative framework, lawmakers are scrambling to fully understand the technology in hopes of crafting legislation that provides guardrails without hindering innovation. The discussion will also address how policymakers at the state level are contributing to the national AI dialogue and its potential impacts on the economy.

Details and registration: Avoiding Litigation and Navigating Regulatory Challenges Amid Growing Privacy, Cybersecurity and Artificial Intelligence Scrutiny | Events | Insights & Events | Squire Patton Boggs

Supreme Court Restricts the Scope of the Aggravated Identity Fraud Statute

By Colin Jennings, Jay Thomas and Ally Rich on June 29, 2023 Posted in Courts, Data Protection & Privacy, Fraud, Healthcare, U.S. Supreme Court, Uncategorized, United States

Earlier this month, the Supreme Court of the United States decided Dubin v. United States, No. 22-10, 2023 WL 3872518, at *1 (U.S. June 8, 2023), in favor of the defendant. Justice Sonia Sotomayor wrote the opinion for the Court, which held that 18 U.S.C. § 1028A(a)(1), aggravated identity theft, is violated only when the misuse of another person’s means of identification is at the crux of what makes the underlying offense criminal.[1]

Defendant David Dubin was convicted of healthcare fraud after over-charging Medicaid for teenagers seeking mental health testing at emergency centers in Texas. Dubin falsely claimed the employees performing the testing were licensed psychologists who command a higher rate from Medicaid. However, the employees were only licensed psychological associates. Because the falsified bills also included the patient’s Medicaid reimbursement number, Dubin was also charged with aggravated identity theft, which carries a two-year mandatory minimum consecutive sentence, and he was convicted of this charge as well.

Supreme Court Clarifies Knowledge Requirement for False Claims Act Liability

By Vipal Patel, Jerrob Duffy, Kathleen McGovern, Benjamin Glassman and Karen Harbaugh on June 8, 2023 Posted in Courts, False Claims Act (FCA), Fraud, Healthcare, U.S. Supreme Court, United States

Earlier this year, we previewed two significant False Claims Act (FCA) cases before the U.S. Supreme Court, United States ex. rel. Schutte v. SuperValu, Inc., No. 21-1326 (“SuperValu”), and United States ex. Rel. Proctor v. Safeway, Inc., No. 22-111 (“Safeway”). The FCA provides that “any person who knowingly presents, or causes to be presented, a false or fraudulent claim” to the United States, or who engages in other related activity as set forth in the statute, is liable to the United States for substantial civil penalties plus treble damages. 31 U.S.C. § 3729 (emphasis added.) The SuperValu and Safeway cases involved a situation where the defendants were alleged to have subjectively believed their claims were false, but because of ambiguity in the underlying regulations (which limited reimbursement for prescription drugs based on a pharmacy’s “usual and customary” drug prices), it would have been objectively reasonable to have believed the claims were proper. The question for the Supreme Court was whether in such a situation the defendants could be said to have “known” their claims were false. After all, so the defendants argued, even if they subjectively believed their claims were false, it was objectively reasonable for them to have believed they were not.

Can a Private Person Defraud the Public of Honest Services?

By Elizabeth Profaci and Benjamin Glassman on June 5, 2023 Posted in Anti-corruption, bribery, Commercial Bribery, Courts, Government Investigation, United States

Last month in Percoco v. United States (U.S. May 11, 2023), the Supreme Court reversed the petitioner’s judgment of conviction for conspiracy to commit honest-services wire fraud for allegedly accepting $70,000 from a developer in return for asking a state agency to drop its labor peace agreement requirement. Joseph Percoco had previously served as Executive Deputy Secretary to former New York Governor Andrew Cuomo and would later return to state government—but was not a government employee when he accepted the developer’s payment and asked the agency to drop its requirement. At issue on appeal were the jury instructions, which, consistent with the Second Circuit’s law at the time, authorized conviction if (1) Percoco dominated and controlled any governmental business, and (2) the people working in the government relied on him because of his special relationship with the government. Relying on its earlier holding in Skilling v. United States, 561 U.S. 358 (2010), the Court held that this was not the proper standard for whether a private individual with informal influence over the government decision making can be convicted of honest-services wire fraud. To the dismay of two concurring Justices, however, the Court did not entirely close the door to such a theory of honest-services fraud.

Sports Betting and the NCAA: What You Need to Know

By Ally Rich on May 30, 2023 Posted in Courts, Industry Investigations, U.S. Supreme Court, United States

“If you put something at risk (such as cash, entry fee, dinner or other tangible item) on any amateur and/or professional sporting event with a chance to win something in return, you violate NCAA sports wagering rules.”[1]

Once the Supreme Court ruled unconstitutional the federal law[2] prohibiting sports betting in Murphy v. Nat’l Collegiate Athletic Ass’n,[3] states quickly enacted legislation to permit this type of betting. Today, 33 states (and the District of Columbia) permit sports betting either through retail or online sportsbooks. Four additional states have legalized sports betting but have not yet set up official sportsbooks (Florida, Kentucky, Maine and Nebraska) while Texas and Vermont have active legislation to legalize sports betting. The remaining 11 states do not permit sports betting.[4]

Notably, four professional sports leagues[5] were named plaintiffs in the underlying district court case in Murphy seeking to prevent New Jersey’s attempt to legalize sports betting. Yet these four leagues—the NBA, NFL, NHL and MLB—have since announced partnerships with official sports betting entities while also implementing reasonable rules for players, coaches and staff.[6] Despite the acceptance of sports betting by the leagues that initially sought to prevent it, the National Collegiate Athletic Association (“NCAA”) remains steadfast in its rules prohibiting athletes, coaches and collegiate athletics employees from placing bets on any sport sponsored by the NCAA at any level.[7]

Investigations Involving Alleged Redlining

By Benjamin Glassman and Derrick Cephas on May 22, 2023 Posted in Department of Justice, Money Service Business, United States

Perhaps the signature initiative of the Department of Justice’s Civil Rights Division under the current Administration has been its Combatting Redlining Initiative. By “redlining,” the Department means that a lender has avoided providing access to home mortgage loans to homeowners and prospective homeowners in majority-minority census tracts, in violation of the Fair Housing and Equal Credit Opportunity Acts. The Department itself calls the initiative its “most aggressive and coordinated enforcement effort to use federal civil rights laws to eradicate redlining,” and it has grabbed headlines and made an impact, including, among other examples, the largest settlement for redlining in the Department’s history and the first resolution with a non-depository mortgage company.

In our view, as explained below, DOJ investigations of financial institutions for redlining will only increase over the foreseeable future. Financial institutions that encounter such an investigation or are contemplating it from a risk perspective should consider at least three things:

“Redlining,” as used by the DOJ in its current initiative, does not necessarily involve any intentional discrimination and, to the contrary, is more likely not intentional;
The fact that an institution’s primary regulator has never raised a concern about redlining should not give that institution comfort that an investigation or lawsuit is unlikely; and
Little is publicly available from authoritative sources about the specific details of DOJ’s approach to alleged redlining, so a proactive approach based in experience is usually best.

We explain each in turn below.

Rule 10b5-1 Application and Enforcement

By Jay Thomas on May 16, 2023 Posted in Department of Justice, Government Investigation, U.S. Securities and Exchange Commission, U.S. Securities and Exchange Commission, Uncategorized, United States, US Department of Justice

On March 1, 2023, the Department of Justice (“DOJ”) and the Securities and Exchange Commission (“SEC”) demonstrated continued interest in investigating insider trading by company executives who possess material non-public information when they unsealed an indictment and filed a civil complaint, respectively, in the Central District of California. Though a Rule 10b5-1 plan—an investment device that allows a corporate insider to set up an investment plan for buying or selling company stock without violating insider trading laws—is intended as a safe harbor, the existence of any such plan cannot be an affirmative defense if the executive possesses material non-public information at the time the plan is implemented.