Welcome to Compliance Hot Spots, our weekly look at the regulatory and white-collar enforcement world. Thanks for reading—and please continue to send feedback. I appreciate hearing from you about what's on your plate—observations, trends, new clients. I'm at [email protected] and 202-828-0315, or follow me on Twitter @cryanbarber.

CFTC Targets Foreign Corrupt Practices

For years, the U.S. Justice Department and Securities and Exchange Commission have worked side by side enforcing anti-corruption laws, bringing parallel enforcement actions against companies and executives accused of building business overseas with bribes.

Another regulator is now interested in joining that party.

In recent remarks, the head of enforcement at the Commodity Futures Trading Commission said the agency will be on the lookout for bribery intended to secure business related to trading, advising, or dealing in swaps or derivatives.

The CFTC lacks the authority to bring charges under the principle law prohibiting foreign bribery, the Foreign Corrupt Practices Act. But at a white-collar enforcement conference in New Orleans, CFTC enforcement director James McDonald said corrupt practices overseas could constitute fraud, manipulation, false reporting, or a number of other types of violations of commodities trading law.

“We know that combating corrupt practices that impact financial markets has increasingly become a team effort,” McDonald said. “We at the CFTC will do our job as part of the team to identify corruption in our markets and hold wrongdoers accountable, working closely and in coordination with our law enforcement partners domestically and abroad.”

McDonald's remarks coincided with the release of an enforcement advisorymaking clear that companies and individuals could receive credit for self-reporting violations of futures trading laws that involve corrupt practices overseas. The advisory aligned with guidance issued by the Justice Department establishing a presumption that a company will receive a declination if it discloses misconduct and cooperates with the government.

Laura Brookover, a Covington & Burling special counsel who previously served as a CFTC enforcement attorney, told me McDonald's remarks were consistent with his push to increase the commission's cooperation with other regulatory agencies.

“We've already seen that this director is keen to work with other agencies and coordinate with other agencies to really boost the CFTC's own enforcement efforts. The prime example of that is the spoofing industry sweep that the CFTC and DOJ coordinated last year. Both the CFTC and DOJ at the same time brought parallel spoofing charges against the same traders for overlapping conduct,” Brookover said.

“It suggests the CFTC and DOJ at least are communicating and keeping abreast of developments in their enforcement programs,” she added.

>> A team from Skadden, Arps, Slate, Meagher & Flom, including former CFTC general counsel Jonathan Marcus, said in an advisory: “What is most significant here is that the CFTC is getting involved in Foreign Corrupt Practices Act-like cases, which are traditionally handled by the Department of Justice and the Securities and Exchange Commission.”

>> Lawyers at Morgan, Lewis & Bockius made this point in their alert: “Mr. McDonald's comments and the CFTC's Advisory reflect the CFTC's continued focus on aggressive investigation of allegations of CEA violations. For the first time in nearly five years, the CFTC is operating with a full complement of five commissioners.”

Who Got the Work

Orrick, Herrington & Sutcliffe partner Richard Morvillo represented Lumber Liquidators as the company resolved claims that it made false statements to investors in 2015 about the levels of formaldehyde in its laminate flooring. Read the deferred prosecution agreement here.

According to federal authorities, the fraudulent statements came in response to a damning segment on the news program “60 Minutes” that featured undercover footage of Lumber Liquidators' suppliers stating that they provided the company with products that did not comply with U.S. emissions standards.

Lumber Liquidators told investors that third-party testing proved that its flooring was in compliance with those standards when, in fact, the company knew that its largest Chinese supplier had failed such testing. Lumber Liquidators agreed to forfeit $14 million and pay a $19 million fine as part of a deferred prosecution agreement in which the Justice Department credited the company for replacing its upper management. Katherine Lee Martin, an AUSA in Richmond, and Cory Jacobs, a fraud section trial attorney at Main Justice, represented the government.

In other big cases… 

>> Chinese tech juggernaut Huawei has turned to two U.S. law firms with ties to the Trump administration, Jones Day and Morgan, Lewis & Bockius, in the federal lawsuit filed last week against the Trump administration in U.S. District Court for the Eastern District of Texas. Read the complaint. The WSJ has more here, and my colleague Dan Packel has more here at Law.com.

>> A team from Dentons—including Christina Carroll, partner in Washington, and Douglas Henkin, a New York partner—are representing the New York Stock Exchange in a new public-records complaint in Washington's federal trial court. The complaint seeks records about the SEC's “market data proceedings” and information regarding the role played by Brett Redfearn, who leads the agency's division of trading and markets. Read the complaint here.

>> “A former high-ranking partner at KPMG LLP was convicted Monday on accusations he was involved in a scheme to steal confidential information to help the Big Four accounting firm look better to its regulator, federal prosecutors said. David Middendorf, KPMG's former national managing partner for audit quality and professional practice, was convicted on four of five counts, including conspiracy and wire fraud, in federal court in Manhattan,” The Wall Street Journal reports. The law firms Petrillo Klein & Boxer and Bruch Hanna LLP represented Middendorf. Assistant U.S. attorneys Rebecca Mermelstein, Amanda Kramer and Jordan Estes were on the prosecution team.

Reading List: Meet Joe Simons; Musk's Twitter Fight; FARA in Focus

>> The Man Deciding Facebook's Fate. ”In the deregulatory era of the Trump administration, Mr. [Joseph] Simons, 60, a Republican lawyer who has jumped between the public and private sectors for more than 30 years, is a rare voice for strengthening the government's hand.”Here's what Simons said last June: “Our remedial authority with respect to data security and also privacy is something that's of serious concern to me.” [NYT]

>> Elon Musk Says Tweeting Is Free Speech in His SEC Battle. “Elon Musk will not go quietly. On Monday night, lawyers representing the Tesla CEO submitted a filing to a federal judge in New York arguing that she should deny the Securities and Exchange Commission's request to hold Musk in contempt of court for—what else?—a tweet. Musk's legal team argued the SEC overreached in its request, and claimed the agency is trying to violate his First Amendment right to free speech.” [Wired] Here's a link to the filing from Musk's lawyers at Hueston Hennigan LLP. Reuters says the SEC will respond to it. Some good background from the Financial Times: Two SEC Officials Objected to How Musk Tweets Reviewed. 

>> Novartis, Volkswagen Focus on Improving Culture Following Compliance Setbacks. “What the government and our shareholders are expecting—and what society is expecting—is to do what's right. They are not only looking at whether we follow the law, but how we do business,” said Thomas Kendris, president of Novartis Corp. [WSJ]

>> U.S. SEC to Review Stock Trading Rules in Big Potential Shakeup. “It is clear that the market challenges we faced in the early 2000s are not the same as the issues that we confront over a decade later,” Jay Clayton, chairman of the SEC, said. [Reuters]

>> CFTC Issues First Whistleblower Award Originating From Both a Related Action and a Company Outsider. “While many details of the award remain undisclosed, the CFTC's collaborative efforts with another federal regulator, and the award being granted for expert market data analysis by an external expert provide an important window into the direction the CFTC's Whistleblower Program may be headed.” [Cleary Gottlieb]

>> DOJ Pivot Suggests No End to FARA Frenzy, Lawyers Say. “A small circle of attorneys well versed in the Foreign Agents Registration Act have been predicting that the once-obscure statute is not about to exit the limelight. News last week out of the Department of Justice suggests that they are on target.” [The American Lawyer] New York Times has more here: Justice Dept. to Step Up Enforcement of Foreign Influence Laws. DOJ has named Brandon L. Van Grack, a former prosecutor on Special Counsel Robert Mueller III's team and a deputy chief in the national security division's counterespionage unit, to oversee the FARA unit.

>> 4 Compliance Apps—Created by Attorneys—to Replace Attorneys. Firms are developing software around compliance because there's a great opportunity for both decision support and training, said Bryan Cave Leighton Paisner's global chief innovation officer Katie DeBord. [LegalTech News]

Notable Moves & Announcements

>> Jessie Liu (above), the former Morrison & Foerster and Jenner & Blockwhite-collar defense partner, is the Trump administration's pick for No. 3 at Main Justice. Liu's written extensively on the FCPA and False Claims Act. And fun fact: she was vice president of the National Association of Women Lawyers when it voiced objections to the nomination of Samuel Alito Jr. for a Supreme Court seat.

Elizabeth Papez, former financial services litigation co-chair at Winston & Strawn, has jumped to Gibson, Dunn & Crutcher, where she will be a partner. Papez, who clerked for Justice Clarence Thomas, “augments the firm's already deep bench of more than 20 former U.S. Supreme Court law clerks and joins more than 50 former U.S. Department of Justice leaders and assistant U.S. attorneys,” Gibson Dunn said.

>> Haidee Schwartz, formerly the Federal Trade Commission bureau of competition acting deputy director, will join Akin Gump Strauss Hauer & Feld. Schwartz is now a partner in the firm's antitrust and competition practice.

>> Steptoe & Johnson LLP has hired Stacie Hartman as co-chair of the financial services group. Hartman, based in Chicago, joins from Schiff Hardin.