Good evening from Washington—and welcome to Compliance Hot Spots, our roundup and analysis of regulatory and enforcement trends. Tips, feedback and general thoughts on your practices always appreciated. I'm C. Ryan Barber—reach me at [email protected] and 202-828-0315, or follow me on Twitter @cryanbarber. Thanks for reading!

   

Perspectives on CFIUS Rulemaking

Expect new regulations this fall that should clarify which types of deals must be reviewed with greater scrutiny under the nearly one-year old CFIUS reform legislation, said Kirkland & Ellis partner Mario Mancuso, who just published the 2019 edition of “A Dealmaker's Guide to CFIUS.”

The implementing rules for the Foreign Investment Risk Review Modernization Act, which was enacted into law last August, actually could come as a relief to many dealmakers who have seen transactions with China in particular plummet since the national security reviews became mandatory for certain transactions.

“Deals continue to be reviewed even absent final implementing regulations. However, the lack of final regulations is creating some uncertainty around the practical impact of FIRRMA, and a non-trivial amount of angst among clients,” said Mancuso, leader of the firm's international trade and national security practice. (Interim regulations for critical technology under a pilot program were issued last October.)

Mancuso said he understands the U.S. Treasury Department “is keen to get these published” in the fall. He doesn't anticipate any surprises but “there may be some positive developments for investors for certain countries related to mandatory declaration,” he said.

Other experts have hinted at a possible “good” list and a “bad” list of countries. Among the trends Mancuso sees: The increasing relevance of CFIUS reviews for U.S. private equity sponsors, whose funds may be considered “foreign” for CFIUS purposes, as well as increasing concern about national security risks in industries that weren't regarded as sensitive in the past, such as health care and real estate.

Meanwhile, other countries including Canada, Germany and the U.K. are strengthening their own national security review regimes, affecting U.S. and non-U.S. investors, he said. Mancuso also said the committee's $1 million civil penalty imposed last year for a company's breach of a 2016 mitigation agreement was a landmark development.

As for the drop in crossborder deal making, Mancuso said the CFIUS overhaul is not totally responsible. “CFIUS has played a role, but it is not the only factor. The drop-off has been particularly significant with respect to China, but even with respect to China, there have been other domestic Chinese factors that have negatively impacted outbound investment to the U.S,” he said. —MP McQueen

 

 

Goldman Whistleblower Must Arbitrate Claims

We got some late news today from the Southern District of New York, where a trial judge said a purported Goldman Sachs whistleblower, Christopher Collins, must take his claims to arbitration. Read the full decision here.

Collins, represented by the firms Press Koral LLP and Redniss LLC, alleged Goldman Sachs retaliated against him after he raised concerns about anti-money laundering compliance. A team from Sullivan & Cromwell represented the bank, which earlier said it would “vigorously contest” the suit.

U.S. District Judge Edgardo Ramos said Wednesday that Collins's claims are within the scope of an enforceable arbitration clause. He put the case on hold pending arbitration.

 

 

Who Got the Work

>> The Republic of Angola has hired a Squire Patton Boggs team to “bring Angola's financial system up to international standards, increase US trade and investment and enhance Angola's profile in the United States,” according to a law firm filing recently filed at the U.S. Justice Department under the Foreign Agents Registration Act. Partner Robert Kapla and senior partner Joseph Brand are the principal Squire Patton Boggs attorneys on the $4.1 million contract.

>> Huawei has assembled a group of A-list U.S. litigators to help with its legal predicaments, my colleague Anna Zhang reports. Jones Day appellate partner Glen Nager is lead counsel for the company in the federal lawsuit in Texas. He's joined on the case by his appellate partner, Ryan Watson, and Morgan, Lewis & Bockius telecom law partners Andrew Lipman and Russell Blau. Meanwhile, the company is fighting charges in the Eastern District of New York related to Iran sanctions violations. It is represented by Sidley Austin partners Michael Levy and James Cole, a former deputy U.S. attorney general under President Barack Obama, and Jenner & Block partner and former Justice Department lawyer David Bitkower.

>> Williams & Connolly partner David Zinn is representing the latest defendant accused by the Securities and Exchange Commission of participating in a scheme to steal $43 million in investor funds that were supposed to be invested in Native American tribal bonds. Zinn's client, Jason Sugarman, was charged with directing the scheme alongside Jason Galanis, who pleaded guilty to parallel criminal charges.

>> Wilmer Cutler Pickering Hale and Dorr partners Bill Paine and Bob Keefe represented State Street Bank and Trust Company as the bank resolved claims that it overcharged clients. As part of its settlement with the SEC, the bank agreed to pay a $40 million civil penalty and to disgorge almost $50 million. The SEC claimed that, from 1998 to 2015, State Street overbilled customers for custodial expenses, such as the cost of sending secured financial messages through the Society of Worldwide Interbank Financial Telecommunication, or SWIFT, network.

 

 

All the Moves & Announcements

• The SEC said that deputy chief of staff Sean Memon (above) has been promoted to chief of staff, succeeding Lucas Moskowitz. Memon, who formerly practiced at Sullivan & Cromwell, has been with the agency since May 2017. Moskowitz earlier practiced at Wilmer Cutler Pickering Hale and Dorr.

• Lee Rudofsky, senior director for global anti-corruption compliance at Walmart Inc., was nominated Monday to federal trial post in Arkansas. The Harvard Law School grad and former Washington-based Kirkland & Ellis associate recently served as solicitor general of Arkansas.

• Barnes & Thornburg has named Roscoe Howard Jr., a former U.S. attorney for the District of Columbia and a member of the firm's white-collar and investigations group, to serve as managing partner of its Washington office, my colleague Ryan Lovelace reports. Howard last year won the ZTE monitorship from the Commerce Department after the agency rescinded an offer made to Covington & Burling partner Peter Lichtenbaum.

• Hughes Hubbard & Reed said Roy (Ruoweng) Liu will chair the firm's Greater China practice as a partner in the sanctions, export controls and anti-money laundering practice. Liu had been at Hogan Lovells since 2009.

• Justin Weddle, who spent five years at Brown Rudnick after a 15-year career at the Justice Department, launched his own New York boutique last month. His two-lawyer firm also includes former Brown Rudnick associate Julia Catania.

• Russell Duncan, the former head of the white-collar defense group at Shulman Rogers, has joined Clark Hill PLC as a partner.