Welcome to Compliance Hot Spots, and good evening from Washington. The US Justice Department just unveiled new guidance for prosecutors evaluating "inability to pay" claims, and we've got highlights below. Plus: the Chicago federal judge defends setting in motion a contempt inquiry focused on CFTC leaders. Scroll down for Who Got the Work, and all the new moves.

Tips, feedback and general thoughts on your practices are 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!

DOJ Issues New 'Inability to Pay' Guidance

The U.S. Justice Department on Tuesday rolled out new guidance for prosecutors assessing claims from corporate defendants who contend they cannot pay a proposed fine or monetary penalty.

Brian Benczkowski, the assistant attorney general in charge of the criminal division, highlighted the new memo in remarks at a conference Global Investigations Review hosted in New York.

Some of the factors that the Justice Department will consider:

The financial picture: "The factors include the company's ability to raise capital, the circumstances giving rise to the organization's current financial condition, the significant and likely collateral consequences of the fine or penalty to the company, and whether the proposed fine or penalty will impair the ability to pay restitution to victims."

Viability and relief to victims: "The memo further clarifies that where a company is in fact unable to pay the appropriate fine or penalty, Criminal Division attorneys should recommend an adjustment to that amount. But the amount should be adjusted only to the extent necessary to avoid threatening the organization's viability or impairing its ability to make restitution to victims."

Open the books: "The burden of establishing an inability to pay rests with the business organization making such a claim, and the organization must cooperate fully in providing information and access to appropriate company personnel to respond to prosecutors' inquiries."

The chain of command: Prosecutors in the criminal division will need the approval of their section chief to make any reduction to a fine based on a company's inability to pay. If the proposed reduction cuts more than 25 percent off of the otherwise agreed upon penalty, prosecutors will need the approval of the assistant attorney general in charge of the criminal division "or his/her designee," according to a memo Benczkowski released Tuesday.

'Unfortunate Series of Events': Chicago Judge Defends Probe of US Regulator

A Chicago federal trial judge is defending his move to start a civil proceeding that could require U.S.-Senate confirmed leaders of a regulatory agency to testify about their involvement in media statements that lawyers for two major food companies contend violated the terms of a $16 million settlement.

The U.S. Commodity and Futures Trading Commission has asked a federal appeals court to stop or minimize the proceeding on the grounds that the judge, John Robert Blakey, overstepped his authority. Blakey is pushing back on that assertion, arguing in new papers that the agency's appeal is not ripe.

At issue in the dispute, unfolding in the U.S. Court of Appeals for the Seventh Circuit, is a recent CFTC settlement with the companies Kraft Food Group and Mondelez. The companies' lawyers at Jenner & Block and Eversheds Sutherland contend that statements about the deal from agency commissioners—including Chairman Heath Tarbert, Dan Berkovitz and Rostin Behnam—violated a provision that restricted what agency officials were allowed to say. Lawyers for the companies filed papers asking Blakey to hold CFTC officials in contempt.

A team from King & Spalding, including former U.S. attorney Zachary Fardon, is representing the agency officials in the appeal, which up until a few days ago had been under seal. The proceedings in the trial court are on hold until the CFTC's petition challenging Blakey's initiation of a contempt proceeding is resolved. The agency has taken down the disputed press releases while the contempt inquiry is pending.

"Obviously, I didn't set a hearing with the commissioners lightly (and granted continuances upon request). But, under the extraordinary circumstances, where the high-ranking executive officials made some of the challenged statements and appeared to be in sole possession of the relevant information, I determined that it was the right call, at least prior to some convincing argument to the contrary by the CFTC," Blakey told the Seven Circuit on Monday.

Blakey, defending why he wants to hear from CFTC commissioners, said any finding of civil contempt would "requires some showing of state of mind." He added: "I believe it's important to note that the CFTC's fears of an unlawful criminal inquisition are unfounded. Despite the prior invocations of the Fifth Amendment, the prospects of having to make a referral for a criminal contempt investigation are extremely remote."

The CFTC has denied that commissioners acted outside the provisions of the settlement with Kraft and Mondelez.

Who Got the Work

>> The brokerage firm Lek Securities Corp., represented by a team from Norton Rose Fulbright and Latham & Watkins, agreed to pay more than $1.5 million to resolve charges that it aided a market manipulation scheme. The SEC had charged Lek Securities in March 2017 with giving a Ukraine-based firm access to U.S. markets and taking steps that allowed that firm to engage in improper trading activity. Lek's chief executive, Sam Lek, agreed to pay a $420,000 penalty. The Norton Rose team included partners Steve Dollar and Kevin Harnisch. Latham partners Richard Owens and Nicolas McQuaid, along with associate Alysha Naik, also represented Lek.

>> Paul Hastings partners Robert Luskin (at left) and Kwame Manley are representing Gordon Sondland, the U.S. ambassador to the European Union, who was scheduled to be deposed by members of the House Intelligence, Foreign Affairs and Oversight committees. "Ambassador Sondland is profoundly disappointed that he will not be able to testify today," Sondland's lawyers said in a statement. "Ambassador Sondland traveled to Washington from Brussels in order to prepare for his testimony and to be available to answer the Committee's questions."

>> Brownstein Hyatt Farber Schrek is lobbying for the telecom Ericsson Inc. on the "intersection of antitrust and patent policies; telecommunications security issues," according to a new U.S. Senate registration. The team includes William Moschella and Greta Joynes.

Compliance Reading Room

Agencies

The SEC Is Hiring Chief Data Officer. "The Securities and Exchange Commission is in the process of hiring a chief data officer focused on overseeing the regulator's data needs. The responsibilities of the role, which was posted to USAJobs.gov and on LinkedIn from late August to early September, include "providing overall direction and oversight to a broad set of functions that support the SEC's data and information needs," according to the posting." [Business Insider]

Barr Calls on Facebook to Limit Message-Encryption Plans. "Companies cannot operate with impunity where lives and the safety of our children is at stake, and if Mr. Zuckerberg really has a credible plan to protect Facebook's more than two billion users it's time he let us know what it is," U.S. Attorney General William Barr's letter states.[Wall Street Journal] The New York Times has more here.

Trump Weighs Weakening Obama Rules to Curb Corporate Inversions. "Treasury Department officials are considering rolling back a tax rule aimed at preventing American companies from moving money offshore to avoid U.S. taxes, according to several people familiar with discussions." [Bloomberg Tax]

CFTC Says Enforcing Risk-Management Rules Is a Priority. "The Commodity Futures Trading Commission for the first time charged a bank with violating risk-management rules adopted after the financial crisis, a signal to the industry to bolster internal controls in their swaps businesses." [WSJ]

White-collar

U.S. DOJ Says Eni Probe Not Closed for Lack of Evidence, Could Re-Open. "The U.S. Department of Justice has described as 'misleading' any implication that it had closed a probe into alleged corruption by Italian energy major Eni for lack of evidence and said the investigation could be re-opened if circumstances changed." [Reuters]

Currencies Trader Sues Citi Over 'Malicious' Prosecution. "A former Citigroup currencies trader is suing the bank for at least $112m, alleging that the bank 'framed' him to protect itself in the throes of a market manipulation scandal that eventually led to him facing the possibility of a decade in jail." [Financial Times]

FARA

US-based Foreign Agent Bankrolled Ukraine President Zelensky's DC Lobbying in Hopes of Ukrainian Government Job. "A little known U.S.-based attorney quietly poured six figures into foreign influence operations for President of Ukraine Volodymyr Zelensky, hoping to be rewarded with a job in his administration, foreign agent records identified by OpenSecrets show." [Open Secrets]

Greg Craig: The Government's Latest Swing at FARA Enforcement & What Comes Next. "These decisions represent a widely anticipated litmus test of how much latitude the judiciary would accord the Justice Department's emerging priority of holding U.S. actors engaged in political activity on behalf of foreign actors criminally liable." [Just Security]

Notable Moves & More

• Wilmer Cutler Pickering Hale and Dorr has hired former prosecutor George Varghese as a white-collar partner in Boston. Varghese had served for more than 14 years as an assistant U.S. attorney in the Boston and Washington U.S. attorney's offices.

• Craig Lee joined Hunton Andrews Kurth this week as a partner in its competition and consumer protection practice in Washington, D.C. Lee, who formerly led the global cartel task force at Baker Mckenzie, will now head the cartel and antitrust investigations team at his new firm.

• The Trump administration's sanctions chief, responsible for wielding U.S. financial firepower as the White House's primary foreign-policy tool, is leaving for the private sector, Treasury Department officials said. Sigal Mandelker (at left), Treasury's undersecretary for terrorism and financial intelligence, signaled over the summer her desire to step down," the Wall Street Journal reported. The Journal said Justin Muzinich will, for now, oversee the office. Muzinich formerly was president of the New York-based investment firm Muzinich & Co.

• Hogan Lovells has added Charles Loughlin as a partner to its global regulatory practice in Washington, D.C., from the Federal Trade Commission. Loughlin has been at the FTC since 2015, most recently serving as the agency's chief trial counsel.

• Munger, Tolles & Olson said it has brought on Robyn Kali Bacon as a partner in Los Angeles. Bacon began her legal career at the firm before spending eight years as a federal prosecutor.

• Milbank LLP has hired litigator Mona Vaswani as a partner in the London litigation & arbitration team. Vaswani joins the firm from Allen & Overy, where she had been the head of the fraud practice and co-leader of the banking, finance and regulatory litigation practice.

• Buchanan Ingersoll & Rooney has brought on Michael Engle as the new chair of the firm's white-collar defense, compliance and investigations practice in Philadelphia. Engle joined the firm as a shareholder along with counsel Ashley Shapiro. Both are moving their practices from Philadelphia-based midsize firm Stradley Ronon Stevens & Young, which they joined less than three years ago.

• The U.S. Securities and Exchange Commission on Tuesday named Katharine Zoladz as the associate director for enforcement in the Los Angeles regional office. Zoladz began joined the SEC's enforcement division in 2010 as a staff attorney in the Los Angeles office in 2010 and was promoted to assistant regional director in 2017.