Welcome to Compliance Hot Spots, our snapshot on white-collar, regulatory and compliance news and trends. Brian Miller, the Trump White House lawyer up for special inspector general for pandemic recovery, has said a lot over the years about IG independence. Plus: False Claims Act compliance amid the crisis, and Latham's Kathy Ruemmler, a leading white-collar partner, is leaving for Goldman Sachs. Scroll down for Who Got the Work, major headlines and more.

We hope you, colleagues, family and friends are staying safe and healthy amid the coronavirus pandemic. Tips, feedback and thoughts on your practices are always appreciated. How are you coping with the covid-19 crisis? Contact C. Ryan Barber in Washington at [email protected] and at 202-828-0315. Follow @cryanbarber. Thanks for reading, and stay safe.

 

 

An IG 'Must Have Independence.' But Will Trump's Pick for Pandemic Relief Watchdog Get It?

President Donald Trump's selection of a White House lawyer, Brian Miller, to oversee the federal government's response to the coronavirus outbreak immediately raised questions about whether the watchdog effort would enjoy sufficient independence.

A former inspector general for the Justice Department, Michael Bromwich, said no White House lawyer should be eligible for such a role. Speaker Nancy Pelosi quickly assailed the selection, saying the special inspector general overseeing the coronavirus relief package "must be independent from politics."

"The president's nomination of one of his own lawyers clearly fails that test," Pelosi said.

Only time, not to mention confirmation by the Senate, will answer the question of whether Miller will doggedly oversee the federal government's emergency spending without fear or favor of the White House. But his past statements and tenure as the internal watchdog for the General Services Administration, point to an appreciation for the role of inspectors general and the need for independence.

"In order to have effective oversight, an IG must have independence to conduct an investigation, review or audit. This includes determining what information is needed. It is the judgment of the IG conducting the investigation that matters, not the judgment of the agency being investigated," he testified in 2015, during a congressional hearing on a Justice Department memo that appeared to bless the FBI's decision to limit the inspector general's access to sensitive information.

Read more about Miller's background and the approach he might bring to the role of special inspector general for pandemic recovery.

 

 

False Claims Act Litigation Will Follow the Stimulus Package. Here's How to Avoid It.

MoloLamken partner Jessica Ortiz and counsel Caleb Hayes-Deats recently put a spotlight on the coronavirus and False Claims Act investigations:

>> "If the past is any guide, the government funds being used to help businesses during this downturn will surely produce False Claims Act investigations and litigation. In the five years after 2009, when Congress passed stimulus bills to respond to the financial crisis, the government and private whistleblowers filed nearly 4,000 FCA cases and recovered almost $23 billion."

>> "An increase in FCA cases is a natural byproduct of emergency economic stimulus. When the government must distribute money quickly to address a crisis, the unscrupulous seek to take advantage. Identifying those engaged in fraud takes the government time, and many innocent individuals and entities may be investigated as part of the process."

Read the full piece here.

 

 

Who Got the Work

>> Williams & Connolly partner Enu Mainigi (above) is advising a former Wells Fargo executive, Carrie Tolstedt, in a federal criminal investigation, Reuters reported. Tolstedt led the bank's retail and small business lending business from 2007 to 2016. "The development marks a rare instance of a senior bank executive facing criminal inquiry as a result of their job," the report stated. Tolstedt acted "appropriately and in good faith at all times," Mainigi said earlier, according to the report.

>> Covington & Burling partner Robert Long Jr. is counsel of record to the American Bankers Association in a pending U.S. Supreme Court case. The association's petition asked: "When a statute expressly directs an agency to define a statutory term, does the delegation expand the scope of the agency's authority at Chevron step two beyond its ordinary bounds?"

>> Luckin Coffee, the upstart coffee chain in China, has hired Kirkland & Ellis and FTI Consulting to conduct an internal investigation into allegations that the company's chief operating officer and several employees fabricated transactions. The company, whose stocks are traded on Nasdaq, disclosed earlier this month that the chief operating officer and employees had been found to have forged up to $310 million in sales in 2019.

 

 

Compliance Reading Room: What I'm Reading

SEC's Clayton Signals Sympathy for Pleas of Private Equity-Backed Firms. "Federal regulations can make it harder for companies with private-equity or venture backers to qualify as small businesses because they essentially consider all firms controlled by a single investor as one entity. Securities and Exchange Commission Chairman Jay Clayton (above) told small business advocates Thursday that he would "echo these issues" to officials at the Small Business Administration and the Treasury Department, which have authority over the rules." [WSJ]

Regulatory Slowdown Due to Coronavirus Makes Compliance Role Critical. "Compliance professionals should also be monitoring corporate disclosures to ensure they comply with federal securities laws—particularly false or misleading statements intended to prop up the value of the stock. These times might dictate disclosing more information, rather than less." [Compliance Week]

Inside DOJ's Nationwide Effort to Take on China. The leadership of the Justice Department has put a bull's-eye on the Chinese government, pushing prosecutors across the country to focus on investigations of Chinese state-backed efforts to steal intellectual property. The work involves investigations into American academics and work with U.S. universities, and department officials say their nationwide undertaking isn't slowing it down. [Politico]

Lobbyist's Coronavirus Challenge: Bring Back the Small Talk. "There is, however, an important ingredient missing from the daily grind: small talk. Videoconferencing and phone calls fill up his day, but these interactions can be impersonal and don't always offer the right setting for a conversation that builds camaraderie and trust." [WSJ]

Company Ignored Compliance Officer Who's Now $450K Richer as Whistleblower. The U.S. Securities and Exchange Commission has given a $450,000 whistleblower award to an employee who had compliance-related job responsibilities at a company—only the third time in eight years that an award has gone to an individual with compliance or internal audit duties. "When gatekeepers such as compliance officers, accountants or lawyers blow the whistle to the SEC, it is a sign that something is very, very wrong at that company," said Jordan Thomas, head of the whistleblower practice at Labaton Sucharow. Thomas, a former assistant director and chief litigation counsel at the SEC, helped build the agency's whistleblower program before he joined Labaton. [Corporate Counsel]

Martin Shkreli Is Trying to Use the Coronavirus Pandemic to Get Out of Prison. "Martin Shkreli, currently serving a seven-year sentence for securities fraud, has a pitch to authorities: Let me out of prison and I'll help stop the novel coronavirus. The disgraced biotech entrepreneur is asking for a "brief" three-month furlough from his federal penitentiary in Allenwood, Penn., to spend time researching potential treatments for Covid-19, the disease caused by the virus." [STAT]

CFPB Gives Credit Bureaus More Time to Investigate Disputes. "Consumer credit rating bureaus and lenders won't face federal penalties for failing to complete timely investigations of disputed items on consumer credit reports due to staffing issues from the new coronavirus pandemic." [Bloomberg Law]

 

 

Notable Moves & Announcements

• Latham & Watkins partner Kathryn Ruemmler (above), global white-collar and investigations co-chairwoman, is joining the Goldman Sachs Group this month to serve as global head of regulatory affairs. Ruemmler, who will be a member of the Management Committee, earlier served as White House counsel during the Obama administration. "Kathy will join John Rogers as co-chair of the Regulatory Reform Steering Group, and will work closely with him on the firm's regulatory agenda. She will also join Gwen Libstag as co-vice chair of the Firmwide Reputational Risk Committee," the company said. Goldman Sachs also named Michael Richman as new chief compliance officer. Richman has held several leadership roles, including deputy head of global compliance. My colleague David Thomas has more here on Latham's plans.

• Edward O'Callaghan, a top U.S. Justice Department official in the Trump administration who played a lead role overseeing the Russia investigation, has joined Wilmer Cutler Pickering Hale and Dorr as a white-collar and investigations partner. The move that returns him to working alongside former Special Counsel Robert Mueller III. O'Callaghan had been a Clifford Chance partner when he joined the Justice Department.

• Latham & Watkins said it had hired Williams & Connolly partner Nicholas Boyle, making him the second practice leader to leave the firm for Latham in less than three months, following the departure of Adam Perlman in January. Boyle, based in Washington, co-chaired the unfair competition and trade secrets practice and the arbitration practice at Williams & Connolly, handling trial, appellate and arbitration matters.

• Akin Gump Strauss Hauer & Feld said Kelly Cleary has joined as a partner in the firm's Washington office, returning to private practice from senior legal positions in the Department of Health and Human Services. For the last three years, Cleary served as deputy general counsel at HHS and as chief legal officer for the Centers for Medicare & Medicaid Services.

• K&L Gates said David Rybicki has joined the firm as a white-collar as a partner from the criminal division of the U.S. Justice Department. Rybicki had served in a variety of roles, including most recently as acting principal deputy assistant attorney general and deputy assistant attorney general.

• O'Melveny & Myers said Michael Dreeben, who joined the firm in Washington, D.C., in December, is now the co-chair of the firm's white-collar defense and corporate investigations practice, joining Los Angeles-based partner Steve Olson.