Welcome to Compliance Hot Spots, our snapshot on white-collar, regulatory and compliance news and trends. On tap this week: Widespread predictions about a surge in enforcement connected to the coronavirus are bearing out, a Bloomberg subsidiary settles with the SEC, and more detail on Skadden Arps' dealings in Ukraine.

Thanks for reading, and we'd love your feedback. Contact C. Ryan Barber in Washington at [email protected] and at 202-828-0315. Follow @cryanbarber.

 

 

'This Is Going to Generate a Lot of Investigative Work'

The coronavirus outbreak has roiled the markets and, like the financial crisis of a decade ago, there's been an outpouring of government aid. The environment has created conditions ripe for fraud—and, already, lawyers are bracing for a surge of enforcement.

As Rod Rosenstein, the former U.S. deputy attorney general and new King & Spalding partner put it recently: "It's certainly good news for lawyers when the government hands out so much money, particularly under circumstances where there are a lot of ambiguities in the law."

"I do think it's inevitable that this is going to generate a lot of investigative work," added Rosenstein, referring to the roughly $2 trillion pandemic relief package.

Within the past week, the widespread predictions of a crackdown on coronavirus-related fraud have begun to bear out. In the first fraud case related to the pandemic relief package, the Justice Department charged two businessmen with falsely representing they had dozens of employees as they sought more than $500,000 in forgivable loans guaranteed by the Small Business Administration.

While the charges hardly alleged a sophisticated scheme, the case nonetheless underscored the Justice Department's stated interest in cracking down on fraud connected to the pandemic stimulus.

"That did perk up some ears," said Morgan, Lewis & Bockius partner Andrew Budreika. Referring to the Justice Department, he added, "That's a different agency, a different department of government than the Treasury or the SBA, a different arm of the executive branch. So everyone has a purpose in this great play that is unfolding, and they're all showing up at different points to fulfill their part."

On the same day those charges were announced, White House lawyer Brian Miller, the Trump's administration's nominee to serve as the special inspector overseeing coronavirus relief funds, vowed at his confirmation hearing "to use my authority and resources to uncover fraud, waste, and abuse."

In the New York Law Journal, my colleague Tom McParland looked at how enforcement cases arising out of the recent market volatility are likely to land in the U.S. attorneys' offices in Manhattan and Brooklyn, where prosecutors have deep experience with complex securities fraud and other financial misconduct.

David Miller, a partner at Greenberg Traurig and former assistant U.S. attorney in the Southern District of New York, said the recent market upheaval could expose financial misconduct that predated the pandemic, such as Ponzi schemes.

"I think you're going to see a combination of both criminal and civil law-enforcement actions," Miller said. "Either way, I think you're going to see an uptick in civil and criminal enforcement work later this year." Read the full story here.

 

 

Who Got the Work

>> Lawyers from DLA Piper—including Ilana Eisenstein, Ryan O'Quinn and Elan Gershoni—are representing Steven J. Dorfman in a new action at the U.S. Supreme Court that will challenge FTC claims of unfair and deceptive trade practices. Eisenstein, co-chair of the firm's appellate advocacy practice, is a former assistant solicitor general at the U.S. Justice Department.

>> Weil, Gotshal & Manges partner Jonathan Polkes, co-chair of the firm's litigation department and a member of the management committee, advised Morgan Stanley Smith Barney in an SEC settlement. The agency said Morgan Stanley, without admitting liability, "agreed to settle charges that it provided misleading information to clients in its retail wrap fee programs regarding trade execution services and transaction costs." The firm will pay a $5 million penalty.

>> Wilmer Cutler Pickering Hale and Dorr partner Bruce Newman was counsel to Bloomberg Tradebook LLC in an SEC enforcement action alleging "material misrepresentations and omitting material facts about how the firm handled certain customer trade orders." The SEC said in a statement: "Without admitting or denying the findings in the SEC's order, Tradebook agreed to be censured and to pay a $5 million penalty, an amount that reflects Tradebook's significant cooperation with the SEC staff."

>> A team at Venable LLP, including partners William Nordwind and David Mullon, registered to lobby for Rare Element Resources Inc. on "Issues related to mining, separation, and production of rare earth elements in the U.S." Also lobbying for the Littleton, Colorado-based company are Venable senior policy advisors Nicholas Choate and Joshua Finestone, according to a new disclosure filing

>> Faegre Drinker Biddle & Reath registered to lobby for Life Care Services, an Iowa-based manager of senior living communities, on economic relief and policy changes related to the coronavirus outbreak, according to a disclosure filing. The firm's lobbying team includes Ilisa Paul, Jodie Curtis and Elaine Vining.

 

 

Compliance Reading Corner

Skadden Said to Have Paid $11 Million to Settle Ukraine Dispute. "The New York-based law firm Skadden, Arps, Slate, Meagher & Flom has paid $11 million or more to avoid a lawsuit by a former Ukrainian prime minister, Yulia V. Tymoshenko, who blamed the firm for aiding in her political persecution. The settlement, which has not been previously reported, is related to the firm's representation starting in 2012 of the Russia-aligned government of Viktor F. Yanukovych, then the president of Ukraine." The NYT report said Skadden did not respond to messages seeking comment. [The New York Times]

Amazon Heads Into Regulatory Whirlwind. "Amazon's runaway success during the coronavirus pandemic has brought the firm's valuation to new heights, but there is likely to be a price to pay: tougher scrutiny from regulators." [Politico]

Justice Department Eyes Fraud in Lending Program for Small Businesses Hit by Coronavirus Crisis. "Federal prosecutors are mounting a broad search for fraud in emergency lending programs designed to assist businesses battered by the coronavirus crisis, a top Justice Department official said Tuesday. The Justice Department "has a lot of leads and there are multiple ongoing investigations of individuals and small businesses," Assistant Attorney General Brian A. Benczkowski said in an interview. Prosecutors also will apply scrutiny to the activities of banks, which are charged with disbursing the funds in some of the programs, he added." [WSJ]

Private Equity, Lobbying the U.S. for Help, Is Mostly Hearing 'No'. Since March, when the federal government began extending trillions of dollars in aid to companies and investors battered by the pandemic, some of the country's biggest private equity firms have lobbied hard to shape the stimulus in their favor. [NYT]

'It's Going to Be a Big, Gigantic, Gargantuan Fight'. "Lobbyists who hustled to get their clients' priorities into the $2.1 trillion coronavirus relief package in March are angling for a piece of the action on the next—and possibly last—multitrillion-dollar bill." [Politico]