Good evening, and welcome back to Compliance Hot Spots, our weekly snapshot of white-collar enforcement, regulatory and news and trends. In your inbox this week: With the 2020 election drawing near, there's moving and shaking at the upper levels of the Justice Department. Also: Winston & Strawn's Abbe Lowell steps in to represent the legendary lobbyist Jack Abramoff against criminal charges (once again). Plus: a new federal appeals court ruling about the litigation funding and the False Claims Act is sure to get some attention in the coming weeks.

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.

 

 

Musical Chairs at Barr's Department of Justice

The U.S. Justice Department has found itself in the midst of a summertime reshuffling, as three Senate-confirmed leaders plan to step down at week's end and a pair of prominent officials prepare to swap roles.

U.S. Attorney General William Barr is eyeing a senior Justice Department official, Seth DuCharme, to lead the federal prosecutor's office in Brooklyn, according to two sources familiar with the recent considerations. DuCharme would effectively exchange roles with Richard Donoghue, the U.S. attorney for the Eastern District of New York, who is set to replace him as the senior official working for Deputy Attorney General Jeff Rosen.

DuCharme led the criminal division of the U.S. attorney's office in Brooklyn before becoming a top adviser to Barr in early 2019. In December, he replaced Ed O'Callaghan as Rosen's principal deputy. O'Callaghan, who acted under then-Deputy Attorney General Rod Rosenstein as the primary liaison between the Justice Department and the special counsel's office, joined the Washington office of Wilmer Cutler Pickering Hale and Dorr in April.

Donoghue's move to Main Justice is seen as bringing national security and criminal law enforcement experience into the office of Rosen, whose career in private practice at Kirkland & Ellis largely focused on civil litigation. Rosen appointed Donoghue earlier this year to coordinate all Justice Department efforts connected to Ukraine, an assignment that came in the wake of an impeachment proceeding that focused on Trump's efforts to pressure the Ukrainian government to launch an investigation into Vice President Joe Biden.

In a January memo, Rosen referred to "several distinct open investigations being handled by different U.S. Attorney's Offices and/or Department components that in some way potentially relate to Ukraine."

Donoghue's arrival at Main Justice comes on the heels of President Trump's headline-grabbing ouster of the top federal prosecutor in Manhattan, Geoffrey Berman, whose office has overseen investigations of Trump's inner orbit, including the president's past and present personal attorneys. Berman stepped down after a remarkable standoff with the attorney general, in which he rebuked Barr for claiming in a press release that he had voluntarily "stepped down."

Meanwhile, three Senate-confirmed Justice Department officials are preparing to step down on July 3. Solicitor General Noel Francisco, who has served for two years as the Trump administration's chief advocate before the Supreme Court, will be replaced by his principal deputy, Jeff Wall, a former Sullivan & Cromwell appellate partner.

Brian Benczkowski, the head of the Justice Department's criminal division, will be replaced by Barr's former chief of staff, Brian Rabbitt, a onetime Williams & Connolly associate and adviser at the SEC. And Jody Hunt, who served as former Attorney General Jeff Sessions' chief of staff before taking charge of the Justice Department's civil division, will be replaced by his top deputy, Ethan Davis, a former King & Spalding partner who clerked for Justice Neil Gorsuch.

 

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Who Got the Work

>> Winston & Strawn partner Abbe Lowell (above left) is defending Jack Abramoff (above right)—the uber lobbyist who served prison time last decade after pleading guilty to charges related to illegally plying federal legislators with expensive gifts and trips—in a new federal case. Federal prosecutors in San Francisco and the U.S. Securities and Exchange Commission both announced charges Thursday against Abramoff in an alleged scheme to mislead investors about the legitimacy of a new form of cryptocurrency. Politico reports on what the case against Abramoff means for Washington's influence industry.

>> Morrison & Foerster partner Charles Duross was counsel to Swiss pharmaceutical company Novartis AG in a new SEC settlement. Novartis AG has agreed to pay more than $112 million to settle charges that it violated the he Foreign Corrupt Practices Act's books and records and internal accounting controls provisions.

>> Sidley Austin partner Corin Swift represented SG Americas Securities LLC as the broker-deal reached a $3.1 million settlement resolving claims that it failed to provide the Securities and Exchange Commission with complete and accurate trading information known as "blue sheet" data. The SEC said that, "for more than five years, SG Americas made numerous deficient blue sheet submissions containing missing or inaccurate data, largely due to undetected coding errors."

>> Skadden, Arps, Slate, Meagher, & Flom partner Alex Drylewski was counsel to Telegram Group Inc. in a new SEC settlement. Without admitting or denying the allegations, Telegram and its subsidiary TON Issuer Inc. agreed to return more than $1.2 billion to investors and to pay an $18.5 million civil penalty. The SEC said the settlement resolved "charges that Telegram's unregistered offering of digital tokens called 'Grams' violated the federal securities laws."

 

 

Compliance Reading Corner: All the Things

Whistleblower's Deal With Litigation Funder Doesn't Doom False Claims Case. A whistleblower who had arranged a monetary deal with a third-party litigation funder still enjoys the authority to pursue fraud claims in the interest of the United States under the federal False Claims Act, a federal appeals court ruled Thursday. None of the provisions in the FCA controlling the behavior of whistleblowers restricts the ability of a tipster to enter into a litigation funding arrangement, the appeals court said. "Indeed, the statute is silent as to this point," the court said. [NLJ] Read the decision.

DOJ Compliance Guidance Places New Emphasis on Middle Management, Use of Data. "A recent revision to U.S. Justice Department guidance on corporate compliance is placing increased emphasis on the role of middle management and access to internal data as it broadens the scope of how prosecutors evaluate companies' policies and controls. 'We wanted to make sure the midlevel management is also echoing that theme, ensuring compliance programs are adequately resourced and empowered,' Sally Molloy, chief of a Justice Department policy and training unit, said this week during an online event hosted by the American Bar Association." [WSJ]

SEC Prevails Over XYPN in Reg BI Suit. The U.S. Court of Appeals for the 2nd Circuit ruled Friday afternoon that Section 913(f) of the Dodd-Frank Act grants the Securities and Exchange Commission broad rulemaking authority, "and Regulation Best Interest clearly falls within the discretion granted to the SEC by Congress." [ThinkAdvisor] Read the ruling here.

Supreme Court's Ruling on SEC Disgorgement Could Shrink Whistleblower Awards. "Lawyers representing corporate whistleblowers are concerned that the ruling, which asks the SEC to consider legitimate business expenses in imposing disgorgement, will decrease the awards tipsters might receive since such payouts are tied to the total amount of monetary penalties issued in a case. Decreases in award totals could discourage some tipsters to come forward, they said." [WSJ]

Justice Department Expected to File Antitrust Suit Against Google. "The people cautioned that Attorney General William Barr, who did not attend the meeting, has yet to make a final decision on whether to sue, a judgment he could make in the coming weeks. The department would also need to decide what remedy it would seek, such as trying to break up the company or placing limits on its behavior. Whether the state attorneys general would also sign on to the DOJ complaint isn't yet determined." [Politico]

Small-Business Aid Program Has Significant Fraud Risk, GAO Says. "The $670 billion Paycheck Protection Program to help struggling small businesses survive fallout from the coronavirus pandemic faces a "significant risk" of fraud because of confusing rules and lack of safeguards, a Government Accountability Office report has found. In its haste to get money to businesses quickly, the Small Business Administration allowed banks to rely on borrowers' own certifications to determine their eligibility for loans, which can be forgiven if borrowers meet certain conditions, the report noted." [WSJ] More here at Politico.

 

 

Notable Moves & More

>> Cadwalader, Wickersham & Taft says it has brought on Rachel Rodman as a white-collar partner from Williams & Connolly, where she had been a counsel. Rodman earlier worked at the Consumer Financial Protection Bureau, including a two-year stint as senior legal counsel in the legal division. "Rachel brings unique capabilities and experiences to our firm at a time when this first-hand experience is at a premium," Cadwalader's Jodi Avergun, who heads the firm's white-collar defense and investigations practice, said. "She played a significant role at the CFPB and has continued to provide important guidance to banks and other financial institutions on consumer litigation and enforcement matters.

>> Jones Day has hired former Federal Trade Commision lawyer Lin Kahn (at left) as an antitrust partner in San Francisco. Kahn, who had been a trial counsel at the FTC since 2015, said that because of her prior time at the firm, she knew of its "seamless collaboration," and she was impressed by what she described as the talent in the antitrust practice. Additionally, the firm said it's brought on former federal prosecutor Robert Huie as of counsel in San Diego. My colleague Brenda Sapino Jeffreys has more here.

>> Options Clearing Corporation has named Jennifer Baum as senior vice president and chief compliance officer. Baum is currently serving as first vice president, regulatory and compliance. She succeeds Joe Adamczyk.

>> Skadden, Arps, Slate, Meagher & Flom said Jeffrey Gerrish, the deputy U.S. trade representative, is returning to the firm as a partner in the firm's national security group. "Gerrish will focus on helping clients navigate challenges and barriers in international trade and investment, including working with clients on trade agreement and supply chain issues, market access issues and trade barriers, reviews by the Committee on Foreign Investment in the United States (CFIUS), export controls matters and trade litigation," the firm said.