Government Enforcement

With the Department of Justice’s (DOJ) decision to drop charges against Michael Flynn, materiality has come to the forefront of popular legal discourse.  At the same time, prosecutors and whistleblowers will carefully consider enforcement/false claims actions against entities who may have wrongfully received relief funds under the Coronavirus Aid, Recovery, and Economic Stability Act (CARES Act).  Such actions likely will turn on whether alleged misrepresentations were materially false.  Those applying for CARES Act funds, such as those under the Paycheck Protection Program (PPP), must ensure all of their representations and certifications are truthful.  However, those accused of making misrepresentations in order to receive government funds may find refuge in a more narrow view of the materiality requirement.
Continue Reading Materiality Concerns For CARES Act Enforcement Cases

The devastating economic impact of the COVID-19 pandemic already has set in, with the future of thousands of businesses hanging in the balance.  Big and small businesses alike are finding it difficult to cope with the downturn.  The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) provisions related to small business loans provide a glimmer of hope.  Among other forms of economic relief, the CARES Act created the $349 billion Paycheck Protection Program (“PPP”) to provide funding to assist small businesses impacted by the pandemic.  After the initial allocation of PPP funds was exhausted the President signed a bill providing an additional $484 billion in relief, including $310 billion for the PPP, on April 24, 2020[1].  It may turn out for some businesses, however, that these provisions will be nothing more than fool’s gold.  The U.S. Small Business Administration (“SBA”) loan programs, including the PPP under the CARES Act, only are available to qualifying businesses that strictly comply with complex rules related to the size of the business, including its employee count, financial condition, affiliations, control and ownership, and industry classifications.  Businesses that reflexively jumped at the SBA money grab without discipline or compliance are at risk of aggressive government enforcement that surely will follow.
Continue Reading Small Business Money Grab Under the CARES Act Brings Enforcement Risks

This month, and with great fanfare, the U.S. Department of Justice (DOJ) announced its creation of a Procurement Collusion Strike Force.  We know what you’re thinking, and no – this
Continue Reading A Few Thoughts on DOJ’s Procurement Collusion Strike Force

To gain insight into where the Securities and Exchange Commission (“SEC”) and Commodity Futures Trading Commission (“CFTC”) have been focusing their oversight and what their priorities will be in 2020, look no further than their recent words and deeds. A common thread running through the recent public statements and enforcement activity of both agencies is a commitment to maximizing the resources at their disposal to expedite resolutions, whether by leveraging technology, deploying multi-pronged approaches, engaging in industry outreach, or coordinating with fellow regulators.
Continue Reading Regulatory Moves Show Financial Watchdogs Working Smarter, if Not Harder

U.S. regulators, in particular the Commodity Futures Trading Commission (“CFTC”), are intently pursuing market manipulation enforcement. The September 30 end of the 2019 fiscal year brought with it a flurry of press releases from four different agencies announcing settlements of spoofing-related enforcement actions against trading firms, banks, interdealer brokers, and traders.
Continue Reading Spoofing Enforcement Intensifies

Under its new leader, the New York Department of Financial Services (“DFS”) has staked out high ground for itself by self-identifying as the “regulator of the future” DFS’s pronouncement came in a July press release issued about a month after Linda Lacewell was confirmed as the agency’s third superintendent. The press release, issued to announce the creation of a new Research and Innovation Division, signals that DFS is attempting to harness the increasing technological tools available to regulators, while making New York an attractive place for financial firms to do business. “The financial services regulatory landscape needs to evolve and adapt as innovation in banking, insurance and regulatory technology continues to grow,” Lacewell said in the press release. “This new division and these appointments position DFS as the regulator of the future, allowing the Department to better protect consumers, develop best practices, and analyze market data to strengthen New York’s standing as the center of financial innovation.”
Continue Reading New York’s Department of Financial Services: the Self-Styled “Regulator of the Future”

The C-Suite rarely wants to consider, much less worry about, the impacts of criminal conduct on their business. The reality is, however, companies can and do get pulled into criminal and quasi-criminal enforcement actions as both victims and (albeit unintentional) perpetrators. Two areas of criminal conduct that perhaps do not receive the amount of C-Suite attention they deserve are internal trade secret theft and human trafficking.
Continue Reading How to Prevent or Defend Against Business Crimes, including Trade Secrets and Human Trafficking

On April 29, 2019, just months into her new job at the New York State Department of Financial Services (“DFS”), acting DFS Superintendent Linda Lacewell announced a significant reorganization within the financial and insurance regulator. The new Consumer Protection and Financial Enforcement Division (the “CPFED”) combines seven previously separate divisions and units – Enforcement, Investigations and Intelligence, the Civil Investigations Unit, the Producers Unit, the Consumer Examinations Unit, the Student Protection Unit, and the Holocaust Claims Processing Office – under a single executive deputy superintendent. Lacewell appointed Katherine Lemire, a former state and federal prosecutor, to head the newly-minted division.
Continue Reading New York DFS Consumer Protection and Financial Enforcement Division: New Name, New Look, Old Mandate

The April issue of National Defense Magazine brought a well-written article by Susan Cassidy and her colleagues at Covington & Burling LLP on a recent DOD IG report analyzing (and criticizing) spare aviation parts pricing, even though the report concluded that the contractor in question had complied with the Truthful Cost or Pricing Data Act. The article addresses the IG’s concept of a fair profit – which is abjectly divorced from reality – and it notes that the GAO has been conducting a study of spare parts purchasing with a promise of recommendations to improve transparency in this area. I commend the article to anyone who operates in the spares market and wants to know where the Government is heading in relation to spares pricing.

With the IG and the GAO injecting themselves – yet again – into the spare parts market and decrying the rapacious contractors who dare to sell at prices that the Government regards as outrageous (after all, why in the world would anyone think that a profit rate in excess of 15% on a firm fixed price contract was reasonable?) it seems like a good time to revisit the reasons why the Government’s periodic complaints about spare parts pricing are generally myopic and wrong. And so, because no criticism of Government contractors ever goes away forever, I offer for your consumption a refresher: the re-publication of a posting that I authored in November 2014, entitled “How Dare You Charge That for a Spare Part!” – The Untold Story of the X27 Interface Assembly” –
Continue Reading Resurrecting the Spare Parts Bogeyman – A Refresher on Why the Government Gets It Wrong