- Lance Armstrong settled a False Claims Act case for $5 million. His cycling team was sponsored at one point by the U.S. Postal Service. Apparently doping violates the terms of federal government sponsorship agreements. Who knew?
- In Texas, the GM of a Venezuelan energy company entered a guilty plea for his role in an international money laundering and bribery scheme
- Closer to home, former FBI Director James Comey will be in Portland tomorrow to plug his new book. He’ll be in Seattle on Sunday. I’ll be attending the Seattle talk.
- It’s not just famously fired government officials who are active in the Pacific Northwest. Current prosecutors are busy as well. In Portland, a CPA’s 4/20 plans went up in smoke when the U.S. Attorney’s Office accused him of hiding income and diverting investor money from his accounting business to his marijuana business.
- In Seattle, the former president and former vault-manager of a King County precious metals business were arraigned this week on charges that they fraudulently obtained millions of dollars from thousands of customers by misrepresenting shipping times for bullion and using bullion and money belonging to customers to fulfill other bullion orders. I can still think of at least one far more ambitious bullion-based criminal scheme:
I was thinking about double jeopardy yesterday. Not the Trebek kind, though that is my favorite tv show. Instead, I was thinking about the somewhat enigmatic statement in the Fifth Amendment to the U.S. Constitution that no person “be subject for the same offence to be twice put in jeopardy of life or limb.” My musings were prompted by yesterday’s news that New York Attorney General Eric Schneiderman has asked New York’s legislature to amend the state’s double jeopardy law to ensure that state prosecutors can go after persons whose conduct violates both federal and state law but who may be pardoned by the President after being prosecuted for federal crimes. I’ll provide some context below, but I don’t want to leave you in suspense about my view: I’m troubled by this.
- The ex-CEO of Alaska-based telecom company Quintillion Networks was accused of forging contracts to secure $250 million in investment
- The chief of Backpage.com has pled guilty to conspiracy and money laundering
- Three men were indicted as part of a bribery scheme to buy alcohol at deep discounts from Navy exchanges — good initiative, bad judgment
- Can’t ignore the obvious part 1: Michael Cohen
- Can’t ignore the obvious part 2: James Comey
- Can’t ignore the obvious part 3: Hungary
Chaplin later regretted this satirization
- A little federal grant fraud and money laundering up in Alaska
- Every employer really, really has to pay payroll and employment taxes, even in Washington
- Being a whistleblower can pay handsomely — $2.2 million from the SEC for this lucky winner
- The Treasury Department issued FAQs regarding implementation of the rule requiring financial institutions to identify the true owners of corporate bank accounts taking effect on May 11th
- Treasury also sanctioned several Russian oligarchs this week as well as a music promoter and prostitution ring leader
- And, lastly, the interesting tale of a lawyer, the judge he bribed, and $550 million in “the biggest Social Security fraud ever“
Did you know that, as of 2008, there’s a good chance the federal government can prosecute you for fraud against the U.S. whenever it wants to, regardless of the statute of limitations? Does that seem alarming to you?
The government can do this because of a federal statute called the Wartime Suspension of Limitations Act. The Act says that when the U.S. is at war or “Congress has enacted a specific authorization for the use of the Armed Forces,” the statute of limitations for any offense involving fraud or attempted fraud against the U.S. or one of its agencies is suspended until five years after the termination of hostilities.
- Lots of pernicious activity in the PNW, beginning with sending a false distress message to the Coast Guard, a big no-no
- An interesting conspiracy to get around sanctions against Iran involving Chinese, Turkish, and Portuguese companies — the indictment was handed down in Washington, DC, but the plea will be in Seattle where the defendant was arrested and has remained in custody
- This case was transferred to Seattle from Florida — ransomware used to extort people into paying “fines” to phony law enforcement organizations
- I’m seeing a spinoff of WAGS — WWCCs
- Even listenin’ to Slippin’ couldn’t convince the judge not to give DMX some prison time
- Most disturbing of all this week: massive wine fraud in the Rhone Valley — life really does imitate The Simpsons…
Following our recent post on disclosures to the EPA, this week we’re going to look at disclosures to outside auditors, often in the context of internal investigations, and steps to take to limit any waiver of attorney work-product protection. Here we go . . .
Work-product protections are not automatically waived by disclosure to third parties. Rather, they are waived when such disclosures are to an adversary or increase the likelihood of disclosure to an adversary. As usual in the world of law, there is a split of authority over whether the disclosure of work-product to an independent auditor, such as a Big Four accounting firm, waives work-product protection.
Most courts have concluded that disclosures to outside auditors do not have the requisite adversarial relationship for waiver. See, e.g., SEC. v. Schroeder; In re JDS Uniphase Corp. Sec. Litig.; SEC v. Roberts; Merrill Lynch & Co. v. Allegheny Energy, Inc.
However, other courts have concluded that disclosures to outside auditors do amount to a waiver. See, e.g., Middlesex Ret. Sys. v. Quest Software, Inc.; Medinol, Ltd. v. Boston Scientific Corp.; Samuels v. Mitchell.
The only federal appellate court to have ruled on the question is the D.C. Circuit in United States v. Deloitte LLP, which concluded that work product protections are not waived by disclosure to independent auditors.
But relying on the “majority view” or one appellate court’s opinion is not a risk most people want to take. So to protect against the risk of waiving work-product protection, or if you’re in a minority jurisdiction, here are certain concrete steps that attorneys can take to help protect against waiver of the work-product doctrine:
- Ensure that disclosures made to the auditors are oral rather than written.
- Be aware that auditors’ notes concerning oral communications with counsel may be discoverable if there is a later determination that there has been a waiver.
- Request that the audit team confine their notes only to those facts that are essential to performing their audit function.
- Answer only those specific questions asked by the auditors.
- Do not volunteer to disclose work-product such as interview memoranda or any written report of the privileged investigation.
- Answer auditors’ questions by providing facts that have been gathered during the investigation, which are not privileged regardless of their form and thus would not constitute a waiver.
- Focus on the process underlying the investigation—the number of witnesses interviewed, length of those interviews, and the general thoroughness of the investigation—to assure auditors of the robust nature of the investigation or a client’s internal controls while minimizing the risk of waiving privilege.
- Discuss the auditors’ confidentiality obligations in advance of any oral report.
- If there is not already a confidentiality agreement in place, then one should be put in place.
- The confidentiality agreement should ensure that any information sent to the auditors is confidential and that the auditors will not further disclose that information.
- Specify that the confidential information is subject to work-product protection.
- Document the legal basis for the work-product protection when the work-product is transferred to the auditors.
- The agreement with the auditors should include a provision that if litigation arises and the auditor is subpoenaed,your in-house or outside counsel will review any auditor work papers that may contain privileged material before they are produced.
- Finally, ensure that other indicia of anticipated litigation, such as a litigation hold, are in place to strengthen the case that you both reasonably anticipate such a dispute and are taking steps to safeguard your information.
Finally, remember, even after all precautions have been taken, there is a limit to one’s control over events . . .
- Don’t mess with the Postal Service — mail thieves busted in Central Oregon
- Meanwhile, over in Eastern Washington, a grocery shop owner was allegedly engaging in food stamp fraud
- Here in Seattle, the owner of a chain of Mexican restaurants faces tax theft charges totaling $5.6 million
- In somewhat bigger news, the DOJ announced this morning that nine Iranians have been charged with conducting a massive cyber theft campaign
- Earlier this week the DOJ charged two Canadian brothers with running an “unlicensed money service business,” which laundered $250 million
- One of the conspirators in the massive foreclosure bid-rigging scheme in California was sentenced to 2 1/2 years in prison and ordered to pay a $1.4 million fine — somebody should’ve told all these guys there are rules …
Reza Olangian, the dual U.S.-Iran citizen arrested in Estonia in 2012 for trying to arrange the purchase of surface-to-air missiles with an undercover DEA agent, was sentenced to 25 years in prison.
- Some alleged passport fraud and identity theft out in Yakima
- And some alleged money laundering involving Iran up in Alaska
- “Massive” money laundering and drug network busted down in San Diego
- The former Navy intelligence chief caught up in the Fat Leonard scandal was found to have accepted extravagant meals, cigars and other illicit gifts but did not party with prostitutes
- Surprise! Check-the-box compliance programs are a waste of money — but the authors’ solution of “metrics” and “analytics” does not seem like the answer …
To disclose or not to disclose, that is the question. Although self-disclosure will bring the matter to the Environmental Protection Agency’s attention, it is a great mechanism for reducing penalties for any enforcement action the EPA might bring.
The EPA’s audit policy was issued in 2000. It offers penalty mitigation and other incentives for companies that discover, promptly disclose, and expeditiously correct environmental violations, as well as take steps to prevent future violations.
The EPA now uses an automated system, eDisclosure, for self-reporting violations. In general, companies must report violations within 21 days of discovery and resolve them within 60 days, although extensions are readily given for returning to compliance to avoid penalties.
The EPA categorizes disclosures as Tier 1 or Tier 2. Only Emergency Planning and Community Right-to-Know Act (EPCRA) violations are covered by Tier 1. Under Tier 1, eligible disclosures will automatically receive an electronic Notice of Determination (eNOD) confirming that the violations are resolved with no assessment of civil penalties, conditioned on the accuracy and completeness of the submitter’s certified eDisclosure.