- Ron Rockwell Hansen, a former Defense Intelligence Agency case officer, was arrested in Seattle for spying on behalf of China — here’s the arrest warrant and complaint
- So many ways to commit fraud — here’s gift card fraud complete with reverse engineering, algorithms, and other techy Seattle things that lawyers don’t understand, as exemplified by the indictment
- Apparently, embezzling from a tribe is its own separate crime
- I love the Washington Post but they get this story about civil asset forfeiture completely wrong and in the most lazy way by simply repeating an attorney’s allegations — a post to follow about how asset forfeiture really works
- Another laugher from the Washington Post about the possible end of legalese — legalese will never die and we’ll have a future post on why
- The SEC is going after a lawyer here in Seattle who specializes in sham IPOs
- A new dawn for data privacy as the European General Data Protection Regulation (GDPR) went into effect yesterday — of course no one’s really ready for it, including the regulators
- This former Tennessee judge would make other criminals blush — sexual favors for favorable judicial treatment, paying off a witness, planting drugs in another witness’s car, and embezzling cash from the court’s drug treatment program
- Watch your mailboxes — these guys allegedly stole mail with personally identifiable info and then opened credit cards in the victims’ names
- Black Market Peso Exchange (BMPE) scheme in Oregon — the CEO of a company called Beauty Plus Global allegedly accepted deposits of laundered money from drug traffickers (an in-depth explanation of the BMPE can be found here on page 29)
- Lastly, Pfizer agreed to pay $24 million to resolve charges that it used an independent charity to pay illegal kickbacks to Medicare patients
Last week, I teased the continuation of a series of posts about the Fifth Amendment. That’s still coming, but I had to return to another common theme first. My preview came at the end of a post about both the Fifth Amendment and parallel proceedings, which I’d also written about before. The Inception-ing of the blog continues with yet another brief comment on parallel proceedings, this time inspired by a news item that Justin flagged in last week’s roundup: Deputy Attorney General Rosenstein gave a speech before the New York City Bar Association’s annual white collar crime conference. The whole speech is worth watching or reading, but the highlight of the address was DAG Rosenstein’s announcement of “a new Department policy that encourages coordination among Department components and other enforcement agencies when imposing multiple penalties for the same conduct.”
News of the last few weeks has prompted me to return to two issues I’ve discussed here before: parallel proceedings and the Fifth Amendment. This time around, the Fifth Amendment issue is not double jeopardy, but instead the constitutional protection against compulsory self-incrimination.
Remember parallel proceedings? By that I mean the government conducting criminal and civil investigations of the same or similar conduct, and bringing related criminal, civil, or administrative enforcement proceedings around the same time. This creates all kinds of problems for defendants, including the difficulty and expense of fending off legal challenges on several fronts and the care needed to ensure that steps taken responding to one enforcement action don’t bite you in the other.
Among the most important dangers are those stemming from offering testimony in a civil or administrative proceeding. You see, “pleading the Fifth” and refusing to answer questions that might incriminate you doesn’t work the same way in civil and administrative settings that it does in the criminal context.
- Disgusting — Seattle man charged with selling food that was supposed to be destroyed or recycled into agricultural feed to discount grocery stores
- The Ninth Circuit said you don’t have to know you’re transporting ammo to be convicted of smuggling ammo
- Panasonic Avionics Corporation agreed to pay a $137.4 million penalty for falsifying its books and concealing payments to third-party sales agents
- VW’s board is thinking of going after its former CEO
- The UK’s data protection watchdog has ordered Cambridge Analytica to release information on US professor David Carroll
- Interesting interview from a a compliance chief regarding a “speak up culture”
- 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:
- 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“
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 …