DOJ has expanded its efforts to give more concrete guidance to companies facing FCPA risk to M&A transactions and the question of successor liability.  In a speech on July 25, 2018, at the American Conference Institute’s 9th Global Forum on Anti-Corruption Compliance in High Risk Markets, Deputy Assistant Attorney General Matthew S. Miner highlighted DOJ’s views on successor liability for FCPA violations by acquired companies.[1]  Miner sought to clarify DOJ’s policy regarding the voluntary disclosure of misconduct by successor companies and to highlight the benefits of such disclosure as spelled out in the joint DOJ and SEC FCPA Resource Guide (the “Resource Guide”).[2]  In general, as with other recent pronouncements and actions by DOJ, such as the FCPA Corporate Enforcement Policy,[3] Miner’s speech seemed intended to highlight ways in which firms can gain cooperation credit (up to and including a declination) in FCPA investigations. Continue Reading DOJ Remarks Provide Guidance on Addressing FCPA Risk in M&A Transactions

During the course of the last month, the Securities and Exchange Commission (“SEC”) brought two enforcement actions related to inadequate disclosure of perquisites.  In early July, the SEC issued an order finding that, from 2011 through 2015, an issuer failed to follow the SEC’s perquisite disclosure standard,[1] which resulted in a failure to disclose approximately $3 million in named executive officer perquisites.[2]   In addition to the imposition of a $1.75 million civil penalty, the SEC order mandated that the issuer retain an independent consultant (at its own expense) for a period of one year to conduct a review of its policies, procedures, controls and training related to the evaluation of whether payments and expense reimbursements should be disclosed as perquisites, and to adopt and implement all recommendations made by such consultant. Continue Reading Recent SEC Enforcement Actions on Inadequate Perquisite Disclosure

A recent report in the Wall Street Journal, drawing on a source “familiar with the matter”, indicates that the Securities and Exchange Commission’s Division of Enforcement has launched a probe into whether certain issuers may have improperly rounded up their earnings per share to the next higher cent in quarterly reports. While the SEC has neither confirmed the report nor otherwise disclosed the existence of any such investigation, the Journal reports that the SEC has sent inquiries to at least 10 companies requesting information about such accounting adjustments that could have inflated reported earnings. The targeted companies have not yet been identified. Whether the reported inquiries amount to a broad-based sweep of issuer accounting practices remains to be seen. However, such an investigation would be consistent with SEC Chairman Jay Clayton’s announced enforcement priorities, which include a focus on public-company accounting practices and the protection of retail investors.

Please click here to read the full alert memorandum.

On May 29, 2018, the U.S. Supreme Court issued an unanimous opinion in Lagos v. United States. Lagos presented the issue of whether costs incurred during and as a result of a corporate victim’s investigation (rather than a governmental investigation) must be reimbursed by a criminal defendant under the Mandatory Victims Restitution Act (“MVRA”). Resolving a circuit split, the Court narrowly held that restitution under the MVRA “does not cover the costs of a private investigation” commenced by a corporate victim on its own initiative and not at the Government’s invitation or request.

The Court’s decision is notable for rejecting the Government’s broad interpretation of the MVRA and for recognizing the “practical fact” that such a broad interpretation would invite “significant administrative burdens.” But the opinion is also notable for what it does not decide. The Court’s opinion expressly leaves unaddressed the question of whether professional costs incurred during a private investigation performed at the Government’s request would be covered by the MVRA.

Please click here to read the full alert memorandum.

On April 24, 2018, Altaba, formerly known as Yahoo, entered into a settlement with the Securities and Exchange Commission (the “SEC”), pursuant to which Altaba agreed to pay $35 million to resolve allegations that Yahoo violated federal securities laws in connection with the disclosure of the 2014 data breach of its user database.  The case represents the first time a public company has been charged by the SEC for failing to adequately disclose a cyber breach, an area that is expected to face continued heightened scrutiny as enforcement authorities and the public are increasingly focused on the actions taken by companies in response to such incidents.  Altaba’s settlement with the SEC, coming on the heels of its agreement to pay $80 million to civil class action plaintiffs alleging similar disclosure violations, underscores the increasing potential legal exposure for companies based on failing to properly disclose cybersecurity risks and incidents.

Please click here to read the full alert memorandum.

On April 18, 2018, the U.S. Supreme Court heard oral argument in Lagos v. United States.  Lagos presents the important issue of whether a corporate victim’s professional costs—such as investigatory and legal expenses—incurred as a result of a criminal defendant’s offense conduct must be reimbursed under the Mandatory Victims Restitution Act.

The court’s decision will impact a company’s considerations when deciding whether and how to conduct an internal investigation, particularly when the corporation is the potential victim of a crime.

Please click here to read the full alert memorandum.

Earlier this month, partners Jennifer Kennedy Park and Kimberly Spoerri participated in a panel co-hosted by The Conference Board and Cleary Gottlieb to discuss the board’s oversight role in issues related to sexual harassment.

Moderator Doug Chia, executive director of The Conference Board, Jen and Kim discussed relevant legal regulations and frameworks and the risks of non-compliance, as well as the policies, procedures and best practices boards and senior management can employ to mitigate risks.  They discussed the responsibility the board has in setting company culture through tone at the top, and how the failure by the board and senior management to be proactive in this area can affect compliance and oversight throughout a company.  The discussion also included ways the board can tangibly address these issues.  Continue Reading Cleary Partners Participate in Panel Discussion on Board Oversight of Sexual Harassment

Maintaining a workplace environment free of discrimination, sexual harassment and other misconduct is critical to both the short-term productivity and long-term health of a business.  Reports of sexual harassment allegations at public corporations can have material negative effects on stock price, with some corporations seeing double digit single day drops after accusations are made public.  As we have written elsewhere, the primary obligation to manage these risks on a day-to-day basis falls to executive leadership.[1]  But the #MeToo movement also has raised questions about the role of boards of directors to provide oversight of management and, to the extent that senior management may be a source of the problem, the board’s obligation to take more direct action.

This note discusses some key issues for General Counsel to consider as they advise corporate boards about how to navigate their responsibilities in this environment.  Continue Reading Bringing The #MeToo Movement Into The Board Room

In recent months, sexual harassment allegations against well-known figures across a growing number of industries have become a common feature in news headlines.  In the wake of these allegations, many companies have concluded that their current policies and procedures related to sexual harassment and discrimination are inadequate.  Against the backdrop of this rapidly evolving landscape, companies are considering how to improve their policies and procedures not only to appropriately and effectively respond to allegations of sexual harassment, but also to deter inappropriate behavior going forward and foster an environment of openness, diversity and inclusion in their workplaces.  To that end, we address 8 key questions that companies should be asking themselves in developing policies and procedures to confront sexual harassment and other forms of misconduct in today’s workplace.

Click here, to read the full memo.

On November 15, 2017, the Securities and Exchange Commission Division of Enforcement released its annual report detailing its priorities for the coming year and evaluating enforcement actions that occurred during Fiscal Year 2017.   The Report captures the SEC during a period of transition and provides insight into changes in the SEC’s approach to enforcement actions and a glimpse into its priorities for the coming year.  The following summarizes key shifts from FY 2016, outlines the Enforcement Division’s current priorities, and, in view of its stated focus on the conduct of investment professionals and protection of retail investors, provides guidance to the investment management industry as it gears up for the coming year.

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