Steal This Form

We're not a big fan of the SEC's whistleblower rules.

They let FCPA reward seekers go straight to the government -- without ever telling the boss, general counsel, chief compliance officer, internal auditors, or directors.

And they encourage employees who want to blow the whistle to snatch the company's data, even if it's proprietary, confidential, or privileged.

When the rules were adopted in May, we said whistleblower complaints will expose some big-time FCPA violations. But how many of the same violations would have come to light anyway? Before Dodd-Frank created the reward program, Sarbanes–Oxley had already made self-reporting of suspected violations a standard practice. Enforcement had increased ten fold in five years, making America's antibribery regime the most robust on the planet -- by a long shot. Wasn't that good enough?

Apparently not. Which brings us to the era of Dodd-Frank.

Pursuant thereto, the SEC's form for reporting a whistleblower complaint runs seventeen pages. Here are three (among many) of our least favorite parts:

• Describe all supporting materials in the complainant’s possession and the availability and location of any additional supporting materials not in complainant’s possession. Use additional sheets, if necessary.

• Describe how and from whom the complainant obtained the information that supports this claim. If any information was obtained from an attorney or in a communication where an attorney was present, identify such information with as much particularity as possible. In addition, if any information was obtained from a public source, identify the source with as much particularity as possible. Attach additional sheets if necessary.

• Identify with particularity any documents or other information in your submission that you believe could reasonably be expected to reveal your identity and explain the basis for your belief that your identity would be revealed if the documents were disclosed to a third party.

Download the complete SEC whistleblower complaint form here.

Lauren Stevens Acquitted

The White Collar Crime Prof Blog reported the acquittal of the former associate general counsel of GlaxoSmithKline, Lauren Stevens.

Judge Roger Titus of the U.S. district court in Maryland directed an acquittal during a hearing today.

"I conclude on the basis of the record before me," Judge Titus said, "that only with a jaundiced eye and with an inference of guilt that's inconsistent with the presumption of innocence could a reasonable jury ever convict this defendant."

Last month, Stevens got her case dismissed without prejudice.

She produced extensive evidence showing she acted on the advice of counsel and without any intent to violate the law.

But the DOJ re-indicted her on four counts of making false statements, one count of obstruction of justice, and one count of falsifying and concealing documents related to Glaxo's promotion of the anti-depressant drug for weight loss, which hadn't been approved by the Food and Drug Administration.

Stevens' case worried company lawyers who deal with federal government agencies, including those handling FCPA investigations or answering compliance-related questions from the DOJ and SEC.

In ordering the acquittal today, Judge Titus said: "There is an enormous potential for abuse in allowing prosecution of an attorney for the giving of legal advice. I conclude that the defendant in this case should never have been prosecuted and she should be permitted to resume her career."

It was never clear why the DOJ was so aggressive in its prosecution of Stevens. In January this year, Lanny Breuer, head of the DOJ's criminal division, told a meeting of corporate counsel near Washington, D.C. that Stevens was in the crosshairs.

As I have said before, if we find credible evidence of criminal conduct – by corporate executives or the lawyers and accountants who advise them – we will not hesitate to charge it, Indeed, as I am sure you are aware, a grand jury in the District of Maryland recently indicted Lauren Stevens, a former in-house attorney for a major pharmaceutical company, charging her with obstructing justice in connection with an investigation by the Food and Drug Administration into the off-label marketing of a pharmaceutical drug.

In a blog post in March, professor Ellen Podgor suggested the DOJ's resources could be better used to help company lawyers understand their obligations when responding to government inquiries.

A transcript of today's hearing before Judge Titus is available through the White Collar Crime Prof Blog here.

Angela Aguilar Alleges DOJ Misconduct

The Mexican woman held in a California jail since her arrest on FCPA charges in August has alleged that prosecutors withheld from her lawyers information about intercepted phone and email logs and violated her attorney-client and spousal privileges.

Angela Aguilar, 55, filed a motion yesterday to dismiss the indictment against her. A hearing on her motion will be held on Monday afternoon before Judge A. Howard Matz. Her federal trial is set to start in LA on Tuesday.

Aguilar is a co-defendant with Lindsey Manufaturing, Dr. Keith Lindsey, and Steve K. Lee. Aguilar's husband, Enrique Faustino Aguilar Noriega, has also been indicted but is still at large.

"About one week prior to trial," Aguilar said in her motion, "on March 21, 2011, in what appears to the defense as an attempt to bury significant information, the government produced telephone records and email logs and summaries thereof (received by the defense on March 22) that reveal that they have intercepted, and may still be intercepting, attorney-client privileged e-mails between defendant Angela Aguilar and her criminal defense counsel . . . ."

The motion said the government intercepted the emails through the email system at the prison where Aguilar is being held.

The DOJ charged her at first with FCPA offenses, later replaced by conspiracy and money laundering counts. Since her arrest in Houston in August and transfer to California, she's been held without bail at the Metropolitan Detention Center in Los Angeles.

The government thinks her husband, Enrique Faustino Aguilar Noriega, led her into the alleged crimes -- helping arrange millions in bribes from Lindsey Manufacturing to officials at the Mexican state-owned electric utility, Comisión Federal de Electridad. Her husband, 56, was charged with conspiracy to violate the Foreign Corrupt Practices Act, four substantive FCPA violations, money laundering conspiracy, and money laundering. He's a fugitive, apparently still in Mexico.

Aguilar's motion said the government has violated her spousal privilege by obtaining both telephone recordings and e-mails between her and her husband.

The motion asks for dismissal of the case against Aguilar or "remedial sanctions," including suppression of improperly obtained evidence.

The other defendants in the case joined in Aguilar's motion to make sure improperly obtianed evidence isn't used against them.

Angela Aguilar is represented by Stephen G. Larson of Garardi Keese. Jan L. Handzlik of Greenberg Traurig is defending Lindsey Manufacturing and Dr. Keith Lindsey. Steve K. Lee is represented by Janet Levine of Crowell & Moring.

Download a copy of the March 24, 2011 motion to dismiss in U.S. v Angela Aguilar et al here.

For Company Counsel, Even More Complications

Two recent cases have focused attention on the hard choices faced by company counsel involved in criminal investigations and prosecutions.

The cases didn't involve the FCPA. But they hold lessons for lawyers and executives dealing with FCPA compliance and enforcement.

In November, the DOJ indicted GlaxoSmithKline's associate general counsel Lauren Stevens for obstruction and making false statements to the FDA during an investigation of her company's products and labelling practices.

"There is a difference between legal advocacy based on the facts and distorting the facts to cover up the truth," said Carmen Ortiz, U.S. Attorney for the District of Massachusetts, who announced the indictment. "Federal agencies such as the FDA cannot protect the public health if the entities and individuals they regulate provide false information and conceal the true facts. . . ."

Last week, law.com reported that the judge might dismiss the case "due to a prosecutor's grand jury error." Still, Stevens' indictment for obstruction, punishable by up to 20 years in prison, should concern company lawyers responding to internal and external FCPA investigations.

Another case about company counsel was reported this week by Ellen Podgor. The Third Circuit looked at attorney-client privilege between Sutton Keany, former U.S. outside counsel to Morgan Crucible, a public company based in Britain, and Ian Norris, the one-time CEO of the company who was later convicted in the U.S. of obstruction.

The court found that Keany had represented not any individual within the corporation but only the company itself. So no privilege existed between Keany and Norris.

Podgor said the case is a warning "to all the corporate executives that are cooperating with corporate counsel thinking that the individual is representing them -- beware...."

We also view it as a warning to company counsel, both inside and outside. The case means lawyers will be more vulnerable to pressure from the DOJ to testify against executives at client companies. And lawyers who may themselves be facing the threat of indictment for obstruction will make particularly easy targets.

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Download the Third Circuit's opinion in U.S. v. Ian Norris here.  

Download the indictment in U.S. v. Stevens here.

EU/US Cross Border Data Discovery – Mission Impossible?

by Joe Looby

Complicated, yes, but impossible? No, according to a report just out from RAND Europe.

With the widely reported increase in FCPA enforcement by the U.S. DOJ and SEC, and a new U.K. Bribery Act taking effect in April of 2011, corporations are increasingly required to conduct anti-bribery due diligence and investigations across the globe. In many instances, this may require the collection of email and documents from one country and the review and production of such documents in another country.

However, EU data privacy laws often seem to be in direct conflict with U.S. regulatory requirements to produce documents for FCPA investigations. To comply with a DOJ request for documents from certain countries—say, Germany or Italy—a company cannot simply rely on “U.S. notions” of employee consent and then gather those documents and bring them to the U.S. for review and production to the DOJ.

For example, if an EU employee were to consent upon hiring to the employer’s unrestricted use of his or her email (a common practice in the U.S.) – a later transfer to the U.S. on this basis alone would violate EU data privacy. To further complicate matters, each EU country, and certain local jurisdictions within those countries, can implement their own data privacy rules differently.

The RAND Europe report, sponsored by FTI Technology, outlines options that can be considered by companies and counsel, and the report incorporates guidance from the European Directive’s Article 29 Working Party, the Sedona Conference, as well as national data privacy regulators and experts from five European countries (France, Germany, Spain, Switzerland and the United Kingdom).

Some of these recommendations include processing and redacting documents in country, use of a privacy log, or assigning a third party to adhere to the European legal framework. In addition, the report includes country-specific requirements for the five countries mentioned above.

The full report is available for download here.

Joe Looby is a senior managing director of FTI Technology and can be contacted here.