Business Crimes Hotline

DISTRICT OF COLUMBIA

DOJ Announces Enhanced Examination of FCA Cases

In remarks delivered at the 14th annual Taxpayers Against Fraud Education Fund Conference in September, former Enron task force director and recently appointed Assistant Attorney General for the Criminal Division, Leslie R. Caldwell, announced that the Department of Justice (DOJ), via the Criminal Division's Fraud Section, was formally “stepping up” its resources to analyze federal False Claims Act (FCA) cases filed by whistleblowers.

According to Caldwell, the new procedure includes a process whereby the Civil Division will share all new whistleblower, or qui tam, complaints with the Criminal Division “as soon as the cases are filed,” so that the Criminal Division can conduct an immediate review of the matter and make a determination as to whether a parallel criminal investigation should be convened. In her remarks, Caldwell also implored whistleblowers, known as “relators” in the context of the False Claims Act, to directly approach criminal authorities with their allegations, in addition to bringing the matters to parallel civil enforcement authorities. Finally, Caldwell highlighted the recent successes of the Fraud Section, particularly its Medicare Fraud Strike Force, defense procurement, and financial fraud (LIBOR, mortgage, Ponzi, etc.) prosecutions as uniquely preparing the section to handle criminal prosecution of the often complex and resource-intensive FCA matters.

SEC Charges Against Former Wells Fargo Compliance Officer

On Oct. 15, the Securities and Exchange Commission (SEC) announced that it had filed an enforcement action against a former Wells Fargo Advisors (Wells Fargo) compliance officer, Judy K. Wolf, for causing Wells Fargo to violate ' and willfully aiding and abetting its violations of ' Section 17(a) and Rule 17a-4(j) of the Securities Exchange Act of 1934 and Rule 204(a) of the Investment Advisers Act of 1940. The Commission's investigation of Wells Fargo centered around the trading activity of its former Miami-based broker, Waldyr Da Silva Prado Neto (Prado), in advance of Burger King's acquisition by private equity firm 3G Capital Partners Ltd. that was announced in September 2010.

Specifically, Prado was accused of trading on nonpublic information that he learned confidentially from his customer. The SEC previously secured a $5.6 million judgment against Prado in January 2014 and, in a September 2014 enforcement action announced by the SEC as the “first-ever against a broker-dealer for failing to protect a customer's material nonpublic information,” Wells Fargo agreed to pay a $5 million penalty to the SEC and admit to a failure to maintain adequate internal controls.

According to the SEC, Wolf's responsibilities at Wells Fargo included identifying potentially suspicious trading and then conducting “look-back” reviews to assess whether the trading activity involved material nonpublic information. Wolf conducted and closed a look-back review of the Burger King trading activity with no findings in September 2010, prior to the SEC's announcement of charges against Prado in September 2012. Wolf contemporaneously recorded the results of her look-back reviews, including the Burger King review, on a log that was produced to the SEC as part of its document requests in the investigation. She allegedly altered the log in December 2012 after the Commission's investigation was public ' adding a statement that acquisition rumors were circulating several weeks prior to the Sept. 2, 2010 public announcement of the deal.

According to the SEC, “[b]y altering the document, Wolf made it appear that she performed a more thorough review in 2010 than she actually had.” Further, Wolf initially denied making any changes to the document when questioned about it by the SEC before changing her account in later testimony. In announcing the charges, the Enforcement Division's Market Abuse Unit Chief, Daniel M. Hawke, stated, “[w]e allege that Wolf intentionally altered a trading review document after she knew that the SEC had charged a Wells Fargo employee with insider trading based on facts related to her review. ' Regardless of her motivation, her conduct was inconsistent with what the SEC expects of compliance professionals and what the law requires.” ' Edward Dumoulin , Mayer Brow

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DISTRICT OF COLUMBIA

DOJ Announces Enhanced Examination of FCA Cases

In remarks delivered at the 14th annual Taxpayers Against Fraud Education Fund Conference in September, former Enron task force director and recently appointed Assistant Attorney General for the Criminal Division, Leslie R. Caldwell, announced that the Department of Justice (DOJ), via the Criminal Division's Fraud Section, was formally “stepping up” its resources to analyze federal False Claims Act (FCA) cases filed by whistleblowers.

According to Caldwell, the new procedure includes a process whereby the Civil Division will share all new whistleblower, or qui tam, complaints with the Criminal Division “as soon as the cases are filed,” so that the Criminal Division can conduct an immediate review of the matter and make a determination as to whether a parallel criminal investigation should be convened. In her remarks, Caldwell also implored whistleblowers, known as “relators” in the context of the False Claims Act, to directly approach criminal authorities with their allegations, in addition to bringing the matters to parallel civil enforcement authorities. Finally, Caldwell highlighted the recent successes of the Fraud Section, particularly its Medicare Fraud Strike Force, defense procurement, and financial fraud (LIBOR, mortgage, Ponzi, etc.) prosecutions as uniquely preparing the section to handle criminal prosecution of the often complex and resource-intensive FCA matters.

SEC Charges Against Former Wells Fargo Compliance Officer

On Oct. 15, the Securities and Exchange Commission (SEC) announced that it had filed an enforcement action against a former Wells Fargo Advisors (Wells Fargo) compliance officer, Judy K. Wolf, for causing Wells Fargo to violate ' and willfully aiding and abetting its violations of ' Section 17(a) and Rule 17a-4(j) of the Securities Exchange Act of 1934 and Rule 204(a) of the Investment Advisers Act of 1940. The Commission's investigation of Wells Fargo centered around the trading activity of its former Miami-based broker, Waldyr Da Silva Prado Neto (Prado), in advance of Burger King's acquisition by private equity firm 3G Capital Partners Ltd. that was announced in September 2010.

Specifically, Prado was accused of trading on nonpublic information that he learned confidentially from his customer. The SEC previously secured a $5.6 million judgment against Prado in January 2014 and, in a September 2014 enforcement action announced by the SEC as the “first-ever against a broker-dealer for failing to protect a customer's material nonpublic information,” Wells Fargo agreed to pay a $5 million penalty to the SEC and admit to a failure to maintain adequate internal controls.

According to the SEC, Wolf's responsibilities at Wells Fargo included identifying potentially suspicious trading and then conducting “look-back” reviews to assess whether the trading activity involved material nonpublic information. Wolf conducted and closed a look-back review of the Burger King trading activity with no findings in September 2010, prior to the SEC's announcement of charges against Prado in September 2012. Wolf contemporaneously recorded the results of her look-back reviews, including the Burger King review, on a log that was produced to the SEC as part of its document requests in the investigation. She allegedly altered the log in December 2012 after the Commission's investigation was public ' adding a statement that acquisition rumors were circulating several weeks prior to the Sept. 2, 2010 public announcement of the deal.

According to the SEC, “[b]y altering the document, Wolf made it appear that she performed a more thorough review in 2010 than she actually had.” Further, Wolf initially denied making any changes to the document when questioned about it by the SEC before changing her account in later testimony. In announcing the charges, the Enforcement Division's Market Abuse Unit Chief, Daniel M. Hawke, stated, “[w]e allege that Wolf intentionally altered a trading review document after she knew that the SEC had charged a Wells Fargo employee with insider trading based on facts related to her review. ' Regardless of her motivation, her conduct was inconsistent with what the SEC expects of compliance professionals and what the law requires.” ' Edward Dumoulin , Mayer Brow

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