Supreme Court rules that five year statute of limitations applies to disgorgement in SEC enforcement cases  

On 5 June 2017, the Supreme Court decided that as the Securities and Exchange Commission (SEC) disgorgement practice operates as a "penalty", the five year statute of limitations applies to any claim for disgorgement in an SEC enforcement action.  Previously, the SEC had maintained the position that disgorgement, which recovers ill-gotten gains from the violator, is only an equitable remedy and should not be subject to the statute of limitations, which only applies to "penalties".  This position has been upheld by the Tenth Circuit, but disputed by some other Circuits. The Court reasoned that disgorgement targets a violation of "public laws," and is oftentimes designed to enhance deterrence and is thus a punitive measure.   The decision applies to all securities enforcement actions, including those related to issuers' violations of the Foreign Corrupt Practices Act (FCPA).  Thus, the case is likely to push the SEC to initiate enforcement actions earlier and to be more proactive in asking for tolling agreements, however it could also help defendants facing such enforcement actions in establishing a more robust defense strategy.    

 

Linde receives public declination through the FCPA Pilot Program

On 16 June 2017, the US Department of Justice (DOJ) publicised a letter issued to Linde North America Inc, Linde Gas North America LLC (Linde), announcing that the DOJ has declined to take enforcement actions against Linde, consistent with the FCPA Pilot Program. The DOJ investigation found that Linde's subsidiary made corrupt payments (through profit sharing paid under fraudulent management contracts) to high level officials in Georgia in connection with Linde's bidding for the purchase of certain state assets. According to the DOJ, Linde discovered the scheme after it acquired the subsidiary, and made timely, voluntary self-disclosure to the DOJ. Although the DOJ will not be imposing fines on Linde, the company has agreed to pay a forfeiture amount of US$3,415,000 representing the corrupt proceeds as well as disgorge profits of US$7,820,000 from the corrupt scheme it uncovered.

 

Former Swiss banker pleads guilty to money laundering charge in connection with soccer bribery scheme

On 15 June 2017, the DOJ announced that Jorge Luis Arzuaga, a citizen of Argentina and a former private banker, pleaded guilty to charges of participating in a money laundering conspiracy in connection with the distribution and receipt of millions of dollars of bribes paid to soccer officials, including the late president of the Asociación del Futbol Argentina (“AFA”), the Argentinian soccer federation. According to the DOJ, beginning in around 2010 and continuing through 2015, while employed as a private banker at two financial institutions based in Switzerland, Arzuaga managed several accounts controlled by Alejandro Burzaco, a principal of Torneos y Competencias, S.A. (“TyC”), a sports media and marketing business headquartered in Argentina. In that capacity, Arzuaga assisted Burzaco and others in paying bribes to various soccer officials.  Burzaco pleaded guilty to racketeering conspiracy and other offenses on 16 November 2015 in connection with his involvement in paying bribes to soccer officials.  The guilty plea is part of the ongoing bribery investigation into FIFA. 

 

US to reinstate certain Cuba sanctions  

On 16 June 2017, President Trump announced a policy framework for the re-imposition of certain US sanctions with respect to Cuba. In particular, the United States' new policy will restore certain restrictions with respect to American investments in the Cuban private sector and the ability to travel outside of pre-arranged groups for American visitors to Cuba. While many of the details will become apparent only as regulations are promulgated implementing President Trump's new policy, the announcement suggests that the Administration will execute only a partial shift from the previous Administration's loosening of Cuba sanctions. The Treasury Department announced that the changes will not be immediately effective, but will be done through the amendments of relevant regulations in the coming months. Details of the changes can be found in our e-bulletin.

 

US broadened civil forfeiture claims targeting allegedly misappropriated Malaysian assets  

On 15 June 2017, the DOJ announced that it had filed additional civil forfeiture complaints seeking the forfeiture and recovery of approximately US$540 million in assets associated with an alleged international conspiracy to launder funds misappropriated from 1Malaysia Development Berhad (1MDB), a Malaysian sovereign wealth fund. These civil forfeiture complaints followed similar complaints filed in July 2016, seeking more than US$1 billion, and civil forfeiture complaints filed the week before seeking approximately $100 million in assets. The complaints allege that 1MDB funds were misappropriated under the guise of repurchasing certain options that had been given in connection with a guarantee of 2012 bonds. The diverted proceeds were allegedly used, among other things, to purchase a luxury yacht, certain movie rights, high-end properties, jewellery, and artwork. A portion of the diverted loan proceeds were also allegedly used in a Ponzi-like scheme to create the false appearance that an earlier investment had been profitable.

 

Federal judge ordered suppression of evidence gathered in improper search  

The US District Court for the Southern District of New York has granted a defendant's motion to suppress evidence in its entirety due to deficiencies in the search warrants and the manner in which searches were executed. The defendant faced an indictment for securities fraud and money laundering for which the Federal Bureau of Investigation (FBI) conducted searches at his office and apartment to collect evidence. The judge determined that the search warrants used to authorise these searches failed to identify suspected crimes, contained expansive categories of generic documents without linkage to suspected criminal conduct, and lacked temporal limitation. Thus it was decided the warrants lacked particularity required under the constitution. The court also found the warrants overbroad and rejected a number of defences, including that the FBI agents were acting in good faith. The court noted that plainly irrelevant documents, such as medical and school records, were collected during the apartment search. The suppression is likely a significant setback to the government's focus on combatting financial crime.  

 

US Senate votes to impose new sanctions on Iran The US Senate has voted to impose an array of new sanctions with respect to Iran, related to Iran's alleged activity concerning its ballistic missile program, international terrorism, and arms supply and training. The bill serves as a reminder that, notwithstanding the continued implementation of the Joint Comprehensive Plan of Action ("JCPOA"), tensions between the US and Iran have the potential to lead to additional and significant sanctions. On June 15, 2017, by a 97-2 vote, the Senate passed the Countering Iran's Destabilizing Activities Act of 2017 (the "Act"). The Act provides for several new categories of primary and secondary sanctions related to the Iranian ballistic missile program, the activities of the Iranian Revolutionary Guard Corps-Quds Force ("IRGC-QF"), and the sale of arms to Iran. See our bulletin here for further details.

 

US Senate approves Russia sanctions amendment  

A bipartisan US Senate coalition has approved a wide-ranging package of new Russia-related sanctions as an amendment to the Countering Iran's Destabilizing Activities Act of 2017 ("S.722" or "Iran Sanctions Bill") currently pending before Congress. The changes contemplated by these provisions-dubbed-Countering Russian Influence in Europe and Eurasia Act of 2017 ("CRIEEA" or the "Amendment") would codify existing Russia-related sanctions and mandate congressional review of any attempts by the President to modify or terminate them.

If enacted, CRIEEA would impose significant new restrictions on carrying out Russia-related business in targeted sectors, including many applicable to non-US companies. However, it is less sweeping than prior proposals, such as Sen. Ben Cardin's (D-MD) Counteracting Russian Hostilities Act of 2017 ("S.94" or "Cardin Bill"). CRIEEA would constrain, but not eliminate, the President's traditional discretion in this area. See our briefing here for further details.