DOJ Announces Yet Another Costly I-9 Discrimination Settlement

Continuing its trend of pursuing companies who violate the pro-employee, non-discrimination provisions of the I-9 law, and not just those employing undocumented workers, the DOJ announced a settlement with a Texas company yesterday requiring payment of a sizable fine and other punitive measures. The settlement that was extracted will cost the company well in excess of $100,000, even though the company, a temp agency with more than 1,000 employees nationwide who uses E-Verify, immediately changed its practice upon initiation of the Government’s investigation.

Infinity Group immediately stopped requiring non-citizen employees to show specific forms of documentation in the Form I-9 process upon being informed that the practice violates the Immigration and Nationality Act, but IG still ended up with a $53,800 fine and mandatory employee training requirements. In addition, IG had to create a $35,000 back pay fund for employees who could show they lost wages as a result of the practice, and worse, be subjected to two years of costly monitoring and reporting requirements.

COA holds statute prohibiting instruction on lesser-included vehicle homicide charge unconstitutional

The Michigan Court of Appeals has held MCL 257.626(5) unconstitutional, affirming a trial court order granting defendant’s motion to instruct the jury in a felony reckless-driving-causing-death prosecution about the lesser-included offense of moving violation causing death. The felony statute contains a prohibition on providing the instruction. Judge Ronayne Krause wrote the opinion for herself and Judge Shapiro. Judge Kirsten Frank Kelly dissented.

If an appeal of the decision, People v. Thabo Jones, is not taken or won, it removes the power of prosecutors to direct the jury toward a felony vs. misdemeanor outcome through their charging decision. Fatal car accident prosecutions (without the presence of alcohol or drugs) often involve an otherwise law-abiding defendant who did not act intentionally, coupled with the tragedy of unexpected loss of life and a potentially very sympathetic and vocal family left behind. The result can be tremendous pressure on the prosecutor for a harsh outcome, even given the lack of intentional behavior.

Interestingly, it is an open question whether MCL 768.32(2) is constitutional, preventing juries from convicting of lesser-degree offenses in certain drug cases. The Court of Appeals once held that it was unconstitutional, but the Supreme Court vacated the opinion as unnecessary to resolution of the facts at issue, and the issue has never been taken up again. Expect to see this issue litigated soon in light of the Jones case.

Hospital network to pay $26M to settle FCA suit brought by its auditor-turned-whistleblower

The U.S. Department of Justice announced a $26 million settlement with Shands Healthcare, operator of a network of health care providers and hospitals in Florida. The settlement results from a whistleblower lawsuit alleging that, over a five year period, six of Shands’ hospitals knowingly submitted claims billed as inpatient procedures that should have been billed outpatient. In a press release following the settlement, Shands indicated that the whistleblower had been hired as an independent consultant by Shands in 2006 and 2007 to conduct a routine audit of its billing practices. There is no public information available why the auditor ended up becoming the whistleblower. Eventually, the HEAT task force became involved in pursuing this claim, but there is no indication that criminal charges will follow.

As a result of the settlement, Shands will not have to admit liability, but that is probably cold comfort given the size of the settlement and the way it came to the attention of the government.

Sixth Circuit remands retaliation claim after internal investigation gets bank employee fired, but affirms dismissal of national origin discrimination claim

The Sixth Circuit affirmed summary judgment of a national origin discrimination claim by a former bank employee fired after its corporate Anti-Money Laudering department launched an internal investigation into his loan to a friend, but reversed dismissal of the employee’s retaliation claim. In Adamov v. U.S. Bank Nat’l Ass’n, the panel agreed with the district court that the evidence did not support the employee’s discrimination claim because the bank came forward with sufficient non-discriminatory reasons for the termination based on the internal investigation. However, the Sixth Circuit held that Title VII’s exhaustion requirement is non-jurisdictional (joining other circuits), so the bank’s failure to raise that issue as a defense to the employee’s retaliation claim required reversal of the trial court’s dismissal of that count.

On remand, the bank will have to defend the temporal proximity of the investigation’s initiation “shortly” after the employee complained of discrimination based on his national origin. In addition, the bank’s ethics policy which prohibited the activity of the employee was created in 2008, whereas the employee’s actions took place in 2007. The bank asserted that its ethics policy had been the same prior to 2008 but it could not produce a copy of the policy in discovery.

The bank also made an argument below that the National Bank Act, 12 U.S.C. s 24, preempted the state law claims that the employee initially brought. However, it appears that neither that act, nor other aspects of the highly-regulated banking compliance environment, were enough to preempt the employee’s federal law discrimination and retaliation claims. The lesson is that having carefully-crafted ethics policies and other compliance rules, with a plan that regularly checks for violations and enforces the rules, is critical for both legal compliance and other business interests, like defending claims of terminated employees, even in a highly-regulated industry.

Living on the “Edge”: The indictment of SAC Capital and its consequences

On July 25, 2013, the U.S. Attorney for the Southern District of New York announced a host of insider trading charges against SAC Capital Advisors and its related companies. According to the forty-one page indictment, the hedge fund and its billionaire owner, Steven Cohen, “fostered a culture that focused on not discussing inside information too openly, rather than not seeking or trading on such information in the first place.” SAC Capital allegedly hired traders with broad public networks and financially incentivized these individuals to trade on any information that would give SAC an “edge” over other investors—without questioning whether the “edge” constituted inside information. Such was compounded by SAC Capital’s failure to employ effective compliance procedures to detect and prevent insider trading. Finally, the guilty pleas of at least six former SAC employees for multiple insider trading violations substantiate the allegations and serve as the prosecution’s coup de grâce.

The far-reaching consequences of the indictment have yet to play out; however, there is some indication of what’s to come. First, although Mr. Cohen is expected to avoid individual charges, the indictment could be the death knell for SAC Capital. Even if not convicted, some believe that the hedge fund will go the way of Arthur Anderson in the wake of Enron scandal. While many in the prosecution’s camp ultimately regretted the collapse of the accounting giant, they appear to be comfortable with this possibility in the present case.

Second, the indictment serves as yet another example of the government’s willingness to hold financial institutions accountable for illicit activities. This, more than anything else, emphasizes the importance of a rigorous compliance program. As the indictment notes throughout, it is simply not enough to have a compliance plan—the plan must also be effectively enforced. In many instances, SAC Capital failed to investigate potential violations and when it did, the investigations were cursory. Indeed, its compliance procedures only detected one instance of insider trading in its entire history—something clearly contradicted by the guilty pleas alone.

In short, questionable activity, whether in the form of an insider trading “edge” or something else, must be reported and investigated thoroughly to avoid the imposition of a potentially fatal enforcement action.

DOJ Continues Aggressive ADA Enforcement With Louisiana Tech Settlement

Continuing its recent enforcement focus on Americans With Disabilities Act (ADA) compliance, the U.S. Department of Justice announced a settlement last week with Louisiana Tech University relating to a blind student’s treatment at the school. As part of its focus, the DOJ has also initiated suits against private companies who provide the type of public accommodations or services reached by the ADA, like a private transportation provider in Arizona who settled in early June with the Department for allegations of failure to accommodate blind passengers.

The DOJ sued LTU over allegations that it used an online learning platform inaccessible to the blind student, as well as failed to provide accessible materials for the discussion and exam in a traditional class. The settlement agreement requires LTU to adopt a number of policies and acquire accessibility technology considered industry-standard, as well as make past materials dating back through 2010 accessible. The agreement also requires LTU to provide compliance training and pay $23,543 in damages to the student.

In the last two months alone, this case is one of nine in which the Justice Department has settled or initiated new actions against public institutions and private entities for ADA compliance failures.

Ex-Detroit mayor convicted of extortion, bribery, and racketeering.

This morning, the jury announced its verdict in the United States v. Kwame Kilpatrick, et al, Case No. CR-10-20403.  The ex-Detroit mayor, along with his father, Bernard Kilpatrick, and contractor Bobby Ferguson, were charged in a 45-count Indictment.  The Government alleged that Kilpatrick used his position as mayor of Detroit to assure Ferguson received contracts for over $80 million of city work.  In return, the Government alleged that Kilpatrick received kickbacks from Ferguson.  Additionally, Kilpatrick and his father were accused of filing false tax returns.

 After weeks of deliberation, the jury found Kwame Kilpatrick guilty of 24 of the 30 counts he was charged with, including racketeering, extortion, mail fraud, wire fraud, filing a false tax return and bribery.  He was acquitted of three charges and the jury was unable to reach a verdict on an additional three charges.  Ferguson was convicted of 9 of the 11 counts he was charged with.  Kilpatrick’s father was found guilty of just one count—submitting a false tax return.  A copy of the verdict form is available here.

 The Court set a hearing for later this afternoon to determine whether the defendants will be released on bond pending their sentencing hearings.

Department of Justice announces it recovered nearly $5 billion in 2012 for violations of False Claims Act

The Department of Justice announced yesterday that it recovered a record $4.9 billion in judgments and settlements in False Claims Act cases in the 2012 fiscal year.  This year’s recovery is an increase of more than $1.7 billion from the previous record recovery in a single year.  Since January 2009, the government has recovered $13.3 billion under the False Claims Act, constituting over one third of total recoveries since the Act’s significant amendments in 1986. Read more »

EPA’s Temporary Suspension of BP Contracts with the U.S. Government–The Other Shoe to Drop

On Wednesday, November 28, 2012, the U.S. Environmental Protection Agency (EPA) announced that it has temporarily suspended BP Exploration and Production, Inc. (BP) from future contracts with the U.S. Government.  The temporary suspension, however, does not affect any existing contracts the company has with the U.S. Government, including those relating to current and ongoing drilling and production operations in the Gulf of Mexico.  This latest EPA administrative sanction remains in effect until BP can demonstrate “present responsibility” to conduct business with the U.S. Government.  According to the company’s press release “BP has been in regular dialogue with the EPA and has already provided both a present responsibility statement of more than 100 pages and supplemental answers to the EPA’s questions based on that submission.”  According to BP, its submission to the EPA has made it clear that the company has made significant enhancements to operational safety since the April 20, 2010 explosion of the Deepwater Horizon rig at the Macondo well site in the Gulf of Mexico.  The explosion resulted in the death of 11 rig workers and caused the largest environmental disaster in U.S. history.  Read more »

DOJ releases long awaited FCPA guide

On November 14, 2012, the Department of Justice released the long awaited Resource Guide to the U.S. Foreign Corrupt Practices Act.  The Guide is designed to provide information for businesses and individuals regarding the FCPA.  It was prepared by the Criminal Division of the U.S. Department of Justice and the Enforcement Division of the U.S. Securities and Exchange Commission, with input from the Departments of Commerce and State.  Although it is non-binding, informal, and summary in nature, it is anticipated that the Guide will provide significant insight into the Government’s enforcement approach and priorities related to the FCPA, which is expected to continue to be a focus of the Criminal Division and the SEC.

We expect to provide further information and analysis regarding the Guide in the near future.  In the meantime, the Guide itself is available here.

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