The Right Side of the Law

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.

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 »

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 »

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.

            On Tuesday, November 6, 2012, voters in the City of Grand Rapids approved Proposal 2, which decriminalizes the possession and use of marijuana under the Grand Rapids City Charter.  While this proposal does not legalize marijuana, it reduces the potential penalty for possession and use of marijuana from a criminal misdemeanor offense to a civil infraction—the same as a speeding ticket.  First time offenders will receive a fine of $25.  The second incident carries a $50 fine, and subsequent incidents carry a fine of to $100.  City leaders, who endorsed the proposal, explained that the proposal would allow the city’s law enforcement officials to focus on more serious crimes.  Additionally, individuals ticketed for use or possession of marijuana by the City of Grand Rapids will no longer have a criminal conviction on their record. Read more »

On Tuesday, the U.S. Supreme Court asked Solicitor General Donald Verrilli to present the government’s view on the type of employees that the Sarbanes-Oxley Act’s “whistleblower” provisions protect. This question was raised in Lawson v. FMR LLC, a case with a petition for certiorari currently pending before the Court.  Under section 1514A of the Act, employees of public companies cannot be retaliated against for reporting suspected violations of Securities and Exchange Commission rules or of federal laws relating to fraud.  At issue in Lawson is whether the Act also protects employees of a private contractor of a public company from retaliation. Read more »

On September 11, the IRS paid Bradley Birkenfeld $104 million as a whistleblower award for his help in uncovering tax fraud being perpetrated by UBS AG.  Mr. Birkenfeld, a former employee of the Swiss bank, materially aided the IRS in uncovering fraud at UBS AG that ultimately resulted in UBS AG paying the IRS a $780 million settlement in 2009.  His aid also exposed $20 billion in illegally undeclared accounts for American taxpayers.  Based on the amounts collected by the IRS to date from UBS AG and taxpayers as a result of Mr. Birkenfeld’s cooperation, his whistleblower award totals approximately 2% of the IRS’s recovery. 

Read more »

            Today, the Sixth Circuit upheld a $6.8 million judgment against an insurance company that had refused to pay certain losses relating to hacked computer data under a policy providing coverage for “theft of any Insured property by Computer Fraud.”  This case provides helpful guidance as to scope of coverage provided by these policies. 

  Read more »

Yesterday, the Securities and Exchange Commission announced that it has issued its first whistleblower award under the new bounty program established after the 2010 Dodd-Frank Act.  Under the Act, whistleblowers may be rewarded between 10 and 30 percent of any money collected in an SEC enforcement action where more than $1 million in sanctions is awarded. Read more »

In a published opinion released today, the Sixth Circuit Court of Appeals reversed and remanded a defendant’s sentence holding that a district court may not apply the enhancement for obstruction of justice under U.S.S.G. § 3C1.1 where the defendant made incomplete statements to insurance investigators or his testimony at trial differed from the Government’s version of events. Read more »