Compliance Hot Spots: Gibson Dunn's Helgi Walker Will Argue Big CFPB Case | New DOJ FCPA Declination | Compliance Headlines
Welcome to Compliance Hot Spots, our weekly look at the regulatory and white-collar enforcement world. We've got a quick spotlight on a 5th Circuit CFPB case, and scroll down for headlines that caught my eye. Thanks for reading—and please continue to send feedback. I appreciate hearing about what’s on your plate—observations, trends, new clients. I’m at cbarber@alm.com and 202-828-0315, or follow me on Twitter @cryanbarber.
Next Up: Helgi Walker Will Argue Against CFPB
Gibson, Dunn & Crutcher partner Helgi Walker will challenge the Consumer Financial Protection Bureau’s independent, single-director design in March as a federal appeals court in New Orleans hears arguments on the agency’s long-contested constitutionality.
In the U.S. Court of Appeals for the Fifth Circuit, Walker (pictured above) is representing All-American Check Cashing, a company the CFPB accused in 2016 of trying to conceal the cost of its check-cashing services and misleading consumers about the benefits of its payday loans.
Walker and the team at Gibson Dunn—including appellate partner Ted Olson—elevated the case to the Fifth Circuit after a federal judge in Mississippi upheld the CFPB’s constitutionality and refused to dismiss the agency’s case against All-American Check Cashing and its owner, Michael Gray.
>> The stakes will be high at the March 12 argument. A decision from the Fifth Circuit striking down the CFPB’s constitutionality would create a divide among the federal appeals courts. The U.S. Court of Appeals for the D.C. Circuit in January 2018 upheld the agency’s structure in a challenge that also brought by Gibson Dunn. Olson argued that case, PHH Corp. v. CFPB, in the D.C. Circuit.
>> Walker, a top appellate partner and former clerk to Justice Clarence Thomas, will make the case in the Fifth Circuit. “Ted obviously loves these issues. He’s, after all, the Olson in Morrison v. Olson,” Walker said in a recent interview, referring to a separation of powers case that has been cited in challenges to the CFPB. “But he’s just so supportive of the next generation of lawyers at the firm. We discussed it, and he said he’d like me to have the opportunity. He knew I would love to do it, and the clients were supportive.”
>> The CFPB is defending itself in the Fifth Circuit, but there is conflict on the horizon. The Trump administration's leaders at Main Justice—including Noel Francisco, the U.S. solicitor general and former Jones Day partner—are looking for a chance to challenge the single-director structure of the consumer bureau. And the All-American Check Cashing case might be that vehicle.
Conservatives and business advocates have long criticized the agency head as wielding too much power. Jeffrey Wall, Francisco's chief deputy at the SG's office, recently told the justices that the government supports the argument that the restriction on the president’s power to remove the bureau’s director violates the Constitution’s separation of powers clause.
The SG's office asked the justices to turn down a petition arising from the D.C. Circuit because Justice Brett Kavanaugh, who presided over the case earlier on the lower court, would need to recuse himself. Wall noted "there are other cases currently pending in the courts of appeals that raise similar challenges."
The SG's office identified the All-American Check Cashing appeal, along with pending challenges in the Second Circuit and Ninth Circuit, as cases that “may not present the same obstacles that could impede the full court from considering the merits of this important issue.”
Unpacking DOJ’s 'Cognizant' FCPA Declination
The U.S. Justice Department’s settlement with Cognizant Technology Solutions Corp., resolving foreign bribery claims, has resounded through the white-collar bar as an example of how much credit prosecutors are willing to give companies for disclosing misconduct.
Under a corporate enforcement policy, the Justice Department has made clear that companies can avoid criminal prosecution if they voluntarily come clean and agree to disgorge ill-gotten gains. At the same time, the DOJ has spelled out “aggravating circumstances"—including the involvement of senior executives and significant profits derived from the misconduct—that could cost companies the chance to receive a so-called “declination letter.”
Both of those circumstances appeared at play in the Cognizant settlement. Two executives, Cognizant’s former president and chief legal officer, were indicted on charges they authorized more than $3.6 million in bribes to secure permitting for an expansive campus in India. And the DOJ, along with the Securities and Exchange Commission, calculated that Cognizant received more than $16 million in ill-gotten gains.
“It was an extraordinarily positive settlement for the company. I don’t think anybody saw this coming. It was as good as it gets for the company, basically,” said Tom Fox, a Houston-based lawyer who advises companies on compliance with anti-corruption laws.
Cognizant was represented by Karl Buch and Grayson Stratton of DLA Piper, and by Kathryn Ruemmler and Douglas Greenburg of Latham & Watkins. Ruemmler (pictured above) formerly served as White House counsel in the Obama administration. Greenburg, in Washington, is local chair of the firm's litigation and trial department.
So how did Cognizant do it? The declination letter notes that within two weeks of learning of the misconduct the Cognizant board decided to report the misconduct. “In the corporate world, two weeks is almost a blink of the eye for anything,” Fox said. Also, notwithstanding the conduct of the two accused former executives, Cognizant had an effective pre-existing compliance program, the DOJ said.
My colleague Phillip Bantz has more on the settlement here at Law.com.
Compliance Headlines: Reading List
>> Documents Detail Multimillion-dollar Ties Involving EPA Official, Secretive Industry Group. "The nation’s biggest coal-burning power companies paid millions to the lobbying firm Hunton Andrews Kurth to challenge Obama-era environmental rules–”shortly before one of the firm’s partners became President Donald Trump’s top air pollution regulator.” William Wehrum, the former partner, denied any wrongdoing, saying he's followed all ethical rules. Politico
>> In-House Lawyers Face Growing Demands Due to Intense Regulatory Environment, Survey Finds. A report from K&L Gates and Forbes Insights concludes that over the next three years the most in-demand lawyers will be those who have expertise with regulatory compliance, fraud protection, risk management, data protection and consumer law compliance. Corporate Counsel
>> Prosecutors Seek to Cut MoFo Lawyer from Och-Ziff Case. "US prosecutors want to block a Morrison & Foerster partner from continuing to defend a former Och-Ziff executive charged with obstruction of justice because of a conflict of interest." Read the government's court filing in the Eastern District of New York here. Global Investigations Review
>> Cyber Attacks on Financial Services Sector Rise Fivefold in 2018. "Financial services companies in the UK saw a fivefold rise in data breaches in 2018 compared to the year before, according to the Financial Conduct Authority, in the latest sign of how the sector is under relentless attack from hackers." Financial Times
>> U.S. Regulator Warns Japan’s Biggest Bank Again on Money Laundering. “State regulators and other federal authorities have said for years that MUFG failed to properly monitor who its customers were and where their money came from. The problems were so severe that one former employee likened the bank’s anti-money laundering program to ‘a dumpster fire.’” Milbank partner Douglas Landy, who's not involved in the case, said about the Office of the Comptroller of the Currency's warning: “The O.C.C. can dangle in front of them: Fix it fast and your fine will be less. They’re not going to explicitly say that, but that will be implied.” NYT
> IRS Analyst Charged With Leaking Cohen Bank Records to Avenatti. “John C. Fry, 54, was an analyst with the IRS’s law enforcement arm in San Francisco, according to the U.S. Attorney’s Office. After searching for activity reports related to Cohen and an entity Cohen created, Essential Consultants LLC, Fry shared the information with attorney Michael Avenatti, according to a federal court filing Thursday by an agent for the Treasury Department.” Bloomberg
Notable Moves and Announcements
A mere two months after becoming Tesla’s general counsel, Dane Butswinkas(above) has left the automaker and is back practicinglaw full-time at Williams & Connolly. Butswinkas, who had not formally severed ties with Williams & Connolly, will be succeeded at Tesla by Jonathan Chang, a former Latham & Watkinslawyer who was most recently the company’s vice president for legal at Tesla.
A major new congressional hire could result in more federal pressure on companies like Facebook and Amazon, The Daily Beast has learned. Lina Khan, who wrote a semi-viral Yale Law Journal article about Amazon, is in talks to join the staff of the congressional panel overseeing antitrust issues." The Daily Beast
Giles Cohen, a veteran lawyer at the Securities and Exchange Commission, was promoted to the role of acting chief counsel in the office of the chief accountant. Cohen joined the SEC in 2005 as a senior counsel in the enforcement division and later served as counsel in the office of former Commissioner Luis Aguilar. Before arriving at the SEC, he worked as a securities counsel at Wilmer Cutler Pickering Hale and Dorr and at Davis, Polk & Wardwell.
Edward McAndrew, a former federal cybercrime prosecutor, is departing Ballard Spahrfor DLA Piper’s intellectual property and technology practice. “DLA has the best global platform available and one of the best privacy and cybersecurity teams already in place,” McAndrew said. My colleague Ryan Lovelace has more here.
