Foley Hoag LLP

SUMMARY

In this Issue: 

• DOJ’s Recent Trend of Prosecuting Individuals for FCPA Violations Continues with Longer Prison Sentences and Increased Fines

SUMMARY

At an open meeting of the Securities and Exchange Commission (the “SEC”) held earlier today, the SEC adopted final rules relating to the implementation of the changes to the registration requirements contained within the Dodd-Frank Wall Street Reform and Consumer Protection Act. The SEC also extended the deadline by which currently unregistered advisers will need to comply with the new registration requirements until March 30, 2012.

Additional information regarding the details of the new rules will follow.

SUMMARY

On May 16th, the Supreme Court, in a 5-3 decision, held that a whistleblower’s complaint under the False Claims Act (FCA) cannot be based upon information obtained from a request under the Freedom of Information Act (FOIA).

The False Claims Act prohibits the submission of false or fraudulent claims for payment to the United States. The statute allows lawsuits to be brought not only by the government, but also by private party qui tam whistleblowers who sue in the name of the government and are eligible to receive a percent of the money recovered in a successful suit. The False Claims Act has recovered billions of dollars into the federal fisc. In fiscal 2010 alone, the government recovered $3 billion in civil settlements and judgments. Whistleblowers, during this same time period, received $385 million.

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Secretary of the Commonwealth William Francis Galvin has proposed regulations to add conditions to the use of “matching or expert network services” by investment advisers which are registered in Massachusetts or operating in Massachusetts within an exemption from registration.

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The I.R.S. has recently issued its annual cost-of-living adjustments applicable in 2011 to qualified retirement (pension, profit-sharing, § 401(k), money purchase and stock bonus) plans. Generally, there has been such a low rate of inflation in the nation’s economy that many of these cost-of-living adjustments will remain unchanged.

SUMMARY

As the end of 2010 approaches and we receive numerous inquiries concerning developing hiring plans, I thought you might be especially interested to note some particulars about the Hiring Incentives to Restore Employment Act (the “HIRE Act”) which was enacted earlier this year to stimulate prompt hiring of workers by businesses.

SUMMARY

In this Issue: 

• The Sarbanes-Oxley Act provides whistleblower protection to certain employees who report wrongdoing by a publicly-traded company.

• A federal district court in Massachusetts has held that Sarbanes-Oxley whistleblower protection covers not only employees of the publicly-traded company, but also employees of that companys contractors, subcontractors, and agents.

• The district court is the only one in the United States that has interpreted Sarbanes-Oxley whistleblower protection to be so broad.

• The First Circuit has accepted the case for interlocutory appeal, and will likely be the first appellate court to determine the proper coverage of Sarbanes-Oxley whistleblower protection.
  

SUMMARY

The Supreme Court last week, in the case of Skilling v. United States and two companion cases, severely curtailed the reach of the federal mail and wire fraud statutes by confining the “intangible right of honest services” to only those schemes that involve bribes or kickbacks. In so doing, the Court rejected the government’s argument that honest-services fraud should apply more broadly to undisclosed self-dealing and conflicts of interests. Justice Ginsburg wrote for the Court. Three other Justices (Justices Scalia, Thomas, and Kennedy) concurred in the judgment but would have gone even further and struck down the honest-services fraud provision in its entirety, finding it unconstitutionally vague and therefore in violation of the Due Process Clause of the Fifth Amendment.

SUMMARY

In this Issue:

SEC v. TAMBONE: The First Circuit Reverses Course on What It Means to “Make” a Statement Under the Securities Laws

• Sitting en banc, the First Circuit vacated a key portion of its prior panel decision and affirmed the district court’s dismissal of the SEC’s Section 10(b)/Rule 10b- 5 claim against two mutual fund underwriters.
• The court rejected the SEC’s argument that a person who uses a false statement drafted by others to sell securities is liable for “making” that statement under Rule 10b-5.
• While this ruling closes one door to primary violator liability, others doors may yet remain open depending on the specific allegations of each case, and the First Circuit declined to choose sides in the current circuit split regarding the scope of primary liability.
  

SUMMARY

Earlier this week, Attorney General Eric Holder announced that the President’s FY 2011 budget request includes a staggering $29.2B for the Justice Department, an increase over the actual FY 2010 budget appropriation of $1.5B and 2,880 positions. 

SUMMARY

The US Citizenship and Immigration Services (“USCIS”) has initiated a significantly expanded version of its Site Visit Program in an effort to uncover fraud in the H-1B temporary worker program. Because of a funding increase, USCIS is increasing the number of employer site visits, and, in the coming months, many employers who have sponsored foreign nationals for employment-based nonimmigrant petitions will be the subject of an investigation.

SUMMARY

On October 1, 2009, Representative Paul E. Kanjorski (D-PA), Chairman of the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, released discussion draft bills of the Investor Protection Act and the Private Fund Investment Advisers Registration Act.  These bills are part of the financial regulatory reform movement in Congress in response to the recent economic crisis.  In conjunction with the release of the draft bills, on October 6, 2009, the House Financial Services Committee has scheduled a hearing to discuss the creation of a national insurance office, improving investor protections and the regulation of private pools of capital.

SUMMARY

An enforcement action announced by the U.S. Commerce Department's Bureau of Industry and Security (BIS) on September 15 has provided another reminder that all exports of items, software or commodities from the U.S. are subject to the U.S. Export Administration Regulations, whether or not the item is specifically classified under the U.S. Commerce Control List.

SUMMARY

A retrospective review of the cases brought by the Massachusetts U.S. Attorney’s Office Health Care Fraud Unit between September 2008 and September 2009 reveals a high number of cases involving medical devices as compared to drugs or other medical products. Medical devices include a wide range of products, such as implants, stents, heart pacemakers, fetal monitors, x-ray equipment, and thermometers. They are used in patients for the purposes of diagnosis, therapy or surgery. By definition, medical devices do not achieve their primary intended purposes through “chemical action” and are not “dependent upon being mobilized” to achieve their primary intended purposes. Medical devices often require approval by the Food & Drug Administration (“FDA”) before they may be legally distributed and marketed.

The gamut of products that may be considered medical devices are reflected in the cases brought by the Health Care Fraud Unit over this past year.

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In July of this year, the U.S. District Court in Dallas dismissed the Securities and Exchange Commission’s insider trading suit against billionaire entrepreneur and Dallas Mavericks owner Mark Cuban. The case has surprising implications.

SUMMARY

In this Issue:

• History and trends as indicators
• Increasing FCPA fines and penalties
• Individual prosecutions
• International cooperation
• M & A challenges

SUMMARY

On July 15, 2009, the Obama administration delivered to Congress the Private Fund Investment Advisers Registration Act of 2009 [.pdf] (the “Legislation”). The Legislation would seek to regulate private investment funds, such as hedge funds, private equity funds and venture capital funds, through mandatory federal registration, risk monitoring and disclosure requirements for private investment fund advisers managing assets valued at more than $30 million.

SUMMARY

The Obama Administration announced earlier this year that U.S. Immigration and Customs Enforcement (ICE) would implement a new, comprehensive strategy to reduce the demand for illegal employment and protect employment opportunities for the nation's lawful workforce. Moreover, the Administration made it clear that this new enforcement effort would be targeted at employers and ICE is now focusing resources on investigating employers suspected of employing undocumented workers.

SUMMARY

Senate Bill would authorize Regulation of Swap Agreements

On May 4, 2009, Senators Carl Levin, D-Michigan and Susan Collins, R-Maine introduced the Authorizing the Regulation of Swaps Act (the “Swaps Bill” or “Bill”) which, if passed, would repeal a number of provisions of US law that currently bar the regulation of swap agreements.

SUMMARY

Yesterday, the U.S. Citizenship and Immigration Services (“USCIS”) announced that the annual cap of 65,000 new H-1B visas has not yet been met and that it is continuing to accept new H-1B petitions. To date, USCIS has only received approximately 42,000 petitions to be processed under the new H-1B cap, plus approximately 20,000 additional petitions filed under the special cap for foreign workers with an advanced degree from a U.S. academic institution.