This week, the Supreme Court in Kokesh v. SEC unanimously held that the Securities and Exchange Commission’s (SEC) equitable disgorgement remedy is subject to a five-year statute of limitations because it is a “penalty” within the meaning of 28 U.S.C. § 2462, which governs “an action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture.” Before Kokesh, some circuits had held that the SEC could obtain disgorgement of the entire amount of the ill-gotten gains or losses avoided, even those that extended well beyond the five-year statute of limitations associated with most federal securities laws. Kokesh clarifies that both civil penalties and disgorgement are subject to the same five-year limitations period.
This week we highlight a report by Ernst & Young based on three years of research on the linkages between nonfinancial performance and investor decision-making. The data concludes that with regards to environmental, social and governance (ESG) reporting, there is a global trend toward increased interest in nonfinancial information on the part of investment professionals.
Cree Inc. (“Cree”), the U.S.-based LED lighting and semiconductor company, announced last month that it is terminating its agreement to sell its Wolfspeed Power & RF division (“Wolfspeed”) to Infineon Technologies AG of Germany (“Infineon”) for USD $850 million. The decision to terminate the deal came shortly after Cree announced that CFIUS raised objections to the acquisition and that the parties were working within the deal structure to mitigate CFIUS’ concerns. This outcome underscores that CFIUS risk can exist in transactions involving buyers from countries that are closely allied to the United States.
CFIUS: Account for CFIUS risks in transactions involving non-U.S. investments in businesses with a U.S. presence
Over the past year, the Committee on Foreign Investment in the United States (CFIUS), an interagency committee chaired by the Department of the Treasury, has been particularly active in reviewing and, at times, intervening, in non-U.S. investments in U.S. businesses to address national security concerns. CFIUS has the authority to impose mitigation measures on a transaction before it can proceed. It may also recommend that the President block a pending transaction or order divestiture of a U.S. business in a completed transaction. Consequently, companies that have not sufficiently accounted for CFIUS risks may face significant hurdles in successfully closing a deal. With the incoming Trump administration, there is also the potential for an expanded role for CFIUS, particularly in light of campaign statements opposing certain foreign investments.
On April 3, 2016, it became public that an anonymous source had leaked 11 million confidential documents, known as the “Panama Papers,” belonging to the Panama-headquartered international law firm Mossack Fonseca. As more of the Panama Papers become public over the coming months, they will raise a host of issues for parties identified in the papers, as well as the business partners, customers, suppliers and other entities connected to those parties. This alert summarizes key legal issues for consideration as companies attempt to understand, assess and mitigate the potential impact and exposure of the Panama Papers on their business.
A U.K.-government-commissioned survey of 500 businesses known as “small and medium sized enterprises” (SMEs) in the United Kingdom released in July 2015 found that more than one-third of the businesses had never heard of the country’s principal international anticorruption law. Commissioned by the U.K.’s Ministry of Justice (MOJ) and Department for Business, Innovation and Skills in January 2014, the survey evaluated the business awareness of, compliance with and overall impact of the U.K. Bribery Act of 2010 (“Bribery Act”), the country’s antiforeign bribery statute that went into effect on July 1, 2011.
On March 18, 2015, nearly two years after the enactment of Brazil’s 2013 Clean Companies Act (CCA), Law No. 12,846, Brazilian President Dilma Rousseff issued Decree No. 8,420 (the “Decree”) implementing the CCA. This week, an English language translation of the Decree was made available, warranting a reminder that companies and individuals doing business in Brazil must ensure their compliance with Brazil’s anticorruption legislation.
Most agree that the CCA is largely in conformance with the U.S. Foreign Corrupt Practices Act (FCPA), the U.K. Bribery Act (“Bribery Act”) and other international anticorruption regimes. The CCA prohibits entities from providing, or attempting to provide, anything of value to Brazilian public officials or foreign public officials (where conduct in furtherance of bribery occurs within Brazil). Like the U.S. and U.K. anticorruption laws, this gives the CCA certain extraterritorial application. One key difference from the FCPA and the U.K. Bribery Act, however, is that the CCA imposes strict liability. The CCA does not require a showing of corrupt intent, which is required to show criminal liability under the FCPA. It also does not require that the bribe benefit the company, which is a required element of a corporate offense under the U.K. Bribery Act.
The prosecution of corporations always makes good headlines. But the emerging trends in these corporate prosecutions tend to be at the margins and therefore less reported—prosecutors commit to sustained and vigorous enforcement of white collar criminals; defense attorneys push back that sentences are overly harsh and that innocent conduct is increasingly characterized as fraud. These messages all played out among the largest annual gathering of lawyers focusing on white collar crime, the ABA White Collar Institute in New Orleans, Louisiana, earlier this month.
The Foreign Corrupt Practices Act (FCPA) was front and center at the conference, as it has been for the last decade. But at least three relatively new messages were included in the discussion.