What to expect from white collar processing in 2020

The new year promises to be interesting in white collar crimes.

Goldman Sachs is negotiating with the Department of Justice to pay a fine of about $ 2 billion for its role in the 1Malaysia Development Berhad scandal, known as 1MDB.

Accounting fraud became a particular focus of the Department of Justice towards the end of 2019. In December, federal prosecutors accused executives of Result Health and MiMed, and opened an investigation into whether BMW, the German automaker, manipulated their figures of sales. Here is a look:

Malaysian authorities have accused 17 Goldman Sachs executives for accusations that they played a role in diverting about $ 2.7 billion from the $ 6.5 billion raised for the 1MDB fund. The way in which that case will be resolved is an open question because the Malaysian authorities are trying to recover all the money raised on behalf of 1MDB.

In the United States, federal prosecutors are analyzing possible violations of the Foreign Corrupt Practices Act for money laundering by Goldman. An agreement could include a guilty plea from its Asian subsidiary, which Goldman would probably close.

It is unlikely that any agreement that Goldman reaches federal authorities affects the bank. The Securities and Exchange Commission has shown its willingness to renounce its “bad actor” rules, which prohibit financial institutions from offering securities to the public. And the large fines and guilty pleas that Citigroup, JPMorgan Chase, Barclays, Royal Bank of Scotland and UBS agreed in 2015 to manipulate foreign currencies did not cripple those banks.

Any agreement with the Department of Justice and the S.E.C. It is likely that Goldman has an external monitor to ensure that he did not violate securities laws in the future. But most likely it is just another cost of doing business for the company, which could certainly survive any problem that arises from monitoring.

Criminal proceedings for accounting fraud are rare, but at the end of last year, prosecutors took a much more aggressive position by accusing senior executives of violating accounting rules.

In December, federal prosecutors accused Rishi Shah, co-founder of Result Health; the company’s former president, Shradha Agarwal; and its chief financial officer, Brad Purdy, of money laundering and postal and electronic fraud for making false statements to a bank to obtain nearly $ 1 billion in loans and capital investments.

The Department of Justice also accused former MiMedx executives Praker Petit and William Taylor of “stuffing channels” by selling more products to distributors than they needed, to “stimulate” corporate sales. According to the indictment, MiMedx “did not reach the lower limit of its revenue guide until the last day of the quarter in each of the four quarters of 2015.” That will surely raise suspicions about whether the sales were legitimate.

If federal prosecutors can convince a jury that the defendants violated the securities law, there are likely to be substantial prison sentences.

The problem for BMW will be if its vehicle sales report also fooled investors. The second. He is investigating whether the company manipulated figures to make it look healthier than it was. If it is determined that it has done so, the company could face a substantial penalty.

In September, Fiat Chrysler paid $ 40 million to settle claims that he used dubious practices to inflate his sales. The second. concluded that Fiat Chrysler had provided inaccurate information to investors, in violation of federal securities laws.

The House of Representatives approved the Law on the Prohibition of Privileged Information, which for the first time would specifically define what constituted privileged information and expand what could be processed.

If the approval of the Senate continues and the legislation becomes law, any person “who knows important and non-public information related to a company” could be held responsible for the insider trading. The communication of confidential information to third parties, the tippees, would be prohibited, provided that the information “reasonably is expected to have a material effect on the market price” of any value.

The legislation also covers obtaining information for “theft, bribery, misrepresentation or espionage,” along with any “conversion, misappropriation or other unauthorized and misleading taking of such information.” That would be subject to many means to obtain confidential information to the new ban on insider trading information.

Providing a definition would be an important step in the prosecution of insider information because prosecutors have had to rely on the courts to define what is and what is not insider information. We are likely to see an expansion of what types of behavior could be subject to prosecution. It remains to be seen if that is a good thing.

Even if the legislation is not passed, a resolution at the end of 2019 will make it easier for the Department of Justice to look for cases of insider trading.

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