AGG’s Government Investigations Team Insights provides periodic updates covering legal and regulatory topics. Our team, which includes former federal prosecutors, SEC enforcement attorneys, and federal agency attorneys, has successfully represented companies and individuals, including executives of public companies, in numerous civil and criminal investigations, including before the U.S. Department of Justice and U.S. Attorney’s Offices, the SEC, the EPA, the FDA, the FTC, and many other federal and state agencies.
In this edition, we review the likely white collar enforcement priorities for the Biden Administration, analyze the Small Business Administration’s new PPP Loan Necessity Questionnaires, assess the impact of recent SEC enforcement proceedings against former Wells Fargo senior executives, and discuss new rules governing the EPA’s use of agency guidance as evidence in enforcement actions.
Predicting White Collar Enforcement Priorities in the Biden Administration
By: Tenley A. Carp, Aaron M. Danzig, Brooke F. Dickerson, Jeffrey S. Jacobovitz, Sara M. Lord, Alan G. Minsk, Adriaen M. Morse Jr., Rebekah N. Plowman, and John P. Rowley III
As all signs point to Joe Biden becoming the 46th President of the United States, AGG’s Government Investigations Team has begun considering the likely shifts in white collar enforcement from the Trump Administration to a Biden Administration. Every administration brings its own priorities to enforcement, with the Trump Administration focusing more on immigration and corporate espionage cases, while conventional wisdom holds that Democratic administrations emphasize white collar enforcement and a more active regulatory environment. Indeed, continuing a ten-year trend, white collar prosecutions declined significantly from the Obama Administration to the Trump Administration. As of mid-2020, the number of white collar prosecutions was down 25% from 2015, while civil enforcement actions by the Securities and Exchange Commission, particularly insider trading cases, also declined. Read More >
SBA’s New PPP Loan Necessity Questionnaires Target PPP Recipients with Loans of $2M
By: Tenley A. Carp and Sara M. Lord
On October 31, 2020, the U.S. Small Business Administration (“SBA”) published a Notice in the Federal Register seeking approval from the Office of Management and Budget for the collection of information through, among other forms, SBA Form 3509 (Loan Necessity Questionnaire – For-Profit Borrowers) and SBA Form 3510 (Loan Necessity Questionnaire – Non-Profit Borrowers). These Paycheck Protection Program (“PPP”) Loan Necessity Questionnaires “will be used by SBA loan reviewers to evaluate the good-faith certification that you made on your PPP Borrower Application…that economic uncertainty made the loan request necessary.” Both Loan Necessity Questionnaire forms – one for for-profit borrowers and one for non-profit borrowers – state that SBA is “reviewing these loans to maximize program integrity and protect taxpayer resources,” emphasizing, if there was any doubt, that SBA intends to search for and investigate possible fraud, waste, and abuse in the PPP. Read More >
SEC’s Investigation into Wells Fargo Concludes with Actions Against Senior Executives
By: Adriaen M. Morse Jr. and Cory C. Kirchert
On Friday, November 13, 2020, the U.S. Securities and Exchange Commission (“SEC” or “Agency”) followed up its February 2020 action against Wells Fargo & Co. (“Wells Fargo”) with actions against two senior officers—former Chairman and CEO of Wells Fargo, John Stumpf, who agreed to an SEC administrative cease and desist order, and $2.5 million in penalties, and former head of Wells Fargo’s Community Bank (“Community Bank”), Carrie Tolstedt, who did not settle with the SEC. The SEC filed a civil complaint in the U.S. District Court for the Northern District of California against her, claiming that Tolstedt had violated “the antifraud provisions of the federal securities laws” and seeking to have a “permanent injunction, civil penalties, disgorgement with prejudgment interest, and an officer-and-director bar” imposed against her. Read More >
EPA's New Rule Limiting the Use of "Guidance" May Make It Easier, or Harder, to Defend Against Enforcement Actions
By: Brooke F. Dickerson
President Trump issued an Executive Order on October 9, 2019, to make the use of guidance documents by federal agencies more transparent. The Environmental Protection Agency subsequently promulgated a final rule, effective November 18, 2020, to clarify how it will manage guidance documents consistent with the Executive Order. Guidance are memoranda, policy papers, or other documents that articulate an agency’s interpretations of laws, regulations, or policies, that have been vetted and approved within the agency but were not subject to public comment, and that do not have the legal force of a regulation or a law. Despite the fact that guidance is not legally enforceable, both EPA and the regulated community frequently rely on guidance to direct their decisions. Sometimes defendants decry EPA’s use of guidance as legal authority, arguing that an agency should not be allowed to rely on unsanctioned interpretations in enforcement actions. However, limiting EPA’s use of guidance may paradoxically lead to less transparency regarding Agency decisions and greater uncertainty in the regulated community. Read More >