Welcome to Compliance Hot Spots, our briefing on compliance, enforcement and government affairs. What can be gleaned from the U.S. Justice Department’s recent declination in an FCPA case? Rod Rosenstein opens up about “pile on” penalties. Also, we highlight concerns accompanying a Covington & Burling partner’s planned jump to the FTC to lead consumer protection efforts. And could the CFPB’s big case against PHH be coming to an end soon? As always, thanks for reading, and we value any feedback. Tips or other other suggestions? What’s on your plate? Contact me email@example.com or 202-828-0315, or follow me on Twitter @cryanbarber.
Real Estate Industry Watches, Waits for Mick Mulvaney’s Next Moves
PHH Corp. earlier this month passed up a chance to take its challenge of the Consumer Financial Protection Bureau’s independent, single-director structure up to the Supreme Court, electing to instead walk away happy with a Washington appeals court’s decision to toss a $109 million fine the agency levied in 2015.
The PHH case is back at the CFPB, and the real estate industry is keeping close tabs on it—waiting to see whether the CFPB’s new leadership reups the enforcement action or lets the mortgage servicing company go. The penalty had been among the largest the agency ever brought.
Mick Mulvaney, the bureau’s interim director, doesn’t appear to be a fan of the case. During an appearance Tuesday at the National Association of Realtors conference in Washington, Mulvaney noted that the U.S. Court of Appeals for the D.C. Circuit had remanded the case to the CFPB and told the crowd that he was “not going to comment on PHH.”
But wait: In the next breath, Mulvaney described the PHH matter as a “regulation-by-enforcement case,” his shorthand for an action taken without first giving the industry notice of the rules of the road.
“That’s the thing that we sort of look at and we say, ‘We’re not going to have that problem anymore, because we’re not doing that,’” he said.
Mulvaney, who earlier this year declared an end to the days of “pushing the envelope” at the CFPB, went on to say Tuesday that the bureau was “still closely associated with Sen. Elizabeth Warren” and not seen as among the “gold standard” regulatory agencies.
“We are her baby. And that elicits tremendous support on one side of the political spectrum and tremendous opposition on the other,” Mulvaney said. “And that’s not where a gold standard regulator should be. A gold standard regulator should never be accused of being political.”
PHH’s lawyers in the D.C. Circuit—led by Gibson, Dunn & Crutcher partner Ted Olson—have a challenge to the agency structure in the works in the Fifth Circuit. So that fight might get to the U.S. Supreme Court just yet.
‘There Absolutely Will Be More Declinations’
Hogan Lovells partner Peter Spivack, fresh off inking a declination with the U.S. Justice Department on behalf of client Dun & Bradstreet, spoke to Corporate Crime Reporter broadly about what he’s been able to glean from his experiences with the Trump administration’s FCPA enforcers.
Late last month, his client Dun & Bradstreet paid $9 million as part of a settlement with the Securities and Exchange Commission resolving allegations that two of the company’ subsidiaries made unlawful payments to government officials in China. But the Justice Department declined to prosecute. The company, prosecutors said, checked several of the boxes of the DOJ’s recently-revised enforcement policy for the Foreign Corrupt Practices Act: it promptly disclosed the misconduct, cooperated with the investigation, fired or otherwise punished culpable employees and improved its compliance program.
Dun & Bradstreet even translated foreign language documents to English, the Justice Department pointed out.
One prediction from Spivack: “There absolutely will be more declinations.”
“There is not a desire at the Department of Justice for having that be an impossible standard to meet,” Spivack told the Corporate Crime Reporter. “Instead, there is a strong desire to have companies meet the standard. That will simply depend on companies and their advocates being able to articulate why they fit within the standard and should get the treatment that the Department of Justice is prepared to give—a declination.”
Deputy Attorney General Rod Rosenstein’s recent rhetoric gives cause for optimism within the white-collar defense bar. Last week, he said the Justice Department would no longer “pile on” as part of an effort to avoid “unfair duplicative penalties.”
Rosenstein said in his remarks:
“Corporate settlements do not necessarily directly deter individual wrongdoers,” Rosenstein said. “They may do so indirectly, by incentivizing companies to develop and enforce internal compliance programs. But at the level of each individual decision-maker, the deterrent effect of a potential corporate penalty is muted and diffused. Our goal in every case should be to make the next violation less likely to occur by punishing individual wrongdoers.”
Who Got the Work
Squire Patton Boggs got more than it bargained for out of its “strategic alliance” with Michael Cohen. But the firm can’t say it walked away from President Donald Trump’s shunned personal lawyer empty-handed, my colleague Ryan Lovelace reports in The National Law Journal. The U.S. Immigration Fund, one of the five “client opportunities Cohen referred to the firm, is one of Squire Patton Boggs’ top-10 lobbying firms so far this year based on revenue. Squire Patton Boggs lobbied for the company on the EB-5 visa program, which grants residency to high-paying foreign investors.
Meanwhile, Holland & Knight‘s Scott Mason, a former Trump campaign aide, is doing quite well for himself, landing clients such as Alphabet and Tesla, according to a CNBC report. Mason is a senior policy advisor in Washington for the firm.
➤➤ A Steptoe & Johnson LLP team has signed up to lobby for the National Retail Federation on data security issues, according to a new registration. The federation’s lobbying team will include Steptoe partner Douglas Kantor, a former deputy chief of staff and special counsel at the Department of Housing and Urban Development. He’ll be joined by associates Eva Rigamonti and Kate Jensen.
➤➤ The NRA, represented by Washington’s Cooper & Kirk and the New York firm Brewer, Attorneys & Counselors last week sued New York financial regulators for an alleged “blacklisting” campaign against companies doing business with the firearms advocate. Bloomberg has more here, and read the complaint, filed in Albany federal district court, here.
Around the Web: Does the RBS Penalty Portend a Soft Touch? And: A Covington Partner Is Up for FTC Post
• Consumer advocates have voiced concern over the FTC’s planned appointment of Covington & Burling‘s Andrew Smith to lead the agency’s consumer protection bureau. Smith was a leading attorney for the Consumer Data Industry Association, the chief trade group for credit reporting companies such as Equifax Inc. The New York Times reports that, if appointed, he would also refrain from being involved in enforcing the FTC’s settlement with Uber over a data breach. [Reuters]
• Mark McWatters, chairman of the National Credit Union Administration board, is putting the “lone” in Lone Star State. He works remotely and presumably alone from his home in Dallas, raising questions about how diligently—or at least closely—he’s leading the regulator of the nation’s $1.4 trillion credit union industry. Could knives be out for him? He’s been mentioned as a top contender to be nominated for a five-year term as the Consumer Financial Protection Bureau’s director. [Washington Post]
• Analysts expected Royal Bank of Scotland Group Plc to pay considerably more than the $4.9 billion penalty the Justice Department is expected to impose to resolve claims over the sale of toxic mortgage-backed securities. The lower amount has fueled some speculation the Trump administration will be softer on banks than Obama-era enforcers. “RBS’s proposed deal looks to be welcome news for HSBC, UBS and Wells Fargo, among the last remaining big banks with unresolved U.S. investigations over mortgage-backed securities.” [Bloomberg]
• Facing a potentially devastating seven-year export ban, the Chinese telecommunications giant ZTE told U.S. authorities that its failure to comply with a settlement over sanctions violations was due to faults in its internal controls, not a plan of deception. The appeal might have helped: Trump on Mondaysignaled a willingness to help ZTE, which had shut down its “major operating activities” following the export ban and asked the Commerce Department to stay an order prohibiting U.S. exports to the company. [Wall Street Journal]
• “U.S. auto safety regulators are raising pressure on a dozen vehicle manufacturers that failed to meet a December deadline to replace millions of defective Takata air-bag inflators that could explode in a crash.” [Bloomberg]
• The SEC’s cyber unit chief is warning that steeper penalties may be coming for ICO issuers that flout rules. “If the conduct continues, despite all that, I think you will continue to see cases and probably the remedies will go up,” Robert Cohen said. [The Recorder]
• “Wells Fargo probably won’t get out of the Federal Reserve’s penalty box any time soon.” The bank anticipates continued restrictions on growth “through the first part of 2019.” [CNN]
New Hires & Promotions: Who Got the Post
• Hughes Hubbard & Reed partner John Wood will succeed Lily Fu Claffee as general counsel to the U.S. Chamber of Commerce. Wood, who starts June 4, is a former U.S. attorney in the Western District of Missouri and law clerk to Justice Clarence Thomas. Claffee left the post to become general counsel to Fox News.
• Freddie Mac has named John Krenitsky as as senior vice president and chief compliance officer. Krenitsky joins from Discover Financial Services. Krenitsky was chief compliance officer at Discover, overseeing an enterprise-wide compliance risk program. Earlier, he served as chief compliance officer for BNP Paribas subsidiaries.
• Salesforce has appointed Lindsey Finch as its first data protection officer, just weeks before the General Data Protection Regulation takes effect in Europe. Finch, also serving as senior vice president of global privacy and product legal, has spent more than a decade in-house at Salesforce.