On Monday April 25, the U.S. Supreme Court granted certiorari in United States v. Shaw, a closely watched case out of the Ninth Circuit addressing the bank fraud statute, 18 U.S.C. § 1344. That statute has two subsections, the first of which criminalizes schemes “to defraud a financial institution.” The question presented in Shaw is whether that subsection requires that a financial institution be the principal victim of a fraudulent scheme, or whether deceiving a financial institution in the course of victimizing a third party is enough for a violation. In its decision, the Ninth Circuit joined the Sixth and Eighth Circuits in holding that a violation does not require that a fraudulent scheme victimize a financial institution. The other nine circuits have all held the opposite.
Last week, the Third Circuit issued a decision that could have major ramifications for sentencing in federal fraud cases. United States v. Nagle dealt with a fraud perpetrated against the Department of Transportation’s Disadvantaged Business Enterprise (“DBE”) program. The DBE program requires states that receive federal transportation funds to set goals for the awarding of construction contracts to certified DBEs. To receive DBE certification, a firm must be a small business that is majority owned and controlled by women or minority group members. In Nagle, a Third Circuit panel addressed the calculation of loss amount under the United States Sentencing Guidelines, where a firm fraudulently has held itself out as a DBE to win a state contract, but then in fact performs the contracted work.
Last week, the Texas Supreme Court joined the majority of jurisdictions in holding that a company enjoys an absolute privilege when providing the Department of Justice (DOJ) with an internal investigation report containing statements later alleged by an employee to be defamatory. The decision in Shell Oil Co. v. Writt, __S.W.3d__ (Tex. 2015) should provide Texas companies comfort that cooperating with regulatory and law enforcement agencies will not expose them to liability for defamation.
The Writt case arose from an FCPA investigation of Panalpina, a contractor Shell employed to provide freighting and customs-clearing services for a deep-water drilling project off the coast of Nigeria. At DOJ’s request, Shell conducted an internal investigation and provided the DOJ with its confidential findings.
2014 was a banner year for federal recoveries under the False Claims Act (“FCA”). In a press release dated November 20, 2014, the DOJ announced that its total recoveries – including those from both settlements and judgments – amounted to $5.69 billion for the fiscal year ending September 30th. These results mark the first time that annual recoveries have exceeded $5 billion, and they continue a recent trend of aggressive FCA enforcement. The FCA is the primary civil statute through which the DOJ combats fraud on the federal Government. It includes qui tam provisions which provide monetary incentives for whistleblowers to file suit directly against wrongdoers. $3 billion of FY 2014’s $5.69 billion recoveries arose from qui tam actions, with the Government paying $435 million to reward the whistleblowers. The number of qui tam suits has exceeded 700 for each of the last two fiscal years, far exceeding the 300 – 400 per year in the period between FY 2000 and 2009.