Compliance Hot Spots: CFPB's Subpoena Tinkering | DOJ's Front-Office Hires | A US Treasury First | Who Got the Work
Good evening from DC, and welcome to Compliance Hot Spots, our roundup and analysis of regulatory and enforcement trends. Tips, feedback and general thoughts on your practices always appreciated. I'm your host, C. Ryan Barber. Reach me at cbarber@alm.com and 202-828-0315, or follow me on Twitter @cryanbarber.
Consumer Bureau Amends Subpoena Policy
In January 2018, just two months into his time leading the Consumer Financial Protection Bureau, Mick Mulvaney launched an effort to examine every facet of the agency—from rulemaking and enforcement to supervision and consumer education initiatives.
The first area to enter his sights was one that for years had been a thorn in the side of the financial industry: the bureau’s civil investigative demands. Announcing a request for comments, the bureau said the input would help it “determine whether any changes are warranted.”
A year later, after hearing complaints from the industry, the bureau has found that changes are necessary in its approach to demanding information from enforcement targets.
The CFPB, now led by the Trump-appointed Director Kathy Kraninger (above), said Tuesday that it had updated its policies to ensure that CIDs, as the demands are known, include more clarity about the conduct under investigation. The change responds to a longstanding gripe that the demands were overly broad and burdensome on companies.
"The first reaction that a recipient of a CID has is: Am I the target? What is the subject of this investigation? What are you looking for? What did I do wrong? And the notification of purpose is supposed to satisfy some of that rightful curiosity and also force the CFPB to home in on to some extent what it is looking for and the violations of law that are at issue,” said Davis Wright Tremaine partner Jonathan Engel, a former CFPB enforcement attorney.
The policy change comes also in response to court decisions that brushed back the bureau, spiking its investigative demands on the ground that they were overly broad.
In September, for instance, the U.S. Court of Appeals for the Fifth Circuit struck down a civil investigative demand the CFPB had issued to Source for Public Data L.P., the operator of website offering access to public records, ruling that the agency had not adequately alerted the company to the specific conduct under investigation.
Previously, in a decision that would be widely cited as companies challenged the CFPB’s investigative demands, the U.S. Court of Appeals for the D.C. Circuit rejected the agency’s investigation of the Accrediting Council for Independent Colleges and Schools. The decision upheld a judge’s ruling that the CFPB had strayed outside its jurisdiction.
Venable partner Allyson Baker, who represented ACICS, said the revised policy could be read as a harbinger of reinvigorated enforcement.
"You could also see it as a statement that the bureau intends to be an enforcer of consumer financial service laws going forward. It gives notice that the bureau is back in business insofar as issuing CIDs."
Compliance Headlines: What Caught My Eye
>> Barr Gets Waiver on Case Linked to Inquiry Into Trump's Inauguration Fund. "Attorney General William Barr has received a waiver to participate in the investigation of 1Malaysia Development Berhad (1MDB), a Malaysian development company that has come under investigation by the FBI and DOJ for alleged money laundering." Politico
>>KPMG's 2019 CCO Survey: Insights for the Future of Ethics and Compliance."There is a growing consensus across all industries regarding the key areas organizations need to focus on and enhance, not only in ethics and investigations but also on the maturity of ethics and compliance programs," saidAmy Matsuo, KPMG principal and regulatory insights national leader. "This is likely driven not only by a commonality of risks but also converging business models." KPMG
>> Judge Reveals Secret Legal Battle in Greg Craig Case. "The federal judge overseeing the case against former Obama White House Counsel Greg Craig has revealed the existence of a previously unreported legal showdown over how attorney-client privilege applies to testimony related to the prosecution of Craig for allegedly misleading the Justice Department about his dealings related to Ukraine." Politico
>> Treasury Bureau Issues First Penalty for Peer-to-Peer Digital Currency Exchange. "The Treasury Department’s financial crimes unit fined a California man it accused of violating anti-money-laundering laws, saying he exchanged bitcoins hundreds of times on behalf of customers without a license. It is the Financial Crimes Enforcement Network’s first enforcement action against a peer-to-peer virtual currency exchanger." The Wall Street Journal
>> On ‘Made in America,’ Trump’s F.T.C. Appointees May Be Out of Step With Him. "On the F.T.C., Mr. Trump’s own appointees appeared to be out of step with the trade policy espoused by the president. 'The Republican commissioners didn’t get the memo from President Trump about the ‘Buy America, Hire America’ administration,' said Lori Wallach, director of the Global Trade Watch at Public Citizen, a consumer advocacy group. The New York Times
>> Time to Prepare for the EU's New Whistleblower Protection Rules. "Under the EU’s heightened standards, businesses will have to implement systems that allow whistleblowers to remain anonymous while reporting their concerns internally to company representatives or externally to authorities, the public or news outlets. Companies also will be banned from retaliating against whistleblowers and bear the burden of proving that they have not retaliated." Law.com
>> Federal Corruption Probe Reaches Into Atlanta Law Department. "Prosecutors have requested records to determine if there was a financial relationship between former City Attorney Cathy Hampton and the private law firm that guided the city’s response to numerous federal grand jury subpoenas. The firm, Paul Hastings LLP, has earned millions over the past decade handling some of the city’s most sensitive matters for both former Mayor Kasim Reed and his successor, Keisha Lance Bottoms." Atlanta Journal Constitution
>> Facebook CEO Mark Zuckerberg said to be under close scrutiny in federal privacy probe. “Mark Zuckerberg is Facebook’s co-founder, chief executive, board chairman and most powerful stock owner, and a sanction from the federal government would be seen as a rare rebuke to him and the tech giant’s ‘move fast and break things’ ethos.” Washington Post
Who Got the Work
>> Broderick Johnson, senior of counsel at Covington & Burling, has registered to lobby for Sprint Corp. "regarding proposed Sprint-T-Mobile merger." Johnson formerly was assistant to the president and cabinet secretary at the White House from 20014 to 2017, and deputy assistant to the president for legislative affairs at the White House from 1998-2000.
>> Brownstein Hyatt Farber Shreckregistered to lobby for Fujian Jinhua Integrated Circuit Co. Ltd. on "Issues related to circuit integrated manufacturing." Shareholder Marc Lampkin, who is the managing partner of the firm's Washington office, and Travis Norton, of counsel, are on the account.
>> Akin Gump Strauss Hauer & Feldfiled papers to lobby for the Carlyle Group on "implementation of international tax reform, taxation of funds; energy public policy issues and regulatory issues related to development of crude oil export facilities; issues related to infrastructure public policy." The team includes partner Jeff McMillen and senior advisor Ryan Thompson.
>> Cozen O'Connor member Lynn Espy-Williams in Washington has signed up to lobby for Equifax Inc. on "banking/financial services, education, housing, health care."
>> Prosper Funding LLC was represented by Covington & Burling partner David Kornblau, head of the law firm’s securities enforcement group, as the company resolved allegations that it miscalculated and overstated investors’ returns. Prosper paid a $3 million to the Securities and Exchange Commission, which alleged that the company misstated net returns to thousands of investors who purchased securities tied to the performance of the firm’s consumer credit loans.
Notable Moves & More
>> Facebook has hired U.S. State Department legal adviser Jennifer Newstead (above) as general counsel, bringing on a lawyer with extensive government expertise in the face of intense regulatory scrutiny. The formerDavis, Polk & Wardwell partner replaces Colin Stretch, who’d planned to leave the Facebook last year but stayed on as the tech giant tried to climb out of one corporate crisis after another. Read Facebook's announcement here. The Washington Post has more here: "She Sold the Patriot Act to Congress. Her Next Job Is Defending Facebook."
>> William Hughes, a former Sullivan & Cromwell associate who joined the Trump administration in early 2017, has moved to a front-office position at the U.S. Justice Department as an adviser to the deputy attorney general. Hughes, named an associate deputy attorney general this month, joined Main Justice from the Trump White House, where he had been deputy director of administration in the executive office of the president. Hughes had been a Sullivan & Cromwell associate since November 2009.
>> "The only Democratic member of the Securities and Exchange Commission is expected to leave government later this year, paving the way for a more conservative tilt on some regulatory decisions," The Wall Street Journal reports. New York University Law School said Robert Jackson Jr. is expected to join for the fall semester.
>> Stephen Vaughn, serving as general counsel at the U.S. Trade Representative office, is preparing to leave his post this month, Bloomberg News reports. Vaughn was formerly a partner in King & Spalding’s international trade group. Vaughn will be replaced by Joseph Barloon, a lawyer at Skadden Arps Slate Meagher & Flom.
>> Vanessa Burrows, a healthcare regulatory lawyer, has joined the Washington office of Simpson Thacher & Bartlett as counsel. She previously worked at McDermott Will & Emery.
>> Florida-based Stumphauzer & Sloman PLLC has hired three partners in Miami—Adam Foslid, Ian Ross, and Timothy Kolaya. They arrived from Greenberg Traurig.
>> Margaret Daum has joinedSquire Patton Boggs as a partner, arriving from her post as Democratic staff director of the U.S. Senate Committee on Homeland Security and Governmental Affairs.
>> Ben Curtis has jumped to McDermott Will & Emery’s Miami office as a partner of the firm’s litigation practice group. He arrives from Nelson Mullins Broad and Cassel.
>> Daniel Cheriyan, a former enforcement attorney at the Consumer Financial Protection Bureau, has joined Wells Fargo as a senior counsel. “After five wonderful years at Buckley LLP, I’ve decided to leave and join up with fellow CFPB alumni at Wells Fargo, here in DC. I’m thrilled for this next adventure and the challenges ahead, and am thankful for the invaluable lessons learned at Buckley,” he wrote on LinkedIn.
