Skadden Attorneys Discuss Biden Administration’s Emphasis on White Collar Crime

By Kathleen Lynn

January 25, 2023

Skadden Attorneys Discuss Biden Administration’s Emphasis on White Collar Crime


By Kathleen Lynn

The Biden administration is targeting white-collar crime, spending heavily to hire more Department of Justice lawyers and FBI agents, a panelist told lawyers Monday during the New York State Bar Association’s Annual Meeting.

The panelist, Maria Cruz Melendez, a partner with Skadden Arps Slate Meagher & Flom, was one of four Skadden attorneys who spoke at a Business Law session on trends in securities and white-collar crime enforcement.

Cruz Melendez said that under U.S. Attorney General Merrick Garland, the Department of Justice is looking “holistically” at corporate misconduct, asking whether a corporation’s leadership, compensation structure and culture opened the door for unethical behavior.

“The department wants to get companies to look at why misconduct happens,” she said.

Moreover, she said, the department’s top enforcement priority is to hold all individual wrongdoers who played a role in misconduct accountable, a change from the previous administration’s policy on holding accountable those individuals “substantially” involved.

The Securities and Exchange Commission has also ramped up enforcement, collecting a record $6.4 billion in penalties, disgorgement and interest relief in fiscal 2022, said Anita B. Bandy, a partner in Skadden’s Washington office. That was up from $3.9 billion in fiscal 2021.

As more investors seek to put their money where their beliefs are, the SEC plans new rules on ESG (environmental, social and governance) investing, Bandy said. Proposed new regulations would require funds and advisers that focus on ESG to disclose more information about their ESG strategies.

In the meantime, Bandy said, the agency has pursued several ESG-related enforcement actions.  “The SEC isn’t afraid to take on litigated ESG cases,” she said.

In addition, Bandy said the SEC has increased its enforcement of cybersecurity cases. It has also continued to examine improper management of reported earnings per share, she said.

Digital assets are also drawing attention from the SEC, which has doubled the staff of the unit overseeing those assets, Bandy said. In 2022, the SEC accused the crypto lending platform BlockFi of failing to register the offers and sales of its retail crypto lending product. The case was the first of its kind against a crypto lending company, and BlockFi settled by agreeing to penalties totaling $100 million.

Bandy predicted that in 2023, SEC enforcement priorities will include ESG disclosures; Regulation Best Interest, which imposes care, disclosure, conflicts and compliance obligations on broker-dealers; and the new marketing rule, which regulates how investment advisers advertise.

In another enforcement change, whistleblowers who report violations of U.S. anti-money laundering laws are eligible, as a result of the Anti-Money Laundering Act of 2020, for much larger incentives than in the past, according to Eytan Fisch of Skadden. Previously, awards were capped at $150,000; now they can total 10 percent to 30 percent of the monetary penalties.  With penalties at times in the hundreds of millions of dollars, “that is obviously quite significant,” Fisch said.

In addition, the whistleblower provisions have recently been extended to include violations of U.S. economic sanctions. That would cover a wider range of corporations, not just financial institutions.

The panel was moderated by David Meister, Skadden’s head of New York government enforcement and white-collar crime group. Meister briefly discussed the new makeup of the Commodities Futures Trading Commission, which he called “very aggressive,” citing its 82 enforcement cases in fiscal 2022, resulting in $2.5 billion in restitution, disgorgement and civil monetary penalties.

Kathleen Lynn is a freelance writer.






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