Investigating Fraudulent Claims: The Role of SIU
Previously we have addressed the issues of fraud at the inception of an insurance claim, a carrier's analysis of fraudulent claims and the use of forensic experts to investigate and defend claims. This article will focus on the role of the carrier's Special Investigation Unit ("SIU") in investigating and defending against fraudulent insurance claims and the role of SIU counsel in the investigative process.
Daubert Motions in Business Crimes Cases
White-collar defense attorneys face many challenges to overcome in successfully representing their clients. In federal criminal cases, the challenges have increased dramatically due to the heightened punishments that can be assessed against "non-cooperating" individuals or businesses who insist upon their rights to a trial. Consider the recent case of Jamie Olis, a mid-level accountant at an energy company, who (unlike two of his superiors) went to trial and was convicted of various fraud charges for having engaged in "income-smoothing" or "cookie-jar accounting" of the company's earnings history to try to help the company meet its earnings expectations. Although Olis received no financial benefit for his misguided efforts, he got 24 years' imprisonment (compared with his cooperative bosses, whose sentences were capped at a 5-year maximum under plea agreements). The sentence was largely due to the calculations of the "amount of loss."
One FCPA World
Suppose a group of officers of one of your foreign-based corporate clients, with no offices or businesses in the United States, makes a rare visit to the U.S. for an industry-related conference. Between sessions, they break off to participate in a conference call with employees overseas. The subject is whether to authorize political contributions in another country in the hope of getting business there, and they tell their compatriots to proceed. As soon as the conference is over, they head home. Can this one call be the basis for an assertion of U.S. jurisdiction over your client and the officers under the Foreign Corrupt Practices Act (FCPA)? Surprisingly, the answer is yes, in spite of the entirely accidental nature of the contact.
Internal Investigations and Outside Auditors
The Problem: You are the CEO of a publicly traded company that has been rocked by a highly publicized scandal. When the story first broke, your General Counsel told you that the company had to hire an outside law firm to conduct an internal investigation. She also told you that the report of the internal review might have to be turned over to DOJ and the SEC if those agencies insisted on having a copy. You worried about whether plaintiffs in the inevitable shareholder lawsuits would claim that they, too, were entitled to copies of the report, but you deferred to the judgment of your General Counsel and authorized the internal review. Now a new issue has arisen. Long before DOJ or the SEC asks for the results of the internal investigation, and well before a single shareholder suit is filed, your General Counsel gets a call from your company's outside auditor saying that they want a copy of the internal review. You ask your General Counsel whether providing the report to your auditor will waive its privileged status. She says the answer probably is "no." Is your General Counsel right?
In The Courts
Recent rulings of importance to you and your practice.
The IRS Office of Professional Responsibility
As many criminal practitioners are acutely aware, the Internal Revenue Service has recently ramped up compliance and enforcement efforts with budget increases and enhanced resources. A lesser-known component of this revitalized enforcement is the IRS Office of Professional Responsibility (OPR), which is charged with regulating professionals - mostly lawyers and accountants -- who practice before the IRS. OPR enforces ethical rules that govern practice before the Service, commonly known as "Circular 230," and may sanction practitioners who violate those rules. Because OPR matters can interact with the criminal process in many respects, conscientious white-collar practitioners and corporate tax counsel should familiarize themselves with OPR and its power over tax professionals.
SOX Lowers the Bar for Barring Directors and Officers
Banishment from the public company world -- through the enforcement of a D&O bar - used to be an extreme remedy for management misconduct. Now, the trend has turned, with Sarbanes-Oxley (SOX) and the current enforcement climate leading to a flood of requests for bars. In 2000, the SEC asked federal courts to impose 38 D&O bars, 7.5% of the cases initiated that year. In 2001, the SEC asked for 51 D&O bars, or 10.5%. In 2002, in the wake of corporate scandals that gave rise to Sarbanes-Oxley, the SEC requested 126 D&O bars, in 21% of initiated actions. In 2003, that number shot up to 170, in 25% of cases. As Stephen Cutler, the head of the SEC's Enforcement Division, recently explained, the SEC is "aggressively" seeking D&O bars "in expanded ways." Practitioners are now finding D&O bars to be a routine component of settling an SEC action.
