text:
“[B]oards that choose to ignore, or minimize, the importance of cybersecurity responsibility do so at their own peril.” SEC Commissioner Luis A. Aguilar, Boards of Directors, Corporate Governance and Cyber-Risks: Sharpening the Focus, Speech at the New York Stock Exchange (June 10, 2014).

Since the financial crisis, corporate governance has increased the focus on risk management. And, in recent years, cybersecurity has increasingly become a key issue in risk management due in large part to the growing realization that most companies’ assets are digital, and that most systems are networked and connected to the Internet, leaving such assets subject to any number of targeted cyberattacks from increasingly sophisticated threat actors, including state actors with unlimited resources to conduct such attacks. In a recent study of 63,436 incidents investigated by Verizon Enterprise Solutions, 1,367 security incidents with confirmed data loss occurred in 2013.[1] Some of those attacks were large-scale attacks on payment card systems, resulting in unprecedented exposure for the victim companies.[2]

As the number of data breaches increases, and the occasional breach with millions of records impacted continues to receive widespread and far-reaching publicity, so does scrutiny surrounding those breaches. Such scrutiny includes increased regulatory interest in cybersecurity practices of companies, both before and after an incident. At the federal level, in the past several years, the U.S. Securities and Exchange Commission (SEC), in an effort to protect shareholders, has shown growing interest in cybersecurity issues, perhaps second only to the Federal Trade Commission (FTC).[3] Such interest has manifested itself through cyber risk disclosure guidance, roundtable discussions, cybersecurity enforcement actions, speeches (including those specifically addressing cyber risk and the Board), and importantly, proactive staff examinations focused on cybersecurity practices of regulated companies.

In addition to increased regulatory scrutiny, companies are also facing a growing number of lawsuits related to data breaches and security incidents, including those brought by shareholders. In the past several months, two organizations victim to payment card breaches orchestrated by organized criminal groups have faced lawsuits seeking to hold corporate directors and officers liable for damages arising from these costly security incidents based on theories of breach of fiduciary duty and corporate waste.

In this era of increased cybersecurity scrutiny and litigation, it is imperative that directors educate themselves on the risks the company may face related to cybersecurity, as well as those risks that any director may face individually. Board members must also involve themselves in the company’s cybersecurity strategy before and after a data breach. This advisory will discuss the developing cyber risk landscape, the increased regulator interest in cybersecurity, particularly from the SEC, and the impact on potential director liability for cybersecurity deficiencies (or perceived deficiencies). This advisory will conclude with practical guidance to help board members navigate the all-too-unfamiliar cyber risk and cybersecurity landscape.

The Cyber Risk Landscape

The risk exposure for cyberattacks continues to rapidly increase. Once a risk involving one-time smash-and-grabs by intellectually curious teenagers, cyber risk has quickly evolved into cybercrimes involving deep and prolonged access to hundreds of systems by various advanced-threat actors with a variety of malevolent motives. This shift has dramatically altered the risk profile presented by a cybersecurity incident, and such an incident is now more likely to result in heavy financial losses, enforcement actions, and lawsuits against the company and its officers and directors.

Indeed, in the past two years the cost of a data breach to a company has increased. A breach costs on average $201 per record, totaling, on average, $5.9 million, including $3.2 million in costs associated with above-normal customer turnover, increased customer acquisition activities, reputation losses, and diminished goodwill.[4] Above-normal customer turnover following a data breach has increased 15 percent over the prior year.[5]

With the increase in the number of breaches and the number of consumers or individuals impacted comes increased interest from local and national media. More than 254 data breaches have been publicized in 2014, a 233 percent increase from last year.[6] Media scrutiny not only contributes to the potential damages to a company’s reputation, but also increases the likelihood of claims against the company. For example, Target’s much-publicized breach has led to at least 30 bank cases, more than 80 consumer cases, and four shareholder cases, all of which have been consolidated into one multidistrict litigation proceeding.

Even where the incident does not involve an immediate notification obligation guaranteed to bring media attention, federal law enforcement’s expansion of the types of cybercrimes and bad actors it investigates and prosecutes criminally means companies should increasingly expect future publicity of previously unreportable events—for example, by being named as victims in criminal indictments. Recently, three U.S. public companies were among the victims named in the first-ever criminal indictment of state-sponsored actors for cyber espionage activities.[7] The companies found themselves receiving scrutiny for not previously disclosing the cyberattacks after the Department of Justice (DOJ) indicted several Chinese officials for carrying out the attacks, which involved the theft of trade secrets and other data, to investors in filings.[8] Although the companies have maintained that the thefts were not “material,” Attorney General Eric Holder stated when announcing the indictment that information “stolen in this case is significant.”[9] These events create opportunity for increased investor scrutiny.

This increased attention is being felt in the boardroom. Following Target’s much-publicized 2013 data breach, proxy advisory firm Institutional Shareholder Services Inc. (ISS) urged shareholders to vote out seven of Target’s 10 board members for allegedly mishandling the data breach. In a report supporting the recommendation, ISS focused on “the board’s alleged failure to manage risk and protect Target from the massive data breach.”[10]

However, investor reaction to data breaches is unpredictable. For example, following eBay’s May 2014 notice of a data breach affecting consumer information, investors appeared unfazed, leading some analysts to conclude that investors ignore these events.[11] While investors may be apathetic to the continued stream of incident reporting, causing what many have labeled as “breach fatigue,” they certainly are likely to pay more attention to an enforcement action or private litigation regarding an organization’s security practices that is the result of proactive or reactive assessments of cybersecurity practices by regulatory authorities.

Increased Regulator Scrutiny

While previously an almost exclusive domain for reactive inquiries following a publicized security incident, recently regulators across industries at the federal and state level have increased their proactive inquiry of cybersecurity practices of companies. Examples include the Federal Communications Commission (FCC) (announcing a “new regulatory paradigm” in which the FCC will develop a risk assessment tool for the telecommunications industry),[12] the Food and Drug Administration (FDA) (actively analyzing cybersecurity threats related to medical devices),[13] and the New York Department of Financial Services (launching an initiative to assess insurance companies’ cybersecurity policies by sending out so-called “308” letters).[14]     Notably, the SEC’s Office of Compliance Inspections and Examinations (OCIE) has launched an initiative to assess the cybersecurity preparedness of 50 registered broker-dealers and registered investment advisors,[15] and focuses on:

the entity’s cybersecurity governance, identification and assessment of cybersecurity risks, protection of networks and information, risks associated with remote customer access and funds transfer requests, risks associated with vendors and other third parties, detection of unauthorized activity, and experiences with certain cybersecurity threats.[16]

In conjunction with the announcement of the initiative, the OCIE published a sample list of requests for information that the OCIE may use in conducting the examinations—a rare disclosure. Notably, this list provides valuable insight into the types of inquiries that regulators may make and the types of practices that they may expect organizations to have in place related to cybersecurity matters.

In the midst of this proactive interest, the National Institute of Standards and Technology (NIST) finalized a year-long process to create a Cybersecurity Framework (“Framework”) in response to Executive Order 13636.[17] Directly applicable to the 16 identified critical infrastructure sectors,[18] the Framework is a voluntary tool for reducing cybersecurity risk that identifies beneficial cybersecurity practices and creates a common language for discussing those practices. Whether the Framework is truly voluntary for critical infrastructure entities is a matter of much debate. Recent regulator statements suggest that regulators will look to the Framework as instructive guidance and expect companies to be actively considering its relevance to their organization. Such a position was recently articulated by SEC Commissioner Luis A. Aguilar, who stated that “boards should work with management to assess their corporate policies to ensure how they match-up to the Framework’s guidelines—and whether more may be needed.”[19] Moreover, while the broader adoption of the Framework outside of critical infrastructure sectors remains to be seen, the Framework foretells potential increases in the expectations for baseline security for organizations across the board.

Impact on Potential Director Liability for Cybersecurity Deficiencies

Because cybersecurity is in the spotlight in both the public and private sector, corporate directors and officers are expected now more than ever to be fully engaged in overseeing their companies’ cybersecurity protections and responses.

Important Legal Standards and Recent Trends in Cybersecurity Litigation

Lawsuits against individual directors and officers will most likely arise in the form of shareholder derivative actions and securities fraud class actions. In derivative actions, claimants typically assert that the directors breached their duties of care to the company. The duty of care is an oversight obligation that entails “a duty to attempt in good faith to assure that a corporate information reporting system, which the board concludes is adequate, exists, and that the failure to do so . . . may . . . at least render a director liable for losses caused by non-compliance with applicable legal standards.”[20] Another possible derivative claim is that directors’ actions wasted corporate assets. For both claims, directors’ decisions are protected by the business judgment rule if the decisions are informed and made in good faith.

After a widespread data breach jolted Target Corporation in 2013, four derivative suits have been consolidated against Target’s directors and officers in the District of Minnesota. These cases allege breach of fiduciary duty, waste of corporate assets, gross mismanagement, and abuse of control.[21] Under similar circumstances, a shareholder for Wyndham Worldwide Corporation filed a derivative lawsuit earlier this year after three data breaches allegedly resulted in the theft of more than 619,000 consumer payment card account numbers.[22] The complaint alleges breach of fiduciary duties, corporate waste and unjust enrichment against certain directors and officers for failing to implement adequate security policies or update the company’s security systems, and for aggravating the damage by failing to timely disclose the data breaches in the company’s public filings.[23] As discussed below, the claims in these cases stem from the directors’ and officers’ conduct before, during, and after the breach. Although Target and Wyndham are not the first to endure fall-out derivative litigation—TJX Companies dealt with similar suits arising from their 2007 data breach—the tendency for these cases to settle means there is little guidance from the courts in the cybersecurity context.

Securities fraud class actions are most likely to arise when a company’s stock price drops proximate to disclosure of a data breach. In these lawsuits, shareholders allege that they relied—to their detriment—on a company’s material misrepresentation, which in the context of a data breach could derive from, among other things, public statements about a company’s cybersecurity protective measures, its risk level for a breach, or the effect or pervasiveness of a breach once it has occurred. Liability in these cases is predicated in part on a showing that the misrepresentation was both material and made knowingly or recklessly.[24] Securities fraud actions can also be asserted against individual officers who make or have authority over the misrepresentation, such as in press releases or SEC filings.[25]

In securities class actions, courts may require a “statistically significant” decline in the company’s stock price.[26]  As a result, non-significant drops are less likely to give rise to securities class action suits. For example, when Apple Computer announced attacks on its system in 2013, it did not experience a significant stock price drop and was not sued in a securities class action.[27]

On the other hand, where a significant stock decline occurs, companies should prepare for shareholder litigation. One example is Heartland Payment Systems, a bank card payment processing services company that suffered a breach from which 130 million debit and credit card numbers were stolen in 2009.[28] Shortly after the data breach was disclosed, Heartland’s stock price declined, peaking at an 80-percent drop.[29] The Heartland shareholders brought suit alleging that the company concealed a past cyberattack on its network and made fraudulent statements about the state of the company’s cybersecurity.[30] The court dismissed the complaint, holding in relevant part that (1) the company’s failure to disclose a past cyber incident was not a material omission; and (2) plaintiffs failed to allege with the requisite particularity that Heartland’s directors and officers knew that Heartland’s security systems were deficient or that the prior cyberattack was not adequately addressed.[31] Although Heartland is an example of the uphill battle faced by plaintiffs pleading federal securities fraud claims, courts consider a failure to disclose cyber incidents a material omission in light of recent SEC Disclosure Guidance, discussed below.

Increased Scrutiny of Disclosures

The growing risk of cyber incidents has the attention of both the plaintiffs’ bar and various regulators. As a result, the sufficiency of corporate disclosures is under the microscope and companies should be mindful of the increased risk of SEC comment letters, enforcement actions and private litigation that may arise in this context.

Although existing disclosure requirements do not explicitly mention cybersecurity, the SEC issued disclosure guidance in 2011 that explains the importance of incorporating cybersecurity issues into public disclosures.[32] Cybersecurity disclosures must address both cybersecurity risks and the company’s history of breaches and attacks.[33] When disclosing cybersecurity risks, the SEC’s guidance directs registrants to tailor their disclosures to their particular circumstances in order to “provide sufficient disclosure to allow investors to appreciate the nature of the risks faced by the particular registrant.”[34] Therefore, a boilerplate disclosure of general threats posed to cybersecurity will not be sufficient.[35]

Additionally, past material breaches must be disclosed, potentially in addition to past immaterial and attempted breaches.[36] The SEC guidance warns that “a registrant may need to disclose known or threatened cyber incidents to place the discussion of cybersecurity risks in context.”[37] Companies should consider the prevalence of cybersecurity in preparing their registration statements, periodic reports, and other required SEC filings, including disclosures of risk factors, MD&A, description of business, legal proceedings disclosures, and financial statements disclosures.[38]

The SEC highlighted its continued focus on cyber disclosures by holding a Cybersecurity Roundtable in March of this year, during which a panel on public company disclosure reiterated the importance of director involvement with cybersecurity decisions. SEC Chair Mary Jo White commented during opening remarks that “[t]he SEC’s formal jurisdiction over cybersecurity is directly focused on the integrity of our market systems, customer data protections, and disclosure of material information.”[39] Thus, although it is uncertain whether the SEC will implement formal rules governing cybersecurity, disclosures on this topic are fully expected and companies should defer to the available SEC guidance and other commentary in the meantime.

Directors and officers should also expect that shareholders will look to the company’s SEC disclosures when drafting their complaint. For example, the Target shareholders point to a cybersecurity risk disclosure in Target’s 2012 SEC Form 10-K to assert that the directors and officers were aware of the risks posed and failed to take preventative measures to address those risks.[40] Attempts to use a company’s risk factors to support a claim turn the safe harbor protections of the Private Securities Litigation Reform Act on their head and should be rejected as a matter of law. As the Target case demonstrates, however, directors and officers should review their cyber risk disclosures very carefully and vet them fully with those employees responsible for cybersecurity.

Practical Guidance

It is important for board members to be aware of their role in both pre-breach cybersecurity preparedness and post-breach oversight of the security incident and any follow-up on remediation measures.

Pre-Breach Oversight Responsibility

Cybersecurity and Corporate Governance

At the outset, and because IT and cybersecurity are particularly technical disciplines, board members need to ensure that they have at least a basic knowledge or familiarity with the technical language to be able to ask the right questions and become adequately informed of the issues. Commissioner Aguilar mentioned mandatory cyber risk education for directors or ensuring representation by directors with a good understanding of IT issues as two recommended practices.[41] He further suggested that boards may improve their technical expertise by establishing a separate enterprise risk committee. Boards may also supplement their knowledge by hiring external consultants, but even if external consultants are engaged, the board should seriously consider creating a special committee to deal exclusively with cybersecurity and to ensure that the board is frequently and adequately briefed on cybersecurity issues. Identifying ways to overcome the obstacles presented by technical jargon and a technical discipline should be an initial first step for boards in tackling their pre-breach cybersecurity oversight role.

The board of directors should be particularly cognizant of its oversight responsibilities before a breach has occurred because shareholder plaintiffs are likely to target the strength and sufficiency of a company’s cybersecurity measures as a cause of their losses. Accordingly, the board of directors should periodically evaluate the company’s current cybersecurity procedures, protective measures and risk profile, and stay informed as risks, threats, and other issues arise. The board should also consider the strength of the current system with respect to the level of risk to which the company is exposed and whether the company is equipped to handle these issues internally or if an external advisor should be engaged. If cybersecurity is handled externally, the board should further evaluate the process and diligence involved in selecting the company’s vendors and other service providers (to the extent cyber issues are implicated) and the adequacy of employee training on these issues.

These considerations fall within the five key principles to govern oversight of cyber risks recently promulgated by the National Association of Corporate Directors, in conjunction with AIG and the Internet Security Alliance:

  1. Directors need to understand and approach cybersecurity as an enterprise-wide risk management issue, not just an IT issue.
  2. Directors should understand the legal implications of cyber risks as they relate to their company’s specific circumstances.
  3. Boards should have adequate access to cybersecurity expertise, and discussions about cyber risk management should be given regular and adequate time on the board meeting agenda.
  4. Directors should set the expectation that management will establish an enterprise-wide cyber risk management framework with adequate staffing and budget.
  5. Board-management discussion of cyber risk should include identification of which risks to avoid, accept, mitigate, or transfer through insurance, as well as specific plans associated with each approach.[42]

In addition, given the challenges of responding to security incidents with far-reaching exposure, one additional key principle is that the board should ensure that a specific cyber incident response plan is in place, has been properly tested, and is ready for swift execution before a breach occurs.

Insurance Coverage

Given the increasing frequency of cybersecurity incidents, directors should consider purchasing cyber insurance to assist with the potentially massive costs of a data breach. Indeed, the SEC’s 2011 guidance requires companies to describe mitigation techniques employed, including cyber insurance. General policies may not be sufficient to address the unique circumstances of cybersecurity, and some may have specific exclusions for data breaches. Stand-alone cyber insurance is tailored to cover security breach fall-out, such as the costs of responding to a breach, lost income and operating expenses, and losses arising from third-party claims. Additional services and coverage are also available, and like other types of insurance, cyber insurance coverage can vary in important ways. For example, some policies will only cover legally required notice to customers and will not cover voluntary notice. Another important consideration is whether the policy covers the cost of a post-breach forensics investigation and legal counsel.

Directors should also revisit their existing D&O policy with inside or outside counsel to assess whether it is sufficient to cover the risk of derivative claims and shareholder class actions incident to a breach. Depending on the size of the company and its inherent cyber risks, directors should take time to assess the various policies on the market to ensure coverage sufficient for the company’s unique needs.     Prepare for Potential Use of Internal Policies in Litigation

Shareholders may also use internal guidelines and policies around cybersecurity against companies and their directors in litigation. In the Target derivative litigation, the shareholders allege that the very fact Target had cybersecurity policies and advisory committees was evidence that the board was aware of the risks of an incident and failed to fulfill their fiduciary duties and prevent a breach. Because the Target Audit Committee was charged with monitoring cybersecurity policies and procedures, members of the committee were specifically targeted for the breach of fiduciary duty claim. Thus, boards should review company policies with advisors to ensure they are thorough and up-to-date. The board should also confirm with appropriate company management that the policies are being implemented and followed.

Consider Director Exculpation Clauses and Indemnification Agreements

Director exculpation clauses and indemnification agreements are important protections against personal liability for private suits arising from cyber incidents. An exculpatory provision in a company’s corporate charter or bylaws can preclude certain cybersecurity claims altogether, which can protect directors not only from personal liability, but also from the stress and expense of lengthy litigation. Indemnity agreements are equally important because they can provide for advancement of defense costs during litigation and cover any settlements or monetary judgments when the case concludes. Therefore, directors should check the language of their exculpation clauses and indemnification agreements to ensure that cybersecurity fallout litigation is protected. Directors should bear in mind that exculpation clauses are typically limited by state law to duty of care violations and will not cover acts in bad faith. Indemnification agreements can vary widely in their coverage and also sometimes have exclusions for “bad” acts.

Post-Breach Oversight Responsibility

Although recent cybersecurity lawsuits are focused on the systems and controls that failed to prevent a breach, a company’s response to a material breach can give rise to liability in both a disclosure and a due care context, and should thus be treated with equal vigilance. For example, public comments made after a breach about the state of a company’s security or the incident’s repercussion could later be the subject of a securities class action. Similarly, any alleged failure of oversight that could have caused or exasperated losses to the company could give rise to a derivative action.[43] The board should take care to understand the incident response plan so that it may oversee its proper implementation. Indeed, during a response to a cybersecurity incident of any legal significance, the board of directors needs to become engaged and involved in directing the response and approving any proposed remediation plan. Moreover, understanding the nature of this role in advance of a breach will go a long way to effectively carrying out these oversight responsibilities in the wake of a cyber crisis firestorm.

Cybersecurity has become a spotlight issue, one which corporate directors and officers are expected to consider and manage. The increasing number and sophistication of cyberattacks has resulted in increased costs and increased scrutiny, and both regulators and shareholders have demonstrated a keen interest in cybersecurity issues. Federal regulators, such as the FCC, FDA, and SEC, and state regulators are proactively inquiring into cybersecurity practices of companies. This will likely expand the scope of companies that should consider adoption of the NIST’s Cybersecurity Framework. At the same time, private litigation has also been a growing avenue for addressing cybersecurity issues. Shareholder derivative actions and securities fraud class actions assert claims against directors and officers for breaches of the duty of care and waste of corporate assets stemming from cyberattacks. Regulator and shareholder interest also means increased scrutiny of disclosure statements, which now must address both cybersecurity risks and the company’s history of breaches and attacks. In this landscape of increased exposure and increased scrutiny, directors and officers must be particularly cognizant of the oversight responsibilities they have for the company’s cybersecurity.


Content-Type: application/http; msgtype=response

WARC-Identified-Payload-Type: text/html

WARC-Type: response

text:
A decision this week by the U.S. Court of Appeals for the District of Columbia Circuit struck down a National Labor Relations Board (NLRB) rule requiring employers to post notices about union rights. The NLRB has not been able to implement this “notice posting rule” since its issuance in 2011 due to multiple challenges against the rule in federal court. Had the controversial rule gone into effect, it would have obligated approximately 6 million NLRB-covered private employers to conspicuously display a poster about workers’ rights, including employees’ rights to join or assist a union and bargain collectively with their employer.

The appeals court did not address the litigants’ arguments about the NLRB’s authority under Section 6 of the National Labor Relations Act (NLRA), which grants the Board power to issue rules to carry out the other provisions of the NLRA. Instead the D.C. Circuit, in an opinion written by Judge A. Raymond Randolph, rejected the rule because it violated Section 8(c) of the NLRA and impermissibly infringed on employers’ First Amendment rights. The court found that since Section 8(c) of the NLRA grants employers the right to expression so long as it does not contain threats, it also protects the rights of employers not to engage in speech. Judge Randolph also noted that since the First Amendment prevents government prohibition of speech, it may also prevent the government from compelling employers to express certain views.

In addition to holding that the “notice posting rule” violates the NLRA, the court also rejected part of the rule that allowed for tolling of the statute of limitations period for filing unfair labor practice charges in the event that an employer did not properly post the required notice. Therefore, the D.C. Circuit’s ruling may have broader implications for other federal agencies since it casts doubt on the government’s ability to preserve claims under other employment laws such as Title VII.

The D.C. Circuit decision resolved one of two appeals pending over challenges to the rule. In April 2012, a South Carolina federal judge also held that the NLRB does not have the authority to require such notice and that employers were not obligated to comply with the rule’s requirements. The NLRB has appealed this decision to the Fourth Circuit and states that it will not fully implement the rule unless the district court decision is overturned by the Fourth Circuit or the Supreme Court.

For a full copy of the decision, click here.

warcinfo:
robots: classic
hostname: ip-10-228-65-216.ec2.internal
software: Nutch 1.6 (CC)
isPartOf: CC-MAIN-2018-09
operator: Common Crawl Admin
description: Wide crawl of the web for February 2018
publisher: Common Crawl
format: WARC File Format 1.0
conformsTo: http://bibnum.bnf.fr/WARC/WARC_ISO_28500_version1_latestdraft.pdf


text:
Overview and introduction

Corruption cases are typically international and multi-jurisdictional. Bribes for the award of public contracts or stolen public funds may be paid into foreign accounts or used to acquire foreign properties or other assets; the proceeds of corruption may be laundered through a number of countries, usually major financial centres or offshore havens.

This Guidance Note considers the broad options open to states seeking to locate, freeze and recover the proceeds of corruption laundered to foreign states, and the advantages and disadvantages of each. Procedures and remedies will, of course, vary between jurisdictions as will, in consequence, the relative importance of the advantages and disadvantages identified in this note.

The available recovery mechanisms are criminal or civil; or, in the case of non-conviction based forfeiture by law enforcement agencies, a hybrid of the two. The United Nations Convention Against Corruption (UNCAC) identifies all as routes to recover the proceeds of corruption.

However, one does not have to discuss asset recovery with too many practitioners to encounter polarised opinions as to which of the available mechanisms should be preferred. Some criminal practitioners are wedded to the view that it is only criminal, or perhaps non-conviction based forfeiture mechanisms, that are an appropriate response to the criminal behaviour of bribery and corruption, sometimes deriding civil mechanism as expensive and ineffective to obtain evidence. Equally, some civil practitioners assert that criminal proceedings are too slow, cumbersome and prone to failure. Supporters of competing mechanisms will usually point to individual examples said to support their contentions.

In our experience, the "correct mechanism" for an individual case is very much dependent on its particular facts. There are some circumstances in which the criminal route is the most likely to achieve meaningful recoveries in a sensible time-frame, and others where the civil route is more likely to do so. There are some circumstances where either criminal or civil mechanisms are unavailable, and the choice is between a particular route or no recovery at all. Consideration of what is the most “effective” mechanism will often also involve the need for reflection on what is meant by “effective” in that case: how much can actually be recovered and at what speed can a recovery be made?

An effective asset recovery strategy is likely to make use of a combination of criminal and civil mechanisms, with the flexibility in individual cases, where possible, to switch between mechanisms if changing circumstances warrant it. Careful consideration of the circumstances is required before decisions are made as to the right route for a particular case. There will always be difficult cases where reasonable people can quite properly disagree, often on incomplete information, as to which is most likely to be the most effective recovery route. But there are also plenty of cases where the correct route is reasonably obvious on open-minded analysis.

Recovering the proceeds of corruption: the options

A victim state has the following broad options when seeking to identify, freeze and recover corruptly acquired assets that have been laundered to foreign countries:

  • mutual legal assistance to support domestic criminal investigations or prosecutions;
  • enforcing, in a foreign country and again through mutual legal assistance, domestic confiscation orders, obtained following criminal conviction, for the payment to the state of assets representing the benefit of the defendant's criminal conduct or the proceeds of corrupt activities;
  • enforcing, in a foreign country, domestic non-conviction forfeiture orders (or civil forfeiture or civil recovery orders) for the payment to the state of assets representing the proceeds of corrupt activities;
  • foreign criminal or non-conviction forfeiture proceedings brought by a foreign law enforcement agency to recover assets in its own country deriving from corrupt activities elsewhere, followed by the repatriation of those assets;
  • private civil proceedings brought, usually in a foreign country where the assets are located, by the victim state against former or current public officials, or associates or financial institutions that have assisted the public officials to launder the proceeds of corruption, or against bribing companies.

Mutual legal assistance in criminal proceedings

Mutual legal assistance is the formal mechanism by which countries request and provide assistance in obtaining evidence in one country to assist in criminal investigations or proceedings in another, and in enforcing criminal and perhaps non-conviction based forfeiture orders. It offers various benefits in an asset recovery programme:

  • Evidence that is only available abroad can be obtained to assist a domestic investigation or prosecution, or to trace assets;
  • A Joint Investigation Team may be established, offering closer co-operation in the investigation and prosecution of the criminal conduct, and the recovery of assets;
  • Foreign States can be asked to freeze assets believed to represent the proceeds of crime at the outset of, or during, criminal investigations. Mutual legal assistance can therefore be an effective and cheap method of securing assets at an early stage, pending later attempts to recover those assets;
  • It is typically the mechanism through which domestic confiscation or forfeiture orders are enforced in a foreign country;
  • Evidence gathered through mutual legal assistance can be used in civil claims. This usually requires the permission of the foreign state providing it. Some states are unable legally to consent to the use in civil proceedings of evidence obtained through mutual legal assistance. Countries that can consent vary in their willingness to grant permission, and defendants will usually challenge a positive decision.

More information about the process is contained in our publication "Mutual Legal Assistance in Corruption Cases: a Guidance Note".1

Enforcing domestic confiscation or non-conviction forfeiture orders abroad

Most jurisdictions have legislation permitting assets derived from criminal conduct, or sometimes untainted assets to the value of the benefit obtained from criminal conduct, to be confiscated following criminal conviction.

Many jurisdictions have also given their law enforcement agencies power to bring proceedings to recover the proceeds of crime (including corruptly acquired assets) in the absence of criminal conviction through non-conviction based forfeiture proceedings.2

Some countries deploy a non-conviction based forfeiture mechanism only where criminal proceedings cannot take place, for example, because of the death or serious illness of the accused, or where the accused is a fugitive. Other countries permit its use whenever it is considered to be a more effective mechanism than criminal proceedings to recover corrupt assets. Usually, non-conviction mechanisms have a lower burden of proof than criminal proceedings, with the case being proved on, for example, the “balance of probabilities” test often used in private civil proceedings.

UNCAC requires signatories to enforce foreign confiscation orders consequent on criminal conviction, and permits signatories to allow enforcement of non-conviction based forfeiture orders.

Most jurisdictions require specified criteria to be fulfilled before enforcement of an overseas confiscation order. For example, criteria in the UK for enforcement of foreign criminal confiscation orders3 include:

  • the order must specify the assets against which enforcement is sought (although the asset can be traced if converted, for example, enforcement is available against the proceeds of sale of a property named in the confiscation order);
  • the order must be based on a finding that the assets were obtained as a result of or in connection with criminal conduct (being conduct which would be an offence if committed in the United Kingdom);
  • the order and the underlying conviction from which it derives must be in force and not subject to any appeal;
  • the order must be compatible with the European Convention on Human Rights, which can provide scope for defendants to cause delay pending determination of false claims that they were not given a fair trial.

Foreign criminal or civil forfeiture proceedings

Foreign authorities may be willing to bring criminal proceedings against offenders within their jurisdiction, for example, corrupt public officials that have placed funds or acquired assets within the jurisdiction, advisers and banks that have helped to launder the proceeds of corruption, or contractors and suppliers that have paid bribes to win contracts.

As part of those criminal proceedings foreign authorities may also freeze corruptly acquired assets within their jurisdiction, sometimes at an early stage of an investigation. Most foreign states can, following conviction, confiscate assets obtained through corruption or, where those assets have been hidden or spent, sometimes other assets to the value of the benefits obtained from the corrupt activity. Non-conviction based forfeiture powers may also be available to recover the proceeds of corruption in the absence of a conviction. Recoveries can usually be repatriated to the victim state, or the defendants can be ordered to pay compensation.

In some jurisdictions (for example Switzerland and other civil law systems) the foreign state seeking to recover assets can become a party to the criminal proceedings. On conviction an application can be made for damages or the recovery of corruptly acquired assets. Where available this is a powerful procedure: the foreign state usually has access to all of the evidence that has been gathered by the Court, is present when the Court questions suspects and witnesses, will be able to ask its own questions, and can itself apply for the recovery of the proceeds of corruption.

Some Governments are willing to enter into bilateral asset sharing agreements with foreign countries. The terms are individually negotiated, but typically provide that assets misappropriated from one state party and recovered by the agencies of another are shared in an agreed proportion.

Civil proceedings

Private civil proceedings are a separate recovery mechanism. They are not dependent on Government to Government co-operation. A state engages lawyers to bring a claim in the civil courts of a foreign jurisdiction, just as a wronged private citizen would do.

One important distinction between most criminal and civil mechanisms is their differing burdens of proof: beyond reasonable doubt or similar language in criminal systems and a test such as "on the balance of probabilities" in civil cases.

The nature of available civil claims will vary across jurisdictions, although usually they can be formulated in a variety of ways. Many jurisdictions permit a state, in civil proceedings, to recover bribes and misappropriated assets, or their value, as well as damages for losses caused by corrupt activities. Some legal systems permit a victim state to recover the profits that public officials, and others, have obtained from corrupt activities or even from investing the proceeds of corruption.

Potential defendants to civil claims include corrupt public officials and the companies or other legal entities used to receive, hold, launder and conceal the proceeds of corruption; associates of public officials that have participated in corruption or assisted with the laundering of funds; and banks, solicitors, financial advisers and other professionals that have assisted public officials or other defendants with corrupt activities or have knowingly laundered the proceeds of that corruption. Civil proceedings therefore can sometimes offer a wider range of targets than criminal alternatives.

Civil proceedings typically offer a range of weapons to assist in tracing, freezing and recovering the proceeds of corruption. These include mareva or freezing injunctions to preserve assets pending the outcome of the case, and orders requiring defendants or third parties to provide information and documents to assist the tracing, freezing and recovery of the proceeds of corruption. In corruption cases, these may initially be obtained without warning to the defendants.

More information about civil proceedings is available in our publication "Civil proceedings to recover the proceeds of corruption: a Guidance Note".4

Factors to weigh when considering criminal and civil asset recovery mechanisms

As noted above, a successful asset recovery strategy involving cases against a range of defendants and assets is likely to make use of a variety of mechanisms. The prospects of making successful recoveries will be enhanced by early evaluation of the most appropriate mechanism for a particular case, and regular review of the decision that is reached as circumstances change. Co-ordination and co-operation between criminal and civil teams, if and to the extent legally permissible, can be a vital factor in ensuring overall success.

Deciding which recovery mechanism to deploy in a particular case requires a victim state, at the outset, to consider and weigh answers to all or some of the following questions:

  • Is the imperative to prosecute a particular offender, or to recover his corruptly acquired assets?
  • What asset recovery mechanisms are legally and practically available?
  • Is further evidence necessary to win or bolster a case, and how can it most effectively and expeditiously be obtained?
  • What is the most effective method of freezing assets?
  • What is the most effective method of recovering the assets?
  • What is the cost, or range of possible costs, of an action to recover assets, and how will this be funded?

Is the imperative to prosecute a particular offender, or to recover his corruptly acquired assets?

Ideally, of course, offenders will be prosecuted, and corruptly acquired assets confiscated following conviction. Where prosecution is both desirable and available in a sensible time-frame, asset recovery may have to await the conclusion of the criminal process, although assets should typically be secured at an early stage through criminal restraining orders.

Prosecution of other offenders may not be possible or undesirable for a number of reasons, including death, flight, immunities or political influence or interference. In addition, particularly where resources are scarce, a decision may be made that minor participants in corruption should not be prosecuted but their corruptly acquired assets should be recovered. In all of these circumstances, the choice of asset recovery mechanism will be between non-conviction based forfeiture and civil proceedings.

What asset recovery mechanisms are legally and practically available?

There is no point investing time in a mechanism which cannot lead to success, or in obtaining a judgment that does not meet the criteria of a relevant foreign state for enforcement.

At the outset of a case it is necessary to assess what asset recovery mechanisms are legally and practically available to obtain a judgment or order that assets should be returned to the state and, critically, to enforce that judgment or order over the assets in question.

It is also necessary to consider the impact of immunities and statutes of limitation, if applicable. Their presence may mean one mechanism is more attractive than another.

UNCAC envisages, as one asset recovery mechanism, that victim states can obtain confiscation or forfeiture orders in their own countries, which are then enforced in foreign countries where assets are located. Too often, it is simply assumed that this means a domestic order will be enforced in foreign countries, without an understanding of the criteria for doing so and the circumstances in which this will not be possible or can be disputed by defendants.

Enforcement is intended to be a streamlined procedure, with limited grounds for challenging enforcement. To date, however, the enforcement abroad of domestic judgments has been a rare mechanism in corruption cases for a variety of reasons. Domestic confiscation or forfeiture orders may not be obtainable due to the ability of the defendant to influence his domestic courts, or where the defendant absconds, or where criminal proceedings (including appeals) take many years, not least because defence teams engineer endless adjournments and appeals.

Further, assets may be held in the names of foreign companies and trusts. These may not be susceptible to domestic confiscation or forfeiture proceedings, or to judgments or orders made against the owners or beneficiaries personally. Foreign jurisdictions may not allow enforcement of confiscation orders against trusts and companies that did not themselves participate in the proceedings.

Finally, defendants may challenge enforcement, alleging for example that judgments against them are politically motivated or obtained without due process, meaning delay as the issues are litigated for a second time.

Civil proceedings in the courts of the country where assets are located may be a necessary or more efficient recovery solution where it is impossible or difficult to obtain, and then enforce abroad, domestic confiscation or forfeiture orders. This is particularly where the foreign state cannot or will not bring its own criminal or non-conviction based forfeiture proceedings to recover assets. However, there are a few countries that may not permit civil proceedings by foreign states. UNCAC requires signatories to do so.

Where contemplated, advice will be required at an early state as to whether civil proceedings are available, and whether the foreign court has jurisdiction to determine a claim to the relevant assets. Courts will invariably have jurisdiction to deal with disputes over assets in their own country, and will typically hear those disputes even where the corrupt activities giving rise to the assets have occurred elsewhere.

Is further evidence necessary to win or bolster a case, and how can it most effectively and expeditiously be obtained?

Mutual legal assistance in support of a criminal investigation or prosecution is usually the most effective method, in international cases, of obtaining evidence of corrupt activities and linking those activities to particular assets, provided that timely and meaningful assistance can be obtained. This is because law enforcement agencies often have a range of powers to require the disclosure of evidence and information, particularly from third parties such as banks, often before proceedings need to be brought and often without the knowledge of the alleged wrongdoers. Exceptions to banking secrecy laws are more likely to apply in the criminal context.

If sufficient evidence simply does not exist to bring or win a case, criminal mechanisms may be the only way of obtaining it. The position will be more complex where there is already sufficient evidence to bring a civil claim, recognising the lower burden of proof discussed below, but there is more evidence to obtain that could bolster a case or lead to claims in relation to other assets.

On the other hand, mutual legal assistance has, for a variety of reasons, proved in some cases to be a slow and ineffective process.

Civil proceedings do offer various mechanisms to obtain evidence, including disclosure from third parties, although generally they are more cumbersome than their criminal equivalents and usually require that proceedings have commenced or are imminent.

However, particularly in common law jurisdictions, defendants to civil proceedings are required, or can be required, to disclose relevant documents, which is not always the case in the criminal process. A failure to disclose documents can lead to adverse inferences against the defendants that documents have been withheld as they would demonstrate corrupt activities, or even judgments in default of compliance with Court orders.

What is the most effective method of freezing assets?

Where available, mutual legal assistance is often the most effective method of securing assets. Foreign authorities often have an easier test to satisfy when freezing assets: they do not have to demonstrate a claim to the asset, merely that an investigation has commenced and there is evidence (e.g. often nothing more than a reasonable suspicion) that the assets represent the proceeds of crime. Assets are frozen at their cost.

Sometimes, however, foreign authorities are unable or unwilling to freeze assets at an early stage through criminal mutual legal assistance mechanisms, or cannot do so sufficiently quickly.

Civil proceedings in most states, but not all, allow a state to freeze or attach assets in circumstances where defendants may conceal them to avoid later enforcement. Where available, states seeking to freeze assets in civil proceedings often face more onerous obligations, including a duty to disclose all relevant known information to the Court, whether helpful or unhelpful, and the need to provide an undertaking to meet a defendant's losses and costs if the injunction is later discharged. In addition, the state will be expected expeditiously to issue and progress its claim at the point that the injunction is obtained.

There is no invariable rule as to whether civil or criminal mechanisms should be deployed to secure assets. The relative ease and speed of obtaining civil and criminal freezing orders will vary between jurisdictions, and on the circumstances of the particular case.

What is the most effective method of recovering the assets?

Determining which mechanism is more likely to recover assets quickly and cheaply itself involves a number of questions, including: How much is recoverable under each mechanism? How long will the process take, including appeals? Is the standard of proof relevant? Are claims available against third parties? Are waivers, amnesties, settlements and plea-bargains available and desirable?

As a general rule, assets are more likely to be recovered quickly when proceedings to recover them, whether criminal or civil, are taken in the jurisdiction where they are located. This is because the alternative is to take proceedings in another jurisdiction, and then to have separate enforcement proceedings in the state where the assets are located. This creates a risk that the issues are effectively litigated twice over, causing substantial delay. Exceptions to this general rule include enforcement between countries that through treaty or other agreement have ensured mutual and efficient enforcement of judgments. A notable example is the enforcement arrangements between the states of the European Union. Another is the arrangements between some Commonwealth states.

How much is recoverable?

When deciding which recovery mechanism to deploy, consideration needs to be given as to which mechanism is likely to lead to the most money or valuable assets being recovered.

Civil proceedings for corruption often offer a range of different legal theories as to how claims can be formulated. These theories may lead to claims for different amounts. Further, civil judgments for damages can usually be enforced against any assets belonging to the defendants, including assets which derive from legitimate business activities or whose source is unknown.

Criminal or non-conviction based forfeiture mechanisms are sometimes limited to assets which can be specifically demonstrated to have been obtained through corruption. The relevant laws of other states either contain rebuttable presumptions, where a defendant is shown to be corrupt, that his assets derive from corruption, or permit enforcement of judgments or orders against untainted assets.

How much time are proceedings likely to take, including appeals?

The length of time it takes to conclude criminal and civil cases vary significantly from jurisdiction to jurisdiction, depending for example on the resources given to the Courts, the number of cases assigned to Courts, and the efficiency of the legal process. Timetables can be heavily influenced by the willingness of Courts to grant adjournments and permit procedural battles, and whether it is open to defendants to appeal any decision, procedural or substantive, to higher courts.

Is the standard of proof relevant?

The quality of the existing evidence, and of the evidence that can reasonably be obtained, may be an important consideration in some cases. Criminal charges must typically be proved beyond reasonable doubt, or to a similar standard. Civil proceedings and non-conviction based forfeiture must be proved on the balance of probabilities, which is usually a significantly easier task. There are often cases where the strength of evidence is insufficient to have a high, or even reasonable, level of confidence of conviction, but where there can be confidence that the burden of proof for non-conviction based forfeiture or civil proceedings will be met.

The relative difference in the civil and criminal tests may be important where there are gaps in the evidence, and inference of corruption may play an important role. The difference in the standards of proof may be of lesser or no importance where the evidence of corruption is overwhelming.

The standard of proof will also be relevant in jurisdictions that will make criminal confiscation and civil forfeiture orders only on proof of a link between the assets that are claimed and a specific offence.

Are claims available against third parties?

There are sometimes barriers or reluctance about prosecuting those that have assisted the principal wrongdoers to obtain and launder corruptly acquired assets, perhaps because of resource or evidential concerns. Civil claims may be available to a state against those third parties for damages for their participation in corruption, or the return of assets they hold for the principal wrong-doers.

Are waivers, amnesties, settlements and plea-bargains available and desirable?

The availability of ways to settle a case may be a relevant consideration. Settling corruption cases is often, quite understandably, a controversial topic. After all, settlements may lead to a corrupt official avoiding conviction or prison, or returning only some of his corruptly acquired assets.

However, settlements are often an important part of any asset recovery programme. Fighting corruption cases, whether through criminal or civil routes or both, can be time-consuming and expensive. Settlements achieve the pragmatic outcomes of avoiding prolonged and expensive litigation, ensuring the return of funds to the public purse, and helping to fund further cases. The attractiveness of any deal will depend on the terms of offer.

Settlements may be of particular interest in relation to those that have assisted the principal wrong-doers. They may be used, for example, to encourage junior civil servants, bank officials, and company employees to provide valuable evidence and information to assist with prosecutions and civil proceedings against the principal wrongdoers.

What is the cost, or range of possible costs, of action to recover assets, and how will this be funded?

It is imperative to ensure that costs of a particular mechanism are reasonable and proportionate to the amounts in dispute.

Generally, criminal mechanisms are cheaper for the victim state, although this is not always so. Enforcement of domestic confiscation orders is usually carried out by the foreign state in which the assets are located, and at its cost, although expenses may be deducted from recoveries or assets may be shared in accordance with bilateral arrangements.

Funding lawyers to bring civil claims can be expensive5, particularly when claims need to be advanced or assets secured in several jurisdictions. Costs are sometimes difficult to predict as much depends on the manner in which claims are defended by the defendant.

In some jurisdictions a Government’s lawyers may be retained on contingency arrangements, meaning they will be paid only following success and from recovered funds. In addition, where funding is legally available, commercial investors may fund cases in return for a share of the recoveries.

Under either approach, a state would not have to fund its legal team unless and until recoveries have been made. The cash-flow benefit is obvious. However, states need to ensure success fees are appropriate and reasonable, and need carefully to weigh whether contingency or funding arrangements really do offer “value-for-money”: the amount paid on success may well be greater than costs paid under the traditional model of paying the lawyers for the amount of work undertaken at agreed hourly rates.

However, one objective of a successful asset-recovery programme should be to ensure that funding is a short-term difficulty, with the programme moving into profit as early as reasonably possible. This will allow the virtuous cycle of recoveries being used in part to fund future action. Grants or loans may sometimes be available to fund cases.

As this note demonstrates, there may be a significant number of factors to take into account and weigh when assessing what asset recovery mechanisms are likely to lead to the most efficient and largest recovery of corrupt assets. Much will depend on the particular circumstances of the cases that arise, and the chosen route may change as those circumstances change. However, careful consideration of the options at the outset of each case, and a willingness to consider all of the alternatives, will give a state the best opportunity to make meaningful recoveries in an appropriate time-frame.


text: The National Research Council held a two-day workshop August 15 and 16 to discuss shale gas development risk challenges. Participants said there is tension between the federal and state governments when it comes to regulating fracking; they advocated for collaboration between the two levels. Some participants pushed for wastewater disposal well regulations. The Center for Sustainable Shale Development unveiled its voluntary standards for Appalachia, which consist of recycling water, double lining wells, and the use of leak detection equipment.


text:
The IRS released yesterday a study on taxpayer compliance when claiming the Earned Income Tax Credit (EITC) in tax years 2006 through 2008.  The IRS found no discernible change in the overall tendency for noncompliance between 1999, when a similar study was last carried out, and 2006–2008.  Nevertheless, estimates of noncompliance were still quite significant, with an estimated 28.5–39.1% total dollars overclaimed as a percent of total dollars initially claimed for EITC on taxpayer returns, amounting to $14 billion to $19.3 billion in total dollars overclaimed. Misidentification of qualifying children accounted for the largest dollar amount of overclaims, while misreporting income was the most common error.

The report may be accessed here


text:
The Commission filed a financial fraud action against the CEO of, and a consultant to, a company which claims to have sold Christian video games. The defendants fraudulently inflated the revenue of the company by nearly 1,300% in one year through a sham transaction, according to the complaint. SEC v. Lyndon, Civil Action No. CV13 00486 (D. Haw. Filed September 24, 2013).

Defendant Troy Lyndon is the founder, CEO, CFO and Chairman of the Board of Left Behind Games, Inc. Ronald Zaucha, also a defendant, is Mr. Lyndon’s friend and purportedly a consultant to the company. He claims to have been involved in conducting a ministry in prisons since the late 1990s. Mr. Zaucha is also the founder of Lighthouse Distributors, Inc. That company supposedly is a wholesaler of Christian-themed video games.

The financial fraud centers on apparent efforts to prop-up Left Behind Games, d/b/a Inspired Media Entertainment, based in Murrieta, California. The company, whose shares are registered with the Commission under the Exchange Act, was founded by Mr. Lyndon in 2001. In its annual report the company states it is “the world leader in the publication of Christian video games and a Christian social network provider.”

Since its founding, Left Behind has never had a profitable year. At some point Mr. Lyndon had Left Behind retain Mr. Zaucha as a consultant under three separate agreements. Each was vague. Mr. Zaucha preformed few actual duties under the agreements, according to the complaint.

In mid-2009 the two men orchestrated a scheme to inflate the revenue of Left Behind. Under the consulting agreements the company began issuing shares to Mr. Zauha for his services. Those shares, which were not registered, were promptly sold into the market, netting Mr. Zauha about $4.6 million.

About $3.3 million from the stock sales was then paid back to Left Behind back under three arrangements:

Early sell: Under one almost $900,000 was paid to the company as “early sell fees resulting from excessive sales of stock.

Game purchase: Under a second arrangement Mr. Zaucha had Lighthouse Distributors use his Left Behind stock proceeds to finance the purchase of about $1.38 million in old and possibly obsolete inventory. Lighthouse donated much of the inventory to churches and religious organizations.

Loans/investments: Under another arrangement Mr. Zaucha paid about $1 million to Left Behind which was booked in a variety of ways including as a loan and an investment.

Left Behind recognized revenue on the sales to Lighthouse immediately, although for other sales it claimed to use a different revenue recognition method which would have delayed taking the proceeds into income. This permitted the company to report $1.6 million in revenue in its March 31, 2013 form 10-K.

Nevertheless, by 2011 the company terminated all of its employees and closed its offices. Its corporate status has been revoked by Nevada where it was reincorporated and Delaware where it was initially incorporated.

The Commission’s complaint alleges violations of Securities Act Sections 5(a), 5(c) and 17(a) and Exchange Act Sections 10(b), 13(a), 13b2-5 and 20(a). The case is in litigation. See Lit. Rel. No. 22813 (September 25, 2013).


text:
On February 17, 2009, President Barack Obama signed into law the American Recovery and Reinvestment Act of 2009 (“Act”). Often commonly referred to as the U.S. Stimulus Package, the Act provides local governments, businesses, and consumers with U.S. $287 billion in tax cuts and U.S. $500 billion in discretionary spending and aid, for a total of U.S. $787 billion in inducements, for the purpose of spurring the U.S. economy out of recession. This is truly an unprecedented measure.

A large proportion of the funding provided by the Act has been earmarked for the energy, transportation, and science and technology sectors. Given the tremendous amount of funds potentially available and given the close-knit nature of the Canadian and U.S. economies, there may be substantial opportunities for Canadian businesses and investors involved in these key sectors to supply goods, services or technology to U.S. counterparts or to otherwise increase their participation in these sectors in the U.S. market. The following discussion provides some basic information about funding provided by the Act with respect to these three particular sectors, but funding is also contemplated for water and waste water infrastructure, healthcare, banking, immigration, construction, commercial real estate, public housing and other industries. (All dollar amounts mentioned below are in U.S. funds).

Although the Act provides some inducements for the development of traditional energy sources, the energy-related initiatives set out in the Act are primarily focused on promoting energy efficiency and conservation, scientific research, and projects for the development of renewable energy, such as biomass, geothermal, wind, solar, and hydro energy. In particular, the Act provides $16.8 billion for the promotion of energy efficiency, such as grants for home weatherization for low- and middle-income families, grants for the manufacturing of energy-efficient vehicle batteries, procurement by local governments of vehicles that use alternative fuels, and funding for applied research and development of renewable energy.

The Act also provides $6 billion for new loan guarantees for renewable energy and bio-fuel projects, $5.5 billion for the construction of energy-efficient government buildings, $3.4 billion for fossil energy research and development, including research and development of clean coal technologies and energy-efficiency improvements, and over $10 billion to modernize and expand the U.S. electricity grid.

In light of these substantial funding commitments, there may be opportunities available for Canadian businesses that provide products, materials, services or technology important for increasing energy efficiency, conservation and “green” energy, scientific research concerning renewable energies, and the generation or transmission of renewable energies.

The Act provides for approximately $48 billion in spending for expansive development of transportation infrastructure throughout the country with a large portion of available funding focused on surface transportation (such as building and repairing highways and bridges), expanding public transportation systems, and upgrading airports and rail systems. In particular, $1.5 billion is allocated for capital investments in surface transportation infrastructure, including bridges and highways, $27.5 billion is allocated to the Federal Highway Administration for highway infrastructure investment, $9.3 billion is allocated for investments in rail transportation, including $8 billion for the development of inter-city high speed rail service, $8.4 billion is allocated for grants for public transportation, $1.3 billion is allocated for investments in air transportation (of which $200 million is allocated to the Federal Aviation Administration for improvements to power systems, air route traffic control centres, air traffic control towers, and navigation and landing equipment), and $1.1 billion is allocated for discretionary grants by the Secretary of Transportation for the procurement, installation and commissioning of runway incursion prevention devices and systems at airports.

Canadian businesses involved in the transportation construction industry, including construction companies, engineering firms, materials and equipment suppliers, and others, could have significant opportunities to participate in the many transportation infrastructure projects that will be occurring in the U.S. over the near term.

Science and Technology

The Act provides funds for substantial investment in initiatives designed to promote science and innovation, disease treatment and prevention, and research into developing alternative energy sources. In particular, the Act provides over $11 billion for bio-medical research, including further developing research concerning the prevention and treatment of cancer, Alzheimer’s, Parkinson’s and heart disease. The Act also provides $20 billion in spending to improve the country’s healthcare infrastructure, such as the implementation of a certified electronic health record system and improving health information technology for the recording and exchange of electronic medical records to improve the quality of healthcare and efficiencies. In addition, the Act provides over $12 billion for research into developing renewable and alternative energy, over $11.7 billion for modernization of technology infrastructure, and $7 billion to provide broadband infrastructure to expand internet access to rural or underserved areas.

There may be substantial opportunities available for Canadian scientific research firms or other businesses that provide products, materials, or technology concerning biomedical research, health infrastructure or broadband internet connectivity and, in particular, security features to protect the privacy of health-related information.

Some Final Thoughts

The Act will provide significant opportunities for companies to finance projects through tax relief, direct grants and loan guarantees. Canadian companies will require the expertise of both Canadian and U.S. professionals to actively work together to analyze what loans or funding programs would be available for specific projects and any qualifying requirements, and to assist in evaluating the benefits and limitations of the procurement and timing for such funding. Qualifying for government programs may have the associated benefit of assisting in making credit financing more accessible to investors, manufacturers, vendors and contractors. However, the government administration to facilitate funding programs needs to be fully implemented and applicants may experience delays in funding and the imposition of conditions, including funding and construction deadlines and accounting and reporting requirements to ensure transparency regarding the use of such funding, which will have to be carefully calculated as part of the merits and components of any project and its timelines.

In general, therefore, taking the initiative to explore and effect opportunities within the suggested areas will require the involvement of professionals who have expertise in each of the two jurisdictions and who also have experience with cross-border matters. Hopefully, the professionals hired to assist will also have their own connections and partnering experiences that may be beneficial to the endeavour.


text:
On April 16, 2013, the Departments of State and Commerce issued long-awaited final rules, kicking off the initial implementation of a four-year effort to reform U.S. export controls. This initial round of new rules covers two categories of the U.S. Munitions List (USML), related to aircraft and gas turbine engines. These regulations go into effect on October 15, 2013.

The Administration has an ambitious schedule to publish final rules related to 17 additional USML Categories by the end of the year, fundamentally restructuring the way the United States regulates defense articles. Future rule changes will impact firearms; guns and armament; ammunition and ordnance; launch vehicles, missiles, torpedoes, bombs and mines; explosives and energetic materials; naval vessels; military vehicles; training and related equipment; protective equipment; electronics; optical and night vision equipment; auxiliary equipment; toxicological agents and associated equipment; spacecraft; nuclear weapons design and testing equipment; directed energy; and submersible vessels.

To illustrate the scope of the April 16 change, which is significant, the International Traffic in Arms Regulations (ITAR) currently control “aircraft...which are specifically designed, modified, or equipped for military purposes.” Instead of this broadly defined “catch-all,” under the new rules the Department of State identifies 13 types of aircraft that are controlled, such as fighters, bombers, and attack helicopters. Certain aircraft previously controlled by the ITAR, including many helicopters, trainers and theater cargo aircraft, are being transferred to the more permissive licensing jurisdiction of the Department of Commerce.

Even more significant changes will happen at the parts and components level. Today, with few exceptions, the ITAR captures most components, parts, accessories, attachments, and associated equipment specifically designed or modified for military aircraft. This broad level of control is being significantly rolled back.

The Department of State has determined that blanket capture of such items by the ITAR, without regard to sensitivity, is no longer justified. Once the final rule becomes effective, this broad catch-all control will only apply to parts, components, accessories, attachments, and equipment “specially designed” for the B-1B, B-2, F-15SE, F/A-18 E/F/G, F-22, F-35, F-117 or U.S. Government technology demonstrators.

For other aircraft controlled by the ITAR, including earlier models of the F-15 SE and F/A-18 E/F/G, “specially designed” parts, components, accessories, attachments, and equipment will only be captured by the ITAR if they fall within one of 25 enumerated categories. Licensing jurisdiction for all others will transfer to the Department of Commerce. Many companies that were previously subject to the ITAR may now find that their operations are subject instead to the Export Administration Regulations (EAR).

This change in licensing jurisdiction creates both risks and opportunities. Care must be used in managing the transition to the EAR to ensure compliance with a different regulatory scheme. For companies newly under Department of Commerce jurisdiction, however, a range of license exceptions may allow license free exports to numerous destinations worldwide.

Manufacturers and exporters must carefully examine their product offerings against the revised control lists, including a review of any previously issued Commodity Jurisdiction determinations, to determine whether their items have transitioned from Department of State to Department of Commerce control. Commodity Jurisdiction determinations previously issued by the Department of State may be superseded by the new final rules without specific notice to affected companies.

Companies unable to ascertain the proper jurisdiction of their products and services will need to request Commodity Jurisdiction determinations from the Department of State. Those who are certain their items have transferred to the Department of Commerce may submit a Commodity Classification Automated Tracking System request (CCATS) to clarify the specific license requirements for their items.


text:
Writing to FCC Chairman Tom Wheeler last Friday, Verizon Wireless senior vice president Kathleen Grillo defended her company’s recent decision to extend its practice of “throttling” data transmission speeds for certain 3G network and is now extending it to users to certain 4G LTE subscribers on unlimited data plans, emphasizing: “the purpose is to ensure there is capacity for everyone . . . and that high users don’t limit capacity for others.”

Verizon’s letter responds to a July 30 communication from Wheeler to Verizon CEO Daniel Mead in which Wheeler acknowledged he was “deeply troubled” by Verizon’s plan to begin slowing network transmission speeds for some of the heaviest users of Verizon’s unlimited 4G LTE data plan starting on October 1. Advising Mead that he was “disturbed” by Verizon’s move to “base its network management on distinctions among its customers’ data plans, rather than on network architecture or technology,” Wheeler countered that “reasonable network management concerns the technical management of your network; it is not a loophole designed to enhance your revenue streams.”

In reply, Grillo maintained that Verizon’s “network optimization” program complies with principles of reasonable management outlined by the FCC in the 2010  Open Internet order and targets only those  subscribers who use “a disproportionate amount of network resources and have an out-sized effect on the network.” Denying that the program represents “an effort to ‘enhance [our] revenue streams,” Grillo termed her company’s throttling practice as “a measured and fair step to ensure that this small group of customers does not disadvantage all others in the sharing of network resources.” Grillo also noted that the policy only targets cell sites “experiencing high demand” and that full network speeds are restored once congestion on impacted cell sites subsides.


text:
On July 16, 2014, the United States Treasury Department's Office of Foreign Assets Control ("OFAC") unveiled new Ukraine-related sanctions. As a result of these sanctions, five individuals and eleven entities were added to OFAC's list of Specially Designated Nationals and Blocked Persons (the "SDN list"). US persons are prohibited from engaging in or facilitating virtually any commerce with any person on the SDN list, absent OFAC licensure.

In a significant expansion of the Ukraine-related sanctions, OFAC also established a new Sectoral Sanctions Identification ("SSI") list, and designated two major Russian banks and two large energy companies for immediate inclusion. US Persons may not provide debt financing longer than 90 days to any person on the SSI list; and in the case of the two banks, US Persons are also prohibited from providing them with new equity. Unlike the SDN list, however, US Persons generally remain able to conduct business with persons on the SSI list, and the entities' assets under US jurisdiction remain unblocked. The new SSI list is significant for several reasons, including:

  • The four entities added to the SSI list are among Russia's largest financial and energy enterprises: banks Gazprombank and VEB (formerly Vneshecononombank), and petroleum companies Rosneft and Novatek.
  • This is the first time that the US has imposed "Ukraine-related" sanctions on Russian firms which do not have a clear expressed link to the ongoing events in Ukraine and Crimea.

Accordingly, for US firms doing business in Russia, and for non-US firms with a US subsidiary or other US presence, the potential for further unlimited expansion of the sanctions creates unsettling concerns regarding business in Russia or with major Russian companies. It is expected, moreover, that the EU will impose specific new sanctions in the near future.

Key Elements of the July 16 US sanctions

New SDNs

The US Department of Treasury added five individuals and eleven entities to the SDN list. These individuals and entities join a growing list of SDNs which were added in five previous rounds of Ukraine-related sanctions.1

Of the five individuals designated on July 16, four are Russian government officials, including a senior Federal Security Service official; the fifth is a separatist "prime minister" of Donetsk. The eleven entities designated on July 16 include the two self-proclaimed separatist republics of Donetsk and Luhansk, eight Russian firms which Treasury states to be "responsible for the production of . . . small arms, mortar shells, and tanks", and a Crimean shipping enterprise, "Feodosiya." Among the entities designated is "Kalashnikov Concern." According to a set of Frequently Asked Questions (and their answers) released by OFAC simultaneously with the new sanctions, Kalashnikov Concern products possessed by US persons are not blocked if they have been fully paid for prior to July 16. However, if Kalashnikov Concern has any current interest in such product, for example if it was purchased on consignment, the US person is advised to contact OFAC for further guidance.

The SSI list

The SSI was created pursuant to EO 13662 and its Directives 1 and 2. Under EO 13662, the US Secretary of the Treasury, in consultation with the US Secretary of State, is authorized to identify sectors of the Russian economy "such as financial services, energy, metals and mining, engineering, and defense and related materiel" and to determine any person operating in those sectors whose property and interests in property should be blocked. EO 13662 also permits the Treasury Department to "take such actions . . . as may be necessary to carry out the purposes" of EO 13662.

The SSI list and its related OFAC directives prohibit US Persons, defined as any US citizen, permanent resident alien, entity organized under the laws of the US or any jurisdiction within the US (including foreign branches) or any person in US territory, from "transacting in, providing financing for, or otherwise dealing in new debt of longer than 90 days maturity" for two energy companies, Rosneft and Novatek, and for two banks, Gazprombank and VEB. The SSI list and its related directives further prohibit US Persons from transacting in, providing financing for, or otherwise dealing in new equity of Gazprombank and VEB (but not Rosneft or Novatek).

The ban on US Persons from transacting in, providing financing for, or otherwise dealing in new debt of longer than 90 days maturity for four major Russian firms, and in the cases of the two banks, new equity, effectively limits their available sources of financing. The prohibition moreover works both ways: the four SSI entities cannot themselves provide debt or equity to any US Persons.

Nonetheless, OFAC has confirmed that US financial institutions may continue to maintain correspondent accounts and process US dollar-clearing transactions for Gazprombank, VEB, Rosneft, and Novatek "so long as those activities do not involve transacting in, providing financing for, or otherwise dealing in prohibited transaction types identified by these directives." Furthermore, OFAC has clarified that the property and interests in property of Gazprombank, VEB, Rosneft, and Novatek are not frozen for sanctions purposes, and that US Persons may continue to otherwise transact business with those four entities. Also, debt obligations with a term of 90 days or less are permitted.

OFAC has also provided guidance as to the nature of "debt" and "equity," but there remains uncertainty about the potential breadth of these prohibitions. Although OFAC has granted General License 1, which authorizes many transactions in derivatives, it is already apparent that US companies may need to revisit existing or proposed transactions involving the SSI list entities to determine whether they are restricted. It is not certain, for example, how the SSI list restricts complicated financial arrangements involving investments which are not loans per se but could be deemed "debt". Such arrangements, not uncommon in the petroleum industry, warrant closer scrutiny.

But the ultimate effect of these prohibitions may be to cause US companies generally to rethink their engagement in the Russian market. For example, for US businesses with whom Rosneft and Novatek may have joint ventures or are otherwise jointly engaged on projects, these US businesses are now barred from providing, but also facilitating or guaranteeing, certain debt to Rosneft or Novatek or their subsidiaries or affiliates.

For persons outside of the United States, the financing restrictions may also have important repercussions. Although the new sanctions do not reach those who are not "US persons," foreign businesses with a US branch or subsidiary, and/or US national employees, must be careful that such US branches or subsidiaries, or US national employees, do not violate the new restrictions.

This new limited financing ban therefore creates a range of legal uncertainties. The SSI prohibitions potentially include, for example, rollovers of existing debt or accelerated equity payments by the US party to a joint venture, or financial arrangements with components that may be deemed "debt" or "equity" under the sanctions. US persons may face situations where, by complying with the sanctions, they are forced to breach material terms of ongoing contracts.

The July 16, 2014 Ukraine-related sanctions not only added Russian and Ukrainian individuals and entities to the SDN list, but also created a new category of sanctioned entities based on sector, not relationship to the events in Ukraine and Crimea. This fast-moving and challenging regulatory landscape requires heightened diligence by US Persons and non-US Persons alike, and active monitoring of the policy landscape.


text:
Seeking to defuse criticism that the government was moving too slowly, and topping this week’s list of ARRA/Stimulus implementation moves, U.S. Commerce Secretary Gary Locke and U.S. Energy Secretary Steven Chu announced significant expansion of funding for smart grid development and the first of an anticipated 16 sets of standards for smart grid design and operation, with the remaining sets due to be released by September. Click here for a great overview of the implications of this move.

The other big story embedded in last week’s DOE/DOC event expanding smart grid funding was the clear evidence that the energy, internet security, and telecommunications worlds are continuing and accelerating their convergence. We are squarely in a world where fiber optics and satellites are becoming energy facilities every bit as much as coal plants and turbines. Are cyber warriors and cubicle geeks are the new linemen? The very definition of energy policy is being rewritten as information and electrons become an intertwined hybrid, and the boundaries between commodities and services blur. We will be paying attention.


WARC-Identified-Payload-Type: application/xhtml+xml

text:
Blue cold shoulder shirt is out of stock . More options from Miss Chase
  • Explore similar brands »

Blue cold shoulder shirt

By Miss Chase 4.2 seller score out of 5
LR Trusted
  • M.R.P.:1599
    You Save:320 (20%)
  • Add to Story
  • Free Delivery Easy Returns 100% Original Brand New Pay Securely
Be the first one to rate

  • Blue cold shoulder shirt
  • Brand Name : Miss Chase
  • Color : Blue
  • Material : Cotton
  • Set of ( Number of units in Set) : 1
  • Length (inches) : 24
  • Print & Pattern : Solids
  • Neck : shirt collar
  • Type : Assymmetric
  • Transparency of the Fabric : Not Transparent
  • Occasion : Casual wear
  • Product Details : Light blue cold shoulder shirt
  • Product Code : 14499561
  • Cold Machine wash with similar colors, Do not Bleach, Tumble Dry Low, Warm Iron
  • Metros : 3-5 working days.
    Other Cities : 5-7 working days.
    Areas servicable only by speed post : 15 working days.
  • 7 days, no hassle returns! details...
Miss Chase is a fast fashion brand that aspires to be a global leader in the western fashion segment. They create chic european designs and get them at a very affordable price. Their mantra is to help women with their age old dilemma of "i have nothing to wear!" They do all this with a unique combination of brilliant in-house designers and international design consultants based in the global fashion hubs. Also, selling the items primarily online helps them bypass the traditional retail markups, hence, allowing them to provide the apparel at a shockingly low price. The brand retail apparel, sleepwear, bags, jewelry, footwear, and other accessories.
Standard Size XS S M L XL
BUST 34 36 38 40 42
WAIST 32 34 36 38 40
Sizechart provided is as per the garment measurement and not the body.

similar items

    refine selection
    • brand :
    • color :
    • tags :
    more options in blue
    • Explore other colors »
    More options from Miss Chase
    • Explore similar brands »
    similar scrapbooks