AGG’s Government Investigations Team Insights provides periodic updates covering legal and regulatory topics. Our team, which includes former federal prosecutors, SEC enforcement attorneys, and federal agency attorneys, has successfully represented companies and individuals, including executives of public companies, in numerous civil and criminal investigations, including before the U.S. Department of Justice and U.S. Attorney’s Offices, the SEC, the EPA, the FDA, the FTC, and many other federal and state agencies. We also assist our clients by conducting internal and parallel investigations, and advising them regarding the related issues that often follow government investigations, including civil litigation, media interest, and reputational concerns.
In this edition, we introduce our new partner Allison Raley who comes to AGG after serving as a global tech general counsel and chief compliance officer, discuss the Supreme Court of the United States’ ruling in Diaz v. United States allowing expert testimony that “most” drug couriers know they are carrying drugs, analyze the Supreme Court ruling in SEC v. Jarkesy requiring jury trials (and not administrative hearings) where the SEC sought civil fraud penalties, and discuss a new trend in False Claims Act cases related to the use of AI and data mining by whistleblowers.
Featured Articles
Q&A With Allison Raley: Defending Against Government Investigations
By Aaron M. Danzig & Allison E. Raley
Allison Raley, AGG partner and co-chair of the Emerging Technologies industry team and Women in Tech Law initiative, shares her insights into handling enforcement matters from prominent regulatory bodies such as OFAC, IRS, NYDFS, and SEC. Drawing from her extensive experience as a general counsel and chief compliance officer of a financial institution, she discusses her approach to consent order negotiations, monitorship, and compliance strategies. Allison also elaborates on her role in representing companies throughout enforcement processes and providing clear, actionable advice to key stakeholders.
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Wave of the Future: Are AI and Data Mining the Next Generation of “Professional Whistleblowers”?
By Kara G. Silverman
In the realm of False Claims Act (“FCA”) litigation, the emergence of artificial intelligence (“AI”) and data mining technologies has introduced both opportunities and complexities for defense strategies. Historically, qui tam cases have relied heavily on meticulous investigation and insider knowledge to substantiate allegations of fraud. However, the integration of AI-driven data analytics is now providing unprecedented capabilities for potential whistleblowers to sort through large volumes of publicly available data. While these technologies offer powerful tools for uncovering complex patterns, they also pose a threat to healthcare companies due to its employment by professional whistleblowing companies utilizing it to bring qui tam cases based on publicly available Medicare data absent any “insider” knowledge. Companies defending against qui tam cases must navigate these challenges effectively, leveraging the public disclosure bar and Federal Rules of Civil Procedure (“FRCP”) Rule 9(b) to scrutinize and challenge allegations based on AI and data mining.
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"If You Most Know, You Know”: Expert Testimony That “Most” Drug Couriers Know They’re Carrying Drugs Allowed to Prove Defendant Knew She Was Carrying Drugs
By Aaron M. Danzig, Sara M. Lord, & W. Jerad Rissler
If you know, you know. The government’s less familiar version — if most know, the defendant knows — just got a boost from the Supreme Court of the United States, which recently held that Federal Rule of Evidence 704(b) did not prohibit the government’s expert witness from testifying that “most” drug couriers know they are transporting drugs. The majority opinion, written by Justice Thomas and joined by five other members of the Court, concluded that Rule 704(b)’s language precludes only opinion testimony “about whether [defendant] herself had a particular mental state.” In a concurring opinion, Justice Jackson observed that the majority opinion opens the door to defendants “to elicit expert testimony on the likelihood that the defendant had a particular mental state based on the defendant’s membership in a particular group.” Justice Gorsuch, joined by Justices Sotomayor and Kagan, dissented, arguing that opinion testimony about what most people in a group know amounts to testimony “about whether the defendant did or did not have” a certain “mental state” that violates Rule 704(b). Both the concurring and dissenting opinions noted that the majority decision did not address authority outside of Rule 704(b) that might prohibit such opinion testimony, and the dissent argued that such authorities should have prohibited the opinion at issue. The case is Diaz v. United States, No. 23-14, 602 U.S. ___ (June 20, 2024).
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Healthcare Providers Could Finally Have Their Day in Court: Supreme Court Holds That Defendants Are Entitled to Jury Trials When the Government Pursues Penalties Based on Alleged Fraud
By Jason E. Bring
On June 27, 2024, the Supreme Court of the United States released its opinion in SEC v. Jarkesy, a case involving a Securities and Exchange Commission (“SEC”) enforcement action for civil penalties against an investment advisor, Jarkesy, and his firm for alleged violations of the antifraud provisions contained in the federal securities laws. Although it had the option of pursuing its enforcement action in federal court, the SEC elected to prosecute the case “in-house,” through its Division of Enforcement overseen by the Commission. In that context, the Commission or its delegee — typically an administrative law judge (“ALJ”) — acts as factfinder and decides discovery disputes, and the SEC’s Rules of Practice govern.
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