Posted On Tuesday, September 29, 2015
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It is not uncommon in the financial services industry, particularly in matters involving the departure of partners or brokers, for there to be accusations that the departing person has taken with them confidential information. Typically these disputes involve threats of or actual lawsuits and motions for injunctive relief, usually involving client lists and other proprietary data. A recent case in the Southern District of New York demonstrates, however, that when a broker accesses client information without permission, even within their own firm, they may also face criminal charges.
On September 21, 2015, a private wealth management advisor, Galen Marsh, entered a plea of guilty before U.S. District Judge Kevin Thomas Duffy in the Southern District of New York to a one-count information charging unauthorized access to a computer. In entering the plea, Marsh admitted that he gained access to confidential and private information of hundreds of thousands of his employer’s clients without authorization.
According to the government, Marsh was employed in the private wealth management division of a bank, initially as a customer service associate (CSA) and then as a financial advisor (FA), working as part of a group that provided financial and investment services to private wealth management clients of the bank. There were other similarly structured groups within the wealth management division who provided similar services to the bank’s other wealth management clients.
While Marsh, as an FA and a CSA, was authorized to access the client information of the clients in his group, he was not authorized to access information regarding clients in other groups providing services to other private wealth management clients of the bank. According to the plea entered by Marsh, from June 2011 through December 2014, Marsh used the bank’s computer systems to access confidential information about certain clients serviced by FAs and CSAs outside of his group. He obtained this information from outside of his group by using identification numbers of other bank branches, groups and FAs in the banks’ computer system. He conducted more than 6,000 unauthorized searches in the bank’s computer systems and obtained confidential client information, including names, addresses, telephone numbers, account numbers, fixed income investment information and account values of approximately 730,000 client accounts at the bank. He then uploaded the confidential client information from the bank to a personal server at his home in New Jersey.
According to the government, Marsh illegally accessed the confidential information in order to use it for his personal advantage as a private wealth management advisor at the bank. The government added that from October 2013 through December 2014, Marsh was engaged in discussions regarding potential employment with two other financial institutions that are competitors of Marsh’s then employer.
The maximum penalty for unauthorized access to a computer under 18 U.S.C. § 1030, in cases where the person accesses the computer of a financial institution for purposes of commercial advantage or private financial gain, is five years in prison and three years of supervised release. Marsh is scheduled to be sentenced by Judge Duffy on December 7, 2015.
Posted On Friday, September 25, 2015
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On Tuesday, Assistant Attorney General Leslie R. Caldwell expanded upon DOJ’s new policy focus on pursuing individuals in connection with the prosecution of corporate wrongdoing. Assistant Attorney General Caldwell, speaking to the Second Annual Global Investigations Review Conference in New York, took the opportunity to throw the spotlight on the policy shift that was previously introduced by Deputy Attorney General (DAG) Sally Quillian Yates in remarks she delivered on September 10, and formalized in a September 9 memorandum to all department attorneys, entitled “Individual Accountability for Corporate Wrongdoing.”
While indicating that the policy announcement by DAG Yates was simply a reinforcement of what the Department has been doing for a long time, Assistant Attorney General Caldwell indicated that the policy shift does forcefully focus all federal prosecutors on pursuing individual accountability for corporate criminal misconduct. She said that “prosecuting the corporate entity, and imposing a fine or other impersonal conditions, simply is not enough – in most instances – to fully punish and, more importantly, deter corporate misconduct.”
Assistant Attorney General Caldwell illustrated how she sees this new focus playing out, citing previous cases settled by the Department, including the resolution of the FCPA matter involving Alstom, S.A., the French power company, in December of 2014. Alstom entered a plea of guilty to violating the FCPA, and agreed to pay a penalty of $772 million. Its Swiss subsidiary pleaded guilty to conspiracy to violate the anti-bribery provision of the FCPA, and two U.S.-based subsidiaries also admitted to conspiring to violate the FCPA and entered into Deferred Prosecution Agreements (DPAs). She added that the Alstom investigation resulted in criminal charges against five individuals, including four corporate executives, in connection with the bribery scheme. She explained that the final global corporate resolution with Alstom was based, at least in part, on what she described as the company’s failure to voluntarily disclose the misconduct and its refusal to cooperate with the investigation until years later, after several company executives had been charged.
Ms. Caldwell also discussed agreements made earlier this year in two other FCPA cases, IAP Worldwide Services (IAP) and Louis Berger International. In both cases, the companies paid a significant financial penalty, but each was permitted to enter into agreements without prosecution – a non-prosecution agreement (NPA) in the case of IAP Worldwide Services, and a DPA in the case of Louis Berger International. Assistant Attorney General Caldwell indicated that the factors considered in entering into these agreements included the following:
1) The companies’ cooperation with the investigations, including voluntarily making U.S. and foreign employees available for interviews and collecting, analyzing and organizing key evidence;
2) The companies’ extensive remediation efforts, including terminating the employees responsible for corrupt payments; and
3) The companies’ demonstrated commitment to improving their compliance programs and internal controls.
She added that both companies agreed to continue to cooperate in ongoing investigations of their officers, directors, employees, agents and consultants.
Assistant Attorney General Caldwell said that she did not see any basis for concern that the new policy guidance will require companies to conduct ever more extensive and expensive investigations. In explaining this point, she said “we are not asking companies to boil the ocean every time they find evidence of wrongdoing.” Rather, she indicated that it has long been the department’s policy that they expect investigations to be thorough and to be tailored to the scope of the wrongdoing.
On the often controversial issue of whether demands for cooperation include a requirement that corporations waive privilege, she said she wanted to “make clear that the new guidance does not change existing department policy regarding attorney/client privilege or work product privilege.” She said that prosecutors will not request a corporate waiver of these privileges in connection with the corporation’s cooperation.
Assistant Attorney General Caldwell asserted that the new policy guidance builds upon the core considerations of the existing principles of federal prosecution, “but also represents a strong step forward to promote and better reflect the importance of individual accountability.” She indicated that it may be that counsel dealing with the criminal division and investigations of corporate wrongdoing may not ultimately see the new policy guidance as anything radical.
The full text of Assistant Attorney General Caldwell’s remarks can be found here.
