For the last few years, the SEC has been issuing guidance as to appropriate cybersecurity policies and procedures for financial firms. In a move that signal’s the regulator’s willingness to put muscle into its cybersecurity guidance, the SEC announced an agreement with St. Louis-based investment company, R.T. Jones Capital Equities Management (“R.T. Jones” or “the company”), to settle charges that the company failed to adequately safeguard the personal information (“PI”) of approximately 100,000 individuals. Consistent with this trend, the SEC has announced that its Office of Compliance Inspections and Examinations (“OCIE”) would be conducting a second round of investigations into the cybersecurity practices of brokerage and advisory firms (the “Cybersecurity Examination Initiative”). These moves signal the SEC’s increasing scrutiny of investment firms’ information security practices and indicate the regulator’s willingness to enforce the guidance that it has issued.
Mark Mermelstein, a partner in the Los Angeles office, is a member of the White Collar and Corporate Investigations group.
Mark, a trial lawyer with more than 20 first-chair trials, specializes in complex litigation and white collar criminal defense. He focuses his work representing corporations and individuals facing allegations of underground storage tank fund (UST Fund) fraud, securities fraud, healthcare fraud, antitrust violations, environmental crimes, money laundering, violations of the Foreign Corrupt Practices Act (FCPA) and the False Claims Act, mail/wire fraud, embezzlement and anti-competitive behavior.
Mark also focuses on asset recovery for corporate crime victims such as those victimized by cybercrime, such as theft of trade secrets, hacking, counterfeiting and other business crimes.
Mark has written many articles and has spoken extensively on many aspects of his practice. A frequent commentator on matters related to white collar crime, he has been honored by the Southern California Super Lawyers Magazine as a Southern California Rising Star each year since 2004.Representative experience includes the following:
- Represented environmental consultants in three of the four criminal investigations initiated by the State Water Resources Control Board and Attorney General’s Office regarding allegations of fraud on the California Underground Storage Tank Fund.
- Represented a bottling company in a federal criminal investigation into violations of the Clean Water Act.
- Represented a hotel engineer in a federal criminal investigation into violations of the Clean Water Act.
- Represented numerous seamen in federal criminal investigations regarding violations of the Clean Water Act.
- Represented the victim of art fraud when he was sold a phony Picasso painting for US$2 million. By referring to the matter to the United States Attorney’s Office for a successful criminal prosecution, and asset forfeiture seizure, recovered more than the client’s US$2 million cash outlay.
- Represented a major international union that was fraudulently induced to enter into more than US$25 million of over-priced office equipment leases. By initiating a state court lawsuit was able to extricate the client from the leases and resolve the litigation on favorable terms.
- Represented an Internet company that was the victim of cyber-extortion when the perpetrator demanded payment of money in exchange for not releasing company and customer trade secret information.
- Represented a chain of nursing homes in connection with a D.A.'s Office investigation into allegations of an elder abuse homicide at one of its residences, the related civil litigation and the related licensing investigation.
- Represented numerous physicians and other healthcare professionals in connection with federal or state criminal investigations into allegations of Medicare/Medical fraud or drug distribution by writing prescriptions without medical necessity.
- Achieved a verdict after jury trial for Aetna below the settlement offer, where the health insurer had been accused of insurance bad faith by decedent seeking more than US$20 million.
- Represented a French investment company in connection with a U.S. Attorney's Office investigation into allegations of fraud in connection with the purchase of a failed insurance company, Executive Life, and related civil litigation.
- Represented a senior executive at KB Home in connection with a U.S. Attorney's Office investigation into allegations of stock options backdating, related Securities & Exchange Commission investigation and civil litigation.
- Represent numerous environmental consultants in criminal and civil proceedings brought by the California State Water Resources Control Board and qui tam whistleblowers related to allegations of fraud on the California Underground Storage Tank Cleanup Fund
- Represented National Basketball Association player in U.S. Attorney's Office investigation
With his substantial trial experience, he knows how to devise winning strategies for trial and has the judgment to know when it is best to find an alternative solution. A sample of Mr. Mermelstein's trial and evidentiary hearing successes appears below.
- Secured complete dismissal of manslaughter charges against a motorist accused of killing a prominent municipal employee in an alcohol-involved car accident.
- Obtained complete dismissal of all allegations of impropriety in a high stakes child custody battle for a multi-millionaire business executive.
- Won a hung jury verdict for ConAgra Foods, where the food manufacturer was facing a US$40 million claim from a distributor for breach of contract.
- Obtained numerous not guilty jury verdicts for individuals accused of a wide array of criminal conduct.
Posts by: Mark Mermelstein
On Monday, February 25, Goldman Sachs won its bid to force former director Rajat K. Gupta to pay legal fees it incurred while investigating Gupta’s insider trading activities. In October 2012, Gupta was sentenced to two years in prison following his conviction on conspiracy and securities fraud charges. As part of those sentencing proceedings, Judge Jed Rakoff of the Southern District of New York has now ordered Gupta to pay Goldman Sachs $6.2 million, an amount equal to approximately 90 percent of the legal expenses the banking firm sought to recover. See United States v. Gupta, Case No. 11 CR 907 (S.D.N.Y. Feb. 25, 2013).
Background on the Ruling
Goldman Sachs sought its fees under the Mandatory Victim Restitution Act (“MVRA”), which allows some crime victims to recover expenses they incur as a result of a criminal defendant’s wrongful conduct. See 18 U.S.C. §3663A.
Judge Rakoff’s restitution order requires Gupta to pay the legal fees Goldman Sachs incurred conducting an internal investigation; responding to grand jury subpoenas and document requests from the U.S. Attorney’s Office, the Securities and Exchange Commission (“SEC”), and from Gupta himself; collecting and reviewing millions of documents leading to document productions of over 400,000 pages; and providing counsel to represent various of its officers and employees in depositions and at trial. The restitution order also covered fees Goldman Sachs incurred relating to the criminal investigation of Raj Rajaratnam, who was unaffiliated with Goldman Sachs but convicted for his role in the same insider trading scheme. Finally, Judge Rakoff ordered Gupta to pay Goldman Sachs its fees associated with preparing the request for restitution.
Implications of the Ruling
In ordering restitution, Judge Rakoff found that the requested attorney’s fees were “necessary,” were “incurred during participation in the investigation or prosecution of the offense or attendance at proceedings related to the offense,” and were incurred by a “victim.” While one may not have thought of Goldman Sachs – the entity from whom Gupta, the tipper, acquired the inside information – as a traditional victim of insider trading, in interpreting that term as anyone who was “directly and proximately harmed” by the offense of conviction, the Court had no difficulty in finding that Goldman was a victim and thus awarding it the attorney’s fees. READ MORE