Several current and former federal officials recently sent letters to the President and the Attorney General urging action to protect persons in custody or facing arrest and detention during the COVID-19 crisis. In response, Attorney General Barr has issued separate directives to all U.S. Attorneys and DOJ Department Heads and to the Director of the Bureau of Prisons (BOP). This guidance comes as justice systems across the United States are dealing with an increasing rate of infection among incarcerated individuals and facility staff, and a flood of petitions seeking early release or reconsideration of orders denying bail.

In his memorandum to DOJ officials on litigating pretrial detention issues during the current health crisis, Barr stressed the “paramount obligation” of federal law enforcement to protect the public from violent offenders, including gang members and child predators, and urged prosecutors to consider the pandemic as a factor in bail determinations. The advisory directs that detention should not be considered “to the same degree we would under normal circumstances – specifically, for those defendants who have not committed serious crimes and who present little risk of flight (but no threat to the public) and who are clearly vulnerable to COVID-19 under CDC Guidelines.” In support, Barr states that each time a new person is added to a jail, it brings the risk of infection to facility personnel and those already incarcerated, as well as serious risk to the health of individuals who may be vulnerable to the virus based on age or a preexisting medical condition.

In a separate memorandum to the Director of the BOP, the Attorney General noted the “significant levels of infection at several of our facilities,” which requires prompt action to address the growing crisis. Acting based on new authority granted to him under the recently enacted CARES Act to address “emergency conditions,” Barr directed BOP to review all inmates, beginning with those at facilities most affected by the spread of COVID-19, to identify those deemed suitable for home confinement and to “immediately process them for transfer,” following a 14-day quarantine at a BOP facility, or at the residence to which the inmate is being transferred. Barr cautioned BOP that, in making these determinations, it “not inadvertently contribute to the spread of COVID-19 by transferring inmates from our facilities.” As he did in the guidance to the U.S. Attorneys, Barr reminded the BOP that it not only has a responsibility to protect those in custody, but an obligation to protect the public and the law enforcement community. He stated that “this pandemic has dramatically increased the already substantial risks facing the men and women who keep us safe,” noting that it is “impossible to engage in social distancing, hand washing, and other recommended steps in the middle of arresting a violent criminal.”

The White Collar and Government Enforcement practice group at Jackson Lewis has attorneys who are former federal and state prosecutors, and experienced criminal law practitioners. The services that we provide include guiding clients through criminal and regulatory investigations, defense of complex criminal cases, sentencing advocacy, pardon petitions, motions for compassionate release, and efforts to seal or expunge criminal records.

As the country faces a wave of COVID-19 closure orders, individuals are being encouraged to report violations.  Hypothetically, these reports could originate from just about anyone – employees, employees’ family members, customers, neighbors, the general public.  Given the wide range of potential complainants, these reports may not always be based on first-hand observations.

When investigating complaints based upon second-hand information, investigators should obtain as much information as possible regarding how the complainant acquired the information and should attempt to verify the details through witness interviews or with relevant documentation. When interviewing the complainant, investigators should let the complainant share the story, in his or her own words, with the least amount of prompting possible. The investigator should do so by asking open-ended questions. For example:

  • What are the incidents that led to this complaint?
  • Who was involved in the alleged incidents? Who are the witnesses? Who else knows about the incidents?
  • Where did the incidents occur?
  • When did the incidents occur and how often?
  • Why is the complainant reporting the incidents?

Similar to an investigation of allegations from a supposed “first-hand” source, after the initial inquiry, investigators should identify the steps necessary to test the accuracy of the allegations and assess the complainant’s credibility, as well as the credibility of any second-hand information provided.

It is important to keep in mind that the sufficiency of the investigation process may play a role in whether an organization faces potential liability from the alleged misconduct.  An employer may face criticism for:

  1. Ignoring a complaint simply because it is based on second-hand information
  2. Delaying an investigation until it receives first-hand information
  3. Failing to interview the complainant and other relevant witnesses
  4. Allowing the investigation to drag on unnecessarily
  5. Failing to take appropriate corrective action

The duty to investigate allegations of misconduct arises from the receipt of a complaint, not from whether the complaint is based on first- or second-hand information. Ultimately, the knowledge obtained by the employer during its investigation is what matters in determining whether misconduct is occurring, not necessarily how the person reporting the suspected misconduct came to possess that information.

Law enforcement is alerting businesses and the public that during the ongoing COVID-19 federal and state emergencies and stay-at-home orders to be extremely vigilant about email and internet scams being perpetrated by wrongdoers trying to capitalize on the scare.

According to the FBI:

“Scammers are leveraging the COVID-19 pandemic to steal your money, your personal information, or both. Don’t let them … protect yourself and do your research before clicking on links purporting to provide information on the virus.”

These warnings are especially pertinent when solicitations from charities, other non-profits, or crowdfunding campaigns may not actually be who or what they claim to be. Similarly, e-commerce shopping where furnishing personal information to receive products or other benefits may prove perilous.

Authorities also have identified fraudsters posing as the Centers for Disease Control and Prevention (CDC) and other health organizations purporting to possess important health information about the virus. Some domains are actually offering the public fake cures and vaccines, as well as phony COVID-19 testing kits. The concern here is that these websites are hackers imbedding links within the messages that contain malware designed to steal personal information or lock the victim’s computer until the “ransom” is paid.

Following passage of the $2 trillion COVID-19 stimulus bill, the Coronavirus Aid, Relief, and Economic Security Act (CARES), scammers are already soliciting the public by emails asking to confirm personal information to receive an economic stimulus check from the government. Authorities are warning the public to distrust these directives, believing they are sophisticated phishing schemes designed to invade computes, hard drives, and mail servers.

The FBI has reiterated:

“While talk of economic stimulus checks has been in the news cycle, government agencies are not sending unsolicited emails seeking your private information in order to send you money.”

In this difficult period of hospital/ICU overutilization and dangerously low inventories of PPE and other medical equipment, the healthcare industry must be especially wary of vendor fraud when it comes to the purchase and payment for essential hospital equipment. Hospitals are urged not to do business with vendors or product brokers unknown to them. Vendors offering unusual payment terms, last-minute price changes, excuses about shipment delays, or the source of the product are telltale signs of fraud.

Employers, employees, and the general public are encouraged to report suspicious activity of healthcare and related vendor fraud to the FBI at: tios.fbi.gov; ic3.gov, or disaster@leo.gov.

If your institution or company is the victim of a teleconference hijacking, or any cyber-crime, the White Collar & Government Enforcement practice group at Jackson Lewis is available to provide guidance and assistance, and to interface with law enforcement as necessary.

As large numbers of people turn to video-teleconferencing (VTC) platforms to stay connected in the wake of the COVID-19 crisis, reports of VTC hijacking (also called “zoom-bombing”) are emerging nationwide. The FBI has received multiple reports of conferences being disrupted by pornographic and/or hate images and threatening language.

For example, two schools in Massachusetts reported the following incidents:

  • A Massachusetts-based high school reported that while a teacher was conducting an online class using the teleconferencing software Zoom, an unidentified individual(s) dialed into the classroom. This individual yelled a profanity and then shouted the teacher’s home address in the middle of instruction.
  • A second Massachusetts-based school reported a Zoom meeting being accessed by an unidentified individual. In this incident, the individual was visible on the video camera and displayed swastika tattoos.

As individuals continue the transition to online lessons and meetings, the FBI recommends exercising due diligence and caution in your cybersecurity efforts. The following steps can be taken to mitigate teleconference hijacking threats:

  • Do not make meetings or classrooms public. In Zoom, there are two options to make a meeting private: require a meeting password or use the waiting room feature and control the admittance of guests.
  • Do not share a link to a teleconference or classroom on an unrestricted publicly available social media post. Provide the link directly to specific people.
  • Manage screensharing options. In Zoom, change screensharing to “Host Only.”
  • Ensure users are using the updated version of remote access/meeting applications. In January 2020, Zoom updated their software. In their security update, the teleconference software provider added passwords by default for meetings and disabled the ability to randomly scan for meetings to join.
  • Lastly, ensure that your organization’s telework policy or guide addresses requirements for physical and information security.

If your institution or company is the victim of a teleconference hijacking, or any cyber-crime, the White Collar & Government Enforcement practice group at Jackson Lewis is available to provide guidance and assistance, and to interface with law enforcement as necessary.

Amid an everchanging legal landscape resulting from the spread of COVID-19, employers must remain mindful of properly responding to and addressing complaints expressed by employees.

In response to the spread of COVID-19, many states have ordered non-essential businesses to close.  States are encouraging employers to allow employees to work remotely wherever possible.  Some employees with preexisting health conditions are expressing concern about continuing to work with coworkers.

States have begun encouraging employees to report to authorities employers that may violate new laws or the closure orders generally applicable to non-essential businesses.  Yesterday, we reported on a New Jersey state hotline being overwhelmed by callers accusing businesses of not abiding by new rules.  Ohio’s Governor and Lieutenant Governor have told the public:  “If you believe a business is in violation of the rules, call your health department or local law enforcement.”  https://thehill.com/policy/healthcare/public-global-health/489327-ohio-governor-urges-public-to-call-law-enforcement.

This all sets the stage for potential protected activity that employers should recognize and be prepared to address consistent with standard procedures.  Here are some key points to consider:

  • Understand the laws and rules concerning COVID-19 in any jurisdiction in which your business operates.  Jackson Lewis has an entire team dedicated to advising employers on these laws and rules, which vary by jurisdiction.  https://www.jacksonlewis.com/practice/coronaviruscovid-19
  • Where non-essential businesses have been ordered to close, understand what businesses are essential and what businesses are not.  While it varies by jurisdiction, a general list of essential businesses includes healthcare, agriculture, grocery stores, pharmacies, financial institutions, utilities, gas stations, and those businesses that support these essential businesses.
  • If your business is an essential business, prepare a brief document describing (1) your business, (2) its general customer base, (3) its role as an essential business or a business that supports essential businesses, and (4) why the business must stay open consistent with an applicable jurisdiction’s rules and laws.
  • If your business remains open as an essential business, explain to employees why it remains open as an essential business.
  • Wherever possible, enable employees to safely and securely work from home, attending group meetings through virtual meeting rooms and teleconferences.
  • Follow standard procedures concerning employee complaints:
    • If an employee complains about a business remaining open:  (1) explore the basis for the complaint with the employee; (2) explain in a reasonable manner why the business must remain open as an essential business; (3) explore options to enable the employee to continue working; and (4) focus any employment decisions on the employee’s performance of essential job functions, with or without a reasonable accommodation.
    • If an employee expresses concern about or refuses to come to the office due to a pre-existing health condition or other disability, despite the business and the employee’s role being essential, explore the underlying basis for the employee’s position and attempt to reach a reasonable accommodation.  This will help to avoid failure to accommodate claims.
  • All adverse employment actions should be assessed using legitimate, nondiscriminatory, and non-retaliatory business justifications.

These are trying times that are presenting unprecedented challenges to businesses.  Employers must adapt to the changes, but also remain vigilant in following reasonable standards for addressing conflicts between and complaints from employees.

In a letter to the President dated tomorrow (March 27, 2020), several hundred federal judges, former U.S. Attorneys, Assistant U.S. Attorneys, and Department of Justice (DOJ) officials are asking the government to implement a plan to dramatically reduce the number of incarcerated individuals in the federal prison system and to address “the threat of disastrous outbreaks” resulting from the current Coronavirus (COVID-19) pandemic.

A bipartisan group of 14 U.S. Senators sent a similar letter to Attorney General William Barr earlier this week imploring DOJ and the Federal Bureau of Prisons (BOP) to take action to protect “the health and wellbeing of federal prison staff and inmates in federal custody, especially those who are most vulnerable to infection.”

According to government statistics, nearly 20 percent of those currently in BOP custody are over the age of 50, and many have underlying health conditions. A significant percentage of those presently serving federal sentences are there for white collar or non-violent offenses and present no risk to public safety.

Conditions within most prisons and correctional centers do not afford staff or inmates the opportunity to take steps to protect themselves, such as regular use of disinfectants or hand sanitizers, and social distancing. Most facilities, even those described as “minimum” security, are plagued by overcrowding. Often, multiple inmates are confined in a small cell or space, and dining arrangements force the residents into close quarters with one another. This current situation poses a substantial threat for the rapid spread of the virus within the prison population, once it enters the facility by and through an infected incoming inmate or a prison guard who may have contracted it from an outside source.

According to the judges and prosecutors, to address this significant potential risk, the President and DOJ should take several important steps, including: (1) use the executive power to commute sentences, especially those of older persons, the medically vulnerable, and inmates who have served almost all of their sentence; (2) establish policies to promote the limitation of new custodial sentences only for individuals who present a serious risk to public safety; and (3) provide emergency funding for the prevention and treatment for those who remain in custody, for reentry services for those to be released from custody, and to incentivize state and local governments to address immediate public health concerns in their own jails and prisons.

In addition to these recommendations to the President, the group of bipartisan U.S. Senators urged the Attorney General to use the existing authority available to him under the First Step Act, which was passed by Congress in December 2018. Included among the available legal mechanisms suggested for use by the Senate is the Elderly Home Detention Pilot Program to place elderly and terminally ill inmates in home confinement. They also recommend a broader use and implementation of the compassionate release program for inmates facing “extraordinary and compelling” circumstances. Finally, they urge, to the extent possible, that lower risk inmates who are at high risk for complications from COVID-19 also be transferred to home confinement.

The media has recently reported on unsuccessful efforts to obtain immediate release from custody by such detained persons as Michael Cohen (the President’s former personal attorney), Michael Avenatti (recently convicted of extorting Nike by a New York jury), and Julian Assage (WikiLeaks founder incarcerated in the UK and awaiting extradition to the United States). Clearly a balance must be struck between those seeking to use the current health crisis as a possible avenue to avoid accountability for their criminal conduct, and the necessary and legitimate actions needed to protect those who are most vulnerable – – if it can be done without creating or increasing a safety risk to the public.

The White Collar and Government Enforcement practice group at Jackson Lewis has attorneys who are former federal and state prosecutors, and experienced criminal law practitioners. The services that we provide include guiding clients through criminal and regulatory investigations, defense of complex criminal cases, sentencing advocacy, pardon petitions, motions for compassionate release, and efforts to seal or expunge criminal records.

As previously reported, the SEC is actively responding to the new wave of issues presented by the coronavirus (COVID-19).  However, as early as January 30, 2020, SEC Chairman Jay Clayton issued a statement identifying coronavirus as a potential concern.

Chairman Clayton’s statement advised that he had instructed the staff to monitor and provide guidance to issuers regarding coronavirus-related disclosures.  Chairman Clayton highlighted the effect of coronavirus as “an uncertain issue where actual effects will depend on many factors beyond the control and knowledge of issuers.”

Fast-forwarding nearly two months, the impact of coronavirus is more significant than many imagined, and the current situation will likely cause companies across the country to examine reporting obligations.

Following the Chairman’s January 2020 statement, the SEC issued a joint statement in February 2020 from SEC Division of Corporation Finance Director Bill Hinman, SEC Chief Accountant Sagar Teotia, PCAOB Chairman William D. Duhnke III, and Chairman Clayton which outlined reporting considerations related to coronavirus.

In the joint statement, the leaders emphasized: “[H]ow issuers plan and respond to the events as they unfold can be material to an investment decision, and we urge issuers to work with their audit committees and auditors to ensure that their financial reporting, auditing and review processes are as robust as practicable in light of the circumstances in meeting the applicable requirements.”  The leaders stressed “the need to consider potential disclosure of subsequent events in the notes to the financial statements in accordance with guidance included in Accounting Standards Codification 855, Subsequent Events[.]”  The statement also conveyed the message that the SEC wants to help issuers, including granting relief from deadlines as appropriate and providing guidance to issuers regarding reporting.

In a press release released in March, companies were reminded “to provide investors with insight regarding their assessment of, and plans for addressing, material risks to their business and operations resulting from the coronavirus to the fullest extent practicable to keep investors and markets informed of material developments.”  The Commission further outlined disclosure considerations:

Disclosure Considerations for All Companies

The Commission encourages all companies and other related persons to consider their activities in light of their disclosure obligations under the federal securities laws. For example, where a company has become aware of a risk related to the coronavirus that would be material to its investors, it should refrain from engaging in securities transactions with the public and to take steps to prevent directors and officers (and other corporate insiders who are aware of these matters) from initiating such transactions until investors have been appropriately informed about the risk.

When companies do disclose material information related to the impacts of the coronavirus, they are reminded to take the necessary steps to avoid selective disclosures and to disseminate such information broadly. Depending on a company’s particular circumstances, it should consider whether it may need to revisit, refresh, or update previous disclosure to the extent that the information becomes materially inaccurate.

Companies providing forward-looking information in an effort to keep investors informed about material developments, including known trends or uncertainties regarding the coronavirus, can take steps to avail themselves of the safe harbor in Section 21E of the Exchange Act for this information.

Please contact a Jackson Lewis attorney for assistance examining your organization’s reporting obligations related to coronavirus.

Over the last few weeks, the SEC identified key initiatives it is implementing to address the effects of the coronavirus (COVID-19) on the nation and its financial markets. https://www.sec.gov/sec-coronavirus-covid-19-response The Commission stressed that it has remained fully operational and continues to process normal daily activities while undertaking additional initiatives to combat the impact of COVID-19.  Id.  It is continuously issuing new orders in response to the fast-changing landscape.

On March 10, the Commission began transitioning its employees to a telework posture, which is now fully functional.  Id.  It continues to create new taskforces to monitor markets and engage with market participants to understand actual market impacts as well as to forecast potential impacts.  Id.  The SEC is also working to provide guidance to market participants and targeted regulatory assistance to vulnerable or critical areas.  Id.  The Commission is also continuing to investigate and bring enforcement actions, including issuing trading suspensions related to COVID-19.  Id.

Recently, the Commission announced it relaxed certain deadlines and requirements. In particular, the SEC:

Please contact a Jackson Lewis attorney with any questions.

The United States House Oversight and Reform Subcommittee on Government Relations is considering proposed changes to protections available to U.S. Intelligence Community (IC) whistleblowers.

The Subcommittee’s January 28, 2020, public hearings received testimony from David K. Colapinto, National Whistleblower Center, Glenn A. Fine, U.S. Department of Defense, Elizabeth Hempowicz, Project on Government Oversight, Michael E. Horowitz, U.S. Department of Justice, and Paul Rosenzweig, R Street Institute.

The witnesses emphasized that whistleblowers’ disclosures should be pursued – not the whistleblowers personally – and that the whistleblower’s motive, whether benign or otherwise, should not determine whether the whistleblower’s disclosure is valid. Each stressed the need for greater and more robust whistleblower anonymity and confidentiality protections.

The witnesses recommended:

  • Broadening avenues through which protected disclosures can be made, and eliminating bureaucratic and process bottlenecks that slow the ability to bring information forward;
  • Rebalancing burdens of proof to give whistleblowers greater parity with civilian whistleblowers;
  • An expansive definition of adverse personnel actions to include public harassment, retaliatory investigations, and security clearance actions;
  • Establishing anonymity and confidentiality protections to address outing of whistleblowers by any individual who learns of the whistleblower’s identity; and
  • Granting testimonial subpoena power to enable the inspectors general (IGs) to conduct thorough assessments of both the whistleblower’s disclosure and the investigations of retaliatory personnel actions.

As a further deterrent, the witnesses recommended restoring claimants’ rights to pursue civil remedies for violations of the disclosure-without-consent rule, and to provide damages for whistleblower confidentiality breaches. Claimants should be allowed, the witnesses urged, access to federal courts and jury trials after exhausting administrative remedies up through the Merit Systems Protection Board (MSPB) on retaliation claims. Pointing to the deterrent effect in Title VII employment discrimination cases that grant the right to jury trial, the witnesses urged a similar arrangement to better protect federal whistleblowers. They testified that persistent, unresolved issues with the current claim adjudication process (in which the MSPB is the sole forum of last resort) leave whistleblowers vulnerable and send a message that they are not protected by the system.

Finally, on process delays at MSPB, the witnesses noted that not only does the MSPB lack a quorum of standing members (since January 2017), but it lacks any members whatsoever due to executive and legislative branch inaction. Further, even when the board is up and running, an estimate shows that the MSPB would need at least three years to address the existing backlog of more than 2,000 cases, not considering the nearly 60 cases added to the backlog each month.

Please contact a Jackson Lewis attorney with any questions.

New York recently enacted the “Women on Corporate Boards Study” law (S. 4278), joining a growing number of states requiring organizations to report their board composition. The new law applies to domestic and foreign corporations “authorized to do business” in the state. Given the expanse of companies doing business in New York, this law may have a broad reach and impact organizations based far from New York.

New York’s new law mandates a study on the number of female directors on the boards of corporations doing business in New York. Under the new law, both foreign and domestic corporations, including publicly traded and privately held, are required to report the number of directors appointed to their board and to report how many directors are female. The New York Department of State will collaborate with the Department of Taxation and Finance to conduct the study, which will include an analysis of the change in the number of women directors compared to prior years and the collective percentage of women directors on all such boards. The initial study will be published by February 1, 2022.

In support of the legislation, New York State Senator Liz Krueger noted that “New York is home to some of the world’s largest and most influential corporations, so what we do here reverberates far beyond our borders.”

Other States Promoting Diversity on Boards

Board diversity has been gaining traction (see Seeking Unity, Not Uniformity*: Diversity and the Corporate Board of Directors), and New York is not the only state implementing laws related to diversity on corporate boards. California, Colorado, Illinois, Maryland, Massachusetts, Michigan, New Jersey, Ohio, Pennsylvania, and Washington have similarly introduced or passed legislation or resolutions related to board diversity. Some highlights include:

  • California: Requires publicly held corporations with principal executive offices in California to have at least one female board director by the end of 2019. By the end of 2021, at least three female directors must sit on boards with six or more directors. (For boards with five or fewer directors, the numbers decrease.) For more information, see California Law Pushes Virtue of Diversity Requiring Females on Boards of Directors and JL Live: Corporate Board Diversity.
  • Maryland: Requires certain corporations to report the number of female board members and the total number of board members on an annual basis.
  • Illinois: Requires publicly held domestic and foreign corporations with a principal executive office in Illinois to report, beginning no later than January 1, 2021, the number of women and minority board members on an annual basis. See New Illinois Law Requires Corporations to Report Diversity on Corporate Boards for more information.

What’s Next?

According to the state’s press release on the new law, the New York legislation will take effect on June 27, 2020. Board diversity likely will remain a hot topic on both the state and federal level as we move into the new decade. For example, at the federal level, in November 2019 the U.S. House of Representatives passed the “Improving Corporate Governance Through Diversity Act of 2019” (H.R. 5084), which would amend the Securities Exchange Act of 1934 to require certain organizations to disclose the gender, race, ethnicity, and veteran status of their board of directors, nominees, and executive officers. The bill also requires the U.S. Securities and Exchange Commission to create a Diversity Advisory Group, which would ultimately “make[] recommendations of strategies that issuers could use to increase gender, racial, and ethnic diversity among board members.”

In addition to legislative initiatives at the federal and/or state level, we have also seen in recent proxy seasons an increase in the call for board diversity by large institutional investors, proxy voting firms and by activists, all seeking best practices for board and corporate governance.  Thus, whether prompted by legislation or otherwise, we expect that the call to diversify the appointment of directors to corporate boards may intensify in the coming years.