June 2019 Legal Report

Security by Industry
Gavel in courtroom

​​Photo by iStock​

June 2019 Legal Report
 

​JUDICIAL D​ECISIONS

Stereotyping. The Supreme Court of Missouri determined it is illegal for employers to discriminate based on sexual stereotyping.

A gay man claimed his employer discriminated against him due to male behavioral stereotypes, while a female coworker asserted she was also discriminated against due to her friendship with the plaintiff.

Although not covered by the Missouri Human Rights Act, the court determined that the Missouri Commission on Human Rights wrongly assumed the man could only be discriminated against for his sexual orientation.

The court, citing a U.S. Supreme Court ruling, found that stereotyping can lead to an inference of illegal discrimination. According to the federal court, an employer basing promotion decisions on stereotypes is discriminating on the basis of sex because the discrimination only occurred as a reaction to the victim's gender.

The state high court ordered the commission to issue right-to-sue letters to both the male and female employees. (Lampley v. Missouri Commission on Human Rights, Supreme Court of Missouri, No. SC96828, 2019)

College Admissions. U.S. federal agents arrested dozens of individuals—including CEOs, actresses, university athletic coaches, and college exam administrators—linked to a nationwide conspiracy that resulted in the admission of students who allegedly cheated on college entrance exams to top universities.

Charges were filed in a U.S. district court against coaches from Yale, Stanford, University of Southern California, Wake Forest, Georgetown, University of California Los Angeles, and University of Texas at Austin.

William Singer, owner and operator of a college counseling and preparation business, was charged with racketeering, conspiracy, money laundering conspiracy, and obstruction of justice. Federal authorities also charged 33 parents, 13 coaches, and other associates of Singer's business, including two SAT and ACT administrators. Singer allegedly conspired with the other defendants between 2011 and February 2019 to bribe or otherwise defraud for certain students to gain admission into select colleges and universities.

The conspiracy involved a college entrance exam cheating scheme, with prosecutors alleging that a Florida private school counselor would take exams for students or correct their answers after an exam; a college recruitment scheme, where university coaches and administrators were bribed in return for the admission of students as athletic recruits, regardless of experience or abilities; and a tax fraud conspiracy, where Singer's charity, the Key Worldwide Foundation, obscured the nature and source of the bribes, allowing parents to deduct the bribes from their federal income taxes. Parents would allegedly pay Singer between $15,000 and $75,000 per test, disguised as charitable donations. Singer was also paid roughly $25 million for the college recruitment scheme. (United States of America v. Gordon Ernst, et al., U.S. District Court District of Massachusetts, No. 19-cr-10081, 2019)

Two Stanford University students filed a class action lawsuit against the colleges and universities involved in the scandal on the basis that the scheme allowed "unqualified" applicants into the schools, denying other students a fair chance to apply to various institutions. (Olsen v. Singer, U.S. District Court for the Northern District of California, No. 3:19-cv-01351, 2019)

Firearms. The Connecticut Supreme Court determined that the families of the Sandy Hook school shooting victims can sue gunmaker Remington for its involvement in the 2012 incident.

The court's 14 March ruling could result in Remington being held liable for the Sandy Hook Elementary School shooting in Newtown, Connecticut. Remington manufactures the semi-automatic rifle Bushmaster AR-15 used in the shooting.

The four to three decision was made in response to a suit filed by families of nine of the victims of the mass shooting gunman. The court narrowly defined Remington's liability, basing it on how the company advertises its weapons, and not on the sale to a third-party seller.

The court found that gun companies cannot apply federal law in suits that claim the companies advertise military-style firearms to buyers as a tool to kill enemies, a marketing technique that could violate state consumer protection laws.

The suit from the victims' families returned to a lower court in Bridgeport, Connecticut, which will decide whether to hold the gunmaker responsible for the December 2012 mass shooting that resulted in 28 deaths, including 20 first-grade children. According to the court, the suit, seeking an unspecified amount in damages for each death, could move forward under Connecticut's Unfair Trade Practices Act, which targets harmful marketing.

Although the higher court agreed that federal law protects firearm manufacturers from certain liabilities, including the illegal actions of gun consumers, the majority also decided the act is limited, especially regarding the allegations outlined in the current suit. (Soto v. Bushmaster, Connecticut Supreme Court, No. 19832, 2019)

LEGISLATION

Whistleblowers. The European Union (EU) granted whistleblowers protection throughout its member states, offering legal guarantees to persons exposing corruption, tax evasion, or other crimes.

Revising the EU's approach to these protections, whistleblowers will have legal protections if they report illegal or illicit activities via proper channels. Anyone reporting such actions publicly, such as to the media, will receive legal protection only if the breaches were disclosed properly and received no response, if there is a risk of retaliation, or if the public is in danger. The reworked rules also outline penalties for false or malicious reporting.

Previously, whistleblower protections varied widely across 28 national authorities, and some member countries had no relevant laws or protections. The revision to EU protections resulted from criticism of the prosecution of two whistleblowers who disclosed information about illegal tax deals between Luxembourg and large corporations.

The new rules will need a final procedural approval by EU states and the EU Parliament before going into effect.

REGULATIO​NS

Kickbacks. The U.S. Department of Justice (DOJ) and a healthcare products and medical devices manufacturing company agreed to a settlement of more than $17 million over allegations that the company provided illegal remuneration, violating the False Claims Act and the Anti-Kickback Statute.

The company was accused of giving doctors in California and Florida free or discounted practice development and market development support between 2011 and 2014, in exchange for inducing the purchase of Covidien products.

"Today's settlement serves as an important reminder to those in the health care community that unlawful kickbacks come in many forms and are not limited to monetary payments to providers," Assistant Attorney General Jody Hunt said in a press release. Hunt, who works in the department's Civil Division, added that exchanging free or discounted services to healthcare providers for the use of specific products or services can drive up healthcare costs.

The DOJ said the support the company provided included customized marketing plans; setting up lunch and dinner meetings with other physicians to boost referrals; and substantial assistance in planning, promoting, and conducting certain screening events to cultivate new patients.

The Anti-Kickback Act disallows cash or "in kind" payments in exchange for referrals or use of items or services provided by federal health care programs. "Kickback schemes don't just victimize those directly involved, they undermine the public's trust in our healthcare system and drive up costs for everyone," said FBI San Francisco Special Agent in Charge John F. Bennett in a statement.

Covidien, which was purchased by medical device company Medtronic in 2015, will pay an additional $1,474,892 to California and $1,047,160 to Florida for claims from the states' Medicaid programs.

According to the DOJ, Covidien cooperated in the department's investigation, sharing internal investigation results and assisting in developing a damages model. (United States ex rel. Hayes, et al. v. Covidien, Inc., et al., and United States, et al. ex rel. Howerton v. Covidien, et al., C 14-1511-EDL and C 15-0559-EDL, 2019)

Judiciary Conduct. A U.S. federal judiciary national policy making organization approved a package of workplace conduct-related reforms on 12 March.

These amendments, issued by the U.S. Judicial Conference, order judges and judiciary employees to report workplace misconduct and clarify that confidentiality obligations should not bar such reports.

These changes, recommended by a group of federal judges, applied to the conduct codes for U.S. judges and judicial employees, and the Judicial Conduct and Disability Act Rules.

The misconduct in these rules was defined to include, but not limited to, unwanted, offensive, or abusive sexual harassment or assault; creating a hostile work environment; discrimination based on race, color, sex, gender, gender identity, pregnancy, sexual orientation, religion, national origin, age, or disability; and retaliation to complaints or reports of misconduct.

The judges also recommended that the judiciary take additional steps to address and prevent misconduct, such as training to avert misbehavior and promote civility in the workplace.

Elsewhere in the cou​rts

Hate Crime. A federal grand jury charged a Utah man with a hate crime for attacking three men with a metal pole. According to the U.S. Department of Justice, Alan Covington believed the men were Mexican, and allegedly went into a tire store in November 2018, shouting that he wanted to “kill Mexicans” before attacking the three men and injuring two of them. If convicted, Covington could receive a maximum sentence of life in prison and a $250,000 fine. (United States of America v. Covington, U.S. District Court District of Utah - Central Division, No. 2:19-cr-00057-DAK, 2019)​

Money Laundering. The U.S. Justice Department (DOJ) indicted Mozambique’s former finance minister along with former state officials, business executives, and investment bankers, accusing them of a $2 billion fraud and money laundering scheme that victimized U.S. investors, as well as those from other countries. The DOJ filed charges against two executives of a shipbuilding company, three former senior Mozambique government officials, and three former London-based investment bankers for their involvement in the scheme, which included more than $200 million in alleged bribes and kickbacks paid to Mozambican government officials and investment bankers in corrupt maritime loans for Mozambique. Between 2013 and 2016, the $200 million was redirected from loan proceeds that were intended to benefit residents of Mozambique. The country and its state-owned entities have so far allegedly not repaid more than $700 million due on the loans. (United States v. Boustani, U.S. District Court for the Eastern District of New York, No. 1:18-cr-00681-WFK, 2019)

Tax Fraud. An Israel-based bank admitted to helping U.S. taxpayers hide income and assets from the U.S. Internal Revenue Service (IRS). After agreeing to a deferred prosecution agreement  with the U.S. Justice Department, Mizrahi-Tefahot Bank, LTD., admitted to opening and maintaining customer accounts for years, violating a previous agreement with the IRS. The bank acknowledged that its employees provided private banking, wealth management, and financial services to high-net-worth individuals and entities across the world, allowing them to avoid paying U.S. income taxes. (United States v. Mizrahi-Tefahot Bank, Ltd., U.S. District Court for the Central District of California, No. 2:19-cr-00150-VAP, 2019)