2013 has the makings of a banner year in the world of white collar crime, with long-simmering cases ready to boil over, new kinds of crime coming to the forefront, and some potential big changes in personnel as the Obama Justice Department and SEC retool for a second term. Here's what to look for:
Remember That Financial Crisis?
Time flies. September will mark five years since the depths of the 2008 financial crisis. The statute of limitations for securities fraud? Five years. That means time is running out for those CEO perp walks. It is not impossible to file criminal charges after this year, but it gets a lot harder. Expect a trip down memory lane this summer, as prosecutors try to get their best shots in before the deadline. And expect more civil cases from a presidential working group investigating mortgage securities fraud. But barring a sudden rush of guilty pleas from lower level executives, the chances of seeing a Wall Street CEO in handcuffs in 2013 are slim at best.
Foreign corruption takes center stage in 2013, as the Obama administration steps up its enforcement of the Foreign Corrupt Practices Act. The law bars U.S. firms from paying bribes to foreign officials, and companies as diverse as Pfizer, Smith & Wesson and Wal-Mart have run up against FCPA issues in recent years. The administration fired a warning shot in November, issuing a lengthy set of guidelines for companies on how to comply with the law. With the new guidelines, the thinking goes, businesses will no longer be able to complain the law is too vague. In addition to pursuing U.S. companies, authorities will go after more foreign officials who use the U.S. banking system to steal from their citizens.
Expect at least one major case involving cybercrime—a multi-billion dollar threat that federal authorities have identified as a priority. "We should all be worried every day that we are still doing too little, that we are not responding aggressively enough, that we are not working hard enough," said Manhattan U.S. Attorney Preet Bharara in a recent speech outlining the cyber threat. Bharara—who could be in line for a promotion if Attorney General Eric Holder steps down in the new year—will actively address those cyber worries in 2013.
Insider trading is the gift that keeps on giving for prosecutors and the SEC, and it will give some more in 2013. More than 70 people have been charged since the first arrests in 2009 in the feds' sweeping hedge fund insider trading probe. At this writing, authorities are circling around SAC Capital founder Steven Cohen, but there is no indication he knowingly used illegal inside information to build his hedge fund empire, and a spokesman says Cohen acted appropriately. No prediction here on Cohen's fate, but expect more insider trading cases—and lots of billable hours—as the crackdown rolls on.
Interest Rate Interest
A global conspiracy of bankers to manipulate interest rates? As white collar scandals go, this one seemed at first to be as juicy as they get. In July, the Justice Department and the Commodity Futures Trading Commission announced that Barclays Bank admitted misconduct involving the London Interbank Offered Rate (LIBOR), which is used to set rates on everything from complex financial derivatives to auto loans. But almost as soon as the scandal blew up, it appeared to recede. Don't be fooled. LIBOR will be back in 2013; the investigation never ended, after all, and it takes at least two to tango—or in this case, collude.
Note: On Dec. 19, 2012, soon after this prediction was published, Swiss banking giant UBS agreed to pay $1.5 billion in fines andbnpenalties for its role in the LIBOR scandal. A UBS subsidiary in Japan pleadednbguilty to criminal charges, and two former traders were charged. Authoritiesbnsay the LIBOR investigation is ongoing.