USA Law and Practice Contributed by: Emily Hughes, Charles Kalil, Cori Lable and Ryan Raybould, Kirkland & Ellis
3.3 Anti-Bribery Regulation There is no general obligation to report suspected bribery to authorities under US law, though report - ing requirements exist in certain contexts. For exam - ple, the FCPA does not explicitly require individuals or entities to report bribery, but as discussed in 3.6 Financial Record-Keeping it penalises those who fail to keep accurate books and records. Some regulations, such as those in government con - tracting, impose consequences for failure to report. For example, under 48 CFR 9.407–2, contractors who knowingly fail to disclose credible evidence of bribery may face suspension or debarment from future gov - ernment contracts. 3.4 Insider Dealing, Market Abuse and Criminal Banking Law Federal law prohibits corporate insiders from using material and non-public information (MNPI) to their advantage or passing that information to outsiders, known as “tipping”. Both the giver and the receiver of the information are liable. Federal law also prohibits corporate outsiders from misappropriating and trad - ing based on MNPI in breach of a duty of confidence or trust. Liability of a corporate outsider is premised upon whether the source or “tipper” disclosed the information with an expectation of confidentiality (ie, with the expectation that such information would not be shared with other parties). The SEC holds authority under Section 10 (b) of the Securities Exchange Act and Rule 10b-5 to bring a civil action for insider trading for injunctive relief and disgorgement of profits. In addition, the Insider Trad - ing Sanctions Act and Insider Trading and Securities Fraud Enforcement Act allow the SEC to seek civil penalties of up to three times the profits gained or losses avoided from insider trading (15 USC Sections 78u, et seq). The SEC can also seek to bar people from serving as officers and directors. Violations can be based on “shadow trading”, where an employee or insider has traded in the securities of another compa - rable company based on MNPI learned in connection with their employment or role as an insider. Private persons who traded at the same time and in the same securities as defendants can also bring an
insider trading case under Section 20A of the Securi - ties Exchange Act (15 USC Sections 78t, et seq). Under Section 32 (a) of the Securities Exchange Act, individual insider trading defendants face criminal fines of up to USD5 million and 20 years of imprison - ment. Entities that are liable as controlling persons for their employees face fines of up to USD25 million. Defendants can also be charged with wire fraud (18 USC Section 1343), which is punishable by up to 20 years in prison. In 2024, the DOJ brought its first pros - ecution of a corporate executive based exclusively on sales of stock under Rule 10b5-1 trading plans, which are plans that typically provide an affirmative defence for corporate insiders buying and selling company stock. The trader was convicted for securities fraud and insider trading based on charges that the trader was aware of MNPI when he entered the Rule 10b5-1 plans. 3.5 Tax Fraud Under the Internal Revenue Code (IRC), multiple criminal statutes concern omission, evasion and false statements regarding the filing and paying of taxes (IRC Sections 7201-7216). Criminal enforcement is accomplished through the IRS’s Criminal Investigation Division and the DOJ’s Tax Division. IRS civil actions can proceed at the same time as a criminal investiga - tion. Tax Evasion The elements of tax evasion under 26 USC Section 7201 are: • wilfulness; • the existence of a tax deficiency; and • an affirmative act constituting an evasion or attempted evasion of the tax. Conviction results in a fine of up to USD100,000 (USD500,000 in the case of a corporation) or impris - onment of not more than five years, or both, together
with the costs of prosecution. False Returns and Statements
False returns and statements constitute a felony under IRC Section 7206 (1) if a person wilfully made and subscribed to a tax return, verified by a written dec -
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