Government Investigations & White Collar Crime (J)

Meet the Co-chairs - TIAG

Hemming Morse, LLP

Meet the Co-chairs - TAGLAW

Hines, Melanie Ann
Berger Singerman LLP

Contact: Sally L Hoffman, CPA, CFE, CFF; Berdon LLP (New York, New York, USA)

Recently, my Twitter feed and email were bombarded with the news that J.P. Morgan had agreed to pay $920 million to settle civil claims by US and UK regulators that a pervasive breakdown in internal controls left the bank vulnerable to $6 billion in derivative trading losses by the notorious "London Whale"1. Significantly, J.P. Morgan acknowledged that it violated securities laws.

Increasingly, challenges to the adequacy of internal controls have been creeping into both SEC Enforcement Actions and private litigation, a trend likely to continue. A summary of accounting class actions spotlights this trend from 2010 to 2012, and also explains that cases involving company announcements of internal control weaknesses increased to almost 45 percent of all cases settled in 2012 and were associated with higher settlements.2 Moreover, the SEC's Division of Enforcement's recently formed financial reporting and accounting fraud task force will reinforce this trend.

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