Legal Crisis Prevention Mechanism

Each company needs to develop its own federal regulations compliance program to predict and prevent a corporate and transactional misconduct and minimize harsh legal penalties for not complying with U.S. federal regulations. The program involves the staff’s business-legal education of Code of Business-Legal Conduct consisting of Tekapult’s tPrimers derivative digests of federal laws and U.S. Department of Justice, U.S. Treasury Department, SEC, and U.S. Homeland Security Department publications. An independent in-house council of multidiscipline attorneys as described in one of tPrimers opines of corporate critical decisions and oversees this program. comprises discovery of corporate misbehavior via investigations, “whistleblower” notices, review of social media, guidance in settling or defending claims and charges, violation caused damage and crisis control and due diligence investigations to uncover the identities of owners and their percentage of ownership in the companies they are dealing with. Thus, secondary sanctions’ imposition on companies’ executives, board members and subsidiaries for having acted or purported to act directly or indirectly for or on behalf of or aiding the evasion of U.S. sanctions against blocked entities and their “derivatives” owned 50% or more by the sanctioned entities could be avoided. 

This tPrimer delineates and summarizes the mail and wire fraud statutes which govern the use of interstate communications, including email, text messages, faxes, TV, radio, phone calls, internet games, chat rooms, social media, and other wire transmissions. These statutes are integrated into as an element of and used in conjunction with other criminal and civil offenses, like Medicare, bank, securities, health care, money laundering and other types of fraud perpetration. Enron’s financial machinations and VW/Audi’s emission test fraud cases exemplify types of wrongful corporate misconduct.

Bribery of either foreign or domestic government officials exposes individuals, a company’s Board of Directors, executives, employees, and independent contractors to a high risk of potential criminal and civil liability. Penalties for bribery include millions of dollars in fines and prison sentences for company principal executives. Each company should have an FCPA compliance plan, implement enforcement measures, and train its staff to prevent violations of federal laws as per the wrongful conduct examples, their outcome and possible defenses as outlined in the pertinent tPrimer. 

This tPrimer is derived from the U.S. government’s publications of Sanctions Programs and hundreds of Frequently Asked Questions. advisories, statutes, regulations, executive orders and directives. U.S. and non-U.S. persons may be exposed to secondary sanctions risk and could be designated for property-blocking sanctions for assisting, sponsoring, or providing financial, material, or technological support for, or goods or services to or in support of persons blocked. The Office of Foreign Assets Control (“OFAC”) enforces these sanctions and publishes its ever expanding Specially Designated Nationals List (“SDN” List) and other lists but it still does not identify all of the blocked entities, like the entities that are owned 50 % or more, directly or indirectly, by one or more SDNs.

An Independent In-House Legal Council (“LC”) is one of legal crisis prevention and management tools to be used for dealing with voluminous common-to-all and industry-specific laws and federal regulations. The LC’s objective is to minimize the organization’s exposure to class action and other lawsuits, and criminal convictions of corporate executives. LC reports to the CEO or head of state agency, oversees, coordinates and incorporates work-products of in-house and outside counsel to influence correction of and advise against the corporate wrongful conduct, monitor legal reporting and disclosures required for publicly traded companies, assess and revise legal risk, initiate investigations of regulation compliance practices and give authoritative opinions on corporate strategic and transactional decisions.

Federal statutes prohibit Anti-Competition Conduct which restrains competition in interstate commerce by every contract, combination, or conspiracy between two or more companies which exerts an unreasonable restraint on trade or commerce, i.e., harms competition by competitors’ agreements to fix prices, boycott, allocate customers, divide geographical territories, obtain price lists directly from competitors, or rig bids; or tying desirable with undesirable products/ services; unlawful monopolies; price dumping or price discrimination/ discounts - predatory pricing. This tPrimer summarizes and crystallizes the pertinent key federal laws.

America is a huge global marketplace for foreign products sales, product components’ assembly, capital, and financial, travel, consulting and other services. Imports include industrial machinery and equipment, such as chemicals, fuel oil, industrial supplies, and consumer goods such as computers, clothing, pharmaceuticals, food, and automobiles. To avoid goods’ loss, confiscation, detention and delivery delay, and possible criminal / civil penalties, importers must comply with hundreds of U.S. laws, rules, and government regulations. A technology and goods’ import process involves approvals from governmental agencies including U.S. Customs and Border Protection Agency (‘CBP”) which enforces anti-trust, intellectual property, consumer protection, environmental pollution, and other U.S. laws by seizure, confiscation and destruction of illegal goods; assessment and collection of duties/tariffs, taxes, penalties; and granting cargo clearances from about 40 government agencies. 

Monetization of corporate non-performing intangible intellectual property assets generates income by licensing, sales, and infringement lawsuit damage recovery; increases business sale profits; enhances value of the core business for mergers and acquisitions, insolvency and liquidation proceedings, insurance coverage and risk management: facilitates compliance with the federal Sarbanes Oxley Act’s financial disclosure; allows their use as a collateral for obtaining growth capital (e.g., by loans) and serves as a basis for development and exchange of new technologies.

Patents protect inventions of structures, and methods of production in mechanical, chemical, electrical, electronics, and life sciences arts and cover all industries ranging from household items, microchips, biotechnology to space, food, cosmetics, medicine, vehicles and any equipment. All patents are published and used to protect for 20 years (legal monopoly for utility patents) and 14 years for design patents. Patents protect the underlying inventions from copying by competitors, preclude entry of counterfeit products into the United States by the U.S. Customs and Border Protection federal agency, obtain loans against patents having a value separate from the core business value, sell or license them, increase revenue by license royalties, magnify the core business value, and even to crush the owner-company competitors by court ordered injunctions.

Copyright protects only the form of expression but not the underlying ideas, principles, or facts, which therefore can be appropriated by anyone. An original work of authorship, fixed in a tangible medium of expression for communication to others, either directly or through a device, can be copyrighted. For instance, facts contained in a copyrighted book can be used without any obligation to the author, but copying the sentences in the book is illegal. Trademark, title, slogan, trade name, mere listing of ingredients, and other short phrases or expressions cannot be copyrighted regardless of their distinct arrangement. Titles of literary works, for books, records, or movies, are not copyrightable, but the title of a series (not a single work) of literary works may be registered as a trademark. One can copyright posters, pictures, TV commercials, manuals and parts catalogs arrangement, books, movies, pictures, paintings, musical works, toys, choreographic performances, translated text, and computer program “menu” screens.

Trade secrets may be defined as any formula, device or information used in a trade or business, like customers list, product specifications, marketing plans, bookkeeping or other office management methods, a code for determining discounts, rebates or other price concessions, barbecue sauce recipe, product manufacturing data, chemical formula for a soft drink or perfume, personnel evaluation, economic research, or marketing plan which give the owner an advantage over competitors. Trade secrets may continue in perpetuity unlike patents. Novelty and invention are not requisites of a trade secret, but secrecy and absence of general knowledge in trade or business, or public knowledge of the item, are. Different royalty rates may be allocated for licensed trade secrets and patents for generation of a supplemental stream of income.

Trademarks, service marks, and trade names are valuable business assets, which can be licensed or conveyed together with the good will, or “going concern value”, of the business. A trademark is “any word, name, symbol or device or any combination thereof adopted and used by a manufacturer or merchant to identify his goods and distinguish them from those manufactured or sold by others”. Trademarks identify the source of goods and service marks identify the source of services. Both trademarks and service marks indicate a sole source, which can be anonymous, and represent uniform quality of such goods or services. Trademarks may be worth billions of dollars.  

The Committee on Foreign Investment in the United States (“CFIUS”), an interagency body of the U.S. federal government reviews foreign investments in U.S. businesses to determine their potential impact on national security where a foreign person acquires control over a U.S. business possessing material nonpublic technical information about critical technologies, infrastructure, or sensitive personal data of U.S. citizens. The parties must assess risk of such transactions to determine if filing of a mandatory declaration is needed and a deal may be structured to avoid national security concerns (e.g., limiting access to sensitive information) to get CFIUS clearance and avoid blocking or unwinding the transaction. Civil penalties for failure to file mandatory declarations may reach up to $250,000 or the value of the transaction, whichever is greater.   

Under regulations covering telemarketing calls, auto-dialed calls, prerecorded calls, text messages, and unsolicited faxes, it is lawful to make a call for emergency purposes or with the called party’s prior express consent. But it is unlawful to make any call using any Automatic Telephone Dialing System to any telephone number assigned to a residential or cellular telephone service without the recipient's prior express consent using an artificial or prerecorded voice, including AI-generated or “cloned” voices, without the recipient’s prior express consent. Businesses must legally obtain permission to send a text message to a mobile device. Obtaining an individual’s phone number is not the same as receiving permission to contact them. Callers and texters must honor revocation of consent through any reasonable means (e.g., replying “STOP” to a text, voicemail, or email) and to process such requests within 10 business days.

The Foreign Agents Registration Act (“FARA”) requires individuals acting on behalf of foreign principals to disclose the source of their information, aimed at preventing covert propaganda, as well as their identity when attempting to influence U.S. public opinion, policy, or legislation. Consultants, attorneys, public officials, charitable organizations, marketing and public relations firms, trade promotion groups, U.S. subsidiaries of foreign commercial enterprises, and businesspersons engaged in promoting or lobbying on behalf of foreign principals to influence U.S. public opinion, policy, or legislation may be subject to civil and criminal penalties for violating U.S. foreign agent registration laws. 

U.S. Foreign-Trade Zones (“FTZ”) were created to support U.S. international trade companies, but foreign manufacturers, processors and distributors also use and benefit from U.S. FTZs which provide the cost-efficient way to bring foreign-origin product components, materials, commodities, and goods into the United States for their distribution, processing, assembly, unlimited storage and manufacturing, or re-export to other countries. FTZs physically located on the U.S. soil are legally deemed to be outside the U.S. commerce and customs territory. Manufacturers use FTZs to assemble, re-label, exhibit, mix, store, clean, re-package, examine, sample, repair, destroy rejects/waste, produce and process their goods duty-free. Foreign and domestic goods warehoused, manipulated, or processed in FTZs may be infinitely kept in FTZs bond-free and duty-free.

Contracts are formed formally and informally, verbally and in writing, socially (meeting arrangements, marriage proposals, etc.) and in business environment. There are employment, manufacturing, joint venture, insurance policies, claim releases, warranties, loans, partnership, buy/sell, license, repair, lease and other types of contracts. Contracts are formed upon acceptance of the serious offer containing the material terms including parties’ identification, definition of terms, consideration, parties’ responsibilities, quantity, delivery schedule/ destination, shipment methods, payment, etc. Contract breach occurs if one or more terms of a contract is not completed without a valid legal excuse. This tPrimer delineates 50+ contract breach defenses if one of the parties needs to exit the contract.  

The Financial Crimes Enforcement Network (“FinCEN”), a bureau of the U.S. Treasury enforces regulations on cross-border currency transactions exceeding $10,000 in cash by people entering or leaving the United States. FinCEN monitors financial transactions conducted by individuals and organizations worldwide. For travelers within the United States, there is no federal law that limits how much cash may be transported on domestic flights or by other means within the country. FinCEN requires financial institutions to file Suspicious Activity Reports and prohibits the division of transactions to bypass reporting requirements.

The Financial Crimes Enforcement Network (“FinCEN”), a bureau of the U.S. Treasury, enforces regulations on beneficial ownership information reporting by entities formed under foreign law that has registered to do business in the United States. FinCEN may bring enforcement actions for violations of Beneficial Ownership Information reporting requirements. The BOI report must disclose those who ultimately own or control the company. The report is required to be updated if the information changes. Entities may also be exempt from reporting if they qualify. 

The Financial Crimes Enforcement Network (“FinCEN”), a bureau of the U.S. Treasury, enforces regulations governing anti-money laundering and counter-terrorism programs. Regulations impose limits on banks, securities brokers and advisors, insurance companies, and people involved in the trade of antiquities, such as dealers. FinCEN monitors financial transactions worldwide and may bring enforcement actions for violations of requirements of the federal anti-money laundering and counter-terrorism financing statutes. FinCEN regulations require financial institutions to implement Customer Due Diligence systems to monitor their clients. FinCEN may also send targeted requests to financial institutions, directing them to search for records regarding individuals or entities suspected of involvement in money laundering or terrorism financing. Companies must maintain structured risk-assessment programs, including regular reviews and audits.

An insider’s use of nonpublic information to trade securities constitutes a fraudulent violation of their fiduciary duty to the issuing company, when a security is bought or sold in breach relationship of confidence while in possession of nonpublic information. Potential violators may include financial professionals, managers, corporate insiders, attorneys, and others who gained access to nonpublic or confidential corporate information. Liability may also be imputed to tip-receiving “friends.” The definition of "insiders" include company’s officers, directors, individuals who control at least 10% of a company’s equity securities, and professionals who come into contact with the company’s nonpublic information.