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Legal Report March 2017


Firearms. A state appeals court has ruled that a California law wrongly required a technology that gun manufacturers could not produce, hindering efforts to require that bullet casings be microstamped to link them to the gun that fired them.

California’s Governor Arnold Schwarzenegger signed Assembly Bill No. 1471 into law in October 2007. The law required that a microscopic array of characters be etched or imprinted “in two or more places on the interior surface or internal working parts” of handguns to help law enforcement investigate, arrest, and convict people who use semiautomatic handguns in crimes. 

However, the act was not scheduled to go into effect until the California Department of Justice certified that microstamping technology was available to more than one firearms manufacturer, and that it did not encumber patent restrictions. The department issued the certification on May 17, 2013.

The National Shooting Sports Foundation, Inc. (NSSF), and the Sporting Arms and Ammunition Manufacturers’ Institute, Inc. (SAAMI), then filed suit against the state for declaratory relief claiming that it was impossible to comply with dual placement microstamping requirements.

The plaintiffs claimed in the suit that the law was invalid and could not be enforced “since no semi-automatic pistol can be designed or equipped with a microscopic array of characters identifying the make, model, and serial number of the pistol…in two or more places…that can be legibly, reliably, repeatedly, consistently, and effectively transferred from both such places to a cartridge case when the firearm is fired.”

The state, in response, argued that gun manufacturers could comply with the law by stamping characters in two places on the firing pin. A trial court agreed with the state, and NSSF and SAAMI appealed the ruling. 

The case reached the California Fifth District Court of Appeal, which sided with NSSF and SAAMI because the law required a technology that firearm manufacturers could not produce.

The “appellants’ position is that it is physically impossible to comply with the dual microstamping requirement using current technology,” the court explained in its opinion. “At this stage in the proceeding, we must accept that allegation as true. It is unreasonable to require an individual to attempt what is impossible to accomplish.”

The appellate court reversed the trial court’s ruling, and remanded the case. (National Shooting Sports Foundation, Inc., v. State of California, California Fifth District Court of Appeal, No. 14CECG00068, 2016)


Money Laundering. The U.S. Financial Industry Regulatory Authority (FINRA) fined Credit Suisse Securities LLC $16.5 million for anti-money laundering (AML) and supervisory violations. 

FINRA found Credit Suisse’s practice of relying on registered representatives to identify and escalate potentially suspicious trading was deficient because “risk activity was not always escalated and investigated, as required,” the authority explained. 

“A significant portion of the data feeds into the system were missing information or had other issues that compromised the system’s effectiveness,” FINRA said.

It also found that Credit Suisse failed to adequately investigate suspicious activity it had identified, claiming that the bank lacked staff to review the “tens of thousands of alerts” that are generated each year.

Instead, it relied on sales representatives to alert the suspicious activity to the AML compliance department, which would then investigate the activity, document its findings, and file suspicious activity reports. But Credit Suisse’s procedures were not designed to detect potentially suspicious activity in the first place.

“Credit Suisse’s reliance on representatives to escalate potentially suspicious trading failed to account for the fact that most orders it received from its foreign affiliates came in to the firm electronically and thus were not seen by the firm’s sales traders,” FINRA said.

Credit Suisse did not admit or deny the charges that FINRA levied, but did accept and consent to them. (FINRA Letter of Acceptance, Waiver, and Consent; No. 2013038726101, 2016)

Cybersecurity. The U.S. National Institute of Standards and Technology (NIST) issued cybersecurity guidance that approaches system security as a design problem.

The guidance, Systems Security Engineering Considerations for a Multidisciplinary Approach in the Engineering of Trustworthy Secure Systems, aims to make digital infrastructure as trustworthy as airplanes or bridges. 

“The ultimate objective is to obtain trustworthy secure systems that are fully capable of supporting critical missions and business operations while protecting stakeholder assets, and to do so with a level of assurance that is consistent with the risk tolerance of those stakeholders,” wrote Ron Ross, a NIST fellow, in the introduction of the guidance.

The guidance is not mandatory, but NIST leaders say they hope it will start a national dialogue among industry, academia, and government agencies about designing secure systems from the ground up.

Whistleblowers. Former U.S. Director of National Intelligence James Clapper released a new training curriculum on whistleblower rights for all federal employees and contractors with access to classified information.

The curriculum, titled Protecting Whistleblowers with Access to Classified Information, was created in coordination with other government stakeholders to fulfill a commitment Clapper made in the Third Open Government National Action Plan (released in 2015) to create a common whistleblower training curriculum that can be adopted by all U.S. federal agencies.

The curriculum consists of modules that address general information on whistleblowing and the process for making a protected disclosure; processes for addressing adverse, retaliatory actions that affect a security clearance; the process for addressing adverse, retaliatory personnel actions; and best practices for managers and supervisors, according to a fact sheet issued by the Office of the Director of National Intelligence.

“This four-part curriculum trains personnel eligible for access to classified information to effectively report illegality, waste, fraud, and abuse while protecting classified national security information,” the fact sheet explained.  ​



School Security. Ohio Governor John Kasich signed a bill into law that allows licensed gun owners to carry concealed weapons on college campuses.

The measure (Am. Sub. H.B. No. 48) allows the board of trustees at Ohio’s public universities to allow concealed-carry on campus, and removes a state ban on carrying concealed weapons in public areas of airports and daycare centers. 

The law also includes provisions giving higher education institutions immunity from liability in civil actions for injuries, deaths, or loss to person or property that are allegedly caused by or related to a licensed gun owner who brings a handgun onto the premise of the institution. This includes motor vehicles owned by the institution.

However, lawmakers stripped provisions from the law that would have allowed gun owners to carry concealed weapons into government buildings.

The Ohio Legislature passed the bill less than two weeks after a mass stabbing at Ohio State University, which wounded 11 people and left the perpetrator dead. The law makes Ohio the eleventh state to allow guns on college campuses.

United Kingdom

Corruption. The U.K. House of Commons is considering legislation that would allow law enforcement agencies to force suspected criminals to prove the source of their wealth.

Under the Criminal Finances Bill, a court can issue an Unexplained Wealth Order that requires an individual or organization suspected of direct involvement in—or association with—serious criminality to explain the origin of their assets. Failing to do so can result in seizure of assets—including property, money stored in banks, precious metals, and jewels—by law enforcement. 

Additionally, the bill introduces two new offenses so corporations can be prosecuted for any tax evasion offenses committed by their employees: one to catch companies facilitating the evasion of U.K. taxes, and the other to cover evasion of foreign taxes facilitated by an entity that has some nexus with the United Kingdom, such as a U.K.–based office.

“This legislation will ensure the UK is taking a world-leading role in cracking down on corruption and send a clear message to criminals—we will take your liberty and your money,” said U.K. Security Minister Ben Wallace in a statement on the bill.

The bill is currently in the report stage in the House of Commons.​


Fraud. A former accounting manager at Cargill, the largest privately held corporation in the United States, pleaded guilty to stealing at least $3.1 million over 10 years and causing at least $25 million in losses. Diane Backis, 50, pleaded guilty to mail fraud and filing a false income tax return. Backis was responsible for accounting functions in Albany related to Cargill’s grain operations. “She stole money by diverting customer payments to her personal bank accounts and sold grain products for millions less than her employer paid, causing enormous financial losses,” the U.S. Department of Justice explained in a statement. To hide her activities, Backis made false entries in Cargill’s accounting software to make it appear that customers were paying prices higher than those on her fraudulent invoices. Backis faces up to 20 years in prison, a three-year term of supervised release, and a fine of up to $250,000, among other penalties. Backis’ sentencing date is scheduled for March 28. (U.S. v. Backis, U.S. District Court for the Northern District of New York, No. 2016-r-00137, 2016)​

Sexual Assault. Two women are suing Kansas State University, claiming it violated gender equity law Title IX by refusing to investigate their reports of being raped at fraternities. The failure to investigate may have led to another rape. Student Sara Weckhorst reported to university officials that she had been raped at a fraternity house by two male students in spring 2014. Kansas State’s affirmative action office told her, according to a federal lawsuit, that it would not investigate or sanction the accused rapists because the alleged attack occurred off campus. (Weckhorst v. Kansas State University, U.S. District Court for the District of Kansas, No. 2:16-cv-02255-JAR-GEB, 2016)

Negligence. The engineer at the controls of a New York commuter train that derailed in 2013, killing four people and injuring 62, filed suit against the railroad alleging negligence for failing to install an automatic braking system. William Rockefeller fell asleep, due to a sleeping disorder, while operating the train and is asking for $10 million from the railroad for his injuries, lost wages, pain, and suffering. The train—bound for Manhattan—was traveling more than 50 miles per hour faster than the speed limit on the track when it derailed in the Bronx. (Rockefeller v. Metro-North, U.S. District Court for the Southern District of New York, No. 7:16-cv-09267, 2016)