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GSEs Provide Guidance Regarding TRID Compliance
On October 6, Fannie Mae and Freddie Mac issued guidance stating that both GSEs, under the direction of the FHFA, “will not conduct routine post-purchase loan file reviews for technical compliance with the TRID Rule,” providing a “transitional period” for lenders to update their operational systems to adhere to the Rule’s requirements. However, the GSEs cautioned lenders that they “expect lenders to make good faith efforts to comply with TRID” and will evaluate whether lenders issued the new required disclosure during the mortgage origination process. Moreover, the guidance explains that “failure to use a TRID-required form” will be viewed as a violation, subjecting the loan to all contractual remedies, including repurchase.
CSBS' Multi-State Mortgage Committee: Mortgage Companies Must Comply with Technology-Based Examination Process
On September 29, the Conference of State Bank Supervisors (CSBS) and the Multi-state Mortgage Committee (MMC) released a bulletin titled, “Supervisory Expectations Regarding the Use of Electronic Examination Tools.” The bulletin explains the MMC’s use of electronic examination tools and the supervisory expectations for mortgage companies undergoing the state examination process. As a result of a 2008 initiative by the MMC, state regulators have been using technology to review loan transaction data for years, originally setting the expectation that companies fully participate with the process by 2011. According to the bulletin, however, “the mortgage industry has regularly failed to provide clean data in a format acceptable to the regulators’ technology platform.” As a result of this non-compliance, the MMC recommended that, going forward, state regulators take enforcement action against companies that are unable to provide accurate data in a timely fashion, so as to ensure a “more efficient and timely regulatory process.”
Bristol-Myers Squibb Pays $14 Million to SEC to Resolve China FCPA Offenses
On October 5, the SEC announced a settlement with Bristol-Myers Squibb to resolve allegations that the pharmaceutical company’s Chinese joint venture, BMS China, gave cash, jewelry, and other benefits to health care providers in order to boost prescription sales at state-owned or controlled hospitals. The SEC proceeded via an administrative cease and desist order. The SEC’s order found that the company violated the internal controls and books and records provisions of the FCPA. Bristol-Myers consented to the SEC’s order without admitting or denying the findings, and agreed to disgorge profits of $11.4 million plus $500,000 in pre-judgment interest and pay a civil penalty of $2.75 million. Bristol-Myers also agreed to report to the SEC for two years regarding the status of its efforts to implement anti-corruption compliance controls.
The SEC’s order states that Bristol-Myers failed to investigate red flags and claims by terminated BMS China employees that raised the possibility that sales personnel were making improper payments. The order also states that Bristol-Myers was too slow to fill gaps in its internal controls regarding interactions with health care providers.
Kinross Gold Discloses FCPA Investigation by SEC and DOJ
On October 2, Canadian mining company Kinross Gold Corp. announced that the SEC and DOJ are investigating potentially improper payments to government officials in West Africa. The company’s announcement states that it received subpoenas from the SEC in 2014 and 2015, and a request for information from the DOJ in December 2014. The subpoenas came after the company launched an internal investigation in August 2013 to investigate a whistleblower complaint alleging improper payments to government officials and internal control deficiencies in the company’s West African mining operations.
Former CEO of Siemens-Argentina Pleads Guilty to FCPA Offenses
On September 30, the former CFO of Siemens S.A.-Argentina pleaded guilty in a federal court in New York to conspiring to pay nearly $100 million dollars in bribes to Argentinian officials. The former executive, Andres Truppel, who is a German and Argentinian citizen, pleaded guilty to conspiracy to violate the antibribery, internal controls, and books and records provisions of the FCPA, and conspiracy to commit wire fraud. As described in the U.S. Attorney’s Office for the Southern District of New York’s press release, the violations stemmed from Siemens’ bid to win an Argentine government contract worth $1 billion to create a national identity card system. Mr. Truppel faces up to five years in prison and three years of supervised release when he is sentenced; there is no information on when sentencing will occur.
Truppel was one of eight former Siemens executives indicted in 2011 on charges of conspiring to violate the FCPA and other statutes (see previous BuckleySandler coverage here and here). Siemens itself reached a record $800 million resolution in 2008 with the DOJ and SEC related to FCPA violations in numerous countries, including Argentina. Siemens S.A.-Argentina pleaded guilty to conspiracy to violate the FCPA’s books and records provisions as part of that resolution.
Hyperdynamics Resolves FCPA Investigation with SEC Settlement
On September 29, Hyperdynamics Corp. announced a settlement with the SEC, fully resolving the SEC’s FCPA investigation into the Houston-based oil and gas company’s operations in the Republic of Guinea. The SEC proceeded via an administrative cease and desist order. Hyperdynamics consented to the SEC’s order without admitting or denying the findings, and agreed to pay a $75,000 penalty. The SEC’s order describes books and records and internal control offenses based on the lack of supporting documentation related to $130,000 the company paid for public relations and lobbying services in the Republic of Guinea during 2007 and 2008.
Hyperdynamics first disclosed that the DOJ was investigating alleged FCPA violations by the company in the Republic of Guinea in 2013. In May of this year, the company announced that the DOJ’s investigation had concluded without enforcement action, and released the DOJ’s declination letter, which noted Hyperdynamics’s cooperation with the investigation. At that time, the company acknowledged that a parallel SEC investigation was ongoing. Previous BuckleySandler coverage of this investigation can be found here.
Hitachi Settles SEC FCPA Case for $19M
On September 28, the SEC filed a settled complaint in Washington, D.C. federal court against Tokyo-based Hitachi, Ltd. for alleged FCPA books and records and internal controls offenses. According to the SEC’s Complaint, the company failed to accurately report payments made to the African National Congress (ANC), South Africa’s ruling political party, in connection with a multi-billion dollar plan to build new power stations in the country. Hitachi purportedly sold a 25-percent stake in a South African subsidiary to a company that was a front to funnel funds to the ANC. The SEC alleges that Hitachi was (i) aware that it had partnered with a “funding vehicle” for the ANC; (ii) encouraged the front company to continue using its political influence to obtain additional government contracts; and (iii) agreed to pay “success fees” to the front company. Hitachi did not admit wrongdoing in the settlement and agreed to pay a $19 million penalty.
In its announcement, the SEC’s Director of Enforcement, Andrew Ceresney, cited Hitachi’s “lax internal control environment” as the factor that led to the conduct described in the complaint. Continuing the trend of international cooperation in FCPA investigations, the SEC also thanked the African Development Bank and the South African Financial Services Board for their assistance with the investigation.
European Court of Justice Ruling on Validity of U.S.-EU Data Sharing Agreement Scheduled for October 6
Following up on an opinion issued on September 23 by the European Court of Justice Advocate General Yves Bot, the European Court of Justice is scheduled to issue its ruling on the validity of the U.S.-EU Safe Harbor Program on October 6. The High Court’s swift decision to issue judgment follows an opinion from the Advocate General advocating that the 2000 data sharing agreement between the U.S. and the European Union is invalid and inadequately protects Europeans’ personal data. Previous InfoBytes coverage can be seen here. The case is Schrems v. Data Protection Commissioner.
Director Cordray Submits Letter to Trade Associations Regarding TRID Compliance
On October 1, CFPB Director Richard Cordray, on behalf of the FFIEC, responded to correspondence from the American Bankers Association and other trade associations seeking guidance as to their compliance with the Bureau’s Know Before You Owe TILA-RESPA Integrated Disclosure Rule, which will become effective on October 3, 2015. Per Director Cordray’s letter, the FFIEC’s member agencies’ examiners “will expect supervised entities to make good faith efforts to comply with the Rule’s requirements in a timely manner.” Moreover, examiners will take a number of factors into consideration in determining compliance with the Rule, including (i) an institution’s implementation plan; (ii) an institution’s training of its staff; and (iii) how an institution handles any early technical problems or other implementation challenges.
New Jersey Resident Charged with Securities and Wire Fraud
On October 1, the U.S. Attorney for the Southern District of New York filed a complaint against New Jersey fund manager William J. Wells charging him with running a “Ponzi” scheme which raised over $1.5 million from investors. According to the complaint, Wells “engaged in a fraudulent scheme to obtain investments by falsely representing that he had achieved consistently positive trading returns in the U.S. equity markets, including through the successful use of options to hedge risk.” Wells allegedly misled investors by claiming that (i) his trading was generating positive returns when it was not; (ii) investors held investments in certain stocks when, in fact, neither Wells nor his firm did; and (iii) sub-accounts had been created for clients, but no such sub-accounts were ever funded. Wells was charged with one count of securities fraud and one count of wire fraud, each carrying a maximum prison sentence of 20 years and a maximum fine of $5 million, or two times the gross gain or loss from the offense.
In a parallel action, the SEC filed a complaint charging Wells with violations of the Securities Act, the Securities Exchange Act, and the Investment Advisers Act.