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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.
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.
CFPB Takes Action against Indirect Auto Lender over its Debt Collection Practices
On October 1, the CFPB ordered an indirect auto lender and its auto title lending subsidiary to pay more than $48 million in restitution and consumer relief over allegations that both companies engaged in unlawful debt collection practices. The CFPB alleged that the companies used a variety of “deceptive” tactics to coerce borrowers into making payments on their remaining loan amounts. The CFPB further asserted that the companies provided inaccurate information in their advertisements to borrowers regarding monthly interest rates, and misled borrowers about the effect of changing payment due dates or the ramifications of extending loan terms, which resulted in additional accrued interest owed over the life of the loan. Under terms of the consent order, the companies agreed to, among other things, provide $44.1 million in restitution and loan balance reductions to affected borrowers and pay a $4.25 million civil money penalty.
CFPB and DOJ Fine Savings Association Over Alleged Mortgage Redlining Practices
On September 24, the CFPB and DOJ announced a joint enforcement action against a federally-chartered savings association, alleging that the lender excluded predominantly minority neighborhoods from its mortgage lending business. The consent order, subject to court approval, would require the lender to, among other things, (i) pay $25 million in various subsidies to assist minority borrowers; (ii) provide a total of $2.25 million, over a five-year period, to local initiatives providing assistance and consumer education to residents in the excluded neighborhoods; and (iii) pay a $5.5 million civil money penalty.
Legislation Seeking Better Transparency in Federal Agency Settlements Passes Unanimously in U.S. Senate
On September 21, Senate Bill 1109, the Truth in Settlements Act, passed in the U.S. Senate with amendments by unanimous consent and has now been referred to the U.S. House of Representative’s Committee on Oversight and Government Reform for consideration. Originally introduced in January 2014 and sponsored by Elizabeth Warren (D-MA), the Truth in Settlements Act would require federal agencies to post online, in a searchable format, a list of each covered settlement agreement, criminal or civil, with payments totaling $1 million or more. The list would entail, among other things, (i) the names of the settling parties and the amount each must pay; (ii) a description of the claims each party settled; (iii) whether a portion of the settlement amount is tax-deductible; and (iv) any actions the settling parties must take under the settlement agreement in lieu of payment. If enacted, the bill would require agencies to publicly explain via written statement why confidentiality is justified for certain instances. The bill, co-sponsored by Senators James Lankford (R-OK) and Tammy Baldwin (D-WI), aims to provide greater transparency and oversight regarding settlements reached by federal enforcement agencies.
CFTC Issues Cease and Desist Order to Unregistered Bitcoin Options Trading Platform, States Bitcoin and Other Virtual Currencies are Commodities
On September 17, the Commodity Futures Trading Commission (CFTC) issued an Order against an unregistered San Francisco-based bitcoin options trading platform and its CEO for alleged violations of the Commodity Exchange Act (CEA) and CFTC Regulations. According to the Order, from March 2014 to at least August 2014, the company and its CEO operated an online website that allowed for the trading or processing of swaps between buyers and sellers of bitcoin options contracts. For the first time, bitcoin and other virtual currencies “are encompassed in the definition and properly defined as commodities,” making them subject to the same regulations as options or swaps. According to the CFTC, the company operated without being properly registered as a swap execution facility or designated contract market, violating the CEA and CFTC regulations. The CFTC’s Director of Enforcement Aitan Goelman noted, “While there is a lot of excitement surrounding Bitcoin and other virtual currencies, innovation does not excuse those acting in this space from following the same rules applicable to all participants in the commodity derivatives markets.” The Order did not impose any monetary sanctions on the company, but required the company to cease and desist any action violating the CEA and CFTC regulations and to cooperate in future investigations conducted by the CFTC or other governmental agencies.
U.S. Attorney General Discusses DOJ's Global Cybercrime Initiatives at Europol
On September 16, U.S. Attorney General Loretta Lynch addressed the European Cybercrime Center at Europol, where she highlighted recent and planned DOJ initiatives related to global cybercrime and cyber threat efforts and stressed the DOJ’s commitment to information-sharing with international law enforcement authorities. Lynch noted that the U.S. and the European Union recently signed an “Umbrella” Data Privacy and Protection Agreement aimed at strengthening the countries’ ability to take on crime and terrorism while protecting personal privacy. In addition, Lynch revealed that the DOJ intends to temporarily assign a U.S. attorney from the DOJ’s Criminal Division to work alongside European authorities to enhance collaboration and information-sharing.
Traders Who Allegedly Profited from Hacked News Releases Settle With SEC for $30 Million
On September 14, the SEC announced that it had reached a $30 million settlement with two defendants who allegedly profited from trading based on information hacked from newswire services. The settlement stems from an SEC complaint filed in August against 34 defendants for their alleged involvement in an international scheme that generated over $100 million in illegal profits over a five-year period. According to the SEC charges, defendants hacked into newswire services and transmitted stolen data to a network of international traders. The SEC claims that the parties to the settlement made $25 million in illicit profits by buying and selling contracts-for-differences (CFDs) based on hacked press release information they received from other defendants. In the proposed settlement offer, which requires court approval, the two defendants neither admit nor deny the SEC’s allegations, but agree to be enjoined from violating U.S. and SEC securities antifraud provisions, and to return $30 million in alleged illegal profits. The Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit stated that the discovery and prosecution of the scheme “should serve as a shot across the bow of any trader who thinks that CFDs traded outside the United States can be used to mask their unlawful conduct,” and demonstrates the SEC’s “ability to police this opaque market.” The SEC’s case against the remaining 32 defendants remains pending.
FCC Cites Two Companies over Unauthorized Telemarketing Allegations
On September 11, the FCC issued citations against a Pennsylvania-based financial institution and a transportation network company (TNC), alleging that both companies engaged in unlawful business practices by infringing consumers’ rights to be free of unauthorized telemarketing robocalls to residential and wireless phones. The financial institution’s citation alleges that the bank required customers to agree to receive autodialed telemarketing texts in order to use its online banking and Apple Pay services. The TNC’s citation alleges that, although it allows consumers who sign up for ride-sharing service to opt out of receiving autodialed or prerecorded telemarketing calls and texts, the TNC does not allow users to access the service if they exercise these opt out rights. Both citations allege that these practices violate the FCC’s rules implementing the Telephone Consumer Protection Act (TCPA), and direct the companies to take immediate steps to come into compliance with the FCC’s rules, orders, and the TCPA prohibition against unlawful marketing and advertising calls. The FCC also warned that future violations may result in monetary forfeitures.