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Financial Services Law Insights and Observations


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  • Executive pleads guilty in oil company bribery case

    Financial Crimes

    On May 29, the DOJ announced that a dual U.S.-Venezuelan citizen pleaded guilty for his role in a bribery scheme involving oil and natural gas company officials. The citizen pleaded guilty in the Southern District of Texas to conspiracy to violate the FCPA, violating the FCPA, and failing to report foreign bank accounts. His sentencing is set for August 28.

    He controlled multiple U.S. and international companies that provided goods and services to the company. According to the DOJ, the citizen and a co-conspirator paid at least $629,000 in bribes to a former company official in exchange for favorable business treatment for his companies. Prior FCPA Scorecard coverage is available here.

    Financial Crimes DOJ FCPA Bribery

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  • FDIC resolves Operation Chokepoint lawsuit

    Federal Issues

    On May 22, the FDIC announced it resolved a 2014 lawsuit brought by payday lenders that  alleged that the FDIC, the OCC and the Federal Reserve abused their supervisory authority during Operation Chokepoint, an Obama Administration DOJ initiative that formally ended in August 2017 (covered by InfoBytes here) and was designed to target fraud by investigating U.S. banks and certain of their clients perceived to be a higher risk for fraud and money laundering. As previously covered by InfoBytes, in 2014, payday lenders filed a lawsuit against the federal banking agencies alleging that they participated in Operation Chokepoint “to drive [the payday lenders] out of business by exerting back-room pressure on banks and other regulated financial institutions to terminate their relationships” with such lenders. The payday lenders argued, among other things, that the initiative resulted in over 80 banking institutions terminating their business relationships with law-abiding companies.

    Along with the announcement of the tentative settlement between the parties, the FDIC released a statement summarizing the FDIC’s internal policies and guidance for FDIC recommendations to financial institutions to terminate customer deposit accounts. The statement also included a letter written to the plaintiffs’ counsel acknowledging that “certain employees acted in a manner inconsistent with FDIC policies with respect to payday lenders in what has been generically described as ‘Operation Choke Point,’ and that this conduct created misperceptions about the FDIC’s policies.” In the press announcement regarding the resolution of the case, the FDIC emphasized that neither the statement nor the letter represent a change in the FDIC’s policy and guidance, and that all “existing applicable regulations and guidance documents remain in full force and effect.” Further, while the May 21 joint status report filed in the case noted that FDIC senior leadership had not yet reviewed the agreement, the report noted that the FDIC does “not anticipate any objections.”

    Additionally, on May 23, the OCC acknowledged it had been dismissed from the litigation as part of the lawsuit’s resolution.

    Federal Issues FDIC OCC Payday Lending Operation Choke Point DOJ Courts

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  • Malaysian national extradited to the United States on embezzlement and FCPA charges in Malaysian fund scheme

    Financial Crimes

    On May 6, the DOJ announced that a Malaysian national was extradited to the United States from Malaysia on charges of conspiracy to embezzle and to violate the FCPA’s bribery and accounting provisions in connection with a scheme relating to a Malaysia government-run strategic development fund. The Malaysian national was a former Managing Director at a financial institution. The indictment against him alleges that between 2009 and 2014, he conspired with others to launder billions of dollars embezzled from the development fund, including money from three bond offerings underwritten by the financial institution in 2012 and 2013, and that he conspired to bribe government officials in Malaysia and Abu Dhabi to obtain and retain business for the financial institution, including the bond transactions. DOJ alleges that the financial institution received approximately $600 million in fees and revenues from its work for the fund, and that he and his co-conspirators embezzled more than $2.7 billion from the fund's bond deals. In his first court appearance, he pleaded not guilty to the charges, and press coverage reported a federal magistrate judge’s statement that he and the DOJ are engaged in plea negotiations, but his defense counsel denied the judge’s characterization. 

    As detailed in prior FCPA Scorecard coverage, an alleged co-conspirator and former managing director of the same financial institution pleaded guilty in November 2018 to conspiracy to violate the FCPA and to commit money laundering. Another charged co-conspirator has not appeared in court.

    Financial Crimes DOJ FCPA Of Interest to Non-US Persons

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  • DOJ issues False Claims Act guidance

    Federal Issues

    On May 7, the DOJ (or the “Department”) announced the release of formal guidance to the Department’s False Claims Act (FCA) litigators, which explains how the DOJ awards credit to defendants who cooperate with the Department during a FCA investigation. Under the formal policy, which is located in Section 4-4.112 of the Justice Manual, cooperation credit in FCA cases may be earned by (i) voluntarily disclosing misconduct unknown to the government, which can be done even if the DOJ has already begun an investigation of other misconduct; (ii) cooperating in an ongoing investigation, such as by preserving documents beyond standard business or legal practices, identifying individuals who are aware of the relevant information or conduct, and facilitating review and evaluation of relevant data or information that requires access to special or proprietary technologies; or (iii) undertaking remedial measures in response to a violation, such as by implementing or improving an effective compliance program or appropriately disciplining or replacing those responsible for the misconduct. 

    The Department has discretion in awarding credit, which will vary depending on the facts and circumstances of each case. With regard to voluntary disclosure or additional cooperation, the Department will consider (i) the timeliness and voluntariness of the assistance; (ii) the truthfulness, completeness, and reliability of any information or testimony provided; (iii) the nature and extent of the assistance; and (iv) the significance and usefulness of the cooperation to the government. Entities or individuals may quality for partial credit if they have “meaningfully assisted the government’s investigation by engaging in conduct qualifying for cooperation credit.” Most often, cooperation credit will take the form of a reduction in penalties or damages sought by the Department. However, the maximum credit that a defendant may earn may not exceed the amount that would result in the government receiving less than full compensation for the losses caused by the misconduct. In addition, the Department may consider in appropriate circumstances other forms of credit, including notifying a relevant agency about the defendant’s disclosure or other cooperation, publicly acknowledging such disclosure or cooperation, and assisting in resolving a qui tam litigation with a relator.  

    Federal Issues DOJ False Claims Act / FIRREA Agency Rule-Making & Guidance

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  • Buckley Special Alert: DOJ issues updated guidance for corporate compliance programs

    Federal Issues

    On April 30, 2019, the Department of Justice Criminal Division released updated guidance on the Evaluation of Corporate Compliance Programs (the “Guidance”). The Guidance sets forth the non-binding factors that DOJ prosecutors utilize to evaluate a company’s compliance program and consequently determine the “(1) form of any resolution or prosecution; (2) monetary penalty, if any; and (3) compliance obligations contained in any corporate criminal resolution (e.g., monitorship or reporting obligation.” The Guidance is, therefore, significant to companies seeking to understand what the DOJ considers to be best practices for compliance programs, as well as to mitigate against criminal penalties resulting from potential wrongdoing.

    The Guidance builds upon a prior version released in February 2017 and does not indicate any major policy changes. Instead, this update provides further explanation of the factors DOJ uses to evaluate companies’ compliance programs and contextualize those factors within the enforcement framework of the Justice Manual and Sentencing Guidelines.

    * * *

    Click here to read the full special alert.

    If you have questions about the DOJ’s new guidance or other related issues, please visit our White Collar practice page or contact a Buckley attorney with whom you have worked in the past.

    Federal Issues DOJ Corporate Compliance Program Special Alerts

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  • German-headquartered financial institution to pay $1.3 billion for Iran sanctions violations

    Financial Crimes

    On April 15, U.S. regulators announced settlements totaling $1.3 billion with several banking units of a German-headquartered financial institution to resolve allegations by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), the DOJ, the Federal Reserve Board, the New York Department of Financial Services (NYDFS), and the New York County District Attorney’s Office of apparent violations of multiple sanctions programs, including those related to Burma, Cuba, Iran, Libya, Sudan, and Syria. According to OFAC’s announcement, between January 2007 and December 2011, the institution’s banking units in Germany, Austria, and Italy processed thousands of payments through U.S. financial institutions on behalf of sanctioned entities “in a manner that did not disclose underlying sanctioned persons or countries to U.S. financial institutions which were acting as financial intermediaries.”

    According to the roughly $611 million combined settlement agreements (see here, here, and here), OFAC considered various aggravating factors, and noted, among other things, that the institution’s banking units failed to sufficiently enforce policies addressing OFAC sanctions concerns or restrict the processing of transactions in U.S. dollars involving persons or countries subject to sanctions programs administered by OFAC. Additionally, OFAC asserted that the Austrian banking unit claimed on several occasions that OFAC’s sanctions programs “were not legally binding or relevant to [the bank].” OFAC further stated that while the banking units failed to voluntarily self-disclose the alleged violations, they have each agreed to implement and maintain compliance commitments to minimize the risk of the recurrence of the alleged conduct.

    The approximate $611 million penalty will be deemed satisfied by the banking units’ payments to other U.S. regulators, which includes an almost $317 million forfeiture and roughly $468 million fine to the DOJ, $158 million fine to the Federal Reserve, and $405 million fine to the NYDFS.

    Financial Crimes Of Interest to Non-US Persons OFAC Department of Treasury Settlement Iran Sanctions DOJ Federal Reserve NYDFS

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  • DOJ settles with multinational corporation for $1.5 billion over RMBS


    On April 12, the DOJ announced that a multinational corporation will pay $1.5 billion in a settlement resolving claims brought under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) that a financial services subsidiary of the corporation misrepresented the quality of loans it originated in connection with the marketing and sale of residential mortgage-backed securities (RMBS). According to the DOJ, between 2005 and 2007, the majority of the mortgage loans sold by the subsidiary for inclusion in RMBS did not comply with the quality representations made about the loans. Specifically, the loan analysts allegedly approved mortgage loans that did not meet criteria outlined in the company’s underwriting guidelines, as they would receive additional compensation based on the number of loans they approved. The DOJ asserts that there were inadequate resources and authority for the subsidiary’s quality control department, resulting in deficiencies in risk management and fraud controls. Additionally, if an investment bank were to reject a loan due to defects in the loan file, the DOJ alleges the subsidiary would attempt to find a new purchaser, without disclosing the previous rejection or identifying the alleged defects. The corporation does not admit to any liability or wrongdoing, but agreed to pay a $1.5 billion civil money penalty to resolve the matter.

    Securities DOJ RMBS Mortgages FIRREA Settlement

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  • London-based financial institution to pay $1.1 billion for U.S. sanctions violations

    Financial Crimes

    On April 9, U.S. and U.K regulators announced that a London-based global financial institution would pay $1.1 billion to settle allegations by the DOJ, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), the Federal Reserve Board, the New York Department of Financial Services (NYDFS), the Manhattan District Attorney, and the U.K.’s Financial Conduct Authority (FCA) for allegedly violating multiple sanctions programs, including those related to Burma, Cuba, Iran, Sudan, and Syria. According to the OFAC announcement, from June 2009 until May 2014, the institution processed thousands of transactions involving persons or countries subject to sanctions programs administered by OFAC, but the majority of the actions at issue concern Iran-related accounts maintained by the institution’s Dubai branches. OFAC alleged the Dubai branches processed transactions through the institution’s New York branches on behalf of customers that were physically located or ordinarily resident in Iran.

    According to the $639 million settlement agreement, OFAC noted, among other things, that the institution “acted with reckless disregard and failed to exercise a minimal degree of caution or care” with respect to the actions at issue. Moreover, OFAC alleged that the institution had actual knowledge or reason to know its compliance program was “inadequate to manage the [the institution]’s risk.” OFAC considered numerous mitigating factors, including that the institution’s substantial cooperation throughout the investigation and its undertaking of remedial efforts to avoid similar violations from occurring in the future.

    The $639 million penalty will be deemed satisfied by the institution’s payments to other U.S. regulators, which includes, $240 million forfeiture and $480 million fine to the DOJ, $164 million fine to the Federal Reserve, and $180 million fine to the NYDFS. The institution also settled with the FCA for $133 million. The settlement illustrates the risks to foreign financial institutions associated with compliance lapses when processing transactions through the U.S. financial system.

    Financial Crimes OFAC Department of Treasury Sanctions DOJ Federal Reserve NYDFS UK FCA Settlement Of Interest to Non-US Persons

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  • Micronesian official pleads guilty to corruption-related money laundering conspiracy

    Financial Crimes

    On April 3, the DOJ announced that a Micronesian government official pleaded guilty in the District of Hawaii to a money laundering conspiracy “involving bribes made to corruptly secure engineering and project management contracts from the government of the Federated States of Micronesia (FSM), in violation of the” FCPA. The official was arrested in February after a Hawaiian executive pleaded guilty to a related FCPA conspiracy charge the prior month (see previous FCPA Scorecard coverage here). 

    According to the DOJ, the official "was a government official in the FSM Department of Transportation, Communications and Infrastructure who administered FSM’s aviation programs, including the management of its airports.” The official admitted that, between 2006 and 2016, a Hawaii-based engineering and consulting company “paid bribes to FSM officials, including [the official], to obtain and retain contracts with the FSM government valued at nearly $8 million.” The official’s sentencing is scheduled for July 29.

    Financial Crimes DOJ Anti-Money Laundering FCPA Of Interest to Non-US Persons

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  • German medical equipment provider settles FCPA claims for $230 million

    Financial Crimes

    On March 29, DOJ publicly released a non-prosecution agreement it had entered into in late February with a Germany-based provider of medical equipment and services in which the company agreed to pay over $230 million to settle claims that it violated the anti-bribery, books and records, and internal accounting controls provisions of the FCPA. The alleged misconduct, which included various schemes to pay bribes to public and/or government officials in exchange for business opportunities, occurred over the course of at least a decade and spanned 17 or more countries in Africa, Europe, and the Middle East. On the same day, the company also entered into an administrative order with the SEC. The SEC stated that the company had failed to timely address “numerous red flags of corruption in its operations” that were known to the company as far back as the early 2000s, and that it “failed to properly assess and manage its worldwide risks, and devoted insufficient resources to compliance.”

    While the company received credit for making a voluntary disclosure to DOJ in April 2012 and for remedial measures undertaken since that time, DOJ stated that the company failed to timely respond to certain of its requests and, at times, provided incomplete responses to those requests. Accordingly, the company did not receive full credit for cooperation and did not qualify for a declination under the FCPA Corporate Enforcement Policy. In its non-prosecution agreement, among other things, the company agreed to: (i) the appointment of an independent compliance monitor for a two-year term, followed by one year of self-reporting, (ii) continuation of its efforts to cooperate with the DOJ’s investigation, and (iii) disgorgement of approximately $147 million to the SEC and payment of approximately $85 million in fines to the U.S. Treasury. The fine amount was calculated with a 40% discount off of the bottom of the United States Sentencing Guidelines fine range based on $141 million in profits from the alleged misconduct.

    Notably, the alleged misconduct involved no U.S.-based conduct, individuals, subsidiaries, or third parties. Instead, the individuals alleged to have engaged in misconduct apparently used internet-based email accounts hosted by service providers in the U.S. (and therefore utilized means and instrumentalities of U.S. interstate commerce), and the company’s American Depository Shares trade on the NYSE so the company files periodic reports with the SEC.


    Financial Crimes Of Interest to Non-US Persons FCPA DOJ

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