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DOJ Announces Prison Sentences of Former Derivatives Traders for LIBOR Manipulation
On March 10, the DOJ announced that U.S. District Judge Jed S. Rakoff sentenced two former derivatives traders for a Netherlands-based bank to prison for their roles in a scheme to manipulate the London Interbank Offered Rates (LIBOR) for the U.S. Dollar (USD) and Japanese Yen (JPY) from 2005-2009. The defendants, who were convicted of bank fraud, wire fraud and conspiracy charges in November 2015, were sentenced to 24 months and 12 months and a day in prison. Two additional bank employees were convicted in the same LIBOR investigation after pleading guilty to one count of conspiracy each for their roles in the scheme; two other individuals were charged and are awaiting trial.
FIFA Seeks to Collect Millions as Victim in U.S. Case
On March 15, FIFA filed a Victim Statement and Request for Restitution (Statement) with the DOJ seeking a portion of the hundreds of millions of dollars that authorities could collect from the former FIFA employees who allegedly engaged in longstanding kickback and bribery schemes. In its Statement, FIFA asserts that the more than 40 defendants charged by the DOJ “grossly abused their positions of trust to enrich themselves,” thereby causing significant harm to FIFA including financial losses and damage to FIFA’s reputation. FIFA asserts that as the victim of the defendants’ crimes, it is entitled to recover restitution under the Mandatory Restitution to Victims Act, 18 U.S.C. § 3663A. FIFA estimates its losses to be at least $28 million in salaries and benefits paid to the defendants, plus $10 million misappropriated as bribes. Time will tell if FIFA ultimately is deemed to qualify for restitution under the Act.
Large International Bank Discloses SEC and DOJ Investigations Into its Hiring Practices in Asia
On March 1, a large international bank based in the U.K. disclosed in its annual report that it is being investigated in connection with its hiring practices in Asia. In disclosing both DOJ and SEC investigations, the bank noted that it is cooperating with the investigations and “keeping certain regulators in other jurisdictions informed.” While not explicitly linking the hiring probe to the FCPA, the acknowledgement appears to be the latest by an international financial institution concerning U.S. investigations into FCPA implications of its hiring practices in Asia and continues the long-running “Sons and Daughters” investigations by the SEC. Prior coverage of other aspects of the “Sons and Daughters” investigation around the world is available here.
Separately in its annual report, the U.K.-based financial institution also stated that the “DOJ and SEC are undertaking an investigation into whether the [bank’s] relationships with third parties who assist [the bank] to win or retain business are compliant with the” FCPA. The bank disclosed that it has briefed regulators in other jurisdictions about these investigations.
Medical Device Subsidiary Agrees to DPA with DOJ Related to Health Care Bribes
On March 1, a Miami-based medical device company entered into a deferred prosecution agreement (DPA) to resolve charges of conspiracy to violate the FCPA and violating the FCPA in connection with improper payments and benefits to health care practitioners at government-owned facilities in Central and South America. The company, which is a majority-owned subsidiary of the United States’ largest distributor of endoscopes and related medical equipment, agreed to pay a $22.8 million penalty and admitted its criminal conduct.
According to the company’s admissions, from 2006 through August 2011, it “designed and implemented a plan to increase medical equipment sales in Central and South America by providing personal benefits, including cash, money transfers, [ ] travel, free or heavily discounted equipment, and other things of value to certain health care practitioners” employed at government-owned health care facilities. The improper payments totaled nearly $3 million, which resulted in the recognition of more than $7.5 million in profits.
Under the terms of the DPA, the DOJ will defer criminal prosecution for a period of three years and the company will appoint a compliance monitor and implement numerous compliance measures. In reaching the resolution, the DOJ gave the company a 20 percent reduction on its penalty as a result of its cooperation, which included “conducting an extensive internal investigation, translating documents, and collecting, analyzing, and organizing voluminous evidence and information.” However, in assessing the penalty, the DOJ noted that the company did not voluntarily disclose the misconduct in a timely manner.
FinCEN Withdraws Findings and Proposed Rulemakings
On February 19, FinCEN withdrew three findings and proposed rulemakings under Section 311 of the USA PATRIOT Act. FinCEN determined that the three entities subject to the proposed rulemakings “no longer pose a money laundering threat to the U.S. financial system.” FinCEN withdrew its findings and proposed rulemakings against (i) a Costa Rica-based financial institution; (ii) a Belarus-based financial institution; and (iii) an Andorra-based financial institution. Regarding the Costa Rica-based institution, FinCEN noted that the DOJ “seized [its] accounts and Internet domain names and charged seven of its principals and employees with money laundering;” the institution stopped functioning after such actions were taken. According to FinCEN, the Belarus-based entity, along with its successor, no longer operates as a foreign financial institution and does not operate in a way that poses a threat to the U.S. financial system. Finally, concerning the third entity, FinCEN noted that Andorran authorities assumed control of the management and operations of the entity, arrested its chief executive officer on money laundering charges, and “are in the final stages of implementing a resolution plan that is isolating the assets, liabilities, and clients of [the entity] that raise money laundering concerns.”
Massachusetts-Based Technology Company and Two Chinese Subsidiaries Pay $28 Million to Settle Civil and Criminal FCPA Charges; SEC Uses First DPA With Individual
On February 16, the SEC and DOJ announced a settlement with a Massachusetts-based technology company for violations of the FCPA. The technology company and two Chinese subsidiaries agreed to pay $28 million to settle the parallel civil and criminal actions, with the technology company paying approximately $13.5 million in disgorgement and prejudgment interest to settle the SEC’s charges, and its two Chinese subsidiaries paying approximately $14.54 million in penalties in a Non-Prosecution Agreement with the DOJ.
The company admitted that its subsidiaries in Shanghai and Hong Kong provided non-business related travel and other improper payments to Chinese government officials to win business. Specifically, from 2006 to 2011, the two subsidiaries provided nearly $1.5 million to Chinese officials in improper travel, gifts, and entertainment. The Chinese officials were employed by state-owned entities that were customers of the technology company. The travel and entertainment expenses included overseas trips to visit the technology company’s facilities, including cooperate headquarters in Massachusetts, but the majority of the time on the trips was spent on recreational excursions unrelated to the purported business purpose. For example, the company paid for Chinese officials to visit New York, Las Vegas, San Diego, Los Angeles, and Honolulu, as well as guided tours, golfing, and other leisure activities during those trips. Employees of the company’s subsidiaries also provided gifts to the Chinese officials, including cell phones, iPods, gift cards, wine, and clothing. The payments were recorded in the company’s books and records as legitimate commissions or business expenses.
As part of the investigation, the SEC also entered into its first Deferred Prosecution Agreement (DAP) with an individual in an FCPA case. The SEC announced that it would wait three years to bring any FCPA charges against a former employee of one of the subsidiaries, Yu Kai Yuan, because of the cooperation he provided during the SEC’s investigation.
Amsterdam-Based Telecommunications Company Pays $795 Million to Settle FCPA Charges Both in US and Abroad
On February 18, an Amsterdam-based telecommunications company and its Uzbek subsidiary reached a global settlement with the SEC, DOJ, and Dutch regulators Openbarr Ministerie (OM) and the Fiscal Intelligence and Investigation Service (FIOD), in which the telecommunications company will pay more than $795 million to resolve FCPA violations in Uzbekistan. The Amsterdam-based telecommunications provider was charged with bribing an Uzbek government official related to the President of Uzbekistan in exchange for government-issued licenses. Between 2006 and 2012, the telecommunications company and its subsidiary made more than $114 million in bribe payments through an entity affiliated with the Uzbek official and disguised approximately half a million dollars as charitable donations made to charities affiliated with the Uzbek official.
The terms of the settlement require the telecommunications company to pay $397.5 million to Dutch regulators, $230.1 million to the DOJ, and $167.5 million to the SEC; it must also retain an independent corporate monitor for three years. DOJ also filed a forfeiture proceeding, seeking more than $550 million held in Swiss bank accounts which it alleged were funds that the Amsterdam-based telecommunications company and two other telecommunications companies used to bribe and/or launder the bribe payments to the Uzbek official. This forfeiture complaint follows the DOJ’s earlier forfeiture complaint filed on June 29, 2015, seeking forfeiture of more than $300 million in funds held in Belgium, Luxembourg, and Ireland.
Department of Homeland Security Publishes CISA Procedures and Guidance
On February 16, the DHS published guidance for both private and federal entities on the sharing of cyber threat indicators with the federal government. As required by the Cybersecurity Information Sharing Act of 2015 (CISA), the DHS and the DOJ jointly released the following four documents: (i) Sharing of Cyber Threat Indicators and Defensive Measures by the Federal Government; (ii) Guidance to Assist Non-Federal Entities to Share Cyber Threat Indicators and Defensive Measures with the Federal Entities; (iii) Interim Procedures Related to the Receipt of Cyber Threat Indicators and Defensive Measures by the Federal Government; and (iv) Privacy and Civil Liberties Interim Guidelines. The first two documents focus on assisting private sector and federal entities identify indicators and defensive measures for cybersecurity threats. The third document establishes procedures relating to the receipt of certain cyber threat indicators and defensive measures by all federal entities under CISA. The fourth document establishes interim privacy and civil liberties guidelines for federal entities on the receipt, retention, use, and dissemination of cyber threat indicators.
DOJ Reopens Bribery Probe into Dutch Oilfield Company
On February 10, a Dutch oilfield company announced that the U.S. DOJ has now re-opened its investigation into allegations that the company paid bribes to secure contracts in various countries around the world. The company stated that the DOJ has made “information requests” in connection with the bribery investigation and that the company is “seeking further clarification about the scope of the inquiry.”
The company previously reached a $240 million settlement with Dutch authorities in November 2014 to resolve allegations involving bribes to government officials in Angola, Brazil, and Equatorial Guinea between 2007 and 2011. At the time, the company announced that the DOJ had simultaneously closed its investigation into the same matter. Its most recent announcement, however, shows that the U.S. government has rekindled its inquiry.
The company also announced that it has reserved $245 million to cover a possible settlement with Brazilian authorities. This announcement comes on the heels of a January 2016 settlement between the Ministerio Publico Federal (MPF), Brazil’s Public Prosecutor’s Office, and the company’s CEO and a member of the company’s supervisory board apparently tied to the ongoing Petrobras scandal in Brazil.
CFPB and DOJ Announce Joint Settlement with Indirect Auto Lender over Alleged ECOA Violations
On February 2, the CFPB and the DOJ announced a joint enforcement action against an indirect auto lender for alleged violations of the Equal Credit Opportunity Act (ECOA) and implementing Regulation B. In April 2013, the CFPB and the DOJ began an investigation into the indirect auto lender’s compliance with the ECOA and found that its policies allowed for dealers to mark up a consumer’s interest rate on the retail installment contract above the established risk-based buy rate, known as “dealer markup.” The dealers received greater compensation from the indirect auto lender on loans with a higher interest rate. The DOJ and the CFPB determined that the respondent’s practice of allowing pricing discretion resulted in qualified African-American/Pacific Islander borrowers paying more than qualified white borrowers. To resolve the DOJ and the CFPB’s allegations, the respondent agreed to (i) reduce the amount by which loans can be marked up to only 1.25% above the established buy rate for auto loans with terms of five years or less, and 1% for loans with longer terms; (ii) pay at least $19.9 million in redress to borrowers affected by its finance practices from January 2011 to February 2, 2016, and up to $2 million more from the date of the action until it implements a new pricing and compensation structure, which must be in place by August 2016; and (iii) hire a settlement administrator to ensure that affected borrowers receive compensation.
These enforcement actions are the fourth in a series of joint CFPB and DOJ actions addressing fair lending risks in the indirect auto lending industry.