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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.
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.
Imaging Company Offers $1.6 Million to Settle FCPA Investigation
Analogic Corp., a manufacturer of airport security equipment, offered the SEC $1.6 million to settle the agency’s FCPA investigation of the company, according to a company press release. The company previously reported that the DOJ and SEC had “substantially” completed their investigations of potential bribery involving transactions by the company’s Danish subsidiary, BK Medical ApS. The transactions at issue involved distributors paying BK Medical more than was owed, and then BK Medical transferring the excess money to third parties identified by the distributors. At the time of its 2011 disclosure of the potentially problematic transactions, the company stated that it had not ascertained the ultimate beneficiaries or purpose of the transfers. According to the company it had not yet engaged in similar settlement discussions with the DOJ or Danish government.
FIFA Investigation Expands In Scope; Former FIFA VP Extradited to United States
On September 14, U.S. Attorney General Loretta Lynch announced that the DOJ is expanding its FIFA investigation to pursue additional charges against individuals and companies. AG Lynch made these comments at a press conference in Zurich with Switzerland’s Attorney General, Michael Lauber. The DOJ has been working closely with Swiss officials in its investigation, and has charged 14 FIFA officials with racketeering, wire fraud, and money laundering.
Additionally, on September 17, the Swiss Federal Office of Justice approved the extradition of Eugenio Figueredo, a former vice president of the South American Football Confederation and former vice president of FIFA, to the United States. Figueredo was one of seven defendants fighting extradition from Switzerland. In July, Jeffrey Webb, a former vice president of FIFA, agreed to be extradited to the United States, but the remaining five defendants are awaiting decisions on extradition.
Previous BuckleySandler coverage of this investigation can be found here.
DOJ Unveils New Policy on Individual Liability in White-Collar Prosecutions
On September 9, the Department of Justice (DOJ), issued a policy memorandum concerning DOJ’s goal of holding individuals accountable for corporate fraud or other misconduct. While some of the guidelines set forth in the memorandum are statements of practices already being followed by DOJ, or by specific U.S. Attorney’s Offices, some of the measures are new and reflect an enhanced focus on DOJ’s goal of holding individuals criminally or civilly liable for corporate wrongdoing. The memo sets forth “six key steps” to accomplish this goal and further DOJ’s underlying policies of deterring future illegal activity, incentivizing change in corporate behavior, holding proper parties responsible for their actions, and promoting public confidence in the justice system.
First, the memo provides that, to be eligible to receive any credit for cooperating with the government in a civil or criminal investigation, a company must completely disclose to DOJ all relevant facts about individual misconduct, regardless of the individual’s position, status or seniority at the company. If a company provides incomplete information about individual employees’ misconduct, then the company’s cooperation will not be considered a mitigating factor in a criminal investigation and will not support, in the case of a prosecution, a cooperation-related reduction at sentencing. Likewise, where the company is not completely forthcoming about individual wrongdoing in a civil investigation, DOJ will not consider the company’s cooperation in negotiating a settlement agreement.
Second, the memo provides that both criminal and civil investigations should focus on individuals from the outset of the investigation, in order to discern the full extent of alleged misconduct, increase the likelihood of cooperation by individuals with knowledge of the misconduct, and maximize the chances that resolution of the investigation will include civil or criminal charges against both the company and culpable individuals.
Third, the memo emphasizes that DOJ criminal and civil attorneys should be in routine communication with one another, so that the DOJ can consider the full range of potential remedies to address alleged misconduct by individuals.
Fourth, the memo provides that, absent “extraordinary circumstances,” no corporate resolution will provide protection for criminal or civil liability for any individuals. Fifth, the memo states that DOJ attorneys should not resolve civil or criminal investigations of a corporation without a “clear plan” to resolve related individual cases. In addition, if a decision is made not to prosecute or proceed civilly against individuals who committed the misconduct, DOJ attorneys must memorialize and submit for approval the reasons for that decision.
Finally, the memo provides that civil prosecutors should consistently focus on individuals as well as the company, and evaluate the decision whether to sue an individual based on considerations beyond the individual’s ability to pay. The memo notes that, while DOJ attorneys may validly consider an individual corporate wrongdoer’s ability to satisfy a judgment in determining whether to pursue an action against that person, DOJ attorneys also should consider other goals and concerns in making this determination, including such things as the seriousness of a person’s misconduct, the person’ s past history, the ability to obtain and sustain a judgment, and the long-term deterrent effects of holding an individual accountable.
Two Additional Former PetroTiger Employees Sentenced Following FCPA Conspiracy Guilty Pleas
On September 10, Gregory Weisman, former general counsel of oil and gas services company PetroTiger, and Knut Hammarskjold, PetroTiger’s co-founder, were each sentenced to two years’ probation stemming from their prior guilty pleas to conspiring to violate the FCPA and commit wire fraud in connection with a bribe paid to an employee of Colombia’s state-run oil company in order to win a $45 million oil-services contract.
Both Mr. Weisman and Hammarskjold were ordered to pay restitution as well as fines of $30,000 and $15,000, respectively. Mr. Weisman’s and Mr. Hammarskjold’s sentencing occurred almost three months after the third PetroTiger co-conspirator, former CEO Joseph Sigelman, received a three-year probation sentence in connection with the same bribes. Mr. Weisman had been the key witness against Mr. Sigelman at Mr. Sigelman’s June 2015 trial, but the trial abruptly ended after Mr. Sigelman entered a plea deal. The DOJ announced the plea after Mr. Weisman informed the court that he gave false testimony regarding the terms of his cooperation agreement. At Mr. Weisman’s sentencing, the District Judge referred to the abrupt turn of events at Mr. Sigelman’s trial as “the elephant in the room” but noted that misstatements by Mr. Weisman were “peripheral” to the charged offenses.
Mortgage Banking Firm Settles with DOJ for Participation in Fraudulent Reimbursement Scheme
On September 4, the DOJ announced a settlement of more than $29 million with a Florida-based mortgage banking firm in connection with violations of the False Claims Act. The firm’s subsidiaries participated in HUD’s Home Equity Conversion Mortgages (HECM) program, which insures reverse mortgage loans by reimbursing lenders that are unable to recoup the full amount of a reverse mortgage loan once the loan becomes due and payable. HUD will reimburse sales commissions paid to real estate agents in connection with the liquidation of foreclosed properties, but will not reimburse fees paid to real estate agents for referrals of loans to be liquidated. According to the DOJ, from July 2010 to October 2014, the firm used straw companies to split commissions with real estate agents, and then later submitted claims to HUD for reimbursement of the full commission amount. Additionally, from August 2009 to March 2015, the firm encouraged its subsidiaries to submit false debenture interest claims to HUD. Specifically, the subsidiaries neglected to disclose that they had failed to meet certain required regulatory deadlines and were therefore not entitled to interest payments. The DOJ stated that the settlement “represents a significant milestone in [the DOJ’s] long standing campaign against mortgage fraud.”
U.S. Attorney General Lynch: "More Determined Than Ever to Vigorously Enforce the Fair Housing Act"
On September 2, U.S. Attorney General Loretta Lynch delivered remarks at HUD’s Fair Housing Policy Conference. In her remarks, Lynch stressed the importance of fair housing as being a primary driver “to access to employment, to education, to credit, to transportation, to safety and to a whole range of institutions and opportunities.” Lynch stated that she is “more determined than ever to vigorously enforce the Fair Housing Act (FHA).” Among other things, Lynch provided an overview on how the DOJ is implementing new programs, technology, and research to conduct electronic testing, allowing the DOJ to expand the reach of its Fair Housing Testing Program. The Attorney General also expressed her support of HUD’s recently issued “Affirmatively Furthering Fair Housing” rule, and signaled that the DOJ intends to “vigorously enforce” the FHA using every available tool, including the disparate impact theory, which the Supreme Court ruled recently as a valid enforcement tool to challenge unfair mortgage lending practices.
Russian Nuclear Official Pleads Guilty in FCPA-Related Case
On August 31, the DOJ announced that Vadim Mikerin, the former president of TENAM Corporation and a director of the Pan American Department of JSC Techsnabexport (TENEX), pleaded guilty to conspiracy to commit money laundering in connection with arranging over $2 million in bribes for contracts with the Russian state-owned nuclear energy corporation. TENEX, a subsidiary of Russia’s State Atomic Energy Corporation, is based in Moscow and acts as the sole supplier and exporter of Russian Federation uranium and uranium enrichment services to nuclear power companies worldwide. Mr. Mikerin admitted to conspiring to transfer funds from the United States to offshore accounts with the intent to perpetuate a bribery scheme in violation of the FCPA. These bribes were made to influence the award of contracts to transport down-blended uranium to US nuclear utility providers. As part of Mr. Mikerin’s plea agreement, he agreed to forfeit over $2.1 million he received in bribes. Mr. Mikerin is expected to be sentenced in December, and faces up to five years in prison and a $250,000 fine.
In addition to Mr. Mikerin, two other individuals, Darren Condrey and Boris Rubizhevsky, have pleaded guilty for their respective involvement in the scheme, including conspiracy to violate the FCPA and commit wire fraud, and conspiracy to commit money laundering, respectively.
Former Chief Credit Officer Sentenced to Over Eight Years in Prison for Role in Securities Fraud Scheme
On September 1, Ebrahim Shabudin, the former Chief Credit Officer of a San Francisco-based bank, was sentenced to 97 months in prison for his involvement in a securities fraud scheme stemming from the bank’s 2009 financial collapse. In 2008, the Troubled Asset Relief Program (TARP) gave the bank roughly $298 million in federal funds. The FDIC took over the bank in 2009 and stated that it was “the ninth largest failure since 2007 of a bank insured by the FDIC’s Deposit Insurance Fund.” In 2013, the FDIC estimated that the bank would accrue losses exceeding $1.1 billion; however, with the United States’ economic recovery, the estimated loss dropped to approximately $677 million.
The DOJ charged Shabudin with “conspiring with others within the bank to falsify key bank records as part of a scheme to conceal millions of dollars in losses and falsely inflate the bank’s financial statements.” Shabudin allegedly falsified records filed with the SEC and the FDIC pertaining to the bank’s 2008 third and fourth quarters and year-end earnings per share. On March 25, 2015, Shabudin was found guilty on seven charges: (i) conspiracy to commit securities fraud; (ii) securities fraud; (iii) falsifying corporate books and records; (iv) false statements to accountants; (v) circumventing internal accounting controls; (vi) conspiracy to commit false bank entries; and (vii) false bank entries. In addition to the prison sentence, U.S. District Judge White ordered the former Chief Credit Officer to undergo three years of supervised release and pay $348,000 in restitution. Both the bank’s CFO and Senior Vice President pleaded guilty to similar charges last year and currently await sentencing.