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DOJ Announces Real Estate Investor's Guilty Plea to Foreclosure Bid Rigging and Fraud Conspiracies
On April 2, the DOJ announced a guilty plea by a Northern California real estate investor to charges of bid rigging and fraud conspiracy at foreclosure auctions in violation of the Sherman Act. The charges are the outcome of the DOJ’s antitrust investigations into bid rigging and fraud at foreclosure auctions in Northern California, during the course of which 52 individuals have pled guilty to criminal charges. According to the DOJ, the Defendant allegedly worked with others to designate one bidder to win the selected properties at public foreclosure auctions and then held second, private auctions with the conspirators. The DOJ also charged the Defendant with conspiracy to commit mail fraud in connection with the bid rigging activities.
DOJ Charges Former Federal Agents with Bitcoin Wire Fraud and Money Laundering
On March 30, the DOJ filed a criminal complaint against two former federal agents on charges of wire fraud and money laundering of digital currency stolen during the investigation of Silk Road. According to the DOJ, both agents were assigned to the Baltimore Silk Road Task Force – one a Special Agent with the Drug Enforcement Administration (DEA), the other with the U.S. Secret Service (USSS). The individual working with the DEA allegedly developed multiple online personas during his undercover investigation of Robert Ulbricht, the alleged operator of Silk Road, and “engaged in a broad range of illegal activities calculated to bring him personal financial gain.” Among other things, the complaint alleges that the DEA agent “sought to extort [Ulbricht] by seeking monetary payment, offering in exchange not to provide the government with certain information if [he] paid $250,000.” The DOJ is accusing the USSS agent of stealing a large amount of bitcoins from the Silk Road website, transferring the bitcoins into a Japanese-based digital currency exchange, and then completing wire transfers from the Japanese exchange into a newly created bank account. The USSS agent self-surrendered on March 30 and the DEA agent was arrested on Friday, March 27.
DOJ Announces Indictment of U.S. Senator Menendez and Friend Salomon Melgen for Conspiracy, Bribery, and Honest Services Fraud
On April 1, the DOJ indicted Senator Robert Menendez and Florida ophthalmologist Salomon Melgen for an alleged bribery scheme in which Menendez accepted financial gifts from Melgen in exchange for using his position of power to assist Melgen in furthering financial and personal interests. According to the DOJ, from January 2006 and January 2013, Menendez accepted gifts including a vacation on the coast of the Dominican Republic, hundreds of thousands of dollars to his 2012 Senate campaign, and numerous trips on Melgen’s private jet. In return for these gifts, which were never reported on the appropriate financial disclosure forms, Menendez (i) pressured executive agencies regarding a dispute between Melgen and the Dominican Republic government concerning a contract relating to the “exclusive screening of containers coming through the Dominican ports;” (ii) advocated on Melgen’s behalf in regards to a Medicare billing dispute; and (iii) actively supported the visa applications of persons related to or in a relationship with Melgen.
HUD Announces National Fair Housing Media Campaign; DOJ Acting Assistant AG Gupta Delivers Remarks
On April 1, HUD held a special Fair Housing event and announced a national media campaign to help ensure that all Americans – regardless of race, color, national origin, religion, gender, family status, and disability – receive equal access to housing, as per the FHA. Through various media channels, the new campaign will (i) increase the public’s awareness of housing discrimination; and (ii) explain how to report violations of the FHA. The new campaign is designed to further the agency’s enforcement efforts when FHA violations occur. At the same event, DOJ Acting Assistant AG Gupta delivered remarks regarding recent actions taken in response to alleged housing discrimination. Specifically, Gupta noted that while racial discrimination remains prevalent, familial status discrimination has recently become a significant concern and that the DOJ and HUD “continue to see the scourge of sexual harassment in housing.” Finally, Gupta emphasized that HUD’s proposed rule on Affirmatively Furthering Fair Housing is “an important way to ensure that the promises of the Fair Housing Act will continue to be fulfilled.”
DOJ Enters Into Plea Agreement with Oil Company For Violating U.S. Sanctions Laws
On March 25, the DOJ entered into a plea agreement with an oil company that agreed to pay over $230 million and plead guilty for facilitating illegal transactions and participating in trade activities with Iran and Sudan. According to the DOJ, from 2004 through 2010, the oil company’s subsidiaries provided oilfield services to customers in Iran and Sudan, and failed to adhere to U.S. sanctions against Iran and Sudan and enforce internal compliance procedures, resulting in a conspiracy to violate the International Emergency Economic Powers Act. Pending court approval, among other stipulations, the plea agreement also requires the oil company to (i) cease all operations in Iran and Sudan during the probation period; (ii) submit to a three-year period of corporate probation and agree to continue to cooperate with the government and not commit any additional felony violations of U.S. Federal law; and (iii) respond to requests to disclose information related to the company’s compliance with U.S. sanctions laws when requested by U.S. authorities.
D.C. Federal District Court Dismisses Lawsuit Seeking to Block $13 Billion DOJ Settlement
On March 18, the U.S. District Court for the District of Columbia dismissed a lawsuit brought by a non-profit organization challenging the $13 billion global settlement agreement entered by the U.S. Department of Justice (DOJ) and a national financial services firm and banking institution arising out of the 2008 financial crisis. Better Markets, Inc. v. U.S. Dept. of Justice, No. CV 14-190 (BAH), 2015 WL 1246104 (D.D.C. Mar. 18, 2015). The plaintiff—an advocacy group founded to “promote the public interest in the financial markets”—alleged that the DOJ’s decision to enter into the 2013 settlement agreement with the firm was in violation of the Constitution, the Administrative Procedure Act, and FIRREA. The court dismissed the lawsuit on grounds that the advocacy group lacked standing, concluding that the group had failed to show “a cognizable harm, or that the relief it seeks will redress its alleged injuries.”
Federal and State Agencies Announce $714 Million FX Settlement
On March 19, four federal and state agencies –DOJ, the Department of Labor (DOL), the SEC, and New York Attorney General – entered into a proposed $714 million settlement agreement against a large bank to resolve allegations of fraudulent conduct involving the pricing and misleading representation of a specific foreign exchange product. According to the settlement, for over a decade the bank misled clients about the pricing they received on the bank’s automatic platform used to execute trades on the clients’ behalf. The bank quoted clients prices that were at or near the least favorable interbank rate, purchased the most favorable interbank rate for themselves, and sold the highest prices to clients, profiting from the difference. Under the proposed settlement, the bank will pay (i) a $167.5 million civil penalty to the DOJ to resolve allegations brought under federal statutes including FIRREA and the False Claims Act; (ii) $167.5 million to the State of New York to resolve claims brought under the Martin Act; (iii) $14 million to the DOL for ERISA claims, (iv) $30 million to the SEC to resolve violations of the Investment Company Act, and (v) $335 million to settle private class action suits filed by customers. The bank also agreed to end its employment relationship with senior executives involved in the conduct.
DOJ Assistant AG Delivers Remarks on Anti-Money Laundering and Financial Crimes
On March 16, DOJ Assistant AG Leslie Caldwell delivered remarks at the annual ACAMS anti-money laundering conference regarding the importance of establishing and maintaining robust compliance programs within financial institutions to prevent criminal activity, and recent DOJ enforcement actions taken against financial institutions in the anti-money laundering space. Caldwell outlined the integral parts of an effective compliance program, to include: (i) providing sufficient funding and access to essential resources; (ii) incentivizing compliance and ensuring that disciplinary measures are even handed for low-level and senior employees; and (iii) ensuring that third parties interacting with the institutions understand the institution’s expectations and are serious about compliance management. Caldwell emphasized that the strength of an institution’s compliance program is “an important factor for prosecutors in determining whether to bring charges against a business entity that has engaged in some form of criminal misconduct.” Caldwell highlighted the Criminal Division’s recent actions involving financial fraud and sanctions violations, observing that many have resulted in deferred prosecution agreements or non-prosecution agreements (DPAs and NPAs), enforcement tools the DOJ utilizes in the Criminal Division’s cases. Finally, addressing concerns that the DOJ and other law enforcement authorities have targeted the financial industry for investigation and prosecution, Caldwell stated, “banks and other financial institutions continue to come up on our radar screens because they, and the individuals through which they act, continue to violate the law, maintain ineffective compliance programs or simply turn a blind eye to criminal conduct to preserve profit.”
DOJ Announces Settlement with California Bank Over BSA & FIRREA Violations
On March 10, the DOJ announced a $4.9 million civil and criminal settlement with a California-based bank. The bank admitted to the DOJ’s allegations that, from December 2011 through July 2013, it ignored warning signs indicating that its third party processor was defrauding hundreds of thousands of consumers by allowing fraudulent merchants to withdraw money from customers’ accounts without consent. The bank chose to ignore the complaints and inquiries it received regarding the third party processor’s activity, failing to terminate its affiliation with the entity or file a Suspicious Activity Report. The DOJ’s complaint alleges that the bank violated FIRREA; the $4.9 million settlement will cover both the criminal and civil charges, however under an agreed deferred prosecution agreement, criminal charges will be deferred for two years contingent upon the bank admitting to wrongdoing and giving up claims to approximately $2.9 million from accounts seized by the government.
New York DFS Takes Action Against Bank for BSA/AML Compliance Deficiencies
On March 12, the New York DFS issued a consent order against a Germany-based global bank for alleged Bank Secrecy Act and other anti-money laundering (BSA/AML) compliance violations that occurred between 2002 and 2008. According to the DFS’s press release, certain bank employees were selected “to manually process Iranian transactions — specifically, to strip from SWIFT payment messages any identifying information that could trigger OFAC-related controls and possibly lead to delay or outright rejection of the transaction in the United States.” The DFS also alleges that the bank’s New York branch failed to implement proper BSA/AML compliance thresholds, allowing certain alerts regarding suspicious transactions to be excluded. Under the terms of the consent order, the bank must pay a $1.45 billion penalty, to be distributed as follows: $610 million to the DFS; $300 million to the U.S. Attorney’s Office for the Southern District of New York; $200 million to the Federal Reserve; $172 million to the Manhattan District Attorney’s Office; and $172 million to the U.S. DOJ. Additionally, the order requires that the bank “terminate individual employees who engaged in misconduct, and install an independent monitor for Banking Law violations in connection with transactions on behalf of Iran, Sudan, and a Japanese corporation that engaged in accounting fraud.”