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U.K. subsea services company and subsidiaries to pay $440,000 for Cuban and Iranian sanctions violations
On April 11, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced two settlements totaling more than $440,000 with a U.K. subsea services company and certain subsidiaries that operate in the oil and gas industry. The first settlement, for $227,500, resolves potential civil liability for seven alleged violations of the Cuban Assets Control Regulations (CACR). According to OFAC, two of the company's Malaysian affiliates produced analytical reports and conducted workshops for oil well drilling projects in Cuban territorial waters related to projects managed by companies including Venezuela’s state-owned oil company, which was previously designated by OFAC in January (see InfoBytes coverage here). OFAC considered various aggravating factors—including that the alleged violations constitute an egregious case—and noted that the company/subsidiaries “willfully violated U.S. sanctions laws and regulations when they knowingly dealt with Cuban interests despite prior notification of their unlawfulness.” OFAC also noted that senior managers “deliberately concealed their dealings with Cuba on multiple occasions.” OFAC considered numerous mitigating factors, including the company/subsidiaries’ voluntarily self-disclosure of the apparent violations and remedial efforts taken to avoid similar violations from occurring in the future.
The same day OFAC announced a second settlement, this time for $213,866, which resolves potential civil liability for 13 alleged CACR violations. The settlement also resolves three alleged violations of the Iranian Transactions and Sanctions Regulations (ITSR) by the company’s U.S.-based parent company. According to OFAC, the company issued sanctions compliance guidance to all of its subsidiaries with instructions that transactions with Cuba and Iran (including indirect third parties) were prohibited. However, certain subsidiaries disregarded the guidance and allegedly engaged in transactions within Cuban and Iranian territorial waters. In reaching the settlement amount, OFAC determined, among other things, that (i) the company voluntarily self-disclosed the apparent violations; (ii) the alleged violations constitute a non-egregious case; (iii) the subsidiaries have confirmed the conduct has been terminated; and (iv) remedial efforts have been undertaken to minimize the risk of similar violations from occurring in the future.
London-based financial institution to pay $1.1 billion for U.S. sanctions violations
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.
FTC obtains $50.1 million judgment against publisher; settles deceptive marketing matter
On April 3, the FTC announced that the U.S. District Court for the District of Nevada ordered a publisher and conference organizer and his three companies (defendants) to pay more than $50.1 million to resolve allegations that the defendants made deceptive claims about the nature of their scientific conferences and online journals, and failed to adequately disclose publication fees in violation of the FTC Act. Among other things, the FTC alleged, and the court agreed, that the defendants misrepresented that their online academic journals underwent rigorous peer reviews but defendants did not conduct or follow the scholarly journal industry’s standard review practices and often provided no edits to submitted materials. The court determined that the defendants also failed to disclose material fees for publishing authors work when soliciting authors and often did not disclose fees until the work had been accepted for publication. The court also found that the defendants falsely advertised the attendance and participation of various prominent academics and researchers at conferences without their permission or actual affiliation.
In addition to the monetary judgment, the final order grants injunctive relief and (i) prohibits the defendants from making misrepresentations regarding their publications and conferences; (ii) requires that the defendants clearly and conspicuously disclose all costs associated with publication in their journals; and (iii) requires the defendants to obtain express written consent from any individual the defendants represent as affiliated with their products or services.
On the same day, the FTC also announced a settlement with a subscription box snack service to resolve allegations that the company violated the FTC Act by misrepresenting customer reviews as independent and failing to adequately disclose key terms of its “free trial” programs. Specifically, the FTC alleged that the company provided customers with free products and other incentives in exchange for posting positive online reviews and misrepresented that independent customers made the reviews or posts. The company also allegedly offered “free trial” snack boxes without adequately disclosing key terms of the offer, including the stipulation that if the trial was not canceled on time, the customer would be automatically enrolled as a subscriber and charged the “total amount owed for six months of snack box shipments.” The proposed order, among other things, prohibits the specified behavior and requires the company to pay $100,000 in consumer redress.
CFPB settles with online lead aggregator for $4 million
On March 28, the U.S. District Court for the Central District of California entered a stipulated final judgment and order resolving the CFPB’s allegations against a California-based company for allegedly buying and selling personal information from payday and installment loan applications without properly vetting buyers and sellers. As previously covered by InfoBytes, the CFPB’s December 2015 complaint alleged that, among other things, the company (i) knew or should have known that the lead generators in its network used false or misleading statements to obtain consumer information; and (ii) connected consumers with lenders that offered less favorable loan terms than were otherwise available, did not comply with state usury limits, or claimed they were exempt from state regulation and jurisdiction. The stipulated order requires the company to pay $1 million for consumer redress and $3 million in civil money penalties. Additionally, the company is banned from acting as a lead generator, lead aggregator, or data broker in connection with the offering of certain loans. The company neither admitted nor denied the allegations.
FTC settles deceptive practices allegations with office supply company, tech-support vendor
On March 27, the FTC announced it had entered into two stipulated orders for permanent injunction and monetary judgment (see here and here) against an office supply company and its California-based tech-support services vendor (defendants) for allegedly violating the FTC Act by selling computer repair and technical services to consumers who were told the company’s software program had detected malware symptoms on their computers. According to the FTC’s complaint, from approximately 2009 to November 2016, the defendants allegedly used a software program marketed as a “PC Health Check Program”—among other names—to “facilitate the sale of computer repair services to . . . retail customers.” The program, which claimed to detect malware symptoms on consumers’ computers, actually based the results on answers to questions consumers were asked at the beginning of the program, including whether the computer had issues with displayed pop-up ads or other problems, ran slow, received virus warnings, or crashed often. The FTC claimed the scan had no connection to the malware symptoms results and that, since at least 2012, the defendants allegedly knew that the program falsely reported malware symptoms but continued to reward store managers and employees who generated sales from the program until late 2016. The proposed order imposes a combined $35 million monetary judgment, bans the office supply company from making misrepresentations concerning the security or performance of consumers’ electronic devices, and requires the company to ensure that existing and future software providers do not engage in the prohibited conduct. The order also prohibits the vendor from misrepresenting or helping others to misrepresent the performance or detection of security issues on consumers’ electronic devices.
Law firms settle with CFPB over debt relief fee allegations
On March 27, the U.S. District Court for the Central District of California entered a consent judgment ending a CFPB lawsuit against a group of affiliated law firms and their managing attorneys. As previously covered by InfoBytes in 2017, the Bureau’s enforcement action alleged that the defendants violated the Telemarketing Sales Rule by, among other things, (i) collecting improper fees in advance of providing debt relief services; (ii) misrepresenting that advance fees would not be charged; and (iii) providing substantial assistance to another company it knew or should have known was engaged in acts or practices that violated the rule. Under the terms of the consent judgment, the defendants—who have neither admitted nor denied the Bureau’s allegations or the factual findings outlined in the judgment—agreed to pay approximately $35.3 million in redress to affected consumers and a $40 million civil money penalty. However, based on the defendants’ inability to pay this amount, full payment is suspended subject to the defendants paying $50,000 to affected consumers and $1.00 toward the CMP.
OFAC reaches settlement with tool company for alleged Iranian sanctions violations
On March 27, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $1,869,144 settlement with a U.S. tool manufacturer and its China-based subsidiary for 23 alleged violations of the Iranian Transactions and Sanctions Regulations (ITSR). The settlement resolves potential civil liability for the company’s alleged transactions, valued at over $3.2 million, involving the subsidiary’s exporting and attempts to export 23 shipments of power tools and spare parts “with knowledge that such goods were intended specifically for supply, transshipment, or reexportation, directly or indirectly, to Iran.” Because the ITSR generally prohibit non-U.S. subsidiaries of U.S. persons from knowingly engaging in transactions with Iran, this settlement illustrates the importance of implementing OFAC compliance measures at such subsidiaries.
In arriving at the settlement amount, OFAC considered various aggravating factors and characterized the alleged violations as “an egregious case.” While the company voluntarily self-disclosed the alleged violations on behalf of its subsidiary, OFAC stated, among other things, that the company allegedly failed to implement procedures to monitor and audit the subsidiary’s compliance with applicable sanctions policies post-acquisition. Moreover, OFAC claimed that the subsidiary’s senior management continued to export goods to Iran, despite executing written agreements stating they would not engage in such conduct and attending compliance training sessions.
OFAC also considered numerous mitigating factors, including that (i) neither the company nor the subsidiary have received a penalty or finding of a violation in the five years prior to the transactions at issue; (ii) the company immediately implemented “substantive remedial efforts,” including halting all of the subsidiary’s exports and hiring an independent investigator; and (iii) the company cooperated with OFAC’s investigation. OFAC noted that the company has committed to taking corrective actions to minimize the risk of recurring conduct.
Visit here for additional InfoBytes coverage of actions related to Iran.
Financial services firm settles SEC’s American Depositary Receipts allegations
On March 22, the SEC announced a settlement with a financial services firm to resolve allegations that certain associated persons on its securities lending desk allegedly “improperly borrowed” pre-released American Depositary Receipts (ADRs)—“U.S. securities that represent shares in foreign companies”—from non-firm brokers who did not own the foreign shares required to support those ADRs. The SEC noted in its press release that ADRs can be pre-released without the deposit of foreign shares only if (i) the brokers receiving the ADRs have an agreement with a depositary bank; and (ii) “the broker or its customer owns the number of foreign shares that corresponds to the number of shares the ADR represents.” The SEC alleged that the firm’s practices violated the Securities Act of 1933 and led to “inappropriate short selling and dividend arbitrage that should not have been occurring.” Moreover, the SEC claimed that the firm’s supervisory policies and procedures “failed to prevent and detect” the securities laws violations. The firm neither admitted nor denied the SEC’s allegations, but agreed to pay more than $4.4 million in disgorgement, roughly $725,000 in prejudgment interest, and a civil money penalty of approximately $2.9 million. The SEC’s order acknowledges the bank’s cooperation in the investigation.
FTC reaches settlements with mega-robocallers
On March 26, the FTC announced settlements issued against four separate operations for allegedly placing billions of illegal robocalls to consumers selling auto warranties, debt-relief services, home security systems, veterans’ charities and Google search results services. The actions are part of the FTC’s ongoing efforts to combat illegal robocalls. According to the FTC, the companies—along with several of their affiliates and leaders—allegedly violated the FTC Act and the Telemarketing Sales Rule (TSR), including its Do Not Call provisions.
Proposed settlements issued against two related operations and their leaders—who, according to the FTC’s complaint, developed and enabled a software dialing platform that resulted in more than one billion robocalls—ban the defendants from engaging in telemarketing activities utilizing an autodialer, and imposes judgements ranging from $1 million to $2.7 million, of which two are fully suspended due to the defendants’ inability to pay. The FTC also reached a final settlement against defendants who allegedly placed robocalls to pitch fake debt-relief services promising lowered credit card interest rates and interest payment savings. The order permanently bans the defendants from engaging in telemarketing and debt-relief services, and imposes a $3.15 million judgment, which will be suspended following the turnover of available assets. Separately, the FTC reached a proposed settlement with a defendant who allegedly used robocalls promoting fake veterans’ charities to solicit donations, which he eventually sold for his own benefit. The proposed order bans the defendant from engaging in telemarketing services or soliciting charitable contributions, prohibits him from making future misrepresentations, and imposes a $541,032 monetary judgment, which will also be suspended following the turnover of available assets. Finally, the FTC announced proposed settlements against three defendants (see here, here, and here) whose Florida-based operations allegedly violated the TSR by falsely claiming to represent Google and making threats and promises to businesses concerning search results and page placements. The terms of the proposed settlements, among other things, ban the defendants from deceptive sales practices, and require the defendants to disclose their identities during telemarketing sales calls. Monetary judgements imposed against the defendants and their companies range from $1.72 million to $3.62 million, and will be partially suspended due to their inability to pay.
FDIC resolves bank auditing claim for $335 million
On March 15, the FDIC announced a settlement with an accounting firm to resolve a professional negligence action stemming from allegations that the firm failed to detect a massive mortgage fraud in its audits of an Alabama-based bank that failed in 2009. According to a July 2018 order entered by the U.S. District Court for the Middle District of Alabama, the court originally ruled that the accounting firm owed more than $625 million in damages for negligent audits. The court’s findings, among other things, determined that the firm “did not design its audits to detect fraud,” which prevented it from detecting the mortgage fraud scheme.
One member of the FDIC Board, Martin J. Gruenberg, released a statement noting that he “voted against authorizing the settlement because the settlement did not include a written admission of liability” from the accounting firm.