Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
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.
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 FCPA Scorecard coverage of this investigation can be found here.
On April 19, the Internal Revenue Service published a final rule that requires U.S. banks to report annually the deposit interest paid to nonresident alien account holders. The reporting requirement will apply to interest payments made on or after January 1, 2013. The IRS is intending to collect this information to help combat offshore tax evasion by (i) ensuring that the IRS can exchange information with other jurisdictions, (ii) supporting implementation of the Foreign Account Tax Compliance Act, and (iii) making it more difficult for U.S. taxpayers to falsely claim to be nonresidents in order to avoid taxes on deposit interest income. To address concerns about the confidential treatment of collected information, the final rule limits the IRS’s exchange of the reported information to those countries with which the U.S. has an exchange-of-information agreement. The IRS believes that those agreements contain legal limitations and administrative safeguards to ensure confidential treatment of the information.
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.
On August 31, 2015, 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.
On August 13, the U.S. District Court for the District of Connecticut held in the individual prosecution of Lawrence Hoskins, a former executive of the U.K. division of Alstom Power, S.A., a French power and transportation company, that the government cannot charge a non-resident foreign national with conspiracy to violate the FCPA if he is not subject to direct liability under the statute due to lack of jurisdiction. United States v. Hoskins, No. 3:12-CR-238 (D. Conn. Aug. 13, 2015).
Under the FCPA’s anti-bribery provisions, jurisdiction extends to three types of individuals and entities: (1) domestic concerns, defined as U.S. citizens, residents, or nationals, or any company organized under the laws of a U.S. territory or having its principal place of business in the U.S.; (2) a United States issuer of securities, or any officer, director, employee, or agent thereof; and (3) any person who while in United States territory commits an act in furtherance of an FCPA violation. See 15 U.S.C. §§ 78dd-1, 78dd-2, 78dd-3. The government, however, has maintained a more expansive view of the FCPA’s jurisdiction. As detailed in its FCPA Resource Guide, the government has argued that “[a] foreign national or company may also be liable under the FCPA if it aids and abets [or] conspires with . . . an issuer or domestic concern, regardless of whether the foreign national or company itself takes any action in the United States.” This theory of liability was recently tested in Hoskins.
In Hoskins, the government alleged that Hoskins approved and authorized payments to consultants retained for the sole purpose of paying bribes to Indonesian government officials to secure a contract to build power stations for Indonesia’s state-owned electric company. Initially the indictment alleged that Hoskins was an agent of Alstom’s U.S. subsidiary, and thus an agent of a domestic concern. That count of the indictment was later amended to allege that he conspired by acting “together with” a domestic concern to violate the FCPA. Hoskins moved to dismiss the count, arguing that an individual cannot be prosecuted for conspiracy to violate the FCPA when he himself is not subject to the statute’s jurisdiction.
The district court agreed and applied the doctrine set forth in Gebardi v. United States, 287 U.S. 112 (1932): where Congress passes a criminal statute that excludes a certain class of individuals from liability, the government cannot evade congressional intent by charging those same individuals under a conspiracy or aiding and abetting theory of liability. The court examined the FCPA’s text and legislative history and determined that Congress did not intend to extend accomplice liability to non-resident foreign nationals who are not otherwise subject to direct liability. The court ultimately ruled that the government would have to prove at trial that Hoskins was acting as an agent of a domestic concern – and therefore subject to direct liability – in order to allege that he conspired to violate or aided and abetted a violation of the FCPA.
Recent developments at the FTC and CFPB provide some guidance on how regulators may approach disclosures on smartphones and other mobile devices.
The recent CFPB Remittance Rule on international remittance transfers indicates some flexibility in the provision of disclosures in the remittances context via a mobile device. Additionally, the FTC’s recent report on best practices in consumer data privacy notes the difficulty in providing privacy notices on the smaller screens of mobile devices and encourages shorter, more effective privacy policies as a result.
These developments raise a series of questions for corporate counsel to consider when advising on the drafting and delivery of mobile disclosures. Specifically, questions include:
- Is the length of the mobile disclosure document as brief and succinct as it can be? Does it use concrete, everyday words and the active voice? Do the disclosures avoid multiple negatives, technical jargon and ambiguous language?
- Are the mobile disclosures presented in a logical sequence? Are they laid out in clear, concise sentences, paragraphs and sections? Are they placed in equal prominence to each other, absent any other specific regulatory format or placement requirements? Is the content placed on a particular page appropriate for the sizing of the page on the mobile screen? If not, are textual or visual cues used to encourage scrolling?
- Does the mobile disclosure "call attention to itself?" Is it on a screen the mobile user must access or will likely access frequently? If not, is it behind a hyperlink on an introductory screen that is clearly labeled so as to convey the importance of the linked disclosure? Is it presented with a clear, visible heading and an easy-to-read typeface and typesize?
- Have various technical and other applicable industry standards been consulted in the process of designing, developing and displaying mobile disclosures?
The CFPB today put consumer lenders on notice that it “will use all available legal avenues, including disparate impact, to pursue lenders whose practices discriminate against consumers.” The CFPB intends to employ disparate impact when examining auto lenders, credit card issuers , student lenders, mortgage lenders, and other providers of consumer credit, allowing the CFPB to claim an institution has engaged in discriminatory lending based on the effects and not the intent of the lending practices. In remarks to the National Community Reinvestment Coalition today, CFPB Director Richard Cordray stated that “[t]he consequences of ‘disparate impact’ discrimination are very real and they affect consumers just as significantly as other forms of discrimination.” To help consumers identify and avoid credit discrimination, the CFPB also compiled and released new lending discrimination “tips and warning signs.”
Concurrent with the announcement, the CFPB published Bulletin 2012-04 to specifically reaffirm its commitment to applying disparate impact when conducting supervision and examination under the Equal Credit Opportunity Act (ECOA) and its implementing regulation, Regulation B. In support of this application, the CFPB cites what it refers to as the “consensus approach” outlined by a 1994 interagency Policy Statement on Discrimination in Lending, which notes court findings that discriminatory lending in violation of ECOA can be established through (i) overt evidence of discrimination, (ii) evidence of disparate treatment, and (iii) evidence of disparate impact. The CFPB also argues that the ECOA legislative history, as characterized in the original Regulation B adopted by the Federal Reserve Board, supports application of the disparate impact doctrine.
On July 28, NCR Corporation, a leading global provider of ATM machines, announced that the SEC had decided not to pursue an enforcement action following an investigation of the company’s FCPA compliance. In 2013, the company disclosed that an anonymous whistleblower had alleged various FCPA and other violations in China, the Middle East (including Syrian sanctions issues), and Africa. The company stated that it had investigated internally and determined the allegations to be without merit. The company then disclosed the matter to the SEC and the DOJ, both of whom requested additional information. The company did not provide an update regarding the status of the DOJ’s inquiries.
On April 9, the CFPB previewed its upcoming mortgage servicing rules, which likely will be proposed this summer and finalized in January 2013. The key aspects of the proposal relate broadly to (i) monthly mortgage statements, (ii) ARM adjustment disclosures, (iii) force-placed insurance, (iv) payment crediting, (v) error resolution and borrower inquiries, and (vi) borrower outreach and borrower information. The majority of the details were provided in an outline prepared for a Small Business Regulatory Enforcement Fairness Act (SBREFA) panel, which will consider the potential impact of the planned rules on small businesses. The outline includes model forms related to periodic statements, ARM reset notices, and force-placed insurance notices, which the CFPB has been testing in recent months. The CFPB release also included questions directed to the small entity representatives in order to assist the SBREFA panel in understanding the potential economic impacts of the particular proposals under consideration by the CFPB. Generally, the servicing proposals incorporate statutory changes imposed by the Dodd-Frank Act, which would go into effect in January 2013 unless final rules are issued on or before that date. The concepts in the proposal that do not address specific Dodd-Frank requirements are consistent with servicing requirements imposed by recent mortgage servicing consent orders and/or recent requirements for servicing delinquent loans owned by or serviced on behalf of Fannie Mae or Freddie Mac (see, e.g., Federal Reserve Board Consent Orders and Fannie Mae Ann. SVC 2011-08R).
- Kathryn L. Ryan to discuss "NMLS usage" at the NMLS Annual Conference & Training
- Jeffrey S. Hydrick to discuss "State legislative update" at the NMLS Annual Conference & Training
- Kathryn L. Ryan to speak at the "Business model primer" at the NMLS Annual Conference & Training
- Daniel P. Stipano to discuss "Dynamic customer due diligence and beneficial ownership from KYC to ongoing CDD and the new rule implementation" at the Puerto Rican Symposium of Anti-Money Laundering
- Michelle L. Rogers to discuss "Preparing for servicing exams in the current regulatory environment" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
- Jon David D. Langlois to discuss "Regulatory risks of convenience fees" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
- APPROVED Webcast: NMLS Annual Conference & Ombudsman Meeting: Review and recap
- Brandy A. Hood to discuss "Keeping your head above water in flood insurance compliance" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
- Melissa Klimkiewicz to discuss "Servicing super session" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
- Daniel P. Stipano to discuss "Lessons learned from recent high profile enforcement actions" at the Florida International Bankers Association AML Compliance Conference
- Moorari K. Shah to provide "Regulatory update – California and beyond" at the National Equipment Finance Association Summit
- Sasha Leonhardt and John B. Williams to discuss "Privacy" at the National Association of Federally-Insured Credit Unions Spring Regulatory Compliance School
- Aaron C. Mahler to discuss "Regulation B/fair lending" at the National Association of Federally-Insured Credit Unions Spring Regulatory Compliance School
- Heidi M. Bauer to discuss "'So you want to form a joint venture' — Licensing strategies for successful JVs" at RESPRO26
- Jonice Gray Tucker to discuss "Small business & regulation: How fair lending has evolved & where are we heading?" at CBA Live
- Jonice Gray Tucker to to discuss "DC policy: Everything but the kitchen sink" at CBA Live
- Daniel P. Stipano to discuss "Lessons learned from ABLV and other major cases involving inadequate compliance oversight" at the ACAMS International AML & Financial Crime Conference
- Daniel P. Stipano to discuss "A year in the life of the CDD final rule: A first anniversary assessment" at the ACAMS International AML & Financial Crime Conference
- Moorari K. Shah to discuss "State regulatory and disclosures" at the Equipment Leasing and Finance Association Legal Forum
- Hank Asbill to discuss "Pay no attention to the man behind the curtain: Addressing prosecutions driven by hidden actors" at the National Association of Criminal Defense Lawyers West Coast White Collar Conference
- Daniel P. Stipano to discuss "Keep off the grass: Mitigating the risks of banking marijuana-related businesses" at the ACAMS AML Risk Management Conference
- Daniel P. Stipano to discuss "Mid-year policy update" at the ACAMS AML Risk Management Conference
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program