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InfoBytes Blog

Financial Services Law Insights and Observations


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  • Eighth Circuit Holds Oral Promise to Postpone Foreclosure Sale Is Not Enforceable under Minnesota Law


    On May 18, former President of the Nicaraguan Football Federal Julio Rocha was extradited from Switzerland to the United States. He was the final FIFA official to be extradited following the arrests made in Zurich in May 2015, according to the Swiss Federal Office of Justice, which has handled the extradition proceedings over the past year. Mr. Rocha was indicted by the DOJ in May 2015 along with 13 other FIFA officials.

    Previous Scorecard coverage on the FIFA investigations can be found here.

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  • D.C. Federal Court Holds FCRA Credit Report Notice Requirements Apply to Auto Dealers Engaging in Third Party Financing Transactions

    Consumer Finance

    On May 10, Deputy U.S. Attorney General Sally Yates spoke at the New York City Bar Association’s White Collar Crime Conference and expanded on the DOJ’s Individual Accountability Policy, which informally bears Yates’ name (the Yates Memo).   The DOJ issued the Yates Memo in September 2015, and Yates’ remarks were focused on why DOJ issued the policy and how it has been working in practice.  Yates made clear that “holding individuals accountable for corporate wrongdoing has always been a priority for” DOJ, but that the policy memorandum was necessary to overcome “real world challenges” that DOJ encounters (e.g., convoluted corporate structures and lines of authority, data privacy laws, and inability to compel foreign witness testimony) so that it can hold individuals responsible for corporate wrongdoing.

    In practice, Yates said that the policy has not caused the parade of horrors that defense attorneys and client alerts have predicted.  For example, she stated that she was not aware of any company refusing to cooperate with DOJ as a result of the policy.  She further added that “no one has told us that they will be forced to waive privilege in order to comply with the policy.”  Instead, she said that the policy already has caused a shift toward higher compliance standards within companies.

    Yates also highlighted how DOJ attorneys are focused on individuals from the outset of an investigation: “The first thing the lawyers briefing me discuss is what we are doing to identify the individuals involved and what the company is doing during the course of its cooperation to meet its obligation to provide all the facts about individual conduct.”  In addition civil enforcement efforts have broadened to focusing on individuals.  According to Yates, “[a]bility to pay is one of the factors considered, but it’s no longer the determinative factor in deciding whether to bring an action in the first instance.

    FTC FCRA Auto Finance

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  • Arizona Supreme Court Holds Beneficiary Does Not Have to Prove Right to Foreclose


    The Huffington Post’s recently-published multi-part investigation centering on Monaco-based Unaoil and allegations of bribing foreign government officials to secure contracts within the oil and gas industry is starting to generate FCPA repercussions.  Two companies that used Unaoil’s consulting services and were identified in the investigative pieces, KBR and FMC Technologies, announced in late April U.S. securities filings that they each have received inquiries from the DOJ in connection with an FCPA investigation into Unaoil’s activities.  Both KBR and FMC Technologies also stated that they are cooperating with the DOJ’s inquiries.

    In late March, the Huffington Post reported that “[h]undreds of major international corporations,” including KBR, FMC Technologies, Rolls-Royce, Halliburton, Samsung, and Hyundai, among many others, utilized Unaoil’s services to win contracts in the Middle East, Africa, and the former Soviet Union.  The Huffington Post alleged that Unaoil engaged in widespread foreign bribery to achieve results for its clients:  “The Monaco-based company specialises in paying bribes for multinational clients on the basis that it can deliver a valuable edge in bidding for oil and gas contracts worth hundreds of millions of dollars.”  Unaoil has said that it is “shocked” by the “unfounded” allegations and has said that it will defend itself and its management “vigorously.”

    Houston-based KBR is no stranger to FCPA investigations.  In 2009, KBR and its former parent Halliburton paid a then-record $579 million to resolve charges that KBR participated in a decade-long scheme to bribe Nigerian government officials to obtain engineering, procurement, and construction contracts.   This time around, the Huffington Post alleged that KBR utilized Unaoil “to help it win oil and gas contracts in Kazakhstan.”  The alleged activity in Kazakhastan was occurring while the DOJ was investigating KBR’s activities in Nigeria, according to the Huffington Post.

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  • Colorado Division of Real Estate Clarifies Mortgage Company Registration Exemptions


    On May 11, following a five-week trial in a London court, a former manager of Securency PTY Ltd (Securency) was convicted of four counts of making corrupt payments to a foreign official in violation of the Prevention of Corruption Act 1906.  Peter Chapman, the former manager of the polymer banknote manufacturer’s Africa office, was acquitted on two other counts.   Chapman was convicted of bribing an agent of Nigerian Security Printing and Mining PLC in order to secure contracts for the purchase of reams of polymer substrate from Securency.  The total amount of bribes to the agent equaled approximately $205,000.  On May 12, he was sentenced to two and a half years (30 months on each convicted count, to be served concurrently).

    The UK Serious Fraud Office (SFO) prosecuted the case following a joint investigation by the SFO and the Australian Federal Police, which initiated the investigation in May 2009.

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  • Tennessee Enacts Legislation Requiring Reasonable Basis to File Liens


    On May 15, Tennessee enacted SB2980, a bill that established provisions relating to liens on real or personal property. Under the bill, it is a misdemeanor to knowingly prepare, sign, or file any lien or other document intended to encumber real or personal property without a reasonable basis for doing so. The bill becomes effective on July 1, 2012.

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  • Federal Reserve Establishes Securities Holding Companies Registration Procedures


    On May 30, the Federal Reserve Board issued a final rule that establishes procedures for nonbank companies that own at least one registered securities broker or dealer to register for supervision by the Federal Reserve Board as a securities holding company (SHC). The Dodd-Frank Act eliminated supervision of SHCs by the SEC and provided SHCs with the ability to seek supervision by the Federal Reserve Board to satisfy the requirements of foreign regulators or foreign law that companies be subject to consolidated supervision in the United States. The final rule includes capital and financial condition requirements and specifies other information necessary for registration. Once registered, an SHC would be supervised and regulated as if it were a bank holding company. However, the restrictions on nonbanking activities in section four of the Bank Holding Company Act would not apply to the supervised SHC.

    Federal Reserve SEC

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  • Freddie Mac Announces Use of House Finance Agency Funds Eligible for Certain Relief Refinance Mortgages Payments


    On April 28, Key Energy Services, an onshore, rig-based well servicing contractor with operations in the United States, Mexico, and Russia, announced that the DOJ had closed its investigation into possible violations of the FCPA in relation to the company’s Mexico operations and declined prosecution. The company stated that it is still in negotiations with the SEC regarding possible violations involving the company’s Russian business. Key Energy Services has been under investigation by the SEC and DOJ since 2014, when the company made a voluntary disclosure to both agencies about the Mexico allegations.

    Freddie Mac

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  • New York Thrift Charged with Mortgage Fraud by Manhattan District Attorney


    On May 31, the Manhattan District Attorney’s Office (DA) announced charges against Abacus Federal Savings Bank (Bank) and nineteen of its former employees for their alleged involvement in a securities and mortgage fraud scheme from 2005 to 2010 that resulted in the sale of “hundreds of millions of dollars worth of fraudulent loans” to Fannie Mae. The DA charged the Bank with allegedly falsifying mortgage application documents, primarily for immigrants working in cash-only businesses, by inflating their income, assets, and job titles, as well as falsifying employment verifications and other income sources to meet investor guidelines to enable the Bank to sell loans to Fannie Mae. The Office of the Comptroller of the Currency, the Internal Revenue Service, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, and Office of the Inspector General provided assistance and cooperation with the investigation as part of their participation in the Residential Mortgage-Backed Securities Working Group.

    FDIC Fannie Mae OCC

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  • CFPB Delays Release of "Ability-to-Repay" Rule


    On May 31, the CFPB announced that it has reopened the comment period for the proposed “ability-to-repay” rule that would require creditors to verify a consumer’s ability to repay prior to making a consumer credit transaction secured by a dwelling. The rule would also define a “qualified mortgage” that has a presumption of compliance with the ability-to-repay requirement. The CFPB is specifically seeking comments on new loan data provided to the CFPB by the Federal Housing Finance Agency. According to the CFPB, the loan data, which contains loan-level information on the characteristics and performance of all single-family mortgages purchased or guaranteed by Fannie Mae and Freddie Mac, can be used to analyze the impact of certain variables on a consumer’s ability to repay such as debt-to-income ratio. The CFPB is also seeking comments regarding the potential risk of litigation in connection with the proposed rule. The CFPB specifies that it has not reopened for comment any other aspect of the proposed rule. Comments are due by July 9, 2012. In its press release, the CFPB states that it expects to issue its final rule before the end of 2012. For more information on the proposed rule, see InfoBytes, Apr. 22, 2011.

    CFPB Freddie Mac Fannie Mae Qualified Mortgage

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  • Seventh Circuit Holds TCPA Prohibits Automated Calls to Cell Phones without Consent from Current Subscriber


    On May 11, the U.S. Court of Appeals for the Seventh Circuit held that the Telephone Consumer Protection Act (TCPA) requires consent from a current cell phone subscriber to receive automated calls – even if a former subscriber to the same number had previously given consent to be contacted. Soppet v. Enhanced Recovery Company, LLC, No. 11-3819, 2012 WL 1650485 (7th Cir. May 11, 2012). The court affirmed a district court decision certifying a class of consumers who alleged that their cell phones were automatically dialed in violation of TCPA. The defendant debt collectors argued that it was not a violation of the TCPA to call a cell phone number if a previous subscriber to that number had given the consent required by the TCPA because the previous subscriber was the “intended recipient” of the call. The court rejected this argument because, even though the TCPA does not define who the “called party” is that must consent to be contacted, its use throughout the TCPA indicates that “called party" refers to the currently subscribed cell phone user, and not to any previous user.

    Privacy/Cyber Risk & Data Security

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