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  • Israeli real estate conglomerate to pay $500,000 to resolve SEC allegations of FCPA violations

    Financial Crimes

    On March 9, an Israeli-based real estate conglomerate (the company) agreed with the SEC, pursuant to an administrative order, to pay $500,000 to resolve alleged violations of FCPA books and records and internal controls provisions. According to the order, the SEC found that from 2007 through 2012, the company and its Netherlands-based subsidiary paid millions of dollars to third party consultants and agents for purported services related to a Romanian real estate project and the sale of a real estate asset portfolio in the United States. The SEC found that these payments were made with no indication that any services were actually provided.

    The company did not admit or deny the SEC’s findings, but agreed to resolve this matter with a civil money penalty. In accepting the company’s offer for resolution, the SEC took into consideration the company’s self-reporting in 2016 to authorities in Romania and in the U.S., as well as its full cooperation with the investigation, including the hiring of outside counsel to conduct an internal investigation, the findings of which were shared with the SEC. The SEC also considered the extensive remedial measures the company has put into place as a result of those findings and the Commission’s suggestions.

    Financial Crimes SEC FCPA

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  • Several companies report developments in FCPA investigations

    Financial Crimes

    In the second half of February, at least three unrelated companies have publicly disclosed the existence and/or status of various FCPA investigations in forms filed with the SEC:

    • Data analytics company: On February 23, a data analytics company disclosed that the DOJ and SEC have both declined to pursue FCPA enforcement actions in connection with a subsidiary’s “questionable expenditures for travel, gifts and other expenses” in Turkey. As the Dayton, Ohio-based company previously disclosed on August 4, 2017, the company initiated an internal investigation after discovering the questionable expenditures, self-reported the issues to the DOJ and SEC, cooperated with the agencies, and undertook certain remedial actions.
    • Dialysis provider​: On February 27, a dialysis provider disclosed that the DOJ and SEC are investigating potential FCPA violations related to “certain conduct in the company’s products business in a number of countries,” and that it has reserved €200 million for a potential settlement with the agencies. After receiving “certain communications alleging conduct in countries outside the U.S. that might violate the FCPA or other anti-bribery laws” in 2012, the Bad Homburg, Germany-based company conducted an internal investigation, self-reported the issues to the DOJ and SEC, cooperated with the agencies, and undertook certain remedial actions.
    • Energy company​: On February 28, an energy company disclosed that the DOJ and SEC have both declined to pursue FCPA enforcement actions in connection with “self-reported [accounting] errors and possible irregularities” at an Italian subsidiary conducting business in the Middle East. In April 2016, the Houston-based company previously disclosed that it was restating its 2015 financial statements and conducting an internal investigation related to the accounting issues. Although “the SEC’s investigation related to the circumstances giving rise to the restatement is continuing,” the FCPA piece of the investigation has concluded.

    Financial Crimes SEC DOJ FCPA

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  • French pharmaceutical company announces DOJ declination in FCPA investigation

    Financial Crimes

    As previously covered, a French pharmaceutical company announced in October 2014 that it was investigating whether certain payments made by company employees to healthcare professionals in the Middle East and Africa violated the FCPA. The company launched an investigation to review payments made from 2007 to 2012 as a result of anonymous whistleblower allegations, and self-reported the allegations to the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC). On March 7, 2018, the company announced in its Form 20-F SEC filing that the DOJ notified the company in February 2018 that it was closing the inquiry into the self-reported whistleblower allegations. The company is continuing to cooperate with the SEC’s review of the allegations.

    Financial Crimes DOJ SEC FCPA Whistleblower

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  • Texas State Securities Board issues order halting unregistered cryptocurrency trading operation


    On February 26, the Texas State Securities Board (Board) issued an emergency cease and desist order (order) to an unregistered cryptocurrency trading operation for allegedly targeting investors through fraudulent and materially misleading online advertisements and offering unregistered securities for sale. According to the order, the company purportedly—in addition to intentionally seeking to mislead the public by promoting high-return investment opportunities—failed to disclose risks associated with cryptocurrency mining, promised investors it would comply with “all relevant laws and regulations,” and claimed that its fund directors were regulated by the Cayman Islands. The Board further asserted the company failed to disclose the true identities of its Code of Ethics Association members responsible for “contract law, due diligence and corporate law,” and instead, created the impression it was associated with attorneys and judges, including U.S. Supreme Court Justice Ruth Bader Ginsburg. Under the terms of the order, the company, among other things, is prohibited from engaging in the sale of securities in the state until the security is registered with the SEC or exempt from registration under the Texas Securities Act, and cannot act as a securities dealer until it complies with the same.

    Securities State Issues Cryptocurrency Enforcement SEC Fintech

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  • Buckley Sandler Special Alert: Supreme Court limits definition of “whistleblower” in potentially hollow victory for public companies


    Buckley Sandler Special Alert

    On February 21, the U.S. Supreme Court issued its opinion in Digital Realty Trust, Inc. v. Somers, a long-anticipated case that clarifies who is protected as a “whistleblower” under the Dodd-Frank Act’s anti-retaliation provisions. In a unanimous decision penned by Justice Ginsburg, the Court held that the Dodd-Frank Act protects an individual only if he or she has reported a securities law violation to the U.S. Securities & Exchange Commission (SEC)—internal reports are not sufficient.


    * * *

    Click here to read the full special alert.


    If you have questions about the decision or other related issues, please visit our Whistleblower practice page, or contact a Buckley Sandler attorney with whom you have worked in the past.

    Courts U.S. Supreme Court Whistleblower Special Alerts SEC Dodd-Frank

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  • SEC issues new cybersecurity reporting guidance

    Privacy, Cyber Risk & Data Security

    On February 21, the SEC released Cybersecurity Interpretive Guidance designed to provide assistance to public companies when preparing disclosures about cybersecurity risks and incidents. According to a press release, the commissioners voted unanimously on February 20 to approve the guidance, which reinforces and expands guidance previously issued in 2011. The guidance, which addresses the “grave threats” cybersecurity risks pose to investors, the capital market, and the United States, states the SEC’s expectations that companies should, among other things, (i) provide disclosures tailored to a particular company’s cybersecurity risks rather than using “boilerplate language or static requirements,” and (ii) adopt policies that will restrict executive trading in a firm’s securities while possessing nonpublic information related to cybersecurity risks or attacks. In connection with the release of the guidance, SEC Chairman Jay Clayton released a statement urging public companies to “examine their controls and procedures, with not only their securities law disclosure obligations in mind, but also reputational considerations around sales of securities by executives.” The statement also stressed the federal securities law disclosure requirements that companies “must pay particular attention to when considering their disclosure obligations with respect to cybersecurity risks and incidents.”

    Privacy/Cyber Risk & Data Security SEC

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  • DOJ concludes FCPA investigation into network consulting company

    Financial Crimes

    A California-based network consulting company announced in a February 9 8K filing that the DOJ has concluded its investigation into possible FCPA violations without taking action against the company. The company disclosed the FCPA investigation by the DOJ and the SEC in August 2013, but has not publicly disclosed any further details about the possible FCPA violations. The recent filing stated that the DOJ’s letter acknowledged the company’s “cooperation in the investigation.” The filing also noted that the FCPA investigation by the SEC is still pending. 

    Financial Crimes DOJ SEC FCPA

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  • President Trump releases 2019 budget proposal; key areas of reform include appropriation shifts, cybersecurity, and financial crimes

    Federal Issues

    On February 12, the White House released its fiscal 2019 budget request, Efficient, Effective, Accountable, an American Budget (2019 budget proposal), along with Major Savings and Reforms (MSR) and an Appendix. The mission of the President’s budget sets forth priorities, including imposing fiscal responsibility, reducing wasteful spending, and prioritizing effective programs. However, the 2019 budget proposal has little chance of being enacted as written and does not take into account a two-year budget agreement Congress passed that the President signed into law on February 9. Notable takeaways of the 2019 budget are as follows:

    CFPB. Under the MSR’s “Restructure the Consumer Financial Protection Bureau” section, Congress and the current administration would implement a broad restructuring of the Bureau to “prevent actions that unduly burden the financial industry” by restricting its enforcement authority over federal consumer law. Among other things, the proposed budget would cap the Federal Reserve’s (Fed) transfers this year at $485 million (an amount equivalent to its 2015 budget) and eliminate all transfers by 2020, at which point the Bureau’s appropriations process would shift to Congress.

    Commodity Futures Trading Commission (CFTC). As stipulated in the Appendix, the budget proposes legislation, which would authorize the CFTC to collect $31.5 million in user fees to fund certain activities and would bring the Commission’s budget to $281.5 million for 2019. According to the administration, if the authorizing legislation is enacted, it would be “in line with nearly all other Federal financial and banking regulators.”

    Cybersecurity. The 2019 budget proposal requests funding for the Department of Homeland Security (DHS) and the Department of Defense (DOD) to execute efforts to counter cybercrime. The DOD funds would go towards efforts to sustain the Cyber Command’s 133 Cyber Mission Force Teams, which “are on track to be fully operational by the end of 2018.” Furthermore, the administration states it “will improve its ability to identify and combat cybersecurity risks to agencies’ data, systems, and networks.”

    Financial Stability Oversight Council (FSOC). Currently FSOC (which is comprised of the heads of the financial regulatory agencies and monitors risk to the U.S. financial system) and the Office of Financial Research (OFR) (FSOC’s independent research arm) receive funding through fees assessed on certain bank holding companies with assets of at least $50 billion as well as nonbanks supervised by the Fed. However, the 2019 budget proposal would require FSOC and OFR to receive their funding through the normal congressional appropriations process. 

    Flood Insurance. Outlined in the MSR is a budget request that would reduce appropriations for the National Flood Insurance Program's flood hazard mapping program by $78 million. The funding reduction is designed to “preserve resources for [DHS]’s core missions”; however, the administration plans to work to “improve efficiency in the flood mapping program, including incentivizing increased State and local government investments in updating flood maps to inform land use decisions and reduce risk.” Additionally, contained within the Appendix is a proposal for a “means-tested affordability program” that would determine assistance for flood insurance premium payments based on a policyholder's income or ability to repay, rather than a home's location or date of construction.

    Government Sponsored Enterprises. Noted within the MSR, the budget proposes doubling the guarantee fee charged by Fannie Mae and Freddie Mac to loan originators from 0.10 to 0.20 percentage points from 2019 through 2021. The proposal is designed to help “level the playing field for private lenders seeking to compete with the GSEs” and would “generate approximately $26 billion over the 10-year Budget window.” 

    HUD. The 2019 budget proposal eliminates funding for the following: (i) the CHOICE Neighborhoods program (a savings of $138 million),  on the basis that state and local governments should fund strategies for neighborhood revitalization; (ii) the Community Development Block Grant (a savings of $3 billion), over claims that it “has not demonstrated a measurable impact on communities”; (iii) the HOME Investment Partnerships Program (a savings of $950 million); and (iv) the Self-Help and Assisted Homeownership Opportunity Program Account (a savings of $54 million). The budget also proposes reductions to grants provided to the Native American Housing Block Grant and plans to reduce costs across HUD’s rental assistance programs through legislative reforms. Rental assistance programs generally comprise about 80 percent of HUD’s total funding.

    SEC. As stipulated in the MSR, the budget proposes eliminating the SEC’s mandatory reserve fund and would require the SEC to request additional funds through the congressional appropriations process starting in 2020. According to the Appendix, the reserve fund is currently funded by collected registration fees and is not subject to appropriation or apportionment. Under the proposed budget, the registration fees would be deposited in the Treasury’s general fund.

    SIGTARP. As proposed under MSR, the 2019 budget would reduce funding for the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) “commensurate with the wind-down of TARP programs.” According to the proposal, “Congress aligned the sunset of SIGTARP with the length of time that TARP funds or commitments are outstanding,” which, Treasury estimates, will be in 2023. This will mark the final time payments are expected to be made under the Home Affordable Modification Program (HAMP). As previously covered in InfoBytes, SIGTARP delivered a report to Congress last month, which identified unlawful conduct by certain of the 130 financial institutions in TARP’s Making Home Affordable Program as the top threat to TARP and, thus, the agency’s top investigative priority.

    Student Loan Reform. Under the 2019 budget proposal, a single income-driven repayment plan (IDR) would be created that caps monthly payments at 12.5 percent of discretionary income. Furthermore, balances would be forgiven after a specific number of repayment years—15 for undergraduate debt, 30 for graduate. In doing so, the Public Service Loan Forgiveness program and subsidized loans will be eliminated, and reforms will be established to “guarantee that all borrowers in IDR pay an equitable share of their income.” These proposals will only apply to loans originated on or after July 1, 2019, with the exception of loans provided to borrowers in order to finish their “current course of study.”

    Treasury Department. Under the 2019 budget proposal, safeguarding markets and protecting financial data are a top priority for the administration, and $159 million has been requested for Treasury’s Office of Terrorism and Financial Intelligence to “continue its critical work safeguarding the financial system from abuse and combatting other national security threats using non-kinetic economic tools. These additional resources would be used to economically isolate North Korea, complete the Terrorist Financing Targeting Center in Saudi Arabia, and increase sanctions pressure on Iran, including through the implementation of the Countering America’s Adversaries Through Sanctions Act.” The budget also requests a $3 million increase from 2017 to be applied to the Financial Crimes Enforcement Network’s authority to administer the Bank Secrecy Act and its work to prevent the financing of terrorism, money laundering, and other financial crimes.  

    Federal Issues Budget Trump CFPB CFTC FSOC Privacy/Cyber Risk & Data Security Flood Insurance HUD SEC Student Lending Department of Treasury

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  • International bank and head trader settle with SEC for CMBS fraud


    On February 12, the Securities Exchange Commission (SEC) announced that it reached an agreement with an international bank and its former head trader for allegedly selling commercial mortgage-backed securities (CMBS) to customers by using false and misleading statements. The bank has agreed to repay more than $3.7 million to the affected customers According to the order, the bank misled customers about the original purchase price of the CMBS and failed to institute proper compliance and surveillance procedures in order to detect and prevent the misconduct. Additionally, the order states that the bank’s former head trader failed to properly supervise the traders making the allegedly false statements and failed to take appropriate action when he became aware of the statements.

    In addition to the customer repayment, the bank has agreed to pay a $750,000 civil money penalty to the SEC, while the former head trader has agreed to a $165,000 civil money penalty and a 12-month suspension from the securities industry. According to the SEC, the settlement amounts reflect substantial cooperation by both parties during the investigation and remedial efforts taken by the bank to improve surveillance and compliance controls. Both parties consented to the order without admitting or denying the findings.

    Securities SEC Mortgages Settlement Fraud

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  • British pharmaceutical company responds to inquiries from SFO, DOJ, and SEC regarding its use of third-party advisors in China

    Financial Crimes

    In a securities filing on Wednesday, Feb. 7, a U.K.-based pharmaceutical company announced that it is responding to requests for information from the DOJ and SEC regarding third-party advisors that the company engaged in China. These requests came about after the company, pursuant to its continuing obligation to report to the SEC on its efforts to improve compliance following its September 2016 settlement of allegations that it violated the FCPA, informed the SEC and DOJ that the SFO had sought additional information in the course of its own investigation, which began in May 2014. The company was also investigated by Chinese authorities and, in September 2014, the company’s Chinese subsidiary was reportedly found guilty of bribery resulting in the company’s payment of a $491.5 million fine. 

    Previous FCPA Scorecard coverage here and here.

    Financial Crimes DOJ SEC FCPA SFO Bribery

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