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  • DOJ Files Suit to Seize $144 Million in Laundered Nigerian Oil Bribes

    Financial Crimes

    The U.S. Department of Justice announced Friday, July 14, that prosecutors filed a civil complaint seeking to seize $144 million in assets that were allegedly the proceeds of corruption in Nigeria and were laundered in and through the U.S. According to the complaint, from 2011 to 2015, two Nigerian businessmen bribed Nigeria’s former Minister for Petroleum Resources, who oversaw Nigeria’s state-owned oil company. In return, the former Minister steered lucrative oil contracts to companies owned by the businessmen. The proceeds were then allegedly used to purchase assets subject to seizure and forfeiture, including a $50 million New York City condominium and an $80 million yacht.

    “The United States is not a safe haven for the proceeds of corruption,” said Acting Assistant Attorney General Blanco. “The complaint announced today demonstrates the Department’s commitment to working with our law enforcement partners around the globe to trace and recover the proceeds of corruption, no matter the source. Corrupt foreign officials and business executives should make no mistake: if illicit funds are within the reach of the United States, we will seek to forfeit them and to return them to the victims from whom they were stolen.”

    The suit was part of the Kleptocracy Asset Recovery Initiative.

    Financial Crimes DOJ Anti-Money Laundering Corruption Nigeria

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  • DOJ Announces Settlement with Michigan Credit Union over SCRA Violations

    Federal Issues

    On July 6, the DOJ announced a settlement with a Michigan-based credit union resolving allegations that the credit union illegally repossessed four servicemembers’ vehicles in violation of the Servicemembers Civil Relief Act (SCRA). As previously reported, the DOJ filed its complaint on July 26, 2016, alleging that the credit union violated the “SCRA’s prohibition against repossessing a motor vehicle from a servicemember during military service without a court order if the servicemember made a deposit or installment payment on the loan before entering military service.”

    Servicemember protections under the SCRA empower the court to (i) review and approve each repossession; (ii) delay a repossession or require the lender to refund the payments made by the servicemember prior to the repossession; (iii) appoint an attorney to represent the servicemember; and (iv) require the lender to post bond with the court.

    Under the settlement, the credit union agreed to a civil penalty of $5,000. In addition, the credit union agreed to pay up to $10,000 plus lost equity in the vehicle with interest and to repair the credit of each affected servicemember whose vehicle was repossessed. The credit union also agreed to obtain either a court order or a valid SCRA waiver before repossessing a servicemember’ s vehicle, and to develop policies and procedures for vehicle repossessions that comply with the SCRA as well as provisions to ensure that servicemembers may benefit from the 6 percent interest rate cap on vehicle loans.

    Federal Issues DOJ Credit Union SCRA Courts Settlement Servicemembers

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  • Former DOJ Fraud Compliance Counsel Resigns, Criticizes President

    Financial Crimes

    Hui Chen, formerly Compliance Counsel Expert in the DOJ Fraud Section, is speaking out about the reasons for her May 2017 resignation, which she has attributed to unacceptable conduct by the President and his Administration. Chen was hired by DOJ in November 2015 after serving as Global Head for Anti-Bribery and Corruption and Standard Chartered Bank. She was the first lawyer to hold this position at the DOJ.

    In a June 25 LinkedIn post, Chen unleashed several criticisms against the President, including regarding lawsuits, conflicts of interest, and ongoing investigations. She said that she would “not tolerate” those conducts in a company, but “worked under an administration that engaged in exactly those conduct.” Chen further elaborated on her criticisms in a July 4, 2017 interview with CNN, stating that the firing of FBI James Comey tipped the scales in favor of resignation. 

    The DOJ had previously posted an opening to hire a new Compliance Counsel, but that listing has now expired. It is not clear if anyone has been hired to replace Ms. Chen.

    Financial Crimes DOJ Trump Fraud

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  • Engineering and Construction Firm Receives Declination of FCPA Charges

    Financial Crimes

    On June 21, the DOJ issued a declination letter to attorneys for a Boston-based privately held engineering and construction firm, in which the DOJ declined prosecution and closed an investigation of the firm regarding potential FCPA violations that occurred in India between 2011 and 2015. The firm agreed to pay DOJ approximately $4 million in disgorgement. The DOJ announced the declination on June 29 with a link posted on its website, making it the second FCPA declination that the DOJ announced in June 2017. Prior to June, the DOJ had last issued an FCPA declination letter in September 2016. 

    According to the DOJ Letter, the firm paid approximately $1.18 million in bribes to India government officials in exchange for contracts that resulted in approximately $4 million in net profits (the disgorgement amount). The payments were made by the firm's division responsible for India operations and by the firm's wholly-owned subsidiary in India through fraudulent subcontractors and generally equaled two to four percent of the contract price. 

    The DOJ’s letter stated that its decision to close its investigation is consistent with the FCPA Pilot Program, launched in April 2016 to encourage companies to “voluntarily self-disclose FCPA-related misconduct, fully cooperate with the Fraud Section, and, where appropriate, remediate flaws in their controls and compliance programs.” Accordingly, the DOJ determined that the firm had, among other things, made a “timely and voluntary self-disclosure” of potential FCPA violations, conducted and “thorough and comprehensive investigation,” fully cooperated with the DOJ, and performed full remediation, including the termination of all of the executives and employees involved in the conduct at issue. However, the letter provides little detail about these factors. 

    The DOJ letter makes clear that it does not foreclose future prosecution of any individuals connected to this matter, whether affiliated with the firm or otherwise.

    Financial Crimes DOJ FCPA Pilot Program Bribery FCPA

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  • Judge Issues Ruling Ordering Unused Consumer Redress Funds to be Deposited in the Treasury

    Courts

    On June 20, a federal judge in the U.S. District Court for the Southern District of New York ordered that leftover funds from a $50 million settlement must be transferred to the Treasury, ultimately ruling against a memorandum filed by the Attorneys General of Connecticut, Indiana, Kansas, and Vermont (State AGs) that sought to redirect the remaining $15 million to be used to “train, support and improve the coordination of the state consumer protection attorneys charged with enforcement of the laws prohibiting the type of unfair and deceptive practices alleged by the CFPB in this [a]ction.” (See previous InfoBytes summary here.) Notably, the judge stated, “the State AGs’ proposal does not reflect the [settling] parties' true intent . . . Nowhere in the Final Judgment or the Redress Plan is there any language supporting the State AGs’ view that leftover funds should broadly aid consumers.” The judge opines further that “[c]ondoning an unintended use of the settlement funds—in the absence of any other equitable relief reasonably related to the allegations of the Complaint—would be tantamount to misappropriating funds that otherwise should be in the public fisc.” The judge further noted that had the State AGs’ memorandum been granted, it would “permit State actors . . . to hijack a significant portion of the settlement funds under the guise of ‘consumer protection,’ all for the purpose of underwriting a project that principally benefits the States.”

    Courts Consumer Finance CFPB DOJ State AG Litigation Treasury Department

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  • German Multinational Chemical Company Agrees to Pay DOJ More Than $11 Million, Receives Declination of FCPA Charges

    Financial Crimes

    On Friday, June 16, the DOJ issued a declination letter to attorneys for North American affiliates of a German multinational chemical company, in which the DOJ declined prosecution and closed an investigation of the company and certain of its subsidiaries and affiliates regarding potential FCPA violations that occurred between November 2006 and December 2009. The affiliates, which trades only on German stock exchanges and which has no securities registered with the SEC, agreed to pay DOJ a combined $11.2 million in disgorgement and forfeiture. 

    According to the DOJ letter, a New Jersey-based company acquired by the affiliate companies in October 2006, made corrupt payments to officials at and related to a Republic of Georgia state-owned and controlled entity to ensure continuity of business. Upon discovering this conduct, the affiliates initiated an internal investigation and subsequently withheld monies earmarked for a company controlled by the Georgian entity. These monies comprise the approximately $3.4 million that the affiliates agreed to forfeit.

    The DOJ letter stated that its decision is consistent with the FCPA Pilot Program, launched in April 2016 to encourage companies “to voluntarily self-disclose FCPA-related misconduct, fully cooperate with the Fraud Section, and, where appropriate, remediate flaws in their controls and compliance programs.” Accordingly, the DOJ determined that the affiliates had, among other things, voluntarily self-reported potential FCPA violations, conducted a thorough and proactive internal investigation, and continues to cooperate fully and remediate its compliance program and internal controls. Notably, the DOJ letter does not foreclose future prosecution of any individuals, and the letter explicitly delineates DOJ’s expectation that the affiliates will continue cooperating fully in any ongoing investigation of individuals.

    Financial Crimes DOJ Anti-Corruption

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  • DOJ Intervenes in False Claims Act Litigation Against City of Los Angeles for Alleged Misuse of HUD Funds

    Courts

    On June 7, the Department of Justice (DOJ) announced that the United States has intervened (see proposed order here) in a lawsuit against the city of Los Angeles (City) alleging that the City misused Department of Housing and Urban Development (HUD) funds intended for affordable housing that is accessible to people with disabilities. See U.S. ex rel Ling et al v. City of Los Angeles et al, No. 11-00974 (D.C. Cal. 2017).

    The DOJ joins in the lawsuit originally instituted by a disabled Los Angeles resident, who filed the False Claims Act (FCA) suit as a whistleblower. The FCA whistleblower provision allows private citizens to file suit on behalf of the government and likewise permits the government to intervene in the suit. Together, the DOJ and the whistleblower allege that the City and a city agency called the CRA/LA falsely certified compliance with federal accessibility laws, including the Fair Housing Act and Section 504 of the Rehabilitation Act as well as the duty to further fair housing in the City, in order to receive millions of dollars in HUD housing grants.

    As recipients of the HUD funds, the City and the CRA/LA were obligated to ensure that (i) “five percent of all units in certain federally-assisted multifamily housing be accessible for people with mobility impairments”; (ii) “an additional two percent be accessible for people with visual and auditory impairments”; (iii) “the City and the CRA/LA maintain a publicly available list of accessible units and their accessibility features”; (iv) “the City and the CRA/LA have a monitoring program in place to ensure people with disabilities are not excluded from participation in, denied the benefits of, or otherwise subjected to discrimination in, federally-assisted housing programs and activities solely on the basis of a disability.” The false certifications resulted in too few accessible housing units, the suit claims.

    The City denies the allegations.

    Courts HUD Litigation Fraud False Claims Act / FIRREA Whistleblower Fair Housing DOJ

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  • Attorney General Sessions Issues Memorandum Ending Payments to Third-Party Organizations as Part of Future Settlement Agreements

    Courts

    On June 7, Attorney General Jeff Sessions issued a memorandum entitled “Prohibition on Settlement Payments to Third Parties” instructing the Department of Justice (DOJ) to cease entering into settlement agreements that include payments to third-party organizations. Attorney General Sessions stated in a press release released by the DOJ, “[w]hen the federal government settles a case against a corporate wrongdoer, any settlement funds should go first to the victims and then to the American people—not to bankroll third-party special interest groups or the political friends of whoever is in power.”

    Summary of Memorandum. The memorandum, which became effective immediately and applies to future settlements, notes that previous settlement agreements involving the DOJ required “payments to various non-governmental, third-party organizations . . . [that] were neither victims nor parties to the lawsuits.” The memorandum now states that DOJ “attorneys may not enter into any agreement on behalf of the United States in settlement of federal claims or charges . . . that directs or provides for a payment or loan to any non-governmental person or entity that is not a party to the dispute.” The following are “limited” exceptions:

    • “the policy does not apply to an otherwise lawful payment or loan that provides restitution to a victim or that otherwise directly remedies the harm that is sought to be redressed, including, for example, harm to the environment or from official corruption”;
    • “the policy does not apply to payments for legal or other professional services rendered in connection with the case”; and
    • “the policy does not apply to payments expressly authorized by statute, including restitution and forfeiture.”

    The memorandum states that it applies to “all civil and criminal cases litigated under the direction of the Attorney General and includes civil settlement agreements, cy pres agreements or provisions, plea agreements, non-prosecution agreements, and deferred prosecution agreements.”

    Courts DOJ Securities SEC Disgorgement Appellate Litigation Settlement

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  • Do Not Call Violations Net $280 Million Fine for FTC, States

    Courts

    On June 5, the U.S. District Court for the Central District of Illinois ruled in favor of the Federal Trade Commission (FTC) and the states of California, Illinois, North Carolina, and Ohio resolving Do Not Call litigation against Dish Network (Dish). The court found Dish liable for making millions of calls resulting in violations of the Telemarketing Sales Rule (TSR) and the Telephone Consumer Protection Act, among other things. The $280 million in civil penalties, with a record $168 million going to the FTC, is the largest civil penalty ever awarded for violation of the FTC Act.

    Additionally, the court issued a permanent injunction order against Dish. Among the requirements in the order, Dish will show within 90 days of the order effective date that they are “fully complying with the safe harbor provisions” and “have made no prerecorded telemarketing calls at any time during the five (5) years immediately preceding the effective date”. Dish must also hire an expert to ensure compliance with the injunction and telemarketing laws, provide semi-annual compliance materials, and ensure their compliance with the TSR.

    Courts FTC Mortgages UDAAP DOJ Telemarketing Sales Rule Litigation

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  • City Agrees to Settlement of Housing Discrimination Suit with DOJ

    Courts

    On May 26, the Department of Justice (DOJ) and the city of Jacksonville, Florida (city), agreed on a settlement over claims that the city violated the Fair Housing Act (FHA) and the Americans with Disabilities Act (ADA). The DOJ alleged that the city denied permission for the development of permanent supportive housing for individuals with disabilities in an historic district and discriminated on the basis of the intended residents’ disabilities.

    The settlement provides for a civil penalty of $25,000 to be paid to the U.S. Treasury as well as the creation by the city of a $1.5 million grant to be awarded to a qualified developer of permanent supportive housing in the community. The city also agreed to take additional specific steps to comply with the requirements of the ADA and FHA.

    Two other plaintiffs whose suits were consolidated with the DOJ’s—Ability Housing, Inc. and Disability Rights Florida, Inc.—also received compensation for reasonable attorneys’ fees and other costs.

    As part of the settlement, the city denied any wrongdoing alleged by the DOJ.

    Courts State Issues DOJ FHA Treasury Department Litigation

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