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  • California branch sentenced in BSA/AML obstruction case

    Financial Crimes

    On May 18, the U.S. District Court for the Southern District of California sentenced a Netherlands-based financial institution’s U.S. subsidiary for “impairing, impeding and obstructing” the OCC during its 2012 examination by concealing deficiencies in its Bank Secrecy Act and anti-money laundering (BSA/AML) compliance programs. As previously covered by InfoBytes, the branch plead guilty in February to one count of conspiracy to defraud the U.S. Government and agreed to pay over $368 million as a result of allowing “hundreds of millions of dollars in untraceable cash, sourced from Mexico and elsewhere, to be deposited into its rural bank branches” without conducting adequate BSA/AML review. In addition to the February plea agreement, the court sentenced the bank to a two-year term of probation and fined the bank $500,000, the maximum statutory fine.

    Financial Crimes OCC DOJ Bank Secrecy Act Anti-Money Laundering Settlement

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  • DOJ, CFPB agree to early termination of consent order with indirect auto lender

    Lending

    On May 15, the auto lending branch of an international automobile company (indirect auto lender) reported in an 8-K filing that the DOJ and CFPB had reached an agreement that the indirect auto lender has met the requirements for early termination of a consent order entered into in 2016 over allegations of unfair lending practices. As previously covered in InfoBytes, a joint agency investigation under ECOA found that the indirect auto lender’s policies allowed for dealers to mark up a consumer’s interest rate on the retail installment contract above the established risk-based buy rate. The parties currently await final court approval of a joint stipulation and proposed order for early termination of the consent order from three years to two years in the U.S. District Court for the Central District of California.

    Lending Fair Lending DOJ CFPB ECOA Auto Finance Consumer Finance

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  • DOJ issues new policy against “piling on” in corporate enforcement, FCPA cases

    Financial Crimes

    On May 9, the DOJ issued a new policy to discourage “piling on” in corporate enforcement cases, including those involving the FCPA. The new policy directs the DOJ to “consider the totality of fines and penalties” being imposed by the DOJ and other law enforcement agencies on a company for the same misconduct. In a speech delivered to a New York City bar organization, Deputy Attorney General Rod Rosenstein described the new policy as encouraging “coordination among Department components and other enforcement agencies” with the aim of “avoiding unfair duplicative penalties.”

    The new policy contains four main elements. First, the DOJ should not threaten criminal prosecution solely to persuade a company to pay a larger settlement in a civil case. Second, DOJ components must coordinate with one another to achieve an overall equitable result. Third, the DOJ should coordinate with other federal, state, local, and foreign enforcement authorities. Finally, the DOJ should consider several factors, including the egregiousness of the wrongdoing and the adequacy of the company’s cooperation with the DOJ, in determining whether multiple penalties serve the interests of justice in a particular case.

    Rosenstein specifically noted in his address that the DOJ’s “FCPA Unit [had recently] announced its first coordinated resolution with . . . Singapore.” See FCPA Scorecard postThe new policy does not prohibit the DOJ from considering additional remedies in “appropriate circumstances.” 

     

    Financial Crimes FCPA DOJ

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  • DOJ settles with Minnesota community bank to resolve fair lending violations

    Lending

    On May 8, the Department of Justice announced a settlement with a Minnesota community bank to resolve allegations that the lender excluded predominantly minority neighborhoods from its mortgage lending service in violation of the Fair Housing Act (FHA) and the Equal Credit Opportunity Act (ECOA). According to the complaint filed in 2017, between 2010 and 2015, the bank engaged in unlawful redlining in and around Minneapolis-St. Paul, Minnesota by meeting the residential credit needs of individuals in majority-white census tracts, but avoided serving similar needs in majority-minority census tracts. The settlement requires the bank to expand its banking services in predominantly minority neighborhoods, including opening one full service branch within the specified census tract. In addition to compliance monitoring and reporting requirements, the bank is also required to (i) employ a Community Development Officer and an Executive leader; (ii) spend a minimum of $300,000 on advertising, outreach, and education and credit repair initiatives; (iii) invest a minimum of $300,000 in a program for special purpose loan subsidies; and (iv) continue to provide fair lending training to all employees.

     

    Lending DOJ Fair Lending Redlining ECOA Fair Housing Mortgage Lenders Mortgage Origination

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  • Outdoor advertising company discloses potential FCPA violations

    Financial Crimes

    On April 30, one of the world’s largest outdoor advertising companies, disclosed that it had self-reported potential FCPA violations to the SEC and DOJ. The San Antonio-based company had previously disclosed that Chinese police were investigating “several employees” of its subsidiary for the misappropriation of funds in China. A related internal investigation purportedly found that three unauthorized bank accounts were opened in the name of the subsidiary and “certain transactions were recorded therein.” In the most recent disclosure, the company newly reported that: (i) “discrepancies” related to the misappropriation resulted in more than $10 million in “accounting errors”; (ii) it determined that there was a “material weakness” in the subsidiary’s internal controls over financial reporting, namely “falsification of bank statements and other supporting documentation used to complete bank reconciliations,” “collusion,” and “circumvention of controls”; and (iii) these issues “could implicate the books and records, internal controls and anti-bribery provisions” of the FCPA, making “possible . . . monetary penalties and other sanctions.” The company said it would cooperate with any investigation by the SEC or DOJ.

    Financial Crimes DOJ SEC FCPA

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  • Japanese electronics corporation settles parallel FCPA actions for $280 million

    Financial Crimes

    On April 30, a DOJ deferred prosecution agreement and SEC settlement with Japan-based electronics corporation and a subsidiary were announced, with the company agreeing to pay $280 million in total. The resolutions related to the company’s U.S.-based subsidiary, and allegations that senior management of the subsidary orchestrated a bribery scheme to help secure over $700 million in business from a state-owned airline, in which the subsidary paid a Middle East government official nearly $900,000 for a “purported consulting position, which required little to no work,” and concealed the payment “through a third-party vendor that provided unrelated services to [the subsidary].” The subsidary is then alleged to have falsely recorded the payments in its books and records, as well as similar payments made to other purported consultants and sales agents in Asia.

    Under the DPA with the subsidary, they agreed to pay the DOJ a $137.4 million criminal penalty for knowing and willful violations of the FCPA’s accounting provisions. The DOJ gave the subsidary a 20 percent discount off the low end of the U.S. Sentencing Guidelines fine range because of its cooperation and remediation, which, although untimely in certain respects, did include causing several senior executives who were either involved in or aware of the misconduct to be separated from [the subsidary] or [the company].” However, because many of the company's remediation efforts were “more recent, and therefore have not been tested,” the deferred prosecution agreement subjects the company to two years of scrutiny by an independent compliance monitor, followed by a year of self-reporting. The SEC‘s simultaneous settlement included violations of the anti-bribery as well as accounting provisions, and the payment of $143 million to the SEC.

    As FCPA Scorecard previously reported, the company disclosed the investigations in February 2017, though they were first reported as early as 2013.

    Financial Crimes DOJ SEC DPA FCPA

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  • DOJ declines to prosecute commercial data and analytics firm, SEC issues $9 million fine for FCPA violations in China

    Financial Crimes

    On April 23, a commercial data and analytics firm secured a declination letter from the DOJ regarding FCPA violations stating that, “consistent with the FCPA Corporate Enforcement Policy,” the DOJ would be declining to bring criminal charges against the company. The firm simultaneously agreed to settle with the SEC regarding books and records and internal controls violations regarding the same conduct, and pay a total of $9 million, including a $2 million civil penalty and $6 million of disgorgement. The firm had self-disclosed payments made by two Chinese subsidiaries through third party agents. One of the subsidiaries, part of a joint venture with a Chinese company, made payments to Chinese government officials to acquire non-public financial statement information on Chinese entities. The other subsidiary made improper payments both to obtain specific business and to acquire non-public personal data. The SEC noted that there were pre-acquisition concerns regarding the subsidiaries, but the firm failed to take appropriate action to stop the payments or the false entries, which continued for several years after the acquisition.

    This is the first instance we are aware of a company receiving a full declination from the DOJ under the new policy. The policy, which grew out of the FCPA Pilot Program, states that when a company voluntarily self-discloses, fully cooperates, and timely and appropriately remediates, there will be a presumption that the DOJ will issue a declination. The firm's declination letter notes the company’s self-identification and disclosure, thorough investigation, and full cooperation, including identifying all individuals involved in the misconduct. The DOJ also cited the company’s “full remediation,” in part by terminating 11 employees, including senior employees, and reducing compensation and other forms of discipline.

    Financial Crimes DOJ FCPA FCPA Pilot Program SEC

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  • Former Venezuelan official pleads guilty in bribery scheme

    Financial Crimes

    The DOJ announced on April 19, that a former Venezuelan official had pleaded guilty to one count of conspiracy to commit money laundering. The charge arose from the former official’s role in a bribery scheme involving bribes paid by the owners of U.S. companies to Venezuelan government officials to secure energy contracts and payments on outstanding invoices. As the former general manager of a procurement subsidiary of a Venezuelan state-owned energy company, he had solicited and accepted bribes. The judge entered a personal money judgment of $7,033,504.71. As a government official receiving the bribes, he could not be charged himself with FCPA offenses (which are targeted at those paying the bribes). Related charges against four other individuals remain pending, including charges of conspiracy to violate the FCPA; 11 individuals have already pleaded guilty in previous cases.  

    For prior coverage of the company's enforcement actions, please see here.

    Financial Crimes DOJ Bribery FCPA Anti-Money Laundering

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  • Aruban telecom official pleads guilty to money laundering conspiracy involving FCPA violations

    Financial Crimes

    An Aruban telecom official pleaded guilty to money laundering charges in connection with a scheme to arrange and receive corrupt payments to influence the awarding of contracts in Aruba. The DOJ’s press release describes the company as an Aruban state-owned company. According to his plea agreement, a Dutch citizen living in Florida operated a money laundering conspiracy between 2005 and 2016 in his position as the company’s product manager. An individual who owned several Florida-based telecommunications companies, previously pleaded guilty to paying bribes to the official and his wife.

    The official admitted that he conspired with the individual and others to transmit funds from Florida and elsewhere in the United States to Aruba and Panama with the intent to promote a wire fraud scheme and a corrupt scheme that violated the FCPA. The official was promised and received bribes from individuals and companies located in the United States and abroad in exchange for using his position at the company to award lucrative mobile phone and accessory contracts. The official also admitted to providing favored vendors with confidential company information in exchange for the more than $1.3 million in corrupt payments.

    The company filed a civil complaint against the official and other parties on March 3 in U.S. District Court for the Southern District of Florida, which contains a few points of note. First, the company describes itself in the complaint as a privatized company, whereas the DOJ’s press release called it an instrumentality of the Aruban government. Second, the complaint states that the company became aware of some of the official's alleged activities via the Panama Papers, the 2016 leak of over 11 million documents from Panamanian law firm and financial services provider Mossack Fonseca.

    Financial Crimes DOJ FCPA Anti-Money Laundering

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  • FCPA class action against Brazilian aerospace firm dismissed

    A class action against a Brazilian aerospace firm was recently dismissed by U.S. District Judge Richard Berman. The class action, which was brought in federal district court in New York, alleged that the firm had failed to adequately disclose the scope and possible financial impact of ongoing corruption investigations by the DOJ and SEC, harming the company’s investors.

    In granting the firm’s motion to dismiss, Judge Berman held that the company’s disclosures were sufficient as a matter of law, and that requiring disclosures advocated by the putative class plaintiffs would effectively require reporting companies to acknowledge guilt for conduct that was still being investigated and had not yet been charged.

    The underlying bribery alleged in the complaint (and being investigated by regulators) involves the firm’s October 2016 admissions that from 2007 to 2011, company executives made payments to government officials in several countries, including the Dominican Republic, Saudi Arabia, Mozambique, and India, totaling $11.5 million. The firm received government contracts resulting in profits over $83 million in exchange.

    This decision is a clear win for publicly traded companies currently under investigation for corruption-related conduct. Had the case proceeded, companies may have faced difficult choices between making more detailed disclosures to investors regarding the potential merits of ongoing investigations and protecting themselves against incriminatory public statements about these same matters.

    DOJ SEC FCPA Class Action Bribery

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