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  • Court dismisses SEC allegations against executives of hedge fund management firm as time-barred

    Financial Crimes

    On July 12, Judge Nicholas Garaufis of the Eastern District of New York issued a 32-page memorandum opinion this week dismissing the SEC’s civil suit against two former executives of an American hedge fund management firm (earlier coverage can be found here and here).

    The SEC’s complaint alleged that the executives violated the FCPA between May 2007 and April 2011 by causing the firm “to pay tens of millions of dollars in bribes to government officials on the continent of Africa.” Specifically, the defendants allegedly induced Libyan authorities to invest in firm managed funds, and directed illicit efforts to secure mining deals by bribing government officials in Libya, Chad, Niger, Guinea, and the Democratic Republic of the Congo. The case against the two executives was the latest in a line of civil and criminal proceedings involving the hedge fund management firm and its employees and executives, and the firm paid $412 million in criminal and civil penalties to settle its FCPA enforcement actions.

    Judge Garaufis, in dismissing the complaint in its entirety with prejudice, found that the claims were barred by the FCPA’s five-year statute of limitations, and he rejected the SEC’s tolling arguments. A cornerstone of this dismissal is the Supreme Court’s ruling last year in Kokesh v. SEC, which held that SEC disgorgement actions are subject to a five-year statute of limitations.

    Financial Crimes SEC FCPA

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  • Latest conviction in Venezuelan oil company bribery case

    Financial Crimes

    On July 16, 2018, a dual U.S.-Venezuelan citizen pleaded guilty to one count of conspiracy to violate the FCPA and one count of conspiracy to commit money laundering. The citizen’s convictions relate to allegations that he bribed officials at Venezuela’s state-owned oil company and laundered money for bribes to other company employees. FCPA Scorecard provided earlier coverage of this case here.

    The citizen admitted to soliciting and directing bribes from two U.S. citizens in exchange for securing payment priority for their companies from the oil company and for awards of the company's contracts. The citizen also admitted to conspiring with these individuals to launder and conceal the proceeds of the scheme through a series of financial transactions, including wire transfers to offshore accounts. Sentencing is scheduled for September 24.

    His conviction underscores how wide investigations can become as the DOJ continues pulling threads and obtaining guilty pleas. The DOJ has charged 15 defendants in the company's cases, 12 of whom have pleaded guilty to date, including the citizen. The DOJ also credited the assistance of the Swiss Federal Office of Justice and the Spanish Guardia Civil.

    Financial Crimes DOJ FCPA Anti-Money Laundering Bribery

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  • Global bank pays $76.7 million to settle hiring practices case

    Financial Crimes

    A global bank and its Hong Kong subsidiary reached a settlement with the DOJ and the SEC related to its alleged practice of “awarding employment to friends and family of Chinese officials” to win business. The subsidiary agreed to pay a $47 million criminal penalty as part of a non-prosecution agreement with the DOJ. It also agreed to continue to cooperate in any ongoing investigations. The DOJ noted that the subsidiary had not self-reported the conduct or properly disciplined the employees involved, although it did receive partial credit for cooperating with the investigation once it began. 

    The parent bank agreed to disgorge nearly $30 million in profits and prejudgment interest in an SEC administrative proceeding. The SEC noted the criminal fine imposed by the DOJ in deciding not to impose a civil penalty. 

    For prior coverage of the sons and daughters investigations into hiring practices in Asia, please see here

    Financial Crimes DOJ FCPA Sons and Daughters

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  • SEC settles with alcoholic beverage company for $8.2 million regarding India payments

    Financial Crimes

    On July 2, the SEC settled FCPA allegations with an alcoholic beverage company in an administrative proceeding stemming from alleged FCPA violations from 2006 through 2012. The company neither admitted nor denied any wrongdoing. The SEC alleged that the company’s subsidiary in India made illegal payments to Indian government officials through third-party sales promoters and distributers. The third parties then presented fabricated or inflated invoices to the subsidiary. These invoices and accounting entries were ultimately incorporated into the parent company’s books and records. The SEC also alleged that the company failed to maintain adequate internal controls.

    This is the third case the SEC has pursued related to conduct in India by alcoholic beverage companies, following a British alcoholic beverage company in 2011 and a Belgian alcoholic beverage in 2016.

    Financial Crimes SEC FCPA

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  • Aruban telecom official sentenced for money laundering conspiracy involving FCPA violations

    Financial Crimes

    On June 27, Judge Frederico Moreno of the United States District Court of the Southern District of Florida sentenced an Aruban telecom official to 36 months in prison following his guilty plea for money laundering charges in connection with a scheme to arrange and receive corrupt payments to influence the awarding of contracts in Aruba. According to the DOJ’s press release, the official, between 2005 and 2016, used his position as the company’s product manager to influence the awarding of lucrative mobile phone and accessory contracts with the Aruban state-owned telecommunications company. He also admitted to providing favored vendors with confidential company information in exchange for more than $1.3 million in corrupt payments. The official was ordered to pay over $1.3 million in restitution and to serve three years of supervised release following his prison term.

    Previous Scorecard coverage of this matter can be found here.

    Financial Crimes DOJ Anti-Money Laundering FCPA

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  • Non-profit advocacy organization accuses UK bank of deceptive report on US whistleblower tip rewards programs

    Financial Crimes

    On June 20, an American non-profit advocacy organization for whistleblowers and a European advocacy organization for whistleblowers formally requested that a UK bank retract a report that they alleges mischaracterizes US whistleblower tip rewards programs, including regarding FCPA tips. The report, originally released in 2014 by the bank in conjunction with the UK’s Financial Conduct Authority, had criticized the use of financial incentives for whistleblowers in the US, arguing that they were ineffective, “don’t generate quality tips,” and “impose expensive and unnecessary governance structures.” The report concluded that the UK should adopt regulatory changes to improve protections for all whistleblowers rather than provide rewards, which allegedly allot large financial payouts to a tiny minority of whistleblowers. 

    The American organization disputed these assertions in a rebuttal report, released this year. According to the whistleblower advocacy organizations, many of the assertions in the bank’s report “are simply false” and the continued use of the report “inhibit[s] the implementation of effective anti-fraud laws in the UK.” The organizations further complained that the 2014 report has been used as justification for stakeholders in UK to not create financial incentives for whistleblowers and that it has stifled momentum in the UK for an effective whistleblower program. 

    Financial Crimes FCPA Whistleblower

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  • CFPB fines installment lender $5 million for improper collection and credit reporting practices

    Federal Issues

    On June 13, the CFPB ordered a South Carolina-based installment lender and its subsidiaries to pay $5 million in civil money penalties for allegedly making improper in-person and telephonic collection attempts in violation of the Consumer Financial Protection Act (CFPA) and inaccurately furnishing information to credit reporting agencies in violation of the Fair Credit Reporting Act (FCRA). According to the consent order, between 2011 and 2016, the company and its subsidiaries (i) initiated collection attempts at consumers’ homes and places of employment; (ii) routinely called consumers at work to collect debts, sometimes after being told they were not allowed to receive calls; and (iii) contacted third parties and disclosed or were at risk of disclosing the existence of the consumer’s debt. The CFPB also alleges that the company and its subsidiaries failed to implement reasonable credit reporting procedures and failed to correct inaccurate information furnished to credit reporting agencies. In addition to the $5 million civil money penalty, the company and its subsidiaries must (i) cease improper collection practices; (ii) correct the credit reporting errors; and (iii) develop a comprehensive compliance plan.

    Federal Issues CFPB CFPA UDAAP FCPA Enforcement Debt Cancellation

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  • Global bank settles FCPA allegations concerning “sons and daughters” investigation into hiring practices

    Financial Crimes

    On June 6, a global bank announced it had entered into a non-prosecution agreement with the DOJ to resolve an FCPA investigation into hiring practices in the Asia Pacific region between 2007 and 2013. As part of the agreement, the bank agreed to pay a $46 million penalty to the DOJ. According to the bank, it has already provisioned for the penalty and expects the payment to have “no material impact” on its second quarter financial results. The bank further stated that it has implemented multiple enhancements to its compliance and control functions since 2013. 

    U.S. authorities have investigated several other financial services institutions over their hiring practices in Asia, which have become known as the “sons and daughters” investigations because of the allegations that banks widely hired the children of elite Chinese political families to secure an advantage in obtaining business. Prior Scorecard coverage of those investigations can be found here.

    Financial Crimes DOJ FCPA Sons and Daughters

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  • Baltimore-based investment management firm settles FCPA allegations with DOJ

    Financial Crimes

    On June 4, the DOJ announced that a Baltimore-based investment management firm, had entered into a non-prosecution agreement and agreed to pay $64.2 million to resolve FCPA allegations in connection with the firm’s involvement in Libya through a London-based fund purchased by the firm. Between 2004 and 2010, Permal, subsidiary of the Baltimore firm, partnered with a Paris-based multinational bank, “to solicit business from state-owned financial institutions in Libya.” As admitted by the bank in its own resolution with the DOJ, the bank paid bribes of over $90 million through the use of a Libyan broker with respect to 14 investments made by Libyan state-owned financial institutions. For seven of the transactions, the bank made payments to the Libyan broker to benefit the firm, through its subsidiary. The subsidiary managed the investments and earned profits of approximately $31 million.

    The firm’s resolution includes a penalty of $32.625 million and disgorgement of $31.617 million. As part of the agreement, the firm agreed to continue to cooperate with the DOJ in related investigations and prosecutions, as well as to enhance its compliance program. According to the DOJ, the resolution is based on factors including the firm’s cooperation in the investigation, as well as the fact that the company “did not voluntarily and timely disclose the conduct at issue.” The DOJ also found that the misconduct was “not pervasive throughout the firm or its subsidiary,” but rather that the bank was responsible for running the scheme, noting that the firm and its subsidiary earned less than one-tenth of the profits earned by the bank.

    As FCPA Scorecard previously reported, the firm had announced the near completion of the agreement in a recent SEC filing.

    Financial Crimes DOJ FCPA

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  • Baltimore-based investment management firm preparing for FCPA settlement

    Financial Crimes

    On May 30, a Baltimore-based investment management firm, announced in a 10-K SEC filing that it will soon complete negotiations with the DOJ and SEC to resolve FCPA allegations stemming from how a London-based fund purchased by the firm in 2005, managed assets of Libyan governmental entities in 2005-2007. The firm reserved $67 million for the settlement, which reflects, in part, the net revenues of approximately $31 million earned by the fund for managing the assets.

    Financial Crimes DOJ SEC FCPA

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