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FTC settles first consumer protection case against a VoIP service provider
On September 22, the FTC and the Ohio attorney general announced several proposed stipulated final orders against a Voice over Internet Protocol (VoIP) service provider, along with an affiliated company, the VoIP service provider’s former CEO and president, and a number of other subsidiaries and individuals, to settle allegations concerning their facilitation of a credit card interest rate reduction scheme. This marks the FTC’s first consumer protection case against a VoIP service provider. According to the FTC and the AG, the VoIP service provider provided one of the defendants with the ability to place illegal robocalls in order to market “phony credit card interest rate reduction services.” Both of these defendants were controlled by the VoIP service provider’s former CEO who was also named in the lawsuit. In addition, the defendant that placed the illegal calls, along with four additional defendants, are accused of managing the overseas call centers and other components used in the credit card interest rate reduction scheme.
One of the settlements will prohibit the former CEO, along with two corporations under his control, from (i) participating in any telemarketing in the U.S.; (ii) marketing any debt relief products or services; and (iii) making misrepresentations when selling or marketing any products or services. These defendants will collectively be subject to a $7.5 million judgment, which is mostly suspended due to their inability to pay.
The settlement with the VoIP service provider and the affiliated company will require a payment of $1.95 million. The VoIP service provider and its U.S.-based subsidiaries will also be prohibited from hiring the former CEO or any of his immediate family members, as well as from hiring two of the other defendants. These defendants will also be required to follow client screening and monitoring provisions, and are prohibited from providing VoIP and related services to clients who pay with stored value cards or cryptocurrency, or to clients who do not maintain public-facing websites or a social media presence. Additionally, the defendants will be required to block calls that may appear to come from certain suspicious phone numbers, block calls that use spoofing technology, and terminate certain high-risk relationships.
The settlements (see here, here, and here) reached with the defendant that placed the illegal calls and four additional defendants include prohibitions similar to those issued against the former CEO, and will require the payment of a total combined judgment of $10.3 million, which will be largely suspended due to their inability to pay.
All settlements are subject to court approval.
Asphalt company agrees to pay over $16 million to settle FCPA charges
On September 22, the DOJ announced that a Florida-based asphalt company pleaded guilty to conspiracy to violate the anti-bribery provisions of the FCPA, agreeing to pay a $16.6 million criminal fine to resolve the charges. According to the information filed in the U.S. District Court for the Eastern District of New York, the company and its affiliates bribed foreign officials in Brazil, Venezuela, and Ecuador with millions of dollars in order to “obtain contracts to purchase or sell asphalt to the countries’ state-owned and state-controlled oil companies, in violation of the FCPA.” Between 2010 and 2015, to execute the bribery scheme in Brazil, the company entered into fake consulting agreements with intermediaries and sent international wires from company bank accounts to offshore bank accounts controlled by the bribe intermediaries. The intermediaries would then pay bribes to Brazilian government officials on the company’s behalf. In Venezuela, between 2012 and 2018, the company used similar fake consulting agreements to bribe Petróleos de Venezuela, S.A. (PDVSA) officials and used code names to hide the names of PDVSA officials in emails and texts. Lastly, in 2014, the company again used similar sham consulting arrangements to bribe Ecuador’s state-owned oil company to secure a contract to supply asphalt.
The announcement notes that the DOJ recently unsealed charges and guilty pleas of five individuals involved in the bribery scheme, including a company senior executive, a company trader, two bribe intermediaries, and a former PDVSA official. Additionally, the announcement states that a different company trader pleaded guilty in 2017 for his role in the scheme and a pending criminal complaint against a former PDVSA official was also recently unsealed in federal court.
OFAC sanctions individuals for supporting Maduro regime
On September 22, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against five key individuals for allegedly “facilitate[ing] the illegitimate Maduro regime’s efforts to undermine democracy in Venezuela.” The sanctions, issued pursuant to Executive Order 13692, reflect Treasury’s continued efforts to hold persons who offer support to the Maduro regime accountable. As a result, all property and interests in property belonging to the identified individuals subject to U.S. jurisdiction are blocked, and “any entities that are owned, directly or indirectly, 50 percent or more by the designated individuals, are also blocked.” U.S. persons are generally prohibited from dealing with any property or interests in property of blocked or designated persons.
Oklahoma regulator amends working from home guidance
On September 23, the Oklahoma Department of Consumer Credit extended, for the third time, its interim guidance to regulated entities on working from home (see here, here, here and here for previous coverage). The guidance sets forth data security standards that regulated entities must meet in order to satisfy the department guidance. The guidance also provides that the department will expedite and waive fees for change of address applications in the event that a licensed location is compromised by Covid-19 or is undergoing decontamination. The guidance was extended through October 31, 2020.
SEC issues two separate whistleblower awards totaling over $2.65 million
On September 21, the SEC announced a $2.4 million award to a whistleblower in connection with a successful agency enforcement action. The SEC’s press release states that the whistleblower’s “timely submission of information” led to the initiation of an investigation and enforcement action that stopped the ongoing misconduct. The redacted order determining the whistleblower award claim states that the whistleblower’s information helped SEC staff “identify key witnesses and parties and draft targeted subpoenas, which saved the staff time and resources in conducting the investigation.”
Earlier on September 17, the SEC announced a nearly $250,000 joint whistleblower award in connection with a successful agency enforcement action. According to the SEC’s press release, the whistleblowers raised their concerns internally before reporting the potential securities violations to the SEC. According to the redacted order, the claimants’ concerns prompted enforcement staff to open an investigation. The order notes, however, that while the claimants’ information identified certain parties and transactions that were ultimately subjects of the covered action, “many of their allegations did not directly relate to the Commission’s charges” in covered action, which played a role in the SEC’s determination of the appropriate award percentage.
The SEC has now paid a total of $523 million to 97 individuals since the inception of the program.
OFAC issues Iran nuclear and ballistic missile program sanctions
On September 21, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) designated three high-ranking individuals of the Atomic Energy Organization of Iran (AEOI), numerous AEOI subsidiaries, equipment supply companies, and various senior officials working on Iran’s missile programs pursuant to Executive Order (E.O.) 13382, which allows for sanctions for engaging in or supporting the proliferation of weapons of mass destruction (WMD). As a result of the sanctions, all property and interests in property of the designated persons that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. OFAC further warned foreign financial institutions that knowingly facilitating significant transactions or providing significant support to the designated entities may subject them to sanctions and could sever access to the U.S. financial system.
In addition, the U.S. Department of Treasury announced a new Executive Order titled, "Blocking Property of Certain Persons with Respect to the Conventional Arms Activities of Iran,” which authorizes the Secretary of the Treasury, in conjunction with the Secretary of State, to impose asset blocking sanctions on any person engaged in any activity that materially contributes to the supply, sale, or transfer of destabilizing conventional weapons and acquisition of arms and related materiel by Iran.
CFPB settles with auto lender on unfair LDW practices
On September 21, the CFPB announced a settlement with a California-based auto-loan servicer to resolve allegations that the company engaged in unfair practices with respect to its Loss Damage Waiver (LDW) product, in violation of the Consumer Financial Protection Act. The CFPB alleged that the company engaged in unfair practices by charging certain borrowers for LDW coverage, but then failed to provide the coverage. Specifically, the LDW agreement allowed the company to suspend coverage if borrowers became 10-days delinquent on their auto loans. The company, however, continued to charge borrowers LDW premiums even though coverage was no longer being provided. The Bureau also alleged that the company assessed LDW claim-related fees that were not disclosed in the LDW contract, which the borrowers were not contractually obligated to pay.
Under the terms of the consent order, the company is required to pay more than $1.3 million in consumer redress to approximately 4,000 impacted consumers, as well as a $100,000 civil money penalty. The order also prohibits the company from “failing to provide consumers with LDW coverage, collateral protection insurance, or similar products or services for which [the company] has charged consumers” or from “charging consumers fees that are not authorized by its LDW contracts.”
LIBOR-based loans will not be eligible for Ginnie Mae pooling
On September 21, Ginnie Mae issued All Participant Memorandum 20-12, which states that Ginnie Mae will stop accepting the delivery of single-family forward adjustable rate mortgage (ARM) loans, dated on or after January 1, 2021, with any interest term based on LIBOR, for securitization in any pool. Additionally, any adjustable rate reverse mortgages (HECMs) will be ineligible for securitization into any HMBS pool that relies on LIBOR if not securitized as of January 1, 2021, “without regard to their date of origination or the date in which the corresponding FHA case number was assigned.” Participations associated with HECM loans backing HMBS will continue to be eligible without restriction, so long as the issuance date is on or before December 1.
Oklahoma regulator extends working from home guidance
On September 23, the Oklahoma Department of Consumer Credit extended, for the fourth time, its interim guidance to regulated entities on working from home (see here, here, here, and here for previous coverage). The guidance sets forth data security standards for regulated entities with employees working from home and also provides that the department will expedite and waive fees for change of address applications in the event that a licensed location is compromised by Covid-19 or is undergoing decontamination. The guidance was extended through October 31, 2020.
Special Alert: FinCEN extends AML program, other requirements to banks without federal regulators
On September 14, the Financial Crimes Enforcement Network (FinCEN) issued a final rule to align Bank Secrecy Act (BSA) requirements applicable to most banks with the requirements applicable to banks lacking a “federal functional regulator.” In particular, the final rule will require all non-federally regulated banks — including private banks, non-federally insured credit unions, and certain trust companies — to establish and implement anti-money-laundering (AML) programs and customer identification programs (CIP).