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  • International bank settles with DOJ for $765 million regarding alleged RMBS misconduct

    Securities

    On October 9, the U.S. Attorney for the District of Colorado announced that an international bank would settle claims related to the bank’s packaging, securitizing, issuing, marketing and sale of residential mortgage-backed securities (RMBS) in the lead-up to the 2008 financial crisis. In particular, the U.S. alleged that (i) the bank’s due diligence loan review procedures disclosed to investors were not, in certain instances, followed; (ii) bank managers overruled due diligence vendors’ warnings regarding the quality of certain loans included in securitizations; and (iii) the bank misrepresented the quality of the RMBS to investors. The bank disputes the allegations and does not admit to any liability or wrongdoing, but agreed to pay a $765 million civil money penalty pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act to resolve the matter.

    Securities DOJ Settlement RMBS FIRREA

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  • DOJ provides further guidance on FCPA Corporate Enforcement Policy in speech

    Financial Crimes

    On September 27, Deputy Assistant Attorney General Matthew Miner gave a speech that provided clarification of DOJ enforcement policies, continuing to emphasize voluntary disclosure and underscoring the notion that companies should view DOJ “as partners, not adversaries.” In his speech, Miner announced that DOJ’s FCPA Corporate Enforcement Policy is not limited to just FCPA violations, and that DOJ “will also look to these principles in the context of mergers and acquisitions that uncover other types of potential wrongdoing,” encouraging companies that discover such wrongdoing to voluntarily disclose it. Miner also pointed to recent published declinations, and noted that declinations under DOJ’s Policy can still be appropriate even when “aggravating circumstances” are present. Miner also referenced the increase in “global enforcement and cooperation with foreign authorities” and emphasized DOJ’s “Anti-Piling On Policy.”

    Financial Crimes FCPA DOJ Corporate Enforcement Policy

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  • Oil services company CEO and executive sentenced to prison for conspiracy to bribe foreign officials

    Financial Crimes

    On September 28, the DOJ announced that a former CEO and a former executive of an oil services company had been sentenced to prison and fined for their roles in a scheme to bribe foreign government officials in Brazil, Angola, and Equatorial Guinea in exchange for oil-services contracts. In November 2017, the former CEO of the company and a former sales and marketing executive at the company each had pleaded guilty to one count of conspiracy to violate the FCPA. The former CEO was sentenced to 36 months in prison and a fine of $150,000 for authorizing payments in furtherance of the bribery scheme, and the former executive was sentenced to 30 months in prison and a fine of $50,000 for using a third-party sales agent to pay bribes to Brazil officials.

    The company itself entered into a $238 million three-year deferred prosecution agreement and its subsidiary pleaded guilty to one count of conspiracy to violate the FCPA.

    Prior Scorecard coverage of the company can be found here.

    Financial Crimes Bribery FCPA DOJ

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  • DOJ reportedly investigating professional baseball organization for potential FCPA violations

    Financial Crimes

    Based on media reports, DOJ’s Fraud Section is reportedly investigating some part of a professional baseball organization for possible FCPA violations related to recruitment of international players, particularly related to immigration issues for players from Latin America. Reports indicate that the investigation was initiated when a whistleblower provided the FBI with information and documents last year during spring training. Since then, several witnesses have reportedly already been subpoenaed and testified before a federal grand jury in connection with the investigation.

    A spokesperson for the organization stated that they had not been contacted by federal authorities regarding an investigation, and the two franchises that appear to be most at issue declined to comment to the media on the matter.

    Financial Crimes FCPA Whistleblower DOJ

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  • DOJ issues updated cybersecurity incident response guidance

    Privacy, Cyber Risk & Data Security

    On September 28, the DOJ issued updated guidance originally presented the day before at a cybersecurity roundtable discussion on best practices for companies when responding to and reporting cybersecurity incidents. Officials from the DOJ, National Security Council, and the Department of Homeland Security made remarks regarding the difficulty in handling data breach investigations at the roundtable. The revised guidance, titled Best Practices for Victim Response and Reporting Cyber Incidents, addressed new issues such as creating relationships with incident response firms, cloud computing, ransomware attacks, and information-sharing with law enforcement. The DOJ further emphasized that properly assessing risk is the key to establishing effective cybersecurity priorities.

    Privacy/Cyber Risk & Data Security DOJ Data Breach

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  • DOJ settles with Washington state foreclosure trustee for alleged SCRA violations

    Federal Issues

    On September 27, the DOJ announced a settlement with a Washington state foreclosure services company resolving allegations that the company violated the Servicemembers Civil Relief Act (SCRA) by foreclosing on homes owned by servicemembers without first obtaining the required court orders. As previously covered by InfoBytes, in November 2017, the DOJ filed a complaint in the Western District of Washington alleging its investigation into the company’s practices uncovered at least 28 unlawful non-judicial foreclosures. The DOJ initiated the investigation following the same court’s dismissal of a private SCRA action brought by a veteran on the ground that it was time-barred.

    Under the settlement, each affected servicemember may receive up to $125,000, with a total payout by the company of up to $750,000. The DOJ notes that the company ceased operations in December 2017 and was placed into receivership in March.

    Federal Issues DOJ SCRA Servicemembers Foreclosure

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  • Brazilian oil company settles FCPA violations for $853 million to U.S. and Brazil

    Financial Crimes

    On September 27, 2018, the DOJ announced that a Brazilian state-owned oil company had entered into a Non-Prosecution Agreement with the DOJ, as well as settlement agreements with the SEC and Brazilian authorities, and agreed to pay a total $853.2 million in penalties to all jurisdictions. Under the terms of the settlement, DOJ and SEC will each receive 10 percent of the penalty amount, with Brazilian authorities receiving the remaining 80 percent.

    As part of the settlement, the company admitted that its Executive Board members “were involved in facilitating and directing millions of dollars in corrupt payments to politicians and political parties in Brazil,” while directors were “involved in facilitating bribes that a major contractor of the company was paying to Brazilian politicians.” The conduct included bribes related to several refineries, as well as shipyard and drillship contracts, as well as payments to “stop a parliamentary inquiry into the company's contracts.”

    The company's penalty reflects a 25 percent discount off the low end of the applicable U.S. Sentencing Guidelines due to its cooperation and remediation. While the company did not voluntary disclose its conduct, it cooperated with authorities by disclosing the findings of its internal investigation, providing document discovery, and facilitating the interview of foreign witnesses. It also took remedial measures by replacing its Board of Directors and Executive Board, as well as implementing reforms in its policies and procedures.

    In addition to the criminal penalty, the SEC announced that the company agreed to an administrative order requiring it to pay almost $1 billion in disgorgement and prejudgment interest. However, the company received full credit for payments it already made to resolve a class action for $2.95 billion earlier this year. The net result is that the company will not have to pay any additional funds to the SEC in the separate disgorgement action.

    Prior ScoreCard coverage of the company and related investigations can be found here.

    Financial Crimes FCPA DOJ SEC

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  • Class certification granted to hedge fund investors

    Financial Crimes

    On September 14, a New York federal district court granted class certification to a group of shareholder investors suing an American hedge fund management firm and two of its senior executives on the grounds that the investors were misled about a government investigation into the company’s activities in Africa. In finding that the proposed class met all the requirements for certification, the court certified a class of investors that held some of the more than 100 million outstanding shares between February 2012 and August 2014, the time period in which the firm allegedly violated the Securities Exchange Act. Plaintiffs claim that the firm told investors it was not under any pending judicial or administrative proceeding that might have a material impact on the firm, when in fact it was under DOJ and SEC investigation over allegations that its employees were bribing government officials in Africa. The allegations against the firm were made public in 2014 media reports detailing government scrutiny into its dealings in Africa.

    Click here for prior FCPA Scorecard’s coverage of this matter.

    Financial Crimes DOJ SEC Securities Exchange Act Bribery

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  • Aircraft manufacturing company settles FCPA charges with SEC

    Financial Crimes

    On September 12, the SEC announced that an aircraft manufacturing company agreed to pay $13.9 million to settle FCPA charges related to payments made through a subsidiary in connection with the sales of elevator and airline equipment in Azerbaijan and China. According the SEC’s Order, from 2012 through 2014, the Connecticut-based company, through its wholly owned subsidiary, made illicit payments to Azerbaijani officials to facilitate the sales of elevator equipment.

    The Order also included other conduct that both the DOJ and SEC have focused on in recent years, including the use of agents and gifts and entertainment. For example, the Order detailed conduct by the company and a joint venture partner from 2009 to 2013 in which an agent in China received improper commissions totaling $55 million in connection with the company’s attempt to win airline business in China. The Order also found that the company, from 2009 through 2015, improperly “provided trips and gifts to various foreign officials in China, Kuwait, South Korea, Pakistan, Thailand, and Indonesia” in order to obtain business. The company consented to the SEC’s order without admitting or denying the findings that it violated the anti-bribery, books and records, and internal accounting controls provisions of the FCPA.

    Financial Crimes SEC DOJ FCPA

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  • DOJ secures additional guilty pleas in wide-ranging Venezuelan energy company case

    Financial Crimes

    On September 13, the DOJ announced two additional guilty pleas in its wide-ranging foreign bribery investigation into payments to officials of a Venezuela’s state-owned energy company. The first individual, a former manager of a Texas-based logistics and freight forwarding company, pleaded guilty to one count of conspiracy to violate the FCPA in connection with corruptly securing contracts, contract extensions, and favorable contract terms from the energy company. He pleaded guilty in the Southern District of Texas, as did the second individual, the energy company official who accepted the bribes, and whose guilty plea was also unsealed. As now revealed, in July 2017, the second individual pleaded guilty under seal to conspiracy to commit money laundering. Both individuals are scheduled to be sentenced in February 2019. Prior Scorecard coverage of the PDVSA matter can be viewed here.

    With these guilty pleas, DOJ has now brought charges against 18 individuals as part of its investigation into bribery at the company. Fourteen individuals have pleaded guilty. Due to the limits inherent in the FCPA, the DOJ’s charges against the corrupt foreign officials such as the second individual (i.e., the energy company's employees) have been based on money laundering and not FCPA (see Prior FCPA Scorecard Coverage here and here) whereas the charges against the U.S.-based individuals who made and/or directed the corrupt payments generally have included FCPA violations (see Prior FCPA Scorecard Coverage here).

    Financial Crimes DOJ FCPA

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