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  • Maryland-based company enters deferred prosecution agreement for violations of FCPA antibribery provisions

    Financial Crimes

    On March 13, a Maryland federal court unsealed bribery-related charges filed in January 2018 against a Maryland-based company (part of a French industrial supplier), as well as a three-year deferred prosecution agreement filed on March 12. The government alleges that the company conspired to violate the FCPA by arranging and paying bribes to Russian officials to obtain uranium transportation contracts between 2004 and 2014. Pursuant to the deferred prosecution agreement, the company agreed to pay a $2 million criminal fine, adopt a compliance program, and provide periodic reporting to DOJ. According to the agreement, the company received credit for its substantial cooperation with the investigation and for its remedial actions, including firing all employees involved in the criminal conduct.

    As previously covered here, in 2015 three individuals entered into guilty pleas in this matter: a former Russian official based in Maryland; a former co-president of the company; and an alleged intermediary between the company and the Russian official. Most recently and as covered here, the other former co-president of the company, was charged in an 11-count indictment, unsealed in January 2018, alleging numerous violations of the FCPA and conspiracy to violate the FCPA.

    Financial Crimes DOJ FCPA Bribery

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  • Several companies report developments in FCPA investigations

    Financial Crimes

    In the second half of February, at least three unrelated companies have publicly disclosed the existence and/or status of various FCPA investigations in forms filed with the SEC:

    • Data analytics company: On February 23, a data analytics company disclosed that the DOJ and SEC have both declined to pursue FCPA enforcement actions in connection with a subsidiary’s “questionable expenditures for travel, gifts and other expenses” in Turkey. As the Dayton, Ohio-based company previously disclosed on August 4, 2017, the company initiated an internal investigation after discovering the questionable expenditures, self-reported the issues to the DOJ and SEC, cooperated with the agencies, and undertook certain remedial actions.
    • Dialysis provider​: On February 27, a dialysis provider disclosed that the DOJ and SEC are investigating potential FCPA violations related to “certain conduct in the company’s products business in a number of countries,” and that it has reserved €200 million for a potential settlement with the agencies. After receiving “certain communications alleging conduct in countries outside the U.S. that might violate the FCPA or other anti-bribery laws” in 2012, the Bad Homburg, Germany-based company conducted an internal investigation, self-reported the issues to the DOJ and SEC, cooperated with the agencies, and undertook certain remedial actions.
    • Energy company​: On February 28, an energy company disclosed that the DOJ and SEC have both declined to pursue FCPA enforcement actions in connection with “self-reported [accounting] errors and possible irregularities” at an Italian subsidiary conducting business in the Middle East. In April 2016, the Houston-based company previously disclosed that it was restating its 2015 financial statements and conducting an internal investigation related to the accounting issues. Although “the SEC’s investigation related to the circumstances giving rise to the restatement is continuing,” the FCPA piece of the investigation has concluded.

    Financial Crimes SEC DOJ FCPA

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  • French pharmaceutical company announces DOJ declination in FCPA investigation

    Financial Crimes

    As previously covered, a French pharmaceutical company announced in October 2014 that it was investigating whether certain payments made by company employees to healthcare professionals in the Middle East and Africa violated the FCPA. The company launched an investigation to review payments made from 2007 to 2012 as a result of anonymous whistleblower allegations, and self-reported the allegations to the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC). On March 7, 2018, the company announced in its Form 20-F SEC filing that the DOJ notified the company in February 2018 that it was closing the inquiry into the self-reported whistleblower allegations. The company is continuing to cooperate with the SEC’s review of the allegations.

    Financial Crimes DOJ SEC FCPA Whistleblower

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  • Independent auditor agrees to $149.5 million settlement with DOJ over potential FCA liability

    Federal Issues

    On February 28, the DOJ announced a $149.5 million settlement with an independent auditor for potential False Claims Act (FCA) liability related to its auditing work of a failed mortgage origination company. According to the announcement, between 2002 and 2008, the company served as an independent auditor of a mortgage originator, which issued Fair Housing Administration (FHA) insured loans through HUD’s Direct Endorsement Lender program. The program requires mortgage companies to submit to HUD annual audit reports on financial statements and compliance with certain HUD requirements. The DOJ alleges that during that time, the now failed mortgage originator engaged in a fraudulent scheme, which, among other things, resulted in the originator’s financial distress to not be reflected in its financial statements. The DOJ alleges that the independent auditor “knowingly deviated from applicable auditing standards” and therefore, failed to detect the misleading financial statements and the originator’s allegedly fraudulent conduct, which allowed the originator to continue issuing FHA loans until it declared bankruptcy in 2009. The DOJ notes that the settlement relates to allegations only and there was no determination of actual liability against the independent auditor.

    Federal Issues DOJ False Claims Act / FIRREA Mortgages FHA HUD

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  • Houston-based energy company sues former Venezuelan government officials for bribery related conduct related to national oil company

    Financial Crimes

    On February 16, 2018, a Houston-based energy corporation that formally dissolved in May 2017 filed suit in the Southern District of Texas against two former presidents of a Venezuelan national oil company and others who allegedly worked for them. According to the complaint filed by the energy company, Venezuela’s Ministerio del Poder Popular de Petroleo y Mineria twice refused to allow the company to sell energy assets co-owned with the oil company because the energy company refused to pay bribes requested by the defendants. According to the energy company, the denials forced the company to sell the same assets at a loss of $470 million. The energy company has sued the defendants alleging civil violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), the Sherman Act, the Robinson-Patman Act, and the Texas Free Enterprise and Antitrust Act.

    This suit was filed days after the DOJ unsealed charges against five former Venezuelan government officials for their involvement in a money laundering scheme at the oil company. Previous FCPA Scorecard coverage of the ongoing DOJ and ICE-HIS investigation into bribery at the national oil company can be found here.

    Financial Crimes DOJ RICO Bribery

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  • FTC files charges against operations that target elder Americans as part of DOJ’s elder fraud enforcement sweep

    Federal Issues

    On February 22, the FTC announced two separate legal actions taken against individuals and their operations for allegedly engaging in schemes exploiting elder Americans. The two cases are part of an enforcement sweep spearheaded by the DOJ in conjunction with the FBI, the FTC, the Kansas Attorney General, and foreign law enforcement agencies, which—according to a press release issued the same day by the DOJ—includes cases from around the globe involving over 250 defendants accused of victimizing more than a million U.S. citizens, the majority of whom are elderly. Charges were brought against both transnational criminal organizations and individuals who allegedly engaged in schemes including (i) mass mailings; (ii) telemarketing and investment frauds; and (iii) guardian identity theft. 

    According to the FTC’s announcement, charges were brought against two individuals and their sweepstake operation accusing them of allegedly bilking consumers out of tens of millions of dollars though personalized mailers that falsely implied the recipients had won or were likely to win a cash prize if they paid a fee. Since 2013, the FTC claims consumers have paid more than $110 million towards the scheme. The second complaint was brought against a group of telemarketers who claimed their software and technical support services would prevent cyber threats. However, the FTC alleges that the telemarketers instead charged up to tens of thousands of dollars for “junk” software or older software available for free or for a much lower price, and communicated “phony” reasons for consumers to purchase additional software to avoid the risk of new threats.

    Federal Issues DOJ FTC Elder Financial Exploitation State Attorney General Enforcement

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  • DOJ settles SCRA lease termination allegations against motor vehicle finance company

    Federal Issues

    On February 22, the DOJ announced a settlement agreement with a motor vehicle finance company regarding allegations that the company did not refund a portion of the capitalized cost reduction (CCR), after the motor vehicle leases were terminated early under the Servicemembers Civil Relief Act (SCRA). The DOJ took the position that the CCR was a prepayment subject to refund upon termination. Consistent with industry practice, the finance company treated the CCR as an amount comparable to a down payment in a finance agreement, not subject to refund, rather than a prepayment. Though not admitting any violation of law, the company agreed to refund certain portions of CCR pre-payments and update its policies and procedures, among other relief. Buckley Sandler attorneys John Redding and Sasha Leonhardt represented the company in this matter.

    Federal Issues DOJ SCRA Auto Finance Servicemembers

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  • Attorney General Sessions announces plans to create Cyber-Digital Task Force

    Privacy, Cyber Risk & Data Security

    On February 20, U.S. Attorney General Jeff Session announced plans to create a Cyber-Digital Task Force (Task Force) designed to combat global cyber threats. According to the DOJ’s press release, Attorney General Sessions stated that the Task Force will “advise me on the most effective ways that this Department can confront these threats and keep the American people safe.” His February 16 memorandum identified certain cyber-related issues as particularly “pressing,” including: (i) the use of the internet to spread violent ideologies; (ii) the theft of corporate, governmental, and private information on a large scale; (iii) the use of technology to evade or frustrate law enforcement; and (iv) the weaponization of consumer devices, including computers and other consumer devices, to attack U.S. citizens and businesses. The Task Force will issue a report by June 30, 2018 outlining the DOJ’s current cyber-related activities and offering recommendations.

    Privacy/Cyber Risk & Data Security DOJ

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  • District Court sanctions bankruptcy law firm for allegedly harming consumers and auto lenders

    Consumer Finance

    On February 12, following a four-day trial, the U.S. Bankruptcy Court for the Western District of Virginia entered a memorandum opinion to sanction and enjoin a national consumer bankruptcy law firm and its local partner attorneys (defendants) for “systematically engag[ing] in the unauthorized practice of law, provid[ing] inadequate representation to consumer debtor clients, and promot[ing] and participat[ing] in a scheme to convert auto lenders’ collateral and then misrepresent[ing] the nature of that scheme.” According to a DOJ press release, the combined order was entered in two actions consolidated for trial brought by the DOJ’s U.S. Trustee Program. The actions concern a Chicago-based law firm that offered legal services via its website to financially distressed consumers and allegedly had “non-attorney ‘client consultants’” engage in the unauthorized practice of law and employ “high-pressure sales tactics” when encouraging consumers to file for bankruptcy relief. Among other things, the defendants allegedly (i) refused to refund bankruptcy-related legal fees to clients for whom the firm failed to file bankruptcy cases; (ii) failed to have in place oversight and supervision procedures to prevent non-attorney salespeople from practicing law; and (iii) partnered with an Indiana-based towing company to implement a scheme that would allow clients to have their bankruptcy-related legal fees paid if they transferred vehicles “fully encumbered by auto lenders’ liens” to the towing company without lienholder consent. Under the “New Car Custody Program,” the towing company allegedly claimed rights to the vehicles, sold the vehicles at auction, paid the client’s bankruptcy fees to the defendants, and pocketed the proceeds. According to the release, this program “harmed auto lenders by converting collateral in which they had valid security interests,” and exposed clients to “undue risk by causing them to possibly violate the terms of their contracts with their auto lenders as well as state laws.”

    Under the terms of the order, the court sanctioned the defendants $250,000, imposed additional sanctions totaling $60,000 against the firm’s managing partner and affiliated partner attorneys, ordered the defendants to disgorge all funds “collected from the consumer debtors in both bankruptcy cases,” and revoked the defendants’ privileges to practice in the Western District of Virginia for various specified periods of time. The court also sanctioned the towing company and “ordered the turnover of all funds it received in connection” with the program. The towing company did not respond to the filed complaints.

    Consumer Finance DOJ Bankruptcy Auto Finance State Issues Courts

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  • DOJ unseals charges against former Venezuelan government officials for money laundering and FCPA violations in state-owned energy company scheme

    Financial Crimes

    On February 12, the DOJ unsealed charges against five former Venezuelan government officials for their involvement in a money laundering scheme at Venezuela’s state-owned energy company. The five defendants are each charged with conspiracy to commit money laundering. Two defendants are also charged with conspiracy to violate the FCPA. 

    Four of the defendants were arrested in Spain in October 2017 on arrest warrants based on an indictment filed in the Southern District of Texas last August. One has been extradited from Spain, while the others are pending extradition. 

    The indictment alleges that the five defendants possessed significant influence within the company, which permitted them to solicit vendors for “bribes and kickbacks in exchange for providing assistance to those vendors in connection with their [company] business.” The company vendors included residents of the U.S. and vendors who owned U.S.-based businesses. According to the indictment, two company vendors transferred more than $27 million to accounts in Switzerland that were connected to two of the defendants. The two company vendors previously pleaded guilty in the Southern District of Texas to FCPA charges related to the bribery of company officials. 

    The charges are part of an ongoing investigation by the DOJ and ICE-HSI into bribery at the company, which has resulted in charges against fifteen individuals, ten of whom have pleaded guilty.

    Financial Crimes DOJ FCPA International Anti-Money Laundering Bribery

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