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  • Florida Energy Company Owner Pleads Guilty to Conspiracy to Violate the FCPA in Venezuelan Bribery Scheme

    Financial Crimes

    On October 11, the DOJ announced that the co-owner of several Florida-based energy companies pleaded guilty to FCPA charges that he conspired to bribe foreign officials in exchange for obtaining contracts from a Venezuela’s state-owned energy company. In his plea, the defendant admitted to conspiring with two other individuals from 2008 through 2014 to bribe purchasing analysts employed by the energy company through cash payments and other entertainment in order to win contracts for their companies. In total, ten individuals have now pleaded guilty in connection with the scheme.    

    This investigation has been a collaboration between the DOJ, ICE-HSI, and IRS-Criminal Investigation Division. Previous FCPA Scorecard coverage of the investigation can be found here.

    Financial Crimes DOJ FCPA Bribery International

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  • South Korean Earthquake Research Official Sentenced for Laundering Bribes

    Financial Crimes

    On October 2, the former director of the earthquake research center of South Korea’s Institute of Geoscience and Mineral Resources was reportedly sentenced in U.S. federal court to 14 months in prison for laundering bribes he had received in South Korea from seismology companies. Prosecutors argued to the federal jury, which convicted him in July, that he had demanded and received more than $1 million in bribes from two seismological companies in exchange for providing them with insider information and directed some of the funds to be transferred to his personal bank account in California.

    The former director has not been charged in South Korea, and his conviction and sentencing in the United States illustrate the US DOJ’s continued focus on targeting foreign officials who receive bribes and then travel to the US or use its financial system.

    Financial Crimes DOJ Anti-Money Laundering Bribery

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  • Additional Charges for Retired U.S. Army Colonel

    Financial Crimes

    On October 4, the Department of Justice expanded the scope of its indictment against a retired U.S. Army colonel. On August 29, he was charged with conspiracy to violate the Foreign Corrupt Practices Act after he allegedly solicited bribes from undercover agents who posed as potential investors for infrastructure projects in Haiti. The expanded charges include conspiracy to launder money and violate the Federal Travel Act. Prior FCPA Scorecard coverage of the initial indictment and the related FCPA sting operation can be found here.

    Financial Crimes DOJ FCPA

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  • HUD IG Blames Ginnie Mae for Inadequate Supervision; HUD IG Concludes HUD Did Not Follow Requirements When Forgiving Debts

    Federal Issues

    On September 21, the HUD Inspector General (IG) released an audit report of Ginnie Mae’s oversight of nonbanks in the mortgage servicing industry. The report found that Ginnie Mae did not adequately respond to the growth in its nonbank issuer base; a base, the report notes, that tends to have more complex financial and operating structures than banking institutions. The IG found, among other things, that Ginnie Mae may not be prepared to identify problems with nonbank issuers prior to default, requiring additional funds from the U.S. Treasury to pay back investors in the event of a large default.

    On the same day, the IG also announced a report which found that HUD did not always follow applicable requirements when forgiving debts and terminating debt collections. The report determined that HUD’s review process for evaluating debt forgiveness or collection termination was not thorough enough to ensure that statutory, regulatory, and policy requirements associated with this process were met—such as ensuring DOJ approval was obtained when required.

    Federal Issues HUD OIG DOJ Ginnie Mae Mortgage Servicing Mortgages Debt Cancellation Nonbank Supervision Department of Treasury

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  • DOJ Obtains Auto Repossession Settlement for Servicemembers

    Consumer Finance

    On September 27, the DOJ announced a settlement with a California-based indirect auto financing company and its subsidiary responsible for extending auto title loans (defendants) resolving allegations that the defendants violated the Servicemembers Civil Relief Act (SCRA) by illegally repossessing at least 70 SCRA-protected servicemembers’ vehicles. The DOJ filed its complaint against the defendants in the U.S. District Court for the Central District of California the same day the settlement agreement was reached. This is the second DOJ settlement reached this month over alleged SCRA violations concerning auto repossessions. (See previous InfoBytes summary here.) According to the complaint, the CFPB’s Office of Servicemember Affairs alerted the DOJ in 2016 to the alleged unlawful vehicle repossessions. The DOJ’s investigation concluded that the defendants repossessed the vehicles between 2011 and 2016, without confirming whether the servicemembers were SCRA-protected or obtaining court orders. The defendants’ practice of violating the SCRA, the DOJ contends, was “intentional, willful, and taken in disregard for the rights of servicemembers.”

    Under the terms of the settlement agreement, the defendants must comply with the following: (i) obtain a court order or “valid SCRA waiver” in compliance with the outlined terms of the agreement before repossessing servicemember vehicles; (ii) develop a set of SCRA policies and procedures that outline repossession compliance measures and another set of policies and procedures to provide SCRA relief; (iii) appoint SCRA-specialized employees; and (iv) provide SCRA compliance training. The defendants must also compensate affected servicemembers $700,000, in addition to “lost equity,” accrued interest, credit repair relief, and an auto loan interest rate cap for eligible servicemembers. Further, the defendants must pay a civil penalty of $60,788 to the Treasury, and provide a list of repossessions between October 2016 and the effective date of the settlement to be reviewed by the DOJ for additional SCRA-violations.

    Consumer Finance DOJ Enforcement Settlement SCRA CFPB Servicemembers Compliance

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  • DOJ Announces Settlement With Financial Institution Over Alleged SCRA Violations Concerning Auto Repossessions

    Consumer Finance

    On September 18, the DOJ announced a settlement with a large financial institution resolving allegations that the financial institution had illegally repossessed 164 active-duty servicemembers’ vehicles without first obtaining necessary court orders in violation of the Servicemembers Civil Relief Act (SCRA). The DOJ filed its complaint against the financial institution in the U.S. District Court for the Northern District of Texas the same day the settlement agreement was reached. According to the complaint, the financial institution repossessed the vehicles between 2007 and 2010, when it completed the sale of its automobile lending and servicing arm to a different company. As part of a separate enforcement action against the company that acquired the accounts, the DOJ discovered that the financial institution allegedly violated the SCRA by arranging “for the physical repossession of the automobile and later [selling] the account to [the new company], which attempted to collect fees relating to the unlawful repossession.” Further, the complaint alleges that the financial institution conducted repossessions without SCRA-required court orders, even though the company possessed information “in its own records suggesting that a borrower could be a SCRA-protected servicemember,” or knew that “the borrower was in military service or had received orders to report for military service” and “nevertheless continued repossession efforts and eventually succeeded in repossessing the [servicemembers’] vehicles.”

    While the financial institution has denied the allegations, it agreed to compensate affected servicemembers $907,000, 163 of whom are to receive $5,000 each, in addition to the $5,000 previously received as partial compensation from a separate settlement the DOJ reached with the company that acquired the accounts. The remaining impacted servicemember, who did not receive partial compensation, will receive $10,000 from the escrow account. All 164 servicemembers will also receive $500 for “lost equity” and accrued interest. In addition, the financial institution must provide credit repair relief to each affected servicemember and any co-borrowers, and are required to cooperate with an “Independent Settlement Administrator” who will monitor compliance. Further, should the financial institution resume originating or servicing automobile loans, it is required to provide notice to the DOJ every six months of any SCRA or military-related complaint.

    Consumer Finance DOJ Enforcement Settlement SCRA Auto Finance

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  • Swedish Telecom Company to Pay $965 Million to DOJ and SEC to Settle Bribery Claims

    Financial Crimes

    On September 21, a Swedish telecom company agreed to pay $965 million as a result of criminal and civil actions brought by the DOJ and SEC charging the company with paying bribes to an Uzbek government official from 2007 to 2010. The company entered into a deferred prosecution agreement with the DOJ that required the company to pay a $548.6 million criminal penalty for violating the anti-bribery provisions of the FCPA, $274 million of which will be paid to the Swedish Prosecution Authority and credited by the DOJ. $40 million of the total criminal penalty consisted of forfeiture by the company on behalf of its indirect subsidiary. According to the criminal information, around 2007, the company began operating a mobile telecommunications business in Uzbekistan through the subsidiary, and the companies allegedly then conspired to make approximately $331 million in bribes to an Uzbek government official to expand their share of the telecommunications market. 

    On the same day, the SEC issued a cease-and-desist order finding that the company violated the anti-bribery and internal accounting controls provisions of the FCPA and ordering the company to disgorge $457 million in illicit profits (but also agreeing to credit up to half that amount if disgorged to the Swedish Prosecution Authority). The SEC found that over the relevant time period, the company “paid bribes to a government official in Uzbekistan in order to obtain and retain business that generated more than $2.5 billion in revenues.” It found that the company paid the Uzbek official $330 million in bribes “funneled through payments for sham lobbying and consulting services to a front company controlled by the official.” The SEC agreed that the $40 million forfeiture to the DOJ would also offset.

    Financial Crimes DOJ SEC Bribery FCPA

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  • OFAC Imposes Additional Iranian Sanctions, List Includes Entities Involved in DDoS Attacks Against U.S. Financial Institutions

    Financial Crimes

    On September 14, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced it was imposing sanctions on 11 entities and individuals for supporting designated Iranian actors or for conducting malicious cyberattacks, including engaging in a series of distributed denial of service (DDoS) attacks against approximately 46 U.S. financial institutions. As reported in an indictment delivered by a federal grand jury in the Southern District of New York (see March 24, 2016 DOJ press release), the DDoS attacks—allegedly conducted by seven Iranian individuals between December 2011 and mid-2013—denied customers access to online bank accounts and collectively cost the affected financial institutions “tens of millions of dollars in remediation costs as they worked to neutralize and mitigate the attacks on their [computer] servers.” During a DDoS attack, a “malicious actor” gains remote control of a server through the installation of malicious software. Once compromised, the “malicious actor” can collect hundreds or thousands of these compromised devices (collectively known as a “botnet”), and, once control is achieved, will “direct the computers or servers comprising the botnet to carry out computer network attack[s] and computer network exploitation activity.” Three of the seven sanctioned individuals worked for a company that was added to OFAC’s updated SDN list on September 14 and oversaw a network of compromised computers that powered DDoS attacks. The other four individuals operated a second DDoS botnet on behalf of a different company listed on OFAC’s non-SDN list. Both Iranian-based private computer security companies perform work on behalf of the Iranian Government, including Iran’s Islamic Revolutionary Guard Corps. Pursuant to E.O. 13694, U.S. persons are prohibited from dealing with the designated entities and individuals, and “foreign financial institutions that facilitate significant transactions for, or persons that provide material or certain other support to, the entities and individuals designated today risk exposure to sanctions that could sever their access to the U.S. financial system or block their property and interests in property under U.S. jurisdiction.”

    In addition, pursuant to E.O. 13382, OFAC sanctioned an Iranian-based engineering company for engaging in activities related to Iran’s ballistic missile program, which include providing “ financial, material, technological, or other support for, or goods or services in support of, the [Islamic Revolutionary Guard Corps].” Two Ukrainian-based companies were also sanctioned pursuant to E.O. 13224 for assisting previously sanctioned Iranian and Iraqi airlines in obtaining U.S.-origin aircraft, as well as crew and services.

    Financial Crimes Sanctions Department of Treasury OFAC DOJ Indictment Privacy/Cyber Risk & Data Security

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  • FCPA Sting Operation Results in Conspiracy Charge for Retired U.S. Army Colonel

    Financial Crimes

    On August 29, the DOJ announced that it had unsealed a criminal complaint and FBI affidavit charging a retired U.S. Army colonel “for his alleged role in a foreign bribery and money laundering scheme in connection with a planned $84 million port development project in Haiti.” The DOJ alleges that he solicited bribes “from undercover [FBI] agents in Boston who posed as potential investors,” telling the agents “that he would funnel the payments to Haitian officials through a non-profit entity that he controlled . . . in order to secure government approval of the project.” The retired colonel allegedly received a $50,000 payment from the FBI, which he wired to his non-profit organization. While he ultimately used the payment for personal purposes, rather than his promised bribery, he allegedly “intended to seek additional money from the undercover agents to use for future bribe payments in connection with the port project.” The DOJ also alleges that FBI agents intercepted telephone calls where he “discussed bribing an aide to a senior Haitian official by giving him a job on the port development project after he left his position.”

    FCPA sting operations are relatively rare. An infamous FCPA sting operation involving Africa resulted in charges for 22 defendants, but it concluded unsuccessfully in 2012 after a series of acquittals and hung juries caused the DOJ to dismiss the remaining indictments.

    Financial Crimes DOJ Bribery Anti-Money Laundering

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  • SFO Director Urges Department to Compete With DOJ on Home Turf

    Financial Crimes

    In a September 4 speech, Serious Fraud Office (SFO) Director David Green urged the SFO to lead anti-corruption enforcement efforts against UK-connected companies, warning that “if we take our foot off the pedal . . . , others will fill the void.” Green noted that the DOJ “is not shy about enforcing the [FCPA] against foreign companies,” and emphasized that seven of the top ten highest-dollar FCPA cases since 2008 were brought against non-American companies. Green said that “it is surely right that the UK should lead enforcement in relation to UK companies or companies with strong connections here,” because it not only “demonstrates our commitment to the level playing field,” but it also “ensures that hefty financial penalties go to UK public coffers rather than elsewhere.”

    Financial Crimes UK Serious Fraud Office DOJ FCPA

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