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  • CFPB and DOJ Take Action Against Bank over Mortgage Lending Practices

    Lending

    On June 29, the CFPB announced a joint action with the DOJ against a regional bank with operations in Memphis, Tennessee for allegedly engaging in discriminatory mortgage lending practices in violation of the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act (FHA). According to the CFPB’s and the DOJ’s complaint, between January 1, 2011 and December 31, 2015, the bank (i) engaged in redlining practices in the Memphis area by structuring its business to meet the credit needs of majority-White neighborhoods while ignoring the credit needs of individuals in majority-minority neighborhoods; (ii) discriminated against African American borrowers by allowing its employees to practice discretion in making credit decisions on mortgage loans, which ultimately resulted in African Americans being denied certain mortgages at significantly greater rates than similarly situated white applicants; (iii) charged African Americans, on average, 30 basis points more for first lien and 64 basis points more for second lien mortgage loans than similarly situated white borrowers; and (iv) implemented a policy under which loan officers were advised to deny minority applicants more quickly than other applicants and to deny credit assistance to “borderline” applicants. The complaint further alleges that a series of matched-pair tests at Memphis branches “revealed that the Bank treated African American testers less favorably than similarly situated white testers.”

    Subject to approval, the proposed consent order would require the bank to take several remedial actions to improve its allegedly discriminatory mortgage lending practices, among which include: (i) allocating $4 million to a loan subsidy program that offers mortgage loans on a more affordable basis to applicants in majority-minority neighborhoods; (ii) spending at least $300,000 on a targeted advertising and outreach campaign that considers the results of a credit needs assessment performed by an independent third-party auditor, advertises the loan subsidy program, and generates mortgage loan applicants from qualified residents in majority-minority neighborhoods; (iii) spending $500,000 on local partnerships that provide education, credit repair, and other assistance in majority-minority neighborhoods; (iv) opening an additional branch or loan production office in a high-minority neighborhood; (v) extending credit offers to African American consumers who were denied mortgage loans as a result of the bank’s allegedly discriminatory underwriting policy; and (vi) implementing policies that ensure employees provide equal assistance to mortgage loan applicants, regardless of race or other prohibited characteristics. Under the proposed consent order, the bank would pay $2.78 million in consumer redress and a $3 million civil penalty. The CFPB’s proposed consent order notes that the bank has “recently taken a number of steps to improve its compliance management system, reduce its fair lending risk, and increase its lending in minority areas.”

    CFPB Fair Housing ECOA DOJ Enforcement Redlining

  • Massachusetts-based Imaging Company and Danish Subsidiary Settle FCPA Charges with the SEC and DOJ

    Federal Issues

    On June 21, the SEC and DOJ announced a nearly $15 million settlement with a Massachusetts-based imaging company and its wholly-owned Danish subsidiary to resolve parallel civil and criminal actions involving FCPA violations. The SEC alleged that, from at least 2001 through early 2011, the subsidiary paid about $20 million to third parties in hundreds of sham transactions with distributors in Russia and shell companies in Belize, the British Virgin Islands, Cyprus, and Seychelles. The sham transactions involved fictitious inflated invoices to the distributors with the over-payments going to third parties identified by the distributors. The subsidiary did not have a relationship with the third parties and did not know if the payments had any business purpose for the distributors.

    The settlement is consistent with the settlement offer that the imaging company disclosed last December, and it reflects the company’s agreement to pay $7.67 million in disgorgement and $3.8 million in prejudgment interest to resolve the SEC’s books and records and internal controls charges, and the subsidiary’s agreement to pay $3.4 million in criminal fines in a non-prosecution agreement with the DOJ. The subsidiary’s former CFO also settled with the SEC, agreeing to pay a $20,000 penalty to settle allegations that he knowingly circumvented internal controls and falsified the subsidiary’s books and records.

    FCPA SEC DOJ

  • Department of Homeland Security and DOJ Issue Operational Rules to Implement Provisions of CISA

    Privacy, Cyber Risk & Data Security

    On June 15, the Department of Homeland Security and the DOJ (collectively, Departments) issued final procedures to implement certain provisions of the Cybersecurity Information Sharing Act (CISA) of 2015. The rules establish operational procedures “relating to the receipt of cyber threat indicators and defensive measures by all federal entities under CISA.” The recently issued procedures finalize interim guidance released by the Departments in February 2016.

    DOJ CISA Privacy/Cyber Risk & Data Security

  • DOJ Determines that Indiana-Based Medical Device Manufacturer Breached FCPA Deferred Prosecution Agreement

    Federal Issues

    On June 6, the DOJ filed a status report with the U.S. District Court for the District of Columbia stating that an Indiana-based medical device manufacturer had violated its 2012 deferred prosecution agreement (DPA) related to FCPA charges. Specifically, the DOJ stated that it notified the medical device manufacturer on April 15, 2016 that “the government had determined that [it] had breached the DPA based on the conduct in Mexico and Brazil and based on [its] failure to implement and maintain a compliance program as required by the DPA.”

    The medical device manufacturer had settled FCPA charges with the DOJ and SEC in 2012 related to the company’s conduct in Argentina, Brazil, and China. As previously reported in the FCPA Scorecard, the company’s DPA had been extended twice since 2012: once in March 2015 because the company had discovered additional potential FCPA violations in Brazil and Mexico, and again in March 2016. According to the DOJ, the company and the DOJ are in discussions to resolve the matter without a trial.

    FCPA DOJ

  • Businessman Pleads Guilty to Foreign Bribery Charges in Connection with Venezuela's State-Owned Oil Company

    Federal Issues

    On June 16, the DOJ announced that the owner of several U.S.-based energy companies had pleaded guilty to bribery charges related to a scheme to corruptly secure energy contracts from Venezuela’s state-owned oil company. This stems from the previously reported December 2015 charges against the energy companies’ owner and the owner of an oil-field supply company.

    According to admissions made by the energy companies’ owner, he worked with the oil-field supply company’s owner to submit bids for equipment and services to Venezuela’s state-owned oil company. Beginning in 2009, the two individuals agreed to pay bribes to purchasing analysts of the state-owned oil company to ensure that their companies were placed on the state-owned oil company’s bidding panels, which enabled the companies to secure lucrative energy contracts. The energy companies’ owner also admitted to making bribe payments to other officials of the state-owned oil company to ensure that his companies were placed on vendor lists approved by the state-owned oil company and given payment priority over other vendors with outstanding invoices. Previous FCPA Scorecard coverage on these investigations can be found here.

    DOJ

  • SEC Reaches Non-Prosecution Agreements for Bribes of Chinese Officials; DOJ Declines to Pursue FCPA Enforcement Actions

    Federal Issues

    On June 7, the SEC announced it had entered into non-prosecution agreements with two unrelated companies in connection with bribes paid to Chinese officials by foreign subsidiaries. First, a Massachusetts-based internet services provider agreed to pay $652,000 in disgorgement and $19,433 in interest. According to its agreement, the company’s foreign subsidiary had paid bribes to induce Chinese government-owned entities to purchase more services than they needed. Second, a Rhode Island-based residential and commercial building products manufacturer agreed to pay $291,000 in disgorgement and $30,000 in interest. According to that agreement, the company’s subsidiary made improper payments and gifts to Chinese officials in exchange for preferential treatment, relaxed regulatory oversight, and reduced customs duties, taxes, and fees. The agreements each stipulate that the companies are not charged with violations of the FCPA and will not pay any additional monetary penalties.

    In support of the agreements, the SEC noted that both companies promptly self-reported the conduct and cooperated extensively with the ensuing investigations. Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit, praised the companies for “promptly tighten[ing] their internal controls after discovering the bribes and [taking] swift remedial measures to eliminate the problems.”

    Also on June 7, each company released letters from the DOJ declining to pursue enforcement actions against the companies. The letters are the first public declinations issued by the DOJ under its FCPA Pilot Program announced in April 2016. The one-year Pilot Program is designed to encourage companies to voluntarily self-report potential FCPA-related misconduct and cooperate with federal investigations. DOJ declined to pursue enforcement actions based on several factors, including that the companies identified the misconduct themselves, promptly self-disclosed the misconduct, thoroughly investigated the misconduct, enhanced their compliance programs and internal accounting controls, terminated the employees responsible for the misconduct, disgorged any ill-gotten gains, fully cooperated with the federal investigations, and agreed to cooperate with any future investigations.

    FCPA SEC DOJ

  • DOJ Announces Indictment of Former Derivatives Traders for Alleged LIBOR Manipulation

    Consumer Finance

    On June 2, the DOJ announced that a federal grand jury of the Southern District of New York indicted two former senior traders of an international investment bank for their alleged roles in a scheme to manipulate the U.S. Dollar London InterBank Offered Rate (LIBOR). Specifically, the former employees were charged with “one count of conspiracy to commit wire fraud and bank fraud and nine counts of wire fraud for their participation in a scheme to manipulate the USD LIBOR rate in a manner that benefited their own or [the investment bank’s] financial positions in derivatives that were linked to those benchmarks.” According to allegations included in the indictment, as director of the Pool Trading Desk in New York and as director of the Money Market Derivatives (MMD) Desk in London, the two former senior traders directed subordinates and/or requested that colleagues “submit false and fraudulent LIBOR contributions consistent with the traders’ or the bank’s financial interests rather than the honest and unbiased costs of borrowing.” Chief U.S. District Judge Colleen McMahon of the SDNY has been assigned to the case.

    DOJ LIBOR

  • Monaco-Based Company Alleges Extortion Following Media Reports of Mass Bribery

    Federal Issues

    On May 16, a Monaco-based industrial solutions company released a statement denying claims made in a media report that linked the company to allegations of bribing foreign government officials to secure contracts within the oil and gas industry. The company stated it has “been the victim of a four-month extortion attempt by criminals,” and that it is currently engaged with UK authorities.

    Separately, an Amsterdam-based oil services company disclosed in a May 11 S-3 filing that it has been subject of DOJ questioning in relation to the investigation of the Monaco-based industrial solutions company. The company stated that it is cooperating with the DOJ’s inquiries. The Amsterdam-based company is the third company to disclose DOJ inquires as a result of the investigation surrounding the Monaco-based company and the companies that used its services. For additional coverage on the investigations, visit BuckleySandler’s FCPA Scorecard website.

    DOJ

  • Swiss Extradite Final FIFA Official Arrested in May 2015 Sweep

    Federal Issues

    On May 18, former President of the Nicaraguan Football Federal Julio Rocha was extradited from Switzerland to the United States. He was the final FIFA official to be extradited following the arrests made in Zurich in May 2015, according to the Swiss Federal Office of Justice, which has handled the extradition proceedings over the past year. Mr. Rocha was indicted by the DOJ in May 2015 along with 13 other FIFA officials.

    DOJ

  • DOJ Sentences Founder of Money Laundering Operation to 20 Years Imprisonment

    Fintech

    On May 6, the DOJ announced that U.S. District Judge Denise L. Cote sentenced the founder of a Costa Rica-based virtual currency company to 20 years imprisonment and ordered him to pay a $500,000 fine for charges related to illegal money laundering. According to the DOJ, the individual owner, at all relevant times, directed and supervised the company’s operations and was aware that cybercriminals, such as credit card traffickers and identity thieves, were using the “digital currency empire” to launder the proceeds of illegal activity. The DOJ further asserts that the company “grew into a financial hub for cybercriminals around the world, trafficking the criminal proceeds of Ponzi schemes, credit card trafficking, stolen identity information and computer hacking.” When the government shut the company down in May 2013, it had more than 5.5 million user accounts worldwide and more than 78 million financial transactions processed, valued at more than $8 billion. Prior to the sentencing hearing, the owner pleaded guilty to one count of conspiring to commit money laundering; four other co-defendants also pleaded guilty, with two individuals being sentenced to five and three years in prison and two others awaiting sentencing.

    DOJ Virtual Currency

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