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DOJ Announces Sentencing of Former DEA Agent for Criminal Involvement in Silk Road Investigation
On October 19, the DOJ announced that a former DEA agent was sentenced to 78 months in prison for crimes he committed while working as an undercover agent in the Silk Road investigation. On July 1, the former DEA agent pleaded guilty to charges of extortion, money laundering, and obstruction of justice. Using his DEA-sanctioned persona, “Nob,” the former agent sold Ross Ulbricht – Silk Road’s convicted operator – fake drivers’ licenses and inside information about the investigation, directing Ulbricht to conceal his payments, which were made in bitcoin, using encrypted messaging. Understanding that the payments were government property and constituted evidence of a crime, the former agent admitted to falsifying reports and depositing the funds into his own personal bank accounts, receiving more than $100,000 in bitcoin payments from Ulbricht. In addition, the former agent created another, not government-sanctioned online persona, “French Maid,” which he used to solicit and receive approximately $100,000 in bitcoins from Ulbricht in exchange for information on the government’s Silk Road investigation. The former agent also admitted to serving as the chief compliance officer for a digital currency exchange company, even though he did not receive permission from the DEA to do so. In February 2014, the company alerted him to suspicious activity in a certain account, but, using his capacity as a DEA agent, the former agent directed the company to freeze $337,000 in cash and digital currency from the account, and then transferred $300,000 of the digital currency into an account he controlled. In addition to his prison sentence and post-sentence supervision, the former DEA agent will pay $340,000 in restitution.
Multiple Agencies Take Action Against Paris-Based Investment Bank for Sanctions Violations
On October 20, the DOJ, OFAC, the NYDFS, the Manhattan District Attorney’s Office, and the Federal Reserve simultaneously announced that a Paris-based investment bank would pay a total of more than $787 million to settle multiple alleged violations of U.S. sanctions regulations. The OFAC settlement resolves allegations that the investment bank and certain predecessor banks, between August 6, 2003 and September 16, 2008, processed 4,055 transactions – for a total of approximately $337,043,846 – to or through U.S. financial institutions that involved countries and/or persons subject to the sanctions regulations administered by OFAC. The investment bank settled with OFAC for more than $329,500,000, an amount that reflects the agency’s consideration of the following aggravating factors: (i) the investment bank had indications that its actions had the potential to constitute violations of the U.S. law before the earliest date of the apparent violations; (ii) several managers of the investment bank were aware of the conduct that led to the violations; (iii) the investment bank’s conduct resulted in significant harm to various sanctions programs OFAC oversees and their associated policy objectives; (iv) the investment bank’s size and sophistication, along with its global presence; and (v) the investment bank’s failure to maintain proper controls to prevent the violations from occurring and otherwise maintain an adequate compliance program.
In addition to OFAC’s settlement, parallel actions against the bank resulted in the investment bank agreeing to pay (i) $385 million to the NYDFS; (ii) $90.3 million to the Federal Reserve; (iii) $156 million to the Manhattan District Attorney’s Office; and (iv) $156 million to the U.S. Attorney’s Office for the District of Columbia.
Former Vice President of Defense Contractor Jailed for Bribing Kuwaiti Officials
On October 9, James Rama, a former Vice President of Florida-based defense contractor IAP Worldwide Services, Inc., was sentenced in the U.S. District Court for the Eastern District of Virginia to 120 days in prison for conspiracy to violate the anti-bribery provisions of the FCPA. Rama pleaded guilty to the conspiracy charge on June 16 for his role in a scheme by IAP to pay more than $1.7 million in bribes to Kuwaiti officials to win a government contract intended to provide nationwide surveillance capabilities for several Kuwaiti government agencies. Rama had faced a recommended sentence under the Sentencing Guidelines of between 57 and 60 months, but received a substantially shorter sentence in part due to his cooperation with authorities during their investigation. Prosecutors had recommended that Rama receive a one year sentence, while the defense had requested just supervised release. IAP previously entered into a non-prosecution agreement with the DOJ and agreed to pay $7.1 million to resolve the allegations against the company.
DOJ Disables Malware Designed for Bank-Theft; Unseals Indictment Against Botnet Administrator
On October 13, the DOJ unsealed an indictment against a Moldovan citizen for his alleged involvement in a criminal conspiracy to steal confidential financial information by distributing malware software through phishing emails. According to the indictment, the Defendant and his co-conspirators infected computers with malware designed to circumvent anti-virus protections and steal confidential personal and financial information from victims. The confidential information, such as online banking credentials, was used to “falsely represent to banks that the defendant and co-conspirators were the victims or employees of the victims with authority to access the victims’ bank accounts.” The investigation found that an estimated $10 million loss in the U.S. alone can be attributed to the Defendant’s scheme.
Georgia Resident Pleads Guilty to Charges of Operating Unlicensed Money Transmitting Business
On October 13, the DOJ announced that a Columbus, Georgia resident pleaded guilty to one count of operating an unlicensed money transmitting business. According to the DOJ, between February 2013 and March 2014, the individual unlawfully owned, operated, and managed multiple money transmitting companies throughout the Columbus area, offering check-cashing services. The individual allegedly knew that he was required to register his company with FinCEN and with the state of Georgia, but failed to do so. Scheduled to face sentencing in January 2016, the individual faces a statutory maximum sentencing of five years and has agreed to a forfeiture order of more than $1,300,000.
Kinross Gold Discloses FCPA Investigation by SEC and DOJ
On October 2, Canadian mining company Kinross Gold Corp. announced that the SEC and DOJ are investigating potentially improper payments to government officials in West Africa. The company’s announcement states that it received subpoenas from the SEC in 2014 and 2015, and a request for information from the DOJ in December 2014. The subpoenas came after the company launched an internal investigation in August 2013 to investigate a whistleblower complaint alleging improper payments to government officials and internal control deficiencies in the company’s West African mining operations.
Former CEO of Siemens-Argentina Pleads Guilty to FCPA Offenses
On September 30, the former CFO of Siemens S.A.-Argentina pleaded guilty in a federal court in New York to conspiring to pay nearly $100 million dollars in bribes to Argentinian officials. The former executive, Andres Truppel, who is a German and Argentinian citizen, pleaded guilty to conspiracy to violate the antibribery, internal controls, and books and records provisions of the FCPA, and conspiracy to commit wire fraud. As described in the U.S. Attorney’s Office for the Southern District of New York’s press release, the violations stemmed from Siemens’ bid to win an Argentine government contract worth $1 billion to create a national identity card system. Mr. Truppel faces up to five years in prison and three years of supervised release when he is sentenced; there is no information on when sentencing will occur.
Truppel was one of eight former Siemens executives indicted in 2011 on charges of conspiring to violate the FCPA and other statutes (see previous BuckleySandler coverage here and here). Siemens itself reached a record $800 million resolution in 2008 with the DOJ and SEC related to FCPA violations in numerous countries, including Argentina. Siemens S.A.-Argentina pleaded guilty to conspiracy to violate the FCPA’s books and records provisions as part of that resolution.
DOJ Assistant Attorney General Stresses Public-Private Cooperation In the Event of a Cyber Breach
On September 30, U.S. Assistant Attorney General John Carlin delivered remarks at the 2015 Cybersecurity Summit hosted jointly by the U.S. Chamber of Commerce and the American Gaming Association. In his remarks, Carlin highlighted a variety of “tools,” including the use of sanctions, the DOJ may employ on individuals or entities that engage in malicious cyber-enabled activities against the U.S. Notably, Carlin discussed certain advantages for increased collaboration among the private sector and government to share information and best practices “to help defend against or disrupt [cyber] attacks before they happen or in real time,” adding that “law enforcement can also enlist the assistance of international partners to help retrieve stolen data or identify a perpetrator.” Concluding his remarks, Carlin urged companies to adopt a strong cybersecurity risk management program.
Owner of Mortgage Company Sentenced to Serve More Than 11 Years for Role in $64 Million Mortgage Fraud Operation
On September 24, the DOJ released a statement regarding the sentencing of the owner of a Florida mortgage company for allegedly organizing a mortgage fraud scheme. In July 2015, the owner, along with his business partner and a senior underwriter for the mortgage company, pleaded guilty to the mortgage fraud scheme that resulted in $64 million in losses to the FHA. The August 2014 indictment stated that the three individuals edited borrowers’ loan applications, altering important information so that they appeared to be qualified for FHA loans when, in fact, they were not. As a result of the September sentencing, the owner of the company will pay more than $64 million in restitution and forfeit $8 million in illegal profits. The owner’s business partner was sentenced to serve 41 months in prison; in addition, he will pay more than $7 million in restitution and forfeit $400,000 in illegal profits. The company’s underwriter will pay more than $24 million in restitution and serve 51 months in prison. A total of 24 defendants were charged in the case, which was jointly investigated by the HUD-OIG and the DOJ.
CFPB and DOJ Fine Savings Association Over Alleged Mortgage Redlining Practices
On September 24, the CFPB and DOJ announced a joint enforcement action against a federally-chartered savings association, alleging that the lender excluded predominantly minority neighborhoods from its mortgage lending business. The consent order, subject to court approval, would require the lender to, among other things, (i) pay $25 million in various subsidies to assist minority borrowers; (ii) provide a total of $2.25 million, over a five-year period, to local initiatives providing assistance and consumer education to residents in the excluded neighborhoods; and (iii) pay a $5.5 million civil money penalty.