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  • SEC and FDIC Announce Senior Appointments


    On July 3, the SEC announced that Ken C. Joseph will lead the Investment Adviser/Investment Company Examination Program for the New York Regional Office. Mr. Joseph previously served for 16 years as a Staff Attorney, Branch Chief, and Assistant Director in the SEC’s Division of Enforcement in Washington, DC and New York.

    On July 2, the FDIC announced that Doreen R. Eberley will oversee all examination activities of the FDIC’s regional and field supervisory operations as Senior Deputy Director for Supervisory Examinations in the Division of Risk Management Supervision. Ms. Eberley currently serves as New York Regional Director and has been with the FDIC for 25 years. The FDIC also announced that Andrew Gray will serve as Deputy to the Chairman for Communications and Eric Spitler will serve as Director of the Office of Legislative Affairs.

    FDIC SEC Investment Adviser

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  • State Law Update: South Carolina Adopts Mortgage Lending Act Regulations


    Recently, the South Carolina State Board of Financial Institutions (Board) adopted regulations implementing the South Carolina Mortgage Lending Act. The regulations set forth definitions for previously-undefined terms, specify circumstances under which a licensee’s Nationwide Mortgage Licensing System unique identification number must be disclosed, clarify periodic reporting requirements applicable to licensees, and provide a timeframe within which a license application must be completed before it is deemed abandoned by the Board. The regulations took effect on June 22, 2012.

    Mortgage Licensing

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  • Special Alert: California Legislature Approves Key Parts of State's "Homeowner Bill of Rights"

    On July 2, the California State Legislature passed AB 278 and SB 900 (“the Bills”), two substantively identical pieces of legislation that implement significant portions of the “Homeowner Bill of Rights” initiative announced by California Attorney General Harris on February 29.  The portions of the initiative that still must be considered by the Legislature are listed in a fact sheet appended to the Attorney General’s press release regarding the Bills.  If signed by Governor Brown, the Bills will (i) codify a number of protections similar to those contained in the Multistate Servicer Settlement between 49 state attorneys general, the Federal Government, and the nation’s five largest mortgage servicers announced on February 9 (“the Settlement”), (ii) amend the mechanics of California’s foreclosure processes, and (iii) provide borrowers with new private rights of action.

    First, the Bills create protections similar to those provided to customers of the mortgage servicers that are subject to the Settlement.  For example, the Bills will restrict "dual tracking" and guarantee a single point of contact for certain borrowers pursuing loss mitigation.  Additionally, the Bills will impose certain notice requirements similar to those contained in the Settlement.  For example, the Bills will require that prior to recording a notice of default, covered mortgage servicers will need to send borrowers a disclosure stating that if they are servicemembers, they may be eligible for benefits and protections under the federal Servicemembers Civil Relief Act.  Likewise, the Bills also will require that, under certain circumstance, mortgage services must send Borrowers loss mitigation solicitations within 5 days of the recording of a notice of default.  Lastly, the Bills also will establish sanctions for inaccurate, incomplete, and unsupported foreclosure documentation, so-called "robo signing" activities.   These sanctions include civil penalties of up to $7,500 per mortgage or deed of trust, in an action brought by specified state and local government entities, as well as administrative enforcement against licensees of the Department of Corporations, the Department of Financial Institutions, and the Department of Real Estate.

    Second, with respect to the state’s foreclosure process, the Bills will make permanent the state’s current pre-foreclosure contact requirements and extend the reach of these requirements to mortgage servicers.  In addition, the Bills will impose a number of new disclosure requirements that will last through January 1, 2018.  For example, whenever a foreclosure sale is postponed for a period of at least 10 business days, the mortgagee will be obligated to provide the borrower with written notice regarding the new sale date and time of the foreclosure sale within five business days of the postponement.

    Finally, the Bills will provide borrowers new private rights of action, allowing them to seek both injunctions and damages (including attorneys’ fees) for violations of certain of the Bills’ provisions.  Furthermore, with respect to damages, if a court determines that a violation was intentional, willful, or reckless, it will have the power to award the greater of treble actual damages or $50,000 in statutory damages.  In addition, the Bills will provide that certain violations committed by licensees of the Department of Corporations, the Department of Financial Institutions, and the Department of Real Estate automatically will become violations of the Departments’ respective licensing laws.

    The Bills’ provisions will be applicable (i) only to mortgage servicers, mortgagees, trustees, beneficiaries, and authorized agents who conduct more than 175 foreclosure sales per year in California and (ii) only with respect to mortgages or deeds of trust secured by owner-occupied, residential real property not exceeding four dwelling units. For a copy of the Bills, please see:









    Loss Mitigation

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  • Spotlight on Anti-Money Laundering (Part 3 of 3): SAR Reporting for RMLOs


    On September 29, Och-Ziff Capital Management (Och-Ziff) agreed to pay approximately $412 million to the DOJ and SEC to resolve related criminal and civil charges of violating the FCPA in connection with the bribery of high-level government officials across Africa.  This is the fourth-largest FCPA enforcement settlement of all time, and the first time a hedge fund has been held accountable for violating the FCPA.  In addition, both the SEC and DOJ made clear that their investigations, including of those of individuals, are ongoing, making it possible that the government is not finished collecting FCPA fines from related parties and individuals.

    In the criminal case, Och-Ziff, a New York-based publicly-traded hedge fund, entered into a three-year deferred prosecution agreement (DPA) to resolve charges of conspiracy to violate the FCPA, falsification of books and records, and failure to implement adequate internal controls. Och-Ziff agreed to pay a criminal penalty of approximately $213 million, and to retain a compliance monitor for three years.  OZ Africa Management (OZ Africa), a wholly-owned subsidiary of Och-Ziff, pleaded guilty to a one-count criminal information charging it with conspiracy to violate the FCPA.  Sentencing is set for March 29, 2017.

    The DPA’s Statement of Facts describes bribes paid to government officials in the Democratic Republic of Congo (Congo) and Libya to help Och-Ziff (i) obtain special access and preferential prices for investment opportunities in government controlled-mining sectors in Congo, and (ii) secure an investment from the Libyan Investment Authority, Libya’s sovereign wealth fund.

    In parallel proceedings, Och-Ziff agreed to pay $199 million to the SEC and entered into an Administrative Order Instituting Cease-and-Desist Proceedings to settle the FCPA civil charges.  The SEC’s allegations covered Libya, Chad, Niger, and the Congo, and alleged that Och-Ziff used intermediaries, agents, and business partners to corruptly influence foreign officials.  The Order found that Och-Ziff executives ignored red flags and corruption risks and permitted the corrupt transactions to proceed..  Both Och-Ziff CEO Daniel S. Och and CFO Joel M. Frank agreed to settle related allegations, without admitting or denying the findings.  Och agreed to pay nearly $2.2 million to the SEC in the settlement, and a penalty will be assessed against Frank at a future date.  In addition, Oz Management, an affiliated investment adviser of Och-Ziff, settled charges that it violated the anti-fraud provisions of the Investment Advisers Act of 1940.

    The FCPA Scorecard previously covered Och-Ziff’s August 2016 10-Q filing, which disclosed substantial financial reserves set aside for alleged FCPA violations for over half a decade.

    Anti-Money Laundering Bank Secrecy Act

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  • CFPB Finalizes Rule Governing Treatment of Privileged Information

    Consumer Finance

    The Argentine sports marketing company, Torneos y Competencias SA, entered into a deferred prosecution agreement with the U.S. DOJ on December 13, admitting to wire fraud conspiracy in connection with paying tens of millions of dollars in bribes and kickbacks to high-ranking FIFA officials in order to secure support for broadcasting rights in Argentina, Uruguay, and Paraguay for the 2018, 2022, 2026, and 2030 World Cup. The four-year DPA calls for Torneos to pay approximately $112.8 million in forfeiture and criminal penalties.  In announcing the DPA, the DOJ noted its consideration of Torneos’ remedial actions including termination of its entire senior management team, hiring a new General Manager, Chief Financial Officer, Legal Director, Chief Compliance Officer, and Compliance Manager, cooperation, and implementation of enhanced internal controls and a rigorous corporate compliance program.

    The deferred prosecution agreement is part of the DOJ’s wider investigation into corruption in international soccer.  Thus far, DOJ has charged 42 defendants and obtained 19 guilty pleas in connection with the FIFA corruption prosecutions. Prior Scorecard coverage of the FIFA investigations can be found here.

    CFPB Examination

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  • CFPB Releases Report on Reverse Mortgages

    Consumer Finance

    On June 28, the CFPB released a report to Congress detailing the characteristics and evolving uses of reverse mortgages in today’s marketplace. The report presents findings from a CFPB study on reverse mortgages required by the Dodd-Frank Act. Among the findings, the CFPB report states that reverse mortgages are often difficult for consumers to understand. The report further observes that reverse mortgages are being used by younger borrowers to obtain all available equity upfront, a use that contravenes the original and intended use of reverse mortgage products and may pose substantial risks to consumers. Concurrent with the release of the report, the CFPB issued a Notice and Request for Information on topics related to reverse mortgages and will accept comments for 60 days following publication of the Notice in the Federal Register. The CFPB intends to use the information and comments received from the public, as well as the findings from its study, to determine whether further consumer education or regulatory action related to reverse mortgages is necessary.

    CFPB Dodd-Frank Reverse Mortgages

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  • Sixth Circuit Holds Foreclosure Filing Before Transfer of Mortgage and Note May Violate FDCPA


    In a first under Israeli law, NIP Global was fined approximately $1.2 million by the Tel Aviv Magistrate’s Court on December 15 for bribing a government official from the African county of Lesotho.  The Israel-based company produces high-tech identification cards and products for population registration and border control.  In 2012, NIP Global entered into a $30 million agreement with the government of Lesotho to sell its products to the African country.  NIP Global was charged with paying a mediator $500,000 to advance that deal, with a significant amount of that sum intended as a bribe for the director general of Lesotho’s interior ministry.  As part of the plea agreement, NIP Global must also cooperate with an ongoing parallel investigation in Lesotho and implement an anti-corruption compliance program.

    The prosecution and plea agreement represent the first time a company has been indicted or convicted of bribing a foreign official under Israeli law.  In July 2008, Israel added Article 291A to its penal code, outlawing bribery of foreign public officials.  The law was enacted in conjunction with Israel entering the UN Convention against Corruption in February 2009 and the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions in March 2009.  Prior to the case against NIP Global, Israel had come under international criticism for lack of enforcement of Article 291A.  The case adds Israel to the list of countries prosecuting companies for bribery of foreign officials and places Israeli companies on notice of future prosecutions.

    Foreclosure FDCPA Mortgage Servicing

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  • Massachusetts Supreme Judicial Court Rules That Lenders May Foreclose Without Possessing Mortgage Note, But Only In Certain Circumstances


    On June 22, the Massachusetts Supreme Judicial Court held that lenders do not need to be in physical possession of a mortgage note to foreclose on a property, but that they must establish that they are acting on behalf of the noteholder. Eaton v. Federal Nat’l Mortgage Ass’n, No. SJC-11041, 2012 WL 2349008 (Mass. June 22, 2012). The lower court had preliminarily enjoined defendant Fannie Mae from evicting the plaintiff following a foreclosure sale; that court interpreted the term “mortgagee,” as used in Massachusetts’ statutes, to refer to a person holding both the mortgage and the mortgage note. At the time of the foreclosure, the foreclosing party held only the mortgage. Reversing the lower court, the Supreme Judicial Court found that the term “mortgagee” refers to a person who (i) holds the mortgage, and (ii) either physically holds the mortgage note or acts on behalf of the mortgage note holder. Recognizing that it was common prior practice to interpret the term “mortgagee” as requiring possession of only the mortgage, the court held that its new interpretation of “mortgagee” should be given only prospective effect.

    Foreclosure Fannie Mae Mortgage Servicing

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  • FTC Sues Hotel Corporation and Subsidiaries Over Data Protection Practices


    On June 26, the FTC filed a complaint in the U.S. District Court for the District of Arizona alleging that Wyndham Worldwide Corporation (and several of its subsidiaries) violated the FTC Act by misrepresenting the adequacy of their data security procedures. The FTC specifically maintains that Wyndham and its subsidiaries engaged in unfair and deceptive practices when they represented on their website that they maintained measures adequate to protect customers’ personal information. In truth, the FTC alleges, Wyndham failed to maintain such protections. According to the FTC, the companies’ lack of reasonable data security allowed intruders to obtain unauthorized access to that information on three separate occasions. These breaches purportedly resulted in more than $10.6 million in fraud loss and the export—to a foreign-registered domain—of payment card account information for hundreds of thousands of consumers.

    FTC Privacy/Cyber Risk & Data Security

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  • California Supreme Court Ruling Stops Convenience Check Class Action


    Just weeks after announcing that it set aside approximately $520 million for a potential settlement of FCPA matters being investigated by the SEC and DOJ, Reuters reports that a spokeswoman for Teva Pharmaceutical Industries Ltd. has confirmed that the Israeli company is investigating new potential bribes to state healthcare workers in Romania. Reuters claims to have reviewed emails sent in the past year by an anonymous tipster to Teva’s CEO and audit committee that detail bribes paid to healthcare providers in exchange for recommending the company’s drugs. Romania was not among the countries Teva identified as being part of the settlement discussions with the SEC and DOJ in its recent SEC filing, although the company has said it is conducting a worldwide investigation of its business practices.

    Prior Scorecard coverage of the Teva investigation can be found here.

    Credit Cards Preemption

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