International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Wednesday, December 13, 2017

SBM Offshore N.V. And United States-Based Subsidiary Resolve Foreign Corrupt Practices Act Case Involving Bribes in Five Countries

SBM Offshore N.V. (SBM), a Netherlands-based company specializing in the manufacture and design of offshore oil drilling equipment, and its wholly owned U.S. subsidiary, SBM Offshore USA Inc. (SBM USA), have agreed to resolve criminal charges and pay a criminal penalty of $238 million in connection with schemes involving the bribery of foreign officials in Brazil, Angola, Equatorial Guinea, Kazakhstan and Iraq in violation of the Foreign Corrupt Practices Act (FCPA).  SBM USA pleaded guilty in connection with the resolution.

Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, Acting U.S. Attorney Abe Martinez of the Southern District of Texas and Special Agent in Charge Mark Dawson of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI) Houston Field Office made the announcement. 

“This corrupt scheme involved some of the highest-level executives within the company, spanned five countries, and lasted for more than a decade,” said Acting Assistant Attorney General Cronan.  “The resolution announced today demonstrates the Criminal Division’s continuing commitment to work closely with our foreign partners to hold both companies and individuals accountable for their actions as we continue to level the playing field for ethical and honest businesses to compete in the marketplace.”

“Deterring corporate crime requires enforcing the law on multiple fronts,” said Acting U.S. Attorney Martinez.  “These cases involve both individual and corporate misconduct, which the guilty pleas reflect. We will continue to aggressively investigate and prosecute individuals and corporations who violate the FCPA and those who misuse our financial system to do so.”

“This case exemplifies how HSI works diligently with our foreign law enforcement partners to promote and protect international trade practices, ensuring a fair and equal playing field for U.S. companies and consumers,” said HSI Special Agent in Charge Dawson. 

SBM entered into a deferred prosecution agreement in connection with a criminal information filed today in the Southern District of Texas charging the company with conspiracy to violate the anti-bribery provisions of the FCPA.  The case is assigned to U.S. District Judge David Hittner.  In addition, SBM USA pleaded guilty and was sentenced by Judge Hittner on a one-count criminal information charging the company with conspiracy to violate the anti-bribery provisions of the FCPA.  Pursuant to its agreement with the Department, SBM agreed to pay a total criminal penalty of $238 million to the United States, including a $500,000 criminal fine and $13.2 million in criminal forfeiture that SBM agreed to pay on behalf of SBM USA.

According to the companies’ admissions and court documents, beginning by at least 1996 and continuing until at least 2012, SBM conspired to violate the FCPA by paying more than $180 million in commissions to intermediaries, knowing that a portion of those commissions would be used to bribe foreign officials in Brazil, Angola, Equatorial Guinea, Kazakhstan and Iraq.  SBM made these payments in order to influence those officials, for the purpose of securing improper advantages and obtaining or retaining business with state-owned oil companies in the five named countries.  SBM acknowledged that it gained at least $2.8 billion from projects it obtained from these state-owned oil companies.

The Justice Department resolution follows guilty pleas by two former SBM executives.  On Nov. 9, Anthony Mace, the former CEO of SBM and a former member of the board of directors of SBM USA, pleaded guilty to one count of conspiracy to violate the FCPA.  On Nov. 6, Robert Zubiate, a former SBM USA executive, pleaded guilty to one count of conspiracy to violate the FCPA.  Mace and Zubiate are awaiting sentencing.

In 2014, SBM settled with the Dutch Public Prosecutor’s Office (Openbaar Ministerie) over related conduct and paid the Netherlands a total $200 million in disgorged profits and a $40 million fine.  SBM has paid a combined worldwide total in criminal penalties in excess of $475 million.          

The Department reached this resolution based on a number of factors, including the fact that while SBM brought the conduct to the attention of the Criminal Division’s Fraud Section and Dutch authorities, it did not provide a complete disclosure for approximately one year; that SBM did cooperate with the Department’s investigation, including an accelerated investigation into bribery conduct related to Kazakhstan and Iraq; and that SBM has undertaken significant remedial measures, including terminating and demoting employees who were involved in the criminal conduct, terminating longstanding agency agreements and implementing a new and enhanced system of internal controls to address and mitigate corruption and compliance risks.  Therefore, SBM was entitled to a 25 percent reduction off of the bottom of the U.S. Sentencing Guidelines range.  In addition, the Department considered SBM’s inability to pay a fine. 

In calculating its fine, the Department credited SBM’s payment of penalties to the Openbaar Ministerie and the payment of penalties likely to be paid to the Brazilian Ministério Público Federal (MPF).

The Department of Justice is grateful to Brazil’s MPF, the Netherlands’ Dutch Public Prosecutor’s Office (Openbaar Ministerie) and Switzerland’s Office of the Attorney General and Federal Office of Justice for providing substantial assistance in gathering evidence during this investigation.

ICE-HSI investigated the case.  Trial Attorney Dennis R. Kihm and Assistant Chief Tarek Helou of the Fraud Section and Assistant U.S. Attorney Suzanne Elmilady of the Southern District of Texas are prosecuting the case.  The Criminal Division’s Office of International Affairs also provided substantial assistance in this matter.  The FBI’s International Corruption Squad and the Internal Revenue Service’s Criminal Investigation Division assisted with portions of the investigation of this case.

December 13, 2017 in AML | Permalink | Comments (0)

Tuesday, December 12, 2017

Former Procurement Officer at Federally Funded Nuclear Research and Development Facility Pleads Guilty to Wire Fraud and Money Laundering

A former procurement officer employed at Sandia Corporation, the prime operator of a federally funded nuclear research and development facility, pleaded guilty to charges of wire fraud and money laundering for orchestrating a scheme to obtain approximately $2.3 million in federal funds through fraudulent means and for laundering fraudulently obtained proceeds through her father’s companies.

Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division made the announcement.

Carla Sena, 55, of Santa Rosa, New Mexico, pleaded guilty to one count of wire fraud and one count of money laundering before U.S. District Chief Judge M. Christina Armijo in the District of New Mexico.  Sentencing will be scheduled at a later date before Judge Armijo.

According to the plea documents, Sena’s employer, Sandia Corporation, managed and operated Sandia National Laboratories (SNL), a nuclear research and development facility owned by the federal government under sponsorship of the U.S. Department of Energy (DOE).  In late 2010, Sena managed the bidding process for the award of a multi-million-dollar contract for moving services at SNL.  Sena admitted that, in anticipation of the bidding process for this contract, she created the company, New Mexico Express Movers LLC (Movers LLC), to which she awarded the multi-million-dollar contract.  Sena prepared a bid on Movers LLC’s behalf containing fraudulent misrepresentations, and submitted the bid under the name of an individual who had no knowledge of Movers LLC to conceal her involvement.    Sena also admitted that she used her position of trust to access inside information and competing bidders’ documents that she leveraged to ensure award of the contract to Movers LLC. 

As a direct result of Sena’s fraudulent scheme, Movers LLC received approximately $2.3 million in federal funds between May 2011 and April 2016.  Sena also admitted that, between October 2011 and April 2015, she transferred via negotiated checks at least $643,000 of the fraudulently obtained proceeds to legitimate businesses owned by her father with the intent to conceal the source and control of those funds and her subsequent personal gain from the proceeds.

December 12, 2017 in AML | Permalink | Comments (0)

Monday, December 11, 2017

More Than $16 Million Awarded to Two Whistleblowers

The Securities and Exchange Commission today announced awards of more than $8 million each to two whistleblowers whose critical information and continuing assistance helped the agency bring the successful underlying enforcement action.

With this case, SEC enforcement actions involving whistleblower awards have now resulted in more than $1 billion in financial remedies ordered against wrongdoers. SEC

The first whistleblower alerted SEC enforcement staff of the particular misconduct that would become the focus of the staff’s investigation and the cornerstone of the agency’s subsequent enforcement action.  The second whistleblower provided additional significant information and ongoing cooperation to the staff during the investigation that saved a substantial amount of time and agency resources.   

“Whistleblowers have played a crucial role in the progression of many investigations and the success of enforcement actions since the inception of the whistleblower program,” said Jane Norberg, Chief of the SEC’s Office of the Whistleblower.  “The value of whistleblowers can be seen in the more than $1 billion in financial remedies ordered against wrongdoers based on actionable information from whistleblowers, including more than $671 million in disgorgement of ill-gotten gains, much of which has been or is scheduled to be returned to harmed investors.” 

The SEC’s whistleblower program has now awarded more than $175 million to 49 whistleblowers since issuing its first award in 2012.  All payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators. No money has been taken or withheld from harmed investors to pay whistleblower awards. 

Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action.  Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million. 

By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.

December 11, 2017 in AML | Permalink | Comments (0)

Sunday, December 10, 2017

Former Company Insider Earns More Than $4.1 Million for Whistleblower Tip

The Securities and Exchange Commission announced an award of more than $4.1 million to a former company insider who alerted the agency to a widespread, multi-year securities law SEC logoviolation and continued to provide important information and assistance throughout the SEC’s investigation.  The whistleblower is the third awarded by the SEC in the past week.  

“Company insiders often have valuable information that can help the SEC halt an ongoing securities law violation and better protect investors,” said Jane Norberg, Chief of the SEC’s Office of the Whistleblower.  “The breadth of the SEC’s whistleblower program is demonstrated by this case, where the whistleblower, a foreign national working outside of the United States, affirmatively stepped forward to shine a light on the wrongdoing.”  

The SEC’s whistleblower program has now awarded more than $179 million to 50 whistleblowers since issuing its first award in 2012.  All payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators. No money has been taken or withheld from harmed investors to pay whistleblower awards. 

Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action.  Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million. 

By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.

December 10, 2017 in AML | Permalink | Comments (0)

Saturday, December 9, 2017

Former Bank Executive Charged for Role in $15 Million Bank Loan Scheme

A former Kansas bank executive was charged in an indictment filed today for his participation in a bank fraud scheme to obtain a $15 million construction loan from 26 Kansas banks based on allegedly false information contained in the loan documents.

Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, Special Agent in Charge David Anderson of the Federal Deposit Insurance Corporation Office of Inspector General’s (FDIC-OIG) Kansas City Regional Office, Special Agent in Charge Karl A. Stiften of the Internal Revenue Service Criminal Investigation’s (IRS-CI) St. Louis Field Office, Special Agent in Charge Darrin E. Jones of the FBI’s Kansas City Field Office and Special Agent in Charge Catherine Huber of the Federal Housing Finance Agency Office of Inspector General’s (FHFA-OIG) Central Region Office made the announcement.

Troy A. Gregory, 50, of Lawrence, Kansas, was charged in an indictment filed in the District of Kansas with one count of conspiracy to commit bank fraud, four counts of bank fraud, and two counts of false statements.  

According to the indictment, Gregory was a bank executive and loan officer who had made millions of dollars in loans to a group of borrowers who were struggling to make payments on the loans.  The indictment alleges that beginning in approximately late 2007, Gregory began the process of making a $15.2 million construction loan to build an apartment complex to that same group of borrowers.  The indictment further alleges that Gregory’s bank shared this loan with 25 other Kansas banks.  Gregory allegedly made or caused others to make false statements to the banks about the strength of the borrowers, the debt status of the apartment property and the existence of approximately $1.7 million in certificates of deposit for collateral on the loan, all to get the loan approved.  Instead of using the loan funds promised for building the apartments, Gregory allegedly immediately diverted over $1 million of the loan to pay for part of the certificates of deposit pledged as collateral, pay off debt on the apartment property and make payments on unrelated loans.  Other Kansas banks that shared in this loan allegedly would not have participated in the loan without the false representations and promises.

The indictment alleges that the banks ultimately wrote off millions of dollars on the $15.2 million construction loan.

An indictment is merely an allegation and all defendants are presumed innocent unless proven guilty beyond a reasonable doubt in a court of law. 

The FDIC-OIG, IRS-CI, FBI and FHFA-OIG are investigating this matter.  Trial Attorney Andrew R. Tyler and Senior Litigation Counsel David A. Bybee of the Criminal Division’s Fraud Section are prosecuting the case.

The Fraud Section plays a pivotal role in the Department of Justice’s fight against white collar crime around the country, focusing on cases of national significance and international scope.  Fraud Section prosecutors have vast experience in investigating and prosecuting securities and financial fraud, health care fraud and foreign corruption.  The Section is routinely the national leader in large, sophisticated white collar investigations and prosecutions, frequently in partnership with U.S. Attorneys’ Offices and in coordination with foreign law enforcement agencies.

December 9, 2017 in AML | Permalink | Comments (0)

Friday, December 8, 2017

Attorney General Sessions Delivers Remarks at the World Bank Global Forum on Asset Recovery

On behalf of President Trump, I want to thank Baroness Williams and the U.K. delegation.  The United States is proud to co-host the forum with you.  We are proud to call attention to the important work that’s been done – and the important work that lies ahead – in our shared fight against crime.  I also want to recognize our distinguished guests from the four focus countries and from our partners in Brazil and Switzerland.  Thank you to the World Bank, the United Nations Office on Drugs and Crime, and everyone else who helped organize this inaugural Global Forum on Asset Recovery.  It is an honor to open the forum today.  I think this is a unique opportunity to bring together investigators, prosecutors, judges, policy-makers and civil society organizations so that we can learn from one another and build relationships.  And that is critically important to us all.

Year by year and day by day, our economies have become increasingly interconnected.  And just as our economies have gone global, so too have the consequences of criminal activity. Criminals are not bound by borders.

Bribes paid to an official in West Africa can be spent on a yacht in Miami.  Dangerous drugs produced in Afghanistan or Colombia can kill a teenager in Cincinnati or Sydney.

A social media post in Syria can inspire a terrorist attack in Europe.  A criminal from Mexico can victimize innocent people in Portland or San Francisco.

In the United States, we know all too well that the consequences of crime can be international.

People across America today are talking about the tragic death of Kate Steinle, a 32-year old woman who was shot in the back walking along a pier in San Francisco.  The man holding the gun had illegally entered the United States six times.

He admitted that he was in San Francisco because the city does not cooperate with immigration enforcement.  He illegally entered 5 times and was charged 10 crimes.

He should not have been in the country in the first place.  Kate Steinle would be alive today if our government had carried out its duties to enforce the law and protect its citizens.

Each one of us—whether we are prosecutors, judges, or legislators—have a responsibility to pursue the common good for the people we serve.  And while each of us has limited jurisdiction, we must recognize that the consequences of our actions can be felt around the world.

You can be sure of this: the United States will do our part.  And we urge every government to do their part, as well.

Over the next few minutes, I’d like to discuss a few of the ways the United States is cooperating with our law enforcement partners across the globe and achieving successes that benefit all of us.

First of all, we have seized or restrained $3.5 billion worth of corruption proceeds involved in money laundering offenses.

Since 2004, the United States has returned millions in corruption proceeds to compensate victims.

That includes approximately $119 million to the people of Italy, $115 million to the people of Kazakhstan, more than $20 million to the people of Peru, and millions more to the people of Nicaragua, South Korea, and Taiwan.

That recovery has only been possible because of cooperation with our foreign law enforcement partners.

You may be familiar with some of these cases.  For example, nearly half of the $3.5 billion in corruption proceeds we have restrained is related to just one enforcement action.

That action was related to a Malaysian sovereign wealth fund known as 1MDB.  1MDB was created by the Malaysian government to promote long-term economic development for the benefit of the Malaysian people.

But allegedly corrupt officials and their associates reportedly used the funds for a lavish spending spree: $200 million for real estate in Southern California and New York.  $130 million in artwork.  $100 million in an American music label.  Not to mention a $265 million yacht.

In total, 1MDB officials allegedly laundered more than $4.5 billion in funds through a complex web of opaque transactions and fraudulent shell companies with bank accounts in countries ranging from Switzerland and Singapore to Luxembourg and the United States.  This is kleptocracy at its worst.

Today, the U.S. Department of Justice is working to provide justice to the victims of this alleged scheme.

As a prosecutor for 14 years, I know firsthand that the best evidence is often simple things like bank records, airplane records, and telephone records.

If they’re not properly shared between nations, then, in many cases, justice cannot be done.  It is essential that we continue to improve that kind of sharing.

That’s why we must all do more to expedite mutual legal assistance requests.  These requests ensure that prosecutors have the evidence that they need to bring criminals to justice.

In response to the increasing volume and complexity of legal assistance requests, the Department of Justice has taken two actions that are critically important.

First, we have increased staffing levels at the Department’s Office of International Affairs, or OIA.  Second, OIA has created two new units dedicated to reviewing and executing foreign requests.  As a result, OIA has significantly reduced its backlog by thousands of cases, despite receiving 16 percent more requests in fiscal 2016 than in fiscal 2015.

These are important steps.  But we can and must do more to help one another.

I challenge all of you to devote more resources to quickly and effectively reducing your backlog too.  You know how serious these cases can be.  There is no time to waste.  We will do our part for you, but we need to work together.

The Department is also working towards the implementation of a framework with some of our closest allies that would supplement the MLAT process and reduce potential conflicts of law regarding the disclosure of electronic evidence.  That kind of framework would enhance public safety efforts in the U.S. and around the world.

In order for this type of framework to function, however, we need to ensure that our warrants continue to be effective even when an American company chooses to store customer data outside of the United States.

When we have access to the right evidence, we get results.

Earlier this year, we worked with foreign authorities to arrest the alleged creator of the Kelihos botnet. Over several years, this network was used to steal login credentials, distribute hundreds of millions of spam e-mails, and install ransomware and other malicious software across the globe.

That pernicious network of tens of thousands of infected computers has now been dismantled.

This summer, with the help of eight of our allies, we dismantled the largest darknet market, AlphaBay.  It operated for more than two years and was used to sell a host of illicit items, including deadly illegal drugs and firearms.

At one time, more than 40,000 vendors offered contraband for sale, and drugs sold on the site have been linked to overdose deaths around the country.  Now this site has been taken down.

The Justice Department has also indicted foreign cyber criminals who have broken into systems in the United States looking to steal ideas that make our nation strong and competitive in the global marketplace.  One of the cases we are prosecuting involved the theft of technology that allegedly caused $800 million in losses.  That is more than ten times the largest bank robbery.

Intellectual property theft is so important today that G-20 leaders have agreed that no country should steal trade secrets or other confidential business information in order to advantage its companies or commercial sectors.  The Department of Justice is committed to bringing those responsible for intellectual property-related crimes to justice.

The United States has too often been a victim, and we intend to fight these crimes vigorously.

All of us need to do a better job of properly evaluating extradition requests, and it is unacceptable for nations to flatly refuse to extradite individuals who have committed crimes in another country.  The United States seeks to participate in economic activity worldwide.

We believe we have a strong record of fairly and professionally prosecuting global criminal activity and we will work hard to assist our global partners in their efforts to crack down on fraud and abuse.  But we will insist on cooperation from our global partners.

Many of the countries in this room have honored our extradition requests, allowing fugitives to undergo the judicial process in the United States.  I want to thank you for that. We are also working with you and plan to do so faster and more effectively in the future.

Cooperation works—and at the Department of Justice, we know that firsthand.

Thank you all for your ongoing efforts against crime. We fully respect the importance of borders. Indeed, borders are an essential component of sovereignty, but if we work together- respectful of each other’s rights- we can far more effectively stop transnational criminals.

And we must do so.  I look forward to our work together—and to many more successes in the future.

December 8, 2017 in AML | Permalink | Comments (0)

Thursday, December 7, 2017

Immigration Attorney Pleads Guilty to Fraud Scheme and Identity Theft in Relation to Visa Applications

An Indianapolis, Indiana immigration attorney pleaded guilty today for defrauding the U.S. Citizenship and Immigration Services (USCIS) and more than 250 of his clients by filing false visa applications and reaping approximately $750,000 in fraudulent fees.

Attorney General Jeff Sessions, Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division and Special Agent in Charge James M. Gibbons of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI) in Chicago made the announcement.

Indianapolis immigration attorney Joel Paul, 45, of Fishers, Indiana pleaded guilty before U.S. District Judge Jane E. Magnus-Stinson of the Southern District of Indiana to an information charging him with one count each of mail fraud, immigration document fraud, and aggravated identity theft in connection with a scheme to submit fraudulent U-visa applications.  Sentencing will be scheduled before Judge Magnus-Stinson in early 2018.

 "Individuals who commit immigration fraud undermine and abuse our generous immigration system—a system that lawfully admits more immigrants than any other country in the world—and put our public safety and national security at risk,” said Attorney General Sessions.  “President Trump promised voters he would return this country to a lawful system of immigration, and this Justice Department is committed to fulfilling that promise by rooting out fraud and abuse. We will not tolerate fraud at any level, and will bring those who engage in fraud to justice.”

According to the plea agreement, Paul admitted that from 2013 to 2017, he submitted more than 250 false Applications for Advance Permission to Enter as a Nonimmigrant on behalf of his clients and without their knowledge.  Those applications falsely asserted that Paul’s clients had been victims of a crime and had provided substantial assistance to law enforcement in investigating the crime.  With approximately 200 of the false applications, Paul submitted unauthorized copies of a certification he had obtained from the U.S. Attorney’s Office (USAO) for the Southern District of Indiana in 2013, using the certification without the USAO’s knowledge to falsely claim that the applicant had provided substantial assistance in a criminal prosecution.  In total, Paul charged his clients approximately $3,000 per application.

December 7, 2017 in AML | Permalink | Comments (0)

Wednesday, December 6, 2017

Russian Cyber-Criminal Sentenced to 14 Years in Prison for Role in Organized Cybercrime Ring Responsible for $50 Million in Online Identity Theft and $9 Million Bank Fraud Conspiracy

A Russian cyber-criminal was sentenced today to 14 years in prison  for his role in a $50 million cyberfraud ring and for defrauding banks of $9 million through a hacking scheme.

Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, Acting U.S. Attorney Steven W. Myhre of the District of Nevada, U.S. Attorney Byung J. Pak of the Northern District of Georgia, Assistant Special Agent in Charge Michael Harris of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE HSI), Special Agent in Charge Brian Spellacy of the U.S. Secret Service in Las Vegas, and FBI Special Agent in Charge David J. LeValley in Atlanta made the announcement.

Roman Valeryevich Seleznev aka Track2, Bulba and Ncux, 33, was sentenced by U.S. District Judge Steve C. Jones of the Northern District of Georgia to serve 168 months in prison for one count of participation in a racketeering enterprise pursuant to an indictment returned in the District of Nevada, and to 168 months in prisonfor one count of conspiracy to commit bank fraud pursuant to an indictment returned in the Northern District of Georgia, with the sentences to run concurrent to one another. In both cases, Seleznev was ordered three years of supervised release to run concurrently.  He was also ordered restitution in the amount of $50,893,166.35 in the Nevada case and $2,178,349 in the Georgia case.Seleznev pleaded guilty to the charges on Sept. 7. 

In connection with his guilty plea in the Nevada case, Seleznev admitted that he became associated with the Carder.su organization, an identify theft and credit card fraud ring, in January 2009.  According to Seleznev’s admissions in his plea agreement, Carder.su was an Internet-based, international criminal enterprise whose members trafficked in compromised credit card account data and counterfeit identifications and committed identity theft, bank fraud, and computer crimes.  Seleznev admitted that the group tried to protect the anonymity and the security of the enterprise from both rival organizations and law enforcement.  For example, members communicated through various secure and encrypted forums, such as chatrooms, private messaging systems, encrypted email, proxies and encrypted virtual private networks. Gaining membership in the group required the recommendation of two current members in good standing.

Seleznev further admitted that he sold compromised credit card account data and other personal identifying information to fellow Carder.su members.  The defendant sold members such a large volume of product that he created an automated website, which he advertised on the Carder.su organization’s websites.  His automated website allowed members to log into and purchase stolen credit card account data.  The defendant’s website had a simple interface that allowed members to search for the particular type of credit card information they wanted to buy, add the number of accounts they wished to purchase to their “shopping cart” and upon check out, download the purchased credit card information.  Payment of funds was automatically deducted from an established account funded through L.R., an online digital currency payment system.

Seleznev further admitted that he sold each account number for approximately $20.  The Carder.su organization’s criminal activities resulted in loss to its victims of at least $50,893,166.35.

In connection with his guilty plea in the Northern District of Georgia case, Seleznev admitted that he acted as a “casher” who worked with hackers to coordinate a scheme to defraud an Atlanta-based company that processed credit and debit card transactions on behalf of financial institutions.  Seleznev admitted that pursuant to the scheme, in November 2008, hackers infiltrated the company’s computer systems and accessed 45.5 million debit card numbers, certain of which they used to fraudulently withdraw over $9.4 million from 2,100 ATMs in 280 cities around the world in less than 12 hours.

Fifty-five individuals were charged in four separate indictments in Operation Open Market, which targeted the Carder.su organization. To date, 33 individuals have been convicted and the rest are either fugitives or are pending trial.

The cases were investigated by HSI, the U.S. Secret Service, and FBI.  The Nevada case was prosecuted by Trial Attorney Catherine K. Dick of the Criminal Division’s Organized Crime and Gang Section and Assistant U.S. Attorney Kimberly M. Frayn of the District of Nevada.  The Northern District of Georgia case was prosecuted by Assistant U.S. Attorney Kamal Ghali of the Northern District of Georgia.

Seleznev is also a defendant in a wire fraud and computer hacking case brought by the Department of Justice in the U.S. District Court for the Western District of Washington.  On Aug. 25, 2016, a federal jury convicted Seleznev of 38 counts related to his role in a scheme to hack into point-of-sale computers to steal and sell credit card numbers to the criminal underworld.  On April 21, Seleznev was sentenced to 27 years in prison for those crimes, which will run concurrent to his sentences today.    

December 6, 2017 in AML | Permalink | Comments (0)

Tuesday, December 5, 2017

FinCEN Issues $8 Million Penalty on California Card Club for Willful Violation of Anti-Money Laundering Controls

Artichoke Joe’s Casino Turned a Blind Eye to Loan Sharking, Suspicious High-Value Chip Transfers, and Flagrant Criminal Activity for Years

The Financial Crimes Enforcement Network (FinCEN) announced an $8 million civil money penalty against Artichoke Joe’s, a California corporation, doing business as Artichoke FINCEN 2Joe’s Casino (AJC). AJC, one of the largest card clubs in California, willfully violated U.S. anti-money laundering (AML) laws from October 2009 to November 2017. During this 8-year period, AJC failed to implement and maintain an effective AML program, and failed to detect, deter, and timely report many suspicious transactions.

“For years, Artichoke Joe’s turned a blind eye to loan sharking, suspicious transfers of high-value gaming chips, and flagrant criminal activity that occurred in plain sight.  FinCEN’s $8 million civil penalty results from the card club’s failure to establish adequate internal controls and its willful violations of the Bank Secrecy Act,” said Jamal El-Hindi, Acting Director of FinCEN. “Casinos, card clubs and others in the gaming industry should consider their risk of exploitation by criminal elements, and understand that they will be held accountable if they disregard anti-money laundering and illicit finance laws.  This significant action highlights the need for all entities, including those in the gaming industry, to build a robust culture of compliance into their policies and procedures to ensure they are not facilitating illicit activities.”

AJC, a card club located in San Bruno, California, has been in operation since 1916. In March 2011, AJC was the subject of a raid by state and Federal law enforcement which led to the racketeering indictment and conviction of two AJC customers for loan-sharking and other illicit activities conducted at AJC. AJC senior-level employees knew that loan-sharks were conducting criminal activity through the card club and using AJC gaming chips to facilitate illegal transactions. Nonetheless, AJC failed to file any Suspicious Activity Reports (SARs) on this activity. For example, there were several instances in which loan-sharks provided AJC chips to customers on the gaming floor within plain sight of AJC employees.

AJC also failed to implement adequate internal controls, which exposed the card club to a heightened risk of money laundering and other criminal activity.  In particular, AJC failed to adopt adequate policies and procedures to address risks associated with gaming practices that allow customers to pool or co-mingle their bets with relative anonymity. Further, AJC did not establish procedures for obtaining and incorporating information from propositional players (players paid by casinos or card clubs to wager at a game) or other employees who may have observed suspicious transactions. AJC also failed to file complete and timely reports on suspicious transactions involving potentially structured chip redemptions and purchases, and redemptions of large volumes of chips with no cash-in or gaming activity. FinCEN’s Assessment of $8 million recognizes the duration and severity of AJC’s violations, the size and sophistication of the card club, AJC’s awareness of criminal activity on its premises, and its deficient culture of compliance.

Acting Director El-Hindi expressed his appreciation to the Internal Revenue Service Small Business/Self-Employed Division, the Federal Bureau of Investigation, the State of California Department of Justice’s Bureau of Gambling Control, and the U.S. Attorney’s Office for the Northern District of California for their support and strong partnerships with FinCEN. This is the third enforcement action against a card club for FinCEN, the only Federal regulator with AML enforcement authority over card clubs.

For analysis of FinCEN decisions, see  Money Laundering, Asset Forfeiture and Recovery, and Compliance- A Global Guide (LexisNexis Matthew Bender updated quarterly), an eBook designed to provide the compliance officer, BSA counsel, and government agent with accurate analyses of the AML/CTF Financial and Legal Intelligence, law and practice in the nations of the world with the most current references and resources.  Special topic chapters will assist the compliance officer design and maintain effective risk management programs.  Over 100 country and topic experts from financial institutions, government agencies, law, audit and risk management firms have contributed analysis to develop this practical compliance guide.

December 5, 2017 in AML | Permalink | Comments (0)

Monday, December 4, 2017

FinCEN Further Restricts North Korea’s Access to the U.S. Financial System and Warns U.S. Financial Institutions of North Korean Schemes

The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a final rule under Section 311 of the USA PATRIOT Act that severs Bank of FINCEN 2Dandong, a Chinese bank that acts as a conduit for illicit North Korean financial activity, from the U.S. financial system.  FinCEN also issued today an advisory to further alert financial institutions to schemes commonly used by North Korea to evade U.S. and United Nations (UN) sanctions, launder funds, and finance the North Korean regime’s weapons programs. 

“Today’s actions will better protect the U.S. financial system from illicit schemes used by North Korea to evade sanctions and finance its weapons programs,” said Treasury Secretary Steven T. Mnuchin.  “Banks and businesses worldwide should take note that they must be vigilant against attempts by North Korea to conduct illicit financing and trade.”

Section 311 Action against Bank of Dandong   

On June 29, 2017, FinCEN found Bank of Dandong to be of “primary money laundering concern” for serving as a gateway for North Korea to access the U.S. and international financial systems despite U.S. and UN sanctions.  As described in the Notice of Proposed Rulemaking (NPRM), Bank of Dandong acts as a conduit for North Korea to access the U.S. and international financial systems, including by facilitating millions of dollars of transactions for companies involved in North Korea’s weapons of mass destruction (WMD) and ballistic missile programs.  Bank of Dandong also facilitates financial activity for North Korean entities designated by the United States and listed by the UN for proliferation of WMDs, as well as for front companies acting on their behalf. 

Today, FinCEN finalized this rulemaking by imposing a prohibition on U.S. financial institutions from opening or maintaining correspondent accounts for, or on behalf of, Bank of Dandong.   Restricting Bank of Dandong from accessing the U.S. financial system—directly or indirectly—helps protect the U.S. financial system from the illicit finance risks posed by Bank of Dandong and serves as an additional measure to prevent North Korea from accessing the U.S. financial system.

Advisory on North Korean Sanctions Evasion Schemes 

FinCEN also issued today an advisory that provides red flags of illicit North Korean schemes, including the use of financial representatives, front and shell companies, trading companies, and financial institutions operating in areas bordering North Korea.  The red flags are designed to assist financial institutions in identifying and reporting suspected illicit activity by North Korea and its financial institutions. 

The final rule, as submitted to the Federal Register, is available here.

The June 29, 2017 NPRM is available here.

The Advisory to financial institutions is available here.

December 4, 2017 in AML | Permalink | Comments (0)

Saturday, December 2, 2017

Deputy Attorney General Rosenstein Delivers Remarks at the 34th International Conference on the Foreign Corrupt Practices Act

Deputy Attorney General Speech of November 29, 2017
Corporate Enforcement Policy (USAM 9-47.120)
Declinations

Good morning and thank you, Sandra for that thoughtful and brief introduction. 

It is a pleasure for me to be here with so many compliance officers, lawyers, auditors, and corporate executives for ACI’s 34th annual conference on the Foreign Corrupt Practices Act. 

I must admit that I was amused by a marketing blurb for this event.  It promised that the audience would hear from “anti-corruption” leaders and other “highly respected” experts. 

Then, it noted that you also would hear from government officials.  I hope those categories are not mutually exclusive!   

As a matter of fact, the experts you will hear from include some of the federal government’s leading fraud prosecutors and investigators. I am proud to work with them.

This year, we mark four decades since Congress enacted the FCPA.  It was the first effort by any country in the world to make it a crime to pay bribes to foreign officials. 

There was a time in the 1960s and ’70s when paying bribes was viewed as a necessary part of doing business abroad.  Some American companies were unapologetic about making corrupt payments. 

Corruption was rife in many parts of the world.  There were European countries that allowed companies to deduct bribes on their corporate tax returns, as business expenses. 

In 1976, the U.S. Senate Banking Committee revealed that hundreds of U.S. companies had made corrupt foreign payments. The payments totaled hundreds of millions of dollars. 

The Committee concluded that there was a need for anti-bribery legislation.  Its report reasoned that “[c]orporate bribery is bad business” and “fundamentally destructive” in a free market society.

Paying bribes may still be common in some places.  But that does not make it right.  As Thomas Jefferson famously said: “On matters of style, swim with the current.  On matters of principle, stand like a rock.”  

Some people refer to me as a career prosecutor, but I studied management, marketing, and finance at an undergraduate business school.  I expected to put those skills to use in corporate America.  Law enforcement took me in a different direction, but understanding the business world remains valuable to my work.

One of the lessons I learned in business school is that ethical conduct is a good investment. Companies sometimes gain a short-term advantage over competitors by cutting corners, but in the long run, companies with a culture of integrity usually prevail in the marketplace.

Good people want to work for honest businesses. Investors trust them.  Customers like to do business with them.

I visited the nation of Armenia in 1994, just as it was emerging from seven decades of Soviet domination. I gave a talk about public corruption at the University of Yerevan, the oldest university in the country. After I finished, a student raised his hand with a question. He asked me, “If you cannot pay bribes in America, how do you get electricity?”

It was a pragmatic question that illustrated how that young man had learned to think about his society.  Corruption may start small, but it has a tendency to spread like an infection.  It stifles innovation, fuels inefficiency, and inculcates distrust of government.

I offer those thoughts in the spirit of the open dialogue of this conference.  But it is not for the Department of Justice to say whether the FCPA reflects sound policymaking.  The United States Congress made that judgment.  Our mission is to detect, deter, and punish violations of the laws of the United States. 

The Attorney General and I have been faithful to that principle.  We plan to continue to emphasize it as an essential step in promoting respect for the rule of law. 

The FCPA is the law of the land.  We will enforce it against both foreign and domestic companies that avail themselves of the privileges of the American marketplace. 

The United States plays a central role in the worldwide fight against corruption, and we serve as a role model.  Following our lead, many other countries have joined America by implementing their own anti-corruption laws.  Those laws do not just encourage good business.  They promote good government.

The Organization for Economic Co-operation and Development adopted an Anti-Bribery Convention in 1997.  That convention fuels the growing international rejection of corruption.

Forty-three nations participate in the OECD Anti-Bribery Convention.  The agreement establishes legally binding standards.  Member countries are required to adopt laws that criminalize bribery of foreign public officials in international business transactions.  Just a few months ago, a new country, Costa Rica, ratified the convention.

These forty-three nations recognize the importance of a level playing field that protects citizens and honest businesses. 

Earlier this year, Attorney General Sessions spoke about the harmful consequences of corruption.  It leads to increased prices, substandard products and services, and reduced investment. 

It is no coincidence that crime syndicates and authoritarian rulers use corruption to enrich themselves.  They engage in corruption to consolidate political power and defeat legitimate political adversaries.  

Working together with international partners, we are making headway in combatting corruption. Federal prosecutors in our Criminal Division’s Fraud Section, together with Assistant U.S. Attorneys and law enforcement partners, continue to secure convictions in important FCPA-related cases.

Recently, the FCPA Unit worked with the U.S. Attorney’s Office for the Southern District of New York to obtain a trial conviction against a former Guinean Minister of Mines, for laundering proceeds from $8 million in bribes. 

The FCPA Unit and the U.S. Attorney’s Office for the Southern District of New York secured another trial victory against a Chinese billionaire for bribing United Nations officials. 

In a third case, FCPA prosecutors worked with Assistant U.S. Attorneys in the Central District of California, and prevailed at trial against a South Korean earthquake research center director who laundered the bribery proceeds in the United States. 

In total, 19 individuals have pleaded guilty or been convicted in FCPA-related cases so far this year. 

The Department of Justice announced another significant case earlier this month.  Two former executives of Rolls‑Royce and its subsidiaries, along with a former employee and a consultant, all pleaded guilty to conspiracy in connection with a scheme to bribe foreign officials.

That results reflects tremendous work by the FCPA Unit, Assistant U.S. Attorneys for the Southern District of Ohio, U.S. Postal Inspectors, and the FBI, as well as cooperation with law enforcement authorities in the United Kingdom, Brazil, Austria, Germany, the Netherlands, Singapore, and Turkey.  We look forward to continuing to work with our international partners.

Those cases and others like them reinforce the Department’s commitment to hold individuals accountable for criminal activity. 

Effective deterrence of corporate corruption requires prosecution of culpable individuals.  We should not just announce large corporate fines and celebrate penalizing shareholders.

Most American companies are serious about engaging in lawful business practices.  Those companies want to do the right thing. They need our support to protect them from criminals who seek unfair advantages.

Law enforcement agencies prosecute criminal wrongdoing only after it occurs.  Those prosecutions achieve deterrence indirectly.  But a company with a robust compliance program can prevent corruption and reduce the need for enforcement. 

That frees agents and prosecutors to focus on people who are committing other financial crimes.  It also allows them to focus on different threats to the American people, including terrorism, gang violence, drug trafficking, child exploitation, and human smuggling.  People who commit those horrendous crimes do not make voluntary disclosures.    

Threats to American safety and security will grow more complex over time.  We need corporate America to help us detect and fight those threats.

As Attorney General Jeff Sessions explained, “Societies where the rule of law is treasured … tend to flourish and succeed. Societies where the rule of law is subject to political whims and personal biases tend to become … afflicted by corruption, poverty, and human suffering.”

The most fundamental mission of the Department of Justice is to protect the American people by enforcing the rule of law.

The rule of law is good for business. It allows businesses to compete for work, enter contracts, make investments, and project revenue with some assurance about the future.  It establishes a mechanism to resolve disputes, and it provides a degree of protection from arbitrary government action.

Corporate America should regard law enforcement as an ally.  We support the rule of law, which establishes and safeguards a vibrant economic marketplace for your products and services.

The government should provide incentives for companies to engage in ethical corporate behavior.  That means fully cooperating with government investigations, and doing what is necessary to remediate misconduct – including implementing a robust compliance program.  Good corporate behavior also means notifying law enforcement about wrongdoing.  

The incentive system set forth in the Department’s FCPA Pilot Program motivates and rewards companies that want to do the right thing and voluntarily disclose misconduct. 

In the first year of the Pilot Program, the FCPA Unit received 22 voluntary disclosures, compared to 13 during the previous year.  In total, during the year and a half that the Pilot Program was in effect, the FCPA Unit received 30 voluntary disclosures, compared to 18 during the previous 18‑month period. 

We analyzed the Pilot Program and concluded that it proved to be a step forward in fighting corporate crime.  We also determined that there were opportunities for improvement.

So today, I am announcing a revised FCPA Corporate Enforcement Policy. 

The new policy enables the Department to efficiently identify and punish criminal conduct, and it provides guidance and greater certainty for companies struggling with the question of whether to make voluntary disclosures of wrongdoing. 

Before I speak about the substance of the policy, let me digress for a moment to make a process point.

I know that previous corporate fraud policies often were identified by the name of the Deputy Attorney General who wrote the memo.  It is nice to be remembered. But one of my goals is not to be remembered for writing a memo.

After spending nearly three decades trying to keep track of prolix memos, I want the Department to issue concise policy statements.  Historical background and commentary should go in a cover memo or a press release.  In most instances, the substance of a policy should be in the United States Attorneys’ Manual, and it should be readily understood and easily applied by busy prosecutors.

So, the FCPA Corporate Enforcement Policy I am announcing today will be incorporated into the United States Attorneys’ Manual.

We expect the new policy to reassure corporations that want to do the right thing.  It will increase the volume of voluntary disclosures, and enhance our ability to identify and punish culpable individuals. 

The new policy, like the rest of the Department’s internal operating policies, creates no private rights and is not enforceable in court.  But it does promote consistency by attorneys throughout the Department.

Establishing internal policies helps guide our exercise of discretion and combat the perception that prosecutors act in an arbitrary manner.

The new policy does not provide a guarantee.  We cannot eliminate all uncertainty.  Preserving a measure of prosecutorial discretion is central to ensuring the exercise of justice. 

But with this new policy, we strike the balance in favor of greater clarity about our decision-making process.

The advantage of the policy for businesses is to provide transparency about the benefits available if they satisfy the requirements.  We want corporate officers and board members to better understand the costs and benefits of cooperation.  The policy therefore specifies what we mean by voluntary disclosure, full cooperation, and timely and appropriate remediation.

Even if a company does not make a voluntary disclosure, benefits are still available for cooperation and remediation.  Those steps assist the Department in running an efficient investigation that identifies culpable individuals.  They also reduce the likelihood that crimes will be committed again.    

I want to highlight a few of the policy’s enhancements. 

First, the FCPA Corporate Enforcement Policy states that when a company satisfies the standards of voluntary self-disclosure, full cooperation, and timely and appropriate remediation, there will be a presumption that the Department will resolve the company’s case through a declination.  That presumption may be overcome only if there are aggravating circumstances related to the nature and seriousness of the offense, or if the offender is a criminal recidivist.

It makes sense to treat corporations differently than individuals, because corporate liability is vicarious; it is only derivative of individual liability.

Second, if a company voluntarily discloses wrongdoing and satisfies all other requirements, but aggravating circumstances compel an enforcement action, the Department will recommend a 50% reduction off the low end of the Sentencing Guidelines fine range.  Here again, criminal recidivists may not be eligible for such credit.  We want to provide an incentive for good conduct.  And scrutiny of repeat visitors.

Third, the Policy provides details about how the Department evaluates an appropriate compliance program, which will vary depending on the size and resources of a business. 

The Policy therefore specifies some of the hallmarks of an effective compliance and ethics program.  Examples include fostering a culture of compliance; dedicating sufficient resources to compliance activities; and ensuring that experienced compliance personnel have appropriate access to management and to the board. 

We expect that these adjustments, along with adding the FCPA Corporate Enforcement Policy to the U.S. Attorneys’ Manual, will incentivize responsible corporate behavior and reduce cynicism about enforcement.         

Of course, companies are free to choose not to comply with the FCPA Corporate Enforcement Policy.  A company needs to adhere to the policy only if it wants the Department’s prosecutors to follow the policy’s guidelines. 

Companies that violate the FCPA are always free to choose a different path.  In those instances, if crimes come to our attention through whistleblowers or other means, the Department will take appropriate action consistent with the facts, the law, and the Principles of Federal Prosecution of Business Organizations. 

Since 2016, the Fraud Section’s FCPA Unit has secured criminal resolutions in 17 FCPA-related corporate cases, resulting in penalties and forfeiture to the Department in excess of $1.6 billion.  Of those 17 corporate criminal resolutions, only two were voluntary disclosures under the Pilot Program. 

Significantly, each of the two voluntary disclosure cases was resolved through a non-prosecution agreement, and in neither case did we impose a compliance monitor. 

Of the 15 corporate resolutions that were not voluntary disclosures, all but three were resolved through guilty pleas, deferred prosecution agreements, or some combination of the two.  In ten of those cases, the company was required to engage an independent compliance monitor.   

Over that same time period, seven additional matters that came to our attention through voluntary disclosures were resolved under the Pilot Program through declinations with the payment of disgorgement. Clearly, this is not immunity. 

Allow me to conclude with the observation that corrupt government officials and criminals who bribe them learn from the cases we bring and the investigative techniques we use. 

Criminals try to evade law enforcement.  But they also need to evade internal controls and compliance programs, if those internal controls and programs exist.  Honest companies pose a meaningful deterrent to corruption.

Companies can protect themselves by exercising caution in choosing their business associates and by ensuring appropriate oversight of their activities.

There is an ancient proverb that counsels, “If you want to know a person’s character, consider his friends.” 

My advice is to make sure that you can stand proudly with the company you keep.

Thank you very much.

December 2, 2017 in AML | Permalink | Comments (0)

Friday, December 1, 2017

President Termer of Brazil Back in Limelight of Petrobras Corruption Scandal?

Reuters reports that the Petrobras investigation is again closing in President Termer of Brazil following revelations of a separate alleged scheme involving Transpetro and President Michel Temer’s Brazilian Democracy Movement Party (PMDB).   The president has twice received Congressional votes in favor of his immunity from prosecution while he serves in government. Read the Reuters report here.

In September, a Brazilian prosecutor charged six current and former PMDB senators of unduly receiving 864 million reais in bribes, generating losses of 5.5 billion reais at Petrobras and 113 million reais at the Transpetro subsidiary.

December 1, 2017 in AML | Permalink | Comments (0)

Thursday, November 30, 2017

The soccer bribery trial reminiscent of a Hollywood drama - BBC reports on FIFA

The BBC is reporting on the New York based FIFA trial of some of its board members in the global bribery trial.  This will make for a great novel and Hollywood movie.  Read the BBC story here.  

  • Burzaco broke down in tears at one point after Burga allegedly made two throat-slashing gestures towards him.  
  • The case has also been overshadowed by the suicide of one former Argentine government official named in court as receiving bribes.
  • And, on Sunday night, Adolfo Lagos - the vice-president of a company that has also been named in the corruption case - was shot dead in Mexico City.

November 30, 2017 in AML | Permalink | Comments (0)

Wednesday, November 29, 2017

Tobacco Companies to Begin Issuing Court-Ordered Statements in Tobacco Racketeering Suit

Several of America’s major cigarette manufacturers will begin issuing court-ordered “corrective statements” in major daily newspapers and on television beginning Friday, November 24, 2017. The statements will clarify for the public the effects of tobacco use and will appear in full-page print ads in the editions of more than 50 newspapers, including the Wall Street Journal, USA Today, New York Times, and Washington Post over four months.  The same statements will also appear in television markets across the country beginning the following week for the next year. 

Following a nine-month civil racketeering trial, the U.S. District Court for the District of Columbia ordered the tobacco companies, including Altria, its Philip Morris USA subsidiary, and R.J. Reynolds Tobacco, to issue the corrective statements as part of a permanent injunction in 2006 designed to “prevent and restrain” further deception of the American people regarding tobacco use. Multiple appeals following the 2006 permanent injunction delayed issuance of the statements until now.  Download Print Corrective Statements

In its 2006 permanent injunction, the district court found that “Defendants lied, misrepresented, and deceived the American public,” on a host of topics. These topics included:

  • Fraudulently distorting and minimizing the health effects of smoking;
  • Falsely denying and minimizing the addictiveness of smoking and nicotine;
  • Designing cigarettes to create addiction; 
  • Fraudulently presenting light/low-tar cigarettes as less dangerous;
  • Falsely denying marketing to youth; and
  • Falsely denying the hazards of secondhand smoke.

The court concluded that, absent court action, the tobacco companies were “reasonably likely” to continue engaging in this behavior and imposed a permanent injunction to prevent future violations. Among other things, this injunction requires the tobacco companies to issue these “corrective statements” in multiple mediums: newspaper, television, company websites, and package “onserts.” Another placement for the statements, at retail point-of-sale, was set aside on appeal by the D.C. Circuit, and whether to reinstate it remains pending before the district court.

Numerous Justice Department attorneys have played a role in this case over the years.  In the most recent phase of the litigation, the United States was represented by Trial Attorneys Daniel K. Crane-Hirsch and John (Josh) Burke of the Justice Department’s Consumer Protection Branch; Linda McMahon of the Commercial Litigation Branch; and Melissa Patterson, Alisa Klein, Mark Stern, and Lewis Yelin of the Civil Appellate Staff.

Six public health organizations – the American Cancer Society, American Heart Association, American Lung Association, Americans for Nonsmokers’ Rights, National African American Tobacco Prevention Network and the Tobacco-Free Kids Action Fund – joined the Department of Justice case as intervenors in 2005.

November 29, 2017 in AML | Permalink | Comments (0)

Tuesday, November 28, 2017

FTC Charges Academic Journal Publisher OMICS Group Deceived Researchers

The Federal Trade Commission has charged the publisher of hundreds of purported online academic journals with deceiving academics and researchers about the nature of its publications and hiding publication fees ranging from hundreds to thousands of dollars. Complaint Alleges Company Made False Claims, Failed To Disclose Steep Publishing Fees.

The FTC’s complaint alleges that OMICS Group, Inc., along with two affiliated companies and their president and director, Srinubabu Gedela, claim that their journals follow rigorous peer-review practices and have editorial boards made up of prominent academics. In reality, many articles are published with little to no peer review and numerous individuals represented to be editors have not agreed to be affiliated with the journals.

According to the FTC’s complaint, OMICS does not tell researchers that they must pay significant publishing fees until after it has accepted an article for publication, and often will not allow researchers to withdraw their articles from submission, thereby making the research ineligible for publication in another journal. Academic ethics standards generally forbid researchers from submitting the same research to more than one journal.

“The defendants in this case used false promises to convince researchers to submit articles presenting work that may have taken months or years to complete, and then held that work hostage over undisclosed publication fees ranging into the thousands of dollars,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “It is vital that we stop scammers who seek to take advantage of the changing landscape of academic publishing.”

Among the deceptive statements OMICS made to researchers, according to the complaint, were descriptions of its journals as having a high “impact factor,” a term that describes approximately how frequently articles in a particular journal are cited in other research. Thomson Reuters’ proprietary measure of journals’ impact factors is the widely accepted standard, but OMICS allegedly calculated its own impact scores and did not clearly disclose that fact to consumers.

The defendants also tell researchers that their journals are indexed by federal research databases, including the National Institutes of Health’s PubMed and MEDLINE services, when in fact that is not true, according to the complaint.

In addition to misrepresentations related to their journal publishing services, the FTC’s complaint alleges that the defendants regularly deceive consumers while promoting academic conferences they organize. The defendants allegedly include the names of prominent researchers as participants and presenters at the conferences, which charge registration fees that can cost more than $1,000, when in fact many of those researchers often did not agree to participate in the events.

The FTC’s complaint charges the defendants, OMICS Group Inc., iMedPub LLC, Conference Series LLC, and Srinubabu Gedela, with multiple violations of the FTC Act’s prohibition on deceptive acts or practices. 

November 28, 2017 in AML | Permalink | Comments (0)

Monday, November 27, 2017

FTC Halts the Deceptive Practices of Academic Journal Publishers

Operation made false claims and hid publishing fees, FTC alleges

federal court has granted a preliminary injunction requested by the Federal Trade Commission, temporarily halting the deceptive practices of academic journal publishers charged by the agency with making false claims about their journals and academic conferences, and hiding their publishing fees, which were up to several thousand dollars.

The preliminary injunction against OMICS Group Inc., iMedPub LLC, Conference Series LLC, and their CEO, director, and owner, Srinubabu Gedela stems from a complaint the FTC filed last year that names Gedela and his three companies as defendants.

The defendants operate several websites, including OMICSonline.org, iMedPub.com, and Conferenceseries.com.  They advertise hundreds of online academic journals and international conferences for scientists and medical professionals. 

According to the complaint, the defendants deceptively claim that their journals provide authors with rigorous peer review and have editorial boards made up of prominent academics when in fact, many articles are published with little to no peer review and many individuals represented to be editors have not agreed to be affiliated with the journals.

The FTC’s complaint alleges that the defendants do not tell authors submitting papers for publication that, after their online journals accept an article, the defendants charge the authors significant publishing fees and often do not allow authors to withdraw their articles from submission, making their research ineligible for publication in other journals.

The FTC also alleges that, to promote their scientific conferences, the defendants deceptively use the names of prominent researchers as conference presenters, when in fact many of those researchers had not agreed to participate in the events.

The FTC’s complaint charges the defendants with multiple violations of the FTC Act’s prohibition on deceptive acts or practices.

The preliminary injunction entered by a federal district court in the District of Nevada prohibits the defendants from making misrepresentations regarding their academic journals and conferences, including that specific persons are editors of their journals or have agreed to participate in their conferences.  It also prohibits the defendants from falsely representing that their journals engage in peer review, that their journals are included in any academic journal indexing service, or any measurement of the extent to which their journals are cited.  It also requires that the defendants clearly and conspicuously disclose all costs associated with submitting or publishing articles in their journals.

November 27, 2017 in AML | Permalink | Comments (0)

Wednesday, November 22, 2017

Former Procurement Officer at Federally Funded Nuclear Research and Development Facility Indicted on Charges of Wire Fraud, Major Fraud and Money Laundering

A federal grand jury sitting in the District of New Mexico returned an 11-count indictment against a former procurement officer employed at Sandia National Laboratories (SNL), a nuclear research and development facility of the U.S. Department of Energy (DOE), for orchestrating a scheme to obtain a $2.3 million contract through fraudulent means.  Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division made the announcement.

Carla Sena, 55, of Albuquerque, New Mexico was charged with three counts of wire fraud, one count of major fraud against the United States and seven counts of money laundering.

According to the indictment, SNL was managed and operated by Sandia Corporation (“Sandia”) during the relevant time period.  In late 2010, Sena was assigned by Sandia to manage the bidding process for the award of a contract for moving services at SNL.  In anticipation thereof, Sena created New Mexico Express Movers LLC (“Movers LLC”), prepared a bid on Movers LLC’s behalf, and submitted the bid to Sandia under someone else’s name to conceal her involvement.  Sena made several material and fraudulent misrepresentations in Movers LLC’s bid that would have resulted in disqualification, but she used her position at SNL to ensure that these misrepresentations went undetected.  Sena also used her position to access other bidders’ documents and information that she in turn leveraged to ensure award of the contract to Movers LLC.  As a direct result of Sena’s scheme to defraud, Movers LLC received approximately $2.3 million in DOE funds.  The indictment further alleges that, between December 2011 and April 2015, Sena transferred via negotiated checks at least $643,000 of these fraudulently obtained proceeds to legitimate businesses owned by her father with the intent to conceal her subsequent use of the proceeds for personal gain.

The indictment is the result of an ongoing investigation by the DOE Office of Inspector General and is being prosecuted by Trial Attorneys Victor R. Salgado and Rebecca Moses of the Criminal Division’s Public Integrity Section.

Attachment(s): 

November 22, 2017 in AML | Permalink | Comments (0)

Saturday, November 18, 2017

Treasury Announces Ken Blanco as FinCEN Director

The U.S. Department of the Treasury announced Kenneth A. Blanco as Director of the Financial Crimes Enforcement Network (FinCEN), a bureau in Treasury’s Office of Terrorism and Financial Intelligence (TFI).
 
“Ken Blanco is an important addition at Treasury, and will focus on combating money laundering and illicit threats by those who seek to abuse our financial system,” said Treasury Secretary Steven Mnuchin.  “His extensive background in law enforcement will be a strong asset to our TFI team.”
 
“I worked with Ken at the Department of Justice and know that he will be a tremendous leader for FinCEN.  He has worked closely with many in TFI for years and his long standing Ken Blanco FinCENrelationships within Treasury and across the law enforcement community will be invaluable to our mission to combat illicit finance and safeguard the financial system,” said Treasury Under Secretary Sigal Mandelker.  “Ken will work closely with Treasury component offices to maximize our authorities and effectiveness.  I would also like to thank Jamal El-Hindi for his leadership as Acting Director during this interim period.”
 
“I am excited to take my 28 years of prosecutorial experience with me to FinCEN, and to join a fabulous team at Treasury.  TFI is dedicated to protecting the American people and securing the integrity of our financial system from bad actors who commit acts of terror or other crimes against our nation,” said Mr. Blanco.  “I look forward to working with others across law enforcement and the private sector in this important endeavor. I am grateful to the Department of Justice, and my dedicated colleagues there, for the wonderful career I have enjoyed over the last two decades.  It has been an honor and a privilege to serve with them.”
 
FinCEN’s wide-ranging work to protect the U.S. financial system from money laundering and other forms of illicit financial activity is a cornerstone of the Treasury Department’s efforts under the office of Terrorism and Financial Intelligence (TFI). Since its establishment in 1990, FinCEN has been at the forefront of the development of regulatory policy to combat money laundering and terrorist financing and has been a respected leader among the world’s financial intelligence units.
 
Mr. Blanco joins Treasury after serving as the Acting Assistant Attorney General of the Criminal Division at the United States Department of Justice. He was appointed to the position of Deputy Assistant Attorney General, Criminal Division in April 2008. During his tenure with the Criminal Division, Mr. Blanco has overseen a number of its sections, including the Money Laundering and Asset Recovery Section (formerly the Asset Forfeiture and Money Laundering Section), the Narcotic and Dangerous Drug Section, the Organized Crime and Gang Section, and the Child Exploitation Section.
 
Mr. Blanco has supervised many of the Criminal Division’s most significant national and international investigations into illicit finance, money laundering, Bank Secrecy Act, and sanctions violations, including investigations of global financial institutions and money services businesses. Much of his work is in the international banking and financial services area, working and collaborating with international partners in countries such as Mexico, Colombia and Panama, among others.
 
Mr. Blanco joined the Department of Justice almost two decades ago as an Assistant United States Attorney in the Southern District of Florida. He later served as the Deputy Chief of Narcotics/Chief of the High Intensity Drug Trafficking Area, Acting Chief of Narcotics, and Deputy Chief of the Major Crimes Section in that Office. Mr. Blanco has also served as General Counsel to the 94 United States Attorney’s Offices and the Executive Office of United States Attorneys and as Chief of the Criminal Division’s Narcotic and Dangerous Drug Section.
 
Prior to joining the Department of Justice, Mr. Blanco began his career at the Miami-Dade State Attorney’s Office, where he served in various sections including the Organized Crime Section, Public Corruption Section, and the Major Narcotics Section.  Mr. Blanco earned his J.D. from the Georgetown University Law Center, where he also currently teaches as an Adjunct Professor of law.
 
Mr. Blanco is expected to transition to FinCEN Director from his current position as Acting Assistant Attorney General of the Criminal Division at the Department of Justice in the next month.

November 18, 2017 in AML | Permalink | Comments (0)

Friday, November 17, 2017

Two SBM Executives Plead Guilty to Role in Foreign Bribery Scheme of Petrobras

Two former executives at a Dutch oil and gas services company (the “Oil Services Company”), Anthony “Tony” Mace and Robert Zubiate, pleaded guilty this week to conspiracy to Petrobrasviolate the Foreign Corrupt Practices Act (FCPA) for their roles in a scheme to bribe foreign government officials in Brazil, Angola and Equatorial Guinea.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Abe Martinez of the Southern District of Texas and Special Agent in Charge Mark Dawson of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations’ (ICE-HSI) Houston Field Office made the announcement.

Mace, 65, of the United Kingdom, was the Oil Services Company’s CEO from 2008 to 2011, and a former board member of one of its wholly-owned Houston subsidiaries.  Zubiate, 66, of California, was a former Texas and California-based sales and marketing executive at the same subsidiary.

U.S. District Judge David Hittner of the Southern District of Texas accepted Mace’s guilty plea on Nov. 9 and Zubiate’s guilty plea on Nov. 6.  Sentencing for Mace is scheduled for Feb. 2, 2018, and Zubiate for Jan. 31, 2018.

As part of his guilty plea, Mace admitted that prior to becoming CEO, other employees of the Oil Services Company entered into an agreement to pay bribes to foreign officials including at Brazil’s state-controlled oil company, Petróleo Brasileiro S.A. (Petrobras), Angola’s state-owned oil company, Sociedade Nacional de Combustíveis de Angola, E.P. (Sonangol) and Equatorial Guinea’s state-owned oil company, Petroléos de Guinea Ecuatorial (GEPetrol).  Mace further admitted that he joined the conspiracy by authorizing payments in furtherance of the bribery scheme and deliberately avoided learning that those payments were bribes. 

Mace admitted that he maintained a spreadsheet reflecting payments to five individuals and that even though he was aware there was a high risk those individuals were Equatorial Guinean officials or persons receiving money on behalf or at the direction of those officials, he nevertheless authorized Oil Services Company to make over $16 million in payments to those individuals.  Mace further admitted that he continued a practice that was instituted before he became CEO by splitting payments to Oil Services Company’s Brazilian intermediary, that is, paying a portion of the intermediary’s commission to an account in Brazil and another portion of the agent’s commission to accounts in Switzerland held in the name of shell companies.  Mace admitted that he deliberately avoided learning that the ultimate recipients of the payments that he authorized to the shell companies were Petrobras officials.

As part of his plea, Zubiate’s admitted that between 1996 and 2012, he and his co-conspirators used a third-party sales agent to pay bribes to foreign officials at Petrobras in exchange for those officials’ assisting the Oil Services Company and its U.S. subsidiary with winning bids.  Zubiate also admitted engaging in a kickback scheme with the bribe-paying sales agent for the Oil Services Company and its U.S. subsidiary.

ICE-HSI investigated the case.  Trial Attorney Dennis R. Kihm and Assistant Chief Tarek Helou of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Suzanne Elmilady of the Southern District of Texas are prosecuting the case.  The Criminal Division’s Office of International Affairs also provided substantial assistance in this matter.

The Department of Justice is grateful to Brazil’s Ministério Público Federal, the Netherlands’ Openbaar Ministerie and Switzerland’s Office of the Attorney General and Federal Office of Justice for providing substantial assistance in gathering evidence during this investigation.

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November 17, 2017 in AML | Permalink | Comments (0)

Paradise Papers Fallout - Argentina

ICIJ reports  and Perfil reports that Argentine National University of Tucumán former or current officials under investigation for involvement with Glencore and a local mining company:

  • Juan Alberto Cerisola, former rector of the National University of Tucumán (UNT) between 2006 and 2009;
  • Olga Cudmani, director general of University Buildings; 
  • Osvaldo Venturino, director of Investments and Contracting;
  • Luis Fernando Sacca, sub-secretary of Administrative Policies and Management

November 17, 2017 in AML | Permalink | Comments (0)