Saturday, March 1, 2008
A press release of the U.S. Attorneys' Office of the Central District of California tells that "[a] former assistant administrator of a Writers Guild fund and another woman were charged" "with conspiring to embezzle $17,228.61 by creating a bogus beneficiary of a union fund that paid union members for their works that were sold, distributed and aired abroad." The charges were by a one count information and were followed with a plea agreement.
Thursday, February 21, 2008
A press release of the DOJ states that "Flowserve Corporation (Flowserve) has agreed to pay a $4 million penalty as part of an agreement with the U.S. government regarding charges brought in connection with an ongoing investigation related to the United Nations Oil for Food program." Flowserve notes the agreed upon penalty on their website as being "a fine, profit disgorgement and related prejudgment interest to the SEC totaling $6,574,225 and a penalty to the DOJ of $4,000,000."
DOJ notes that "[t]he Information [filed by the government] charges that Flowserve Pompes engaged in a conspiracy to commit wire fraud and to violate the books and records provisions of the Foreign Corrupt Practices Act."
Tuesday, February 19, 2008
If looking for white collar news, one can always check out what is happening in south Florida. This week the ABA Law Journal News Now reports on a plea agreement reached for the Miami City Attorney that will result in a resignation, a plea to two misdemeanor counts, and a term of probation. For details also see the Miami Herald here.
(esp) (w/ a hat tip to John Wesley Hall)
Tuesday, January 15, 2008
There have been reports of a forthcoming settlement with California's Sigue Corp., a money-services business. The terms of any forthcoming deferred prosecution agreement, however, remain to be seen. (Damian Paletta of the Wall Street Jrl has the amount and some terms of the alleged agreement see here). It would seem unlikely that the agreement would include a waiver of attorney-client privilege, as this government practice has recently been extremely controversial. (see here and here)
Also to be seen would be any possible aftermath resulting from the government and a money services business reaching an agreement. Many deferred prosecutions agreements include company cooperation which can serve as a prelude to future criminal prosecutions against individuals.
See also PR Newswire here.
Read About Sigue Corporation's Anti-Money Laundering Compliance Efforts here
Thursday, December 13, 2007
An article on Law.Com (here) discusses how counsel for public companies have to deal with that new animal, the corporate monitor, if there is a government investigation of significant wrongdoing at the organization. The advent of deferred and non-prosecution agreements since the demise of Arthur Andersen made federal prosecutors chary about indicting companies, has usually included the company paying for an independent monitor to ensure that it implements the terms of the agreement, which usually includes beefing up the internal compliance program and developing better reporting mechanisms to prevent a recurrence of the misconduct. The article concludes, "Since monitorships -- whether bane or benefit -- are likely to remain a fixture in the legal and regulatory landscape for the foreseeable future, corporations and their counsel must learn how to deal with them." I suspect most corporate counsel would vote for "bane" but there's not much they can do about them.
With deferred and non-prosecution agreements becoming almost the norm in corporate crime investigations, I think we should expect at some point to see the Department of Justice create some routine procedures for the appointment of monitors, the scope of authority, and their reporting responsibilities. To this point, however, the agreements have been developed fairly haphazardly, with different districts following their own internal rules for appointing the monitor and the scope of authority to intervene in corporate affairs. The monitor for Bristol-Myers Squibb essentially got the company's CEO and general counsel fired because of a criminal investigation initiated while the company was operating under a deferred prosecution agreement -- a rather significant level of involvement in corporate governance. The appointment of individuals or firms as monitors has drawn criticism in a few instances for the possible appearance of impropriety, with former colleagues of the U.S. Attorney appointed in one district.
The monitorships can be quite lucrative, and the company has almost no power to control the costs. As discussed in an earlier post (here), former Attorney General John Ashcroft's firm will likely bill a medical device manufacturer between $29 million and $52 million for work as a monitor for 18 months, which is between $1.5 and $3 million per month. A company has no real avenue to object to the bills, because the key to escaping the deferred prosecution agreement is cooperating fully with the monitor. The cost of the monitor is a fairly small price for a company to pay for getting an investigation resolved without a criminal conviction.
As deferred and non-prosecution agreements become more routine, will the Department of Justice, or perhaps even Congress, try to institute regular procedures for them? Perhaps one day there will be a group of approved corporate monitors who will work for a fixed fee or discounted rate that a company could chose from. The lack of regular procedures works to the benefit of the local U.S. Attorney's Offices at this point, because without procedures there can be no real oversight. The day may come, however, when the "wild west" aspects of these agreements comes to an end. (ph)
Saturday, December 1, 2007
Corporate deferred prosecution agreements allow the government and a company to reach an agreement where the company can continue its business, institute increased reform within the entity, and avoid a criminal conviction. The agreements have been controversial, in large part because of some of the terms within these agreements (see here). The increased use of corporate deferred prosecution agreements started several years ago. And some companies that reached an agreement are starting to see the end of their corporate probation without conviction. Roger Williams Medical Center is such an example, as the U.S. Attorney in Rhode Island has agreed to terminate this agreement, although several measures will remain in effect. (see here and here).
Sunday, November 18, 2007
"The settlement resolves allegations that Physiotherapy, which is based in Memphis, Tenn., submitted claims for services to Medicare, state Medicaid programs, and the Department of Defense’s TRICARE program that were falsely billed as one-on-one services and that Physiotherapy improperly retained excess or duplicate payments it received from federal health care programs. Under the terms of the settlement, Physiotherapy agreed also to enter into a corporate integrity agreement with the Office of Inspector General for the Department of Health and Human Services."
The case came from two qui tam actions, with the two whistleblowers receiving nearly three (3) million dollars. The case was resolved civilly.
Thursday, November 15, 2007
Oil giant Chevron Corp. settled civil and criminal investigations related to illegal kickbacks paid into Iraqi-controlled accounts in 2001 and 2002 as part of the UN's Iraq Oil-for-Food program that has turned out to be a cesspool of corruption. According to the SEC Litigation Release (here):
The Commission's complaint alleges that from approximately April 2001 through May 2002, third parties with which Chevron contracted paid approximately $20 million in illegal kickback payments in connection with Chevron's purchases of crude oil under the U.N. Oil for Food Program. Chevron knew or should have known that third parties paid a portion of the premiums they received from Chevron to Iraq as illegal surcharges. The Oil for Food Program provided humanitarian relief to the Iraqi population during the time that Iraq was subject to international trade sanctions. However, the surcharges paid by third parties in connection with Chevron's purchases of oil bypassed the escrow account and were instead paid to Iraqi-controlled bank accounts in Jordan and Lebanon.
The settlement requires Chevron to pay $30 million, to be divided between a $20 million forfeiture payable as part of a settlement with the U.S. Attorney's Office for the Southern District of New York, $5 million in disgorgement in a settlement with the Manhattan D.A.'s office, a civil penalty to the SEC of $3 million, and another $2 million civil penalty to the Treasury Department's Office of Foreign Asset Controls. Looks like everyone gets to claim a piece of this settlement. (ph)
Friday, November 2, 2007
Energy services firm Willbros Group Inc. disclosed in its third quarter 10-Q (here) that it has reached a tentative settlement with the Department of Justice and the SEC over violations of the Foreign Corrupt Practices Act. The bribes involved former subsidiaries operating in Nigeria, Bolivia and Ecuador, and the company will enter into a three-year deferred prosecution agreement requiring it to pay over $40 million in criminal and civil penalties, disgorgement, and prejudgment interest. According to the company's disclosure -- buried in the footnotes to its financial statements -- the settlement with DOJ will involve:
- A twelve-count criminal information will be filed against WGI and WII as part of the execution of the DPAs between the DOJ and each of WGI and WII. The twelve counts include substantive violations of the anti-bribery provisions of the FCPA, and violations of the FCPA’s books-and-records provisions. All twelve counts relate to operations in Nigeria, Ecuador and Bolivia during the period from 1996 to 2005.
- Provided that WGI and WII fully comply with the DPAs for a period of approximately three years, the DOJ will agree not to continue the criminal prosecution and, at the conclusion of that time, will move to dismiss the criminal information.
- The DPAs will require, for each of their three year terms, among other things, full cooperation with the government; compliance with all federal criminal law, including but not limited to the FCPA; and a three year monitor for WGI and its subsidiary companies, primarily focused on international operations outside of North America, the costs of which are payable by WGI.
- The Company will be subject to $22,000 in fines related to FCPA violations. The fines are payable in four equal installments of $5,500, first on signing, and annually for approximately three years thereafter, with no interest payable on the unpaid amounts.
This is another example of the growing trend to use deferred prosecution agreements in FCPA cases rather than full guilty pleas by companies. (ph)
Thursday, November 1, 2007
Industrial manufacturer Ingersoll-Rand Co. settled criminal and civil investigations of Foreign Corrupt Practices Act violations related to bribes given to participate in the Iraq Oil-for-Food program, which seemed to generate a fountain of corrupt payments. The bribes involved two foreign subsidiaries, in Ireland and Italy, and Ingersoll-Rand agreed to a three-year deferred prosecution agreement (here) and pay a $2.5 million fine. The government filed conspiracy to commit wire fraud charges against the subsidiaries, which will be dismissed if it fulfills the terms of the DPA. In addition, the company settled an SEC civil enforcement action, agreeing to disgorge profits of $1,710,034, and pay $560,953 in pre-judgment interest and a $1,950,000 civil penalty (Litigation Release here). Ingersoll-Rand's total cost was about $6.7 million, which does not include the increased expenses of ensuring compliance with the DPA.
A provision of the DPA that is becoming more common is a section allowing Ingersoll-Rand to assert the attorney-client privilege and work product doctrine to resist producing records prosecutors might request. However, the cost of doing so is that "the Department may consider this fact in determining whether Ingersoll has fully cooperated with the Department." Whether DOJ will ever follow through on such a threat remains to be seen, but this type of provision seems to be designed to avoid claims that the government is demanding across-the-board waivers of the privilege. (ph)
Tuesday, October 30, 2007
Recent false claim settlements will be adding money to the government. Neither of the two recent cases involve criminal allegations.
The DOJ reports that "Hexcel Corporation of Stamford, Conn., has agreed to pay the United States $15 million to resolve allegations it violated the False Claims Act in connection with its role in the manufacture and sale of defective Zylon bullet-proof vests to federal, state, local and tribal law enforcement agencies, the Justice Department announced today. As part of the agreement with the government, the manufacturer has pledged their cooperation in the government’s on-going investigation of other participants involved in the fraudulent conduct."
The DOJ in another press release states that "Dianon Systems Inc. has agreed to pay the United States $1.5 million to resolve claims under the False Claims Act that the company mischarged Medicare and TRICARE for certain tests it performed."
Monday, October 29, 2007
DOJ's antitrust division reports that "[a]n Oregon-based freight forwarder pleaded guilty to rigging bids and allocating shipments for its role in a conspiracy involving its participation in the U.S. Department of Defense (DOD) program for shipping the household goods of military and civilian DOD personnel between the United States and foreign countries." The press release states that:
"Criminal charges were filed today in U.S. District Court in Alexandria, Va. against Lift Forwarders Inc. (Lift). Under the terms of a plea agreement, Lift pleaded guilty to participating in a conspiracy to restrain trade, in violation of the Sherman Antitrust Act, and agreed to pay a $140,000 criminal fine."
Sunday, October 28, 2007
The topic was "Corporate Deferred Prosecution Agreements: Issues in Hybrid Enforcement," and the place was the Press Club in DC. Last Friday afternoon, Steven A. Tyrrell, chief of the Fraud Division of the US Department of Justice, along with Stephanie Martz, Director of the White Collar Crime Project of the National Association of Criminal Defense Lawyers (NACDL), and I, talked about the benefits and problems of corporate deferred prosecution agreements. As one might suspect, there was ample discussion of attorney-client privilege and attorney fee waivers. Concerns that some deferred prosecution agreements may contain a clause that placed a breach of the agreement in the sole determination of the government also caused discussion. Finally, several panelists talked about pending legislation. The panel was moderated by Professor Lisa Kern Griffin, visiting professor Duke Law School. For more information, see here.
Saturday, October 27, 2007
BP plc settled three government investigations by agreeing to pay a total of $373 million in fines, restitution, and civil penalties. The company pleaded guilty to a violation of the Clean Air Act, a subsidiary pleaded guilty to a violation of the Clean Water Act, and another subsidiary agreed to a deferred prosecution agreement on a charge of conspiracy to violate the Commodity Exchange Act (CEA). According to a Department of Justice press release (here), the payments include:
$50 million in criminal fines to be paid as part of an agreement to plead guilty in the Southern District of Texas to a one-count felony violation of the Clean Air Act. The agreement resulted from the prosecution of BP by the Department of Justice for a catastrophic explosion that occurred at the BP Texas City refinery on March 23, 2005, that killed 15 contract employees and injured more than 170 others;
$12 million in criminal fines, $4 million in payments to the National Fish and Wildlife Foundation, and $4 million in criminal restitution to the state of Alaska, as part of an agreement to plead guilty by British Petroleum Exploration (Alaska), Inc. (BPXA) to a violation of the Clean Water Act to resolve criminal liability relating to pipeline leaks of crude oil onto the tundra as well as a frozen lake in Alaska;
A criminal penalty of $100 million, a payment of $25 million to the U.S. Postal Inspection Consumer Fraud Fund, and restitution of approximately $53 million, plus a civil penalty of $125 million to the Commodity Futures Trading Commission, as part of an agreement to defer the prosecution of a one-count criminal information filed in the Northern District of Illinois charging BP America Inc. with conspiring to violate the Commodity Exchange Act and to commit mail fraud and wire fraud.
The deferred prosecution agreement calls for the appointment of a monitor for three years to oversee the company's compliance with its terms and to ensure no future violations of the CEA. In addition to the charges against BP, four former commodities traders at its BP America subsidiary were charged in a twenty-count indictment (here) with conspiracy, violations of the CEA, and wire fraud. According to the press release, the traders conspired
to manipulate and corner the TET propane market in February 2004, in violation of the Commodity Exchange Act, and to sell TET propane at an artificially inflated index price in violation of the federal mail and wire fraud statutes. The indictment further charges the defendants with substantive violations of the Commodity Exchange Act and the wire fraud statute. According to the proposed indictment, from Feb. 5, 2004, through March 15, 2004, the defendants allegedly agreed to manipulate the market for February 2004 TET propane.
Thursday, October 18, 2007
Nothing goes better with the great American pastime than passing a little inside information to your friend about a pending corporate transaction. The SEC filed a settled civil enforcement action against a former director of of NSD Bancorp who disclosed a pending merger of the company with F.N.B. Corp. that was announced in October 2004. The tippee bought 2,000 shares, and after the announcement NSD's stock price jumped 52%, allowing him to reap over $25,000 in profits. According to the SEC Litigation Release (here), the director provided the information at or before the September 22 Pittsburgh Pirates game. According to Baseball-Reference.Com (here), the Pirates lost to the Chicago Cubs 1-0 that evening -- the type of pitcher's duel that has a lot of down time to discuss a proposed buyout, no doubt. The SEC alleges that "the morning of September 23, 2004, Pitterich, who had no prior history of trading in the securities of NSD Bancorp, purchased 1,000 shares of NSD Bancorp's stock on the basis of the material, nonpublic information provided to him by Lenzner. On October 1, 2004, Pitterich, on the basis of the same information, purchased an additional 1,000 shares." The tippee disgorged his profits plus payed a one-time penalty, and the director/tipper also payed a one-time penalty. Given that the Bucs haven't had a winning season since 1992, when Barry Bonds was on the team -- with a much smaller head -- there's got to be some reason to attend a late-season game. (ph)
Tuesday, October 16, 2007
Sunday, October 7, 2007
A press release of the U.S. Attorneys Office of the Central District of California states that a "name partner and an attorney at one of the West Coast’s largest immigration law firms have pleaded guilty to charges related to the filing of fraudulent employment visa applications on behalf of foreign nationals, including some of the law firm’ s own workers."
Press Release -Download kaf_visa_fraud_partner_pleads.130.pdf
Friday, October 5, 2007
Multinational industrial giant Siemens A.G. settled with German prosecutors the probe of corrupt overseas payments by its telecom unit by agreeing to pay €201 million. The company will also pay an additional €179 million to the tax authorities because it improperly deducted the foreign payments as ordinary business expenses. As discussed in an earlier post (here), the scope of the questionable overseas payments is much broader than first suspected, with Debevoise & Plimpton's internal investigation raising questions about as much as €1.6 billion in transfers throughout the company and not just the telecom unit. While the settlement with the German prosecutors closes one avenue of problems, Siemens still faces investigations by the SEC and Department of Justice in the United States and an inquiry by the Italian authorities. Given the size of the payments and their occurrence in different parts of the company, this is the type of case that the federal government will pursue vigorously. A Bloomberg story (here) discusses the settlement. (ph)
The SEC filed a settled insider trading enforcement action accusing the defendant of trading on information about the impending takeover of Commercial Federal Corp. According to the Commission's complaint (here), the defendant learned about the transaction from his brother, who received the information from his wife, an administrative assistant to Commercial Federal's CEO at the time who discussed her concerns about job losses from an acquisition of the bank. The SEC asserts that by trading on the information, the defendant breached a fiduciary duty to his brother, based on the fact that they "had a history of sharing and maintaining confidences." The defendant is a self-employed farmer/rancher, and the nature of the confidences the brothers shared is not described in the complaint.
That's not the classic duty of trust and confidence described by the Supreme Court in Chiarella v. United States, 445 U.S. 222 (1980), which discussed legal fiduciaries like trustees and lawyers as examples of those with the duty of confidentiality. But it does fit within the SEC's more expansive definition of such a duty in Rule 10b5-2(b)(3), which covers, inter alia, any person who "receives or obtains material nonpublic information from his or her spouse, parent, child, or sibling." The broader definition of "duty of trust and confidence" in the SEC rule has never been tested in court, and won't be in this case because it is a settled matter. But it's an open question whether a court would find the requisite duty based solely on the familial relationship and the trading of confidences. The defendant settled the matter by disgorging over $39,000 in profits from his trading and a tippee's, and a civil penalty of $31.150 based on his profits.