International Financial Law Prof Blog

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

Saturday, December 31, 2016

Two Attorneys Indicted for Multimillion-Dollar Scheme to Fraudulently Obtain Settlements from Victims Who Downloaded Pornography

Two attorneys were charged today in a federal indictment for their roles in a multimillion-dollar scheme to fraudulently Badge_of_the_Federal_Bureau_of_Investigationobtain settlement agreements from individuals who supposedly downloaded pornographic movies from file-sharing websites. 

Assistant Attorney General Leslie R. Caldwell of the Department of Justice’s Criminal Division, U.S. Attorney Andrew M. Luger of the District of Minnesota, Chief Richard Weber of the Internal Revenue Service-Criminal Investigation (IRS-CI) and Special Agent in Charge Richard T. Thornton of the FBI’s Minneapolis Division made the announcement.

Paul R. Hansmeier, 35, of St. Paul, Minnesota, and John L. Steele, 45, of Florida, were charged in an 18-count indictment today for conspiracy to commit wire fraud and mail fraud, substantive wire fraud and mail fraud, concealment money laundering and conspiracy to commit and suborn perjury.  Hansmeier was suspended from the practice of law in the state of Minnesota on Sept. 12, 2016. 

“Abusing one’s position as a licensed attorney and using the courts and legal process to file false and abusive copyright claims that threaten individuals and encourage fraudulent settlements is wrong and will not be tolerated,” said Assistant Attorney General Caldwell.  “The Department of Justice’s action today demonstrates that we will act to protect the integrity of judicial proceedings against attorneys and others who would seek to use them as a mechanism for their own illegal gains.”

“The defendants in this case are charged with devising a scheme that casts doubt on the integrity of our profession,” said U.S. Attorney Luger. “The conduct of these defendants was outrageous – they used deceptive lawsuits and unsuspecting judges to extort millions from vulnerable defendants.  Our courts are halls of justice where fairness and the rule of law triumph, and my office will use every available resource to stop corrupt lawyers from abusing our system of justice.”

“The charges announced today describe a fraud scheme perpetrated by lawyers and officers of the court who abused their positions of trust for personal enrichment,” said Special Agent in Charge Thornton.  “The FBI remains committed to uncovering fraud such as this to protect the integrity of our civil justice system.”

“The role of IRS Criminal Investigation becomes even more important in complex financial investigations involving money laundering because of the time it takes to unravel the criminal scheme,” said Chief Weber.  “This case is an excellent example of the lengths to which individuals will go to defraud others in whatever way they can.  We are committed to working these types of difficult financial investigations and following the criminal’s money, wherever it leads.”

According to the indictment, between 2011 and 2014, Hansmeier and Steele, both practicing lawyers, executed a scheme to fraudulently obtain approximately $6 million by threatening copyright lawsuits against individuals who supposedly downloaded pornographic movies from file-sharing websites.  Hansmeier and Steele allegedly created a series of sham entities to obtain copyrights to pornographic movies that they uploaded to file-sharing websites and filed bogus copyright infringement lawsuits in order to learn the subscriber information associated with the IP addresses used to download the pornographic movies.  The indictment further alleges the defendants used extortionate letters and phone calls to threaten victims with enormous financial penalties and public embarrassment unless they agreed to pay a $4,000 settlement fee.  To distance themselves from the specious lawsuits and any potential fallout, defendants created and used Prenda Law, among other firms, to pursue their claims.  

According to the charges, after various courts began to restrict the defendants’ ability to sue multiple individuals in the same copyright lawsuit, the defendants changed their tactics and began filing lawsuits falsely alleging that computer systems belonging to their sham clients had been hacked.  To facilitate their phony “hacking” lawsuits, Hansmeier and Steele allegedly recruited “ruse defendants,” who had been caught downloading pornography from a file-sharing website, to be sued in exchange for Hansmeier and Steele waiving their settlement fees while pursuing claims against their supposed “co-conspirators.”

As alleged in the indictment, as courts began to uncover the defendant’s unscrupulous litigation tactics, judges began denying the defendants’ requests to subpoena ISPs, dismissing lawsuits, accusing the defendants of deceptive and fraudulent behavior and imposing sanctions against the defendants and their associates.  For example, on May 6, 2013, the U.S. District Court for the Central District of California issued an order imposing sanctions against the defendants.  In total, the defendants obtained approximately $6 million from the fraudulent copyright lawsuits.

The charges contained in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

FBI and IRS-CI are investigating the case.  Senior Trial Counsel Brian Levine of the Department of Justice’s Computer Crime and Intellectual Property Section and Assistant U.S. Attorney Benjamin Langner of the District of Minnesota are prosecuting the case.

Hansmeier Indictment

December 31, 2016 | Permalink | Comments (0)

Friday, December 30, 2016

2014 Data on Activities of U.S. Multinational Enterprises

Detailed statistics on the worldwide activities of U.S. multinational enterprises in 2014, including the finances and operations of U.S. parent companies and their foreign affiliates, are Bureau Econ Analysisnow available from the U.S. Bureau of Economic Analysis.

Available on BEA’s website at https://www.bea.gov/international/usdia2014p.htm, the statistics include information about U.S. multinational enterprises including: employment and employee compensation at U.S. parent companies and foreign affiliates; balance sheet and income statement details; sales; value added–a measure of the enterprise’s contribution to gross domestic product in the United States or in the other countries where it operates; capital expenditures; trade in goods; and spending on research and development.

The statistics released today incorporate the results of the 2014 Benchmark Survey of U.S. Direct Investment Abroad.

The statistics can be used to measure the scale of the global business activity of U.S. multinational enterprises or MNEs, as well as their impact on the U.S. economy and on other countries’ economies.

More information can be found here: https://blog.bea.gov/2016/12/16/new-statistics-on-the-activities-of-u-s-multinational-enterprises-are-now-available-3/.

 

Here are a few highlights from the 2014 data:

  • The activities of U.S. MNEs in 2014 remained concentrated in the United States; U.S. parents accounted for more than two-thirds and foreign affiliates for less than one-third of the worldwide value added, capital expenditures, and R&D expenditures of U.S. MNEs.
  • MNE employment was slightly less concentrated in the United States, with U.S. parents accounting for 65.8 percent and foreign affiliates accounting for 34.2 percent.
  • Most foreign affiliates were located in high-income countries in 2014. Affiliates in these countries accounted for 75.9 percent of foreign affiliate value added.
  • The operations of U.S. MNEs are dominated by very large (greater than 10,000 employees) companies. These companies accounted for 68.4 percent of MNE value added and 75.9 percent of MNE employment. In terms of counts, however, almost half of U.S. MNEs were small (maximum of 500 employees) companies.

An article in the December edition of the Survey of Current Business, BEA’s online journal, will feature the statistics.

The preliminary data are based on the 2014 Benchmark Survey of U.S. Direct Investment Abroad.  Benchmark surveys, which are conducted every five years (in lieu of the annual survey), are BEA’s most comprehensive surveys – in terms of both the coverage of companies and the amount of information that is collected. Consequently, the increase in most U.S. MNE activities from 2013 to 2014 largely reflects the improved coverage of these activities in the 2014 Benchmark Survey of U.S. Direct Investment Abroad.

The newly released statistics also include revised statistics on the activities of U.S. MNEs in 2013.

December 30, 2016 in Economics | Permalink | Comments (0)

Thursday, December 29, 2016

Three Romanian Nationals Indicted in $4 Million Cyber Fraud Scheme that Infected at Least 60,000 Computers and Sent 11 Million Malicious Emails

A 21-count indictment was unsealed today charging three Romanian nationals for operating a cyber fraud conspiracy in which they infected between 60,000 and 160,000 computers, FBISeal (1)sent out 11 million malicious emails and stole at least $4 million.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Carole S. Rendon of the Northern District of Ohio and Special Agent in Charge Stephen D. Anthony of the FBI’s Cleveland Division made the announcement.

Bogdan Nicolescu, 34, Tiberiu Danet, 31, and Radu Miclaus, 34, were extradited to the United States this week after being taken into custody in their native Romania earlier this year.  They were each charged with 12 counts of wire fraud, as well as one count each of conspiracy to commit wire fraud, conspiracy to traffic in counterfeit service marks, aggravated identity theft, conspiracy to commit money laundering and conspiracy to violate the Computer Fraud and Abuse Act.

“This case illustrates the sophistication and determination with which cyber criminals seek to harm Americans and American businesses from abroad,” said Assistant Attorney General Caldwell.  “But our response demonstrates that, with effective international cooperation, we can track these criminals down and make sure they face justice, no matter where or how they try to hide.”

“These defendants stole millions of dollars from people in the United States through a sophisticated fraud conspiracy they operated in Eastern Europe,” said U.S. Attorney Rendon.  “Cybercrime is an ever-growing threat.  We will continue to work with both our partners in law enforcement and in the private sector to evolve with the threat and protect our networks and national security.”

“This indictment and subsequent arrests reveal the dynamic landscape in which international criminals utilize sophisticated cyber methods to take advantage of and defraud unsuspecting victims,” said Special Agent in Charge Anthony.  “Despite the complexity and global character of these investigations, these arrests demonstrate the commitment by the FBI and our partners to aggressively pursue these individuals and bring justice to the victims.” 

According to the indictment, Nicolescu, Danet and Miclaus collectively operated a criminal conspiracy from Bucharest, Romania, which began at least as early 2007 with the development of proprietary malware used to infect and control more than 60,000 computers, primarily in the United States.  The co-conspirators allegedly used the computers to harvest personally identifiable information, such as credit card information, user names and passwords; disable malware protection; and solve complex algorithms to accrue valuable cryptocurrency for the financial benefit of the group, a process known as cryptocurrency mining.

To spread their malware, the defendants allegedly activated files that forced infected computers to register a total of over 100,000 email accounts with public email providers, according to the indictment.  The co-conspirators sent a total of more than 11 million emails containing the malware from these accounts to email contacts copied from victim computers.  When victims with infected computers visited websites such as Facebook, PayPal or eBay, the co-conspirators would redirect the computers to a nearly identical website they had created to steal account credentials.  The defendants then used stolen credit card information to fund their criminal infrastructure while concealing their identities.

In addition, the indictment alleges that the defendants placed more than 1,000 fraudulent listings for automobiles, motorcycles and other high-priced goods on eBay and similar auction websites.  Photos of the items were allegedly infected with malware, which, when clicked, redirected victims to fictitious webpages designed by the co-conspirators to resemble legitimate eBay pages.  The fictitious webpages prompted users to pay for their goods through a nonexistent “eBay Escrow Agent,” and payments would then be funneled back to the co-conspirators.  This scheme allegedly resulted in at least $4 million – though the actual total may be tens of millions more – in losses to victims, which the defendants laundered through wire transfers under the names of fictitious companies and then collected and delivered to the co-conspirators by “money mules.”

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

December 29, 2016 | Permalink | Comments (0)

Wednesday, December 28, 2016

Peru joins the Inclusive Framework on BEPS

Following the first meeting of the Inclusive Framework on BEPS in Japan, on 30 June-1 July, and recent regional meetings, more countries and jurisdictions are joining the framework. The Inclusive Framework on BEPS recently welcomed Peru bringing to 91 the total number of countries and jurisdictions participating on an equal footing in the Project.
 
» Download the full list of all countries and jurisdictions participating in the Inclusive Framework on BEPS.

December 28, 2016 in BEPS, OECD | Permalink | Comments (0)

California Man Pleads Guilty to Perpetrating Trademark Fraud and Money Laundering

Associate Pleads Guilty to Helping Launder Proceeds of Scam

A Southern California man who masterminded a $1.66 million mass-mailing scam targeting trademark applicants pleaded guilty today to charges of mail fraud and money laundering and his associate pleaded guilty to helping launder the scam’s proceeds.

Artashes Darbinyan, 37, of Glendale, pleaded guilty to one count of mail fraud and one count of conspiracy to launder monetary instruments before U.S. District Judge Stephen V. FBI DOJ logoWilson of the Central District of California.  Orbel Hakobyan, 42, also of Glendale, pleaded guilty to one count of conspiracy to launder monetary instruments before Judge Wilson.  Sentencing for both has been set for June 19, 2017.

As part of his guilty plea, Darbinyan admitted that he ran a mass-mailing scam through companies called Trademark Compliance Center (TCC) and Trademark Compliance Office (TCO).  The scam involved fraudulent offers  of a service in which TCC and TCO promised to monitor an applicant’s trademark for infringing marks and to register the trademark with U.S. Customs and Border Protection (CBP), which offers a real service that screens imports for possibly infringing trademarks.  The offers were made via mail solicitations to applicants for U.S. trademarks for $385.  Darbinyan never registered, nor ever intended to register, any of the trademarks with CBP for the customers who paid the fee.

Darbinyan also admitted to concealing his control over the scam through elaborate measures in which he illegally used the identities of other people to open accounts at virtual office centers in the Washington, D.C., area, which received and then forwarded victims’ payments to other virtual office centers in the Los Angeles area.  Using those same illicit identities, Darbinyan then opened bank accounts at Wells Fargo through which he laundered the proceeds of the scam.  To further avoid detection, Darbinyan paid virtual office fees with money orders; used bogus email accounts, which he would only log into using prepaid wireless modems; and regularly changed cell phone numbers.

As part of his guilty plea, Hakobyan admitted to helping launder the proceeds of the trademark scam.  Specifically, Hakobyan deposited victims’ checks into bank accounts at Wells Fargo that had been opened under false names.  Hakobyan misrepresented his identity to withdraw funds from the accounts at Wells Fargo in the form of cash and cashier’s checks, which he then used to purchase gold.  In total, he admitted to helping launder approximately $1.29 million of the scam’s proceeds.

In total, Darbinyan admitted, the trademark scam defrauded approximately 4,446 victims of $1.66 million.

Darbinyan and Hakobyan were charged along with Albert Yagubyan, 36, of Burbank, California, in a second superseding indictment unsealed on July 19, 2016.  Yagubyan, the former branch manager of the Wells Fargo branch where the majority of the scam’s proceeds were laundered, is awaiting trial.  An indictment is merely an allegation and all defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

December 28, 2016 | Permalink | Comments (0)

Tuesday, December 27, 2016

Monaco strengthens international tax co-operation – ratifies the Convention on Mutual Administrative Assistance in Tax Matters

Monaco today deposited its instrument of ratification for the Convention on Mutual Administrative Assistance in Tax Matters ("the Convention"). By doing so, Monaco underlines its commitment to fighting tax evasion and avoidance and takes another important step in implementing the Standard for Automatic Exchange of Financial Account Information in Tax Matters developed by the OECD and G20 countries as well as automatic exchange of Country-by-Country Reports under the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project.

Monaco committed to implement automatic exchange of financial account information in time to commence exchanges in 2018 and was amongst the first signatories of the CRS Multilateral Competent Authority Agreement (the "CRS MCAA") and the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports (the "CbC MCAA"), which are both based on Article 6 of the Convention.

The Convention will enter into force for Monaco on 1 April 2017.

December 27, 2016 in GATCA, OECD | Permalink | Comments (0)

Alaska Man Charged With Conspiring to Provide Unlawful Services to Iran and International Money Laundering Conspiracy

Kenneth Zong, 77, of Anchorage Alaska, was named as the sole defendant in the 47-count indictment charging him with conspiracy to violate the International Emergency Economic FBISeal (1)Powers Act (IEEPA), unlawful provision of services to Iran, money laundering conspiracy and money laundering.

The announcement was made by U.S. Attorney Karen L. Loeffler for the District of Alaska.

The indictment alleges that at an undetermined time, Zong left Alaska for Seoul, South Korea, and operated businesses there. From January 2011 through at least April 2014, Zong and four co-conspirators – three Iranian nationals and one U.S. citizen – allegedly conspired to evade the prohibitions of IEEPA and Iranian Transactions and Sanctions Regulations (ITSR) by engaging in false, fictitious and fraudulent transactions which were designed to unlawfully convert and remove Iranian owned funds, equivalent to approximately $1 billion United States dollars (USD). These funds were held in controlled Korean bank accounts and converted into more easily tradeable currencies, such as dollars and/or euros, by defrauding the Korean regulators into thinking the transactions were legitimate.

Zong is charged with transferring those currencies to more than 10 countries around the world, including the U.S., United Arab Emirates, Switzerland, Germany, Austria and Italy. Zong received payment for these acts from the Iranian nationals in an amount from $10 million to $17 million USD.

The indictment alleges that the scheme began in 2011, when Zong changed the name of his Korean company, “KSI Ejder, Inc.” (KSI) to “Anchore.” Zong used KSI/Anchore as a conduit to convert and distribute Iranian funds into USD and/or euros, by fictitiously selling marble tiles and other construction supplies to an Iranian shell company in Kish Island, Iran. KSI/Anchore fictitiously purchased Italian marble tiles and other construction supplies from “MSL & Co Investment Trading” (MSL Investment Dubai), an Iranian-controlled shell company in Dubai, which were then fictitiously shipped directly to another fictitious company in Iran.

Zong and his co-conspirators created false and fictitious contracts, bills of lading and invoices to show Korean government banking regulators that the Iranian company owed KSI/Anchore for the false marble purchases. This resulted in the transfer of Iranian funds, at the direction of Zong’s co-conspirators, from the restricted Iranian bank account to Zong’s KSI/Anchore account. Zong then transferred the funds to entities and individuals throughout the world.

Zong is also charged with 43 counts of money laundering and one count of money laundering conspiracy for his actions in connection with the $10 million dollar fee paid to him by his Iranian associates. In furtherance of the scheme, Zong transferred $10 million of his fees from Korea to a co-conspirator who resided in Anchorage. This individual also created and operated various companies to be used as front companies to purchase real estate, automobiles, an interest in a yacht and other purchases or transfers of the Iranian funds. 

The U.S. embargo on Iran, which is enforced through IEEPA and the ITSR, prohibits the export of goods, technology, and services to Iran with very limited exceptions.

December 27, 2016 | Permalink | Comments (0)

Monday, December 26, 2016

CarMax and Two Other Dealers Settle FTC Charges That They Touted Inspections While Failing to Disclose Some of the Cars Were Subject to Unrepaired Safety Recalls

CarMax Inc. and two other major used auto retailers have agreed to settle Federal Trade Commission charges that they touted how rigorously they inspect their used cars, yet failed to adequately disclose that some of the cars were subject to unrepaired safety recalls. The proposed consent orders will prohibit them from making unqualified inspection or safety-related claims about their used vehicles if any are subject to open, or unrepaired, safety recalls.

Also, following a public comment period, the Commission has approved final consent orders in similar cases against General Motors Company, Jim Koons Management, and Lithia Motors Inc. that were settled earlier this year.

The FTC’s complaint against Virginia-based CarMax cites its claims about rigorous used car inspections, including its “125+ Point Inspection” and that its cars undergo, on average, “12 hours of renewing – sandwiched between two meticulous inspections.”  The complaint also notes a TV commercial touting a team inspection and reconditioning, which included a message that appears for three seconds in tiny type at the bottom of the screen stating, “Some CarMax vehicles are subject to open safety recalls.”  Despite highlighting their inspections, the FTC alleges that CarMax failed to adequately disclose that some of the cars had open recalls. These recalls included defects that could cause serious injury, including the GM key ignition switch defect, as well as the Takata airbag defect.

Similarly, the FTC’s complaint against Georgia-based Asbury Automotive Group, which also does business as Coggin Automotive Group and Crown Automotive Group, alleges that the company made claims such as: “Every Coggin Certified used car or truck has undergone a 150 point bumper-to-bumper inspection by Certified mechanics. We find and fix problems – from bulbs to brakes – before offering a vehicle for sale.”  However, as alleged, the company advertised some certified used vehicles without adequately disclosing that some of the cars were subject to open recalls, including one that could cause fuel to leak and the engine to misfire or stall, and one that could cause a car to move in an unexpected or unintended direction.

The FTC’s complaint against West-Herr Automotive Group, the largest auto group in New York, cites claims about vehicles backed by the “West-Herr Guarantee” and touting a “rigorous multi-point inspection with our factory trained technicians.” However, the complaint alleges again that the company failed to properly disclose that some of the vehicles were subject to recalls for defects that could result in serious injury.

Under the proposed consent orders, CarMax, Asbury, and West-Herr are prohibited from claiming that their used vehicles are safe, have been repaired for safety issues, or have been subject to an inspection for safety-related issues, unless they are free of open recalls, or the companies clearly and conspicuously disclose that their vehicles may be subject to unrepaired recalls for safety issues and explain how consumers can determine whether a vehicle is subject to a recall for a safety issue that has not been repaired, and the claims are not otherwise misleading.

The proposed orders also would prohibit the companies from misrepresenting whether there is or is not an open recall for safety issues for any used motor vehicle, whether they 1024px-US-FederalTradeCommission-Seal.svgrepair such vehicles, and any other material fact about the safety of the used vehicles they advertise for sale. The proposed orders also would require the companies to inform recent customers, by mail, that vehicles they bought as far back as July 1, 2013, may be subject to open recalls.

In a Commission Statement regarding the six auto recall advertising cases, the Commission notes that its orders “will help empower consumers to make more informed and safer purchasing decisions in a market that, absent a change in federal law, continues to include cars subject to open recalls.”  The Commission vote to issue the statement was 3-0.

The Commission vote to issue the administrative complaints against CarMax, Asbury Automotive Group, and West-Herr Automotive Group and to accept the consent agreements was 3-0. The FTC will publish a description of each consent agreement package in the Federal Register shortly. The agreements will be subject to public comment for 30 days, beginning today and continuing through January 17, 2017, after which the Commission will decide whether to make the proposed consent orders final. Interested parties can submit comments electronically for CarMax, Asbury Automotive Group and West-Herr Automotive Group by following the instructions in the “Invitation To Comment” part of the “Supplementary Information” section.

The Commission vote approving the final consent orders against GM, Jim Koons Management and Lithia Motors, and letters to commenters was 3-0.

December 26, 2016 in Financial Regulation | Permalink | Comments (0)

Sunday, December 25, 2016

Seven Individuals Plead Guilty to Involvement in Large-Scale International Online Romance Fraud

even individuals pleaded guilty to participating in a large-scale international online fraud conspiracy, announced Assistant Attorney General Leslie R. Caldwell of the Justice FBISealDepartment’s Criminal Division, U.S. Attorney Gregory K. Davis of the Southern District of Mississippi and Special Agent in Charge Raymond R. Parmer Jr. of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) in New Orleans.

Rhulane Fionah Hlungwane, 26, of South Africa; Gabriel Oludare Adeniran, 30, of Nigeria; Olusegun Seyi Shonekan, 34, of Nigeria; Taofeeq Olamilekan Oyelade, 32, of Nigeria; Olufemi Obaro Omoraka, 27, of Nigeria; Anuoluwapo Segun Adegbemigun, 40, of Nigeria; and Adekunle Adefila, 41, of Nigeria, each pleaded guilty this week to one count of conspiracy to commit mail and wire fraud.  In addition, Hlungwane, Adeniran, Shonekan, Oyelade, Omoraka and Adegbemigun each pleaded guilty to one count of conspiracy to commit identity theft, access device fraud and theft of government funds.

According to the plea agreements, the defendants and their co-conspirators carried out numerous internet-based fraud schemes dating back at least to 2001.  These schemes involved using unsuspecting victims to cash counterfeit checks and money orders, using stolen credit card numbers to purchase electronics and other merchandise and using stolen personal identification information to take over victims’ bank accounts.  As a whole, the conspiracy involved tens of millions of dollars in intended losses.

The defendants admitted that, to accomplish their fraud schemes, they recruited the assistance of U.S. citizens via “romance scams,” in which the perpetrator would typically use a false identity on a dating website to establish a romantic relationship with an unsuspecting victim.  Once the perpetrator gained the victim’s trust and affection, the perpetrator would convince the victim to either send money or to help carry out fraud schemes.  For example, the defendants admitted that they used romance victims to launder money via Western Union and MoneyGram, to re-package and re-ship fraudulently obtained merchandise and to cash counterfeit checks. 

This case is being prosecuted as part of the Justice Department’s mission to combat transnational organized crime.  Any person who believes they may be a victim of online fraud should report suspected criminal activity using the HSI Tip Form: www.ice.gov/webform/hsi-tip-form.

December 25, 2016 | Permalink | Comments (0)

Saturday, December 24, 2016

Justice Department Recovers Over $4.7 Billion From False Claims Act Cases in Fiscal Year 2016

The Department of Justice obtained more than $4.7 billion in settlements and judgments from civil cases involving fraud and Justice logofalse claims against the government in fiscal year 2016 ending Sept. 30, Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division, announced today.  This is the third highest annual recovery in False Claims Act history, bringing the fiscal year average to nearly $4 billion since fiscal year 2009, and the total recovery during that period to $31.3 billion.

“Congress amended the False Claims Act 30 years ago to give the government a more effective tool against false and fraudulent claims against federal programs,” said Mizer.  “An astonishing 60 percent of those recoveries were obtained in the last eight years.  The beneficiaries of these efforts include veterans, the elderly, and low-income families who are insured by federal health care programs; families and students who are able to afford homes and go to college thanks to federally insured loans; and all of us who are protected by the government’s investment in national security and defense.  In short, Americans across the country are healthier, enjoy a better quality of life, and are safer because of our continuing success in protecting taxpayer funds from misuse.”

Of the $4.7 billion recovered, $2.5 billion came from the health care industry, including drug companies, medical device companies, hospitals, nursing homes, laboratories, and physicians.  The $2.5 billion recovered in fiscal year 2016 reflects only federal losses.  In many of these cases, the Department was instrumental in recovering additional millions of dollars for state Medicaid programs.  This is the seventh consecutive year the Department’s civil health care fraud recoveries have exceeded $2 billion. 

The next largest recoveries came from the financial industry in the wake of the housing and mortgage fraud crisis.  Settlements and judgments in cases alleging false claims in connection with federally insured residential mortgages totaled nearly $1.7 billion in fiscal year 2016 – the second highest annual recovery in this area.  

The False Claims Act is the government’s primary civil remedy to redress false claims for government funds and property under government programs and contracts relating to such varied areas as health care, defense and national security, food safety and inspection, federally insured loans and mortgages, highway funds, small business contracts, agricultural subsidies, disaster assistance, and import tariffs.  In 1986, Congress strengthened the Act by amending it to increase incentives for whistleblowers to file lawsuits alleging false claims on behalf of the government.

Most false claims actions are filed under those whistleblower, or qui tam, provisions.  If the government prevails in the action, the whistleblower, also known as the relator, receives up to 30 percent of the recovery.  Whistleblowers filed 702 qui tam suits in fiscal year 2016, and the Department recovered $2.9 billion in these and earlier filed suits this past year.  The government awarded the whistleblowers $519 million during the same period. 

Health Care Fraud

The Department recovered $19.3 billion in health care fraud claims from January 2009 to the end of fiscal year 2016 – 57 percent of the health care fraud dollars recovered in the 30 years since the 1986 amendments to the False Claims Act.  These recoveries restore valuable assets to federally funded programs such as Medicare, Medicaid, and TRICARE, the health care program for service members and their families.  But just as important, the Department’s vigorous pursuit of health care fraud prevents billions more in losses by deterring others who might otherwise try to cheat the system for their own gain.  The Department’s success is a direct result of the high priority the Obama Administration has placed on fighting health care fraud.  In 2009, the Attorney General and the Secretary of the Department of Health and Human Services, the Department that administers Medicare and Medicaid, announced the creation of an interagency task force called the Health Care Fraud Prevention and Enforcement Action Team (HEAT), to increase coordination and optimize criminal and civil enforcement.  Additional information on the government’s efforts in this area is available at StopMedicareFraud.gov, a webpage jointly established by the Departments of Justice and Health and Human Services.

The largest recoveries this past year – $1.2 billion – came from the drug and medical device industry.  Drug manufacturers Wyeth and Pfizer Inc. paid $784.6 million to resolve federal and state claims that Wyeth knowingly reported false and fraudulent prices on two drugs used to treat acid reflux, Protonix Oral and Protonix IV.  The government alleged that Wyeth (before it was acquired by Pfizer) failed to report deep discounts available to hospitals, as required by the government to ensure that the Medicaid program enjoyed the same pricing benefits available to the company’s commercial customers.  Wyeth paid $413.2 million to the federal government and $371.4 million to state Medicaid programs.

In another settlement against a drug company, Novartis Pharmaceuticals Corp. paid $390 million based on claims that the company gave kickbacks to specialty pharmacies in return for recommending Exjade, an iron chelation drug, and Myfortic, an anti-rejection drug for kidney transplant recipients.  The settlement includes $306.9 million for the federal government and $83.1 million for state Medicaid programs.

Hospitals and outpatient clinics accounted for $360 million in recoveries.  Tenet Healthcare Corp., a major hospital chain in the United States, paid $244.2 million to resolve civil allegations that four of its hospitals engaged in a scheme to defraud the United States by paying kickbacks in return for patient referrals.  Tenet paid an additional $123.7 million to state Medicaid programs, and two of its subsidiaries pleaded guilty to related charges and forfeited $145 million, bringing the total resolution to $513 million.          

In the medical lab arena, Millennium Health (formerly Millennium Laboratories) paid $260 million to settle allegations that it billed Medicare, Medicaid, and other federal health care programs for excessive and unnecessary urine drug and genetic testing and also that it gave free items to induce physicians to refer expensive and profitable lab tests to Millennium, in violation of the Anti-Kickback Statute and Stark Law.  The settlement included $214.8 million in alleged false claims against federal programs, $26 million in alleged false claims against state Medicaid programs, and $19.2 million in related administrative claims.

The nation’s largest contract therapy provider paid $125 million to resolve claims that it had induced skilled nursing homes to submit false claims to Medicare for rehabilitation services that were not reasonable, necessary, and skilled, or that weren’t provided at all.  The settlement was with RehabCare Group Inc., RehabCare Group East Inc., and their parent, Kindred Healthcare Inc.  Cases involving nursing homes and skilled nursing facilities accounted for more than $160 million in settlements and judgments this past fiscal year.

“These health care recoveries benefit vulnerable citizens in Medicare and Medicaid and the taxpayers who pay for those programs,” said Inspector General Daniel R. Levinson of the U.S. Department of Health and Human Services.  “Beyond those significant settlements, though, my agency works to improve voluntary observance of federal laws through corporate integrity agreements addressing compliance weaknesses, and self-disclosures that encourage health care providers and other entities to voluntarily report suspected violations.”

Housing and Mortgage Fraud

The Department recovered more than $7 billion in housing and mortgage claims from January 2009 to the end of fiscal year 2016, including settlements and judgments totaling $1.6 billion this past fiscal year – the second highest annual recovery in the history of the federally insured mortgage program.  Notable this year were settlements with Wells Fargo for $1.2 billion and Freedom Mortgage Corp. for $113 million.

Wells Fargo and Freedom Mortgage both admitted that they had originated and endorsed residential mortgages as eligible for federal insurance by the Federal Housing Administration (FHA) that did not meet requirements intended to reduce the risk of default.  This put consumers at risk of losing their homes in foreclosure and increased the number of claims against the FHA when their loans went into default.  The banks also admitted failing to report such deficiencies to the authorities as required under the program, despite internal reports exposing high rates of underwriting deficiencies that would have put the agency on notice so it could prevent continued program violations and mounting losses.  By originating and endorsing ineligible loans for FHA insurance, the banks increased their mortgage profits at taxpayer expense while incurring little or no risk of their own. 

As part of the Wells Fargo settlement, the bank’s vice president of Credit Risk – Quality Assurance, Kurt Lofrano, admitted that he annually certified Wells Fargo’s compliance with FHA’s Direct Endorsement Lender program and the bank’s continued qualification to remain in the program. 

These recoveries are part of the broader enforcement efforts by President Obama’s Financial Fraud Enforcement Task Force.  President Obama established the interagency task force in 2009, to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.  The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.  For more information about the task force, visit www.stopfraud.gov

Other Fraud Recoveries

Although health care and mortgage fraud dominated fiscal year 2016 recoveries, the Department has aggressively pursued fraud wherever it is found in federal programs and contracts.  For example, the Department recovered $82.6 million in false claims from BP Exploration and Production Inc. (BP) arising from the April 2010 Deepwater Horizon/Macondo Well explosion and oil spill in the Gulf of Mexico.  The government, through the Department of the Interior, leases portions of the Outer Continental Shelf to companies like BP that operate exploratory oil wells.  In exchange for the lease, the operators pay royalties based on the volume of oil extracted from the wells.  Program regulations applicable to exploration of the Outer Continental Shelf require well operators to maintain a “safe drilling margin” and to report plans to drill further into an open hole if the margin falls below legal limits.  The government alleged that BP provided false reports about its “safe drilling margin” that concealed its improper drilling, which left the well in a fragile state and ultimately resulted in the blowout.  The government’s civil fraud claims were part of a $20 billion consent decree reached with the United States and five Gulf states that also included damages and penalties under state and federal environmental laws, mandatory restoration of the area, and other relief.  

The government also continued to pursue a variety of procurement fraud matters.  For example, L-3 Communications EOTech Inc. and its parent company, L-3 Communications Corp., paid the United States $25.6 million for defective holographic weapon sites EOTech sold to the Department of Defense, Department of Homeland Security, and FBI.  The defendants, including EOTech’s president, admitted knowing the sights failed to perform as represented in cold temperatures and humid environments, but delayed disclosing the defects to federal authorities for years.  Besides compensating the government for critical funds lost through fraud, such settlements ensure that the vital terms of contracts supporting the nation’s defense and security agencies are enforced, and deter other contractors from acting fraudulently or recklessly to increase their profits in the future. 

The Department had several settlements with for-profit schools that allegedly participated in illegal schemes to secure federal education funds.  For example, the second largest for-profit education company in the country, Education Management Corp., paid the United States $52.6 million to resolve allegations that it unlawfully recruited students, engaged in deceptive and misleading recruiting practices, and falsely certified compliance with Title IV of the Higher Education Act and parallel state laws that prohibited such conduct, as part of a $95.5 million global federal-state settlement.

The Department also recovered $50 million in customs fraud.  U.S. Customs and Border Protection collects duties on imports of foreign goods to protect U.S. manufacturers from unfair competition abroad by leveling the playing field for domestic products.  Importers who seek an unfair advantage by knowingly evading or reducing their obligation to pay these duties are subject to damages and penalties under the False Claims Act.  These recoveries both address lost duties and safeguard U.S. markets.

These suits and settlements illustrate the diversity of cases pursued by the Department and the Department’s quest to root out fraud and false claims against the government wherever it may be found.

Holding Individuals Accountable    

On Sept. 9, 2015, the Department issued a memorandum on individual accountability for corporate wrongdoing.  This memorandum reinforced the Department’s commitment to use the False Claims Act and other civil remedies to deter and redress fraud by individuals as well as corporations. 

Cardiologist Dr. Asad Qamar and his practice, the Institute of Cardiovascular Excellence (ICE), paid $2 million this past fiscal year, and released claims to an additional $5.3 million in suspended Medicare funds, to settle allegations that he and his practice billed Medicare, Medicaid, and TRICARE for medically unnecessary procedures and paid kickbacks to patients by waiving Medicare copayments irrespective of financial hardship.  Medicare copayments provide beneficiaries with an incentive to be smart health care consumers and avoid unnecessary procedures.  The government alleged that by waiving the required copayments indiscriminately, Dr. Qamar and ICE induced patients to undergo unnecessary and invasive procedures.  This conduct made Dr. Qamar the highest paid Medicare cardiologist in the United States in 2012 and 2013.  Dr. Qamar also agreed to a three-year exclusion from participating in any federal health care program followed by a three-year integrity agreement with the Department of Health and Human Services Office of the Inspector General. 

Additional examples of individuals held personally liable for alleged false claims include George Hepburn ($10.3 million), founder and president of Dynasplint Systems Inc.; Dr. Jonathan Oppenheimer ($9.35 million), former owner and chief executive officer of a Nashville drug testing laboratory; Gottfried and Mieke Kellermann ($8.5 million), founders of Pharmasan Labs Inc. and NeuroScience Inc.; Jacob (Jake) J. Kilgore ($4 million), former co-owner, vice president, and later president of Orbit Medical Inc.; Dr. David G. Bostwick ($3.75 million), founder and former owner and chief executive officer of Bostwick Laboratories Inc.; Mark T. Conklin ($1.75 million), former owner, operator, and sole shareholder of Recovery Home Care Inc. and Recovery Home Care Services Inc.; Dr. David Spellberg ($1.05 million) and Robert A. Scappa, D.O.($250,000), urologists with 21st Century Oncology LLC; and Ralph J. Cox III ($1 million), former chief executive officer of Tuomey Healthcare System.  

Recoveries in Whistleblower Suits

Of the $4.7 billion the government recovered in fiscal year 2016, $2.9 billion related to lawsuits filed under the qui tamprovisions of the False Claims Act.  During the same period, the government paid out $519 million to the individuals who exposed fraud and false claims by filing a qui tam complaint. 

The number of lawsuits filed under the qui tam provisions of the Act has grown significantly since 1986, with 702 qui tamsuits filed this past year – an average of 13.5 new cases every week.  The growing number of qui tam lawsuits, particularly since 2009, has led to increased recoveries.  From January 2009 to the end of fiscal year 2016, the government recovered nearly $24 billion in settlements and judgments related to qui tam suits and paid more than $4 billion in whistleblower awards during the same period.

“The qui tam provisions provide a valuable incentive to industry insiders who are uniquely positioned to expose fraud and false claims to come forward despite the risk to their careers,” said Principal Deputy Assistant Attorney General Mizer.  “This takes courage, for which they are justly rewarded under the Act.”   

In 1986, Senator Charles Grassley and Representative Howard Berman led the successful efforts in Congress to amend the False Claims Act to, among other things, encourage whistleblowers to come forward with allegations of fraud.  In 2009, Senator Patrick J. Leahy, along with Senator Grassley and Representative Berman, championed the Fraud Enforcement and Recovery Act of 2009, which made additional improvements to the False Claims Act and its whistleblower provisions.  And in 2010, the passage of the Affordable Care Act provided additional inducements and protections for whistleblowers.

Mizer also expressed his deep appreciation for the many dedicated public servants who investigated and pursued these cases – the attorneys, investigators, auditors, and other agency personnel throughout the Department’s Civil Division and the U.S. Attorneys’ Offices, as well as the agency Offices of Inspector General, and the many federal and state agencies that contributed to the Department’s recoveries this past fiscal year. 

December 24, 2016 | Permalink | Comments (0)

Friday, December 23, 2016

Over 1300 relationships to automatically exchange information between tax authorities

Another important step to implement the OECD Common Reporting Standard (CRS) was taken, with a further 350 bilateral automatic exchange relationships being established OECDbetween over 50 jurisdictions committed to exchanging information automatically pursuant to the OECD Common Reporting Standard (CRS), starting in 2017.

There are now more than 1 300 bilateral relationships in place across the globe, most of them based on the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (the CRS MCAA). The full list of automatic exchange relationships that are currently in place under the CRS MCAA and other legal instruments can be accessed on the Automatic Exchange Portal. With respect to the jurisdictions exchanging as of 2017, 1133 out of the 1459 possible bilateral exchange relationships are now established. The 326 non activated exchange relationships are mainly due to the fact that 6 jurisdictions were not yet in a position to provide a full set of notifications. 

Two more rounds of activations are scheduled to take place in March and June 2017 which will allow the remaining 2017 and 2018 jurisdictions to nominate the partners with which they will undertake automatic exchanges in the coming months. The next update on the latest bilateral exchange relationships will be published before the end of March 2017, with updates to follow on a periodic basis. In total, 101 jurisdictions have agreed to start automatically exchanging financial account information in September 2017 and 2018, under the CRS.

The 2017 second wave of activations of bilateral exchange relationships is a further crucial step towards the timely implementation of the OECD-developed international standard for the automatic exchange of financial account information, the CRS, and reflects the determination of jurisdictions around the world to deliver on their political commitment to fight tax evasion.

December 23, 2016 in GATCA, OECD | Permalink | Comments (0)

Christmas for DeVry Students - University Agrees to $100 Million Refunds and Student Loan Repayment

DeVry University and its parent company have agreed to a $100 million settlement of a Federal Trade Commission lawsuit Devry_infographicalleging that they misled prospective students with ads that touted high employment success rates and income levels upon graduation. The FTC settlement secures significant financial redress for tens of thousands of students harmed by DeVry’s conduct.

Under the settlement resolving the FTC charges, DeVry will pay $49.4 million in cash to be distributed to qualifying students who were harmed by the deceptive ads, as well as $50.6 million in debt relief. The debt being forgiven includes the full balance owed—$30.35 million—on all private unpaid student loans that DeVry issued to undergraduates between September 2008 and September 2015, and $20.25 million in student debts for items such as tuition, books and lab fees.

“When people are making important decisions about their education and their future, they should not be misled by deceptive employment and earnings claims,” said FTC Chairwoman Edith Ramirez. “The FTC has secured compensation for the many students who were harmed, and I am pleased that DeVry is changing its practices.”

The FTC’s complaint charged that DeVry misled consumers in violation of the FTC Act by claiming that 90 percent of graduates actively seeking employment landed jobs in their field within six months of graduation. Advertisements making these claims appeared on television and radio, as well as online and in print and other media.

The complaint further alleges that DeVry misled students by claiming that graduates with bachelor’s degrees, on average, had 15 percent higher incomes one year after graduation than the graduates with bachelor’s degrees from all other colleges or universities.

The proposed federal court order requires DeVry to notify the students who will receive debt relief, and to inform the credit bureaus and collection agencies of the debt forgiveness. All loan and debt forgiveness will occur automatically. DeVry will also release transcripts and diplomas previously withheld from students because of outstanding debt and will cooperate with future requests for diplomas and transcripts and related enrollment or graduation information.

The settlement also includes provisions designed to prevent DeVry from misleading consumers in the future. Among other things, it prohibits DeVry from misrepresenting the likelihood that graduates will get a job as a result of their degree. It specifically prohibits DeVry from including jobs students obtained more than six months before graduating whenever DeVry advertises its graduates’ success in finding jobs near graduation. The settlement also prohibits DeVry from misrepresenting the compensation or compensation ranges that students or graduates have received or can be expected to receive.

The FTC also has a new consumer blog that describes how the refund process was developed and implemented.

The FTC would like to thank the Department of Education and the Department of Veterans Affairs for their cooperation and collaboration.

For more information about the refund and debt forgiveness program, visit ftc.gov/devry or call 844-578-2645. Sign up to get email updates about the FTC’s DeVry refund program.

The Commission vote approving the proposed stipulated order was 3-0. The FTC filed the proposed stipulated order in the U.S. District Court for the Central District of California.

NOTE: Stipulated orders have the force of law when approved and signed by the District Court judge.

December 23, 2016 in Education | Permalink | Comments (0)

Thursday, December 22, 2016

Odebrecht and Braskem Plead Guilty and Agree to Pay at Least $3.5 Billion in Global Penalties to Resolve Largest Foreign Bribery Case in History. But How Many Employees and Facilitators Will Be Jailed?

Odebrecht S.A. (Odebrecht), a global construction conglomerate based in Brazil, and Braskem S.A. (Braskem), a Brazilian petrochemical company, pleaded guilty today and agreed to Petrobraspay a combined total penalty of at least $3.5 billion to resolve charges with authorities in the United States, Brazil and Switzerland arising out of their schemes to pay hundreds of millions of dollars in bribes to government officials around the world. 

Deputy Assistant Attorney General Sung-Hee Suh of the Justice Department’s Criminal Division, U.S. Attorney Robert L. Capers of the Eastern District of New York, Assistant Director Stephen Richardson of the FBI’s Criminal Investigative Division and Assistant Director in Charge William F. Sweeney of the FBI’s New York Field Office made the announcement.

“Odebrecht and Braskem used a hidden but fully functioning Odebrecht business unit—a ‘Department of Bribery,’ so to speak—that systematically paid hundreds of millions of dollars to corrupt government officials in countries on three continents,” said Deputy Assistant Attorney General Suh.  “Such brazen wrongdoing calls for a strong response from law enforcement, and through a strong effort with our colleagues in Brazil and Switzerland, we have seen just that.  I hope that today’s action will serve as a model for future efforts.”

“These resolutions are the result of an extraordinary multinational effort to identify, investigate and prosecute a highly complex and long-lasting corruption scheme that resulted in the payment by the defendant companies of close to a billion dollars in bribes to officials at all levels of government in many countries,” said U.S. Attorney Capers.  “In an attempt to conceal their crimes, the defendants used the global financial system – including the banking system in the United States – to disguise the source and disbursement of the bribe payments by passing funds through a series of shell companies.  The message sent by this prosecution is that the United States, working with its law enforcement partners abroad, will not hesitate to hold responsible those corporations and individuals who seek to enrich themselves through the corruption of the legitimate functions of government, no matter how sophisticated the scheme.”

“This case illustrates the importance of our partnerships and the dedicated personnel who work to bring to justice those who are motivated by greed and act in their own best interest,” said Assistant Director Richardson.  “The FBI will not stand by idly while corrupt individuals threaten a fair and competitive economic system or fuel criminal enterprises.  Our commitment to work alongside our foreign partners to root out corruption across the globe is unwavering and we thank our Brazilian and Swiss partners for their tireless work in this effort.”

“No matter what the reason, when foreign officials receive bribes, they threaten our national security and the international free market system in which we trade,” said Assistant Director in Charge Sweeney.  “Just because they’re out of our sight, doesn’t mean they’re beyond our reach.  The FBI will use all available resources to put an end to this type of corrupt behavior.”

Odebrecht pleaded guilty to a one-count criminal information filed today by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office in the U.S. District Court for the Eastern District of New York, charging the company with conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA).  Odebrecht agreed that the appropriate criminal fine is $4.5 billion, subject to further analysis of the company’s ability to pay the total global penalties.  In related proceedings, Odebrecht also settled with the Ministerio Publico Federal in Brazil and the Office of the Attorney General in Switzerland. 

Under the plea agreement, the United States will credit the amount that Odebrecht pays to Brazil and Switzerland over the full term of their respective agreements, with the United States and Switzerland receiving 10 percent each of the principal of the total criminal fine and Brazil receiving the remaining 80 percent.  The fine is subject to an inability to pay analysis to be completed by the Department of Justice and Brazilian authorities on or before March 31, 2017, because Odebrecht has represented it is only able to pay approximately $2.6 billion over the course of the respective agreements.  Sentencing has been scheduled for April 17, 2017. 

Braskem, whose American Depositary Receipts (ADRs) are publicly traded on the New York Stock Exchange, separately pleaded guilty to a one-count criminal information filed in the Eastern District of New York charging it with conspiracy to violate the anti-bribery provisions of the FCPA.  Braskem agreed to pay a total criminal penalty of $632 million.  Sentencing has not yet been scheduled.  In related proceedings, Braskem also settled with the U.S. Securities and Exchange Commission (SEC), the Ministerio Publico Federal in Brazil and the Office of the Attorney General in Switzerland.  Under the terms of its resolution with the SEC, Braskem agreed to a total of $325 million in disgorgement of profits.  Braskem agreed to pay Brazilian authorities 70 percent of the total criminal penalty and agreed to pay the Swiss authorities 15 percent.  The department has agreed to credit the criminal penalties paid to Brazilian and Swiss authorities as part of its agreement with the company.  The United States will receive $94.8 million, an amount equal to 15 percent of the total criminal fines paid by Braskem. 

Under their respective plea agreements, Odebrecht and Braskem are required to continue their cooperation with law enforcement, including in connection with the investigations and prosecutions of individuals responsible for the criminal conduct.  Odebrecht and Braskem also agreed to adopt enhanced compliance procedures and to retain independent compliance monitors for three years.  The cases are assigned to U.S. District Judge Raymond J. Dearie of the Eastern District of New York.

The combined total amount of United States, Brazilian and Swiss criminal and regulatory penalties paid by Braskem will be approximately $957 million.  The combined total amount of penalties imposed against Odebrecht will be at least $2.6 billion and up to $4.5 billion.  With a combined total of at least $3.5 billion, today’s resolutions with Odebrecht and Braskem are the largest-ever global foreign bribery resolution.     

The Bribery Schemes

According to its admissions, Odebrecht engaged in a massive and unparalleled bribery and bid-rigging scheme for more than a decade, beginning as early as 2001.  During that time, Odebrecht paid approximately $788 million in bribes to government officials, their representatives and political parties in a number of countries in order to win business in those countries.  The criminal conduct was directed by the highest levels of the company, with the bribes paid through a complex network of shell companies, off-book transactions and off-shore bank accounts. 

As part of the scheme, Odebrecht and its co-conspirators created and funded an elaborate, secret financial structure within the company that operated to account for and disburse bribe payments to foreign government officials and political parties.  By 2006, the development and operation of this secret financial structure had evolved such that Odebrecht established the “Division of Structured Operations,” which effectively functioned as a stand-alone bribe department within Odebrecht and its related entities.  Until approximately 2009, the head of the Division of Structured Operations reported to the highest levels within Odebrecht, including to obtain authorization to approve bribe payments.  After 2009, this responsibility was delegated to certain company business leaders in Brazil and the other jurisdictions.  To conceal its activities, the Division of Structured Operations utilized an entirely separate and off-book communications system, which allowed members of the Division of Structured Operations to communicate with one another and with outside financial operators and other co-conspirators about the bribes via secure emails and instant messages, using codenames and passwords. 

The Division of Structured Operations managed the “shadow” budget for the Odebrecht bribery operation via a separate computer system that was used to request and process bribe payments as well as to generate and populate spreadsheets that tracked and internally accounted for the shadow budget.  These funds for the company’s sophisticated bribery operation were generated by the Odebrecht Finance Department through a variety of methods, as well as by certain Odebrecht subsidiaries, including Braskem.  The funds were then funneled by the Division of Structured Operations to a series of off-shore entities that were not included on Odebrecht’s balance sheet as related entities.  The Division of Structured Operations then directed the disbursement of the funds from the off-shore entities to the bribe recipient, through the use of wire transfers through one or more of the off-shore entities, as well as through cash payments both inside and outside Brazil, which were sometimes delivered using packages or suitcases left at predetermined locations. 

Odebrecht, its employees and agents took a number of steps while in the United States to further the scheme.  For instance, in 2014 and 2015, while located in Miami, two Odebrecht employees engaged in conduct related to certain projects in furtherance of the scheme, including meetings with other co-conspirators to plan actions to be taken in connection with the Division of Structured Operations, the movement of criminal proceeds and other criminal conduct.  In addition, some of the off-shore entities used by the Division of Structured Operations to hold and disburse unrecorded funds were established, owned and/or operated by individuals located in the United States.  In all, this conduct resulted in corrupt payments and/or profits totaling approximately $3.336 billion.

Braskem also admitted to engaging in a wide-ranging bribery scheme and acknowledged the pervasiveness of its conduct.  Between 2006 and 2014, Braskem paid approximately $250 million into Odebrecht’s secret, off-book bribe payment system.  Using the Odebrecht system, Braskem authorized the payment of bribes to politicians and political parties in Brazil, as well as to an official at Petróleo Brasileiro S.A. – Petrobras (Petrobras), the state-controlled oil company of Brazil.  In exchange, Braskem received various benefits, including: preferential rates from Petrobras for the purchase of raw materials used by the company; contracts with Petrobras; and favorable legislation and government programs that reduced the company’s tax liabilities in Brazil.  This conduct resulted in corrupt payments and/or profits totaling approximately $465 million.

The Corporate Resolutions

The department reached these resolutions with Odebrecht and Braskem based on a number of factors, including: the failure to voluntarily disclose the conduct that triggered the investigation; the nature and seriousness of the offense, which spanned many years, involved the highest levels of the companies, occurred in multiple countries and involved sophisticated schemes to bribe high-level government officials; the lack of an effective compliance and ethics program at the time of the conduct; and credit for each company’s respective cooperation.  The companies also engaged in remedial measures, including terminating and disciplining individuals who participated in the misconduct, adopting heightened controls and anti-corruption compliance protocols and significantly increasing the resources devoted to compliance.

The criminal penalty for Odebrecht reflects a 25 percent reduction off the bottom of the U.S. Sentencing Guidelines fine range because of Odebrecht’s full cooperation with the government’s investigation, while the criminal penalty for Braskem reflects a 15 percent reduction off the bottom of the U.S. Sentencing Guidelines as a result of its partial cooperation.

Odebrecht has represented its ability to pay a maximum of $2.6 billion of the total fine amount.  The department and Brazilian authorities are engaged in further analysis regarding the company’s claimed inability to pay, which will be completed on or before March 31, 2017.

*          *          *

The FBI’s New York Field Office is investigating the case.  Chief Dan Kahn and Trial Attorneys Christopher Cestaro, Sarah Edwards, David Fuhr, Kevin R. Gingras, Lorinda Laryea and David Last of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Julia Nestor and Alixandra Smith of the Eastern District of New York are prosecuting the case. 

The Criminal Division’s Office of International Affairs also provided substantial assistance.  The SEC and the Ministerio Publico Federal in Brazil the Departamento de Polícia Federal and the Office of the Attorney General in Switzerland provided significant cooperation.

The Criminal Division’s Fraud Section is responsible for investigating and prosecuting all FCPA matters.  Additional information about the Justice Department’s Fraud Section FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa

December 22, 2016 | Permalink | Comments (0)

Largest ever survey sheds light on the impact of change on people’s lives

Largest poll of its kind assesses life satisfaction, role of corruption and the gender divide; provides insight on impact of crisis in Greece

A new report from the European Bank for Reconstruction and Development (EBRD) shows growing levels of life satisfaction across the former communist bloc, generally decreasing EU Bank Investmentbut continuing concerns about corruption and a persistent gender divide in the labour markets and in business.

The report is the third in a series of Life in Transition Surveys (LiTS) that the EBRD has produced since 2006.

They are large-scale and comprehensive surveys focusing on beliefs, perceptions and attitudes of individuals and households, providing invaluable insight into how peoples’ lives have been shaped by change and upheaval since the fall of communism.

In the largest survey so far, the EBRD together with the World Bank polled 51,000 households in 34 countries*, mainly “transition countries” in central and eastern Europe as well as Turkey and also, for the sake of comparison with more prosperous western neighbours, from Germany and Italy. For the first time, the survey also covered Cyprus and Greece.

A sobering chapter on Greece reveals just how hard the people of that country were affected by its recent economic crisis. It shows the various ways in which they coped with the impact of the crisis and provides an insight into their expectations for the future.

In a section on life satisfaction, parts of which have already been reflected in the EBRD’s recently published Transition Report, “Equal Opportunities in an Unequal World”, the survey showed satisfaction levels had increased compared to 2006 and 2010 and were converging with more prosperous western European countries.

People’s responses showed them to be more tolerant of ethnic and sexual minorities than they were in 2010, although less so than respondents in Germany and Italy. The report also indicated that they had become slightly less tolerant of immigrants.

By assessing the hopes, fears and aspirations of ordinary people, LiTS is a key tool that helps make sure that the work of the EBRD is aligned with the requirements of the countries where it invests and the people who live there.

In his foreword to the latest survey, EBRD Chief Economist Sergei Guriev explains that the economic hardship that transition has entailed has led to some disillusionment and sometimes a slowdown or reversal of reforms, a trend that has underscored the importance of assessing reform not just in terms of economic growth or levels of private ownership.

“Reforms are, after all, intended to enhance the well-being of the general public. If the public does not see the benefits of the reforms, they will ultimately not be successful,” he writes.

The second chapter of the latest LiTS report focuses on corruption, an area where the EBRD has persistently fought for improvements via support for government reforms and in the conditions on its own investment.

The survey shows that people’s perceptions and actual experiences of corruption have decreased since 2006 but are still higher than in comparative western European countries. There are also marked regional differences. The level of trust in institutions is generally high in Central Asia and south-eastern Europe and low in eastern Europe and the Caucasus.

Overall, the report reveals that people tend to trust their police, armed forces, president or prime minister, and religious institutions while only about two-fifths of respondents have confidence in their government.

The survey also highlights a strong correlation between corruption levels and progress in areas such as the freedom of the press, effectiveness of democracy, governance and the rule of law. “…respondents in democratic countries tend to report fewer experiences of corruption than their counterparts in less democratic countries.”

The chapter on gender reveals roughly similar levels of education between men and women but again with regional difference. Some 10 per cent of women and 15 per cent of men have been in tertiary education in Azerbaijan and Serbia while the split is 26 per cent for women and 30 per cent for men in the Kyrgyz Republic, Mongolia and Poland.

Despite some narrowing of the education divide, the report shows that women are less engaged in the workforce than men. Furthermore, women’s education could be limited in cultures where marrying and starting a family at an early age is the social norm.

Women are also less likely to be in full-time employment and bear a disproportionate share of the housework and care of children and relatives.

There are fewer businesswomen in the transition region compared with Germany and Italy and there has been no significant increase since 2010. While both men and women often cite insufficient funding as the main barrier to setting up a business, more women than men fail to get a business started due to changes in their personal situations, such as having a child.

The report makes an economic case for more women in the workforce, noting that obstacles to full participation of women in the labour market and decision-making at household, corporate and political levels mean “a great volume of economic potential remains untapped”.

However, it also notes that in Russia, eastern Europe and the Caucasus and Central Asia most people believe that “it is better for everyone involved if the man earns the money and the woman takes care of the home and children”, a stance that is broadly backed by women in these regions.

It concludes that reforms in family and education laws are needed in order to encourage parents to invest in their daughters’ education and says more steps are needed to bring women into higher education, particularly in science and technology, and improve their employment prospects.

The latest LiTS report shows that the impact of the economic crisis on Greek households has been deep and widespread, taking a greater toll on people than was unleashed by the global recession that began in 2008-09 on the people of central and eastern Europe.

Over 92 per cent of Greek respondents say the crisis affected them “a fair amount” or “a lot”, while 76 per cent of them experienced a negative income shock between 2010 and 2016, compared with one in two households in the transition region and about one in three in the western European comparator countries in 2008-10.

“Compared to eastern European households interviewed as part of LiTS II in 2010 (who also reported a deep impact of the recent crisis), Greeks have had to resort to cutting the consumption of necessities, non-necessities and services to a greater extent,” the report says.

The survey revealed a widespread distrust of national political institutions in Greece, with around 70 per cent of respondents blaming political parties for the economic crisis.

After enduring a number of extremely difficult years, the survey shows that Greece has the lowest proportion of respondents satisfied with their lives of all the 34 countries polled.

The picture looking forward for Greeks does not appear much rosier. Only 16 per cent of the respondents in Greece saw their situation improving over the next four years, compared with 48 per cent in post-communist countries and 35 and 23 per cent in Germany and Italy, respectively.

 “This signals that, despite the recent political changes and attempts at economic reforms that have taken place in the country, Greeks do not see their situation improving for the foreseeable future”, the report concludes.

*The “transition region” in this report refers to the EBRD’s countries of operations that are covered in the third round of the Life in Transition Survey (LiTS): Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Estonia, FYR Macedonia, Georgia, Hungary, Kazakhstan, Kosovo, the Kyrgyz Republic, Latvia, Lithuania, Moldova, Mongolia, Montenegro, Poland, Romania, Russia, Serbia, the Slovak Republic, Slovenia, Tajikistan, Turkey, Ukraine and Uzbekistan.

It also includes Cyprus and Greece, which became recipient member countries of the EBRD in May 2014 and March 2015, respectively. The Bank’s involvement in both countries is expected to be temporary, with no new investment after the end of 2020.  

The survey was also implemented in the Czech Republic. Please note that the EBRD ceased making new investments in the Czech Republic in 2007 but still manages a portfolio in the country.

Western Europe refers to the comparator countries – Germany and Italy – which allow us to benchmark the transition region against some advanced market economies, thereby giving a clearer perspective on the remaining challenges facing transition countries.

December 22, 2016 in Economics | Permalink | Comments (0)

Wednesday, December 21, 2016

AALS Jan 4 Wed in San Fran "Practical Approach to Developing and Assessing Experiential, Meaningful Placements for Incoming and Outgoing Students"

AALS 2017 Wednesday Jan 4th 13:30 16:30

A Practical Approach to Developing and Assessing Experiential, Meaningful Placements for Incoming and Outgoing Students

This ½ day panel will be a well-attended because it is a joint panel with many co-sponsors: Sections on International Legal Exchange and Post-Graduate Legal Education, Co‐ 2000px-US-DeptOfEducation-Seal.svgSponsored by Clinical Legal Education, East Asian Law & Society, and Graduate Programs for Non‐U.S. Lawyers. 

(register separately Joint Section Breakfast on Thursday Jan 5th 7:00am – 8:30am w/ Post-Grad Legal Education). 

JD Panel A 13:30 - 14:50 A practical approach to developing and assessing experiential, meaningful placements for incoming and outgoing JD law students.

Moderator: William Byrnes (Chair, International Legal Exchange): Texas A&M Law

  • Jessica Burns: Director of Operations, Global Experiences (15,000+ externship placements)
  • Gillian Dutton: Seattle University Law, Externship Program Director and Associate Professor of Lawyering Skills
  • Carole Silver: Northeastern University Law School Professor of Global Law & Practice
  • Charlotte Ku: Texas A&M Law, former director of ASIL and of Lauterpacht Center (Cambridge)

LLM Panel B 15:00:16:20 A practical approach to developing and assessing experiential, meaningful placements for incoming and outgoing LLM law students.

Moderator: Aric Short, Chair, Post Graduate Legal Education: Texas A&M Law

  • Jeff Thomas: UMKC (literature review, IDI competency index to contrast study abroad with overseas externship with outlook to develop instrument for assessment)
  • Susan Schechter: Field Placement Director and Lecturer-in-Residence, Berkeley Law
  • Sri Ragavan: Texas A&M Law, Director of South Asia programs

Synopsis

The ABA Section on Legal Education has, via its amendment of the Standards, required U.S. law schools to provide at least six credit hours of meaningful experiential opportunity for each student.  Some state bar authorities have considered adopting this new standard, have adopted it, or have adopted a rule exceeded the standard.  New York adopted §520.18 “Skills Competency Requirement for Admission” which requires applicants for the bar examination based upon having attended an ABA-approved law school or based upon their foreign legal education alone submit a certification from the applicant's approved law school confirming that the applicant enrolled in and successfully completed 15 credit hours of practice-based experiential coursework designed to foster the development of professional competencies, as defined by the ABA.

The ABA Section on Legal Education requires at least six credit hours of meaningful experiential opportunity for each student.  Some state bar authorities have considered exceeding this standard.  How are the International Legal Exchange and Post Graduate Legal Education coordinators and programs going to address these new challenges of providing meaningful experiential opportunities on a scale for all of their students?  How are these stakeholders working with the law school clinicians?

Experiential opportunities may include by example: local clinical opportunities for foreign law students and the equivalent for US law students in foreign countries, field placements, externships, student trainee exchange programs (STEP) pursuant to the ELSA model, among a host of other creative solutions, as well as include practice-based experiential coursework within the curriculum.  Challenges faced include by examples: (a) sourcing enough meaningful externships for incoming international and post-graduate students and securing for outgoing exchange JD students, and managing these and the other placement opportunities, (b) developing field placement templates that address labor issues within and outside the U.S., (c) outcomes and assessment for placements such as rubrics and other instrument for assessment among others. The panelist of this half-day program will share their secret recipes for addressing these issues.

The moderators will solicit and then prepare several questions from the two Joint sections and from the two co-sponsoring sections.  The moderator will then, for each question, seek responses to the questions from some or all of the 4 panelists, keeping response times to about 4 minutes so that the discussion moves among the panel members.  The panel should wrap up at 80 minutes to allow swap of panelists/coffee break.  The moderators will have worked with the panel beforehand to identify who is best to respond to which questions. 

Business meeting at end.

Program Chairs

Aric Short, Vice Dean of Texas A&M University Law, oversees new degree programs, academic collaborations with other schools, and an innovative Professionalism and Leadership Program. Dean Short also established and leads the law school’s annual pro bono summer trip to Costa Rica. He expanded experiential learning and professionalism training, including a skills-based winter term, building new clinical partnerships with the Tarrant County District Attorney's Office and the Federal Aviation Administration, and helping implement an oral skills graduation requirement. Dean Short served on the ABA committee that revised distance-learning standards for legal education.  Prior to teaching, Dean Short practiced international law at Wilmer, Cutler & Pickering in Washington, D.C.

William Byrnes (Texas A&M University School of Law) is the author and co-author of eight Lexis law treatises, a Kluwer 10-volume company and trust law compendium, three tax books for National Underwriter, and has authored the re-issue of 16 chapters for West’s Mertens Federal Taxation treatise.  Prof. Byrnes pioneered online education in the early nineties, for which India’s National Board of Accreditation recognized him with its 2012 Education Leadership Award, the chair remarking: “Professor William Byrnes’ leadership and contribution to the field of education is well known,” calling him a "role model" for innovation.  Fulbright and the State Department Bureau of Education and Cultural Affairs (ECA) selected him to its Specialist Roster for the areas of pedagogy and comparative taxation.  

Panelists

Jessica Burns is the Global Experiences Director of Operations responsible for all day to day operations, global partnerships, and program management. Global Experiences has been providing life changing experiences for thousands of young professionals since 2001. Through our years of experience, we have crafted an international internship program that has been recognized for its innovation and high-quality programming by the higher education community.

Srividhya Ragavan is a Professor of Law at the Texas A& M University School of Law.  Prof. Ragavan’s research emphasizes issues relating to international trade law and intellectual property rights. Ragavan’s monograph Patents and Trade Disparities in Developing Countries was published by the Oxford University Press. Ragavan’s co-edited book with Irene Calboli titled Diversity in Intellectual property was published by Cambridge University Press. Ragavan has served as a Fulbright Nehru Scholar affiliated with NLSIU in Bangalore.  She was a visiting faculty of the IP program at NALSAR in Hyderabad.  She hold the LL.B. (National Law School, Bangalore), LL.M. (Kings College, University of London), and S.J.D. (George Washington School of Law).

Carole Silver is Professor of Global Law & Practice at Northwestern University Law School. Her scholarship investigates the influence of globalization on the work and structure of law firms, on legal education and on regulation of the profession.  She teaches courses on business associations, globalization and the legal profession and professional responsibility.  Professor Silver served as a member of the ABA’s Ethics 20/20 Commission from 2009 – 2013, a group created by the ABA President to study the influence of globalization and technology on lawyer regulation.

Charlotte Ku is Associate Dean for International Programs and Professor of Law at the Texas A&M University School of Law. Previously, she was the Assistant Dean for Graduate and International Legal Studies and Professor of Law at the University of Illinois College of Law. She served as the Acting Director of the Lauterpacht Centre for International Law at the University of Cambridge following a twelve year term as Executive Vice President and Executive Director of the American Society of International Law.

Gillian Dutton is the Director of the Externship Program and Associate Professor of Lawyering Skills at Seattle University School of Law. She is a Korematsu Center Faculty Fellow and Faculty Advisor to the Iraqi Refugee Assistance Project and the Access to Justice Institute Citizenship Project. She teaches four externship seminars (civil, criminal, judicial and international) and continues to work in the areas of language access, cross-cultural communication, immigrant benefits, human trafficking and refugee health. Professor Dutton has an M.A. in Chinese history and is a 1988 graduate of Boalt Hall School of Law at the University of California at Berkeley. She is a recipient of the 1999 Charles A. Goldmark Award for Distinguished Service and the 2005 Northwest Immigrant Rights Project Golden Door Award. A national expert on language access on the law, she served as a consultant on the ABA Standards for Language Access in Courts. Having lived abroad a number of years, she speaks Spanish, French, German and Mandarin.

Sue Schechter (Berkeley Law) for more than a decade has been teaching in and helping to administer field placement programs. She was an Adjunct/Clinical Professor at Golden Gate and is currently Boalt Hall’s first full-time Field Placement Coordinator working with students doing general field placements, judicial externships, and away placements.  Prior to her work at law schools, Schechter was the Project Director for the Public Interest Clearninghouse’s Public Interest Law Program in San Francisco; a Patients’ Rights Advocate/Attorney at the Mental Health Advocacy Project in Santa Clara County; and as a Campus Organizer/Staff Attorney with the National Association for Public Interest Law (NAPIL, now known as Equal Justice Works) in Washington, DC.

December 21, 2016 in Education | Permalink | Comments (0)

Happy Holidays: Life satisfaction increasing in post-communist countries

People from the post-communist countries of eastern Europe are generally happier with their lives now than they were 10 years ago, according to a comprehensive new survey from EU Bank Investmentthe European Bank for Reconstruction and Development (EBRD).

The findings, previewed in the EBRD’s Transition Report 2016-17 in November, now appear in full in the latest report of the Bank’s Life in Transition Survey (LiTS), a far-reaching survey carried out over the past decade and designed to show how people’s lives have been shaped  by  change and upheaval since the fall of communism.

This third survey, after earlier iterations in 2006 and 2010, is the largest so far and questioned 51,000 households in 34 countries*, mainly from transition countries in central and eastern Europe as well as Turkey.  It also covered Cyprus and Greece for the first time. For the sake of comparison with more prosperous western neighbors, LiTS III was also carried out in Germany and Italy.

The new survey reveals that the “happiness gap” between the transition region and western European comparators has finally closed.

Despite suffering a major impact from the global financial crisis, respondents in the transition region are also more optimistic about their future than their Western neighbors.

However, they continue to have major concerns about inequality. In his foreword to the new report, EBRD Chief Economist Sergei Guriev writes: “LiTS III data…show that people in the transition region almost uniformly think that the gap between the rich and the poor should be reduced – much more so than in 2010.”

Responses to the assertion “All things considered, I am satisfied with my life now” revealed that the 10 “happiest” countries are from Central Asia and central Europe and the Baltic states while Russia, eastern Europe and the Caucasus and south-eastern Europe rank lowest in the life satisfaction index.

Greece, shown elsewhere in the report to have been hit particularly hard by its economic crisis, ranked lowest on the happiness scale of all the countries in the survey, followed by Moldova, Ukraine and Armenia.

The levels of satisfaction reflect the varying extent to which people have access to goods and services and whether or not they can afford extras. For example, more than 80 percent of respondents in Estonia, Kosovo, Poland and Russia report having an internet connection at home. At the other end of the scale, less than 20 percent of respondents in Armenia, Azerbaijan, Georgia and Tajikistan say their family can afford a one-week holiday each year.

Generally, people in the region appeared to be most happy about the standards of education available in their countries and were least happy with the state of their local roads.

The report provides new insight into the extent to which people are tolerant of minorities, including the fact that while respondents appear more tolerant of other people’s sexuality compared within 2010, more 50 percent of people in the transition region would still prefer not to have gay or lesbian neighbors.

The increase in sexual tolerance was largest in Turkey and south-eastern Europe while a trend of tolerance appears to have reversed in Armenia, Kazakhstan, Romania, Russia and Uzbekistan.

About a third of respondents in Russia and in central Europe and the Baltic states reported negative feelings towards immigrants or foreign workers.  This compared with the 85 percent of people in south-eastern Europe, and 89 and 80 percent in Germany and Italy, respectively, who said they have no issue with having immigrants or foreign workers as neighbors.

On average, people in the transition region have become slightly less tolerant of the presence of immigrants in their countries since 2010. Asked whether immigrants made a valuable contribution to their country, on average only about 25 percent responded positively.

In addition to the section in the survey on life satisfaction, the report also focuses on levels of corruption and the gender gap in the transition region.  A chapter on Greece shows just how hard the Greek economic crisis hit the people in the country.

*The “transition region” in this report refers to the EBRD’s countries of operations that are covered in the third round of the Life in Transition Survey (LiTS): Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Estonia, FYR Macedonia, Georgia, Hungary, Kazakhstan, Kosovo, the Kyrgyz Republic, Latvia, Lithuania, Moldova, Mongolia, Montenegro, Poland, Romania, Russia, Serbia, the Slovak Republic, Slovenia, Tajikistan, Turkey, Ukraine and Uzbekistan.

It also includes Cyprus and Greece, which became recipient member countries of the EBRD in May 2014 and March 2015, respectively. The Bank’s involvement in both countries is expected to be temporary, with no new investment after the end of 2020.  

The survey was also implemented in the Czech Republic. Please note that the EBRD ceased making new investments in the Czech Republic in 2007 but still manages a portfolio in the country.

Western Europe refers to the comparator countries – Germany and Italy – which allow us to benchmark the transition region against some advanced market economies, thereby giving a clearer perspective on the remaining challenges facing transition countries.

December 21, 2016 in Economics | Permalink | Comments (0)

Tuesday, December 20, 2016

Guilty Plea in Cellphone Fraud Scheme To Bilk Compromised Customers

A New York City resident pleaded guilty today in connection with a sophisticated global cellphone fraud scheme that involved compromising cellphone customers’ accounts and FBI DOJ logo“cloning” their phones to make fraudulent international calls.

Farintong Calderon, 37, pleaded guilty to one count of conspiracy to commit wire fraud; access device fraud; the use, production or possession of modified telecommunications instruments; and the use or possession of hardware or software configured to obtain telecommunications services.  Sentencing was set for Feb. 21, 2017, before Senior U.S. District Judge Daniel T.K. Hurley of the Southern District of Florida.

According to the plea agreement, Calderon and his co-conspirators participated in a scheme to steal access to and fraudulently open new cellphone accounts using the personal information of individuals around the United States.  Calderon formerly worked for Verizon Wireless installing cellphone towers and equipment and, after leaving his employer, moved to New York City and became involved in the fraud scheme as a “line” supplier. 

Specifically, Calderon provided his co-conspirators with telecommunications identifying information associated with the accounts of customers of Verizon and other wireless companies.  His co-conspirators used that data—as well as other software and hardware—to reprogram cellphones that they controlled.  Calderon’s co-conspirators would then transmit thousands of international calls over the Internet through the re-programmed cellphones to Cuba, Jamaica, the Dominican Republic and other countries with high calling rates.  The calls were billed to the customers’ compromised accounts. 

In addition, Calderon admitted that, from approximately 2010 to 2013, he sent or received emails to co-conspirators with at least 1,408 combinations of telecommunication identifying information for specific cellphone devices or accounts belonging to persons around the United States, and was personally responsible for at least $250,000 in loss resulting from the scheme.

Calderon is the third defendant to plead guilty in the case.  Edwin Fana and Jose Santana previously pleaded guilty to similar charges in this matter.  Fana is scheduled to be sentenced on Dec. 22, 2016, and Santana is scheduled to be sentenced on Jan. 4, 2017.

December 20, 2016 | Permalink | Comments (0)

Monday, December 19, 2016

OECD holds regional meeting of the Inclusive Framework on BEPS for the Eastern Europe and Central Asia region

 This regional meeting followed the inaugural meeting of the Inclusive Framework on BEPS which took place in Kyoto, Japan, on 30 June-1 July 2016.  The main objective of this event OECDwas to discuss and seek input on the latest developments in the Inclusive Framework and in the Committee on Fiscal Affairs' (CFA) Working Parties. The meeting also provided an opportunity to:

1) Discuss the implementation of the BEPS Project measures, in particular regarding the peer review process proposed for the minimum standards ; 2) Seek input from participants on toolkits being developed to address specific issues previously identified by the non-OECD/G20 and

2) Seek input from participants on toolkits being developed to address specific issues previously identified by the non-OECD/G20 and low income countries as priority issues; 

3) Prepare the delegates for the next meetings of the Inclusive Framework, including the working party meetings; 

4) Understand country priorities and specific needs in terms of capacity building. Dainoras Bradauskas, Director General of the State Tax Inspectorate of Lithuania, welcomed the participants to the event that gathered 62 participants from 14 countries (Bulgaria, Croatia, Georgia, Hungary, Kazakhstan, Latvia, Lithuania, Montenegro, Poland, Romania, Slovakia, Slovenia, Turkey and Ukraine). Business representatives from international firms such as Ernst and Young, KPMG, PricewatherhouseCoopers and from Lithuanian corporations and associations such as Cobalt, Lithuania Tax Consultants Association, Rödl & Partner, Sorainen and Valiunas

Business representatives from international firms such as Ernst and Young, KPMG, PricewatherhouseCoopers and from Lithuanian corporations and associations such as Cobalt, Lithuania Tax Consultants Association, Rödl & Partner, Sorainen and Valiunas Ellex also participated during the first morning of the meeting, and actively contributed to the discussion, including through a specific session dedicated to them. In their opening remarks, Ms. Daiva Brasiunaite, Director of Tax Policy Department at the Ministry of Finance of Lithuania, and Miguel Silva Pinto, Executive Secretary of IOTA expressed their appreciation for the interest shown by many countries in the region participating in the meeting, as well as for the important work carried out by the OECD to achieve greater inclusiveness. They highlighted the unprecedented number of countries that joined the Inclusive Framework on BEPS as well as the overall efforts towards transparency, with an increasing volume of exchanges of information among tax administrations, together with an enhanced co-operation among countries.

The agenda focussed on the following topics: 

 The organisation of the Inclusive Framework and the implementation of the measures developed under the BEPS Project; 

 A specific session dedicated to the views of the business community;

 The latest developments within the Forum on Harmful Tax Practices and the Working Party 11 on aggressive tax planning;

 The discussions within the Working Party 6 linked to transfer pricing and the follow-up work underway on the remaining BEPS related standard setting; 

 The work of the Working Party 1 on tax conventions and on the finalisation of the multilateral instrument to implement tax treaty related BEPS measures.

 The country priorities for implementation of BEPS measures and specific needs of the Eastern European and Central Asian countries in terms of capacity building, including the use of the Platform for Collaboration Tax

 The work related to the toolkits to support non-OECD/G20 

Key messages

  • Participating countries recognised that joining the Inclusive Framework on BEPS provides opportunities for implementing sound and consistent domestic and treaty tax legislation, improving tax administration procedures and sharing experiences and best practices with other countries at policy and administration level. 
  • Countries expressed the importance of implementing the BEPS measures consistently and some participants reported their active involvement in the Inclusive Framework and in other OECD initiatives. Several countries also indicated that they are engaged through their EU membership in several initiatives, including in the context of the EU Anti-Tax Avoidance Directive and other measures in seeking a co-ordinated approach to tackle the emerging BEPS issues. 
  • Participants reiterated in several instances the need for flexibility offered in the peer review of the implementation of the BEPS minimum standards, and welcomed the level of optionality offered in the multilateral instrument. They also noted that this instrument would be an efficient tool to implement the BEPS treaty-related measures and reiterated the need to closely follow this work stream. Participants stressed the importance of Country-by-Country reporting, and shared the reforms already underway to implement transfer pricing documentation requirements. They also recognized that the implementation of the BEPS measures will allow them to address current areas of concerns, in particular aggressive tax planning, treaty abuse, avoidance of the permanent establishment status and transfer pricing.  A number of participating countries indicated that the main difficulties in implementing BEPS relate to limitations
  • Participants stressed the importance of Country-by-Country reporting, and shared the reforms already underway to implement transfer pricing documentation requirements. They also recognized that the implementation of the BEPS measures will allow them to address current areas of concerns, in particular aggressive tax planning, treaty abuse, avoidance of the permanent establishment status and transfer pricing.
  • A number of participating countries indicated that the main difficulties in implementing BEPS relate to limitations in personnel and IT resources. They also noted that changes in the legal and administrative systems are a challenge for the swift implementation of the BEPS measures.On capacity building, country delegates highlighted the need for support in the implementation as well as for extended deadlines to comply with the minimum standards. They also stressed the importance of training programmes, in particular on transfer pricing and aggressive tax planning issues. They expressed the need for more training in these areas, including for EU members since they need a lot of human resources to monitor OECD and EU developments.
  • They also welcomed the OECD Tax Inspectors Without Borders initiative in partnership with UNDP as well as opportunities to participate in the technical events under the work programme of IOTA.  Countries also indicated the need to employ their limited capacity to more fundamental areas of priority, such as tackling the shadow economy. They also mentioned the importance of exchange of information, notably in the area of detection of hybrid mismatch arrangements.
  • On capacity building, country delegates highlighted the need for support in the implementation as well as for extended deadlines to comply with the minimum standards. They also stressed the importance of training programmes, in particular on transfer pricing and aggressive tax planning issues. They expressed the need for more training in these areas, including for EU members since they need a lot of human resources to monitor OECD and EU developments.
  • They also welcomed the OECD Tax Inspectors Without Borders initiative in partnership with UNDP as well as opportunities to participate in the technical events under the work programme of IOTA.  Countries also indicated the need to employ their limited capacity to more fundamental areas of priority, such as tackling the shadow economy. They also mentioned the importance of exchange of information, notably in the area of detection of hybrid mismatch arrangements and on CbC reporting, and noted the benefits of participating in the Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC).Participants appreciated the partnership between the OECD and IOTA, noting the significant number of IOTA members that are participating in the Inclusive Framework. They also highlighted the importance of the involvement of regional tax organizations, and of IOTA in particular, in the Inclusive Framework, also considering its Observer status in the Ad Hoc Group on the multilateral instrument to implement tax treaty related BEPS measures. IOTA also announced the planned launch, in 2017, of a forum on the implementation of BEPS to discuss strategies and practical application of working methods and tools developed to effectively tackle BEPS.  The business representatives raised the need for mutual understanding between corporations and tax administrations, and expressed concerns in relation to the appropriate use of the Country-by-Country reports. They noted that the BEPS project targeted multinational business and also expressed concerns
  • Participants appreciated the partnership between the OECD and IOTA, noting the significant number of IOTA members that are participating in the Inclusive Framework. They also highlighted the importance of the involvement of regional tax organizations, and of IOTA in particular, in the Inclusive Framework, also considering its Observer status in the Ad Hoc Group on the multilateral instrument to implement tax treaty related BEPS measures. IOTA also announced the planned launch, in 2017, of a forum on the implementation of BEPS to discuss strategies and practical application of working methods and tools developed to effectively tackle BEPS. The business representatives raised the need for mutual understanding between corporations and tax administrations, and expressed concerns in relation to the appropriate use of the Country-by-Country reports. They noted that the BEPS project targeted multinational business and also expressed concerns
  • The business representatives raised the need for mutual understanding between corporations and tax administrations, and expressed concerns in relation to the appropriate use of the Country-by-Country reports. They noted that the BEPS project targeted multinational business and also expressed concerns on the possible retroactive application of the BEPS measures by tax administrations. The business community welcomed the new OECD tax initiative on tax certainty under the mandate of the G20, since predictability is key for them.
  • Countries expressed the importance of implementing the BEPS measures consistently and some participants reported their active involvement in the Inclusive Framework and in other OECD initiatives. Several countries also indicated that they are engaged through their EU membership in several initiatives, including in the context of the EU Anti-Tax Avoidance Directive and other measures in seeking a co-ordinated approach to tackle the emerging BEPS issues.
  • Participants reiterated in several instances the need for flexibility offered in the peer review of the implementation of the BEPS minimum standards, and welcomed the level of optionality offered in the multilateral instrument. They also noted that this instrument would be an efficient tool to implement the BEPS treaty-related measures and reiterated the need to closely follow this work stream. 
  • A number of participating countries indicated that the main difficulties in implementing BEPS relate to limitations in personnel and IT resources. 

December 19, 2016 in BEPS, OECD | Permalink | Comments (0)

Sunday, December 18, 2016

new OECD books available for free reading

 
OECD Pensions Outlook 2016
The OECD Pensions Outlook 2016 assesses policy issues regarding strengthening pension systems and, in particular, funded pension plans.
More information
Life Annuity Products and Their Guarantees
This publication helps policy makers to better understand annuity products and the guarantees they provide in order to optimise the role that these products can play in financing retirement.
More information
Revenue Statistics 2016
This annual publication gives a conceptual framework to define which government receipts should be regarded as taxes, presenting a set of detailed, internationally comparable tax data for OECD countries.

 

 
State-Owned Enterprises as Global Competitors
 
A Challenge or an Opportunity?
 
An estimated 22% of the world’s largest firms are now effectively under state control, this is the highest percentage in decades. These firms are likely to remain a prominent feature of the global marketplace in the near future.  22 of the largest 100 global companies are state owned and controlled.

December 18, 2016 in OECD | Permalink | Comments (0)

Friday, December 16, 2016

Third U.S.-China High-Level Joint Dialogue on Cybercrime and Related Issues

Yesterday, Attorney General Loretta E. Lynch and Department of Homeland Security Secretary Jeh Johnson, together with Chinese State Councilor and Minister of the Ministry of Public Security Guo Shengkun, co-chaired the third U.S.-China High-Level Joint Dialogue on Cybercrime and Related Issues.  The dialogue aims to review the timeliness and quality of responses to requests for information and assistance with respect to cybercrime or other malicious cyber activities and to enhance pragmatic bilateral cooperation with regard to cybercrime, network protection and other related issues.  

Both sides endorse the establishment of the dialogue mechanism as beneficial to bilateral communication and enhanced cooperation, and believe that further solidifying, FBI DOJ logodeveloping and maintaining the dialogue mechanism and continuing to strengthen bilateral cooperation in cybersecurity is beneficial to mutual interests.

The outcomes of the third dialogue are listed as below:

1. Combatting Cybercrime and Cyber-Enabled Crime.  Both sides re-commit to cooperate on the investigation of cyber crimes and malicious cyber activities emanating from China or the United States and to refrain from cyber-enabled theft of intellectual property with the intent of providing competitive advantages to companies or commercial sectors.  To that end, both sides:

  • Plan to continue the mechanism of the “Status Report on U.S./China Cybercrime Cases” to evaluate the effectiveness of case cooperation. 
  • Affirm that both sides intend to focus cooperation on hacking and cyber-enabled fraud cases, share cybercrime-related leads and information with each other in a timely manner, and determine priority cases for continued law enforcement cooperation.  Both sides intend to continue cooperation on cases involving online distribution of child pornography.  Both sides seek to expand cyber-enabled crime cooperation to counter Darkweb marketplaces’ illicit sale of synthetic drugs and firearms. 
  • Seek to provide concrete and timely updates on cases brought within the ambit of the dialogue.
  • Exchanged views on existing channels of multilateral cooperation, and intend to continue exchanges regarding this topic.

2. Network Protection.  Both sides acknowledged the network protection seminar held in August 2016 in China, and believe that enhancing network protection is beneficial to both sides.  Both sides suggest holding regular network protection working-level meetings, either remotely or in-person, the next of which should be planned for 2017.  Both sides seek to promote the protection of our respective networks through multiple methods. To that end, both sides:

  • Plan to enhance network hygiene by promoting the cleaning and patching of malware infections in our respective networks and promoting best network protection practices.
  • Propose to engage in regular reciprocal sharing of malicious IP addresses, malware samples, analytic products, and other network protection information, and to develop standard operating procedures to guide network protection cooperation.
  • Seek to assess the effectiveness of information shared and provide substantive feedback to each side regarding the utility of that information.
  • Plan to provide Principals with regular summaries of network protection cooperation.
  • Intend to continue discussion on future cooperation concerning cybersecurity of critical infrastructure, and to provide timely assistance on cybersecurity incidents impacting critical infrastructure.
  • Intend to hold, as early as possible in 2017, a U.S.-China government and technology company roundtable to discuss cybersecurity issues of mutual concern.

3. Misuse of Technology and Communications to Facilitate Violent Terrorist Activities.  Both sides acknowledged the seminar on misuse of technology and communications to facilitate violent acts of terrorism held in November 2016 in China, and decided to continue cooperation on information sharing in countering the use of the Internet for terrorist and other criminal purposes.  Both sides will consider holding a second seminar in 2017.

4. Hotline Mechanism.  Both sides welcomed the launch of the U.S.-China Cybercrime and Related Issues Hotline Mechanism, and decided to continue to use the hotline in accordance with the Work Plan.  Both sides will conduct routine review of the use of the hotline.

5. Dialogue Continuity.  Both sides recommend that the dialogue continue to be held each year, and that the fourth dialogue occur in 2017.

December 16, 2016 | Permalink | Comments (0)