The Securities and Exchange Commission has charged the giant pharmaceutical company with bribing doctors in Europe and paying kickbacks to Iraq. The following excerpt of the case is from the SEC web site:
“Washington, D.C., April 7, 2011 – The Securities and Exchange Commission today charged Johnson and Johnson (J&J) with violating the Foreign Corrupt Practices Act (FCPA) by bribing public doctors in several European countries and paying kickbacks to Iraq to illegally obtain business.
The SEC alleges that since at least 1998, subsidiaries of the New Brunswick, N.J.-based pharmaceutical, consumer product, and medical device company paid bribes to public doctors in Greece who selected J&J surgical implants, public doctors and hospital administrators in Poland who awarded contracts to J&J, and public doctors in Romania to prescribe J&J pharmaceutical products. J&J subsidiaries also paid kickbacks to Iraq to obtain 19 contracts under the United Nations Oil for Food Program.
J&J agreed to settle the SEC’s charges by paying more than $48.6 million in disgorgement and prejudgment interest. J&J also agreed to pay a $21.4 million fine to settle parallel criminal charges announced by the U.S. Department of Justice (DOJ) today. A resolution of a related investigation by the United Kingdom Serious Fraud Office is anticipated.
“The message in this and the SEC’s other FCPA cases is plain – any competitive advantage gained through corruption is a mirage,” said Robert Khuzami, Director of the SEC's Division of Enforcement. “J&J chose profit margins over compliance with the law by acquiring a private company for the purpose of paying bribes, and using sham contracts, off-shore companies, and slush funds to cover its tracks.”
Cheryl J. Scarboro, Chief of the SEC Enforcement Division’s Foreign Corrupt Practices Act Unit, added, “Bribes to public doctors can have a detrimental effect on the public health care systems that potentially pay more for products procured through greed and corruption.”
According to the SEC’s complaint filed in federal court in the District of Columbia, public doctors and administrators in Greece, Poland, and Romania who ordered or prescribed J&J products were rewarded in a variety of ways, including with cash and inappropriate travel. J&J subsidiaries, employees and agents used slush funds, sham civil contracts with doctors, and off-shore companies in the Isle of Man to carry out the bribery.
Without admitting or denying the SEC’s allegations, J&J has consented to the entry of a court order permanently enjoining it from future violations of Sections 30A, 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934; ordering it to pay $38,227,826 in disgorgement and $10,438,490 in prejudgment interest; and ordering it to comply with certain undertakings regarding its FCPA compliance program. J&J voluntarily disclosed some of the violations by its employees and conducted a thorough internal investigation to determine the scope of the bribery and other violations, including proactive investigations in more than a dozen countries by both its internal auditors and outside counsel. J&J’s internal investigation and its ongoing compliance programs were essential in gathering facts regarding the full extent of J&J’s FCPA violations.
. The SEC acknowledges the assistance of the U.S. Department of Justice, Fraud Section; Federal Bureau of Investigation; Serious Fraud Office in the United Kingdom; and 5th Investigation Department of the Regional Prosecutor’s Office in Radom, Poland. The SEC's investigation is continuing.”
Perhaps the question should be asked is that if Johnson and Johnson are bribing doctors overseas and paying kickbacks then perhaps they might think to do the same thing in the United States. It seems like everyone that sees a doctor gets signed up for more tests and/or more drugs.
This is a photo of the National Register of Historic Places listing with reference number 7000063
Friday, April 8, 2011
Tuesday, April 5, 2011
INDIAN COMPANY PW SETTLES SEC CHARGES AND PAYS $6 MILLION
The following story came from the SEC Web site:
"Washington, D.C., April 5, 2011 – The Securities and Exchange Commission today sanctioned five India-based affiliates of PricewaterhouseCoopers (PwC) that formerly served as independent auditors of Satyam Computer Services Limited for repeatedly conducting deficient audits of the company’s financial statements and enabling a massive accounting fraud to go undetected for several years.
The SEC found that the audit failures by the PW India affiliates – Lovelock & Lewes, Price Waterhouse Bangalore, Price Waterhouse & Co. Bangalore, Price Waterhouse Calcutta, and Price Waterhouse & Co. Calcutta – were not limited to Satyam, but rather indicative of a much larger quality control failure throughout PW India.
The PW India affiliates agreed to settle the SEC’s charges and pay a $6 million penalty, the largest ever by a foreign-based accounting firm in an SEC enforcement action.
In addition, the PW India affiliates agreed to refrain from accepting any new U.S.-based clients for a period of six months, establish training programs for its officers and employees on securities laws and accounting principles; institute new pre-opinion review controls; revise its audit policies and procedures; and appoint an independent monitor to ensure these measures are implemented.
In a related settlement today, Satyam agreed to settle fraud charges, pay a $10 million penalty, and undertake a series of internal reforms. Since the fraud came to light, the India government seized control of the company by dissolving its board of directors and appointing new government-nominated directors, among other things. Additionally, India authorities filed criminal charges against several former officials as well as two lead engagement partners from PW India.
"PW India violated its most fundamental duty as a public watchdog by failing to comply with some of the most elementary auditing standards and procedures in conducting the Sataym audits. The result of this failure was very harmful to Satyam shareholders, employees and vendors," said Robert Khuzami, Director of the SEC's Division of Enforcement.
Cheryl Scarboro, Chief of the SEC’s Foreign Corrupt Practices Act Unit, added, “PW India failed to conduct even the most fundamental audit procedures. Audit firms worldwide must take seriously their critical gate-keeping duties whenever they perform audit engagements for SEC-registered issuers and their affiliates, and conduct proper audits that exercise professional skepticism and care.”
The SEC’s order instituting administrative proceedings against the firms finds that PW India staff failed to conduct procedures to confirm Satyam’s cash and cash equivalent balances or its accounts receivables. Specifically, the order finds that PW India’s “failure to properly execute third-party confirmation procedures resulted in the fraud at Satyam going undetected” for years. PW India’s failures in auditing Satyam “were indicative of a quality control failure throughout PW India” because PW India staff “routinely relinquished control of the delivery and receipt of cash confirmations entirely to their audit clients and rarely, if ever, questioned the integrity of the confirmation responses they received from the client by following up with the banks.”
After the fraud at Satyam came to light, PW India replaced virtually all senior management responsible for audit matters. The affiliates suspended its Satyam audit engagement partners from all work and removed from client service all senior audit professionals on the former Satyam audit team.
In addition to the $6 million penalty and previously listed reforms, the PW India affiliates have consented to a censure, as well as the entry of a cease-and-desist order finding that they violated Section 10A(a) of the Exchange Act and were a cause of Satyam’s violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and relevant Rules thereunder.
PCAOB Proceeding
In a related proceeding, the PW India affiliates also reached a settlement with the Public Company Accounting Oversight Board (PCAOB) in which the PW India firms have been censured and agreed to extensive undertakings substantially similar to those set forth in the SEC administrative order. Additionally, Lovelock & Lewes and Price Waterhouse Bangalore have agreed to pay the PCAOB a $1.5 million penalty for their violations of PCAOB rules and standards in relation to the Satyam audit engagement.
The Commission acknowledges the assistance of the PCAOB. The SEC’s investigation is continuing."
"Washington, D.C., April 5, 2011 – The Securities and Exchange Commission today sanctioned five India-based affiliates of PricewaterhouseCoopers (PwC) that formerly served as independent auditors of Satyam Computer Services Limited for repeatedly conducting deficient audits of the company’s financial statements and enabling a massive accounting fraud to go undetected for several years.
The SEC found that the audit failures by the PW India affiliates – Lovelock & Lewes, Price Waterhouse Bangalore, Price Waterhouse & Co. Bangalore, Price Waterhouse Calcutta, and Price Waterhouse & Co. Calcutta – were not limited to Satyam, but rather indicative of a much larger quality control failure throughout PW India.
The PW India affiliates agreed to settle the SEC’s charges and pay a $6 million penalty, the largest ever by a foreign-based accounting firm in an SEC enforcement action.
In addition, the PW India affiliates agreed to refrain from accepting any new U.S.-based clients for a period of six months, establish training programs for its officers and employees on securities laws and accounting principles; institute new pre-opinion review controls; revise its audit policies and procedures; and appoint an independent monitor to ensure these measures are implemented.
In a related settlement today, Satyam agreed to settle fraud charges, pay a $10 million penalty, and undertake a series of internal reforms. Since the fraud came to light, the India government seized control of the company by dissolving its board of directors and appointing new government-nominated directors, among other things. Additionally, India authorities filed criminal charges against several former officials as well as two lead engagement partners from PW India.
"PW India violated its most fundamental duty as a public watchdog by failing to comply with some of the most elementary auditing standards and procedures in conducting the Sataym audits. The result of this failure was very harmful to Satyam shareholders, employees and vendors," said Robert Khuzami, Director of the SEC's Division of Enforcement.
Cheryl Scarboro, Chief of the SEC’s Foreign Corrupt Practices Act Unit, added, “PW India failed to conduct even the most fundamental audit procedures. Audit firms worldwide must take seriously their critical gate-keeping duties whenever they perform audit engagements for SEC-registered issuers and their affiliates, and conduct proper audits that exercise professional skepticism and care.”
The SEC’s order instituting administrative proceedings against the firms finds that PW India staff failed to conduct procedures to confirm Satyam’s cash and cash equivalent balances or its accounts receivables. Specifically, the order finds that PW India’s “failure to properly execute third-party confirmation procedures resulted in the fraud at Satyam going undetected” for years. PW India’s failures in auditing Satyam “were indicative of a quality control failure throughout PW India” because PW India staff “routinely relinquished control of the delivery and receipt of cash confirmations entirely to their audit clients and rarely, if ever, questioned the integrity of the confirmation responses they received from the client by following up with the banks.”
After the fraud at Satyam came to light, PW India replaced virtually all senior management responsible for audit matters. The affiliates suspended its Satyam audit engagement partners from all work and removed from client service all senior audit professionals on the former Satyam audit team.
In addition to the $6 million penalty and previously listed reforms, the PW India affiliates have consented to a censure, as well as the entry of a cease-and-desist order finding that they violated Section 10A(a) of the Exchange Act and were a cause of Satyam’s violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and relevant Rules thereunder.
PCAOB Proceeding
In a related proceeding, the PW India affiliates also reached a settlement with the Public Company Accounting Oversight Board (PCAOB) in which the PW India firms have been censured and agreed to extensive undertakings substantially similar to those set forth in the SEC administrative order. Additionally, Lovelock & Lewes and Price Waterhouse Bangalore have agreed to pay the PCAOB a $1.5 million penalty for their violations of PCAOB rules and standards in relation to the Satyam audit engagement.
The Commission acknowledges the assistance of the PCAOB. The SEC’s investigation is continuing."
SEC CHARGES INDIAN COMPANY SATYAM WTH FRAUD
Fraud is currently a world wide delema. Fraud is as old as business and government themselves. The following case is from the SEC web site:
"Washington, D.C., April 5, 2011 – The Securities and Exchange Commission today charged India-based Satyam Computer Services Limited with fraudulently overstating the company’s revenue, income and cash balances by more than $1 billion over five years.
The SEC’s complaint, filed in U.S. District Court in Washington, D.C., alleges that former senior officials at Satyam – an information technology services company based in Hyderabad, India – used false invoices and forged bank statements to inflate the company’s cash balances and make it appear far more profitable to investors. Although Satyam’s shares primarily traded on the Indian markets, its American depository shares traded on the New York Stock Exchange.
According to the SEC’s complaint, shortly after the fraud came to light in January 2009, the India government seized control of the company by dissolving Satyam’s board of directors and appointing new government-nominated directors; removed former top managers of the company; and oversaw a bidding process to select a new controlling shareholder in Satyam. In addition, India authorities filed criminal charges against several former officials.
In addition to the actions taken by the India authorities, Satyam, whose new leadership cooperated with the SEC’s investigation, has agreed to pay a $10 million penalty to settle the SEC’s charges, require specific training of officers and employees concerning securities laws and accounting principles, and improve its internal audit functions. Satyam also agreed to hire an independent consultant to evaluate the internal controls the company is putting in place.
In a related settlement, the SEC sanctioned Satyam’s former independent auditors for violations of federal securities laws and improper professional conduct while auditing the company’s financial statements from 2005 through January 2009.
“The actions of Indian and U.S. authorities have transformed Satyam into a new company with new management, directors and investors and state-of-the art controls, resulted in criminal charges against seven former executives and given harmed shareholders the chance to recoup losses,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “This comprehensive and thoughtful response underscores the ability of regulators across the globe to respond to cross-border misconduct in a coordinated manner.”
Cheryl Scarboro, Chief of the SEC’s Foreign Corrupt Practices Act Unit, added, “The fact that Satyam’s former top officers were able to maintain a fraud of this scale represents a company-wide failure of extreme proportions that cut across a wide array of functions from customer invoicing to cash management.”
According to the SEC’s complaint, Satyam’s former senior managers engineered a scheme that created more than 6,000 phony invoices to be used in Satyam’s general ledger and financial statements. Satyam employees created bogus bank statements to reflect payment of the sham invoices. This resulted in more than $1 billion in fictitious cash and cash-related balances, representing half the company’s total assets.
The SEC alleges that when the fraud was finally revealed, Satyam’s then-Chairman, B. Ramalinga Raju, declared that maintaining Satyam’s inflated revenues and profits “was like riding a tiger, not knowing how to get off without being eaten.”
Raju and other former senior and mid-level Satyam executives, as well as two lead engagement partners from Satyam’s former external audit firm, are defendants in a criminal trial now underway in India.
Without admitting or denying the allegations in the SEC’s complaint, Satyam agreed to a permanent injunction against future violations of the periodic reporting provisions of Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20 13a-1 and 13a-16. As previously mentioned, the settlement also requires Satyam to pay a $10 million penalty, to hire an independent consultant and to comply with certain undertakings. In bringing this settled enforcement action, the SEC balanced the scope and severity of Satyam’s misconduct and harm to holders of Satyam’s American Depository Shares against the unique and significant remediation efforts made after the fraud became public in 2009.
The SEC’s investigation is continuing."
"Washington, D.C., April 5, 2011 – The Securities and Exchange Commission today charged India-based Satyam Computer Services Limited with fraudulently overstating the company’s revenue, income and cash balances by more than $1 billion over five years.
The SEC’s complaint, filed in U.S. District Court in Washington, D.C., alleges that former senior officials at Satyam – an information technology services company based in Hyderabad, India – used false invoices and forged bank statements to inflate the company’s cash balances and make it appear far more profitable to investors. Although Satyam’s shares primarily traded on the Indian markets, its American depository shares traded on the New York Stock Exchange.
According to the SEC’s complaint, shortly after the fraud came to light in January 2009, the India government seized control of the company by dissolving Satyam’s board of directors and appointing new government-nominated directors; removed former top managers of the company; and oversaw a bidding process to select a new controlling shareholder in Satyam. In addition, India authorities filed criminal charges against several former officials.
In addition to the actions taken by the India authorities, Satyam, whose new leadership cooperated with the SEC’s investigation, has agreed to pay a $10 million penalty to settle the SEC’s charges, require specific training of officers and employees concerning securities laws and accounting principles, and improve its internal audit functions. Satyam also agreed to hire an independent consultant to evaluate the internal controls the company is putting in place.
In a related settlement, the SEC sanctioned Satyam’s former independent auditors for violations of federal securities laws and improper professional conduct while auditing the company’s financial statements from 2005 through January 2009.
“The actions of Indian and U.S. authorities have transformed Satyam into a new company with new management, directors and investors and state-of-the art controls, resulted in criminal charges against seven former executives and given harmed shareholders the chance to recoup losses,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “This comprehensive and thoughtful response underscores the ability of regulators across the globe to respond to cross-border misconduct in a coordinated manner.”
Cheryl Scarboro, Chief of the SEC’s Foreign Corrupt Practices Act Unit, added, “The fact that Satyam’s former top officers were able to maintain a fraud of this scale represents a company-wide failure of extreme proportions that cut across a wide array of functions from customer invoicing to cash management.”
According to the SEC’s complaint, Satyam’s former senior managers engineered a scheme that created more than 6,000 phony invoices to be used in Satyam’s general ledger and financial statements. Satyam employees created bogus bank statements to reflect payment of the sham invoices. This resulted in more than $1 billion in fictitious cash and cash-related balances, representing half the company’s total assets.
The SEC alleges that when the fraud was finally revealed, Satyam’s then-Chairman, B. Ramalinga Raju, declared that maintaining Satyam’s inflated revenues and profits “was like riding a tiger, not knowing how to get off without being eaten.”
Raju and other former senior and mid-level Satyam executives, as well as two lead engagement partners from Satyam’s former external audit firm, are defendants in a criminal trial now underway in India.
Without admitting or denying the allegations in the SEC’s complaint, Satyam agreed to a permanent injunction against future violations of the periodic reporting provisions of Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 and Rules 10b-5, 12b-20 13a-1 and 13a-16. As previously mentioned, the settlement also requires Satyam to pay a $10 million penalty, to hire an independent consultant and to comply with certain undertakings. In bringing this settled enforcement action, the SEC balanced the scope and severity of Satyam’s misconduct and harm to holders of Satyam’s American Depository Shares against the unique and significant remediation efforts made after the fraud became public in 2009.
The SEC’s investigation is continuing."
BANK EMPLOYEE PLEADS GUILTY TO CONSPIRACY
The following case was taken from the Department of Justice web site:
“WASHINGTON —A former bank employee pleaded guilty today for his participation in a conspiracy related to contracts for the investment of municipal bond proceeds and other municipal finance contracts, the Department of Justice announced.
According to charges filed today in U.S. District Court in New York City, Brian Scott Zwerner, a resident of Atlanta, engaged in a conspiracy to falsify bank records related to the marketing profits for a type of contract, known as an investment agreement, and other municipal finance contracts, including derivative contracts. Public entities throughout the United States, such as state, county and local governments and agencies, invested the proceeds of bonds issued in these contracts. According to the plea agreement, Zwerner has agreed to cooperate with the department’s ongoing investigation.
“Today’s guilty plea demonstrates the Antitrust Division’s commitment to vigorously pursue and prosecute crimes in the financial services industry that harm competition,” said Christine Varney, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.
According to the court document, the Charlotte, N.C.-based bank that employed Zwerner was a provider of investment agreements and other municipal finance contracts to public entities. Public entities seek to invest money from a variety of sources, primarily the proceeds of municipal bonds that they issued, to raise money for, among other things, public projects. Public entities typically hire a broker to conduct a competitive bidding process for the award of the investment agreements. Competitive bidding for these agreements is the subject of regulations issued by the Department of the Treasury and is related to the tax-exempt status of the bonds.
The department said in the court document that Zwerner was the manager of the Municipal Derivatives Trading Desk at the bank. According to the court document, Zwerner engaged in the conspiracy from at least as early as January 1999 until approximately May 2002. Among other objectives, Zwerner and co-conspirators falsified bank records related to marketing profits so that the bank could pay kickbacks to brokers, including Rubin/Chambers, Dunhill Insurance Services Inc., also known as CDR Financial Products, a Beverly Hills, Calif.-based financial products and services firm. Specifically, Zwerner understated the marketing profits on trade tickets for certain investment agreements or other municipal finance contracts so that money could be held back and accumulated in an off-the-books account in order to pay the kickbacks. According to the court document, trade tickets are reports that record the essential terms of investment agreements. The department said that the kickbacks were in exchange for brokers, including CDR, manipulating the competitive bidding process so that the bank would be the winning bidder for certain investment agreements and other municipal finance contracts.
The false bank records conspiracy for which Zwerner is charged carries a maximum penalty of five years in prison and a $250,000 fine. The maximum fine for this offense may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.
This is the ninth guilty plea to arise from an ongoing investigation into the municipal bonds industry, which is being conducted by the Antitrust Division’s New York and Cleveland Field Offices, the FBI and Internal Revenue Service-Criminal Investigation. The department is coordinating its investigation with the Securities and Exchange Commission, the Office of the Comptroller of the Currency and the Federal Reserve Bank of New York.
Three former employees of CDR have pleaded guilty to bid-rigging and fraud conspiracies in relation to the ongoing investigation. Five other individuals have pleaded guilty to charges related to the ongoing investigation. In October 2009, CDR, two of its employees and one former employee were charged for participating in bid-rigging and fraud conspiracies and related crimes. The CDR trial is scheduled to begin on Jan. 9, 2012. In addition, six other former executives at financial service companies or financial institutions have been indicted as a result of this investigation and are awaiting trial.
Today’s guilty plea is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force 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.”
There is an ongoing investigation in this case so maybe someone important might get some jail time eventually.
“WASHINGTON —A former bank employee pleaded guilty today for his participation in a conspiracy related to contracts for the investment of municipal bond proceeds and other municipal finance contracts, the Department of Justice announced.
According to charges filed today in U.S. District Court in New York City, Brian Scott Zwerner, a resident of Atlanta, engaged in a conspiracy to falsify bank records related to the marketing profits for a type of contract, known as an investment agreement, and other municipal finance contracts, including derivative contracts. Public entities throughout the United States, such as state, county and local governments and agencies, invested the proceeds of bonds issued in these contracts. According to the plea agreement, Zwerner has agreed to cooperate with the department’s ongoing investigation.
“Today’s guilty plea demonstrates the Antitrust Division’s commitment to vigorously pursue and prosecute crimes in the financial services industry that harm competition,” said Christine Varney, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.
According to the court document, the Charlotte, N.C.-based bank that employed Zwerner was a provider of investment agreements and other municipal finance contracts to public entities. Public entities seek to invest money from a variety of sources, primarily the proceeds of municipal bonds that they issued, to raise money for, among other things, public projects. Public entities typically hire a broker to conduct a competitive bidding process for the award of the investment agreements. Competitive bidding for these agreements is the subject of regulations issued by the Department of the Treasury and is related to the tax-exempt status of the bonds.
The department said in the court document that Zwerner was the manager of the Municipal Derivatives Trading Desk at the bank. According to the court document, Zwerner engaged in the conspiracy from at least as early as January 1999 until approximately May 2002. Among other objectives, Zwerner and co-conspirators falsified bank records related to marketing profits so that the bank could pay kickbacks to brokers, including Rubin/Chambers, Dunhill Insurance Services Inc., also known as CDR Financial Products, a Beverly Hills, Calif.-based financial products and services firm. Specifically, Zwerner understated the marketing profits on trade tickets for certain investment agreements or other municipal finance contracts so that money could be held back and accumulated in an off-the-books account in order to pay the kickbacks. According to the court document, trade tickets are reports that record the essential terms of investment agreements. The department said that the kickbacks were in exchange for brokers, including CDR, manipulating the competitive bidding process so that the bank would be the winning bidder for certain investment agreements and other municipal finance contracts.
The false bank records conspiracy for which Zwerner is charged carries a maximum penalty of five years in prison and a $250,000 fine. The maximum fine for this offense may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.
This is the ninth guilty plea to arise from an ongoing investigation into the municipal bonds industry, which is being conducted by the Antitrust Division’s New York and Cleveland Field Offices, the FBI and Internal Revenue Service-Criminal Investigation. The department is coordinating its investigation with the Securities and Exchange Commission, the Office of the Comptroller of the Currency and the Federal Reserve Bank of New York.
Three former employees of CDR have pleaded guilty to bid-rigging and fraud conspiracies in relation to the ongoing investigation. Five other individuals have pleaded guilty to charges related to the ongoing investigation. In October 2009, CDR, two of its employees and one former employee were charged for participating in bid-rigging and fraud conspiracies and related crimes. The CDR trial is scheduled to begin on Jan. 9, 2012. In addition, six other former executives at financial service companies or financial institutions have been indicted as a result of this investigation and are awaiting trial.
Today’s guilty plea is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force 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.”
There is an ongoing investigation in this case so maybe someone important might get some jail time eventually.
Sunday, April 3, 2011
BANK EMPLOYEE PLEADS GUILTY TO CONSPIRACY IN MUNICPAL BOND AND OTHER ASSEST TRADING
The following case is an excerpt fromt he Department of Justice U.S. web site:
"WASHINGTON —A former bank employee pleaded guilty today for his participation in a conspiracy related to contracts for the investment of municipal bond proceeds and other municipal finance contracts, the Department of Justice announced.
According to charges filed today in U.S. District Court in New York City, Brian Scott Zwerner, a resident of Atlanta, engaged in a conspiracy to falsify bank records related to the marketing profits for a type of contract, known as an investment agreement, and other municipal finance contracts, including derivative contracts. Public entities throughout the United States, such as state, county and local governments and agencies, invested the proceeds of bonds issued in these contracts. According to the plea agreement, Zwerner has agreed to cooperate with the department’s ongoing investigation.
“Today’s guilty plea demonstrates the Antitrust Division’s commitment to vigorously pursue and prosecute crimes in the financial services industry that harm competition,” said Christine Varney, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.
According to the court document, the Charlotte, N.C.-based bank that employed Zwerner was a provider of investment agreements and other municipal finance contracts to public entities. Public entities seek to invest money from a variety of sources, primarily the proceeds of municipal bonds that they issued, to raise money for, among other things, public projects. Public entities typically hire a broker to conduct a competitive bidding process for the award of the investment agreements. Competitive bidding for these agreements is the subject of regulations issued by the Department of the Treasury and is related to the tax-exempt status of the bonds.
The department said in the court document that Zwerner was the manager of the Municipal Derivatives Trading Desk at the bank. According to the court document, Zwerner engaged in the conspiracy from at least as early as January 1999 until approximately May 2002. Among other objectives, Zwerner and co-conspirators falsified bank records related to marketing profits so that the bank could pay kickbacks to brokers, including Rubin/Chambers, Dunhill Insurance Services Inc., also known as CDR Financial Products, a Beverly Hills, Calif.-based financial products and services firm. Specifically, Zwerner understated the marketing profits on trade tickets for certain investment agreements or other municipal finance contracts so that money could be held back and accumulated in an off-the-books account in order to pay the kickbacks. According to the court document, trade tickets are reports that record the essential terms of investment agreements. The department said that the kickbacks were in exchange for brokers, including CDR, manipulating the competitive bidding process so that the bank would be the winning bidder for certain investment agreements and other municipal finance contracts.
The false bank records conspiracy for which Zwerner is charged carries a maximum penalty of five years in prison and a $250,000 fine. The maximum fine for this offense may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.
This is the ninth guilty plea to arise from an ongoing investigation into the municipal bonds industry, which is being conducted by the Antitrust Division’s New York and Cleveland Field Offices, the FBI and Internal Revenue Service-Criminal Investigation. The department is coordinating its investigation with the Securities and Exchange Commission, the Office of the Comptroller of the Currency and the Federal Reserve Bank of New York.
Three former employees of CDR have pleaded guilty to bid-rigging and fraud conspiracies in relation to the ongoing investigation. Five other individuals have pleaded guilty to charges related to the ongoing investigation. In October 2009, CDR, two of its employees and one former employee were charged for participating in bid-rigging and fraud conspiracies and related crimes. The CDR trial is scheduled to begin on Jan. 9, 2012. In addition, six other former executives at financial service companies or financial institutions have been indicted as a result of this investigation and are awaiting trial.
Today’s guilty plea is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force 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."
"WASHINGTON —A former bank employee pleaded guilty today for his participation in a conspiracy related to contracts for the investment of municipal bond proceeds and other municipal finance contracts, the Department of Justice announced.
According to charges filed today in U.S. District Court in New York City, Brian Scott Zwerner, a resident of Atlanta, engaged in a conspiracy to falsify bank records related to the marketing profits for a type of contract, known as an investment agreement, and other municipal finance contracts, including derivative contracts. Public entities throughout the United States, such as state, county and local governments and agencies, invested the proceeds of bonds issued in these contracts. According to the plea agreement, Zwerner has agreed to cooperate with the department’s ongoing investigation.
“Today’s guilty plea demonstrates the Antitrust Division’s commitment to vigorously pursue and prosecute crimes in the financial services industry that harm competition,” said Christine Varney, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.
According to the court document, the Charlotte, N.C.-based bank that employed Zwerner was a provider of investment agreements and other municipal finance contracts to public entities. Public entities seek to invest money from a variety of sources, primarily the proceeds of municipal bonds that they issued, to raise money for, among other things, public projects. Public entities typically hire a broker to conduct a competitive bidding process for the award of the investment agreements. Competitive bidding for these agreements is the subject of regulations issued by the Department of the Treasury and is related to the tax-exempt status of the bonds.
The department said in the court document that Zwerner was the manager of the Municipal Derivatives Trading Desk at the bank. According to the court document, Zwerner engaged in the conspiracy from at least as early as January 1999 until approximately May 2002. Among other objectives, Zwerner and co-conspirators falsified bank records related to marketing profits so that the bank could pay kickbacks to brokers, including Rubin/Chambers, Dunhill Insurance Services Inc., also known as CDR Financial Products, a Beverly Hills, Calif.-based financial products and services firm. Specifically, Zwerner understated the marketing profits on trade tickets for certain investment agreements or other municipal finance contracts so that money could be held back and accumulated in an off-the-books account in order to pay the kickbacks. According to the court document, trade tickets are reports that record the essential terms of investment agreements. The department said that the kickbacks were in exchange for brokers, including CDR, manipulating the competitive bidding process so that the bank would be the winning bidder for certain investment agreements and other municipal finance contracts.
The false bank records conspiracy for which Zwerner is charged carries a maximum penalty of five years in prison and a $250,000 fine. The maximum fine for this offense may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.
This is the ninth guilty plea to arise from an ongoing investigation into the municipal bonds industry, which is being conducted by the Antitrust Division’s New York and Cleveland Field Offices, the FBI and Internal Revenue Service-Criminal Investigation. The department is coordinating its investigation with the Securities and Exchange Commission, the Office of the Comptroller of the Currency and the Federal Reserve Bank of New York.
Three former employees of CDR have pleaded guilty to bid-rigging and fraud conspiracies in relation to the ongoing investigation. Five other individuals have pleaded guilty to charges related to the ongoing investigation. In October 2009, CDR, two of its employees and one former employee were charged for participating in bid-rigging and fraud conspiracies and related crimes. The CDR trial is scheduled to begin on Jan. 9, 2012. In addition, six other former executives at financial service companies or financial institutions have been indicted as a result of this investigation and are awaiting trial.
Today’s guilty plea is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force 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."
SEC CHARGES RAE SYSTEMS INC WITH BRIBING CHINESE OFFICIALS
The following is an excerpt from the SEC web site:
The SEC “charged San Jose-based RAE Systems Inc. with violations of the Foreign Corrupt Practices Act (FCPA) for making improper payments through two of its Chinese joint venture entities to Chinese officials in order to obtain significant government contracts for their gas and chemical detection products.
The SEC alleges that the $400,000 in improper payments resulted in contracts worth approximately $3 million in revenue and garnered more than $1.1 million in illicit profits.
RAE agreed to pay approximately $1.25 million to settle the SEC's charges. In a related criminal case, the U.S. Department of Justice announced today that RAE agreed to pay an additional $1.7 million criminal fine.
"RAE Systems develops products to detect harmful emissions, yet it did not have adequate measures in place to detect and root out internal wrongdoing," said Cheryl J. Scarboro, Chief of the SEC's Foreign Corrupt Practices Act Unit. "Companies that fail to respond to red flags can be held liable for the acts of their joint venture partners."
According to the SEC's complaint filed in U.S. District Court for the District of Columbia, the payments — which occurred from 2004 to 2008 — were made primarily by the direct sales force utilized by RAE at the two joint venture entities: RAE-KLH (Beijing) Co., Limited (RAE-KLH) and RAE Coal Mine Safety Instruments (Fushun) Co., Ltd. (RAE-Fushun).
The SEC alleges that RAE-KLH and RAE-Fushun sales personnel typically made the illicit payments by obtaining cash advances from accounting personnel, and that RAE did not impose sufficient internal controls or make any meaningful changes to sales personnel practices. Expenses associated with these payments were improperly recorded on the books of RAE-KLH and RAE-Fushun as "business fees" or "travel and entertainment" expenses. Moreover, while the payments were made exclusively in China and by Chinese employees of RAE-KLH and RAE-Fushun, RAE failed to act on red flags indicating this activity, which allowed, at least in part, the misconduct to continue at RAE-KLH.
The SEC's complaint charges RAE with violations of the anti-bribery, books and records, and internal controls provisions of the FCPA. Without admitting or denying the allegations, RAE consented to the entry of a permanent injunction against FCPA violations and agreed to pay $1,147,800 in disgorgement and $109,212 in prejudgment interest. RAE also agreed to comply with certain undertakings regarding its FCPA compliance program. The settlement is subject to court approval.
Ricky Sachar and C. Joshua Felker conducted the SEC's investigation. The Commission acknowledges the assistance of the Department of Justice's Criminal Division-Fraud Section.”
The SEC “charged San Jose-based RAE Systems Inc. with violations of the Foreign Corrupt Practices Act (FCPA) for making improper payments through two of its Chinese joint venture entities to Chinese officials in order to obtain significant government contracts for their gas and chemical detection products.
The SEC alleges that the $400,000 in improper payments resulted in contracts worth approximately $3 million in revenue and garnered more than $1.1 million in illicit profits.
RAE agreed to pay approximately $1.25 million to settle the SEC's charges. In a related criminal case, the U.S. Department of Justice announced today that RAE agreed to pay an additional $1.7 million criminal fine.
"RAE Systems develops products to detect harmful emissions, yet it did not have adequate measures in place to detect and root out internal wrongdoing," said Cheryl J. Scarboro, Chief of the SEC's Foreign Corrupt Practices Act Unit. "Companies that fail to respond to red flags can be held liable for the acts of their joint venture partners."
According to the SEC's complaint filed in U.S. District Court for the District of Columbia, the payments — which occurred from 2004 to 2008 — were made primarily by the direct sales force utilized by RAE at the two joint venture entities: RAE-KLH (Beijing) Co., Limited (RAE-KLH) and RAE Coal Mine Safety Instruments (Fushun) Co., Ltd. (RAE-Fushun).
The SEC alleges that RAE-KLH and RAE-Fushun sales personnel typically made the illicit payments by obtaining cash advances from accounting personnel, and that RAE did not impose sufficient internal controls or make any meaningful changes to sales personnel practices. Expenses associated with these payments were improperly recorded on the books of RAE-KLH and RAE-Fushun as "business fees" or "travel and entertainment" expenses. Moreover, while the payments were made exclusively in China and by Chinese employees of RAE-KLH and RAE-Fushun, RAE failed to act on red flags indicating this activity, which allowed, at least in part, the misconduct to continue at RAE-KLH.
The SEC's complaint charges RAE with violations of the anti-bribery, books and records, and internal controls provisions of the FCPA. Without admitting or denying the allegations, RAE consented to the entry of a permanent injunction against FCPA violations and agreed to pay $1,147,800 in disgorgement and $109,212 in prejudgment interest. RAE also agreed to comply with certain undertakings regarding its FCPA compliance program. The settlement is subject to court approval.
Ricky Sachar and C. Joshua Felker conducted the SEC's investigation. The Commission acknowledges the assistance of the Department of Justice's Criminal Division-Fraud Section.”
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