EXPERT FROM INSIDE TRADING "EXPERT NETWORK" GETS 48 MONTH PRISON TERM

The following excerpt is from the SEC website:
March 27, 2012
SEC Obtains Final Judgment on Consent Against Winifred Jiau
The SEC announced that, on March 24, 2012, the Honorable Jed S. Rakoff, United States District Judge, United States District Court for the Southern District of New York, entered a Final Judgment on consent as to Winifred Jiau in the SEC’s insider trading case, entitled SEC v. Mark Anthony Longoria, et al., 11-CV-0753 (SDNY) (JSR).

This case alleges insider trading by ten individuals and one investment adviser entity, all of whom are consultants, employees, or clients of the so-called “expert network” firm, Primary Global Research LLC (“PGR”). The SEC filed its Complaint on February 3, 2011, charging two PGR employees and four consultants with insider trading for illegally tipping hedge funds and other investors. On February 8, 2011, the SEC filed an Amended Complaint, charging a New York-based hedge fund and four hedge fund portfolio managers and analysts who illegally traded on confidential information obtained from technology company employees moonlighting as expert network consultants. The scheme netted more than $30 million from trades based on material, nonpublic information about such companies as Advanced Micro Devices, Seagate Technology, Western Digital, Fairchild Semiconductor, and Marvell Technology Group Ltd. (“Marvell”). The charges were the first against traders in the SEC's ongoing investigation of insider trading involving expert networks.

The SEC alleged that Jiau was a consultant associated with PGR who passed material, nonpublic information regarding the quarterly earnings of Marvell to defendants Samir Barai and Noah Freeman. Barai then traded on that information and reaped over $850,000 in illegal trading profits.

The Final Judgment entered against Jiau permanently enjoins her from violations of Section 10(b) of the Exchange Act of 1934 (“Exchange Act”) and Exchange Act Rule 10b-5. The Commission separately recovered illicit trading profits from Jiau’s tippees. In a parallel criminal action against Jiau, she was ordered to pay more than $3 million in forfeiture and was sentenced to a 48-month term of imprisonment. In light of the foregoing, the Commission did not seek disgorgement or a civil penalty from Jiau in this settlement.

SK FOODS FORMER OWNER AND CEO SCOTT SALYER PLEADS GUILTY TO RACKETEERING AND PRICE FIXING IN CALIFORNIA

The following excerpt is from the Department of Justice Antitrust website: 
SACRAMENTO, Calif. — Frederick Scott Salyer, 56, of Pebble Beach, Calif., pleaded guilty today to racketeering and price fixing, U.S. Attorney Benjamin B. Wagner announced. Salyer entered his plea before U.S. District Judge Lawrence K. Karlton.

Between 1990 and 2009, Salyer was the CEO and owner of SK Foods LP, a grower, processor and international seller of tomato paste and other processed agricultural products with facilities in Monterey, Lemoore, Williams and Ripon, Calif. In his plea, Salyer admitted that he operated SK Foods as a racketeering organization. According to the plea agreement, from January 2004 to April 2008, Salyer encouraged food broker Randall Rahal to pay bribes and kickbacks to purchasing officers employed by SK Foods’s customers Kraft Foods, Frito-Lay and B&G Foods. The intent was to induce Kraft’s Robert Watson, Frito-Lay’s Richard Wahl and B&G’s Robert Turner to promote the interests of SK Foods over their employers’ interests. Salyer also admitted that at his direction, SK Foods routinely falsified the lab test results for its tomato paste. Salyer ordered former employees Alan Huey and Jennifer Dahlman to falsify tomato paste grading factors, and SK Foods lied about its product’s percentage of natural tomato soluble solids, mold count, production date and whether the tomato paste qualified as “organic.” Finally, Salyer admitted that he had discussed an illegal target price agreement with other sellers of tomato paste and, when another co-conspirator offered a lower price, Salyer got the co-conspirator to agree to withdraw that offer to a customer.

U.S. Attorney Benjamin B. Wagner said: “Food grown in California’s Central Valley feeds people all over the United States; agriculture and food processing are critical to this region’s economy. This case of corporate corruption was met with the government’s full arsenal of law enforcement tools, which included grand jury process, an informant operation, wiretaps, search warrants, computer forensics and arrests. This office and its partners will continue to use these tools to attack fraud and corruption wherever it is detected in this district.”

“The Antitrust Division has made antitrust enforcement in the agriculture sector a priority,” said Acting Assistant Attorney General Sharis A. Pozen in charge of the Department of Justice’s Antitrust Division. “The division is committed to continuing to work with its law enforcement partners to crack down on illegal price fixing conspiracies that affect products used by consumers in their everyday lives.”

“Corruption in any form is despicable, but when such occurs within the food industry, it erodes public trust in products and threatens the industry as a whole,” said Herbert M. Brown, Special Agent in Charge of the FBI’s Sacramento Field Office. “The FBI continues to tirelessly combat white collar crime that is motivated by unscrupulous greed.”

“Today’s guilty plea is the result of a combined law enforcement effort against a corrupt organization motivated by greed and profit,” said Internal Revenue Service-Criminal Investigation (IRS-CI) Assistant Special Agent in Charge Rick Goss. “These crimes touched the lives of many unsuspecting citizens and the public should know that we will hold accountable those individuals who put personal financial gain above the safety and well-being of the general public.”

“The Food and Drug Administration-Office of Criminal Investigations is fully committed to investigating and supporting the prosecution of those who defraud consumers by manufacturing and selling adulterated foods to an unsuspecting public for economic gain. We continue to look forward to working with our law enforcement partners and commend the U.S. Attorney’s Office for their diligence,” said Thomas Emerick, Special Agent in Charge, Food and Drug Administration (FDA)-Office of Criminal Investigations, Los Angeles Field Office.

Salyer’s plea caps an investigative effort that began in August 2006, when federal agents executed a search warrant at the home of Anthony Manuel, an SK Foods employee who had embezzled approximately $1 million from his former employer, a competitor of SK Foods. Manuel promptly confessed to the embezzlement and later told agents about the crimes to which Salyer and others have now pleaded guilty. In 2007 and 2008, Manuel recorded conversations with SK Foods executives, including Salyer, and provided documents corroborating his account of the crimes being committed at SK Foods.  Wiretaps of Rahal telephones revealed that Rahal was discussing bribery and food mislabeling with Salyer and other senior officers of SK Foods. The wiretap also confirmed that Rahal was bribing Watson, Wahl, Turner and Safeway Inc. employee Michael Chavez. On April 18, 2008, agents of the FBI, IRS-CI and FDA Office of Criminal Investigations executed search warrants at the offices of SK Foods and at Salyer’s residence in Pebble Beach, seizing documents and copying SK Foods’s computer servers.

In 2009, the bribe recipients and many of Salyer’s subordinates at SK Foods pleaded guilty before Judge Karlton. Also that year, creditors forced SK Foods into bankruptcy. According to court documents, in late 2009, Salyer moved more than $3 million to Andorra and made a $50,000 deposit on a condominium there. Andorra is a small principality in the Pyrenees Mountains between France and Spain and has no extradition treaty with the United States. When agents learned of Salyer’s plans, they obtained an arrest warrant for him, which was executed on Feb. 4, 2010, when Salyer made what was to have been a short visit back to the United States. Salyer was jailed as a flight risk until Sept. 3, 2010, when he was released to house arrest after posting a $6 million bond.

Salyer was indicted by a federal grand jury on Feb. 18, 2010, with a superseding indictment brought against him on April 29, 2010. According to court documents, several issues have been litigated, such as whether the evidence against Salyer had been obtained lawfully. Judge Karlton ultimately rejected Salyer’s efforts to suppress the evidence gathered by Manuel. Judge Karlton also upheld the wiretap and search warrant applications.

Salyer is scheduled to be sentenced by Judge Karlton on July 10, 2012, at 9:15 a.m EDT. The maximum statutory penalty for a Racketeer Influenced and Corrupt Organizations (RICO) violation is 20 years in prison and a $250,000 fine. The maximum statutory penalty for price fixing is 10 years in prison and a $1 million fine. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables. In the plea agreement, Salyer may argue for a sentence as low as four years and the government may argue for a sentence up to seven years. Salyer also agrees to forfeit to the United States all of his interest in the $3 million that he transferred to Andorra.

This is the 11th guilty plea in an extensive investigation by the FBI, IRS-CI, FDA Office of Criminal Investigations and the Antitrust Division of the U.S. Department of Justice. The case is currently being prosecuted by Assistant U.S. Attorneys Matthew D. Segal, R. Steven Lapham and Jared C. Dolan, and Antitrust Division Trial Attorneys Anna T. Pletcher and Tai Milder.

JUDGE ORDERS CONNECTICUT HOTEL TO REHIRE 28 WORKERS FIRED FOR UNION ACTIVITY

The following excerpt is from a National Labor Relations Board e-mail:

A U.S. District Court Judge in Connecticut has ordered the Stamford Plaza Hotel and Conference Center to reinstate 28 employees who were laid off, then rehired by a subcontractor to perform the same work, after they expressed support for a union.

The layoffs occurred just weeks after the United Food & Commercial Workers Union, Local 371, began gathering signatures for a unionization effort in June 2011. The two hotel operations that were subcontracted, housekeeping and maintenance, had demonstrated the strongest level of union support.

The NLRB regional office in Hartford issued a complaint against the hotel, alleging that the subcontracting was an unlawful attempt to disrupt the organizing campaign. The region sought an injunction from the federal court to restore the work situation to what it had been while the case works its way through the NLRB’s process.

In granting the injunction on March 22, Judge Mark R. Kravitz found that the region was likely to prevail and that prompt action was needed to prevent irreparable harm. “Given the timing of the Stamford Plaza’s decision to subcontract, its shifting explanations for that decision, and the testimony that the hotel continues to structure its subcontracting arrangements with the goal of frustrating union activity, the Court easily finds reasonable cause to believe that unfair labor practices have occurred,” the judge wrote. The judge further found that it was “just and proper” to grant the injunction even though the employees had been re-hired by the subcontractors, because “the termination of so many pro-union housekeeping and maintenance employees seems to have frozen, not just chilled, organization efforts at Stamford Plaza.”

In addition to ordering the reinstatement of the employees to the hotel’s payroll until a final decision has been reached in the NLRB case, the judge also ordered the employer to refrain from interrogating employees about their union sympathies or otherwise interfering with their labor rights.

MINE OPERATORS TIPPIING OFF MINE EMPLOYEES OF COMING INSPECTIONS

The following excerpt is from the Department of Labor website:
MSHA: Advance notification of federal mine inspectors still a serious problem
ARLINGTON, Va. — Despite stepped-up enforcement efforts over the past two years by the U.S. Department of Labor's Mine Safety and Health Administration, some mine operators continue to tip off their employees when federal inspectors arrive to carry out an inspection. The Federal Mine Safety and Health Act of 1977 specifically prohibits providing advance notice of inspections conducted by MSHA.

There have been several recent instances in which MSHA has been able to detect the occurrence of advance notice. For example, on March 22, agency inspectors responded to a hazard complaint call about conditions at Gateway Eagle Coal Co. LLC's Sugar Maple Mine in Boone County, W.Va. A truck driver with J&N Trucking reportedly alerted mine personnel by citizens band radio of the inspectors' arrival. The inspection turned up 14 violations for advance notification, accumulations of combustible material, and inadequate preshift and on-shift examinations, as well as a failure to comply with the current ventilation plan, maintain the lifeline, maintain permissibility of mobile equipment and maintain fire fighting equipment.

As a second example, during a Feb. 29 inspection at Rhino Eastern LLC's Eagle No. 2 Mine in Wyoming County, W.Va., a dispatcher's decision to shut down the belts prompted a call from the section foreman about his actions. The dispatcher responded that an MSHA inspector was at the mine. During this inspection, three citations were issued for failure to comply with the roof control and ventilation plans. In addition, a citation was issued to Applachian Security, a contractor, for providing advance notification of the MSHA inspection. Rhino Eastern's Eagle No. 1 Mine was placed on potential pattern of violations status in November 2010 and again in August 2011 after a miner was killed in a rib collapse, and the mine's compliance record deteriorated.

A third example is from Feb. 13, when the dispatcher for Metinvest B V's Affinity Mine in Raleigh County, W.Va., notified the belt foreman over the mine telephone that federal and state inspectors were headed underground. The mine operator was issued a citation and, to abate it, MSHA required that all certified foremen and dispatchers be trained in the requirements of the Mine Act regarding advance notification, and that a notice be conspicuously posted in the mine office to ensure future compliance with the Mine Act.
"Providing advance notice of an inspection is illegal," said Joseph A. Main, assistant secretary of labor for mine safety and health. "It can obscure actual mining conditions by giving mine employees the opportunity to alter working conditions, thereby inhibiting the effectiveness of MSHA inspections. Furthermore, it appears that current penalties are not sufficient to deter this type of conduct."

Upper Big Branch Mine superintendent Gary May recently entered into a plea agreement with the U.S. Department of Justice, admitting to conspiracy to give advance notification of mine inspections, falsify examination of record books and alter the mine's ventilation system before federal inspectors were able to inspect underground. May testified that, through these unlawful practices, the mine operator was able to avoid detection of violations by federal and state inspectors.

"Despite the attention to the issue that has resulted from the Upper Big Branch investigation and recent testimony from Gary May, advance notice continues to occur too often in the coalfields," said Main. "Upper Big Branch is a tragic reminder that operators and miners alike need to understand advance notice can prevent inspectors from finding hazards that can claim miners' lives."

SEC CHARGES BIOMET INC., WITH ALLEGED VIOLATIONS OF FOREIGN CORRUPT PRACTICES ACT

The following excerpt is from a Securities and Exchange Commission e-mail:
Washington, D.C., March 26, 2012 — The Securities and Exchange Commission today charged Warsaw, Ind.-based medical device company Biomet Inc. with violating the Foreign Corrupt Practices Act (FCPA) when its subsidiaries and agents bribed public doctors in Argentina, Brazil, and China for nearly a decade to win business.

Biomet, which primarily sells products used by orthopedic surgeons, agreed to pay more than $22 million to settle the SEC’s charges as well as parallel criminal charges announced by the U.S. Department of Justice today. The charges arise from the SEC and DOJ’s ongoing proactive global investigation into medical device companies bribing publicly-employed physicians.

The SEC alleges that Biomet and its four subsidiaries paid bribes from 2000 to August 2008, and employees and managers at all levels of the parent company and the subsidiaries were involved along with the distributors who sold Biomet’s products. Biomet’s compliance and internal audit functions failed to stop the payments to doctors even after learning about the illegal practices.

“Biomet’s misconduct came to light because of the government’s proactive investigation of bribery within the medical device industry,” said Kara Novaco Brockmeyer, Chief of the Enforcement Division’s Foreign Corrupt Practices Act Unit. “A company’s compliance and internal audit should be the first line of defense against corruption, not part of the problem.”

According to the SEC’s complaint filed in federal court in Washington D.C., employees of Biomet Argentina SA paid kickbacks as high as 15 to 20 percent of each sale to publicly-employed doctors in Argentina. Phony invoices were used to justify the payments, and the bribes were falsely recorded as “consulting fees” or “commissions” in Biomet’s books and records. Executives and internal auditors at Biomet’s Indiana headquarters were aware of the payments as early as 2000, but failed to stop it.

The SEC alleges that Biomet’s U.S. subsidiary Biomet International used a distributor to bribe publicly-employed doctors in Brazil by paying them as much as 10 to 20 percent of the value of their medical device purchases. Payments were openly discussed in communications between the distributor, Biomet International employees, and Biomet’s executives and internal auditors in the U.S. For example, a February 2002 internal Biomet memorandum about a limited audit of the distributor’s books stated:

Brazilian Distributor makes payments to surgeons that may be considered as a kickback. These payments are made in cash that allows the surgeon to receive income tax free. …The accounting entry is to increase a prepaid expense account. In the consolidated financials sent to Biomet, these payments were reclassified to expense in the income statement.

According to the SEC’s complaint, two additional subsidiaries – Biomet China and Scandimed AB – sold medical devices through a distributor in China who provided publicly-employed doctors with money and travel in exchange for their purchases of Biomet products. Beginning as early as 2001, the distributor exchanged e-mails with Biomet employees that explicitly described the bribes he was arranging on the company’s behalf. For example, one e-mail stated:

[Doctor] is the department head of [public hospital]. [Doctor] uses about 10 hips and knees a month and it’s on an uptrend, as he told us over dinner a week ago. …Many key surgeons in Shanghai are buddies of his. A kind word on Biomet from him goes a long way for us. Dinner has been set for the evening of the 24th. It will be nice. But dinner aside, I’ve got to send him to Switzerland to visit his daughter.
The SEC alleges that some e-mails described the way that vendors would deliver cash to surgeons upon completion of surgery, and others discussed the amount of payments. The distributor explained in one e-mail that 25 percent in cash would be delivered to a surgeon upon completion of surgery. Biomet sponsored travel for 20 Chinese surgeons in 2007 to Spain, where a substantial part of the trip was devoted to sightseeing and other entertainment.

Biomet consented to the entry of a court order requiring payment of $4,432,998 in disgorgement and $1,142,733 in prejudgment interest. Biomet also is ordered to retain an independent compliance consultant for 18 months to review its FCPA compliance program, and is permanently enjoined from future violations of Sections 30A, 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934. Biomet agreed to pay a $17.28 million fine to settle the criminal charges.

The SEC’s investigation was conducted by Brent S. Mitchell with Tracy L. Price of the Enforcement Division’s FCPA Unit and Reid A. Muoio. The SEC acknowledges the assistance of the U.S. Department of Justice’s Fraud Section and the Federal Bureau of Investigation. The investigation into bribery in the medical device industry is continuing.

U.S. SETTLES FALSE CLAIMS ACT ALLEGATIONS AGAINST LIFEWATCH SERVICES INC.

The following excerpt is from the U.S. Department of Justice website:
Friday, March 23, 2012
United States Settles False Claims Act Allegations Against Illinois-Based Lifewatch Services Chicago-Area Firm Allegedly Improperly Billed Medicare for Ambulatory Cardiac Telemetry Services
WASHINGTON - LifeWatch Services Inc., a Rosemont, Ill.-based company, has agreed to pay the United States $18.5 million to resolve allegations that the company submitted false claims to federal health care programs, the Justice Department announced today.   The settlement resolves two lawsuits filed under the qui tam, or whistleblower, provisions of the False Claims Act.

The two complaints allege that LifeWatch improperly billed Medicare for ambulatory cardiac telemetry (ACT) services.  ACT services are a form of cardiac event monitoring that use cell phone technology to record cardiac events in real time without patient intervention.   Traditional event monitoring requires the patient to press a button when he or she notices a cardiac event to record the cardiac rhythms.   Medicare reimbursed ACT services at between $750 and $1200 and traditional event monitoring services at roughly $250 during the relevant time period.        

According to the complaints, LifeWatch was aware that ACT services were not eligible for Medicare reimbursement for patients who had experienced only mild or moderate palpitations.  The complaints allege that LifeWatch nonetheless submitted claims to Medicare for ACT services for such patients using a false diagnostic code in order to have the claims paid.   In addition, according to the complaints, LifeWatch improperly induced Medicare claims for monitoring services by providing valuable services in the form of full-time employees to several
hospitals and medical practices, without charge.  The relators (whistleblowers) in their lawsuits alleged that these services amounted to kickbacks.

“False claims on federal health care programs drive up the costs of health care for all of us,” said Stuart F. Delery, Acting Assistant Attorney General for the Civil Division of the Department of Justice.   “Today’s settlement furthers the Department of Justice’s commitment to making sure that those who benefit from Medicare play by the rules.”

Ryan Sims, a former LifeWatch sales representative, filed a lawsuit in the U.S. District Court for the Western District of Washington in December 2009.   In May 2011, Sara Collins, another former LifeWatch sales representative, filed a complaint in the U.S. District Court for the Southern District of Ohio.

Under provisions of the False Claims Act, individuals can bring a lawsuit on behalf of the government and receive a portion of the proceeds of any settlement or judgment that may result.     Sims and Collins together will receive approximately $3.4 million plus interest as their share of the settlement proceeds.

“The False Claims Act is a critical tool for weeding out fraud and protecting the taxpayers,” said U.S. Attorney Jenny A. Durkan, of the Western District of Washington.  “We must ensure tax dollars go to intended programs, not to line the pockets of those who seek to cheat the programs.”

“The settlement underscores the need for physicians to be able to make care decisions without undue influence,” said Carter M. Stewart, U.S. Attorney for the Southern District of Ohio.  “The settlement is also the result of close cooperation between our office, the Justice Department’s Civil Division and U.S. Attorney Durkan’s office.”

In addition to the monetary settlement, LifeWatch has entered into a comprehensive Corporate Integrity Agreement (CIA) with the Office of Inspector General of the U.S. Department of Health and Human Services to ensure its continued compliance with federal health care benefit program requirements.

“The chief executive officer at LifeWatch as well as other corporate executives will be required to personally certify compliance with our five-year CIA, which includes provisions to monitor LifeWatch’s claim submission process, sales force activities and relationships with some types of business referrals,” said Daniel R. Levinson, Inspector General of the U.S. Department of Health and Human Services.  “LifeWatch allegedly tried to boost profits at taxpayer expense, and, ultimately, paid $18.5 million back to the government.”

The claims resolved by the settlement are only alleg ations and do not constitute a determination of liability.

In addition to the efforts of attorneys from the U.S. Attorney’s Offices for the Western District of Washington and Southern District of Ohio and the Commercial Litigation Branch of the Civil Division of the Department of Justice in Washington, D.C., investigators from the Office of Inspector General of the Department of Health and Human Services, Defense Criminal Investigative Service and Office of Inspector General for the Office of Personnel Management assisted the government’s investigation of the whistleblowers’ allegations.

This resolution is part of the government's emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009.   The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.   One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover nearly $6.7 billion since January 2009 in cases involving fraud against federal health care programs.   The Justice Department's total recoveries in False Claims Act cases since January 2009 are over $8.9 billion.

GREEK OIL COMPANY SENTENCED FOR COVER-UP OF OIL POLLUTION AND OBSTRUCTION OF JUSTICE

The following excerpt is from the Department of Justice website:
Tuesday, March 27, 2012
Greek Shipping Company Sentenced in New Orleans to Pay $2 Million for Intentional Cover-Up of Oil Pollution and Obstruction of Justice
WASHINGTON – Ilios Shipping Company S.A. was sentenced today in federal court in New Orleans for violating the Act to Prevent Pollution from Ships (APPS) and obstruction of justice, announced Assistant Attorney General Ignacia S. Moreno and Jim Letten, U.S. Attorney for the Eastern District of Louisiana.

Ilios operated the M/V Agios Emilianos, a 738 foot, 36,573 ton bulk carrier cargo ship that hauled grain from New Orleans to various ports around the world.  According to the plea agreement, from April 2009 until April 2011, oily bilge waste and sludge was routinely discharged from the vessel directly into the sea without the use of required pollution prevention equipment.  During that time, the crew intentionally covered up the illegal discharges of oil waste by falsifying the vessel’s oil record book.  The master of the vessel, Valentino Mislang, previously pleaded guilty to and was sentenced for conspiracy to obstruct justice for his role in destroying evidence and instructing crewmembers to lie to the Coast Guard during an inspection of the vessel in April 2011.  According to Mislang, a senior manager of Ilios directed the destruction of computer records and ordered Mislang to tell crewmembers to lie to the Coast Guard.

The chief engineer of the vessel, Romulo Esperas, previously pleaded guilty to and was sentenced for conspiracy to obstruct justice for his role in falsifying the vessel’s oil record book and directing the discharge of oily bilge waste and sludge directly into the sea.  According to Esperas, a senior manager of Ilios directed him to discharge the vessel’s oily waste into the sea and refused to provide funding for the proper discharge of the oily waste to shore-side facilities.  Both Mislang and Esperas were sentenced to three years of unsupervised release and are not permitted to re-enter the United States during that time.
“The Department of Justice will continue to prosecute shipping companies who break the laws that protect our oceans,” said Assistant Attorney General Moreno.  “The penalty imposed by this sentence holds Ilios fully accountable for violating the Act to Prevent Pollution from Ships, and a part of the penalty will fund projects that will help restore precious marine and aquatic resources in Louisiana.”

“We owe a debt of gratitude to the men and women of the U.S. Coast Guard, their partners in the Environmental Protection Agency and our brethren in the U. S. Department of Justice Environment and Natural Resources Division, along with our own U.S. Attorney’s Office professionals, for their continued vigilance in this and other cases protecting our precious environment, coastline and water resources from those unscrupulous companies and individuals who clandestinely and wantonly discharge oily waste into our waters,” said U.S. Attorney Letten.  “We will not falter in our commitment to do everything within our power to apprehend and punish these violators in defense of our environment.”

“Unfortunately, we continue to see many environmental crimes cases involving ocean-going commercial vessels.  The Coast Guard will continue to hold non-compliant companies and operators accountable when they break the law and endanger the marine environment or public health.  I applaud the efforts of Coast Guard Sector New Orleans, the Coast Guard Investigative Service, our Eighth District legal staff and the Department of Justice for their tireless efforts in investigating and prosecuting this case,” said Rear Admiral Roy A. Nash, Eighth Coast Guard District Commander.
All discharges of sludge or oily bilge waste from a vessel are required to be recorded in the vessel’s oil record book.  However, none of the illegal discharges were recorded in the oil record book for the M/V Agios Emilianos.

The court ordered Ilios to pay an overall criminal penalty of $2 million.  The National Fish and Wildlife Foundation will receive $250,000 to fund projects aimed at the restoration of marine and aquatic resources in the Eastern District of Louisiana.

As a condition of probation, Ilios is required to implement an environmental compliance plan which will ensure that any ship operated by Ilios complies with all maritime environmental requirements established under applicable international, flag state and port state laws.  The plan ensures that Ilios’s employees and the crew of any vessel operated by Ilios are properly trained in preventing maritime pollution.  An independent monitor will report to the court about Ilios’s compliance with its obligations during the period of probation.

This case was investigated by the U.S. Coast Guard and the Environmental Protection Agency.  The case was prosecuted by Emily Greenfield and Dorothy Manning Taylor from the U.S. Attorney's Office of the Eastern District of Louisiana and by Ken Nelson in the Environmental Crimes Section of the Environment and Natural Resources Division of the Department of Justice.

LOCKHEED MARTIN CORPORATION SETTLES FALSE CLAIMS ACT ALLEGATIONS FOR $15.85 MILLION

The following excerpt is from the U.S. Department of Justice website:
Friday, March 23, 2012
Lockheed Martin Corporation Reaches $15.85 Million Settlement with U.S. to Resolve False Claims Act AllegationsU.S. Alleges Lockheed Subcontractor Inflated Costs for Military Aircraft Tools That Were Passed on to Government
WASHINGTON – Lockheed Martin Corporation has agreed to pay $15,850,000 to settle allegations that it mischarged perishable tools used on numerous government contracts, the Department of Justice announced today.  Lockheed Martin, headquartered in Bethesda, Md., is one of the world’s largest defense contractors.

Today’s settlement resolves allegations that the government was overcharged as a result
of a seven-year pricing scheme by Tools & Metals Inc. (TMI), a subcontractor that sold perishable tools to Lockheed Martin for use on military aircraft, including the F-22 and the F-35 fighter jets.  Specifically, the government alleged that TMI inflated the costs of these tools between 1998 and 2005, and that Lockheed Martin passed these costs on to the United States under its various contracts with the government.  On Dec. 8, 2005, Todd B. Loftis, a former president of TMI, pleaded guilty and was sentenced to seven years in prison in connection with his role in TMI’s scheme.

The United States subsequently brought civil claims against Lockheed Martin under the False Claims Act, alleging that Lockheed Martin contributed to the inflated amounts paid by the United States in connection with TMI’s pricing scheme.  Specifically, the government alleged that Lockheed Martin acted recklessly by failing to adequately oversee TMI’s charging practices and by mishandling information revealing these practices. These allegations are the subject of today’s settlement between the United States and Lockheed Martin.

“It is troubling that a large defense contractor with long-established contractual ties with the United States failed to undertake appropriate measures to ensure the integrity and validity of the costs it submitted to the United States,” said Stuart F. Delery, Acting Assistant Attorney General for the Justice Department’s Civil Division.
“This settlement demonstrates the government’s commitment to devoting the necessary resources to protect taxpayer funds from the most complex mischarging schemes,” stated Sarah R. Saldaña, U.S. Attorney for the Northern District of Texas.

Today’s settlement also settles two qui tam, or whistleblower, actions brought under the whistleblower  provisions of the False Claims Act and consolidated in the U.S. District Court in Dallas.  The case is captioned U.S. ex rel. Becker, et al. v. Tools & Metals, Inc., et al., Civil Action No. 3:05-CV-0627-L.

Under the False Claims Act, a private party can file an action on behalf of the United States and receive a portion of the recovery.  The whistleblowers in the two cases resolved by the settlement, Robert Spencer and John Becker, will split a $2 million share of the government’s recovery.

This matter was jointly handled by the Defense Criminal Investigative Service, the Air Force Office of Special Investigations, the Defense Contract Audit Agency, the Contract Integrity Offices of the Departments of the Air Force and the Navy, the Defense Contract Management Agency, the Department of Justice's Civil Division and the U.S. Attorney's Office for the Northern District of Texas.

JUSTICE SETTLES DISCRIMINATION CASE WITH ROSS STORES

The following excerpt is from the Department of Justice website:
Thursday, March 22, 2012
Justice Department Settles Document Abuse Claim Against Ross Stores Inc.
WASHINGTON – The Justice Department announced today that it reached an agreement with Ross Stores Inc., resolving allegations that the company had engaged in a pattern or practice of discrimination based on citizenship status while verifying employment eligibility at its store in San Ysidro, Calif.  The department also alleged that Ross Stores discriminated against a work-authorized individual when it refused to honor a genuine work authorization document and requested that she produce a green card, despite the fact that the company did not require U.S. citizens to show specific work authorization documents.

The department’s investigation began in response to a charge of discrimination filed by a work-authorized, non-U.S. citizen, who was not permitted to work at the San Ysidro store after showing a valid employment authorization document (EAD) for the Form I-9.  The charging party alleged that Ross Stores refused to allow her to work after presenting her EAD, requested more or different documents for the Form I-9 and eventually withdrew her job offer.  The charging party had already produced sufficient documentation establishing her work authorization.  The department also alleged that Ross Stores subjected newly hired non-U.S. citizens to excessive demands for documents issued by the Department of Homeland Security, in order to verify their employment eligibility, but did not require the same of U.S. citizens.  The Immigration and Nationality Act (INA) requires employers to treat all authorized workers equally during the employment eligibility verification process, regardless of their national origin or citizenship status.

“Employers must not treat authorized workers differently during the employment eligibility verification process based on their citizenship status or national origin,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division.  “The department is committed to ensuring authorized workers are treated fairly during the employment eligibility verification process.”

Under the settlement agreement, Ross Stores agrees to reinstate the charging party and pay $6,384 in back pay plus interest to the charging party and $10,825 in civil penalties to the United States.  Ross Stores also agrees to comply with the law, to train its human resources personnel about employers’ responsibilities to avoid discrimination in the employment eligibility verification process and to be subject to reporting and compliance monitory requirements for 18 months.  

The Office of Special Counsel (OSC) for Immigration-Related Unfair Employment Practices is responsible for enforcing the anti-discrimination provision of the INA, which protects work authorized individuals from employment discrimination on the basis of citizenship status or national origin discrimination, including discrimination in hiring and the employment eligibility verification (Form I-9) process.  For more information about protections against employment discrimination under the immigration law, call 1-800-255-7688 (OSC’s worker hotline) (1-800-237-2525, TDD for hearing impaired), 1-800-255-8155 (OSC’s employer hotline) (1-800-362-2735, TDD for hearing impaired) or 202-616-5594; email osccrt@usdoj.gov; or visit OSC’s website at www.justice.gov/crt/about/osc.

OWNER ARKLA DISPOSAL SERVICES CONVICTED OF VIOLATING CLEAN WATER ACT

The following excerpt is from the U.S. Department of Justice website:
Thursday, March 22, 2012
Louisiana Jury Convicts General Manager/former Owner of Arkla Disposal Services of Violations of Clean Water Act and Obstructing an EPA Investigation Untreated Wastewater Dumped into Red River
WASHINGTON – A federal jury in Shreveport, La., has convicted John Tuma, 54, of Centerville, Texas, of discharging untreated wastewater directly into the Red River without a permit, discharging untreated wastewater into the city of Shreveport sewer system in violation of its permit and obstructing an Environmental Protection Agency (EPA) inspection, announced Assistant Attorney General Ignacia S. Moreno and Western District of Louisiana U.S. Attorney Stephanie A. Finley.

Father and son, John Tuma and Cody Tuma, 28, of Shreveport, were both charged in a five-count indictment with violations of the Clean Water Act, conspiracy and obstruction of justice related to illegal discharges coming from the Arkla Disposal Services Inc., a facility in Shreveport.   The Arkla facility received off-site wastewater from industrial processes and from oilfield exploration and production facilities for treatment at the Arkla facility.

“It was irresponsible, illegal and potentially harmful to the health of city residents and their environment for Mr. Tuma to conspire to dump untreated industrial wastewater into Shreveport’s sewer system,” said Assistant Attorney General Ignacia S. Moreno of the Environment and Natural Resources Division of the Department of Justice.   “This case is an example of how the Clean Water Act protects the health and safety of the American people.”

“This case was about a defendant who had no concern about the effects of discharging untreated wastewater into the Red River or the people that his actions harmed,” said U.S. Attorney Finley.  “The verdict of this jury should send a message that disregarding laws designed to protect citizens will not be taken lightly.   Louisiana is a state with precious natural resources, which our office, along with the Environmental Protection Agency, will continue to protect.”

“The defendant dumped thousands of gallons of untreated wastewater directly into the Red River,” said Ivan Vikin, Special Agent in Charge of EPA’s criminal enforcement program in Louisiana.   “Improperly discharged wastewater can sicken or injure people, fish and wildlife. Today’s guilty verdict shows that those who try to save money by cutting corners will be vigorously prosecuted.”

Cody Tuma pleaded guilty in February 2012 to one count of negligently discharging pollutants into the Red River without a permit.   He faces a maximum penalty of one year in prison or a fine of not more than $100,000, or twice the gross gain or loss resulting from the unlawful conduct, or both.   Sentencing for Cody Tuma has been set for June 20, 2012.

John Tuma will be sentenced July 25, 2012.   He faces a maximum penalty of five years in prison on the conspiracy charge, three years in prison on each of the Clean Water Act violations and five years in prison on the obstruction of justice charge.   He also faces a fine of not more than $250,000, or twice the gross gain or loss resulting from the unlawful conduct, or both, per count.

The case is being investigated by EPA’s Criminal Investigation Division and is being prosecuted by Assistant U.S. Attorney C. Mignonne Griffing and Trial Attorney Leslie E. Lehnert of the Environmental Crimes Section of the Justice Department’s Environment and Natural Resources Division.

GOLDMAN SACHS EXECUTION & CLEARING, L.P., ORDERED TO PAY $7 MILLION FOR SUPERVISION FAILURES

The following excerpt is from the Commodity Futures Trading Commission website: 
March 13, 2012
CFTC Orders Goldman Sachs Execution & Clearing, L.P., a Registered Futures Commission Merchant, to Pay $7 Million for Supervision Failures in Handling Accounts it Carried

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Goldman Sachs Execution & Clearing, L.P. (GSEC), a registered futures commission merchant based in New York, N.Y., agreed to pay a $5.5 million civil monetary penalty and $1.5 million in disgorgement to settle CFTC charges that it failed to diligently supervise accounts that it carried from about May 2007 to December 2009. The CFTC order also requires GSEC to cease and desist from violating CFTC regulations requiring diligent supervision. Additionally, the order states that GSEC represented in its settlement offer that it has made changes in light of the events discussed in the order, including implementing enhanced supervision policies, procedures, and training.

GSEC provided back-office and other services to some clients who themselves are broker-dealers, according to the order. One such broker-dealer (Broker-Dealer) offered memberships to investors to trade commodities in subaccounts of the Broker-Dealer carried by GSEC, the order finds. GSEC failed to diligently supervise the handling of these subaccounts when it did not investigate signs of questionable conduct by the Broker-Dealer, according to the order. For example, in May 2007, at the beginning of GSEC’s relationship with the Broker-Dealer, the Broker-Dealer’s lawyer represented that the Broker-Dealer would not engage in commodity futures trading and therefore would not need to register as a commodity pool operator with the CFTC. However, the order further finds that the Broker-Dealer had already opened a commodity futures trading account with GSEC and, thereafter, traded commodity futures. Nevertheless, GSEC did not investigate the apparent contradiction between the lawyer’s representations and the Broker-Dealer’s actions, the order finds.

The order states, as another example, that in August 2009, GSEC learned that the Broker-Dealer distributed to at least one of its members a subaccount statement that falsely purported to have been issued by a non-existent GSEC affiliate. In addition to noting that no such GSEC affiliate existed, GSEC told the Broker-Dealer that the statement created an inaccurate picture of the Broker-Dealer’s overall performance. Yet, as the order further finds, despite these signals of questionable conduct, GSEC simply instructed the Broker-Dealer not to issue such an account statement and accepted the Broker-Dealer’s assurances that it had not done so before and would not do so again. In December 2009, the Broker-Dealer provided to GSEC a draft disclosure statement that disclosed that the Broker-Dealer had carried negative capital balances of approximately $6.8 million since October 2009, according to the order.

From May 2007 to December 2009, GSEC received approximately $1.5 million of gross fees and commissions for transactions it executed and/or cleared on behalf of the Broker-Dealer, the order finds.

According to CFTC Division of Enforcement Director David Meister: “The CFTC’s rules mandate that registrants diligently supervise their employees and agents. When registrants become aware of questionable activity, they must not simply rely on assurances from interested parties and their representatives, but instead must diligently investigate. As this case indicates, the Commission will hold registrants accountable if they fail in this regard.”

The CFTC appreciates the assistance of the National Futures Association, the Chicago Board Options Exchange, and the U.S. Securities and Exchange Commission.

CFTC staff members responsible for this case are Laura Martin, Janine Gargiulo, Candice Aloisi, Judith Slowly, David Acevedo, Manal Sultan, Lenel Hickson, Lisa Hazel, Annette Vitale, Ronald Carletta, Stephen Obie, and Vincent McGonagle.