FROM: U.S. JUSTICE DEPARTMENT
Wednesday, February 6, 2013
RBS Securities Japan Limited Agrees to Plead Guilty in Connection with Long-Running Manipulation of Libor Benchmark Interest Rates
Second Financial Institution to Plead Guilty to Libor Fraud and Pay Substantial Criminal Penalties; RBS Parent Company Also Admits Fault in Deferred Prosecution Agreement
RBS Securities Japan Limited, a wholly owned subsidiary of The Royal Bank of Scotland plc (RBS), has agreed to plead guilty to felony wire fraud and admit its role in manipulating the Japanese Yen London Interbank Offered Rate (LIBOR), a leading benchmark used in financial products and transactions around the world, Assistant Attorney General Lanny Breuer of the Justice Department’s Criminal Division, Deputy Assistant Attorney General Scott D. Hammond of the Justice Department’s Antitrust Division and Special Agent in Charge Timothy A. Gallagher of the FBI’s Washington Field Office Criminal Division announced today.
A criminal information, being filed in U.S. District Court for the District of Connecticut, charges RBS Securities Japan with one count of wire fraud for engaging in a scheme to defraud counterparties to interest rate derivatives trades by secretly manipulating Yen LIBOR benchmark interest rates. RBS Securities Japan has signed a plea agreement with the government admitting its criminal conduct, and has agreed to pay a $50 million fine.
In addition, the government is filing a criminal information in the District of Connecticut which charges parent company RBS as part of a deferred prosecution agreement (DPA). The information charges RBS with wire fraud for its role in manipulating LIBOR benchmark interest rates, and with participation in a price-fixing conspiracy in violation of the Sherman Act by rigging the Yen LIBOR benchmark interest rate with other banks. The DPA requires the bank to admit and accept responsibility for its misconduct as described in an extensive statement of facts, to continue cooperating with the Justice Department in its ongoing investigation and to pay a $100 million penalty beyond the fine imposed upon RBS Securities Japan.
Together with approximately $462 million in regulatory penalties and disgorgement – $325 million as a result of a Commodity Futures Trading Commission (CFTC) action and approximately $137 million as a result of a U.K. Financial Services Authority (FSA) action – the Justice Department’s criminal penalties bring the total amount of the resolution with RBS and RBS Securities Japan to approximately $612 million.
"As we have done with Barclays and UBS, we are today holding RBS accountable for a stunning abuse of trust," said Assistant Attorney General Breuer. "The bank has admitted to manipulating one of the cornerstone benchmark interest rates in our global financial system, and its Japanese subsidiary has agreed to plead guilty to felony wire fraud. The department’s ongoing investigation has now yielded two guilty pleas by significant financial institutions. These are extraordinary results, and our investigation is far from finished. Our message is clear: no financial institution is above the law."
"RBS secretly rigged the benchmark interest rates upon which many transactions and consumer financial products are based," said Deputy Assistant Attorney General Hammond. "RBS’ conduct not only harmed its unsuspecting counterparties, it undermined the integrity and the competitiveness of financial markets everywhere."
"The manipulation of LIBOR by RBS and its subsidiary directly affected the rates referenced by financial products held by and on behalf of American companies and investors. The FBI works to uncover wrongdoing such as this in order to protect American consumers and the integrity of financial markets," said Special Agent in Charge Gallagher. "Today’s announcement is the result of the hard work of the FBI special agents, financial analysts, and forensic accountants as well as the prosecutors who dedicated significant time and resources to investigating this case."
According to court documents, LIBOR is an average interest rate, calculated based upon submissions from leading banks around the world, reflecting the rates those banks believe they would be charged if borrowing from other banks. LIBOR serves as the primary benchmark for short-term interest rates globally, and is used as a reference rate for many interest rate contracts, mortgages, credit cards, student loans and other consumer lending products. The Bank of International Settlements estimated that as of the second half of 2009, outstanding interest rate contracts were valued at approximately $450 trillion.
LIBOR, published by the British Bankers’ Association (BBA), a trade association based in London, is calculated for 10 currencies at 15 borrowing periods, known as maturities, ranging from overnight to one year. The LIBOR for a given currency at a specific maturity is the result of a calculation based upon submissions from a panel of banks for that currency (the Contributor Panel) selected by the BBA. From at least 2006 through 2010, RBS has been a member of the Contributor Panel for a number of currencies, including Yen LIBOR and Swiss Franc LIBOR, which are the focus of the plea agreement and DPA.
According to the filed charging documents, at various times from at least 2006 through 2010, certain RBS Yen and Swiss Franc derivatives traders – whose compensation was directly connected to their success in trading financial products tied to LIBOR – engaged in efforts to move LIBOR in a direction favorable to their trading positions. Through these schemes, RBS allegedly defrauded counterparties who were unaware of the manipulation affecting financial products referencing Yen and Swiss Franc LIBOR. The alleged schemes included hundreds of instances in which RBS employees sought to influence LIBOR submissions in a manner favorable to their trading positions in two principal ways: internally at RBS through requests by derivatives traders for Yen and Swiss Franc LIBOR submissions, and externally through an agreement with a separately charged derivatives trader to request Yen LIBOR submissions. The trader, Tom Alexander William Hayes, was formerly employed by a Japanese subsidiary of another Contributor Panel bank, UBS AG (UBS).
According to court documents, RBS employees engaged in this conduct through electronic communications, which included both emails and electronic chats. For example, in an electronic chat on March 16, 2009, an RBS Swiss Franc derivatives trader, (Trader-7), sought to benefit his trading book by asking the RBS LIBOR submitter (Submitter-1), "can we pls get a very very very low 3m [3 month] and 6m [6 month] fix today [please]" because "we have rather large fixings!" Submitter-1 responded, "perfect, if that’s what u want." After thanking Submitter-1, Trader-7 informed Submitter-1 that "from tomorrow . . . we need them thru the roof!!!!!"
In another electronic chat on May 20, 2009, involving an RBS Yen derivatives trader, ("Trader-2"), Submitter-1, and others, the following exchange occurred:
Trader-2: high 3s and low 6s pls [Submitter-1]
Submitter-1: no problems
Trader-2: grazias amigo . . . where will you lower 6s to?
Submitter-1: 70
That day, RBS’s 6-month Yen LIBOR submission dropped two basis points from .72 to .70, before reverting to .72 the following two days.
RBS employees also allegedly furthered their collusive scheme with Hayes to fix the price of derivative instruments tied to Yen LIBOR through electronic communications. For instance, in an electronic chat on April 20, 2007, Hayes requested that an RBS derivatives trader, ("Trader-3"), ask Submitter-1 for a low 3 month Yen LIBOR submission:
Hayes: . . . if you could ask your guys to keep 3m low wd be massive help as long as it doesn’t interfere with your stuff . . . tx in adavance.
Approximately 30 minutes later, Hayes and Trader-3 had the following exchange:
Hayes: mate did you manage to spk to your cash boys?
Trader-3: yes u owe me they are going 65 and 71
Hayes: thx mate yes i do . . . in fact i owe you big time
Approximately 45 minutes later, Hayes sent the following message to Trader-3:
Hayes: mater they set 64! . . . thats beyond the call of duty!
Saturday, February 9, 2013
Friday, February 8, 2013
AUSTRALIAN COMPANY SUED BY CFTC FOR UNLAWFUL SOLICITATION
FROM: COMMODITY FUTURES TRADING COMMISSION
CFTC Sues Australian Company, Halifax Investment Services, Ltd., for Unlawfully Soliciting U.S. Customers
Washington DC. – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it filed a complaint in the U.S. District Court for the Northern District of Illinois against Halifax Investment Services, Ltd. (Halifax) of Sydney, Australia for soliciting and accepting foreign currency (forex) orders from U.S. customers without registering with the CFTC as required.
In the forex market, entities known as Retail Foreign Exchange Dealers (RFEDs) may buy foreign currency contracts from, or sell foreign currency contracts to, individual investors. Under the Commodity Exchange Act (CEA) and CFTC regulations, since October 18, 2010, with a few exceptions, an entity acting as an RFED that solicits or accepts orders from U.S. customers in connection with forex transactions must register with the CFTC and abide by rules and regulations designed for investor protection, including those relating to minimum capital requirements, recordkeeping, and compliance (see the CFTC’s Forex Currency Trading page).
According to the CFTC complaint, Halifax acts as an RFED and knowingly solicits or accepts orders from non-eligible contract participants (non-ECPs) located in the U.S. without being registered with the CFTC as an RFED. Among other things, the complaint states that Halifax operates a website that permits U.S. customers to open trading accounts by submitting online account applications, and that nothing in Halifax’s online account application states that Halifax does not accept U.S. customers or precludes non-ECPs from opening forex accounts with Halifax.
In its continuing litigation, the CFTC seeks a permanent injunction preventing Halifax from soliciting U.S. customers to buy or sell foreign currency contracts and from operating its website unless and until it complies with the CEA and CFTC regulations, as charged. The complaint also seeks civil monetary penalties, trading and registration bans, disgorgement, and rescission.
The CFTC strongly urges the public to check with the National Futures Association (NFA) whether a company is registered before investing funds. If a company is not registered, an investor should be wary of providing funds to that company.
CFTC Sues Australian Company, Halifax Investment Services, Ltd., for Unlawfully Soliciting U.S. Customers
Washington DC. – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it filed a complaint in the U.S. District Court for the Northern District of Illinois against Halifax Investment Services, Ltd. (Halifax) of Sydney, Australia for soliciting and accepting foreign currency (forex) orders from U.S. customers without registering with the CFTC as required.
In the forex market, entities known as Retail Foreign Exchange Dealers (RFEDs) may buy foreign currency contracts from, or sell foreign currency contracts to, individual investors. Under the Commodity Exchange Act (CEA) and CFTC regulations, since October 18, 2010, with a few exceptions, an entity acting as an RFED that solicits or accepts orders from U.S. customers in connection with forex transactions must register with the CFTC and abide by rules and regulations designed for investor protection, including those relating to minimum capital requirements, recordkeeping, and compliance (see the CFTC’s Forex Currency Trading page).
According to the CFTC complaint, Halifax acts as an RFED and knowingly solicits or accepts orders from non-eligible contract participants (non-ECPs) located in the U.S. without being registered with the CFTC as an RFED. Among other things, the complaint states that Halifax operates a website that permits U.S. customers to open trading accounts by submitting online account applications, and that nothing in Halifax’s online account application states that Halifax does not accept U.S. customers or precludes non-ECPs from opening forex accounts with Halifax.
In its continuing litigation, the CFTC seeks a permanent injunction preventing Halifax from soliciting U.S. customers to buy or sell foreign currency contracts and from operating its website unless and until it complies with the CEA and CFTC regulations, as charged. The complaint also seeks civil monetary penalties, trading and registration bans, disgorgement, and rescission.
The CFTC strongly urges the public to check with the National Futures Association (NFA) whether a company is registered before investing funds. If a company is not registered, an investor should be wary of providing funds to that company.
Wednesday, February 6, 2013
SETTLEMENTS REACHED WITH KEMIRA GROUP SIBSIDIARIES IN CHEMICAL/PESTICIDE CASE
FROM: U.S. ENVIRONMENTAL PROTECTION AGENCY
EPA Announces Settlements with Company for Multiple Violations of Chemical Reporting and Pesticide Laws
WASHINGTON - The U.S. Environmental Protection Agency (EPA) announced that it reached settlements with two subsidiaries of the Kemira Group for violations of chemical and pesticide laws.
The settlement with Kemira Chemicals resolves alleged violations of the Federal Insecticide, Fungicide, and Rodenticide Act, including the sale and distribution of an unregistered pesticide, the sale and distribution of misbranded pesticides, and pesticide production reporting violations. The sale and distribution of unregistered or misbranded pesticides can cause serious illness in humans and be harmful to the environment. Under the terms of the agreement, Kemira Chemicals has corrected the alleged violations and will pay a civil penalty of $301,600.
EPA also reached an agreement with Kemira Water Solutions after an EPA inspection identified 27 violations of the Toxic Substance Control Act’s Inventory Update Reporting (IUR) rule for the 2006 reporting period. The IUR rule requires manufacturers and importers of certain chemical substances to report the production volume and location of each facility producing these chemical substances. The information collected is used to support risk screening and assessment and makes up the most comprehensive source of basic screening-level, exposure-related information on chemicals available to EPA. Kemira Water Solutions has since submitted the required information to EPA and will pay a civil penalty of $503,110.
Kemira Chemicals, Inc. and Kemira Water Solutions, Inc. are both subsidiaries of Kemira Group, a global chemical company with U.S. headquarters in Atlanta, Ga.
EPA Announces Settlements with Company for Multiple Violations of Chemical Reporting and Pesticide Laws
WASHINGTON - The U.S. Environmental Protection Agency (EPA) announced that it reached settlements with two subsidiaries of the Kemira Group for violations of chemical and pesticide laws.
The settlement with Kemira Chemicals resolves alleged violations of the Federal Insecticide, Fungicide, and Rodenticide Act, including the sale and distribution of an unregistered pesticide, the sale and distribution of misbranded pesticides, and pesticide production reporting violations. The sale and distribution of unregistered or misbranded pesticides can cause serious illness in humans and be harmful to the environment. Under the terms of the agreement, Kemira Chemicals has corrected the alleged violations and will pay a civil penalty of $301,600.
EPA also reached an agreement with Kemira Water Solutions after an EPA inspection identified 27 violations of the Toxic Substance Control Act’s Inventory Update Reporting (IUR) rule for the 2006 reporting period. The IUR rule requires manufacturers and importers of certain chemical substances to report the production volume and location of each facility producing these chemical substances. The information collected is used to support risk screening and assessment and makes up the most comprehensive source of basic screening-level, exposure-related information on chemicals available to EPA. Kemira Water Solutions has since submitted the required information to EPA and will pay a civil penalty of $503,110.
Kemira Chemicals, Inc. and Kemira Water Solutions, Inc. are both subsidiaries of Kemira Group, a global chemical company with U.S. headquarters in Atlanta, Ga.
Monday, February 4, 2013
COMPANY FINED FOR COLLECTIONG PERSONAL INFORMATION FROM MINORS
FROM: U.S. JUSTICE DEPARTMENT
Friday, February 1, 2013
Social Networking Company to Pay $800,000 for Collecting Personal Information from Minors
The company that operates Path, an online social networking application, agreed to pay an $800,000 penalty to settle charges that it violated the Federal Trade Commission (FTC) Act and the Children’s Online Privacy Protection Rule, the Justice Department announced today.
In a complaint filed on Jan. 31, 2013, the United States alleged that San Francisco-based Path Inc. violated the Children’s Online Privacy Protection Rule by collecting personal information from children under the age of 13 without obtaining parental consent. According to the complaint, in over 3,000 instances, Path collected personal information from the address books in children’s mobile devices, including the names, addresses, phone numbers and email addresses of the child’s contacts. Path also collected personal information from children during the registration process and by allowing them to post content online.
"The rules established by the Children’s Online Privacy Protection Act play an important role in keeping kids safe online," said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Civil Division. "Companies that market to children must respect their privacy by getting parental consent before collecting any personal information, and the Justice Department will work with the FTC to ensure that they do."
According to the complaint, Path also violated the FTC Act by failing to disclose to consumers that it was automatically collecting information from users’ address books on their mobile devices. Path’s privacy policy and "Add Friends" feature led consumers to believe that this information would be collected only with the user’s consent.
Along with the civil penalty, Path agreed to an injunction barring future violations of the FTC Act and the Children’s Online Privacy Protection Rule. Path further agreed that it would delete all information previously collected from children under age 13, implement a comprehensive privacy program, and submit to regular assessments by an independent third party.
The FTC, which oversees the Children’s Online Privacy Protection Rule, referred the case to the Justice Department. The lawsuit, United States v. Path Inc., was filed in the Northern District of California.
Principal Deputy Assistant Attorney General Delery thanked the FTC for investigating this matter and referring it to the department. The Consumer Protection Branch of the Justice Department’s Civil Division brought the case on behalf of the United States.
Friday, February 1, 2013
Social Networking Company to Pay $800,000 for Collecting Personal Information from Minors
The company that operates Path, an online social networking application, agreed to pay an $800,000 penalty to settle charges that it violated the Federal Trade Commission (FTC) Act and the Children’s Online Privacy Protection Rule, the Justice Department announced today.
In a complaint filed on Jan. 31, 2013, the United States alleged that San Francisco-based Path Inc. violated the Children’s Online Privacy Protection Rule by collecting personal information from children under the age of 13 without obtaining parental consent. According to the complaint, in over 3,000 instances, Path collected personal information from the address books in children’s mobile devices, including the names, addresses, phone numbers and email addresses of the child’s contacts. Path also collected personal information from children during the registration process and by allowing them to post content online.
"The rules established by the Children’s Online Privacy Protection Act play an important role in keeping kids safe online," said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Civil Division. "Companies that market to children must respect their privacy by getting parental consent before collecting any personal information, and the Justice Department will work with the FTC to ensure that they do."
According to the complaint, Path also violated the FTC Act by failing to disclose to consumers that it was automatically collecting information from users’ address books on their mobile devices. Path’s privacy policy and "Add Friends" feature led consumers to believe that this information would be collected only with the user’s consent.
Along with the civil penalty, Path agreed to an injunction barring future violations of the FTC Act and the Children’s Online Privacy Protection Rule. Path further agreed that it would delete all information previously collected from children under age 13, implement a comprehensive privacy program, and submit to regular assessments by an independent third party.
The FTC, which oversees the Children’s Online Privacy Protection Rule, referred the case to the Justice Department. The lawsuit, United States v. Path Inc., was filed in the Northern District of California.
Principal Deputy Assistant Attorney General Delery thanked the FTC for investigating this matter and referring it to the department. The Consumer Protection Branch of the Justice Department’s Civil Division brought the case on behalf of the United States.
Sunday, February 3, 2013
MICHIGAN COMPANY ORDERED TO KEEP WASTEWATER AND FOOD PRODUCT SEPARATE
FROM: U.S. DEPARTMENT OF JUSTICE
Monday, January 28, 2013
Permanent Injunction Entered Against Michigan-Based Manufacturer of Soy Products
U.S. District Judge David M. Lawson, of the Eastern District of Michigan, entered a consent decree of permanent injunction against Ann Arbor, Michigan-based Green Hope LLC, dba Rosewood Products, and its president, Phil G. Ye, the Justice Department announced today.
The company manufactures and sells ready-to-eat organic tofu and soy milk products to businesses in Michigan and Minnesota, including organic supermarket chains. As alleged in the complaint filed against the company and Ye, numerous Food and Drug Administration (FDA) inspections since 2009 found persistent violations at the company’s manufacturing facility involving insanitary conditions. FDA’s inspections found that Green Hope did not store food properly, did not address employee cleanliness issues, permitted waste water to come into contact with tofu during processing and failed to clean all food-contact surfaces and equipment. These violations raised the possibility of contamination of the company’s food products.
The consent decree orders Green Hope and Ye to take a wide range of actions to correct the violations and ensure that they do not happen again. Among other actions, Green Hope must develop and implement sanitation control programs; provide FDA the opportunity to inspect the facilities to assure Green Hope’s compliance with the consent decree, the Food, Drug and Cosmetic Act, and applicable regulations; and receive written authorization from FDA to resume operations. Green Hope must also make structural repairs to its facility necessary to protect against contamination of raw ingredients, in-process and finished articles of food, containers and packaging materials.
"This company has a long history of not complying with federal statutes and regulations intended to protect the public health," said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Justice Department’s Civil Division. "Consumers expect, and deserve, that their food be safe to eat, and the Department of Justice will continue to take enforcement action against food manufacturers whose conduct can endanger public safety."
This case was litigated by Dan Baeza of the Consumer Protection Branch in the Department of Justice’s Civil Division in conjunction with Assistant U.S. Attorney Peter A. Caplan of the U.S. Attorney’s Office for the Eastern District of Michigan and Christopher Fanelli of the FDA’s Office of Chief Counsel. The case was investigated by the FDA’s Detroit District Office.
Monday, January 28, 2013
Permanent Injunction Entered Against Michigan-Based Manufacturer of Soy Products
U.S. District Judge David M. Lawson, of the Eastern District of Michigan, entered a consent decree of permanent injunction against Ann Arbor, Michigan-based Green Hope LLC, dba Rosewood Products, and its president, Phil G. Ye, the Justice Department announced today.
The company manufactures and sells ready-to-eat organic tofu and soy milk products to businesses in Michigan and Minnesota, including organic supermarket chains. As alleged in the complaint filed against the company and Ye, numerous Food and Drug Administration (FDA) inspections since 2009 found persistent violations at the company’s manufacturing facility involving insanitary conditions. FDA’s inspections found that Green Hope did not store food properly, did not address employee cleanliness issues, permitted waste water to come into contact with tofu during processing and failed to clean all food-contact surfaces and equipment. These violations raised the possibility of contamination of the company’s food products.
The consent decree orders Green Hope and Ye to take a wide range of actions to correct the violations and ensure that they do not happen again. Among other actions, Green Hope must develop and implement sanitation control programs; provide FDA the opportunity to inspect the facilities to assure Green Hope’s compliance with the consent decree, the Food, Drug and Cosmetic Act, and applicable regulations; and receive written authorization from FDA to resume operations. Green Hope must also make structural repairs to its facility necessary to protect against contamination of raw ingredients, in-process and finished articles of food, containers and packaging materials.
"This company has a long history of not complying with federal statutes and regulations intended to protect the public health," said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Justice Department’s Civil Division. "Consumers expect, and deserve, that their food be safe to eat, and the Department of Justice will continue to take enforcement action against food manufacturers whose conduct can endanger public safety."
This case was litigated by Dan Baeza of the Consumer Protection Branch in the Department of Justice’s Civil Division in conjunction with Assistant U.S. Attorney Peter A. Caplan of the U.S. Attorney’s Office for the Eastern District of Michigan and Christopher Fanelli of the FDA’s Office of Chief Counsel. The case was investigated by the FDA’s Detroit District Office.
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