FROM: U.S. DEPARTMENT OF LABOR
US Labor Department obtains consent judgment to recover $3 million in back wages, damages for New Jersey gas station attendants
Company agrees to extensive monitoring program to ensure future FLSA compliance
MADISON, N.J. — Daniyal Enterprises LLC and owner Waseem Chaudhary, and other companies owned and operated by Chaudhary, have agreed to pay $2 million in overtime back wages and an additional $1 million in liquidated damages to 417 workers employed at 72 of Chaudhary's New Jersey gas stations after investigations by the U.S. Department of Labor's Wage and Hour Division found violations of the Fair Labor Standards Act.
The department also has assessed $91,000 in civil money penalties against this employer because of the repeat and willful nature of the violations. Additionally, the employer has agreed to take proactive measures, including a three-year monitoring program at each gas station, to ensure future FLSA compliance.
"This agreement returns hard-earned wages to workers in one of only two states that still mandates full-service gas pumps,"said acting Secretary of Labor Seth D. Harris. "All gas station owners and operators in New Jersey should take note of this precedent by reviewing their payroll practices and legal obligations. Gas station attendants are few in number, earn low wages, work long hours and often lack English proficiency — factors that contribute to their vulnerability as well as the importance of protecting their right to be paid properly."
Wage and Hour Division investigators found that employees often worked up to 84 hours per week, but did not receive earned overtime pay. Instead, many employees were paid partly on the payroll and partly off the books, sometimes in cash, to disguise the improper payment of overtime. The employer also failed to maintain accurate records of the hours employees worked.
A consent judgment outlining the terms of the agreement between the Labor Department and the employer has been filed in the U.S. District Court for the District of New Jersey. The three-year monitoring program will be supervised by an independent monitor who will report to the department. It will include the installation of biometric time clocks in each establishment; a notice to workers regarding the terms of the compliance agreement; FLSA training for all employees in English and other languages; an anti-kickback protection clause to ensure that all workers are paid any back wages due; and a toll-free telephone number for workers to report violations to the monitor.
In 2012, the Wage and Hour Division conducted more than 100 investigations as part of a multiyear enforcement initiative focused on FLSA compliance among New Jersey gas stations. More than $2.3 million in back wages was recovered for more than 500 gas station workers.
The FLSA requires that covered, nonexempt employees be paid at least the federal minimum wage of $7.25 per hour as well as one and one-half times their regular rates for hours worked over 40 per week. Additionally, the law requires that accurate records of employees' wages, hours and other conditions of employment be maintained. The FLSA also provides that employers who violate the law are, as a general rule, liable to employees for the back wages as well as an equal amount in liquidated damages.
The consent judgment was filed by the department's Regional Office of the Solicitor in New York.
Saturday, March 9, 2013
Friday, March 8, 2013
FINAL JUDGEMENTS ENTERED AGAINST J.C. REED AND COMPANY FOR VIOLATIONS OF SECURITIES LAWS
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Court enters final judgment against Defendants
The Securities and Exchange Commission ("Commission") announced today that the Honorable William J. Haynes, Jr., United States District Judge for the Middle District of Tennessee, entered final judgments on February 27, 2013 against J.C. Reed & Company ("JC Parent"), J.C. Reed Advisory Group ("JC Advisory") and Barron A. Mathis ("Mathis"). The final judgment against JC Parent and JC Advisory held them liable for disgorgement of $11,000,000 and prejudgment interest of $3,910,003.07, for a total of $14,910,003.07. The final judgment against Mathis restrained and enjoined him from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. Mathis also was held liable for disgorgement of $11,000,000 and prejudgment interest of $4,944,175.39, for a total of $15,944,175.39.
The Commission's Complaint, filed on November 18, 2008, alleged that, at various times from no later than 2005 through at least September 2008, JC Parent, JC Advisory, John C. Reed ("Reed"), the founder of JC Parent and JC Advisory, and Mathis facilitated the offer and sale of more than $11 million of JC Parent stock in unregistered transactions to over 100 investors in several states. According to the Complaint, JC Parent, JC Advisory, and Reed misrepresented and omitted material facts to investors relating to the value of the investors' stock, JC Parent's revenues and profitability, the use of key man life insurance proceeds for redemptions of Reed's JC Parent stock, and undisclosed sales commissions. The Complaint also alleges that Mathis promoted JC Parent stock to advisory clients and misrepresented material facts to investors about undisclosed sales commissions. In addition, the Complaint alleges that JC Advisory used JC Parent's inflated stock values to falsely report assets under management as JC Advisory's basis for registration with the Commission and on reports filed with the Commission.
Court enters final judgment against Defendants
The Securities and Exchange Commission ("Commission") announced today that the Honorable William J. Haynes, Jr., United States District Judge for the Middle District of Tennessee, entered final judgments on February 27, 2013 against J.C. Reed & Company ("JC Parent"), J.C. Reed Advisory Group ("JC Advisory") and Barron A. Mathis ("Mathis"). The final judgment against JC Parent and JC Advisory held them liable for disgorgement of $11,000,000 and prejudgment interest of $3,910,003.07, for a total of $14,910,003.07. The final judgment against Mathis restrained and enjoined him from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. Mathis also was held liable for disgorgement of $11,000,000 and prejudgment interest of $4,944,175.39, for a total of $15,944,175.39.
The Commission's Complaint, filed on November 18, 2008, alleged that, at various times from no later than 2005 through at least September 2008, JC Parent, JC Advisory, John C. Reed ("Reed"), the founder of JC Parent and JC Advisory, and Mathis facilitated the offer and sale of more than $11 million of JC Parent stock in unregistered transactions to over 100 investors in several states. According to the Complaint, JC Parent, JC Advisory, and Reed misrepresented and omitted material facts to investors relating to the value of the investors' stock, JC Parent's revenues and profitability, the use of key man life insurance proceeds for redemptions of Reed's JC Parent stock, and undisclosed sales commissions. The Complaint also alleges that Mathis promoted JC Parent stock to advisory clients and misrepresented material facts to investors about undisclosed sales commissions. In addition, the Complaint alleges that JC Advisory used JC Parent's inflated stock values to falsely report assets under management as JC Advisory's basis for registration with the Commission and on reports filed with the Commission.
Thursday, March 7, 2013
AMBULANCE SERVICE COMPANY OWNER CONVICETED IN MEDICARE FRAUD SCHEME
FROM: U.S. DEPARTMENT OF JUSTICE
Tuesday, March 5, 2013
Owner and Operator of Houston-Area Ambulance Service Convicted in Medicare Fraud Scheme
The owner and operator of a Houston-area ambulance company was convicted by a federal jury in Houston of multiple counts of health care fraud for submitting false and fraudulent claims to Medicare, Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Kenneth Magidson of the Southern District of Texas, Special Agent in Charge Stephen L. Morris of the FBI’s Houston Field Office and Special Agent in Charge Mike Fields of the U.S. Health and Human Services Office of Inspector General, Office of Investigations Houston Office announced today.
Olusola Elliott, 44, of Fort Bend County, Texas, was convicted late yesterday by a federal jury in U.S. District Court in the Southern District of Texas of one count of conspiracy to commit health care fraud and six counts of health care fraud.
Elliott was the owner and operator of Double Daniels LLC, a Texas entity that purportedly provided non-emergency ambulance services to Medicare beneficiaries in the Houston area. According to evidence presented at trial, Elliott and others conspired from April 2010 through December 2011 to unlawfully enrich themselves by submitting false and fraudulent claims to Medicare for ambulance services that were medically unnecessary and not provided. Evidence showed that Elliott falsified patient records in order to fraudulently bill Medicare on behalf of beneficiaries who were not in need of ambulance services.
During the course of the scheme, Elliott submitted and caused the submission of approximately $1,713,716 in fraudulent ambulance service claims to Medicare. According to court documents, Elliot transferred the proceeds of the fraud to himself and others after Medicare payments were sent to Double Daniels.
Elliot is scheduled for sentencing on May 31, 2013, in Houston. The six health care fraud counts and the conspiracy count each carry a maximum potential penalty of 10 years in prison and a $250,000 fine
This case is being prosecuted by Trial Attorneys Christopher Cestaro and Laura M.K. Cordova of the Criminal Division’s Fraud Section with assistance from former Special Assistant U.S. Attorney James S. Seaman. The case was investigated by the FBI, HHS-OIG and the Texas Attorney General Medicaid Fraud Control Unit. The case was brought as part of the Medicare Fraud Strike Force, supervised by the U.S. Attorney’s Office for the Southern District of Texas and the Criminal Division’s Fraud Section.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,480 defendants who have collectively billed the Medicare program for more than $4.8 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.
Tuesday, March 5, 2013
Owner and Operator of Houston-Area Ambulance Service Convicted in Medicare Fraud Scheme
The owner and operator of a Houston-area ambulance company was convicted by a federal jury in Houston of multiple counts of health care fraud for submitting false and fraudulent claims to Medicare, Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Kenneth Magidson of the Southern District of Texas, Special Agent in Charge Stephen L. Morris of the FBI’s Houston Field Office and Special Agent in Charge Mike Fields of the U.S. Health and Human Services Office of Inspector General, Office of Investigations Houston Office announced today.
Olusola Elliott, 44, of Fort Bend County, Texas, was convicted late yesterday by a federal jury in U.S. District Court in the Southern District of Texas of one count of conspiracy to commit health care fraud and six counts of health care fraud.
Elliott was the owner and operator of Double Daniels LLC, a Texas entity that purportedly provided non-emergency ambulance services to Medicare beneficiaries in the Houston area. According to evidence presented at trial, Elliott and others conspired from April 2010 through December 2011 to unlawfully enrich themselves by submitting false and fraudulent claims to Medicare for ambulance services that were medically unnecessary and not provided. Evidence showed that Elliott falsified patient records in order to fraudulently bill Medicare on behalf of beneficiaries who were not in need of ambulance services.
During the course of the scheme, Elliott submitted and caused the submission of approximately $1,713,716 in fraudulent ambulance service claims to Medicare. According to court documents, Elliot transferred the proceeds of the fraud to himself and others after Medicare payments were sent to Double Daniels.
Elliot is scheduled for sentencing on May 31, 2013, in Houston. The six health care fraud counts and the conspiracy count each carry a maximum potential penalty of 10 years in prison and a $250,000 fine
This case is being prosecuted by Trial Attorneys Christopher Cestaro and Laura M.K. Cordova of the Criminal Division’s Fraud Section with assistance from former Special Assistant U.S. Attorney James S. Seaman. The case was investigated by the FBI, HHS-OIG and the Texas Attorney General Medicaid Fraud Control Unit. The case was brought as part of the Medicare Fraud Strike Force, supervised by the U.S. Attorney’s Office for the Southern District of Texas and the Criminal Division’s Fraud Section.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,480 defendants who have collectively billed the Medicare program for more than $4.8 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.
Wednesday, March 6, 2013
MAN GOES TO PRISON AND WILL PAY $34.5 MILLION FOR PART IN SILVER BULLION PONZI SCHEME
FROM: COMMODITY FUTURES TRADING COMMISSION
CFTC Settles Charges against Ronnie Gene Wilson of South Carolina and His Company, Atlantic Bullion and Coin, for Operating a Multi-Million Dollar Silver Bullion Ponzi Scheme
Federal court in South Carolina orders Wilson to pay over $34.5 million dollars in restitution and a civil monetary penalty
In a parallel criminal action, Wilson pleaded guilty to mail fraud and was sentenced to 235 months in prison
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge J. Michelle Childs of the U.S. District Court for the District of South Carolina issued an Order requiring Defendant Ronnie Gene Wilson to pay a $23 million civil monetary penalty and $11,530,000 of restitution to defrauded investors in connection with a multi-million dollar silver bullion Ponzi scheme. The Consent Order of Permanent Injunction also imposes permanent trading and registration bans against Wilson and his company, Atlantic Bullion & Coin, Inc. (Atlantic Bullion), both of Easley, S.C., and prohibits them from violating the Commodity Exchange Act and CFTC Regulations, as charged.
The Order stems from a CFTC Complaint filed on June 6, 2012, charging violations under the CFTC’s new authority contained within the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) prohibiting the use of any manipulative device, scheme, or artifice to defraud in connection with a contract of sale of a commodity in interstate commerce. Wilson and Atlantic Bullion were charged with fraudulently selling contracts of sale of silver to investors in a nationwide scheme that spanned 11 years.
In the Consent Order, the court concludes that the Defendants fraudulently obtained at least $11.53 million from at least 237 investors for the purchase of contracts of sale of silver bullion between August 15, 2011, and February 29, 2012 (the relevant period), which corresponds to the time period during which the CFTC possessed jurisdiction over the Defendants’ actions pursuant to new provisions contained within the Dodd-Frank Act. The Order further finds that, during the relevant period, the Defendants failed to purchase any silver whatsoever. Instead, the Order concludes that the Defendants misappropriated the entirety of the investors’ funds and issued false account statements to investors in an attempt to conceal their fraud.
In a related criminal proceeding in November 2012, Wilson was sentenced to serve the maximum 235 months imprisonment under the applicable federal sentencing guidelines and ordered to pay $57,401,009 in restitution to his victims for his involvement in the Ponzi scheme (US v. Wilson, 8:12-00320, D. SC).
The CFTC appreciates the cooperation and assistance in this matter from the U.S. Attorney’s Office for the District of South Carolina (including Assistant U.S. Attorney George J. Conits and Assistant United States Attorney William J. Watkins, Jr.), the South Carolina Attorney General’s Office, and the U.S. Secret Service.
The CFTC Division of Enforcement staff responsible for this case are A. Daniel Ullman II, George H. Malas, Antoinette Chance, John Einstman, Richard Foelber, Paul G. Hayeck, and Joan M. Manley.
CFTC Settles Charges against Ronnie Gene Wilson of South Carolina and His Company, Atlantic Bullion and Coin, for Operating a Multi-Million Dollar Silver Bullion Ponzi Scheme
Federal court in South Carolina orders Wilson to pay over $34.5 million dollars in restitution and a civil monetary penalty
In a parallel criminal action, Wilson pleaded guilty to mail fraud and was sentenced to 235 months in prison
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge J. Michelle Childs of the U.S. District Court for the District of South Carolina issued an Order requiring Defendant Ronnie Gene Wilson to pay a $23 million civil monetary penalty and $11,530,000 of restitution to defrauded investors in connection with a multi-million dollar silver bullion Ponzi scheme. The Consent Order of Permanent Injunction also imposes permanent trading and registration bans against Wilson and his company, Atlantic Bullion & Coin, Inc. (Atlantic Bullion), both of Easley, S.C., and prohibits them from violating the Commodity Exchange Act and CFTC Regulations, as charged.
The Order stems from a CFTC Complaint filed on June 6, 2012, charging violations under the CFTC’s new authority contained within the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) prohibiting the use of any manipulative device, scheme, or artifice to defraud in connection with a contract of sale of a commodity in interstate commerce. Wilson and Atlantic Bullion were charged with fraudulently selling contracts of sale of silver to investors in a nationwide scheme that spanned 11 years.
In the Consent Order, the court concludes that the Defendants fraudulently obtained at least $11.53 million from at least 237 investors for the purchase of contracts of sale of silver bullion between August 15, 2011, and February 29, 2012 (the relevant period), which corresponds to the time period during which the CFTC possessed jurisdiction over the Defendants’ actions pursuant to new provisions contained within the Dodd-Frank Act. The Order further finds that, during the relevant period, the Defendants failed to purchase any silver whatsoever. Instead, the Order concludes that the Defendants misappropriated the entirety of the investors’ funds and issued false account statements to investors in an attempt to conceal their fraud.
In a related criminal proceeding in November 2012, Wilson was sentenced to serve the maximum 235 months imprisonment under the applicable federal sentencing guidelines and ordered to pay $57,401,009 in restitution to his victims for his involvement in the Ponzi scheme (US v. Wilson, 8:12-00320, D. SC).
The CFTC appreciates the cooperation and assistance in this matter from the U.S. Attorney’s Office for the District of South Carolina (including Assistant U.S. Attorney George J. Conits and Assistant United States Attorney William J. Watkins, Jr.), the South Carolina Attorney General’s Office, and the U.S. Secret Service.
The CFTC Division of Enforcement staff responsible for this case are A. Daniel Ullman II, George H. Malas, Antoinette Chance, John Einstman, Richard Foelber, Paul G. Hayeck, and Joan M. Manley.
Tuesday, March 5, 2013
REMARKS BY MARTIN GRUENBERG, CHAIRMAN, FDIC REGARDING FINANCIAL CRISIS
FROM: FEDERAL INSURANCE DEPOSIT CORPORATION
Remarks by Martin J. Gruenberg, Chairman, FDIC to the Annual Washington Conference of the Institute of International Bankers; Washington, DC March 4, 2013
Introduction
It is a pleasure to take part in the Annual Washington Conference of the Institute of International Bankers.
Today I would like to focus my remarks on one of the key challenges we face in the aftermath of the financial crisis of 2008-2009 – developing the capability to manage the orderly resolution of a systemically important financial institution (SIFI) with extensive cross-border operations.
Prior to the crisis, this was an issue that was not the subject of significant international attention. Yet during the course of the crisis it became apparent that all of the major countries lacked this capability. National jurisdictions lacked the basic authorities to manage an orderly resolution of a SIFI, had no plans in place and no operational capability to carry out an orderly resolution even if authorities had existed, and had not developed cross-border relationships with key foreign authorities to facilitate critical international cooperation. As a result, there was no ability to hold these firms accountable to the discipline of the marketplace, by which I mean allowing these firms to fail and ensuring that shareholders were wiped out, unsecured creditors haircut, and culpable management replaced.
In the aftermath of the crisis, I think it is fair to say that this has been a subject of intense international attention by both the Financial Stability Board of the G-20 countries at the multilateral level, as well as at the level of national and regional jurisdictions.
I thought I would use my remarks today to describe the progress we have made in the United States, as well as with some of our key foreign counterpart jurisdictions in this critical area of financial reform.
Progress in the United States
Prior to the crisis, the resolution authorities of the FDIC were limited only to FDIC-insured depository institutions. The FDIC did not have authority to place the holding company or affiliates of an FDIC-insured institution into a public receivership process, nor did it have authority to place a nonbank financial company whose failure might pose a risk to the financial system into resolution.
Title II of the Dodd-Frank Act provided the FDIC these crucial authorities which are really a threshold for the capability to manage an orderly resolution of a SIFI. Given the highly integrated nature of the largest, most complex and diversified financial companies with extensive cross border operations, authority to place the consolidated entity into a resolution process is critical.
Since the enactment of Dodd-Frank, the FDIC has been actively developing internal resolution plans for our major companies based on the expanded authorities provided by the new law. In July 2011 the FDIC Board approved a final rule implementing the Title II authority.
In addition, Title I of the Dodd-Frank Act requires bank holding companies with total consolidated assets of $50 billion or more, and certain nonbank financial companies that the Financial Stability Oversight Council (FSOC) designates as systemic, to develop, maintain, and periodically submit to the FDIC and the Federal Reserve Board resolution plans that are credible and would enable these entities to be resolved under the Bankruptcy Code. These are the so-called "living wills." In 2011 the FDIC and the Federal Reserve Board jointly issued the basic rulemaking regarding these resolution plans. On July 1, 2012 the first group of living wills, generally involving bank holding companies and foreign banking organizations with $250 billion or more in nonbank assets, was received. Banking organizations with less than $250 billion, but with $100 billion or more in assets will file by July 1 of this year, and all other banking organizations with assets over $50 billion will file by December 31.
The FDIC and the Federal Reserve are currently in the process of reviewing the first round of plans submitted by the largest companies. As I indicated, the Dodd-Frank Act requires that the ultimate result of this process is that these plans be credible and facilitate an orderly resolution of these firms under the Bankruptcy Code.
International Efforts on Resolution
In October 2011 the Financial Stability Board (FSB) of the G-20 countries released the Key Attributes of Effective Resolution Regimes for Financial Institutions which set out the core elements that the FSB considers to be necessary for an effective resolution regime. The Key Attributes, as they are known, outline critical resolutions authorities along the lines of those available in the United States under the Federal Deposit Insurance Act and the Dodd-Frank Act.
In order to monitor compliance by member jurisdictions with international standards promulgated by the FSB, including the Key Attributes, the FSB has established a regular program of country and thematic peer reviews of its member jurisdictions. The FDIC is currently leading the first peer review to evaluate FSB jurisdictions’ existing resolution regimes and any planned changes to those regimes using the Key Attributes as a benchmark. This review will compare national resolution regimes across both individual Key Attributes and across different financial sectors. It will provide recommendations for future work by the FSB and its members in support of an effective and credible resolution regime for SIFIs. We expect the final report of the peer review to be released this spring.
In addition to its multilateral work with the FSB, the FDIC has been actively engaging on a bilateral basis with its key counterpart jurisdictions. Section 210 of the Dodd-Frank Act expressly requires the FDIC to "coordinate, to the maximum extent feasible" with appropriate foreign regulatory authorities in the event of the resolution of a systemic financial company with cross-border operations.
As part of our bilateral efforts, the FDIC and the Bank of England, in conjunction with the prudential regulators in our jurisdictions, have been working to develop contingency plans for the failure of Global SIFIs (G-SIFIs) that have operations in both the U.S. and the U.K. Of the 28 G-SIFIs designated by the Financial Stability Board, 4 are headquartered in the U.K, and another 8 are headquartered in the U.S. Moreover, around two-thirds of the reported foreign activities of the 8 U.S. SIFIs emanates from the U.K.1 The magnitude of these financial relationships makes the U.S. – U.K. bilateral relationship by far the most important with regard to global financial stability. As a result, our two countries have a strong mutual interest in ensuring that, if such an institution should fail, it can be resolved at no cost to taxpayers and without placing the financial system at risk.
As this working relationship has developed, we have discovered a significant commonality in our thinking on the basic approach to a SIFI resolution. The approach involves taking control of the failing institution at the parent company level, imposing losses on shareholders and creditors, as well as replacing culpable management at that level, while allowing solvent subsidiaries, domestic and foreign, to remain open and operating thereby minimizing disruption to the wider financial system. In December, the FDIC and the Bank of England released a joint paper outlining our work together that can be accessed on the FDIC’s website.
In addition, the FDIC has also launched an extensive bilateral dialogue on both resolution and deposit insurance with the European Commission.
Last year, the EC published a draft Recovery and Resolution Directive to establish a framework for dealing with failed and failing financial institutions which is expected to be finalized this spring. The overall authorities outlined in this document has a number of parallels to the SIFI resolution authorities provided here in the U.S. under the Dodd-Frank Act.
European authorities have also called for the establishment of a European resolution agency, expected to be proposed this year, that would have broad legal powers and work closely with national authorities.
These recent developments signaled an opportunity for the FDIC to engage our counterparts in the European Union with the goal of better coordinating our resolution planning as well as share experience on deposit guaranty schemes. As a result, the EC and the FDIC have agreed to establish a joint working group made up of senior officials from our respective agencies that would meet twice a year, once in Washington and once in Brussels, to discuss issues of mutual interest relating to resolution and deposit insurance.
The first meeting of the joint working group took place in Washington last month.
Among the topics discussed at that meeting were:
the EC’s proposed directive on bank recovery and resolution;
deposit guarantee regimes;
the FDIC’s work on planning for SIFI resolutions; and
future initiatives that might be undertaken related to cross-border cooperation.
The next meeting of the Working Group will take place in Brussels later this year. We will also be exchanging detailees twice a year as a way to develop better understanding of our respective organizations.
Let me say that as Europe moves toward greater fiscal consolidation and the establishment of a single bank regulator, there is a strong logic for the European Community to develop a European wide approach to both cross border resolution and deposit insurance. In that regard, the FDIC may have useful and relevant experience to share. We very much look forward to our ongoing engagement with the EC.
Conclusion
Let me say in conclusion that we understand that there is a great deal more work to do in terms of developing effective cross border relationships with our key foreign counterparts in order to manage an orderly resolution of a globally active SIFI. I do believe that the initiatives I have outlined today represent meaningful steps in that direction. We are very committed to pursuing these efforts. The stakes for both international financial stability and market accountability for these global financial institutions are very high.
Remarks by Martin J. Gruenberg, Chairman, FDIC to the Annual Washington Conference of the Institute of International Bankers; Washington, DC March 4, 2013
Introduction
It is a pleasure to take part in the Annual Washington Conference of the Institute of International Bankers.
Today I would like to focus my remarks on one of the key challenges we face in the aftermath of the financial crisis of 2008-2009 – developing the capability to manage the orderly resolution of a systemically important financial institution (SIFI) with extensive cross-border operations.
Prior to the crisis, this was an issue that was not the subject of significant international attention. Yet during the course of the crisis it became apparent that all of the major countries lacked this capability. National jurisdictions lacked the basic authorities to manage an orderly resolution of a SIFI, had no plans in place and no operational capability to carry out an orderly resolution even if authorities had existed, and had not developed cross-border relationships with key foreign authorities to facilitate critical international cooperation. As a result, there was no ability to hold these firms accountable to the discipline of the marketplace, by which I mean allowing these firms to fail and ensuring that shareholders were wiped out, unsecured creditors haircut, and culpable management replaced.
In the aftermath of the crisis, I think it is fair to say that this has been a subject of intense international attention by both the Financial Stability Board of the G-20 countries at the multilateral level, as well as at the level of national and regional jurisdictions.
I thought I would use my remarks today to describe the progress we have made in the United States, as well as with some of our key foreign counterpart jurisdictions in this critical area of financial reform.
Progress in the United States
Prior to the crisis, the resolution authorities of the FDIC were limited only to FDIC-insured depository institutions. The FDIC did not have authority to place the holding company or affiliates of an FDIC-insured institution into a public receivership process, nor did it have authority to place a nonbank financial company whose failure might pose a risk to the financial system into resolution.
Title II of the Dodd-Frank Act provided the FDIC these crucial authorities which are really a threshold for the capability to manage an orderly resolution of a SIFI. Given the highly integrated nature of the largest, most complex and diversified financial companies with extensive cross border operations, authority to place the consolidated entity into a resolution process is critical.
Since the enactment of Dodd-Frank, the FDIC has been actively developing internal resolution plans for our major companies based on the expanded authorities provided by the new law. In July 2011 the FDIC Board approved a final rule implementing the Title II authority.
In addition, Title I of the Dodd-Frank Act requires bank holding companies with total consolidated assets of $50 billion or more, and certain nonbank financial companies that the Financial Stability Oversight Council (FSOC) designates as systemic, to develop, maintain, and periodically submit to the FDIC and the Federal Reserve Board resolution plans that are credible and would enable these entities to be resolved under the Bankruptcy Code. These are the so-called "living wills." In 2011 the FDIC and the Federal Reserve Board jointly issued the basic rulemaking regarding these resolution plans. On July 1, 2012 the first group of living wills, generally involving bank holding companies and foreign banking organizations with $250 billion or more in nonbank assets, was received. Banking organizations with less than $250 billion, but with $100 billion or more in assets will file by July 1 of this year, and all other banking organizations with assets over $50 billion will file by December 31.
The FDIC and the Federal Reserve are currently in the process of reviewing the first round of plans submitted by the largest companies. As I indicated, the Dodd-Frank Act requires that the ultimate result of this process is that these plans be credible and facilitate an orderly resolution of these firms under the Bankruptcy Code.
International Efforts on Resolution
In October 2011 the Financial Stability Board (FSB) of the G-20 countries released the Key Attributes of Effective Resolution Regimes for Financial Institutions which set out the core elements that the FSB considers to be necessary for an effective resolution regime. The Key Attributes, as they are known, outline critical resolutions authorities along the lines of those available in the United States under the Federal Deposit Insurance Act and the Dodd-Frank Act.
In order to monitor compliance by member jurisdictions with international standards promulgated by the FSB, including the Key Attributes, the FSB has established a regular program of country and thematic peer reviews of its member jurisdictions. The FDIC is currently leading the first peer review to evaluate FSB jurisdictions’ existing resolution regimes and any planned changes to those regimes using the Key Attributes as a benchmark. This review will compare national resolution regimes across both individual Key Attributes and across different financial sectors. It will provide recommendations for future work by the FSB and its members in support of an effective and credible resolution regime for SIFIs. We expect the final report of the peer review to be released this spring.
In addition to its multilateral work with the FSB, the FDIC has been actively engaging on a bilateral basis with its key counterpart jurisdictions. Section 210 of the Dodd-Frank Act expressly requires the FDIC to "coordinate, to the maximum extent feasible" with appropriate foreign regulatory authorities in the event of the resolution of a systemic financial company with cross-border operations.
As part of our bilateral efforts, the FDIC and the Bank of England, in conjunction with the prudential regulators in our jurisdictions, have been working to develop contingency plans for the failure of Global SIFIs (G-SIFIs) that have operations in both the U.S. and the U.K. Of the 28 G-SIFIs designated by the Financial Stability Board, 4 are headquartered in the U.K, and another 8 are headquartered in the U.S. Moreover, around two-thirds of the reported foreign activities of the 8 U.S. SIFIs emanates from the U.K.1 The magnitude of these financial relationships makes the U.S. – U.K. bilateral relationship by far the most important with regard to global financial stability. As a result, our two countries have a strong mutual interest in ensuring that, if such an institution should fail, it can be resolved at no cost to taxpayers and without placing the financial system at risk.
As this working relationship has developed, we have discovered a significant commonality in our thinking on the basic approach to a SIFI resolution. The approach involves taking control of the failing institution at the parent company level, imposing losses on shareholders and creditors, as well as replacing culpable management at that level, while allowing solvent subsidiaries, domestic and foreign, to remain open and operating thereby minimizing disruption to the wider financial system. In December, the FDIC and the Bank of England released a joint paper outlining our work together that can be accessed on the FDIC’s website.
In addition, the FDIC has also launched an extensive bilateral dialogue on both resolution and deposit insurance with the European Commission.
Last year, the EC published a draft Recovery and Resolution Directive to establish a framework for dealing with failed and failing financial institutions which is expected to be finalized this spring. The overall authorities outlined in this document has a number of parallels to the SIFI resolution authorities provided here in the U.S. under the Dodd-Frank Act.
European authorities have also called for the establishment of a European resolution agency, expected to be proposed this year, that would have broad legal powers and work closely with national authorities.
These recent developments signaled an opportunity for the FDIC to engage our counterparts in the European Union with the goal of better coordinating our resolution planning as well as share experience on deposit guaranty schemes. As a result, the EC and the FDIC have agreed to establish a joint working group made up of senior officials from our respective agencies that would meet twice a year, once in Washington and once in Brussels, to discuss issues of mutual interest relating to resolution and deposit insurance.
The first meeting of the joint working group took place in Washington last month.
Among the topics discussed at that meeting were:
deposit guarantee regimes;
the FDIC’s work on planning for SIFI resolutions; and
future initiatives that might be undertaken related to cross-border cooperation.
The next meeting of the Working Group will take place in Brussels later this year. We will also be exchanging detailees twice a year as a way to develop better understanding of our respective organizations.
Let me say that as Europe moves toward greater fiscal consolidation and the establishment of a single bank regulator, there is a strong logic for the European Community to develop a European wide approach to both cross border resolution and deposit insurance. In that regard, the FDIC may have useful and relevant experience to share. We very much look forward to our ongoing engagement with the EC.
Conclusion
Let me say in conclusion that we understand that there is a great deal more work to do in terms of developing effective cross border relationships with our key foreign counterparts in order to manage an orderly resolution of a globally active SIFI. I do believe that the initiatives I have outlined today represent meaningful steps in that direction. We are very committed to pursuing these efforts. The stakes for both international financial stability and market accountability for these global financial institutions are very high.
Monday, March 4, 2013
CHINA BASED INSURER CHARGED BY SEC WITH FAILING TO IMPLEMENT PROPER INTERNAL ACCOUNTING CONTROLS
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission ("Commission") today charged Keyuan Petrochemicals, Inc., a China-based issuer formed through a reverse merger in April 2010, with violations of the anti-fraud, reporting, books and records, and internal control provisions of the federal securities laws. The SEC further charged Aichun Li, Keyuan’s former Chief Financial Officer, with aiding and abetting Keyuan’s reporting and books and records violations and for failing to implement internal accounting controls. Keyuan and Li have agreed to settle the SEC’s claims against them.
According to the SEC’s complaint, between May 2010 and January 2011, in what was its first year as a U.S. public company, Keyuan systematically failed to disclose in its SEC filings numerous material related party transactions, as required by U.S. Generally Accepted Accounting Principles ("GAAP") and Commission rules and regulations. The related parties included the company’s three founding and controlling shareholders, including its current Chief Executive Officer, entities controlled by or affiliated with these persons, and entities controlled by Keyuan’s management or their family members. The related party transactions included sales of products, purchases of raw materials, loan guarantees, and short term financing.
Keyuan also operated an off-balance sheet cash account that was kept off the company’s books by the former Vice President of Accounting. The account was used to pay for various items, including cash bonuses for senior officers and reimbursements to the CEO for business expenses, including travel, entertainment, and rent for an apartment. The account was also used to fund gifts—both cash and non-cash—for Chinese government officials. By failing to properly record these transactions on the company’s books and records, the company misstated its reported balances in its financial statements filed with the Commission.
The SEC further alleges that Keyuan’s then-CFO Aichun Li, a resident of North Carolina, played a role in the company’s failure to disclose the related party transactions. Li was hired to ensure the company’s compliance with U.S. accounting and financial reporting regulations, and she received information and encountered red flags that should have indicated that the company was not properly identifying or disclosing related party transactions. Despite such knowledge, Li signed Keyuan’s registration statements and quarterly reports that failed to disclose material related party transactions.
The SEC’s complaint, which was filed in federal court in Washington, D.C., charges Keyuan with violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 ("Securities Act"), Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rules 12b-20 and 13a-13 thereunder. The SEC’s complaint further charges Li with violations of Section 13(b)(5) of the Exchange Act and aiding and abetting Keyuan’s violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20 and 13a-13 thereunder.
Without admitting or denying the claims against them, Keyuan and Li have consented to the entry of a judgment permanently enjoining them from violations of the respective provisions of the Securities Act and Exchange Act. Keyuan has agreed to pay a civil penalty in the amount of $1,000,000. Li has agreed to pay a civil penalty in the amount of $25,000. Li also has consented to the issuance of a Commission order, pursuant to Rule 102(e)(3) of the Commission’s Rules of Practice, suspending her from appearing or practicing as an accountant before the Commission with the right to apply for reinstatement after two years. The proposed settlement is subject to approval by the court.
The Securities and Exchange Commission ("Commission") today charged Keyuan Petrochemicals, Inc., a China-based issuer formed through a reverse merger in April 2010, with violations of the anti-fraud, reporting, books and records, and internal control provisions of the federal securities laws. The SEC further charged Aichun Li, Keyuan’s former Chief Financial Officer, with aiding and abetting Keyuan’s reporting and books and records violations and for failing to implement internal accounting controls. Keyuan and Li have agreed to settle the SEC’s claims against them.
According to the SEC’s complaint, between May 2010 and January 2011, in what was its first year as a U.S. public company, Keyuan systematically failed to disclose in its SEC filings numerous material related party transactions, as required by U.S. Generally Accepted Accounting Principles ("GAAP") and Commission rules and regulations. The related parties included the company’s three founding and controlling shareholders, including its current Chief Executive Officer, entities controlled by or affiliated with these persons, and entities controlled by Keyuan’s management or their family members. The related party transactions included sales of products, purchases of raw materials, loan guarantees, and short term financing.
Keyuan also operated an off-balance sheet cash account that was kept off the company’s books by the former Vice President of Accounting. The account was used to pay for various items, including cash bonuses for senior officers and reimbursements to the CEO for business expenses, including travel, entertainment, and rent for an apartment. The account was also used to fund gifts—both cash and non-cash—for Chinese government officials. By failing to properly record these transactions on the company’s books and records, the company misstated its reported balances in its financial statements filed with the Commission.
The SEC further alleges that Keyuan’s then-CFO Aichun Li, a resident of North Carolina, played a role in the company’s failure to disclose the related party transactions. Li was hired to ensure the company’s compliance with U.S. accounting and financial reporting regulations, and she received information and encountered red flags that should have indicated that the company was not properly identifying or disclosing related party transactions. Despite such knowledge, Li signed Keyuan’s registration statements and quarterly reports that failed to disclose material related party transactions.
The SEC’s complaint, which was filed in federal court in Washington, D.C., charges Keyuan with violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 ("Securities Act"), Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rules 12b-20 and 13a-13 thereunder. The SEC’s complaint further charges Li with violations of Section 13(b)(5) of the Exchange Act and aiding and abetting Keyuan’s violations of Sections 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 12b-20 and 13a-13 thereunder.
Without admitting or denying the claims against them, Keyuan and Li have consented to the entry of a judgment permanently enjoining them from violations of the respective provisions of the Securities Act and Exchange Act. Keyuan has agreed to pay a civil penalty in the amount of $1,000,000. Li has agreed to pay a civil penalty in the amount of $25,000. Li also has consented to the issuance of a Commission order, pursuant to Rule 102(e)(3) of the Commission’s Rules of Practice, suspending her from appearing or practicing as an accountant before the Commission with the right to apply for reinstatement after two years. The proposed settlement is subject to approval by the court.
Sunday, March 3, 2013
JUSTICE SETTLES IMMIGRATION-RELATED DISCRIMINATION CLAIM
FROM: U.S. DEPARTMENT OF JUSTICE
Thursday, February 28, 2013
Justice Department Settles Immigration-Related Discrimination Claim Against Illinois Staffing Agency
The Justice Department today reached an agreement with The Agency Staffing located in West Dundee, Ill., resolving claims that the staffing company violated the anti-discrimination provisions of the Immigration and Nationality Act (INA).
The Justice Department’s investigation was initiated based on a referral from the U.S. Citizenship and Immigration Services (USCIS) under a memorandum of agreement between the Civil Rights Division and USCIS. The department’s investigation concluded that The Agency Staffing applied enhanced employment eligibility procedures to work-authorized non-U.S. citizens that were run through E-Verify. The company did not utilize these additional procedures when it ran U.S. Citizens through E-Verify. E-Verify is an Internet-based system run by USCIS that confirms employment eligibility by comparing information from an employee’s Form I-9.
Under the settlement agreement, The Agency Staffing will pay $8,400 in civil penalties to the United States, undergo Justice Department training on the anti-discrimination provision of the INA, and be subject to monitoring of its employment eligibility verification practices for a period of three years. The case settled prior to the Justice Department filing a complaint in this matter.
"Employers cannot create higher hurdles for non-U.S. citizens in the employment eligibility verification process, which includes E-Verify, than those required of U.S. citizens or those required by law," said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. "We commend The Agency Staffing for restructuring its hiring processes to ensure that it will no longer be treating new hires differently based on their citizenship status."
Thursday, February 28, 2013
Justice Department Settles Immigration-Related Discrimination Claim Against Illinois Staffing Agency
The Justice Department today reached an agreement with The Agency Staffing located in West Dundee, Ill., resolving claims that the staffing company violated the anti-discrimination provisions of the Immigration and Nationality Act (INA).
The Justice Department’s investigation was initiated based on a referral from the U.S. Citizenship and Immigration Services (USCIS) under a memorandum of agreement between the Civil Rights Division and USCIS. The department’s investigation concluded that The Agency Staffing applied enhanced employment eligibility procedures to work-authorized non-U.S. citizens that were run through E-Verify. The company did not utilize these additional procedures when it ran U.S. Citizens through E-Verify. E-Verify is an Internet-based system run by USCIS that confirms employment eligibility by comparing information from an employee’s Form I-9.
Under the settlement agreement, The Agency Staffing will pay $8,400 in civil penalties to the United States, undergo Justice Department training on the anti-discrimination provision of the INA, and be subject to monitoring of its employment eligibility verification practices for a period of three years. The case settled prior to the Justice Department filing a complaint in this matter.
"Employers cannot create higher hurdles for non-U.S. citizens in the employment eligibility verification process, which includes E-Verify, than those required of U.S. citizens or those required by law," said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. "We commend The Agency Staffing for restructuring its hiring processes to ensure that it will no longer be treating new hires differently based on their citizenship status."
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