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!
Showing posts with label U.S. JUSTICE DEPARTMENT. Show all posts
Showing posts with label U.S. JUSTICE DEPARTMENT. Show all posts
Saturday, February 9, 2013
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.
Thursday, January 31, 2013
U.S. ASSISTANT ATTORNEY GENERAL BREUER LEAVES JUSTICE DEPARTMENT
FROM: U.S. JUSTICE DEPARTMENT
Wednesday, January 30, 2013
Assistant Attorney General Lanny A. Breuer Announces Departure from Department of Justice
The Justice Department announced today that Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division will leave the department on March 1, 2013.
"Lanny has led one of the most successful and aggressive Criminal Divisions in the history of the Department of Justice, accomplishing record penalties in corruption cases at home and abroad and dismantling major organized crime and health care fraud networks around the country while also protecting the integrity of our banking systems and fighting financial fraud," said Attorney General Eric Holder. "Throughout his tenure, Lanny has demonstrated an unwavering commitment to the mission of this Department and I want to thank him for his dedication and exceptional service."
"Serving as Assistant Attorney General for the Criminal Division has been the greatest privilege of my professional life," said Assistant Attorney General Breuer. "From my first day on this job, nearly four years ago, I have loved it, and I am so proud of what the Criminal Division has accomplished over the past four years. I have had no higher honor than to work alongside the talented and dedicated men and women of the Criminal Division, and I will forever be grateful for the opportunity to serve the American people together with them."
Assistant Attorney General Breuer was unanimously confirmed by the U.S. Senate on April 20, 2009, and is the longest-serving head of the Criminal Division in recent history.
Under the leadership of Assistant Attorney General Breuer, the Criminal Division has taken significant steps to fight corruption at home and abroad, including by developing the innovative Kleptocracy Asset Recovery Initiative to identify and forfeit the proceeds of foreign official corruption – ensuring that corrupt officials from other countries are prevented from hiding their ill-gotten gains in the United States. The Criminal Division has also substantially increased enforcement of the Foreign Corrupt Practices Act (FCPA), convicting three dozen individuals for FCPA-related offenses – a record number – and entering into more than 40 corporate resolutions involving eight of the top 10 largest FCPA penalties in history. The Criminal Division also partnered with the Securities and Exchange Commission to publish groundbreaking guidance on FCPA enforcement.
Assistant Attorney General Breuer was asked by the Attorney General to oversee the Deepwater Horizon Task Force – created to investigate conduct leading up to, and following, the Deepwater Horizon explosion on April 20, 2010. The Task Force reached the largest criminal resolution in U.S. history with BP. On Jan. 29, 2013, BP was ordered to pay $4 billion in criminal fines and penalties after previously having agreed to plead guilty to 11 felony manslaughter charges, environmental crimes and obstruction of congress. The Criminal Division brought charges against four individuals in connection with the explosion and its aftermath as part of the ongoing investigation. Additionally, Assistant Attorney General Breuer has overseen efforts to combat fraud arising from the oil spill, as well as to detect and deter fraud in the wake of natural disasters such as Hurricane Sandy, through the Disaster Fraud Task Force.
Protecting the integrity of the banking system and fighting financial fraud have been hallmarks of the Criminal Division during Assistant Attorney General Breuer’s tenure. The division’s aggressive, ongoing investigation into manipulation of the London Interbank Offered Rate by global financial institutions has thus far led to nearly $2 billion in criminal penalties, as well as a guilty plea by a UBS subsidiary and charges against individuals. Assistant Attorney General Breuer also spearheaded the development of the division’s Money Laundering and Bank Integrity Unit to pursue financial institutions and individuals who violate money laundering statutes and the Bank Secrecy Act. Along with U.S. Attorney partners, the groundbreaking unit already has secured approximately $3.1 billion in criminal forfeitures from major financial institutions – including the largest forfeiture ever by a bank.
The Criminal Division has also prosecuted, together with U.S. Attorneys’ Offices, numerous significant perpetrators of financial fraud, including Lee Bentley Farkas, former chairman of Taylor, Bean & Whitaker, who perpetrated an approximately $3 billion bank fraud; and R. Allen Stanford, former chairman of Stanford International Bank, who perpetrated a $7 billion investment fraud scheme. Both were convicted at trial and are serving 30 and 110 years in prison, respectively.
Assistant Attorney General Breuer has also focused on combating healthcare fraud, helping to expand the Medicare Fraud Strike Force from two to nine cities and to carry out the two largest Medicare fraud takedowns in history, one involving 111 defendants charged and the other involving $452 million in alleged fraudulent billings.
The Criminal Division under Assistant Attorney General Breuer’s leadership, working alongside its partners at U.S. Attorneys’ Offices, has pursued innovative cybercrime and intellectual property crime prosecutions. Those prosecutions include the indictment of Megaupload and its leadership for intellectual property infringement in one of the largest criminal copyright cases brought by the United States.
During Assistant Attorney General Breuer’s tenure, the Criminal Division has made great strides in the fight against violent crime along the southwest border and across the country. Among other successes, the division, along with several U.S. Attorneys’ Offices, brought charges against 127 members and associates of La Cosa Nostra in the largest traditional organized crime takedown in U.S. history. The Criminal Division and U.S. Attorney partners also have brought prosecutions against 35 Barrio Azteca gang members and associates – including those allegedly responsible for the death of a U.S. Consular official and others in Juarez, Mexico, on March 13, 2010; individuals allegedly responsible for the murder of ICE Special Agent Jaime Zapata; and dozens of members and associates of the Aryan Brotherhood of Texas, including the gang’s top "generals." Assistant Attorney General Breuer has traveled frequently to Mexico to develop close relationships with Mexican counterparts and created new prosecutorial units dedicated to targeting Mexican cartels and seizing their assets. In 2012, the Criminal Division secured 115 extraditions from Mexico, a record for a calendar year.
Along with these new or expanded teams and initiatives, Assistant Attorney General Breuer has taken significant steps to reform the Criminal Division to meet the needs of the modern law enforcement climate, including creating the Organized Crime and Gang Section and the Human Rights and Special Prosecutions Section, and hiring hundreds of talented prosecutors and several new Section Chiefs into the division.
In his role as head of the Criminal Division, Assistant Attorney General Breuer has engaged on issues of criminal law policy throughout the United States and around the world, delivering dozens of keynote and special addresses across the country as well as in Russia, the Ukraine, the United Kingdom, Romania, Sweden, Liechtenstein, Spain and at the World Bank and United Nations.
Prior to joining the Justice Department, Assistant Attorney General Breuer was a partner in the law firm of Covington and Burling LLP. He earlier served as special counsel to President William Jefferson Clinton, and began his legal career as an Assistant District Attorney in Manhattan. He is a graduate of Columbia College and Columbia Law School.
Wednesday, January 30, 2013
Assistant Attorney General Lanny A. Breuer Announces Departure from Department of Justice
The Justice Department announced today that Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division will leave the department on March 1, 2013.
"Lanny has led one of the most successful and aggressive Criminal Divisions in the history of the Department of Justice, accomplishing record penalties in corruption cases at home and abroad and dismantling major organized crime and health care fraud networks around the country while also protecting the integrity of our banking systems and fighting financial fraud," said Attorney General Eric Holder. "Throughout his tenure, Lanny has demonstrated an unwavering commitment to the mission of this Department and I want to thank him for his dedication and exceptional service."
"Serving as Assistant Attorney General for the Criminal Division has been the greatest privilege of my professional life," said Assistant Attorney General Breuer. "From my first day on this job, nearly four years ago, I have loved it, and I am so proud of what the Criminal Division has accomplished over the past four years. I have had no higher honor than to work alongside the talented and dedicated men and women of the Criminal Division, and I will forever be grateful for the opportunity to serve the American people together with them."
Assistant Attorney General Breuer was unanimously confirmed by the U.S. Senate on April 20, 2009, and is the longest-serving head of the Criminal Division in recent history.
Under the leadership of Assistant Attorney General Breuer, the Criminal Division has taken significant steps to fight corruption at home and abroad, including by developing the innovative Kleptocracy Asset Recovery Initiative to identify and forfeit the proceeds of foreign official corruption – ensuring that corrupt officials from other countries are prevented from hiding their ill-gotten gains in the United States. The Criminal Division has also substantially increased enforcement of the Foreign Corrupt Practices Act (FCPA), convicting three dozen individuals for FCPA-related offenses – a record number – and entering into more than 40 corporate resolutions involving eight of the top 10 largest FCPA penalties in history. The Criminal Division also partnered with the Securities and Exchange Commission to publish groundbreaking guidance on FCPA enforcement.
Assistant Attorney General Breuer was asked by the Attorney General to oversee the Deepwater Horizon Task Force – created to investigate conduct leading up to, and following, the Deepwater Horizon explosion on April 20, 2010. The Task Force reached the largest criminal resolution in U.S. history with BP. On Jan. 29, 2013, BP was ordered to pay $4 billion in criminal fines and penalties after previously having agreed to plead guilty to 11 felony manslaughter charges, environmental crimes and obstruction of congress. The Criminal Division brought charges against four individuals in connection with the explosion and its aftermath as part of the ongoing investigation. Additionally, Assistant Attorney General Breuer has overseen efforts to combat fraud arising from the oil spill, as well as to detect and deter fraud in the wake of natural disasters such as Hurricane Sandy, through the Disaster Fraud Task Force.
Protecting the integrity of the banking system and fighting financial fraud have been hallmarks of the Criminal Division during Assistant Attorney General Breuer’s tenure. The division’s aggressive, ongoing investigation into manipulation of the London Interbank Offered Rate by global financial institutions has thus far led to nearly $2 billion in criminal penalties, as well as a guilty plea by a UBS subsidiary and charges against individuals. Assistant Attorney General Breuer also spearheaded the development of the division’s Money Laundering and Bank Integrity Unit to pursue financial institutions and individuals who violate money laundering statutes and the Bank Secrecy Act. Along with U.S. Attorney partners, the groundbreaking unit already has secured approximately $3.1 billion in criminal forfeitures from major financial institutions – including the largest forfeiture ever by a bank.
The Criminal Division has also prosecuted, together with U.S. Attorneys’ Offices, numerous significant perpetrators of financial fraud, including Lee Bentley Farkas, former chairman of Taylor, Bean & Whitaker, who perpetrated an approximately $3 billion bank fraud; and R. Allen Stanford, former chairman of Stanford International Bank, who perpetrated a $7 billion investment fraud scheme. Both were convicted at trial and are serving 30 and 110 years in prison, respectively.
Assistant Attorney General Breuer has also focused on combating healthcare fraud, helping to expand the Medicare Fraud Strike Force from two to nine cities and to carry out the two largest Medicare fraud takedowns in history, one involving 111 defendants charged and the other involving $452 million in alleged fraudulent billings.
The Criminal Division under Assistant Attorney General Breuer’s leadership, working alongside its partners at U.S. Attorneys’ Offices, has pursued innovative cybercrime and intellectual property crime prosecutions. Those prosecutions include the indictment of Megaupload and its leadership for intellectual property infringement in one of the largest criminal copyright cases brought by the United States.
During Assistant Attorney General Breuer’s tenure, the Criminal Division has made great strides in the fight against violent crime along the southwest border and across the country. Among other successes, the division, along with several U.S. Attorneys’ Offices, brought charges against 127 members and associates of La Cosa Nostra in the largest traditional organized crime takedown in U.S. history. The Criminal Division and U.S. Attorney partners also have brought prosecutions against 35 Barrio Azteca gang members and associates – including those allegedly responsible for the death of a U.S. Consular official and others in Juarez, Mexico, on March 13, 2010; individuals allegedly responsible for the murder of ICE Special Agent Jaime Zapata; and dozens of members and associates of the Aryan Brotherhood of Texas, including the gang’s top "generals." Assistant Attorney General Breuer has traveled frequently to Mexico to develop close relationships with Mexican counterparts and created new prosecutorial units dedicated to targeting Mexican cartels and seizing their assets. In 2012, the Criminal Division secured 115 extraditions from Mexico, a record for a calendar year.
Along with these new or expanded teams and initiatives, Assistant Attorney General Breuer has taken significant steps to reform the Criminal Division to meet the needs of the modern law enforcement climate, including creating the Organized Crime and Gang Section and the Human Rights and Special Prosecutions Section, and hiring hundreds of talented prosecutors and several new Section Chiefs into the division.
In his role as head of the Criminal Division, Assistant Attorney General Breuer has engaged on issues of criminal law policy throughout the United States and around the world, delivering dozens of keynote and special addresses across the country as well as in Russia, the Ukraine, the United Kingdom, Romania, Sweden, Liechtenstein, Spain and at the World Bank and United Nations.
Prior to joining the Justice Department, Assistant Attorney General Breuer was a partner in the law firm of Covington and Burling LLP. He earlier served as special counsel to President William Jefferson Clinton, and began his legal career as an Assistant District Attorney in Manhattan. He is a graduate of Columbia College and Columbia Law School.
Friday, December 14, 2012
OVER $50 MILLION SETTLEMENT TO CLEAN UP RIALTO CA. SUPERFUND SITE
FROM: U.S. JUSTICE DEPARTMENT
Wednesday, December 5, 2012
US and Local Governments Achieve $50 Million Settlement to Address Contamination at Superfund Site in Rialto, Calif.
WASHINGTON – The United States has entered into two settlements worth more than $50 million to clean up contamination from the B.F. Goodrich Superfund Site in San Bernardino County, Calif. There are a dozen settling parties including Emhart Industries and Pyro Spectaculars, Inc. (PSI), as well as the cities of Rialto and Colton and County of San Bernardino.
The Superfund site has been used to store, test and manufacture fireworks, munitions, rocket motors and pyrotechnics and was added to the EPA’s National Priorities List in September 2009. The area’s groundwater is contaminated with trichloroethylene (TCE) and perchlorate, which have resulted in the closure of public drinking water supply wells in the communities of Rialto and Colton.
"After decades of harmful groundwater contamination and following protracted and costly litigation, the parties responsible for releases of TCE and perchlorate at the BF Goodrich Superfund Site have agreed to a comprehensive long-term plan to clean up the contaminated groundwater at the site," said Ignacia S. Moreno, Assistant Attorney General for the Environment and Natural Resources Division. "The commitment made under the consent decrees announced today will provide immeasurable benefits to the environment and the communities who live in Rialto and Colton, California."
"For decades, the defendants have been polluting this critical source of drinking water with both perchlorate and industrial solvents," said Jared Blumenfeld, EPA’s Regional Administrator for the Pacific Southwest. "Today's historic settlement ensures that the impacted communities in Southern California will finally have their drinking water sources restored."
Under one agreement, Emhart will perform the first portion of the cleanup, which is estimated to cost $43 million over the next 30 years to design, build and operate groundwater wells, treatment systems and other equipment needed to clean up the contaminated groundwater at the site. A significant portion of these funds will come from other settling parties, including the Department of Defense. The cities of Rialto and Colton will receive $8 million.
The Emhart settlement includes the following entities: Emhart Industries Inc., Black & Decker Inc, American Promotional Events Inc., the Department of Defense, the Ensign-Bickford Company, Raytheon, Whittaker Corporation, Broco Inc., and J. S. Brower & Associates Inc. and related companies, as well as the cities of Rialto and Colton and the County of San Bernardino.
As part of the second agreement, six entities, including PSI and its former subsidiary, will pay a combined $4.3 million to the EPA toward cleanup at the site and $1.3 million to the cities of Rialto and Colton and San Bernardino County. The entities involved in this settlement are PSI; Astro Pyrotechnics (a defunct subsidiary of PSI); Trojan Fireworks; Thomas O. Peters and related trusts; and Stonehurst Site, LLC.
EPA used government funds to pay for investigation and clean up work at the site while investigating potentially responsible parties for their role in the contamination. The United States, on behalf of EPA, sued Emhart and PSI, as well as the Goodrich Corporation, the estate of Harry Hescox and its representative, Wong Chung Ming, Ken Thompson Inc. and Rialto Concrete Products, in 2010 and 2011 to require cleanup and recover federal money spent at the site. Prior to EPA’s lawsuit, the cities of Rialto and Colton initiated litigation against many of the settling parties, including the Department of Defense, in 2004.
A company acquired by Emhart manufactured flares and other pyrotechnics at the site for the military in the 1950s. PSI has operated at the site since 1979, designing fireworks shows produced throughout the United States.
TCE is an industrial cleaning solvent. Drinking or breathing high levels may cause damage to the nervous system, liver and lungs. Perchlorate is an ingredient in many flares and fireworks, and in rocket propellant, and may disrupt the thyroid’s ability to produce hormones needed for normal growth and development.
The consent decree for the Emhart settlement (City of Colton v. American Promotional Events Inc., et al.) will be lodged with the federal district court by the U.S. Department of Justice and is subject to a comment period and final court approval.
Wednesday, December 5, 2012
US and Local Governments Achieve $50 Million Settlement to Address Contamination at Superfund Site in Rialto, Calif.
WASHINGTON – The United States has entered into two settlements worth more than $50 million to clean up contamination from the B.F. Goodrich Superfund Site in San Bernardino County, Calif. There are a dozen settling parties including Emhart Industries and Pyro Spectaculars, Inc. (PSI), as well as the cities of Rialto and Colton and County of San Bernardino.
The Superfund site has been used to store, test and manufacture fireworks, munitions, rocket motors and pyrotechnics and was added to the EPA’s National Priorities List in September 2009. The area’s groundwater is contaminated with trichloroethylene (TCE) and perchlorate, which have resulted in the closure of public drinking water supply wells in the communities of Rialto and Colton.
"After decades of harmful groundwater contamination and following protracted and costly litigation, the parties responsible for releases of TCE and perchlorate at the BF Goodrich Superfund Site have agreed to a comprehensive long-term plan to clean up the contaminated groundwater at the site," said Ignacia S. Moreno, Assistant Attorney General for the Environment and Natural Resources Division. "The commitment made under the consent decrees announced today will provide immeasurable benefits to the environment and the communities who live in Rialto and Colton, California."
"For decades, the defendants have been polluting this critical source of drinking water with both perchlorate and industrial solvents," said Jared Blumenfeld, EPA’s Regional Administrator for the Pacific Southwest. "Today's historic settlement ensures that the impacted communities in Southern California will finally have their drinking water sources restored."
Under one agreement, Emhart will perform the first portion of the cleanup, which is estimated to cost $43 million over the next 30 years to design, build and operate groundwater wells, treatment systems and other equipment needed to clean up the contaminated groundwater at the site. A significant portion of these funds will come from other settling parties, including the Department of Defense. The cities of Rialto and Colton will receive $8 million.
The Emhart settlement includes the following entities: Emhart Industries Inc., Black & Decker Inc, American Promotional Events Inc., the Department of Defense, the Ensign-Bickford Company, Raytheon, Whittaker Corporation, Broco Inc., and J. S. Brower & Associates Inc. and related companies, as well as the cities of Rialto and Colton and the County of San Bernardino.
As part of the second agreement, six entities, including PSI and its former subsidiary, will pay a combined $4.3 million to the EPA toward cleanup at the site and $1.3 million to the cities of Rialto and Colton and San Bernardino County. The entities involved in this settlement are PSI; Astro Pyrotechnics (a defunct subsidiary of PSI); Trojan Fireworks; Thomas O. Peters and related trusts; and Stonehurst Site, LLC.
EPA used government funds to pay for investigation and clean up work at the site while investigating potentially responsible parties for their role in the contamination. The United States, on behalf of EPA, sued Emhart and PSI, as well as the Goodrich Corporation, the estate of Harry Hescox and its representative, Wong Chung Ming, Ken Thompson Inc. and Rialto Concrete Products, in 2010 and 2011 to require cleanup and recover federal money spent at the site. Prior to EPA’s lawsuit, the cities of Rialto and Colton initiated litigation against many of the settling parties, including the Department of Defense, in 2004.
A company acquired by Emhart manufactured flares and other pyrotechnics at the site for the military in the 1950s. PSI has operated at the site since 1979, designing fireworks shows produced throughout the United States.
TCE is an industrial cleaning solvent. Drinking or breathing high levels may cause damage to the nervous system, liver and lungs. Perchlorate is an ingredient in many flares and fireworks, and in rocket propellant, and may disrupt the thyroid’s ability to produce hormones needed for normal growth and development.
The consent decree for the Emhart settlement (City of Colton v. American Promotional Events Inc., et al.) will be lodged with the federal district court by the U.S. Department of Justice and is subject to a comment period and final court approval.
Sunday, October 21, 2012
AMBULANCE COMPANY PLEADS GUILTY TO FRAUD
FROM: U.S. JUSTICE DEPARTMENT
Monday, October 15, 2012
Houston Ambulance Company Administrator Pleads Guilty to Fraud
WASHINGTON – The administrator of CardioMax EMS, a Houston-based ambulance company, pleaded guilty today to charges that he submitted approximately $1,734,550 in fraudulent claims to Medicare, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Kenneth Magidson of the Southern District of Texas; Special Agent-In-Charge Elvis McBride of the FBI’s Houston Field Office; Special Agent-in-Charge Mike Fields of the Dallas Regional Office of the U.S. Department of Health and Human Service’s Office of the Inspector General (HHS-OIG); and the Texas Attorney General’s Medicaid Fraud Control Unit (MFCU).
Okechukwu Ofoegbu, 31, of Houston, pleaded guilty today in U.S. District Court in the Southern District of Texas to one count of conspiracy to commit health care fraud.
Ofoegbu was the administrator of Cardiomax EMS, a Houston-based ambulance company that primarily transported patients to community mental health centers. According to Ofoegbu’s plea agreement, from January 2011 through December 2011, Ofoegbu and others at Cardiomax were involved in transporting patients that did not meet the requirements for ambulance transport under Medicare regulations, falsifying ambulance run sheets that described patients’ conditions and using the falsified run sheets to file claims with Medicare. Ofoegbu admitted in his plea agreement that he conspired to submit claims to Medicare for ambulance services that he knew were miscoded, not medically necessary and, in some cases, not provided.
As part of the plea agreement, Ofoegbu has agreed to pay $553,002 in restitution to the United States. At sentencing, scheduled for Jan. 24, 2013, Ofoegbu faces a maximum sentence of 10 years in prison.
Ofoegbu was originally indicted as part of a nationwide takedown on May 2, 2012, that resulted in charges against 107 individuals, including doctors, nurses and other licensed medical professionals, for their alleged participation in Medicare fraud schemes involving approximately $452 million in false billing.
The case was prosecuted by Trial Attorney Laura M.K. Cordova, Special Trial Attorney James S. Seaman, Special Trial Attorney Ronald Cummings and Deputy Chief Sam S. Sheldon of the Criminal Division’s Fraud Section. The case was investigated by HHS-OIG, FBI and the Texas Attorney General’s Medicaid Fraud Control Unit, as part 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.
Monday, October 15, 2012
Houston Ambulance Company Administrator Pleads Guilty to Fraud
WASHINGTON – The administrator of CardioMax EMS, a Houston-based ambulance company, pleaded guilty today to charges that he submitted approximately $1,734,550 in fraudulent claims to Medicare, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Kenneth Magidson of the Southern District of Texas; Special Agent-In-Charge Elvis McBride of the FBI’s Houston Field Office; Special Agent-in-Charge Mike Fields of the Dallas Regional Office of the U.S. Department of Health and Human Service’s Office of the Inspector General (HHS-OIG); and the Texas Attorney General’s Medicaid Fraud Control Unit (MFCU).
Okechukwu Ofoegbu, 31, of Houston, pleaded guilty today in U.S. District Court in the Southern District of Texas to one count of conspiracy to commit health care fraud.
Ofoegbu was the administrator of Cardiomax EMS, a Houston-based ambulance company that primarily transported patients to community mental health centers. According to Ofoegbu’s plea agreement, from January 2011 through December 2011, Ofoegbu and others at Cardiomax were involved in transporting patients that did not meet the requirements for ambulance transport under Medicare regulations, falsifying ambulance run sheets that described patients’ conditions and using the falsified run sheets to file claims with Medicare. Ofoegbu admitted in his plea agreement that he conspired to submit claims to Medicare for ambulance services that he knew were miscoded, not medically necessary and, in some cases, not provided.
As part of the plea agreement, Ofoegbu has agreed to pay $553,002 in restitution to the United States. At sentencing, scheduled for Jan. 24, 2013, Ofoegbu faces a maximum sentence of 10 years in prison.
Ofoegbu was originally indicted as part of a nationwide takedown on May 2, 2012, that resulted in charges against 107 individuals, including doctors, nurses and other licensed medical professionals, for their alleged participation in Medicare fraud schemes involving approximately $452 million in false billing.
The case was prosecuted by Trial Attorney Laura M.K. Cordova, Special Trial Attorney James S. Seaman, Special Trial Attorney Ronald Cummings and Deputy Chief Sam S. Sheldon of the Criminal Division’s Fraud Section. The case was investigated by HHS-OIG, FBI and the Texas Attorney General’s Medicaid Fraud Control Unit, as part 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.
Monday, January 9, 2012
EPA & DOJ SETTLE WITH TRIAD MINING'S OVER FAILURE TO OBTAIN CLEAR WATER ACT PERMIT
The following excerpt is from the Evnironmental Protection Agency website:
"WASHINGTON – The U.S. Environmental Protection Agency (EPA) and U.S. Department of Justice (DOJ) announced that Triad Mining Inc., the owner and operator of 31 surface mines in Appalachia and Indiana, has agreed to pay a penalty and restore affected waterways for failing to obtain the required Clean Water Act (CWA) permit for stream impacts caused by its surface mining operation in Indiana. Since 2002, Triad's mining operation has resulted in the unpermittedexcavation and filling of more than 53,000 feet of streams that flow into the White River.
“Protecting America’s waters is one of EPA’s top priorities,” said Cynthia Giles, assistant administrator for EPA’s Office of Enforcement and Compliance Assurance. “Today’s settlement will ensure that waterways impacted by unpermitted mining operations are restored and can again benefit the state of Indiana and the surrounding communities.”
“With this settlement, Triad will achieve compliance with the nation’s Clean Water Act and be held accountable for its unpermitted discharges into streams of the White River watershed,” said Ignacia S. Moreno, assistant attorney general for the Environment and Natural Resources Division of the Department of Justice. “Triad must also undertake restoration efforts and mitigate impacts from its mining activities by enhancing stream beds and creating buffer areas that will benefit aquatic life and recreational resources for the people of Indiana.”
Triad, a subsidiary of James River Coal Company, obtained the required Surface Mining Control and Reclamation Act permits from the state of Indiana for its mining operations, but never obtained the required CWA permit for the site, despite the fact that its surface mining operation involved excavating coal seams located directly below stream beds.
On March 24, 2008, the Army Corps of Engineers issued a cease and desist order requiring Triad to stop its unauthorized stream-filling activities. Triad continued its mining practices until the Army Corps of Engineers sent a second order on June 24, 2009, which Triad complied with. Since the second order was issued, Triad has continued mining, but has avoided additional impacts to streams.
Under the settlement, Triad must restore 34,906 linear feet of streams and enhance 4,330 linear feet of stream bed to address and mitigate impacts to stream beds caused by its mining activities. Triad will also create and maintain 66 acres of forested buffer areas and nine acres of forested wetland to protect the restored streams. Triad will also pay a $810,171 civil penalty.
The proposed settlement, lodged in the U.S. District Court for the Southern District of Indiana, is subject to a 30-day comment period and final court approval."
Tuesday, December 13, 2011
FORMER SENIOR EXECUTIVES AT SIEMENS ARE CHARGED WITH $100 MILLION DOLLAR BRIBERY SCHEME
The following excerpt is from the Department of Justice website;
Tuesday, December 13, 2011
“Eight Former Senior Executives and Agents of Siemens Charged in Alleged $100 Million Foreign Bribe Scheme
WASHINGTON – Eight former executives and agents of Siemens AG and its subsidiaries have been charged for allegedly engaging in a decade-long scheme to bribe senior Argentine government officials to secure, implement and enforce a $1 billion contract with the Argentine government to produce national identity cards, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney Preet Bharara for the Southern District of New York and Ronald T. Hosko, Special Agent in Charge of the FBI, Washington Field Office’s Criminal Division.
The defendants charged in the indictment returned late yesterday are:
Uriel Sharef, a former member of the central executive committee of Siemens AG;
Herbert Steffen, a former chief executive officer of Siemens Argentina;
Andres Truppel, a former chief financial officer of Siemens Argentina;
Ulrich Bock, Stephan Signer and Eberhard Reichert, former senior executives of Siemens Business Services (SBS); and
Carlos Sergi and Miguel Czysch, who served as intermediaries and agents of Siemens in the bribe scheme.
“Today’s indictment alleges a shocking level of deception and corruption,” said Assistant Attorney General Breuer. “The indictment charges Siemens executives, along with agents and conduits for the company, with committing to pay more than $100 million in bribes to high-level Argentine officials to win a $1 billion contract. Business should be won or lost on the merits of a company’s products and services, not the amount of bribes paid to government officials. This indictment reflects our commitment to holding individuals, as well as companies, accountable for violations of the FCPA.”
“As alleged, the defendants in this case bribed Argentine government officials in two successive administrations and paid off countless others in a successful effort to secure a billion dollar contract,” said U.S. Attorney Bharara. “When the project was terminated, they even sought to recover the profits they would have reaped from a contract that was awarded to them illegitimately in the first place. Bribery corrupts economic markets and creates an unfair playing field for law-abiding companies. It is critical that we hold individuals as well as corporations accountable for such corruption as we are doing today.”
“Backroom deals and corrupt payments to foreign officials to obtain business wear away public confidence in our global marketplace,” said FBI Special Agent in Charge Hosko of the Washington Field Office’s Criminal Division. “The investigation into this decades-long scheme serves as an example that the FBI is committed to curbing corruption and will investigate those who try to advance their businesses through foreign bribery.”
According to the indictment, the government of Argentina issued a tender for bids in 1994 to replace an existing system of manually created national identity booklets with state of the art national identity cards (the DNI project). The value of the DNI project was $1 billion. In 1998, the Argentine government awarded the DNI project to a special-purpose subsidiary of Siemens AG.
The indictment alleges that during the bidding and implementation phases of the project, the defendants and their co-conspirators caused Siemens to commit to paying nearly $100 million in bribes to sitting officials of the Argentine government, members of the opposition party and candidates for office who were likely to come to power during the performance of the project. According to the indictment, members of the conspiracy worked to conceal the illicit payments through various means. For instance, Bock made cash withdrawals from Siemens AG general-purpose accounts in Germany totaling approximately $10 million, transported the cash across the border into Switzerland and deposited the funds into Swiss bank accounts for transfer to officials. Bock, Truppel, Reichert and other conspirators also allegedly caused Siemens to wire transfer more than $7 million in bribes to a bank account in New York disguised as a foreign exchange hedging contract relating to the DNI project. Over the duration of the conspiracy, the conspirators allegedly relied on at least 17 off-shore shell companies associated with Sergi, Czysch and other intermediaries to disguise and launder the funds, often documenting the payments through fake consulting contracts.
In May 1999, according to the indictment, the Argentine government suspended the DNI project, due in part to instability in the local economy and an impending presidential election. When a new government took power in Argentina, and in the hopes of getting the DNI project resumed, members of the conspiracy allegedly committed Siemens to paying additional bribes to the incoming officials and to satisfying existing obligations to officials of the outgoing administration, many of whom remained in influential positions within the government.
When the project was terminated in May 2001, members of the conspiracy allegedly responded with a multi-faceted strategy to overcome the termination. According to the indictment, the conspirators sought to recover the anticipated proceeds of the DNI project, notwithstanding the termination, by causing Siemens AG to file a fraudulent arbitration claim against the Republic of Argentina in Washington, D.C. The claim alleged wrongful termination of the contract for the DNI project and demanded nearly $500 million in lost profits and expenses. Members of the conspiracy allegedly caused Siemens to actively hide from the tribunal the fact that the contract for the DNI project had been secured by means of bribery and corruption, including tampered witness statements and pleadings that falsely denied the existence of corruption.
In related actions, the indictment also alleges that members of the conspiracy continued the bribe scheme, in part to prevent disclosure of the bribery in the arbitration and to ensure Siemens’ ability to secure future government contracts in Argentina and elsewhere in the region. In four installments between 2002 and 2007, members of the conspiracy allegedly caused Siemens to pay approximately $28 million in further satisfaction of the obligations. Conspirators continued to conceal these additional payments through various means. For example, Sharef, Truppel and other members of the conspiracy allegedly caused Siemens to transfer approximately $9.5 million through fictitious transactions involving a Siemens business division that had no role in the DNI project. They also caused Siemens to pay an additional $8.8 million in 2007 under the legal cover of a separate arbitration initiated in Switzerland by the intermediaries to enforce a sham $27 million contract from 2001 between SBS and Mfast Consulting, a company controlled by their co-conspirator intermediaries, which consolidated existing bribe commitments into one contract. The conspirators caused Siemens to quietly settle the arbitration, keeping all evidence of corruption out of the proceeding. The settlement agreement included a provision preventing Sergi, Czysch and another intermediary from testifying in, or providing information to, the Washington arbitration.
Siemens’s corrupt procurement of the DNI project was not exposed during the lifespan of the conspiracy, and, in February 2007, the arbitral tribunal in Washington sided with Siemens AG, awarding the company nearly $220 million on its DNI claims, plus interest. On Aug. 12, 2009, following Siemens’ corporate resolutions with the U.S. and German authorities – new management of Siemens caused Siemens AG to forego its right to receive the award and, as a result, the company never claimed the award money.
The indictment charges the defendants with conspiracy to violate the anti-bribery, books and records and internal control provisions of the FCPA; conspiracy to commit wire fraud; conspiracy to commit money laundering; and substantive wire fraud.
The charges announced today follow the Dec. 15, 2008, guilty pleas by Siemens AG and its subsidiary, Siemens S.A. (Siemens Argentina), to criminal violations of the FCPA. As part of the plea agreement, Siemens AG and Siemens Argentina agreed to pay fines of $448.5 million and $500,000, respectively.
In a parallel civil action, the Securities and Exchange Commission (SEC) announced charges against executives and agents of Siemens. The department acknowledges and expresses its appreciation of the significant assistance provided by the staff of the SEC during the course of these parallel investigations.
Today’s charges follow, in large part, the laudable actions of Siemens AG and its audit committee in disclosing potential FCPA violations to the department after the Munich Public Prosecutor’s Office initiated an investigation. Siemens AG and its subsidiaries disclosed these violations after initiating an internal FCPA investigation of unprecedented scope; shared the results of that investigation; cooperated extensively and authentically with the department in its ongoing investigation; and took remedial action, including the complete restructuring of Siemens AG and the implementation of a sophisticated compliance program and organization.
The department and the SEC closely collaborated with the Munich Public Prosecutor’s Office in bringing this case. The high level of cooperation, including sharing information and evidence, was made possible by the use of mutual legal assistance provisions of the 1997 Organization for Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.
The case is being prosecuted by Principal Deputy Chief Jeffrey H. Knox of the Criminal Division’s Fraud Section, and by Assistant U.S. Attorneys Jason P. Hernandez and Sarah McCallum of the U.S. Attorney’s Office for the Southern District of New York. The Fraud Section of the Justice Department’s Criminal Division and the Complex Frauds Unit of the U.S. Attorney’s Office for the Southern District of New York are handling the case. The case was investigated by FBI agents who are part of the Washington Field Office’s dedicated FCPA squad. The Criminal Division’s Office of International Affairs provided significant assistance in this matter.”
Tuesday, December 13, 2011
“Eight Former Senior Executives and Agents of Siemens Charged in Alleged $100 Million Foreign Bribe Scheme
WASHINGTON – Eight former executives and agents of Siemens AG and its subsidiaries have been charged for allegedly engaging in a decade-long scheme to bribe senior Argentine government officials to secure, implement and enforce a $1 billion contract with the Argentine government to produce national identity cards, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney Preet Bharara for the Southern District of New York and Ronald T. Hosko, Special Agent in Charge of the FBI, Washington Field Office’s Criminal Division.
The defendants charged in the indictment returned late yesterday are:
Herbert Steffen, a former chief executive officer of Siemens Argentina;
Andres Truppel, a former chief financial officer of Siemens Argentina;
Ulrich Bock, Stephan Signer and Eberhard Reichert, former senior executives of Siemens Business Services (SBS); and
Carlos Sergi and Miguel Czysch, who served as intermediaries and agents of Siemens in the bribe scheme.
“Today’s indictment alleges a shocking level of deception and corruption,” said Assistant Attorney General Breuer. “The indictment charges Siemens executives, along with agents and conduits for the company, with committing to pay more than $100 million in bribes to high-level Argentine officials to win a $1 billion contract. Business should be won or lost on the merits of a company’s products and services, not the amount of bribes paid to government officials. This indictment reflects our commitment to holding individuals, as well as companies, accountable for violations of the FCPA.”
“As alleged, the defendants in this case bribed Argentine government officials in two successive administrations and paid off countless others in a successful effort to secure a billion dollar contract,” said U.S. Attorney Bharara. “When the project was terminated, they even sought to recover the profits they would have reaped from a contract that was awarded to them illegitimately in the first place. Bribery corrupts economic markets and creates an unfair playing field for law-abiding companies. It is critical that we hold individuals as well as corporations accountable for such corruption as we are doing today.”
“Backroom deals and corrupt payments to foreign officials to obtain business wear away public confidence in our global marketplace,” said FBI Special Agent in Charge Hosko of the Washington Field Office’s Criminal Division. “The investigation into this decades-long scheme serves as an example that the FBI is committed to curbing corruption and will investigate those who try to advance their businesses through foreign bribery.”
According to the indictment, the government of Argentina issued a tender for bids in 1994 to replace an existing system of manually created national identity booklets with state of the art national identity cards (the DNI project). The value of the DNI project was $1 billion. In 1998, the Argentine government awarded the DNI project to a special-purpose subsidiary of Siemens AG.
The indictment alleges that during the bidding and implementation phases of the project, the defendants and their co-conspirators caused Siemens to commit to paying nearly $100 million in bribes to sitting officials of the Argentine government, members of the opposition party and candidates for office who were likely to come to power during the performance of the project. According to the indictment, members of the conspiracy worked to conceal the illicit payments through various means. For instance, Bock made cash withdrawals from Siemens AG general-purpose accounts in Germany totaling approximately $10 million, transported the cash across the border into Switzerland and deposited the funds into Swiss bank accounts for transfer to officials. Bock, Truppel, Reichert and other conspirators also allegedly caused Siemens to wire transfer more than $7 million in bribes to a bank account in New York disguised as a foreign exchange hedging contract relating to the DNI project. Over the duration of the conspiracy, the conspirators allegedly relied on at least 17 off-shore shell companies associated with Sergi, Czysch and other intermediaries to disguise and launder the funds, often documenting the payments through fake consulting contracts.
In May 1999, according to the indictment, the Argentine government suspended the DNI project, due in part to instability in the local economy and an impending presidential election. When a new government took power in Argentina, and in the hopes of getting the DNI project resumed, members of the conspiracy allegedly committed Siemens to paying additional bribes to the incoming officials and to satisfying existing obligations to officials of the outgoing administration, many of whom remained in influential positions within the government.
When the project was terminated in May 2001, members of the conspiracy allegedly responded with a multi-faceted strategy to overcome the termination. According to the indictment, the conspirators sought to recover the anticipated proceeds of the DNI project, notwithstanding the termination, by causing Siemens AG to file a fraudulent arbitration claim against the Republic of Argentina in Washington, D.C. The claim alleged wrongful termination of the contract for the DNI project and demanded nearly $500 million in lost profits and expenses. Members of the conspiracy allegedly caused Siemens to actively hide from the tribunal the fact that the contract for the DNI project had been secured by means of bribery and corruption, including tampered witness statements and pleadings that falsely denied the existence of corruption.
In related actions, the indictment also alleges that members of the conspiracy continued the bribe scheme, in part to prevent disclosure of the bribery in the arbitration and to ensure Siemens’ ability to secure future government contracts in Argentina and elsewhere in the region. In four installments between 2002 and 2007, members of the conspiracy allegedly caused Siemens to pay approximately $28 million in further satisfaction of the obligations. Conspirators continued to conceal these additional payments through various means. For example, Sharef, Truppel and other members of the conspiracy allegedly caused Siemens to transfer approximately $9.5 million through fictitious transactions involving a Siemens business division that had no role in the DNI project. They also caused Siemens to pay an additional $8.8 million in 2007 under the legal cover of a separate arbitration initiated in Switzerland by the intermediaries to enforce a sham $27 million contract from 2001 between SBS and Mfast Consulting, a company controlled by their co-conspirator intermediaries, which consolidated existing bribe commitments into one contract. The conspirators caused Siemens to quietly settle the arbitration, keeping all evidence of corruption out of the proceeding. The settlement agreement included a provision preventing Sergi, Czysch and another intermediary from testifying in, or providing information to, the Washington arbitration.
Siemens’s corrupt procurement of the DNI project was not exposed during the lifespan of the conspiracy, and, in February 2007, the arbitral tribunal in Washington sided with Siemens AG, awarding the company nearly $220 million on its DNI claims, plus interest. On Aug. 12, 2009, following Siemens’ corporate resolutions with the U.S. and German authorities – new management of Siemens caused Siemens AG to forego its right to receive the award and, as a result, the company never claimed the award money.
The indictment charges the defendants with conspiracy to violate the anti-bribery, books and records and internal control provisions of the FCPA; conspiracy to commit wire fraud; conspiracy to commit money laundering; and substantive wire fraud.
The charges announced today follow the Dec. 15, 2008, guilty pleas by Siemens AG and its subsidiary, Siemens S.A. (Siemens Argentina), to criminal violations of the FCPA. As part of the plea agreement, Siemens AG and Siemens Argentina agreed to pay fines of $448.5 million and $500,000, respectively.
In a parallel civil action, the Securities and Exchange Commission (SEC) announced charges against executives and agents of Siemens. The department acknowledges and expresses its appreciation of the significant assistance provided by the staff of the SEC during the course of these parallel investigations.
Today’s charges follow, in large part, the laudable actions of Siemens AG and its audit committee in disclosing potential FCPA violations to the department after the Munich Public Prosecutor’s Office initiated an investigation. Siemens AG and its subsidiaries disclosed these violations after initiating an internal FCPA investigation of unprecedented scope; shared the results of that investigation; cooperated extensively and authentically with the department in its ongoing investigation; and took remedial action, including the complete restructuring of Siemens AG and the implementation of a sophisticated compliance program and organization.
The department and the SEC closely collaborated with the Munich Public Prosecutor’s Office in bringing this case. The high level of cooperation, including sharing information and evidence, was made possible by the use of mutual legal assistance provisions of the 1997 Organization for Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.
The case is being prosecuted by Principal Deputy Chief Jeffrey H. Knox of the Criminal Division’s Fraud Section, and by Assistant U.S. Attorneys Jason P. Hernandez and Sarah McCallum of the U.S. Attorney’s Office for the Southern District of New York. The Fraud Section of the Justice Department’s Criminal Division and the Complex Frauds Unit of the U.S. Attorney’s Office for the Southern District of New York are handling the case. The case was investigated by FBI agents who are part of the Washington Field Office’s dedicated FCPA squad. The Criminal Division’s Office of International Affairs provided significant assistance in this matter.”
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