AUCTION HOUSE, PRESIDENT PLEAD GUILTY FOR ROLES IN WILDLIFE SMUGGLING CONSPIRACY

FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, January 14, 2015

Auction House and Company’s President Plead Guilty to Wildlife Smuggling Conspiracy

Elite Estate Buyers Inc., doing business as Elite Decorative Arts, an auction house located in Boynton Beach, Florida, and the company’s president and owner, Christopher Hayes, pleaded guilty today in U.S. District Court in Miami to an illegal wildlife trafficking and smuggling conspiracy in which  the auction house sold rhinoceros horns and objects made from rhino horn, elephant ivory and coral that were smuggled from the United States to China.

The guilty plea was announced today by Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division, U.S. Attorney Wifredo Ferrer for the Southern District of Florida and Director Dan Ashe of the U.S. Fish and Wildlife Service (FWS).  The prosecution of Elite and Hayes is part of Operation Crash, a continuing effort by the Special Investigations Unit of the FWS’ Office of Law Enforcement in coordination with the Department of Justice to detect, deter and prosecute those engaged in the illegal killing of rhinoceros and the unlawful trafficking of rhinoceros horns.

According to records filed in court, Hayes and his company sold six endangered black rhino horns.  Two of the horns were sold for $80,500 to a Texas resident involved in smuggling the horns to China.  Two more rhino horns were purchased by an undercover FWS special agent.  Another undercover agent with the FWS consigned two horns for auction.

As part of today’s plea agreement, Hayes and Elite have admitted to being part of a far reaching felony conspiracy in which the company helped smugglers traffic in endangered and protected species in interstate and foreign commerce, and falsified records and shipping documents related to the wildlife purchases in order to avoid the scrutiny of the FWS and U.S. Customs and Border Protection.  Elite aided foreign buyers by directing them to third-party shipping stores that were willing to send the wildlife out of the country with false paperwork.  

“In pleading guilty this auction house is admitting that it played a key role in the supply chain of rhino horn and elephant ivory to wildlife smugglers and foreign markets,” said Assistant Attorney General Cruden.  “Auction houses and art galleries should be especially mindful of abiding by the laws designed to prevent the extinction of these species rather than devoting their expertise to help smugglers evade the law.  This prosecution is the result of a sophisticated and long-ranging investigation into every aspect of the illegal wildlife trade and we will hold all law violators fully accountable for their actions.”

“Not only did Hayes and his company illegally profit from obtaining rhinoceros horns and elephant ivory, but his greed and indifference contributed to the senseless slaughter of these animals,” said U.S. Attorney Ferrer.  “Trafficking in endangered and threatened species is illegal.  Together with our law enforcement partners, we will strictly enforce the laws that protect our environment and our wildlife.”

“As this guilty plea demonstrates, ivory and rhino horn trafficking is not just a problem for other countries to solve,” said Director Ashe.  “The ongoing slaughter of rhinos and elephants in Africa is driven by rising consumer demand and United States citizens like Christopher Hayes are intimately involved in illegal trade both here and abroad.  We will continue to work with international law enforcement agencies and the international community to apprehend and bring to justice those whose callous disregard threatens the survival of the world’s wildlife heritage.”

Elite and Hayes also admitted to selling items made from rhinoceros horn, elephant ivory and coral to an antiques dealer in Canada, who they then directed to a local shipper that agreed to mail the items in Canada without required permits.  The defendants also admitted to selling raw rhinoceros horns, which they believed were from a black rhinoceros, to a person in Texas.

Hayes, 55, of Wellington, Florida, will be sentenced by Judge Daniel T. K. Hurley on a date yet to be determined.  The maximum penalty is five years in prison and a maximum fine of $500,000 for Elite and $250,000 for Hayes, or up to twice the gross gain.  Elite has agreed to pay a $1.5 million fine and to no longer engage in the receipt, consignment or sale of endangered or protected wildlife, or items containing endangered or protected wildlife, including items containing rhinoceros horn, elephant ivory and red coral.    

The investigation is continuing and is being handled by the FWS Office of Law Enforcement, the U.S. Attorney’s Office for the Southern District of Florida and the Environment and Natural Resources Division’s Environmental Crimes Section.  The government is represented by Assistant U.S. Attorney Thomas Watts-FitzGerald for the Southern District of Florida and Trial Attorney Gary N. Donner of the Environmental Crimes Section.

DOJ, JANITORIAL COMPANY REACH SETTLEMENT IN IMMIGRATION-RELATED DISCRIMINATION CLAIM

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, January 15, 2015

Justice Department Settles Immigration-Related Discrimination Claim Against Janitorial Company

The Justice Department announced that it reached a settlement agreement with U.S. Service Industries (USSI), a janitorial company headquartered in Bethesda, Maryland, and operating in Florida, Maryland, Virginia and Washington, D.C.  The agreement resolves allegations that USSI violated the Immigration and Nationality Act (INA) by discriminating against work-authorized individuals who are not U.S. citizens.  

The Justice Department’s investigation found that USSI required workers who are not U.S. citizens to produce documents issued by the Department of Homeland Security as a condition of employment, but it did not make similar demands of U.S. citizens.  The INA’s anti-discrimination provision prohibits employers from placing additional documentary burdens on workers during the employment eligibility verification process based on their citizenship status.

Under the settlement agreement, USSI will pay $132,000 in civil penalties to the United States; undergo training on the anti-discrimination provision of the INA; establish a $50,000 back pay fund to compensate any workers who may have lost wages; revise its employment eligibility verification policies; and be subject to monitoring of its employment eligibility verification practices for two years.

“Employers cannot create unlawful discriminatory obstacles for immigrants,” said Acting Assistant Attorney General Vanita Gupta for the Civil Rights Division.  “It is important that large employers review their employment eligibility verification practices at all of their offices to make sure they are in compliance with the law.”

The Office of Special Counsel for Immigration-Related Unfair Employment Practices (OSC) within the Justice Department is responsible for enforcing the anti-discrimination provision of the INA.  Among other things, the statute prohibits citizenship status and national origin discrimination in hiring, firing or recruitment or referral for a fee, unfair documentary practices, retaliation and intimidation.

For more information about protections against employment discrimination under immigration laws, call OSC’s worker hotline at 1-800-255-7688 (1-800-237-2515, TTY for hearing impaired), call OSC’s employer hotline at 1-800-255-8155 (1-800-237-2515, TTY for hearing impaired), sign up for a free webinar at www.justice.gov/crt/about/osc/webinars.php, email osccrt@usdoj.govEmail links icon or visit OSC’s website at www.justice.gov/crt/about/osc.  

Applicants or employees who believe they were subjected to different documentary requirements based on their citizenship status, immigration status or national origin, or discrimination based on their citizenship status, immigration status or national origin in hiring, firing, or recruitment or referral for a fee should contact OSC’s worker hotline for assistance.

SEC ANNOUNCES $14 MILLION PENALTY PAID BY TWO EXCHANGES FOR FAILING TO DESCRIBE ORDER TYPES

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

The Securities and Exchange Commission announced that two exchanges formerly owned by Direct Edge Holdings and since acquired by BATS Global Markets have agreed to pay a $14 million penalty to settle charges that their rules failed to accurately describe the order types being used on the exchanges.  The penalty is the SEC’s largest against a national securities exchange, and the case is the SEC’s first principally focusing on stock exchange order types.

An SEC investigation found that while operating under rules that described a single “price sliding” process for handling buy or sell orders, the EDGA Exchange and EDGX Exchange actually offered three variations of “price sliding” order types.  The exchanges’ rules did not completely and accurately describe the prices at which those orders would be ranked and executable in certain circumstances, and they also failed to describe the execution priority of the three order types relative to each other and other order types.  The SEC’s investigation further found that the exchanges separately disclosed information about how those order types operated to some but not all of their members.

“These exchanges did not properly describe in their rules how their order types were functioning,” said Andrew J. Ceresney, Director of the SEC’s Division of Enforcement.  “They also gave information about order types only to some members, including certain high-frequency trading firms that provided input about how the orders would operate.  Exchanges must ensure that their order types are described accurately in their rules and communications to all members.”

According to the SEC’s order instituting a settled administrative proceeding, exchanges and other self-regulatory organizations are required under federal securities laws to obtain Commission approval for rules governing order types and operate in compliance with their own set of rules as approved by the SEC.  An important category of an exchange’s rules is the operation of its order types, so that its members and all other participants in trading on an exchange can understand the terms and conditions under which trading is conducted.  From the time they began operating as registered exchanges in 2010 until late 2014, when they finally updated their rules and obtained Commission approval for the changes, the EDGA Exchange and EDGX Exchange were supposed to be processing orders using a single “displayed price sliding process” according to their rules.  However, the exchanges actually offered three price sliding order types: Hide Not Slide, Price Adjust, and Single Re-Price.  These were not completely and accurately described in their rules.

The SEC’s order also finds that the exchanges provided complete and accurate information about the order types to only some members, including certain high-frequency trading firms that Direct Edge also solicited for input about how the Hide Not Slide order type should operate.  Direct Edge originally developed this order type following a request from one of the firms.  Although the exchanges provided information about the Hide Not Slide order type in technical specifications made available to all members, those technical specifications did not contain fully accurate information.  This created a significant risk that not all market participants would understand how these order types operated.

The SEC’s order finds that the EDGA and EDGX exchanges violated Sections 19(b) and 19(g) of the Securities Exchange Act of 1934.  Without admitting or denying the SEC’s findings, EDGA and EDGX agreed to accept a censure, pay the $14 million penalty, and cease and desist from committing these violations.  EDGA and EDGX also agreed to comply with various undertakings, including a requirement that they develop new policies and procedures relating to the development of, rule filing process for, and communication of information regarding order types.

This is the SEC’s second enforcement action against the Direct Edge exchanges.  In October 2011, the Commission found that EDGA and EDGX violated Sections 19(b) and 19(g) of the Exchange Act and ordered remedial measures in connection with two systems incidents occurring in November 2010 and April 2011.

The SEC’s investigation was conducted by Kathryn Pyszka, Fuad Rana, Darren Boerner, Ainsley Kerr, and Mandy Sturmfelz of the SEC’s Market Abuse Unit as well as James Thibodeau of the Chicago Regional Office.  The case was supervised by Daniel M. Hawke, Chief of the Market Abuse Unit, Stephen L. Cohen, Associate Director in the Washington D.C. office, Timothy L. Warren, Associate Regional Director in the Chicago office, and Robert A. Cohen and Joseph Sansone, Co-Deputy Chiefs of the Market Abuse Unit.

Remarks by the President at the Federal Trade Commission | The White House

Remarks by the President at the Federal Trade Commission | The White House

HONG KONG-BASED AUDIT COMPANY CHARGED BY SEC WITH FAILURE TO PROPERLY AUDIT

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

The Securities and Exchange Commission imposed sanctions against a Hong Kong-based audit firm and two accountants for failing to properly audit year-end financial statements of a company that the SEC has charged with fraud.

An SEC investigation found that Baker Tilly Hong Kong Limited, its director Andrew Ross, and its former director Helena Kwok ignored red flags surrounding approximately $59 million in related-party transactions reflected in internal accounting records of China North East Petroleum Holdings Limited but not adequately disclosed in year-end 2009 financial statements.  Baker Tilly and the two accountants failed to plan and implement an appropriate audit response to the related-party transactions, which primarily involved the company, its then-CEO, and his mother.  Baker Tilly consequently issued an audit report containing an unqualified opinion on China North East Petroleum’s financial statements.

Baker Tilly, Ross, and Kwok agreed to settle the SEC’s charges.  Baker Tilly must disgorge its audit fees of $75,000 plus prejudgment interest of $9,101, and cannot accept any new U.S. issuer audit clients until an independent consultant has reviewed and certified that the firm’s audit policies and procedures are compliant with SEC regulations and PCAOB standards.  Ross and Kwok must pay penalties of $20,000 and $10,000 respectively and are barred from practicing as an accountant on behalf of any SEC-regulated entity for at least three years.    

“Auditors play a critical gatekeeper role in our financial markets, and Baker Tilly failed to uphold U.S. auditing standards and exercise appropriate professional care and skepticism with regard to numerous related-party transactions,” said Antonia Chion, an Associate Director in the SEC’s Division of Enforcement.

According to the SEC’s order instituting a settled administrative proceeding, the Baker Tilly audit team failed to adequately perform the audit of China North East Petroleum in light of 176 related-party transactions detailed in an independent forensic accounting report.  China North East Petroleum’s resulting financial statements failed to adequately disclose the magnitude of the related-party transactions and note they involved the company’s CEO and his mother.  Instead, the company only disclosed the year-end net balance due, thus masking the true scope of the related-party transactions.  The audit team also failed to properly obtain adequate evidential matter to support its audit report.  For example, the audit workpapers contain conflicting information regarding the source of a $4.6 million capital contribution to a company subsidiary.

The SEC’s order finds that Baker Tilly, Ross, and Kwok engaged in improper professional conduct under Rule 102(e)(2)(ii) of the SEC’s Rules of Practice, and violated Section 10A(a)(2) of the Securities Exchange Act of 1934.  They neither admitted nor denied the findings of the order, which censures Baker Tilly.

The SEC’s investigation was conducted by Ansu Banerjee, Delane Olson, Debra Russell, and Michael Semler.  The case was supervised by Melissa Hodgman.

OSHA CITES COMPANY IN DEATH OF 16 YEAR OLD

FROM:  U.S. LABOR DEPARTMENT 

OSHA cites Robertson Incorporated Bridge and Grading Division after 16-year-old laborer dies at Delta, Missouri, construction site

Wage and Hour Division assesses company penalties for violating child labor law

DELTA, Mo. — A 16-year-old laborer was fatally struck by the swinging cab and boom of a crane being disassembled by Robertson Incorporated Bridge and Grading Division at a construction site in Delta on June 18, 2014. A U.S. Department of Labor Occupational Safety and Health Administration investigation found the crane operator was unaware that the teen was directed to stand in an inadequately marked danger zone. The teen also was not provided required protective headgear. OSHA cited the company for 13 serious safety violations.

"This is a tragic death involving a teenager who should not have been allowed to work on the job site. Clearly, the law prohibits children from being involved in the disassembly of heavy-duty construction machinery," said Bill McDonald, OSHA's area director in St. Louis. "Robertson Incorporated Bridge has a responsibility to train workers in hazards, adequately mark hazardous operations areas and provide competent supervision and protective equipment."

In addition to the struck-by hazard that resulted in this young man's death, OSHA's investigation found a lack of employee hazard recognition training contributed to the fatality. The company also failed to document required inspections of the crane's wire rope and hook.

OSHA found multiple safety violations that included worker exposure to fall hazards of nearly 7 feet from unguarded machine platforms and failure to implement procedures, such as machine guarding that protects workers from contacting operating machinery parts, exposing workers to serious amputation risks and hazards. These violations are among the most frequently cited violations by OSHA and put workers at risk for amputation and injuries. Robertson Incorporated Bridge also failed to inspect portable fire extinguishers or train employees in their use.

A serious violation occurs when there is substantial probability that death or serious physical harm could result from a hazard about which the employer knew or should have known.

OSHA has proposed penalties of $44,730.

The department's Wage and Hour Division also assessed civil money penalties of $11,000 for violatingHazardous Order Number 7, which prohibits minors under age 18 from operating or assisting in the operation of power-driven hoists.

Robertson Incorporated Bridge has 15 business days from receipt of its citations and penalties to comply, request an informal conference with OSHA's area director, or contest the findings before the independent Occupational Safety and Health Review Commission.

U.S. BROKER-DEALER CEO AND MANAGING DIRECTOR PLEAD GUILTY TO INTERNATIONAL BRIBERY SCHEME

FROM:  U.S. JUSTICE DEPARTMENT 
Wednesday, December 17, 2014
CEO and Managing Director of U.S. Broker-Dealer Plead Guilty to Massive International Bribery Scheme
Senior Venezuelan Banking Official Received at Least $5 Million in Bribes in Exchange for Directing Business to U.S. Defendants

The former chief executive officer and former managing director of a U.S. broker-dealer (the Broker-Dealer), pleaded guilty to bribery charges arising from their scheme to pay bribes to Maria De Los Angeles Gonzalez De Hernandez, who was a senior official in Venezuela’s state economic development bank, Banco de Desarrollo Económico y Social de Venezuela (Bandes), in return for trading business that generated more than $60 million in commissions.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Preet Bharara of the Southern District of New York made the announcement.

“Benito Chinea and Joseph DeMeneses are the fifth and sixth defendants to plead guilty in connection with this far-reaching bribery scheme, which ranged from Wall Street to the streets of Caracas,” said Assistant Attorney General Caldwell.  “The guilty pleas and the forfeiture of assets once again demonstrate that the Department is committed to holding corporate executives who engage in foreign bribery individually accountable and to deny them the proceeds of their corruption.”

According to the allegations in the indictment and other documents previously filed in Manhattan federal court:

Benito Chinea, 48, of Manalapan, New Jersey, and Joseph De Meneses, 45, of Fairfield, Connecticut, working with others, arranged the bribe payments to Gonzalez in exchange for her directing Bandes’s financial trading business to the Broker-Dealer.  Previously, Gonzalez, along with two employees of the Broker-Dealer, Tomas Alberto Clarke Bethancourt (“Clarke”) and Jose Alejandro Hurtado (“Hurtado”), pleaded guilty for their involvement in this bribery scheme.  A managing director of the Broker-Dealer, Ernesto Lujan (“Lujan”), also pleaded guilty for his role in the scheme.

Background on the Broker-Dealer and Bandes

At all times relevant to the charges, Chinea was the chief executive officer and De Meneses was a managing director in the Broker-Dealer, which was headquartered in New York, New York, with offices in Miami, Florida.  In 2008, the Broker-Dealer established a group called the Global Markets Group, which included De Meneses, Lujan, and Clarke, and which offered fixed income trading services to institutional clients.  One of the Broker-Dealer’s clients was Bandes, which operated under the direction of the Venezuelan Ministry of Finance.  The Venezuelan government had a majority ownership interest in Bandes and provided it with substantial funding.  Gonzalez was an official at Bandes and oversaw the development bank’s overseas trading activity.  At her direction, Bandes conducted substantial trading through the Broker-Dealer.  Most of the trades executed by the Broker-Dealer on behalf of Bandes involved fixed income investments for which the Broker-Dealer charged Bandes a mark-up on purchases and a mark-down on sales.

             The Bribery Scheme

As alleged in court documents, from late 2008 through 2012, Chinea and De Meneses, together with three Miami-based Broker-Dealer employees, Lujan, Clarke and Hurtado, participated in a bribery scheme in which Gonzalez directed trading business she controlled at Bandes to the Broker-Dealer, and in return, agents and employees of the Broker-Dealer split the revenue the Broker-Dealer generated from this trading business with Gonzalez.  During this time period, the Broker-Dealer generated over $60 million in commissions from trades with Bandes.

In order to conceal their conduct, Chinea, De Meneses and their co-conspirators routed the payments to Gonzalez, frequently in six-figure amounts, through third-parties posing as “foreign finders” and into offshore bank accounts.  In several instances, Chinea personally signed checks worth millions of dollars that were made payable to one of these purported “foreign finders” and later deposited in a Swiss bank account.

As further alleged in court documents, as a result of the bribery scheme, Bandes quickly became the Broker-Dealer’s most profitable customer.  As the relationship continued, however, Gonzalez became increasingly unhappy about the untimeliness of the payments due her from the Broker-Dealer, and she threatened to suspend Bandes’s business.  In response, De Meneses and Clarke agreed to pay Gonzalez approximately $1.5 million from their personal funds.  Chinea and De Meneses agreed to use Broker-Dealer funds to reimburse De Meneses and Clarke for these bribe payments.  To conceal their true nature, Chinea and De Meneses agreed to hide these reimbursements in the Broker-Dealer’s books as sham loans from the Broker-Dealer to corporate entities associated with De Meneses and Clarke.

Chinea and De Meneses each pleaded guilty before U.S. District Judge Denise L. Cote of the Southern District of New York to one count of conspiracy to violate the Foreign Corrupt Practices Act and the Travel Act.  Chinea and De Meneses have also agreed to pay $3,636,432 and $2,670,612 in forfeiture, respectively, which amounts represent their earnings from the bribery scheme.  Sentencing hearings are scheduled for March 27, 2015.

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations.  For more information on the task force, visit www.stopfraud.gov.

This case is being investigated by the FBI, and prosecuted Senior Deputy Chief James Koukios of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Harry A. Chernoff and Jason H. Cowley of the Southern District of New York.  Assistant U.S. Attorney Carolina Fornos of the Southern District of New York is responsible for the forfeiture aspects of the case.  The U.S. Securities and Exchange Commission also assisted with this investigation.