FROM: U.S. DEPARTMENT OF LABOR
MSHA announces results of November impact inspections
ARLINGTON, Va. — The U.S. Department of Labor's Mine Mine Safety and Health Administration today announced that federal inspectors issued 285 citations, 11 orders and two safeguards during special impact inspections conducted at nine coal mines and seven metal/nonmetal mines last month.
The monthly inspections, which began in force in April 2010 following the explosion at the Upper Big Branch Mine, involve mines that merit increased agency attention and enforcement due to their poor compliance history or particular compliance concerns. These matters include high numbers of violations or closure orders; frequent hazard complaints or hotline calls; plan compliance issues; inadequate workplace examinations; a high number of accidents, injuries or illnesses; fatalities; adverse conditions such as increased methane liberation, faulty roof conditions and inadequate ventilation; and respirable dust.
For example, MSHA conducted an impact inspection at TRC Mining Corp. #2 mine in Letcher County, Ky., on Nov. 27. Enforcement personnel issued 23 citations and seven orders, including five unwarrantable failure orders and two failure-to-abate orders for previously issued citations. The orders closed the entire underground portion of the mine.
Subsequent to this inspection, the mine operator changed the mine status to non-producing, with four miners working one shift per day. The operator also submitted a plan to remove equipment from the mine on Dec. 7 and to have the removal completed by Jan. 1, 2013. This was the third impact inspection at this mine.
Five unwarrantable failure orders were issued for failure to follow the approved ventilation plan, failure to properly maintain and repair mine seals, and failure to conduct adequate pre-shift examinations.
The operator's approved ventilation plan on the mechanized mining unit stipulates the installation of a line curtain within 14 feet of each working face with a minimum air quantity in all 10 entries. Mining was underway when inspectors arrived to find either no line curtain where required or line curtains in excess of the required 14 feet; at one point a line curtain was installed 35 feet from the face. No air movement could be detected behind the curtains in four entries, and they did not extend into the last open cross-cut to maintain the necessary minimum air quantity. The operator also did not properly maintain the water spray system — provided for the belt drive transfer point — in an operable condition. At the time of the inspection, coal was running on the belt line at this location. The water supply had been turned off at the cutoff valve (where the branch line connects to the main water line).
The mine also was cited for violations of annual retraining requirements, inadequate roof support, no warning devices at the end of permanent roof support, blocked personnel doors along each side of the #1 beltline, pre-shift examinations not recorded, failure to maintain the primary intake escape way, accumulations of combustible material in areas of the mine, and improperly maintained mining and electrical equipment and fire suppression systems.
"We continue to identify operators who have not gotten the message," said Joseph A. Main, assistant secretary of labor for mine safety and health. "Exposure to harmful levels of respirable dust is unacceptable. Not conducting adequate examinations is unacceptable. Miners deserve better."
Also last month, MSHA conducted an impact inspection at the BHP Copper Inc., Pinto Valley Operation in Gila County, Ariz., where a miner was fatally injured in a fall in September. Federal inspectors issued 40 citations and 2 orders during the Nov. 6-21 inspection.
Inspectors issued two unwarrantable failure orders during this inspection, one for failure to provide barricades or signs warning miners of fall hazard at the North Mine Pit, Castle Dome building. This standard has been cited five times in the past two years. A second such order was issued for not providing a barricade, railing, or barrier to prevent miners from over-traveling a steep, uneven, rocky dropoff located south of the Rectifier Building.
Hazardous conditions resulted in six citations for damaged electrical conductors, exposing miners to electrical shock . This hazardous condition has been cited 14 times in the past two years at this mine. Five citations were issued for failure to conduct continuity and resistance testing of the grounding system on power cords, power strips, power supplies, and a portable band saw, exposing miner to possible electrical shock hazards. This standard has been cited 14 times in the past two years at this mine. Four citations were issued for improper storage of supplies, parts and materials, exposing miners to slip, trip, fall and fall of material hazards. This standard has been cited eight times in the past two years at this mine.
Four citations were issued because high-pressure hoses located at the shop bay, electrician shop, primary crusher and secondary crusher building were not equipped with safety chains or locking devices to prevent a connection failure, creating the potential of a violent hose-whipping action if a hose came apart. This standard was cited one time in the past two years.
Since April 2010, MSHA has conducted 539 impact inspections and issued 9,445 citations, 900 orders and 40 safeguards.
Editor's note: A spreadsheet containing the results of impact inspections in November 2012 accompanies this news release.
Monday, December 31, 2012
Sunday, December 30, 2012
PHARMA COMPANY ACCUSED OF GIVING KICKBACKS TO DOCTORS
FROM: U.S. DEPARTMENT OF JUSTICE
Thursday, December 27, 2012
Victory Pharma Inc. of San Diego Pays $11.4 Million to Resolve Kickback Allegations in Connection with Promotion of Its Drugs
Victory Pharma Inc., a specialty pharmaceutical company headquartered in San Diego, has agreed to pay $11,420,743 to resolve federal civil and criminal liability arising from its marketing of the pharmaceutical products Naprelan, Xodol, Fexmid and Dolgic, the Justice Department announced today. Under the agreement announced today, Victory entered into a deferred prosecution agreement and paid a criminal forfeiture of $1.4 million to resolve federal Ant-Kickback Statute allegations, and paid $9,938,310 to resolve False Claims Act allegations.
The settlement resolves allegations that Victory engaged in a scheme to promote its drugs by paying kickbacks to doctors to induce them to write prescriptions for Victory’s products, including prescriptions for patients covered by Medicare and other federal health insurance programs. The kickbacks included tickets to professional and collegiate sporting events; tickets to concerts and plays; spa outings; golf and ski outings; dinners at expensive restaurants; and numerous other out-of-office events. Victory also encouraged its sales representatives to schedule paid "preceptorships," which involved sales representatives "shadowing" doctors in their offices. The settlement also resolves allegations that Victory improperly used these preceptorships to induce doctors to prescribe Victory’s products.
"Kickback schemes undermine the integrity of medical decisions, subvert the health marketplace and waste taxpayer dollars," said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Civil Division. "We will continue to hold accountable those who refuse to play by the rules and provide illegal incentives to influence the decision making of health care providers."
"This resolution underscores the need for physicians to make treatment decisions based on their own independent medical judgment, without being influenced by kickbacks or other improper benefits," said Laura E. Duffy, U.S. Attorney for the Southern District of California. "Protecting taxpayers from health care fraud is a priority of this office. We will continue to work closely with our investigative partners in taking both criminal and civil measures to combat health care fraud."
The settlement resolves a False Claims Act lawsuit filed in the Southern District of California by Chad Miller, a former sales representative for Victory. The whistleblower, or qui tam, provisions of the False Claims Act permit the whistleblower (or relator) to obtain a portion of the proceeds obtained by the federal government. As part of today’s resolution, Mr. Miller will receive $1.7 million.
"Patients expect health care providers to be concerned only with patients’ best medical interests," said Glenn R. Ferry, Special Agent in Charge for the U.S. Department of Health and Human Services Office of Inspector General Los Angeles region. "Financial kickbacks betray that patient trust, and taxpayers’ expectation that federal and state health dollars be put only to the wisest use."
FBI Special Agent in Charge Daphne Hearn commented, "Many laws of this nation are put in place to protect our citizens from corrupt practices that may endanger our health and safety. When individuals or businesses operate outside of the fence in order to turn a bigger profit the FBI will pursue them in the justice system."
Chris Hendrickson, Special Agent in Charge, Western Field Office, Defense Criminal Investigative Service, stated: "The Department of Defense is committed to its partnership with the Department of Justice and other federal and state enforcement agencies to aggressively pursue those who take advantage of taxpayer-funded health care systems for illicit gain. Doctors providing services to our military members and their families should be free from undue influence in prescribing medicines and other care decisions, and DCIS will act swiftly against those who engage in these illegal and unethical acts."
This settlement is the result of a coordinated effort by the Department of Justice, Civil Division, Commercial Litigation Branch; the U.S. Attorney’s Office for the Southern District of California; the FBI; and the Offices of Inspectors General for Health and Human Services, the Department of Defense, the Department of Labor, the U.S. Postal Service, the Veteran’s Administration, and the Office of Personnel Management.
This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover $10.1 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department's total recoveries in False Claims Act cases since January 2009 are over $13.9 billion.
Thursday, December 27, 2012
Victory Pharma Inc. of San Diego Pays $11.4 Million to Resolve Kickback Allegations in Connection with Promotion of Its Drugs
Victory Pharma Inc., a specialty pharmaceutical company headquartered in San Diego, has agreed to pay $11,420,743 to resolve federal civil and criminal liability arising from its marketing of the pharmaceutical products Naprelan, Xodol, Fexmid and Dolgic, the Justice Department announced today. Under the agreement announced today, Victory entered into a deferred prosecution agreement and paid a criminal forfeiture of $1.4 million to resolve federal Ant-Kickback Statute allegations, and paid $9,938,310 to resolve False Claims Act allegations.
The settlement resolves allegations that Victory engaged in a scheme to promote its drugs by paying kickbacks to doctors to induce them to write prescriptions for Victory’s products, including prescriptions for patients covered by Medicare and other federal health insurance programs. The kickbacks included tickets to professional and collegiate sporting events; tickets to concerts and plays; spa outings; golf and ski outings; dinners at expensive restaurants; and numerous other out-of-office events. Victory also encouraged its sales representatives to schedule paid "preceptorships," which involved sales representatives "shadowing" doctors in their offices. The settlement also resolves allegations that Victory improperly used these preceptorships to induce doctors to prescribe Victory’s products.
"Kickback schemes undermine the integrity of medical decisions, subvert the health marketplace and waste taxpayer dollars," said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Civil Division. "We will continue to hold accountable those who refuse to play by the rules and provide illegal incentives to influence the decision making of health care providers."
"This resolution underscores the need for physicians to make treatment decisions based on their own independent medical judgment, without being influenced by kickbacks or other improper benefits," said Laura E. Duffy, U.S. Attorney for the Southern District of California. "Protecting taxpayers from health care fraud is a priority of this office. We will continue to work closely with our investigative partners in taking both criminal and civil measures to combat health care fraud."
The settlement resolves a False Claims Act lawsuit filed in the Southern District of California by Chad Miller, a former sales representative for Victory. The whistleblower, or qui tam, provisions of the False Claims Act permit the whistleblower (or relator) to obtain a portion of the proceeds obtained by the federal government. As part of today’s resolution, Mr. Miller will receive $1.7 million.
"Patients expect health care providers to be concerned only with patients’ best medical interests," said Glenn R. Ferry, Special Agent in Charge for the U.S. Department of Health and Human Services Office of Inspector General Los Angeles region. "Financial kickbacks betray that patient trust, and taxpayers’ expectation that federal and state health dollars be put only to the wisest use."
FBI Special Agent in Charge Daphne Hearn commented, "Many laws of this nation are put in place to protect our citizens from corrupt practices that may endanger our health and safety. When individuals or businesses operate outside of the fence in order to turn a bigger profit the FBI will pursue them in the justice system."
Chris Hendrickson, Special Agent in Charge, Western Field Office, Defense Criminal Investigative Service, stated: "The Department of Defense is committed to its partnership with the Department of Justice and other federal and state enforcement agencies to aggressively pursue those who take advantage of taxpayer-funded health care systems for illicit gain. Doctors providing services to our military members and their families should be free from undue influence in prescribing medicines and other care decisions, and DCIS will act swiftly against those who engage in these illegal and unethical acts."
This settlement is the result of a coordinated effort by the Department of Justice, Civil Division, Commercial Litigation Branch; the U.S. Attorney’s Office for the Southern District of California; the FBI; and the Offices of Inspectors General for Health and Human Services, the Department of Defense, the Department of Labor, the U.S. Postal Service, the Veteran’s Administration, and the Office of Personnel Management.
This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover $10.1 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department's total recoveries in False Claims Act cases since January 2009 are over $13.9 billion.
Saturday, December 29, 2012
W.W. GRAINGER SETTLES FALSE CLAIMS ALLEGATIONS CASE WITH U.S. JUSTICE DEPARTMENT FOR $70 MILLION
FROM: U.S. DEPARTMENT OF JUSTICE
Wednesday, December 26, 2012
Illinois-based Hardware Distributor W.W. Grainger Pays US $70 Million to Resolve False Claims Act Allegations
W.W. Grainger Inc. has agreed to pay the United States $70 million to resolve allegations that it submitted false claims under contracts with the General Services Administration (GSA) and the U.S. Postal Services (USPS), the Department of Justice announced today. Grainger is a national hardware distributor headquartered in Lake Forest, Illinois.
Grainger entered into a contract to sell hardware products and other supplies to government customers through the GSA’s Multiple Award Schedule (MAS) program. The MAS program provides the government and other GSA-authorized purchasers with a streamlined process for procurement of commonly-used commercial goods and services. To be awarded a MAS contract, and thereby gain access to the broad government marketplace, contractors must agree to disclose their commercial pricing policies and practices to assist the government in negotiating the terms of the MAS contract.
Today’s settlement resolves issues discovered during a GSA post-award audit of Grainger’s MAS contract. The GSA Office of Inspector General learned that Grainger failed to meet its contractual obligations to provide the GSA with current, accurate and complete information about its commercial sales practices, including discounts afforded to other customers. As a result, government customers purchasing items under the Grainger MAS contract paid higher prices than they should have.
In addition, today’s settlement resolves allegations that Grainger failed to meet its contractual obligations to provide "most-favored customer" pricing under two USPS contracts for sanitation and maintenance supplies. The USPS contracts required Grainger to treat USPS as Grainger’s "most-favored customer" by ensuring that USPS received the best overall discount that Grainger offered to any of its commercial customers. Agents and auditors from the USPS Office of Inspector General (OIG) investigated Grainger’s pricing practices and discovered that Grainger did not consistently adhere to this requirement, causing USPS to pay more than it should have for purchases made under the two contracts.
"Misrepresentations during contract negotiations undermine the integrity of the government procurement process," said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Civil Division. "The Justice Department is committed to ensuring that government purchasers of commercial products receive the prices to which they are entitled."
"The substantial payment by Grainger reflects the Justice Department’s focused and productive work in the economic interests of our citizen constituents," commented United States Attorney James L. Santelle of the Eastern District of Wisconsin. "This settlement shows that we are committed to ensuring that false claims are investigated fully and pursued effectively so that government monies are used properly and the integrity of our contracting system is upheld."
"This case is another demonstration of the value of the work performed by Inspectors General ," said GSA Inspector General Brian D. Miller. "Our auditors and agents worked tirelessly to reach this critical settlement."
"The U.S. Postal Service Office of Inspector General aggressively pursues instances of contracting improprieties that negatively impact the Postal Service and cause unnecessary expenses. We appreciate the partnership of the Civil Divisions of the Department of Justice and the United States Attorney’s Office for their support in this case," said Joanne Yarbrough, Special Agent-in-Charge of the OIG’s Major Fraud Investigations Division.
This settlement was the result of a coordinated effort by the Commercial Litigation Branch of the Justice Department’s Civil Division; the U.S. Attorney’s Office for the Eastern District of Wisconsin; the GSA Office of Inspector General; and the USPS Office of Inspector General and Office of General Counsel. The claims settled by this agreement are allegations only, and there has been no determination of liability.
Wednesday, December 26, 2012
Illinois-based Hardware Distributor W.W. Grainger Pays US $70 Million to Resolve False Claims Act Allegations
W.W. Grainger Inc. has agreed to pay the United States $70 million to resolve allegations that it submitted false claims under contracts with the General Services Administration (GSA) and the U.S. Postal Services (USPS), the Department of Justice announced today. Grainger is a national hardware distributor headquartered in Lake Forest, Illinois.
Grainger entered into a contract to sell hardware products and other supplies to government customers through the GSA’s Multiple Award Schedule (MAS) program. The MAS program provides the government and other GSA-authorized purchasers with a streamlined process for procurement of commonly-used commercial goods and services. To be awarded a MAS contract, and thereby gain access to the broad government marketplace, contractors must agree to disclose their commercial pricing policies and practices to assist the government in negotiating the terms of the MAS contract.
Today’s settlement resolves issues discovered during a GSA post-award audit of Grainger’s MAS contract. The GSA Office of Inspector General learned that Grainger failed to meet its contractual obligations to provide the GSA with current, accurate and complete information about its commercial sales practices, including discounts afforded to other customers. As a result, government customers purchasing items under the Grainger MAS contract paid higher prices than they should have.
In addition, today’s settlement resolves allegations that Grainger failed to meet its contractual obligations to provide "most-favored customer" pricing under two USPS contracts for sanitation and maintenance supplies. The USPS contracts required Grainger to treat USPS as Grainger’s "most-favored customer" by ensuring that USPS received the best overall discount that Grainger offered to any of its commercial customers. Agents and auditors from the USPS Office of Inspector General (OIG) investigated Grainger’s pricing practices and discovered that Grainger did not consistently adhere to this requirement, causing USPS to pay more than it should have for purchases made under the two contracts.
"Misrepresentations during contract negotiations undermine the integrity of the government procurement process," said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Civil Division. "The Justice Department is committed to ensuring that government purchasers of commercial products receive the prices to which they are entitled."
"The substantial payment by Grainger reflects the Justice Department’s focused and productive work in the economic interests of our citizen constituents," commented United States Attorney James L. Santelle of the Eastern District of Wisconsin. "This settlement shows that we are committed to ensuring that false claims are investigated fully and pursued effectively so that government monies are used properly and the integrity of our contracting system is upheld."
"This case is another demonstration of the value of the work performed by Inspectors General ," said GSA Inspector General Brian D. Miller. "Our auditors and agents worked tirelessly to reach this critical settlement."
"The U.S. Postal Service Office of Inspector General aggressively pursues instances of contracting improprieties that negatively impact the Postal Service and cause unnecessary expenses. We appreciate the partnership of the Civil Divisions of the Department of Justice and the United States Attorney’s Office for their support in this case," said Joanne Yarbrough, Special Agent-in-Charge of the OIG’s Major Fraud Investigations Division.
This settlement was the result of a coordinated effort by the Commercial Litigation Branch of the Justice Department’s Civil Division; the U.S. Attorney’s Office for the Eastern District of Wisconsin; the GSA Office of Inspector General; and the USPS Office of Inspector General and Office of General Counsel. The claims settled by this agreement are allegations only, and there has been no determination of liability.
Friday, December 28, 2012
WHEELCHAIR MANUFACTURER AGREES TO RESOLVE ALLEGATIONS OF FOOD, DRUG AND COSMETIC ACT VIOLATIONS
FROM: U.S. DEPARTMENT OF JUSTICE
Thursday, December 20, 2012
Ohio-Based Wheelchair Manufacturer Agrees to Consent Decree to Resolve Allegations of Food, Drug and Cosmetic Act Violations
The Justice Department, at the request of the Food and Drug Administration (FDA), today filed a complaint and a proposed consent decree in the U.S. District Court for the Northern District of Ohio against Invacare Corp., Gerald B. Blouch and Ronald J. Clines. The complaint and proposed consent decree are being filed today in accordance with an agreement with the defendants resolving numerous allegations of violations of the Food, Drug and Cosmetic Act (FDCA).
The defendants design, manufacture and distribute powered wheelchairs and powered hospital beds, which are medical devices under the FDCA. Medical device manufacturers are required to comply with the FDA’s Current Good Manufacturing Practices (CGMP) regulatory requirements in order to ensure the safety and effectiveness of their devices.
The FDA conducted multiple inspections of Invacare’s corporate headquarters and Taylor Street manufacturing facility, both located in Elyria, Ohio, between September 2002 and August 2011. Those inspections revealed significant violations of the CGMP regulatory requirements. Many of the violations related to design controls, complaint handling, and corrective and preventive action (CAPA). Those regulations ensure that when a device manufacturer learns that one of its devices has malfunctioned or has caused injury to a patient, the complaint is thoroughly investigated and necessary design changes are implemented. Without such controls, recurring defects may not be identified or corrected, endangering patients who rely on the defendants’ powered wheelchairs and beds.
Under the terms of the agreement reached with the government, the defendants cannot resume manufacturing power wheelchairs or conducting design activities related to wheelchairs and power beds at the two Ohio facilities until an independent expert inspects the company’s operations and certifies that the defendants are in compliance with the law. FDA can then evaluate that certification. Until FDA provides written notification that the facilities are in compliance with the law, they cannot resume operations.
"Today’s proposed consent decree would require Invacare to establish procedures that will help ensure their products are safe and effective for the patients who rely on them," said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Civil Division of the Department of Justice. "Consumers who need wheelchairs or powered hospital beds should not have to risk being harmed by the very products meant to help them."
"This resolution underscores the commitment of our office and this department to protecting consumers, particularly those who have to use wheelchairs or hospital beds," said Steven M. Dettelbach, U.S. Attorney for the Northern District of Ohio.
Thursday, December 20, 2012
Ohio-Based Wheelchair Manufacturer Agrees to Consent Decree to Resolve Allegations of Food, Drug and Cosmetic Act Violations
The Justice Department, at the request of the Food and Drug Administration (FDA), today filed a complaint and a proposed consent decree in the U.S. District Court for the Northern District of Ohio against Invacare Corp., Gerald B. Blouch and Ronald J. Clines. The complaint and proposed consent decree are being filed today in accordance with an agreement with the defendants resolving numerous allegations of violations of the Food, Drug and Cosmetic Act (FDCA).
The defendants design, manufacture and distribute powered wheelchairs and powered hospital beds, which are medical devices under the FDCA. Medical device manufacturers are required to comply with the FDA’s Current Good Manufacturing Practices (CGMP) regulatory requirements in order to ensure the safety and effectiveness of their devices.
The FDA conducted multiple inspections of Invacare’s corporate headquarters and Taylor Street manufacturing facility, both located in Elyria, Ohio, between September 2002 and August 2011. Those inspections revealed significant violations of the CGMP regulatory requirements. Many of the violations related to design controls, complaint handling, and corrective and preventive action (CAPA). Those regulations ensure that when a device manufacturer learns that one of its devices has malfunctioned or has caused injury to a patient, the complaint is thoroughly investigated and necessary design changes are implemented. Without such controls, recurring defects may not be identified or corrected, endangering patients who rely on the defendants’ powered wheelchairs and beds.
Under the terms of the agreement reached with the government, the defendants cannot resume manufacturing power wheelchairs or conducting design activities related to wheelchairs and power beds at the two Ohio facilities until an independent expert inspects the company’s operations and certifies that the defendants are in compliance with the law. FDA can then evaluate that certification. Until FDA provides written notification that the facilities are in compliance with the law, they cannot resume operations.
"Today’s proposed consent decree would require Invacare to establish procedures that will help ensure their products are safe and effective for the patients who rely on them," said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Civil Division of the Department of Justice. "Consumers who need wheelchairs or powered hospital beds should not have to risk being harmed by the very products meant to help them."
"This resolution underscores the commitment of our office and this department to protecting consumers, particularly those who have to use wheelchairs or hospital beds," said Steven M. Dettelbach, U.S. Attorney for the Northern District of Ohio.
Thursday, December 27, 2012
CFTC COMMISSIONER BART CHILTON REFLECTS ON HAVING A CONSCIENCE
FROM: U.S. COMMODITY FUTURES EXCHANGE COMMISSION
Statement of Commissioner Bart Cilton on UBS Settlement"A Conscience Isn't Nonsense"
December 19, 2012
Every so often, folks wonder if some in the financial sector believe that having a business conscience is nonsense. Financial sector violations are hurtling toward us like a spaceship moving through the stars. All too often, penalties have been a simple cost of doing business. That needs to change.
The UBS settlement is serious and significant and will provide a definite deterrent.
This $700 million settlement is the granddaddy of CFTC penalties. Combined with other regulator settlements, UBS will pay $1.5 billion. Even for a mega-bank, that amount serves as a direct deterrent. It serves as a deterrent not only for UBS, but for the biggest of the big schemers in the financial world.
One of the most egregious aspects of this case was that even when the bank knew it was being investigated for these violations of the law, it continued the wrongdoing. It was a corrupt culture.
One of the crooked characters in this debacle went so far as to pay off brokers at other firms in return for falsifying rates. All told, he made at least 2,000 attempts to manipulate the benchmark in a three-year period.
Whether the manipulated rates moved higher or lower (and rates went both ways) really isn’t what matters. They were not true rates. They were fictitious and that can throw off the normal balance of the global economy. When somebody is making false profits, somebody else pays the price.
These interest rate benchmarks are extremely important affecting virtually anything consumers purchase with credit. The entire benchmark rate regime needs to be revisited. We need to ensure that the rates are based upon transparent, actual trades. The numbers should not be consolidated by a trade association and there should never be a profit motive involved in submitting rates.
Finally, I’ve asked Congress to revisit this issue of puny penalty authority for the CFTC. Our authority needs to be revised and enhanced to ensure we continually protect consumers from violations of the law.
Statement of Commissioner Bart Cilton on UBS Settlement"A Conscience Isn't Nonsense"
December 19, 2012
Every so often, folks wonder if some in the financial sector believe that having a business conscience is nonsense. Financial sector violations are hurtling toward us like a spaceship moving through the stars. All too often, penalties have been a simple cost of doing business. That needs to change.
The UBS settlement is serious and significant and will provide a definite deterrent.
This $700 million settlement is the granddaddy of CFTC penalties. Combined with other regulator settlements, UBS will pay $1.5 billion. Even for a mega-bank, that amount serves as a direct deterrent. It serves as a deterrent not only for UBS, but for the biggest of the big schemers in the financial world.
One of the most egregious aspects of this case was that even when the bank knew it was being investigated for these violations of the law, it continued the wrongdoing. It was a corrupt culture.
One of the crooked characters in this debacle went so far as to pay off brokers at other firms in return for falsifying rates. All told, he made at least 2,000 attempts to manipulate the benchmark in a three-year period.
Whether the manipulated rates moved higher or lower (and rates went both ways) really isn’t what matters. They were not true rates. They were fictitious and that can throw off the normal balance of the global economy. When somebody is making false profits, somebody else pays the price.
These interest rate benchmarks are extremely important affecting virtually anything consumers purchase with credit. The entire benchmark rate regime needs to be revisited. We need to ensure that the rates are based upon transparent, actual trades. The numbers should not be consolidated by a trade association and there should never be a profit motive involved in submitting rates.
Finally, I’ve asked Congress to revisit this issue of puny penalty authority for the CFTC. Our authority needs to be revised and enhanced to ensure we continually protect consumers from violations of the law.
Wednesday, December 26, 2012
COURT ACTS TO STOP SALE OF SALMONELLA TAINTED PEANUT BUTTER PRODUCTS
FROM: U.S. DEPARTMENT OF JUSTICE
Friday, December 21, 2012
District Court Enters Permanent Injunction Against New Mexico-Based Producer of Peanut Butter Products and Company’s President and Chief Executive Officer
WASHINGTON - U.S. District Court Judge William P. Johnson entered a consent decree of permanent injunction against Sunland Inc., a Portales, N.M.-based producer of peanut butter, and Jimmie D. Shearer, president and chief executive officer of Sunland, the Justice Department announced today. The department, at the request of the Food and Drug Administration (FDA), asked the court to enter the consent decree.
The Centers for Disease Control and Prevention (CDC) has reported that since September 2012 at least 35 people from 19 states have been infected with a strain of Salmonella Bredeney. Eight of these individuals were hospitalized as a result of their infection. Peanut butter manufactured by Sunland was identified by FDA and the CDC as a likely source of this outbreak.
As set forth in the complaint filed by the United States on December 20, FDA conducted an inspection of defendants’ facility from Sept. 9 to Oct. 16, 2012. According to the complaint, FDA analyses of samples collected during the 2012 inspection confirmed that certain of Sunland’s nut products were contaminated with Salmonella Bredeney and established the widespread presence of Salmonella Bredeney in Sunland’s facility. Salmonella Bredeney is a pathogenic organism that has a reasonable probability of causing serious adverse health consequences or death to humans.
FDA suspended the registration of Sunland’s food facility on Nov. 26, 2012. As the FDA’s suspension letter explained, the FDA’s analysis found that the Salmonella Bredeney detected at Sunland was indistinguishable from the Salmonella Bredeney identified in the multistate outbreak and the FDA’s investigation uncovered a number of practices that likely result in cross-contamination between raw peanuts and peanuts that had been roasted or brined. Specifically, packaging equipment was not effectively cleaned to prevent contamination; collapsible mesh totes used to store and transport nuts were not cleaned and sanitized between uses; employees came into contact with ready to package, roasted, in-shell peanuts with their bare hands; and processing equipment had unused connections that could facilitate the growth of pathogenic bacteria by allowing food material and water to accumulate.
The FDA concluded that unless and until Sunland implemented a number of corrective actions, and FDA evaluated the completed corrective actions to assure their adequacy, food manufactured and held by Sunland would continue to pose a reasonable probability of causing serious adverse health consequences or death to humans or animals.
Shortly after the suspension of Sunland’s registration, the United States filed suit to permanently enjoin Sunland and Shearer from delivering adulterated foods into interstate commerce. The consent decree entered resolves that suit by requiring Sunland to take a wide range of actions to correct its violations and ensure that they do not happen again. Among other actions, Sunland must develop and implement sanitation control programs; provide FDA the opportunity to inspect the facilities to assure Sunland’s compliance with the consent decree, the Food, Drug and Cosmetic Act, and applicable regulations; and receive written authorization from FDA to resume operations. Sunland must also implement testing, monitoring and remediation protocols.
"This consent decree prohibits Sunland from selling processed foods to consumers until it fully complies with the law," said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Justice Department’s Civil Division. "As this case demonstrates, the Department of Justice and FDA will work together to protect the health and safety of Americans by making sure that those who produce and sell the food we eat follow the law."
Principal Deputy Assistant Attorney General Delery thanked the FDA for referring this matter to the Department of Justice. Roger Gural, Trial Attorney at the Consumer Protection Branch of the Justice Department, in conjunction with Assistant U.S. Attorney Michael Hoses in the District of New Mexico, and Scott Kaplan and Jillian Wein Riley, Counsel at FDA’s Office of the Chief Counsel, brought this case on behalf of the United States.
Friday, December 21, 2012
District Court Enters Permanent Injunction Against New Mexico-Based Producer of Peanut Butter Products and Company’s President and Chief Executive Officer
WASHINGTON - U.S. District Court Judge William P. Johnson entered a consent decree of permanent injunction against Sunland Inc., a Portales, N.M.-based producer of peanut butter, and Jimmie D. Shearer, president and chief executive officer of Sunland, the Justice Department announced today. The department, at the request of the Food and Drug Administration (FDA), asked the court to enter the consent decree.
The Centers for Disease Control and Prevention (CDC) has reported that since September 2012 at least 35 people from 19 states have been infected with a strain of Salmonella Bredeney. Eight of these individuals were hospitalized as a result of their infection. Peanut butter manufactured by Sunland was identified by FDA and the CDC as a likely source of this outbreak.
As set forth in the complaint filed by the United States on December 20, FDA conducted an inspection of defendants’ facility from Sept. 9 to Oct. 16, 2012. According to the complaint, FDA analyses of samples collected during the 2012 inspection confirmed that certain of Sunland’s nut products were contaminated with Salmonella Bredeney and established the widespread presence of Salmonella Bredeney in Sunland’s facility. Salmonella Bredeney is a pathogenic organism that has a reasonable probability of causing serious adverse health consequences or death to humans.
FDA suspended the registration of Sunland’s food facility on Nov. 26, 2012. As the FDA’s suspension letter explained, the FDA’s analysis found that the Salmonella Bredeney detected at Sunland was indistinguishable from the Salmonella Bredeney identified in the multistate outbreak and the FDA’s investigation uncovered a number of practices that likely result in cross-contamination between raw peanuts and peanuts that had been roasted or brined. Specifically, packaging equipment was not effectively cleaned to prevent contamination; collapsible mesh totes used to store and transport nuts were not cleaned and sanitized between uses; employees came into contact with ready to package, roasted, in-shell peanuts with their bare hands; and processing equipment had unused connections that could facilitate the growth of pathogenic bacteria by allowing food material and water to accumulate.
The FDA concluded that unless and until Sunland implemented a number of corrective actions, and FDA evaluated the completed corrective actions to assure their adequacy, food manufactured and held by Sunland would continue to pose a reasonable probability of causing serious adverse health consequences or death to humans or animals.
Shortly after the suspension of Sunland’s registration, the United States filed suit to permanently enjoin Sunland and Shearer from delivering adulterated foods into interstate commerce. The consent decree entered resolves that suit by requiring Sunland to take a wide range of actions to correct its violations and ensure that they do not happen again. Among other actions, Sunland must develop and implement sanitation control programs; provide FDA the opportunity to inspect the facilities to assure Sunland’s compliance with the consent decree, the Food, Drug and Cosmetic Act, and applicable regulations; and receive written authorization from FDA to resume operations. Sunland must also implement testing, monitoring and remediation protocols.
"This consent decree prohibits Sunland from selling processed foods to consumers until it fully complies with the law," said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Justice Department’s Civil Division. "As this case demonstrates, the Department of Justice and FDA will work together to protect the health and safety of Americans by making sure that those who produce and sell the food we eat follow the law."
Principal Deputy Assistant Attorney General Delery thanked the FDA for referring this matter to the Department of Justice. Roger Gural, Trial Attorney at the Consumer Protection Branch of the Justice Department, in conjunction with Assistant U.S. Attorney Michael Hoses in the District of New Mexico, and Scott Kaplan and Jillian Wein Riley, Counsel at FDA’s Office of the Chief Counsel, brought this case on behalf of the United States.
Sunday, December 23, 2012
SEC FILES FCPA CHARGES AGAINST ELI LILLY AND COMPANY
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission today charged Eli Lilly and Company with violations of the Foreign Corrupt Practices Act (FCPA) for improper payments its subsidiaries made to foreign government officials to win millions of dollars of business in Russia, Brazil, China and Poland.
The SEC alleges that the Indianapolis-based pharmaceutical company’s subsidiary in Russia used offshore "marketing agreements" to pay millions of dollars to third parties chosen by government customers or distributors, despite knowing little or nothing about the third parties beyond their offshore address and bank account information. These offshore entities rarely provided any services, and in some instances were used to funnel money to government officials in order to obtain business for the subsidiary. Transactions with off-shore or government-affiliated entities did not receive specialized or closer review for possible FCPA violations. Paperwork was accepted at face value and little was done to assess whether the terms or circumstances surrounding a transaction suggested the possibility of foreign bribery.
The SEC alleges that when the company did become aware of possible FCPA violations in Russia, Lilly did not curtail the subsidiary’s use of the marketing agreements for more than five years. Lilly subsidiaries in Brazil, China, and Poland also made improper payments to government officials or third party entities associated with government officials. Lilly agreed to pay more than $29 million to settle the SEC’s charges.
As alleged in the SEC’s complaint filed in federal court in Washington D.C.:
Lilly’s subsidiary in Russia paid millions of dollars to off-shore entities for alleged "marketing services" in order to induce pharmaceutical distributors and government entities to purchase Lilly’s drugs, including approximately $2 million to an off-shore entity owned by a government official and approximately $5.2 million to off-shore entities owned by a person closely associated with an important member of Russia’s Parliament. Despite the company’s recognition that the marketing agreements were being used to "create sales potential" with government customers and that it did not appear that any actual services were being rendered under the agreements, Eli Lilly allowed its subsidiary to continue using the agreements for years.
Employees at Lilly’s subsidiary in China falsified expense reports in order to provide spa treatments, jewelry, and other improper gifts and cash payments to government-employed physicians.
Lilly’s subsidiary in Brazil allowed one of its pharmaceutical distributors to pay bribes to government health officials to facilitate $1.2 million in sales of a Lilly drug product to state government institutions.
Lilly’s subsidiary in Poland made eight improper payments totaling $39,000 to a small charitable foundation that was founded and administered by the head of one of the regional government health authorities in exchange for the official’s support for placing Lilly drugs on the government reimbursement list.
Lilly agreed to pay disgorgement of $13,955,196, prejudgment interest of $6,743,538, and a penalty of $8,700,000 for a total payment of $29,398,734. Without admitting or denying the allegations, Lilly consented to the entry of a final judgment permanently enjoining the company from violating the anti-bribery, books and records, and internal controls provisions of the FCPA, Sections 30A, 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act. Lilly also agreed to comply with certain undertakings including the retention of an independent consultant to review and make recommendations about its foreign corruption policies and procedures. The settlement is subject to court approval.
The Securities and Exchange Commission today charged Eli Lilly and Company with violations of the Foreign Corrupt Practices Act (FCPA) for improper payments its subsidiaries made to foreign government officials to win millions of dollars of business in Russia, Brazil, China and Poland.
The SEC alleges that the Indianapolis-based pharmaceutical company’s subsidiary in Russia used offshore "marketing agreements" to pay millions of dollars to third parties chosen by government customers or distributors, despite knowing little or nothing about the third parties beyond their offshore address and bank account information. These offshore entities rarely provided any services, and in some instances were used to funnel money to government officials in order to obtain business for the subsidiary. Transactions with off-shore or government-affiliated entities did not receive specialized or closer review for possible FCPA violations. Paperwork was accepted at face value and little was done to assess whether the terms or circumstances surrounding a transaction suggested the possibility of foreign bribery.
The SEC alleges that when the company did become aware of possible FCPA violations in Russia, Lilly did not curtail the subsidiary’s use of the marketing agreements for more than five years. Lilly subsidiaries in Brazil, China, and Poland also made improper payments to government officials or third party entities associated with government officials. Lilly agreed to pay more than $29 million to settle the SEC’s charges.
As alleged in the SEC’s complaint filed in federal court in Washington D.C.:
Employees at Lilly’s subsidiary in China falsified expense reports in order to provide spa treatments, jewelry, and other improper gifts and cash payments to government-employed physicians.
Lilly’s subsidiary in Brazil allowed one of its pharmaceutical distributors to pay bribes to government health officials to facilitate $1.2 million in sales of a Lilly drug product to state government institutions.
Lilly’s subsidiary in Poland made eight improper payments totaling $39,000 to a small charitable foundation that was founded and administered by the head of one of the regional government health authorities in exchange for the official’s support for placing Lilly drugs on the government reimbursement list.
Lilly agreed to pay disgorgement of $13,955,196, prejudgment interest of $6,743,538, and a penalty of $8,700,000 for a total payment of $29,398,734. Without admitting or denying the allegations, Lilly consented to the entry of a final judgment permanently enjoining the company from violating the anti-bribery, books and records, and internal controls provisions of the FCPA, Sections 30A, 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act. Lilly also agreed to comply with certain undertakings including the retention of an independent consultant to review and make recommendations about its foreign corruption policies and procedures. The settlement is subject to court approval.
Saturday, December 22, 2012
U.S. ASSISTANT AG MAKES COMMENTS ON UBS LIBOR MANIPULATION CASE
FROM: U.S. DEPARTMENT OF JUSTICE
Assistant Attorney General Lanny A. Breuer Speaks at the UBS Press Conference
Washington, D.C. ~ Wednesday, December 19, 2012
UBS Japan has agreed to plead guilty in connection with one of the most significant scandals ever to hit the global banking industry. For years, including at the height of the financial crisis, UBS manipulated its submissions to the British Bankers’ Association for calculation of the London Interbank Offered Rate, or LIBOR. UBS AG, the banking giant and parent company of UBS Japan, has also entered into a non-prosecution agreement with the Justice Department, agreeing together with UBS Japan to pay $500 million to resolve our allegations related to the bank’s manipulation of LIBOR. Together with approximately $1 billion in regulatory penalties and disgorgement, these criminal penalties bring the total amount of today’s resolution to $1.5 billion.
The bank’s conduct was simply astonishing. Hundreds of trillions of dollars in mortgages, student loans, credit card debt, financial derivatives, and other financial products worldwide are tied to LIBOR, which serves as the premier benchmark for short-term interest rates. In short, the global marketplace depends upon an accurate LIBOR. Yet UBS, like Barclays before it, sought repeatedly to fix LIBOR for its own ends – in this case, so UBS traders could maximize profit on their trading positions, and so the bank wouldn’t appear vulnerable to the public during the financial crisis.
In addition to UBS Japan’s agreement to plead guilty, two former UBS traders – Tom Alexander William Hayes and Roger Darin – have been charged, in a criminal complaint unsealed today, with conspiracy to manipulate LIBOR. Hayes has also been charged with wire fraud and an antitrust violation. There was nothing subtle about these traders’ alleged conduct. In one instance, according to the complaint, Hayes explained to a junior rate submitter that he and Darin "generally coordinate" and "skew the libors a bit." In another instance, according to the complaint, Hayes told a trader at another bank that, "3m libor is too high cause i have kept it artificially high."
The scope of the misconduct admitted to by UBS AG and UBS Japan is far-reaching. For years, traders at UBS sought to manipulate the bank’s LIBOR submissions for their own profit. The traders had positions in interest rate swaps that depended on UBS’s LIBOR submissions. And, on numerous occasions, they caused UBS to make LIBOR submissions that directly benefited their own trading books. UBS’s manipulation was extensive, and covered several currencies and interest rates.
Make no mistake: for UBS traders, the manipulation of LIBOR was about getting rich. As one broker told a UBS derivatives trader, according to the statement of facts appended to our agreement with the bank, "mate yur getting bloody good at this libor game . . . think of me when yur on yur yacht in monaco wont yu."
From 2006 to 2009, according to the complaint unsealed today against Hayes and Darin, Hayes arranged to move UBS’s Yen LIBOR submissions in directions that would maximize his profit on the trading positions he took for the bank; and Darin repeatedly made false Yen LIBOR submissions on behalf of Hayes. The complaint also alleges that Hayes contacted brokers to influence them to disseminate false information about LIBOR. Hayes further allegedly made efforts to coordinate with traders at other banks to try to move their banks’ LIBOR submissions in directions that would help his trading positions.
Since the government’s investigation began, UBS has changed its senior leadership and improved its compliance and training programs. UBS has also cooperated with the Justice Department, and has agreed to continue doing so, as we pursue our ongoing, and active investigation into the manipulation of LIBOR.
We cannot, and we will not, tolerate misconduct on Wall Street of the kind admitted to by UBS today, and by Barclays last June. We will continue to follow the facts and the law wherever they lead us in this matter, as we do in every case.
I want to thank the many tenacious prosecutors in the Criminal Division, as well as the Antitrust Division, who are working on the LIBOR investigation, as well as the many talented agents and analysts at the FBI who have worked so hard on this case. I would also like to thank our colleagues at the Commodity Futures Trading Commission, the United Kingdom Financial Services Authority, and the Securities and Exchange Commission for their important parallel investigations; and the Swiss Financial Market Supervisory Authority, the Japanese Ministry of Justice, and the Japan Financial Services Authority for their valuable assistance.
Thank you.
Assistant Attorney General Lanny A. Breuer Speaks at the UBS Press Conference
Washington, D.C. ~ Wednesday, December 19, 2012
UBS Japan has agreed to plead guilty in connection with one of the most significant scandals ever to hit the global banking industry. For years, including at the height of the financial crisis, UBS manipulated its submissions to the British Bankers’ Association for calculation of the London Interbank Offered Rate, or LIBOR. UBS AG, the banking giant and parent company of UBS Japan, has also entered into a non-prosecution agreement with the Justice Department, agreeing together with UBS Japan to pay $500 million to resolve our allegations related to the bank’s manipulation of LIBOR. Together with approximately $1 billion in regulatory penalties and disgorgement, these criminal penalties bring the total amount of today’s resolution to $1.5 billion.
The bank’s conduct was simply astonishing. Hundreds of trillions of dollars in mortgages, student loans, credit card debt, financial derivatives, and other financial products worldwide are tied to LIBOR, which serves as the premier benchmark for short-term interest rates. In short, the global marketplace depends upon an accurate LIBOR. Yet UBS, like Barclays before it, sought repeatedly to fix LIBOR for its own ends – in this case, so UBS traders could maximize profit on their trading positions, and so the bank wouldn’t appear vulnerable to the public during the financial crisis.
In addition to UBS Japan’s agreement to plead guilty, two former UBS traders – Tom Alexander William Hayes and Roger Darin – have been charged, in a criminal complaint unsealed today, with conspiracy to manipulate LIBOR. Hayes has also been charged with wire fraud and an antitrust violation. There was nothing subtle about these traders’ alleged conduct. In one instance, according to the complaint, Hayes explained to a junior rate submitter that he and Darin "generally coordinate" and "skew the libors a bit." In another instance, according to the complaint, Hayes told a trader at another bank that, "3m libor is too high cause i have kept it artificially high."
The scope of the misconduct admitted to by UBS AG and UBS Japan is far-reaching. For years, traders at UBS sought to manipulate the bank’s LIBOR submissions for their own profit. The traders had positions in interest rate swaps that depended on UBS’s LIBOR submissions. And, on numerous occasions, they caused UBS to make LIBOR submissions that directly benefited their own trading books. UBS’s manipulation was extensive, and covered several currencies and interest rates.
Make no mistake: for UBS traders, the manipulation of LIBOR was about getting rich. As one broker told a UBS derivatives trader, according to the statement of facts appended to our agreement with the bank, "mate yur getting bloody good at this libor game . . . think of me when yur on yur yacht in monaco wont yu."
From 2006 to 2009, according to the complaint unsealed today against Hayes and Darin, Hayes arranged to move UBS’s Yen LIBOR submissions in directions that would maximize his profit on the trading positions he took for the bank; and Darin repeatedly made false Yen LIBOR submissions on behalf of Hayes. The complaint also alleges that Hayes contacted brokers to influence them to disseminate false information about LIBOR. Hayes further allegedly made efforts to coordinate with traders at other banks to try to move their banks’ LIBOR submissions in directions that would help his trading positions.
Since the government’s investigation began, UBS has changed its senior leadership and improved its compliance and training programs. UBS has also cooperated with the Justice Department, and has agreed to continue doing so, as we pursue our ongoing, and active investigation into the manipulation of LIBOR.
We cannot, and we will not, tolerate misconduct on Wall Street of the kind admitted to by UBS today, and by Barclays last June. We will continue to follow the facts and the law wherever they lead us in this matter, as we do in every case.
I want to thank the many tenacious prosecutors in the Criminal Division, as well as the Antitrust Division, who are working on the LIBOR investigation, as well as the many talented agents and analysts at the FBI who have worked so hard on this case. I would also like to thank our colleagues at the Commodity Futures Trading Commission, the United Kingdom Financial Services Authority, and the Securities and Exchange Commission for their important parallel investigations; and the Swiss Financial Market Supervisory Authority, the Japanese Ministry of Justice, and the Japan Financial Services Authority for their valuable assistance.
Thank you.
Friday, December 21, 2012
AU OPTRONICS CORPORATION EXECUTIVE CONVICTED FOR ROLE IN WORLDWIDE PRIICE FIXING CONSPIRACY
FROM: U.S. DEPARTMENT OF JUSTICE ANTITRUST DIVISION
WASHINGTON — Following a three-week trial, a federal jury in San Francisco today convicted an executive of the largest Taiwan liquid crystal display (LCD) producer for his participation in a worldwide conspiracy to fix the prices of thin-film transistor-liquid crystal display (TFT-LCD) panels sold worldwide, the Department of Justice announced.
Shiu Lung Leung, AU Optronics Corp.’s former senior manager in the Desktop Display Business Group, was found guilty today in U.S. District Court for the Northern District of California in San Francisco, of participating in a worldwide TFT-LCD price-fixing conspiracy from May 15, 2002 to Dec. 1, 2006.
AU Optronics Corp., based in Hsinchu, Taiwan, and its American subsidiary, AU Optronics Corp. America, headquartered in Houston, were found guilty on March 13, 2012, following an eight-week trial. Former AU Optronics Corp. president Hsuan Bin Chen and former AU Optronics Corp. executive vice president Hui Hsiung were also found guilty at that time. A mistrial was declared against Leung after that trial. Today’s verdict is the result of Leung’s retrial.
"This international price-fixing conspiracy impacted countless American consumers by raising the price of computer monitors, notebooks and televisions containing LCD panels," said Scott D. Hammond, Deputy Assistant Attorney General of the Antitrust Division’s criminal enforcement program. "Today’s guilty verdict demonstrates that the Antitrust Division will continue to hold executives accountable for crimes that undermine a competitive marketplace."
The indictment charged that AU Optronics Corp. participated in the worldwide price-fixing conspiracy from Sept. 14, 2001, to Dec. 1, 2006, and that its subsidiary joined the conspiracy as early as spring 2003. Today a jury found that Leung, along with the previously convicted companies and former executives, was guilty of fixing the prices of LCD panels sold in the United States. The conspirators fixed the prices of LCD panels during monthly meetings with their competitors, which were secretly held in hotel conference rooms, karaoke bars and tea rooms around Taiwan.
LCD panels are used in computer monitors and notebooks, televisions and other electronic devices. By the end of the conspiracy, the worldwide market for LCD panels was valued at $70 billion annually. The LCD price-fixing conspiracy affected some of the largest computer manufacturers in the world, including Hewlett Packard, Dell and Apple.
The company and its U.S. subsidiary were sentenced on Sept. 20, 2012, before Judge Susan Illston, to pay a $500 million criminal fine, matching the largest fine imposed against a company for violating U.S. antitrust laws. Chen and Hsiung were each sentenced to serve three years in prison and to each pay a $200,000 criminal fine.
As a result of this ongoing investigation, eight companies have pleaded guilty or been convicted to date and have been sentenced to pay criminal fines totaling more than $1.39 billion. Of the 22 charged executives, 13 have pleaded guilty or have been convicted and seven remain fugitives. The executives who have been sentenced have been ordered to serve a combined total of 4,871 days in prison.
The maximum penalty for a Sherman Act violation for an individual is 10 years in prison and a $1 million fine. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory fine.
WASHINGTON — Following a three-week trial, a federal jury in San Francisco today convicted an executive of the largest Taiwan liquid crystal display (LCD) producer for his participation in a worldwide conspiracy to fix the prices of thin-film transistor-liquid crystal display (TFT-LCD) panels sold worldwide, the Department of Justice announced.
Shiu Lung Leung, AU Optronics Corp.’s former senior manager in the Desktop Display Business Group, was found guilty today in U.S. District Court for the Northern District of California in San Francisco, of participating in a worldwide TFT-LCD price-fixing conspiracy from May 15, 2002 to Dec. 1, 2006.
AU Optronics Corp., based in Hsinchu, Taiwan, and its American subsidiary, AU Optronics Corp. America, headquartered in Houston, were found guilty on March 13, 2012, following an eight-week trial. Former AU Optronics Corp. president Hsuan Bin Chen and former AU Optronics Corp. executive vice president Hui Hsiung were also found guilty at that time. A mistrial was declared against Leung after that trial. Today’s verdict is the result of Leung’s retrial.
"This international price-fixing conspiracy impacted countless American consumers by raising the price of computer monitors, notebooks and televisions containing LCD panels," said Scott D. Hammond, Deputy Assistant Attorney General of the Antitrust Division’s criminal enforcement program. "Today’s guilty verdict demonstrates that the Antitrust Division will continue to hold executives accountable for crimes that undermine a competitive marketplace."
The indictment charged that AU Optronics Corp. participated in the worldwide price-fixing conspiracy from Sept. 14, 2001, to Dec. 1, 2006, and that its subsidiary joined the conspiracy as early as spring 2003. Today a jury found that Leung, along with the previously convicted companies and former executives, was guilty of fixing the prices of LCD panels sold in the United States. The conspirators fixed the prices of LCD panels during monthly meetings with their competitors, which were secretly held in hotel conference rooms, karaoke bars and tea rooms around Taiwan.
LCD panels are used in computer monitors and notebooks, televisions and other electronic devices. By the end of the conspiracy, the worldwide market for LCD panels was valued at $70 billion annually. The LCD price-fixing conspiracy affected some of the largest computer manufacturers in the world, including Hewlett Packard, Dell and Apple.
The company and its U.S. subsidiary were sentenced on Sept. 20, 2012, before Judge Susan Illston, to pay a $500 million criminal fine, matching the largest fine imposed against a company for violating U.S. antitrust laws. Chen and Hsiung were each sentenced to serve three years in prison and to each pay a $200,000 criminal fine.
As a result of this ongoing investigation, eight companies have pleaded guilty or been convicted to date and have been sentenced to pay criminal fines totaling more than $1.39 billion. Of the 22 charged executives, 13 have pleaded guilty or have been convicted and seven remain fugitives. The executives who have been sentenced have been ordered to serve a combined total of 4,871 days in prison.
The maximum penalty for a Sherman Act violation for an individual is 10 years in prison and a $1 million fine. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory fine.
Wednesday, December 19, 2012
ALLEGED PRICE FIXING OF E-BOOKS
FROM: U.S. DEPARTMENT OF JUSTICE
Tuesday, December 18, 2012
Justice Department Reaches Settlement with Penguin Group (USA) Inc. in E-Books Case
Department Continues to Litigate Against Apple Inc. and Macmillan to Prevent Continued Restrictions on Price Competition
WASHINGTON – The Department of Justice announced today that it has reached a settlement with Penguin Group (USA) Inc.–one of the largest book publishers in the United States–and will continue to litigate against Apple Inc. and Holtzbrinck Publishers LLC, which does business as Macmillan, for conspiring to raise e-book prices to consumers.
Today’s proposed settlement was filed in the U.S. District Court for the Southern District of New York. If approved by the court, the settlement will resolve the department’s competitive concerns as to Penguin, ending Penguin’s role as a defendant in the civil antitrust lawsuit filed by the department on April 11, 2012.
The department’s Antitrust Division previously settled its claims against three book publishers–Hachette Book Group Inc., HarperCollins Publishers L.L.C. and Simon & Schuster Inc. The department said that the publishers eliminated retail price competition, resulting in consumers paying millions of dollars more for their e-books. The settlement with those three publishers was approved by the court in September 2012. A trial against Macmillan and Apple currently is scheduled to begin in June 2013.
"Since the department’s settlement with Hachette, HarperCollins and Simon & Schuster, consumers are already paying lower prices for the e-book versions of many of those publishers’ new releases and bestsellers," said Jamillia Ferris, Chief of Staff and Counsel at the Department of Justice’s Antitrust Division. "If approved by the court, the proposed settlement with Penguin will be an important step toward undoing the harm caused by the publishers’ anticompetitive conduct and restoring retail price competition so consumers can pay lower prices for Penguin’s e-books."
According to the complaint, the five publishers and Apple were unhappy that competition among e-book sellers had reduced e-book prices and the retail profit margins of the book sellers to levels they thought were too low. To address these concerns, the department said the companies worked together to enter into contracts that eliminated price competition among bookstores selling e-books, substantially increasing prices paid by consumers. Before the companies began their conspiracy, retailers regularly sold e-book versions of new releases and bestsellers for, as described by one of the publisher’s CEO, the "wretched $9.99 price point." As a result of the conspiracy, consumers were typically forced to pay $12.99, $14.99, or more for the most sought-after e-books, the department said.
Under the proposed settlement agreement, Penguin will terminate its agreements with Apple and other e-books retailers and will be prohibited for two years from entering into new agreements that constrain retailers’ ability to offer discounts or other promotions to consumers to encourage the sale of the Penguin’s e-books. The proposed settlement agreement also will impose a strong antitrust compliance program on Penguin, which will include a requirement that it provide advance notification to the department of any e-book ventures it plans to undertake jointly with other publishers and that it regularly report to the department on any communications it has with other publishers. Also for five years, Penguin will be forbidden from agreeing to any kind of most favored nation (MFN) agreement that could undermine the effectiveness of the settlement.
The department is currently reviewing the proposed joint venture announced by Penguin and Random House Inc., the largest U.S. book publisher. Should the proposed joint venture proceed to consummation, the terms of Penguin’s settlement will apply to it.
Penguin Group (USA) Inc. has its principal place of business in New York City. It publishes e-books and print books through publishers such as The Viking press and Gotham Books. Penguin Group (USA) Inc. is the U.S. subsidiary of The Penguin Group, a division of Pearson plc, which has its principal place of business in London.
Hachette Book Group USA has its principal place of business in New York City. It publishes e-books and print books through its publishers such as Little, Brown and Company and Grand Central Publishing.
HarperCollins Publishers, L.L.C. has its principal place of business in New York City. It publishes e-books and print books through publishers such as Harper and William Morrow.
Macmillan has its principal place of business in New York City. It publishes e-books and print books through publishers such as Farrar, Straus and Giroux, and St. Martin’s Press. Verlagsgruppe Georg von Holtzbrinck GmbH owns Holtzbrinck Publishers LLC, which does business as Macmillan, and has its principal place of business in Stuttgart, Germany.
Simon & Schuster Inc. has its principal place of business in New York City. It publishes e-books and print books through publishers such as Free Press and Touchstone.
Apple Inc. has its principal place of business in Cupertino, Calif. Among many other businesses, Apple distributes e-books through its iBookstore.
Tuesday, December 18, 2012
Justice Department Reaches Settlement with Penguin Group (USA) Inc. in E-Books Case
Department Continues to Litigate Against Apple Inc. and Macmillan to Prevent Continued Restrictions on Price Competition
WASHINGTON – The Department of Justice announced today that it has reached a settlement with Penguin Group (USA) Inc.–one of the largest book publishers in the United States–and will continue to litigate against Apple Inc. and Holtzbrinck Publishers LLC, which does business as Macmillan, for conspiring to raise e-book prices to consumers.
Today’s proposed settlement was filed in the U.S. District Court for the Southern District of New York. If approved by the court, the settlement will resolve the department’s competitive concerns as to Penguin, ending Penguin’s role as a defendant in the civil antitrust lawsuit filed by the department on April 11, 2012.
The department’s Antitrust Division previously settled its claims against three book publishers–Hachette Book Group Inc., HarperCollins Publishers L.L.C. and Simon & Schuster Inc. The department said that the publishers eliminated retail price competition, resulting in consumers paying millions of dollars more for their e-books. The settlement with those three publishers was approved by the court in September 2012. A trial against Macmillan and Apple currently is scheduled to begin in June 2013.
"Since the department’s settlement with Hachette, HarperCollins and Simon & Schuster, consumers are already paying lower prices for the e-book versions of many of those publishers’ new releases and bestsellers," said Jamillia Ferris, Chief of Staff and Counsel at the Department of Justice’s Antitrust Division. "If approved by the court, the proposed settlement with Penguin will be an important step toward undoing the harm caused by the publishers’ anticompetitive conduct and restoring retail price competition so consumers can pay lower prices for Penguin’s e-books."
According to the complaint, the five publishers and Apple were unhappy that competition among e-book sellers had reduced e-book prices and the retail profit margins of the book sellers to levels they thought were too low. To address these concerns, the department said the companies worked together to enter into contracts that eliminated price competition among bookstores selling e-books, substantially increasing prices paid by consumers. Before the companies began their conspiracy, retailers regularly sold e-book versions of new releases and bestsellers for, as described by one of the publisher’s CEO, the "wretched $9.99 price point." As a result of the conspiracy, consumers were typically forced to pay $12.99, $14.99, or more for the most sought-after e-books, the department said.
Under the proposed settlement agreement, Penguin will terminate its agreements with Apple and other e-books retailers and will be prohibited for two years from entering into new agreements that constrain retailers’ ability to offer discounts or other promotions to consumers to encourage the sale of the Penguin’s e-books. The proposed settlement agreement also will impose a strong antitrust compliance program on Penguin, which will include a requirement that it provide advance notification to the department of any e-book ventures it plans to undertake jointly with other publishers and that it regularly report to the department on any communications it has with other publishers. Also for five years, Penguin will be forbidden from agreeing to any kind of most favored nation (MFN) agreement that could undermine the effectiveness of the settlement.
The department is currently reviewing the proposed joint venture announced by Penguin and Random House Inc., the largest U.S. book publisher. Should the proposed joint venture proceed to consummation, the terms of Penguin’s settlement will apply to it.
Penguin Group (USA) Inc. has its principal place of business in New York City. It publishes e-books and print books through publishers such as The Viking press and Gotham Books. Penguin Group (USA) Inc. is the U.S. subsidiary of The Penguin Group, a division of Pearson plc, which has its principal place of business in London.
Hachette Book Group USA has its principal place of business in New York City. It publishes e-books and print books through its publishers such as Little, Brown and Company and Grand Central Publishing.
HarperCollins Publishers, L.L.C. has its principal place of business in New York City. It publishes e-books and print books through publishers such as Harper and William Morrow.
Macmillan has its principal place of business in New York City. It publishes e-books and print books through publishers such as Farrar, Straus and Giroux, and St. Martin’s Press. Verlagsgruppe Georg von Holtzbrinck GmbH owns Holtzbrinck Publishers LLC, which does business as Macmillan, and has its principal place of business in Stuttgart, Germany.
Simon & Schuster Inc. has its principal place of business in New York City. It publishes e-books and print books through publishers such as Free Press and Touchstone.
Apple Inc. has its principal place of business in Cupertino, Calif. Among many other businesses, Apple distributes e-books through its iBookstore.
Tuesday, December 18, 2012
ALLIANZ SE CHARGED BY SEC WITH VIOLATING PROVISIONS OF THE FOREIGN CORRUPT PRACTICES ACT
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., Dec. 17, 2012 — The Securities and Exchange Commission today charged Germany-based insurance and asset management company Allianz SE with violating the books and records and internal controls provisions of the Foreign Corrupt Practices Act (FCPA) for improper payments to government officials in Indonesia during a seven-year period.
The SEC’s investigation uncovered 295 insurance contracts on large government projects that were obtained or retained by improper payments of $650,626 by Allianz’s subsidiary in Indonesia to employees of state-owned entities. Allianz made more than $5.3 million in profits as a result of the improper payments.
Allianz, which is headquartered in Munich, agreed to pay more than $12.3 million to settle the SEC’s charges.
"Allianz’s subsidiary created an 'off-the-books' account that served as a slush fund for bribe payments to foreign officials to win insurance contracts worth several million dollars," said Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit.
According to the SEC’s order instituting settled administrative proceedings against Allianz, the misconduct occurred from 2001 to 2008 while the company’s shares and bonds were registered with the SEC and traded on the New York Stock Exchange. Two complaints brought the misconduct to Allianz’s attention. The first complaint submitted in 2005 reported unsupported payments to agents, and a subsequent audit of accounting records at Allianz’s subsidiary in Indonesia uncovered that managers were using "special purpose accounts" to make illegal payments to government officials in order to secure business in Indonesia. The misconduct continued in spite of that audit.
According to the SEC’s order, the second complaint was made to Allianz’s external auditor in 2009. Allianz failed to properly account for certain payments in their books and records. The improper payments were disguised in invoices as an "overriding commission" for an agent that was not associated with the government insurance contract. In other instances, the improper payments were structured as an overpayment by the government insurance contract holder, who was later "reimbursed" for the overpayment. Excess funds were then paid to foreign officials who were responsible for procuring the government insurance contracts. Allianz lacked sufficient internal controls to detect and prevent the wrongful payments and improper accounting.
The SEC’s order found that Allianz violated the books and records and internal controls provisions of the FCPA, specifically Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934. Without admitting or denying the findings, Allianz agreed to cease and desist from further violations and pay disgorgement of $5,315,649, prejudgment interest of $1,765,125, and a penalty of $5,315,649 for a total of $12,396,423.
The SEC’s investigation was conducted by Irene Gutierrez, Jennifer Baskin and Tracy L. Price of the FCPA Unit.
Washington, D.C., Dec. 17, 2012 — The Securities and Exchange Commission today charged Germany-based insurance and asset management company Allianz SE with violating the books and records and internal controls provisions of the Foreign Corrupt Practices Act (FCPA) for improper payments to government officials in Indonesia during a seven-year period.
The SEC’s investigation uncovered 295 insurance contracts on large government projects that were obtained or retained by improper payments of $650,626 by Allianz’s subsidiary in Indonesia to employees of state-owned entities. Allianz made more than $5.3 million in profits as a result of the improper payments.
Allianz, which is headquartered in Munich, agreed to pay more than $12.3 million to settle the SEC’s charges.
"Allianz’s subsidiary created an 'off-the-books' account that served as a slush fund for bribe payments to foreign officials to win insurance contracts worth several million dollars," said Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit.
According to the SEC’s order instituting settled administrative proceedings against Allianz, the misconduct occurred from 2001 to 2008 while the company’s shares and bonds were registered with the SEC and traded on the New York Stock Exchange. Two complaints brought the misconduct to Allianz’s attention. The first complaint submitted in 2005 reported unsupported payments to agents, and a subsequent audit of accounting records at Allianz’s subsidiary in Indonesia uncovered that managers were using "special purpose accounts" to make illegal payments to government officials in order to secure business in Indonesia. The misconduct continued in spite of that audit.
According to the SEC’s order, the second complaint was made to Allianz’s external auditor in 2009. Allianz failed to properly account for certain payments in their books and records. The improper payments were disguised in invoices as an "overriding commission" for an agent that was not associated with the government insurance contract. In other instances, the improper payments were structured as an overpayment by the government insurance contract holder, who was later "reimbursed" for the overpayment. Excess funds were then paid to foreign officials who were responsible for procuring the government insurance contracts. Allianz lacked sufficient internal controls to detect and prevent the wrongful payments and improper accounting.
The SEC’s order found that Allianz violated the books and records and internal controls provisions of the FCPA, specifically Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934. Without admitting or denying the findings, Allianz agreed to cease and desist from further violations and pay disgorgement of $5,315,649, prejudgment interest of $1,765,125, and a penalty of $5,315,649 for a total of $12,396,423.
The SEC’s investigation was conducted by Irene Gutierrez, Jennifer Baskin and Tracy L. Price of the FCPA Unit.
Monday, December 17, 2012
JUDGE ORDERS COMPANY TO REINSTATE EMPLOYEES, WAGES, BENEFITS, AND BARGIN WITH UNION
FROM: U.S. NATIONAL LABOR RELATIONS BOARD
Federal judge orders Healthbridge to reinstate employees, restore wages and benefits, and bargain with union
A federal judge has ordered a Connecticut nursing home chain to offer reinstatement to approximately 600-700 workers, to rescind changes made to employee wages and benefits, and to bargain in good faith with the union that has long represented its employees
U.S. District Judge Robert N. Chatigny granted the injunction against Healthbridge Management, LLC, at the request of the NLRB Regional Director Jonathan Kreisberg, who has authorized four complaints against the employer alleging a series of unlawful actions at six nursing homes over more than two years. The employees are represented by District 1199 of the New England Health Care Employees Union, SEIU.
The petition seeking the injunction alleged that after 19 months of bargaining, in June 2012, the company unilaterally implemented contract proposals affecting wages, hours, benefit eligibility, and retirement and health benefits without first bargaining to a good faith impasse. Employees went on an unfair labor practice strike in protest. In mid-July, the employees through their union offered to return to work under the terms of the contract that existed prior to the unilateral implementation, but the employer refused to bring them back.
In his order, Judge Chatigny found reasonable cause to believe the employer has refused to bargain in good faith, and that there was a "pressing need to restore the status quo" that existed before the unilateral changes were made. Under the order, Healthbridge must make the offers of reinstatement by Dec. 17. The injunction will remain in effect while the NLRB resolves the underlying Healthbridge cases.
Following hearings, two NLRB administrative law judges previously found that Healthbridge violated federal labor laws by, among other things, unilaterally implementing changes to employee wages and benefits and by prohibiting employees from wearing Union stickers protesting Healthbridge’s unfair labor practices, Judge Steven Davis’ July 20 decision is here, and Judge Steven Fish’s August 1 decision is here. A third hearing before an administrative law judge is now in progress on charges that the employer illegally locked out workers in December 2011 at its Milford facility, and bargained in bad faith by unilaterally imposing its contract proposals without first bargaining to a good faith impasse as required by the National Labor Relations Act.
Federal judge orders Healthbridge to reinstate employees, restore wages and benefits, and bargain with union
A federal judge has ordered a Connecticut nursing home chain to offer reinstatement to approximately 600-700 workers, to rescind changes made to employee wages and benefits, and to bargain in good faith with the union that has long represented its employees
U.S. District Judge Robert N. Chatigny granted the injunction against Healthbridge Management, LLC, at the request of the NLRB Regional Director Jonathan Kreisberg, who has authorized four complaints against the employer alleging a series of unlawful actions at six nursing homes over more than two years. The employees are represented by District 1199 of the New England Health Care Employees Union, SEIU.
The petition seeking the injunction alleged that after 19 months of bargaining, in June 2012, the company unilaterally implemented contract proposals affecting wages, hours, benefit eligibility, and retirement and health benefits without first bargaining to a good faith impasse. Employees went on an unfair labor practice strike in protest. In mid-July, the employees through their union offered to return to work under the terms of the contract that existed prior to the unilateral implementation, but the employer refused to bring them back.
In his order, Judge Chatigny found reasonable cause to believe the employer has refused to bargain in good faith, and that there was a "pressing need to restore the status quo" that existed before the unilateral changes were made. Under the order, Healthbridge must make the offers of reinstatement by Dec. 17. The injunction will remain in effect while the NLRB resolves the underlying Healthbridge cases.
Following hearings, two NLRB administrative law judges previously found that Healthbridge violated federal labor laws by, among other things, unilaterally implementing changes to employee wages and benefits and by prohibiting employees from wearing Union stickers protesting Healthbridge’s unfair labor practices, Judge Steven Davis’ July 20 decision is here, and Judge Steven Fish’s August 1 decision is here. A third hearing before an administrative law judge is now in progress on charges that the employer illegally locked out workers in December 2011 at its Milford facility, and bargained in bad faith by unilaterally imposing its contract proposals without first bargaining to a good faith impasse as required by the National Labor Relations Act.
Sunday, December 16, 2012
U.S. JUSTICE DEPARTMENT REPORTS RECOVERING NEARLY $4.5 BILLION IN FALSE CLAIM ACT CASES
FROM: U.S. DEPARTMENT OF JUSTICE
Justice Department Recovers Nearly $5 Billion in False Claims Act Cases in Fiscal Year 2012
Largest Annual Recovery in Department History Department Also Sets Records for Health Care and Mortgage Fraud Recoveries And Recoveries in Whistleblower Suits
The Justice Department secured $4.9 billion in settlements and judgments in civil cases involving fraud against the government in the fiscal year ending Sept. 30, 2012, Tony West, Acting Associate Attorney General, and Stuart F. Delery, Principal Deputy Assistant Attorney General for the Civil Division, announced today. This figure constitutes a record recovery for a single year, eclipsing the previous record by more than $1.7 billion, and brings total recoveries under the False Claims Act since January 2009 to $13.3 billion – which is the largest four-year total in the Justice Department’s history and more than a third of total recoveries since the act was amended 26 years ago in 1986.
The False Claims Act is the government’s primary civil remedy to redress false claims for federal money or property, such as Medicare benefits, federal subsidies and loans and payments under contracts for goods and services, including military contracts. The 1986 amendments strengthened the act and increased incentives for whistleblowers to file lawsuits on behalf of the government, leading to more investigations and greater recoveries.
Most false claims actions are filed under the act’s whistleblower, or qui tam, provisions, which allow private citizens to file suits alleging false claims on behalf of the government. If the United States prevails in the action, the whistleblower, known as a relator, receives up to 30 perc ent of the recovery. The department saw a record 647 qui tam suits filed last fiscal year and recovered a record $3.3 billion in suits filed by whistleblowers during the same period.
The Justice Department’s 2012 efforts also included record recoveries for health care fraud, where recoveries topped $3 billion for the first time in a single fiscal year, thereby besting the previous record which had been set in fiscal year 2011. Housing and mortgage fraud accounted for an unprecedented $1.4 billion.
"Today’s announcement underscores the Obama Administration’s ongoing commitment to recover losses, to prevent fraud, to bring abuses to light, and to hold accountable those who violate the law and exploit some of the government’s most critical programs," said Attorney General Eric Holder. "Thanks to the dedicated work of attorneys, investigators, analysts, and support staff at every level of the Justice Department – along with our state and local partners across the country – we have secured the largest annual recovery in the Department's history. By aggressively investigating allegations of waste and pursuing those who would take advantage of the most vulnerable members of society, I'm confident that we will continue to build on this historic progress in the months and years ahead."
"The Justice Department, using the False Claims Act, recovered nearly $5 billion in taxpayer for false claims on the treasury, by far a record for any one year," said Acting Associate Attorney General West. "This Administration’s commitment to fighting fraud in its many forms has led to the most successful four-year period in the department’s history. Vigorous enforcement of the False Claims Act not only protects taxpayer dollars; it also protects the integrity of important government programs on which so many of us rely."
"Redressing fraud and abuse in government programs has been a top priority of the Department of Justice," Principal Deputy Assistant Attorney General Delery said. "This success is also largely attributable to the brave individuals who initiate many of the investigations through whistleblower suits and to the Obama Administration’s efforts to coordinate enforcement efforts across government. While today we focus on federal recoveries, the cases successfully pursued by the Civil Division and the United States Attorneys throughout the country also returned billions of dollars to state Medicaid funds and homeowners threatened with foreclosure. In some cases, the individuals and corporations involved were also subject to criminal sanctions and were required to enter into corporate integrity agreements to prevent future misconduct."
Health Care Fraud
As noted, this year represents the second straight year in which the department has set a new record for recoveries under the False Claims Act for health care fraud. This steady, significant and continuing success can be attributed in part to the high priority placed by the administration on fighting health care fraud. In 2009, Attorney General Holder and Health and Human Services (HHS) Secretary Kathleen Sebelius announced the creation of an interagency task force, the Health Care Fraud Prevention and Enforcement Action Team (HEAT), to increase coordination and optimize criminal and civil enforcement. This coordination has yielded historic results: From January 2009 through the end of the 2012 fiscal year, the department used the False Claims Act to recover more than $9.5 billion in federal health care dollars – also a record for any four-year period. Most of these recoveries relate to frauds against Medicare and Medicaid. For more information, go to StopMedicareFraud.gov , a web page jointly established by the Department of Justice and HHS that provides additional information on the government’s efforts in this area.
Enforcement actions involving the pharmaceutical and medical device industry were the source of some of the largest recoveries this year. The department recovered nearly $2 billion in cases alleging false claims for drugs and medical devices under federally insured health programs and, in addition, returned $745 million to state Medicaid programs. These cases include recoveries from GlaxoSmithKline LLC (GSK) and Merck, Sharp & Dohme (Merck) – two of the three top settlements this year. These recoveries do not include a $561 million False Claims Act settlement with Abbott Laboratories Inc., part of a $1.5 billion global resolution (which will be reflected in FY 2013 numbers) (details at Abbott Labs ).
GSK paid $1.5 billion to resolve False Claims Act allegations that the company (1) promoted the drugs Paxil, Wellbutrin, Advair, Lamictal and Zofran for uses not approved by the Food and Drug Administration, known as off-label use, and paid kickbacks to physicians to prescribe those drugs as well as the drugs Imitrex, Lotronex, Flovent and Valtrex; (2) made false and misleading statements concerning the safety of the drug Avandia; and (3) reported false best prices and underpaid rebates owed under the Medicaid Drug Rebate Program. The $1.5 billion in federal civil recoveries was part of a $3 billion global settlement including criminal fines and forfeitures as well as state Medicaid recoveries, making GSK the largest health care fraud settlement in U.S. history. For details, go to GSK settlement .
The department also recovered $441 million, including interest, from Merck to resolve allegations that the company promoted the drug Vioxx for off-label use for relief of rheumatoid arthritis and that company representatives made inaccurate, unsupported or misleading statements about Vioxx’s cardiovascular safety to increase sales, resulting in payments by federal health care programs. In addition, Merck paid nearly $322 million in criminal fines and returned more than $200 million to state Medicaid programs. For details, go to Merck settlement .
Adding to its successes under the False Claims Act, the Civil Division, through its Consumer Protection Branch, and together with U.S. Attorneys across the country, obtained 14 criminal convictions and $1.5 billion in criminal fines and forfeitures under the Food, Drug and Cosmetic Act (FDCA).
Mortgage and Housing Fraud
In addition to health care fraud, the department continued its aggressive pursuit of financial fraud, including fraud in the housing and mortgage industries that came to light in the wake of the financial crisis. In November 2009, President Obama established the Financial Fraud Enforcement Task Force to hold accountable the individuals and corporations who contributed to the crisis as well as those who would claim illegal advantage through false claims for funds intended to stimulate economic recovery. The task force is the broadest coalition of law enforcement, investigative, and regulatory agencies ever assembled to combat fraud. For more information on the efforts and results of the Financial Fraud Enforcement Task Force in mortgage and other financial fraud, go to StopFraud.gov .
In fiscal year 2012, the Task Force’s efforts resulted in a landmark $25 billion agreement between the federal government, the attorneys general of 49 states and the District of Columbia, on the one hand, and the nation’s five largest mortgage servicers, on the other, to address mortgage loan servicing and foreclosure abuses. The five settling companies are the Bank of America Corporation, JP Morgan Chase & Co., Wells Fargo & Company, Citigroup Inc. and Ally Financial Inc. (formerly GMAC). Among its other provisions – which included significant relief for struggling homeowners – the settlement included resolutions under the False Claims Act that returned more than $900 million to federal mortgage insurance programs, including programs designed to promote home ownership by families and veterans. In addition, the agreement provides substantial financial relief to homeowners and establishes significant new homeowner protections for the future. For details, go to $25 billion agreement .
Other significant settlements to redress false claims in connection with federally insured mortgages include a $202.3 million settlement with Deutsche Bank AG and its subsidiary MortgageIT Inc., a $158.3 million settlement with Citibank subsidiary CitiMortgage Inc. and a $132.8 million settlement with Flagstar Bank. For details, go to Deutsche Bank/MortgageIT , CitiMortgage , and Flagstar Bank .
Procurement Fraud
The department, with the assistance of other members of the Financial Fraud Enforcement Task Force, also achieved great success in the pursuit of procurement fraud, including fraud connected to the procurement of equipment and services for the military. In fiscal year 2012, the department recovered $427 million in false claims for goods and services purchased by the government, bringing total recoveries for procurement fraud since January 2009 to $1.7 billion.
The department recovered $73 million in cases related to the wars in Iraq and Afghanistan. These cases include a $37 million settlement with ATK Launch Systems Inc. to resolve allegations that ATK sold dangerous and defective illumination flares used by the Army and the Air Force for nighttime combat and for covert and search and rescue operations. In another wartime contracting case, Maersk Line Limited paid the United States $31.9 million to resolve allegations that the company knowingly overcharged the Department of Defense to transport cargo to U.S. troops in Afghanistan and Iraq. For details on these settlements, go to ATK and Maersk .
The department also recovered $200 million from software manufacturer Oracle Corp. and Oracle USA in the largest False Claims Act settlement ever obtained under a General Services Administration contract. GSA negotiates contracts with private sector companies for the purchase of commonly used commercial goods and services by agencies throughout the government. As part of their contract to gain access to the vast federal marketplace, these companies agree to disclose the discounts given to their commercial customers and to pass along those discounts to the government. The $200 million settlement with Oracle resolved allegations that the company overcharged the government by failing to disclose substantially lower prices offered to its commercial customers. For more details, go to Oracle settlement .
Recoveries in Whistleblower Suits
As part of a commemoration of the 25th anniversary of the False Claims Act amendments, the department noted earlier this year the importance of the legislation providing the tools needed to combat fraud against the government, especially by strengthening the False Claims Act’s qui tam provisions. In 1986, Senator Charles Grassley and Representative Howard Berman led successful efforts in Congress to amend the False Claims Act to, among other things, encourage whistleblowers to come forward with allegations of fraud. In 2009, Senator Patrick J. Leahy, chairman of the Senate Judiciary Committee, along with Senator Grassley and Representative Berman, championed the Fraud Enforcement and Recovery Act of 2009, which made additional improvements to the False Claims Act and other fraud statutes. And in 2010, the passage of the Affordable Care Act provided additional inducements and protections for whistleblowers and strengthened the provisions of the federal health care Anti-Kickback Statute.
The increased incentives for whistleblowers have led to an unprecedented number of investigations and greater recoveries. Of the $4.9 billion in fiscal year 2012 recoveries, a record $3.3 billion was recovered in whistleblower suits. In fiscal year 2012 alone, relators filed 647 qui tam suits. Of the nearly 8,500 qui tam suits filed since the 1986 amendments, nearly 2,200 were filed since January 2009. Looking at qui tam recoveries for the same periods, the department tallied $24.2 billion since 1986, with nearly $10.5 billion of that amount recovered from January 2009 through fiscal year 2012. Since 1986, whistleblowers have been awarded nearly $4 billion, with $439 million in awards in fiscal year 2012.
"The whistleblowers who bring wrongdoing to the government’s attention are instrumental in preserving the integrity of government programs and protecting taxpayers from the costs of fraud," said Principal Deputy Assistant Attorney General Delery. "We are extremely grateful for the sacrifices they make to do the right thing."
Acting Associate Attorney General West and Principal Deputy Assistant Attorney General Delery also expressed their deep appreciation for the dedicated public servants who contributed to the investigation and prosecution of these cases. These individuals include attorneys, investigators, auditors and other agency personnel throughout the Civil Division, the U.S. Attorneys’ Offices, HHS, Department of Defense and the many other federal and state agencies that contributed to the department’s record recoveries this past year.
"The department’s record recoveries this past year are a product of the tremendous skill and dedication of the people who worked on these cases and investigations," Mr. Delery said.
Justice Department Recovers Nearly $5 Billion in False Claims Act Cases in Fiscal Year 2012
Largest Annual Recovery in Department History Department Also Sets Records for Health Care and Mortgage Fraud Recoveries And Recoveries in Whistleblower Suits
The Justice Department secured $4.9 billion in settlements and judgments in civil cases involving fraud against the government in the fiscal year ending Sept. 30, 2012, Tony West, Acting Associate Attorney General, and Stuart F. Delery, Principal Deputy Assistant Attorney General for the Civil Division, announced today. This figure constitutes a record recovery for a single year, eclipsing the previous record by more than $1.7 billion, and brings total recoveries under the False Claims Act since January 2009 to $13.3 billion – which is the largest four-year total in the Justice Department’s history and more than a third of total recoveries since the act was amended 26 years ago in 1986.
The False Claims Act is the government’s primary civil remedy to redress false claims for federal money or property, such as Medicare benefits, federal subsidies and loans and payments under contracts for goods and services, including military contracts. The 1986 amendments strengthened the act and increased incentives for whistleblowers to file lawsuits on behalf of the government, leading to more investigations and greater recoveries.
Most false claims actions are filed under the act’s whistleblower, or qui tam, provisions, which allow private citizens to file suits alleging false claims on behalf of the government. If the United States prevails in the action, the whistleblower, known as a relator, receives up to 30 perc ent of the recovery. The department saw a record 647 qui tam suits filed last fiscal year and recovered a record $3.3 billion in suits filed by whistleblowers during the same period.
The Justice Department’s 2012 efforts also included record recoveries for health care fraud, where recoveries topped $3 billion for the first time in a single fiscal year, thereby besting the previous record which had been set in fiscal year 2011. Housing and mortgage fraud accounted for an unprecedented $1.4 billion.
"Today’s announcement underscores the Obama Administration’s ongoing commitment to recover losses, to prevent fraud, to bring abuses to light, and to hold accountable those who violate the law and exploit some of the government’s most critical programs," said Attorney General Eric Holder. "Thanks to the dedicated work of attorneys, investigators, analysts, and support staff at every level of the Justice Department – along with our state and local partners across the country – we have secured the largest annual recovery in the Department's history. By aggressively investigating allegations of waste and pursuing those who would take advantage of the most vulnerable members of society, I'm confident that we will continue to build on this historic progress in the months and years ahead."
"The Justice Department, using the False Claims Act, recovered nearly $5 billion in taxpayer for false claims on the treasury, by far a record for any one year," said Acting Associate Attorney General West. "This Administration’s commitment to fighting fraud in its many forms has led to the most successful four-year period in the department’s history. Vigorous enforcement of the False Claims Act not only protects taxpayer dollars; it also protects the integrity of important government programs on which so many of us rely."
"Redressing fraud and abuse in government programs has been a top priority of the Department of Justice," Principal Deputy Assistant Attorney General Delery said. "This success is also largely attributable to the brave individuals who initiate many of the investigations through whistleblower suits and to the Obama Administration’s efforts to coordinate enforcement efforts across government. While today we focus on federal recoveries, the cases successfully pursued by the Civil Division and the United States Attorneys throughout the country also returned billions of dollars to state Medicaid funds and homeowners threatened with foreclosure. In some cases, the individuals and corporations involved were also subject to criminal sanctions and were required to enter into corporate integrity agreements to prevent future misconduct."
Health Care Fraud
As noted, this year represents the second straight year in which the department has set a new record for recoveries under the False Claims Act for health care fraud. This steady, significant and continuing success can be attributed in part to the high priority placed by the administration on fighting health care fraud. In 2009, Attorney General Holder and Health and Human Services (HHS) Secretary Kathleen Sebelius announced the creation of an interagency task force, the Health Care Fraud Prevention and Enforcement Action Team (HEAT), to increase coordination and optimize criminal and civil enforcement. This coordination has yielded historic results: From January 2009 through the end of the 2012 fiscal year, the department used the False Claims Act to recover more than $9.5 billion in federal health care dollars – also a record for any four-year period. Most of these recoveries relate to frauds against Medicare and Medicaid. For more information, go to StopMedicareFraud.gov , a web page jointly established by the Department of Justice and HHS that provides additional information on the government’s efforts in this area.
Enforcement actions involving the pharmaceutical and medical device industry were the source of some of the largest recoveries this year. The department recovered nearly $2 billion in cases alleging false claims for drugs and medical devices under federally insured health programs and, in addition, returned $745 million to state Medicaid programs. These cases include recoveries from GlaxoSmithKline LLC (GSK) and Merck, Sharp & Dohme (Merck) – two of the three top settlements this year. These recoveries do not include a $561 million False Claims Act settlement with Abbott Laboratories Inc., part of a $1.5 billion global resolution (which will be reflected in FY 2013 numbers) (details at Abbott Labs ).
GSK paid $1.5 billion to resolve False Claims Act allegations that the company (1) promoted the drugs Paxil, Wellbutrin, Advair, Lamictal and Zofran for uses not approved by the Food and Drug Administration, known as off-label use, and paid kickbacks to physicians to prescribe those drugs as well as the drugs Imitrex, Lotronex, Flovent and Valtrex; (2) made false and misleading statements concerning the safety of the drug Avandia; and (3) reported false best prices and underpaid rebates owed under the Medicaid Drug Rebate Program. The $1.5 billion in federal civil recoveries was part of a $3 billion global settlement including criminal fines and forfeitures as well as state Medicaid recoveries, making GSK the largest health care fraud settlement in U.S. history. For details, go to GSK settlement .
The department also recovered $441 million, including interest, from Merck to resolve allegations that the company promoted the drug Vioxx for off-label use for relief of rheumatoid arthritis and that company representatives made inaccurate, unsupported or misleading statements about Vioxx’s cardiovascular safety to increase sales, resulting in payments by federal health care programs. In addition, Merck paid nearly $322 million in criminal fines and returned more than $200 million to state Medicaid programs. For details, go to Merck settlement .
Adding to its successes under the False Claims Act, the Civil Division, through its Consumer Protection Branch, and together with U.S. Attorneys across the country, obtained 14 criminal convictions and $1.5 billion in criminal fines and forfeitures under the Food, Drug and Cosmetic Act (FDCA).
Mortgage and Housing Fraud
In addition to health care fraud, the department continued its aggressive pursuit of financial fraud, including fraud in the housing and mortgage industries that came to light in the wake of the financial crisis. In November 2009, President Obama established the Financial Fraud Enforcement Task Force to hold accountable the individuals and corporations who contributed to the crisis as well as those who would claim illegal advantage through false claims for funds intended to stimulate economic recovery. The task force is the broadest coalition of law enforcement, investigative, and regulatory agencies ever assembled to combat fraud. For more information on the efforts and results of the Financial Fraud Enforcement Task Force in mortgage and other financial fraud, go to StopFraud.gov .
In fiscal year 2012, the Task Force’s efforts resulted in a landmark $25 billion agreement between the federal government, the attorneys general of 49 states and the District of Columbia, on the one hand, and the nation’s five largest mortgage servicers, on the other, to address mortgage loan servicing and foreclosure abuses. The five settling companies are the Bank of America Corporation, JP Morgan Chase & Co., Wells Fargo & Company, Citigroup Inc. and Ally Financial Inc. (formerly GMAC). Among its other provisions – which included significant relief for struggling homeowners – the settlement included resolutions under the False Claims Act that returned more than $900 million to federal mortgage insurance programs, including programs designed to promote home ownership by families and veterans. In addition, the agreement provides substantial financial relief to homeowners and establishes significant new homeowner protections for the future. For details, go to $25 billion agreement .
Other significant settlements to redress false claims in connection with federally insured mortgages include a $202.3 million settlement with Deutsche Bank AG and its subsidiary MortgageIT Inc., a $158.3 million settlement with Citibank subsidiary CitiMortgage Inc. and a $132.8 million settlement with Flagstar Bank. For details, go to Deutsche Bank/MortgageIT , CitiMortgage , and Flagstar Bank .
Procurement Fraud
The department, with the assistance of other members of the Financial Fraud Enforcement Task Force, also achieved great success in the pursuit of procurement fraud, including fraud connected to the procurement of equipment and services for the military. In fiscal year 2012, the department recovered $427 million in false claims for goods and services purchased by the government, bringing total recoveries for procurement fraud since January 2009 to $1.7 billion.
The department recovered $73 million in cases related to the wars in Iraq and Afghanistan. These cases include a $37 million settlement with ATK Launch Systems Inc. to resolve allegations that ATK sold dangerous and defective illumination flares used by the Army and the Air Force for nighttime combat and for covert and search and rescue operations. In another wartime contracting case, Maersk Line Limited paid the United States $31.9 million to resolve allegations that the company knowingly overcharged the Department of Defense to transport cargo to U.S. troops in Afghanistan and Iraq. For details on these settlements, go to ATK and Maersk .
The department also recovered $200 million from software manufacturer Oracle Corp. and Oracle USA in the largest False Claims Act settlement ever obtained under a General Services Administration contract. GSA negotiates contracts with private sector companies for the purchase of commonly used commercial goods and services by agencies throughout the government. As part of their contract to gain access to the vast federal marketplace, these companies agree to disclose the discounts given to their commercial customers and to pass along those discounts to the government. The $200 million settlement with Oracle resolved allegations that the company overcharged the government by failing to disclose substantially lower prices offered to its commercial customers. For more details, go to Oracle settlement .
Recoveries in Whistleblower Suits
As part of a commemoration of the 25th anniversary of the False Claims Act amendments, the department noted earlier this year the importance of the legislation providing the tools needed to combat fraud against the government, especially by strengthening the False Claims Act’s qui tam provisions. In 1986, Senator Charles Grassley and Representative Howard Berman led successful efforts in Congress to amend the False Claims Act to, among other things, encourage whistleblowers to come forward with allegations of fraud. In 2009, Senator Patrick J. Leahy, chairman of the Senate Judiciary Committee, along with Senator Grassley and Representative Berman, championed the Fraud Enforcement and Recovery Act of 2009, which made additional improvements to the False Claims Act and other fraud statutes. And in 2010, the passage of the Affordable Care Act provided additional inducements and protections for whistleblowers and strengthened the provisions of the federal health care Anti-Kickback Statute.
The increased incentives for whistleblowers have led to an unprecedented number of investigations and greater recoveries. Of the $4.9 billion in fiscal year 2012 recoveries, a record $3.3 billion was recovered in whistleblower suits. In fiscal year 2012 alone, relators filed 647 qui tam suits. Of the nearly 8,500 qui tam suits filed since the 1986 amendments, nearly 2,200 were filed since January 2009. Looking at qui tam recoveries for the same periods, the department tallied $24.2 billion since 1986, with nearly $10.5 billion of that amount recovered from January 2009 through fiscal year 2012. Since 1986, whistleblowers have been awarded nearly $4 billion, with $439 million in awards in fiscal year 2012.
"The whistleblowers who bring wrongdoing to the government’s attention are instrumental in preserving the integrity of government programs and protecting taxpayers from the costs of fraud," said Principal Deputy Assistant Attorney General Delery. "We are extremely grateful for the sacrifices they make to do the right thing."
Acting Associate Attorney General West and Principal Deputy Assistant Attorney General Delery also expressed their deep appreciation for the dedicated public servants who contributed to the investigation and prosecution of these cases. These individuals include attorneys, investigators, auditors and other agency personnel throughout the Civil Division, the U.S. Attorneys’ Offices, HHS, Department of Defense and the many other federal and state agencies that contributed to the department’s record recoveries this past year.
"The department’s record recoveries this past year are a product of the tremendous skill and dedication of the people who worked on these cases and investigations," Mr. Delery said.
Saturday, December 15, 2012
NATION'S LARGEST GLASS CONTAINER MANUFACTURER AGREES TO INSTALL AIR POLLUTION CONTROL EQUIPMENT
FROM: U.S. ENVIRONMENTAL PROTECTION AGENCY
Glass Container Manufacturer Agrees to Install Pollution Controls and Pay $1.45 Million to Settle Clean Air Act Violations
Settlement to reduce emissions at facilities in Georgia, Oklahoma, Pennsylvania, and Texas
WASHINGTON – Today, the U.S. Environmental Protection Agency (EPA) and the Department of Justice announced that Ohio-based Owens-Brockway Glass Container Inc., the nation’s largest glass container manufacturer, has agreed to install pollution control equipment to reduce harmful emissions of nitrogen oxides (NOx), sulfur dioxide (SO2), and particulate matter (PM) by nearly 2,500 tons per year and pay a $1.45 million penalty to resolve alleged Clean Air Act violations at five of the company’s manufacturing plants.
"The pollution controls required by today’s settlement will significantly reduce emissions that can impact residents’ health and local environment in communities located near glass manufacturing plants," said Cynthia Giles, assistant administrator for the EPA’s Office of Enforcement and Compliance Assurance. "These new pollution controls will improve air quality and protect communities from Georgia to Texas from emissions that can lead to respiratory illnesses, smog and acid rain."
"This agreement will significantly reduce the amount of air pollution, known to cause a variety of environmental and health problems, from the nation’s largest manufacturer of glass containers," said Ignacia S. Moreno, assistant attorney general for the Environment and Natural Resources Division of the Department of Justice. "The settlement, the latest in a series of agreements with the glass manufacturing sector, addresses major sources of pollution at facilities located in four states and will mean cleaner air for the people living in those communities."
The pollution controls required as part of the settlement to reduce NOx, SO2, and PM will cost an estimated cost of $37.5 million. Owens-Brockway will also spend an additional $200,000 to mitigate excess emissions at its plant in Atlanta by working with the Georgia Retrofit Program to retrofit diesel school buses and fleet vehicles with controls to reduce emissions, or it will assist with the purchase of new natural gas, propane, or hybrid vehicles.
Reducing air pollution from the largest sources of emissions, including glass manufacturing plants, is one of the EPA’s National Enforcement Initiatives for 2011-2013. This is the fourth settlement in EPA’s National Glass Manufacturing Plant Initiative.
NOx, SO2, and PM, three key pollutants emitted from glass plants, have numerous adverse effects on human health and the environment. NOx and SO2 contribute to ground-level ozone, or smog, acid rain, and the destruction of terrestrial and aquatic ecosystems. NOx and SO2 can also irritate the lungs and aggravate of pre-existing heart or lung conditions. PM contains microscopic particles that can travel deep into the lungs and cause difficulty breathing, coughing, decreased lung function, and even death.
The facilities covered by the settlement are located in Atlanta, Ga.; Clarion, Penn.; Crenshaw, Penn.; Muskogee, Okla.; and Waco, Texas.
The Oklahoma Department of Environmental Quality is also a signatory to this consent decree.
The proposed consent decree will be lodged with the United States District Court for the Northern District of Ohio, and will be subject to a 30-day public comment period.
Glass Container Manufacturer Agrees to Install Pollution Controls and Pay $1.45 Million to Settle Clean Air Act Violations
Settlement to reduce emissions at facilities in Georgia, Oklahoma, Pennsylvania, and Texas
WASHINGTON – Today, the U.S. Environmental Protection Agency (EPA) and the Department of Justice announced that Ohio-based Owens-Brockway Glass Container Inc., the nation’s largest glass container manufacturer, has agreed to install pollution control equipment to reduce harmful emissions of nitrogen oxides (NOx), sulfur dioxide (SO2), and particulate matter (PM) by nearly 2,500 tons per year and pay a $1.45 million penalty to resolve alleged Clean Air Act violations at five of the company’s manufacturing plants.
"The pollution controls required by today’s settlement will significantly reduce emissions that can impact residents’ health and local environment in communities located near glass manufacturing plants," said Cynthia Giles, assistant administrator for the EPA’s Office of Enforcement and Compliance Assurance. "These new pollution controls will improve air quality and protect communities from Georgia to Texas from emissions that can lead to respiratory illnesses, smog and acid rain."
"This agreement will significantly reduce the amount of air pollution, known to cause a variety of environmental and health problems, from the nation’s largest manufacturer of glass containers," said Ignacia S. Moreno, assistant attorney general for the Environment and Natural Resources Division of the Department of Justice. "The settlement, the latest in a series of agreements with the glass manufacturing sector, addresses major sources of pollution at facilities located in four states and will mean cleaner air for the people living in those communities."
The pollution controls required as part of the settlement to reduce NOx, SO2, and PM will cost an estimated cost of $37.5 million. Owens-Brockway will also spend an additional $200,000 to mitigate excess emissions at its plant in Atlanta by working with the Georgia Retrofit Program to retrofit diesel school buses and fleet vehicles with controls to reduce emissions, or it will assist with the purchase of new natural gas, propane, or hybrid vehicles.
Reducing air pollution from the largest sources of emissions, including glass manufacturing plants, is one of the EPA’s National Enforcement Initiatives for 2011-2013. This is the fourth settlement in EPA’s National Glass Manufacturing Plant Initiative.
NOx, SO2, and PM, three key pollutants emitted from glass plants, have numerous adverse effects on human health and the environment. NOx and SO2 contribute to ground-level ozone, or smog, acid rain, and the destruction of terrestrial and aquatic ecosystems. NOx and SO2 can also irritate the lungs and aggravate of pre-existing heart or lung conditions. PM contains microscopic particles that can travel deep into the lungs and cause difficulty breathing, coughing, decreased lung function, and even death.
The facilities covered by the settlement are located in Atlanta, Ga.; Clarion, Penn.; Crenshaw, Penn.; Muskogee, Okla.; and Waco, Texas.
The Oklahoma Department of Environmental Quality is also a signatory to this consent decree.
The proposed consent decree will be lodged with the United States District Court for the Northern District of Ohio, and will be subject to a 30-day public comment period.
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.
PFIZER AGREES TO PAY $55 MILLION FOR ILLEGAL PROMOTION OF A DRUG FOR OFF-LABEL USE
FROM: U.S. DEPARTMENT OF JUSTICE
Wednesday, December 12, 2012
Pfizer Agrees to Pay $55 Million for Illegally Promoting Protonix for Off-Label Use
Pfizer Inc. will pay $55 million plus interest to resolve allegations that Wyeth LLC illegally introduced and caused the introduction into interstate commerce of a misbranded drug, Protonix, between February 2000 and June 2001, the Justice Department announced today.
Wyeth manufactured and promoted Protonix tablets. Protonix is a proton pump inhibitor (PPI) that was used by physicians to treat various forms of gastro-esophageal reflux disease (GERD). Wyeth sought and obtained approval from the Food and Drug Administration (FDA) to promote Protonix for short-term treatment of erosive esophagitis–a condition associated with GERD that can only be diagnosed with an invasive endoscopy. However, the government alleges that Wyeth fully intended to, and did, promote Protonix for all forms of GERD, including symptomatic GERD, which was far more common and could be diagnosed without an endoscopy.
Under the Federal Food Drug and Cosmetic Act, manufacturers must obtain FDA approval for any indication for use for which a manufacturer intends to market a drug. A drug is misbranded if its labeling does not bear adequate directions for use by a layman safely and for the purposes for which it is intended. A prescription drug must be prescribed by a physician and is only exempt from the adequate directions for use requirement if a number of conditions are met, including that the manufacturer only intended to sell that drug for an FDA-approved use. A prescription drug marketed for unapproved off-label uses does not qualify for the exemption and is misbranded.
As alleged in the government’s complaint, Wyeth’s illegal promotional campaign for Protonix was multi-faceted. Before Wyeth even began promoting Protonix, the FDA warned Wyeth that its proposed promotional materials were misleading because Wyeth had "overstated" its "erosive esophagitis indication" by "suggesting that Protonix is safe and effective in the treatment of patients with . . . GERD. Protonix is not indicated for treatment of GERD symptoms that occur in the absence of esophageal erosions." Despite the FDA’s admonishment, the government alleges that Wyeth trained its sales force to promote Protonix for all forms of GERD, beyond its limited erosive esophagitis indication, and that Wyeth sales representatives frequently promoted Protonix to physicians for unapproved uses, such as symptomatic GERD.
In addition, Wyeth allegedly promoted Protonix as the "best PPI for nighttime heartburn." even though there was never any clinical evidence that Protonix was more effective than any other PPI for nighttime heartburn. The allegations in the complaint are that this superiority slogan was formulated at the highest levels of the company. Wyeth retained an outside market research firm, at the cost of tens of thousands of dollars, to ensure that sales representatives delivered that misleading superiority message.
Finally, the government alleges that Wyeth used continuing medical education (CME) programs to promote Protonix for unapproved uses. CME programs are sponsored by accredited independent providers, such as universities, nonprofit organizations, or specialty societies. Pharmaceutical companies are permitted to provide financial support for CME programs, but they are not permitted to use CME programs as promotional vehicles for off-label indications. According to the complaint, Wyeth spent millions of dollars providing "unrestricted educational grants" to CME providers, and these grants invariably included promises that Wyeth would not attempt to influence the content of the program in any way. Nevertheless, the government alleges that one of Wyeth’s core marketing tactics for Protonix was to use CME programs to drive off-label use of the drug. According to the complaint, the Protonix "brand team" influenced virtually every aspect of these CME programs: program topics, speaker selection, organization, and content. In addition, the government alleges that Wyeth even insisted that the CME program materials use the same color and appearance as Protonix promotional materials–a tactic that Wyeth and the vendor called "branducation."
"Today’s settlement once again demonstrates our commitment to making sure drug manufacturers follow the rules," said Stuart Delery, Principal Deputy Assistant Attorney General of the Department of Justice’s Civil Division. "Drug manufacturers should not be permitted to profit from misbranding their products; the disgorgement remedy here ensures that this does not happen in this case."
"Wyeth tried to cheat the system by obtaining a limited FDA approval for Protonix, fully intending to promote this drug for additional, unapproved uses," said U.S. Attorney Carmen M. Ortiz. "Wyeth ignored the FDA’s warning not to promote Protonix off-label, and then went so far as to contaminate CME programs that physicians rely on for unbiased, independent scientific information. Today’s settlement reinforces this office’s historic commitment to holding drug companies responsible for their misconduct."
This case was litigated by Assistant U.S. Attorneys David Schumacher and Susan Winkler of Ortiz’s Health Care Fraud Unit, together with former Trial Attorney Kevin Larsen and Deputy Director Jill Furman in the Department of Justice Consumer Protection Branch. This case was investigated by the FDA’s Office of Criminal Investigations; the Office of Inspector General of the Department of Health and Human Services, the Department of Veterans’ Affairs, and the FBI.
This civil complaint and settlement resolve the United States’ investigation of Wyeth related to the promotion of Protonix for unapproved uses. The claims settled by this agreement are allegations only, allegations which Pfizer denies; there has been no determination of liability. Pfizer acquired Wyeth in October 2009. Since August 2009, Pfizer has been under a Corporate Integrity Agreement with the Department of Health and Human Services, which agreement remains in effect.
Wednesday, December 12, 2012
Pfizer Agrees to Pay $55 Million for Illegally Promoting Protonix for Off-Label Use
Pfizer Inc. will pay $55 million plus interest to resolve allegations that Wyeth LLC illegally introduced and caused the introduction into interstate commerce of a misbranded drug, Protonix, between February 2000 and June 2001, the Justice Department announced today.
Wyeth manufactured and promoted Protonix tablets. Protonix is a proton pump inhibitor (PPI) that was used by physicians to treat various forms of gastro-esophageal reflux disease (GERD). Wyeth sought and obtained approval from the Food and Drug Administration (FDA) to promote Protonix for short-term treatment of erosive esophagitis–a condition associated with GERD that can only be diagnosed with an invasive endoscopy. However, the government alleges that Wyeth fully intended to, and did, promote Protonix for all forms of GERD, including symptomatic GERD, which was far more common and could be diagnosed without an endoscopy.
Under the Federal Food Drug and Cosmetic Act, manufacturers must obtain FDA approval for any indication for use for which a manufacturer intends to market a drug. A drug is misbranded if its labeling does not bear adequate directions for use by a layman safely and for the purposes for which it is intended. A prescription drug must be prescribed by a physician and is only exempt from the adequate directions for use requirement if a number of conditions are met, including that the manufacturer only intended to sell that drug for an FDA-approved use. A prescription drug marketed for unapproved off-label uses does not qualify for the exemption and is misbranded.
As alleged in the government’s complaint, Wyeth’s illegal promotional campaign for Protonix was multi-faceted. Before Wyeth even began promoting Protonix, the FDA warned Wyeth that its proposed promotional materials were misleading because Wyeth had "overstated" its "erosive esophagitis indication" by "suggesting that Protonix is safe and effective in the treatment of patients with . . . GERD. Protonix is not indicated for treatment of GERD symptoms that occur in the absence of esophageal erosions." Despite the FDA’s admonishment, the government alleges that Wyeth trained its sales force to promote Protonix for all forms of GERD, beyond its limited erosive esophagitis indication, and that Wyeth sales representatives frequently promoted Protonix to physicians for unapproved uses, such as symptomatic GERD.
In addition, Wyeth allegedly promoted Protonix as the "best PPI for nighttime heartburn." even though there was never any clinical evidence that Protonix was more effective than any other PPI for nighttime heartburn. The allegations in the complaint are that this superiority slogan was formulated at the highest levels of the company. Wyeth retained an outside market research firm, at the cost of tens of thousands of dollars, to ensure that sales representatives delivered that misleading superiority message.
Finally, the government alleges that Wyeth used continuing medical education (CME) programs to promote Protonix for unapproved uses. CME programs are sponsored by accredited independent providers, such as universities, nonprofit organizations, or specialty societies. Pharmaceutical companies are permitted to provide financial support for CME programs, but they are not permitted to use CME programs as promotional vehicles for off-label indications. According to the complaint, Wyeth spent millions of dollars providing "unrestricted educational grants" to CME providers, and these grants invariably included promises that Wyeth would not attempt to influence the content of the program in any way. Nevertheless, the government alleges that one of Wyeth’s core marketing tactics for Protonix was to use CME programs to drive off-label use of the drug. According to the complaint, the Protonix "brand team" influenced virtually every aspect of these CME programs: program topics, speaker selection, organization, and content. In addition, the government alleges that Wyeth even insisted that the CME program materials use the same color and appearance as Protonix promotional materials–a tactic that Wyeth and the vendor called "branducation."
"Today’s settlement once again demonstrates our commitment to making sure drug manufacturers follow the rules," said Stuart Delery, Principal Deputy Assistant Attorney General of the Department of Justice’s Civil Division. "Drug manufacturers should not be permitted to profit from misbranding their products; the disgorgement remedy here ensures that this does not happen in this case."
"Wyeth tried to cheat the system by obtaining a limited FDA approval for Protonix, fully intending to promote this drug for additional, unapproved uses," said U.S. Attorney Carmen M. Ortiz. "Wyeth ignored the FDA’s warning not to promote Protonix off-label, and then went so far as to contaminate CME programs that physicians rely on for unbiased, independent scientific information. Today’s settlement reinforces this office’s historic commitment to holding drug companies responsible for their misconduct."
This case was litigated by Assistant U.S. Attorneys David Schumacher and Susan Winkler of Ortiz’s Health Care Fraud Unit, together with former Trial Attorney Kevin Larsen and Deputy Director Jill Furman in the Department of Justice Consumer Protection Branch. This case was investigated by the FDA’s Office of Criminal Investigations; the Office of Inspector General of the Department of Health and Human Services, the Department of Veterans’ Affairs, and the FBI.
This civil complaint and settlement resolve the United States’ investigation of Wyeth related to the promotion of Protonix for unapproved uses. The claims settled by this agreement are allegations only, allegations which Pfizer denies; there has been no determination of liability. Pfizer acquired Wyeth in October 2009. Since August 2009, Pfizer has been under a Corporate Integrity Agreement with the Department of Health and Human Services, which agreement remains in effect.
Thursday, December 13, 2012
CA RESTAURANT WORKERS RECOVER OVER $672,000 IN UNPAID WAGES
FROM: U.S. DEPARTMENT OF LABOR
San Francisco and Los Angeles restaurant workers recover more than $672,000 in unpaid wages following investigations by the Labor Department
Wage and Hour Division enforcement initiatives remedy significant labor law violations
SAN FRANCISCO — Ongoing enforcement initiatives conducted by the U.S. Department of Labor's Wage and Hour Division that focused on the restaurant industry in California have uncovered significant violations of the minimum wage, overtime and record-keeping provisions of the Fair Labor Standards Act. Under these initiatives, personnel from the division's San Francisco and Los Angeles District Offices conducted several restaurant investigations in 2012. They recovered $672,333 in unpaid minimum wages and overtime compensation for 273 employees working as cooks, bussers, servers and other restaurant staff.
Wage and Hour Division investigators conducted thorough reviews of payroll records and employment practices, in addition to employee interviews to assess employer compliance with all applicable labor standards. Common FLSA violations uncovered during these investigations include not paying employees for all hours worked, such as pre-shift and post-shift work; paying employees cash wages "off the books;" paying fixed salaries for all hours worked, without regard to minimum wage and overtime requirements; missing payroll or failing to pay employees on scheduled pay days; and not maintaining accurate records of employees' wages and work hours.
"We have found widespread labor violations among restaurants in well-known tourist areas in San Francisco and throughout Los Angeles County. This culture of noncompliance adversely impacts the wages and working conditions of many low-wage, vulnerable workers," said Ruben Rosalez, regional administrator for the Wage and Hour Division in the West. "We are pleased that these employees — many of whom worked 10-hour shifts, five to six days per week — will finally be paid their rightful wages. As demonstrated by the success of our ongoing initiatives, we are committed to strengthening FLSA compliance in the restaurant industry to protect workers and ensure a level playing field for the many employers who abide by the law and properly pay their employees."
The FLSA requires that covered employees be paid at least the federal minimum wage of $7.25 per hour, as well as time and one-half their regular rates for hours worked over 40 per week. The law also requires employers to maintain accurate records of employees' wages, hours and other conditions of employment, and prohibits employers from retaliating against employees who exercise their rights under the law. The FLSA provides that employers who violate the law are, as a general rule, liable to employees for back wages and an equal amount in liquidated damages.
San Francisco and Los Angeles restaurant workers recover more than $672,000 in unpaid wages following investigations by the Labor Department
Wage and Hour Division enforcement initiatives remedy significant labor law violations
SAN FRANCISCO — Ongoing enforcement initiatives conducted by the U.S. Department of Labor's Wage and Hour Division that focused on the restaurant industry in California have uncovered significant violations of the minimum wage, overtime and record-keeping provisions of the Fair Labor Standards Act. Under these initiatives, personnel from the division's San Francisco and Los Angeles District Offices conducted several restaurant investigations in 2012. They recovered $672,333 in unpaid minimum wages and overtime compensation for 273 employees working as cooks, bussers, servers and other restaurant staff.
Wage and Hour Division investigators conducted thorough reviews of payroll records and employment practices, in addition to employee interviews to assess employer compliance with all applicable labor standards. Common FLSA violations uncovered during these investigations include not paying employees for all hours worked, such as pre-shift and post-shift work; paying employees cash wages "off the books;" paying fixed salaries for all hours worked, without regard to minimum wage and overtime requirements; missing payroll or failing to pay employees on scheduled pay days; and not maintaining accurate records of employees' wages and work hours.
"We have found widespread labor violations among restaurants in well-known tourist areas in San Francisco and throughout Los Angeles County. This culture of noncompliance adversely impacts the wages and working conditions of many low-wage, vulnerable workers," said Ruben Rosalez, regional administrator for the Wage and Hour Division in the West. "We are pleased that these employees — many of whom worked 10-hour shifts, five to six days per week — will finally be paid their rightful wages. As demonstrated by the success of our ongoing initiatives, we are committed to strengthening FLSA compliance in the restaurant industry to protect workers and ensure a level playing field for the many employers who abide by the law and properly pay their employees."
The FLSA requires that covered employees be paid at least the federal minimum wage of $7.25 per hour, as well as time and one-half their regular rates for hours worked over 40 per week. The law also requires employers to maintain accurate records of employees' wages, hours and other conditions of employment, and prohibits employers from retaliating against employees who exercise their rights under the law. The FLSA provides that employers who violate the law are, as a general rule, liable to employees for back wages and an equal amount in liquidated damages.
Wednesday, December 12, 2012
HSBC BANK ADMITS TO MONEY LAUNDERING AND WILL FORFEIT $1.256 BILLION
FROM: U.S. DEPARTMENT OF JUSTICE
Tuesday, December 11, 2012
HSBC Holdings Plc. and HSBC Bank USA N.A. Admit to Anti-Money Laundering and Sanctions Violations, Forfeit $1.256 Billion in Deferred Prosecution Agreement
Bank Agrees to Enhanced Compliance Obligations, Oversight by Monitor in Connection with Five-year Agreement
WASHINGTON – HSBC Holdings plc (HSBC Group) – a United Kingdom corporation headquartered in London – and HSBC Bank USA N.A. (HSBC Bank USA) (together, HSBC) – a federally chartered banking corporation headquartered in McLean, Va. – have agreed to forfeit $1.256 billion and enter into a deferred prosecution agreement with the Justice Department for HSBC’s violations of the Bank Secrecy Act (BSA), the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA). According to court documents, HSBC Bank USA violated the BSA by failing to maintain an effective anti-money laundering program and to conduct appropriate due diligence on its foreign correspondent account holders. The HSBC Group violated IEEPA and TWEA by illegally conducting transactions on behalf of customers in Cuba, Iran, Libya, Sudan and Burma – all countries that were subject to sanctions enforced by the Office of Foreign Assets Control (OFAC) at the time of the transactions.
The announcement was made by Lanny A. Breuer, Assistant Attorney General of the Justice Department’s Criminal Division; Loretta Lynch, U.S. Attorney for the Eastern District of New York; and John Morton, Director of U.S. Immigration and Customs Enforcement (ICE); along with numerous law enforcement and regulatory partners. The New York County District Attorney’s Office worked with the Justice Department on the sanctions portion of the investigation. Treasury Under Secretary David S. Cohen and Comptroller of the Currency Thomas J. Curry also joined in today’s announcement.
A four-count felony criminal information was filed today in federal court in the Eastern District of New York charging HSBC with willfully failing to maintain an effective anti-money laundering (AML) program, willfully failing to conduct due diligence on its foreign correspondent affiliates, violating IEEPA and violating TWEA. HSBC has waived federal indictment, agreed to the filing of the information, and has accepted responsibility for its criminal conduct and that of its employees.
"HSBC is being held accountable for stunning failures of oversight – and worse – that led the bank to permit narcotics traffickers and others to launder hundreds of millions of dollars through HSBC subsidiaries, and to facilitate hundreds of millions more in transactions with sanctioned countries," said Assistant Attorney General Breuer. "The record of dysfunction that prevailed at HSBC for many years was astonishing. Today, HSBC is paying a heavy price for its conduct, and, under the terms of today’s agreement, if the bank fails to comply with the agreement in any way, we reserve the right to fully prosecute it."
"Today we announce the filing of criminal charges against HSBC, one of the largest financial institutions in the world," said U.S. Attorney Lynch. "HSBC’s blatant failure to implement proper anti-money laundering controls facilitated the laundering of at least $881 million in drug proceeds through the U.S. financial system. HSBC’s willful flouting of U.S. sanctions laws and regulations resulted in the processing of hundreds of millions of dollars in OFAC-prohibited transactions. Today’s historic agreement, which imposes the largest penalty in any BSA prosecution to date, makes it clear that all corporate citizens, no matter how large, must be held accountable for their actions."
"Cartels and criminal organization are fueled by money and profits," said ICE Director Morton. "Without their illicit proceeds used to fund criminal activities, the lifeblood of their operations is disrupted. Thanks to the work of Homeland Security Investigations and our El Dorado Task Force, this financial institution is being held accountable for turning a blind eye to money laundering that was occurring right before their very eyes. HSI will continue to aggressively target financial institutions whose inactions are contributing in no small way to the devastation wrought by the international drug trade. There will be also a high price to pay for enabling dangerous criminal enterprises."
In addition to forfeiting $1.256 billion as part of its deferred prosecution agreement (DPA) with the Department of Justice, HSBC has also agreed to pay $665 million in civil penalties – $500 million to the Office of the Comptroller of the Currency (OCC) and $165 million to the Federal Reserve – for its AML program violations. The OCC penalty also satisfies a $500 million civil penalty of the Financial Crimes Enforcement Network (FinCEN). The bank’s $375 million settlement agreement with OFAC is satisfied by the forfeiture to the Department of Justice. The United Kingdom’s Financial Services Authority (FSA) is pursuing a separate action.
As required by the DPA, HSBC also has committed to undertake enhanced AML and other compliance obligations and structural changes within its entire global operations to prevent a repeat of the conduct that led to this prosecution. HSBC has replaced almost all of its senior management, "clawed back" deferred compensation bonuses given to its most senior AML and compliance officers, and has agreed to partially defer bonus compensation for its most senior executives – its group general managers and group managing directors – during the period of the five-year DPA. In addition to these measures, HSBC has made significant changes in its management structure and AML compliance functions that increase the accountability of its most senior executives for AML compliance failures.
The AML Investigation
According to court documents, from 2006 to 2010, HSBC Bank USA severely understaffed its AML compliance function and failed to implement an anti-money laundering program capable of adequately monitoring suspicious transactions and activities from HSBC Group Affilliates, particularly HSBC Mexico, one of HSBC Bank USA’s largest Mexican customers. This included a failure to monitor billions of dollars in purchases of physical U.S. dollars, or "banknotes," from these affiliates. Despite evidence of serious money laundering risks associated with doing business in Mexico, from at least 2006 to 2009, HSBC Bank USA rated Mexico as "standard" risk, its lowest AML risk category. As a result, HSBC Bank USA failed to monitor over $670 billion in wire transfers and over $9.4 billion in purchases of physical U.S. dollars from HSBC Mexico during this period, when HSBC Mexico’s own lax AML controls caused it to be the preferred financial institution for drug cartels and money launderers.
A significant portion of the laundered drug trafficking proceeds were involved in the Black Market Peso Exchange (BMPE), a complex money laundering system that is designed to move the proceeds from the sale of illegal drugs in the United States to drug cartels outside of the United States, often in Colombia. According to court documents, beginning in 2008, an investigation conducted by ICE Homeland Security Investigation’s (HSI’s) El Dorado Task Force, in conjunction with the U.S. Attorney’s Office for the Eastern District of New York, identified multiple HSBC Mexico accounts associated with BMPE activity and revealed that drug traffickers were depositing hundreds of thousands of dollars in bulk U.S. currency each day into HSBC Mexico accounts. Since 2009, the investigation has resulted in the arrest, extradition, and conviction of numerous individuals illegally using HSBC Mexico accounts in furtherance of BMPE activity.
As a result of HSBC Bank USA’s AML failures, at least $881 million in drug trafficking proceeds – including proceeds of drug trafficking by the Sinaloa Cartel in Mexico and the Norte del Valle Cartel in Colombia – were laundered through HSBC Bank USA. HSBC Group admitted it did not inform HSBC Bank USA of significant AML deficiencies at HSBC Mexico, despite knowing of these problems and their effect on the potential flow of illicit funds through HSBC Bank USA.
The Sanctions Investigation
According to court documents, from the mid-1990s through September 2006, HSBC Group allowed approximately $660 million in OFAC-prohibited transactions to be processed through U.S. financial institutions, including HSBC Bank USA. HSBC Group followed instructions from sanctioned entities such as Iran, Cuba, Sudan, Libya and Burma, to omit their names from U.S. dollar payment messages sent to HSBC Bank USA and other financial institutions located in the United States. The bank also removed information identifying the countries from U.S. dollar payment messages; deliberately used less-transparent payment messages, known as cover payments; and worked with at least one sanctioned entity to format payment messages, which prevented the bank’s filters from blocking prohibited payments.
Specifically, beginning in the 1990s, HSBC Group affiliates worked with sanctioned entities to insert cautionary notes in payment messages including "care sanctioned country," "do not mention our name in NY," or "do not mention Iran." HSBC Group became aware of this improper practice in 2000. In 2003, HSBC Group’s head of compliance acknowledged that amending payment messages "could provide the basis for an action against [HSBC] Group for breach of sanctions." Notwithstanding instructions from HSBC Group Compliance to terminate this practice, HSBC Group affiliates were permitted to engage in the practice for an additional three years through the granting of dispensations to HSBC Group policy.
Court documents show that as early as July 2001, HSBC Bank USA’s chief compliance officer confronted HSBC Group’s Head of Compliance on the issue of amending payments and was assured that "Group Compliance would not support blatant attempts to avoid sanctions, or actions which would place [HSBC Bank USA] in a potentially compromising position." As early as July 2001, HSBC Bank USA told HSBC Group’s head of compliance that it was concerned that the use of cover payments prevented HSBC Bank USA from confirming whether the underlying transactions met OFAC requirements. From 2001 through 2006, HSBC Bank USA repeatedly told senior compliance officers at HSBC Group that it would not be able to properly screen sanctioned entity payments if payments were being sent using the cover method. These protests were ignored.
"Today HSBC is being held accountable for illegal transactions made through the U.S. financial system on behalf of entities subject to U.S. economic sanctions," said Debra Smith, Acting Assistant Director in Charge of the FBI’s Washington Field Office. "The FBI works closely with partner law enforcement agencies and federal regulators to ensure compliance with federal banking laws to promote integrity across financial institutions worldwide."
"Banks are the first layer of defense against money launderers and other criminal enterprises who choose to utilize our nation’s financial institutions to further their criminal activity," said Richard Weber, Chief, Internal Revenue Service-Criminal Investigation (IRS-CI). "When a bank disregards the Bank Secrecy Act’s reporting requirements, it compromises that layer of defense, making it more difficult to identify, detect and deter criminal activity. In this case, HSBC became a conduit to money laundering. The IRS is proud to partner with the other law enforcement agencies and share its world-renowned financial investigative expertise in this and other complex financial investigations."
Manhattan District Attorney Cyrus R. Vance Jr., said, "New York is a center of international finance, and those who use our banks as a vehicle for international crime will not be tolerated. My office has entered into Deferred Prosecution Agreements with two different banks in just the past two days, and with six banks over the past four years. Sanctions enforcement is of vital importance to our national security and the integrity of our financial system. The fight against money laundering and terror financing requires global cooperation, and our joint investigations in this and other related cases highlight the importance of coordination in the enforcement of U.S. sanctions. I thank our federal counterparts for their ongoing partnership."
Queens County District Attorney Richard A. Brown said, "No corporate entity should ever think itself too large to escape the consequences of assisting international drug cartels. In particular, banks have a special responsibility to use appropriate due diligence in monitoring the cash transactions flowing through their financial system and identifying the sources of that money in order not to assist in criminal activity. By allowing such illicit transactions to occur, HSBC failed in its global responsibility to us all. Hopefully, as a result of this historical settlement, we have gained the attention of not only HSBC but that of every other major financial institution so that they cannot turn a blind eye to the crime of money laundering."
Tuesday, December 11, 2012
HSBC Holdings Plc. and HSBC Bank USA N.A. Admit to Anti-Money Laundering and Sanctions Violations, Forfeit $1.256 Billion in Deferred Prosecution Agreement
Bank Agrees to Enhanced Compliance Obligations, Oversight by Monitor in Connection with Five-year Agreement
WASHINGTON – HSBC Holdings plc (HSBC Group) – a United Kingdom corporation headquartered in London – and HSBC Bank USA N.A. (HSBC Bank USA) (together, HSBC) – a federally chartered banking corporation headquartered in McLean, Va. – have agreed to forfeit $1.256 billion and enter into a deferred prosecution agreement with the Justice Department for HSBC’s violations of the Bank Secrecy Act (BSA), the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA). According to court documents, HSBC Bank USA violated the BSA by failing to maintain an effective anti-money laundering program and to conduct appropriate due diligence on its foreign correspondent account holders. The HSBC Group violated IEEPA and TWEA by illegally conducting transactions on behalf of customers in Cuba, Iran, Libya, Sudan and Burma – all countries that were subject to sanctions enforced by the Office of Foreign Assets Control (OFAC) at the time of the transactions.
The announcement was made by Lanny A. Breuer, Assistant Attorney General of the Justice Department’s Criminal Division; Loretta Lynch, U.S. Attorney for the Eastern District of New York; and John Morton, Director of U.S. Immigration and Customs Enforcement (ICE); along with numerous law enforcement and regulatory partners. The New York County District Attorney’s Office worked with the Justice Department on the sanctions portion of the investigation. Treasury Under Secretary David S. Cohen and Comptroller of the Currency Thomas J. Curry also joined in today’s announcement.
A four-count felony criminal information was filed today in federal court in the Eastern District of New York charging HSBC with willfully failing to maintain an effective anti-money laundering (AML) program, willfully failing to conduct due diligence on its foreign correspondent affiliates, violating IEEPA and violating TWEA. HSBC has waived federal indictment, agreed to the filing of the information, and has accepted responsibility for its criminal conduct and that of its employees.
"HSBC is being held accountable for stunning failures of oversight – and worse – that led the bank to permit narcotics traffickers and others to launder hundreds of millions of dollars through HSBC subsidiaries, and to facilitate hundreds of millions more in transactions with sanctioned countries," said Assistant Attorney General Breuer. "The record of dysfunction that prevailed at HSBC for many years was astonishing. Today, HSBC is paying a heavy price for its conduct, and, under the terms of today’s agreement, if the bank fails to comply with the agreement in any way, we reserve the right to fully prosecute it."
"Today we announce the filing of criminal charges against HSBC, one of the largest financial institutions in the world," said U.S. Attorney Lynch. "HSBC’s blatant failure to implement proper anti-money laundering controls facilitated the laundering of at least $881 million in drug proceeds through the U.S. financial system. HSBC’s willful flouting of U.S. sanctions laws and regulations resulted in the processing of hundreds of millions of dollars in OFAC-prohibited transactions. Today’s historic agreement, which imposes the largest penalty in any BSA prosecution to date, makes it clear that all corporate citizens, no matter how large, must be held accountable for their actions."
"Cartels and criminal organization are fueled by money and profits," said ICE Director Morton. "Without their illicit proceeds used to fund criminal activities, the lifeblood of their operations is disrupted. Thanks to the work of Homeland Security Investigations and our El Dorado Task Force, this financial institution is being held accountable for turning a blind eye to money laundering that was occurring right before their very eyes. HSI will continue to aggressively target financial institutions whose inactions are contributing in no small way to the devastation wrought by the international drug trade. There will be also a high price to pay for enabling dangerous criminal enterprises."
In addition to forfeiting $1.256 billion as part of its deferred prosecution agreement (DPA) with the Department of Justice, HSBC has also agreed to pay $665 million in civil penalties – $500 million to the Office of the Comptroller of the Currency (OCC) and $165 million to the Federal Reserve – for its AML program violations. The OCC penalty also satisfies a $500 million civil penalty of the Financial Crimes Enforcement Network (FinCEN). The bank’s $375 million settlement agreement with OFAC is satisfied by the forfeiture to the Department of Justice. The United Kingdom’s Financial Services Authority (FSA) is pursuing a separate action.
As required by the DPA, HSBC also has committed to undertake enhanced AML and other compliance obligations and structural changes within its entire global operations to prevent a repeat of the conduct that led to this prosecution. HSBC has replaced almost all of its senior management, "clawed back" deferred compensation bonuses given to its most senior AML and compliance officers, and has agreed to partially defer bonus compensation for its most senior executives – its group general managers and group managing directors – during the period of the five-year DPA. In addition to these measures, HSBC has made significant changes in its management structure and AML compliance functions that increase the accountability of its most senior executives for AML compliance failures.
The AML Investigation
According to court documents, from 2006 to 2010, HSBC Bank USA severely understaffed its AML compliance function and failed to implement an anti-money laundering program capable of adequately monitoring suspicious transactions and activities from HSBC Group Affilliates, particularly HSBC Mexico, one of HSBC Bank USA’s largest Mexican customers. This included a failure to monitor billions of dollars in purchases of physical U.S. dollars, or "banknotes," from these affiliates. Despite evidence of serious money laundering risks associated with doing business in Mexico, from at least 2006 to 2009, HSBC Bank USA rated Mexico as "standard" risk, its lowest AML risk category. As a result, HSBC Bank USA failed to monitor over $670 billion in wire transfers and over $9.4 billion in purchases of physical U.S. dollars from HSBC Mexico during this period, when HSBC Mexico’s own lax AML controls caused it to be the preferred financial institution for drug cartels and money launderers.
A significant portion of the laundered drug trafficking proceeds were involved in the Black Market Peso Exchange (BMPE), a complex money laundering system that is designed to move the proceeds from the sale of illegal drugs in the United States to drug cartels outside of the United States, often in Colombia. According to court documents, beginning in 2008, an investigation conducted by ICE Homeland Security Investigation’s (HSI’s) El Dorado Task Force, in conjunction with the U.S. Attorney’s Office for the Eastern District of New York, identified multiple HSBC Mexico accounts associated with BMPE activity and revealed that drug traffickers were depositing hundreds of thousands of dollars in bulk U.S. currency each day into HSBC Mexico accounts. Since 2009, the investigation has resulted in the arrest, extradition, and conviction of numerous individuals illegally using HSBC Mexico accounts in furtherance of BMPE activity.
As a result of HSBC Bank USA’s AML failures, at least $881 million in drug trafficking proceeds – including proceeds of drug trafficking by the Sinaloa Cartel in Mexico and the Norte del Valle Cartel in Colombia – were laundered through HSBC Bank USA. HSBC Group admitted it did not inform HSBC Bank USA of significant AML deficiencies at HSBC Mexico, despite knowing of these problems and their effect on the potential flow of illicit funds through HSBC Bank USA.
The Sanctions Investigation
According to court documents, from the mid-1990s through September 2006, HSBC Group allowed approximately $660 million in OFAC-prohibited transactions to be processed through U.S. financial institutions, including HSBC Bank USA. HSBC Group followed instructions from sanctioned entities such as Iran, Cuba, Sudan, Libya and Burma, to omit their names from U.S. dollar payment messages sent to HSBC Bank USA and other financial institutions located in the United States. The bank also removed information identifying the countries from U.S. dollar payment messages; deliberately used less-transparent payment messages, known as cover payments; and worked with at least one sanctioned entity to format payment messages, which prevented the bank’s filters from blocking prohibited payments.
Specifically, beginning in the 1990s, HSBC Group affiliates worked with sanctioned entities to insert cautionary notes in payment messages including "care sanctioned country," "do not mention our name in NY," or "do not mention Iran." HSBC Group became aware of this improper practice in 2000. In 2003, HSBC Group’s head of compliance acknowledged that amending payment messages "could provide the basis for an action against [HSBC] Group for breach of sanctions." Notwithstanding instructions from HSBC Group Compliance to terminate this practice, HSBC Group affiliates were permitted to engage in the practice for an additional three years through the granting of dispensations to HSBC Group policy.
Court documents show that as early as July 2001, HSBC Bank USA’s chief compliance officer confronted HSBC Group’s Head of Compliance on the issue of amending payments and was assured that "Group Compliance would not support blatant attempts to avoid sanctions, or actions which would place [HSBC Bank USA] in a potentially compromising position." As early as July 2001, HSBC Bank USA told HSBC Group’s head of compliance that it was concerned that the use of cover payments prevented HSBC Bank USA from confirming whether the underlying transactions met OFAC requirements. From 2001 through 2006, HSBC Bank USA repeatedly told senior compliance officers at HSBC Group that it would not be able to properly screen sanctioned entity payments if payments were being sent using the cover method. These protests were ignored.
"Today HSBC is being held accountable for illegal transactions made through the U.S. financial system on behalf of entities subject to U.S. economic sanctions," said Debra Smith, Acting Assistant Director in Charge of the FBI’s Washington Field Office. "The FBI works closely with partner law enforcement agencies and federal regulators to ensure compliance with federal banking laws to promote integrity across financial institutions worldwide."
"Banks are the first layer of defense against money launderers and other criminal enterprises who choose to utilize our nation’s financial institutions to further their criminal activity," said Richard Weber, Chief, Internal Revenue Service-Criminal Investigation (IRS-CI). "When a bank disregards the Bank Secrecy Act’s reporting requirements, it compromises that layer of defense, making it more difficult to identify, detect and deter criminal activity. In this case, HSBC became a conduit to money laundering. The IRS is proud to partner with the other law enforcement agencies and share its world-renowned financial investigative expertise in this and other complex financial investigations."
Manhattan District Attorney Cyrus R. Vance Jr., said, "New York is a center of international finance, and those who use our banks as a vehicle for international crime will not be tolerated. My office has entered into Deferred Prosecution Agreements with two different banks in just the past two days, and with six banks over the past four years. Sanctions enforcement is of vital importance to our national security and the integrity of our financial system. The fight against money laundering and terror financing requires global cooperation, and our joint investigations in this and other related cases highlight the importance of coordination in the enforcement of U.S. sanctions. I thank our federal counterparts for their ongoing partnership."
Queens County District Attorney Richard A. Brown said, "No corporate entity should ever think itself too large to escape the consequences of assisting international drug cartels. In particular, banks have a special responsibility to use appropriate due diligence in monitoring the cash transactions flowing through their financial system and identifying the sources of that money in order not to assist in criminal activity. By allowing such illicit transactions to occur, HSBC failed in its global responsibility to us all. Hopefully, as a result of this historical settlement, we have gained the attention of not only HSBC but that of every other major financial institution so that they cannot turn a blind eye to the crime of money laundering."
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