U.S. ASSISTANT AG'S COMMENTS AT IBC LEAGAL'S WORLD BRIBERY AND CORRUPTION COMPLIANCE FORUM

FROM: U.S. DEPARTMENT OF JUSTICE

Assistant Attorney General Lanny A. Breuer Speaks at IBC Legal’s World Bribery & Corruption Compliance Forum

LONDON ~ Tuesday, October 23, 2012

Thank you, Howard, for that kind introduction. I am honored to be here with you and the other participants in this bribery and corruption conference.

I am asked to speak about efforts in the United States to fight foreign bribery perhaps more than on any other subject, and all over the world. In Russia, Romania, Liberia, Sweden and other countries, I have been privileged to discuss our anti-corruption enforcement efforts, and I am delighted to do so here in London – particularly because of the close working relationship that U.S. prosecutors have with their U.K. counterparts.

This is a critically important time in United States enforcement of anti-bribery laws, and other anti-fraud measures, so I am grateful for the opportunity to share my thoughts with you today.

I want to speak with you this afternoon about what the U.S. Justice Department is doing to fight corruption around the globe, and how we do it.

I have been Assistant Attorney General of the Criminal Division for three-and-a-half years, which I am told makes me the longest serving head of the Division in nearly 50 years. The Justice Department’s Criminal Division is based in Washington, D.C., and has approximately 600 lawyers across 15 sections. Division lawyers prosecute an array of federal crimes – from public corruption, to cybercrime, to violent and organized crime, to financial fraud.

Since 2009, my team and I have changed the division in significant ways – bringing in new, energetic leadership in virtually all of our sections, and prosecuting the highest-impact cases in the country.

One section whose work may be of particular interest to you is our Fraud Section, which has primary responsibility for criminal enforcement of the Foreign Corrupt Practices Act. As you may know, no criminal FCPA case can be brought in the United States without the Fraud Section’s authorization.

I have said before that I personally believe our FCPA work is so important. It helps to level the playing field for U.S. and foreign companies, and motivates corporations to create genuine cultures of compliance. Moreover, corruption has such negative effects, particular in emerging economies, that we must use every tool at our disposal to fight it. Not only does corruption corrode the public trust and weaken democratic institutions, but it also creates gaps in government structures that organized criminal groups and terrorist networks can exploit.

The FCPA, which has been on the books for approximately 35 years, was the first effort of any nation to specifically criminalize the act of bribing foreign officials. But only in the last several years has the law become a strong enforcement tool.

Although we of course bring our cases in the United States, our anti-corruption work has become increasingly global in scope, with ramifications for companies around the world, including here in the United Kingdom.

As just one example of the international nature of the Criminal Division’s work in general – not having to do with corporations – last week, Colombian prosecutor Ramiro Anturi Larrahondo pleaded guilty to providing law enforcement information to drug traffickers as part of a cocaine trafficking conspiracy. Anturi Larrahondo was the first Colombian prosecutor ever to be extradited to the United States.

As I mentioned, I have traveled to many countries as head of the Criminal Division, and perceptions about corruption – and of our prosecutorial efforts – differ widely.

I was in Russia earlier this year, for example, where the issue of corruption is front and center. Last year, Russia passed a law criminalizing foreign bribery and joined the OECD Working Group on Bribery.

These developments notwithstanding, Russia is still a place where corruption is perceived to be a very significant problem. Transparency International ranked Russia 143rd on its most recent Corruption Perceptions Index. Yet, based on my discussions there, it is clear to me that companies that take a hard line against corruption, and develop strong cultures of compliance, can thrive in Russia, as they do elsewhere.

My sense is that in the United Kingdom, over the past two years, attitudes toward foreign bribery have changed in light of the U.K. Bribery Act. But, as it did in the United States, I expect it will take time for the full impact of the law to sink in.

Criminal enforcement is a critically important aspect of our anti-corruption work. But, in the Criminal Division, we have also been developing an asset forfeiture initiative – the Kleptocracy Asset Recovery Initiative – that involves civil actions against the proceeds of foreign official corruption.

Attorney General Holder announced the initiative in Uganda in 2010, and my team and I have been building the initiative in the Criminal Division’s Asset Forfeiture and Money Laundering Section since then. Our theory is simple: Even if we cannot pursue you criminally in the United States – because we lack criminal jurisdiction, for example – corrupt leaders should not be permitted to use the United States as a safe haven for the proceeds of their corrupt activities.

We have recently had our first Kleptocracy Initiative successes. In July, for example, we announced that we had secured a restraining order against more than $3 million in corruption proceeds related to James Onanefe Ibori, the former governor of the oil-producing Delta State in Nigeria; and, earlier this month, we executed restraints against an additional $4 million in Ibori assets, including the proceeds from the sale of a penthouse unit in the Ritz-Carlton in Washington, D.C. Ibori was previously convicted here in the United Kingdom on money laundering and fraud charges and sentenced to 13 years in prison.

Another example involves two civil forfeiture complaints we have filed against approximately $70 million in assets allegedly belonging to Teodoro Nguema Obiang Mangue, a government minister for Equatorial Guinea and the son of that country’s president. According to the complaints, despite an official government salary of less than $100,000 per year, Minister Obiang corruptly amassed wealth of more than $100 million. Among the items that we are seeking to forfeit are a Gulfstream jet, a mansion in Malibu, Calif., and $1.8 million worth of Michael Jackson memorabilia.

There is plenty of corporate misconduct to keep prosecutors in the United States busy – both FCPA-related and non-FCPA-related.

We have ongoing investigations of several large financial institutions, and we have resolved cases against many others. Earlier in my tenure, for example, we resolved a case against Credit Suisse, which agreed to forfeit $536 million in connection with violations relating to transactions the bank conducted on behalf of customers from Iran, Sudan and other sanctioned countries.

As a result both of increased FCPA enforcement and increased policing of corporate conduct in general, I think that the culture of corporate compliance has improved in recent years. As I explained in a speech in New York City recently, until roughly 20 years ago, prosecutors in the United States, when they encountered corporate misconduct, were usually faced with a stark choice – either to indict, or walk away.

That began to change in the 1990s, when the government started doing something new: agreeing to defer prosecution against the corporation in exchange for an admission of wrongdoing; cooperation with the government’s investigation, including against individual employees; payment of monetary penalties; and concrete steps to improve the company’s behavior. And, over the past decade, deferred prosecution agreements, or DPAs, have become an important part of corporate criminal law enforcement.

I am aware that the U.K. government recently put forth a proposal to introduce DPAs as a way of resolving corporate cases in the U.K. Based on the United States experience, my sense is that the availability of DPAs here would represent a positive step forward.

In the United States, the increased use of DPAs has meant far greater accountability for corporate wrongdoing. Whereas prosecutors often declined when their only choice was to indict or walk away, now companies know that avoiding the disaster scenario of an indictment does not mean an escape from accountability.

This past June, for example, the Fraud Section resolved allegations of criminal wrongdoing against Barclays Bank over the bank’s role in the manipulation of the London Interbank Offered Rate, or LIBOR. Barclays, which entered into a non-prosecution agreement, or NPA, with the government, paid a significant price for its egregious conduct. In the wake of our announcement, the top management of the bank was replaced. But, as we also recognized at the time, Barclays’s cooperation with our investigation was extraordinary, which is why an NPA was appropriate in that case.

DPAs and NPAs are appropriate in certain circumstances and, therefore, they can be useful alternatives to criminal indictments. But they cannot be a substitute for criminal charges. Just last week, for example, we announced criminal trade secret theft charges against Kolon Industries, a South Korean corporation, and five Kolon executives and employees. As the Kolon case shows, we do not hesitate to charge corporations criminally in appropriate circumstances, in addition to holding individuals accountable.

As I have said repeatedly, the strongest deterrent against corporate wrongdoing is the prospect of prison time. That is why I have put such a high priority on making sure that individuals are prosecuted when the evidence warrants prosecution. To give you just two Criminal Division examples: Lee Bentley Farkas, the former chairman of Taylor Bean & Whitaker, which was one of the largest private mortgage lending companies in the country, is serving a 30-year prison sentence for having masterminded a nearly $3 billion bank and securities fraud, and several of his co-conspirators are also serving substantial prison sentences. R. Allen Stanford, who misappropriated $7 billion from Stanford International Bank to finance his personal businesses, is serving a 110-year sentence.

A third example involves the prosecution of Garth Peterson. A former managing director of Morgan Stanley, Peterson pleaded guilty to conspiring to evade the bank’s internal FCPA controls and was sentenced to prison in August. Because Morgan Stanley voluntarily disclosed Peterson’s misconduct, fully cooperated with our investigation and showed us that it maintained a rigorous compliance program, including extensive training of bank employees on the FCPA and other anti-corruption measures, we declined to bring any enforcement action against the institution in connection with Peterson’s conduct.

Prosecutors need to be smart about how they use their discretion in the FCPA context, as in every context. And, as we did in the Peterson case, we always attempt to strike an appropriate balance between vigorous and responsible enforcement.

In recent years, we have witnessed a significant awakening to the problem of corruption around the globe. Russia, China and India are taking foreign bribery more seriously than ever before; the U.K. has an important new Bribery Act; and, perhaps due in part to United States enforcement efforts, companies and individuals doing business around the world are coming to appreciate that they will be held accountable for the way they conduct business with foreign officials. In short, the world is moving in one direction only with respect to anti-corruption efforts. There is still plenty of work to be done. But we are making progress, and I hope and believe that we will continue to make strides in this area together.

What the label says

What the label says

OHIO RESAURANTS ACCUSED OF FAILING TO PROPERLY PAY WORKERS MINIMUM WAGES AND OVERTIME COMPENSATION

FROM: U.S. DEPARTMENT OF LABOR

US Labor Department complaint seeks back wages plus damages for underpaid workers at 3 El Rancho Grande restaurants in Ohio

DAYTON, Ohio — The U.S. Department of Labor has filed a complaint in U.S. district court in Dayton seeking to recover back wages and damages for workers at three El Rancho Grande restaurants in Ohio. An investigation by the department's Wage and Hour Division determined that the restaurants, as well as co-owners Francisco Magana and Juan Hernandez, violated the Fair Labor Standards Act by failing to pay workers proper minimum wage and overtime compensation.

Investigators have determined that approximately $285,000 in back wages is owed to 171 workers at Gran Fiesta Inc. in Cincinnati, El Rancho Inc. in Sharonville and WRGRM LCC in Dayton. All three restaurants do business as El Rancho Grande.

"Low-wage workers such as restaurant servers and kitchen staff are far too often taken advantage of because they are reluctant to question employers about their pay and benefits," said George Victory, district director of the division in Columbus. "We are committed to ensuring that all workers receive their rightful wages and benefits."

Investigators found that some kitchen workers were paid a flat rate per week, which amounted to less than the minimum wage per hour, and were not compensated at time and one-half their regular rates for overtime hours worked beyond 40 per week. Additionally, servers' pay fell below the minimum wage due to deductions made for uniforms and because they were not paid for work performed both before and after their scheduled shifts. Workers with limited English skills often performed more uncompensated pre- and post-shift work than other servers. The restaurants also failed to maintain accurate time and payroll records as required.

The complaint seeks the restoration of all back wages plus an equal amount in liquidated damages, as well as future compliance with the FLSA's minimum wage, overtime, record-keeping and child labor provisions. When similar wage violations and the falsification of payroll records were disclosed at the same restaurants by a 2002 Wage and Hour Division investigation, the employer agreed to pay more than $100,000 in back wages.

The FLSA requires that covered employees be paid at least the federal minimum wage of $7.25 for all hours worked, plus time and one-half their regular rates, including commissions, bonuses and incentive pay, for hours worked beyond 40 per week. Earnings may be determined on a piece-rate, salary, commission or some other basis, but in all such cases the overtime pay due must be computed using the employee's average hourly rate. Employers are also required to maintain accurate time and payroll records.

The FLSA also establishes a minimum age of 18 for workers in those nonagricultural occupations that the secretary of labor declares to be particularly hazardous for 16- and 17-year-old workers or detrimental to their health or well-being. Individuals ages 14 and 15 may be employed outside of school hours in a variety of nonmanufacturing and nonhazardous jobs for limited periods of time and under specified conditions. A list of hazardous occupations prohibited for minors is available at http://www.dol.gov/whd/childlabor.htm. Additional information on child labor rules can be found http://www.youthrules.dol.gov/index.htm.

The department has created a smartphone application, available at http://www.dol.gov/dol/apps/, to help employees independently track the hours they work and determine the wages they are owed. Available in English and Spanish, users conveniently can track regular work hours, break times and any overtime hours for one or more employers. This new technology is significant because, instead of relying on their employers' records, workers now can keep their own records.

U.S.-CVS SUBSIDIARY REACH $5 MILLION SETTLEMENT RELATED TO FASLE PRICING

FROM: U.S. DEPARTMENT OF JUSTICE
Monday, October 15, 2012

CVS Subsidiary, RxAmerica, Reaches $5 Million Settlement with US for Allegedly Submitting False Pricing Relating to the Company’s Medicare Part D Plan

In one of the first False Claims Act settlements involving Medicare’s Prescription Drug Program, known as Part D, RxAmerica LLC. has entered into a civil settlement agreement with the United States in which it has agreed to pay the government $5.25 million to resolve allegations that it made false submissions to the Centers for Medicare & Medicaid Services (CMS), the Justice Department announced today. RxAmerica, a wholly-owned subsidiary of CVS Caremark Corporation, provides prescription drug benefits to Medicare beneficiaries pursuant to a prescription drug plan.

The Medicare program offers Part D participants prescription drug coverage. For Medicare participants to obtain this drug coverage, they must join a Medicare-approved plan, often referred to as a Part D plan. Medicare Part D plans can vary in both the drugs that they cover, the amount they reimburse for those drugs, and the deductibles and co-pays they require their participants to pay.

To assist participants to choose a Part D plan that minimized their out-of-pocket costs, CMS offered a web-based tool called Plan Finder, which allowed Medicare Part D beneficiaries to determine estimated prescription drug prices for each Medicare Part D plan that the beneficiary considered for enrollment. CMS obtained the pricing information that is contained on Plan Finder from data submitted to CMS by each Part D Plan sponsor.

The United States alleged that during the period Jan. 1, 2007, to Dec. 31, 2008, RxAmerica made false submissions to CMS regarding prices for certain generic prescription drugs used for Plan Finder, despite certifying to CMS that it would submit accurate pricing data for Plan Finder. As a result, the government alleged that RxAmerica received Medicare Part D payments for claims for the covered drugs at prices that in some cases were significantly higher than the pricing data RxAmerica submitted to CMS for use on Plan Finder.

"The Department of Justice is committed to protecting the Medicare drug prescription program against all types of misconduct," said Stuart F. Delery, Acting Assistant Attorney General for the Justice Department's Civil Division. "As today's settlement demonstrates, we will ensure that Medicare Part D sponsors submit accurate drug pricing information, to ensure the integrity of the Medicare Part D program and to protect the beneficiaries who participate in the program."

"The health care choices facing Americans are complicated enough without patients being misinformed and forced to select a Part D plan based on false data. Those navigating our Medicare system deserve accurate information so they can make informed choices and obtain the benefits to which they are entitled. The Medicare system deserves honest input from plan sponsors, so it can continue to safeguard taxpayer dollars. Nothing less will suffice," stated Loretta Lynch, U.S. Attorney for the Eastern District of New York. "This case exemplifies our continuing dedication to combating all types of alleged health care fraud that can eat away at our precious public health care dollars."

" RxAmerica was charged with advertising false drug prices to Medicare Part D enrollees," said Daniel R. Levinson, Inspector General of the Department of Health and Human Services. "Protecting people in government health programs from those seeking to profit by misrepresenting goods and services is one of our top law enforcement priorities."

Today’s settlement resolves allegations made in two separate complaints against RxAmerica filed under the False Claims Act’s qui tam or whistleblower provisions, which permit a private individual to file suit for false claims to the United States and share in any recovery. The first complaint, U.S. ex rel. Doe v. RxAmerica, was filed in the United States District Court of the Eastern District of New York in November 2008. The second complaint, U.S. ex rel. Hauser v. CVS Caremark Corp. and RxAmerica, was filed in the United States District Court for the Western District of North Carolina in June 2009. The two cases were consolidated in the Eastern District of New York in November 2011.

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 over $10 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 $13.8 billion.

The Federal Trade Commission reached an agreement with CVS, RxAmerica’s parent corporation, earlier this year in which CVS agreed to pay $5 million to resolve allegations relating to RxAmerica’s inaccurate Plan Finder submissions from late 2007 through 2008. The resolution from the FTC’s settlement is being used to compensate beneficiaries.

The investigation in this matter was handled by the Department of Justice’s Civil Division, the U.S. Attorney’s Office for the Eastern District of New York, HHS-OIG and CMS. The claims resolved by this settlement are allegations only, and there has been no admission of liability by RxAmerica or CVS.

AMBULANCE COMPANY PLEADS GUILTY TO FRAUD

FROM: U.S. JUSTICE DEPARTMENT

Monday, October 15, 2012

Houston Ambulance Company Administrator Pleads Guilty to Fraud

WASHINGTON – The administrator of CardioMax EMS, a Houston-based ambulance company, pleaded guilty today to charges that he submitted approximately $1,734,550 in fraudulent claims to Medicare, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Kenneth Magidson of the Southern District of Texas; Special Agent-In-Charge Elvis McBride of the FBI’s Houston Field Office; Special Agent-in-Charge Mike Fields of the Dallas Regional Office of the U.S. Department of Health and Human Service’s Office of the Inspector General (HHS-OIG); and the Texas Attorney General’s Medicaid Fraud Control Unit (MFCU).

Okechukwu Ofoegbu, 31, of Houston, pleaded guilty today in U.S. District Court in the Southern District of Texas to one count of conspiracy to commit health care fraud.

Ofoegbu was the administrator of Cardiomax EMS, a Houston-based ambulance company that primarily transported patients to community mental health centers. According to Ofoegbu’s plea agreement, from January 2011 through December 2011, Ofoegbu and others at Cardiomax were involved in transporting patients that did not meet the requirements for ambulance transport under Medicare regulations, falsifying ambulance run sheets that described patients’ conditions and using the falsified run sheets to file claims with Medicare. Ofoegbu admitted in his plea agreement that he conspired to submit claims to Medicare for ambulance services that he knew were miscoded, not medically necessary and, in some cases, not provided.

As part of the plea agreement, Ofoegbu has agreed to pay $553,002 in restitution to the United States. At sentencing, scheduled for Jan. 24, 2013, Ofoegbu faces a maximum sentence of 10 years in prison.

Ofoegbu was originally indicted as part of a nationwide takedown on May 2, 2012, that resulted in charges against 107 individuals, including doctors, nurses and other licensed medical professionals, for their alleged participation in Medicare fraud schemes involving approximately $452 million in false billing.

The case was prosecuted by Trial Attorney Laura M.K. Cordova, Special Trial Attorney James S. Seaman, Special Trial Attorney Ronald Cummings and Deputy Chief Sam S. Sheldon of the Criminal Division’s Fraud Section. The case was investigated by HHS-OIG, FBI and the Texas Attorney General’s Medicaid Fraud Control Unit, as part the Medicare Fraud Strike Force, supervised by the U.S. Attorney’s Office for the Southern District of Texas and the Criminal Division’s Fraud Section.