Friday, May 22, 2015

COMPANY RESOLVES CRIMINAL INVESTIGATION INVOLVING VIRTUAL CURRENCY BUSINESS

FROM:  U.S. JUSTICE DEPARTMENT 
Tuesday, May 5, 2015
Ripple Labs Inc. Resolves Criminal Investigation

Ripple Labs Inc. and its wholly-owned subsidiary, XRP II LLC, formerly XRP Fund II LLC, have agreed to resolve a criminal investigation in exchange for a settlement agreement calling for a series of substantial remedial measures, including a migration of a portion of Ripple’s virtual currency business to a separate entity, the company’s ongoing cooperation in other investigations, an extensive remedial framework to ensure future compliance with federal laws and forfeiture and penalties totaling $700,000, announced U.S. Attorney Melinda Haag of the Northern District of California, Director Jennifer Shasky Calvery of the U.S. Treasury Department Financial Crimes Enforcement Network (FinCEN) and Chief Richard Weber of the Internal Revenue Service (IRS) Criminal Investigation Division.  The agreement will resolve allegations that Ripple and its subsidiary failed to follow the law while engaging in the exchange of virtual currency and that the entities failed to establish and maintain an appropriate anti-money laundering program.

Ripple Labs Inc. is headquartered in San Francisco, California, and developed and sold virtual currency known as “XRP.”  As of 2015, the currency of the Ripple network, XRP, is the second-largest digital currency by market capitalization.

The agreement formalizes the steps Ripple and its subsidiary must take to bring its virtual currency operation within the existing regulatory framework for money services businesses.  The agreement consists of a settlement agreement, an agreed statement of facts, and a remedial framework for the company going forward.  Aside from monetary penalties in the form of forfeiture, the remedial framework requires the migration of any component of Ripple’s business that is engaged in the exchange of virtual currency into an entity registered with FinCEN.  In addition, the agreement calls for continued enhancements to the company’s anti-money laundering (AML) controls and training program.  Further, the remedial framework calls for external audits through the year 2020, enhancements to the ripple protocol, increased transaction monitoring and an extensive review of historical activity.

“By these agreements, we demonstrate again that we will remain vigilant to ensure the security of and prevent the misuse of the financial markets,” said U.S. Attorney Haag.  “Ripple Labs Inc. and its wholly-owned subsidiary both have acknowledged that digital currency providers have an obligation not only to refrain from illegal activity, but also to ensure they are not profiting by creating products that allow would-be criminals to avoid detection.  We hope that this sets an industry standard in the important new space of digital currency.”

The agreement is the culmination of a criminal investigation conducted by U.S. Attorney’s Office and the Internal Revenue Service’s Criminal Investigation Division.  FinCEN joined the investigation with a parallel civil enforcement action.  In that action, Ripple Labs and XRP II have agreed to pay a $700,000 civil penalty, $450,000 of which will be designated a forfeiture to settle issues raised in the U.S. Attorney’s investigation.

“Virtual currency exchangers must bring products to market that comply with our anti-money laundering laws,” said Director Calvery for FinCEN.  “Innovation is laudable but only as long as it does not unreasonably expose our financial system to tech-smart criminals eager to abuse the latest and most complex products.”

“Federal laws that regulate the reporting of financial transactions are in place to detect and stop illegal activities, including those in the virtual currency arena,” said Chief Weber of the IRS Criminal Investigation Division.  “Unregulated, virtual currency opens the door for criminals to anonymously conduct illegal activities online, eroding our financial systems and creating a Wild West environment where following the law is a choice rather than a requirement.”

Ripple described itself as an exchanger of virtual currency in a December 2013 filing made in San Francisco, California, federal court in an unrelated case.  As an exchanger, Ripple was required to register with FinCEN and to comply with applicable federal laws and regulations.  Yet Ripple sold XRP even though it had not registered with FinCEN, effectuating sales of over approximately $1.3 million in April 2013 alone.  Ripple also failed to establish and maintain an appropriate AML program and failed to have policies, procedures and internal controls to ensure compliance with the Bank Secrecy Act and anti-money laundering laws.  In July 2013, Ripple incorporated a subsidiary, now known as XRP II, that replaced Ripple as the seller of XRP.  Although XRP II registered with FinCEN, it failed to have an effective AML program or to file appropriate suspicious activity reports.  In late 2013, for example, it negotiated a $250,000 transaction with an individual who had prior felony convictions for dealing in explosive devices and had been sentenced to prison, failing to follow its own internal “know your customer” requirements.

Assistant U.S. Attorneys Kathryn R. Haun and Arvon J. Perteet handled the matter on behalf of the U.S. Attorney’s Office with the assistance of Daniel Charlier-Smith and Leslie Cook.  The settlement agreement with Ripple Labs was the result of a coordinated effort by the U.S. Attorney’s Office and IRS Criminal Investigation, working in tandem with FinCEN.

Thursday, May 21, 2015

ASSISTANT AG CRUDEN'S CONGRESSIONAL TESTIMONY ON ENVIRONMENT AND NATURAL RESOURCES DIVISION OF DOJ

FROM:  U.S. JUSTICE DEPARTMENT
Assistant Attorney General John C. Cruden Delivers Testimony Before the U.S. House of Representatives Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law
Washington, DCUnited States ~ Tuesday, May 19, 2015

Chairman Marino, Representative Johnson and members of the Subcommittee, thank you for the opportunity to appear before you today to discuss the important work of the Environment and Natural Resources Division (ENRD or the Division) of the U.S. Department of Justice.

In January, I returned to the division as the Assistant Attorney General following my senate confirmation.  I have had the honor and privilege of spending over two decades at the Department of Justice, first as Chief of the Environmental Enforcement section and then as a career Deputy Assistant Attorney General.  I am grateful for the opportunity to represent the interests of the United States in my current capacity.

The division functions as the nation’s environmental and natural resources lawyer.  Our work protects the country’s air, land and water, and promotes responsible stewardship of

America’s wildlife, natural resources and public lands.  About half of ENRD’s lawyers bring enforcement cases against those who violate the nation’s civil and criminal pollution-control laws.  Others defend environmental challenges to government programs and activities and represent the United States in matters concerning natural resources and public lands.  The division is responsible for the acquisition of real property by eminent domain for the federal government and for cases arising under the wildlife and marine resources protection laws.  In addition, ENRD handles a broad array of important matters affecting Indian tribes and their members, as well as protecting the lands and resources held in trust for them by the United States.

The FY 2016 budget requests $127 million to support ENRD’s important work as the nation’s environment and natural resources lawyer, representing the United States and its territories and possessions, in civil and criminal cases that arise under more than 150 federal statutes.  ENRD is made up of about 600 permanent employees, more than 400 of whom are attorneys.  Each year, division lawyers handle thousands of cases and represent virtually every federal agency in courts across the United States.  Our primary client agencies are the U.S.

Environmental Protection Agency (EPA), the U.S. Department of the Interior, the U.S. Army

Corps of Engineers, the U.S. Department of Commerce, the U.S. Department of Agriculture, the U.S. Department of Homeland Security, the U.S. Department of Energy and the U.S. Department of Defense, among others.

I am very proud of the division’s work and its outstanding litigation results.  The division’s efforts result in significant public health and other direct benefits to the American people.  In fiscal year 2014, we obtained almost $6.3 billion in corrective measures through court orders and settlements, which will go a long way toward protecting the nation’s air, water and other natural resources.  We are also committed to ensuring that American taxpayers receive a substantial return on their investment by securing significant monetary recoveries through litigation.  For example, in fiscal year 2014, we secured more than $270 million in civil and stipulated penalties, cost recoveries, natural resource damages and other civil monetary relief, including more than $162 million recovered for the Superfund.  We concluded 48 criminal cases against 77 defendants, obtaining more than 37 years in confinement and more than $63 million in criminal fines, restitution, community service funds and special assessments.  Finally, by comparing claims made with the amounts ultimately imposed, we estimate that the handling of defensive and condemnation cases closed in fiscal year 2014 saved the United States more than $2 billion.

In this 21st year since the signing of Executive Order 12898, which directed each federal agency to make achieving environmental justice part of its mission, the Department of Justice and the division remain staunchly committed to the pursuit of environmental justice. Environmental justice is the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation and enforcement of environmental and natural resources laws, regulations, and policies.  We have done this in many ways, including by working closely with other federal agencies to coordinate environmental justice efforts, by engaging communities to an unprecedented degree and by achieving meaningful results for vulnerable communities in our cases.

Looking forward, I have five goals for the coming year:

• Goal 1: Enforce the nation’s bedrock environmental laws that protect air, land and water for all Americans.

• Goal 2: Vigorously represent the United States in federal trial and appellate courts, including by defending EPA’s rulemaking authority and effectively advancing other agencies’ missions and priorities.

• Goal 3: Protect the public fisc and defend the interests of the United States.

• Goal 4: Advance Environmental Justice through all of the division’s work and promote and defend tribal sovereignty, treaty obligations, and the rights of Native Americans.

• Goal 5: Provide effective stewardship of the nation’s public lands, natural resources and animals, including fighting for the survival of the world’s most protected and iconic species and marine resources and working across the government and the globe to end the illegal trade in wildlife.

RECENT DIVISION LITIGATION

For purposes of today’s hearing, I will highlight a few cases across ENRD’s work.

A. Deepwater Horizon

The division’s top civil enforcement priority remains the Deepwater Horizon–Macondo

Well oil spill.  On April 20, 2010, an explosion and fire destroyed the Deepwater Horizon offshore drilling rig in the Gulf of Mexico and trigged a massive oil spill amounting to millions of barrels.  The discharge continued for nearly 90 days.  Eleven people aboard the rig lost their lives and many others suffered injury.  The spill seriously impacted natural habitats, wildlife and human communities along coastal areas of Alabama, Florida, Louisiana, Mississippi and Texas.

In December 2010, the United States brought a civil suit against BPXP, Anadarko, MOEX and Transocean for civil penalties under the Clean Water Act and a declaration of liability under the Oil Pollution Act, as part of multidistrict litigation in the U.S. District Court for the Eastern District of Louisiana.  In February 2012, the Department announced a partial settlement agreement in which MOEX agreed to pay $70 million in civil penalties to resolve alleged violations of the Clean Water Act and to spend at least $20 million to facilitate land acquisition projects in several Gulf States that will preserve and protect in perpetuity habitat and resources important to water quality.  In January 2013, Transocean Deepwater Inc. agreed to plead guilty to violating the Clean Water Act and to pay a total of $1.4 billion in civil penalties and criminal fines for its conduct relating to the Deepwater Horizon disaster, including a then record-setting $1 billion penalty to resolve Clean Water Act civil claims.

The division is now more than four years into hard-fought litigation against BPXP and the remaining defendants.  We have continued to work closely with other departmental components, a host of federal client agencies and the five Gulf States in this action.  Federal claims involve billions of dollars, both in Clean Water Act penalties and natural resources damages under the Oil Pollution Act.

The Department tried the first phase of the U.S. case (addressing the cause of the disaster and liability) for nine weeks from February through April 2013, as part of a mass trial in which thousands of private plaintiffs also tried parts of their cases relating to liability and fault.  The district court then ruled that BPXP and Anadarko were liable under the Clean Water Act as owners of the well from which oil was discharged. BPXP and Anadarko filed an interlocutory appeal in the Fifth Circuit.  In June 2014, a Fifth Circuit panel upheld the district court’s liability ruling against BPXP and Anadarko.  On January 9, 2015, the Fifth Circuit denied rehearing en banc; and BPXP and Anadarko have petitioned the Supreme Court for review of that judgment.  We also tried the second phase of the U.S. case addressing how much oil was discharged into the

Gulf of Mexico in September and October 2013.

On September 4, 2014, the court held that the discharge of oil was the result of BPXP’s gross negligence, its willful misconduct, or both on the well as it neared completion and also in BPXP’s central and often controlling, role in a number of imprudent decisions that were part of the construction of the well.

On January 15, 2015, the district court ruled on the second phase of trial, finding that some 3.19 million barrels of oil discharged into the Gulf of Mexico.  Rulings from the first two trial phases are now on appeal to the Fifth Circuit.

During January and February 2015, we litigated the third and final phase of our penalty claim in the district court.  That trial addressed all statutory factors relevant to civil penalty under the Clean Water Act, not addressed in the first two phases of trial.  We now await the district court’s ruling on the third phase, which we expect to include assessment of a civil penalty against BPXP and Anadarko.  As the Deepwater Horizon litigation progresses, the United States will take whatever steps are necessary to hold accountable those responsible for the explosion, fire and oil spill.

B. Other Civil and Criminal Environmental Enforcement

The division’s many other civil and criminal environmental enforcement efforts have immeasurably protected human health and the environment through significant reductions in emissions and discharges of harmful pollutants.  The cases discussed below–A&E Salvage, ExxonMobil, Lehigh and Tronox–are illustrative.

In January 2015, five owners and managers of salvage operations at a former textile plant in Tennessee were sentenced to prison terms for conspiring to commit Clean Air Act offenses in connection with the illegal removal and disposal of asbestos-containing materials.  A&E Salvage had purchased the former Liberty Fibers Plant in Hamblen County, Tennessee, out of bankruptcy in order to salvage metals which remained in the plant.  The United States alleged that the defendants engaged in a multi-year scheme in which substantial amounts of regulated asbestos containing materials were illegally removed from the plant without properly removing and disposing of the asbestos or providing workers with the necessary protective equipment.  Asbestos has been determined to cause lung cancer, asbestosis and mesothelioma and EPA has determined that there is no safe level of exposure to asbestos.

After a three-day sentencing hearing that included expert testimony that the exposures of the A&E Salvage workers to asbestos resulted in a substantial likelihood they would suffer death or serious bodily injury, the district court sentenced all five defendants to prison terms.  The former manager was sentenced to five years in prison, to be followed by two years of supervised release.  Two other managers were sentenced to 37 months and 28 months, respectively.  Two other employees also received sentences of six months in prison.  The judge ordered all the defendants to pay restitution of more than $10.3 million to clean up the plant site contamination.

On April 22, 2015, we announced a consent decree with ExxonMobil Pipeline Company and Mobil Pipe Line Company (ExxonMobil) related to a pipeline oil spill in Mayflower,

Arkansas, on March 29, 2013. ExxonMobil owns and operates the Pegasus pipeline, a 20-inch diameter pipeline that transports Canadian heavy crude oil over 850 miles from Patoka, Illinois, to Nederland, Texas.  The pipeline ruptured and oil spilled directly into a residential neighborhood and then into nearby waterways, including a creek, wetlands and Lake Conway, which is a tributary of the Arkansas River.  Residents of 22 homes were forced to evacuate due to the hazardous conditions in the neighborhood and most people never moved back home.  Remediation efforts are nearing completion.  In the complaint, filed in June 2013, we sought civil penalties and injunctive relief under the Clean Water Act.  The state of Arkansas brought multiple claims for penalties under state law related to the spill and cleanup.  Under the consent decree, ExxonMobil will pay a Clean Water Act civil penalty of $3.19 million, which equates to

$1,000 per barrel discharged and will perform injunctive relief to help prevent and minimize future spills.  ExxonMobil will also pay a penalty to the State in the amount of $1 million.

On April 28, 2015, the United States filed a complaint and consent decree under the

Clean Water Act against Lehigh Southwest Cement Company and Hanson Permanente Cement Inc., operator and owner of a rock and aggregate mining and cement manufacturing facility in

Cupertino, California.  The state of California, on behalf of the California Regional Water

Quality Control Board, is a co-plaintiff. Lehigh and Hanson violated two previous Clean Water Act National Pollutant Discharge Elimination System permits by routinely discharging excessive selenium and solids and occasionally discharging excessive mercury, hexavalent chromium and other pollutants.  The settlement requires Lehigh and Hanson to pay a civil penalty of $2.55 million and to reduce its selenium discharges to levels that will be protective of a seleniumim paired creek.  The facility will also be making major technology changes, spending over $5 million to build a new treatment system for selenium and other metals.  The consent decree provides a strict schedule for the facility to complete construction and come into full compliance by 2017, as well as interim limits and deadlines that will ensure the process remains on track.  Even before formal lodging of the settlement, the facility had already made approximately 50 percent reductions in its selenium discharges as a result of our enforcement efforts. The biologic treatment system that Lehigh will be putting in is an innovative new technology that may have applications to other facilities and industries.  Selenium is a difficult pollutant to remove and it is fitting that in Silicon Valley a state-of-the-art technology will help protect Permanente Creek and the San Francisco Bay.

ENRD also files claims to protect environmental obligations owed to the United States when a responsible party goes into bankruptcy. From the beginning of fiscal year 2009 through the second quarter of fiscal year 2015, we obtained agreements in 43 bankruptcy proceedings, under which debtors committed to spend an estimated $3.75 billion to clean up hazardous-waste sites, reimburse the Superfund more than $2.45 billion plus an additional $88 million in interest and pay more than $154 million in natural resource damages.

Recent developments in an adversary proceeding arising out of a bankruptcy case, Tronox Inc. v. Anadarko Petroleum Corp., are particularly noteworthy.  There, the United States and its co-plaintiff won an award against defendant “New” Kerr-McGee Corporation and certain related defendant companies, all of which are subsidiaries of the Anadarko Petroleum Corp.  In December 2013, the bankruptcy court in New York concluded that the historic Kerr-McGee Corp. fraudulently conveyed assets in 2005 to evade its debts, including its liability for environmental cleanup at toxic sites nationwide. Subsequently, the parties entered into a $5.15 billion settlement, the largest recovery for the cleanup of environmental contamination in American history, which the district court approved on November 10, 2014.  Under the settlement, approximately $4.4 billion will be paid to fund environmental cleanup and for environmental claims at numerous contaminated sites around the country, including radioactive uranium waste on the Navajo Nation’s reservation; radioactive thorium in Chicago and West Chicago, Illinois; creosote waste in the Northeast, the Midwest and the South; and perchlorate waste in Nevada.

C. Increasing Domestic Energy Supplies

One component of the continuing efforts to increase domestic energy supplies is expansion of cleaner domestic sources of energy like wind and solar power.  The division has defended challenges to permits and rights-of-way in nearly 40 cases involving solar and wind projects across the country.  Our recent successes included favorable rulings on summary judgment in cases involving the Ivanpah Solar Project, the Genesis Solar Project, the North Sky

River Wind Energy Project, the Ocotillo Wind Energy Project, the West Tennessee Solar Farm

Project, the Deerfield Wind Project, the Cape Wind Project and the Steens Mountain Wind Project.  These victories have enabled substantial development of renewable energy resources across the country.

D. Other Clean Air Act Litigation

Through a settlement approved by the district court in January 2015, the division obtained its largest Clean Air Act penalty in United States v. Hyundai Motors Co., for violations related to testing and certification of close to 1.2 million vehicles that will emit approximately

4.75 million metric tons of greenhouse gases in excess of their certification to EPA.  Automakers

Hyundai and Kia will pay a $100 million penalty, spend approximately $50 million on measures to prevent future violations, and forfeit 4.75 million greenhouse gas emissions credits estimated to be worth over $200 million.

On April 22, 2015, we announced a consent decree with Noble Energy Inc. and simultaneously filed a complaint to support the lodging of the decree.  The settlement covers

Noble’s natural gas production operation in the Denver-Julesburg Basin north of Denver, an area that fails to attain the National Ambient Air Quality Standards for ground level ozone.  At issue were emissions of vapors from hydrocarbon liquids, which contain volatile organic compounds, methane and hazardous air pollutants such as benzene. EPA and State of Colorado inspectors observed emissions from storage tanks using state-of-the-art optical imaging and thermal infrared cameras.  Under the terms of the settlement, Noble will conduct an engineering evaluation of vapor systems, undertake corrective actions as needed and verify the adequacy of the actions at over 3,400 tank batteries.  In addition, Noble will retain a third party to audit the performance of this work and install next-generation pressure monitoring on tank batteries.  The total value of the civil penalty being split between the United States and the state of Colorado, plus Supplemental Environmental Projects is $8.95 million.

Division cases frequently involve challenges to regulations promulgated to implement other aspects of the Clean Air Act. The Department recently successfully defended two sets of important rules involving power-plant emissions.  In April 2014, the department obtained a victory in the D.C. Circuit concerning EPA’s Mercury and Air Toxics Standards rule, which was the first rule limiting emissions of mercury and other hazardous air pollutants from the nation’s fossil-fuel-fired electric power plants.  One aspect of the D.C. Circuit’s decision has been briefed and argued before the Supreme Court, and we expect a decision shortly.  Also, in April 2014, the

Supreme Court upheld EPA’s Cross-State Air Pollution Rule, which limits emissions of nitrogen oxides and sulfur dioxide that contribute to the formation of ozone and particulate-matter pollution that drifts from state-to-state. The Supreme Court found that the rule reflected a “permissible, workable and equitable” approach to this complex interstate pollution problem.

E. Management of Public Lands and Resources

A substantial portion of the division’s work includes litigation under dozens of statutes and treaties related to the management of public lands and associated natural and cultural resources.  Cases involving the U.S. Department of Agriculture’s Forest Service, for example, are a significant part of the ENRD docket.  The Forest Service is responsible for forests and grasslands totaling 193 million acres.  The agency manages those lands according to the multiple-use mandate given to it by Congress.  Forest Service lands are important for timber production, watershed protection, non-motorized and motorized outdoor recreation and wildlife management.  Management of Forest Service lands may result in litigation by industry groups, timber companies, environmental organizations, tribes, states, counties and individuals.  Litigation over the management of these lands arises at all levels, ranging from challenges to nationwide rules to small, site-specific timber-harvest projects.  Currently, more than a hundred of these cases are pending in the district and appellate courts.

ENRD recently successfully defended the Forest Service’s 2012 Planning Rule, which governs the Forest Service’s development of individual land and resource management plans for 155 national forests and 20 national grasslands, covering over 180 million acres of forest and rangeland throughout the United States.  In Federal Forest Resource Coalition v. Vilsack, plaintiffs, a coalition of trade associations representing the timber industry, grazers and motorized recreational interests, brought a facial challenge to the rule.  On April 28, 2015, the district court issued a comprehensive opinion explaining that it was dismissing the case because plaintiffs lacked standing to challenge the rule.

ENRD also handles a variety of cases involving federal onshore and offshore oil and gas programs.  Typically, these cases challenge decisions by the Interior Department that make federally managed lands or discrete tracts of the Outer Continental Shelf available for lease, exploration and development by the oil and gas industry.  We also handle litigation concerning the amount of royalties that are owed to the United States for oil and gas produced from federal sources and cases involving the apportionment of oil and gas royalties between the United States and states located along the Gulf Coast.

F. Indian Tribal Work

The Division handles a broad range of matters affecting Indian tribes and their members.  We have been actively engaged with the Interior Department and tribes to protect tribal interests such as tribal water rights; tribal hunting, fishing and gathering rights; reservation boundaries; and tribal jurisdiction and sovereignty.  The United States has a government-to-government relationship with each of the 566 federally recognized Indian tribes, and we seek to work collaboratively with them in carrying out this work wherever possible.

We assert water-rights claims for the benefit of tribes to secure safe and reliable drinking water for tribes, as well as water for sanitation, economic development, and other purposes. For example, during this Administration, ENRD contributed to six landmark Indian water-rights settlements and corresponding statutes which, when fully implemented, will resolve complex and contentious water-rights issues in Arizona, Montana, Nevada, and New Mexico.

ENRD is also charged with representing the United States in civil litigation brought by tribes and their members against the United States, including claims that the United States has breached its trust responsibility.  Over the past several years, the division has sought to resolve, without protracted litigation, dozens of Indian tribal “breach of trust” lawsuits.  In these cases, numerous federally recognized Indian tribes allege that the United States, principally the Departments of the Interior and the Treasury, violated the federal government’s trust duties and responsibilities to the tribes by failing to provide full and complete historical trust accountings and failing to properly manage the tribes’ trust funds and non-monetary trust assets or resources.  The tribes seek declaratory and injunctive relief, as well as monetary compensation for their financial injuries. From 2002 until today, some 128 Indian tribes and tribal entities filed over 100 such “breach of trust” lawsuits in federal district courts and in the Court of Federal Claims.  To date, the United States has settled the trust-accounting and trust-management claims of 87 tribes in 64 cases.  The United States will continue settlement discussions in other pending cases and is committed to resolving these matters in a manner that is fair and reasonable to the tribes and the United States.

Among other things, all of these settlements set forth a framework for promoting tribal sovereignty and improving aspects of the tribes’ relationship with the United States, while reducing or minimizing the possibility of future disputes and avoiding unnecessary litigation.  Under the settlements, the tribes and the United States will implement measures that will lead to strengthened management of trust assets and improved communications between the Department of the Interior and the tribes.  Also, the tribes and the United States will use an alternative dispute-resolution process to address concerns regarding the future management of the tribes’ trust funds and non-monetary trust resources.

To accomplish these objectives, the President’s 2016 budget request includes a $3 million increase to hire attorneys and procure contract litigation support and expert consultant services.  We expect to hire hydrologic experts to assess the impact of water depletion and water quality degradation.  These expert consultants will also assist in collecting and/or interpreting air emission and water-quality data to develop civil and criminal cases for potential violations of the Clean Air Act, the Clean Water Act, the Safe Drinking Water Act, and the Resource Conservation and Recovery Act in Indian Country.

G. Wildlife Trafficking

The department, principally through ENRD, has long been a leader in the fight against illegal wildlife trafficking. In the past decade, wildlife trafficking has escalated into an international crisis.  Beyond decimating the world’s iconic species, this illegal trade threatens international security.  Reports from the State Department and elsewhere indicate that transnational criminal organizations, including some terrorist networks, armed insurgent groups and narcotics trafficking organizations, are increasingly drawn to wildlife trafficking due to the exorbitant proceeds from this illicit trade.  These criminal groups breed corruption, disrupt the peace and security of fragile regions and destabilize communities and their economies, thus undermining not just wildlife laws and international agreements, but the rule of law itself.

Over the last several years, the department has engaged fully in the administration’s redoubled effort to combat wildlife trafficking through the Presidential Task Force on Wildlife Trafficking, established by the July 2013 Executive Order on Combating Wildlife Trafficking.  The division serves as a Task Force co-chair (as the Attorney General’s delegate) and worked with the other co-chairs from the Departments of State and the Interior, and the numerous other

Task Force agencies, to craft the National Strategy for Combating Wildlife Trafficking, which the

President signed and issued on February 11, 2014.  The National Strategy emphasizes the need for a “whole of government” approach to combating this problem and identifies three priorities: (1) strengthening domestic and global enforcement; (2) reducing demand for illegally traded wildlife at home and abroad; and (3) strengthening partnerships with foreign governments, international organizations, nongovernmental organizations, local communities, private industry and others to combat illegal wildlife poaching and trade.  The National Strategy provides a set of overarching principles to guide the U.S. response to the increasing global wildlife-trafficking crisis.

The task force agencies have been working in coordination to implement the strategy since its issuance and in February of this year, the task force released an implementation plan that builds upon the strategy.  The implementation plan provides a robust, focused reaffirmation of the nation’s commitment to stopping wildlife trafficking and sets out specific steps to achieve each strategic priority.

The division works with U.S. Attorneys’ Offices around the country and federal agency partners, such as the U.S. Fish and Wildlife Service, U.S. Immigration and Customs

Enforcement and the National Oceanic and Atmospheric Administration, to combat wildlife trafficking under the Endangered Species Act and the Lacey Act, as well as statutes prohibiting smuggling, criminal conspiracy and related crimes.  The department has successfully prosecuted numerous cases of illicit wildlife smuggling involving trafficking of rhinoceros horns, elephant ivory, South African leopard, Asian and African tortoises and reptiles and many other forms of protected wildlife and protected plant species.  Through enforcement efforts like “Operation Crash”–which is focused on the lucrative and often brutal trade in rhinoceros horns–we work to bring traffickers to justice.  This operation has resulted in 20 successful prosecutions thus far and we are continuing to unravel the sophisticated international criminal networks that engage in these crimes.

Last March, I had the honor of leading the U.S. delegation to the Kasane Conference on the illegal wildlife trade in Kasane, Botswana, where representatives from more than 30 nations gathered to follow up on the commitments made at last year’s London Conference.

To support these efforts, the President’s 2016 budget includes a $2 million increase and serves three purposes.  First, ENRD seeks two attorney positions to support the additional case and capacity building work that is developing.  Second, the division will retain consulting experts to assist in analysis of a variety of issues important to the development of our cases, including plant and animal identification.  In particular, such expert assistance will help us in conducting complex investigations into the operations of multinational corporations involved in the global trade in illegal wildlife and timber and the tracking of proceeds from this trafficking.  Third, we will consult with experts to develop a detailed analysis of the domestic ivory markets and supply chain that will help identify targets in this area and prioritize enforcement resources.

H. Land Acquisition

Another portion of the division’s caseload consists of eminent domain litigation.  This important work, undertaken with congressional direction or authority, involves the acquisition of land for projects such as national parks or the construction of federal buildings and for national security-related purposes.  Consistent with the mandate of the Fifth Amendment to the U.S.

Constitution to pay just compensation when the United States must acquire private property,

ENRD works to ensure that all landowners receive fair-market value, while taxpayers are not required to pay in excess of fair-market value.  Great efforts are made to resolve disputes without litigation where feasible.  As an example of our litigation in this area, we exercised the federal government’s power of eminent domain to condemn nearly 276 acres of land in Somerset County, Pennsylvania, where United Airlines Flight 93 crashed on September 11, 2001.  The land was acquired to construct the Flight 93 National Memorial.  In December 2013, following a week-long trial, the land commission issued a report finding that the fair-market value of the property was $1.535 million, which was $21.765 million less than the amount sought in the litigation.  The federal district court in Pennsylvania adopted the land commission’s report in March 2014.   Through this litigation, American taxpayers saved tens of millions of dollars in obtaining the land necessary to develop a national memorial to the passengers on United Airlines Flight 93, who tragically lost their lives on September 11, 2001.

CONCLUSION

At this time, Mr. Chairman, I would be happy to address any questions you or Members

of the Subcommittee may have.

Wednesday, May 20, 2015

FORMER AUTO PARTS EXECUTIVE INDICTED FOR ROLE IN FIXING PRICES

FROM:   U.S. JUSTICE DEPARTMENT 
Thursday, May 14, 2015
Former Automotive Parts Manufacturer Executive Indicted for Role in Conspiracy to Fix Prices

A Detroit federal grand jury returned a one-count indictment against the former Executive Managing Director of a Japanese automotive parts manufacturer for his participation in a conspiracy to fix prices and rig bids of automotive parts, the Department of Justice announced today.

The indictment, filed today in the U.S. District Court of the Eastern District of Michigan, charges Michitaka Sakuma, a former director and member of the board of directors of T.RAD Co. Ltd., with conspiring to fix the prices of radiators sold to Honda Motor Co. Ltd., Toyota Motor Corp., and certain of their subsidiaries in the United States and elsewhere.

“Today’s charge demonstrates that the Antitrust Division will continue to hold senior executives accountable for directing and authorizing subordinate employees to engage in criminal conduct,” said Deputy Assistant Attorney General Brent Snyder of the Antitrust Division’s Criminal Enforcement Program.  “Senior executives should expect that they will be pursued and prosecuted when they knowingly permit and direct collusive conduct to occur under their management.”

Sakuma participated in the conspiracy first as a general manager in charge of Toyota sales and then as the executive managing director in charge of all sales at T.RAD.  Sakuma was also a member of the board of directors at T.RAD.

The indictment alleges, among other things, that beginning at least as early as October 2003 and continuing until at least February 2010, Sakuma and his co-conspirators participated in meetings with co-conspirators and reached collusive agreements to rig bids, allocate supply and fix the price of radiators sold to Honda and Toyota.

T.RAD is a corporation organized and existing under the laws of Japan with its principal place of business in Tokyo, Japan.  On Nov. 12, 2013, T.RAD pleaded guilty and agreed to pay a $13.75 million criminal fine for its role in the conspiracy.  On Dec. 9, 2014, Kosei Tamura, the general manager in charge of Honda sales at T.RAD, pleaded guilty of participating in the same conspiracy and was sentenced to serve one year and one day in a U.S. prison.

Including Sakuma, 53 individuals have been charged in the government’s ongoing investigation into market allocation, price fixing and bid rigging in the automotive parts industry.  Additionally, 35 companies have pleaded guilty or agreed to plead guilty and have agreed to pay a total of more than $2.5 billion in criminal fines.

Sakuma is charged with price fixing and bid rigging in violation of the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million criminal fine for individuals.  The maximum fine for an individual 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 maximum fine.

Today’s indictment is the result of an ongoing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in the automotive parts industry, which is being conducted by the Antitrust Division’s criminal enforcement sections and the FBI.  Today’s charge was brought by the Antitrust Division’s Washington Criminal I Section and the FBI’s Detroit Field Office, with the assistance of the FBI headquarters’ International Corruption Unit.

Monday, May 18, 2015

CFTC ORDERS COMPANY AND OWNER TO PAY OVER $700,000

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 
May 14, 2015
CFTC Orders Double Eagle Enterprises, LLC and Eric Arlt to Pay More than $700,000 in Restitution and a Civil Monetary Penalty in Precious Metals Enforcement Action
Order also Permanently Bars Respondents from Trading on CFTC-Regulated Markets

Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against Double Eagle Enterprises, LLC, Double Eagle Metals (collectively Double Eagle), and its owner Eric Arlt, all of Charlevoix, Michigan (together Respondents). The Order charged the Respondents with illegally offering off-exchange financed transactions in precious metals with retail customers, and failure to register as a Futures Commission Merchant (FCM) with the CFTC, as required.

The CFTC Order requires the Respondents jointly to pay restitution of $611,154 to their customers and a $100,000 civil monetary penalty. The Order also requires the Respondents to cease and desist from further violations of the Commodity Exchange Act, as charged, and prohibits them from trading on or pursuant to the rules of any registered entity.

The Illegal Transactions

Specifically, the CFTC Order finds that, from July 2011 through May 2013, the Respondents solicited retail customers, generally by telephone, to buy and sell physical precious metals, such as gold and silver, in off-exchange, leveraged transactions and failing to properly be registered. According to the Order, customers paid a percentage of the purchase price for the metals, and Respondents purportedly financed the remainder of the purchase price, while charging customers interest on the amount borrowed.

The CFTC Order states that financed, off-exchange transactions with retail customers have been illegal since July 16, 2011, when certain amendments of the Dodd-Frank Wall Street and Consumer Protection Act of 2010 became effective. As explained in the Order, financed transactions in commodities with retail customers like those engaged in by Respondents must be executed on, or subject to, the rules of a board of trade that has been approved by the CFTC. Since Respondents’ transactions were done off-exchange, with customers who were not eligible contract participants, they were illegal, the Order finds.

Failure to Register

The Order also states that it unlawful for any person to engage as a FCM, unless such person is registered with the CFTC as an FCM and such registration has not expired or been suspended or revoked. Double Eagle acted as an FCM by soliciting and accepting customers’ orders for financed precious metals transactions and, in connection with those transactions, accepting at least $1 million from those customers, including customers who were not eligible contract participants. As such, Double Eagle acted as an unregistered FCM.

The CFTC cautions victims that restitution orders may not result in the recovery of money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.

CFTC Division of Enforcement staff members responsible for this matter are Michelle Bougas, James H. Holl, III, and Rick Glaser.

CFTC’s Precious Metals Fraud Advisory

In January 2012, the CFTC issued a the Precious Metals Consumer Fraud Advisory regarding precious metals fraud, saying that it had seen an increase in the number of companies offering customers the opportunity to buy or invest in precious metals. The CFTC’s Precious Metals Fraud Advisory specifically warns that frequently companies do not purchase any physical metals for the customer, instead simply keeping the customer’s funds. The Advisory further cautions consumers that leveraged commodity transactions are unlawful unless executed on a regulated exchange.

In addition, the CFTC has issued several other customer protection

Sunday, May 17, 2015

SEC CHARGES COMPANIES, IDIVIDUALS IN HOME BUILDING INDUSTRY SCAM

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 
Litigation Release No. 23262 / May 14, 2015
Securities and Exchange Commission v. North Star Finance LLC, Thomas G. Ellis, Yasuo Oda, Thomas H. Vetter, Michael K. Martin, Sharon L. Salinas, Capital Source Funding LLC, Capital Source Lending LLC, Civil Action No. 15-cv-1339 (D. Md.)

SEC Halts Advance Fee Loan Scam Targeting Home Building Industry

The Securities and Exchange Commission today announced charges and an emergency asset freeze against Maryland, Virginia, and California residents and their companies for defrauding dozens of investors, many of whom they solicited from the National Association of Home Builders ("NAHB"), in an alleged advance fee loan scam involving bogus prime bank instruments. The SEC filed its complaint under seal on May 11, 2015, in the U.S. District Court for the District of Maryland.

Advance fee frauds solicit investors to make upfront payments before purported deals can go through, and perpetrators fool investors with official-sounding terminology to add an air of legitimacy to the investment programs.

According to the SEC's complaint, which the Court unsealed yesterday at the SEC's request, Thomas G. Ellis and Yasuo Oda, through their company, North Star Finance LLC, and Michael K. Martin and Sharon L. Salinas, through their companies, Capital Source Lending LLC and Capital Source Funding LLC, have collected approximately $5 million from defrauded investors since at least January 2013. The SEC alleges that North Star and the Capital Source entities promised investors that, for an advance fee that would be safely held in escrow accounts and used only for transactional expenses, they could "monetize" bank guarantees to generate millions of dollars. North Star and Capital Source promised that this windfall could then be made available to investors in the form of project funding on highly favorable terms. The SEC alleges that the bank guarantees that served as the backbone of North Star's and Capital Source's programs were a fiction, and underscores that several government agencies have warned investors away from transactions involving such instruments. Even if these bank guarantees did exist, the SEC alleges, they could never be "monetized" as there is no formal or informal market on which they might be bought or sold.

The SEC alleges that, with the assistance of Thomas H. Vetter, a trusted member of the NAHB community, Ellis first pitched North Star's scheme at an annual meeting of the NAHB in February 2014, managing to convince multiple building concerns to sign up. Thereafter, Ellis, Vetter, and Martin allegedly repeatedly lied to investors about the existence of the supposed bank instrument investments and the use of investor funds. Ellis and Oda sent several emails in which they pressured investors to sign phony documents, on the false pretenses that the investment program was both legitimate and available for only a limited time. Martin falsely told one of these investors that he had personally been involved in seven other transactions in 2014 in which he had "secured" and "monetized" bank guarantees. Salinas participated in and aided and abetted the scheme by establishing bank accounts for Capital Source Funding, by falsely representing herself to be an escrow officer, and by signing at least one document that fraudulently purported to be an escrow agreement for the safekeeping of investor funds.

The SEC further alleges that, more than a year after signing up their first investors from the NAHB, the defendants have yet to produce any funding. During this time, Martin, Ellis, Oda, and Vetter have lulled investors by giving them a string of phony updates promising funding was just around the corner; blaming delays on fictitious bank processes; and admonishing those investors who asked detailed questions about the status of their investments. Instead of using investor funds to secure the promised bank instruments and subsequent funding, the defendants converted the funds for their own personal use or unlawfully transferred the funds to third parties.

The Honorable George J. Hazel for the U.S. District Court for the District of Maryland granted the SEC's request for a temporary restraining order to prevent the defendants from engaging in their bank instrument investment programs. The Court also granted the SEC's request for an order freezing the assets of all the defendants, requiring accountings, prohibiting the destruction or alteration of documents, and allowing for expedited discovery. A court hearing has been scheduled for May 26, 2015, on the SEC's motion for a preliminary injunction.

Separately, the Federal Bureau of Investigation arrested Martin on May 11, 2015, on wire fraud charges.

The Commission's complaint alleges violations of the antifraud, and securities and broker-dealer registration provisions of the federal securities laws. Specifically, it alleges that North Star, Ellis, Oda, Martin, Capital Source Funding and Capital Source Lending violated Sections 5(a), 5(c), and, except as to Salinas, Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The complaint further alleges that North Star, Ellis, Oda, Vetter, Martin, and Salinas aided and abetted violations of Securities Act Section 17(a), Exchange Act Section 10(b), and Rule 10b-5 thereunder; and Ellis, Oda, Martin, and Salinas aided and abetted violations of Securities Act Sections 5(a) and 5(c). Finally, the complaint alleges that Ellis, Oda, Vetter, and Martin violated Exchange Act 15(a). The Commission seeks preliminary and permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties against each defendant.

The SEC's investigation was conducted by Stephen W. Simpson and supervised by Timothy N. England. The SEC's litigation is being led by Matthew P. Cohen and Mr. Simpson. The SEC appreciates the assistance of the Federal Bureau of Investigation's Buffalo Field Office