SOUTH AFRICAN BANK SETTLES CFTC CHARGES FOR UNLAWFUL EXECUTION OF PREARRANGED, NONCOMPETITIVE TRADES

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 

August 27, 2014

CFTC Orders FirstRand Bank, Ltd. to Pay $150,000 Civil Monetary Penalty for Unlawfully Executing Prearranged, Noncompetitive Trades on the CBOT

FirstRand and another foreign-based company prearranged noncompetitive corn and soybean futures trades

Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) issued an Order filing and simultaneously settling charges against financial services company FirstRand Bank, Ltd. (FirstRand), headquartered in Johannesburg, South Africa, for executing unlawful prearranged, noncompetitive trades involving corn and soybean futures contracts on the Chicago Board of Trade (CBOT), a designated contract market of the CME Group. FirstRand has never been registered with the CFTC.

The CFTC’s Order requires FirstRand to pay a $150,000 civil monetary penalty as a result of its unlawful conduct. The Order also requires FirstRand to comply with certain undertakings, including instituting, updating, and/or strengthening policies and procedures designed to detect, deter, discipline, and correct any potential prearranged, fictitious, or noncompetitive trading in violation of the Commodity Exchange Act (CEA) and CFTC Regulations. Finally, the Order requires FirstRand to cease and desist from further violations of Section 4c(a)(1) of the CEA and CFTC Regulation 1.38(a), as charged.

The CFTC order finds that on several occasions, from June 2009 to August 2011, FirstRand and another foreign-based company entered into prearranged noncompetitive trades involving CBOT corn and soybean futures contracts. Before these trades were entered on the CBOT, employees for FirstRand and the other company had telephonic conferences with each other during which they agreed upon the contract, quantity, price, direction, and timing of those trades. These prearranged trades negated market risk and price competition and constituted fictitious sales, in violation of the CEA. Further, by entering into prearranged trades for corn and soybean futures contracts, FirstRand also engaged in noncompetitive transactions in violation of a CFTC Regulation, according to the Order.

In settling this matter, the CFTC has taken into account FirstRand’s cooperation during the CFTC’s investigation.

The CFTC thanks the CME Group for its assistance.

CFTC Division of Enforcement staff members responsible for this case are Kara Mucha, Steven Kim, Kassra Goudarzi, Michael Solinsky, and Charles D. Marvine.

DOJ ANNOUNCES SETTLEMENT WITH EXXONMOBIL OVER TORBERT, LOUISIANA, OIL SPILL

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, August 26, 2014

ExxonMobil Pipeline Company to Pay Civil Penalty Under Proposed Settlement for Torbert, Louisiana, Oil Spill

Settlement Resolves Clean Water Act Violation Stemming from 2012 Spill
ExxonMobil Pipeline Company (ExxonMobil) has agreed to pay a civil penalty for an alleged violation of the Clean Water Act stemming from a 2012 crude oil spill from ExxonMobil’s “North Line” pipeline near Torbert, Louisiana, the Department of Justice and the Environmental Protection Agency (EPA) announced today. Under the consent decree lodged today in federal court, ExxonMobil will pay $1,437,120 to resolve the government’s claim.

The United States’ complaint, which was also filed today in the U.S. District Court for the Middle District of Louisiana, alleges that ExxonMobil discharged at least 2,800 barrels (or 117,000 gallons) of crude oil in violation of Section 311 of the Clean Water Act. On April 28, 2012, ExxonMobil’s 20/22-inch-diameter pipeline ruptured near Torbert, about 20 miles west of Baton Rouge, and crude oil spilled into the surrounding area and flowed into an unnamed tributary connected to Bayou Cholpe.

“Oil spills into our nation’s waters endanger public health and the environment and warrant concerted enforcement efforts,” said Sam Hirsch, Acting Assistant Attorney General for the Justice Department’s Environment and Natural Resources Division. “Today’s settlement achieves a just result and furthers our enforcement mission.”

“All businesses have an obligation to protect their workers, the local community and the environment in which they operate,” said Cynthia Giles, Assistant Administrator for Enforcement and Compliance Assurance at EPA. “EPA is committed to protecting communities by enforcing laws that reduce pollution in local waterways.”

The $1.4 million penalty is in addition to the costs incurred by ExxonMobil to respond to the oil spill and to replace the segment of ruptured pipeline. ExxonMobil is completing cleanup actions pursuant to an administrative order issued by the Louisiana Department of Environmental Quality. The company also continues to do follow-up work and to operate under a Corrective Action Order issued by the United States Department of Transportation, Pipeline and Hazardous Materials Safety Administration.

The Clean Water Act makes it unlawful to discharge oil or hazardous substances into or upon the navigable waters of the United States or adjoining shorelines in quantities that may be harmful to the environment or public health. The penalty paid for this spill will be deposited in the federal Oil Spill Liability Trust Fund managed by the National Pollution Fund Center. The Oil Spill Liability Trust Fund is used to pay for federal response activities and to compensate for damages when there is a discharge or substantial threat of discharge of oil or hazardous substances to waters of the United States or adjoining shorelines.

FORMER EXECUTIVES SENTENCED IN $18 MILLION PONZI SCHEME FRAUD CASE

 FROM:  U.S. JUSTICE DEPARTMENT 

Monday, August 25, 2014

Former Investment Company Executives Sentenced for Roles in $18 Million Ponzi Scheme

The former Hanover Corporation chief financial officer and a former Hanover salesman were sentenced last week to serve 60 months in prison and 70 months in prison respectively, and ordered to pay $14,454,999.19 in restitution, for their roles in an $18 million Ponzi scheme. Hanover’s former chief executive officer was previously sentenced to 14 years in prison and ordered to pay $14,784,983.75 in restitution in this case.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney David Rivera of the Middle District of Tennessee, Special Agent in Charge Todd McCall of the FBI’s Memphis Division and Special Agent in Charge Christopher Henry of the Internal Revenue Service-Criminal Investigation (IRS-CI) in Nashville made the announcement today after the sentences were handed down by U.S. District Judge Todd J. Campbell in the Middle District of Tennessee.

According to court documents, Daryl Bornstein, 55, of Kinston Springs, Tennessee, a former Hanover salesman, and Robert Haley, 55, of Lebanon, Tennessee, the former Hanover CFO, colluded with Hanover CEO, Terry Kretz, to steal $18 million of investors’ money in a Ponzi scheme. Specifically, Kretz and Bornstein solicited investors with the promise that the monies would be invested in stock options and startup companies. More than half of the money, however, was actually used to repay earlier investors, to pay Hanover’s salaries and overhead, and to benefit the defendants personally. Such personal benefits included golf memberships and $100,000 in cash for Bornstein. Kretz and Bornstein also issued Hanover promissory notes to reimburse individuals who had previously lost money investing in ventures recommended by Bornstein before he joined Hanover. In some cases, these former investors contributed new money to Hanover, therefore unwittingly paying off their old investment losses with their new investments.

Haley furthered the fraud by sending investors checks for purported “interest,” knowing that they were simply monies recently taken in from new investors. He also prepared a false balance sheet that overstated Hanover’s financial health to be shown to investors.

The case was investigated by the FBI, IRS-CI, Tennessee Bureau of Investigation, and Tennessee Department of Commerce and Insurance. The case is being prosecuted by Trial Attorney Justin Goodyear of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Scarlett S. Nokes of the Middle District of Tennessee.

DOJ SAYS TRANS ENERGY INC. WILL RESTORE STREAMS, WETLANDS DAMAGED BY NATURAL GAS EXTRACTION

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, September 2, 2014

Trans Energy Inc. to Restore Streams and Wetland Damaged by Natural Gas Extraction Activities in West Virginia

Company Will Also Pay $3 Million Civil Penalty to Resolve Alleged Clean Water Act Violations

The Department of Justice, the U.S. Environmental Protection Agency (EPA) and the West Virginia Department of Environmental Protection (WVDEP) today announced a settlement with   Trans Energy Inc., requiring the oil and gas company to restore portions of streams and wetlands at 15 sites in West Virginia that were polluted by the company’s unauthorized discharge of dredge or fill material.   Trans Energy will pay a penalty of $3 million to be divided equally between the federal government and the WVDEP.   The Clean Water Act requires a company to obtain a permit from EPA and the U.S. Army Corps of Engineers prior to discharging dredge or fill material into wetlands, rivers, streams and other waters of the United States.

“Today’s agreement requires that Trans Energy take important steps to comply with state and federal laws that are critical to protecting our nation’s waters, wetlands and streams,” said Sam Hirsch, Acting Assistant Attorney General of the Justice Department’s Environment and Natural Resources Division.  “We will continue to ensure that the development of our nation’s domestic energy resources, including through the use of hydraulic fracturing techniques, complies with the Clean Water Act and other applicable federal laws.”

“As part of our commitment to safe development of domestic energy supplies, EPA is working to protect wetlands and local water supplies on which communities depend,” said Cynthia Giles, Assistant Administrator of EPA’s Office of Enforcement and Compliance Assurance.   “By enforcing environmental laws, we’re helping to ensure a level playing field for responsible businesses."

In addition to the penalty, the company will reconstruct impacted aquatic resources or otherwise address impacts at each of the 15 sites, provide appropriate compensatory mitigation for impacts to streams and wetlands, and implement a comprehensive compliance program to ensure future compliance with Section 404 of the Clean Water Act and applicable state law.   Among other requirements, the company will work to ensure that all aquatic resources are identified prior to starting work on any future projects in West Virginia, and that appropriate consideration is given at the design stage to avoid and minimize impacts to aquatic resources.   It is estimated that Trans Energy will spend more than $13 million to complete the restoration and mitigation work required by the consent decree.

The federal government and the WVDEP allege that the company impounded streams and discharged sand, dirt, rocks and other materials into streams and wetlands without a federal permit in order to construct well pads, impoundments, road crossings and other facilities related to natural gas extraction.   The government alleges that the violations impacted approximately 13,000 linear feet of stream and more than an acre of wetlands.

Filling wetlands illegally and damming streams can result in serious environmental consequences.   Streams, rivers and wetlands benefit the environment by reducing flood risks, filtering pollutants, recharging groundwater and drinking water supplies, and providing food and habitat for aquatic species.

EPA discovered the violations in 2011 and 2012 through information provided by WVDEP and the public, and through routine field inspections.   In summer 2014, the company conducted an internal audit and ultimately disclosed to EPA alleged violations at eight additional locations, which are also being resolved through this Consent Decree.

The settlement also resolves alleged violations of state law brought by the WVDEP.

EPA CRIMINAL ENFORCEMENT: PROTECTING PEOPLE AND THE ENVIRONMENT

FTC APPROVES FINAL ORDER REGARDING DECEPTIVE, UNFAIR SECURITY PRACTICES ALLEGATIONS OF GMR TRANSPORTATION SERVICES

FROM:  U.S. FEDERAL TRADE COMMISSION 

FTC Approves Final Order in Case Against GMR Transcription Services
Following a public comment period, the Federal Trade Commission has approved a final order resolving FTC allegations that GMR Transcription Services, Inc., engaged in deceptive and unfair information security practices that exposed the personal information of thousands of consumers online, in some instances including consumers’ medical histories and examination notes. The settlement was first announced by the Commission in January.

In its complaint, the agency alleged that GMR’s data security practices were inadequate and resulted in transcriptions of audio files provided by GMR’s customers being indexed by a major search engine and made publicly available to anyone using the search engine.

Under the settlement, GMR and its owners are prohibited from misrepresenting the extent to which they maintain the privacy and security of consumers’ personal information.  They also must establish a comprehensive information security program that will protect consumers’ sensitive personal information, including information the company provided to independent service providers.  In addition, the company must have the program evaluated both initially and every two years by a certified third party. The settlement will be in force for the next 20 years.

The Commission vote approving the final order and letters to members of the public who commented on it was 5-0. (FTC File No. 122-3095, the staff contacts in the Bureau of Consumer Protection are Alain Sheer,

Correcting Some of the Flaws in the ABS Market

Correcting Some of the Flaws in the ABS Market