Wednesday, September 17, 2014
Tuesday, September 16, 2014
DOJ, EPA, WVDEP SETTLE CLEAN WATER ACT VIOLATIONS CASE WITH TRANS ENERGY INC.,
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.
Sunday, September 14, 2014
MORTGAGE LEAD GENERATOR BUSINESS SETTLES FTC CHARGES OF DECEPTIVE ADVERTISING OF MORTGAGE REFINANCING CHARGES
FROM: U.S. FEDERAL TRADE COMMISSION
Mortgage Lead Generator Will Pay $500,000 to Settle FTC Charges That It Deceptively Advertised Mortgage Refinancing
An Internet-based operation that finds potential borrowers for mortgage refinancing lenders will pay a $500,000 civil penalty to settle Federal Trade Commission charges that it deceived consumers with ads that falsely claimed they could refinance their mortgages for free.
“An ad that says you can refinance your mortgage for free is clearly deceptive if you have to pay money at some point before you sign on the dotted line,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Lead generators need to understand that federal laws governing truth in advertising apply to them as well as everybody else.”
The FTC charged that the Colorado-based Intermundo Media, LLC, using the name “Delta Prime Refinance,” designed and distributed the deceptive refinancing ads as a part of its lead generation service. According to the complaint, the company ran these ads on Google, Microsoft, AOL, and Yahoo, as well as on its own websites. When consumers clicked on the ads, they were sent to a landing page where they provided contact information, which was ultimately passed on to providers of mortgage refinancing.
Delta Prime Refinance made deceptive and unsupported claims in its advertisements that overstated how much consumers could reduce their payments if they refinanced their mortgages, how low their annual percentage rate would be, and how easy it would be for them to qualify for refinancing, according to the complaint. Some ads falsely claimed there were no hidden fees, and that the mortgage refinancing was “free,” according to the FTC. Other ads claimed that fixed interest rates were available, when in fact the rates and the amount consumers spent on interest were variable.
The complaint charges Delta Prime Refinance with violating the Federal Trade Commission Act, the Mortgage Acts and Practices Advertising Rule, or “MAP” Rule and Regulation N, and the Truth in Lending Act and Regulation Z.
Under the terms of the settlement, in addition to paying the $500,000 civil penalty, Intermundo Media is prohibited from:
misrepresenting the terms and conditions of any financial product or service, and any term or condition of a mortgage credit product,
disclosing, selling, or transferring the consumer data obtained through the Delta Prime Refinance lead generation service; and
violating the FTC Act; the MAP Rule and Regulation N; and the Truth in Lending Act and Regulation Z.
For consumer information about mortgages, see Homes and Mortgages on the FTC’s website.
The Commission vote authorizing the staff to refer the complaint to the Department of Justice and to approve the proposed consent decree was 5-0. The DOJ filed the complaint and proposed consent decree on behalf of the Commission in U.S. District Court for the District of Colorado on September 12, 2014. The proposed consent decree is subject to court approval.
NOTE: The Commission authorizes the filing of a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. Consent decrees have the force of law when signed by the District Court judge.
Friday, September 12, 2014
Thursday, September 11, 2014
SEC CHARGES TELECOMMUNICATIONS EQUIPMENT COMPANY, FORMER EXECS WITH IMPROPERLY RECOGNIZING REVENUE
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission announced charges against a Newport Beach, Calif.-based telecommunications equipment company and two former executives accused of improperly recognizing as revenue more than a million dollars’ worth of inventory that was shipped to a Florida warehouse but not actually sold.
They’re also accused of defrauding an investor from whom they secured a $2 million loan for the company based on misstatements and omissions associated with the inventory shipments.
The SEC’s Enforcement Division alleges that AirTouch Communications Inc., former president and CEO Hideyuki Kanakubo, and former CFO Jerome Kaiser orchestrated a fraudulent revenue recognition scheme that violated Generally Accepted Accounting Principles (GAAP), which establish that revenue cannot be recognized unless it is “realized or realizable” and “earned.” When AirTouch reported net revenues of a little more than $1.03 million in its quarterly report for the third quarter of 2012, it included approximately $1.24 million in inventory that had been shipped to a company in Florida that agreed to warehouse AirTouch’s products in anticipation of future sales. AirTouch’s revenue recognition was improper because the Florida company had not purchased the inventory, and AirTouch had not sold the inventory to any of its customers. AirTouch would have had zero revenue to report for the quarter if it had not recorded the shipments as purported revenue from the Florida company.
“Kanakubo and Kaiser created a facade of sales activity in AirTouch’s quarterly report to falsely depict a healthy and growing company when in fact it was struggling without any positive revenue,” said Michele Layne, director of the SEC’s Los Angeles Regional Office. “They also deceptively obtained financing from an investor based on a similar false portrayal of the company’s sales activity.”
According to the SEC’s order instituting an administrative proceeding, AirTouch develops and sells telecommunications equipment, including a product called the U250 SmartLinx that was designed in early 2012 for sale to Mexico’s largest provider of landline telephone services. Later that year, AirTouch contacted the Florida company about the possibility of it warehousing U250 SmartLinx units for potential future sale to the Mexican entity or other AirTouch customers. During contract negotiations for the warehousing arrangement, the CEO of the Florida company told Kanakubo that it would not buy the product from AirTouch, but rather warehouse the U250 SmartLinx inventory and provide logistics for eventual delivery to the Mexican entity or other AirTouch customers who purchased the product. AirTouch shipped approximately $1.24 million of inventory to the Florida company. Despite not receiving any payment from the Florida company or any commitment from the Mexican entity or any other customer that it would actually buy product, Kanakubo and Kaiser reported the shipped inventory as revenue on AirTouch’s Form 10-Q. They also signed certifications falsely attesting to the accuracy of the company’s financial results.
The SEC’s Enforcement Division further alleges that Kanakubo and Kaiser made false and misleading statements and omissions to an investor they solicited for a $2 million short-term bridge loan to the company in exchange for a promissory note and a warrant to purchase common stock. Among other things, Kanakubo falsely told the investor via e-mail that the inventory to be shipped by AirTouch to the Florida company pertained to an existing purchase order from the Mexican entity, and Kaiser did not disclose the existence of the agreement wherein the Florida company agreed merely to warehouse the inventory and provide associated fulfillment and logistics services. On Oct. 17, 2012, AirTouch received the loan of $2 million from the investor, and two days later Kanakubo approved a $15,000 bonus payment to Kaiser for his work on raising capital. The same day, Kanakubo authorized a $15,000 payment to himself in connection with unused vacation time.
According to the SEC’s order, Kanakubo, who lives in Irvine, Calif., and Kaiser, who lives in Chowchilla, Calif., withheld key information about the inventory shipments to the Florida entity from AirTouch’s board of directors and controller as well as its outside independent accountant.
The SEC’s order alleges that AirTouch, Kanakubo, and Kaiser violated the antifraud provisions of the federal securities laws, and asserts that Kaiser’s violations constituted willful conduct.
The SEC’s investigation was conducted by Peter Altman, Rhoda Chang, and Diana Tani of the Los Angeles office. The SEC’s litigation will be led by Amy Longo, Gary Leung, David VanHavermaat, and Mr. Altman.
Wednesday, September 10, 2014
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