FROM: U.S. DEPARTMENT OF JUSTICE
Friday, September 28, 2012
U.S. Government Intervenes in False Claims Suit Against CH2M Hill Hanford Group
Colorado-based Company Allegedly Engaged in Widespread Time Card Fraud At Department of Energy Nuclear Site
The government has intervened in a lawsuit against CH2M Hill Hanford Group Inc. (CH2M Hill) in the U.S. District Court for the Eastern District of Washington, the Department of Justice announced today. CH2M Hill is a subsidiary of CH2M Hill Companies Ltd., a Colorado-based engineering and construction services company.
Between 1999 and 2008, CH2M Hill was a U.S. Department of Energy prime contractor responsible for the management and cleanup of over 170 underground storage tanks containing mixed radioactive and hazardous waste at the Department of Energy’s Hanford Nuclear Site in southeastern Washington. The lawsuit filed by Mr. Schroeder alleges that numerous CH2M Hill hourly employees regularly and substantially overstated the number of hours that they worked. The complaint also alleges that CH2M Hill management knowingly condoned this practice and submitted inflated claims to the Department of Energy that included the fraudulently claimed hours.
Eight former CH2M Hill employees, including Mr. Schroeder, have pleaded guilty to felony charges stemming from the time card fraud. The lawsuit was originally filed under the False Claims Act by Carl Schroeder, a former employee of CH2M Hill.
The False Claims Act authorizes private parties to sue on behalf of the United States and authorizes the United States to intervene in such a suit and take over responsibility for litigating it. Although the act generally authorizes the whistleblower who initiated the suit to share in any recovery, it also bars recovery by any whistleblower who is convicted of criminal conduct for his role in the fraud/ The United States has notified the court that it expects to file a motion to dismiss Mr. Schroeder from the action on the basis of is criminal conduct. Mr. Schroder’s lawsuit is captioned U.S. ex rel. Schroeder v. CH2M Hill, 09-cv-5038.
The claims asserted in this case are allegations only, and there has been no determination of liability. The case is being handled by the Civil Division of the Department of Justice and the U.S. Attorney’s Office for the Eastern District of Washington, with the assistance of the Department of Energy Office of Inspector General.
Thursday, October 4, 2012
Wednesday, October 3, 2012
U.S. DEPARTMENT OF LABOR SETTLES SEX DISCRIMINATION CHARGES WITH NASH FINCH CO.
FROM: U.S. DEPARTMENT OF LABOR
Minnesota-based food distributor to pay back wages to 84 women — and provide job offers — to settle allegations of sex discrimination at North Carolina facility
LUMBERTON, N.C. — The U.S. Department of Labor's Office of Federal Contract Compliance Programs has reached an agreement with federal contractor Nash Finch Co. to settle allegations of hiring discrimination against female job applicants at the company's distribution facility in Lumberton. In consent findings approved by the department's Office of Administrative Law Judges, Nash Finch Co. has agreed to pay $188,500 in back wages and interest to 84 women who were rejected for the entry-level position of order selector at the company's distribution facility in Lumberton.
"I am glad we were able to achieve a fair resolution in this case," said Solicitor of Labor M. Patricia Smith. "Our economy cannot afford to lose the skills and talents of millions of American women who count on us to enforce equal opportunity laws so that they can find good jobs without fear of discrimination."
OFCCP investigators conducted a review of Nash Finch's employment practices at the Lumberton facility from May 1, 2005, to Dec. 31, 2006. Based on their findings, the agency asserted that Nash Finch had failed to ensure qualified female job applicants received equal consideration for employment without regard to sex as required by Executive Order 11246. OFCCP filed a complaint with the Labor Department's Office of Administrative Law Judges on Nov. 30, 2010, alleging that Nash Finch systematically had discriminated against women who applied for jobs as order selectors during a nine-month period in 2006.
"Our government relies on thousands of private companies to produce the goods and provide the services that we depend on to do our jobs," said OFCCP Director Patricia A. Shiu. "It is in everyone's best interest that contractors like Nash Finch succeed. But, for federal contractors, success is not measured solely by performing a task or providing a service. True success means that, as required by law, every qualified worker has a fair shot at jobs funded by taxpayer dollars."
In addition to the financial remedies, the settlement requires Nash Finch to extend job offers to up to 12 women in the original class as order selector positions become available. The company must also submit progress reports to OFCCP for the next two years.
Women who applied and were rejected for order selector positions at Nash Finch's Lumberton facility between March 1 and Dec. 31, 2006, may be eligible for the back wages, interest and job opportunities in this settlement. The company will attempt to contact all class members to explain their eligibility for these remedies. However, anyone who does not receive such a notice and believes the omission is an error can contact OFCCP's toll-free helpline at 800-397-6251 (TTY: 877-889-5627) for more information.
Nash Finch is based in Minneapolis and is the second-largest publicly traded wholesale food distributor in the nation. The company distributes food products to military commissaries around the world. Since the start of the OFCCP review period on May 1, 2005, Nash Finch has received payments of more than $14 million from the U.S. Department of Defense.
In addition to Executive Order 11246, OFCCP enforces Section 503 of the Rehabilitation Act of 1973 and the Vietnam Era Veterans' Readjustment Assistance Act Of 1974. As amended, these three laws require those who do business with the federal government, both contractors and subcontractors, to follow the fair and reasonable standard that they not discriminate in employment on the basis of sex, race, color, religion, national origin, disability or status as a protected veteran.
Minnesota-based food distributor to pay back wages to 84 women — and provide job offers — to settle allegations of sex discrimination at North Carolina facility
LUMBERTON, N.C. — The U.S. Department of Labor's Office of Federal Contract Compliance Programs has reached an agreement with federal contractor Nash Finch Co. to settle allegations of hiring discrimination against female job applicants at the company's distribution facility in Lumberton. In consent findings approved by the department's Office of Administrative Law Judges, Nash Finch Co. has agreed to pay $188,500 in back wages and interest to 84 women who were rejected for the entry-level position of order selector at the company's distribution facility in Lumberton.
"I am glad we were able to achieve a fair resolution in this case," said Solicitor of Labor M. Patricia Smith. "Our economy cannot afford to lose the skills and talents of millions of American women who count on us to enforce equal opportunity laws so that they can find good jobs without fear of discrimination."
OFCCP investigators conducted a review of Nash Finch's employment practices at the Lumberton facility from May 1, 2005, to Dec. 31, 2006. Based on their findings, the agency asserted that Nash Finch had failed to ensure qualified female job applicants received equal consideration for employment without regard to sex as required by Executive Order 11246. OFCCP filed a complaint with the Labor Department's Office of Administrative Law Judges on Nov. 30, 2010, alleging that Nash Finch systematically had discriminated against women who applied for jobs as order selectors during a nine-month period in 2006.
"Our government relies on thousands of private companies to produce the goods and provide the services that we depend on to do our jobs," said OFCCP Director Patricia A. Shiu. "It is in everyone's best interest that contractors like Nash Finch succeed. But, for federal contractors, success is not measured solely by performing a task or providing a service. True success means that, as required by law, every qualified worker has a fair shot at jobs funded by taxpayer dollars."
In addition to the financial remedies, the settlement requires Nash Finch to extend job offers to up to 12 women in the original class as order selector positions become available. The company must also submit progress reports to OFCCP for the next two years.
Women who applied and were rejected for order selector positions at Nash Finch's Lumberton facility between March 1 and Dec. 31, 2006, may be eligible for the back wages, interest and job opportunities in this settlement. The company will attempt to contact all class members to explain their eligibility for these remedies. However, anyone who does not receive such a notice and believes the omission is an error can contact OFCCP's toll-free helpline at 800-397-6251 (TTY: 877-889-5627) for more information.
Nash Finch is based in Minneapolis and is the second-largest publicly traded wholesale food distributor in the nation. The company distributes food products to military commissaries around the world. Since the start of the OFCCP review period on May 1, 2005, Nash Finch has received payments of more than $14 million from the U.S. Department of Defense.
In addition to Executive Order 11246, OFCCP enforces Section 503 of the Rehabilitation Act of 1973 and the Vietnam Era Veterans' Readjustment Assistance Act Of 1974. As amended, these three laws require those who do business with the federal government, both contractors and subcontractors, to follow the fair and reasonable standard that they not discriminate in employment on the basis of sex, race, color, religion, national origin, disability or status as a protected veteran.
Monday, October 1, 2012
FREIGHT FORWARDING COMPANY AGREES TO PAY $2.3 MILLION CRIMINAL FINE TO SETTLE PRICE FIXING CHARGES
FROM: U.S. DEPARTMENT OF JUSTICE
Company Agrees to Pay a $2.3 Million Criminal Fine
WASHINGTON — A Japanese freight forwarding company has agreed to plead guilty and to pay a $2.3 million criminal fine for its role in a conspiracy to fix certain fees in connection with the provision of freight forwarding services for air cargo shipments from Japan to the United States, the Department of Justice announced today.
Including today’s charge, as a result of this investigation, 14 companies have either pleaded guilty or agreed to plead guilty and to pay more than $100 million in criminal fines.
According to the one count felony charge filed today in the U.S. District Court for the District of Columbia, Yamato Global Logistics Japan Co. Ltd. engaged in a conspiracy to fix and to impose certain freight forwarding service fees, including fuel surcharges and various security fees, charged to customers for services provided in connection with freight forwarding shipments of cargo shipped by air from Japan to the United States from about September 2002 until at least November 2007.
As part of the plea agreement, which will be subject to court approval, Yamato Global Logistics Japan Co. Ltd. has agreed to pay a criminal fine of $2,326,774 and to cooperate with the department’s ongoing antitrust investigation.
"Consumers ultimately were forced to pay higher prices on the goods they buy every day as a result of the noncompetitive and collusive service fees charged by these companies," said Scott D. Hammond, Deputy Assistant Attorney General for the Antitrust Division’s criminal enforcement program. "Prosecuting these kinds of global price-fixing conspiracies continues to be a high priority of the Antitrust Division."
According to the charges, the company carried out the conspiracy by, among other things, agreeing during meetings and discussions to coordinate and impose certain freight forwarding service fees and charges on customers purchasing freight forwarding services for cargo shipped by air from Japan to the United States. The department said the company levied freight forwarding service fees in accordance with the agreements reached and engaged in meetings and discussions for the purpose of monitoring and enforcing adherence to the agreed-upon freight forwarding service fees.
Freight forwarders manage the domestic and international delivery of cargo for customers by receiving, packaging, preparing and warehousing cargo freight, arranging for cargo shipment through transportation providers such as air carriers, preparing shipment documentation and providing related ancillary services.
The company is charged with price fixing in violation of the Sherman Act, which carries a maximum $100 million fine for corporations. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.
Company Agrees to Pay a $2.3 Million Criminal Fine
WASHINGTON — A Japanese freight forwarding company has agreed to plead guilty and to pay a $2.3 million criminal fine for its role in a conspiracy to fix certain fees in connection with the provision of freight forwarding services for air cargo shipments from Japan to the United States, the Department of Justice announced today.
Including today’s charge, as a result of this investigation, 14 companies have either pleaded guilty or agreed to plead guilty and to pay more than $100 million in criminal fines.
According to the one count felony charge filed today in the U.S. District Court for the District of Columbia, Yamato Global Logistics Japan Co. Ltd. engaged in a conspiracy to fix and to impose certain freight forwarding service fees, including fuel surcharges and various security fees, charged to customers for services provided in connection with freight forwarding shipments of cargo shipped by air from Japan to the United States from about September 2002 until at least November 2007.
As part of the plea agreement, which will be subject to court approval, Yamato Global Logistics Japan Co. Ltd. has agreed to pay a criminal fine of $2,326,774 and to cooperate with the department’s ongoing antitrust investigation.
"Consumers ultimately were forced to pay higher prices on the goods they buy every day as a result of the noncompetitive and collusive service fees charged by these companies," said Scott D. Hammond, Deputy Assistant Attorney General for the Antitrust Division’s criminal enforcement program. "Prosecuting these kinds of global price-fixing conspiracies continues to be a high priority of the Antitrust Division."
According to the charges, the company carried out the conspiracy by, among other things, agreeing during meetings and discussions to coordinate and impose certain freight forwarding service fees and charges on customers purchasing freight forwarding services for cargo shipped by air from Japan to the United States. The department said the company levied freight forwarding service fees in accordance with the agreements reached and engaged in meetings and discussions for the purpose of monitoring and enforcing adherence to the agreed-upon freight forwarding service fees.
Freight forwarders manage the domestic and international delivery of cargo for customers by receiving, packaging, preparing and warehousing cargo freight, arranging for cargo shipment through transportation providers such as air carriers, preparing shipment documentation and providing related ancillary services.
The company is charged with price fixing in violation of the Sherman Act, which carries a maximum $100 million fine for corporations. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.
Sunday, September 30, 2012
UNLAWFUL REFUSAL TO HIRE UNIONIZED EMPLOYEES
FROM: U.S. NATIONAL LABOR RELATIONS BOARD
The National Labor Relations Board has ruled that Massey Energy Company and its subsidiary, Mammoth Coal Company, unlawfully refused to hire former unionized employees in order to avoid union obligations at a West Virginia coal mine it had purchased.
Massey bought the mine in Kanawha County in 2004 from Horizon Natural Resources Company after Horizon declared bankruptcy. Massey then created Mammoth Coal, a subsidiary, to operate the mine.
In the end, only 19 of the former miners were hired into a workforce of 219. Then, having eliminated the union, Mammoth unlawfully imposed a lower wage structure for all miners, the Board found.
Under the National Labor Relations Act, the buyer of a union company must recognize and bargain with the union if a majority of the buyer’s new employees came from the former union-represented workforce. It is also a violation of labor law to discriminate against union supporters in hiring.
Members Griffin and Block also found that Massey Energy was responsible for the discriminatory treatment of the miners because it directly participated in the unlawful conduct. "Massey made clear to the managers and supervisors making the hiring decisions for Mammoth that Massey would not accept a union in that operation," the Board majority found. In addition, the Board majority, rejecting procedural arguments, found Massey and Mammoth to constitute a single employer based on their integrated operations and lack of arms-length relationship. (The Board had earlier asked all parties to the case to submit supplemental briefs on the single employer question.) Massey is therefore jointly liable for any remedies, including backpay for miners who were unlawfully discriminated against.
On that point, Member Hayes dissented. He found that neither the direct participation issue, nor the single employer issue were raised by the NLRB General Counsel in his complaint or in arguments before an administrative law judge who initially heard the case. He also found that the additional briefing requested by the Board did not cure that failure. "In their collective zeal to hold Massey liable – for the obvious reason that it is far more likely than Mammoth to have funds to meet backpay obligations – the Acting General Counsel and my colleagues have trampled due process," Member Hayes wrote.
In its decision, the Board ordered Mammoth and Massey to offer employment to 85 named former Horizon employees and make them whole for lost earnings, to recognize the union and bargain with it on request, to restore the former terms and conditions of employment, and to bargain in good faith with the union regarding any changes. (In 2011, Massey Energy was purchased by Alpha Natural Resources.)
The National Labor Relations Board has ruled that Massey Energy Company and its subsidiary, Mammoth Coal Company, unlawfully refused to hire former unionized employees in order to avoid union obligations at a West Virginia coal mine it had purchased.
Massey bought the mine in Kanawha County in 2004 from Horizon Natural Resources Company after Horizon declared bankruptcy. Massey then created Mammoth Coal, a subsidiary, to operate the mine.
In the end, only 19 of the former miners were hired into a workforce of 219. Then, having eliminated the union, Mammoth unlawfully imposed a lower wage structure for all miners, the Board found.
Under the National Labor Relations Act, the buyer of a union company must recognize and bargain with the union if a majority of the buyer’s new employees came from the former union-represented workforce. It is also a violation of labor law to discriminate against union supporters in hiring.
Members Griffin and Block also found that Massey Energy was responsible for the discriminatory treatment of the miners because it directly participated in the unlawful conduct. "Massey made clear to the managers and supervisors making the hiring decisions for Mammoth that Massey would not accept a union in that operation," the Board majority found. In addition, the Board majority, rejecting procedural arguments, found Massey and Mammoth to constitute a single employer based on their integrated operations and lack of arms-length relationship. (The Board had earlier asked all parties to the case to submit supplemental briefs on the single employer question.) Massey is therefore jointly liable for any remedies, including backpay for miners who were unlawfully discriminated against.
On that point, Member Hayes dissented. He found that neither the direct participation issue, nor the single employer issue were raised by the NLRB General Counsel in his complaint or in arguments before an administrative law judge who initially heard the case. He also found that the additional briefing requested by the Board did not cure that failure. "In their collective zeal to hold Massey liable – for the obvious reason that it is far more likely than Mammoth to have funds to meet backpay obligations – the Acting General Counsel and my colleagues have trampled due process," Member Hayes wrote.
In its decision, the Board ordered Mammoth and Massey to offer employment to 85 named former Horizon employees and make them whole for lost earnings, to recognize the union and bargain with it on request, to restore the former terms and conditions of employment, and to bargain in good faith with the union regarding any changes. (In 2011, Massey Energy was purchased by Alpha Natural Resources.)
Friday, September 28, 2012
GOLDMAN SACHS & CO. CHARGED BY SEC WITH "PAY TO PLAY" VIOLATIONS
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., Sept. 27, 2012 – The Securities and Exchange Commission today charged Goldman, Sachs & Co. and one of its former investment bankers with "pay-to-play" violations involving undisclosed campaign contributions to then-Massachusetts state treasurer Timothy P. Cahill while he was a candidate for governor.
Pay-to-play schemes involve campaign contributions or other payments made in an attempt to influence the awarding of lucrative public contracts for securities underwriting business. This marks the first SEC enforcement action for pay-to-play violations involving "in-kind" non-cash contributions to a political campaign.
According to the SEC’s order against Goldman Sachs, Neil M.M. Morrison was a vice president in the firm’s Boston office and solicited underwriting business from the Massachusetts treasurer’s office beginning in July 2008. Morrison also was substantially engaged in working on Cahill’s political campaigns from November 2008 to October 2010. Morrison at times conducted campaign activities from the Goldman Sachs office during work hours and using the firm’s phones and e-mail. Morrison’s use of Goldman Sachs work time and resources for campaign activities constituted valuable in-kind campaign contributions to Cahill that were attributable to Goldman Sachs and disqualified the firm from engaging in municipal underwriting business with certain Massachusetts municipal issuers for two years after the contributions. Nevertheless, Goldman Sachs subsequently participated in 30 prohibited underwritings with Massachusetts issuers and earned more than $7.5 million in underwriting fees.
While the SEC’s case against Morrison continues, Goldman Sachs agreed to settle the charges by paying $7,558,942 in disgorgement, $670,033 in prejudgment interest, and a $3.75 million penalty, which is the largest ever imposed by the SEC for Municipal Securities Rulemaking Board (MSRB) pay-to-play violations. The SEC coordinated this enforcement action with a related action filed by the Massachusetts Attorney General against Goldman Sachs.
"The pay-to-play rules are clear: municipal finance professionals that use their firm’s resources to campaign on behalf of political candidates compromise themselves and the firms that employ them," said Robert Khuzami, Director of the SEC’s Division of Enforcement.
Elaine C. Greenberg, Chief of the SEC Enforcement Division’s Municipal Securities and Public Pensions Unit, added, "Fighting efforts to improperly influence the underwriting selection process is one of the unit’s top priorities. These practices result in undisclosed conflicts of interest and undermine public confidence in the integrity of the municipal securities market."
According to the SEC’s orders against Morrison and Goldman Sachs, among the campaign activities that Morrison engaged in for Cahill were fundraising, drafting speeches, communicating with reporters, approving personnel decisions, and interviewing at least one possible running mate. Morrison at times referenced his campaign work while soliciting underwriting business in an apparent attempt to curry favor during the selection process. Morrison sent e-mails to a deputy treasurer in Cahill’s office making the following statements while discussing the selection of underwriters:
"The boss [Cahill] mentioned to me this morning that he spoke to [the Assistant Treasurer] and that it is looking good for us [Goldman Sachs] on the build America bond deal."
"From my standpoint as an advisor/consultant/friend I am saying, PLEASE don’t give these [underwriter] slots away willy-nilly. You are in the fight of your lives and need to reward loyalty and encourage friendship. If people aren’t willing to be creative with their support then they shouldn’t expect business. This has to be a political decision."
"We have discussed the Build American Bond transaction and how important it is to me. You have been great keeping me up to speed. This is my number 1 priority and most important ask. Having Goldman as the lead and getting 50% of the economics would be such a home run for me."
According to the SEC’s orders, in addition to his direct campaign work for Cahill, Morrison made an indirect cash contribution to Cahill by giving cash to a friend who then wrote a check to the Cahill campaign. Morrison’s campaign work and his indirect financial contribution created a conflict of interest that was not disclosed by Goldman Sachs in the relevant municipal securities offerings in violation of pay-to-play rules. Morrison himself acknowledged the existence of this conflict in an e-mail to a campaign official, saying, "I am staying in banking and don’t want a story that says that I am helping Cahill, who is giving me banking business. If that came out, I’m sure I wouldn’t get any more business."
According to the SEC’s orders against Goldman Sachs and Morrison, Goldman Sachs terminated Morrison in December 2010.
The SEC’s order against Goldman Sachs found that the firm violated Section 15B(c)(1) of the Exchange Act and MSRB Rule G-37(b), which prohibits firms from underwriting offerings for municipal issuers within two years after any contribution to an official of such issuer. The SEC’s order found that Goldman Sachs did not disclose any of the contributions on MSRB Forms G-37, and did not make or keep records of the contributions in violation of MSRB Rules G-37(e), G-8 and G-9. The order found that Goldman Sachs did not take steps to ensure that the attributed contributions or campaign work or the conflicts of interest raised by them were disclosed in the bond offering documents, in violation of MSRB Rule G-17, which requires broker-dealers to deal fairly and not engage in any deceptive, dishonest, or unfair practice. The order found that Goldman Sachs failed to effectively supervise Morrison in violation of MSRB Rule G-27.
Goldman Sachs consented to the SEC’s order without admitting or denying the findings. In addition to paying disgorgement, prejudgment interest, and the penalty, Goldman Sachs agreed to be censured and to cease and desist from committing or causing any violations and any future violations of the provisions referenced in the order.
In its order against Morrison, the SEC’s Enforcement Division alleges that Morrison violated MSRB Rule G-37(d) by making a secret, undisclosed cash campaign contribution to Cahill, that he violated MSRB Rule G-37(c) by soliciting campaign contributions for Cahill, and that he violated MSRB Rule G-17 by failing to disclose conflicts of interest to the purchasers of municipal securities. The Division of Enforcement further alleges that Morrison caused Goldman Sachs to violate Rule G-8, Rule G-9, Rule G-37(b) and Rule G-37(e).
The SEC’s investigation was conducted by members of the Enforcement Division's Municipal Securities and Public Pensions Unit including Senior Enforcement Counsel Louis A. Randazzo and Assistant Director LeeAnn Ghazil Gaunt, and supervised by Unit Chief Elaine C. Greenberg and Deputy Chief Mark Zehner. Richard Harper of the SEC’s Boston Regional Office will lead the litigation against Morrison.
Washington, D.C., Sept. 27, 2012 – The Securities and Exchange Commission today charged Goldman, Sachs & Co. and one of its former investment bankers with "pay-to-play" violations involving undisclosed campaign contributions to then-Massachusetts state treasurer Timothy P. Cahill while he was a candidate for governor.
Pay-to-play schemes involve campaign contributions or other payments made in an attempt to influence the awarding of lucrative public contracts for securities underwriting business. This marks the first SEC enforcement action for pay-to-play violations involving "in-kind" non-cash contributions to a political campaign.
According to the SEC’s order against Goldman Sachs, Neil M.M. Morrison was a vice president in the firm’s Boston office and solicited underwriting business from the Massachusetts treasurer’s office beginning in July 2008. Morrison also was substantially engaged in working on Cahill’s political campaigns from November 2008 to October 2010. Morrison at times conducted campaign activities from the Goldman Sachs office during work hours and using the firm’s phones and e-mail. Morrison’s use of Goldman Sachs work time and resources for campaign activities constituted valuable in-kind campaign contributions to Cahill that were attributable to Goldman Sachs and disqualified the firm from engaging in municipal underwriting business with certain Massachusetts municipal issuers for two years after the contributions. Nevertheless, Goldman Sachs subsequently participated in 30 prohibited underwritings with Massachusetts issuers and earned more than $7.5 million in underwriting fees.
While the SEC’s case against Morrison continues, Goldman Sachs agreed to settle the charges by paying $7,558,942 in disgorgement, $670,033 in prejudgment interest, and a $3.75 million penalty, which is the largest ever imposed by the SEC for Municipal Securities Rulemaking Board (MSRB) pay-to-play violations. The SEC coordinated this enforcement action with a related action filed by the Massachusetts Attorney General against Goldman Sachs.
"The pay-to-play rules are clear: municipal finance professionals that use their firm’s resources to campaign on behalf of political candidates compromise themselves and the firms that employ them," said Robert Khuzami, Director of the SEC’s Division of Enforcement.
Elaine C. Greenberg, Chief of the SEC Enforcement Division’s Municipal Securities and Public Pensions Unit, added, "Fighting efforts to improperly influence the underwriting selection process is one of the unit’s top priorities. These practices result in undisclosed conflicts of interest and undermine public confidence in the integrity of the municipal securities market."
According to the SEC’s orders against Morrison and Goldman Sachs, among the campaign activities that Morrison engaged in for Cahill were fundraising, drafting speeches, communicating with reporters, approving personnel decisions, and interviewing at least one possible running mate. Morrison at times referenced his campaign work while soliciting underwriting business in an apparent attempt to curry favor during the selection process. Morrison sent e-mails to a deputy treasurer in Cahill’s office making the following statements while discussing the selection of underwriters:
"From my standpoint as an advisor/consultant/friend I am saying, PLEASE don’t give these [underwriter] slots away willy-nilly. You are in the fight of your lives and need to reward loyalty and encourage friendship. If people aren’t willing to be creative with their support then they shouldn’t expect business. This has to be a political decision."
"We have discussed the Build American Bond transaction and how important it is to me. You have been great keeping me up to speed. This is my number 1 priority and most important ask. Having Goldman as the lead and getting 50% of the economics would be such a home run for me."
According to the SEC’s orders, in addition to his direct campaign work for Cahill, Morrison made an indirect cash contribution to Cahill by giving cash to a friend who then wrote a check to the Cahill campaign. Morrison’s campaign work and his indirect financial contribution created a conflict of interest that was not disclosed by Goldman Sachs in the relevant municipal securities offerings in violation of pay-to-play rules. Morrison himself acknowledged the existence of this conflict in an e-mail to a campaign official, saying, "I am staying in banking and don’t want a story that says that I am helping Cahill, who is giving me banking business. If that came out, I’m sure I wouldn’t get any more business."
According to the SEC’s orders against Goldman Sachs and Morrison, Goldman Sachs terminated Morrison in December 2010.
The SEC’s order against Goldman Sachs found that the firm violated Section 15B(c)(1) of the Exchange Act and MSRB Rule G-37(b), which prohibits firms from underwriting offerings for municipal issuers within two years after any contribution to an official of such issuer. The SEC’s order found that Goldman Sachs did not disclose any of the contributions on MSRB Forms G-37, and did not make or keep records of the contributions in violation of MSRB Rules G-37(e), G-8 and G-9. The order found that Goldman Sachs did not take steps to ensure that the attributed contributions or campaign work or the conflicts of interest raised by them were disclosed in the bond offering documents, in violation of MSRB Rule G-17, which requires broker-dealers to deal fairly and not engage in any deceptive, dishonest, or unfair practice. The order found that Goldman Sachs failed to effectively supervise Morrison in violation of MSRB Rule G-27.
Goldman Sachs consented to the SEC’s order without admitting or denying the findings. In addition to paying disgorgement, prejudgment interest, and the penalty, Goldman Sachs agreed to be censured and to cease and desist from committing or causing any violations and any future violations of the provisions referenced in the order.
In its order against Morrison, the SEC’s Enforcement Division alleges that Morrison violated MSRB Rule G-37(d) by making a secret, undisclosed cash campaign contribution to Cahill, that he violated MSRB Rule G-37(c) by soliciting campaign contributions for Cahill, and that he violated MSRB Rule G-17 by failing to disclose conflicts of interest to the purchasers of municipal securities. The Division of Enforcement further alleges that Morrison caused Goldman Sachs to violate Rule G-8, Rule G-9, Rule G-37(b) and Rule G-37(e).
The SEC’s investigation was conducted by members of the Enforcement Division's Municipal Securities and Public Pensions Unit including Senior Enforcement Counsel Louis A. Randazzo and Assistant Director LeeAnn Ghazil Gaunt, and supervised by Unit Chief Elaine C. Greenberg and Deputy Chief Mark Zehner. Richard Harper of the SEC’s Boston Regional Office will lead the litigation against Morrison.
Thursday, September 27, 2012
CORPORATION PAYS PENALTY FOR VIOLATING ANTITRUST PREMERGEER NOTIFICATION REQUIREMENTS
FROM: U.S. DEPARTMENT OF JUSTICE
Tuesday, September 25, 2012
Biglari Holdings Inc. to Pay $850,000 Civil Penalty for Violating Antitrust Premerger Notification Requirements
Violations Occurred When Cracker Barrel Voting Securities Were Acquired
WASHINGTON – San Antonio-based Biglari Holdings Inc. will pay an $850,000 civil penalty to settle charges that it violated premerger reporting and waiting requirements when it acquired Cracker Barrel voting securities, the Department of Justice announced today.
The Justice Department’s Antitrust Division, at the request of the Federal Trade Commission, filed a civil antitrust lawsuit today in U.S. District Court in Washington, D.C., against Biglari Holdings for violating the notification requirements of the Hart-Scott-Rodino (HSR) Act of 1976. At the same time, the department filed a proposed settlement that, if approved by the court, will settle the charges.
According to the complaint, Biglari Holdings failed to comply with the antitrust premerger notification requirements of the HSR Act before acquiring voting securities of Cracker Barrel Old Country Store Inc. in June of 2011. Although the HSR Act exempts from its premerger notification requirements certain acquisitions "solely for the purpose of investment," Biglari Holdings’ acquisitions were not made solely for the purpose of investment, the department said. The complaint alleges that Biglari Holdings was in violation of the HSR Act from June 8, 2011 through Sept. 22, 2011.
The Hart-Scott-Rodino Act of 1976, an amendment to the Clayton Act, imposes notification and waiting period requirements on individuals and companies over a certain size before they consummate acquisitions resulting in holding stock or assets above a certain value, which was $66 million in 2011 and is currently $68.2 million.
Federal courts can assess civil penalties for premerger notification violations under the HSR Act in lawsuits brought by the Department of Justice. For a party in violation of the HSR Act the maximum civil penalty is $16,000 a day.
Tuesday, September 25, 2012
Biglari Holdings Inc. to Pay $850,000 Civil Penalty for Violating Antitrust Premerger Notification Requirements
Violations Occurred When Cracker Barrel Voting Securities Were Acquired
WASHINGTON – San Antonio-based Biglari Holdings Inc. will pay an $850,000 civil penalty to settle charges that it violated premerger reporting and waiting requirements when it acquired Cracker Barrel voting securities, the Department of Justice announced today.
The Justice Department’s Antitrust Division, at the request of the Federal Trade Commission, filed a civil antitrust lawsuit today in U.S. District Court in Washington, D.C., against Biglari Holdings for violating the notification requirements of the Hart-Scott-Rodino (HSR) Act of 1976. At the same time, the department filed a proposed settlement that, if approved by the court, will settle the charges.
According to the complaint, Biglari Holdings failed to comply with the antitrust premerger notification requirements of the HSR Act before acquiring voting securities of Cracker Barrel Old Country Store Inc. in June of 2011. Although the HSR Act exempts from its premerger notification requirements certain acquisitions "solely for the purpose of investment," Biglari Holdings’ acquisitions were not made solely for the purpose of investment, the department said. The complaint alleges that Biglari Holdings was in violation of the HSR Act from June 8, 2011 through Sept. 22, 2011.
The Hart-Scott-Rodino Act of 1976, an amendment to the Clayton Act, imposes notification and waiting period requirements on individuals and companies over a certain size before they consummate acquisitions resulting in holding stock or assets above a certain value, which was $66 million in 2011 and is currently $68.2 million.
Federal courts can assess civil penalties for premerger notification violations under the HSR Act in lawsuits brought by the Department of Justice. For a party in violation of the HSR Act the maximum civil penalty is $16,000 a day.
Wednesday, September 26, 2012
SEC CHARGES TYCO INTERNATIONAL LTD. WITH VIOLATING THE FOREIGN CORRUPT PRACTICES ACT
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., Sept. 24, 2012 — The Securities and Exchange Commission today charged Tyco International Ltd. with violating the Foreign Corrupt Practices Act (FCPA) when subsidiaries arranged illicit payments to foreign officials in more than a dozen countries.
The SEC alleges that subsidiaries of the Swiss-based global manufacturer perpetuated schemes that typically involved payments of fake "commissions" or the use of third-party agents to funnel money improperly to obtain lucrative contracts. Overall, Tyco reaped illicit benefits amounting to more than $10.5 million as a result of the paid to win business.
Tyco, whose securities are publicly traded in the U.S., agreed to pay more than $26 million to settle the SEC’s charges and resolve a criminal matter announced today by the U.S. Department of Justice.
"Tyco’s subsidiaries operating in Asia and the Middle East saw illicit payment schemes as a typical way of doing business in some countries, and the company illicitly reaped substantial financial benefits as a result," said Scott W. Friestad, Associate Director of the SEC’s Division of Enforcement.
The SEC alleges that Tyco subsidiaries operated 12 different illicit payment schemes around the world starting before 2006 and continuing until 2009. The most profitable scheme occurred in Germany, where agents of a Tyco subsidiary paid third parties to secure contracts or avoid penalties or fines in several countries. These payments were falsely recorded as "commissions" in Tyco’s books and records when they were in fact bribes to pay off government customers. Tyco’s benefit as a result of these illicit payments was more than $4.6 million.
According to the SEC’s complaint, Tyco’s subsidiary in China signed a contract with the Chinese Ministry of Public Security for $770,000 but reportedly paid approximately $3,700 to the "site project team" of a state-owned corporation to be able to obtain the contract. This amount was improperly recorded as a commission. Tyco’s subsidiary in France recorded payments to individuals from 2005 to 2009 for "business introduction services." However, one of the individuals receiving payments was a security officer at a government-owned mining company in Mauritania, and many of the earlier payments were deposited in the official’s personal bank account in France. In Thailand, Tyco’s subsidiary had a contract to install a CCTV system in the Thai Parliament House in 2006, and paid more than $50,000 to a Thai entity that acted as a consultant. The invoice for the payment refers to "renovation work," but Tyco is unable to ascertain what, if any, work was actually done.
The SEC alleges that another scheme occurred in Turkey, where Tyco’s subsidiary retained a New York City-based sales agent who made illicit payments involving the sale of microwave equipment in September 2006 to an entity controlled by the Turkish government. Employees at Tyco’s subsidiary were well aware that the agent was paying foreign government customers to obtain orders. One internal e-mail stated, "Hell, everyone knows you have to bribe somebody to do business in Turkey. Nevertheless, I’ll play it dumb if [the sales agent] should call." The benefit obtained by Tyco as a result of the September 2006 deal was $44,513.
The SEC’s complaint alleges that Tyco’s books and records were misstated as a result of the misconduct, and Tyco failed to devise and maintain internal controls sufficient to detect the violations. The complaint also alleges that the payments by the sales agent to Turkish government officials violated the anti-bribery provisions of the FCPA.
In arriving at the settlement, the Commission considered Tyco’s extensive efforts to identify and remediate its wrongdoing. Tyco conducted a global review and internal investigation for potential FCPA violations and voluntarily disclosed its findings to the SEC while implementing significant, broad-spectrum remedial measures. Tyco consented to a proposed final judgment that orders the company to pay $10,564,992 in disgorgement and $2,566,517 in prejudgment interest. Tyco also agreed to be permanently enjoined from violating Section 13(b)(2)(A), Section 13(b)(2)(B), and Section 30A(a) of the Securities Exchange Act of 1934.
In the parallel criminal proceedings, the Justice Department entered into a Non-Prosecution Agreement with Tyco in which the company will pay a penalty of approximately $13.68 million.
The SEC’s case was investigated by David Frohlich, Stephen E. Jones, Matthew B. Greiner, and Brent S. Mitchell. The Commission acknowledges the assistance of the U.S. Department of Justice’s Fraud Section in this matter.
Washington, D.C., Sept. 24, 2012 — The Securities and Exchange Commission today charged Tyco International Ltd. with violating the Foreign Corrupt Practices Act (FCPA) when subsidiaries arranged illicit payments to foreign officials in more than a dozen countries.
The SEC alleges that subsidiaries of the Swiss-based global manufacturer perpetuated schemes that typically involved payments of fake "commissions" or the use of third-party agents to funnel money improperly to obtain lucrative contracts. Overall, Tyco reaped illicit benefits amounting to more than $10.5 million as a result of the paid to win business.
Tyco, whose securities are publicly traded in the U.S., agreed to pay more than $26 million to settle the SEC’s charges and resolve a criminal matter announced today by the U.S. Department of Justice.
"Tyco’s subsidiaries operating in Asia and the Middle East saw illicit payment schemes as a typical way of doing business in some countries, and the company illicitly reaped substantial financial benefits as a result," said Scott W. Friestad, Associate Director of the SEC’s Division of Enforcement.
The SEC alleges that Tyco subsidiaries operated 12 different illicit payment schemes around the world starting before 2006 and continuing until 2009. The most profitable scheme occurred in Germany, where agents of a Tyco subsidiary paid third parties to secure contracts or avoid penalties or fines in several countries. These payments were falsely recorded as "commissions" in Tyco’s books and records when they were in fact bribes to pay off government customers. Tyco’s benefit as a result of these illicit payments was more than $4.6 million.
According to the SEC’s complaint, Tyco’s subsidiary in China signed a contract with the Chinese Ministry of Public Security for $770,000 but reportedly paid approximately $3,700 to the "site project team" of a state-owned corporation to be able to obtain the contract. This amount was improperly recorded as a commission. Tyco’s subsidiary in France recorded payments to individuals from 2005 to 2009 for "business introduction services." However, one of the individuals receiving payments was a security officer at a government-owned mining company in Mauritania, and many of the earlier payments were deposited in the official’s personal bank account in France. In Thailand, Tyco’s subsidiary had a contract to install a CCTV system in the Thai Parliament House in 2006, and paid more than $50,000 to a Thai entity that acted as a consultant. The invoice for the payment refers to "renovation work," but Tyco is unable to ascertain what, if any, work was actually done.
The SEC alleges that another scheme occurred in Turkey, where Tyco’s subsidiary retained a New York City-based sales agent who made illicit payments involving the sale of microwave equipment in September 2006 to an entity controlled by the Turkish government. Employees at Tyco’s subsidiary were well aware that the agent was paying foreign government customers to obtain orders. One internal e-mail stated, "Hell, everyone knows you have to bribe somebody to do business in Turkey. Nevertheless, I’ll play it dumb if [the sales agent] should call." The benefit obtained by Tyco as a result of the September 2006 deal was $44,513.
The SEC’s complaint alleges that Tyco’s books and records were misstated as a result of the misconduct, and Tyco failed to devise and maintain internal controls sufficient to detect the violations. The complaint also alleges that the payments by the sales agent to Turkish government officials violated the anti-bribery provisions of the FCPA.
In arriving at the settlement, the Commission considered Tyco’s extensive efforts to identify and remediate its wrongdoing. Tyco conducted a global review and internal investigation for potential FCPA violations and voluntarily disclosed its findings to the SEC while implementing significant, broad-spectrum remedial measures. Tyco consented to a proposed final judgment that orders the company to pay $10,564,992 in disgorgement and $2,566,517 in prejudgment interest. Tyco also agreed to be permanently enjoined from violating Section 13(b)(2)(A), Section 13(b)(2)(B), and Section 30A(a) of the Securities Exchange Act of 1934.
In the parallel criminal proceedings, the Justice Department entered into a Non-Prosecution Agreement with Tyco in which the company will pay a penalty of approximately $13.68 million.
The SEC’s case was investigated by David Frohlich, Stephen E. Jones, Matthew B. Greiner, and Brent S. Mitchell. The Commission acknowledges the assistance of the U.S. Department of Justice’s Fraud Section in this matter.
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