SEC Charges Mexico-Based Homebuilder in $3.3 Billion Accounting Fraud

03/03/2017 09:55 AM EST

The Securities and Exchange Commission today announced that Mexico-based homebuilding company Desarrolladora Homex S.A.B. de C.V. has agreed to settle charges that it reported fake sales of more than 100,000 homes to boost revenues in its financial statements during a three-year period.

The SEC used satellite imagery to help uncover the accounting scheme and illustrate its allegation that Homex had not even broken ground on many of the homes for which it reported revenues.

The SEC alleges that Homex, one of the largest homebuilders in Mexico at the time, inflated the number of homes sold during the three-year period by approximately 317 percent and overstated its revenue by 355 percent (approximately $3.3 billion).  The SEC’s complaint highlights, for example, that Homex reported revenues from a project site in the Mexican state of Guanajuato where every planned home was purportedly built and sold by Dec. 31, 2011.  Satellite images of the project site on March 12, 2012, show it was still largely undeveloped and the vast majority of supposedly sold homes remained unbuilt.

According to the SEC’s complaint, Homex filed for the Mexican equivalent of bankruptcy protection in April 2014 and emerged in October 2015 under new equity ownership.  The company’s then-CEO and then-CFO have been placed on unpaid leave since May 2016.  Homex has since undertaken significant remedial efforts and cooperated with the SEC’s investigation.

“As alleged in our complaint, Homex deprived its investors of accurate and reliable financial results by reporting key numbers that were almost completely made up,” said Stephanie Avakian, Acting Director of the SEC’s Enforcement Division.  “The settlement takes into account that the fraud occurred entirely under the watch of prior ownership and management, the company’s new leaders provided critical information regarding the full scope of the fraudulent conduct, and the company continues to significantly cooperate with our ongoing investigation.”

Melissa Hodgman, Associate Director of the SEC’s Enforcement Division, added, “We used high-resolution satellite imagery and other innovative investigative techniques to unearth that tens of thousands of purportedly built-and-sold homes were, in fact, nothing but bare soil.”

The SEC separately issued a trading suspension in the securities of Homex.

Without admitting or denying the allegations in the SEC’s complaint filed in U.S. District Court for the Southern District of California, Homex consented to the entry of a final judgment permanently enjoining the company from violating the antifraud, reporting, and books and records provisions of the federal securities laws, and the company agreed to be prohibited from offering securities in the U.S. markets for at least five years.  The settlement is subject to court approval.

The SEC’s investigation is being conducted by Alfred C. Tierney, Benjamin D. Brutlag, Andrew M. Shirley, Juan M. Migone and Richard Hong.  The case is being supervised by J. Lee Buck II.  The SEC appreciates the assistance of the Mexican Comisión Nacional Bancaria y de Valores.

DEFENDANTS IN SEC CASE INVOLVING LOANS TO PROFESSIONAL ATHLETES SENTENCED CRIMINALLY

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23768 / March 3, 2017

Securities and Exchange Commission v. Capital Financial Partners, LLC et al., No. 15-cv-11447-IT (D. Mass. filed Apr. 7, 2015)

United States of America v. Will D. Allen and Susan C. Daub, No. 15-cr-10181 (D. Mass. filed June 15, 2015)

Defendants in SEC Case Involving Loans to Professional Athletes Sentenced Criminally

On March 1, 2017, William D. Allen and Susan C. Daub, both defendants in a parallel SEC enforcement action, were each sentenced to six years imprisonment and ordered to pay $16.8 million in restitution for their role in an investment scheme involving fraudulent loans to professional athletes.

Allen and Daub were arrested in June 2015 on criminal charges of conspiracy, wire fraud, and charging a money transaction in connection with specified unlawful activity. The criminal complaint against Allen and Daub alleged that they collected funds from investors for certain fictitious or oversubscribed loans to professional athletes and created the false impression that athletes were repaying certain fictitious or oversubscribed loans on schedule by making scheduled monthly payments to investors from new investor funds. They pled guilty to the criminal charges in November 2016.

In the SEC’s parallel enforcement action, filed in federal court in April 2015, the SEC’s complaint alleges that Allen and Daub, and three corporate entities they owned or controlled – Florida-based Capital Financial Partners Enterprises LLC, and Boston-based Capital Financial Partners LLC and Capital Financial Holdings LLC – operated a Ponzi scheme that raised almost $32 million from investors who were promised profits from loans to professional athletes. The SEC’s complaint charges Allen, Daub and the three corporate entities with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC’s complaint also named WJBA Investments LLC, Insurance Depot of America LLC, Simplified Health Solutions LLC, and Simplified Health Solutions 2 LLC. – entities owned or controlled by Allen, Daub, or both – as relief defendants for the sole purpose of recovering investor funds received as a result of the alleged Ponzi scheme.

On April 28, 2015, the SEC obtained a preliminary injunction that continued an asset freeze against Allen, Daub, the defendant corporate entities, and relief defendants, restrained the defendants from accepting additional investor funds, and prevented the defendants from destroying or concealing documents related to the alleged Ponzi scheme.

The SEC’s litigation against Allen, Daub, and the corporate defendants and relief defendants is continuing. The SEC seeks permanent injunctions, disgorgement and prejudgment interest, and civil penalties.

SEC Whistleblower Program Continues, Rewards Two Individuals $450,000

Cinnaminson, NJ- The SEC has continued to demonstrate its power in its new whistleblower program, rewarding two whistleblowers with $450,000 jointly. The third SEC whistleblower award this month, this payout follows a multi-million dollar settlement just last week, illustrating the SEC’s conviction in protecting, encouraging, and rewarding whistleblowers.

Article reproduced below, with original link following.

SEC ANNOUNCES THIRD WHISTLEBLOWER AWARD THIS MONTH, TWO INDIVIDUALS SPLIT $450,000

By Richard L. Cassin | Monday, May 23, 2016 at 1:28PM

The Securities and Exchange Commission awarded more than $450,000 jointly to two individuals Friday for a tip that led the SEC to open a corporate accounting investigation and for their help once the investigation was underway.

The whistleblower award is the third announced by the SEC during May, bringing the month’s payouts to $10 million, the agency said.

“The recent flurry of awards reflects the high-quality nature of the tips the SEC is receiving as public awareness of the whistleblower program grows,” Sean McKessy, chief of the SEC’s Office of the Whistleblower, said in a statement Friday.

“These two individuals not only submitted valuable tips to help open our investigation but also provided valuable assistance as we proceeded,” McKessy said.

On May 17, the SEC awarded between $5 million and $6 million to a whistleblower whose information led the SEC to uncover securities violations which would have been “nearly impossible to detect” without the company insider’s help.

The award was the third highest ever granted under the SEC whistleblower program since the program’s inception in 2011.

On May 13, the SEC awarded a whistleblower more than $3.5 million for producing evidence against his or her company during an ongoing investigation “that strengthened the SEC’s case.”

In that case, the SEC first denied an award to the whistleblower because the informaiton related to an investigation that had already started.

After the whistleblower appealed, the SEC reversed its decision.

By law, the SEC has to protect the confidentiality of whistleblowers and not disclose information that might reveal a whistleblower’s identity.

The agency has now awarded more than $68 million to 31 whistleblowers since the program started in 2011.

The biggest award so far was more than $30 million in 2014. A 2013 award topped $14 million.

Whistleblowers can be eligible for awards when they voluntarily provide the SEC with “unique and useful information that leads to a successful enforcement action.”

Awards can range from 10 percent to 30 percent of recoveries when amounts collected are more than $1 million.

The SEC received more than 4,000 tips last year.

Original Link

SEC Awards Over $5 Million to Whistleblower, Provides Anonymity

Washington, D.C.- The Security and Exchange Commission’s (SEC) whistleblower program continues to build momentum, awarding its third-highest whistleblower payment ($5-6 million) as well as censoring his/her identity and former employer.

 The subsequent article is reproduced below, with original link following.

 

SEC Awards More Than $5 Million to Whistleblower Award is SEC Program’s Third Highest to Date

FOR IMMEDIATE RELEASE

2016-91

Washington D.C., May 17, 2016 — The Securities and Exchange Commission today announced that it will award between $5 million and $6 million to a former company insider whose detailed tip led the agency to uncover securities violations that would have been nearly impossible for it to detect but for the whistleblower’s information.

“Employees are often best positioned to witness wrongdoing,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement.  “When they report specific and credible tips to us, we will leverage that inside knowledge to advance our enforcement of the securities laws and better protect investors and the marketplace.”

Today’s award is the SEC’s third highest to a whistleblower.  In September 2014, the agency announced a more than $30 million whistleblower award, exceeding the prior highest award of more than $14 million announced in October 2013.  Since the inception of the whistleblower program in 2011, the SEC has awarded more than $67 million to 29 whistleblowers, including one for more than $3.5 million announced last week.

“The whistleblower program has seen tremendous growth since its inception and we anticipate the continued issuance of significant whistleblower awards in the months and years to come,” said Sean X. McKessy, Chief of the SEC’s Office of the Whistleblower.

By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.

Whistleblowers may be eligible for an award when they voluntarily provide the SEC with unique and useful information that leads to a successful enforcement action.

Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million.  All payments are made out of an investor protection fund established by Congress that is financed through monetary sanctions paid to the SEC by securities law violators.  No money has been taken or withheld from harmed investors to pay whistleblower awards.

For more information about the whistleblower program and how to report a tip: www.sec.gov/whistleblower.

Original Article

SEC Charges Shell Factory Operators With Fraud

The Microcap Fraud Task Force Activities have clearly been gaining momentum…

The Securities and Exchange Commission today announced fraud charges against a California stock promoter and a New Jersey lawyer who allegedly were creating sham companies and selling them until the SEC stopped them in their tracks.

The SEC alleges that Imran Husain and Gregg Evan Jaclin essentially operated a shell factory enterprise by filing registration statements to form various startup companies and misleading potential investors to believe each company would be operating and profitable.  The agency further alleges that their secret objective all along was merely to make money for themselves by selling the companies as empty shells rather than actually implementing business plans and following through on their representations to investors.

Moving quickly to protect investors based on evidence collected even before its investigation was complete, the SEC issued stop orders and suspended the registration statements of the last two created companies – Counseling International and Comp Services – before investors could be harmed and the companies could be sold.

“Issuers of securities offerings must make truthful disclosures about the company and its business operations so investors know what they’re getting into when they buy the stock,” said Michele Wein Layne, Director of the SEC’s Los Angeles Regional Office.  “We allege that Husain drummed up false business plans and created a mirage of initial shareholders while Jaclin developed false paperwork to depict emerging companies that later sold as just empty shells.”

According to the SEC’s complaint filed in federal court in Los Angeles:

  • Husain and Jaclin created nine shell companies and sold seven using essentially the same pattern.
  • Husain created a business plan for each company that would not be implemented beyond a few initial steps, and then convinced a friend, relative, or acquaintance to become a puppet CEO who approved and signed corporate documents at Husain’s direction.
  • Jaclin supplied bogus legal documents that Husain used to conduct sham private sales of a company’s shares of stock to “straw shareholders” who were recruited and given cash to pay for the stock they purchased plus a commission.  Some of the recorded shareholders were not even real people.
  • Husain and Jaclin filed registration statements for initial public offerings and falsely claimed that a particular business plan would be implemented.  Deliberately omitted from the registration statements were any mention of Husain starting and controlling the company.
  • Husain and Jaclin filed misleading quarterly and annual reports once a company became registered publicly, providing much of the same false information depicted in the registration statements.
  • Husain obtained about $2.25 million in total proceeds when the empty shell companies were sold, and Jaclin and his firm received nearly $225,000 for their legal services.

The SEC’s complaint charges Husain and Jaclin with violating or aiding and abetting violations of the antifraud, reporting, and securities registration provisions of the federal securities laws.  The SEC seeks disgorgement of ill-gotten gains plus interest and penalties, permanent injunctions, and penny stock bars.  The SEC also seeks an officer-and-director bar against Husain.

The SEC’s investigation was conducted by Roberto A. Tercero and Spencer E. Bendell as part of the Microcap Fraud Task Force.  The litigation will be led by Amy J. Longo and supervised by John Berry.  The SEC appreciates the assistance of the FBI and the U.S. Attorney’s Office for the Northern District of California.

SEC Announces Whistleblower Award of More Than $325,000

FOR IMMEDIATE RELEASE
2015-252

Washington D.C., Nov. 4, 2015 

The Securities and Exchange Commission today announced a whistleblower award totaling more than $325,000 for a former investment firm employee who tipped the agency with specific information that enabled enforcement staff to open an investigation and uncover the extent of the fraudulent activity.

The whistleblower provided a detailed description of the misconduct and specifically identified individuals behind the wrongdoing to help the SEC bring a successful enforcement action.  The whistleblower waited until after leaving the firm to come forward to the SEC, however, and agency officials say the award could have been higher had this whistleblower not hesitated.

“Corporate insiders who become aware of securities law violations are encouraged to come forward without delay in order to prevent misconduct from continuing unabated while investors suffer more harm,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement.  “Whistleblowers are afforded significant incentives and protections under the Dodd-Frank Act and the SEC’s whistleblower program so they can feel secure about doing the right thing and immediately reporting an ongoing fraud rather than letting time pass.”

Sean X. McKessy, Chief of the SEC’s Office of the Whistleblower, added, “This award recognizes the value of the information and assistance provided by the whistleblower while underscoring the need for whistleblowers to report information to the agency expeditiously.”

Since its inception in 2011, the SEC’s whistleblower program has paid more than $54 million to 22 whistleblowers who provided the SEC with unique and useful information that contributed to a successful enforcement action.  Whistleblowers are eligible for awards that can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million.  All payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators.  No money is taken or withheld from harmed investors to pay whistleblower awards.

By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.

For more information about the whistleblower program and how to report a tip, visit www.sec.gov/whistleblower.

Remarks at a Press Conference Announcing Major Enforcement Charges Involving a Massive Hacking Trading Scheme

Chair Mary Jo White

Newark, New Jersey

Aug. 11, 2015

Good morning. Thank you, U.S. Attorney Paul Fishman, for inviting me to be here today. I congratulate all of the law enforcement agencies represented for their extraordinary efforts on this groundbreaking case to safeguard the integrity of our markets.

I will just briefly comment on the securities law violations alleged in the SEC’s complaint, which shows how cutting-edge and important this case is. It also illustrates the risks posed for our global markets by today’s sophisticated hackers.

While the SEC has uncovered and successfully litigated hacking and trading schemes in the past, today’s international case is unprecedented in terms of the scope of the hacking at issue; the number of traders involved; the number of securities unlawfully traded; and the amount of profits generated. Over the course of 5 years, the 32 defendants named in this complaint are charged with carrying out a brazen scheme to steal non-public earnings information for hundreds of publicly traded companies, and then placing thousands of trades through a network of U.S. and overseas traders located in the Russian Federation, Ukraine, Malta, Cyprus, France, New York, Pennsylvania and Georgia—geographies electronically connected by this illicit network.

According to the complaint, these traders located across the globe executed thousands of illicit trades on the basis of this material, nonpublic information, concealing their scheme by spreading the transactions across multiple accounts held in the names of many individuals and entities. And, the traders were market savvy, using equities, options and contracts-for-differences to maximize their profits.

Two Ukrainian hackers are charged with spearheading the scheme, Ivan Turchynov and Okelsandr Ieremenko. Along with the 30 other defendants, they are collectively alleged to have made more than $100 million in illegal profits by trading based on pre-release corporate earnings announcements stolen from multiple newswire services. We charged these defendants in a complaint unsealed today with multiple securities fraud violations, seeking disgorgement and penalties, and we obtained an asset freeze against the overseas traders, which secured at least $20 million of the defendants’ ill-gotten gains. And the SEC’s investigation continues.

The complaint charges that Turchynov and Ieremenko used malicious programming code and other deceptive techniques to hack into the computer systems of multiple newswire services that stored unpublished corporate earnings announcements. These announcements were slated for public release at a prescheduled date and time, and the hackers took advantage of the time gap. According to the complaint, the two primary hackers brazenly recruited traders with a video showcasing the hackers’ ability to steal and transmit earnings information before its public release.

This case highlights a number of important points. It demonstrates the enhanced trading surveillance and analysis capabilities that the SEC has developed over the last few years. It also highlights our use of market experts with specialized skills and experience. We now have new technological tools and investigative approaches that allow us not only to pinpoint suspicious trading across multiple securities but also to identify relationships among traders. The SEC’s Enforcement Division sorted through literally millions of trades, thousands of earnings announcements and gigabytes of data on IP addresses in order to identify these defendants who went to great lengths to evade detection, often identifying these traders based on their patterns of trading. With these enhanced capabilities, we are now more capable than ever of rooting out even the most sophisticated of trading schemes. Maintaining the integrity of our high-tech markets requires that kind of regulatory expertise and vigilance to match the sophisticated trading and market manipulation we see in the markets.

Today’s case also serves as a stark reminder to companies that your computer systems are vulnerable targets. Be vigilant in protecting your systems, taking measures to detect and guard against hacking, and working together with law enforcement to uncover the theft and misuse of stolen information.

Today’s case also highlights the SEC’s continued partnership with the criminal authorities in investigating securities law violations, including misconduct that crosses international borders. Each of us brings to bear the unique tools, expertise and remedies that we have and together we are able to bring innovative cases like this one which serve as a stronger deterrent to unlawful conduct.

The work of everyone involved in this investigation, from every agency, has been extraordinary. For the SEC, I want to recognize our Market Abuse Unit, the Complex Financial Instruments Unit, the Home Office staff in D.C., as well as the Denver and Philadelphia regional office staffs, together with the Division of Economic and Risk Analysis and Office of International Affairs, who all worked tirelessly on this matter. The SEC staff’s expertise and unwavering dedication are essential to the protection of our markets and investors. I will end by recognizing and thanking all of our law enforcement partners, as always, for their outstanding work and cooperation in this investigation.

Two U.S. Broker-dealer Employees and Venezuelan Government Official Charged for Massive International Bribery Scheme

Senior Venezuelan Banking Official Allegedly Received at Least $5 Million in Bribes in Exchange for Directing Business to U.S. Defendants

Two employees of a U.S. broker-dealer and a senior official in Venezuela’s state economic development bank have been charged in New York’s federal court for their alleged roles in a massive international bribery scheme.

Mythili Raman, Acting Assistant Attorney General for the Justice Department’s Criminal Division; Preet Bharara, the U.S. Attorney for the Southern District of New York; and George Venizelos, the Assistant Director-in-Charge of the New York Office of the FBI, made the announcement.

According to the criminal complaint unsealed today, Tomas Alberto Clarke Bethancourt (Clarke) and Jose Alejandro Hurtado – who were both employees of a U.S. broker-dealer (Broker-Dealer) – and Maria de los Angeles Gonzalez de Hernandez (Gonzalez) – who is a senior official in Venezuela’s state economic development bank, Banco de Desarrollo Económico y Social de Venezuela (BANDES) – are accused of conspiring to pay bribes to Gonzalez in exchange for her directing BANDES’s financial trading business to the Broker-Dealer.  Gonzalez, 54, a resident of Caracas, Venezuela, was arrested in Miami on May 3, 2013.  Clarke, 43, and Hurtado, 38, were also arrested Friday in Miami, where they reside.  All three defendants were presented yesterday in federal court in Miami and remain in custody.

“Today’s announcement is a wake-up call to anyone in the financial services industry who thinks bribery is the way to get ahead,” said Acting Assistant Attorney General Raman. “The defendants in this case allegedly paid huge bribes so that foreign business would flow to their firm.  Their return on investment now comes in the form of criminal charges carrying the prospect of prison time.  We will not stand by while brokers or others try rig the system to line their pockets, and will continue to vigorously enforce the FCPA and money laundering statutes across all industries.”

“The defendants’ arrests lay bare a web of bribery and corruption in which employees of a U.S. broker-dealer allegedly generated tens of millions of dollars through transactions in order to fund kickbacks to a Venezuelan government official in exchange for her directing the Venezuelan economic development bank’s financial trading business to their employer,” said U.S. Attorney Bharara. “As alleged, the defendants also engaged in international money laundering to carry out their corrupt scheme.  This Office, along with all of our federal partners, is committed to holding individuals who violate the Foreign Corrupt Practices Act to account.”

“As alleged, the defendants conspired to use Venezuela’s economic development bank as their personal piggy bank,” said FBI Assistant Director-in-Charge Venizelos. “Clarke and Hurtado reaped huge commissions from their trading of the bank’s assets, and kicked back significant sums to Gonzalez.  The brazenness of the alleged scheme was exemplified in their buying bank bonds and selling them back on the same day.”

In a separate action, the U.S. Securities and Exchange Commission (SEC) announced
civil charges against Clarke, Hurtado, and two others.

According to the allegations in the criminal complaint unsealed today, the forfeiture complaint, and other documents filed in Manhattan federal court, Clarke and Hurtado worked or were associated with the Broker-Dealer, based in New York City, principally through its Miami offices.  In 2008, the Broker-Dealer established a group called the Global Markets Group, which included Clarke and later Hurtado, and which offered fixed income trading services to institutional clients.  One of the Broker-Dealer’s clients was BANDES.  Gonzalez was an official at BANDES and oversaw the development bank’s overseas trading activity.  At her direction, BANDES conducted substantial trading through the Broker-Dealer.  Most of the trades executed by the Broker-Dealer on behalf of BANDES involved fixed income investments for which the Broker-Dealer charged the bank a mark-up on purchases and a mark-down on sales.

From April 2009 through June 2010, Clarke, Hurtado, and Gonzalez participated in a bribery scheme in which Gonzalez directed trading business she controlled at BANDES to the Broker-Dealer, and in return, agents and employees of the Broker-Dealer split the revenue the Broker-Dealer generated from this trading business with Gonzalez.  During this time period, the Broker-Dealer generated over $60 million in mark-ups and mark-downs from trades with BANDES.  Agents and employees of the Broker-Dealer, including Clarke and Hurtado, devised a split with Gonzalez of the commissions paid by BANDES to the Broker-Dealer.  Emails, account records, and other documents collected from the Broker-Dealer and other sources reveal that Gonzalez received a substantial share of the revenue generated by the Broker-Dealer for BANDES -related trades.  Specifically, Gonzalez received monthly kickbacks from Broker-Dealer agents and employees that were frequently in six-figure amounts.

Some of the trades the Broker-Dealer executed for BANDES had no discernible business purpose.  For instance, in January 2010, the Broker-Dealer executed at least two round-trip trades between itself and BANDES for the same bonds on the same day.  In other words, the Broker-Dealer bought certain bonds from BANDES and then immediately sold those same bonds back to the bank.  The result of the trades was that BANDES was left with the same bond holdings as before the trades, except that it had paid the Broker-Dealer approximately $10.5 million in mark-ups in the course of the two round-trip transactions.

Certain payments to Gonzalez directly from Hurtado and an entity controlled by Clarke totaled at least $3.6 million. When added together with other payments referenced in the Complaint, Gonzalez received a total of at least $5 million.

To further conceal the scheme, the kickbacks to Gonzalez were often paid using intermediary corporations and offshore accounts that she held in Switzerland, among other places.  For instance, Clarke used an account he controlled in Switzerland to transfer funds to an account Gonzalez controlled in Switzerland.  Gonzalez then transferred some of this money to an account she held in the United States.  Additionally, Hurtado and his spouse received substantial compensation from the Broker-Dealer, portions of which Hurtado transferred to an account held by Gonzalez in Miami and to an account held by an associate of Gonzalez in Switzerland.  Hurtado also sought and received reimbursement from Gonzalez for the payment of U.S. income taxes related to the money that he used to make kickback payments to Gonzalez.

In addition to the criminal complaint, on May 6, 2013, the government filed a civil forfeiture action in Manhattan federal court, seeking the forfeiture of assets held in a number of bank accounts associated with the scheme, including several bank accounts located in Switzerland.  The forfeiture complaint also seeks the forfeiture of several properties in the Miami area related to Hurtado that were purchased with his proceeds from the scheme.  As set forth in the forfeiture complaint, in addition to Gonzalez, another BANDES official, identified as CC-1 in the forfeiture complaint, also received kickback payments as part of the scheme.  Also on May 6, 2013, the Court issued seizure warrants for multiple bank accounts and a restraining order relating to the Miami properties.

This ongoing investigation is being conducted by the FBI, with assistance from the SEC and the Justice Department’s Office of International Affairs. Assistant Chief James Koukios and Trial Attorneys Maria Gonzalez Calvet and Aisling O’Shea of the Criminal Division’s Fraud Section and Assistant United States Attorneys Harry A. Chernoff and Jason H. Cowley of the Southern District of New York’s Securities and Commodities Fraud Task Force are in charge of the prosecution.  Assistant United States Attorney Carolina Fornos is also responsible for the forfeiture aspects of the case.

Additional information about the Justice Department’s FCPA enforcement efforts can be
found at www.justice.gov/criminal/fraud/fcpa.

The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

Ralph Lauren Corporation Resolves Foreign Corrupt Practices Act Investigation and Agrees to Pay $882,000 Monetary Penalty

Ralph Lauren Corporation (RLC), a New York based apparel company, has agreed to pay an $882,000 penalty to resolve allegations that it violated the Foreign Corrupt Practices Act (FCPA) by bribing government officials in Argentina to obtain improper customs clearance of merchandise, announced Mythili Raman, the Acting Assistant Attorney General for the Criminal Division, and Loretta E. Lynch, the United States Attorney for the Eastern District of New York.

According to the agreement, the manager of RLC’s subsidiary in Argentina bribed customs officials in Argentina over the span of five years to improperly obtain paperwork necessary for goods to clear customs; permit clearance of items without the necessary paperwork and/or the clearance of prohibited items; and on occasion, to avoid inspection entirely.  RLC’s employee disguised the payments by funneling them through a customs clearance agency, which created fake invoices to justify the improper payments.  During these five years, RLC did not have an anti-corruption program and did not provide any anti-corruption training or oversight with respect to its subsidiary in Argentina.

In addition to the monetary penalty, RLC agreed to cooperate with the Department of Justice, to report periodically to the department concerning RLC’s compliance efforts, and to continue to implement an enhanced compliance program and internal controls designed to prevent and detect FCPA violations.  If RLC abides by the terms of the agreement, the Department will not prosecute RLC in connection with the conduct.

The agreement acknowledges RLC’s extensive, thorough, and timely cooperation, including self-disclosure of the misconduct, voluntarily making employees available for interviews, making voluntary document disclosures, conducting a worldwide risk assessment, and making multiple presentations to the Department on the status and findings of the internal investigation and the risk assessment.  In addition, RLC has engaged in early and extensive remediation, including conducting extensive FCPA training for employees worldwide, enhancing the company’s existing FCPA policy, implementing an enhanced gift policy and other enhanced compliance, control and anti-corruption policies and procedures, enhancing its due diligence protocol for third-party agents, terminating culpable employees and a third-party agent, instituting a whistleblower hotline, and hiring a designated corporate compliance attorney.

In a related matter, the U.S. Securities and Exchange Commission today announced a non-prosecution agreement with RLC , in which RLC agreed to pay $$734,846 in disgorgement and prejudgment interest.

The case is being prosecuted by Trial Attorney Daniel S. Kahn of the Criminal Division’s Fraud Section and Sarah Coyne, Chief of the Business and Securities Fraud Section of the Eastern District of New York.  The case was investigated by the FBI’s New York Field Office.  The department acknowledges and expresses its appreciation for the assistance provided by the SEC’s Division of Enforcement.

Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.

Parker Drilling Company Resolves FCPA Investigation and Agrees to Pay $11.76 Million Penalty

Parker Drilling Company Resolves FCPA Investigation and Agrees to Pay $11.76 Million Penalty
 Parker Drilling Company, a publicly listed drilling-services company, headquartered in Houston, has agreed to pay an $11.76 million penalty to resolve charges related to the Foreign Corrupt Practices Act (FCPA) for authorizing payment to an intermediary, knowing that the payment would be used to corruptly influence the decisions of a Nigerian government panel reviewing Parker Drilling’s adherence to Nigerian customs and tax laws.  Acting Assistant Attorney General Mythili Raman of the Criminal Division and U.S. Attorney Neil H. MacBride for the Eastern District of Virginia announced the charges.

The investigation of Parker Drilling stemmed from the Justice Department’s Panalpina-related investigations, which previously yielded criminal resolutions with Panalpina and five oil and gas service companies and subsidiaries and resulted in more than $156 million in criminal penalties.

Today, the department filed a deferred prosecution agreement and a criminal information against Parker Drilling in U.S. District Court for the Eastern District of Virginia.  The one-count information charges Parker Drilling with violating the FCPA’s anti-bribery provisions.

According to court documents, in  2001 and 2002, Panalpina World Transport (Nigeria) Limited, working on Parker Drilling’s behalf, avoided certain costs associated with complying with Nigeria’s customs laws by fraudulently claiming that Parker Drilling’s rigs had been exported and then re-imported into Nigeria.  In late 2002, Nigeria formed a government commission, commonly called the Temporary Import (TI) Panel, to examine whether Nigeria’s Customs Service had collected certain duties and tariffs that Nigeria was due. In December 2002, the TI Panel commenced proceedings against Parker Drilling.  The TI Panel later determined that Parker Drilling had violated Nigeria’s customs laws and assessed a $3.8 million fine against Parker Drilling.

According to court documents, rather than pay the assessed fine, Parker Drilling contracted indirectly with an intermediary agent to resolve its customs issues.  From January to May 2004, Parker Drilling transferred $1.25 million to the agent, who reported spending a portion of the money on various things including entertaining government officials.  Emails in which the agent requested additional money from Parker Drilling referenced the agent’s interactions with Nigeria’s Ministry of Finance, State Security Service, and a delegation from the president’s office.  Two senior executives within Parker Drilling at the time reviewed and approved the agent’s invoices, knowing that the invoices arbitrarily attributed portions of the money that Parker Drilling transferred to the agent to various fees and expenses.  The agent succeeded in reducing Parker Drilling’s TI Panel fines from $3.8 million to just $750,000.

Under the terms of the agreement, the Justice Department agreed to defer prosecution of Parker Drilling for three years.  Parker Drilling agreed, among other things, to implement an enhanced compliance program and internal controls capable of preventing and detecting FCPA violations, to report periodically to the department concerning Parker Drilling’s compliance efforts, and to cooperate with the department in ongoing investigations.  If Parker Drilling abides by the terms of the deferred prosecution agreement, the department will dismiss the criminal information when the term of the agreement expires.

In entering into the deferred prosecution agreement with Parker Drilling, the Justice Department took into account a number of considerations.  Parker Drilling conducted an extensive, multi-year investigation into the charged conduct; engaged in widespread remediation, including ending its business relationships with officers, employees, or agents primarily responsible for the corrupt payments, enhancing scrutiny of high-risk third-party agents and transactions, increasing training and testing requirements, and instituting heightened review of proposals and other transactional documents for all the company’s contracts; otherwise significantly enhanced its compliance program and internal controls; and agreed to continue to cooperate with the department in any ongoing investigation of the conduct.

Parker Drilling also reached a settlement of a related civil complaint filed by the U.S. Securities and Exchange Commission (SEC) charging Parker Drilling with violating the FCPA’s anti-bribery, books and records, and internal controls provisions.  As part of that settlement, Parker Drilling agreed to pay $3.05 million in disgorgement and $1.04 million in prejudgment interest relating to those violations.

The criminal case is being prosecuted by Trial Attorney Stephen J. Spiegelhalter of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Jasmine Yoon of the U.S. Attorney’s Office for the Eastern District of Virginia, and is being investigated by the FBI. The department’s Office of International Affairs assisted in the investigation.  The department also acknowledges and is grateful for the assistance of the Crown Prosecution Service, the United Kingdom’s Metropolitan Police Service, and SEC.

Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.