Category Archives: Antitrust Division

NORTHERN CALIFORNIA REAL ESTATE INVESTOR INDICTED – Superseding Indictment Adds Obstruction of Justice to Bid-Rigging

Posted on by

A federal grand jury in U.S. District Court for the Eastern District of California in Sacramento today returned a superseding indictment charging Andrew B. Katakis, of Danville, Calif., with obstruction of justice related to a federal investigation into conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions held in San Joaquin County, Calif., the Department of Justice announced.

The remaining allegations are unchanged from the original indictment, which was returned by a federal grand jury on Dec. 7, 2011. The pre-existing counts charge Katakis, Donald M. Parker, Anthony B. Joachim and W. Theodore Longley with conspiring with other unnamed co-conspirators to rig bids and commit mail fraud when purchasing selected properties at public real estate foreclosure auctions. Wiley C. Chandler, another real estate investor who was also charged in the original indictment, pleaded guilty on Feb. 24, 2012.

The added charge alleges that after Katakis received a letter notifying him that a federal grand jury had subpoenaed his bank account, he deleted and caused others to delete electronic records and documents related to the conspiracies. The superseding indictment alleges that Katakis also installed and caused others to install and use a software program that overwrote deleted electronic records and documents so that they could not be viewed or recovered.

“Obstruction of a grand jury investigation is a crime the Antitrust Division takes seriously,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “We will prosecute those who subvert the competitive process, as well as those who attempt to conceal their illegal actions by destroying evidence.”
According to the superseding indictment, Katakis, Parker, Joachim, Longley and co-conspirators agreed to suppress and restrain competition by rigging bids to obtain selected properties offered at public auctions in San Joaquin County. The conspirators also devised a scheme to fraudulently acquire titles to selected properties sold at the public auctions and to divert money to co-conspirators that would have gone to the beneficiaries. The indictment alleges that the conspiracy lasted from at least September 2008 until at least October 2009.
“This superseding indictment includes allegations that, in addition to the charges previously alleged, this defendant obstructed justice,” said Benjamin B. Wagner, U.S. Attorney for the Eastern District of California. “The new charge arises out of a long-running investigation that has already resulted in guilty pleas by numerous other defendants who participated in the scheme charged in this case.”

Katakis, Parker, Joachim and Longley are charged with bid rigging, a violation of the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. 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. They are also charged with conspiracy to commit mail fraud, which carries a maximum sentence of 30 years in prison and a $1 million fine. The government can also seek to forfeit the proceeds earned from participating in the conspiracy to commit mail fraud. The newly added obstruction of justice charge against Katakis carries a maximum sentence of 20 years and a $250,000 fine.

To date, 10 individuals have pleaded guilty in U.S. District Court for the Eastern District of California in connection with the investigation: Anthony B. Ghio, John R. Vanzetti, Theodore B. Hutz, Richard W. Northcutt, Yama Marifat, Gregory L. Jackson, Walter Daniel Olmstead, Robert Rose, Kenneth Swanger and Chandler.

The additional charge today is the latest filed by the department in its ongoing federal antitrust investigation of fraud and bidding irregularities in certain real estate auctions in San Joaquin County. The investigation is being conducted by the Antitrust Division’s San Francisco office, the U.S. Attorney’s Office for the Eastern District of California, the FBI’s Sacramento Division, and the San Joaquin County District Attorney’s Office. Anyone with information concerning bid rigging or fraud related to real estate foreclosure auctions should contact the Antitrust Division’s San Francisco office at 415-436-6660, visit www.justice.gov/atr/contact/newcase.htm, contact the U.S. Attorney’s Office for the Eastern District of California at 916-554-2700 or contact the FBI’s Sacramento Division at 916-481-9110.

Today’s charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants.

Justice Department Reaches Settlement with Anheuser-Busch InBev and Grupo Modelo in Beer Case

Posted on by
Divestitures of Piedras Negras Brewery, Perpetual Licenses to Modelo Beer Brands, and Other Assets Will Maintain Competition in the Beer Industry Nationwide

WASHINGTON – The Department of Justice announced today that it has reached a settlement with Anheuser-Busch InBev SA/NV (ABI) and Grupo Modelo S.A.B. de C.V. that requires the companies to divest Modelo’s entire U.S. business – including licenses of Modelo brand beers, its most advanced brewery, Piedras Negras, its interest in Crown Imports LLC and other assets – to Constellation Brands Inc., in order to go forward with their merger.    The department said the proposed settlement will maintain competition in the beer industry nationwide, benefitting consumers.

Today’s proposed settlement was filed in the U.S. District Court for the District of Columbia.    If approved by the court, the settlement will resolve the department’s competitive concerns.

On Jan. 31, 2013, the department filed an antitrust lawsuit against ABI and Modelo alleging that ABI’s $20.1 billion acquisition of the remaining interest in Modelo that ABI did not already own, as originally proposed, would substantially lessen competition in the market for beer in the United States as a whole and in at least 26 metropolitan areas across the United States.    The department alleged that the transaction would result in consumers paying more for beer and would limit innovation in the beer market.

 

“Before the merger, there were two competitors – Modelo and ABI – and ABI owned a substantial stake in Modelo.    The companies’ proposed merger would have reduced those two competitors to one – ABI.  The proposed settlement announced today will create an independent, fully integrated and economically viable competitor to ABI.    This is a win for the $80 billion U.S. beer market and consumers,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.    “If this settlement makes just a one percent difference in prices, U.S. consumers will save almost $1 billion a year.”

The settlement requires ABI and Modelo to divest Modelo’s entire U.S. business to Constellation or to an alternative purchaser if for some reason the transaction with Constellation cannot be completed.    Specifically, the settlement requires ABI and Modelo to divest:    the Piedras Negras brewery, Modelo’s newest, most technologically advanced brewery; perpetual and exclusive licenses of the Modelo brand beers for distribution and sale in the United States; Modelo’s current interest in Crown – the joint venture established by Modelo and Constellation to import, market and sell certain Modelo beers into the United States; and other assets, rights and interests necessary to ensure that Constellation is able to compete in the U.S. beer market using the Modelo brand beers, independent of a relationship to ABI and Modelo.

 

The licensed brands include all seven brands that Modelo currently offers (through its distributor, Crown) in the United States – Corona Extra, Corona Light, Modelo Especial, Negra Modelo, Modelo Light, Pacifico and Victoria – as well as three brands not yet offered in the United States, but currently sold by Modelo in Mexico – Pacifico Light, Barrilito and León.   The licenses include rights that will give Constellation the ability to adapt to changing market conditions in the United States.

 

Constellation has committed to expand the capacity of Piedras Negras in order to meet current and future demand for the Modelo brands in the United States, and that commitment is a condition of the proposed settlement.    The settlement also sets milestones for the expansion of the Piedras Negras brewery.    In order to enable Constellation to compete in the United States during the time it takes to expand the Piedras Negras brewery’s capacity to brew and bottle beer, the settlement requires ABI to enter into interim supply and transition services agreements with Constellation.   These agreements are time-limited to ensure that Constellation will become a fully independent competitor to ABI as soon as practicable.

 

ABI and Modelo originally proposed selling Modelo’s stake in Crown to Constellation and entering into a 10-year supply agreement to provide Modelo beer to Constellation to import into the United States.    The department rejected that purported fix because it would have eliminated the Modelo brands as an independent competitive force in the United States beer market.    Unlike the companies’ original proposal, which left Constellation with no brewing assets and beholden to ABI for the supply of beer, the proposed settlement ensures that Constellation, or an alternative purchaser, will have independent brewing assets and the ownership of the Modelo beer brands for sale in the United States in perpetuity.    As a result, Constellation will fully replace Modelo as a competitor in the United States.

 

ABI is a corporation organized and existing under the laws of Belgium, with headquarters in Leuven, Belgium.    ABI brews and markets more beer sold in the United States than any other firm, with a 39 percent market share nationally.    ABI owns and operates 125 breweries worldwide, including 12 in the United States.    It owns more than 200 different beer brands, including Bud Light – the best-selling brand in the United States – and other popular brands such as Budweiser, Busch, Michelob, Natural Light, Stella Artois, Goose Island and Beck’s.

 

Modelo is a corporation organized and existing under the laws of Mexico, with headquarters in Mexico City.    Modelo is the third-largest brewer of beer sold in the United States, with a seven percent market share nationally.    Modelo owns Corona Extra–the top-selling beer imported into the United States.    Its other popular brands sold in the United States include Corona Light, Modelo Especial, Negra Modelo, Victoria and Pacifico.    Crown imports, markets and sells Modelo’s brands into the United States.    ABI currently holds a 35.3 percent direct interest in Modelo and a 23.3 percent direct interest in Modelo’s operating subsidiary Diblo.

 

Constellation, headquartered in Victor, N.Y, is a beer, wine and spirits company with a portfolio of more than 100 products, including Robert Mondavi, Clos du Bois, Ruffino and SVEDKA Vodka.    It produces wine and distilled spirits, with more than 40 facilities worldwide.

The proposed settlement, along with the department’s competitive impact statement, will be published in the Federal Register, consistent with the requirements of the Antitrust Procedures and Penalties Act.   Any person may submit written comments concerning the proposed settlement within 60 days of its publication to James Tierney, Chief, Networks and Technology Enforcement Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street, N.W., Suite 7100, Washington, D.C. 20530.   The comments will be published in the Federal Register.   At the conclusion of the 60-day comment period, the court may enter the final judgment upon a finding that it serves the public interest.

Northern California Real Estate Investor Agrees to Plead Guilty to Bid Rigging at Public Foreclosure Auctions Investigation Has Yielded 30 Plea Agreements to Date

Posted on by
Northern California Real Estate Investor Agrees to Plead Guilty to Bid Rigging at Public Foreclosure Auctions
Investigation Has Yielded 30 Plea Agreements to Date
A Northern California real estate investor has agreed to plead guilty for his role in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California, the Department of Justice announced.

Felony charges were filed today in the U.S. District Court for the Northern District of California in San Francisco against Mohammed Rezaian, of Novato, Calif. Rezaian is the 30th individual to plead guilty or agree to plead guilty as a result of the department’s ongoing antitrust investigations into bid rigging and fraud at public real estate foreclosure auctions in Northern California.

According to court documents, Rezaian conspired with others not to bid against one another, but instead to designate a winning bidder to obtain selected properties at public real estate foreclosure auctions in San Francisco and San Mateo counties, Calif . Rezaian was also charged with conspiring to use the mail to carry out schemes to fraudulently acquire title to selected properties sold at public auctions, to make and receive payoffs, and to divert to co-conspirators money that would have otherwise gone to mortgage holders and others.   According to court documents, a forfeiture allegation was also included in the charges against Rezaian.

The department said Rezaian conspired with others to rig bids and commit mail fraud at public real estate foreclosure auctions in San Francisco and San Mateo counties beginning as early as July 2008 and continuing until about January 2011.

“As a result of this investigation, the Antitrust Division has thus far filed charges against 30 real estate investors in Northern California for their illegal activity at foreclosure auctions,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The division will vigorously pursue the perpetrators of these fraudulent and anticompetitive schemes.”

The department said that the primary purpose of the conspiracies was to suppress and restrain competition and to conceal payoffs in order to obtain selected real estate offered at San Francisco and San Mateo County public foreclosure auctions at non-competitive prices. When real estate properties are sold at these auctions, the proceeds are used to pay off the mortgage and other debt attached to the property, with remaining proceeds, if any, paid to the homeowner.

 

“Not only is bid rigging at public foreclosure auctions illegal, it also severely undermines the integrity of a fair and competitive marketplace,” said David J. Johnson, FBI Special Agent in Charge of the San Francisco Field Office. “The FBI will continue to investigate and pursue those who commit fraudulent anticompetitive practices at foreclosure auctions and work with those who have fallen victim to such selfish crimes.”

 

A violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine for the Sherman Act charges may be increased to twice the gain derived from the crime or twice the loss suffered by the victims if either amount is greater than $1 million. A count of conspiracy to commit mail fraud carries a maximum sentence of 30 years in prison and a $1 million fine. The government can also seek to forfeit the proceeds earned from participating in the conspiracy to commit mail fraud.
The charges today are the latest filed by the department in its ongoing investigation into bid rigging and fraud at public real estate foreclosure auctions in San Francisco, San Mateo, Contra Costa and Alameda counties, Calif. These investigations are being conducted by the Antitrust Division’s San Francisco office and the FBI’s San Francisco office. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s San Francisco office at 415-436-6660 , visit www.justice.gov/atr/contact/newcase.htm, or call the FBI tip line at 415-553-74 00.

Today’s charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.StopFraud.gov .

STATEMENT OF ASSISTANT ATTORNEY GENERAL BILL BAER ON CHANGES TO ANTITRUST DIVISION’S CARVE-OUT PRACTICE REGARDING CORPORATE PLEA AGREEMENTS

Posted on by

STATEMENT OF ASSISTANT ATTORNEY GENERAL BILL BAER ON
CHANGES TO ANTITRUST DIVISION’S CARVE-OUT PRACTICE REGARDING CORPORATE PLEA AGREEMENTS

WASHINGTON — Assistant Attorney General Bill Baer in charge of the Department of Justice’s Antitrust Division issued the following statement today on changes to the division’s carve-out practice regarding corporate plea agreements:

“Over the years, the Antitrust Division’s efforts to investigate and prosecute price fixing and other cartel conduct have produced outstanding results in holding both corporations and individuals accountable for their wrongdoing. We are committed to continuing these efforts and to build on the division’s past successes.

“Going forward, we are making certain changes to the Antitrust Division’s approach to corporate plea agreements. In the past, the division’s corporate plea agreements have, in appropriate circumstances, included a provision offering non-prosecution protection to those employees of the corporation who cooperate with the investigation and whose conduct does not warrant prosecution. The division excluded, or carved out, employees who were believed to be culpable. In certain circumstances, it also carved out employees who refused to cooperate with the division’s investigation, employees against whom the division was still developing evidence and employees with potentially relevant information who could not be located. The names of all carved-out employees were included in the corporate plea agreements, which were publicly filed in the district courts where the charges were brought.

“As part of a thorough review of the division’s approach to corporate dispositions, we have decided to implement two changes. The division will continue to carve out employees who we have reason to believe were involved in criminal wrongdoing and who are potential targets of our investigation. However, we will no longer carve out employees for reasons unrelated to culpability.

“The division will not include the names of carved-out employees in the plea agreement itself. Those names will instead be listed in an appendix, and we will ask the court for leave to file the appendix under seal. Absent some significant justification, it is ordinarily not appropriate to publicly identify uncharged third-party wrongdoers.

“The Antitrust Division will continue to exclude from the non-prosecution protections of corporate plea agreements any employees whose conduct may warrant prosecution. The division will continue to make these decisions on an employee-by-employee basis consistent with the evidence and the Principles of Federal Prosecution. We will continue to demand the full cooperation of anyone who seeks to benefit from the non-prosecution protection of a corporate plea agreement, and will revoke that protection for anyone who does not fully and truthfully cooperate with division investigations.”

Former Shipping Executive Indicted for Role in Price-Fixing Conspiracy Involving Coastal Freight Services Between the Continental United States and Puerto Rico

Posted on by
A federal grand jury in San Juan, Puerto Rico, has returned an indictment against Thomas Farmer, a former executive of Jacksonville, Fla.-based Crowley Liner Services, for participating in a conspiracy to fix rates and surcharges for freight transported by water between the continental United States and Puerto Rico, the Department of Justice announced today.

The indictment, filed today in the U.S. District Court in San Juan, charges Farmer, the former vice president of price and yield management of Crowley, with conspiring with co-conspirators to suppress and eliminate competition by agreeing to fix rates and surcharges for Puerto Rico freight services from at least as early as mid-2005 until at least April 2008.

Crowley transports a variety of cargo shipments, such as heavy equipment, perishable food items, medicines and consumer goods, on scheduled ocean voyages between the continental United States and Puerto Rico.

The indictment alleges, among other things, that Farmer and co-conspirators carried out the conspiracy by attending meetings and engaging in conversations and communications in the continental United States and Puerto Rico to fix, stabilize and maintain rates and surcharges for Puerto Rico freight services; to allocate customers of Puerto Rico freight services between and among the conspirators; and to rig bids submitted to customers of Puerto Rico freight services.

“Today’s indictment charges this executive with participating in a price-fixing conspiracy that affected the cost of shipping many consumer goods to Puerto Rico,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The division will continue to vigorously pursue individuals who engage in anticompetitive behavior.”

Farmer is charged with price fixing in violation of the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. 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.

As a result of this ongoing investigation, three companies, including Crowley, and six individuals have pleaded guilty or been convicted at trial. Five of the individuals and the three companies have been ordered to serve sentences ranging from seven months to four years in prison and to pay more than $46 million in criminal fines. The sixth individual, Frank Peake, was convicted at trial in January 2013 and is currently scheduled to be sentenced on May 31, 2013.

This case is part of an ongoing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in the coastal water freight transportation industry, which is being conducted by the Antitrust Division’s National Criminal Enforcement Section; the Baltimore Resident Agency of the Department of Defense’s Office of the Inspector General, Defense Criminal Investigative Service (DCIS); the Miami Field Office of the Department of Transportation’s Office of Inspector General; and the Jacksonville Field Office of the FBI. Anyone with information concerning anticompetitive conduct in the coastal water freight transportation industry is urged to call the Antitrust Division’s National Criminal Enforcement Section at 202-307-6694.

Two Japanese Freight Forwarding Companies Agree To Plead Guilty To Criminal Price-Fixing Charges

Posted on by

Companies Agree to Pay a Total of $18.9 Million in Criminal Fines

WASHINGTON — Two Japanese air freight forwarding companies have agreed to plead guilty and to pay criminal fines totaling $18.9 million for their roles in a conspiracy to fix certain fees in connection with the provision of air freight forwarding services for air cargo shipments from Japan to the United States, the Department of Justice announced today. “K” Line Logistics Ltd. has agreed to pay a $3,507,246 criminal fine and Yusen Logistics Co. Ltd. has agreed to pay a $15,428,207 criminal fine.

Including today’s charges, as a result of this investigation, 16 companies have either pleaded guilty or agreed to plead guilty and have agreed to pay criminal fines totaling more than $120 million.

“Consumers 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 Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “Prosecuting these kinds of global, price-fixing conspiracies continues to be a top priority of the Antitrust Division.”

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.

According to charges filed separately today in the U.S. District Court for the District of Columbia, “K” Line Logistics and Yusen Logistics 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 air freight forwarding shipments of cargo shipped by air from Japan to the United States from about September 2002 until at least November 2007.

According to the charges, the companies 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 companies 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.

Each 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.

Today’s charges are the result of a joint investigation being conducted by the Antitrust Division’s National Criminal Enforcement Section, the FBI’s Washington Field Office and the Department of Commerce’s Office of Inspector General. Anyone with information concerning the price fixing or other anticompetitive conduct in the freight forwarding industry is urged to call the Antitrust Division’s National Criminal Enforcement Section at 202-307-6694 or visit www.justice.gov/atr/contract/newcase.htm or call the FBI’s Washington Field Office at 202-278-2000.

Two Northern California Real Estate Investors Agree to Plead Guilty to Bid Rigging at Public Foreclosure Auctions

Posted on by
29 Individuals Have Agreed to Plead Guilty to Date

WASHINGTON – Two Northern California real estate investors have agreed to plead guilty for their role in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California, the Department of Justice announced.

Felony charges were filed today in the U.S. District Court for the Northern District of California in Oakland against Peter McDonough of Pleasanton, Calif., and Michael Renquist of Livermore, Calif.

Including today’s pleas, 29 individuals have pleaded guilty or agreed to plead guilty as a result of the department’s ongoing antitrust investigation into bid rigging and fraud at public real estate foreclosure auctions in Northern California.

According to court documents, for various lengths of time between November 2008 and January 2011, McDonough and Renquist conspired with others not to bid against one another, but instead designated a winning bidder to obtain selected properties at public real estate foreclosure auctions in Alameda County, Calif . McDonough and Renquist were also charged with a conspiracy to use the mail to carry out a scheme to fraudulently acquire title to selected Alameda County properties sold at public auctions, to make and receive payoffs and to divert money to co-conspirators that would have gone to mortgage holders and others by holding second, private auctions open only to members of the conspiracy. The department said that the selected properties were then awarded to the conspirators who submitted the highest bids in the second, private auctions. The private auctions often took place at or near the courthouse steps where the public auctions were held. Renquist was also charged with additional counts for his involvement in similar conduct in Contra Costa County, Calif.

“The conspirators suppressed competition and lined their pockets through fraudulent and collusive conduct at the expense of lenders and distressed homeowners,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The Antitrust Division and its law enforcement partners at the FBI will continue to hold accountable individuals who subvert the competitive process at foreclosure auctions around the country.”

The department said that the primary purpose of the conspiracies was to suppress and restrain competition and to conceal payoffs in order to obtain selected real estate offered at Alameda and Contra Costa County public foreclosure auctions at non-competitive prices. When real estate properties are sold at these auctions, the proceeds are used to pay off the mortgage and other debt attached to the property, with remaining proceeds, if any, paid to the homeowner. According to court documents, the conspirators paid and received money that otherwise would have gone to pay off the mortgage and other holders of debt secured by the properties, and, in some cases, the defaulting homeowner.

“The FBI and the Antitrust Division continue to bring to justice those individuals who engage in fraudulent anticompetitive practices at foreclosure actions,” said David J. Johnson, FBI Special Agent in Charge of the San Francisco Field Office.   “The foundation of our real estate market depends on fairness and transparency of all participants, and we are committed to working with our local and federal partners to ensure that conspirators are held accountable.”

A violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine for the Sherman Act charges may be increased to twice the gain derived from the crime or twice the loss suffered by the victims if either amount is greater than $1 million. A count of conspiracy to commit mail fraud carries a maximum sentence of 30 years in prison and a $1 million fine. The government can also seek to forfeit the proceeds earned from participating in the conspiracy to commit mail fraud.

The charges today are the latest filed by the department in its ongoing investigation into bid rigging and fraud at public real estate foreclosure auctions in San Francisco, San Mateo, Contra Costa and Alameda counties, Calif. These investigations are being conducted by the Antitrust Division’s San Francisco Office and the FBI’s San Francisco office. Anyone with information concerning bid rigging or frau d related to public real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Field Office at 415-436-6660, visit www.justice.gov/atr/contact/newcase.htm, or call the FBI tip line at 415-553-7400.

Today’s case was done in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.StopFraud.gov .

RBS Scotland Deferred Prosecution Agreement with the Antitrust Division

Posted on by

Former Prosecutor Rich Rosenberg Joins GeyerGorey LLP

Posted on by

GeyerGorey LLP today announced that Richard S. Rosenberg, formerly a prosecutor with the Antitrust Division, U.S. Department of Justice, has joined the firm and will be resident in the firm’s Philadelphia Office.

According to GeyerGorey partner Bradford Geyer, who was a long-time colleague of Rosenberg’s at the Antitrust Division, Rosenberg was known to be a highly critical analyst who would pick apart a case as it was developing to ensure that all potential defenses had been considered and evaluated before a case was brought. Rosenberg developed a reputation for constructing “worst case” scenarios that government might face in trying a case, built upon potential case weaknesses, imperfections and even blemishes. So critical could Rosenberg be that it was not unheard of for Antitrust Division staff to be quite displeased with Rosenberg’s negative view of the merits of a Division case. At the Division, Rosenberg’s office was often referred to as “the Skunkworks” — a cozy den where Rosenberg anticipated potential defense strategies and “wargamed” the various anticipated angles of attack by the defense.

Rosenberg comes to the firm just a week after Wendy Norman, also a former Department of Justice prosecutor. According to Norman, “Rich’s creativity allowed trials staffs to better anticipate defenses and prepare for them. Although most of us appreciated Rich’s deconstruction of a case, it was often unpleasant and, for many, scary to hear.”

“Rich was notorious for the sleepless nights he would cause prosecutors,” Geyer added. “We used to joke that he was a plant by the manufacturer of Ambein. Sometimes we also joked that we didn’t know what team he worked for. We thought he might be part of a defense team strategy to scare us to death.” Norman concluded her assessment of Rosenberg by saying that “Luckily, we rarely encountered a defense as sophisticated as Rich developed, but when we did, we were ready.”

Rosenberg served in the Antitrust Division from 1979 to 2013. A graduate of Georgetown Law School, Rosenberg’s reputation within the Antitrust Division that was as important, influential and appreciated as it was closely held.

RBS Securities Japan Limited Agrees to Plead Guilty in Connection with Long-Running Manipulation of Libor Benchmark Interest Rates

Posted on by
Second Financial Institution to Plead Guilty to Libor Fraud and Pay Substantial Criminal Penalties; RBS Parent Company Also Admits Fault in Deferred Prosecution Agreement

RBS Securities Japan Limited, a wholly owned subsidiary of The Royal Bank of Scotland plc (RBS), has agreed to plead guilty to felony wire fraud and admit its role in manipulating the Japanese Yen London Interbank Offered Rate (LIBOR), a leading benchmark used in financial products and transactions around the world, Assistant Attorney General Lanny Breuer of the Justice Department’s Criminal Division, Deputy Assistant Attorney General Scott D. Hammond of the Justice Department’s Antitrust Division and Special Agent in Charge Timothy A. Gallagher of the FBI’s Washington Field Office Criminal Division announced today.

A criminal information, being filed in U.S. District Court for the District of Connecticut, charges RBS Securities Japan with one count of wire fraud for engaging in a scheme to defraud counterparties to interest rate derivatives trades by secretly manipulating Yen LIBOR benchmark interest rates.  RBS Securities Japan has signed a plea agreement with the government admitting its criminal conduct, and has agreed to pay a $50 million fine.

In addition, the government is filing a criminal information in the District of Connecticut which charges parent company RBS as part of a deferred prosecution agreement (DPA).  The information charges RBS with wire fraud for its role in manipulating LIBOR benchmark interest rates, and with participation in a price-fixing conspiracy in violation of the Sherman Act by rigging the Yen LIBOR benchmark interest rate with other banks.  The DPA requires the bank to admit and accept responsibility for its misconduct as described in an extensive statement of facts, to continue cooperating with the Justice Department in its ongoing investigation and to pay a $100 million penalty beyond the fine imposed upon RBS Securities Japan.

Together with approximately $462 million in regulatory penalties and disgorgement – $325 million as a result of a Commodity Futures Trading Commission (CFTC) action and approximately $137 million as a result of a U.K. Financial Services Authority (FSA) action – the Justice Department’s criminal penalties bring the total amount of the resolution with RBS and RBS Securities Japan to approximately $612 million.

“As we have done with Barclays and UBS, we are today holding RBS accountable for a stunning abuse of trust,” said Assistant Attorney General Breuer.  “The bank has admitted to manipulating one of the cornerstone benchmark interest rates in our global financial system, and its Japanese subsidiary has agreed to plead guilty to felony wire fraud.  The department’s ongoing investigation has now yielded two guilty pleas by significant financial institutions.  These are extraordinary results, and our investigation is far from finished.  Our message is clear:  no financial institution is above the law.”

“RBS secretly rigged the benchmark interest rates upon which many transactions and consumer financial products are based,” said Deputy Assistant Attorney General Hammond. “RBS’ conduct not only harmed its unsuspecting counterparties, it undermined the integrity and the competitiveness of financial markets everywhere.”

“The manipulation of LIBOR by RBS and its subsidiary directly affected the rates referenced by financial products held by and on behalf of American companies and investors. The FBI works to uncover wrongdoing such as this in order to protect American consumers and the integrity of financial markets,” said Special Agent in Charge Gallagher.  “Today’s announcement is the result of the hard work of the FBI special agents, financial analysts, and forensic accountants as well as the prosecutors who dedicated significant time and resources to investigating this case.”

According to court documents, LIBOR is an average interest rate, calculated based upon submissions from leading banks around the world, reflecting the rates those banks believe they would be charged if borrowing from other banks.  LIBOR serves as the primary benchmark for short-term interest rates globally, and is used as a reference rate for many interest rate contracts, mortgages, credit cards, student loans and other consumer lending products.  The Bank of International Settlements estimated that as of the second half of 2009, outstanding interest rate contracts were valued at approximately $450 trillion.

LIBOR, published by the British Bankers’ Association (BBA), a trade association based in London, is calculated for 10 currencies at 15 borrowing periods, known as maturities, ranging from overnight to one year.  The LIBOR for a given currency at a specific maturity is the result of a calculation based upon submissions from a panel of banks for that currency (the Contributor Panel) selected by the BBA.  From at least 2006 through 2010, RBS has been a member of the Contributor Panel for a number of currencies, including Yen LIBOR and Swiss Franc LIBOR, which are the focus of the plea agreement and DPA.

According to the filed charging documents, at various times from at least 2006 through 2010, certain RBS Yen and Swiss Franc derivatives traders – whose compensation was directly connected to their success in trading financial products tied to LIBOR – engaged in efforts to move LIBOR in a direction favorable to their trading positions.  Through these schemes, RBS allegedly defrauded counterparties who were unaware of the manipulation affecting financial products referencing Yen and Swiss Franc LIBOR.  The alleged schemes included hundreds of instances in which RBS employees sought to influence LIBOR submissions in a manner favorable to their trading positions in two principal ways: internally at RBS through requests by derivatives traders for Yen and Swiss Franc LIBOR submissions, and externally through an agreement with a separately charged derivatives trader to request Yen LIBOR submissions.  The trader, Tom Alexander William Hayes, was formerly employed by a Japanese subsidiary of another Contributor Panel bank, UBS AG (UBS).

According to court documents, RBS employees engaged in this conduct through electronic communications, which included both emails and electronic chats.  For example, in an electronic chat on March 16, 2009, an RBS Swiss Franc derivatives trader, (Trader-7), sought to benefit his trading book by asking the RBS LIBOR submitter (Submitter-1), “can we pls get a very very very low 3m [3 month] and 6m [6 month] fix today [please]” because “we have rather large fixings!”  Submitter-1 responded, “perfect, if that’s what u want.”  After thanking Submitter-1, Trader-7 informed Submitter-1 that “from tomorrow . . .  we need them thru the roof!!!!!”

In another electronic chat on May 20, 2009, involving an RBS Yen derivatives trader, (“Trader-2”), Submitter-1, and others, the following exchange occurred:

Trader-2: high 3s and low 6s pls [Submitter-1]

Submitter-1: no problems

Trader-2: grazias amigo . . . where will you lower 6s to?

Submitter-1: 70

That day, RBS’s 6-month Yen LIBOR submission dropped two basis points from .72 to .70, before reverting to .72 the following two days.

RBS employees also allegedly furthered their collusive scheme with Hayes to fix the price of derivative instruments tied to Yen LIBOR through electronic communications.  For instance, in an electronic chat on April 20, 2007, Hayes requested that an RBS derivatives trader, (“Trader-3”), ask Submitter-1 for a low 3 month Yen LIBOR submission:

Hayes: . . . if you could ask your guys to keep 3m low wd be massive help as long as it doesn’t interfere with your stuff . . . tx in adavance.

Approximately 30 minutes later, Hayes and Trader-3 had the following exchange:

Hayes:   mate did you manage to spk to your cash boys?

Trader-3:  yes u owe me they are going 65 and 71

Hayes:  thx mate yes i do . . . in fact i owe you big time

Approximately 45 minutes later, Hayes sent the following message to Trader-3:

Hayes:  mater they set 64! . . . thats beyond the call of duty!

* * * *
Trader-3: no worries

By entering into a DPA with RBS, the Justice Department credits RBS’ cooperation in disclosing LIBOR misconduct within the financial institution, recognizes the significant remedial measures undertaken by RBS’ management to enhance internal controls, and acknowledges the additional reporting, disclosure and cooperation requirements undertaken by the bank.  The DPA does not prevent the Justice Department from prosecuting individuals for related conduct.

The pending charges against Hayes are merely accusations and he is considered innocent unless and until proven guilty.

The prosecution of RBS is being handled by Deputy Chief Patrick Stokes and Trial Attorney Gary Winters of the Criminal Division’s Fraud Section, and New York Field Office Assistant Chief Elizabeth Prewitt and Trial Attorneys Eric Schleef and Richard Powers of the Antitrust Division.  Deputy Chiefs Daniel Braun and William Stellmach, Assistant Chief Rebecca Rohr and Trial Attorney Alex Berlin of the Criminal Division’s Fraud Section, Trial Attorneys Daniel Tracer and Kristina Srica of the Antitrust Division, Jeremy Verlinda of the Antitrust Division’s Economic Analysis Group, Assistant U.S. Attorneys Eric Glover and Liam Brennan of the U.S. Attorney’s Office for the District of Connecticut and the Criminal Division’s Office of International Affairs have also provided valuable assistance in this matter.  The investigation is being conducted by special agents, forensic accountants and intelligence analysts of the FBI’s Washington Field Office.

The investigation leading to these cases has required, and has greatly benefited from, a diligent and wide-ranging cooperative effort among various enforcement agencies both in the United States and abroad.  The Justice Department acknowledges and expresses its deep appreciation for this assistance.  In particular, the CFTC’s Division of Enforcement referred this matter to the department and, along with the FSA, has played a major role in the investigation.  The Securities and Exchange Commission has also played a significant role in the LIBOR series of investigations.  Various agencies and enforcement authorities from other nations are also participating in different aspects of the broader investigation relating to LIBOR and other benchmark rates, and the department is grateful for their cooperation and assistance.

This prosecution is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force.  President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.  The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets and recover proceeds for victims of financial crimes. For more information about the task force visit: www.stopfraud.gov.