Category Archives: DCT

Former Virtual Currency CEO Pleads Guilty to $9 Million Fraud Scheme

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Thursday, July 20, 2017

Deirdre M. Daly, United States Attorney for the District of Connecticut, and Patricia M. Ferrick, Special Agent in Charge of the New Haven Division of the Federal Bureau of Investigation, announced that HOMERO JOSHUA GARZA, 32, of Texas, formerly of Somers, Conn., waived his right to be indicted and pleaded guilty today in Hartford federal court to one count of wire fraud related to his role in his companies’ purported generation and sale of virtual currency.

According to court documents and statements made in court, “virtual currency” is a digital representation of a value that can be traded and functions as a medium of exchange. Virtual currency generally is not issued or guaranteed by any jurisdiction or government, and its value is decided by consensus within the community of users of the virtual currency. A virtual currency generally self-generates units of currency through a process called “mining.” A virtual currency “miner” is computer hardware that runs special computer software to solve complex algorithms that validate groups of transactions in that virtual currency. Once a complex algorithm is solved, a unit of currency, such as a bitcoin, is awarded to the individual operating the miner. This process is known as “mining.”

Between approximately May 2014 and January 2016, GARZA, through GAW, GAW Miners, ZenMiner, and ZenCloud, companies he founded and operated, defrauded victims out of money in connection with the procurement of virtual currency on their behalf. The companies sold miners, access to miners, and the right to purchase a virtual currency called “paycoin,” as well as “hashlets.” A hashlet entitled an investor to a share of the profits that GAW Miners or ZenMiner would purportedly earn by mining virtual currencies using the computers that were maintained in their data centers. In other words, hashlet customers, or investors, were buying the rights to profit from a slice of the computing power owned by GAW Miners and ZenMiner.

To generate business and attract customers and investors, GARZA made multiple false statements related to the scheme, including stating that GAW Miners’ parent company purchased a controlling stake in ZenMiner for $8 million and that ZenMiner became a division of GAW Miners. In fact, there was no such transaction. GARZA also stated that the hashlets GARZA’s companies sold engaged in the mining of virtual currency. In fact, GARZA’s companies sold more hashlets than was supported by the computing power maintained in their data centers. Stated differently, GARZA’s companies sold the customers the right to more virtual currency than the companies’ computing power could generate. GARZA also stated that the market value of a single paycoin would not fall below $20 per unit because GARZA’s companies had a reserve of $100 million that the companies would use to purchase paycoins to drive up its price. In fact, no such reserve existed.

During the scheme, GARZA, through his companies, used money his companies had made from new hashlet investors to pay older hashlet investors. The payments were money that the companies owed the older investors based on the purported mining GAW Miners and ZenMiner had done on the investors’ behalf.

The loss attributable to GARZA from the scheme was $9,182,000.

GARZA is scheduled to be sentenced by U.S. District Judge Robert N. Chatigny on October 12, 2017, at which time he faces a maximum term of imprisonment of 20 years.

This matter is being investigated by the Federal Bureau of Investigation and is being prosecuted by Assistant U.S. Attorneys John T. Pierpont, Jr. and Jonathan Francis.

Drug Company Sales Rep Admits Role in Kickback Scheme Related to Fentanyl Spray Prescriptions

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Tuesday, July 11, 2017

Deirdre M. Daly, United States Attorney for the District of Connecticut, announced that NATALIE LEVINE, 33, of Scottsdale, Arizona, waived her right to be indicted and pleaded guilty today before U.S. District Judge Michael P. Shea in Hartford to one count of engaging in a kickback scheme that defrauded federal healthcare programs.

According to court documents and statements made in court, from approximately March 2013 to October 2014, LEVINE was employed by Insys Therapeutics, an Arizona-based pharmaceutical company that manufactured and sold Subsys, a fentanyl-based sublingual spray that was approved by the Food and Drug Administration solely for the management of breakthrough pain in cancer patients. LEVINE was a sales representative for the company and was responsible for covering the territories that included Connecticut, New Hampshire and Rhode Island.

In pleading guilty, LEVINE admitted that she induced certain medical practitioners, including an advanced practice registered nurse (APRN) in Connecticut, a physician’s assistant (PA) in New Hampshire, and a physician in Rhode Island, to prescribe Subsys by paying them to participate in hundreds of sham “Speaker Programs.” The Speaker Programs, which were typically held at high-end restaurants, were ostensibly designed to gather licensed healthcare professionals who had the capacity to prescribe Subsys and educate them about the drug. In truth, the events were usually just a gathering of friends and co-workers, most of whom did not have the ability to prescribe Subsys, and no educational component took place. “Speakers” were paid a fee that ranged from $1,000 to several thousand dollars for attending these dinners. At times, the sign-in sheets for the Speaker Programs were forged so as to make it appear that the programs had an appropriate audience of healthcare professionals.

The medical practitioners were paid thousands of dollars in illegal kickbacks in order to prescribe Subsys, and induce others to prescribe Subsys, over similar medications. Medicare Part D plans authorized payment for hundreds of Subsys prescriptions written by the three medical practitioners, resulting in a loss of approximately $4.5 million.

LEVINE pleaded guilty to one count of conspiracy to violate the anti-kickback law, an offense that carries a maximum term of imprisonment of five years and a fine of up to $250,000. Judge Shea scheduled sentencing for October 5, 2017.

This investigation is being conducted by the U.S. Department of Health and Human Services Office of the Inspector General and the Federal Bureau of Investigation, with the assistance of the Drug Enforcement Administration’s Tactical Diversion Squad. The case is being prosecuted by Assistant U.S. Attorneys Douglas P. Morabito and Richard M. Molot.

Several other individuals affiliated with Insys Therapeutics, and medical practitioners involved in this kickback scheme, have been charged in the District of Connecticut and in other Districts across the United States.

U.S. Attorney Daly encouraged individuals who suspect health care fraud to report it by calling the Health Care Fraud Task Force (203) 785-9270 or 1-800-HHS-TIPS.

National Health Care Fraud Takedown Results in Charges Against Over 412 Individuals Responsible for $1.3 Billion in Fraud Losses

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Thursday, July 13, 2017

Largest Health Care Fraud Enforcement Action in Department of Justice History

Attorney General Jeff Sessions and Department of Health and Human Services (HHS) Secretary Tom Price, M.D., announced today the largest ever health care fraud enforcement action by the Medicare Fraud Strike Force, involving 412 charged defendants across 41 federal districts, including 115 doctors, nurses and other licensed medical professionals, for their alleged participation in health care fraud schemes involving approximately $1.3 billion in false billings. Of those charged, over 120 defendants, including doctors, were charged for their roles in prescribing and distributing opioids and other dangerous narcotics. Thirty state Medicaid Fraud Control Units also participated in today’s arrests. In addition, HHS has initiated suspension actions against 295 providers, including doctors, nurses and pharmacists.

Attorney General Sessions and Secretary Price were joined in the announcement by Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting Director Andrew McCabe of the FBI, Acting Administrator Chuck Rosenberg of the Drug Enforcement Administration (DEA), Inspector General Daniel Levinson of the HHS Office of Inspector General (OIG), Chief Don Fort of IRS Criminal Investigation, Administrator Seema Verma of the Centers for Medicare and Medicaid Services (CMS), and Deputy Director Kelly P. Mayo of the Defense Criminal Investigative Service (DCIS).

Today’s enforcement actions were led and coordinated by the Criminal Division, Fraud Section’s Health Care Fraud Unit in conjunction with its Medicare Fraud Strike Force (MFSF) partners, a partnership between the Criminal Division, U.S. Attorney’s Offices, the FBI and HHS-OIG.  In addition, the operation includes the participation of the DEA, DCIS, and State Medicaid Fraud Control Units.

The charges announced today aggressively target schemes billing Medicare, Medicaid, and TRICARE (a health insurance program for members and veterans of the armed forces and their families) for medically unnecessary prescription drugs and compounded medications that often were never even purchased and/or distributed to beneficiaries. The charges also involve individuals contributing to the opioid epidemic, with a particular focus on medical professionals involved in the unlawful distribution of opioids and other prescription narcotics, a particular focus for the Department. According to the CDC, approximately 91 Americans die every day of an opioid related overdose.

“Too many trusted medical professionals like doctors, nurses, and pharmacists have chosen to violate their oaths and put greed ahead of their patients,” said Attorney General Sessions. “Amazingly, some have made their practices into multimillion dollar criminal enterprises. They seem oblivious to the disastrous consequences of their greed. Their actions not only enrich themselves often at the expense of taxpayers but also feed addictions and cause addictions to start. The consequences are real: emergency rooms, jail cells, futures lost, and graveyards.  While today is a historic day, the Department’s work is not finished. In fact, it is just beginning. We will continue to find, arrest, prosecute, convict, and incarcerate fraudsters and drug dealers wherever they are.”

“Healthcare fraud is not only a criminal act that costs billions of taxpayer dollars – it is an affront to all Americans who rely on our national healthcare programs for access to critical healthcare services and a violation of trust,” said Secretary Price. “The United States is home to the world’s best medical professionals, but their ability to provide affordable, high-quality care to their patients is jeopardized every time a criminal commits healthcare fraud. That is why this Administration is committed to bringing these criminals to justice, as President Trump demonstrated in his 2017 budget request calling for a new $70 million investment in the Health Care Fraud and Abuse Control Program. The historic results of this year’s national takedown represent significant progress toward protecting the integrity and sustainability of Medicare and Medicaid, which we will continue to build upon in the years to come.”

According to court documents, the defendants allegedly participated in schemes to submit claims to Medicare, Medicaid and TRICARE for treatments that were medically unnecessary and often never provided. In many cases, patient recruiters, beneficiaries and other co-conspirators were allegedly paid cash kickbacks in return for supplying beneficiary information to providers, so that the providers could then submit fraudulent bills to Medicare for services that were medically unnecessary or never performed. The number of medical professionals charged is particularly significant, because virtually every health care fraud scheme requires a corrupt medical professional to be involved in order for Medicare or Medicaid to pay the fraudulent claims.  Aggressively pursuing corrupt medical professionals not only has a deterrent effect on other medical professionals, but also ensures that their licenses can no longer be used to bilk the system.

“This week, thanks to the work of dedicated investigators and analysts, we arrested once-trusted doctors, pharmacists and other medical professionals who were corrupted by greed,” said Acting Director McCabe. “The FBI is committed to working with our partners on the front lines of the fight against heath care fraud to stop those who steal from the government and deceive the American public.”

“Health care fraud is a reprehensible crime.  It not only represents a theft from taxpayers who fund these vital programs, but impacts the millions of Americans who rely on Medicare and Medicaid,” said Inspector General Levinson. “In the worst fraud cases, greed overpowers care, putting patients’ health at risk. OIG will continue to play a vital leadership role in the Medicare Fraud Strike Force to track down those who abuse important federal health care programs.”

“Our enforcement actions underscore the commitment of the Defense Criminal Investigative Service and our partners to vigorously investigate fraud perpetrated against the DoD’s TRICARE Program. We will continue to relentlessly investigate health care fraud, ensure the taxpayers’ health care dollars are properly spent, and endeavor to guarantee our service members, military retirees, and their dependents receive the high standard of care they deserve,” advised Deputy Director Mayo.

“Last year, an estimated 59,000 Americans died from a drug overdose, many linked to the misuse of prescription drugs. This is, quite simply, an epidemic,” said Acting Administrator Rosenberg. “There is a great responsibility that goes along with handling controlled prescription drugs, and DEA and its partners remain absolutely committed to fighting the opioid epidemic using all the tools at our disposal.”

“Every defendant in today’s announcement shares one common trait – greed,” said Chief Fort. “The desire for money and material items drove these individuals to perpetrate crimes against our healthcare system and prey upon many of the vulnerable in our society.  Thanks to the financial expertise and diligence of IRS-CI special agents, who worked side-by-side with other federal, state and local law enforcement officers to uncover these schemes, these criminals are off the street and will now face the consequences of their actions.”

The Medicare Fraud Strike Force operations are part of a joint initiative between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country. The Medicare Fraud Strike Force operates in nine locations nationwide. Since its inception in March 2007, the Medicare Fraud Strike Force has charged over 3500 defendants who collectively have falsely billed the Medicare program for over $12.5 billion.

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For the Strike Force locations, in the Southern District of Florida, a total of 77 defendants were charged with offenses relating to their participation in various fraud schemes involving over $141 million in false billings for services including home health care, mental health services and pharmacy fraud.  In one case, the owner and operator of a purported addiction treatment center and home for recovering addicts and one other individual were charged in a scheme involving the submission of over $58 million in fraudulent medical insurance claims for purported drug treatment services. The allegations include actively recruiting addicted patients to move to South Florida so that the co-conspirators could bill insurance companies for fraudulent treatment and testing, in return for which, the co-conspirators offered kickbacks to patients in the form of gift cards, free airline travel, trips to casinos and strip clubs, and drugs.

In the Eastern District of Michigan, 32 defendants face charges for their alleged roles in fraud, kickback, money laundering and drug diversion schemes involving approximately $218 million in false claims for services that were medically unnecessary or never rendered. In one case, nine defendants, including six physicians, were charged with prescribing medically unnecessary controlled substances, some of which were sold on the street, and billing Medicare for $164 million in facet joint injections, drug testing, and other procedures that were medically unnecessary and/or not provided.

In the Southern District of Texas, 26 individuals were charged in cases involving over $66 million in alleged fraud. Among these defendants are a physician and a clinic owner who were indicted on one count of conspiracy to distribute and dispense controlled substances and three substantive counts of distribution of controlled substances in connection with a purported pain management clinic that is alleged to have been the highest prescribing hydrocodone clinic in Houston, where approximately 60-70 people were seen daily, and were issued medically unnecessary prescriptions for hydrocodone in exchange for approximately $300 cash per visit.

In the Central District of California, 17 defendants were charged for their roles in schemes to defraud Medicare out of approximately $147 million. Two of these defendants were indicted for their alleged involvement in a $41.5 million scheme to defraud Medicare and a private insurer. This was purportedly done by submitting fraudulent claims, and receiving payments for, prescription drugs that were not filled by the pharmacy nor given to patients.

In the Northern District of Illinois, 15 individuals were charged in cases related to six different schemes concerning home health care services and physical therapy fraud, kickbacks, and mail and wire fraud.  These schemes involved allegedly over $12.7 million in fraudulent billing. One case allegedly involved $7 million in fraudulent billing to Medicare for home health services that were not necessary nor rendered.

In the Middle District of Florida, 10 individuals were charged with participating in a variety of schemes involving almost $14 million in fraudulent billing.  In one case, three defendants were charged in a $4 million scheme to defraud the TRICARE program.  In that case, it is alleged that a defendant falsely represented himself to be a retired Lieutenant Commander of the United States Navy Submarine Service. It is alleged that he did so in order to gain the trust and personal identifying information from TRICARE beneficiaries, many of whom were members and veterans of the armed forces, for use in the scheme.

In the Eastern District of New York, ten individuals were charged with participating in a variety of schemes including kickbacks, services not rendered, and money laundering involving over $151 million in fraudulent billings to Medicare and Medicaid. Approximately $100 million of those fraudulent billings were allegedly part of a scheme in which five health care professionals paid illegal kickbacks in exchange for patient referrals to their own clinics.

In the Southern Louisiana Strike Force, operating in the Middle and Eastern Districts of Louisiana as well as the Southern District of Mississippi, seven defendants were charged in connection with health care fraud, wire fraud, and kickback schemes involving more than $207 million in fraudulent billing. One case involved a pharmacist who was charged with submitting and causing the submission of $192 million in false and fraudulent claims to TRICARE and other health care benefit programs for dispensing compounded medications that were not medically necessary and often based on prescriptions induced by illegal kickback payments.

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In addition to the Strike Force locations, today’s enforcement actions include cases and investigations brought by an additional 31 U.S. Attorney’s Offices, including the execution of search warrants in investigations conducted by the Eastern District of California and the Northern District of Ohio.

In the Northern and Southern Districts of Alabama, three defendants were charged for their roles in two health care fraud schemes involving pharmacy fraud and drug diversion.

In the Eastern District of Arkansas, 24 defendants were charged for their roles in three drug diversion schemes that were all investigated by the DEA.

In the Northern and Southern Districts of California, four defendants, including a physician, were charged for their roles in a drug diversion scheme and a health care fraud scheme involving kickbacks.

In the District of Connecticut, three defendants were charged in two health care fraud schemes, including a scheme involving two physicians who fraudulently billed Medicaid for services that were not rendered and for the provision of oxycodone with knowledge that the prescriptions were not medically necessary.

In the Northern and Southern Districts of Georgia, three defendants were charged in two health care fraud schemes involving nearly $1.5 million in fraudulent billing.

In the Southern District of Illinois, five defendants were charged in five separate schemes to defraud the Medicaid program.

In the Northern and Southern Districts of Indiana, at least five defendants were charged in various health care fraud schemes related to the unlawful distribution and dispensing of controlled substances, kickbacks, and services not rendered.

In the Southern District of Iowa, five defendants were charged in two schemes involving the distribution of opioids.

In the Western District of Kentucky, 11 defendants were charged with defrauding the Medicaid program.  In one case, four defendants, including three medical professionals, were charged with distributing controlled substances and fraudulently billing the Medicaid program.

In the District of Maine, an office manager was charged with embezzling funds from a medical office.

In the Eastern and Western Districts of Missouri, 16 defendants were charged in schemes involving over $16 million in claims, including 10 defendants charged as part of a scheme involving fraudulent lab testing.

In the District of Nebraska, a dentist was charged with defrauding the Medicaid program.

In the District of Nevada, two defendants, including a physician, were charged in a scheme involving false hospice claims.

In the Northern, Southern, and Western Districts of New York, five defendants, including two physicians and two pharmacists, were charged in schemes involving drug diversion and pharmacy fraud.

In the Southern District of Ohio, five defendants, including four physicians, were charged in connection with schemes involving $12 million in claims to the Medicaid program.

In the District of Puerto Rico, 13 defendants, including three physicians and two pharmacists, were charged in four schemes involving drug diversion, Medicaid fraud, and the theft of funds from a health care program.

In the Eastern District of Tennessee, three defendants were charged in a scheme involving fraudulent billings and the distribution of opioids.

In the Eastern, Northern, and Western Districts of Texas, nine defendants were charged in schemes involving over $42 million in fraudulent billing, including a scheme involving false claims for compounded medications.

In the District of Utah, a nurse practitioner was charged in connection with fraudulently obtaining a controlled substance, tampering with a consumer product, and infecting over seven individuals with Hepatitis C.

In the Eastern District of Virginia, a defendant was charged in connection with a scheme involving identify theft and fraudulent billings to the Medicaid program.

In addition, in the states of Arizona, Arkansas, California, Delaware, Illinois, Iowa, Louisiana, Massachusetts, Michigan, Minnesota, Mississippi, New York, Oklahoma, Pennsylvania, Rhode Island, South Dakota, Texas, Utah, Vermont and Washington, 96 defendants have been charged in criminal and civil actions with defrauding the Medicaid program out of over $31 million. These cases were investigated by each state’s respective Medicaid Fraud Control Units. In addition, the Medicaid Fraud Control Units of the states of Alabama, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Missouri, Nebraska, New York, North Carolina, Ohio, Texas, and Utah participated in the investigation of many of the federal cases discussed above.

The cases announced today are being prosecuted and investigated by U.S. Attorney’s Offices nationwide, along with Medicare Fraud Strike Force teams from the Criminal Division’s Fraud Section and from the U.S. Attorney’s Offices of the Southern District of Florida, Eastern District of Michigan, Eastern District of New York, Southern District of Texas, Central District of California, Eastern District of Louisiana, Northern District of Texas, Northern District of Illinois and the Middle District of Florida; and agents from the FBI, HHS-OIG, Drug Enforcement Administration, DCIS and state Medicaid Fraud Control Units.

A complaint, information, or indictment is merely an allegation, and all defendants are presumed innocent unless and until proven guilty.

Additional documents related to this announcement will shortly be available here: https://www.justice.gov/opa/documents-and-resources-july-13-2017.

This operation also highlights the great work being done by the Department of Justice’s Civil Division.  In the past fiscal year, the Department of Justice, including the Civil Division, has collectively won or negotiated over $2.5 billion in judgements and settlements related to matters alleging health care fraud.

Virginia Man Admits to Falsely Certifying Bridge Inspection Vehicles

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Friday, May 26, 2017

Deirdre M. Daly, United States Attorney for the District of Connecticut, today announced that CAROL “CASEY” SMITH, 56, of Chester, Virginia, waived his right to be indicted and pleaded guilty yesterday before U.S. District Judge Stefan R. Underhill in Bridgeport to a federal charge related to his false certification of bridge inspection vehicles.

According to court documents and statements made in court, Under Bridge Inspection (“UBI”) vehicles are vehicles that contain a moveable boom with a platform. The vehicles are used to conduct inspections of bridges by positioning the vehicle on top of the bridge and, using the boom, lifting a platform carrying inspectors alongside or beneath a bridge deck. “Company A” rents or leases bridge access equipment, including UBI vehicles, to engineering companies and government agencies for use on bridge inspection and bridge maintenance projects. Company A’s UBI vehicles travel on interstate highways to job locations throughout the U.S. Company A has several locations, including one in Connecticut.

SMITH was the president and chief surveyor for Virginia-based Martin Enterprizes, Inc. (“MEI”). Between January 2012 and January 2015, SMITH falsely represented that he, as the chief surveyor for MEI, examined the UBI vehicles in Company A’s fleet on an annual basis. During that time, SMITH created 165 Certificates of Unit Text/Examination of Material Handling Device (the “Certificate of Inspection”) for UBI vehicles in Company A’s fleet. As part of the Certificate of Inspection, SMITH verified that he personally examined the specified UBI vehicle and that the UBI vehicle met federal requirements. SMITH also issued 165 annual stickers representing that he had inspected the UBI Vehicles, and he knew that an employee or employees of Company A would affix the stickers to the UBI vehicles, and that those UBI vehicles would be driven on interstate highways and used on jobs throughout the U.S., including Connecticut.

Between 2012 and 2015, in exchange for the Certificates of Inspection for the UBI vehicles, as well as other vehicles in its fleet, Company A paid SMITH a total of $76,400.

SMITH pleaded guilty to one count of making a false statement, which carries a maximum term of imprisonment of five years. A sentencing date is not scheduled.

This matter is being investigated by the U.S. Department of Transportation – Office of Inspector General and the U.S. Department of Labor – Office of Inspector General. The case is being prosecuted by Assistant U.S. Attorney Nancy V. Gifford.

Former Executive of French Power Company Subsidiary Pleads Guilty in Connection with Foreign Bribery Scheme

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A former senior executive of a subsidiary of Alstom SA, the French power and transportation company, pleaded guilty today for his participation in a scheme to pay bribes to foreign government officials.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Acting U.S. Attorney Michael J. Gustafson of the District of Connecticut and Assistant Director in Charge Valerie Parlave of the FBI’s Washington Field Office made the announcement.
William Pomponi, a former vice president of regional sales at Alstom Power Inc., the Connecticut-based power subsidiary of Alstom, pleaded guilty today in federal court in New Haven, Connecticut, to a criminal information charging him with conspiracy to violate the Foreign Corrupt Practices Act (FCPA) in connection with the awarding of the Tarahan power project in Indonesia.    Pomponi was charged in a second superseding indictment on July 30, 2013.    Pomponi is the fourth defendant to plead guilty to charges stemming from this investigation.    Frederic Pierucci, the vice president of global boiler sales at Alstom, pleaded guilty on July 29, 2013, to one count of conspiracy to violate the FCPA and one count of violating the FCPA; and, David Rothschild, a former vice president of regional sales at Alstom Power Inc., pleaded guilty to conspiring to violate the FCPA on Nov. 2, 2012.  Marubeni Corporation, Alstom’s consortium partner on the Tarahan project, pleaded guilty on March 19, 2014, to one count of conspiracy to violate the FCPA and seven counts of violating the FCPA, and was sentenced to pay a criminal fine of $88 million.    FCPA and money laundering charges remain pending against Lawrence Hoskins, the former senior vice president for the Asia region for Alstom, and trial is scheduled for June 2, 2015.
“Three Alstom corporate executives and Marubeni, a major Japanese corporation, have now pleaded guilty to a seven-year scheme to pay bribes to Indonesian officials to secure a $118 million power contract,” said Assistant Attorney General Caldwell.  “The Criminal Division of the Department of Justice will follow evidence of corruption wherever it leads, including into corporate boardrooms and corner offices.  As this case demonstrates, we will hold both companies and their executives responsible for criminal conduct.”
According to the court filings, the defendants, together with others, paid bribes to officials in Indonesia, including a member of the Indonesian Parliament and high-ranking members of Perusahaan Listrik Negara (PLN), the state-owned and state-controlled electricity company in Indonesia, in exchange for assistance in securing a $118 million contract, known as the Tarahan project, to provide power-related services for the citizens of Indonesia from facilities in Tarahan.    To conceal the bribes, the defendants retained two consultants purportedly to provide legitimate consulting services on behalf of Alstom and Marubeni in connection with the Tarahan project.    In reality, the primary purpose for hiring the consultants was to use the consultants to pay bribes to Indonesian officials.
The first consultant retained by the defendants allegedly received hundreds of thousands of dollars in his Maryland bank account to be used to bribe the member of Parliament.    The consultant then allegedly transferred the bribe money to a bank account in Indonesia for the benefit of the official.    According to court documents, emails between Hoskins, Pomponi, Pierucci, Rothschild, and their co-conspirators discuss in detail the use of the first consultant to funnel bribes to the member of Parliament and the influence that the member of Parliament could exert over the Tarahan project.
However, in the fall of 2003, Hoskins, Pomponi, Pierucci and others determined that the first consultant was not effectively bribing key officials at PLN.    One email between Alstom employees described PLN officials’ “concern that if we have won the job, whether their rewards will still be satisfactory or this agent only give them pocket money and disappear.” In another email, an employee at Alstom’s subsidiary in Indonesia sent an email to Hoskins asserting that the first consultant “has no grip on the PLN Tender team at all” and “is more or less similar to [a] cashier which I feel we pay too much.”
As a result, the co-conspirators retained a second consultant to bribe PLN officials, according to the court documents.    The co-conspirators deviated from Alstom’s usual practice of paying consultants on a pro-rata basis in order to make a much larger up-front payment to the second consultant so that the consultant could “get the right influence.” An employee at Alstom’s subsidiary in Indonesia sent an email to Hoskins, Pomponi, Pierucci and others asking them to finalize the consultancy agreement with the front-loaded payments but stated that in the meantime the employee would give his word to a high-level official at PLN, according to the charges.    The defendants and their co-conspirators were successful in securing the Tarahan project and subsequently made payments to the consultants for the purpose of bribing the Indonesian officials.
An indictment is merely an accusation, and defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt.
The case is being investigated by FBI agents who are part of the Washington Field Office’s dedicated FCPA squad, with assistance from the Meriden, Connecticut, Resident Agency of the FBI.    Significant assistance was provided by the Criminal Division’s Office of International Affairs, and the department has also received substantial assistance from its law enforcement counterparts in Indonesia, Switzerland and Singapore and greatly appreciates their cooperation.    The case is being prosecuted by Assistant Chief Daniel S. Kahn of the Criminal Division’s Fraud Section and Assistant U.S. Attorney David E. Novick of the District of Connecticut.

Marubeni Corporation Agrees to Plead Guilty to FCPA Charges and to Pay an $88 Million Fine

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Marubeni Corporation, a Japanese trading company involved in the handling of products and provision of services in a broad range of sectors around the world, including power generation, entered a plea of guilty today for its participation in a scheme to pay bribes to high-ranking government officials in Indonesia to secure a lucrative power project.
Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, Acting U.S. Attorney Michael J. Gustafson of the District of Connecticut and Assistant Director in Charge Valerie Parlave of the FBI’s Washington Field Office made the announcement.

“Marubeni pleaded guilty to engaging in a seven-year scheme to pay – and conceal – bribes to a high-ranking member of Parliament and other foreign officials in Indonesia,” said Acting Assistant Attorney General Raman.  “The company refused to play by the rules, then refused to cooperate with the government’s investigation.  Now Marubeni faces the consequences for its crooked business practices in Indonesia .”

“For several years, the Marubeni Corporation worked in concert with a Connecticut company, among others, to bribe Indonesian officials in order to secure a contract to provide power-related services in Indonesia,” said Acting U.S. Attorney Michael J. Gustafson.  “Today’s guilty plea by Marubeni Corporation is an important reminder to the business community of the significant consequences of participating in schemes to bribe government officials, whether at home or abroad.”

“Companies that wish to do business in the United States or with U.S. companies must adhere to U.S. law, and that means bribery is unacceptable,” said Assistant Director in Charge Parlave.  “The FBI continues to work with our international law enforcement partners as demonstrated in this case to ensure that companies are held accountable for their criminal conduct.  I want to thank the agents, analysts and prosecutors who brought this case to today’s conclusion.”

Marubeni entered a plea of guilty to an eight-count criminal information filed today in the U.S. District Court for the District of Connecticut, charging Marubeni with one count of conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA) and seven counts of violating the FCPA.   Marubeni admitted its criminal conduct and has agreed to pay a criminal fine of $88 million, subject to the district court’s approval.  Sentencing has been scheduled for May 15, 2014.

As part of the plea agreement, Marubeni has agreed to maintain and implement an enhanced global anti-corruption compliance program and to cooperate with the department’s ongoing investigation.   The plea agreement cites Marubeni’s decision not to cooperate with the department’s investigation when given the opportunity to do so, its lack of an effective compliance and ethics program at the time of the offense, its failure to properly remediate and the lack of its voluntary disclosure of the conduct as some of the factors considered by the department in reaching an appropriate resolution.

Frederic Pierucci, who was the vice president of global boiler sales at Marubeni’s consortium partner, pleaded guilty on July 29, 2013, to one count of conspiring to violate the FCPA and one count of violating the FCPA.   David Rothschild, a former vice president of regional sales at the consortium partner, pleaded guilty on Nov. 2, 2012, to one count of conspiracy to violate the FCPA.   Lawrence Hoskins, a former senior vice president for the Asia region for the consortium partner, and William Pomponi, a former vice president of regional sales at the consortium partner, were charged in a second superseding indictment on July 30, 2013.   The charges against Hoskins and Pomponi are merely allegations, and the defendants are presumed innocent unless and until proven guilty.

According to court filings, Marubeni and its employees, together with others, paid bribes to officials in Indonesia – including a high-ranking member of the Indonesian Parliament and high-ranking members of Perusahaan Listrik Negara (PLN), the state-owned and state-controlled electricity company in Indonesia – in exchange for assistance in securing a $118 million contract, known as the Tarahan project, for Marubeni and its consortium partner to provide power-related services for the citizens of Indonesia.   To conceal the bribes, Marubeni and its consortium partner retained two consultants purportedly to provide legitimate consulting services on behalf of the power company and its subsidiaries in connection with the Tarahan project.   The primary purpose for hiring the consultants, however, was to use the consultants to pay bribes to Indonesian officials.

As admitted in court documents, Marubeni and its co-conspirators retained the first consultant in the fall of 2002.   However, in the fall of 2003, before the Tarahan contract had been awarded, Marubeni and its co-conspirators determined that the first consultant was not bribing key officials at PLN effectively.   One e-mail between employees of the power company’s subsidiary in Indonesia described a meeting between Marubeni employees, employees of its consortium partner, and PLN officials during which the PLN officials expressed “concern” that if Marubeni and its consortium partner win the project, whether the agent would give the officials “rewards” that they would consider “satisfactory,” or “only give them pocket money and disappear.  Nothing has been shown by the agent that the agent is willing to spend money.”   Shortly thereafter, a Marubeni employee sent an e-mail to other employees at Marubeni and its consortium partner stating that “unfortunately our agent almost did not execute his function at all, so far.   In case we don’t take immediate action now now [sic], we don’t have any chance to get this project forever.”

As a result, Marubeni and its consortium partner decided to reduce the first consultant’s commission from three percent of the total contract value to one percent, and pay the remaining two percent to a second consultant who could more effectively bribe officials at PLN.  In an e-mail between two employees of Marubeni’s consortium partner, they discussed a meeting between Marubeni, an executive from the consortium partner, and the first consultant, stating that the first consultant “committed to convince [the member of Parliament] that ‘one’ [percent] is enough.”

Marubeni and its co-conspirators were successful in securing the Tarahan project and subsequently made payments to the consultants for the purpose of bribing the Indonesian officials.   Marubeni and its co-conspirators paid hundreds of thousands of dollars into the first consultant’s bank account in Maryland to be used to bribe the member of Parliament. The consultant then allegedly transferred the bribe money to a bank account in Indonesia for the benefit of the official.

This case is being investigated by FBI agents from the Washington Field Office, with assistance from the Resident Agency of the FBI in Meriden, Conn.   Significant assistance was provided by the Criminal Division’s Office of International Affairs.   In addition, the department greatly appreciates the significant cooperation provided by its law enforcement colleagues in Indonesia at the Komisi Pemberantasan Korupsi (Corruption Eradication Commission), the Office of the Attorney General in Switzerland and the Serious Fraud Office in the United Kingdom.

The case is being prosecuted by Assistant Chief Daniel S. Kahn of the Criminal Division’s Fraud Section and Assistant U.S. Attorney David E. Novick of the District of Connecticut.

RBS Securities Japan Ltd Sentenced for Manipulation of Yen Libor

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RBS Securities Japan Limited, a wholly owned subsidiary of The Royal Bank of Scotland plc (RBS) that engages in investment banking operations with its principal place of business in Tokyo, Japan, was sentenced today for its role in manipulating the Japanese Yen London Interbank Offered Rate (LIBOR), a leading benchmark used in financial products and transactions around the world.
Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, Deputy Assistant Attorney General Brent Snyder of the Justice Department’s Antitrust Division and Assistant Director in Charge Valerie Parlave of the FBI’s Washington Field Office made the announcement.
RBS Securities Japan was sentenced by U.S. District Judge Michael P. Shea in the District of Connecticut.    RBS Securities Japan pleaded guilty on April 12, 2013, to one count of wire fraud for its role in manipulating Yen LIBOR benchmark interest rates.    RBS Securities Japan signed a plea agreement with the government in which it admitted its criminal conduct and agreed to pay a $50 million fine, which the court accepted in imposing sentence.    In addition, RBS plc, the Edinburgh, Scotland-based parent company of RBS Securities Japan, entered into a deferred prosecution agreement (DPA) with the government requiring RBS plc to pay an additional $100 million penalty, to admit and accept responsibility for its misconduct as set forth in an extensive statement of facts and to continue cooperating with the Justice Department in its ongoing investigation.    The DPA reflects RBS plc’s cooperation in disclosing LIBOR misconduct within the financial institution and recognizes the significant remedial measures undertaken by new management to enhance internal controls.
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 Conduct Authority (FCA) action – the Justice Department’s criminal penalties bring the total amount of the resolution with RBS and RBS Securities Japan to approximately $612 million.
“Today’s sentencing of RBS is an important reminder of the significant consequences facing banks that deliberately manipulate financial benchmark rates, and it represents one of the numerous enforcement actions taken by the Justice Department in our ongoing LIBOR investigation” said Acting Assistant Attorney General Raman. “As a result of the department’s investigation, we have charged five individuals and secured admissions of criminal wrongdoing by four major financial institutions.  Our enforcement actions have had a lasting impact on the global banking system, and we intend to continue to vigorously investigate and prosecute the manipulation of this cornerstone benchmark rate.”
“By colluding to manipulate the Yen LIBOR benchmark interest rate, RBS Securities Japan reaped higher profits for itself at the expense of unknowing counterparties, and in the process undermined the integrity of a major benchmark rate used in financial transactions throughout the world,” said Deputy Assistant Attorney General Snyder.  “Today’s sentence, in conjunction with the department’s agreement with parent company RBS, demonstrates the Antitrust Division’s commitment to prosecuting these types of far-reaching and sophisticated conspiracies.”
“The manipulation of LIBOR impacts financial products the world over, and erodes the integrity of the financial markets,” said Assistant Director in Charge Parlave.    “Without a level playing field in our financial marketplace, banks and investors do not have a threshold to which they can measure their hard work.    I commend the Special Agents, forensic accountants and analysts, as well as the prosecutors, for the significant time and resources they committed 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 is published by the British Bankers’ Association (BBA), a trade association based in London.    At the time relevant to the conduct in the criminal information, LIBOR was 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.
According to the plea agreement, at various times from at least 2006 through 2010, certain RBS Securities Japan Yen derivatives traders engaged in efforts to move LIBOR in a direction favorable to their trading positions, defrauding RBS counterparties who were unaware of the manipulation affecting financial products referencing Yen LIBOR.    The scheme included efforts to manipulate more than one hundred Yen LIBOR submissions in a manner favorable to RBS Securities Japan’s trading positions.    Certain RBS Securities Japan Yen derivatives traders, including a manager, engaged in this conduct in order to benefit their trading positions and thereby increase their profits and decrease their losses.
The prosecution of RBS Securities Japan is being handled by Deputy Chief Patrick Stokes and Trial Attorney Gary Winters of the Criminal Division’s Fraud Section, and New York Office Assistant Chief Elizabeth Prewitt and Trial Attorneys Eric Schleef and Richard Powers of the Antitrust Division.    Deputy Chiefs Daniel Braun and William Stellmach 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 FCA, has played a major role in the investigation.    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.   In particular, the Securities and Exchange Commission has played a significant role in the LIBOR investigation, and the department expresses its appreciation to the United Kingdom’s Serious Fraud Office for its assistance and ongoing cooperation.
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 .

RABOBANK ADMITS WRONGDOING IN LIBOR INVESTIGATION, AGREES TO PAY $325 MILLION CRIMINAL PENALTY

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WASHINGTON — Coöperatieve Centrale  Raiffeisen-Boerenleenbank B.A. (Rabobank) has entered into an  agreement with the Department of Justice to pay a $325 million penalty to  resolve violations arising from Rabobank’s submissions for the London InterBank  Offered Rate (LIBOR) and the Euro Interbank Offered Rate (Euribor), which are  leading benchmark interest rates around the world, the Justice Department  announced today.

A criminal information will be filed  today in U.S. District Court for the District of Connecticut that charges  Rabobank as part of a deferred prosecution agreement (DPA). The  information charges Rabobank with wire fraud for its role in manipulating the  benchmark interest rates LIBOR and Euribor. In addition to the $325  million penalty, the DPA requires the  bank to admit and accept responsibility for its misconduct as described in an  extensive statement of facts. Rabobank has agreed to continue cooperating  with the Justice Department in its ongoing investigation of the manipulation of  benchmark interest rates by other financial institutions and  individuals.

“For years, employees at Rabobank, often working with traders at other  banks around the globe, illegally manipulated four different interest rates –  Euribor and LIBOR for the U.S. dollar, the yen, and the pound sterling – in the  hopes of fraudulently moving the market to generate profits for their traders  at the expense of the bank’s counterparties,” said Acting Assistant Attorney  General Mythili Raman of the Justice Department’s Criminal Division.  “Today’s criminal resolution – which represents the second-largest penalty in  the Criminal Division’s active, ongoing investigation of the manipulation of  global benchmark interest rates by some of the largest banks in the world –  comes fast on the heels of charges brought against three former ICAP brokers  just last month. Rabobank is the fourth major financial institution that  has admitted its misconduct in this wide-ranging criminal investigation, and  other banks should pay attention: our investigation is far from over.”

“Rabobank rigged multiple benchmark rates, allowing its traders to reap  higher profits at the expense of their unsuspecting counterparties,” said  Deputy Assistant Attorney General Leslie C. Overton of the Justice  Department’s Antitrust Division. “Not only was this conduct fraudulent,  it compromised the integrity of globally-used interest rate benchmarks –  undermining financial markets worldwide.”

“Rabobank admitted to manipulating LIBOR and Euribor submissions which  directly affected the rates referenced by financial products held by and on  behalf of companies and investors around the world,” said Assistant Director in  Charge Valerie Parlave of the FBI’s Washington Field Office. “Rabobank’s  actions resulted in the deliberate harm to counterparties holding products  referencing the manipulated rates. Today’s announcement is yet another  example of the tireless efforts of the FBI special agents and forensic  accountants who are dedicated to investigating complex fraud schemes and,  together with prosecutors, bringing to justice those who participate in such  schemes.”

Together with approximately $740 million in criminal and regulatory  penalties imposed by other agencies in actions arising out of the same conduct  – $475 million by the Commodity Futures Trading Commission (CFTC) action, $170  million by the U.K. Financial Conduct Authority (FCA) action and approximately  $96 million by the Openbaar Ministerie (the Dutch Public Prosecution Service) –  the Justice Department’s $325 million criminal penalty brings the total amount  to be paid by Rabobank to more than $1 billion.

According to signed documents, LIBOR is an average interest rate,  calculated based upon submissions from leading banks around the world and  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 is published by the British Bankers’ Association (BBA), a trade  association based in London. At the time relevant to the conduct in the  criminal information, LIBOR was 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 2005 through 2011,  Rabobank was a member of the Contributor Panel for a number of currencies,  including United States dollar (dollar) LIBOR, pound sterling LIBOR, and yen  LIBOR.

The Euro Interbank Offered Rate (Euribor) is published by the European  Banking Federation (EBF), which is based in Brussels, Belgium, and is  calculated at 15 maturities, ranging from overnight to one year. Euribor  is the rate at which Euro interbank term deposits within the Euro zone are  expected to be offered by one prime bank to another at 11:00 a.m. Brussels  time. The Euribor at a given maturity is the result of a calculation based  upon submissions from Euribor Contributor Panel banks. From at least 2005  through 2011, Rabobank was also a member of the Contributor Panel for  Euribor.

According to the statement of facts accompanying the agreement, from as  early as 2005 through at least November 2010, certain Rabobank derivatives  traders requested that certain Rabobank dollar LIBOR, yen LIBOR, pound sterling  LIBOR, and Euribor submitters submit LIBOR and Euribor contributions that would  benefit the traders’ trading positions, rather than rates that complied with  the definitions of LIBOR and Euribor.

In addition, according to the statement of facts accompanying the  agreement, from as early as January 2006 through October 2008, a Rabobank yen  LIBOR submitter and a Rabobank Euribor submitter had two separate agreements  with traders at other banks to make yen LIBOR and Euribor submissions that  benefitted trading positions, rather than submissions that complied with the  definitions of LIBOR and Euribor.

The Rabobank LIBOR and Euribor submitters accommodated traders’  requests on numerous occasions, and on various occasions, Rabobank’s  submissions affected the fixed rates.

According to the statement of facts, Rabobank employees engaged in this  conduct through electronic communications, which included both emails and  electronic chats. For example, on Sept. 21, 2007, a Rabobank Yen  derivatives trader emailed the Rabobank Yen LIBOR submitter at the time with  the subject line “libors,” writing: “Wehre do you think today’s libors are?  If you can, I would like 1mth libors higher today.” The submitter  replied: “Bookies reckon 1m sets at .85.” The trader wrote back: “I have  some fixings in 1 mth so would appreciate if you can put it higher mate.”  The submitter replied: “No prob mate let me know your level.” The trader  responded: “Wud be nice if you could put 0.90% for 1mth cheers.” The  submitter wrote back: “Sure no prob. I’ll probably get a few phone calls but no  worries mate!” The trader replied: “If you may get a few phone calls then  put 0.88% then.” The submitter responded: “Don’t worry mate – there’s  bigger crooks in the market than us guys!” That day, as requested,  Rabobank’s 1-month Yen LIBOR submission was 0.90, an increase of seven basis  points from its previous submission, whereas the other panel banks’ submissions  decreased by approximately a half of a basis point on average. Rabobank’s  submission went from being tied as the tenth highest submission on the  Contributor Panel on the previous day to being the highest submission on the  Contributor Panel.

On Nov. 29, 2006, a Rabobank dollar derivatives trader wrote to  Rabobank’s Global Head of Liquidity and Finance and the head of Rabobank’s  money markets desk in London, who supervised rate submitters: “Hi mate, low 1s  high 3s LIBOR pls !!! Dont tell [another Rabobank U.S. Dollar derivatives  trader] haa haaaaaaa. Sold the market today doooooohhhh!” The money  markets desk head replied: “ok mate , will do my best …speak later.”  After the LIBOR submissions that day, Rabobank’s ranking compared to other  panel banks dropped as to 1-month dollar LIBOR and rose as to 3-month dollar  LIBOR. Two days later, on Dec. 1, 2006, the trader again wrote to the money  markets desk head: “Appreciate 3s go down, but a high 3s today would be nice…  cheers chief.” The money markets desk head wrote back: “I am fast turning  into your LIBOR bitch!!!!” The trader replied: “Just friendly  encouragement that’s all , appreciate the help.” The money markets desk  head wrote back: “No worries mate , glad to help ….We just stuffed ourselves  with good ol pie , mash n licker !!”

In an example of an agreement with traders at other banks, on July 28,  2006, a Rabobank rate submitter and Rabobank trader discussed their mutual  desires for a high fixing. The submitter stated to the trader: “setting a  high 1m again today – I need it!” to which the trader responded: “yes pls  mate…I need a higher 1m libor too.” Within approximately 20 minutes, the  submitter contacted a trader at another Contributor Panel bank and wrote: “morning  skipper…..will be setting an obscenely high 1m again today…poss 38 just  fyi.” The other bank’s trader responded, “(K)…oh dear..my poor  customers….hehehe!! manual input libors again today then!!!!” Both  banks’ submissions on July 28 moved up one basis point, from 0.37 to 0.38, a  move which placed their submissions as the second highest submissions on the  Contributor Panel that day.

As another example, on July 7, 2009, a Rabobank trader wrote to a  former Rabobank yen LIBOR submitter: “looks like some ppl are talking with each  other when they put libors down. . . quite surprised that 3m libors came down a  lot.” The former submitter replied: “yes deffinite manipulation – always  is tho to be honest mate. . . i always used to ask if anyone needed a favour  and vise versa. . . . a little unethical but always helps to have friends in  mrkt.”

By entering into a DPA with Rabobank, the Justice Department took  several factors into consideration, including that Rabobank has no history of  similar misconduct and has not been the subject of any criminal enforcement  actions or any significant regulatory enforcement actions by any authority in  the United States, the Netherlands, or elsewhere. In addition, Rabobank  has significantly expanded and enhanced its legal and regulatory compliance  program and has taken extensive steps to remediate the misconduct.  Significant remedies and sanctions are also being imposed on Rabobank by  several regulators and an additional criminal law enforcement agency (the Dutch  Public Prosecution Service).

This ongoing investigation is being conducted by special agents, forensic  accountants, and intelligence analysts of the FBI’s Washington Field  Office. The prosecution of Rabobank is being handled by Assistant Chief  Glenn S. Leon and Trial Attorney Alexander H. Berlin of the Criminal Division’s  Fraud Section and Trial Attorneys Ludovic C. Ghesquiere, Michael T. Koenig and  Eric L. Schleef of the Antitrust Division. Deputy Chiefs Daniel Braun and  William Stellmach of the Criminal Division’s Fraud Section, Criminal Division  Senior Counsel Rebecca Rohr, Assistant Chief Elizabeth B. Prewitt and Trial  Attorney Richard A. Powers of the Antitrust Division’s New York Office, and  Assistant U.S. Attorneys Eric Glover and Liam Brennan of the U.S. Attorney’s  Office for the District of Connecticut, along with Criminal Division’s Office  of International Affairs, have provided valuable assistance in this  matter.

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 FCA, has  played a major role in the investigation. The department has also worked  closely with the Dutch Public Prosecution Service and De Nederlandsche Bank  (the Dutch Central Bank) in the investigation of Rabobank. 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. In particular, the Securities and Exchange Commission has  played a significant role in the LIBOR investigation, and the department  expresses its appreciation to the United Kingdom’s Serious Fraud Office for its  assistance and ongoing cooperation.

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.

 

UBS Securities Japan Co. Ltd Sentenced for Long-running Manipulation of Libor

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UBS Securities Japan Co. Ltd. (UBS Securities Japan), an investment bank, financial advisory securities firm and wholly-owned subsidiary of UBS AG, was sentenced today for its role in manipulating the London Interbank Offered Rate (LIBOR), a leading benchmark used in financial products and transactions around the world, the Justice Department announced.

UBS Securities Japan was sentenced by U.S. District Judge Robert N. Chatigny in the District of Connecticut.  UBS Securities Japan pleaded guilty on Dec. 19, 2012, to one count of engaging in a scheme to defraud counterparties to interest rate derivative trades by secretly manipulating LIBOR benchmark interest rates.  UBS Securities Japan signed a plea agreement with the government in which it admitted its criminal conduct and agreed to pay a $100 million fine, which the court accepted in imposing sentence.  In addition, UBS AG, the Zurich-based parent company of UBS Securities Japan, entered into a non-prosecution agreement (NPA) with the government requiring UBS AG to pay an additional $400 million penalty, to admit and accept responsibility for its misconduct as set forth in an extensive statement of facts and to continue cooperating with the Justice Department in its ongoing investigation.  The NPA reflects UBS AG’s substantial cooperation in discovering and disclosing LIBOR misconduct within the financial institution and recognizes the significant remedial measures undertaken by new management to enhance internal controls.

Together with approximately $1 billion in regulatory penalties and disgorgement – $700 million as a result of a Commodity Futures Trading Commission (CFTC) action; $259.2 million as a result of a U.K. Financial Conduct Authority (FCA) action; and $64.3 million as a result of a Swiss Financial Market Supervisory Authority (FINMA) action – the Justice Department’s criminal penalties bring the total amount of the resolution to more than $1.5 billion.

“This action, and the resulting sentence, prove that no individual or firm is above the law – no matter what,” said Attorney General Eric Holder.  “The Department of Justice will continue to stand vigilant against corporations or individuals who threaten the integrity of our financial markets, undermine the stability of our economy, or jeopardize the well-being of our citizens.  And, when supported by the facts and the law, we will never hesitate to use every tool and authority available to us to hold accountable those who illegally take advantage of others for their own financial gain.”

“Through its guilty plea and sentence, UBS has been held to account for deliberately manipulating LIBOR, one of the cornerstone interest rates in our global financial system,” said Acting Assistant Attorney General Mythili Raman of the Criminal Division.  “The $1.5 billion global resolution against UBS – of which this guilty plea and sentence are a critical element – is just one of several actions we have taken against financial firms throughout the world that sought to illegally influence LIBOR.  As we continue our active and ongoing investigation of the manipulation of LIBOR, our prosecutors and agents will continue to tenaciously follow the evidence wherever it leads.  Neither UBS, nor the individual UBS defendants we have charged in connection with this sophisticated scheme, nor any other bank or individual, is above the law.”

According to documents filed in these cases, LIBOR is an average interest rate, calculated based on 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 estimated 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.

Beginning in September 2006, UBS Securities Japan and a senior trader employed in the Tokyo office of UBS Securities Japan orchestrated a sustained, wide-ranging and systematic scheme to move Yen LIBOR in a direction favorable to the trader’s trading positions, defrauding UBS’s counterparties and harming others with financial products referencing Yen LIBOR who were unaware of the manipulation.  Between November 2006 and August 2009, the senior trader or a colleague of the senior trader endeavored to manipulate Yen LIBOR on at least 335 of the 738 trading days in that period, and during some periods on almost a daily basis.  Because of the large size of the senior trader’s positions, even slight moves of a fraction of a percent in Yen LIBOR could generate large profits.  For example, the senior trader once estimated that a 0.01 percent movement in the final Yen LIBOR fixing on a specific date could result in a $2 million profit for UBS.

According to the charging documents, UBS Securities Japan and the senior trader employed three strategies to execute the scheme: causing UBS to make false and misleading Yen LIBOR submissions to the BBA; causing cash brokerage firms, which purported to provide market information regarding LIBOR to panel banks, to disseminate false and misleading information about short-term interest rates for Yen, which those banks could and did rely upon in formulating their own LIBOR submissions to the BBA; and communicating with interest rate derivatives traders employed at three other Yen LIBOR panel banks in an effort to cause them to make false and misleading Yen LIBOR submissions to the BBA.

In entering into the NPA with UBS AG, the Justice Department considered information from UBS and from regulatory agencies in Switzerland and Japan demonstrating that in the last two years UBS has made important and positive changes in its management, compliance and training to ensure adherence to the law.  The Department received favorable reports from the FINMA and the Japan Financial Services Authority (JFSA) describing, respectively, progress that UBS has made in its approach to compliance and enforcement and UBS Securities Japan’s effective implementation of the remedial measures the JFSA imposed based on findings relating to the attempted manipulation of Yen benchmarks.

The investigation was conducted by the FBI’s Washington Field Office.  The prosecution is being handled by Deputy Chiefs Daniel Braun and William Stellmach and Trial Attorneys Thomas B.W. Hall and Sandra L. Moser, along with former Trial Attorney Luke Marsh, of the Criminal Division’s Fraud Section.  Assistant U.S. Attorneys Eric Glover and Liam Brennan of the U.S. Attorney’s Office for the District of Connecticut have provided valuable assistance.  The Criminal Division’s Office of International Affairs also provided assistance in this matter.

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 FCA, has played a major role in the investigation.  The SEC has also played a significant role in the LIBOR series of investigations and, among other efforts, has made an invaluable contribution to the investigation relating to UBS.  The Department of Justice also wishes to acknowledge and thank FINMA, the Japanese Ministry of Justice, and the JFSA.  Various agencies and enforcement authorities from other nations also have participated in different aspects of the broader investigation relating to LIBOR and other benchmark rates, and the Department is grateful for their cooperation and assistance.

Foreign Bribery Charges Unsealed Against Current and Former Executives of French Power Company

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Charges have been unsealed against one current and one former executive of the U.S. subsidiary of a French power and transportation company for their alleged participation in a scheme to pay bribes to foreign government officials, Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney for the District of Connecticut David Fein and Assistant Director in Charge Valerie Parlave of the FBI’s Washington Field Office announced today.

Frederic Pierucci, 45, a current company executive who previously held the position of vice president of global sales for the Connecticut-based U.S. subsidiary, was charged in an indictment unsealed yesterday in the District of Connecticut with conspiring to violate the Foreign Corrupt Practices Act (FCPA) and to launder money, as well as substantive charges of violating the FCPA and money laundering.  Pierucci, a French national, was arrested Sunday night at John F. Kennedy International Airport.

David Rothschild, 67, of Massachusetts, a former vice president of sales for the Connecticut-based U.S. subsidiary, pleaded guilty on Nov. 2, 2012, to a criminal information charging one count of conspiracy to violate the FCPA.  The charges against Rothschild and his guilty plea were unsealed today.

“Frederic Pierucci and David Rothschild allegedly used outside consultants to bribe foreign officials in Indonesia in exchange for lucrative power contracts,” said Acting Assistant Attorney General Raman.  “Stamping out foreign bribery is a Justice Department priority, and we are determined to continue our vigorous enforcement of the Foreign Corrupt Practices Act.”

“As alleged, this investigation has revealed a corrupt scheme to secure valuable contracts by bribing government officials in Indonesia,” said U.S. Attorney Fein.  “Corrupt payments to government officials erode public confidence in the global marketplace, and these charges demonstrate our commitment to hold people responsible for violating the FCPA.”

“Anyone who still believes that foreign bribery is an acceptable business practice should take a hard look at the charges against these executives.  There is no place for bribery in any business model or corporate culture,” said Assistant Director in Charge Parlave.  “Along with the Department of Justice, international law enforcement partners, and other U.S. federal agencies, the FBI is committed to investigating corrupt backroom deals that threaten our global commerce.”

According to the charges, Pierucci and Rothschild, together with others, paid bribes to officials in Indonesia, including a member of Indonesian Parliament and high-ranking members of Perusahaan Listrik Negara (PLN), the state-owned and state-controlled electricity company in Indonesia, in exchange for those officials’ assistance in securing a contract for the company to provide power-related services for the citizens of Indonesia, known as the Tarahan project.  The charges allege that, in order to conceal the bribes, the defendants retained two consultants purportedly to provide legitimate consulting services on behalf of the power company and its subsidiaries in connection with the Tarahan project.  In reality, however, the primary purpose for hiring the consultants was allegedly to use the consultants to pay bribes to Indonesian officials.

The first consultant retained by the defendants allegedly received hundreds of thousands of dollars into his Maryland bank account to be used to bribe the member of Parliament, according to the charges.  The consultant then allegedly transferred the bribe money to a bank account in Indonesia for the benefit of the official.  According to court documents, emails between Pierucci, Rothschild and their co-conspirators discuss in detail the use of the first consultant to funnel bribes to the member of Parliament and the influence that the member of Parliament could exert over the Tarahan project.  However, when Pierucci and others determined that the first consultant was not effectively bribing key officials at PLN, they allegedly retained the second consultant to accomplish that purpose.  The charges allege that the power company deviated from its usual practice of paying consultants on a pro-rata basis in order to make a much larger up-front payment to the second consultant so that the consultant could “get the right influence.”  An employee at the power company’s subsidiary in Indonesia sent an e-mail to Pierucci and others asking them to finalize the consultancy agreement with the front-loaded payments but stated that in the meantime the employee would give his word to a high-level official at PLN, according to the charges.

The conspiracy to commit violations of the FCPA count carries a maximum penalty of five years in prison and a fine of the greater of $250,000 or twice the value gained or lost.  The substantive FCPA counts each carry a maximum penalty of five years in prison and a fine of the greater of $100,000 or twice the value gained or lost.  The conspiracy to commit money laundering count carries a maximum penalty of 20 years in prison and a fine of the greater of $500,000 or twice the value of the property involved in the transaction.  The substantive money laundering counts each carry a maximum penalty of 20 years in prison and a fine of the greater of $500,000 or twice the value of the property involved in the transaction.

An indictment is merely an accusation, and defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt.

The case is being prosecuted by Trial Attorney Daniel S. Kahn of the Criminal Division’s Fraud Section and Assistant U.S. Attorney David E. Novick of the District of Connecticut.  The case is being investigated by FBI agents who are part of the Washington Field Office’s dedicated FCPA squad, with assistance from the Meriden, Conn., Resident Agency of the FBI.  Significant assistance was provided by the Criminal Division’s Office of International Affairs, and the department has also worked closely with its law enforcement counterparts in Indonesia at the Komisi Pemberantasan Korupsi (Corruption Eradication Commission) and deeply appreciates KPK’s assistance in this matter.

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