Tag Archives: Financial Fraud Enforcement Task Force

Two Former Rabobank Traders Indicted for Alleged Manipulation of U.S. Dollar, Yen Libor Interest Rates

Posted on by
Two former Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank) derivative traders – including the bank’s former Global Head of Liquidity & Finance in London – have been charged in a superseding indictment for their alleged roles in a scheme to manipulate the U.S. Dollar (USD) and Yen London InterBank Offered Rate (LIBOR), a benchmark interest rate to which trillions of dollars in interest rate contracts were tied, the Justice Department announced today.  Six former Rabobank employees have now been charged in the Rabobank LIBOR investigation.

Assistant Attorney General Leslie R. Caldwell 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 Andrew G. McCabe of the FBI’s Washington Field Office made the announcement.

Earlier today, a federal grand jury in the Southern District of New York returned a superseding indictment charging Anthony Allen, 43, of Hertsfordshire, England; and Anthony Conti, 45, of Essex, England, with conspiracy to commit wire fraud and bank fraud and with substantive counts of wire fraud for their participation in a scheme to manipulate the USD and Yen LIBOR rate in a manner that benefitted their own or Rabobank’s  financial positions in derivatives that were linked to those benchmarks.

The indictment also charges Tetsuya Motomura, 42, of Tokyo, Japan, and Paul Thompson, 48, of Dalkeith, Australia, who were charged in a prior indictment with Paul Robson, a former Rabobank LIBOR submitter.  In addition to adding as defendants Allen and Conti, the superseding indictment alleges a broader conspiracy to manipulate both the USD LIBOR and the Yen LIBOR.

Robson and Takayuki Yagami, a former Rabobank derivatives trader, each pleaded guilty earlier this year to one count of conspiracy in connection with their roles in the scheme.

“Today, we have charged two more members of the financial industry with influencing Dollar LIBOR and Yen LIBOR to gain an illegal advantage in the market, unfairly benefitting their own trading positions in financial derivatives,” said Assistant Attorney General Caldwell.  “LIBOR is a key benchmark interest rate that is relied upon to be free of bias and self-dealing, but the conduct of these traders was as galling as it was greedy.  Today’s charges are just the latest installment in the Justice Department’s industry-wide investigation of financial institutions and individuals who manipulated global financial rates.”

“With today’s charges against Messrs. Allen and Conti, we continue to reinforce our message to the financial community that we will not allow the individuals who perpetrate these crimes to hide behind corporate walls,” said Deputy Assistant Attorney General Snyder.  “This superseding indictment, with its charges against Mr. Allen, makes an especially strong statement to managers in financial institutions who devise schemes to undermine fair and open markets but leave the implementation – and often the blame – with their subordinates.”

“With today’s indictments the FBI’s investigation into Rabobank’s manipulation of LIBOR benchmark rates expands in scope to include the U.S. Dollar,” said Assistant Director in Charge McCabe. “I would like to thank the special agents, forensic accountants, and analysts, as well as the prosecutors who have worked to identify and stop those who hide behind complex corporate and securities fraud schemes.”

According to the superseding indictment, at the time relevant to the charges, LIBOR was an average interest rate, calculated based on submissions from leading banks around the world, reflecting the rates those banks believed they would be charged if borrowing from other banks.   LIBOR was published by the British Bankers’ Association (BBA), a trade association based in London.  LIBOR was calculated for 10 currencies at 15 borrowing periods, known as maturities, ranging from overnight to one year.  The published LIBOR “fix” for U.S. Dollar and Yen currency for a specific maturity was the result of a calculation based upon submissions from a panel of 16 banks, including Rabobank.

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.

Rabobank entered into a deferred prosecution agreement with the Department of Justice on Oct. 29, 2013, and agreed to pay a $325 million penalty to resolve violations arising from Rabobank’s LIBOR submissions.

According to allegations in the superseding indictment, Allen, who was Rabobank’s Global Head of Liquidity & Finance and the manager of the company’s money market desk in London, put in place a system in which Rabobank employees who traded in derivative products linked to USD and Yen LIBOR regularly communicated their trading positions to Rabobank’s LIBOR submitters, who submitted Rabobank’s LIBOR contributions to the BBA.  Motomura, Thompson, Yagami and other traders entered into derivative contracts containing USD or Yen LIBOR as a price component and they asked Conti, Robson, Allen and others to submit LIBOR contributions consistent with the traders’ or the bank’s financial interests, to benefit the traders’ or the banks’ trading positions.  Conti, who was based in London and Utrecht, Netherlands, served as Rabobank’s primary USD LIBOR submitter and at times acted as Rabobank’s back-up Yen LIBOR submitter.  Robson, who was based in London, served as Rabobank’s primary submitter of Yen LIBOR.  Allen, in addition to supervising the desk in London and money market trading worldwide, occasionally acted as Rabobank’s backup USD and Yen LIBOR submitter.  Allen also served on a BBA Steering Committee that provided the BBA with advice on the calculation of LIBOR as well as recommendations concerning which financial institutions should sit on the LIBOR contributor panel.

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

The investigation is being conducted by special agents, forensic accountants and intelligence analysts in the FBI’s Washington Field Office.  The prosecution is being handled by Senior Litigation Counsel Carol L. Sipperly and Trial Attorney Brian R. Young of the Criminal Division’s Fraud Section and Trial Attorney Michael T. Koenig of the Antitrust Division.  The Criminal Division’s Office of International Affairs has provided assistance in this matter.

The Justice Department expresses its appreciation for the assistance provided by various enforcement agencies in the United States and abroad.  The Commodity Futures Trading Commission’s Division of Enforcement referred this matter to the department and, along with the U.K. Financial Conduct Authority, has played a major role in the LIBOR investigation.  The Securities and Exchange Commission also has played a significant role in the LIBOR series of investigations, and the department expresses its appreciation to the United Kingdom’s Serious Fraud Office for its assistance and ongoing cooperation.   The department has worked closely with the Dutch Public Prosecution Service and 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.

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.com [external link].

Former Rabobank LIBOR Submitter Pleads Guilty for Scheme to Manipulate Yen Libor

Posted on by

A former Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank) Japanese Yen London InterBank Offered Rate (LIBOR) submitter pleaded guilty today for his role in a conspiracy to commit wire and bank fraud by manipulating Rabobank’s Yen LIBOR submissions to benefit trading positions.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Deputy Assistant Attorney General Brent Snyder of the Justice Department’s Antitrust Division and Acting Assistant Director in Charge Timothy A. Gallagher of the FBI’s Washington Field Office made the announcement.
Paul Robson, a citizen of the United Kingdom, appeared before United States District Judge Jed S. Rakoff in the Southern District of New York and pleaded guilty to count one of a 15-count indictment returned by a federal grand jury in the Southern District on April 28, 2014.    Sentencing is scheduled for June 9, 2017.
“ Paul Robson is the second employee at Rabobank, one of the world’s largest banks, to plead guilty to participating in a global fraud scheme,” said Assistant Attorney General Caldwell.  “The scope of the fraud was massive, but the scheme was simple.  By illegally influencing the LIBOR rates, Robson and his coconspirators rigged the markets to ensure that their trades made money.  Robson’s conviction demonstrates the Department of Justice’s continued resolve to hold individuals and institutions accountable for their involvement in fraud in the financial markets.”
“Today’s guilty plea demonstrates our continuing resolve to prosecute those who fraudulently manipulated the LIBOR rate for their own personal benefit and, in doing so, undermined free and fair markets,” said Deputy Assistant Attorney General Snyder.
“Fraudulently manipulating the LIBOR has far reaching effects on international financial markets and such criminal activity will not be tolerated,” said Acting Assistant Director in Charge Gallagher.    “The Washington Field Office has committed significant time and resources including the expertise of Special Agents, forensic accountants and analysts to investigate this case along with our Department of Justice colleagues.    While the crimes committed are complex, their expertise demonstrates our ability to bring justice to those that choose to commit these crimes.”
Robson, along with former Rabobank Yen LIBOR derivatives traders Paul Thompson, of Australia, and Tetsuya Motomura, of Japan, was charged with conspiracy to commit wire and bank fraud as well as substantive counts of wire fraud.    The indictment also alleges that the conspiracy involved numerous additional, unnamed individuals and entities.    Among those individuals and entities are:

Takayuki Yagami (described in the indictment as Trader-R), a Japanese national and former Rabobank trader who pleaded guilty on June 10, 2014, in the Southern District of New York to one count of conspiracy to commit wire and bank fraud for his involvement in the conspiracy alleged in the indictment; and

Lloyds Banking Group plc (LBG), a U.K.-based bank that, as part of a deferred prosecution agreement filed in the United States District Court for the District of Connecticut on July 28, 2014, admitted wrongdoing in connection with the alleged conspiracy’s overt acts, and agreed to pay an $86 million penalty.

According to court documents, 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 valued at approximately $450 trillion.
At the time relevant to the charges, LIBOR was published by the British Bankers’ Association (BBA), a trade association based in London.    LIBOR was calculated for 10 currencies at 15 borrowing periods, known as maturities, ranging from overnight to one year.    The published LIBOR “fix” for Yen LIBOR at a specific maturity is the result of a calculation based upon submissions from a panel of 16 banks, including Rabobank.
Rabobank entered into a deferred prosecution agreement with the Department of Justice on Oct. 29, 2013, and agreed to pay a $325 million penalty to resolve violations arising from Rabobank’s LIBOR submissions.
According to court documents, Robson worked as a senior trader at Rabobank’s Money Markets and Short Term Forwards desk in London and also served as Rabobank’s primary submitter of Yen LIBOR to the BBA; Thompson was Rabobank’s head of Money Market and Derivatives Trading Northeast Asia and worked in Singapore; Motomura was a senior trader at Rabobank’s Tokyo desk who supervised money market and derivative traders; and Yagami worked as a senior trader at Rabobank’s Money Market/FX Forwards desks in Tokyo and elsewhere in Asia.
Robson’s main role in the conspiracy was to submit Yen LIBOR rates at the requests of traders, including Thompson, Motomura and Yagami, who entered into derivatives contracts containing Yen LIBOR as a price component .    T he profit and loss that flowed from those contracts was directly affected by the relevant Yen LIBOR on certain dates.    If the relevant Yen LIBOR moved in the direction favorable to the defendants’ positions, Rabobank and the defendants benefitted at the expense of the counterparties.    When LIBOR moved in the opposite direction, the defendants and Rabobank stood to lose money to their counterparties.
As alleged in court filings, from about May 2006 to at least January 2011, the four defendants, a Yen LIBOR submitter at LBG, and others agreed to make false and fraudulent Yen LIBOR submissions for the benefit of selected trading positions.    According to the allegations, sometimes Robson submitted rates at a specific level requested by a co-defendant or other traders, and at other times Robson made a higher or lower Yen LIBOR submission consistent with the direction requested by a co-defendant or other traders.
For example, according to court filings, on Sept. 21, 2007, Yagami asked Robson by email, “where do you think today’s libors are?    If you can I would like 1mth higher today.” Robson responded, “bookies reckon .85,” to which Yagami replied, “I have some fixings in 1mth so would appreciate if you can put it higher mate.” Robson answered, “no prob mate let me know your level.” After Yagami asked for “0.90% for 1mth,” Robson confirmed, “sure no prob[ ] I’ll probably get a few phone calls but no worries mate… there’s bigger crooks in the market than us guys!”
Robson admitted that he accommodated the requests of his co-defendants and other traders.    For example, on Sept. 21, 2007, after Robson allegedly received a request from Yagami for a high one-month Yen LIBOR, Rabobank submitted a one-month Yen LIBOR rate of 0.90, which was seven basis points higher than the previous day and five basis points above where Robson said that “bookies” predicted it, and which moved Rabobank’s submission from the middle to the highest of the panel.
According to court documents, the defendants were also aware that they were making false or fraudulent Yen LIBOR submissions.    For example, on May 10, 2006, Robson admitted in an email to Yagami that “it must be pretty embarrasing to set such a low libor.   I was very embarrased to set my 6 mth – but wanted to help thomo [Thompson].   Tomorrow it will be more like 33 from me.” At times, Robson referred to the submissions that he submitted on behalf of his co-defendants as “ridiculously high” and “obscenely high,” and acknowledged that his submissions would be so out of line with the other Yen LIBOR panel banks that he might receive a phone call about them from the BBA or Thomson Reuters.
On numerous occasions, Robson also passed along such requests to the LBG submitter, who altered LBG’s Yen LIBOR submission accordingly if doing so did not adversely affect selected trading positions at LBG.    Likewise, the LBG setter sent requests to Robson and he generally altered Rabobank’s Yen LIBOR to satisfy the requests.    For example, on July 28, 2006, Robson wrote to the LBG submitter: “morning skipper…..will be setting an obscenely high 1m again today…poss 38 just fyi.” The LBG submitter 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.    As the LBG submitter explained, according to court documents filed in connection with Rabobank’s deferred prosecution agreement, to other LBG submitters, “We usually try and help each other out…but only if it suits.”
The charges in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
The investigation is being conducted by special agents, forensic accountants, and intelligence analysts in the FBI’s Washington Field Office.    The prosecution is being handled by Senior Litigation Counsel Carol L. Sipperly and Trial Attorney Brian R. Young of the Criminal Division’s Fraud Section, and Trial Attorney Michael T. Koenig of the Antitrust Division.    The Criminal Division’s Office of International Affairs has provided assistance in this matter.
The Justice Department expresses its appreciation for the assistance provided by various enforcement agencies in the United States and abroad.    The Commodity Futures Trading Commission’s Division of Enforcement referred this matter to the department and, along with the U.K. Financial Conduct Authority, has played a major role in the LIBOR investigation.    The Securities and Exchange Commission also has played a significant role in the LIBOR series of investigations, and the department expresses its appreciation to the United Kingdom’s Serious Fraud Office for its assistance and ongoing cooperation.      The department has worked closely with the Dutch Public Prosecution Service and 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.
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.com.

 

Antitrust Division Increasing Procurement Fraud Footprint Once Again

Posted on by

The Antitrust Division announced that a former owner and operator of a Florida-based airline fuel supply service company was sentenced today to serve 50 months in prison for participating in a scheme to defraud Illinois-based Ryan International Airlines, the Department of Justice announced.

This is a legacy case reassigned from the shuttered Atlanta Field Office suggesting a successful and a smooth transition of its assignment to the Washington 1 Criminal Office (formerly the National Criminal Enforcement Section).    For any tea leaf readers, AAG Bill Baer’s comments in this press release (reprinted below) suggest renewed focus by the Antitrust Division into procurement fraud and an increasing willingness to open, investigate and charge matters that involve non Title 15 U.S.C Section 1 offenses in all types of procurements.  The “tell” here is subtle, but it is very significant.

 Baer’s quote today:

 “Awarding government contracts in exchange for payoffs is a crime the Antitrust Division takes seriously,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.  “Today’s sentence reaffirms the division’s commitment to vigorously prosecute individuals who engage in this behavior.”

If you know the history of Title 18 procurement prosecutions, Baer’s commitment to bringing future procurement fraud cases is significant.  The Antitrust Division was a significant player during the Bush years’ National Procurement Fraud Task Force.  Besides domestic kickback and other Title 18 cases, the Division brought many overseas contingency operations (then “WarZone”) prosecutions for bidding corruption and grant fraud.  In fact, the Division had wide berth to investigate and prosecute cases that involved “corruption of the bidding or award process.”  This was a wider mandate than simply bringing cases of horizontal collusion among competitors.  The National Procurement Fraud Task Force was incorporated into the Financial Fraud Enforcement Task Force early in the Obama administration and resources were reallocated to new enforcement priorities in the wake of the financial crisis in 2008.  As everyone viewed their new enforcement mission through a financial crimes prism, the focus of the Antitrust Division returned to a more restrictive view of its mission, i.e., bringing Sherman Act cases under 15 U.S.C. Section 1.  At the height of this limitation, for an investigation to receive authority to be opened, it had to include evidence that on its face could be construed classic horizontal bid rigging conduct. 

It is beyond the scope of this blog entry, but there is much that goes into the press release process that provides insights into enforcement agency gestalt, resource allocation, drive to open cases, and willingness to keep cases open and to charge cases, particularly marginal ones.  A press release also can provide insight into the AAG’s mindset and, sometimes, even more importantly from an agency effectiveness perspective, what people reporting to the AAG think his mindset is.

Today’s quote from AAG Baer is instructive.  It is in an active, broad and forceful voice. In a sweeping statement it links “kickbacks” and “the Antitrust Division” in the same sentence and suggests direct Antitrust Division intervention.  Most importantly, it suggests an interest in crimes involving the payment of kickbacks to award contracts (a Title 18 offense where a Section 1 agreement between competitors is usually not present).  It then states that when offenses like these are committed they will be “tak[en] seriously…[and will be vigorously prosecut[ed]” by the Antitrust Division.

Contrast this with Baer’s statement in September 2013 regarding another case on the same investigation:

“Today’s sentence should serve as a stiff deterrent to executives who might be tempted to solicit a kickback from their supplies in exchange for their honest services,” said Bill Baer, Assistant Attorney General in charge of the Antitrust Division. “The Antitrust Division is committed to ensuring that contracts are won based on competition and not collusion.”

The 2013 AAG quote literally suggests that deterrence is provided by the length of this sentence rather than by any threat of immediate action by the Antitrust Division.  It then links to a general principle that references the blanket requirement imposed earlier in the Administration that a horizontal agreement between competitors had to be present to justify resources.  It also should be recognized that “collusion” is a primarily a term of art within the Antitrust Division directed at collusion among competitors rather than collusion with a contract officer. 

Baer’s current statement is forward-looking and reaffirms that procurement fraud as a Division priority.   For all intents and purposes, AAG Baer has indicated to line attorneys and the outside world (most importantly, investigative agencies) that the Antitrust Division is again open for cases of “corruption of the bidding or award process.”   This strongly suggests a move away from an exclusive focus on Invitation for Bids (IFB) contracting to the massively larger pie of “everything else” including cost plus contracts, prime vendor contracts, sole source contracts and even the issuance of grants.

To advise clients regarding risk analysis, GeyerGorey LLP has been tracking this progression because in many hidden, but key areas, the Antitrust Division provides disproportionate value to the government’s procurement fraud mission by supporting the agency mission, helping resource investigations and by providing continuity to long investigations and program management.  This message has been received loud and clear by Antitrust Division rank and file and it is in the process of being received by the FBI, IRS-CID and 38 Inspectors General who immediately recognize that they can bring cases to Antitrust that require extensive resourcing or which have been declined.   With history as a guide, we expect procurement fraud investigation openings to increase substantially and we expect current investigations to be prolonged or rekindled as resources are reallocated with Antitrust Division resources.  


++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

 

Former airline fuel owner sentenced in fraud scheme

Executive Sentenced to Serve 50 Months in Prison

A former owner and operator of a Florida-based airline fuel supply service company was sentenced today to serve 50 months in prison for participating in a scheme to defraud Illinois-based Ryan International Airlines, the Department of Justice announced.

Sean E. Wagner, the former owner and operator of Aviation Fuel International Inc. (AFI), was sentenced in the U.S. District Court for the Southern District of Florida in West Palm Beach to serve 50 months in prison and to pay $202,856 in restitution.  On Aug. 13, 2013, a grand jury returned an indictment against Wagner and AFI, charging them for their roles in a conspiracy to defraud Ryan. On March 6, 2014, Wagner pleaded guilty to one count of conspiracy to commit honest services wire fraud.   According to court documents, from at least as early as December 2005 through at least August 2009, Wagner and others at AFI made kickback payments to Wayne Kepple, a former vice president of ground operations for Ryan, totaling more than $200,000 in the form of checks, wire transfers, cash and gift cards in exchange for awarding business to AFI.  The charges against AFI were dismissed on Feb. 21, 2014.

Ryan provided air passenger and cargo services for corporations, private individuals and the U.S. government – including the U.S. Department of Defense and the U.S. Department of Homeland Security.

“Awarding government contracts in exchange for payoffs is a crime the Antitrust Division takes seriously,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.  “Today’s sentence reaffirms the division’s commitment to vigorously prosecute individuals who engage in this behavior.”

“This sentencing highlights the continuing commitment of the DCIS to thoroughly investigate and bring to justice any companies or individuals who engage in fraudulent and corrupt practices that undermine the integrity of Department of Defense procurement programs,” said John F. Khin, Special Agent in Charge of the Defense Criminal Investigative Service Southeast Field Office.

As a result of the ongoing investigation, five individuals, including Wagner, have pleaded guilty and have been ordered to serve sentences ranging from 16 to 87 months in prison and to pay more than $780,000 in restitution.  An additional individual has pleaded guilty to obstructing the investigation and is currently awaiting sentencing.

The investigation is being conducted by the Antitrust Division’s Washington Criminal I office and the U.S. Department of Defense’s Office of Inspector General’s Defense Criminal Investigative Service, with assistance from the U.S. Attorney’s Office for the Southern District of Florida.

THREE FORMER RABOBANK TRADERS CHARGED WITH MANIPULATING YEN LIBOR

Posted on by

WASHINGTON — Two former Coöperatieve Centrale  Raiffeisen-Boerenleenbank B.A. (Rabobank) Japanese Yen derivatives traders and  the trader responsible for setting Rabobank’s Yen London InterBank Offered Rate  (LIBOR) were charged as part of the ongoing criminal investigation into the  manipulation of LIBOR.

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.

Earlier today, a U.S. Magistrate  Judge sitting in the Southern District of New York signed a criminal complaint  charging Paul Robson of the United Kingdom, Paul Thompson of Australia, and Tetsuya  Motomura of Japan with conspiracy to commit wire fraud and bank fraud as well  as substantive counts of wire fraud.  All  are former employees of Rabobank, which on Oct. 29, 2013, entered into a  deferred prosecution agreement with the Department of Justice as part of the  department’s LIBOR investigation and agreed to pay a $325 million penalty.  Each defendant faces up to 30 years in prison  for each count upon conviction.

“Today, less than three months  after Rabobank admitted its involvement in the manipulation of LIBOR, we have charged  three of its senior traders with participating in this global fraud scheme,”  said Acting Assistant Attorney General Raman.  “As alleged, these three  traders – working from Japan, Singapore and the U.K. – deliberately submitted  what they called ‘obscenely high’ or ‘silly low’ LIBOR rates in order to  benefit their own trading positions.  The illegal  manipulation of this cornerstone benchmark rate undermines the integrity  of the markets; it harms those who are relying on what they expect to be an  honest benchmark; and it has ripple effects that extend far beyond the trading  at issue here.  The Justice Department has now charged eight individuals  and reached resolutions with four multi-national banks as part of our ongoing  and industry-wide LIBOR probe and, alongside our law enforcement and regulatory  partners both here and abroad, we remain committed to continuing to root out  this misconduct.”

“The  conspirators charged today conspired to rig the interest rates used by  derivative products throughout the financial industry to benefit their own  trading books,” said Deputy Assistant Attorney General Snyder. “Today’s charges  demonstrate the department’s commitment to hold individuals accountable for  schemes that undermine the integrity of markets that rely on competition to  flourish.”

“Manipulation  of benchmark rates that are routinely referenced by financial products around  the world erodes the integrity of our financial markets,” said Assistant  Director in Charge Parlave.  “The charges  against these individuals represent another step in our ongoing efforts to find  and stop those who hide behind complex corporate and securities fraud schemes.  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 the complaint,  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 is published by the British Bankers’ Association (BBA), a trade  association based in London.  At the time  relevant to the criminal complaint, LIBOR was calculated for 10 currencies at  15 borrowing periods, known as maturities, ranging from overnight to one  year.  The published LIBOR “fix” for Yen  LIBOR at a specific maturity is the result of a calculation based upon  submissions from a panel of 16 banks, including Rabobank.

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.

According to allegations in the complaint,  all three defendants traded in derivative products that referenced Yen  LIBOR.  Robson worked  as a senior trader at Rabobank’s Money Markets and Short Term Forwards desk in  London; Thompson was Rabobank’s head of Money Market and Derivatives Trading  Northeast Asia and worked in Singapore; and Motomura was a senior trader at  Rabobank’s Tokyo desk who supervised money market and derivative traders employed  at Rabobank’s Tokyo desk.  In addition to  trading derivative products that referenced Yen LIBOR, Robson also served as  Rabobank’s primary submitter of Yen LIBOR to the BBA.

Robson, Thompson and Motomura  each entered into derivatives contracts containing Yen LIBOR as a price  component.  The  profit and loss that flowed from those contracts was directly affected by the  relevant Yen LIBOR on certain dates.  If  the relevant Yen LIBOR moved in the direction favorable to the defendants’  positions, Rabobank and the defendants benefitted at the expense of the  counterparties.   When LIBOR moved in the opposite direction, the defendants and  Rabobank stood to lose money to their counterparties.

The complaint alleges that from about May 2006 to at least  January 2011, Robson, Thompson, Motomura and others agreed to make false and  fraudulent Yen LIBOR submissions for the benefit of their trading positions.  According to the allegations, sometimes  Robson submitted rates at a specific level requested by a co-defendant and  consistent with the co-defendant’s trading positions.  Other times, Robson made a higher or lower  Yen LIBOR submission consistent with the direction requested by a co-defendant  and consistent with the co-defendant’s trading positions.  On those occasions, Robson’s manipulated Yen  LIBOR submissions were to the detriment of, among others, Rabobank’s  counterparties to derivative contracts.

In addition to allegedly manipulating Rabobank’s Yen LIBOR  submissions, Robson, on occasion and on behalf of one or more co-defendants,  coordinated his Yen LIBOR submission with the trader responsible for making Yen  LIBOR submissions at another Yen LIBOR panel bank.  At times, Robson allegedly submitted Yen  LIBOR at a level requested by the other trader, and, at other times, that trader  submitted Yen LIBOR at a level requested by Robson.

As alleged  in the complaint, Thompson, Motomura and another Rabobank trader described in  the complaint as Trader-R made requests of Robson for Yen LIBOR submissions  through electronic chats and email exchanges.   For example, on May 19, 2006, after Thompson informed Robson that his  net exposure for his 3-month fixes was 125 billion Yen, he requested by email  that Robson “sneak your 3m libor down a cheeky 1 or 2 bp” because “it will make  a bit of diff for me.”  On or about May  19, 2006, Robson responded: “No prob mate I mark it low.”

On Sept. 21, 2007, Trader-R  asked Robson by email, “where do you think today’s libors are?  If you can I would like 1mth higher  today.”  Robson responded, “bookies  reckon .85,” to which Trader-R replied, “I have some fixings in 1mth so would  appreciate if you can put it higher mate.”   Robson answered, “no prob mate let me know your level.”  After Trader-R asked for “0.90% for 1mth,”  Robson confirmed, “sure no prob[ ] I’ll probably get a few phone calls but no  worries mate… there’s bigger crooks in the market than us guys!”

As another example, on Aug. 4,  2008, in a Bloomberg chat, Motomura asked Robson, “Please set today’s 6mth  LIBOR at 0.96 I have chunky fixing.”  To this, Robson responded, “no  worries mate.”
The complaint alleges that  Robson accommodated the requests of his co-defendants.  For example, on Sept. 21, 2007, after Robson  received a request from Trader-R for a high 1 month Yen LIBOR, Rabobank  submitted a 1-month Yen LIBOR rate of 0.90, which was 7 basis points higher  than the previous day and 5 basis points above where Robson said that “bookies”  predicted it, and which moved Rabobank’s submission from the middle to the  highest of the panel.

According  to court documents, the defendants were also aware that they were making false  or fraudulent Yen LIBOR submissions.  For  example, on May 10, 2006, Robson admitted in an email that “it must be pretty  embarrasing to set such a low libor.  I  was very embarrased to set my 6 mth – but wanted to help thomo [Thompson].  tomorrow it will be more like 33 from  me.”  At times, Robson referred to the  submissions that he submitted on behalf of his co-defendants as “ridiculously  high” and “obscenely high,” and acknowledged that his submissions would be so  out of line with the other Yen LIBOR panel banks that he might receive a phone  call about them from the BBA or Thomson Reuters.

A criminal complaint is a formal  accusation of criminal conduct, not evidence.   A defendant is presumed innocent unless and until convicted.

The investigation is being  conducted by special agents, forensic accountants, and intelligence analysts in  the FBI’s Washington Field Office.  The  prosecution is being handled by Trial Attorneys Carol L. Sipperly, Brian Young  and Alexander H. Berlin of the Criminal Division’s Fraud Section, and Trial  Attorneys Ludovic C. Ghesquiere and Michael T. Koenig of the Antitrust  Division.  Former Deputy Chief Glenn Leon  and Senior Counsel Rebecca Rohr of the Criminal Division’s Fraud Section, along  with Assistant Chief Elizabeth Prewitt and Trial Attorneys Eric Schleef and  Richard Powers of the Antitrust Division, have also provided valuable  assistance.  The Criminal Division’s  Office of International Affairs has provided assistance in this matter as well.

The broader investigation  relating to LIBOR and other benchmark rates 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 Commodity Futures Trading  Commission’s Division of Enforcement referred this matter to the department  and, along with the U.K. Financial Conduct Authority, has played a major role  in the LIBOR investigation.  The department  has worked closely with the Dutch Public Prosecution Service and 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 series of investigations, 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.

RBS Securities Japan Ltd Sentenced for Manipulation of Yen Libor

Posted on by
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 .

NORTHERN CALIFORNIA REAL ESTATE INVESTOR PLEADS GUILTY TO BID RIGGING AT PUBLIC FORECLOSURE AUCTIONS

Posted on by

WASHINGTON — A Northern California real estate investor pleaded guilty today 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.

Kuo Hsuan “Chuck” Chang, of San Francisco, entered his guilty plea in  U.S. District Court for the Northern District of California in San  Francisco.  Felony charges were filed  against Chang on Oct. 9, 2013.

Chang is the 37th 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, Chang 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 County, Calif.  Chang 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 co-conspirators’ money that would have otherwise  gone to mortgage holders and others.  Chang is charged with participating in these conspiracies beginning  as early as October 2009 and continuing until about November 2010.

“The Antitrust Division will continue to vigorously prosecute  anticompetitive schemes that compromise local markets and cause financial harm  to consumers,” said Bill Baer, Assistant Attorney General in charge of the  Department of Justice’s Antitrust Division.   “Collusion at foreclosure auctions harmed both lenders and distressed  homeowners in an already struggling real estate market, and the conspirators  must be held accountable.”

As described in the charging document, 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 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, these 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.

“We urge anyone with information regarding fraudulent anticompetitive  practices at foreclosure auctions to contact the FBI or our partners at the  Antitrust Division,” said FBI San Francisco Special Agent in Charge David J.  Johnson.  “The FBI will continue to work with our law enforcement partners  and the community to root out and bring to justice those individuals who  undermine the real estate market and victimize legitimate consumers.”

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 charges against  Chang 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, Alameda and Contra Costa 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.html or call the FBI tip  line at 415-553-7400.

This case was 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 is 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

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

Posted on by

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.

 

ICAP Brokers Face Felony Charges for Alleged Long-Running Manipulation of LIBOR Interest Rates

Posted on by
Two former derivatives brokers and a former cash broker employed by London-based brokerage firm ICAP were charged as part of the ongoing criminal investigation into the manipulation of the London Interbank Offered Rate (LIBOR), the Justice Department announced today.

Darrell Read, who resides in New Zealand, and Daniel Wilkinson and Colin Goodman, both of England, were charged with conspiracy to commit wire fraud and two counts of wire fraud in a criminal complaint unsealed in Manhattan federal court earlier today.  They each face a maximum penalty of 30 years in prison for each count upon conviction.

“By allegedly participating in a scheme to manipulate benchmark interest rates for financial gain, these defendants undermined the integrity of the global markets,” said Attorney General Eric Holder. “They were supposed to be honest brokers, but instead, they put their own financial interests ahead of that larger responsibility.  And as a result, transactions and financial products around the world were compromised, because they were tied to a rate that was distorted due to the brokers’ dishonesty.  These charges underscore the Justice Department’s determination to hold accountable all those whose conduct threatens the integrity of our financial markets.”

“These three men are accused of repeatedly and deliberately spreading false information to banks and investors around the world in order to fraudulently move the market and help their client fleece his counterparties,” said Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division.  “Our criminal investigation of the manipulation of LIBOR by some of the largest banks in the world has led us from New York to London, to Tokyo, and other financial hubs around the globe.  These important charges are just the latest law-enforcement action in the Criminal Division and Antitrust Division’s global LIBOR investigation, and reflect the Department’s continued dedication to detecting, and prosecuting, financial fraudsters who affect U.S. markets, whether they work at a bank, or a brokerage, and whether they carry out their fraud from a desk in the United States, or abroad.”

“The complaint unsealed today charges Colin Goodman, Daniel Wilkinson and Darrell Read for conspiring to manipulate benchmark interest rates that determined the profitability of their client’s trades,” said Scott D. Hammond, Deputy Assistant Attorney General for the Antitrust Division’s criminal enforcement program.  “In exchange for bigger bonus checks, the three defendants undermined financial markets around the world by compromising the integrity of globally used interest rate benchmarks.  The Department continues to demonstrate its commitment to protecting the interest of American citizens in free and fair financial markets.”

“Corporate and securities fraud involving the manipulation of these rates causes a worldwide impact on trading positions and erodes the integrity of the market and confidence in Wall Street,” said Assistant Director in Charge Valerie Parlave of the FBI’s Washington Field Office.  “Unraveling such complex financial schemes is difficult and time consuming.  Today’s charges are the result of the hard work of the FBI special agents and forensic accountants who dedicated significant time and resources to investigating this case.”

According to the criminal complaint, 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 is published by the British Bankers’ Association (BBA), a trade association based in London.  At the time relevant to the criminal complaint, LIBOR was calculated for 10 currencies at 15 borrowing periods, known as maturities, ranging from overnight to one year.  The published LIBOR “fix” 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.

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.

According to allegations in the criminal complaint filed in this case, between July 2006 and September 2010, Wilkinson was a desk director employed in the London office of ICAP, where he supervised a group of derivatives brokers – including Read – specializing in Yen-based financial products.  Generally, the desk’s clients were derivatives traders at large financial institutions, and the transactions brokered by Wilkinson, Read and others on the desk essentially consisted of bets between traders on the direction in which Yen LIBOR would move.  Between July 2006 and September 2009, the desk’s largest client was a senior trader at UBS (UBS Trader) in Tokyo, to whom Read spoke almost daily.  Because of the large size of the client’s trading positions, even slight moves of a fraction of a percent in Yen LIBOR could generate large profits.  For example, UBS Trader once told Read that a 0.01 percent – or one basis point – movement in the final Yen LIBOR fixing on a specific date could result in $3 million profit for his trading positions.  A significant part of both Read’s and Wilkinson’s compensation was tied to the brokerage fees generated by UBS Trader and paid to ICAP.

Goodman was a cash broker at ICAP’s London office during the relevant time period.  In addition to brokering cash transactions, Goodman distributed a daily email to individuals outside of ICAP, including derivatives traders at several large banks as well as those responsible for providing the BBA with LIBOR submissions at certain banks.  Goodman’s email contained what was termed his “SUGGESTED LIBORS,” purported predictions of where Yen LIBOR ultimately would fix each day across eight specified borrowing periods.  Read and Wilkinson, along with Goodman himself, often referred to Goodman as “lord libor.”

The complaint alleges that Read, Wilkinson and Goodman, together with UBS Trader, executed a sustained and systematic scheme to move Yen LIBOR in a direction favorable to UBS Trader’s trading positions.

According to the criminal complaint, the primary strategy employed by Read, Wilkinson and Goodman to execute the scheme was to use Goodman’s “SUGGESTED LIBORS” email to disseminate misinformation to Yen LIBOR panel banks in hopes that the banks would rely on the misinformation when making their own respective Yen LIBOR submissions to the BBA for inclusion in the published fix.  Rather than providing good faith predictions as to where Yen LIBOR would fix, Goodman instead often used his daily email to set forth predictions which benefitted UBS Trader’s trading positions.

Beginning in or about June 2007, Goodman was paid a bonus through the desk Wilkinson supervised, allegedly intended, at least in part, to reward Goodman for his role in their effort to influence and manipulate the published Yen LIBOR fix.

As a second strategy, Read and Wilkinson allegedly further agreed to contact interest rate derivatives traders and submitters employed at Yen LIBOR panel banks in an effort to cause them to make false and misleading submissions to the BBA at UBS Trader’s behest.

As alleged in the charging document, Read, Wilkinson, Goodman, UBS Trader, and other co-conspirators often executed their scheme through electronic chats and email exchanges.  For example, on June 28, 2007, in an email message, Read told Wilkinson: “DAN THIS IS GETTING SERIOUS [UBS TRADER] IS NOT HAPPY WITH THE WAY THINGS ARE PROGRESSING . . . CAN YOU PLEASE GET HOLD OF COLIN AND GET HIM TO SEND OUT 6 MOS LIBOR AT 0.865 AND TO GET HIS BANKS SETTING IT HIGH. THIS IS VERY IMPORTANT BECA– — USE [UBS TRADER] IS QUESTIONING MY (AND OUR) WORTH.”

The complaint alleges that the defendants were aware of the effects that Goodman’s false and fraudulent “SUGGESTED LIBORS” had on submissions by Yen LIBOR panel banks.  For example, on Nov. 20, 2008, Read asked UBS Trader, “you have a really big fix tonight I believe? if Colin sends out 6m at a more realistic level than 1.10 [%] i reckon [the two panel banks] will parrot him, it might mean 6m coming down a bit.” On the following day, Nov. 21, 2008, Goodman moved his suggestion for 6-month Yen LIBOR down by nine basis points.  The two other banks mirrored Goodman’s suggestion, moving their 6-month Yen LIBOR submissions down by nine basis points.

According to allegations in the complaint, Read counseled UBS Trader how to most effectively manipulate Yen LIBOR.  For example, UBS Trader told Read in a July 22, 2009, electronic chat that “11th aug is the big date…i still have lots of 6m fixings till the 10th.”   Read responded to UBS Trader, “if you drop [UBS’s] 6m dramatically on the 11th mate, it will look v fishy… .  I’d be v careful how you play it, there might be cause for a drop as you cross into a new month but a couple of weeks in might get people questioning you.”  UBS Trader replied, “don’t worry will stagger the drops…ie 5bp then 5bp,” and Read told UBS Trader, “ok mate, don’t want you getting into [expletive].”  UBS Trader again assured Read that UBS and two additional panel banks would stagger their drops in coordination, and Read concluded, “great the plan is hatched and sounds sensible.”

A criminal complaint is a formal accusation of criminal conduct, not evidence.  A defendant is presumed innocent unless and until convicted.

The investigation is being conducted by special agents, forensic accountants, and intelligence analysts of the FBI’s Washington Field Office.  The prosecution is being handled by Deputy Chief William Stellmach and Trial Attorney Sandra L. Moser of the Criminal Division’s Fraud Section and Trial Attorneys Eric Schleef and Kristina Srica of the Antitrust Division.  Trial Attorneys Alexander Berlin and Thomas B.W. Hall, Law Clerk Andrew Tyler, and Paralegal Specialist Kevin Sitarski of the Criminal Division’s Fraud Section, along with Assistant Chief Elizabeth Prewitt and Trial Attorney Richard Powers of the Antitrust Division, and former Trial Attorney Luke Marsh have also provided valuable assistance.  The Criminal Division’s Office of International Affairs has provided assistance in this matter as well.

The broader investigation relating to LIBOR and other benchmark rates 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 Commodity Futures Trading Commission’s Division of Enforcement referred this matter to the Department and, along with the U.K. Financial Conduct Authority, has played a major role in the investigation.  The Securities and Exchange Commission has also provided valuable assistance for which the Department is grateful.  The Department also expresses its appreciation to the United Kingdom’s Serious Fraud Office for its assistance and ongoing cooperation.  Various agencies and enforcement authorities from other nations are also participating in different aspects of the broader investigation, and the Department is grateful for their cooperation and assistance as well.

Finally, the Department acknowledges ICAP’s continuing cooperation in the Department’s ongoing investigation.

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.

Former Executive at Florida-Based Lender Processing Services Inc. Sentenced to Five Years in Prison for Role in Mortgage-Related Document Fraud Scheme

Posted on by
A former executive of Lender Processing Services Inc. (LPS) – a publicly traded company based in Jacksonville, Fla. – was sentenced today to serve five years in prison for her participation in a six-year scheme to prepare and file more than 1 million fraudulently signed and notarized mortgage-related documents with property recorders’ offices throughout the United States, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney for the Middle District of Florida Robert E. O’Neill, and Special Agent in Charge Michelle S. Klimt of the FBI Jacksonville Division.

Lorraine Brown, 56, of Alpharetta, Ga., was sentenced by Senior U.S. District Judge Henry Lee Adams Jr. in the Middle District of Florida. In addition to her prison term, Brown was sentenced to serve two years of supervised release and ordered to pay a fine of $15,000.   On Nov. 20, 2012, Brown pleaded guilty to conspiracy to commit mail and wire fraud.   

“Lorraine Brown will spend five years in prison for her central role in a scheme to fraudulently execute thousands of mortgage-related documents while our nation’s housing market was at its most vulnerable point in generations,” said Acting Assistant Attorney General Raman.  “The documents that were fraudulently produced under Brown’s direction were relied upon in court proceedings, including a significant number of foreclosure and bankruptcy matters. Today’s sentencing represents appropriate punishment for someone who sought to capitalize on the nation’s housing crisis.”

“Floridians were hard hit by the downturn in the real estate market,” said U.S. Attorney O’Neill.  “We will continue to pursue individuals like Brown who took advantage of consumers for personal gain and contributed to the financial crisis.  Prosecuting financial crimes remains a priority for our office.”

“The investigation of sophisticated mortgage and corporate fraud schemes continues to be a priority for the Federal Bureau of Investigation as such criminal activities have a significant economic impact on our community,” said Special Agent in Charge Klimt.

Brown was an executive at LPS and the chief executive of DocX LLC, which was a wholly-owned subsidiary of LPS, until it was closed down in early 2010.    DocX’s main clients were residential mortgage servicers, which typically undertake certain actions for the owners of mortgage-backed promissory notes.    Servicers hired DocX to, among other things, assist in creating and executing mortgage-related documents filed with recorders’ offices.

According to Brown’s plea agreement, employees of DocX, at the direction of Brown and others, began forging and falsifying signatures of authorized personnel on the mortgage-related documents that they had been hired to prepare and file with property recorders’ offices.    Only specific personnel at DocX were authorized by clients to sign the documents, but the documents were fraudulently notarized as if actually executed by authorized DocX employees.

According to plea documents, Brown implemented these signing practices at DocX to enable DocX and Brown to generate greater profit.   Specifically, DocX was able to create, execute and file larger volumes of documents using these signing and notarization practices.    To further increase profits, DocX also hired temporary workers to act as authorized signers.    These temporary employees worked for much lower costs and without the quality control represented by Brown to DocX’s clients.   Some of these temporary workers were able to sign thousands of mortgage-related instruments a day.   Between 2003 and 2009, DocX generated approximately $60 million in gross revenue.

After these documents were falsely signed and fraudulently notarized, Brown authorized DocX employees to file and record them with local county property records offices across the country.   Many of these documents were later relied upon in court proceedings, including property foreclosures and federal bankruptcy actions.   Brown admitted she understood that property recorders, courts, title insurers and homeowners relied upon the documents as genuine.

This case is being prosecuted by Trial Attorney Ryan Rohlfsen and Assistant Chief Glenn S. Leon of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Mark B. Devereaux of the U.S. Attorney’s Office for the Middle District of Florida.    This case was investigated by the FBI, with assistance from the state of Florida’s Department of Financial Services.

This case is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 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 more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants.

Northern California Real Estate Investor Agrees to Plead Guilty to Bid Rigging at Public Foreclosure Auctions

Posted on by

 

Investigation Has Yielded 27 Plea Agreements to Date

WASHINGTON — 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 Gilbert Chung of Burlingame, Calif. Chung is the 27th 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, Chung 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. Chung 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.

The department said Chung 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 January 2010 and continuing until about December 2010.

“The conspirators went to great lengths to suppress competition and prices at these foreclosure auctions,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The division will continue to vigorously enforce the antitrust laws and to prosecute those who violate them at the expense of distressed homeowners.”

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.

“Today’s charges are another example of our resolve to bring to justice those who engaged in fraudulent bid rigging and anticompetitive practices at foreclosure auctions,” said FBI Special Agent in Charge David J. Johnson of the San Francisco Field Office. “We continue our partnership with the Antitrust Division in aggressively pursuing individuals who participate in these criminal acts.”

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 victim 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 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 charges are part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 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 more than 10,000 financial fraud cases against nearly 15,000 defendants, including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.