Why it matters: This month, we look at a sampling of enforcement actions announced in recent weeks by agencies ranging from the DOJ and the SEC on the one hand to the CFTC and FINRA on the other. The actions cover a myriad of financial crimes, including insider trading, LIBOR manipulation and Medicare fraud. Read on for a recap.
Detailed discussion: What do tax evasion, AML violations, stock manipulation schemes (including a rare DPA for an individual), insider trading charges, LIBOR manipulation, and the Medicare Fraud Strike Force have in common? They all figured prominently in recently announced enforcement actions that caught our eye. We’ve sampled them for you here and linked to the relevant press releases if you want more details.
- On June 22, 2016, the DOJ announced that a former Credit Suisse banker pleaded guilty to conspiring with U.S. taxpayers and other Swiss bankers to defraud the United States. The DOJ said that the individual pleaded guilty to assisting U.S. taxpayers to conceal foreign accounts and evade U.S. taxes during his employment as a banker working for Credit Suisse AG on its North American desk. He faces a statutory maximum sentence of five years in prison as well as monetary penalties and restitution. See here to read the DOJ’s press release entitled “Former Swiss Banker Pleads Guilty to Conspiring with U.S. Taxpayers and Other Swiss Bankers to Defraud the United States.”
- On May 18, 2016, the Financial Industry Regulatory Authority (FINRA) announced that it had fined Raymond James & Associates $17 million and sanctioned/fined its former compliance officer for “widespread” AML violations. FINRA said that, due in part to rapid growth, the company failed to put in place adequate AML compliance programs and, as a result, missed numerous “red flags.” The former compliance officer was fined $25,000 and suspended for three months. See here to read the FINRA press release entitled “FINRA Fines Raymond James $17 Million for Systemic Anti-Money Laundering Compliance Failures.”
- On May 11, 2016, the DOJ announced that the former CEO of Majorca-based Absolute Capital Holdings Ltd. (Absolute Holdings) entered into a deferred prosecution agreement (DPA) with the DOJ pursuant to which he agreed to forfeit $8 million in profits allegedly derived from a fraud scheme conducted by fugitive hedge fund manager Florian Homm (Homm is accused of overseeing a stock manipulation scheme that caused investors to lose approximately $200 million). The DOJ said that primary to its decision to enter into the DPA with the former CEO were the facts that he agreed to voluntarily travel to the U.S. from Dubai (where he resides) to resolve the matter, and was taking full responsibility for the actions alleged in the criminal case in which he was charged with books and records violations under the Investment Advisors Act. The DOJ said that, under the DPA, the former CEO did not admit to any criminal liability or concede knowledge of any allegedly illegal acts by Homm and others at Absolute Capital. The DOJ confirmed that the DPA and payment of the financial penalty resolves the government’s investigation as to the former CEO and provides that it will not pursue him further in the stock manipulation scheme. See here to read the DOJ’s press release entitled “Former CEO of Investment Firm with Main Office in Spain to Pay $8 Million as Part of Agreement to Resolve Criminal Allegations.”
- On June 16, 2016, the SEC charged former SAP America software executive and three friends with insider trading. The SEC alleged that the software executive, a former global vice president at SAP America, and three close friends made more than $500,000 in illicit profits based on the executive’s illegal tip about SAP America’s upcoming merger with Concur Technologies. See here to read the SEC’s press release entitled “Software Executive and Three Friends Charged With Insider Trading.”
- On June 15, 2016, the SEC charged three hedge fund managers and a former government official in a $32 million insider trading scheme: The SEC alleged that two hedge fund managers and their source, a former FDA official, reaped unlawful profits of nearly $32 million for hedge funds investing in healthcare securities by deceptively obtaining confidential information from the FDA regarding the status of FDA approvals for drugs developed by prominent pharmaceutical companies. A third hedge fund manager working at the same investment advisory firm was also charged with falsely inflating assets in portfolios he managed via “asset mismarking,” yielding $6 million in extra fees. See here to read the SEC’s press release entitled “Hedge Fund Managers and Former Government Official Charged in $32 Million Insider Trading Scheme.”
Manipulation of London Interbank Offered Rate (LIBOR) and other bank lending rates:
- On June 2, 2016, the DOJ announced the indictment of two former Deutsche Bank employees on fraud charges in connection with LIBOR manipulation: The DOJ announced that the bank’s supervisor of the Pool Trading Desk in New York and a derivatives trader in London were indicted for their alleged roles in a “long-running” scheme to manipulate the U.S. Dollar and LIBOR. See here to read the DOJ’s press release entitled “Two Former Deutsche Bank Employees Indicted on Fraud Charges in Connection with Long-Running Manipulation of Libor.”
- On May 25, 2016, the Commodity Futures Trading Commission (CFTC) ordered Citigroup and its Japanese affiliates to pay $175 million in penalties for attempted Yen LIBOR and Euroyen TIBOR rates. The CFTC also found Citigroup and its Japanese affiliates liable for false reporting of Euroyen TIBOR and USD LIBOR rates. The CFTC reported that this is the third CFTC enforcement action against Citibank for benchmark abuses (FX, ISDAFix, and LIBOR), bringing the total penalties imposed against Citibank and its affiliates to $735 million and requiring extensive remediation on Citibank’s part. See here to read the CFTC’s press release entitled “CFTC Orders Citibank, N.A. and Japanese Affiliates to Pay $175 Million Penalty for Attempted Manipulation of Yen LIBOR and Euroyen TIBOR, and False Reporting of Euroyen TIBOR and U.S. Dollar LIBOR.”
Medicare fraud: On June 22, 2016, the DOJ announced charges against 301 individuals for approximately $900 million in false billings to federal and state Medicare programs. The DOJ said that the “national healthcare fraud takedown” was the largest in Medicare Fraud Strike Force history. See here to read the DOJ’s press release entitled “National Health Care Fraud Takedown Results in Charges against 301 Individuals for Approximately $900 Million in False Billing.”