SEC ENFORCEMENT RESULTS FOR 2015
The SEC announced its enforcement results for financial year 2015 on October 22. It has filed 807 enforcement actions covering a range of misconduct, an increase from 2014's total of 755. The SEC's actions cover, among other things, fraud, market manipulation and insider trading and issues relating to market disclosures. The SEC's key FCPA cases during the period included actions involving Bio-Rad Laboratories Inc., Avon Products Inc., Goodyear Tire & Rubber Company, and Hitachi Ltd.
BRISTOL-MYERS SQUIBB ENTERS INTO FCPA SETTLEMENT WITH SEC
The Securities and Exchange Commission (the "SEC") announced on October 5 that pharmaceutical company Bristol-Myers Squibb had agreed to settle charges that its joint venture in China made cash payments and provided other benefits to health care providers and state-owned and state-controlled hospitals in exchange for prescription sales. According to the SEC's order, sales representatives sought to secure and increase business by providing cash, jewelry and other gifts, travel, meals and other entertainment, and sponsorships for conferences and meetings. Those payments were inaccurately recorded as legitimate business expenses, resulting in a finding that Bristol-Myers Squibb violated the FCPA's books and records provisions.
Without admitting or denying the findings, Bristol-Myers Squibb agreed to return US$11.4 million in profits, plus interest, and to pay a civil penalty of US$2.75 million. The company will also report to the SEC on its implementation of FCPA compliance measures over the next two years.
The company also said in its most recent quarterly report that the Department of Justice (the "DOJ") has confirmed that it has closed its inquiry into this matter.
ALLEGED UN BRIBERY SCHEME
In October 2015, US federal law-enforcement authorities charged the former president of the United Nations (UN) General Assembly and Ambassador for Antigua and Barbuda, John W Ashe, a Macau property developer, Ng Lap Seng, and four others with bribery. They are alleged to have engaged in a scheme involving payments to Mr Ashe to gain support for real estate developments in Macau and other business interests. The charges currently concern breaches of domestic US law and not the FCPA. The UN has announced it will audit the UN's dealings with two organizations through which money was allegedly transmitted.
KINROSS GOLD CORP UNDER INVESTIGATION BY SEC AND DOJ
Canadian mining company Kinross Gold Corp ("Kinross") announced in October 2015 that it is under investigation by the SEC and the DOJ in relation to possible internal control deficiencies and improper payments to government officials in West Africa. Press reports indicate that the investigation concerns Kinross's operations in Mauritania and Ghana.
Kinross's statement indicates that it received information regarding the allegations in 2013 and has been carrying out an internal investigation with the assistance of external legal counsel (which remains ongoing).
FEDERAL GOVERNMENT CONTRACTOR PLEADS GUILTY TO ACCEPTING KICKBACKS
Victor Villalobos, a former employee of a federal prime contractor in Alabama, pleaded guilty on October 23 to accepting unlawful kickbacks. According to the DOJ, the defendant solicited illegal kickbacks from a subcontractor in exchange for refraining to take action to unfavorably affect that subcontractor's business relationships and for helping to ensure that the subcontractor received additional work from Villalobos's employer.
Villalobos admitted to receiving over US$1.9 million in wire transfers from various bank accounts owned by the subcontractor and to accepting US$60,000 in cash during two separate meetings with the subcontractor. Villalobos also pleaded guilty to tax evasion.
HONDURAN BUSINESSMEN CHARGED WITH MONEY LAUNDERING AND BRIBERY
The US Attorney for the Southern District of New York announced on October 7 that four Honduran individuals had been charged in connection with a scheme to launder the proceeds of narcotics trafficking offenses and foreign bribery through US bank accounts. One of the individuals was arrested in Florida while the others remain at large.
The indictment alleges that, between 2004 and 2015, the defendants conspired to conduct financial transactions occurring in whole or in part in the US involving the proceeds of (i) narcotics offenses, and (ii) offenses against a foreign nation involving the bribery of public officials and the misappropriation, theft or embezzlement of public funds.
The Department of Treasury's Office of Foreign Assets Control ("OFAC") announced on the same day that three of the individuals, together with businesses associated with them, had been designated as Specially Designated Narcotics Traffickers/Specially Designated Nationals and would therefore be subject to asset freezing measures.
CRÉDIT AGRICOLE AGREES TO PAY US$787.3 MILLION IN RELATION TO SANCTIONS VIOLATIONS
On October 20, it was announced that Crédit Agricole Corporate and Investment Bank ("CACIB") had reached settlements with the DOJ,OFAC, the Federal Reserve, the New York Department of Financial Services, and the New York County District Attorney's Office in relation to sanctions violations. CACIB has agreed to pay a total of US$787.3 million in criminal and civil financial penalties under these settlements and has entered into deferred prosecution agreements with the DOJ and New York County District Attorney's Office.
According to the various settlement agreements, CACIB's Geneva subsidiaries processed approximately US$312 million in transactions on behalf of sanctioned entities located in Sudan, Myanmar, Iran and Cuba between 2003 and 2008. In particular, employees sought to conceal the involvement of designated banks and other companies in financial transactions so as to ensure that they were not blocked by CACIB's New York branch, or other US financial institutions. Compliance personnel were reportedly aware that the US had sanctions in place against Sudan and that those sanctions applied to the transactions in question but nonetheless authorized certain transactions on behalf of Sudanese customers. The press releases announcing the various settlements state that CACIB fully cooperated with the investigations and took appropriate remedial action.
CACIB has also agreed to establish and maintain appropriate sanctions compliance policies and procedures and to retain an independent third party to report on their implementation.
OFAC ISSUES FINDING OF VIOLATION TO BMO HARRIS BANK NA AND ISSUES GUIDANCE ON FALSE HITS
On October 21, OFAC announced that it had issued a Finding of Violation to BMO Harris Bank NA in its capacity as successor to Marshall and Ilsley Bank ("M&I Bank") in connection with violations of its Iranian sanctions.
M&I Bank reportedly originated six funds transfers totaling over US$67,000 for one of its customers, for the purposes of paying an outstanding balance owed to an Iranian carpet supplier. M&I Bank's customer had been authorized to import Iranian-origin carpets from this supplier under an OFAC General License and the name of the supplier was therefore entered onto an internal "false hit list". However, the General License was revoked in September 2010. M&I Bank did not update its false hit list and continued to process funds transfers to this supplier.
OFAC has also issued guidance on the maintenance of false hit lists, emphasizing the importance of implementing policies and procedures to review, evaluate and reassess the parties that are included on such lists.
SEC ANNOUNCES INSIDER TRADING SETTLEMENT WITH FORMER STOCKBROKER
We commented in our October 2015 update on former stockbroker Vladimir Eydelman's guilty plea in relation to criminal insider trading charges. On October 23, the SEC announced a civil settlement with Eydelman. Under the settlement agreement (which is subject to final court approval), Eydelman would disgorge US$1,236,657 in profits from his illegal trades with this amount deemed satisfied by the settlement to be paid under the parallel criminal proceedings. However, he would be subject to a civil penalty in the same amount.
The SEC's case against Steven Metro, who allegedly passed the inside information to Eydelman through a mutual friend, is ongoing.
EFFECT OF NEWMAN ON INSIDER TRADING CASES
Following the Supreme Court's refusal to review the criminal convictions of Todd Newman and Anthony Chiasson (see our previous briefing for further details), the SEC filed a letter with the US District Court for the Southern District of New York, confirming that it will not oppose Newman and Chiasson's motion for summary judgement in the SEC's related civil proceedings. The motion was granted on October 21 and the case was formally closed.
The impact of the Newman decision was demonstrated on October 22 when the US Attorney for the Southern District of New York announced the dismissal of the 2013 conviction of Michael Steinberg on insider trading charges. Charges against six cooperating witnesses who had entered guilty pleas were also dismissed. All seven convictions related to the same insider trading scheme that was the subject of the Newman decision. US Attorney Preet Bharara said that: "the decision to dismiss these charges follows the Second Circuit's Newman decision, and also reflects determinations, after careful consideration of all of our prior insider trading prosecutions, that insisting on maintaining guilty pleas in these cases would not be in the interests of justice