Global Technology Company Settles FCPA Charges with SEC; DOJ Issues Third Declination Letter

On July 11, a Wisconsin-based global technology company agreed, pursuant to an administrative cease and desist order and without admitting or denying the SEC’s findings, to pay $14.3 million to settle the SEC’s allegations that it violated the books and records and internal controls provisions of the FCPA. The charges related to actions taken by managers and employees of the company’s wholly-owned Chinese subsidiary, between 2007 and 2013, to make payments to sham vendors to effect bribes and improper payments to employees of Chinese government owned shipyards, ship-owners, and others, as well as to obtain and retain business and personally enrich the subsidiary’s employees. The company’s settlement includes a disgorgement of $11,800,000, prejudgment interest of $1,382,561, as well as a civil penalty of $1,180,000. The company also agreed to a one-year period of self-reporting to the SEC on the status of its FCPA and anti-corruption related remediation and compliance enhancements. Read more…

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CFPB and DOJ Take Action Against Bank over Mortgage Lending Practices

On June 29, the CFPB announced a joint action with the DOJ against a regional bank with operations in Memphis, Tennessee for allegedly engaging in discriminatory mortgage lending practices in violation of the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act (FHA). According to the CFPB’s and the DOJ’s complaint, between January 1, 2011 and December 31, 2015, the bank (i) engaged in redlining practices in the Memphis area by structuring its business to meet the credit needs of majority-White neighborhoods while ignoring the credit needs of individuals in majority-minority neighborhoods; (ii) discriminated against African American borrowers by allowing its employees to practice discretion in making credit decisions on mortgage loans, which ultimately resulted in African Americans being denied certain mortgages at significantly greater rates than similarly situated white applicants; (iii) charged African Americans, on average, 30 basis points more for first lien and 64 basis points more for second lien mortgage loans than similarly situated white borrowers; and (iv) implemented a policy under which loan officers were advised to deny minority applicants more quickly than other applicants and to deny credit assistance to “borderline” applicants. The complaint further alleges that a series of matched-pair tests at Memphis branches “revealed that the Bank treated African American testers less favorably than similarly situated white testers.” Read more…

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Massachusetts-based Imaging Company and Danish Subsidiary Settle FCPA Charges with the SEC and DOJ

On June 21, the SEC and DOJ announced a nearly $15 million settlement with a Massachusetts-based imaging company and its wholly-owned Danish subsidiary to resolve parallel civil and criminal actions involving FCPA violations. The SEC alleged that, from at least 2001 through early 2011, the subsidiary paid about $20 million to third parties in hundreds of sham transactions with distributors in Russia and shell companies in Belize, the British Virgin Islands, Cyprus, and Seychelles. The sham transactions involved fictitious inflated invoices to the distributors with the over-payments going to third parties identified by the distributors. The subsidiary did not have a relationship with the third parties and did not know if the payments had any business purpose for the distributors.

The settlement is consistent with the settlement offer that the imaging company disclosed last December, and it reflects the company’s agreement to pay $7.67 million in disgorgement and $3.8 million in prejudgment interest to resolve the SEC’s books and records and internal controls charges, and the subsidiary’s agreement to pay $3.4 million in criminal fines in a non-prosecution agreement with the DOJ. The subsidiary’s former CFO also settled with the SEC, agreeing to pay a $20,000 penalty to settle allegations that he knowingly circumvented internal controls and falsified the subsidiary’s books and records.

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Department of Homeland Security and DOJ Issue Operational Rules to Implement Provisions of CISA

On June 15, the Department of Homeland Security and the DOJ (collectively, Departments) issued final procedures to implement certain provisions of the Cybersecurity Information Sharing Act (CISA) of 2015. The rules establish operational procedures “relating to the receipt of cyber threat indicators and defensive measures by all federal entities under CISA.” The recently issued procedures finalize interim guidance released by the Departments in February 2016.

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DOJ Determines that Indiana-Based Medical Device Manufacturer Breached FCPA Deferred Prosecution Agreement

On June 6, the DOJ filed a status report with the U.S. District Court for the District of Columbia stating that an Indiana-based medical device manufacturer had violated its 2012 deferred prosecution agreement (DPA) related to FCPA charges. Specifically, the DOJ stated that it notified the medical device manufacturer on April 15, 2016 that “the government had determined that [it] had breached the DPA based on the conduct in Mexico and Brazil and based on [its] failure to implement and maintain a compliance program as required by the DPA.”

The medical device manufacturer had settled FCPA charges with the DOJ and SEC in 2012 related to the company’s conduct in Argentina, Brazil, and China. As previously reported in the FCPA Scorecard, the company’s DPA had been extended twice since 2012: once in March 2015 because the company had discovered additional potential FCPA violations in Brazil and Mexico, and again in March 2016. According to the DOJ, the company and the DOJ are in discussions to resolve the matter without a trial.

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