Citigroup unit to pay $25 million over 'spoofing' in U.S. Treasury futures

Citigroup Inc on Thursday became the first-ever bank to get hit with civil "spoofing charges," after U.S. derivatives regulators said one of its units entered U.S. Treasury futures market orders with the intent of canceling them.

The Commodity Futures Trading Commission said that Citigroup will settle the case without admitting or denying the charges and pay a $25 million fine.

"We are pleased to have resolved this matter," Citigroup spokeswoman Danielle Romero-Apsilos said in a statement.

The CFTC first won new powers to go after manipulative "spoofing" in the 2010 Dodd-Frank Wall Street reform law.

The term refers to efforts by traders to create a false appearance of market interest in a commodity or other financial instrument by placing orders and then immediately canceling them. read more »

How Deutsche Bank Made minus $462 Million Disappear

A dubious trade leads to a criminal trial for Europe’s most important bank.

On Dec. 1, 2008, most of the world’s banks were still panicking through the financial crisis. Lehman Brothers had collapsed. Merrill Lynch had been sold. Citigroup and others had required multibillion-dollar bailouts to survive. But not every institution appeared to be in free fall. That afternoon, at the London outpost of Deutsche Bank, the stolid-seeming, €2 trillion German powerhouse, a group of financiers met to consider a proposal from a team led by a trim, 40-year-old banker named Michele Faissola.

The scion of an Italian banking family, Faissola was the head of Deutsche’s global rates unit, a division that created and sold financial instruments tied to interest rates. He’d been studying the problems of one of Deutsche’s clients, Italy’s Banca Monte dei Paschi di Siena, which, as the crisis raged, was down €367 million ($462 million at the time) on a single investment. Losing that much money was bad; having to include it in the bank’s yearend report to the public, as required by Italian law, was arguably much worse. Monte dei Paschi was the world’s oldest bank. It had been operating since 1472, not long after the invention of the printing press, when the Black Death was still a living memory. If investors were to find out the extent of its losses in the 2008 credit crisis, the consequences would be unpredictable and grave: a run on the bank, a government takeover, or worse. At the Deutsche meeting, Faissola’s team said it had come up with a miraculous solution: a new trade that would make Paschi’s loss disappear. read more »

Credit Suisse finalizes $5.3 billion mortgage deal with U.S.

Credit Suisse has formally agreed to pay $5.3 billion to settle with U.S. authorities over claims it misled investors in residential mortgage-backed securities it sold in the run-up to the 2008 financial crisis.

As part of the settlement, announced by the U.S. Department of Justice on Wednesday, the Zurich-based bank acknowledged that home loans it pooled into the securities did not meet underwriting guidelines, with some described by employees as "complete crap" and "[u]tter complete garbage." read more »

South Korea Court Rejects Arrest of Samsung Heir Jay Y. Lee

A court in South Korea turned down prosecutors’ request to arrest Samsung Group’s Jay Y. Lee on alleged bribery, perjury and embezzlement, letting him stay in place atop the country’s most powerful company while they continue their investigation.

Some of the evidence prosecutors had reviewed included e-mails from a tablet PC that they believe belongs to Choi Soon-sil, Park’s confidante. Prosecutors said last week that one e-mail indicates Choi received funds from Samsung. The court’s decision indicates that the e-mails probably stopped short of saying anything explicit, said Troy Stangarone, senior director for congressional affairs and trade at the Korea Economic Institute of America in Washington.

“While the prosecutors are still going to be looking into things, and this doesn’t necessarily close the case, this is definitely the outcome Samsung was looking for,” he said. “At this point, now that the court has rejected the arrest warrant, there’s no reason to not proceed with the succession.” read more »

Orthofix Settles Bribery, Accounting Probes

Medical-device company Orthofix International N.V. settled charges related to accounting and foreign bribery, agreeing Wednesday to pay more than $14 million to the Securities and Exchange Commission.

The Lewisville, Texas-based firm admitted wrongdoing in its settlement with the SEC, which alleged that it improperly booked revenue in some cases and had paid doctors at state-owned hospitals in Brazil to increase sales.

Orthofix agreed to pay an $8.25 million penalty to resolve the accounting violations, and more than $6.25 million to settle charges that it violated the Foreign Corrupt Practices Act, which bars the use of bribes to foreign officials to get or keep business. It also agreed to retain an independent compliance consultant for a year to review and test its FCPA compliance program. Several former Orthofix executives also agreed to pay penalties, the SEC said. read more »

Southern California Residents Plead Guilty to Hiding Millions of Dollars in Secret Foreign Bank Accounts

Failed to Report Swiss and Israeli Accounts Held for Over a Decade

Three Orange County, California residents pleaded guilty today to willfully failing to report their foreign bank accounts in Switzerland and Israel, announced Principal Deputy Assistant Attorney General Caroline D. Ciraolo, head of the Justice Department’s Tax Division.

Dan Farhad Kalili, 55, a resident of Irvine, California, together with his brother, David Ramin Kalili, 52, and his brother-in-law, David Shahrokh Azarian, 67, residents of Newport Coast, California, admitted that they willfully failed to file Reports of Foreign Bank and Financial Accounts (FBARs) with the Internal Revenue Service (IRS) regarding secret bank accounts in Switzerland and in Israel that each respectively maintained and controlled, many for well over a decade. These secret accounts held assets that reached into the millions of dollars.

“The days of being able to safely hide income and assets offshore and evade U.S. tax have come to an end,” said Principal Deputy Assistant Attorney General Ciraolo. “The United States and foreign jurisdictions are sharing information and working together to ensure that citizens around the world are paying their fair share. The guilty pleas entered today are yet another example of what awaits U.S. taxpayers who continue to flout the law read more »

State Street Corporation Agrees to Pay More than $64 Million to Resolve Fraud Charges

Massachusetts-based global financial services company State Street Corporation (State Street) entered into a deferred prosecution agreement and agreed to pay a $32.3 million criminal penalty to resolve charges that it engaged in a scheme to defraud a number of the bank’s clients by secretly applying commissions to billions of dollars of securities trades. State Street also agreed to offer an equal amount as a civil penalty to the U.S. Securities and Exchange Commission (SEC) read more »

Whistleblower suit alleges widespread problems at bank run by Treasury nominee Mnuchin

Whistleblowers connected to the California mortgage lender once run by Treasury secretary nominee Steven T. Mnuchin have accused the bank in federal court of mishandling more than a thousand applications for loan modifications during his tenure -- potentially costing many borrowers their homes.

One of the whistleblowers, Andrew Mitchell, worked at OneWest for three years and was responsible for processing mortgage modification requests. In a lawsuit filed in 2014, Mitchell said he aired his concerns directly with Mnuchin and other top OneWest executives but that the issues were not resolved.

The case is currently under review by the Justice Department, which is required to assess all complaints brought under the federal False Claims Act, commonly known as the whistleblower law. Court records show the DOJ is slated to determine whether to prosecute the case by the end of March -- well after President-elect Donald Trump’s administration hopes to have Sen. Jeff Sessions (R-Alabama) installed to lead the agency and Mnuchin confirmed as Treasury secretary. read more »

One in five global investors scared of investing in India on fraud risk

A mid-2016 survey by global advisory firm Kroll has found that corruption, frauds and security-related risks are dissuading nearly a fifth of global firms from entering India despite a promising market opportunity.

The survey revealed that the percentage of companies affected by fraud had reduced to 68%, as compared to 80% in 2015.

"As many as 545 senior executives, 11% of them domestic firms, participated in the survey. Nearly a fifth of our respondents are dissuaded from investing in the country due to frauds and security concerns," said Reshmi Khurana, MD and head of South Asia, Kroll.

She said while corruption is a major risk that "is growing", laws like the FCPA (Foreign Corrupt Practices Act) in the US deter potential investors. read more »

Ex-VW CEO Winterkorn Deflects Blame for Emissions Cheating

Martin Winterkorn, the former chief executive officer of Volkswagen AG, sought to deflect blame for the biggest scandal in the carmaker’s history, saying he would have put a stop to the emissions cheating if he’d known.

In his first public appearance since being forced to resign 16 months ago, Winterkorn apologized for breaching the trust of millions of customers while defending his tenure and saying that he wasn’t directly involved in developing software to comply with emissions regulations. read more »

San Antonio-based refining company Valero Energy Corp. has beefed up language in its contracts with executives regarding confidentiality agreements and company protections for reporting criminal wrongdoing.

Valero amended its severance agreements with its executives, the company reported in a filing with the U.S. Securities and Exchange Commission.

Under those severance agreements, Valero executives must adhere to a strict confidentiality policy during and after their employment with the company. Former Valero executives are prohibited from sharing confidential information with people outside the company or designated personnel without the company's written consent.

In the SEC filing, Valero General Counsel Jay Browning wrote that the amendment was written to clarify the severance agreement's whistleblower provisions. The amended severance agreement provides executives with an exception to their confidentiality agreement if reporting a violation of federal law.

Valero executives can share confidential documents, information and disclosures with law enforcement officials and regulators without providing notice to the company.

The whistleblower provision also allows an executive who files a lawsuit alleging retaliation to disclose trade secrets in such a lawsuit if it is filed under seal and does not disclose those trade secreta to the public. read more »

 

Student loan servicer Navient hit with three government lawsuits in one day

Navient, one of the largest student loan management companies in the country, misallocated payments, steered people into costly plans, supplied the wrong information and ignored borrowers’ pleas for help, according to a lawsuit filed Wednesday by the Consumer Financial Protection Bureau.

The case is one of three separate complaints by government authorities that paint Navient as a company more interested in serving its financial interests than the needs of struggling student loan borrowers — a characterization the firm vehemently denies.

“Navient has systematically and illegally failed borrowers at every stage of repayment,” CFPB Director Richard Cordray said on a call with reporters Wednesday. “These unlawful practices have cost student-loan borrowers across the country both heartache and money. And we are working to make sure they do not happen again.” read more »