Embraer Paying $205 Million to Settle FCPA Charges

The Securities and Exchange Commission today announced a global settlement along with the U.S. Department of Justice and Brazilian authorities that requires aircraft manufacturer Embraer S.A. to pay more than $205 million to resolve alleged violations of  the Foreign Corrupt Practices Act (FCPA).

The SEC’s complaint alleges that Embraer made more than $83 million in profits as a result of bribe payments from its U.S.-based subsidiary through third-party agents to foreign government officials in the Dominican Republic, Saudi Arabia, and Mozambique.  Embraer allegedly created false books and records to conceal the illicit payments, and also engaged in an alleged accounting scheme in India.

According to the SEC’s complaint, $3.52 million in bribes were paid to an official in the Dominican Republic’s air force to secure a military aircraft contract in that country, and $1.65 million in bribes were routed to an official in Saudi Arabia to win business there.  An alleged $800,000 payment was made at the behest of a Mozambican government official as a condition of obtaining a contract with a state-owned airline in that country.  Approximately $5.76 million was allegedly paid to an agent in India in connection with the sale of three highly specialized military aircraft for India’s air force, and the payments were falsely recorded in Embraer’s books and records as part of a consulting agreement that wasn’t legitimate. read more »

 

 

Why companies like Wells Fargo ignore their whistleblowers – at their peril

Enron. Worldcom. The Madoff scandal. The mortgage meltdown. Now Wells Fargo.

High-profile corporate frauds like these all seem to follow the same pattern. First the misconduct is discovered, and then we learn about all of the whistleblowers who tried to stop the fraud much earlier. Congress then tries to enhance whistleblower protections, with varying success.

The Sarbanes-Oxley Act, passed in 2002 after the Enron and Worlcom scandals, was supposed to protect whistleblowers who uncovered accounting frauds, but judges typically rejected their retaliation claims. The Dodd Frank Act, approved in 2010, provides financial rewards for certain whistleblowers. Its success is still unclear.

While these laws may protect employees who expose wrongdoing from retaliation and encourage more to do the same, nothing requires employers to take their disclosures seriously. And as we saw with the latest scandal involving Wells Fargo, several former employees say they tried to get the company’s attention in 2005 and 2006, to no avail. read more »

U.S. to seek ex-HSBC executive's extradition from Britain

The United States will seek the extradition from Britain of a former HSBC Holdings Plc executive accused of participating in a fraudulent scheme involving a $3.5 billion currency transaction, prosecutors said on Friday.

In a letter filed in federal court in Brooklyn, prosecutors said the U.S. government will initiate formal proceedings to seek Stuart Scott's extradition after learning he did not wish to come to the United States voluntarily to face the charges. read more »

Libya versus Goldman Sachs

A clever bank meets an unsophisticated customer with a huge pile of cash. The customer and the cash part company. Did the bank do anything wrong? read more »

Senator Warren Says Mylan Settlement With DOJ ‘Shamefully Weak’

Massachusetts Senator Elizabeth Warren is the latest critic of the $465 million settlement that drugmaker Mylan NV said it reached with the federal government over Medicaid rebates for its EpiPen allergy shot.

In a letter Friday to Attorney General Loretta Lynch, the Democratic senator wrote that her staff calculated Mylan underpaid Medicaid rebates by an estimated $530 million -- $65 million more than the settlement -- mostly because Mylan didn’t pay the required inflation rebate. Warren wrote the settlement with the Department of Justice is “shamefully weak” because it lacks criminal penalties or any incentive to “prevent drug companies from engaging in abusive schemes to defraud Medicaid and rip off taxpayers.” read more » 

Moody’s Expects U.S. to Sue Over Its Pre-Crisis Bond Ratings

Justice Department case would allege violations related to rosy ratings of securities that later soured

The world’s second-biggest ratings firm said Friday it expects the Justice Department to sue over bond grades it issued prior to the 2008 housing market collapse, setting up one of the industry’s last crisis-related legal clashes.

The U.S. plans to bring a case against Moody’s Corp. that alleges violations related to residential mortgage bonds and other complex securities, the company said, citing a Sept. 29 letter from federal authorities. Moody’s said “a number” of states are also pursuing a case. The Justice Department has been investigating Moody’s for applying rosy grades on these deals in the buildup to the last financial crisis, according to people familiar with the situation. read more » and here

Life Care Centers of America Inc. Agrees to Pay $145 Million to Resolve False Claims Act Allegations Relating to the Provision of Medically Unnecessary Rehabilitation Therapy Services

Life Care Centers of America Inc. (Life Care) and its owner, Forrest L. Preston, have agreed to pay $145 million to resolve a government lawsuit alleging that Life Care violated the False Claims Act by knowingly causing skilled nursing facilities (SNFs) to submit false claims to Medicare and TRICARE for rehabilitation therapy services that were not reasonable, necessary or skilled, the Department of Justice announced today.  Life Care, based in Cleveland, Tennessee, owns and operates more than 220 skilled nursing facilities across the country. read more »

 

 

$4.3 Million Settlement With Owners Of For-Profit School Network For Overcharging State

Attorney General Eric T. Schneiderman, Acting Tax Commissioner Nonie Manion and Comptroller Thomas P. DiNapoli announced today a settlement with K3 Learning, Inc. (f/k/a Metropolitan Preschools, Inc.) and its president and owner Michael C. Koffler, together with his sons, Brian and Daniel Koffler, and his special education preschool, Sunshine Development School , for overcharging the State of New York for services rendered by SDS and for failing to pay millions in personal and corporate income tax.  Following a coordinated investigation with the Department of Taxation and Finance and an audit and investigation by the Office of the State Comptroller, Koffler and the other parties have agreed to pay the State over $4.3 million to resolve the investigation.

“We won’t allow special education programs to be exploited for personal financial gain.  These defendants used their programs as a way to defraud the government and cheat on their taxes—sticking law abiding New Yorkers with the bill in the process,” read more »

HSBC Hong Kong Wins Bid To Exit Calif. Ponzi Scheme Suit

A California federal judge on Friday allowed HSBC Hong Kong to exit a proposed class action in which victims of a Ponzi scheme alleged the bank aided the fraud by holding deposits linked to the scheme, saying the court has no personal jurisdiction over the bank.

U.S. District Judge Otis D. Wright II dismissed with prejudice the action against Hong Kong and Shanghai Banking Corp. Ltd., agreeing with the defendant there was not a sufficient nexus between the bank’s alleged activity and California. read more »