WHISTLEBLOWER NEWS QUOTE OF THE DAY:

“Those who do business with the U.S. government should expect appropriate consequences if they do not deal fairly. As this case demonstrates, the government will hold both corporate entities and individuals accountable if they misuse taxpayer funds”

- Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division

WHISTLEBLOWER NEWS:

Forget Snapchat. Facebook's biggest threat right now may be Uncle Sam.

Facebook disclosed on Thursday that it could owe billions due to an IRS investigation into the way it moved assets to an Irish subsidiary to avoid higher taxes.

The IRS tax penalty could total $3 billion to $5 billion, plus interest, according to a Facebook filing with the Securities and Exchange Commission. If so, Facebook says the penalty could have a "material adverse impact" on its financial position.

The tax issue was first disclosed publicly three weeks ago when the U.S. Justice Department filed a lawsuit forcing Facebook to comply with the ongoing IRS investigation. No figures were provided at the time for possible penalties.

The investigation dates back to 2010 when Facebook shifted the rights for its worldwide business, excluding the U.S. and Canada, to Facebook Ireland as part of a complex maneuver to reduce its tax payments. read more »

Goldman Banker Warned Colleagues Not to ‘Milk Libya’

LONDON—A lawyer for Libya’s sovereign-wealth fund disclosed an internal email from a Goldman Sachs Group Inc. banker warning colleagues not to “milk Libya” by selling complicated trades that fund officials weren’t prepared to handle.

The internal email from Driss Ben-Brahim, who left Goldman in 2008, was cited in the High Court in London during closing arguments this week of a case in which the Libyan Investment Authority is suing Goldman for $1.2 billion to cover losses from derivatives it bought from the bank in 2008. The fund alleges that Goldman executives exerted “undue influence” over its officials, who didn’t understand the trades.  read more »

Embraer Tumbles Most Since 2001 After Surprise Loss, Outlook Cut

Embraer SA plunged the most since the aftermath of the Sept. 11 terrorist attacks, after the planemaker reported a surprise loss and cut its sales forecast because of a diminished outlook for business-jet deliveries. 

Revenue this year is likely to total between $5.8 billion and $6.2 billion, down from a previous forecast range of $6 billion to $6.4 billion, the Brazilian planemaker said in a statement Friday. The company posted a second-quarter loss of $99.4 million after setting aside $200 million in connection with a probe under the U.S. Foreign Corrupt Practices Act. read more »

Alere shares whiplash as investors eye latest probe

Alere investors went on a wild ride in the last 24 hours as the shares plunged following a report of a second Justice Department investigation of the medical test maker, then rebounded after the company said the probe was narrow in scope.

Along with the legal implications of the probe, it could also impact whether potential misconduct by Alere will help Abbott Laboratories get out of its offer to buy the troubled company for $5.8 billion. Alere also remains under investigation for alleged violations of the U.S. Foreign Corrupt Practices Act and sales practices in Africa, Asia and Latin America. read more »

1MDB: The inside story of the world’s biggest financial scandal

How a jailed former banker and a lone British journalist broke a story that shook the world..

According to lawsuits filed last week by the United States Department of Justice, at least $3.5bn has been stolen from 1MDB. The purpose of the fund, which was set up by Malaysia’s prime minister, Najib Razak, in 2009, was to promote economic development in a country where the median income stands at approximately £300 per month. Instead, the DoJ alleged that stolen money from 1MDB found its way to numerous associates of Prime Minister Najib, who subsequently went on a lavish spending spree across the world. It also accused Najib of receiving $681m of cash from 1MDB – a claim he denied. Money from 1MDB, the US also claimed, helped to purchase luxury apartments in Manhattan, mansions in Los Angeles, paintings by Monet, a corporate jet, and even financed a major Hollywood movie. read more »

Lilly joins drugmakers probed by DOJ about PBMs

Eli Lilly today said it has joined a growing list of pharma companies to be asked by the Justice Department to cough up info on relationships with pharmacy benefits managers, the companies that negotiate prices and set reimbursement conditions.

Deep in its quarterly report filed today with the SEC, Lilly said it has “received a civil investigative demand from the U.S. Attorney’s Office for the Southern District of New York requesting documents and information relating to our contracts with, services performed by and payments to pharmacy benefit managers.” It said it was cooperating with the investigation.

In an email, Eli Lilly declined to comment beyond its filing. read more »

Tax Whistleblower Gets IRS Depositions In Claims Dispute

A U.S. Tax Court judge took the “extraordinary” discovery step Thursday of forcing the deposition of current and former IRS employees, over the agency's objections, in a lawsuit brought by an unnamed whistleblower seeking payment for calling attention to a company's alleged tax evasion scheme.

Tax Court Judge James S. Halpern noted that “nonconsensual” tax court depositions are typically only taken when the evidence cannot be obtained otherwise, but that's exactly the case here, he said, despite IRS contentions that the agency has turned over all the information relevant to its decision to deny the petitioner a whistleblower award for having called out the unnamed corporation. read more » 

United States Sues Former Executives of Government Contractor for Making False Claims in Connection with Reconstruction Contracts in Afghanistan and Iraq

The Justice Department announced today that the government has filed suit under the False Claims Act against Derish M. Wolff and Salvatore J. Pepe, respectively the former CEO and CFO of Louis Berger Group Inc. (LBG), for conspiring to overbill the U.S. Agency for International Development (USAID) and other government agencies for costs incurred performing reconstruction contracts in Afghanistan, Iraq, and other countries, the Justice Department announced today.  LBG is based in East Orange, New Jersey.

“Those who do business with the U.S. government should expect appropriate consequences if they do not deal fairly,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “As this case demonstrates, the government will hold both corporate entities and individuals accountable if they misuse taxpayer funds.” read more »

South Carolina Hospital to Pay $17 Million to Resolve False Claims Act and Stark Law Allegations

The Lexington County Health Services District Inc. d/b/a Lexington Medical Center located in West Columbia, South Carolina, has agreed to pay $17 million to resolve allegations that it violated the Physician Self-Referral Law (the Stark Law) and the False Claims Act by maintaining improper financial arrangements with 28 physicians, the Department of Justice announced today. 

The Stark Law is intended to ensure that physician referrals are made based on the medical needs of the patients and are not tainted by certain financial arrangements.  Thus, the Stark Law generally forbids a hospital from billing Medicare for certain services referred by physicians who have a financial relationship with the hospital unless that relationship falls within enumerated exceptions.  The exceptions generally require, among other things, that the financial arrangements do not exceed fair market value, do not take into account the volume or value of any referrals and are commercially reasonable.  In addition, arrangements with physicians who are not hospital employees must be set out in writing and satisfy a number of other requirements intended to insulate the referrals from financial considerations. read more »

SEC Obtains Asset Freeze in Case of Investor Funds Stolen for Shopping Sprees

The Securities and Exchange Commission today announced an asset freeze it has obtained against three men who aren’t registered to sell investments and allegedly went on lavish shopping sprees with more than $5 million raised from investors to purportedly develop a resort.

In an emergency action filed in federal court in Atlanta, the SEC alleges that Matthew E. White, Rodney A. Zehner, and Daniel J. Merandi fraudulently issued $1 billion in unsecured corporate bonds out of a shell company they own and claimed the money would be used to fund the resort project.  But they never came close to raising the funds necessary to start the project, and meantime they pocketed the $5.6 million they did raise and used it for personal purchases at Saks Fifth Avenue, Gucci, Louis Vuitton, Prada, and Versace.

“We allege that these men stole millions of dollars from investors for personal use and orchestrated sham transactions to prop up the price of the worthless, expired bonds at the center of the fraud,” said William P. Hicks, Associate Director of the SEC’s Atlanta Regional Office. read more »

Federal Court Orders Israeli Web-based Firms, Vault Options, Ltd. and Global Trader 365, to Pay More than $4.5 Million for Unlawful Off-Exchange Binary Options Trading, Fraud, and Registration Violations

CFTC Obtains Default Judgment and Permanent Trading Ban against the Two Binary Options Trading Firms.

The U.S. Commodity Futures Trading Commission (CFTC) today announced that Judge John Z. Lee of the U.S. District Court for the Northern District of Illinois entered an Order of Final Judgment by Default (Order) that requires Defendants Vault Options, Ltd. (Vault) and Global Trader 365 (GT 365), two Israeli web-based binary options firms, to jointly and severally pay a $3 million civil monetary penalty and $1,587,731 in restitution to their defrauded customers. The Court’s Order also imposes permanent injunctions and permanent trading bans against the two entities. read more »