Forensic News June 2016
Financial/Accounting Fraud
Uber must hand over documents to a New York judge probing whether private investigators hired by the ride-hailing company fraudulently sought information about its opponents in an antitrust case, according to a court ruling on Tuesday. U.S. District Judge Jed Rakoff is seeking to determine whether Uber instructed an investigator to lie in order to elicit information about Spencer Meyer, lead plaintiff in the antitrust lawsuit, and his attorney. The suit, filed in December, alleges that Uber chief executive Travis Kalanick engaged in a price-fixing scheme with Uber drivers. The proposed class action names Kalanick and not the ride-hailing company, though Uber is seeking to intervene in the lawsuit. In one instance, an investigator hired by Uber allegedly called Meyer’s attorney’s professional colleagues and “falsely stated that he was compiling a profile of up-and-coming labor lawyers in the United States,” Rakoff wrote. When confronted about the investigator’s calls, attorneys for Kalanick initially denied that the company was involved with them, according to court documents. In court filings, Kalanick’s attorneys eventually acknowledged hiring an investigator from a company called Ergo to dig up information about Meyer. However, Uber denied in a court filing that it knew the investigator had lied or concealed his identity. An Uber spokesman declined to comment on Tuesday. The lawsuit alleges that “Uber has a simple but illegal business plan: to fix prices among competitors and take a cut of the profits.” It argues that drivers conspired with Kalanick to charge fares set by Uber’s algorithm, with an understanding that other Uber drivers would do the same, even if they might do better setting more competitive prices on their own. In his order of Tuesday, Rakoff said he wanted evidence backing Uber's assertions that it did not know about the misrepresentations.
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Hackers have sought to steal more than $3 billion from businesses in a pernicious, fast-growing type of scam in which criminals impersonate company executives in e-mails ordering large wire transfers, the Federal Bureau of Investigation warned on Tuesday. The FBI disclosed the data as it launched a public awareness campaign providing tips on how to defend against such scams. The cases, which are widely known as business e-mail compromise, target businesses and not consumers. U.S. and foreign victims reported 22,143 cases involving business e-mail compromise cases in which cyber criminals sent requests for some $3.1 billion in fraudulent transfers from October 2013 through last month, according to the FBI. That represents a significant increase from the agency’s previous tally, which put attempted losses at $2.3 billion through February of this year. Supervisory Special Agent Mitchell Thompson said victims should notify the FBI immediately if they find they have been victimized in such scams, so the bureau can work with agents overseas to ask foreign banks to freeze the funds before fraudsters pull them out of the banking system. “The sooner somebody reports this to the FBI, the better the possibility they can get their money back,” he said at a news conference in New York. The bulk of the cases involved requests to transfer funds to banks in Hong Kong and China, though a total of 79 countries have been identified to date, according to the bureau. Thompson said he could not say how much money victims actually lost through the schemes, but said about one in four U.S. victims respond by wiring money to fraudsters. The FBI said the sharp jump in cases since its last tally was due to the high level of recent activity, as well as an effort by law enforcement agencies around the world to identify such scams as business e-mail compromise, rather than generic wire fraud. The FBI said it has seen a 1,300 percent increase in identified exposed losses since January 2015.
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A Manhattan hedge fund manager was charged on Wednesday with trading on confidential tips about drug approvals, in one of the biggest insider trading cases since a 2014 court ruling made it harder for U.S. prosecutors to pursue them. U.S. Attorney Preet Bharara in Manhattan accused Sanjay Valvani of Visium Asset Management LP of fraudulently making $25 million by gaining advance word about U.S. Food and Drug Administration approvals of generic drug applications. Prosecutors said the inside information was provided by Gordon Johnston, a consultant who got tips from a friend and former FDA colleague still working at the agency. Valvani passed some of these tips to Christopher Plaford, then a Visium portfolio manager, who made his own illegal trades, prosecutors said. “Sadly these are schemes we see time and time again, where lies and use of non-public information profits those conducting the crimes, and everyday investors lose out,” FBI Assistant Director-in-Charge Diego Rodriguez said in a statement. Prosecutors also accused Plaford and Stefan Lumiere, another former Visium portfolio manager, of fraudulently inflating the value and liquidity of a bond fund they oversaw by getting “sham” price quotations from brokers, in an effort to prevent investors from demanding their money back.
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The union leader for New York City's prison guards and a hedge fund financier were charged on Wednesday with orchestrating a bribery scheme involving union retirement and operating funds in a case stemming from a wide-ranging federal corruption probe. The Federal Bureau of Investigation arrested Norman Seabrook, the president of the Correction Officers' Benevolent Association, and Murray Huberfeld early on Wednesday. According to a criminal complaint, Seabrook invested $20 million of union money in 2014 in New York – based Platinum Partners in exchange for kickbacks from Huberfeld, who worked at the firm. The men were charged with honest services fraud and conspiracy to commit fraud. The case is the first major prosecution to emerge from several overlapping state and federal corruption probes examining New York City Mayor Bill de Blasio's fundraising practices, among other avenues of inquiry. It is also the latest high-profile public corruption case brought by the office of Preet Bharara, the U.S. attorney in Manhattan. The investigations have proven to be a distraction for de Blasio, who will be up for re-election in 2017. He has repeatedly said that he and his administration have acted legally. On Wednesday at a public appearance, de Blasio reiterated that he was “absolutely comfortable that we have done things properly. What Norman Seabrook did with his pension fund has nothing to do with how we run our government day to day.” In April, Reuters reported that Seabrook had invested union funds in Platinum, a mid-sized firm with a history of buying into controversial businesses. Representatives for Platinum Partners did not respond to a request for comment. Seabrook was released on a $250,000 bond package after an appearance in federal court in Manhattan. Huberfeld was released on a $1 million bond package. “The charges are not strong,” Seabrook’s defense lawyer Paul Shechtman said during a court hearing. The criminal complaint referred to a “cooperating witness” who has pleaded guilty and is helping the government. According to prosecutors, the witness initially referred Seabrook to Huberfeld and Platinum and helped arrange the bribery scheme. A person familiar with the matter previously told Reuters that Jona Rechnitz, a New York real estate investor, introduced Seabrook to Platinum. Rechnitz's lawyer, Alan Levine, declined to comment on Wednesday. Rechnitz, who has contributed more than $150,000 to efforts supported by the mayor, is at the heart of an ongoing probe into de Blasio's fundraising activities and also police corruption. Investigators have focused on Rechnitz and another businessman, Jeremy Reichberg, and whether they gave police officers gifts and trips in exchange for official favors. Several high-ranking officers have been reassigned or disciplined as a result of the probe.
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Morris Zukerman spent 16 years at Morgan Stanley, at various points overseeing its energy and merchant banking practices, before starting his own investment firm in the late 1980s. His firm’s partners have included ConocoPhillips, ExxonMobil and Kinder Morgan. He endowed a Harvard sociology professorship. He collected dozens of expensive paintings, including works he loaned to the Metropolitan Museum of Art. Along the way, he evaded more than $45 million in taxes, the U.S. now alleges. Zukerman avoided income and sales taxes by hiding his gains in phony commercial and charitable transactions, according to an indictment made public on Monday by a federal court in Manhattan. The indictment arrives as tax evasion draws renewed attention from law enforcement agencies and policy makers, prompted by leaked Panama law firm documents showing how networks of international shell companies are used by the ultra-rich to shield assets. But the Zukerman allegations are a reminder of the continued prevalence of methods that are far more old school. Zukerman failed to report profits from the sale of an oil company, lied to his accountants, created phony and backdated documents and shipped paintings to addresses in Delaware and New Jersey to avoid New York state sales tax on artwork that hangs in his Park Avenue duplex, according to the indictment. He also took charitable tax deductions for donations he didn’t make, it says. Zukerman, with a full head of white hair and wearing tortoiseshell glasses, pleaded not guilty in a Manhattan courtroom Monday. The judge approved his $2.5 million bond, secured by works in his art collection. The government had already taken $1 million in art from Zukerman during a search, according to Stanley J. Okula, the prosecutor at the hearing. Zukerman’s attorney, James Bruton of Williams & Connolly LLP, said that he was in talks with the government to resolve the case.
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Two months after Japanese camera and printer maker Ricoh Co. was again recognized as one of the world’s most ethical companies, the shares of its Indian unit were suspended following a rout exacerbated by allegations of fraud. Ricoh India Ltd. climbed almost 5,800 percent in about two decades to a record in August last year, before erasing most of those gains until the suspension of trading from May 26. The Indian unit said it’s a victim of a fraud allegedly perpetrated by people acting individually and conspiratorially. Ricoh India’s auditors said profits may have been inflated. The episode highlights the wider question of whether India needs to bolster corporate governance to help Prime Minister Narendra Modi achieve his goal of wooing more foreign investment to stoke rapid growth. The nation’s banks, for instance, are grappling with about $120 billion of soured debt that for critics signals flawed business standards at many lenders and some industrial groups. “Indian corporate governance is generally poor, with some bright spots, but the regulators have been constantly improving their processes and reaction times,” said Naveen Fernandes, vice president at investment adviser Right Horizons Financial Services Pvt. in Bengaluru. New Delhi – based Ricoh India began life as a joint venture with RPG Group in 1993 and was reincorporated as Ricoh India Ltd. in 1998, according to the company’s web site. Ricoh Co. in Japan owns 73.6 percent of Ricoh India, the web site shows. About 10 percent of the Japanese company’s sales stem from regions outside Japan, the Americas and Europe, the Middle East and Africa.
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The European Union reached a tentative agreement to crack down on corporate-tax avoidance, forcing nations to start closing loopholes that allow companies to get away with paying little or no tax. EU finance ministers struck a compromise deal at a meeting in Luxembourg on Friday that will set minimum standards for governments to tackle firms that shift profits around different tax systems to reduce liabilities. The agreement will take effect at midnight on Monday unless countries raise last-minute objections. “If we work together closely on this, the options for companies to move around and shift their profits around will become limited over the course of the years,” Dutch Finance Minister Jeroen Dijsselbloem, who led the talks, told reporters. “It’ll have a major impact both in the size of the taxes that the companies will pay, need to pay; but also in the distribution, where they’ll pay it.” After a succession of leaks about the tax-dodging behavior of some international companies, as well as policy makers’ recognition that the fight against tax avoidance plays well with their voters, the EU has prioritized a set of common rules that all 28 nations must implement. The EU estimates that its governments lose as much as 70 billion euros ($79 billion) a year from companies that shop the world for tax bargains and leaders argue that this money could be spent on improving public services. The bloc’s new rules are based on work to tackle the issue globally by the Organization for Economic Cooperation and Development. “The compromise that was agreed today will help improve corporate tax collection, because it has several concrete provisions to fight tax avoidance.” European Commission Vice President Valdis Dombrovskis told reporters after the meeting. The new rules include restrictions on the extent to which firms can move profits to low-tax jurisdictions and how much they can shift money back and forth through a network of subsidiary companies to reduce their overall tax bill. Friday’s compromise came after the EU agreed to drop the draft law’s so-called switch-over clause aimed at limiting exemptions on foreign income from taxation.
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Ericsson CEO Hans Vestberg, already under pressure from restive shareholders, really didn't need another problem on his desk. Yet that's just what's happened: the Justice Department and SEC are investigating the company for alleged corruption by its executives in China, according to Swedish newspaper Svenska Dagbladet. Ericsson, the biggest maker of equipment used in wireless networks, said it's cooperating with the authorities. Vestberg will have to hope that the episode won't prove to be his undoing. The experience of telecom carrier Vimpelcom when it was investigated and fined a near-record $795 million under the U.S. Foreign Corrupt Practices Act will be of little comfort. That episode, over alleged bribes paid to win business in Uzbekistan, also embroiled Telenor and Teliasonera, and led to the departures of top executives at the Nordic carriers. Even before the inquiry came to light, Vestberg had been facing criticism from investors. Ericsson's second-biggest shareholder, Industrivaerden, had publicly rebuked the company in May for its stock performance inability to grow revenue or profit. Sweden's powerful Wallenberg family, which controls about 22 percent of Ericsson's voting rights, has remained mum to date. The U.S. inquiry will sorely test the two institutions' patience. Ericsson's woes run deep. With sales of mobile gear and services accounting for 94 percent of revenue last year, the company has been hurt as telecom companies cut spending after completing their 4G networks. The wireless market will shrink by an average 3.5 percent a year to $65.7 billion in 2019, according to market research firm IHS.
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Analogic Corp will pay $14.9 million to settle U.S. charges the medical device maker's Danish subsidiary conducted sham transactions with foreign distributors, with some money funneled to doctors employed by state-owned Russian entities. The Department of Justice on Tuesday said Analogic agreed to pay a $3.4 million criminal fine as part of a non-prosecution agreement. Analogic will also give up $7.67 million of improper gains plus $3.81 million of interest to settle related Securities and Exchange Commission civil charges, that regulator said. Investigators said Analogic's BK Medical ApS ultrasound equipment unit violated the Foreign Corrupt Practices Act through its dealings with distributors in Russia and five other countries. They said the scheme resulted in millions of dollars of corrupt payments being funneled to third parties, and caused Analogic's books and records to be falsified. The SEC said the suspicious transactions occurred from 2001 to 2011. Analogic spokesman Mark Namaroff said the Peabody, Massachusetts-based company is glad to settle, has improved its internal controls, and set aside money to cover the accords. The Justice Department said it credited BK Medical for its disclosures and remediation efforts, including its firing of employees responsible for the corrupt payments. Lars Frost, a Danish citizen and former BK Medical chief financial officer, agreed to pay a $20,000 penalty to settle related SEC civil charges, the regulator said. He did not admit wrongdoing.
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A Venezuelan businessman pleaded guilty to bribing officials of Venezuela’s national oil company to steer about $1 billion in energy-supply contracts amid the country’s now-faded oil boom to himself and a partner in the U.S. Roberto Enrique Rincon Fernandez, a Venezuelan citizen who lived in Texas, admitted his role in the bribery scheme as part of a plea deal that reduced his potential prison term to 13 years. He previously faced a possible sentence of more than 100 years, according to court papers. Rincon’s plea is the latest turn in the Justice Department’s wide-ranging investigation of allegations of corruption in Venezuela. The country remains South America’s largest oil exporter as it faces triple-digit inflation and an economy predicted to contract for the third consecutive year amid food riots and a push to recall President Nicolas Maduro. The scheme began amid the nation’s boom years under socialist President Hugo Chavez and continued after his death in 2013, when Maduro took over. Rincon, 55, has been in U.S. custody since he and a Miami colleague were arrested in December on suspicion of bribing officials of Petroleos de Venezuela SA, or PDVSA, from 2009 through 2014. Rincon and Abraham Jose Shiera Bastidas were charged with paying millions of dollars in bribes to three PDVSA officials to rig the bidding process in their favor. Federal agents have traced at least $750 million of the scheme’s proceeds to Rincon-controlled companies. He appeared in court Thursday shackled at the wrists and ankles, accompanied by guards. Addressing the judge throughout as “Senor,” Rincon calmly answered each of the judge’s questions through a translator, saying he was more comfortable speaking in Spanish. U.S. District Judge Gray Miller explained he’s free to impose any sentence he chooses, after reviewing the guidelines, facts and recommendations. “You’re stuck with that whether you like it or not,” the judge told him. “Si, Senor,” Rincon replied.
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Medical device maker Biomet Inc breached a deferred prosecution agreement it reached in 2012 to resolve a foreign corruption investigation, U.S. prosecutors said in a court filing. In a status report filed in federal court in Washington, D.C. on June 6, the U.S. Department of Justice said Biomet breached the agreement through activity in Brazil and Mexico that it disclosed in 2014, and by failing maintain a corporate compliance program. The finding means the company could face criminal prosecution, though the Justice Department said the company had pledged to cooperate and was in “discussions to resolve this matter which would obviate the need for a trial.” Indiana-based Biomet, now called Zimmer Biomet Holdings Inc after being acquired by Zimmer Holdings last year, did not immediately respond to a request for comment. Biomet entered into the deferred prosecution agreement to settle allegations that it paid bribes to state-employed healthcare providers in Argentina, Brazil and China in order to secure business with hospitals, the Justice Department said in 2012. Prosecutors said Biomet disguised those payments in its financial reports as “commissions,” “consulting fees,” “royalties” and “scientific incentives.” The company also agreed to pay a $17.3 million criminal penalty, along with a $5.4 million civil settlement to the U.S. Securities and Exchange Commission, and to maintain a compliance program to prevent future misconduct. The Justice Department said Biomet's conduct violated the Foreign Corrupt Practices Act, which prohibits bribery of foreign officials. It agreed not to prosecute the company if it abided by the deal for three years.
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Akamai Technologies Inc (AKAM.O) and Nortek Inc (NTK.O), which voluntarily disclosed to U.S. prosecutors that their units in China had paid bribes, will not be charged because the U.S. companies turned themselves in, U.S. officials said on Tuesday. These were the first cases in which the U.S. Department of Justice publicly acknowledged deciding not to prosecute since the agency launched a year-long pilot program in April to show leniency to companies that share information about bribes by employees. The U.S. Justice Department said in letters on Tuesday to Akamai and Nortek, which Reuters reviewed, that it had closed its investigations into the companies. Their “prompt voluntary self-disclosure" and cooperation won them decisions not to prosecute, the agency said in the so-called declination letters. The Foreign Corrupt Practices Act makes it a crime to bribe overseas officials to win business. For firms under investigation for bribery, a written confirmation from the Justice Department declining to prosecute is considered among the best possible outcomes. The U.S. Securities and Exchange Commission also said in a statement on Tuesday that it would not charge Akamai and Nortek after they agreed to forfeit profits made as a result of the bribes. Akamai, an internet services provider based in Cambridge, Massachusetts, will pay the SEC $671,885, the agency said. Nortek, a building products manufacturer based in Providence, Rhode Island, will pay $322,058. Many corporate counsels had questioned whether self-reporting bribery allegations to the Justice Department would win them lower penalties. “The perception was that there was no difference,” U.S. Assistant Attorney General Leslie Caldwell said in an interview last week. “So we wanted to create a delta that would be transparent and visible.” The SEC said Akamai’s foreign subsidiary arranged $40,000 in payments to Chinese officials to sell a state-owned enterprise 100 times more network capacity than it needed. Nortek’s China unit made $290,000 in improper payments and gifts to Chinese officials to get better treatment from the country's regulators, such as lower taxes, the SEC said. “The involved parties were terminated and Akamai immediately began an aggressive remediation plan,” said company spokesman Jeffrey Young said.
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A divided U.S. Supreme Court threw out European Union claims that Reynolds American Inc. orchestrated a global scheme to launder drug money, in a ruling that limits the reach of a federal racketeering law that can impose heavy damage awards. Writing for an unusual 4-3majority, Justice Samuel Alito said people suing under the law must show an injury to their U.S. property. The decision overturns a lower court ruling that Reynolds contended would have invited a torrent of racketeering lawsuits against American companies over their activities abroad. “There is a potential for international controversy that militates against recognizing foreign injury claims without clear direction from Congress,” Alito wrote. The EU has pursued Reynolds and other tobacco companies in court for more than a decade. The lawsuit before the Supreme Court centered on an alleged network involving Russian and Colombian criminal organizations that smuggled illegal narcotics into Europe. As part of the complex scheme, the money from the drug sales allegedly was used to buy Reynolds cigarettes. The EU and more than two dozen of its member states argued that Reynolds directed the scheme from the U.S., putting its conduct under the ambit of the federal Racketeer Influenced and Corrupt Organizations Act, known as RICO. The court was operating with an unusual seven-member bench. Justice Antonin Scalia died in February and Justice Sonia Sotomayor didn’t take part in the case. Although Sotomayor didn’t disclose her reason, she was involved as an appeals court judge in an earlier round in the litigation. Justices Ruth Bader Ginsburg, Stephen Breyer and Elena Kagan dissented on the central issue in the case, saying the majority’s conclusion couldn’t be squared with RICO’s broad language. Ginsburg wrote that the case involved American corporations alleged to have managed a racketeering scheme from inside the U.S. “In short, this case has the United States written all over it,” Ginsburg wrote
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HSBC Holdings Plc agreed to pay $1.58 billion to settle a 14-year-old shareholder lawsuit over allegations that executives of a U.S. subprime-lending business acquired by the bank misled investors. The HSBC Finance unit will record a $585 million pretax charge in the second quarter to resolve the litigation, which the parent company inherited through its 2003 acquisition of Household International, the bank said Thursday in a statement. The settlement is subject to court approval. “This settlement is too small to have any influence over dividend decisions,” Keefe, Bruyette & Woods Inc. analysts Mark Phin and Richard Smith wrote in a note to investors. “We had nothing explicit in our estimates for this case, but have $2 billion for litigation until 2017 and remain broadly comfortable with that.” HSBC has been reducing staff and cutting costs as revenue growth slows in its key markets across Asia and the U.K. The lender has also been striving to bring misconduct costs and litigation charges to an end, boosting its compliance workforce to about 9,000 staff from 1,500 in 2010. The pace of hiring accelerated after U.S. authorities fined the bank $1.9 billion in 2012 and charged it with violating sanctions laws and allowing Mexican drug traffickers to launder hundreds of millions of dollars. The pretax charge represents about 9 percent of the $6.57 billion in pretax profit the KBW analysts had estimated for the second quarter before the announcement.
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A California couple raised $27 million from at least 50 Chinese investors seeking U.S. immigration visas but misused two-thirds of the money, instead of building a cancer treatment center they had proposed, the U.S. Securities and Exchange Commission said on Thursday. Charles C. Liu and Xin “Lisa” Wang, both of Laguna Niguel, California, promoted the facility as a project that would help the Chinese investors obtain permanent U.S. immigration visas through a federal program known as EB-5, the SEC said. But Liu transferred $11.8 million of the funds to three firms in China, including one in which he is chief executive and chairman, according to the SEC's civil complaint, unsealed in a Los Angeles federal court on Thursday. Liu also diverted another $7 million to personal accounts for him and Wang, the SEC said. No construction has started at the proposed facility site more than 18 months after the couple began taking investments, the SEC said. A lawyer for Liu and Wang did not return a call requesting comment. The SEC obtained a court order freezing the assets and accounts of Liu, Wang, and their entities, as well as barring them from collecting additional funds, the agency said. Under the federal EB-5 program, wealthy foreigners can in effect buy U.S. immigration visas for themselves and families by investing at least $500,000 in certain development projects. In the past two decades, much of the investment has gone into commercial real-estate projects such as luxury hotels, ski resorts and gas stations. But the program has also sparked concerns about possible scams, which the SEC addressed in a 2013 investor warning. The Liu case is one of several EB-5 fraud cases filed the agency has filed since that warning. The project's investors were told that the center would provide a cancer treatment that uses protons, instead of x-rays, to treat cancer, and create more than 4,500 full-time jobs. The proposed building, slated for Montebello, California, would contain 125,000 square feet, according to the SEC's complaint.
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China’s banks turned on the lending spigot again last month—a boost for the near-term economic outlook, but a longer-term drag as the nation’s debt pile keeps on swelling. New yuan loans rebounded to 985.5 billion yuan ($150 billion) in May, the People’s Bank of China said, ahead of all 35 economists estimates and beating the median for 750 billion yuan in a Bloomberg survey. Aggregate financing was 659.9 billion yuan last month, missing all but one of 28 forecasts and below the median for 1 trillion yuan, as short-term bill financing slumped and net issuance of corporate bonds turned negative. The two-speed data illustrate the tightrope being walked by the central bank: on the one hand it’s seeking to curb financial and debt risks, while on the other it needs to keep credit flowing so that economic growth isn’t derailed. Mortgages led the bank lending increase last month amid a recovering property market. “The jump in new yuan loans shows the PBOC’s determination to support growth, and the shrinking shadow financing, seen in aggregate financing data, shows its awareness of the risks," said Zhu Qibing, a Beijing-based analyst at China Minzu Securities Co. “The PBOC has too many targets, so it inevitably swings back and forth in policies.” The International Monetary Fund this week said China’s near-term economic outlook is being buoyed by policy support even as its medium-term prospects become more uncertain because of rapidly rising credit, excess industrial capacity and financial sector risks. China’s debt load has swelled to about two and a half times gross domestic product, according to Bloomberg Intelligence estimates.
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Cambodia will deport 21 Taiwan nationals to China, a senior Cambodian official said on Monday, ignoring attempts by Taiwanese officials to have them returned instead to Taiwan. Cambodia does not have official relations with self-ruled Taiwan and considers the island part of "one China", in line with Beijing which considers the island a breakaway province. Cambodia detained the 21 Taiwanese along with 14 Chinese nationals in coordination with Chinese authorities who are attempting to halt the proliferation of internet and phone extortion scams that have cost billions of dollars and driven some victims to suicide. Cambodia has deported more than 200 people suspected of involvement in the rings to China since November. "We will deport them to China under the one-China policy," Uk Heisela, investigation chief at Cambodia's immigration department, told Reuters. "They have all confessed to committing the crime." Taipei has accused Beijing of kidnapping when other countries such as Kenya and Malaysia have deported Taiwanese people to China. Taiwan's attempts to have the suspects deported to Taiwan had failed, Taipei's foreign ministry said in a statement. Pressure from Beijing would likely lead to Cambodia deporting them all to China, the ministry said. Taiwan officials based in Vietnam traveled to Cambodia but were not allowed to visit the Taiwanese suspects, the ministry added. Heisela and Kem Sarin, spokesman for Cambodia's immigration department, said they were unaware of a visit by Taiwanese officials. China is Cambodia's largest foreign investor, and Cambodia is one of Beijing's staunchest regional allies. Cambodia had yet to set a date for the deportation, Heisela said. Cambodian authorities arrested 13 of the Taiwanese along with 14 Chinese nationals on June 13. Another 8 Taiwanese suspects were detained on Saturday, said Heisela.
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Valeant Pharmaceuticals International Inc will pay $54 million to settle civil charges that its Salix unit paid illegal kickbacks to induce doctors to prescribe seven of its products, causing the submission of thousands of fraudulent reimbursement claims to the U.S. government. The accord announced on Thursday by the U.S. Department of Justice covers alleged improper activity at the former Salix Pharmaceuticals Inc from 2009 to 2013, predating its April 2015 acquisition by Valeant for more than $11 billion. Salix admitted and accepted responsibility for routinely paying doctors hundreds or thousands of dollars, or offering perks including lavish meals at restaurants such as Le Bernardin and Nobu, to attend some of its roughly 10,000 "speaker programs," including many with little or no educational value. One doctor from Rochester, New York allegedly received more than $200,000 for attending numerous events, including some where he was told not to do slide presentations and that dinner was the only gathering planned. "Receipts from Salix's speaker programs – which were approved by managers – evidence the existence of speaker programs that were quite clearly happy hours," the government added. The Justice Department said the kickback scheme worked, as many attendees began prescribing Salix products more often. It said this led to thousands of false payment claims being submitted to Medicare and Medicaid, and two healthcare programs serving active and retired military personnel. "Salix found a way to pay doctors money and treated them to fancy meals to push their drugs," U.S. Attorney Preet Bharara in Manhattan said in a statement. The drugs and devices covered by the lawsuit are Apriso, Deflux, MoviPrep, OsmoPrep, Relistor, Solesta and Xifaxan.
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A 70-year-old Placentia woman was sentenced Monday to eight years in federal prison for running a hospice that submitted millions of dollars in fraudulent bills to Medicare and Medi-Cal for end-of-life care for patients who were, in reality, not dying. Priscilla Villabroza — who recently completed a 4 1/2-year term at a federal prison in Victorville for running a separate fraud scheme—pleaded guilty in December to a felony health care fraud count before U.S. District Judge S. James Otero. Villabroza's daughter, Sharon Patrow, 45, previously pleaded guilty to the same charge and is expected to be sentenced in August. The mother-daughter pair, along with four others, were charged in 2014 with 25 health care fraud and money laundering counts, each of which carries a potential multiple-year prison sentence, according to the U.S. Attorney's Office. The case involves the formerly Covina-based California Hospice Care, which Villabroza purchased in late 2007 while under investigation in the earlier case. Prosecutors said that between March 2009 and June 2013, California Hospice submitted nearly $9 million in fraudulent bills to Medicare and Medi-Cal for purportedly providing end-of-life care to patients who were, in fact, doing well. The public health programs paid nearly $7.5 million on those bogus bills. According to the indictment, Patrow and her mother paid patient recruiters known as “marketers” or “cappers” to bring in Medicare and Medi-Cal beneficiaries.
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The Securities and Exchange Commission today announced a whistleblower award of more than $17 million to a former company employee whose detailed tip substantially advanced the agency’s investigation and ultimate enforcement action. The award is the second-largest issued by the SEC since its whistleblower program began nearly five years ago. The SEC issued a $30 million award in September 2014 and an award in October 2013. “Company insiders are uniquely positioned to protect investors and blow the whistle on a company’s wrongdoing by providing key information to the SEC so we can investigate the full extent of the violations,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement. “The information and assistance provided by this whistleblower enabled our enforcement staff to conserve time and resources and gather strong evidence supporting our case.” Sean X. McKessy, Chief of the SEC’s Office of the Whistleblower, added, “In the past month, five whistleblowers have received a total of more than $26 million, and we hope these substantial awards encourage other individuals with knowledge of potential federal securities law violations to make the right choice to come forward and report the wrongdoing to the SEC.” By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity. The SEC’s whistleblower program has now awarded more than $85 million to 32 whistleblowers since the program’s inception in 2011. Whistleblowers may be eligible for an award when they voluntarily provide the SEC with unique and useful information that leads to a successful enforcement action. Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million. All payments are made out of an investor protection fund established by Congress that is financed through monetary sanctions paid to the SEC by securities law violators. No money has been taken or withheld from harmed investors to pay whistleblower awards.
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The Securities and Exchange Commission today announced that it has obtained a court order freezing the assets of an investment adviser it has charged with secretly siphoning millions of dollars from accounts he managed for professional athletes and investing them in a struggling online sports and entertainment ticket business on whose board he served. In a complaint filed on May 24 and unsealed today in federal court in Dallas, the SEC charged the adviser, Ash Narayan, of Newport Coast, California, along with The Ticket Reserve Inc., CEO Richard M. Harmon, and chief operating officer John A. Kaptrosky. The SEC obtained a court order on May 24 to freeze the assets of the defendants and the court appointed a receiver over The Ticket Reserve. The SEC’s complaint alleges that Narayan transferred more than $33 million from clients’ accounts to The Ticket Reserve, typically without their knowledge or consent and often using forged or unauthorized signatures. According to the complaint, the Ticket Reserve became dependent on the fraudulent cash infusions from Narayan’s unsuspecting clients to stay in business and in exchange, Narayan received nearly $2 million in hidden compensation from the company, most of it directly traceable to funds stolen from his clients. According to the SEC’s complaint, The Ticket Reserve also made Ponzi-like payments to existing investors using money from new investors. Since being fired from the investment firm where he worked and losing access to the clients’ accounts, Narayan is alleged to have been redirecting to The Ticket Reserve the sham fees he received out of the money taken from client accounts. The SEC secured the court-ordered asset freeze before Narayan could make a planned financial transaction on May 31.
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The Securities and Exchange Commission today announced a settlement with Juan Rangel, the former President of UNO Charter School Network Inc. and former CEO of United Neighborhood Organization of Chicago, for his role in a misleading $37.5 million bond offering to build three charter schools. Rangel agreed to pay a $10,000 penalty and be barred from participating in any future municipal bond offerings to settle the SEC’s fraud charges. The SEC announced a settlement with UNO in 2014 for defrauding investors in the same 2011 bond offering. The SEC’s complaint alleges that Rangel negligently approved and signed a bond offering statement that omitted the charter schools’ multi-million-dollar contracts with two brothers of UNO’s chief operating officer – conflicted transactions that could have threatened UNO’s ability to repay bond investors. “We allege that Juan Rangel signed off on the offering document without even reading it,” said David Glockner, Regional Director of the SEC’s Chicago Regional Office. “This kind of negligent behavior is unacceptable in the securities markets.” According to the SEC’s complaint filed in U.S. District Court for the Northern District of Illinois, in 2010 and 2011, UNO entered into grant agreements with the Illinois Department of Commerce and Economic Opportunity (IDCEO) to build three charter schools. Rangel signed the agreements, which required UNO to certify that no conflict of interest existed and to immediately notify IDCEO in writing if any conflicts subsequently arose. If UNO breached the requirements, IDCEO could suspend the grant payments and recover grant funds already paid to UNO. The complaint alleges that UNO breached the agreement when, at Rangel’s direction, it contracted with its COO’s brothers, agreeing to pay approximately $11 million to one brother’s window company and approximately $1.9 million to another brother for services during construction. According to the complaint, UNO did not notify IDCEO in writing about either transaction and its offering statement disclosed only the $1.9 million contract, not the larger $11 million contract. In addition, the offering document did not disclose that by breaching its agreement, IDCEO could seek to recover the grants, requiring UNO to liquidate its charter schools to repay them, losing the assets it depended on to repay bond investors.
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