Forensic News November 2016
U.S. prosecutors on Tuesday brought new charges against a billionaire from Macau accused of engaging in a scheme to pay hundreds of thousands of dollars in bribes to a former United Nations General Assembly president. A revised indictment filed in Manhattan federal court against Ng Lap Seng, a real estate developer from the Chinese territory, and his assistant, Jeff Yin, included new charges that both men violated the U.S. Foreign Corrupt Practices Act. Prosecutors also added tax-related charges against Yin. The indictment said he took steps to evade paying income taxes and helped a diplomat from the Dominican Republic involved in the scheme conceal portions of his income from U.S. tax authorities. And prosecutors unveiled an alias that they said Ng, the founder of Macau-based real estate developer Sun Kian Ip Group, was known by: “Boss Wu.” Lawyers for Ng and Yin did not immediately respond to requests for comment. Both have previously denied wrongdoing and pleaded not guilty to bribery and money laundering charges. Ng, who was once linked to a campaign fundraising investigation during former U.S. President Bill Clinton’s administration, is one of seven individuals charged since October 2015 in the U.N.-related probe. Prosecutors accuse Ng and Yin of paying more than $500,000 in bribes to John Ashe, a former U.N. ambassador from Antigua and Barbuda who served as General Assembly president from 2013 to 2014. Ashe died in June awaiting trial. The indictment said Ng and Yin also paid bribes to Francis Lorenzo, a then-deputy U.N. ambassador from the Dominican Republic who pleaded guilty in March to bribery and money laundering charges as part of a deal to cooperate in the probe.
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The influence-peddling scandal shadowing South Korean President Park Geun-hye is raising fresh questions about decades of cozy ties between the nation’s big conglomerates and those in power. Successive governments – including Park’s administration – have pledged to curb the influence of the companies, often family-run, known as chaebols. That’s amid public disquiet about how much they affect policy making and, in turn, how strongly and openly they are regulated. Now, one of the biggest chaebols is caught up in the turmoil that is casting doubt on Park’s political future. Investigators on Tuesday raided the headquarters of Samsung Electronics Co., seeking evidence on whether the smartphone maker illegally provided gifts to a confidante of Park who is accused of having undue influence on the president. The company confirmed the probe and declined to comment further. While the public outrage has mostly been directed at Park and her friend Choi Soon-sil, the search of Samsung’s premises, which follows raids on eight banks last week seeking financial details related to Choi, could spur a backlash against major corporations. Hours after the Samsung raid, prosecutors said a Hyundai Motor Co. executive was summoned to provide details related to donations the company made to two foundations. Other chaebols mentioned in the latest allegations include Lotte Group, which gave 7 billion won ($6.2 million) to a foundation in May but said it wasn’t aware of Choi’s alleged role. Local media said the foundation took advantage of the group’s family feud and allegations of improper business transactions, but returned the money the next month after getting wind of a potential investigation.
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France adopted new anti-corruption legislation on Tuesday which will for the first time enable companies to strike negotiated financial settlements with magistrates, in line with practice in the United States and Britain. The measure approved by the lower house of parliament comes after France has been criticized by international organizations for failing to ever convict a French firm for bribery abroad. French firms including Alstom or Total have however been fined in corruption cases in the United States. France ranks 23rd in Transparency International’s latest corruption perception index, behind Germany, Britain and the United States. The new system, allowing for a Deferred Prosecution Agreement (DPA), aims to speed up lengthy legal procedures. The maximum fine will amount to 30 percent of the company’s annual turnover. “It will help companies resolve cases without going to court, without the press being around day after day, and it will probably be cheaper,” Washington-based anti-corruption lawyer Saskia Zandieh of the Miller & Chevalier practice told Reuters. Initial proposals were criticized by the Conseil d’Etat – the country’s highest administrative court – which said it was worried they would lead to a lack of public scrutiny. To alleviate those concerns, the final version includes provisions to ensure a judge checks the legality of the settlement in a public hearing. “I am sure that this provision will be implemented usefully by magistrates and that our country will at last fight so-called transnational corruption effectively,” Finance Minister Michel Sapin told.
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Embattled startup Theranos Inc. was sued by Walgreens Boots Alliance Inc. in connection with claims it violated an agreement tied to a scandal over faulty blood-testing claims. Deerfield, Illinois-based Walgreens, which joined with Theranos to provide testing at some of its retail stores, filed a sealed lawsuit against its former partner on Tuesday in federal court in Delaware. The suit seeks $140 million in damages, the Wall Street Journal reported, citing court records that couldn’t be confirmed in the public docket. Walgreens terminated its relationship with Theranos and closed 40 Arizona sites in June after questions arose about whether the Palo Alto, California-based company misled consumers and investors about the validity of its testing capabilities. “Over the years, Walgreens consistently failed to meet its commitments to Theranos,” the startup said in a statement on its web site. “Through its mishandling of our partnership and now this lawsuit, Walgreens has caused Theranos and its investors significant harm. We will respond vigorously to Walgreens’ unfounded allegations, and will seek to hold Walgreens responsible for the damage it has caused to Theranos and its investors.” Michael Polzin, a spokesman for Walgreens, declined to comment on the case. Walgreens joins testing patients who’ve already sued Theranos, claiming faulty blood-test results led to heart attacks and other issues. It’s also facing fraud claims in state court in Delaware from one of its investors. Theranos’s reputation suffered a hit after it issued tens of thousands of corrected or voided results to former patients. It’s been investigated by federal prosecutors, securities regulators and federal and state health officials. U.S. District Judge Sue Robinson in Wilmington, Delaware, agreed to seal the suit for seven days so Theranos officials can decide whether it contains any proprietary information, according to a public court filing. Walgreens claims Theranos misled it about the state of its technology when the two firms entered into their agreement, the Journal reported, citing unidentified people familiar with the suit.
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Alphabet Inc’s (GOOGL.O) Google is expected to reach a tax settlement with the Indonesian government in the next few weeks, people familiar with the matter told Reuters. Under the proposed settlement, Google will pay back taxes and fines, and the search giant will have to agree to a new calculation of profits made in the country, said one of the people, who declined to be named as the information was not public. If the settlement goes ahead, it could pave the way for more countries to aggressively pursue back taxes from internet companies like Google, analysts say. A tax office spokesman declined to comment. A Google spokesman also declined to comment. Most of the revenue generated by Google in Indonesia is booked at its Asia Pacific headquarters in Singapore, according to the tax office. A senior tax official said in September that Indonesia planned to pursue Google for five years of back taxes, and the company could face a bill of more than $400 million for 2015 alone if it were found to have avoided payments. “I think other countries that have a significant population will also try to chase Google for taxes,” said Yustinus Prastowo, executive director of the Center for Indonesia Taxation Analysis. Indonesia, which launched a tax amnesty scheme in July to lure back billions of dollars stashed abroad, is eager to ramp up its tax collection to narrow its budget deficit and fund an ambitious infrastructure program. The country of 250 million people has a youthful demographic that is among the world’s biggest users of social media like Facebook and Twitter. Senior executives from Google’s Asia Pacific headquarters had met with Indonesian tax officials several times to negotiate its tax bill, people familiar with the matter told Reuters. In January, Google agreed to pay 130 million pounds ($185 million) in back taxes to settle a probe by Britain’s tax authority, which had challenged the company’s low tax returns for the years since 2005. Other governments around the world are also seeking to clamp down on what they see as egregious corporate tax avoidance.
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Xerox Corp. has agreed to pay $2.4 million to settle Massachusetts state prosecutors’ accusations that the company mistreated student debtors in violation of state law banning unfair and deceptive practices, Attorney General Maura Healey said. Xerox, known more for its photocopiers than for its student loan business, allegedly took months to process debtors’ applications to make reduced payments under a federal program, charged excessive fees, harassed borrowers with numerous phone calls, and overcharged active-duty service members in violation of federal law, according to a copy of the settlement filed on Monday in Massachusetts state court. Xerox denied liability. The company “regularly undermined the opportunity for students to access appropriate repayment plans,” Healey said in a statement. “This conduct increases the already high cost of education, damages credit, and prevents students and their families from achieving long-term economic security.” Kevin Lightfoot, a Xerox spokesman, said the company cooperated with Healey’s office and worked closely with prosecutors to improve its loan-servicing practices. The agreement is the latest in a growing list of settlements struck between government agencies and student loan companies accused of misconduct, part of a government crackdown following years of widespread consumer complaints of shoddy customer service. Since 2014, federal regulators have settled similar allegations lodged against companies such as Navient Corp., formerly known as Sallie Mae; Wells Fargo; and Discover Financial Services. The Massachusetts agreement is probably the first in what is expected to be a much broader settlement between the company and numerous state and federal regulators over its student loan practices. In January the federal Consumer Financial Protection Bureau told Xerox that its enforcement staff had amassed enough evidence in a two-year investigation to indicate the company violated federal laws banning unfair practices, according to Xerox’s securities filings. CFPB officials are considering whether to sue the company in court.
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JPMorgan Chase & Co (JPM.N) will pay more than $250 million to settle allegations by the U.S. government that it had hired children of Chinese decision makers to win business, a source familiar with the matter told Reuters. The bank will pay roughly $200 million combined to the Securities and Exchange Commission and the Justice Department and more than $50 million to the Federal Reserve, the source said. There will not be any individual prosecution at this time, the source said. The SEC opened an investigation into JPMorgan in 2013 over the hiring. The Justice Department opened a parallel investigation around the same time. Investment banks have a long history of employing the children of China’s politically connected. While close ties to top government officials are a boon to any banking franchise across the world, they are especially beneficial in China, where relationships and personal connections play a critical role in business decisions. The SEC, JPMorgan and the Justice Department all declined to comment. The settlement was first reported by Bloomberg. It will end a probe into whether the bank’s hires violated U.S. anti-bribery laws, Bloomberg said.
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Chinese regulators have approved Pfizer Inc’s blockbuster vaccine Prevenar 13, the U.S. drugmaker said on Wednesday, a breakthrough for the firm after it was forced to shut its vaccine business in China last year. Prevenar – one of Pfizer’s top selling products – is used primarily for infants to help prevent pneumococcal disease, a bacterial infection that can lead to illnesses such as pneumonia, meningitis and sepsis. Pfizer shuttered its China vaccines business after a license for an earlier version of Prevenar was not renewed in 2015. Foreign drugmakers face growing difficulties obtaining approvals for medicines in China, the world’s No. 2 drug market. The U.S. firm said it had received approval from the China Food and Drug Administration (CFDA) to market Prevenar 13 to infants and children aged between 6 weeks to 15 months. “We applaud the efforts of CFDA and other relevant Chinese government agencies to bring new medicines and vaccines to the Chinese healthcare system,” Wu Xiaobin, president of Pfizer China, said in a statement. The firm aims to make the vaccine available in China within the earliest possible timeframe, but there was no set date, said Pfizer spokeswoman Trupti Wagh. “We have just received the approval and we are working through the timing of our launch,” she said in an e-mail.
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A day after the U.K. Chancellor of the Exchequer Philip Hammond highlighted the problem of British technology companies’ inability to grow to international scale, another one of its most promising startups was snapped up by a Chinese buyer. Ctrip.com International Ltd. will buy air-ticketing specialist Skyscanner Ltd. for about 1.4 billion pounds ($1.7 billion), as China’s biggest online travel company explores ways to expand beyond a home market it already dominates. The deal marks another purchase of a U.K. tech firm by a foreign buyer. Skyscanner, based in Scotland, was valued at more than 1 billion pounds by investors after a financing round in January, according to a British securities filing. Ctrip, whose growth in years past was tied to the phenomenal rise of Chinese tourism, gains a strong foothold in Europe through the purchase of 13-year-old Skyscanner, one of the region’s larger flight ticketing services with more than 60 million monthly active users. The Chinese company said the acquisition will help it offer users a more complete array of options that combine air, rail and road travel. Ctrip said in a statement that the purchase is “mainly” a cash transaction, with the remainder consisting of equity and loans. Skyscanner, a 13-year-old company based in Edinburgh, Scotland, searches through travel options for users and provides price comparisons. Bloomberg reported last month it was looking to sell itself or go public. Sequoia Capital and Scottish Equity Partners are among its backers. Skyscanner reported revenue of 120 million pounds for the year ending December 2015, up 29 percent year-on-year, according to filings with U.K. business registry Companies House in May. Profit hit 17.5 million pounds during over the same time period, up 3 percent year-on-year. In China, visitors to Skyscanner’s platform grew 67 percent in 2015 and mobile visitors nearly doubled, according to a company statement in February. Skyscanner acquired Chinese travel startup Youbibi in 2014 for an undisclosed sum. Qatalyst advised Skyscanner on the Ctrip deal, according to a spokeswoman for Skyscanner.
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Martin Shkreli’s new strategy to defend himself against criminal fraud charges is to blame his lawyers. The 33-year-old founder of Retrophin and Turing Pharmaceuticals AG, who’s been dubbed in the media as the “most hated man in America” for raising the price of a potentially life-saving drug by 5,000 percent, asked for a court order to force his former law firm to turn over three years’ worth of documents. He says the evidence will help clear him. “Shkreli sought and received his lawyers’ legal advice and he followed it,” his lawyers, Ben Brafman and Marc Agnifilo, said in the request for a subpoena. The documents sought “would tend to show that he acted in good faith and without criminal intent in connection with the decisions and actions that the government alleges to be illegal.” Shkreli’s securities-fraud case stems from his operation of two hedge funds. Federal prosecutors say he defrauded investors in the hedge funds and used $11 million of Retrophin assets to pay them off. He’s also accused of hiding his control in the company’s unrestricted stock to help pay off his debts. His former law firm, Katten Muchin Rosenman LLP, fired back Friday, saying Shkreli’s sweeping document request covers all correspondence from 2011 to 2014 that involves Katten, Shkreli, Retrophin and the two hedge funds. The firm says it shouldn’t be forced to hand over almost 600,000 pages of material, including 175,000 e-mails and documents, which covers years of work for multiple entities. Shkreli’s subpoena is not only overly broad, but covers materials that can’t be shared because they’re protected by the attorney-client privilege, Katten said. Much of the material Shkreli and his legal team seek is for entities which the firm hasn’t represented since 2014 or that it doesn’t have the authority to turn over, Katten said. ”We think the privilege belongs to Mr. Shkreli, and as a result, it’s a privilege he has a right to waive,” Brafman said in a telephone interview Monday.
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Generic drugmaker Mylan NV said on Wednesday it was working to finalize a settlement with the U.S. government over Medicaid rebates for its EpiPen emergency allergy treatment, adding that money set aside for the settlement led to a third quarter loss. The company had previously said it agreed to terms of a settlement set at $465 million. However the U.S. Justice Department and other agencies have yet to confirm any such agreement. The dispute involves the classification of EpiPen as a generic rather than a branded product, which led to significantly smaller rebates to state Medicaid programs. Mylan has been under investigation and faced harsh criticism over steep price increases for its life-saving auto-injector used for severe allergic reactions. Chief Executive Heather Bresch, on a conference call with analysts, said high deductible health plans and pricing pressure had created U.S. headwinds for its business. “We wish we had better anticipated the acceleration of rising out-of-pocket costs” for our customers, she said. With the distraction of the U.S. presidential election over, Bresch said she hoped to be part of a discussion aimed at finding solutions to better transparency around the complexities of drug pricing. Mylan’s announcement earlier this year of a near doubling of the price for a pair of EpiPen injectors to $600 set off a firestorm of criticism from parents, politicians and patient advocates. The company said it expects EpiPen to account for 6 percent of total sales in 2017. Mylan has virtually had the market for emergency allergy auto-injectors to itself. However, competition is coming. Last month, privately held Kaleo Inc announced plans for a U.S. relaunch of its Auvi-Q injector in the first half of next year following a product recall. While Mylan works to integrate recent acquisitions, Bresch said business development plans will focus on smaller bolt-on acquisitions, perhaps to enhance a particular therapeutic area. “It’s buyer’s market. I think there’s great assets out there,” Bresch said. “We don’t need to do any big acquisitions.”
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Royal Philips NV plans to roll out software designed to help doctors improve the diagnoses of diseases such as cancer as it challenges General Electric Co. and Siemens AG for a bigger share of the lucrative health-care solutions market. The apps will improve interpretation of data such as a sequence of scans, with different colors showing up minor differences easily be missed with the naked eye, Chief Executive Officer Frans van Houten said in a media briefing. It’s a market that could potentially grow twice as fast as Philips’ traditional business supplying scanners and other big-ticket medical gear. Software currently accounts for about 3 billion euros ($3.1 billion) of the 17 billion euros in sales generated by Philips. “The world does not need much more capacity in scanners, but is especially in need of better interpretation of data,” Van Houten said, adding that currently about half of diagnoses given to patients are incorrect. “This is the holy grail that we all are after.” Van Houten earlier this month told investors at a capital markets day in London that they should increasingly consider Philips a provider of software, as opposed to the iconic lightbulbs, TVs and CD players that have been core products during the company’s 125-year history. Philips has exited traditional businesses to focus on health care, and is streamlining its factory network and increasing spending on research to close the gap on its rivals. The Dutch company’s 12-month trailing 8.9 percent operating margin in healthcare sales lags behind GE Healthcare’s 16.9 percent and Siemens’ 15.7 percent, according to Bloomberg Intelligence. GE is bundling software apps on its health-care cloud platform capable of linking imaging machines and patient devices. Siemens also made the first steps in the area of computer-assisted detection with software that analyzes pictures for typical patterns and irregularities and support radiologists in their analysis, including in mammography and lung screening.
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Teva Pharmaceuticals Industries Ltd. reported acquisition-driven revenue growth in its latest quarter, but sales fell across much of its specialty-drug business. Shares fell 3.6% in premarket trading as Teva also cut its guidance for the year. Teva also disclosed that it had set aside $520 million as it was in advanced discussions with the U.S. Department of Justice and the U.S. Securities and Exchange Commission to settle potential violations of foreign corruption laws. The potential settlement relates to conduct in Russia, Mexico and Ukraine from 2007 to 2013. Teva said the conduct doesn’t involve its U.S. business. Teva said in response to the investigation that it had ended “problematic” business relationships, withdrawn from some countries, gotten rid of relevant employees and overhauled the management of several subsidiaries. Teva cut its revenue guidance for the year to between $21.6 billion and $21.9 billion, from between $22 billion and $22.5 billion previously. It also expects adjusted earnings per share to be between $5.10 and $5.20, down from $5.20 to $5.40 previously. During the quarter, the Israeli pharmaceutical company known for its generic-drugs business closed its $40.5 billion deal for Allergan’s generics business. Revenue in its generic medicine segment grew 32% to $2.9 billion, largely due to the Allergan deal. In its specialty segment, revenue fell 6% to $2.05 billion due to lower sales of its multiple sclerosis drug copaxone and sleepiness treatment nuvigil. Sales fell across most of its specialty segment’s divisions including central nervous system, respiratory, cancer and women’s health. Research-and-development costs jumped 84% to $663 million, with the increase largely being attributed to $250 million paid to Regeneron Pharmaceuticals Inc. related to development of pain medication product Fasinumab.
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