BNP PARIBAS TO PAY $80 MILLION JUDGEMENT FOR FALSE CLAIMS TO USDA

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, July 24, 2014

$80 Million Judgment Entered Against BNP Paribas for False Claims to the U.S. Department of Agriculture

The Department of Justice announced today that an $80 million False Claims Act judgment was entered against BNP Paribas for submitting false claims for payment guarantees issued by the U.S. Department of Agriculture (USDA).  BNP Paribas is a global financial institution headquartered in Paris.    

 “We will not tolerate the misuse of taxpayer funded programs designed to help American businesses,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery.  “Companies that abuse these programs will be held accountable.”

The United States filed a lawsuit against BNP Paribas in connection with its receipt of payment guarantees under USDA’s Supplier Credit Guarantee (SCG) Program.  The program provided payment guarantees to U.S.-based exporters for their sales of grain and other agricultural commodities to importers in foreign countries.  The program encouraged American exporters to sell American agricultural commodities to foreign importers and covered part of the losses if the foreign importers failed to pay.  The SCG Program regulations provided that U.S. exporters were ineligible to participate in the SCG Program if the exporter and foreign importer were under common ownership or control.
         
The judgment entered by the court resolves the government’s allegations that, from 1998 to 2005, BNP Paribas participated in a sustained scheme to defraud the SCG Program.  In furtherance of the scheme, American exporters and Mexican importers who were under common control improperly obtained SCG Program export credit guarantees for transactions between the affiliated exporters and importers.  In some cases, the underlying transactions were shams and did not involve any real shipment of grain.  BNP Paribas accepted assignment of the credit guarantees from the American exporters, even though it knew that the affiliated exporters and importers were ineligible for SCG Program financing, and a BNP Paribas vice-president, Jerry Cruz, received bribes from the exporters.  Beginning in April 2005, when the Mexican importers began defaulting on their payment obligations, BNP Paribas submitted claims to the USDA for the resulting losses.

On Jan. 20, 2012, Cruz pleaded guilty to conspiracy to commit bank fraud, mail fraud and wire fraud, and conspiracy to commit money laundering.  

“I would like to thank the Department of Justice and the USDA General Counsel’s office for their collaboration in recovering $80 million under this judgment,” said Administrator of USDA’s Foreign Agricultural Service Phil Karsting.  “This illustrates the importance USDA and this administration places on protecting the integrity of our programs.”

The resolution of this matter was the result of a coordinated effort among the Commercial Litigation Branch of the Justice Department’s Civil Division, the USDA, the USDA Office of Inspector General, the U.S. Postal Inspection Service and the Internal Revenue Service Criminal Investigation.

EXPORT-IMPORT BANK CHAIRMAN HOCHBERG ON SUCCESS IN GLOBAL MARKET

FROM:  U.S. EXPORT-IMPORT BANK 
Ex-Im Bank Chairman Outlines How American Exporters Can Remain Competitive Despite Unprecedented Challenges
In Annual Competitiveness Report, Hochberg Describes Path to Success in Tough Global Market 

Washington, DC – Today, Export-Import Bank Chairman Fred P. Hochberg outlined the unprecedented challenges facing our nation’s exporters in a keynote address at the Center for American Progress. During his speech, Hochberg spoke about how U.S. companies are often forced to go head-to-head with foreign governments who offer attractive financing, provided a strong defense of Ex-Im Bank, and outlined how U.S. companies can succeed in an increasingly competitive global environment.

Excerpts from Hochberg's speech 

“American products are the best in the world. And on a level playing field, they often come out on top. But, today more than ever, foreign governments are willing to do whatever it takes to close a sale – putting massive resources behind their chosen exporters, which are often state-owned enterprises.”

“In this year’s competitiveness report, we found that China, Korea, Japan and others are ramping up government export support… Yet, here at home, Congress has required the Treasury Department to begin negotiations with our competitors to end export credits…To end export credits when our competitors are playing by a completely different set of rules…This would be a self-inflicted wound our economy cannot sustain.”

“Make no mistake, foreign governments would love to see Ex-Im go out of business and swoop in and snatch the $50 billion worth of exports we financed last year. They would love to have those 255,000 American jobs for themselves. Failing to reauthorize our charter next year is a particularly bad idea in light of the growth of the global middle class and the unprecedented competition America faces from Asia and Russia, among many others.”

Key findings from Ex-Im Bank's Competitiveness Report 

Commercial bank capacity has declined and cost of funds has increased worldwide since the global financial crisis, shifting the volume of demand from commercial lenders to export credit agencies (ECAs).

The global financial crisis has altered the landscape, affecting economic progress in Europe while manufacturing prowess has vastly improved in Asia. Many Asian countries have ambitious export plans to gain market share and the financing that goes along with it.

U.S. exporters compete in many markets and sectors that other countries have targeted as a “national interest,” either explicitly as part of their national policy, or implicitly by making available a range of official financing tools intended to maximize the flow of national benefits.

More and more financing is being offered outside of OECD guidelines. But it’s not just interest rates. It is open season on other inducements as non-OECD countries continue to use financing to sway purchase decisions.
About Ex-Im Bank

Ex-Im Bank is an independent federal agency that helps create and maintain U.S. jobs by filling gaps in private export financing at no cost to American taxpayers. In the past five years (from Fiscal Year 2008), Ex-Im Bank has earned for U.S. taxpayers nearly $1.6 billion above the cost of operations. The Bank provides a variety of financing mechanisms, including working capital guarantees, export-credit insurance and financing to help foreign buyers purchase U.S. goods and services.

EXPORT-IMPORT BANK CHAIRMAN HOCHBERG'S MESSAGE

FROM:  U.S. EXPORT-IMPORT BANK
Message from the Chairman,
Fred Hochberg

Let me begin by telling you how honored I am to have been reappointed by President Obama and confirmed by the Senate for another term as Chairman of the Export-Import Bank. After a strong, bipartisan vote, I look forward to working with the excellent team here at Ex-Im on behalf of American exporters, supporting jobs here at home through sales abroad. And I look forward to working with all of you.

As we continue our economic recovery, exports continue to play a key role. Over the past four years, Ex-Im Bank’s financing has supported nearly one million American jobs and helped thousands of small businesses expand their reach into international markets.  The Bank also delivered more than $1 billion to the U.S. Treasury during this period at no cost to American taxpayers.

Moving forward, all of us at Ex-Im will continue to work with members of Congress, our Board and customers to ensure that America’s workers, small business owners, and exporters have access to the financing they need.  We’ll work to ensure America’s exporters are able to compete on a level playing field and sell their products and services around the world.

Aside from the confirmation proceedings, it’s been an eventful three months here at Ex-Im. I would like to update you on our latest results.

Following fiscal year 2012’s record results, Ex-Im is on track for another productive year—thanks to America’s dynamic exporting community.  Authorizations in our April-June quarter were $6 billion, for a total of $21.7billion for the year to date.  More important, our financing supported 165,000 export-related American jobs so far this year in communities across the country.  Our total exposure is nearly $110 billion.

The Bank’s year-to-date authorizations have declined relative to the same period last year from $23.8 billion to $21.7 billion, a promising trend that illustrates the renewed lending activity of commercial banks in the wake of the financial crisis. Our transportation authorizations, for instance, will be down overall as commercial banks re-enter commercial-aircraft financing, though our support for general aviation and helicopters has increased as we have diversified our portfolio.  Mining, which has traditionally played a large role, will decrease as well due in large part to slower global demand for commodities. However, our authorizations for satellite and manufacturing deals are up this year.  We’ve done more transactions this year than in FY 2012, but our ticket sizes are smaller. While commercial banks are stepping back into the breach, we’re still needed to do the tougher, more complicated deals.

And if you allow me to brag a little, we won three prestigious awards:

Trade Finance magazine named Ex-Im “Best Global Export Credit Agency” for the second time and, for the fourth consecutive time, “Best ECA in the Americas.”  Besides that, Trade Finance recognized Ex-Im for our participation in six “Deals of the Year.”
Two weeks later, London’s Trade and Forfaiting Review named us “World’s Best Export Credit Agency” for our support for exports and innovative deals.
AirFinance Journal recognized Ex-Im for four 2012 aviation “Deal of the Year” awards – each of them financed by our innovative Bank-guaranteed bonds, one of our most successful innovations in recent years.
We’ve achieved these results without any significant increase in staff, instead creating new financial products to meet the unique needs of our exporters competing in today’s global economy.  For example, our innovative Global Credit Express program for short-term working capital loans to small exporters continues to grow rapidly.  We’re having great success with our capital markets initiative that issues large, long-term guaranteed bonds for export sales like commercial aircraft.

I was also pleased that President Obama recently nominated Ex-Im Bank Vice Chair Wanda Felton for a second term here.  Among her accomplishments, she’s been a driving force behind our successful expansion of financing exports to Sub-Saharan Africa.  We look forward to her timely confirmation by the Senate.

Sadly, Director Larry Walther left the Bank earlier this month after two years of outstanding service as a member of our Board of Directors.  Larry is a seasoned pro in trade finance and promotion here and in his beloved Arkansas, where he returns for some well-earned relaxation.

None of these successes would have been possible without the creativity, hard work and dedication of Ex-Im staff – in support of our exporters who continue to sell world-class goods and services to buyers in over 150 countries.  You are a great team, and I’m proud to work with you.

Sincerely,
Fred P. Hochberg