FROM: U.S. COMMODITY FUTURES TRADING COMMISSION
December 16, 2014
Federal Court Orders Missouri Resident Daniel K. Steele and His Missouri Company, Champion Management International, LLC, to Pay over $2.5 Million in Monetary Sanctions
Order Also Requires Relief Defendant Judy D. Steele to Disgorge Ill-Gotten Gains
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) announced that the Honorable Ronnie L. White of the U.S. District Court for the Eastern District of Missouri entered a Consent Order for permanent injunction against Defendants Daniel K. Steele and Champion Management International, LLC, (Champion Management), a Missouri limited liability company. The Court’s Order requires Defendants jointly to pay $1,544,722.81 in restitution to defrauded investors, imposes a $1 million civil monetary penalty, and requires Relief Defendant Judy D. Steele to disgorge ill-gotten gains totaling $187,083.58. The Order also imposes a permanent trading and registration ban on the Defendants and prohibits them from further violations of the anti-fraud provisions of the Commodity Exchange Act (CEA), as charged.
The Court’s Order stems from a CFTC Complaint filed on September 25, 2013 and an amended Complaint filed on July 16, 2014, charging that from approximately February 28, 2011 through September 25, 2013, Steele individually and acting as an agent of Champion Management solicited at least $1.97 million from at least 24 pool participants to participate in three foreign currency (forex) pools (see CFTC Press Release and Complaint 6712-13, September 26, 2013, and CFTC Press Release and Amended Complaint 6962-14, July 18, 2014).
Specifically, the Court’s Order finds that Steele knowingly made material misrepresentations to actual and prospective pool participants concerning Defendants’ forex trading and trading results, such as: “I’ve been doing this long enough to know what I can consistently deliver above expenses, in all market conditions…the return is fixed and is currently 5% per month on your invested amount compounded… .”
The Court’s Order also finds, among other things, that Steele concealed trading losses, misappropriated approximately $1 million of pool participants’ funds, issued false account statements to pool participants, and failed to disclose that the counterparty to the retail forex transactions that were offered or entered into with the respective pools was not registered with the CFTC as a Retail Foreign Exchange Dealer, all in violation of Sections 4o and 4b of the CEA.
The CFTC cautions victims that restitution orders may not result in the recovery of money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.
The CFTC appreciates the assistance of the Missouri Secretary of State, Securities Division, the U.S. Postal Inspection Service, and the Swiss Financial Market Supervisory Authority.
CFTC Division of Enforcement staff members responsible for this case are Eugene Smith, Melanie Devoe, George Malas, Kyong J. Koh, Peter M. Haas, and Paul G. Hayeck.
* * * * * *
CFTC’s Foreign Currency (Forex) Fraud Advisory
The CFTC has issued several customer protection Fraud Advisories that provide the warning signs of fraud, including the Foreign Currency Trading (Forex) Fraud Advisory, which states that the CFTC has witnessed a sharp rise in Forex trading scams in recent years and helps customers identify this potential fraud.
Customers can report suspicious activities or information, such as possible violations of commodity trading laws, to the CFTC Division of Enforcement via a Toll-Free Hotline 866-FON-CFTC (866-366-2382) or file a tip or complaint online.
Monday, December 29, 2014
Sunday, December 28, 2014
ANTI-AGING, WART REMOVAL AND WEIGHT LOSS MARKETERS SETTLE FTC'S DECEPTIVE ADVERTISING CHARGES
FROM: U.S. FEDERAL TRADE COMMISSION
Marketers Settle FTC Charges That They Used Deceptive Ads In Promoting Products for Mole and Wart Removal, Anti-Aging and Weight Loss
Companies Must Stop Making Deceptive Claims
Two companies that market skin care and weight-loss products must stop making false or unsubstantiated deceptive claims about their products, under settlements resolving charges in two separate cases brought by the Federal Trade Commission.
In one case, the FTC challenged ads for DermaTend, a skin cream that was promoted for do-it-yourself removal of moles, skin tags, and warts, as well as Lipidryl, a supplement promoted for weight loss. In the second case, the agency challenged claims for Photodynamic Therapy anti-aging lotions, as well Shrinking Beauty, a supposed body-slimming lotion.
The FTC settlements in both cases prohibit the defendants from misleading consumers about the efficacy of their products and about whether their claims are backed by scientific evidence. In addition, the marketers of DermaTend and Lipidryl are required to disclose when people promoting the products are paid for their endorsement.
“These companies made outrageous claims that their products could provide a range of benefits – from removing warts to decreasing the appearance of cellulite to providing substantial weight loss,” said Jessica Rich, Director of the Bureau of Consumer Protection. “The common thread for all of these claims was the fundamental lack of scientific evidence. Consumers deserve better.”
DermaTend and Lipidryl
Aaron Lilly, a Nevada-based marketer, owns and operates both Solace International, Inc. and Bioscience Research Institute LLC, which sell DermaTend and Lipidryl, respectively. DermaTend was advertised in SkyMall (both the magazine and website), as well as on Amazon.com and eBay, and through Google AdWords. It was also sold on company-owned websites and marketed through affiliates.
According to the FTC’s complaint, DermaTend contains the botanical bloodroot and zinc chloride. A 1.7 ounce container of the “Original” formula sells for $39.95, while a 3.4 ounce container of “Ultra” sells for $69.95. Consumers who bought DermaTend also received an emery board and instructions directing consumers to file down their mole, skin tag, or wart with the emery board before applying the product.
The complaint alleges that DermaTend ads made false or unsubstantiated claims that the product worked in a very short amount of time, caused little or no scarring, and was safe (even for children). They also touted a “97 percent success rate.” The FTC also alleges that DermaTend ads touted “real user results” supposedly showing before and after photos of consumers who had success using the products, and written testimonials, without disclosing that reviewers were sometimes paid for their stories.
Bioscience, Lilly’s other company, charged $129.99 for a three-month supply of Lipidryl, which contains African mango seed extract. The FTC complaint charges that ads for Lipidryl falsely claimed that the supplement was clinically proven to cause substantial weight loss (such as 28 pounds in 10 weeks) and reduce users’ waistlines.
The FTC’s settlement order with Lilly and his companies requires that future claims for DermaTend and other products promoted for removing skin lesions be supported by high-quality human clinical testing. Future claims for Lipidryl or other weight-loss products must be supported by at least two well-done human clinical studies.
The order prohibits the defendants from making a number of specific unsubstantiated representations; requires disclosure if endorsers are provided with compensation; and requires monitoring of affiliate marketers. The order also requires the defendants to pay $402,338 and to provide the Commission with the proceeds from the sale of four homes in Texas.
DERMAdoctor, Inc.
According to the FTC’s complaint, DERMADoctor, Inc. and its majority owner, Audrey Kunin, M.D., violated the FTC Act by making deceptive claims about their anti-aging products and a body-slimming lotion. DERMAdoctor is based in Missouri and marketed Photodynamic Therapy Liquid Red Light Anti-Aging Lotion and Photodynamic Therapy Liquid Red Light Eye Lift Lotion, as well Shrinking Beauty, a “firming, sculpting & toning lotion with lobster weight loss inspired technology.”
The complaint states that since October 2010, the defendants have marketed and sold Photodynamic Therapy lotion with extract of the noni fruit, which was promoted as able to capture UV light and transform it into visible red light that has purported anti-aging effects on the skin. The defendants charged $85 for a one-ounce bottle of the face lotion. DERMAdoctor products are sold in retailers such as Nordstrom, Sephora, and Ulta, and according to the FTC, Photodynamic Therapy was advertised on QVC, the DERMAdoctor website, and in women’s magazines, including Cosmopolitan and Shape.
Since December 2012, the defendants also have marketed and sold Shrinking Beauty, with a retail price of $58 for a 5.5-ounce tube. Through ads in magazines such as Health and on the DERMAdoctor website, the defendants claimed the product would improve the appearance of cellulite, smooth and tighten skin, and that the results were “clinically proven to reduce measurements up to one inch in two weeks.”
The proposed settlement order with DERMAdoctor requires that the defendants have competent and reliable scientific evidence to support future anti-aging and cellulite-reduction claims, as well as at least two randomized, double-blind, placebo-controlled human clinical studies to support claims relating to weight loss or reduction of body size. It also prohibits them from misrepresenting the existence or results of any scientific test, study or research. The order requires payment of $12,675.
The Commission votes approving the complaints and proposed stipulated orders in both cases were 5-0. The complaint and proposed order in the Lilly case were filed in the U.S. District Court for the District of Nevada on December 10, 2014 and signed by the judge the next day The complaint and proposed order in the DERMAdoctor case were filed in the U.S. District Court for the Western District of Missouri, Western Division, on December 23, 2014.
In the course of its investigation into Solace International and Bioscience Research Institute, the FTC worked with the U.S. Food and Drug Administration (FDA), which issued a warning letter to Solace regarding its marketing of DermaTend, and law enforcers in 10 California counties. The National Advertising Division of the Better Business Bureaus referred this matter to the Commission.
Information for Consumers
When it comes to treatments for health and fitness, it can be tough to tell useful products and services from those that don’t work or aren’t safe. For more information, see the FTC’s guidance on Treatments & Cures and Weight Loss & Fitness.
The FTC is a member of the National Prevention Council, which provides coordination and leadership at the federal level regarding prevention, wellness, and health promotion practices. This case advances the National Prevention Strategy’s goal of increasing the number of Americans who are healthy at every stage of life.
NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. Stipulated orders have the force of law when approved and signed by the District Court judge.
Marketers Settle FTC Charges That They Used Deceptive Ads In Promoting Products for Mole and Wart Removal, Anti-Aging and Weight Loss
Companies Must Stop Making Deceptive Claims
Two companies that market skin care and weight-loss products must stop making false or unsubstantiated deceptive claims about their products, under settlements resolving charges in two separate cases brought by the Federal Trade Commission.
In one case, the FTC challenged ads for DermaTend, a skin cream that was promoted for do-it-yourself removal of moles, skin tags, and warts, as well as Lipidryl, a supplement promoted for weight loss. In the second case, the agency challenged claims for Photodynamic Therapy anti-aging lotions, as well Shrinking Beauty, a supposed body-slimming lotion.
The FTC settlements in both cases prohibit the defendants from misleading consumers about the efficacy of their products and about whether their claims are backed by scientific evidence. In addition, the marketers of DermaTend and Lipidryl are required to disclose when people promoting the products are paid for their endorsement.
“These companies made outrageous claims that their products could provide a range of benefits – from removing warts to decreasing the appearance of cellulite to providing substantial weight loss,” said Jessica Rich, Director of the Bureau of Consumer Protection. “The common thread for all of these claims was the fundamental lack of scientific evidence. Consumers deserve better.”
DermaTend and Lipidryl
Aaron Lilly, a Nevada-based marketer, owns and operates both Solace International, Inc. and Bioscience Research Institute LLC, which sell DermaTend and Lipidryl, respectively. DermaTend was advertised in SkyMall (both the magazine and website), as well as on Amazon.com and eBay, and through Google AdWords. It was also sold on company-owned websites and marketed through affiliates.
According to the FTC’s complaint, DermaTend contains the botanical bloodroot and zinc chloride. A 1.7 ounce container of the “Original” formula sells for $39.95, while a 3.4 ounce container of “Ultra” sells for $69.95. Consumers who bought DermaTend also received an emery board and instructions directing consumers to file down their mole, skin tag, or wart with the emery board before applying the product.
The complaint alleges that DermaTend ads made false or unsubstantiated claims that the product worked in a very short amount of time, caused little or no scarring, and was safe (even for children). They also touted a “97 percent success rate.” The FTC also alleges that DermaTend ads touted “real user results” supposedly showing before and after photos of consumers who had success using the products, and written testimonials, without disclosing that reviewers were sometimes paid for their stories.
Bioscience, Lilly’s other company, charged $129.99 for a three-month supply of Lipidryl, which contains African mango seed extract. The FTC complaint charges that ads for Lipidryl falsely claimed that the supplement was clinically proven to cause substantial weight loss (such as 28 pounds in 10 weeks) and reduce users’ waistlines.
The FTC’s settlement order with Lilly and his companies requires that future claims for DermaTend and other products promoted for removing skin lesions be supported by high-quality human clinical testing. Future claims for Lipidryl or other weight-loss products must be supported by at least two well-done human clinical studies.
The order prohibits the defendants from making a number of specific unsubstantiated representations; requires disclosure if endorsers are provided with compensation; and requires monitoring of affiliate marketers. The order also requires the defendants to pay $402,338 and to provide the Commission with the proceeds from the sale of four homes in Texas.
DERMAdoctor, Inc.
According to the FTC’s complaint, DERMADoctor, Inc. and its majority owner, Audrey Kunin, M.D., violated the FTC Act by making deceptive claims about their anti-aging products and a body-slimming lotion. DERMAdoctor is based in Missouri and marketed Photodynamic Therapy Liquid Red Light Anti-Aging Lotion and Photodynamic Therapy Liquid Red Light Eye Lift Lotion, as well Shrinking Beauty, a “firming, sculpting & toning lotion with lobster weight loss inspired technology.”
The complaint states that since October 2010, the defendants have marketed and sold Photodynamic Therapy lotion with extract of the noni fruit, which was promoted as able to capture UV light and transform it into visible red light that has purported anti-aging effects on the skin. The defendants charged $85 for a one-ounce bottle of the face lotion. DERMAdoctor products are sold in retailers such as Nordstrom, Sephora, and Ulta, and according to the FTC, Photodynamic Therapy was advertised on QVC, the DERMAdoctor website, and in women’s magazines, including Cosmopolitan and Shape.
Since December 2012, the defendants also have marketed and sold Shrinking Beauty, with a retail price of $58 for a 5.5-ounce tube. Through ads in magazines such as Health and on the DERMAdoctor website, the defendants claimed the product would improve the appearance of cellulite, smooth and tighten skin, and that the results were “clinically proven to reduce measurements up to one inch in two weeks.”
The proposed settlement order with DERMAdoctor requires that the defendants have competent and reliable scientific evidence to support future anti-aging and cellulite-reduction claims, as well as at least two randomized, double-blind, placebo-controlled human clinical studies to support claims relating to weight loss or reduction of body size. It also prohibits them from misrepresenting the existence or results of any scientific test, study or research. The order requires payment of $12,675.
The Commission votes approving the complaints and proposed stipulated orders in both cases were 5-0. The complaint and proposed order in the Lilly case were filed in the U.S. District Court for the District of Nevada on December 10, 2014 and signed by the judge the next day The complaint and proposed order in the DERMAdoctor case were filed in the U.S. District Court for the Western District of Missouri, Western Division, on December 23, 2014.
In the course of its investigation into Solace International and Bioscience Research Institute, the FTC worked with the U.S. Food and Drug Administration (FDA), which issued a warning letter to Solace regarding its marketing of DermaTend, and law enforcers in 10 California counties. The National Advertising Division of the Better Business Bureaus referred this matter to the Commission.
Information for Consumers
When it comes to treatments for health and fitness, it can be tough to tell useful products and services from those that don’t work or aren’t safe. For more information, see the FTC’s guidance on Treatments & Cures and Weight Loss & Fitness.
The FTC is a member of the National Prevention Council, which provides coordination and leadership at the federal level regarding prevention, wellness, and health promotion practices. This case advances the National Prevention Strategy’s goal of increasing the number of Americans who are healthy at every stage of life.
NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. Stipulated orders have the force of law when approved and signed by the District Court judge.
SEC ANNOUNCES AN INVESTMENT MANAGEMENT FIRM TO PAY $35 MILLION TO SETTLE FRAUD CHARGES
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission announced that investment management firm F-Squared Investments has agreed to pay $35 million and admit wrongdoing to settle charges that it defrauded investors through false performance advertising about its flagship product.
The SEC separately charged the firm’s co-founder and former CEO Howard Present with making false and misleading statements to investors as the public face of F-Squared.
According to the SEC’s order instituting a settled administrative proceeding against Massachusetts-based F-Squared, which is the largest marketer of index products using exchange-traded funds (ETFs), the firm began receiving signals from a third-party data provider in September 2008 indicating when to buy or sell an investment. The signals were based on an algorithm, and F-Squared and Present used the signals to create a model portfolio of sector ETFs that could be rebalanced periodically as the signals changed. They named the new product “AlphaSector” and launched the first index a month later. AlphaSector’s indexes quickly became the firm’s largest revenue source, and F-Squared went from losing money to becoming a highly profitable investment manager.
The SEC alleges that while marketing AlphaSector into the largest active ETF strategy in the market, F-Squared falsely advertised a successful seven-year track record for the investment strategy based on the actual performance of real investments for real clients. In reality, the algorithm was not even in existence during the seven years of purported performance success. The data used in F-Squared’s advertising was actually derived through backtesting, which is the application of a quantitative model to historical market data to generate a hypothetical performance during a prior period. F-Squared and Present specifically advertised the investment strategy as “not backtested.” Furthermore, the hypothetical data contained a substantial performance calculation error that inflated the results by approximately 350 percent.
“Investors must be able to trust that performance advertisements are accurate,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement. “F-Squared has admitted that it misled its clients over a number of years about the existence and success of its core strategy.”
According to the SEC’s complaint against Present filed in federal court in Boston, he was responsible for F-Squared’s advertising materials that were often posted on the company website and sent to clients and prospective clients. Present also was responsible for the descriptions of AlphaSector in its filings with the SEC, and he certified the accuracy of those filings. F-Squared and Present made the false and misleading statements about AlphaSector from September 2008 to September 2013. The SEC alleges that they claimed AlphaSector was based on an investment strategy that had been used to invest client assets since April 2001. Yet Present knew that the algorithm was not finalized until late summer 2008 when he devised rules for turning the signals into a model ETF portfolio and directed an assistant to calculate hypothetical returns for the portfolio going back to April 2001.
The SEC further alleges that the F-Squared analyst who calculated the backtested AlphaSector performance inadvertently applied the buy/sell signals to the week preceding any ETF price change that the signals were based on. The mistake carried the model portfolio’s backtested buy and sell decisions back in time one week, enabling the model to buy an ETF just before the price rose and sell an ETF just before the price fell. The SEC alleges that the analyst tried to explain this possible calculation error to Present in late September 2008, yet F-Squared went on to advertise the inflated data for the next five years and overstated that AlphaSector significantly outperformed the S&P 500 from April 2001 to September 2008.
“We allege that not only did F-Squared and Present attract clients to this investment strategy by touting a track record they presented as real when it was merely hypothetical, but the hypothetical calculations also were substantially inflated,” said Julie M. Riewe, co-chief of the Enforcement Division’s Asset Management Unit.
F-Squared consented to the entry of the order finding that it violated Sections 204, 206(1), 206(2), 206(4), and 207 of the Investment Advisers Act of 1940 and Rules 204-2(a)(16), 206(4)-1(a)(5), 206(4)-7, and 206(4)-8. The order also finds that F-Squared aided and abetted and caused certain mutual funds sub-advised by F-Squared to violation Section 34(b) of the Investment Company Act of 1940. F-Squared acknowledged that its conduct violated federal securities laws, and agreed to cease and desist from committing or causing violations of these provisions. F-Squared agreed to retain an independent compliance consultant and pay disgorgement of $30 million and a penalty of $5 million.
The SEC’s complaint against Present alleges that he violated Sections 206(1), 206(2), 206(4), and 207 of the Investment Advisers Act of 1940 and Rule 206(4)-8.
The SEC’s investigation, which is continuing, is being conducted by Bill Donahue, Robert Baker, Jose Santillan, and John Farinacci of the Asset Management Unit as well as Rachel Hershfang, Frank Huntington, Mayeti Gametchu, Jennifer Cardello, and Rory Alex of the Boston Regional Office. The case has been supervised by Kevin Kelcourse. The SEC’s litigation against Present will be led by Mr. Huntington and Ms. Hershfang.
The Securities and Exchange Commission announced that investment management firm F-Squared Investments has agreed to pay $35 million and admit wrongdoing to settle charges that it defrauded investors through false performance advertising about its flagship product.
The SEC separately charged the firm’s co-founder and former CEO Howard Present with making false and misleading statements to investors as the public face of F-Squared.
According to the SEC’s order instituting a settled administrative proceeding against Massachusetts-based F-Squared, which is the largest marketer of index products using exchange-traded funds (ETFs), the firm began receiving signals from a third-party data provider in September 2008 indicating when to buy or sell an investment. The signals were based on an algorithm, and F-Squared and Present used the signals to create a model portfolio of sector ETFs that could be rebalanced periodically as the signals changed. They named the new product “AlphaSector” and launched the first index a month later. AlphaSector’s indexes quickly became the firm’s largest revenue source, and F-Squared went from losing money to becoming a highly profitable investment manager.
The SEC alleges that while marketing AlphaSector into the largest active ETF strategy in the market, F-Squared falsely advertised a successful seven-year track record for the investment strategy based on the actual performance of real investments for real clients. In reality, the algorithm was not even in existence during the seven years of purported performance success. The data used in F-Squared’s advertising was actually derived through backtesting, which is the application of a quantitative model to historical market data to generate a hypothetical performance during a prior period. F-Squared and Present specifically advertised the investment strategy as “not backtested.” Furthermore, the hypothetical data contained a substantial performance calculation error that inflated the results by approximately 350 percent.
“Investors must be able to trust that performance advertisements are accurate,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement. “F-Squared has admitted that it misled its clients over a number of years about the existence and success of its core strategy.”
According to the SEC’s complaint against Present filed in federal court in Boston, he was responsible for F-Squared’s advertising materials that were often posted on the company website and sent to clients and prospective clients. Present also was responsible for the descriptions of AlphaSector in its filings with the SEC, and he certified the accuracy of those filings. F-Squared and Present made the false and misleading statements about AlphaSector from September 2008 to September 2013. The SEC alleges that they claimed AlphaSector was based on an investment strategy that had been used to invest client assets since April 2001. Yet Present knew that the algorithm was not finalized until late summer 2008 when he devised rules for turning the signals into a model ETF portfolio and directed an assistant to calculate hypothetical returns for the portfolio going back to April 2001.
The SEC further alleges that the F-Squared analyst who calculated the backtested AlphaSector performance inadvertently applied the buy/sell signals to the week preceding any ETF price change that the signals were based on. The mistake carried the model portfolio’s backtested buy and sell decisions back in time one week, enabling the model to buy an ETF just before the price rose and sell an ETF just before the price fell. The SEC alleges that the analyst tried to explain this possible calculation error to Present in late September 2008, yet F-Squared went on to advertise the inflated data for the next five years and overstated that AlphaSector significantly outperformed the S&P 500 from April 2001 to September 2008.
“We allege that not only did F-Squared and Present attract clients to this investment strategy by touting a track record they presented as real when it was merely hypothetical, but the hypothetical calculations also were substantially inflated,” said Julie M. Riewe, co-chief of the Enforcement Division’s Asset Management Unit.
F-Squared consented to the entry of the order finding that it violated Sections 204, 206(1), 206(2), 206(4), and 207 of the Investment Advisers Act of 1940 and Rules 204-2(a)(16), 206(4)-1(a)(5), 206(4)-7, and 206(4)-8. The order also finds that F-Squared aided and abetted and caused certain mutual funds sub-advised by F-Squared to violation Section 34(b) of the Investment Company Act of 1940. F-Squared acknowledged that its conduct violated federal securities laws, and agreed to cease and desist from committing or causing violations of these provisions. F-Squared agreed to retain an independent compliance consultant and pay disgorgement of $30 million and a penalty of $5 million.
The SEC’s complaint against Present alleges that he violated Sections 206(1), 206(2), 206(4), and 207 of the Investment Advisers Act of 1940 and Rule 206(4)-8.
The SEC’s investigation, which is continuing, is being conducted by Bill Donahue, Robert Baker, Jose Santillan, and John Farinacci of the Asset Management Unit as well as Rachel Hershfang, Frank Huntington, Mayeti Gametchu, Jennifer Cardello, and Rory Alex of the Boston Regional Office. The case has been supervised by Kevin Kelcourse. The SEC’s litigation against Present will be led by Mr. Huntington and Ms. Hershfang.
MF GLOBAL HOLDINGS LTD. ORDERED TO PAY $1.212 BILLION TO COVER CUSTOMER CLAIMS RESULTING FROM IMPROPER USE OF FUNDS
FROM: U.S. JUSTICE DEPARTMENT
December 24, 2014
Federal Court in New York Orders MF Global Holdings Ltd. to Pay $1.212 Billion in Restitution for Unlawful Use of Customer Funds and Imposes a $100 Million Penalty
Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) has obtained a federal court consent Order against Defendant MF Global Holdings Ltd. (MFGH) requiring it to pay $1.212 billion in restitution or such amount as necessary to ensure that claims of customers of its subsidiary, MF Global Inc. (MFGI), are paid in full. The CFTC previously filed and settled charges against MFGI for misuse of customer funds and related supervisory failures in violation of the Commodity Exchange Act and CFTC Regulations (see CFTC Press Release 6776-13). MFGI was required to pay $1.212 billion in restitution to its customers, as well as a $100 million penalty. MFGH’s restitution obligation is joint and several with MFGI’s restitution obligation, pursuant to which a substantial portion of the restitution obligation has already been paid (see CFTC Press Prelease 6904-14). The consent Order, entered on December 23, 2014, by Judge Victor Marrero of the U.S. District Court for the Southern District of New York, also imposes a $100 million civil monetary penalty on MFGH, to be paid after claims of customers and certain other creditors entitled to priority under bankruptcy law have been fully paid.
The consent Order arises out of the CFTC’s amended Complaint, filed on December 6, 2013, charging MFGH and the other Defendants with unlawful use of customer funds. In the consent Order, MFGH admits to the allegations pertaining to its liability based on the acts and omissions of its agents as set forth in the consent Order and the amended Complaint.
The CFTC’s amended Complaint charged that MFGH controlled MFGI’s operations and was responsible for MFGI’s unlawful use of customer segregated funds during the last week of October 2011. In addition to the misuse of customer funds, the amended Complaint alleged that MFGH is responsible for MFGI’s (i) failure to notify the CFTC immediately when it knew or should have known of the deficiencies in its customer accounts, (ii) filing of false statements in reports with the CFTC that failed to show the deficits in the customer accounts, and (iii) use of customer funds for impermissible investments in securities that were not considered readily marketable or highly liquid, in violation of CFTC regulations.
The CFTC’s litigation continues against the remaining Defendants, Jon S. Corzine and Edith O’Brien.
The CFTC appreciates the assistance of the U.S. Attorneys’ Offices for the Southern District of New York and the Northern District of Illinois, the Federal Bureau of Investigation, the Securities and Exchange Commission, and the Financial Conduct Authority in the United Kingdom.
The consent Order recognizes the cooperation of MFGH and requires MFGH’s continued cooperation with the CFTC.
Staff from the CFTC’s Division of Swap Dealer and Intermediary Oversight, Division of Clearing and Risk, and Office of Data and Technology assisted in this matter. CFTC Division of Enforcement staff members responsible for this matter are David W. Oakland, Chad Silverman, K. Brent Tomer, Douglas K. Yatter, Steven Ringer, Lenel Hickson, and Manal Sultan.
December 24, 2014
Federal Court in New York Orders MF Global Holdings Ltd. to Pay $1.212 Billion in Restitution for Unlawful Use of Customer Funds and Imposes a $100 Million Penalty
Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) has obtained a federal court consent Order against Defendant MF Global Holdings Ltd. (MFGH) requiring it to pay $1.212 billion in restitution or such amount as necessary to ensure that claims of customers of its subsidiary, MF Global Inc. (MFGI), are paid in full. The CFTC previously filed and settled charges against MFGI for misuse of customer funds and related supervisory failures in violation of the Commodity Exchange Act and CFTC Regulations (see CFTC Press Release 6776-13). MFGI was required to pay $1.212 billion in restitution to its customers, as well as a $100 million penalty. MFGH’s restitution obligation is joint and several with MFGI’s restitution obligation, pursuant to which a substantial portion of the restitution obligation has already been paid (see CFTC Press Prelease 6904-14). The consent Order, entered on December 23, 2014, by Judge Victor Marrero of the U.S. District Court for the Southern District of New York, also imposes a $100 million civil monetary penalty on MFGH, to be paid after claims of customers and certain other creditors entitled to priority under bankruptcy law have been fully paid.
The consent Order arises out of the CFTC’s amended Complaint, filed on December 6, 2013, charging MFGH and the other Defendants with unlawful use of customer funds. In the consent Order, MFGH admits to the allegations pertaining to its liability based on the acts and omissions of its agents as set forth in the consent Order and the amended Complaint.
The CFTC’s amended Complaint charged that MFGH controlled MFGI’s operations and was responsible for MFGI’s unlawful use of customer segregated funds during the last week of October 2011. In addition to the misuse of customer funds, the amended Complaint alleged that MFGH is responsible for MFGI’s (i) failure to notify the CFTC immediately when it knew or should have known of the deficiencies in its customer accounts, (ii) filing of false statements in reports with the CFTC that failed to show the deficits in the customer accounts, and (iii) use of customer funds for impermissible investments in securities that were not considered readily marketable or highly liquid, in violation of CFTC regulations.
The CFTC’s litigation continues against the remaining Defendants, Jon S. Corzine and Edith O’Brien.
The CFTC appreciates the assistance of the U.S. Attorneys’ Offices for the Southern District of New York and the Northern District of Illinois, the Federal Bureau of Investigation, the Securities and Exchange Commission, and the Financial Conduct Authority in the United Kingdom.
The consent Order recognizes the cooperation of MFGH and requires MFGH’s continued cooperation with the CFTC.
Staff from the CFTC’s Division of Swap Dealer and Intermediary Oversight, Division of Clearing and Risk, and Office of Data and Technology assisted in this matter. CFTC Division of Enforcement staff members responsible for this matter are David W. Oakland, Chad Silverman, K. Brent Tomer, Douglas K. Yatter, Steven Ringer, Lenel Hickson, and Manal Sultan.
MAN PLEADS GUILTY FOR ROLE IN $53 MILLION TAX SCHEME THAT INVOLVED BRIBING BANK OFFICIALS
FROM: U.S. JUSTICE DEPARTMENT
Tuesday, December 23, 2014
Kentucky Businessman Pleads Guilty in Manhattan Federal Court to $53 Million Tax Scheme and Massive Fraud That Involved the Bribery of Bank Officials
U.S. Attorney Preet Bharara for the Southern District of New York and Deputy Assistant Attorney General David A. Hubbert for the Tax Division of the Department of Justice announced that Wilbur Anthony Huff, a Kentucky businessman, pleaded guilty today in Manhattan federal court to various tax crimes that caused more than $50 million in losses to the Internal Revenue Service (IRS), and a massive fraud that involved the bribery of bank officials, the fraudulent purchase of an insurance company, and the defrauding of insurance regulators. Huff pleaded guilty this afternoon before U.S. District Judge Naomi Reice Buchwald.
“Today’s guilty plea ensures that Wilbur Huff will be punished for perpetuating a vortex of fraud – complete with bribery, tax crimes that caused $53 million in losses to the IRS, the fraudulent purchase of a company, and the defrauding of insurance regulators,” said U.S. Attorney Bharara. “Those who might be tempted to follow in Huff’s criminal footsteps should understand that this office and our law enforcement partners will aggressively pursue and root out fraud wherever we find it.”
Huff, 53, of Caneyville and Louisville, Kentucky, pleaded guilty to one count of corruptly endeavoring to obstruct and impede the due administration of the internal revenue laws, which carries a maximum penalty of three years in prison, one count of aiding and assisting with the preparation and presentation of false and fraudulent tax returns, which carries a maximum penalty of three years in prison, one count of failing and causing the failure to pay taxes to the IRS, which carries a maximum penalty of one year in prison, and one count of conspiracy to (a) commit bank bribery, (b) commit fraud on bank regulators and the board and shareholders of a publicly-traded company, and (c) fraudulently purchase an Oklahoma insurance company, which carries a maximum penalty of five years in prison. He is scheduled to be sentenced by Judge Buchwald on April 8, 2015, at 2:30 p.m. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. As part of his plea, Huff also agreed to forfeit $10.8 million to the United States and to provide restitution in the following amounts to victims of his crimes: $70,100,000 to the Receiver for Park Avenue Property and Casualty Insurance Company; $4,857,266.62 to the Federal Deposit Insurance Corporation (FDIC); $597,420.29 to Valley National Bank (the successor of Park Avenue Bank); and $53,094,219 to the IRS.
According to the information, plea agreement, and statements made during court proceedings:
Background
Huff was a businessman who controlled numerous entities located throughout the United States (Huff-controlled entities). Huff controlled the companies and their finances, using them to orchestrate a $53 million fraud on the IRS as well as other illegal schemes. However, rather than exercise control of these companies openly, Huff concealed his control by installing other individuals to oversee the companies’ day-to-day functions and to serve as the companies’ titular owners, directors or officers. Huff also maintained a corrupt relationship with Park Avenue Bank and its executives, Charles J. Antonucci Sr., the president and chief executive officer, and Matthew L. Morris, the senior vice president.
Tax Crimes
From 2008 to 2010, Huff controlled O2HR, a professional employer organization (PEO) located in Tampa, Florida. Like other PEOs, O2HR was paid to manage the payroll, tax, and workers’ compensation insurance obligations of its client companies. However, instead of paying $53 million in taxes that O2HR’s clients owed the IRS, and instead of paying $5 million to Providence Property and Casualty Insurance Company (Providence P&C) – an Oklahoma-based insurance company – for workers’ compensation coverage expenses for O2HR clients, HUFF stole the money that his client companies had paid O2HR for those purposes. Among other things, Huff diverted millions of dollars from O2HR to fund his investments in unrelated business ventures, and to pay his family members’ personal expenses. The expenses included mortgages on Huff’s homes, rent payments for his children’s apartments, staff and equipment for Huff’s farm, designer clothing, jewelry, and luxury cars.
Conspiracy to Commit Bank Bribery, Defraud Bank Regulators, and Fraudulently Purchase an Oklahoma Insurance Company
From 2007 up to and including 2010, HUFF engaged in a massive multi-faceted conspiracy, in which he schemed to (i) bribe executives of Park Avenue Bank, (ii) defraud bank regulators and the board and shareholders of a publicly-traded company and (iii) fraudulently purchase an Oklahoma insurance company. As described in more detail below, Huff paid bribes totaling hundreds of thousands of dollars in cash and other items to Morris and Antonucci, in exchange for their favorable treatment at Park Avenue Bank.
As part of the corrupt relationship between Huff and the bank executives, Huff, Morris, Antonucci, and others conspired to defraud various entities and regulators during the relevant time period. Specifically, Huff conspired with Morris and Antonucci to falsely bolster Park Avenue Bank’s capital, by orchestrating a series of fraudulent transactions to make it appear that Park Avenue Bank had received an outside infusion of $6.5 million, and engaged in a series of further fraudulent actions to conceal from bank regulators the true source of the funds.
Huff further conspired with Morris, Antonucci, and others to defraud Oklahoma insurance regulators and others by making material misrepresentations and omissions regarding the source of $37.5 million used to purchase Providence Property and Casualty Insurance Company, an Oklahoma insurance company that provided workers’ compensation insurance for O2HR’s clients, and to whom O2HR owed a significant debt.
Bribery of Park Avenue Bank Executives
From 2007 to 2009, Huff paid Morris and Antonucci at least $400,000 in exchange for which they: (1) provided Huff with fraudulent letters of credit obligating Park Avenue Bank to pay an investor in one of Huff’s businesses $1.75 million if Huff failed to pay the investor back himself; (2) allowed the Huff-controlled entities to accrue $9 million in overdrafts; (3) facilitated intra-bank transfers in furtherance of Huff’s frauds; and (4) fraudulently caused Park Avenue Bank to issue at least $4.5 million in loans to the Huff-controlled entities.
Fraud on Bank Regulators and a Publicly-Traded Company
From 2008 to 2009, Huff, Morris, and Antonucci engaged in a scheme to prevent Park Avenue Bank from being designated as “undercapitalized” by regulators – a designation that would prohibit the bank from engaging in certain types of banking transactions, and that would subject the bank to a range of potential enforcement actions by regulators. Specifically, they engaged in a series of deceptive, “round-trip” financial transactions to make it appear that Antonucci had infused the bank with $6.5 million in new capital when, in actuality, the $6.5 million was part of the bank’s pre-existing capital. Huff, Morris, and Antonucci funneled the $6.5 million from the bank through accounts controlled by Huff to Antonucci. This was done to make it appear as though Antonucci was helping to stabilize the bank’s capitalization problem, so the bank could continue engaging in certain banking transactions that it would otherwise have been prohibited from doing, and to put the bank in a better posture to receive $11 million from the Troubled Asset Relief Program. To conceal their unlawful financial maneuvering, Huff created, or directed the creation of, documents falsely suggesting that Antonucci had earned the $6.5 million through a bogus transaction involving another company Antonucci owned. Huff, Morris, and Antonucci further concealed their scheme by stealing $2.3 million from General Employment Enterprises Inc., a publicly-traded temporary staffing company, in order to pay Park Avenue Bank back for monies used in connection with the $6.5 million transaction.
Fraud on Insurance Regulators and the Investment Firm
From July 2008 to November 2009, Huff, Morris, Antonucci, and Allen Reichman, an executive at an investment bank and financial services company headquartered in New York, New York (the “investment firm”), conspired to (i) defraud Oklahoma insurance regulators into allowing Antonucci to purchase the assets of Providence P&C – the Oklahoma insurance company that was owed $5 million by O2HR and (ii) defraud the investment firm into providing a $30 million loan to finance the purchase. Specifically, HUFF and Antonucci devised a scheme in which Antonucci would purchase Providence P&C’s assets by obtaining a $30 million loan from the Investment Firm, which used Providence P&C’s own assets as collateral for the loan. However, because Oklahoma insurance regulators had to approve any sale of Providence P&C, and because Oklahoma law forbade the use of Providence P&C’s assets as collateral for such a loan, Huff, Morris, Antonucci, and Reichman made, and conspired to make, a number of material misstatements and material omissions to the investment firm and Oklahoma insurance regulators concerning the true nature of the financing for Antonucci’s purchase of Providence P&C. Among other things, Reichman directed Antonucci to sign a letter that provided false information regarding the collateral that would be used for the loan, and Huff, Morris, and Antonucci conspired to falsely represent to Oklahoma insurance regulators that Park Avenue Bank – not the investment firm – was funding the purchase of Providence P&C.
After deceiving Oklahoma regulators into approving the sale of Providence P&C, Huff took $4 million of the company’s assets, which he used to continue the scheme to defraud O2HR’s clients. Ultimately, in November 2009, the insurance company became insolvent and was placed in receivership after Huff, Morris, and Antonucci had pilfered its remaining assets.
* * *
Charles Antonucci, who was charged separately by complaint on March 15, 2010, pleaded guilty to his role in the crimes described above on Oct. 8, 2010. Matthew L. Morris and Allen Reichman were charged by Indictment with Huff on Oct. 1, 2012. Morris pleaded guilty in connection with the case on Oct.17.
Reichman is currently scheduled to go to trial March 2, 2015 before Judge Buchwald. The charges against Reichman are allegations and he is presumed innocent unless and until proven guilty beyond a reasonable doubt.
U.S. Attorney Bharara praised the investigative work of the Special Inspector General for the Troubled Asset Relief Program, the FBI, the IRS, the New York State Department of Financial Services, Immigration and Customs Enforcement (ICE)’s Homeland Security Investigations (HSI), and the Office of Inspector General of the FDIC. Mr. Bharara also thanked the Department of Justice’s Tax Division and the U.S. Attorney’s Office for the Southern District of Florida for their assistance.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants.
The case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Janis Echenberg and Daniel Tehrani and Special Assistant U.S. Attorney Tino Lisella are in charge of the criminal case.
Tuesday, December 23, 2014
Kentucky Businessman Pleads Guilty in Manhattan Federal Court to $53 Million Tax Scheme and Massive Fraud That Involved the Bribery of Bank Officials
U.S. Attorney Preet Bharara for the Southern District of New York and Deputy Assistant Attorney General David A. Hubbert for the Tax Division of the Department of Justice announced that Wilbur Anthony Huff, a Kentucky businessman, pleaded guilty today in Manhattan federal court to various tax crimes that caused more than $50 million in losses to the Internal Revenue Service (IRS), and a massive fraud that involved the bribery of bank officials, the fraudulent purchase of an insurance company, and the defrauding of insurance regulators. Huff pleaded guilty this afternoon before U.S. District Judge Naomi Reice Buchwald.
“Today’s guilty plea ensures that Wilbur Huff will be punished for perpetuating a vortex of fraud – complete with bribery, tax crimes that caused $53 million in losses to the IRS, the fraudulent purchase of a company, and the defrauding of insurance regulators,” said U.S. Attorney Bharara. “Those who might be tempted to follow in Huff’s criminal footsteps should understand that this office and our law enforcement partners will aggressively pursue and root out fraud wherever we find it.”
Huff, 53, of Caneyville and Louisville, Kentucky, pleaded guilty to one count of corruptly endeavoring to obstruct and impede the due administration of the internal revenue laws, which carries a maximum penalty of three years in prison, one count of aiding and assisting with the preparation and presentation of false and fraudulent tax returns, which carries a maximum penalty of three years in prison, one count of failing and causing the failure to pay taxes to the IRS, which carries a maximum penalty of one year in prison, and one count of conspiracy to (a) commit bank bribery, (b) commit fraud on bank regulators and the board and shareholders of a publicly-traded company, and (c) fraudulently purchase an Oklahoma insurance company, which carries a maximum penalty of five years in prison. He is scheduled to be sentenced by Judge Buchwald on April 8, 2015, at 2:30 p.m. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. As part of his plea, Huff also agreed to forfeit $10.8 million to the United States and to provide restitution in the following amounts to victims of his crimes: $70,100,000 to the Receiver for Park Avenue Property and Casualty Insurance Company; $4,857,266.62 to the Federal Deposit Insurance Corporation (FDIC); $597,420.29 to Valley National Bank (the successor of Park Avenue Bank); and $53,094,219 to the IRS.
According to the information, plea agreement, and statements made during court proceedings:
Background
Huff was a businessman who controlled numerous entities located throughout the United States (Huff-controlled entities). Huff controlled the companies and their finances, using them to orchestrate a $53 million fraud on the IRS as well as other illegal schemes. However, rather than exercise control of these companies openly, Huff concealed his control by installing other individuals to oversee the companies’ day-to-day functions and to serve as the companies’ titular owners, directors or officers. Huff also maintained a corrupt relationship with Park Avenue Bank and its executives, Charles J. Antonucci Sr., the president and chief executive officer, and Matthew L. Morris, the senior vice president.
Tax Crimes
From 2008 to 2010, Huff controlled O2HR, a professional employer organization (PEO) located in Tampa, Florida. Like other PEOs, O2HR was paid to manage the payroll, tax, and workers’ compensation insurance obligations of its client companies. However, instead of paying $53 million in taxes that O2HR’s clients owed the IRS, and instead of paying $5 million to Providence Property and Casualty Insurance Company (Providence P&C) – an Oklahoma-based insurance company – for workers’ compensation coverage expenses for O2HR clients, HUFF stole the money that his client companies had paid O2HR for those purposes. Among other things, Huff diverted millions of dollars from O2HR to fund his investments in unrelated business ventures, and to pay his family members’ personal expenses. The expenses included mortgages on Huff’s homes, rent payments for his children’s apartments, staff and equipment for Huff’s farm, designer clothing, jewelry, and luxury cars.
Conspiracy to Commit Bank Bribery, Defraud Bank Regulators, and Fraudulently Purchase an Oklahoma Insurance Company
From 2007 up to and including 2010, HUFF engaged in a massive multi-faceted conspiracy, in which he schemed to (i) bribe executives of Park Avenue Bank, (ii) defraud bank regulators and the board and shareholders of a publicly-traded company and (iii) fraudulently purchase an Oklahoma insurance company. As described in more detail below, Huff paid bribes totaling hundreds of thousands of dollars in cash and other items to Morris and Antonucci, in exchange for their favorable treatment at Park Avenue Bank.
As part of the corrupt relationship between Huff and the bank executives, Huff, Morris, Antonucci, and others conspired to defraud various entities and regulators during the relevant time period. Specifically, Huff conspired with Morris and Antonucci to falsely bolster Park Avenue Bank’s capital, by orchestrating a series of fraudulent transactions to make it appear that Park Avenue Bank had received an outside infusion of $6.5 million, and engaged in a series of further fraudulent actions to conceal from bank regulators the true source of the funds.
Huff further conspired with Morris, Antonucci, and others to defraud Oklahoma insurance regulators and others by making material misrepresentations and omissions regarding the source of $37.5 million used to purchase Providence Property and Casualty Insurance Company, an Oklahoma insurance company that provided workers’ compensation insurance for O2HR’s clients, and to whom O2HR owed a significant debt.
Bribery of Park Avenue Bank Executives
From 2007 to 2009, Huff paid Morris and Antonucci at least $400,000 in exchange for which they: (1) provided Huff with fraudulent letters of credit obligating Park Avenue Bank to pay an investor in one of Huff’s businesses $1.75 million if Huff failed to pay the investor back himself; (2) allowed the Huff-controlled entities to accrue $9 million in overdrafts; (3) facilitated intra-bank transfers in furtherance of Huff’s frauds; and (4) fraudulently caused Park Avenue Bank to issue at least $4.5 million in loans to the Huff-controlled entities.
Fraud on Bank Regulators and a Publicly-Traded Company
From 2008 to 2009, Huff, Morris, and Antonucci engaged in a scheme to prevent Park Avenue Bank from being designated as “undercapitalized” by regulators – a designation that would prohibit the bank from engaging in certain types of banking transactions, and that would subject the bank to a range of potential enforcement actions by regulators. Specifically, they engaged in a series of deceptive, “round-trip” financial transactions to make it appear that Antonucci had infused the bank with $6.5 million in new capital when, in actuality, the $6.5 million was part of the bank’s pre-existing capital. Huff, Morris, and Antonucci funneled the $6.5 million from the bank through accounts controlled by Huff to Antonucci. This was done to make it appear as though Antonucci was helping to stabilize the bank’s capitalization problem, so the bank could continue engaging in certain banking transactions that it would otherwise have been prohibited from doing, and to put the bank in a better posture to receive $11 million from the Troubled Asset Relief Program. To conceal their unlawful financial maneuvering, Huff created, or directed the creation of, documents falsely suggesting that Antonucci had earned the $6.5 million through a bogus transaction involving another company Antonucci owned. Huff, Morris, and Antonucci further concealed their scheme by stealing $2.3 million from General Employment Enterprises Inc., a publicly-traded temporary staffing company, in order to pay Park Avenue Bank back for monies used in connection with the $6.5 million transaction.
Fraud on Insurance Regulators and the Investment Firm
From July 2008 to November 2009, Huff, Morris, Antonucci, and Allen Reichman, an executive at an investment bank and financial services company headquartered in New York, New York (the “investment firm”), conspired to (i) defraud Oklahoma insurance regulators into allowing Antonucci to purchase the assets of Providence P&C – the Oklahoma insurance company that was owed $5 million by O2HR and (ii) defraud the investment firm into providing a $30 million loan to finance the purchase. Specifically, HUFF and Antonucci devised a scheme in which Antonucci would purchase Providence P&C’s assets by obtaining a $30 million loan from the Investment Firm, which used Providence P&C’s own assets as collateral for the loan. However, because Oklahoma insurance regulators had to approve any sale of Providence P&C, and because Oklahoma law forbade the use of Providence P&C’s assets as collateral for such a loan, Huff, Morris, Antonucci, and Reichman made, and conspired to make, a number of material misstatements and material omissions to the investment firm and Oklahoma insurance regulators concerning the true nature of the financing for Antonucci’s purchase of Providence P&C. Among other things, Reichman directed Antonucci to sign a letter that provided false information regarding the collateral that would be used for the loan, and Huff, Morris, and Antonucci conspired to falsely represent to Oklahoma insurance regulators that Park Avenue Bank – not the investment firm – was funding the purchase of Providence P&C.
After deceiving Oklahoma regulators into approving the sale of Providence P&C, Huff took $4 million of the company’s assets, which he used to continue the scheme to defraud O2HR’s clients. Ultimately, in November 2009, the insurance company became insolvent and was placed in receivership after Huff, Morris, and Antonucci had pilfered its remaining assets.
* * *
Charles Antonucci, who was charged separately by complaint on March 15, 2010, pleaded guilty to his role in the crimes described above on Oct. 8, 2010. Matthew L. Morris and Allen Reichman were charged by Indictment with Huff on Oct. 1, 2012. Morris pleaded guilty in connection with the case on Oct.17.
Reichman is currently scheduled to go to trial March 2, 2015 before Judge Buchwald. The charges against Reichman are allegations and he is presumed innocent unless and until proven guilty beyond a reasonable doubt.
U.S. Attorney Bharara praised the investigative work of the Special Inspector General for the Troubled Asset Relief Program, the FBI, the IRS, the New York State Department of Financial Services, Immigration and Customs Enforcement (ICE)’s Homeland Security Investigations (HSI), and the Office of Inspector General of the FDIC. Mr. Bharara also thanked the Department of Justice’s Tax Division and the U.S. Attorney’s Office for the Southern District of Florida for their assistance.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants.
The case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Janis Echenberg and Daniel Tehrani and Special Assistant U.S. Attorney Tino Lisella are in charge of the criminal case.
Saturday, December 27, 2014
RECENT U.S. NAVY PHOTOS
FROM: U.S. NAVY
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| SAN DIEGO (Dec. 19, 2014) The guided-missile destroyers USS Kidd (DDG 100), left, and USS Wayne E. Meyer (DDG 108) display their lights during Naval Base San Diego's third annual Holiday Lights Open House. During the event, the public was invited to drive through and observe the decorated ships along the base's waterfront. U.S. Navy photo by Mass Communication Specialist Seaman Amanda Chavez (Released) 141219-N-LR795-026. |
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| AIFA, Israel (Dec. 23, 2014) Sailors aboard the guided-missile destroyer USS Cole (DDG 67) stand by their lines as a tug boat maneuvers the ship into positing for mooring in Haifa, Israel, for a scheduled port visit. Cole is conducting naval operations in the U.S. 6th Fleet area of responsibility in support of U.S. national security interests in Europe. U.S. Navy photo by Mass Communication Specialist 2nd Class John Herman (Released) 141223-N-IY142-094. |
SECRETARY HAGEL CALLS SERVICE MEMBERS ON CHRISTMAS DAY
FROM: U.S. DEFENSE DEPARTMENT
Hagel Calls Service Members on Christmas, Thanks Them for Service to Nation
DoD News, Defense Media Activity
WASHINGTON, Dec. 25, 2014 – Defense Secretary Chuck Hagel today called service members taking part in U.S. operations around the world to wish them a Merry Christmas, according to Pentagon Press Secretary Navy Rear Adm. John Kirby.
In a DoD News Release, Kirby said “Secretary Hagel expressed his appreciation for their service in defending the United States, and supporting our allies and partners.
“In each of the calls, Secretary Hagel noted that he knows how difficult it is to be away from home on this holiday and thanked the service members and their families for their sacrifice for the nation,” Kirby said.
Hagel spoke with representatives from each military service, including:
- Army Spc. Randolph A. Priest, of Barren Springs, Va. Priest is a communications specialist serving in Afghanistan, who is responsible for ensuring reliable communications between the headquarters and soldiers.
- Air Force Capt. Laura A. Klepper, of Palmdale, Calif. Klepper is an F-15E weapon system officer deployed to the Central Command area of responsibility, providing combat airpower in support of regional missions. She was selected as her squadron’s flight commander of the year.
- Marine Corps Cpl. Thomas A. Vasko, Jr., of Medina, Ohio. Vasko is an infantry advisor in Afghanistan, training allies in how to conduct patrols to prevent enemy freedom of movement and indirect fire attacks. He is also an assistant patrol leader.
- Navy Petty Officer 1st Class Taylor A. Porter, of Dayton, Wash. Porter is deployed to the Central Command area of responsibility and leads an 11-person team in ensuring aviation equipment is maintained and safe for flight. She was selected as her squadron’s maintainer of the year and led the stand-up of a unit supporting Operation Inherent Resolve.
“The secretary was delighted to be able to reach these service members, forward deployed as they are, and to wish them his best for the holiday,” Kirby said. “He asked that each pass on his best wishes to their units as well. The secretary was very grateful for the time these young leaders gave him.”
Hagel Calls Service Members on Christmas, Thanks Them for Service to Nation
DoD News, Defense Media Activity
WASHINGTON, Dec. 25, 2014 – Defense Secretary Chuck Hagel today called service members taking part in U.S. operations around the world to wish them a Merry Christmas, according to Pentagon Press Secretary Navy Rear Adm. John Kirby.
In a DoD News Release, Kirby said “Secretary Hagel expressed his appreciation for their service in defending the United States, and supporting our allies and partners.
“In each of the calls, Secretary Hagel noted that he knows how difficult it is to be away from home on this holiday and thanked the service members and their families for their sacrifice for the nation,” Kirby said.
Hagel spoke with representatives from each military service, including:
- Army Spc. Randolph A. Priest, of Barren Springs, Va. Priest is a communications specialist serving in Afghanistan, who is responsible for ensuring reliable communications between the headquarters and soldiers.
- Air Force Capt. Laura A. Klepper, of Palmdale, Calif. Klepper is an F-15E weapon system officer deployed to the Central Command area of responsibility, providing combat airpower in support of regional missions. She was selected as her squadron’s flight commander of the year.
- Marine Corps Cpl. Thomas A. Vasko, Jr., of Medina, Ohio. Vasko is an infantry advisor in Afghanistan, training allies in how to conduct patrols to prevent enemy freedom of movement and indirect fire attacks. He is also an assistant patrol leader.
- Navy Petty Officer 1st Class Taylor A. Porter, of Dayton, Wash. Porter is deployed to the Central Command area of responsibility and leads an 11-person team in ensuring aviation equipment is maintained and safe for flight. She was selected as her squadron’s maintainer of the year and led the stand-up of a unit supporting Operation Inherent Resolve.
“The secretary was delighted to be able to reach these service members, forward deployed as they are, and to wish them his best for the holiday,” Kirby said. “He asked that each pass on his best wishes to their units as well. The secretary was very grateful for the time these young leaders gave him.”
DEALER'S ALLEGED DECEPTIVE AUTO ADS HALTED BY FTC
FROM: U.S. FEDERAL TRADE COMMISSION
FTC Halts Texas Auto Dealer’s Deceptive Ads
Misleading Ads Claimed $1 Gets Consumers Out of Current Loan or Lease
An auto dealer in suburban Dallas has agreed to settle Federal Trade Commission charges that it used deceptive ads to promote the sale and lease of its vehicles, including an ad that claimed consumers could get out of their current loan or lease for $1.
According to the complaint, false or deceptive ads from TXVT Limited Partnership, doing business as Trophy Nissan (Trophy), violated the FTC Act as well as the Consumer Leasing Act (CLA) and Regulation M, and the Truth in Lending Act (TILA) and Regulation Z.
The FTC charged that Trophy advertised enticing prices, lease or finance terms, and promotions and then attempted to disclaim its attractive offers using small text in print and video ads. In addition to print and TV advertisements, Trophy also ran ads on its website, Facebook and Twitter. The dealership also ran print ads in a local Spanish-language newspaper, Al Dia.
Among the deceptive ads run by Trophy was one that misled consumers into thinking they could get out of their current loan or lease for only $1. The Commission’s complaint alleges the advertisement was deceptive since consumers could not get out of their loan or lease for that amount. In fact, Trophy would add the balance of any loan or lease obligation to the balance of a new loan.
In another promotion, “Max Your Tax,” Trophy claimed it would match tax refunds to use for a down payment, but the small print at the bottom of the ad disclosed it limited match refunds to no more than $1,000. The FTC alleges that Trophy failed to disclose adequately the additional terms.
As part of the proposed consent order, Trophy is prohibited from:
misrepresenting it will pay off a consumers’ trade-in;
misrepresenting material terms of any promotion or other incentive;
misrepresenting the cost of leasing or purchasing a vehicle; and
failing to clearly and conspicuously disclose material terms of a promotion or other incentive.
The proposed consent order also requires Trophy to comply with CLA and Regulation M and TILA and Regulation Z.
The case is part of the Commission’s continued efforts to protect consumers in the auto marketplace. The FTC provides a variety of resources for consumers buying or leasing a vehicle, including Are Car Ads Taking You For A Ride?
The Commission vote to issue the administrative complaint and accept the proposed consent order was 5-0. The agreement is subject to public comment for 30 days, beginning today and continuing through Jan. 22, 2015, after which the Commission will decide whether to make the proposed consent order final. Submit a comment online or through the mail.
NOTE: The Commission issues administrative complaints when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. When the Commission issues consent orders on a final basis, they carry the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000 per day.
FTC Halts Texas Auto Dealer’s Deceptive Ads
Misleading Ads Claimed $1 Gets Consumers Out of Current Loan or Lease
An auto dealer in suburban Dallas has agreed to settle Federal Trade Commission charges that it used deceptive ads to promote the sale and lease of its vehicles, including an ad that claimed consumers could get out of their current loan or lease for $1.
According to the complaint, false or deceptive ads from TXVT Limited Partnership, doing business as Trophy Nissan (Trophy), violated the FTC Act as well as the Consumer Leasing Act (CLA) and Regulation M, and the Truth in Lending Act (TILA) and Regulation Z.
The FTC charged that Trophy advertised enticing prices, lease or finance terms, and promotions and then attempted to disclaim its attractive offers using small text in print and video ads. In addition to print and TV advertisements, Trophy also ran ads on its website, Facebook and Twitter. The dealership also ran print ads in a local Spanish-language newspaper, Al Dia.
Among the deceptive ads run by Trophy was one that misled consumers into thinking they could get out of their current loan or lease for only $1. The Commission’s complaint alleges the advertisement was deceptive since consumers could not get out of their loan or lease for that amount. In fact, Trophy would add the balance of any loan or lease obligation to the balance of a new loan.
In another promotion, “Max Your Tax,” Trophy claimed it would match tax refunds to use for a down payment, but the small print at the bottom of the ad disclosed it limited match refunds to no more than $1,000. The FTC alleges that Trophy failed to disclose adequately the additional terms.
As part of the proposed consent order, Trophy is prohibited from:
misrepresenting it will pay off a consumers’ trade-in;
misrepresenting material terms of any promotion or other incentive;
misrepresenting the cost of leasing or purchasing a vehicle; and
failing to clearly and conspicuously disclose material terms of a promotion or other incentive.
The proposed consent order also requires Trophy to comply with CLA and Regulation M and TILA and Regulation Z.
The case is part of the Commission’s continued efforts to protect consumers in the auto marketplace. The FTC provides a variety of resources for consumers buying or leasing a vehicle, including Are Car Ads Taking You For A Ride?
The Commission vote to issue the administrative complaint and accept the proposed consent order was 5-0. The agreement is subject to public comment for 30 days, beginning today and continuing through Jan. 22, 2015, after which the Commission will decide whether to make the proposed consent order final. Submit a comment online or through the mail.
NOTE: The Commission issues administrative complaints when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. When the Commission issues consent orders on a final basis, they carry the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000 per day.
FORMER FBI AGENT PLEADS GUILTY IN BRIBERY CASE
FROM: U.S. JUSTICE DEPARTMENT
Tuesday, December 23, 2014
Former FBI Special Agent Pleads Guilty to Bribery Scheme
A former FBI special agent pleaded guilty today to bribery charges, admitting that he provided internal law enforcement documents and other confidential information about a prominent citizen of Bangladesh for use by a political rival in exchange for cash.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Preet Bharara of the Southern District of New York and Justice Department Inspector General Michael E. Horowitz made the announcement.
“Robert Lustyik discarded the FBI’s principles of ‘fidelity, bravery, and integrity,’ and sold his badge to the highest bidder,” said Assistant Attorney General Caldwell. “Greed has no place in public service or law enforcement. The Department of Justice will root out corruption wherever it takes hold, and hold accountable those who abuse the public’s trust for personal gain.”
“Robert Lustyik today admitted to conducting a bribery scheme in which, for his own personal gain, he secretly sold information and documents to which he had access as an FBI agent,” said U.S. Attorney Bharara. “Lustyik betrayed our system of justice: he breached not only the law, but also his sworn oath, and the great trust and confidence placed in him by citizens and colleagues. For his criminal conduct he now faces, as he must, serious, commensurate penalties.”
“The Department of Justice Office of the Inspector General is committed to working with our law enforcement partners to identify, investigate, and bring to justice all DOJ employees who engage misconduct,” said Inspector General Horowitz.
Robert Lustyik, 52, of Westchester County, New York, pleaded guilty to all five counts in the indictment against him, including conspiracy to engage in a bribery scheme, soliciting bribes by a public official, conspiracy to defraud the citizens of the United States and the FBI, theft of government property, and unauthorized disclosure of a Suspicious Activity Report. Lustyik is scheduled to be sentenced by U.S. District Court Judge Vincent L. Briccetti of the Southern District of New York on April 30, 2015.
According to the complaint, indictment, court hearings, and today’s plea proceeding, Lustyik was an FBI special agent who worked on the counterintelligence squad in the White Plains Resident Agency. Johannes Thaler was Lustyik’s friend, and Rizve Ahmed, aka, “Caesar,” was an acquaintance of Thaler. From September 2011 through March 2012, Lustyik, Thaler and Ahmed engaged in a bribery scheme. As part of the scheme, Lustyik and Thaler solicited payments from Ahmed, in exchange for Lustyik’s agreement to provide internal, confidential documents and other confidential information to which Lustyik had access by virtue of his position as an FBI special agent. The documents and information pertained to a prominent citizen of Bangladesh (Individual 1), who Ahmed perceived as a political rival. Ahmed sought, among other things, to obtain information about Individual 1, to locate and harm Individual 1 and others associated with Individual 1.
As part of the scheme, Lustyik and Thaler exchanged text messages, including messages about how to pressure Ahmed to pay them additional money in exchange for confidential information. For example, in text messages, Lustyik told Thaler, “we need to push [Ahmed] for this meeting and get that 40 gs quick . . . . I will talk us into getting the cash . . . . I will work my magic . . . . We r sooooooo close.” Thaler responded, “I know. It’s all right there in front of us. Pretty soon we’ll be having lunch in our oceanfront restaurant . . . .”
As another example, in late January 2012, Lustyik, upon learning that Ahmed was considering using a different source to obtain confidential information about Individual 1, sent a text message to Thaler stating, “I want to kill C . . . . I hung my ass out the window n we got nothing? . . . . Tell [Ahmed], I’ve got [Individual 1’s] number and I’m pissed. . . . I will put a wire on n get [Ahmed and his associates] to admit they want [a Bangladeshi political figure] offed n we sell it to Individual 1].” Lustyik further stated, “So bottom line. I need ten gs asap. We gotta squeeze C.”
Thaler and Ahmed previously pleaded guilty to bribery and conspiracy to commit fraud, and are scheduled to be sentenced on Jan. 23, 2015.
The case was investigated by the Department of Justice Office of the Inspector General, and prosecuted by Trial Attorney Emily Rae Woods of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Benjamin Allee of the Southern District of New York.
Tuesday, December 23, 2014
Former FBI Special Agent Pleads Guilty to Bribery Scheme
A former FBI special agent pleaded guilty today to bribery charges, admitting that he provided internal law enforcement documents and other confidential information about a prominent citizen of Bangladesh for use by a political rival in exchange for cash.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Preet Bharara of the Southern District of New York and Justice Department Inspector General Michael E. Horowitz made the announcement.
“Robert Lustyik discarded the FBI’s principles of ‘fidelity, bravery, and integrity,’ and sold his badge to the highest bidder,” said Assistant Attorney General Caldwell. “Greed has no place in public service or law enforcement. The Department of Justice will root out corruption wherever it takes hold, and hold accountable those who abuse the public’s trust for personal gain.”
“Robert Lustyik today admitted to conducting a bribery scheme in which, for his own personal gain, he secretly sold information and documents to which he had access as an FBI agent,” said U.S. Attorney Bharara. “Lustyik betrayed our system of justice: he breached not only the law, but also his sworn oath, and the great trust and confidence placed in him by citizens and colleagues. For his criminal conduct he now faces, as he must, serious, commensurate penalties.”
“The Department of Justice Office of the Inspector General is committed to working with our law enforcement partners to identify, investigate, and bring to justice all DOJ employees who engage misconduct,” said Inspector General Horowitz.
Robert Lustyik, 52, of Westchester County, New York, pleaded guilty to all five counts in the indictment against him, including conspiracy to engage in a bribery scheme, soliciting bribes by a public official, conspiracy to defraud the citizens of the United States and the FBI, theft of government property, and unauthorized disclosure of a Suspicious Activity Report. Lustyik is scheduled to be sentenced by U.S. District Court Judge Vincent L. Briccetti of the Southern District of New York on April 30, 2015.
According to the complaint, indictment, court hearings, and today’s plea proceeding, Lustyik was an FBI special agent who worked on the counterintelligence squad in the White Plains Resident Agency. Johannes Thaler was Lustyik’s friend, and Rizve Ahmed, aka, “Caesar,” was an acquaintance of Thaler. From September 2011 through March 2012, Lustyik, Thaler and Ahmed engaged in a bribery scheme. As part of the scheme, Lustyik and Thaler solicited payments from Ahmed, in exchange for Lustyik’s agreement to provide internal, confidential documents and other confidential information to which Lustyik had access by virtue of his position as an FBI special agent. The documents and information pertained to a prominent citizen of Bangladesh (Individual 1), who Ahmed perceived as a political rival. Ahmed sought, among other things, to obtain information about Individual 1, to locate and harm Individual 1 and others associated with Individual 1.
As part of the scheme, Lustyik and Thaler exchanged text messages, including messages about how to pressure Ahmed to pay them additional money in exchange for confidential information. For example, in text messages, Lustyik told Thaler, “we need to push [Ahmed] for this meeting and get that 40 gs quick . . . . I will talk us into getting the cash . . . . I will work my magic . . . . We r sooooooo close.” Thaler responded, “I know. It’s all right there in front of us. Pretty soon we’ll be having lunch in our oceanfront restaurant . . . .”
As another example, in late January 2012, Lustyik, upon learning that Ahmed was considering using a different source to obtain confidential information about Individual 1, sent a text message to Thaler stating, “I want to kill C . . . . I hung my ass out the window n we got nothing? . . . . Tell [Ahmed], I’ve got [Individual 1’s] number and I’m pissed. . . . I will put a wire on n get [Ahmed and his associates] to admit they want [a Bangladeshi political figure] offed n we sell it to Individual 1].” Lustyik further stated, “So bottom line. I need ten gs asap. We gotta squeeze C.”
Thaler and Ahmed previously pleaded guilty to bribery and conspiracy to commit fraud, and are scheduled to be sentenced on Jan. 23, 2015.
The case was investigated by the Department of Justice Office of the Inspector General, and prosecuted by Trial Attorney Emily Rae Woods of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Benjamin Allee of the Southern District of New York.
Friday, December 26, 2014
PRESIDENT OBAMA AND FIRST LADY MAKE STATEMENT ON KWANZAA
FROM: THE WHITE HOUSE
December 26, 2014
Statement from the President and the First Lady on Kwanzaa
Michelle and I extend our warmest wishes to those celebrating Kwanzaa this holiday season. Today begins a celebration highlighting the rich African American heritage and culture through the seven principles of Kwanzaa—unity, self-determination, collective work and responsibility, cooperative economics, purpose, creativity and faith. During this season, families come together to reflect on blessings of the past year and look forward to the promises in the year ahead. As we remain committed to building a country that provides opportunity for all, this time of year reminds us that there is much to be thankful for.
As families around the world unite to light the Kinara today, our family extends our prayers and best wishes during this holiday season.
December 26, 2014
Statement from the President and the First Lady on Kwanzaa
Michelle and I extend our warmest wishes to those celebrating Kwanzaa this holiday season. Today begins a celebration highlighting the rich African American heritage and culture through the seven principles of Kwanzaa—unity, self-determination, collective work and responsibility, cooperative economics, purpose, creativity and faith. During this season, families come together to reflect on blessings of the past year and look forward to the promises in the year ahead. As we remain committed to building a country that provides opportunity for all, this time of year reminds us that there is much to be thankful for.
As families around the world unite to light the Kinara today, our family extends our prayers and best wishes during this holiday season.
U.S. OFFICIAL'S OP-ED ON CORRUPTION
FROM: THE STATE DEPARTMENT
Stopping the Flow of Corruption
Op-Ed
Tom Malinowski
Assistant Secretary, Bureau of Democracy, Human Rights, and Labor
Washington Post
December 26, 2014
When Viktor Yanukovych fled Kiev in February, the Ukrainian leader left behind a spectacular Swiss chalet-style mansion, a golf course, dozens of antique cars and a private zoo boasting $10,000 nameplates for the animal pens. Even the Ukrainian public, painfully familiar with the corruption of its leaders, was shocked. Yanukovych had managed to keep the chalet hidden because it was owned not by him but by an anonymous shell company registered in Britain. Other corrupt leaders have used the same trick to hide billions of dollars offshore, including through companies registered in the United States.
The rise and fall of Ukraine’s top kleptocrat teaches us a couple of things about corruption.
First, in many countries, corruption and human rights are tightly bound. The chance to profit from corruption is why many authoritarian leaders seize and cling to power. It becomes the glue that holds their regimes together, giving them spoils to distribute while turning their cronies into criminals who could be exposed and punished if they turn disloyal. It is also among the issues most likely to fuel popular resistance to authoritarianism, as we’ve seen from Tunisia to Russia and Venezuela. Any strategy to promote democracy and human rights must have the fight against corruption at its heart.
Second, we can’t fight corruption abroad if we don’t stop its proceeds from flowing through our companies and banks. We already work hard to return illicitly acquired assets to benefit the citizens of such countries, generally after the leaders who stole them have left office. But this kind of “departure tax” for falling autocrats is not enough: We must do more to deny safe haven to such funds while corrupt leaders are still in power. One way to do that is to prevent the registration of anonymous shell companies on our shores.
The Treasury Department recently took a significant step toward limiting the use of such companies by proposing a regulation that would require financial institutions to collect and verify the identity of the people behind company accountholders. President Obama’s 2015 budget includes a much more far-reaching proposal: It would require all companies to identify their “beneficial ownership” — the human beings who own or control them — to the IRS as part of a routine tax filing and make that information more readily available to law enforcement. Congress should enact this proposal now to ensure that our legal and financial systems are not used to hide corruption and facilitate autocracy overseas.
The overwhelming majority of U.S. companies that have a bank account or pay taxes in the United States already disclose their beneficial ownership. Thus, they would not be burdened and would only benefit from a reform that makes registration in the United States a sure sign of legitimacy rather than a cause for suspicion.
It is foreign criminals and corrupt officials who can benefit from the ability to conceal their identities under our current financial system. They are unlikely to file a U.S. tax return, and if they register a paper legal entity in the United States, they can use it to open a bank account on an offshore island. Indeed, they can create a web of 50 anonymous entities overnight simply by calling a state company registration office, or they can even purchase “shelf” companies registered a decade ago, adopting an additional guise of establishment and credibility. When U.S. law enforcement agencies investigate corruption or other crimes, often all they have is the name of a company and a dead end.
The wildly corrupt son of Equatorial Guinea’s president, for example, allegedly set up a slew of shell companies in the United States to launder millions of dollars of bribes from international logging companies, hiding any ties to himself. Teodoro Nguema Obiang Mangue used this money to purchase a $30 million Malibu, Calif., estate, a $38 million private jet and about $2 million worth of Michael Jackson memorabilia, among other luxuries. Meanwhile, most of his compatriots live on less than $2 per day.
Corruption empowers and enriches dictators. But here is another lesson from Ukraine: It can also become their greatest political vulnerability. Authoritarian governments may be able to muster excuses for shooting demonstrators, arresting political enemies or censoring the Internet, but no cultural, patriotic or national security argument can justify thievery. Disgust with corruption can also ease the ethnic, religious and social divisions such regimes exploit to stay in power — it’s a point of agreement between southern and northern Nigerians, nationalists and liberals in Russia, Shiites and Sunnis across the Middle East.
Fighting corruption by improving financial transparency may be one of the most effective ways of promoting liberty around the world. Members of Congress who believe in that cause and who want us to do better should embrace the president’s proposal to strengthen those laws by closing the shell company loophole that enables dictators to conceal their criminality from their people and the world.
Stopping the Flow of Corruption
Op-Ed
Tom Malinowski
Assistant Secretary, Bureau of Democracy, Human Rights, and Labor
Washington Post
December 26, 2014
When Viktor Yanukovych fled Kiev in February, the Ukrainian leader left behind a spectacular Swiss chalet-style mansion, a golf course, dozens of antique cars and a private zoo boasting $10,000 nameplates for the animal pens. Even the Ukrainian public, painfully familiar with the corruption of its leaders, was shocked. Yanukovych had managed to keep the chalet hidden because it was owned not by him but by an anonymous shell company registered in Britain. Other corrupt leaders have used the same trick to hide billions of dollars offshore, including through companies registered in the United States.
The rise and fall of Ukraine’s top kleptocrat teaches us a couple of things about corruption.
First, in many countries, corruption and human rights are tightly bound. The chance to profit from corruption is why many authoritarian leaders seize and cling to power. It becomes the glue that holds their regimes together, giving them spoils to distribute while turning their cronies into criminals who could be exposed and punished if they turn disloyal. It is also among the issues most likely to fuel popular resistance to authoritarianism, as we’ve seen from Tunisia to Russia and Venezuela. Any strategy to promote democracy and human rights must have the fight against corruption at its heart.
Second, we can’t fight corruption abroad if we don’t stop its proceeds from flowing through our companies and banks. We already work hard to return illicitly acquired assets to benefit the citizens of such countries, generally after the leaders who stole them have left office. But this kind of “departure tax” for falling autocrats is not enough: We must do more to deny safe haven to such funds while corrupt leaders are still in power. One way to do that is to prevent the registration of anonymous shell companies on our shores.
The Treasury Department recently took a significant step toward limiting the use of such companies by proposing a regulation that would require financial institutions to collect and verify the identity of the people behind company accountholders. President Obama’s 2015 budget includes a much more far-reaching proposal: It would require all companies to identify their “beneficial ownership” — the human beings who own or control them — to the IRS as part of a routine tax filing and make that information more readily available to law enforcement. Congress should enact this proposal now to ensure that our legal and financial systems are not used to hide corruption and facilitate autocracy overseas.
The overwhelming majority of U.S. companies that have a bank account or pay taxes in the United States already disclose their beneficial ownership. Thus, they would not be burdened and would only benefit from a reform that makes registration in the United States a sure sign of legitimacy rather than a cause for suspicion.
It is foreign criminals and corrupt officials who can benefit from the ability to conceal their identities under our current financial system. They are unlikely to file a U.S. tax return, and if they register a paper legal entity in the United States, they can use it to open a bank account on an offshore island. Indeed, they can create a web of 50 anonymous entities overnight simply by calling a state company registration office, or they can even purchase “shelf” companies registered a decade ago, adopting an additional guise of establishment and credibility. When U.S. law enforcement agencies investigate corruption or other crimes, often all they have is the name of a company and a dead end.
The wildly corrupt son of Equatorial Guinea’s president, for example, allegedly set up a slew of shell companies in the United States to launder millions of dollars of bribes from international logging companies, hiding any ties to himself. Teodoro Nguema Obiang Mangue used this money to purchase a $30 million Malibu, Calif., estate, a $38 million private jet and about $2 million worth of Michael Jackson memorabilia, among other luxuries. Meanwhile, most of his compatriots live on less than $2 per day.
Corruption empowers and enriches dictators. But here is another lesson from Ukraine: It can also become their greatest political vulnerability. Authoritarian governments may be able to muster excuses for shooting demonstrators, arresting political enemies or censoring the Internet, but no cultural, patriotic or national security argument can justify thievery. Disgust with corruption can also ease the ethnic, religious and social divisions such regimes exploit to stay in power — it’s a point of agreement between southern and northern Nigerians, nationalists and liberals in Russia, Shiites and Sunnis across the Middle East.
Fighting corruption by improving financial transparency may be one of the most effective ways of promoting liberty around the world. Members of Congress who believe in that cause and who want us to do better should embrace the president’s proposal to strengthen those laws by closing the shell company loophole that enables dictators to conceal their criminality from their people and the world.
FTC ALLEGES DATA BROKER SOLD PERSONAL FINANCIAL INFORMATION TO SCAM CRIMINALS
FROM: U.S. FEDERAL TRADE COMMISSION
FTC Charges Data Broker with Facilitating the Theft of Millions of Dollars from Consumers' Accounts
Company Sold Personal Financial Information to Scammers
A data broker operation sold the sensitive personal information of hundreds of thousands of consumers – including Social Security and bank account numbers – to scammers who allegedly debited millions from their accounts, the Federal Trade Commission charged in a complaint filed today.
According to the FTC’s complaint, data broker LeapLab bought payday loan applications of financially strapped consumers, and then sold that information to marketers whom it knew had no legitimate need for it. At least one of those marketers, Ideal Financial Solutions – a defendant in another FTC case – allegedly used the information to withdraw millions of dollars from consumers’ accounts without their authorization.
“This case shows that the illegitimate use of sensitive financial information causes real harm to consumers,” said Jessica Rich, Director of the Federal Trade Commission’s Bureau of Consumer Protection. “Defendants like those in this case harm consumers twice: first by facilitating the theft of their money and second by undermining consumers’ confidence about providing their personal information to legitimate lenders.”
The defendants collected hundreds of thousands of payday loan applications from payday loan websites known as publishers. Publishers typically offer to help consumers obtain payday loans. To do so, they ask for consumers’ sensitive financial information to evaluate their loan applications and transfer funds to their bank accounts if the loan is approved. These applications, including those bought and sold by LeapLab, contained the consumer’s name, address, phone number, employer, Social Security number, and bank account number, including the bank routing number.
The defendants sold approximately five percent of these loan applications to online lenders, who paid them between $10 and $150 per lead. According to the FTC’s complaint, however, the defendants sold the remaining 95 percent for approximately $0.50 each to third parties who were not online lenders and had no legitimate need for this financial information.
The Commission’s complaint alleges that these non-lender third parties included: marketers that made unsolicited sales offers to consumers via email, text message, or telephone call; data brokers that aggregated and then resold consumer information; and phony internet merchants like Ideal Financial Solutions. According to the FTC’s complaint, the defendants had reason to believe these marketers had no legitimate need for the sensitive information they were selling.
In the FTC’s case against Ideal Financial Solutions, between 2009 and 2013, Ideal Financial allegedly purchased information on at least 2.2 million consumers from data brokers and used it to make millions of dollars in unauthorized debits and charges for purported financial products that the consumers never purchased. LeapLab provided account information for at least 16 percent these victims.
The complaint notes that LeapLab hired a key executive from Ideal Financial as its own Chief Marketing Officer and then knew that Ideal used the information purchased from it to make unauthorized debits. Yet, the complaint alleges, the defendants continued to sell such information to Ideal.
The defendants in the case, Sitesearch Corp., LeapLab LLC; Leads Company LLC; and John Ayers, are alleged to have violated the FTC Act’s prohibition on unfair practices.
The Commission vote authorizing the staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the District of Arizona, Phoenix Division.
NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. The case will be decided by the court.
FTC Charges Data Broker with Facilitating the Theft of Millions of Dollars from Consumers' Accounts
Company Sold Personal Financial Information to Scammers
A data broker operation sold the sensitive personal information of hundreds of thousands of consumers – including Social Security and bank account numbers – to scammers who allegedly debited millions from their accounts, the Federal Trade Commission charged in a complaint filed today.
According to the FTC’s complaint, data broker LeapLab bought payday loan applications of financially strapped consumers, and then sold that information to marketers whom it knew had no legitimate need for it. At least one of those marketers, Ideal Financial Solutions – a defendant in another FTC case – allegedly used the information to withdraw millions of dollars from consumers’ accounts without their authorization.
“This case shows that the illegitimate use of sensitive financial information causes real harm to consumers,” said Jessica Rich, Director of the Federal Trade Commission’s Bureau of Consumer Protection. “Defendants like those in this case harm consumers twice: first by facilitating the theft of their money and second by undermining consumers’ confidence about providing their personal information to legitimate lenders.”
The defendants collected hundreds of thousands of payday loan applications from payday loan websites known as publishers. Publishers typically offer to help consumers obtain payday loans. To do so, they ask for consumers’ sensitive financial information to evaluate their loan applications and transfer funds to their bank accounts if the loan is approved. These applications, including those bought and sold by LeapLab, contained the consumer’s name, address, phone number, employer, Social Security number, and bank account number, including the bank routing number.
The defendants sold approximately five percent of these loan applications to online lenders, who paid them between $10 and $150 per lead. According to the FTC’s complaint, however, the defendants sold the remaining 95 percent for approximately $0.50 each to third parties who were not online lenders and had no legitimate need for this financial information.
The Commission’s complaint alleges that these non-lender third parties included: marketers that made unsolicited sales offers to consumers via email, text message, or telephone call; data brokers that aggregated and then resold consumer information; and phony internet merchants like Ideal Financial Solutions. According to the FTC’s complaint, the defendants had reason to believe these marketers had no legitimate need for the sensitive information they were selling.
In the FTC’s case against Ideal Financial Solutions, between 2009 and 2013, Ideal Financial allegedly purchased information on at least 2.2 million consumers from data brokers and used it to make millions of dollars in unauthorized debits and charges for purported financial products that the consumers never purchased. LeapLab provided account information for at least 16 percent these victims.
The complaint notes that LeapLab hired a key executive from Ideal Financial as its own Chief Marketing Officer and then knew that Ideal used the information purchased from it to make unauthorized debits. Yet, the complaint alleges, the defendants continued to sell such information to Ideal.
The defendants in the case, Sitesearch Corp., LeapLab LLC; Leads Company LLC; and John Ayers, are alleged to have violated the FTC Act’s prohibition on unfair practices.
The Commission vote authorizing the staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the District of Arizona, Phoenix Division.
NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. The case will be decided by the court.
U.S. ATTORNEY'S OFFICE ANNOUNCES COLLECTION OF $2.3 BILLION IN FISCAL 2014
FROM: U.S. JUSTICE DEPARTMENT
Tuesday, December 23, 2014
U.S. Attorney's Office Collects More Than $2.3 Billion In Civil And Criminal Actions In Fiscal Year 2014
(PHILADELPHIA) - U.S. Attorney Zane David Memeger announced today that the Eastern District of Pennsylvania collected $2,373,688,153 in criminal and civil actions in Fiscal Year (FY) 2014.
The Department of Justice collected $24.7 billion in civil and criminal actions in FY 2014. The more than $24 billion in collections in FY 2014 represents nearly eight and a half times the appropriated $2.91 billion budget for the 94 U.S. Attorney’s offices and the main litigating divisions in that same period.
“Recouping federal funds that were misspent due to fraud, including substantial health care and mortgage insurance funds, is a critical part of our mission,” said Memeger. “Our nation’s taxpayers deserve our most aggressive efforts to recover their hard-earned tax dollars that have been misappropriated. During fiscal year 2014, we continued to honor this mission with these tremendous resolutions and collections.”
The recoveries in the Eastern District of Pennsylvania include more than $1.6 billion in civil and criminal penalties paid by healthcare giant Johnson & Johnson (J&J) to resolve misbranding and unapproved use allegations. J&J paid a $1.273 billion civil settlement to resolve allegations of off-label marketing for Risperdal and Invega, as well as the alleged payment of kickbacks to physicians involving Risperdal. Janssen Pharmaceuticals, Inc. (Janssen), a subsidiary of J&J, paid $400 million in a criminal fine and forfeiture for promoting Risperdal to health care providers for unapproved uses.
The collections also include: a $56.5 million civil settlement with Shire Pharmaceuticals LLC to resolve False Claims Act allegations; a $150 million civil settlement with Amedisys Inc. and its affiliates to resolve False Claims Act allegations; a $7.3 million civil settlement with pharmaceutical company Astellas Pharma US, Inc., to resolve False Claims Act allegations; and a $172.9 million civil settlement with specialty pharmaceuticals company Endo Health Solutions, Inc. and its subsidiary Endo Pharmaceuticals Inc. (Endo), to resolve allegations of off-label marketing.
Additionally, the U.S. Attorney’s office in the Eastern District of Pennsylvania, working with partner agencies and divisions, collected approximately $15 billion in asset forfeiture actions in FY 2014, which includes a $13 billion settlement with JP Morgan - the largest settlement with a single entity in American history - to resolve federal and state civil claims arising out of the packaging, marketing, sale and issuance of residential mortgage-backed securities (RMBS).
The U.S. Attorneys’ Offices, along with the department’s litigating divisions, are responsible for enforcing and collecting civil and criminal debts owed to the U.S. and criminal debts owed to federal crime victims. The law requires defendants to pay restitution to victims of certain federal crimes who have suffered a physical injury or financial loss. While restitution is paid to the victim, criminal fines and felony assessments are paid to the department’s Crime Victims’ Fund, which distributes the funds to state victim compensation and victim assistance programs.
The largest civil collections were from affirmative civil enforcement cases, in which the United States recovered government money lost to fraud and other misconduct and collected fines imposed on individuals and corporations for violations of federal health, safety, civil rights, and environmental laws. In addition, civil debts were collected on behalf of several federal agencies, including the U.S. Department of Housing and Urban Development, Health and Human Services, Internal Revenue Service, Small Business Administration, and Department of Education.
Forfeited assets deposited into the Department of Justice Assets Forfeiture Fund are used to restore funds to crime victims and for a variety of law enforcement purposes.
Tuesday, December 23, 2014
U.S. Attorney's Office Collects More Than $2.3 Billion In Civil And Criminal Actions In Fiscal Year 2014
(PHILADELPHIA) - U.S. Attorney Zane David Memeger announced today that the Eastern District of Pennsylvania collected $2,373,688,153 in criminal and civil actions in Fiscal Year (FY) 2014.
The Department of Justice collected $24.7 billion in civil and criminal actions in FY 2014. The more than $24 billion in collections in FY 2014 represents nearly eight and a half times the appropriated $2.91 billion budget for the 94 U.S. Attorney’s offices and the main litigating divisions in that same period.
“Recouping federal funds that were misspent due to fraud, including substantial health care and mortgage insurance funds, is a critical part of our mission,” said Memeger. “Our nation’s taxpayers deserve our most aggressive efforts to recover their hard-earned tax dollars that have been misappropriated. During fiscal year 2014, we continued to honor this mission with these tremendous resolutions and collections.”
The recoveries in the Eastern District of Pennsylvania include more than $1.6 billion in civil and criminal penalties paid by healthcare giant Johnson & Johnson (J&J) to resolve misbranding and unapproved use allegations. J&J paid a $1.273 billion civil settlement to resolve allegations of off-label marketing for Risperdal and Invega, as well as the alleged payment of kickbacks to physicians involving Risperdal. Janssen Pharmaceuticals, Inc. (Janssen), a subsidiary of J&J, paid $400 million in a criminal fine and forfeiture for promoting Risperdal to health care providers for unapproved uses.
The collections also include: a $56.5 million civil settlement with Shire Pharmaceuticals LLC to resolve False Claims Act allegations; a $150 million civil settlement with Amedisys Inc. and its affiliates to resolve False Claims Act allegations; a $7.3 million civil settlement with pharmaceutical company Astellas Pharma US, Inc., to resolve False Claims Act allegations; and a $172.9 million civil settlement with specialty pharmaceuticals company Endo Health Solutions, Inc. and its subsidiary Endo Pharmaceuticals Inc. (Endo), to resolve allegations of off-label marketing.
Additionally, the U.S. Attorney’s office in the Eastern District of Pennsylvania, working with partner agencies and divisions, collected approximately $15 billion in asset forfeiture actions in FY 2014, which includes a $13 billion settlement with JP Morgan - the largest settlement with a single entity in American history - to resolve federal and state civil claims arising out of the packaging, marketing, sale and issuance of residential mortgage-backed securities (RMBS).
The U.S. Attorneys’ Offices, along with the department’s litigating divisions, are responsible for enforcing and collecting civil and criminal debts owed to the U.S. and criminal debts owed to federal crime victims. The law requires defendants to pay restitution to victims of certain federal crimes who have suffered a physical injury or financial loss. While restitution is paid to the victim, criminal fines and felony assessments are paid to the department’s Crime Victims’ Fund, which distributes the funds to state victim compensation and victim assistance programs.
The largest civil collections were from affirmative civil enforcement cases, in which the United States recovered government money lost to fraud and other misconduct and collected fines imposed on individuals and corporations for violations of federal health, safety, civil rights, and environmental laws. In addition, civil debts were collected on behalf of several federal agencies, including the U.S. Department of Housing and Urban Development, Health and Human Services, Internal Revenue Service, Small Business Administration, and Department of Education.
Forfeited assets deposited into the Department of Justice Assets Forfeiture Fund are used to restore funds to crime victims and for a variety of law enforcement purposes.
SEC ISSUES ANNUAL STAFF REPORT REGARDING NRSROs
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
12/23/2014 05:15 PM EST
The Securities and Exchange Commission issued its annual staff report on the findings of examinations of credit rating agencies registered as nationally recognized statistical rating organizations (NRSROs) and submitted a separate report on NRSROs to Congress.
“These reports provide the most current and comprehensive picture of the credit rating industry,” said SEC Chair Mary Jo White. “The SEC’s enhanced oversight of NRSROs, informed by risk assessment, regular examinations and policy considerations, provides increasingly robust and effective oversight of the industry, as reflected by overall improvements in compliance, documentation, and board oversight.”
The 2010 Dodd-Frank Act requires the SEC to examine each NRSRO once a year and issue an annual report summarizing the examination findings. In addition to covering eight areas required by the Dodd-Frank Act, SEC examiners used risk assessment tools to identify specific areas of focus such as information technology, cybersecurity, or certain ratings activities. During the 2014 examinations, the staff observed improvements concerning:
Compliance resources, monitoring, and culture
Documentation and resources for criteria and model validation
Document retention
Board of directors or governing committee oversight
The staff made recommendations for improvement in certain areas, including:
Use of affiliates or third-party contractors in the credit rating process
Management of conflicts of interest related to the rating business operations
Adherence to policies and procedures for determining or reviewing credit ratings
“The findings and recommendations in the 2014 examination report demonstrate the impact of rigorous oversight by the SEC and regular examinations by the Office of Credit Ratings,” said Thomas J. Butler, Director of the SEC’s Office of Credit Ratings.
The annual report to Congress, which is required by the Credit Rating Agency Reform Act of 2006, details the state of competition, transparency, and conflicts of interest at NRSROs. The staff report includes a discussion of the new requirements for NRSROs adopted by the Commission in August 2014 to improve the quality of credit ratings and increase credit rating agency accountability through enhanced transparency, governance, and protections against conflicts of interest.
The following SEC staff made significant contributions to the examinations and reports: Diane Audino, Rita Bolger, Patrick Boyle, Matthew Chan, Kristin Costello, Scott Davey, Shawn Davis, Franco Destro, Michael Gerity, Kenneth Godwin, Natalia Kaden, Julia Kiel, Russell Long, Abe Losice, Carlos Maymi, Matt Middleton, David Nicolardi, Sam Nikoomanesh, Harriet Orol, Abraham Putney, Jeremiah Roberts, Mary Ryan, Warren Tong, Evelyn Tuntono, Chris Valtin, Kevin Vasel, and Michele Wilham. The Office of Credit Ratings appreciates the assistance provided during the examinations by Todd Scharf and Ted Shelkey of the SEC’s Office of Information Technology.
12/23/2014 05:15 PM EST
The Securities and Exchange Commission issued its annual staff report on the findings of examinations of credit rating agencies registered as nationally recognized statistical rating organizations (NRSROs) and submitted a separate report on NRSROs to Congress.
“These reports provide the most current and comprehensive picture of the credit rating industry,” said SEC Chair Mary Jo White. “The SEC’s enhanced oversight of NRSROs, informed by risk assessment, regular examinations and policy considerations, provides increasingly robust and effective oversight of the industry, as reflected by overall improvements in compliance, documentation, and board oversight.”
The 2010 Dodd-Frank Act requires the SEC to examine each NRSRO once a year and issue an annual report summarizing the examination findings. In addition to covering eight areas required by the Dodd-Frank Act, SEC examiners used risk assessment tools to identify specific areas of focus such as information technology, cybersecurity, or certain ratings activities. During the 2014 examinations, the staff observed improvements concerning:
Compliance resources, monitoring, and culture
Documentation and resources for criteria and model validation
Document retention
Board of directors or governing committee oversight
The staff made recommendations for improvement in certain areas, including:
Use of affiliates or third-party contractors in the credit rating process
Management of conflicts of interest related to the rating business operations
Adherence to policies and procedures for determining or reviewing credit ratings
“The findings and recommendations in the 2014 examination report demonstrate the impact of rigorous oversight by the SEC and regular examinations by the Office of Credit Ratings,” said Thomas J. Butler, Director of the SEC’s Office of Credit Ratings.
The annual report to Congress, which is required by the Credit Rating Agency Reform Act of 2006, details the state of competition, transparency, and conflicts of interest at NRSROs. The staff report includes a discussion of the new requirements for NRSROs adopted by the Commission in August 2014 to improve the quality of credit ratings and increase credit rating agency accountability through enhanced transparency, governance, and protections against conflicts of interest.
The following SEC staff made significant contributions to the examinations and reports: Diane Audino, Rita Bolger, Patrick Boyle, Matthew Chan, Kristin Costello, Scott Davey, Shawn Davis, Franco Destro, Michael Gerity, Kenneth Godwin, Natalia Kaden, Julia Kiel, Russell Long, Abe Losice, Carlos Maymi, Matt Middleton, David Nicolardi, Sam Nikoomanesh, Harriet Orol, Abraham Putney, Jeremiah Roberts, Mary Ryan, Warren Tong, Evelyn Tuntono, Chris Valtin, Kevin Vasel, and Michele Wilham. The Office of Credit Ratings appreciates the assistance provided during the examinations by Todd Scharf and Ted Shelkey of the SEC’s Office of Information Technology.
NSF MATHENATICS PRIZE WINNER WORKS TO SOLVE PROBLEMS
FROM: NATIONAL SCIENCE FOUNDATION
Unlocking the mysteries of mathematics
Breakthrough Prize winner has advanced the field
Évariste Galois was a 19th Century French mathematician who died at 20 after a duel over a woman. Even by then, however, his work had established him as an important force in mathematics, especially his proof that polynomial equations of any degree greater than four were impossible to solve using radicals. It is a concept whose various ramifications have engrossed serious mathematicians ever since, including Richard Taylor.
Taylor, a professor in the school of mathematics at the Institute for Advanced Study in Princeton, N.J., and a National Science Foundation (NSF)-funded scientist, has spent much of his career focusing on the relationship between Galois Groups and their representations, which measure the algebraic symmetries of equations and their relationship to geometric symmetries, a template first developed by Taylor's institute colleague Robert P. Langlands.
Translating the associations between the two ultimately can result in new ways to solve problems in both areas. "You can write a ‘dictionary' with entries connecting both subjects," Taylor says. "You can take a problem on one side and turn it into a problem on the other side--you can make hard problems simpler by turning them from algebra into geometry, or geometry into algebra."
For example, a problem known as Fermat's Last Theorem, after a 17th Century French judge and mathematician, had stymied mathematicians for more than three centuries until Andrew Wiles, a teacher of Taylor's, proved the theorem by establishing a special case of Langlands' dictionary, turning this algebraic problem into a much easier geometric problem.
It took more than one try, and Taylor helped after Wiles made an error during his first attempt. "After trying alone to fix it for a bit, he asked me to help him, and we finally found a way around the mistake," Taylor says.
Langlands' design has transformed the process of solving these once impossible mathematical problems, albeit sometimes inexplicably.
"What I find so attractive about this is that there is so much mystery here," Taylor says. "Why should we have this tool? Even when we prove it exists, it still seems mysterious, which is rare in mathematics. The proofs are long and complicated without a simple reason why it is true. It is also very beautiful, but hard to convey."
Some applications of Langlands' program have proved useful in developing error correcting codes, which allow the correction of mistakes introduced into data during storage, such as on a DVD, or during transmission via radio or cables.
"When you have a phone conversation or send a photo to someone else's phone, little errors may creep in as that message is transmitted, the result of interference," Taylor says. "If you didn't do anything, it would look or sound funny. So what they do is transmit extra information as a check, so even if errors creep in, you can correct them. There are mathematical ways to do this, some of which have been influenced by the Langlands program."
Taylor's research has been dedicated to proving instances of Langlands dictionary. Its applications include his work on, among other things, the Sato-Tate conjecture, an algebra problem that goes back about 50 years, and is a statement about the statistical distribution of certain sequences of numbers.
"Nobody had made any progress on it, but we proved it as a consequence of Langlands' dictionary," Taylor says. "Using the dictionary, we could turn it into a much easier problem about symmetry."
Taylor has received five NSF grants supporting his research between 1997 and 2012, totaling more than $2.2 million. He also recently won the $3 million Breakthrough Prize in Mathematics, launched by Facebook founder Mark Zuckerberg and Russian entrepreneur Yuri Milner, which recognized Taylor for his major advances in the field, and for contributing to communicating the importance and excitement of mathematics to the general public.
Taylor also has worked on the Taniyama-Shimura-Weil conjecture, which states that elliptic curves over the field of rational numbers are related to modular forms. Wiles initially proved the modularity theorem for semi-stable elliptic curves, which was related to Fermat's Last Theorem; later Taylor and others extended Wiles' techniques in 2001 to prove the full modularity theorem, a special case of more general conjectures resulting from Langlands' work.
"The Taniyama-Shimura Conjecture is a special case of the Langlands program," Taylor says. "Wiles proved some cases of the Taniyama-Shimura Conjecture, and from this one could deduce Fermat's Last Theorem. Later, a group of us extended this to prove the full Shimura-Taniyama Conjecture."
Taylor also is known for his proof--with Michael Harris, an American mathematician now jointly based at the Institute of Mathematics of Jussieu in Paris and Columbia University--of the Local Langlands Conjecture, part of the Langlands program, "where one focuses on one prime number at a time, surely much easier than the full program, but an essential stepping stone on the way to the full Langlands Conjectures," Taylor says.
He and his collaborators also proved the Hasse-Weil Conjecture, another part of the Langlands program, although it actually predates Langlands, he says.
"I do mathematics because of its beauty, with no thought to applications," Taylor says. However, it is quite amazing how often such curiosity-driven research has later been crucial to the development of the technology that is transforming our world."
-- Marlene Cimons, National Science Foundation
Investigators
Richard Taylor
Related Institutions/Organizations
Harvard University
Institute For Advanced Study
Unlocking the mysteries of mathematics
Breakthrough Prize winner has advanced the field
Évariste Galois was a 19th Century French mathematician who died at 20 after a duel over a woman. Even by then, however, his work had established him as an important force in mathematics, especially his proof that polynomial equations of any degree greater than four were impossible to solve using radicals. It is a concept whose various ramifications have engrossed serious mathematicians ever since, including Richard Taylor.
Taylor, a professor in the school of mathematics at the Institute for Advanced Study in Princeton, N.J., and a National Science Foundation (NSF)-funded scientist, has spent much of his career focusing on the relationship between Galois Groups and their representations, which measure the algebraic symmetries of equations and their relationship to geometric symmetries, a template first developed by Taylor's institute colleague Robert P. Langlands.
Translating the associations between the two ultimately can result in new ways to solve problems in both areas. "You can write a ‘dictionary' with entries connecting both subjects," Taylor says. "You can take a problem on one side and turn it into a problem on the other side--you can make hard problems simpler by turning them from algebra into geometry, or geometry into algebra."
For example, a problem known as Fermat's Last Theorem, after a 17th Century French judge and mathematician, had stymied mathematicians for more than three centuries until Andrew Wiles, a teacher of Taylor's, proved the theorem by establishing a special case of Langlands' dictionary, turning this algebraic problem into a much easier geometric problem.
It took more than one try, and Taylor helped after Wiles made an error during his first attempt. "After trying alone to fix it for a bit, he asked me to help him, and we finally found a way around the mistake," Taylor says.
Langlands' design has transformed the process of solving these once impossible mathematical problems, albeit sometimes inexplicably.
"What I find so attractive about this is that there is so much mystery here," Taylor says. "Why should we have this tool? Even when we prove it exists, it still seems mysterious, which is rare in mathematics. The proofs are long and complicated without a simple reason why it is true. It is also very beautiful, but hard to convey."
Some applications of Langlands' program have proved useful in developing error correcting codes, which allow the correction of mistakes introduced into data during storage, such as on a DVD, or during transmission via radio or cables.
"When you have a phone conversation or send a photo to someone else's phone, little errors may creep in as that message is transmitted, the result of interference," Taylor says. "If you didn't do anything, it would look or sound funny. So what they do is transmit extra information as a check, so even if errors creep in, you can correct them. There are mathematical ways to do this, some of which have been influenced by the Langlands program."
Taylor's research has been dedicated to proving instances of Langlands dictionary. Its applications include his work on, among other things, the Sato-Tate conjecture, an algebra problem that goes back about 50 years, and is a statement about the statistical distribution of certain sequences of numbers.
"Nobody had made any progress on it, but we proved it as a consequence of Langlands' dictionary," Taylor says. "Using the dictionary, we could turn it into a much easier problem about symmetry."
Taylor has received five NSF grants supporting his research between 1997 and 2012, totaling more than $2.2 million. He also recently won the $3 million Breakthrough Prize in Mathematics, launched by Facebook founder Mark Zuckerberg and Russian entrepreneur Yuri Milner, which recognized Taylor for his major advances in the field, and for contributing to communicating the importance and excitement of mathematics to the general public.
Taylor also has worked on the Taniyama-Shimura-Weil conjecture, which states that elliptic curves over the field of rational numbers are related to modular forms. Wiles initially proved the modularity theorem for semi-stable elliptic curves, which was related to Fermat's Last Theorem; later Taylor and others extended Wiles' techniques in 2001 to prove the full modularity theorem, a special case of more general conjectures resulting from Langlands' work.
"The Taniyama-Shimura Conjecture is a special case of the Langlands program," Taylor says. "Wiles proved some cases of the Taniyama-Shimura Conjecture, and from this one could deduce Fermat's Last Theorem. Later, a group of us extended this to prove the full Shimura-Taniyama Conjecture."
Taylor also is known for his proof--with Michael Harris, an American mathematician now jointly based at the Institute of Mathematics of Jussieu in Paris and Columbia University--of the Local Langlands Conjecture, part of the Langlands program, "where one focuses on one prime number at a time, surely much easier than the full program, but an essential stepping stone on the way to the full Langlands Conjectures," Taylor says.
He and his collaborators also proved the Hasse-Weil Conjecture, another part of the Langlands program, although it actually predates Langlands, he says.
"I do mathematics because of its beauty, with no thought to applications," Taylor says. However, it is quite amazing how often such curiosity-driven research has later been crucial to the development of the technology that is transforming our world."
-- Marlene Cimons, National Science Foundation
Investigators
Richard Taylor
Related Institutions/Organizations
Harvard University
Institute For Advanced Study
Thursday, December 25, 2014
Wednesday, December 24, 2014
5TH ANNIVERSARY OF NOBEL PRIZE LAUREATE LIU XIAOBO'S CONVICTION IN CHINA FOR INCITING SUBVERSION
FROM: U.S. STATE DEPARTMENT
Fifth Anniversary of Liu Xiaobo's Conviction
Press Statement
John Kerry
Secretary of State
Washington, DC
December 24, 2014
Nobel Peace Prize laureate and writer Liu Xiaobo today spends the fifth anniversary of his conviction for “inciting subversion” in prison, serving out an 11-year sentence.
The United States remains deeply concerned that China continues to incarcerate Liu Xiaobo and hold his wife, Liu Xia, in extralegal house arrest.
Liu Xiaobo is a courageous and eloquent spokesperson recognized throughout the world for his long and non-violent advocacy for human rights and democracy in China.
We reiterate our call on China to release Liu Xiaobo and to remove all restrictions on Liu Xia.
We also urge China to release all individuals detained for peacefully expressing their views, including Ilham Tohti and his students, and Pu Zhiqiang, Gao Zhisheng, Yang Maodong, Gao Yu, and Xu Zhiyong.
In addition, we request that Chinese leaders guarantee them the protections and freedoms to which they are entitled under China's international human rights commitments.
I raise human rights concerns in each and every one of my conversations with President Xi and other Chinese leaders, because it is too important to stand in the way of China's emergence in the community of nations.
Fifth Anniversary of Liu Xiaobo's Conviction
Press Statement
John Kerry
Secretary of State
Washington, DC
December 24, 2014
Nobel Peace Prize laureate and writer Liu Xiaobo today spends the fifth anniversary of his conviction for “inciting subversion” in prison, serving out an 11-year sentence.
The United States remains deeply concerned that China continues to incarcerate Liu Xiaobo and hold his wife, Liu Xia, in extralegal house arrest.
Liu Xiaobo is a courageous and eloquent spokesperson recognized throughout the world for his long and non-violent advocacy for human rights and democracy in China.
We reiterate our call on China to release Liu Xiaobo and to remove all restrictions on Liu Xia.
We also urge China to release all individuals detained for peacefully expressing their views, including Ilham Tohti and his students, and Pu Zhiqiang, Gao Zhisheng, Yang Maodong, Gao Yu, and Xu Zhiyong.
In addition, we request that Chinese leaders guarantee them the protections and freedoms to which they are entitled under China's international human rights commitments.
I raise human rights concerns in each and every one of my conversations with President Xi and other Chinese leaders, because it is too important to stand in the way of China's emergence in the community of nations.
FTC WARNS CHINA-BASED MOBILE APP DEVELOPER ABOUT COLLECTING CHILDREN'S PERSONAL INFORMATION
FROM: U.S. FEDERAL TRADE COMMISSION
FTC Warns Children’s App Maker BabyBus About Potential COPPA Violations
Letter Notes Company’s Apps Appear to Collect Children’s Location Info
The staff of the Federal Trade Commission sent a letter to a China-based developer of mobile applications directed to children, warning that the company may be in violation of the Children’s Online Privacy Protection Act (COPPA) Rule.
In the letter, the FTC notes that it appears the child-directed applications marketed by the company, BabyBus, appear to collect precise geolocation information about users. The letter notes that the company does not get parents’ consent before collecting children’s personal information, which would appear to violate the COPPA Rule.
The letter notes that the applications, available on the Apple App Store, Amazon App Store and Google Play, have been downloaded millions of times. The apps are clearly directed to children from ages one to six, including apps that teach letters, numbers and shapes. The letter was also sent to the three application marketplaces.
The COPPA Rule requires companies collecting personal information from children under 13 to post clear privacy policies and to notify parents and get their consent before collecting or sharing any information from a child. The rule was revised in 2013 to adapt to the growth of mobile technology aimed at children.
The letter asks the company to evaluate its apps and determine whether they may be in violation, as well as informing the company that the Commission will review the apps again in the next month to ensure they are in compliance with the rule.
The Commission vote to authorize public release of the letter was 5-0.
FTC Warns Children’s App Maker BabyBus About Potential COPPA Violations
Letter Notes Company’s Apps Appear to Collect Children’s Location Info
The staff of the Federal Trade Commission sent a letter to a China-based developer of mobile applications directed to children, warning that the company may be in violation of the Children’s Online Privacy Protection Act (COPPA) Rule.
In the letter, the FTC notes that it appears the child-directed applications marketed by the company, BabyBus, appear to collect precise geolocation information about users. The letter notes that the company does not get parents’ consent before collecting children’s personal information, which would appear to violate the COPPA Rule.
The letter notes that the applications, available on the Apple App Store, Amazon App Store and Google Play, have been downloaded millions of times. The apps are clearly directed to children from ages one to six, including apps that teach letters, numbers and shapes. The letter was also sent to the three application marketplaces.
The COPPA Rule requires companies collecting personal information from children under 13 to post clear privacy policies and to notify parents and get their consent before collecting or sharing any information from a child. The rule was revised in 2013 to adapt to the growth of mobile technology aimed at children.
The letter asks the company to evaluate its apps and determine whether they may be in violation, as well as informing the company that the Commission will review the apps again in the next month to ensure they are in compliance with the rule.
The Commission vote to authorize public release of the letter was 5-0.
U.S. UN REP. POWER MAKES REMARKS ON NORTH KOREA
FROM: U.S. STATE DEPARTMENT
Samantha Power
U.S. Permanent Representative to the United Nations
New York, NY
December 22, 2014
AS DELIVERED
Thank you, Mr. President, and thank you Assistant Secretary-General Simonovic and Assistant Secretary-General Zerihoun, for your informative and appropriately bleak briefings; and for the ongoing attention that your respective teams give to the situation in the DPRK, in spite of persistent obstacles put up by the North Korean government.
Today’s meeting reflects the growing consensus among Council members and UN Member States that the widespread and systematic human rights violations being committed by the North Korean government are not only deplorable in their own right, but also pose a threat to international peace and security.
A major impetus for the Security Council taking up this issue was the comprehensive report issued in February 2014 by the UN Human Rights Council Commission of Inquiry. The Commission of Inquiry conducted more than 200 confidential interviews with victims, eyewitnesses, and former officials, and held public hearings in which more than 80 witnesses gave testimony. Witness accounts were corroborated by other forms of evidence, such as satellite imagery confirming the locations of prison camps.
North Korea denied the Commission access to the country, consistent with its policy of routinely denying access to independent human rights and humanitarian groups, including the Red Cross and UN special rapporteurs. And despite repeated requests, the DPRK refused to cooperate with the inquiry.
The main finding of the Commission’s thorough and objective report is that “systematic, widespread and gross human rights violations have been and are being committed by the Democratic People’s Republic of Korea.” The Commission found that the evidence it gathered provided reasonable grounds to determine that, “crimes against humanity have been committed in the Democratic People’s Republic of Korea, pursuant to policies established at the highest level of the State.”
If you have not watched any of the hours of victims’ testimony, or read from the hundreds of pages of transcripts from the Commission’s public hearings, I urge you to do so. They show North Korea for what it is: a living nightmare.
A former prisoner of Prison Camp 15, Kim Young-soon, said she and other prisoners were so famished they picked kernels of corn from the dung of cattle to eat. She said, “If there was a day that we were able to have mouse, that was a special diet for us. We had to eat everything alive, every type of meat we could find. Everything that flew, that crawled on the ground, any grass that grew in the field.”
Ahn Myong Chul, a former guard at Prison Camp 22, spoke of guards routinely raping prisoners. In one case in which a victim became pregnant and gave birth, the former guard reported that prison officials cooked her baby and fed it to their dogs. This sounds unbelievable and unthinkable; yet this is what a former guard told the Commission of Inquiry at a public hearing. His account fits a pattern across witnesses’ testimonies of sadistic punishments meted out to prisoners whose “crime” was being raped by officials.
The Commission estimates that between 80 and 120 thousand people are being held in prison camps like the ones where so many of these crimes occurred.
Many who testified before the Commission were tortured as punishment for trying to flee North Korea. One man who was sent back to the DPRK from China described being held in prison cells that were only around 50 centimeters high, just over a foot and a half. He said the guards told him that because the prisoners were animals, they would have to crawl like animals. A woman from the city of Musan told how her brother was caught after fleeing to China. When he was returned, North Korean security officials bound his hands and chained him to the back of a truck before dragging him roughly 45 kilometers, driving three loops around the city so everyone could see, his sister testified. “When he fell down, they kept on driving,” she said.
Nor are the horrors limited to prison camps or those who try to flee. The Commission found “an almost complete denial of the right to freedom of thought, conscience and religion, as well as of the rights to freedom of opinion, expression, information and association” in the DPRK.
On December 18th, the UN General Assembly passed a resolution expressing grave concern at the Commission’s findings, and roundly condemning the DPRK’s “widespread and gross violations of human rights.” One hundred and sixteen member States voted in favor, 20 against, and 53 abstained. The resolution also encouraged the Security Council to “take appropriate action to ensure accountability, including through consideration of referral of the situation in the Democratic People’s Republic of Korea to the International Criminal Court and consideration of the scope for effective targeted sanctions against those who appear to be most responsible.”
The Security Council should demand the DPRK change its atrocious practices, which demonstrate a fundamental disregard for human rights and constitute a threat to international peace and security.
We should take this on for three reasons. First, the DPRK’s response to the Commission of Inquiry’s report – and even to the prospect of today’s session – shows that it is sensitive to criticism of its human rights record. Just look at all the different strategies North Korea has tried in the past several months to distract attention from the report, to delegitimize its findings, and to avoid scrutiny of its human rights record.
The DPRK ramped up its propaganda machine, publishing its own sham report on its human rights record, and claiming “the world’s most advantageous human rights system.” The DPRK tried to smear the reputations of hundreds of people who were brave enough to speak out about the heinous abuses they suffered, calling them “human scum bereft of even an iota of conscience.” This was in a statement North Korea sent to the Security Council today. And North Korea launched slurs against the Commission’s distinguished chairman, Justice Kirby.
The DPRK deployed threats, saying any effort to hold it more accountable for its atrocities would be met with “catastrophic consequences.”
All of North Korea’s responses – the threats, the smears, the cynical diversions – show that the government feels the need to defend its abysmal human rights record. And that is precisely why our attention is so important.
The second argument for exerting additional pressure is that when regimes warn of deadly reprisals against countries that condemn their atrocities, as the North Koreans have done, that is precisely the moment when we need stand up and not back down. Dictators who see threats are an effective tool for silencing the international community tend to be emboldened and not placated. And that holds true not only for the North Korean regime, but for human rights violators around the world who are watching how the Security Council responds to the DPRK’s threats.
The DPRK is already shockingly cavalier about dishing out threats of staging nuclear attacks, and has routinely flouted the prohibitions on proliferation imposed by the Security Council. In July, North Korea’s military threatened to launch nuclear weapons at the White House and the Pentagon, and in March 2013, it threatened to launch a pre-emptive strike on the United States, saying, “everything will be reduced to ashes and flames.”
In the most recent example of its recklessness, the DPRK carried out a significant cyber-attack on the United States in response to a Hollywood comedy portraying a farcical assassination plot. The attack destroyed systems and stole massive quantities of personal and commercial data from Sony Pictures Entertainment – not only damaging a private sector entity, but also affecting countless Americans who work for the company. The attackers also threatened Sony’s employees, actors in the film, movie theaters, and even people who dared to go to the theaters showing the movie, warning them to “Remember the 11th of September.” Not content with denying freedom of expression to its own people, the North Korean regime now seems intent on suppressing the exercise of this fundamental freedom in our nation.
North Korea also threatened the United States with “serious consequences” if our country did not conduct a joint investigation with the DPRK – into an attack that they carried out. This is absurd. Yet it is exactly the kind of behavior we have come to expect from a regime that threatened to take “merciless countermeasures” against the U.S. over a Hollywood comedy, and has no qualms about holding tens of thousands of people in harrowing gulags. We cannot give in to threats or intimidation of any kind.
Third, the international community does not need to choose between focusing on North Korea’s proliferation of nuclear weapons and focusing on its widespread and ongoing abuses against its own people. That is a false choice. We must do both. As we have seen throughout history, the way countries treat their own citizens – particularly those countries that systematically commit atrocities against their own people – tends to align closely with the way they treat other countries and the norms of our shared international system.
On November 23, a week after the UN’s Third Committee adopted its DPRK resolution, North Korea’s military said “all those involved in its adoption deserve a severe punishment” and warned, again, of “catastrophic consequences.” Now here, presumably, “all” would imply the more than 100 Member States who voted for the resolution. The military also that said if Japan “continued behaving as now, it will disappear from the world map.”
When a country threatens nuclear annihilation because it receives criticism of how it treats its own people, can there be any doubt regarding the connection between North Korea’s human rights record and international peace and security?
North Korea did not want us to meet today, and vociferously opposed the country’s human rights situation being added to the Security Council’s agenda. If the DPRK wants to be taken off the Security Council’s agenda, it can start by following the Commission of Inquiry’s recommendations to: acknowledge the systematic violations it continues to commit; immediately dismantle political prison camps and release all political prisoners; allow free and unfettered access by independent human rights observers; and hold accountable those most responsible for its systematic violations.
Knowing the utter improbability of North Korea making those and a long list of other necessary changes, it is incumbent on the Security Council to consider the Commission of Inquiry’s recommendation that the situation in North Korea be referred to the International Criminal Court and to consider other appropriate action on accountability – as 116 Member States have urged the Council to do.
In the meantime, the United States will support the efforts of the Office of the High Commissioner for Human Rights to establish a field-based office to continue documenting the DPRK’s human rights violations, as mandated by the Human Rights Council, as well as support the work of the Special Rapporteur. Both should brief the Council on new developments in future sessions on this issue.
It is also crucial that all of DPRK’s neighbors abide by the principle of non-refoulement, given the horrific abuses to which North Koreans are subjected to upon return, and provide unfettered access to the UNHCR in their countries. The United States will continue to welcome North Korean refugees to our country, and help provide assistance to North Korean asylum seekers in other countries.
It is reasonable to debate the most effective strategy to end the nightmare of North Korea’s human rights crisis. What is unconscionable in the face of these widespread abuses – and dangerous, given the threat that the situation in the DPRK poses to international peace and security – is to stay silent. Silence will not make the North Korean government end its abuses. Silence will not make the international community safer.
Today, we have broken the Council’s silence. We have begun to shine a light, and what it has revealed is terrifying. We must continue to shine that light, for as long as these abuses persist. Today’s session is another important step – but far from the last – towards accountability for the crimes being perpetrated against the people of North Korea. The Council must come back to speak regularly about the DPRK’s human rights situation – and what we can do to change it – for as long as the crimes that brought us here today persist. That is the absolute minimum we can and must do.
Thank you, Mr. President.
Samantha Power
U.S. Permanent Representative to the United Nations
New York, NY
December 22, 2014
AS DELIVERED
Thank you, Mr. President, and thank you Assistant Secretary-General Simonovic and Assistant Secretary-General Zerihoun, for your informative and appropriately bleak briefings; and for the ongoing attention that your respective teams give to the situation in the DPRK, in spite of persistent obstacles put up by the North Korean government.
Today’s meeting reflects the growing consensus among Council members and UN Member States that the widespread and systematic human rights violations being committed by the North Korean government are not only deplorable in their own right, but also pose a threat to international peace and security.
A major impetus for the Security Council taking up this issue was the comprehensive report issued in February 2014 by the UN Human Rights Council Commission of Inquiry. The Commission of Inquiry conducted more than 200 confidential interviews with victims, eyewitnesses, and former officials, and held public hearings in which more than 80 witnesses gave testimony. Witness accounts were corroborated by other forms of evidence, such as satellite imagery confirming the locations of prison camps.
North Korea denied the Commission access to the country, consistent with its policy of routinely denying access to independent human rights and humanitarian groups, including the Red Cross and UN special rapporteurs. And despite repeated requests, the DPRK refused to cooperate with the inquiry.
The main finding of the Commission’s thorough and objective report is that “systematic, widespread and gross human rights violations have been and are being committed by the Democratic People’s Republic of Korea.” The Commission found that the evidence it gathered provided reasonable grounds to determine that, “crimes against humanity have been committed in the Democratic People’s Republic of Korea, pursuant to policies established at the highest level of the State.”
If you have not watched any of the hours of victims’ testimony, or read from the hundreds of pages of transcripts from the Commission’s public hearings, I urge you to do so. They show North Korea for what it is: a living nightmare.
A former prisoner of Prison Camp 15, Kim Young-soon, said she and other prisoners were so famished they picked kernels of corn from the dung of cattle to eat. She said, “If there was a day that we were able to have mouse, that was a special diet for us. We had to eat everything alive, every type of meat we could find. Everything that flew, that crawled on the ground, any grass that grew in the field.”
Ahn Myong Chul, a former guard at Prison Camp 22, spoke of guards routinely raping prisoners. In one case in which a victim became pregnant and gave birth, the former guard reported that prison officials cooked her baby and fed it to their dogs. This sounds unbelievable and unthinkable; yet this is what a former guard told the Commission of Inquiry at a public hearing. His account fits a pattern across witnesses’ testimonies of sadistic punishments meted out to prisoners whose “crime” was being raped by officials.
The Commission estimates that between 80 and 120 thousand people are being held in prison camps like the ones where so many of these crimes occurred.
Many who testified before the Commission were tortured as punishment for trying to flee North Korea. One man who was sent back to the DPRK from China described being held in prison cells that were only around 50 centimeters high, just over a foot and a half. He said the guards told him that because the prisoners were animals, they would have to crawl like animals. A woman from the city of Musan told how her brother was caught after fleeing to China. When he was returned, North Korean security officials bound his hands and chained him to the back of a truck before dragging him roughly 45 kilometers, driving three loops around the city so everyone could see, his sister testified. “When he fell down, they kept on driving,” she said.
Nor are the horrors limited to prison camps or those who try to flee. The Commission found “an almost complete denial of the right to freedom of thought, conscience and religion, as well as of the rights to freedom of opinion, expression, information and association” in the DPRK.
On December 18th, the UN General Assembly passed a resolution expressing grave concern at the Commission’s findings, and roundly condemning the DPRK’s “widespread and gross violations of human rights.” One hundred and sixteen member States voted in favor, 20 against, and 53 abstained. The resolution also encouraged the Security Council to “take appropriate action to ensure accountability, including through consideration of referral of the situation in the Democratic People’s Republic of Korea to the International Criminal Court and consideration of the scope for effective targeted sanctions against those who appear to be most responsible.”
The Security Council should demand the DPRK change its atrocious practices, which demonstrate a fundamental disregard for human rights and constitute a threat to international peace and security.
We should take this on for three reasons. First, the DPRK’s response to the Commission of Inquiry’s report – and even to the prospect of today’s session – shows that it is sensitive to criticism of its human rights record. Just look at all the different strategies North Korea has tried in the past several months to distract attention from the report, to delegitimize its findings, and to avoid scrutiny of its human rights record.
The DPRK ramped up its propaganda machine, publishing its own sham report on its human rights record, and claiming “the world’s most advantageous human rights system.” The DPRK tried to smear the reputations of hundreds of people who were brave enough to speak out about the heinous abuses they suffered, calling them “human scum bereft of even an iota of conscience.” This was in a statement North Korea sent to the Security Council today. And North Korea launched slurs against the Commission’s distinguished chairman, Justice Kirby.
The DPRK deployed threats, saying any effort to hold it more accountable for its atrocities would be met with “catastrophic consequences.”
All of North Korea’s responses – the threats, the smears, the cynical diversions – show that the government feels the need to defend its abysmal human rights record. And that is precisely why our attention is so important.
The second argument for exerting additional pressure is that when regimes warn of deadly reprisals against countries that condemn their atrocities, as the North Koreans have done, that is precisely the moment when we need stand up and not back down. Dictators who see threats are an effective tool for silencing the international community tend to be emboldened and not placated. And that holds true not only for the North Korean regime, but for human rights violators around the world who are watching how the Security Council responds to the DPRK’s threats.
The DPRK is already shockingly cavalier about dishing out threats of staging nuclear attacks, and has routinely flouted the prohibitions on proliferation imposed by the Security Council. In July, North Korea’s military threatened to launch nuclear weapons at the White House and the Pentagon, and in March 2013, it threatened to launch a pre-emptive strike on the United States, saying, “everything will be reduced to ashes and flames.”
In the most recent example of its recklessness, the DPRK carried out a significant cyber-attack on the United States in response to a Hollywood comedy portraying a farcical assassination plot. The attack destroyed systems and stole massive quantities of personal and commercial data from Sony Pictures Entertainment – not only damaging a private sector entity, but also affecting countless Americans who work for the company. The attackers also threatened Sony’s employees, actors in the film, movie theaters, and even people who dared to go to the theaters showing the movie, warning them to “Remember the 11th of September.” Not content with denying freedom of expression to its own people, the North Korean regime now seems intent on suppressing the exercise of this fundamental freedom in our nation.
North Korea also threatened the United States with “serious consequences” if our country did not conduct a joint investigation with the DPRK – into an attack that they carried out. This is absurd. Yet it is exactly the kind of behavior we have come to expect from a regime that threatened to take “merciless countermeasures” against the U.S. over a Hollywood comedy, and has no qualms about holding tens of thousands of people in harrowing gulags. We cannot give in to threats or intimidation of any kind.
Third, the international community does not need to choose between focusing on North Korea’s proliferation of nuclear weapons and focusing on its widespread and ongoing abuses against its own people. That is a false choice. We must do both. As we have seen throughout history, the way countries treat their own citizens – particularly those countries that systematically commit atrocities against their own people – tends to align closely with the way they treat other countries and the norms of our shared international system.
On November 23, a week after the UN’s Third Committee adopted its DPRK resolution, North Korea’s military said “all those involved in its adoption deserve a severe punishment” and warned, again, of “catastrophic consequences.” Now here, presumably, “all” would imply the more than 100 Member States who voted for the resolution. The military also that said if Japan “continued behaving as now, it will disappear from the world map.”
When a country threatens nuclear annihilation because it receives criticism of how it treats its own people, can there be any doubt regarding the connection between North Korea’s human rights record and international peace and security?
North Korea did not want us to meet today, and vociferously opposed the country’s human rights situation being added to the Security Council’s agenda. If the DPRK wants to be taken off the Security Council’s agenda, it can start by following the Commission of Inquiry’s recommendations to: acknowledge the systematic violations it continues to commit; immediately dismantle political prison camps and release all political prisoners; allow free and unfettered access by independent human rights observers; and hold accountable those most responsible for its systematic violations.
Knowing the utter improbability of North Korea making those and a long list of other necessary changes, it is incumbent on the Security Council to consider the Commission of Inquiry’s recommendation that the situation in North Korea be referred to the International Criminal Court and to consider other appropriate action on accountability – as 116 Member States have urged the Council to do.
In the meantime, the United States will support the efforts of the Office of the High Commissioner for Human Rights to establish a field-based office to continue documenting the DPRK’s human rights violations, as mandated by the Human Rights Council, as well as support the work of the Special Rapporteur. Both should brief the Council on new developments in future sessions on this issue.
It is also crucial that all of DPRK’s neighbors abide by the principle of non-refoulement, given the horrific abuses to which North Koreans are subjected to upon return, and provide unfettered access to the UNHCR in their countries. The United States will continue to welcome North Korean refugees to our country, and help provide assistance to North Korean asylum seekers in other countries.
It is reasonable to debate the most effective strategy to end the nightmare of North Korea’s human rights crisis. What is unconscionable in the face of these widespread abuses – and dangerous, given the threat that the situation in the DPRK poses to international peace and security – is to stay silent. Silence will not make the North Korean government end its abuses. Silence will not make the international community safer.
Today, we have broken the Council’s silence. We have begun to shine a light, and what it has revealed is terrifying. We must continue to shine that light, for as long as these abuses persist. Today’s session is another important step – but far from the last – towards accountability for the crimes being perpetrated against the people of North Korea. The Council must come back to speak regularly about the DPRK’s human rights situation – and what we can do to change it – for as long as the crimes that brought us here today persist. That is the absolute minimum we can and must do.
Thank you, Mr. President.
ATTORNEY AND WIFE SETTLE CHARGES OF TRADING ON CLIENT CONFIDENTIAL INFORMATION
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23167 / December 22, 2014
Securities and Exchange Commission v. Shivbir S. Grewal and Preetinder Grewal, Civil Action No. 8:14-CV-02026 (C.D. Cal., Dec. 22, 2014)
SEC Charges Corporate Attorney and Wife with Insider Trading On Client's Confidential Information
The SEC alleges that while serving as outside counsel to Spectrum Pharmaceuticals last year, Shivbir Grewal learned that the company was on the brink of announcing a significant decline in expected revenue due to an unanticipated drop in orders for its top-selling drug. Grewal sold his entire investment in Spectrum stock within 48 hours of getting the nonpublic information from company officials who sought the disclosure advice of his law firm. He tipped his wife Preetinder Grewal, who also sold all of her Spectrum shares on the basis of the nonpublic information. The day after Grewal sold her stock, Spectrum issued a press release revealing the expectation of decreased sales of the drug Fusilev and the consequent expectation of reduced revenue, and Spectrum's stock price fell more than 35 percent. Shivbir Grewal and his wife avoided losses of nearly $45,000 by selling ahead of the bad news.
The Grewals agreed to pay $90,000 to settle the SEC's charges, and Shivbir Grewal also agreed to be suspended from practicing as an attorney before the SEC on behalf of any publicly traded company or other entity regulated by the agency.
The SEC's complaint alleges that the Grewals violated Sections 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 as well as Rule 10b-5. Without admitting or denying the allegations, the Grewals agreed to be permanently enjoined from violating these provisions of the securities laws. Shivbir Grewal agreed to pay disgorgement of $30,343.17, prejudgment interest of $997.68, and a penalty of $30,343.17. Preetinder Grewal agreed to pay disgorgement of $14,400.05, prejudgment interest of $476.73, and a penalty of $14,400.05. The settlement is subject to court approval.
The SEC's investigation, which is continuing, is being conducted by Lance Jasper and Spencer Bendell in the Los Angeles Regional Office.
Litigation Release No. 23167 / December 22, 2014
Securities and Exchange Commission v. Shivbir S. Grewal and Preetinder Grewal, Civil Action No. 8:14-CV-02026 (C.D. Cal., Dec. 22, 2014)
SEC Charges Corporate Attorney and Wife with Insider Trading On Client's Confidential Information
The SEC alleges that while serving as outside counsel to Spectrum Pharmaceuticals last year, Shivbir Grewal learned that the company was on the brink of announcing a significant decline in expected revenue due to an unanticipated drop in orders for its top-selling drug. Grewal sold his entire investment in Spectrum stock within 48 hours of getting the nonpublic information from company officials who sought the disclosure advice of his law firm. He tipped his wife Preetinder Grewal, who also sold all of her Spectrum shares on the basis of the nonpublic information. The day after Grewal sold her stock, Spectrum issued a press release revealing the expectation of decreased sales of the drug Fusilev and the consequent expectation of reduced revenue, and Spectrum's stock price fell more than 35 percent. Shivbir Grewal and his wife avoided losses of nearly $45,000 by selling ahead of the bad news.
The Grewals agreed to pay $90,000 to settle the SEC's charges, and Shivbir Grewal also agreed to be suspended from practicing as an attorney before the SEC on behalf of any publicly traded company or other entity regulated by the agency.
The SEC's complaint alleges that the Grewals violated Sections 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 as well as Rule 10b-5. Without admitting or denying the allegations, the Grewals agreed to be permanently enjoined from violating these provisions of the securities laws. Shivbir Grewal agreed to pay disgorgement of $30,343.17, prejudgment interest of $997.68, and a penalty of $30,343.17. Preetinder Grewal agreed to pay disgorgement of $14,400.05, prejudgment interest of $476.73, and a penalty of $14,400.05. The settlement is subject to court approval.
The SEC's investigation, which is continuing, is being conducted by Lance Jasper and Spencer Bendell in the Los Angeles Regional Office.
COURT ORDERS RBC TO PAY $35 MILLION FOR ILLEGAL, FICTITIOUS, NONCOMPETITIVE TRANSACTIONS
FROM: U.S. COMMODITY FUTURES TRADING COMMISSION
December 18, 2014
Federal Court Orders Royal Bank of Canada to Pay $35 Million Penalty for Illegal Wash Sales, Fictitious Sales, and Noncompetitive Transactions
Canadian Bank Traded Single Stock Futures and Narrow-Based Stock Index Futures on OneChicago Futures Exchange
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that on December18, 2014, Judge Alvin K. Hellerstein of the U.S. District Court for the Southern District of New York entered a Consent Order for Permanent Injunction and Civil Monetary Penalty against Royal Bank of Canada (RBC) for engaging in more than 1,000 illegal wash sales, fictitious sales, and noncompetitive transactions over a three-year period. The Order enjoins RBC from committing future violations of the wash sale, fictitious sale, and noncompetitive transaction prohibitions of the Commodity Exchange Act and the CFTC’s Regulations, and requires RBC to pay a civil monetary penalty of $35 million.
CFTC Director of Enforcement Aitan Goelman stated: “Illegal wash trades may seem innocuous. They are not. They provide misleading signals to the market and are thus prohibited, whether their purpose is to lessen a foreign tax bill or another reason. This matter clearly demonstrates that the CFTC will vigorously enforce this prohibition to protect the integrity of our markets.”
The court’s Order arises from a Complaint filed by the CFTC on October 17, 2012, that charged RBC with engaging in illegal wash sales, fictitious sales, and noncompetitive transactions involving stock futures contracts, among other illegal conduct (see CFTC Press Release 6223-12, April 2, 2012). In its Order, the court found that between June 1, 2007 and May 31, 2010, RBC knowingly executed 1,026 illegal wash sales and fictitious sales of narrow-based stock index futures (NBI) and single stock futures (SSF) contracts. RBC conducted the transactions as block trades through its branches and internal trading accounts trading opposite two of RBC’s off-shore subsidiaries, and executed the trades on the OneChicago, LLC futures exchange in Chicago, Illinois. The court also found that RBC’s NBI and SSF transactions were noncompetitive transactions prohibited by CFTC Regulations.
According to the Order, senior RBC personnel designed the trading strategy, which was motivated in part by tax benefits it generated for the RBC corporate group. The Order states that, as designed, RBC and its subsidiaries entered into the NBI and SSF trades so that RBC entities would be both buyer and seller in the transactions, initiated with the express or implied understanding that they would later unwind the positions opposite each other through offset or delivery, and that the trades were equal and offsetting in all material respects: They involved the trading of the same quantity of the same futures contracts at the same price and time, and therefore achieved a wash result for RBC. Further, the Order states that the employees who oversaw RBC’s NBI and SSF trading knew that the trades negated the market risk inherent in normal futures transactions because the profits and losses that accrued to the RBC entities participating in the trades were ultimately consolidated in the RBC corporate group’s overall profits and losses, where they netted to zero, and were therefore economic and futures market nullities for the bank.
Finally, the Order finds that RBC’s trades were noncompetitive because RBC failed to timely report part of each trade to the OneChicago futures exchange, in violation of the exchange’s written rules. Because the trades did not comply with the written rules of the exchange, they violated a CFTC Regulation requiring futures transactions to be executed openly and competitively on designated contract markets in accordance with the exchange’s written rules.
CFTC Division of Enforcement staff members responsible for this action are David Slovick, Lindsey Evans, Susan Gradman, Amanda Harding, Joseph Patrick, Scott Williamson, Rosemary Hollinger, and Richard Wagner. The Division of Enforcement also recognizes the contributions of CFTC Division of Market Oversight staff.
Tuesday, December 23, 2014
SECRETARY KERRY'S STATEMENT ON NORTHERN IRELAND AGREEMENT
FROM: U.S. STATE DEPARTMENT
Success of Northern Ireland Talks
Press Statement
John Kerry
Secretary of State
Washington, DC
December 23, 2014
The United States warmly welcomes that announcement today of an agreement among Northern Ireland's political parties, facilitated by the U.K. and Irish governments.
This is statesmanship, pure and simple, and leadership by all parties to break a political impasse and avoid a fiscal crisis by resolving complex budgetary and welfare issues. The agreement reforms institutional arrangements, which will improve governance in Northern Ireland, and advances Northern Ireland’s peace process by establishing new institutions to deal with the often divisive legacy of the past – including a Historical Investigations Unit, an Independent Commission for Information Retrieval, an Implementation and Reconciliation Group, and an Oral History Archive. The agreement on legacy issues is based largely on negotiations led last year by former Special Envoy for Northern Ireland Richard Haass.
I commend the parties for working together through some very contentious issues – and finding solutions that will promote a more peaceful and hopeful future for the people of Northern Ireland. The agreement will now go through party structures for endorsement.
The U.K. Government also played a critical role in the talks’ success by agreeing to provide financial support, including new funding to implement the arrangements for dealing with legacy issues and to promote shared and integrated education.
I applaud the parties and the two governments for securing this agreement and pledge America’s full political support for the new arrangements. I'm also particularly grateful to my Personal Representative, Senator Gary Hart, and his Deputy Greg Burton, whose deep engagement helped ensure the success of the talks. I know Senator Hart looks forward to continuing his efforts next year in support of a peaceful and prosperous Northern Ireland, and I am very lucky to have Gary devoting his time to this effort.
Success of Northern Ireland Talks
Press Statement
John Kerry
Secretary of State
Washington, DC
December 23, 2014
The United States warmly welcomes that announcement today of an agreement among Northern Ireland's political parties, facilitated by the U.K. and Irish governments.
This is statesmanship, pure and simple, and leadership by all parties to break a political impasse and avoid a fiscal crisis by resolving complex budgetary and welfare issues. The agreement reforms institutional arrangements, which will improve governance in Northern Ireland, and advances Northern Ireland’s peace process by establishing new institutions to deal with the often divisive legacy of the past – including a Historical Investigations Unit, an Independent Commission for Information Retrieval, an Implementation and Reconciliation Group, and an Oral History Archive. The agreement on legacy issues is based largely on negotiations led last year by former Special Envoy for Northern Ireland Richard Haass.
I commend the parties for working together through some very contentious issues – and finding solutions that will promote a more peaceful and hopeful future for the people of Northern Ireland. The agreement will now go through party structures for endorsement.
The U.K. Government also played a critical role in the talks’ success by agreeing to provide financial support, including new funding to implement the arrangements for dealing with legacy issues and to promote shared and integrated education.
I applaud the parties and the two governments for securing this agreement and pledge America’s full political support for the new arrangements. I'm also particularly grateful to my Personal Representative, Senator Gary Hart, and his Deputy Greg Burton, whose deep engagement helped ensure the success of the talks. I know Senator Hart looks forward to continuing his efforts next year in support of a peaceful and prosperous Northern Ireland, and I am very lucky to have Gary devoting his time to this effort.
SECRETARY KERRY'S STATEMENT ON INDIAN OCEAN TSUNAMI TENTH ANNIVERSARY
FROM: U.S. STATE DEPARTMENT
Marking the Tenth Anniversary of the Indian Ocean Tsunami
Press Statement
John Kerry
Secretary of State
Washington, DC
December 22, 2014
I’ll never forget hearing the news of the tsunami that struck in the Indian Ocean 10 years ago. The images were gut-wrenching: entire towns razed from Indonesia to Somalia; raging waters sweeping away people’s homes; hundreds of thousands killed and many more separated from their families.
Today of all days, we pause to remember those we lost—from farmers and fishers to travelers from our own lands. I know that there are no words to express such a horrific loss. There’s no way to wipe away the pain of parents who lost a child, or children who lost their parents and were forced to assume adult responsibilities at a tender age.
We recognize the millions of people who contributed to the recovery effort. And we honor those who have continued to work in the years since to help the victims pick up the pieces and rebuild their communities. The tsunami was one of the worst we have ever seen, but it brought out the best in all of us.
It also sounded a warning. We know that many regions are already suffering historic floods and rising sea levels. And scientists have been saying for years that climate change could mean more frequent and disastrous storms, unless we stop and reverse course. Last year I visited the Philippines and saw the devastation of Typhoon Haiyan. It is incomprehensible that that kind of storm – or worse – could become the norm. The time to act on climate change is now – before it’s too late to heed the warning.
On this day of reflection, we mourn with our friends in Asia and Africa who were affected by this terrible disaster. We commit to the hard work still ahead to help the region build safer, more resilient communities. And we pledge our best efforts to leave our children and grandchildren a safer and more sustainable planet. Future generations are counting on us.
Marking the Tenth Anniversary of the Indian Ocean Tsunami
Press Statement
John Kerry
Secretary of State
Washington, DC
December 22, 2014
I’ll never forget hearing the news of the tsunami that struck in the Indian Ocean 10 years ago. The images were gut-wrenching: entire towns razed from Indonesia to Somalia; raging waters sweeping away people’s homes; hundreds of thousands killed and many more separated from their families.
Today of all days, we pause to remember those we lost—from farmers and fishers to travelers from our own lands. I know that there are no words to express such a horrific loss. There’s no way to wipe away the pain of parents who lost a child, or children who lost their parents and were forced to assume adult responsibilities at a tender age.
We recognize the millions of people who contributed to the recovery effort. And we honor those who have continued to work in the years since to help the victims pick up the pieces and rebuild their communities. The tsunami was one of the worst we have ever seen, but it brought out the best in all of us.
It also sounded a warning. We know that many regions are already suffering historic floods and rising sea levels. And scientists have been saying for years that climate change could mean more frequent and disastrous storms, unless we stop and reverse course. Last year I visited the Philippines and saw the devastation of Typhoon Haiyan. It is incomprehensible that that kind of storm – or worse – could become the norm. The time to act on climate change is now – before it’s too late to heed the warning.
On this day of reflection, we mourn with our friends in Asia and Africa who were affected by this terrible disaster. We commit to the hard work still ahead to help the region build safer, more resilient communities. And we pledge our best efforts to leave our children and grandchildren a safer and more sustainable planet. Future generations are counting on us.
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