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“If you aint cheating, you aint trying”: Six Banks Pay $5.8 Billion, Five Guilty of Market Rigging, in FOREX Probe

In just the latest revelation of wrongdoing in the banking system, five global banks have agreed to pay a combined $5.8 billion in penalties and to plead guilty to criminal charges to resolve an ongoing Justice Department investigation into whether foreign currency traders colluded to manipulate foreign currency exchange rates for their own financial gain.
Barclays PLC, Citigroup Inc., J.P. Morgan Chase & Co. and Royal Bank of Scotland Group PLC, pleaded guilty on May 20, 2015 to antitrust violations in the $5.3 trillion-a-day foreign exchange market that spanned the period from 2007 to 2013. UBS AG received immunity in the antitrust case but pleaded guilty to manipulating the London interbank offered rate, or LIBOR, and will pay a fine for violating an earlier deal intended to settle those allegations
Announcement of the accords concludes the most recent probe into allegations of bank wrongdoing that has seen the biggest global banks pay out over $60 billion in penalties over the past two years to resolve charges of unlawful mortgage lending and servicing, manipulative trading behavior and tax evasion, among other things.
In imposing some of the largest fines levied to date by the Justice Department for antitrust violations, Attorney General Loretta Lynch said, “These unprecedented figures appropriately reflect the conspiracy’s breathtaking flagrancy, its systemic reach and its significant impact.” The Attorney General also said that investigations of individual traders and others remain ongoing, though no charges have yet been filed.
The first four banks operated what they described as “The Cartel”, using online chat rooms and coded language to influence the twice-daily setting of benchmarks in an effort to increase their profits in what Attorney General Lynch characterized as “a brazen display of collusion and foreign exchange rate market manipulation.” What began as an inquiry into rate-rigging was broadened into an examination of unlawful practices generally in the currency trading industry, including banks charging excessive commissions, sales staff passing on tips to favored clients and traders using inside information to place private bets on currency moves.
The 19-month investigation showed traders withholding bids or offers to avoid moving the rate in directions that would hurt positions held by other members of the group, all in violation of antitrust laws. Barclays’ sales staff, for example, typically offered clients a different price to the one offered by the bank’s traders in order to boost profits. Transcripts of chat room communications give some of the flavor, such as a Barclays employee who said “if you aint cheating, you aint trying,” as well as a Barclays foreign-exchange trader who reportedly said, “[Y]es, the less competition the better.”
The fines, which include penalties from the Federal Reserve and other regulators, come on top of a combined $4.3 billion many of the same banks paid in November 2014 to resolve similar charges from U.K. regulators and other U.S. agencies.
Citigroup, which is among the largest currency-trading banks, will pay the largest criminal fine, $925 million, in addition to a federal penalty of $342 million. J.P. Morgan will pay a fine of $550 million and a federal penalty of $342 million. Barclays was also fined $115 million in a separate matter also announced on May 20 by the Commodity Futures Trading Commission for the bank’s alleged manipulation of the International Swaps and Derivatives Association Fix, a benchmark interest rate typically used to set payout rates on pension funds and to determine the cost of real-estate loans.
Despite the “unprecedented” size and scope of the settlements, the banks continue to be exposed to private lawsuits, with Citigroup announcing on May 20 that it would settle a suit from investors based on similar accusations. For one thing, guilty pleas will make it easier for pension funds and investment managers who have regular currency dealings with banks to sue them for losses on those trades, and other customers to charge that had they known that their banks were manipulating FOREX rates, they would never have entered into those contracts in the first place.
Nevertheless, some commentators do not believe the criminal pleas and massive fines will cause the banks to change their behavior in any meaningful way. Jimmy Gurulé, a former assistant attorney general and Treasury official, now a University of Notre Dame law professor, noted that as long as those individuals responsible for designing and executing the scheme continue to escape prosecution, corporate penalties “will do little to change the pervasive culture of corruption that currently exists in the banking sector. Real change will only occur when corrupt bank officials are indicted, convicted and sent to prison for their crimes.”
Under Federal law, individuals who report fraud to the government are sometimes entitled to monetary awards. If you are aware of wrongdoing and would like to know more about your rights, please click here.

Australian Company Fined $25 Million To Settle Claims It Violated the Foreign Corrupt Practices Act

You might wonder why, as was announced on May 20, 2015, an Australian mining giant, BHP Billiton, agreed to pay a $25 million penalty to settle charges levied by a U.S. government agency, the Securities and Exchange Commission (SEC), for violating a U.S. federal statute, the Foreign Corrupt Practices Act (FCPA). After all, an allegation that an Australian company made payments for foreign government officials to attend the Beijing Olympics in 2008 does not sound like something the SEC would normally be interested in, let alone have jurisdiction to address.
However, the FCPA, whose anti-bribery provisions expressly prohibit payments to foreign officials to obtain or retain business, applies not only to “domestic concerns” such as U.S. persons and businesses, but also to “Issuers,” which include U.S. and foreign public companies listed on U.S. stock exchanges.
Which is why BHP Bulliton, which is listed on the New York Stock Exchange and provided the raw metals used to make the Beijing Olympics medals, found itself under the scrutiny of the SEC when an investigation that was started in 2009 and continues in Australia revealed that the company invited 176 government officials and employees of state-owned enterprises to attend the Games at the company’s expense, and ultimately paid for 60 such guests as well as some spouses and others who attended along with them.
Sponsored guests, primarily from countries in Africa and Asia, including China, were government officials connected to pending contract negotiations or regulatory dealings such as the company’s efforts to obtain access rights. They enjoyed three- and four-day hospitality packages that included event tickets, luxury hotel accommodations, and sightseeing excursions valued at $12,000 to $16,000 per package.
“BHP Billiton footed the bill for foreign government officials to attend the Olympics while they were in a position to help the company with its business or regulatory endeavors,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement. “BHP Billiton recognized that inviting government officials to the Olympics created a heightened risk of violating anti-corruption laws, yet the company failed to implement sufficient internal controls to address that heightened risk.”
Although the company put some internal controls in place for its Beijing Olympics sponsorship, it failed to provide employees with anti-bribery training about the invitations or how to evaluate bribery risks of the invitations.
BHP Billiton neither admitted nor denied the SEC’s findings. The settlement requires the company to report to the SEC on the operation of its FCPA and anti-corruption compliance program for one year.
Under Federal law, individuals who report fraud to the government, such as a violation of anti-corruption statutes such as the FCPA, can be entitled to monetary awards. If you are aware of wrongdoing and would like to know more about your rights, please click here.

Compliance Officer Awarded $1.5 Million by SEC Whistleblower Program

The Securities and Exchange Commission (SEC) announced its second award to a whistleblower with internal audit or compliance responsibilities.

Specifically, the SEC will award a compliance officer whistleblower between $1.4 million and $1.6 million for providing information to the SEC that may have prevented significant financial harm to investors in the company that employed the whistleblower. The SEC announced its first whistleblower award to a compliance professional in August 2014.

“When investors or the market could suffer substantial financial harm, our rules permit compliance officers to receive an award for reporting misconduct to the SEC,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement.  “This compliance officer reported misconduct after responsible management at the entity became aware of potentially impending harm to investors and failed to take steps to prevent it.”

The SEC issues awards to whistleblowers for original information that leads to an enforcement action which results in sanctions greater than $1,000,000. The SEC awards whistleblowers between 10% and 30% of the monetary sanctions.

If you would like more information on whistleblower awards or other news, please click here and fill out the form.


SEC Targets Restrictive Language in Confidentiality Agreements

The Securities and Exchange Commission (SEC) announced that it forced KBR Inc., a Houston-based global technology and engineering company, to amend language in confidentiality agreements that it said discourages employees from going directly to the government with information about legal violations. Whistleblower protection Rule 21F-17 prohibits such provisions.

The SEC stated that KBR Inc. improperly required witnesses in its internal investigations interviews, including investigations involving allegations of possible securities law violations, to sign confidentiality statements which warned that they could be subject to discipline and even be fired if they discussed the matters with parties outside of KBR without the prior approval of KBR’s legal department.

KBR resolved the matter by agreeing to pay a $130,000 penalty, and amending its confidentiality statement by adding language which clarifies that employees are free to report possible violations to the SEC and other government agencies without approval or fear of retaliation by KBR.

“By requiring its employees and former employees to sign confidentiality agreements imposing pre-notification requirements before contacting the SEC, KBR potentially discouraged employees from reporting securities violations to us,” said Andrew J. Ceresney, Director of the SEC’s Division of Enforcement.  “SEC rules prohibit employers from taking measures through confidentiality, employment, severance, or other type of agreements that may silence potential whistleblowers before they can reach out to the SEC.  We will vigorously enforce this provision.”

If you would like additional information on the SEC’s first whistleblower protection enforcement action or other news, please click here and fill out the form.



A.G. Schneiderman Proposes Bill to Incentivize Whistleblowers Who Report Financial Fraud

Attorney General Eric T. Schneiderman announced a proposal for the Financial Frauds Whistleblower Act, a bill which would monetarily reward employees who provide original information to the AG that leads to penalties or settlement proceeds greater than $1 million for financial fraud or misconduct in the financial markets.

Specifically, whistleblowers would receive 10 – 30 percent of the funds obtained by the AG for a securities fraud case.  The AG also indicated that the bill would protect employees from retaliation by their employers.

“From holding the banks accountable for the collapse of the housing market, to taking on unfair advantages for high-frequency traders, this office has committed to promoting fairness and a level playing field for all investors. And yet, a valuable tool for building these cases is rarely at our disposal,” said Attorney General Schneiderman.  “New York has a unique opportunity to set the gold standard for states seeking to expose and hold individuals accountable for financial crimes.  This law will be the strongest, most comprehensive in the nation, and is long overdue for a state with the world’s most important financial markets.”

If you would like additional information on AG Schneiderman’s Financial Frauds Whistleblower act or other news, please click the green button and fill out the form.

If you would like additional information on the Financial Frauds Whistleblower Act or other news, please click here and fill out the form.

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