enforcement actions

U.S. Steps Up Anti-Corruption Inquiry Against BHP

August 15, 2013 by NewsMaker

The company has been under investigation by the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) since 2009, mainly over exploration activities that had been terminated and its hospitality at the Beijing Olympic Games.

“As a part of the U.S. process, the SEC and DOJ have recently notified the group of the issues they consider could form the basis of enforcement actions and discussions are continuing,” BHP said in a statement, adding that it could not comment on possible outcomes.

BHP has said previously it believed it had complied with all applicable laws in regards to its Olympics sponsorship, and said on Friday it has what it considers to be a “world class anti-corruption compliance program.”

“BHP Billiton is fully committed to operating with integrity and the group’s policies specifically prohibit engaging in unethical conduct,” the company said, adding that it was cooperating fully with the authorities.

After being approached by the SEC, the company said in 2010 that it had uncovered potential violations of anti-corruption laws “involving interactions with government officials”, which media have said related to a payment to Cambodian officials in 2006 for a bauxite project that BHP later dropped.

Penalties for violations of the U.S. Foreign Corrupt Practices Act can vary widely, depending on, among other factors, the extent and duration of the violations, the level of benefit the company received, and the level of cooperation from the target of the probe.

In one recent case, French oil giant Total SA agreed to pay $398 million to settle U.S. criminal and civil allegations that it paid $60 million in bribes to win oil and gas contracts in Iran over nine years.

In another recent settlement, Parker Drilling booked a $15.85 million charge to settle allegations by the SEC and Justice Department that it bribed officials in Nigeria and Kazakhstan.

SEC spokesman John Nester declined to comment on the BHP probe. The Department of Justice was not immediately available for comment.

The company released the update on the anti-corruption probe ahead of its annual results, due on August 20, the first results under new Chief Executive Andrew Mackenzie.

(Reporting by Sonali Paul; Editing by Richard Pullin)

Article source: http://www.nytimes.com/reuters/2013/08/15/business/15reuters-bhp-investigation.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: enforcement actions, oil giant, olympic games

Google Admits Street View Project Violated Privacy

March 12, 2013 by NewsMaker Leave a Comment

In agreeing to settle a case brought by 38 states involving the project, the search company for the first time is required to aggressively police its own employees on privacy issues and to explicitly tell the public how to fend off privacy violations like this one.

While the settlement also included a tiny — for Google — fine of $7 million, privacy advocates and Google critics characterized the overall agreement as a breakthrough for a company they say has become a serial violator of privacy.

Complaints have led to multiple enforcement actions in recent years and a spate of worldwide investigations into the way the mapping project also collected the personal data of private computer users.

“Google puts innovation ahead of everything and resists asking permission,” said Scott Cleland, a consultant for Google’s competitors and a consumer watchdog whose blog maintains a close watch on Google’s privacy issues. “But the states are throwing down a marker that they are watching and there is a line the company shouldn’t cross.”

The agreement paves the way for a major privacy battle over Google Glass, the heavily promoted wearable computer in the form of glasses, Mr. Cleland said. “If you use Google Glass to record a couple whispering to each other in Starbucks, have you violated their privacy?” he asked. “Well, 38 states just said they have a problem with the unauthorized collection of people’s data.”

George Jepsen, the Connecticut attorney general who led the states’ investigation, said that he was hopeful the settlement would produce a new Google.

“This is the industry giant,” he said. “It is committing to change its corporate culture to encourage sensitivity to issues of personal data privacy.”

The applause was not universal, however. Consumer Watchdog, another privacy monitor and frequent Google critic, said that “asking Google to educate consumers about privacy is like asking the fox to teach the chickens how to ensure the security of their coop.”

Niki Fenwick, a Google spokeswoman, said on Tuesday that “we work hard to get privacy right at Google, but in this case we didn’t, which is why we quickly tightened up our systems to address the issue.”

Last summer, the Federal Trade Commission fined Google $22.5 million for bypassing privacy settings in the Safari browser, the largest civil penalty ever levied by the F.T.C. In 2011, Google agreed to be audited for 20 years by the F.T.C. after it admitted to using deceptive tactics when starting its Buzz social network. That agreement included several rather vague privacy provisions.

The new settlement, which requires Google to set up a privacy program within six months, is more specific. Among its requirements, Google must hold an annual privacy week event for employees. It also must make privacy certification programs available to select employees, provide refresher training for its lawyers overseeing new products and train its employees who deal with privacy matters.

Several provisions involve outreach. Google must create a video for YouTube explaining how people can easily encrypt their data on their wireless networks and run a daily online ad promoting it for two years. It must run educational ads in the biggest newspapers in the 38 participating states, which besides Connecticut also include New York, New Jersey, Massachusetts, California, Ohio and Texas.

“There are minimum benchmarks Google has to meet,” said Matthew Fitzsimmons, an assistant Connecticut attorney general who negotiated with the company. “This will impact how Google rolls out products and services in the future.”

Marc Rotenberg of the Electronic Privacy Information Center said the agreement was “a significant privacy decision by the state attorneys general,” adding that “it shows the ongoing importance of the states’ A.G.’s in protecting the privacy rights of Internet users.”

Kevin O’Brien contributed reporting from Berlin.

Article source: http://www.nytimes.com/2013/03/13/technology/google-pays-fine-over-street-view-privacy-breach.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: enforcement actions, mapping project, worldwide investigations

Standard Chartered Bank Accused of Hiding About 60,000 Transactions With Iranians

August 7, 2012 by NewsMaker Leave a Comment

The New York State Department of Financial Services accused the British bank, which it called a “rogue institution,” of hiding the transactions to gain hundreds of millions of dollars in fees from January 2001 through 2010.

Under United States law, transactions with Iranian banks are strictly monitored and subject to sanctions because of government concerns about the use of American banks to finance Iran’s nuclear programs and terrorist organizations.

The highest levels of management knew that Standard Chartered was deliberately falsifying records to allow billions of dollars in transactions to flood through the bank, according to the regulatory filing.

The bank “left the U.S. financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes,” the agency said in an order sent to the bank Monday. At the most extreme, the agency’s enforcement actions against the bank could include the revocation of its license to operate in New York.

Beyond the dealings with Iran, the department said it discovered evidence that Standard Chartered operated “similar schemes” to do business with other countries under United States sanctions, including Burma, Libya and Sudan.

During a nine-month investigation, the department, led by Benjamin M. Lawsky, said that it reviewed more than 30,000 bank documents, including internal e-mails. It investigated the bank because it had routed the transactions through its New York operations. Under the order, Standard Chartered will have to pay for an independent monitor to ensure its operations comply with state law.

In an e-mailed statement, a spokesman for Standard Chartered said the bank was reviewing its “historical U.S. sanctions compliance and is discussing that review with U.S. enforcement agencies and regulators.” He added that the bank “cannot predict when this review and these discussions will be completed or what the outcome will be.”

The department contends that Standard Chartered systematically scrubbed any identifying information from the transactions for powerful Iranian institutions, including the Central Bank of Iran and Bank Saderat, that are legally subject to sanctions under United States law.

The department accused the bank of undermining the safety of New York’s financial system through a range of violations including “falsifying business records” and “obstructing governmental administration,” according to the order.

Suspecting that Iranian banks were using their financial institutions to finance its nuclear weapons program, the United States Treasury Department banned certain transactions between Iranian banks and United States financial institutions in 2008. The regulator said the bank engaged in so-called U-turn transactions, where a foreign institution routes money to an American bank, which then transfers the money immediately to a separate foreign institution.

The accusations are the latest to strike British banks. In July, a United States Senate panel found that HSBC was used by Iranians looking to evade sanctions and by Mexican drug cartels to funnel money back into the United States.

Together, the allegations raise concerns that there is a broader pattern of illegal money freely flowing into the United States through international financial institutions.

In the Standard Chartered investigation, the order said that the bank’s management created a formalized operating manual that showed staff members how to strip off any information from the transactions that might tie them to the sanctioned Iranian institution. The manual was called “Quality Operating Procedure Iranian Bank Processing.”

Under a strategy called Project Gazelle, which the regulator said was approved at the highest echelon of the bank, Standard Chartered falsified or omitted client identification in paperwork authorizing transactions, the order said. To drum up more revenue, the bank wanted to forge “new relationships with Iranian companies,” bank e-mails show.

The order says that executives at Standard Chartered sidelined concerns raised by its management in the United States. Concerned that the bank’s practices ran afoul of regulators and could lead to criminal liability, executives at Standard Chartered urged a thorough accounting of the bank’s Iranian business, according to an e-mail uncovered as part of the investigation.

Rather than quashing the program once concerns were raised, executives at Standard Chartered got better at shielding the wire transfers and other transactions, according to the order. What’s more, the regulator said Monday, the bank responded to calls for a review with outright hostility. A London executive of the bank was quoted in the document as having directed an expletive at Americans and adding, “Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians?”

By falsifying records and lying to regulators, the regulator said, Standard Chartered conducted a widespread conspiracy continuing for almost 10 years.

Article source: http://www.nytimes.com/2012/08/07/business/standard-chartered-bank-accused-of-hiding-transactions-with-iranians.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: american banks, enforcement actions, levels of management

Economix Blog: Bruce Bartlett: The ‘Tax Gap’

January 10, 2012 by NewsMaker Leave a Comment

Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul. He is the author of the coming book “The Benefit and the Burden: Tax Reform – Why We Need It and What It Will Take.”

In keeping with its apparent policy of releasing important economic reports late on Friday afternoons in the hope that no one will notice them, the Obama administration published new estimates of the so-called tax gap on Jan. 6. They deserve more attention.

Today’s Economist

Perspectives from expert contributors.

For many years, the Internal Revenue Service has been studying the tax gap, which is the difference between aggregate tax liabilities and revenue collected. The data just released are for the 2006 tax year and update the most recent previous data, which were for the 2001 tax year.

According to the study, in 2006 Americans owed $450 billion more in federal taxes than they paid, an increase of $105 billion over 2001. The I.R.S. estimates that the compliance rate declined slightly to 83.1 percent in 2006, from 83.7 percent in 2001. In other words, people voluntarily pay only about 84 percent of the taxes they owe.

The I.R.S. estimates that enforcement actions will eventually bring in some of the uncollected revenue. It says that $55 billion of the 2001 tax gap was subsequently collected and that $65 billion of the 2006 gap will be. Thus the net tax gap is a bit lower: $290 billion in 2001 and $385 billion in 2006. The ultimate compliance rate, therefore, is 86.3 percent for 2001 and 85.5 percent for 2006.

Noncompliance primarily takes the form of unreported income rather than taking unjustified deductions, exemptions and such. The bulk of unreported income is among unincorporated businesses, which can much more easily hide income from the I.R.S. than workers who primarily earn wages from which their employers withhold taxes.

Internal Revenue Service

Information reporting and withholding are the I.R.S.’s principal lines of defense against tax cheating. As the chart illustrates, noncompliance is lowest in areas where there is substantial reporting requirements and withholding. Almost all wages and salaries are reported and taxes withheld.

There is more noncompliance in areas like pensions and investment income, where there is reporting but generally no withholding. Noncompliance rises as reporting requirements weaken for things like alimony and capital gains and rises sharply where reporting requirements are nonexistent, such as for proprietors’ income, rents and royalties.

Effect of Information Reporting on Taxpayer Compliance

Internal Revenue Service, December 2011Tax year individual income tax underreporting gap and net misreporting percentage, by “visibility category.” (Dark bars represent underreporting gap, in billions of dollars on left scale; light bars show net misreporting percentage, defined as the net misreported amount of income as a percentage of the true amount, on right scale.)

Clearly, therefore, one solution to the tax gap is to increase reporting and withholding requirements. However, previous efforts by Congress to do so have been met with huge political resistance. People don’t like the intrusion into their privacy — and the diminution of their opportunities for tax evasion — and businesses don’t like the cost or the alienation of their customers.

In 1982, Congress briefly enacted a withholding requirement for interest income and the outcry was so loud that it was repealed almost immediately.

Conservatives tend to talk about noncompliance as if it were solely a function of tax rates. The higher tax rates are, the greater the incentive for tax evasion; lower tax rates and evasion will decline. Thus tax evasion is yet another excuse to cut taxes.

However, as the I.R.S. data show, noncompliance increased between 2001 and 2006, a period in which a substantial number of tax cuts were enacted. The top rate fell to 35 percent from 39.6 percent, the bottom rate fell to 10 percent from 15 percent and the rate on dividends fell to just 15 percent from a top rate of 39.6 percent. If the conservative model is correct, tax compliance should have increased, since the return to evasion fell substantially.

Of course, another factor in tax compliance is enforcement. Someone who thinks the odds of being caught are close to zero is going to be strongly tempted to cheat no matter how low tax rates are.

Unfortunately, Republicans have been treating the I.R.S. like a political punching bag for years, cutting its personnel and restricting its ability to do its job. The number of I.R.S. employees fell to 84,711 in 2010 from 116,673 in 1992 despite an increase in the population of the United States of 53 million over that period.

Federal revenues are at a historically low level and are a key cause of the federal budget deficit. Sooner or later, taxes will have to be increased. It would be better to minimize that increase by ensuring that taxpayers pay what they owe. It’s unfair to honest taxpayers and undermines tax morale when large numbers of people and businesses don’t pay their taxes.

Article source: http://feeds.nytimes.com/click.phdo?i=78a199cb201adfa0d54ca017aa142d9f

Filed Under: Economy News Tagged With: afternoons, enforcement actions, tax liabilities

Google Agrees to Allow Owners of Wi-Fi Routers to Opt Out of Database

November 16, 2011 by NewsMaker Leave a Comment

BERLIN — Google, under pressure from privacy regulators in the Netherlands, said Tuesday that it had agreed to give people around the world the option of keeping the names and locations of their home or business Wi-Fi routers out of a company database.

Google uses the data to help pinpoint the location of cellphones and other mobile devices within broadcast range of the routers. That information is useful for weather and mapping services, among other things, and can allow Google to show relevant advertising for nearby businesses.

Under the agreement, which was announced by Google and the Dutch Data Protection Authority, owners of Wi-Fi routers can add “_nomap” to the end of a router’s name to tell Google that they do not want its information included.

If many people opt out of the registry, Google’s ability to offer location-based services could be compromised. The company would then have to use cell tower locations and the Global Positioning System to determine a phone’s location, which could result in less accuracy and greater use of battery power.

But while Google’s collection of Wi-Fi location data has been controversial in Europe, analysts in the United States were skeptical that many owners of routers would bother to remove them from the database.

“I think the Wi-Fi network operator would be more than happy to have it plotted,” said Chenxi Wang, principal analyst covering security at Forrester Research. “It doesn’t hurt them in any way.”

Jacob Kohnstamm, the chairman of the Dutch Data Protection Authority, called the agreement a positive step for consumer privacy.

“We all hope that with enforcement actions like these, the bigger firms will use privacy by design from the start so we don’t need to go into enforcement mode,” Mr. Kohnstamm said.

Google, the global search engine leader, was found to have illegally collected information about 3.6 million routers in the Netherlands from March 2008 through May 2010 as it compiled its Street View mapping service. It has said that it was using the information to help log the position of cellphones running its Android operating system.

Google had faced a fine of 1 million euros, or $1.4 million, from the Dutch agency for its illegal data collection. Mr. Kohnstamm said officials at the agency would independently verify whether Google keeps its promise to remove the data once a router owner uses the new opt-out procedure.

“Assuming Google follows through on its agreement, the fine will not be levied,” he said.

In a statement, Google said the Wi-Fi location data could not be used to identify individuals.

“Even though the wireless access point signals we use in our location services don’t identify people, we think we can go further in protecting people’s privacy,” Google said.

Peter Fleischer, Google’s global privacy counsel, wrote in a blog post that Google hoped other companies that log router locations would also use Google’s “_nomap” suffix as an opt-out mechanism.

Natalie Kerris, a spokeswoman for Apple, which collects similar data through its phones and other devices, declined to comment.

Google began advertising the details of the opt-out procedure in several Dutch newspapers and on its Web site. Mr. Kohnstamm said Google agreed to offer the option after it was requested by officials in the Netherlands and France, and several other European countries he declined to name.

The Netherlands has been one of Europe’s most aggressive enforcers of data protection laws, using sanctions and legislative action to tightly restrict how companies that do business on the Internet can collect and manipulate personal data.

Google ran afoul of data protection officials from Europe to Hong Kong when it acknowledged that its Street View mapping vehicles had collected private data from Wi-Fi routers as the cars were compiling panoramic maps. This went beyond logging the name and location of the routers to include data traveling over the networks. Google attributed the unlawful data collection to a programming error and apologized publicly.

The company, based in Mountain View, Calif., settled most of the complaints by privacy regulators by deleting the data, although prosecutors in Hamburg, Germany, are still weighing whether to bring criminal charges against Google.

Johannes Caspar, the Hamburg data protection supervisor whose inquiry brought Google’s Wi-Fi collection practices to light, said his office was awaiting a decision by criminal prosecutors before deciding whether to levy penalties.

Claire Cain Miller contributed reporting from San Francisco.

Article source: http://feeds.nytimes.com/click.phdo?i=f589ad9c1d30dec080153051dca72b4a

Filed Under: Business News Tagged With: cell tower, enforcement actions, global positioning system

S.E.C. Faults Credit Ratings Agencies, but Doesn’t Name Them

October 1, 2011 by NewsMaker Leave a Comment

The examinations were mandated in the Dodd-Frank regulatory law passed last year after numerous investigations into the causes of the financial crisis. Several of those inquiries found that the agencies had issued inaccurate reports, failed to report or manage conflicts of interest and appeared to put generating revenue ahead of rigorous financial analysis.

For the investing public, however, the S.E.C.’s report is likely to be of limited value because the commission did not name the agencies at which it found deficiencies. Instead, it described its findings as having occurred either at one or more of the three large agencies — Moody’s Investors Service, Standard Poor’s and Fitch Ratings — or at one or more of the seven smaller ratings firms. The report also found that all three of the large agencies and four of the small ones had weak controls or inadequate policies for ownership of securities by employees.

The S.E.C. also said the procedures at one of the large ratings agencies “appeared to allow for limited dissemination of a pending rating action in some instances prior to public dissemination.”

Changes in credit ratings have the potential to affect not only the prices a company’s bonds bring but its stock price as well. And sometimes the overall market is affected. The S.E.C. has begun an inquiry into whether news of Standard Poor’s pending downgrade of United States government debt was leaked, and the information traded upon, before it was officially announced in August.

“The takeaway for both individual investors and institutions is to always have a skeptical eye when looking at ratings agencies,” Katherine Addleman, a partner at Haynes and Boone, a Dallas law firm.

The findings have not resulted in any enforcement actions by the agency, but staff members could refer some or all of the findings to the enforcement division for further investigation. Ms. Addleman said the report was typical of those issued after the S.E.C. conducts a sweep of brokerage firms to check on compliance with regulations. After those inquiries, it often outlines areas where firms should bring themselves into compliance or risk enforcement action.

Inflated credit ratings were the subject of several investigations into the causes of the financial crisis. A report by the Senate permanent subcommittee on investigations issued in April noted that more than 90 percent of the highest, or AAA, ratings given to mortgage-backed securities in 2006 and 2007 “were later downgraded to junk status, defaulted or withdrawn,” causing huge investor losses.

In a conference call with reporters, members of the commission staff said neither the Dodd-Frank statute nor the commission’s own regulations forbade the disclosure of the names of the companies whose procedures had been found deficient. Carlo V. di Florio, director of the office of compliance inspections and examinations, said, “We made a decision internally that it was most effective” not to name the companies.

“We didn’t name names because we are separately following up” the findings with each agency, Mr. di Florio said.

The commission’s report said each of the three larger ratings agencies “has made changes to improve its operations” since the last periodic examination in 2007-8. But the report also noted that all 10 agencies “failed to follow their ratings procedures in some instances.”

The report specifically said that the failure of one of the largest ratings firms to follow its own procedures had resulted in ratings of asset-backed securities that were inconsistent with its publicly disclosed standards. “The staff is concerned about the extent to which market share and business considerations may have contributed” to the failure, the report said.

Mr. di Florio declined to name the company. A footnote in the report said that the agency itself had reported its analysis error as the S.E.C. staff was conducting its examination, which covered the period Dec. 1, 2009, through Aug. 1, 2010.

In August 2010, the S.E.C. released a separate report on an investigation of Moody’s, which found that the company had made false statements in its registration as a ratings agency with the S.E.C. and had failed to follow its procedures for determining credit ratings.

Anthony Mirenda, a Moody’s spokesman, declined to comment on the specific findings in the report. “Moody’s welcomes the S.E.C.’s constructive recommendations to our industry,” he said.

Article source: http://feeds.nytimes.com/click.phdo?i=c243b5b8dcf2fa772cbb8229c80cacd3

Filed Under: Business News Tagged With: enforcement actions, haynes, takeaway

S.E.C. Finds Problems at Credit-Rating Agencies

September 30, 2011 by NewsMaker Leave a Comment

The examinations were mandated in the Dodd-Frank regulatory law passed last year after numerous investigations into the causes of the financial crisis. Several of those inquiries found that the agencies issued inaccurate reports, failed to report or manage conflicts of interest and put generating revenue ahead of rigorous financial analysis.

For the investing public, however, the S.E.C.’s report is likely to be of limited value because the commission declined to name the credit ratings agencies at which it found deficiencies. Instead, it refers to its findings as occurring either at one or more of the three large agencies — Moody’s Investors Service, Standard Poor’s and Fitch — or at one or more of the seven smaller ratings firms.

The report also found that all three of the large agencies and four of the small ones had weak controls or inadequate policies for ownership of securities by employees.

The findings have not resulted in any enforcement actions by the agency, but staff members could refer some or all of its findings to the enforcement division for further investigation.

In a conference call with reporters, commission staff members said it was not forbidden by the Dodd-Frank statute or the commission’s own regulations from disclosing the names of the companies whose procedures it found deficient. Carlo Y. di Florio, director of the office of compliance inspections and examinations, said, “We made a decision internally that it was most effective” not to name the companies.

“We didn’t name names because we are separately following up” with each ratings agency about the findings, Mr. di Florio said, a path he said was “more efficient.”

The commission’s report said that each of the three larger ratings agencies “has made changes to improve its operations” since the last periodic examination in 2007-8. But the report also noted that all of the 10 agencies “failed to follow their ratings procedures in some instances.”

The report specifically said that the failure of one of the largest ratings firms to follow its own procedures resulted in ratings of asset-backed securities that were inconsistent with its publicly disclosed standards. “The staff is concerned about the extent to which market share and business considerations may have contributed” to the failure, the report said.

Mr. di Florio declined to disclose the company’s name. A footnote in the report said that the agency itself reported its analysis error as the S.E.C. staff was conducting its examination, which covered the period Dec. 1, 2009, through Aug. 1, 2010.

In August 2010, the S.E.C. released a separate report on its investigation of Moody’s, which found that the company made false statements in its registration as a ratings agency with the S.E.C. and failed to follow its procedures and methodologies for determining credit ratings.

Article source: http://feeds.nytimes.com/click.phdo?i=36dea2c1927fef6f5573f4606a75ecde

Filed Under: Economy News Tagged With: enforcement actions, financial crisis, senate permanent subcommittee on investigations