Two men in China have been executed for their role in the tainted milk scandal last year that killed at least six infants, made another 300,000 sick, and caused widespread panic in the country.
According to a statement issued by Shijiazhuang Intermediate People’s Court, Zhang Yujun, a farmer, was executed for endangering public safety. He was named by prosecutors as one of the “principal criminals”, guilty of producing more than 750 tons of milk powder laced with the chemical melamine. He then sold 600 tons of it to distributors for 6.83 million yuan.
Geng Jinping, a milk salesman, was executed for producing and selling toxic food. He was convicted of adding 434kg of powder containing melamine to around 900 tons of milk.
Melamine is a protein-like substance which is high in nitrogen. It is used primarily to make plastics and fertilisers, and can cause kidney stones or kidney failure among children if ingested. In an attempt to boost profits, sometimes producers water down the milk they obtain from cows, and add melamine in order to fool inspectors who test for protein content.
The milk then made their way for the production of infant formula, causing many children to be sick after drinking it.
The two men were among the 21 people tried and sentenced in January for involvement in the scandal. One person was handed down a suspended death sentence, and the other 18, including senior executives from Sanlu – a state-own producer of infant formula – were given prison sentences of between two years to life.
The Chinese government has been keen to be seen as having responded swiftly and decisively to the scandal, partly because of allegations it tried to cover up the problems until last year’s Beijing Olympics ended in late August. The first allegations surfaced in mid-July. Parents of affected children have since been offered compensation ranging from 2,000 yuan to 200,000 yuan, in exchange for not pursuing civil lawsuits.
Sunday 29 November 2009
US drops FCPA probe against Statoil
US authorities have dropped their foreign bribery case against Norwegian energy giant Statoil, after the satisfactory completion of a three-year deferred prosecution arrangement.
In 2006, the US Department of Justice charged the Norwegian gas and oil producer of violating the US Foreign Corrupt Practices Act (FCPA) by making a bribe of more than US$5 million, through an intermediary, to an Iranian official with the purpose of influencing the award of oil and gas contracts in the Middle East country.
The company was charged with making corrupt payments, as well as committing securities fraud by falsifying its books and mislabelling the illicit payments as “consulting fees”. As part of a settlement, Statoil acknowledged that the bribes were paid, was fined US$10.5 million, and had to submit to periodic reviews on the company’s compliance controls as they related to the FCPA for a period of three years.
Under the deferred prosecution deal, the criminal charges against it were to remain pending until it was dismissed or followed through by prosecution, depending on whether the company was able to demonstrate good conduct.
In a statement, Statoil said that it had fulfilled its obligations under this deferred prosecution agreement, and the criminal charges against the company have been dismissed. As such, the company’s controls, policies, and procedures related to compliance with FCPA will no longer be subject to review by external compliance consultants, it said.
“Three years of diligent efforts by Statoil to address past misconduct and serious compliance failures have led to the dismissal of foreign bribery charges against the company. Bribing foreign government officials and then attempting to disguise the payments cannot be standard operating procedure. Companies that have robust compliance programs risk far less than companies that take their chances on possible FCPA violations,” said US assistant attorney general Lanny Breuer.
US Attorney Prett Bharara said the case showed that deferred prosecution agreements worked, and they served as an important middle ground between declining to prosecute and getting a conviction. “The deferred prosecution in this case helped restore the integrity of Statoil’s operations and preserve its financial viability while at the same time ensuring that it improved what was obviously a failed compliance and anti-corruption program,” he said.
In 2006, the US Department of Justice charged the Norwegian gas and oil producer of violating the US Foreign Corrupt Practices Act (FCPA) by making a bribe of more than US$5 million, through an intermediary, to an Iranian official with the purpose of influencing the award of oil and gas contracts in the Middle East country.
The company was charged with making corrupt payments, as well as committing securities fraud by falsifying its books and mislabelling the illicit payments as “consulting fees”. As part of a settlement, Statoil acknowledged that the bribes were paid, was fined US$10.5 million, and had to submit to periodic reviews on the company’s compliance controls as they related to the FCPA for a period of three years.
Under the deferred prosecution deal, the criminal charges against it were to remain pending until it was dismissed or followed through by prosecution, depending on whether the company was able to demonstrate good conduct.
In a statement, Statoil said that it had fulfilled its obligations under this deferred prosecution agreement, and the criminal charges against the company have been dismissed. As such, the company’s controls, policies, and procedures related to compliance with FCPA will no longer be subject to review by external compliance consultants, it said.
“Three years of diligent efforts by Statoil to address past misconduct and serious compliance failures have led to the dismissal of foreign bribery charges against the company. Bribing foreign government officials and then attempting to disguise the payments cannot be standard operating procedure. Companies that have robust compliance programs risk far less than companies that take their chances on possible FCPA violations,” said US assistant attorney general Lanny Breuer.
US Attorney Prett Bharara said the case showed that deferred prosecution agreements worked, and they served as an important middle ground between declining to prosecute and getting a conviction. “The deferred prosecution in this case helped restore the integrity of Statoil’s operations and preserve its financial viability while at the same time ensuring that it improved what was obviously a failed compliance and anti-corruption program,” he said.
Tuesday 24 November 2009
The Red Flag Group Launches its Financial Services Practice
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New arm will help banks and financial services companies deal with new wave of banking sector regulation reform
HONG KONG, 24 November 2009 – The Red Flag Group, Asia’s leading Compliance Advisory, Due Diligence & Technology firm, today launches its financial services practice to help banks and other financial institutions deal with the changing and increasingly complex regulatory landscape that has formed in the wake of the global financial crisis.
Around the world, financial institutions are facing greater scrutiny and regulation. In the UK, the government has proposed giving more power to the Financial Services Authority to preserve stability in the banking sector. Across the Atlantic, banks are also facing a shake-up to the banking system, proposed by the Obama Administration, which has been described as the biggest since the 1930s.
The race to regulate the financial services sector has been mirrored in Asia. Earlier this year, Hong Kong has launched a consultative study into proposed legislation that will tighten the customer due-diligence and record-keeping requirements for banks and other financial services companies. It will also empower regulators to supervise compliance, and set up criminal and supervisory sanctions in case of breaches in compliance. Across the border in China, there has also been increasing focus on financial irregularities.
Scott Lane, principal and chief executive officer at The Red Flag Group, said that it has become more important for financial services companies to understand and stay up-to-date with these regulatory changes that affect how they operate. The alternative is they run the risk of falling afoul of new laws. “We are seeing reforms in financial services sector across the globe because regulators have been made aware that systematic risks in banks can hurt economic sectors that they used to think were unrelated. In the US and UK, what started as weaknesses in the sub-prime mortgage market, brought on by imprudent lending practices, spread its contagion to other credit markets, and led us to the economic conditions that we are seeing today.
“Banks and other financial services companies are becoming increasingly concerned about this increasing regulation. They need to understand how it will impact the way they do business, and what the changes they need to stay compliant. This is something that we think our new financial services practice will be able to help them address.
“Because of the changing regulatory environment, not only do firms in the financial services sector run the risk of being liable to massive fines as well as criminal prosecution, there is also the danger of damage to a firm’s reputation associated with a high profile investigation by a regulator. Regardless of whether a violation has actually taken place, sometimes the mere suggestion that a financial institution is being probed is all that is needed for its clients to lose confidence,” Mr. Lane said.
The Red Flag Group’s new financial services practice will include Michael Clement, a 17-year veteran of the financial services sector, with extensive experience in building compliance programs, internal audit, compliance, and risk management. Prior to his appointment, he was most recently an Associate Director with a global consulting firm in Hong Kong. Previously, he was Director of International Compliance for Charles Schwab, for whom he worked for over 15 years, based in San Francisco.
In addition, Perminder Kaur has been appointed as a Due Diligence Manager, Asia South in the Group. With a Bachelor of Law degree, Mrs. Kaur has extensive experience in the field of Anti-Money Laundering, particularly conducting Due Diligence enquiries in Asia South countries. Prior to joining the firm, Mrs. Kaur worked as a Compliance professional in a Hong Kong- based firm, which provides Trust and Company services. “Our Due Diligence practice continues to grow and extend into new markets, with a growing focus on India and South East Asia, so it essential that we have talent like Mrs Kaur’s background with a rich experience in regional due diligence and law to provide clients with local intelligence.
Sunday 22 November 2009
Hong Kong tightens property sales rules
Property developers in Hong Kong will have to comply with a new tighter set of rules governing the way uncompleted apartments are marketed and sold in the city.
The rules, which will take effect at the end of November, are aimed at improving transparency in the retail property market. As flat prices have soared in recent months, there were concerns that misleading sales tactics used by property developers contributed to the price surge.
In particular, in one instance, local property developer Henderson Land said in October that it had set a global record by selling an apartment for HK$88,000 per square foot. The unit in question was advertised as being located on the 68th floor, when the building was only 46 floors high. It is common practice for developers to skip floors which had numbers that were considered inauspicious in Chinese culture. In this case, Henderson omitted the floor numbers 13, 14, 24, 34, 40 to 59, 62, 64, 65, 67, 69, and 87.
While it is also common practice also for developers to include space set aside for common use in calculating how big an apartment being sold is, the revised regime will require developers to spell out the exact usable square footage of the uncompleted flats being sold. According to Bloomberg, typically as much as 20 to 30 per cent of new residential buildings are set aside for common use.
The new rules will also require developers to make floor numbering information in a more prominent manner in sales brochures, to ensure that buyers are not misled.
“The government is deeply concerned about some recent sales tactics in the first-hand uncompleted residential property market and confusing market information. The new measures will enhance the transparency of transactions of uncompleted first-hand properties and the clarity of property information,” a spokesperson for the Hong Kong government’s policy-setting Transport and Housing Bureau said.
The rules, which will take effect at the end of November, are aimed at improving transparency in the retail property market. As flat prices have soared in recent months, there were concerns that misleading sales tactics used by property developers contributed to the price surge.
In particular, in one instance, local property developer Henderson Land said in October that it had set a global record by selling an apartment for HK$88,000 per square foot. The unit in question was advertised as being located on the 68th floor, when the building was only 46 floors high. It is common practice for developers to skip floors which had numbers that were considered inauspicious in Chinese culture. In this case, Henderson omitted the floor numbers 13, 14, 24, 34, 40 to 59, 62, 64, 65, 67, 69, and 87.
While it is also common practice also for developers to include space set aside for common use in calculating how big an apartment being sold is, the revised regime will require developers to spell out the exact usable square footage of the uncompleted flats being sold. According to Bloomberg, typically as much as 20 to 30 per cent of new residential buildings are set aside for common use.
The new rules will also require developers to make floor numbering information in a more prominent manner in sales brochures, to ensure that buyers are not misled.
“The government is deeply concerned about some recent sales tactics in the first-hand uncompleted residential property market and confusing market information. The new measures will enhance the transparency of transactions of uncompleted first-hand properties and the clarity of property information,” a spokesperson for the Hong Kong government’s policy-setting Transport and Housing Bureau said.
Middle managements engaging in more fraud
A recent survey has found that not only are firms falling prey more often to fraud as a result of the recession, but the profile of the typical fraudster has evolved as well.
Surveying more than 3,000 businesses in 54 countries, the poll by accounting firm PricewaterhouseCoopers and business school INSEAD found one in three companies has suffered as victims of economic crime in the last 12 months.
It also found that of companies which reported fraud, 53 per cent said it came from inside the organisation, and 44 per cent said it was external. Internal fraud was highest in the aerospace, chemicals, manufacturing, and pharmaceuticals industries, while external fraud was common in insurance, technology, communications, and financial services sectors.
Particularly alarming was the increasing likelihood that middle management was complicit in fraud. It accounted for 42 per cent of all internal fraud reported by respondents, compared to 26 per cent in 2007, the last time the survey was carried out. On the other hand, the number of fraud reported to be committed by senior management has declined from 26 per cent in 2007, to 14 per cent.
For companies which reported fraud from external sources, 45 per cent said it was committed by customers, and 20 per cent said it was either agents or intermediaries.
The survey also found 43 per cent of respondents said the incidences of fraud had increased during the last 12 months, and 42 per cent said that the cost of fraud had gone up compared to a year ago.
The greatest risk came from asset misappropriation or theft, with 67 per cent of respondents who had suffered from economic crime citing fallen victim to it in the last 12 months. This was followed by financial statement fraud (38 per cent), and bribery and corruption (27 per cent).
On top of monetary loss, respondents also said fraud caused “collateral damage”, the top four of which were damage to employee morale (32 per cent), business relationships (23 per cent), reputation and brand (19 per cent), and relationships with regulators (16 per cent).
“In these tough times, the temptation to inflate results or take part in other forms of financial statement fraud may overcome ethical values. In an economic downturn, financial targets are more difficult to achieve, individuals may feel pressured, and their personal financial position may be threatened by reductions in pay or layoffs.
Countries that reported the highest incidents of fraud were Russia (71 per cent), South Africa (62 per cent), and Kenya (40 per cent). At low end of the scale were Turkey (15 per cent), Hong Kong (13 per cent), and Japan (10 per cent). The industries most affected by fraud were communications (46 per cent), hospitality and leisure (42 per cent), and financial services (44 per cent).
Surveying more than 3,000 businesses in 54 countries, the poll by accounting firm PricewaterhouseCoopers and business school INSEAD found one in three companies has suffered as victims of economic crime in the last 12 months.
It also found that of companies which reported fraud, 53 per cent said it came from inside the organisation, and 44 per cent said it was external. Internal fraud was highest in the aerospace, chemicals, manufacturing, and pharmaceuticals industries, while external fraud was common in insurance, technology, communications, and financial services sectors.
Particularly alarming was the increasing likelihood that middle management was complicit in fraud. It accounted for 42 per cent of all internal fraud reported by respondents, compared to 26 per cent in 2007, the last time the survey was carried out. On the other hand, the number of fraud reported to be committed by senior management has declined from 26 per cent in 2007, to 14 per cent.
For companies which reported fraud from external sources, 45 per cent said it was committed by customers, and 20 per cent said it was either agents or intermediaries.
The survey also found 43 per cent of respondents said the incidences of fraud had increased during the last 12 months, and 42 per cent said that the cost of fraud had gone up compared to a year ago.
The greatest risk came from asset misappropriation or theft, with 67 per cent of respondents who had suffered from economic crime citing fallen victim to it in the last 12 months. This was followed by financial statement fraud (38 per cent), and bribery and corruption (27 per cent).
On top of monetary loss, respondents also said fraud caused “collateral damage”, the top four of which were damage to employee morale (32 per cent), business relationships (23 per cent), reputation and brand (19 per cent), and relationships with regulators (16 per cent).
“In these tough times, the temptation to inflate results or take part in other forms of financial statement fraud may overcome ethical values. In an economic downturn, financial targets are more difficult to achieve, individuals may feel pressured, and their personal financial position may be threatened by reductions in pay or layoffs.
Countries that reported the highest incidents of fraud were Russia (71 per cent), South Africa (62 per cent), and Kenya (40 per cent). At low end of the scale were Turkey (15 per cent), Hong Kong (13 per cent), and Japan (10 per cent). The industries most affected by fraud were communications (46 per cent), hospitality and leisure (42 per cent), and financial services (44 per cent).
Sunday 15 November 2009
Four guilty in Hong Kong’s first stock manipulation case
Four people have been found guilty for inflating the liquidity in shares of a listed company in Hong Kong, in what the city’s stock market regulator has described as its first and largest ever market manipulation case.
The four, Chan Chin-yuen, Elaine Au Yeung Man-chun, Chan Chin-tat, and Chiu Siu-fung, conspired to create a false or misleading impression with respect to shares in Hong Kong Stock Exchange-listed Asia Standard Hotel Group, according to the city’s Securities and Futures Commission (SFC).
Between August and September 2005, three of the four traded in shares of the company between themselves, with the final member – Chan Chin-yuen – funding the trades conducted by his co-conspirators. This made the hotel investment and management company’s shares seem more liquidity, raised their price by 78 per cent, and boosted the company’s market capitalisation by HK$4 billion, the commission said.
The commission said the actions by the four during the period in question made up for more than half of all the trades – totalling HK$190 million – that were made in the shares of the company.
“Market manipulation is a serious crime of dishonesty designed to defraud the investing public for illegal profit. In this case, we allege the market was given an entirely false picture of the market for shares in this company, giving a falsified value to the tune of HK$4 billion. Criminals who think they can take advantage of innocent investors by falsifying the market are on notice by this result that the SFC will fight them all the way,” said Mark Steward, the commission’s executive director of enforcement.
Sentencing will carried out on November 26. The defendants could now face up to 10 years in jail and a HK$10 million fine. The four were released on bail of HK$200,000 each, the regulator said.
In addition, Chan Chin-tat, and Chui have also been charged with failing to answer questions, as required under an SFC investigation, without a reasonable excuse. They will be tried separately for these charges, and trial is set to begin on December 17.
The four, Chan Chin-yuen, Elaine Au Yeung Man-chun, Chan Chin-tat, and Chiu Siu-fung, conspired to create a false or misleading impression with respect to shares in Hong Kong Stock Exchange-listed Asia Standard Hotel Group, according to the city’s Securities and Futures Commission (SFC).
Between August and September 2005, three of the four traded in shares of the company between themselves, with the final member – Chan Chin-yuen – funding the trades conducted by his co-conspirators. This made the hotel investment and management company’s shares seem more liquidity, raised their price by 78 per cent, and boosted the company’s market capitalisation by HK$4 billion, the commission said.
The commission said the actions by the four during the period in question made up for more than half of all the trades – totalling HK$190 million – that were made in the shares of the company.
“Market manipulation is a serious crime of dishonesty designed to defraud the investing public for illegal profit. In this case, we allege the market was given an entirely false picture of the market for shares in this company, giving a falsified value to the tune of HK$4 billion. Criminals who think they can take advantage of innocent investors by falsifying the market are on notice by this result that the SFC will fight them all the way,” said Mark Steward, the commission’s executive director of enforcement.
Sentencing will carried out on November 26. The defendants could now face up to 10 years in jail and a HK$10 million fine. The four were released on bail of HK$200,000 each, the regulator said.
In addition, Chan Chin-tat, and Chui have also been charged with failing to answer questions, as required under an SFC investigation, without a reasonable excuse. They will be tried separately for these charges, and trial is set to begin on December 17.
Blackwater allegedly bribed Iraqi officials US$1m
US private security firm Blackwater Worldwide authorised bribes of up to US$1 million to Iraqi officials to silence criticism after an incident in 2007 in which the company’s guards shot and killed 17 Iraqi civilians in Bagdad, according to a report which appeared in the New York Times.
The allegations were based on interviews conducted by the newspaper with four former Blackwater executives. They allege that the payments, which are illegal under US anti-bribery laws, were approved by then-president Gary Jackson in December 2007. The money was sent from the company’s operations hub in Amman, Jordan to a manager in Iraq. However, they could not confirm whether the funds were then distributed to Iraqi officials. What is known is that officials in Iraq’s Interior Ministry were the intended recipients.
In September 2007, Blackwater guards, travelling in a convoy, opened fire on Iraqi civilians in a section of Bagdad known as Nisour Square. They sprayed automatic weapons fire and launched grenades into civilian buildings. A total 17 Iraqi civilians were killed and many more were wounded. Despite an international outcry over the incident, Blackwater was not immediately stripped of its operating licence in Iraq due to pressure from the US State Department. The company continued to operate in Iraq until earlier this year, when its licence renewal was rejected.
Speaking on condition of anonymity, the four former Blackwater executives said they had either took part in the talks on payments, or had been told by other company officials of the plans. They also described a culture of questionable conduct in the company, where officials were contemptuous of government regulations, and that some top company executives pushed the boundaries of legality to keep lucrative contracts to protect US diplomatic personnel in war-torn Iraq, as well as in Afghanistan.
A spokesperson for the security firm, which has been renamed Xe Services, said the allegations were baseless, and declined to comment on former employees. Mr Jackson, who resigned as the company’s president earlier this year, said: “I don’t care what you write.”
A US State Department official said they were not aware of any illicit payments made to Iraqi officials.
According to a report by the BBC news service, Iraqi officials have ordered an investigations in whether the payments had been made.
The allegations were based on interviews conducted by the newspaper with four former Blackwater executives. They allege that the payments, which are illegal under US anti-bribery laws, were approved by then-president Gary Jackson in December 2007. The money was sent from the company’s operations hub in Amman, Jordan to a manager in Iraq. However, they could not confirm whether the funds were then distributed to Iraqi officials. What is known is that officials in Iraq’s Interior Ministry were the intended recipients.
In September 2007, Blackwater guards, travelling in a convoy, opened fire on Iraqi civilians in a section of Bagdad known as Nisour Square. They sprayed automatic weapons fire and launched grenades into civilian buildings. A total 17 Iraqi civilians were killed and many more were wounded. Despite an international outcry over the incident, Blackwater was not immediately stripped of its operating licence in Iraq due to pressure from the US State Department. The company continued to operate in Iraq until earlier this year, when its licence renewal was rejected.
Speaking on condition of anonymity, the four former Blackwater executives said they had either took part in the talks on payments, or had been told by other company officials of the plans. They also described a culture of questionable conduct in the company, where officials were contemptuous of government regulations, and that some top company executives pushed the boundaries of legality to keep lucrative contracts to protect US diplomatic personnel in war-torn Iraq, as well as in Afghanistan.
A spokesperson for the security firm, which has been renamed Xe Services, said the allegations were baseless, and declined to comment on former employees. Mr Jackson, who resigned as the company’s president earlier this year, said: “I don’t care what you write.”
A US State Department official said they were not aware of any illicit payments made to Iraqi officials.
According to a report by the BBC news service, Iraqi officials have ordered an investigations in whether the payments had been made.
Sunday 8 November 2009
Hedge fund insider probe widens
A further 14 people have been charged in the widening of what is believed to be the biggest insider trading case involving hedge funds. The new indictments bring the total number of people officially charged in the insider trading case, first brought to light with the arrest of Raj Rajaratnam, to 20.
At the centre of a new insider trading ring is Zvi Goffer, 32, a former trader at the Galleon Group and Schottenfield Group - two hedge funds. According to prosecutors, Goffer was referred to by others in the insider trading ring as “Octopussy” a reference to the James Bond movie, because of the many sources of inside information he had access to. Also charged Arthur Cutillo, 33, an attorney at Ropes & Gray who supplied tips on deals that the law firm was advising on, and Jason Goldfarb, 31, a Brooklyn-based lawyer who acted as a go-between for Goffer and Cutillo.
The others arrested were Craig Drimal, 53, a Galleon employee; Zvi Goffer’s brother Emanuel Goffer, 31; Ali Hariri, a vice president at Atheros Communications, David Plate, 34, an employee at Incremental Capital; and Michael Kimelman, 38. Deep Shah, a former analyst at Moody’s investor service, was still at large, prosecutors said. They were charged with conspiracy and fraud, and were released on bonds of between US$100,000 to US$500,000.
Another five people, including Roomy Khan, a former Intel employee and who is a key witness in the Rajaratnam case, have already pleaded guilty.
According to a 24-page criminal complaint filed in a New York federal court, prosecutors say that the group used non-public information to trade in shares of Avaya, a privately held telecommunications communications company. They also traded in shares of network equipment provider 3Com, retail solution provider Alliance Data Systems, and drug maker Axcan Pharma. The new charges bring the total illicit profit gained by the group from trading on inside information to US$53 million, according to the Bloomberg report.
Prosecutors also said that those charged behaved like common criminals, and took a page from the way drug dealers operated. In one instance, they said that the conspirators used mobile phones to communicate sensitive information related to a bid by private equity firm Bain Capital to purchase 3Com. After the deal was announced, they said that both the phones and SIM cards inside were destroyed to destroy an records of their misconduct.
In announcing the new charges, Manhattan US attorney Preet Bharara said that the current probe was focused on hedge funds, and how they obtained their information. He added that more arrests may be coming.
The US Securities and Exchange Commission has also filed a civil complaint against those arrested.
At the centre of a new insider trading ring is Zvi Goffer, 32, a former trader at the Galleon Group and Schottenfield Group - two hedge funds. According to prosecutors, Goffer was referred to by others in the insider trading ring as “Octopussy” a reference to the James Bond movie, because of the many sources of inside information he had access to. Also charged Arthur Cutillo, 33, an attorney at Ropes & Gray who supplied tips on deals that the law firm was advising on, and Jason Goldfarb, 31, a Brooklyn-based lawyer who acted as a go-between for Goffer and Cutillo.
The others arrested were Craig Drimal, 53, a Galleon employee; Zvi Goffer’s brother Emanuel Goffer, 31; Ali Hariri, a vice president at Atheros Communications, David Plate, 34, an employee at Incremental Capital; and Michael Kimelman, 38. Deep Shah, a former analyst at Moody’s investor service, was still at large, prosecutors said. They were charged with conspiracy and fraud, and were released on bonds of between US$100,000 to US$500,000.
Another five people, including Roomy Khan, a former Intel employee and who is a key witness in the Rajaratnam case, have already pleaded guilty.
According to a 24-page criminal complaint filed in a New York federal court, prosecutors say that the group used non-public information to trade in shares of Avaya, a privately held telecommunications communications company. They also traded in shares of network equipment provider 3Com, retail solution provider Alliance Data Systems, and drug maker Axcan Pharma. The new charges bring the total illicit profit gained by the group from trading on inside information to US$53 million, according to the Bloomberg report.
Prosecutors also said that those charged behaved like common criminals, and took a page from the way drug dealers operated. In one instance, they said that the conspirators used mobile phones to communicate sensitive information related to a bid by private equity firm Bain Capital to purchase 3Com. After the deal was announced, they said that both the phones and SIM cards inside were destroyed to destroy an records of their misconduct.
In announcing the new charges, Manhattan US attorney Preet Bharara said that the current probe was focused on hedge funds, and how they obtained their information. He added that more arrests may be coming.
The US Securities and Exchange Commission has also filed a civil complaint against those arrested.
UBS fined for letting employees gamble with client cash
Global financial services group UBS has been fined US$13.2 million by the UK’s top financial watchdog, because the bank failed to put in place safeguards to prevent its employees from using client funds to made unauthorised trades.
Bloomberg has reported that the Financial Services Authority has fined UBS after the Swiss-based lender failed to prevent four employees in its wealth management department in London from using client money to make as many as 50 bets a day on currency and commodity markets. The trades, which were made without the authorisation of the clients to whom the funds belonged to, occurred between January 2006 to December 2007, the report said.
In fining UBS, the FSA has said it applied a 20 per cent discount on the original penalty of US$16.5 million because the bank had settled the investigation early.
The watchdog said that the bank’s bonus policies contributed to the violations because it created a conflict of interest between an employee’s personal interests, and its compliance obligations. According to the UK financial watchdog, investigators found that the four employees, one of which headed a desk in bank’s wealth management teams, would make the trades without informing clients during this period.
If there were any profits or loss from the trade, this would then be evenly allocated to the accounts from which the money came from. If there were shortfalls in some accounts, other customers would be persuaded to lend so that it can be concealed, the FSA said.
“These employees were able to take advantage of UBS’s inadequate systems and controls, giving them free rein to make unauthorised trades with customer money that they were then able to conceal,” said the FSA’s enforcement director Margaret Cole.
The FSA has not said whether it would bring penalties against the individuals who made the trades, but added that the employees concerned no longer worked at the bank.
“UBS deeply regrets this incident and having fully cooperated with the FSA’s investigation, we are now pleased that this matter has been settled so that we can move forward,” a spokesperson for UBS said.
Bloomberg has reported that the Financial Services Authority has fined UBS after the Swiss-based lender failed to prevent four employees in its wealth management department in London from using client money to make as many as 50 bets a day on currency and commodity markets. The trades, which were made without the authorisation of the clients to whom the funds belonged to, occurred between January 2006 to December 2007, the report said.
In fining UBS, the FSA has said it applied a 20 per cent discount on the original penalty of US$16.5 million because the bank had settled the investigation early.
The watchdog said that the bank’s bonus policies contributed to the violations because it created a conflict of interest between an employee’s personal interests, and its compliance obligations. According to the UK financial watchdog, investigators found that the four employees, one of which headed a desk in bank’s wealth management teams, would make the trades without informing clients during this period.
If there were any profits or loss from the trade, this would then be evenly allocated to the accounts from which the money came from. If there were shortfalls in some accounts, other customers would be persuaded to lend so that it can be concealed, the FSA said.
“These employees were able to take advantage of UBS’s inadequate systems and controls, giving them free rein to make unauthorised trades with customer money that they were then able to conceal,” said the FSA’s enforcement director Margaret Cole.
The FSA has not said whether it would bring penalties against the individuals who made the trades, but added that the employees concerned no longer worked at the bank.
“UBS deeply regrets this incident and having fully cooperated with the FSA’s investigation, we are now pleased that this matter has been settled so that we can move forward,” a spokesperson for UBS said.
Sunday 1 November 2009
Big three Japanese electronics makers probed
The US Department of Justice (DoJ) has subpoenaed Japanese technology giants Sony, Hitachi, and Toshiba in an investigation into potential anti-trust violations in the optical disk drive business.
Officials from the three firms said they had received the subpoenas seeking information about each of their company’s optical disk drive business in the US, according to the reports which appeared in the Wall Street Journal.
The DoJ has yet to make public the details of the subpoenas sent to the three companies, but the report quoted a source close to the department as saying that it concerned a criminal anti-trust probe in the market for optical disk drives. The department was investigating whether price-fixing, bid-rigging, and allocation of markets had occurred.
Sony has said that it believes that the DoJ is conducting an investigation on competition in the optical disk drive market, which include products such as DVD and Blu-ray drives used by consumers to view home movies. Sony has declined to comment on the precise nature or the scope of the DoJ’s inquiry.
Neither Hitachi nor Toshiba has disclosed the contents of the subpoena. All three companies have said their US business units will cooperate fully with the inquiry. The DoJ has declined to comment.
Officials from the three firms said they had received the subpoenas seeking information about each of their company’s optical disk drive business in the US, according to the reports which appeared in the Wall Street Journal.
The DoJ has yet to make public the details of the subpoenas sent to the three companies, but the report quoted a source close to the department as saying that it concerned a criminal anti-trust probe in the market for optical disk drives. The department was investigating whether price-fixing, bid-rigging, and allocation of markets had occurred.
Sony has said that it believes that the DoJ is conducting an investigation on competition in the optical disk drive market, which include products such as DVD and Blu-ray drives used by consumers to view home movies. Sony has declined to comment on the precise nature or the scope of the DoJ’s inquiry.
Neither Hitachi nor Toshiba has disclosed the contents of the subpoena. All three companies have said their US business units will cooperate fully with the inquiry. The DoJ has declined to comment.
China cracks down on invoice fraud
Police in China have arrested more than 5,000 people in a crackdown against invoice fraud, the official news agency Xinhua reported.
In a national campaign that lasted for 10 months, police shut down 1,045 sites which were producing fake business invoices. They also arrested 5,134 people and seized more than 80 million fake invoices, according to Wu Heping, a spokesman for China’s Ministry of Public Security. An additional 540 people were also arrested and charged with tax evasion and fraud by submitting fake invoices to tax authorities, Mr Wu said.
In China, it is common for people and companies to purchase such fake invoices off vendors. They are then passed off as real expenses when submitting tax return to authorities, thereby lowering tax liabilities. Mr Wu also said that use of fake invoices was also linked to other illegal activities, such as smuggling, money laundering, and other forms of corruption.
Mr Wu said the problem was especially prevalent in Guangdong Province, where more than 35 per cent of the fake invoices were seized.
He also said that fake invoices were most commonly used in the catering and retail industries, accounting for 51 per cent of the number of fake invoices confiscated in the crackdown. However, he added that it was also a problem in the construction and transportation sectors, because the sums involved led to bigger tax losses.
More than 18 per cent of the invoices were sold to local government and government sponsored bodies, Mr Wu added.
In a national campaign that lasted for 10 months, police shut down 1,045 sites which were producing fake business invoices. They also arrested 5,134 people and seized more than 80 million fake invoices, according to Wu Heping, a spokesman for China’s Ministry of Public Security. An additional 540 people were also arrested and charged with tax evasion and fraud by submitting fake invoices to tax authorities, Mr Wu said.
In China, it is common for people and companies to purchase such fake invoices off vendors. They are then passed off as real expenses when submitting tax return to authorities, thereby lowering tax liabilities. Mr Wu also said that use of fake invoices was also linked to other illegal activities, such as smuggling, money laundering, and other forms of corruption.
Mr Wu said the problem was especially prevalent in Guangdong Province, where more than 35 per cent of the fake invoices were seized.
He also said that fake invoices were most commonly used in the catering and retail industries, accounting for 51 per cent of the number of fake invoices confiscated in the crackdown. However, he added that it was also a problem in the construction and transportation sectors, because the sums involved led to bigger tax losses.
More than 18 per cent of the invoices were sold to local government and government sponsored bodies, Mr Wu added.
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