Whistleblower Insider

Whistleblower Insider is written by the Constantine Cannon law firm team of experienced qui tam and whistleblower lawyers. It is updated daily to provide the latest whistleblower and fraud news and developments.
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January 20, 2017

In Their Own Words — Norberg

— “This is the second case this week against a company that took steps to impede former employees from sharing information with the SEC.  Companies simply cannot disrupt the lines of communications between the SEC and potential whistleblowers.” 

Jane Norberg, Chief of the SEC’s Office of the Whistleblower, commenting on the SEC’s finding that Seattle-based HomeStreet, Inc. took steps to impede whistleblowers from speaking with the SEC, including requiring former employees to sign severance agreements waiving potential whistleblower awards or risk losing their severance payments and other post-employment benefits.

January 20, 2017

Fraudster Of The Week — Gambian “President” Yahya Jammeh

By the C|C Whistleblower Lawyer Team

During last month’s elections in Gambia, incumbent President Yahya Jammeh was defeated by challenger Adama Barrow.  Nonetheless, Jammeh has refused to step down, forcing President-elect Barrow to hold his inauguration yesterday at the Gambian embassy in Senegal.  It remains unclear whether Jammeh will succeed in cheating the Gambian people out of their democratically-chosen leader.

Jammeh seized power in a 1994 coup and once stated he had a mandate to rule for a billion years.  An erratic leader, Jammeh has claimed the ability to cure AIDS with an herbal concoction, declared that gay people should be beheaded, and imprisoned his political opponents.  Barrow, in contrast, is a soft-spoken real estate agent who ran for president only after Jammeh jailed other opposition party members.   click here for more »

January 20, 2017

Financial Company HomeStreet Charged With Improper Accounting and Impeding Whistleblowers

By the C|C Whistleblower Lawyer Team

The SEC announced that Seattle-based financial services company HomeStreet Inc. has agreed to pay a $500,000 penalty to settle charges that it conducted improper hedge accounting and later took steps to prevent potential whistleblowers in violation of SEC Rule 21F-17, which prohibits taking actions to impede communication with the SEC.

According to the SEC’s order, HomeStreet originated approximately 20 fixed rate commercial loans and entered into interest rate swaps to hedge the exposure.  The company elected to designate the loans and the swaps in fair value hedging relationships, which can reduce income statement volatility that might exist absent hedge accounting treatment.  Companies are required to periodically assess the hedging relationship and must discontinue the use of hedge accounting if the effectiveness ratio falls outside a certain range.  The SEC’s order finds that in certain instances from 2011 to 2014, HomeStreet’s treasurer Darrell van Amen made unsupported adjustments in HomeStreet’s hedge effectiveness testing to ensure the company could continue using the favorable accounting treatment.  The phony test results were provided to HomeStreet’s accounting department, which resulted in inaccurate accounting entries. click here for more »

January 20, 2017

Whistleblower News From The Inside — January 20, 2017

By the C|C Whistleblower Lawyer Team

Las Vegas Sands agrees to pay nearly $7M to resolve FCPA charges — Las Vegas Sands Corp. agreed to pay a $6.96 million criminal penalty to resolve the government’s investigation into violations of the Foreign Corrupt Practices Act in connection with business transactions in the People’s Republic of China and Macao.  According to admissions by Sands, certain Sands executives knowingly and willfully failed to implement a system of internal accounting controls to adequately ensure the legitimacy of payments to a business consultant who assisted Sands in promoting its brand in Macao and the PRC, and to prevent the false recording of those payments in its books and records.  DOJ

Western Union will pay $586M for aiding in wire fraud — The global money service company Western Union has admitted it helped people commit wire fraud, among other criminal violations, and agreed to pay $586 million. The settlement is the result of an investigation that found Western Union was “willfully failing to maintain an effective anti-money laundering program.”   NPR 

Whistleblower wins 13-year campaign against HSBC — A lone whistleblower has won a 13-year “David and Goliath battle” against HSBC and Britain’s chief financial watchdog, resulting in a multimillion-pound compensation payout to thousands of people. The Financial Conduct Authority said HSBC had voluntarily agreed to set up a £4m compensation scheme for people who had lost out financially as a result of having to pay “unreasonable” debt collection charges imposed by two subsidiaries of the bank.  The Guardian

January 20, 2017

DOJ Catch of The Week — Deutsche Bank And Credit Suisse

By the C|C Whistleblower Lawyer Team

This week’s Department of Justice “Catch of the Week” is shared between Deutsche Bank and Credit Suisse.  On Tuesday, the two European-based banking giants agreed to pay more than $12 billion between them to resolve charges they misled investors in the packaging, securitization, marketing, sale and issuance of residential mortgage-backed securities (RMBS) in the years leading up to the Great Recession.  The $7.2 billion Deutsche Bank agreed to pay is the largest RMBS resolution in what has been a string of multi-billion dollar settlements.  Credit Suisse will pay $5.28 billion in its settlement.  See DOJ Press Releases here and here. click here for more »

January 19, 2017

Arrest Warrant Denied for Samsung Heir in South Korean Bribery Scandal

By the C|C Whistleblower Lawyer Team

A South Korean court denied an arrest warrant for Samsung heir Jay Y. Lee, ruling there was currently insufficient evidence to detain Lee. The attempt to arrest Lee is the latest development in a months-long corruption scandal involving a dressage horse, a Rasputin-reminiscent cult leader, million-protester marches, and South Korean president Park Geun-hye’s eventual impeachment.

The scandal recently led authorities to issue an arrest warrant for Samsung electronics vice chairman Lee. Mr. Lee is the only son of Samsung’s incapacitated chairman, Lee Kun-hee, and is considered the de facto head of Samsung as a whole. The arrest warrant related to Lee allegedly directing Samsung company money to President Park’s secret confidant in hopes of currying favor with the administration. Samsung revenues account for 17% of South Korea’s GDP, and Samsung electronics accounts for 20% of all South Korean exports.

Prosecutors alleged Lee directed $36 million in such payments to President Park’s friend, Choi Soon-sil, and two charitable foundations she controlled, in return for government support in a father-to-son transfer of ownership in Samsung. Special prosecutor Park Young-soo said Lee not only paid bribes on behalf of Samsung, but also embezzled some of the bribe money from his companies. Police questioned Lee last week, and he issued a public apology for not putting Samsung’s best face forward. The company, however, has denied the allegations.

“We have enough evidence to establish President Park and Choi Soon-sil as co-conspirators sharing profits” in the bribery scheme, Lee Kyu-chul, a spokesman of the special prosecutor, said during a news briefing earlier this week. Despite the court’s denial, the bribery investigation into Samsung, and South Korea’s attempts to fight corruption within family-controlled conglomerates known as chaebol, continue.

January 19, 2017

Whistleblower News From The Inside — January 19, 2017

By the C|C Whistleblower Lawyer Team

Medical device company settles FCPA charges for $14M – Texas-based medical device company Orthofix agreed to pay $14M to the SEC to settle charges it paid doctors at Brazilian government-owned hospitals in exchange for increased sales of its medical devices. SEC

Whistleblower suit alleges widespread problems at bank run by Treasury nominee Mnuchin – Whistleblowers connected to OneWest, the California mortgage lender once run by Treasury Secretary nominee Steven T. Mnuchin, accused the bank in federal court of mishandling over a thousand loan modification applications during Mnuchin’s tenure; the mishandled loans may have cost many borrowers their homes. The Washington Post

Ad company settles accounting fraud violations for $1.5M – Advertising company MDC Partners settled SEC allegations it misused “non-GAAP” financial measures to artificially boost organic revenue growth for 2012 and 2013. MDC also allegedly failed to reveal perks it provided to its former CEO, include usage of a private-jet, plastic surgery, and pet care. The Wall Street Journal

January 18, 2017

Ninth Circuit Applies Escobar, Dismisses Whistleblower Suit against Government Contractor

By Hallie Noecker

Last Thursday, the Ninth Circuit issued United States ex rel. Kelly v. Serco, Inc., the latest in a series of False Claims Act decisions—including in the First, Seventh, and Eighth Circuits—wrestling with the Supreme Court’s holding on materiality in Universal Health Services, Inc. v. United States ex rel. Escobar. Citing Escobar’s “rigorous” and “demanding” materiality standard, the Ninth Circuit affirmed the district court’s summary judgment dismissal of whistleblower Darryn Kelly’s FCA action against government defense contractor Serco, Inc.

Kelly, a former Serco, Inc. employee, alleged Serco submitted false claims for technology and project management services it provided pursuant to a contract with the U.S. Navy’s Space and Naval Warfare Systems Command. Serco’s work involved a project to upgrade wireless communications systems along the U.S.-Mexico border. Kelly said Serco failed to follow required billing processes, instead tracking costs manually using a single charge code, and falsifying monthly costs reports to match budgeted costs.

In analyzing whether Kelly’s claims, premised on implied certification liability, could survive as a matter of law, the court looked to Escobar, which concluded “implied certification can be a basis for liability at least where two conditions are satisfied:  first, the claim does not merely request payment, but also makes specific representations about the goods or services provided; and second, the defendant’s failure to disclose noncompliance with material … requirements makes those representations misleading half-truths.” With respect to the first condition, the Ninth Circuit found no evidence that Serco’s claims made any specific representations about its performance, nor did it find evidence of false statements.

As for the second condition, the panel found Kelly had not satisfied Escobar’s materiality requirement. In so holding, it attached particular importance to the government’s knowledge, quoting Escobar’s guidance that, “if the Government pays a particular claim in full despite its actual knowledge that certain requirements were violated, that is very strong evidence that those requirements are not material.” Thus the court’s materiality analysis focused on the fact that the government accepted Serco’s costs reports knowing Serco utilized a single task code and nonetheless paid Serco for its work.

The relative weight to afford government knowledge may become a battleground for post-Escobar FCA litigants. For instance, in reaffirming Escobar’s dismissal on remand, while the First Circuit pointed to the government’s knowledge of defendant’s regulatory noncompliance, it emphasized that this was not itself dispositive. And here, although the Serco panel appeared focused on government knowledge, it also noted in its materiality analysis that the government did not find the more detailed cost reports useful, had actually agreed to allow Serco to submit its manually tracked reports, and eventually eliminated the requirement at issue. Thus, it’s unclear whether the Ninth Circuit found government knowledge dispositive as to materiality, or, as in the First Circuit, merely a factor in a holistic analysis.

January 18, 2017

Question of the Week: Are You Excited to Try Silicon Valley’s “Impossible” Burger?

By the C|C Whistleblower Lawyer Team

Can anyone really put a price tag on the perfect veggie burger? Well, if the venture-capital funding received by Impossible Foods is any indication, the answer is a resounding yes. According to a 2016 profile in the Wall Street Journal, Impossible Foods has received over $180 million during four rounds of venture-capital funding, making it one of the best-funded food startups of the decade.

With a star-studded roster of backers, including Bill Gates, the Impossible Burger is no stranger to press or accolades; it has been featured in TechCrunch, Serious Eats, CNBC, and countless other publications. And if a recent New York Times taste test is any indication, the hype surrounding the plant-based burger does not appear to subside any time soon. But while much has been written about the deliciousness of the Impossible Burger, the true motivations behind its creation may signify much larger ambitions:

The way the world produces meat today is taking an enormous toll on our planet. According to livestock researchers, animal agriculture uses 30% of all land, over 25% of all freshwater on Earth, and creates as much greenhouse gas emissions as all of the world’s cars, trucks, trains, ships, and airplanes combined.

We make the Impossible Burger entirely from plants, without the destructive impact of livestock, so that you, your children, and your grandchildren’s children will always be able to enjoy a good ol’ fashioned burger.

Time will tell whether the Impossible Burger is truly Silicon Valley’s “answer to the Big Mac,” but its environmental returns are already quite impressive. When compared to cattle, the Impossible Burger “uses 95% less land, 74% less water, and creates 87% less greenhouse gas emissions.” And it also happens to be “100% free of hormones, antibiotics, and artificial ingredients.”

What do you think?  Are you excited to try Silicon Valley’s “Impossible” burger??

Are You Excited to Try Silicon Valley’s “Impossible” Burger? Tell us what you think and vote below!
    January 18, 2017

    In Their Own Words — Hollander and Ward

    “Ms. Manning is the longest-serving whistleblower in the history of the United States. Her 35-year sentence for disclosing information that served the public interest and never caused harm to the United States was always excessive, and we’re delighted that justice is being served in the form of this commutation.”

    — Joint statement of Nancy Hollander and Vince Ward, appellate attorneys for Chelsea Manning.