Archive

October 21, 2022

Mattel Inc. has agreed to pay $3.5 million to settle charges of making material misstatements in its third and fourth quarter 2017 financial statements.  The toy manufacturer was found to have understated its third quarter tax valuation allowance by $109 million and overstated its fourth quarter tax expense by the same amount, resulting in a net loss and net loss per share that was understated by 15% and overstated by 63% respectively.  In connection with this action, the SEC launched an investigation into a former audit partner at Pricewaterhouse Coopers LLP, Joshua Abrahams, for the audit failure.  SEC

October 18, 2022

Building materials manufacturer Lafarge S.A., together with its Syrian subsidiary, pleaded guilty to conspiring to provide material support and resources to U.S.-designated foreign terrorist organizations, paying penalties, fines, and forfeitures totaling $778 million.  According to the plea, during the civil war in Syria, Lafarge negotiated to pay armed factions to ensure continued operation of a cement plant it operated in Syria.  Defendants effectively entered into a revenue-sharing agreement with ISIS, paying the terrorist organization based on the amount of cement that defendants were able to sell.  DOJ; USAO EDNY

September 29, 2022

The Chinese affiliate of accounting firm Deloitte, known as Deloitte Touche Tohmatsu Certified Public Accountants LLP, has agreed to pay a $20 million penalty and submit to extensive remedial measures for its failures to comply with fundamental U.S. auditing requirements in audits of companies listed on U.S. exchanges.  According to multiple SEC audits spanning multiple years, instead of properly reviewing client financial statements and internal controls, Deloitte-China had a practice of asking clients to select their own samples for testing and prepare their own audit documentation.  SEC

September 29, 2022

Barclays PLC and Barclays Bank PLC has agreed to pay $361 million following charges that they offered and sold an unprecedented $17.7 million in unregistered securities without setting up internal controls to track those transactions in real time.  The firms eventually self-reported to regulators and commenced a rescission offer.  SEC

September 28, 2022

Alabama-based Regions Bank, which operates thousands of branches and ATMs across 16 states, has been ordered to pay $50 million to the CFPB’s victims relief fund and refund at least $141 million to customers, after the CFPB found it charged surprise overdraft fees to customers told they had sufficient funds.  Leadership was also found to have known about the illegal practice long before it ended in 2021, but chose to wait until they could make up the revenue, which made up 17.7% of their non-interest income, in other ways.  CFPB

September 27, 2022

Fifteen broker-dealers and one affiliated investment advisor has been ordered to pay combined penalties of more than $1.1 billion following SEC charges of violating the recordkeeping provision of securities laws.  Barclays, Bank of America (including Merrill Lynch, Pierce, Fenner & Smith), Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley, and UBS each paid $125 million, while Jefferies and Nomura each paid $50 million and Cantor Fitzgerald paid $10 million, to settle charges of failing to prevent or preserve communications their employees made via messaging apps on their personal devices.  SEC

September 27, 2022

Eleven financial institutions—including Bank of America, Barclays, Cantor Fitzgerald, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, Jefferies, Morgan Stanley, Nomura, and UBS—have been ordered to pay over $710 million total for violating CFTC recordkeeping and supervision requirements.  Each institution was found to have failed to prevent their employees from communicating both internally and externally about firm business using informal means, such as texts, Whatsapp, and Signal, and failed to preserve those communications.  The individual payments ranged from $100 million (Bank of America) to $6 million (Cantor Fitzgerald), with the majority of institutions ordered to pay $75 million.  CFTC

August 10, 2022

Angel Oak Capital Advisors and its portfolio manager Ashish Neghandi will pay $1.75 million and $75,000 respectively to settle charges of misleading investors via their $90 million securitization of home renovation loans. When delinquency rates on their “fix-and-flip” loans increased unexpectedly, rather than accelerating return payments to certain investors, as contractually required, defendants artificially reduced delinquency rates by diverting borrowers’ funds to pay down outstanding loan balances. SEC

July 28, 2022

U.S. Bank will pay a $37.5 million penalty and is required to make harmed customers whole for illegally accessing their credit reports and opening new, unauthorized accounts in these customers’ names. The bank’s actions violated the Consumer Financial Protection Act, the Fair Credit Reporting Act, the Truth in Lending Act, and the Truth in Savings Act. The bank pressured its employees to hit certain sales goals and implemented an incentive-compensation program that financially rewarded employees for selling bank products. As a result, the bank’s customers held unwanted accounts, had negative effects on their credit profiles, and lost control over their personally identifiable information—not to mention the time-consuming hassle of closing unauthorized accounts and resolving other consequences stemming from this practice.  CFPB

July 27, 2022

Three registered broker-dealers have been ordered to pay civil penalties based on SEC findings that each had deficiencies in its programs to prevent customer identity theft, in violation of the SEC’s Identity Theft Red Flags Rule, or Regulation S-ID.  J.P. Morgan Securities LLC will pay $1.2 million, UBS Financial Services Inc. will pay $925,000, and TradeStation Securities, Inc. will pay $425,000.  The SEC found that the broker-dealers’ cybersecurity policies failed to detect identity theft red flags in connection with customer accounts or to incorporate those red flags into their programs, and that the firms failed to adequately train staff, failed to review and update the policies as required, did not include appropriate board oversight, and failed to oversee service provider arrangements.  SEC