Government Enforcement Actions

May 12, 2023

HSBC Bank USA, N.A., HSBC Securities (USA) Inc., and HSBC Bank plc (collectively HSBC Affiliates) have been ordered to pay $30 million to the CFTC and $15 million to the SEC to settle charges of violating recordkeeping and supervisory requirements.  As part of the settlement, HSBC Affiliates admitted that it failed to stop employees from communicating internally and externally through unapproved mediums, and failed to preserve those messages as business records even if they pertained to the businesses.  CFTC; SEC

May 11, 2023

The Bank of Nova Scotia and Scotia Capital USA Inc. (collectively BNS Affiliates) have been ordered to pay $15 million to the CFTC and $7.5 million to the SEC to settle charges of violating recordkeeping and supervisory requirements.  BNS Affiliates admitted that its employees often communicated internally and externally through unapproved channels, and though some messages pertained to the businesses, failed to preserve those messages as records, and would be unable to produce them if requested.  CFTC; SEC

May 11, 2023

GCI Communications Corp. has agreed to pay $40 million to resolve a whistleblower case by its former Director of Business Administration, which alleged the company violated the False Claims Act by failing to comply with competitive bidding regulations for the FCC’s Rural Health Care Program.  In order to participate in the program—which awards $570 million in subsidies annually to bring critical telecommunications services to rural healthcare providers—GCI was subject to regulations governing the prices it could charge these providers.  However, GCI charged inflated rates to a provider in Alaska, thereby receiving higher subsidy payments than it was entitled to.  For launching a successful enforcement action, whistleblower Robert Taylor will receive a $6.4 million share of the settlement.  DOJ

May 11, 2023

Dutch medical supplier Koninklijke Philips N.V. has agreed to pay $62 million to settle charges that it violated the Foreign Corrupt Practices Act while selling medical equipment to hospitals in China.  A SEC investigation found that Philips’ Chinese subsidiaries gave distributors special pricing discounts that invited excessive funds to be used for improper payments, made such payments to curry favor toward their products, and manipulated the fair bidding process to fake compliance with Chinese laws.  The SEC had previously charged Philips for similar conduct in Poland between 1999 and 2007.  SEC

May 3, 2023

Zeus Lines Management S.A., chief engineer Roberto Cayabyab Penaflor, and Captain Ervin Mahigne Porquez pleaded guilty to environmental law violations, admitting to discharging oily bilge directly into the ocean while bypassing the onboard pollution prevention equipment and failing to report a hazardous condition on board the oil tanker Galissas. In violation of the Act to Prevent Pollution from Ships, Penaflor ordered the engine room crew to discharge 9,544 gallons of oily bilge directly into the ocean and instructed them to hide this information from the U.S. Coast Guard during inspections. Additionally, Porquez violated the Ports and Waterways Safety Act for failing to report that the Galissas’ inert gas system was inoperable, causing the vessel’s cargo tanks’ oxygen level to reach as dangerously high as 17%, where 8% is the highest allowed. Zeus will pay $2.25 million total, which includes a community service payment of $562,500 and a fine of $1,687,500.  DOJ, USAO RI

April 28, 2023

Joyce Agu, of Sugar Land, TX, will spend 60 months in prison and will pay over $3 million in restitution for conspiring to pay and receive kickbacks for services billed to Medicare. Agu paid others to certify that her clients were eligible for home health services, which they were not, but she used the certifications anyway as a basis to submit false claims to Medicare. TX AG

April 27, 2023

Adela Cruz, of Uvalde County, TX, will spend 27 months in prison and will pay $129,239 in restitution for willfully assisting clients in the preparation and filing of their IRS tax returns. Cruz inflated her clients’ refunds by claiming false education credits, dependents, and business profits or losses, and concealed her involvement by using fake taxpayer emails on the filings. DOJ

April 27, 2023

Gary James Harmon will spend 51 months in prison for stealing 712 bitcoin subject to forfeiture. Gary’s brother, Larry Dean Harmon, operated a cryptocurrency money laundering service on the darknet, with large amounts of said money coming from darknet markets. Knowing the government was attempting to seize Larry’s crypto, Gary transferred the $4.8 million in bitcoin to his own accounts, using Larry’s credentials to effectuate the transfer. DOJ, USAO DC

April 26, 2023

Brian Kolfage and Andrew Badolato will spend 51 months and 36 months in prison, respectively, for their participation in the “We Build The Wall” fundraising scheme. Kolfage, Badolato, and others raised over $25 million in donations from folks bound by their passion for walls and hatred of their fellow humans. Kolfage and Badolato lined their pockets with the funds, despite assuring the public that they wouldn’t take any of the funds for their personal use. Both pled guilty to one count of conspiracy to commit wire fraud in the Southern District of New York, and Kolfage pled guilty to tax and wire fraud charges in the Northern District of Florida, as well. USAO SDNY, USAO NDFL

April 25, 2023

British American Tobacco and its subsidiary BAT Marketing Singapore, will pay penalties totaling more than $629 million for doing business with North Korea, despite stating it was no longer selling tobacco in North Korea, and in violation of the bank fraud statute and the International Emergency Economic Powers Act. Through this scheme, BAT and BATMS utilized a third party in Singapore to surreptitiously route sales to North Korea. USAO DC, DOJ