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Government Enforcement Actions

Please also see our Recent Government Enforcement Actions page.

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August 4, 2014

The CFTC obtained a $500,000 judgment against former Citigroup Director John Aaron Brooks for defrauding Citigroup by mismarking and inflating the value of his position in ethanol futures in Citigroup's proprietary account.  Specifically, the court found Brooks cheated and defrauded Citigroup by inflating and mismarking the value of his position in New York Mercantile Exchange (NYMEX) Chicago Ethanol (Platts) Futures contracts by misrepresenting his profits and losses and offsetting and masking the losses in his other futures positions.  By this conduct, Brooks violated the anti-fraud provisions of the Commodities Exchange Act (CEA) and a CFTC Regulation.  CFTC

August 1, 2014

The CFTC filed a civil enforcement Complaint against Southern Trust Metals, Robert Escobio and Loreley Overseas Corp. charging them with violating the Dodd-Frank Act by operating an illegal, off-exchange precious metals scheme involving at least 135 customers who collectively lost $600,000 of the funds they invested.  CFTC

July 29, 2014

JP Morgan Securities, a wholly-owned subsidiary of JPMorgan Chase & Co., agreed to pay $650,000 to settle CFTC charges of submitting inaccurate reports to the CFTC relating to the required reporting of positions held by certain large traders whose accounts are carried by JPMS.  The reports are known as “large trader” reports and are used by the CFTC to evaluate potential market risks and monitor compliance with CFTC requirements.  The reporting violations occurred despite the CFTC notifying JPMS of numerous errors in its reports.  CFTC

July 28, 2014

The CFTC issued an Order against Lloyds Banking Group and Lloyds Bank for false reporting and attempted manipulation of the London Interbank Offered Rate (LIBOR) for Sterling, U.S. Dollar, and Yen. The CFTC also brought and settled charges that Lloyds aided and abetted the attempts of derivatives traders at Rabobank to manipulate Yen LIBOR.  The Order requires Lloyds Banking Group and Lloyds Bank to pay a $105M civil monetary penalty, cease and desist from their violations of the Commodity Exchange Act, and to adhere to specific undertakings to ensure the integrity of LIBOR submissions in the future.  CFTC

July 28, 2014

Vascular Solutions Inc (VSI), a Minneapolis-based medical device maker, agreed to pay $520,000 to resolve allegations that it violated the False Claims Act by marketing a product for sealing veins without FDA approval.  Specifically, the government charged that VSI marketed and sold its "Vari-Lase Short Kit" for treating perforator veins (which run deep in the leg muscle) even though the FDA approved the device only for treating surface (or superficial) veins.  DeSalle Bui, a former sales representative of VSI, will receive a whistleblower award in an undisclosed amount.  DOJ

July 18, 2014

The CFTC filed an amended Complaint against Missouri resident Daniel K. Steele and his firm Champion Management International charging them with misappropriation, issuance of false account statements, and other acts of fraudulent solicitation and concealment relating to their solicitation of investments in foreign currency (forex) pools.  The amended Complaint follows a CFTC complaint against them filed in September 2013.  The amended Complaint further alleges that Steele knowingly made material misrepresentations to actual and prospective pool participants concerning Defendants’ forex trading and trading results.  The amended Complaint also alleges that Steele concealed trading losses, misappropriated approximately $1 million of pool participants’ funds for personal use, and issued false account statements to pool participants reflecting that they were earning profits when instead Steele was misappropriating the majority of their funds, all in violation of Section 4b of the Commodities Exchange Act.  CFTC

July 1, 2014

New York Attorney General Eric T. Schneiderman announced a $24.6M settlement of his Charities Bureau’s investigation into direct mail fundraising abuses at what has become one of the country’s largest veterans’ charities, the Disabled Veterans National Foundation. The abuses, the investigation found — including misleading solicitations and failure to disclose conflicts of interest — were perpetrated by DVNF’s two outside, for-profit direct mail vendors, Quadriga Art and Convergence Direct Marketing. Under the settlement, Quadriga, which produced and sent out the mailings and played the dominant role in running DVNF’s fundraising efforts, will pay $9.7M in damages, and Convergence, which designed the solicitations and provided other advice, will pay $300,000 in damages. This $10M will go to help support and improve the lives of disabled American veterans. In addition, Quadriga will forgive $13.8M in debt that DVNF owes to Quadriga, and adopt a number of significant reforms to improve transparency and set a higher ethical bar for the direct mail charitable solicitations industry. Quadriga will pay an additional $800,000 to the State of New York for costs and fees. The settlement is believed to represent the largest amount of financial relief ever obtained in the U.S. for deceptive charitable fundraising. NYAG

June 25, 2014

Ohio-based Omnicare Inc., the country’s largest provider of pharmaceuticals and pharmacy services to nursing homes, agreed to pay $124 million to settle government charges of offering improper financial incentives to skilled nursing facilities in return for their continued selection of Omnicare to supply drugs to their elderly Medicare and Medicaid patients. Donald Gale, former employee of Omnicare Inc., will receive a whistleblower award of roughly $17M from the settlementDOJ

June 24, 2014

New York Attorney General Eric T. Schneiderman announced that his office, along with the Federal Trade Commission and the Attorney General of Florida, have reached a $15.6M settlement with The Tax Club, Inc. related to deceptive business practices and false advertising seen in telemarketing schemes that targeted consumers operating internet-based businesses. According to the government, the operators of The Tax Club’s telemarketing schemes took millions of dollars from consumers by allegedly misleading them into believing that its purported services would help consumers’ home-based businesses succeed. NYAG

June 19, 2014

The CFTC obtained a court Order requiring Texas resident Robert J. Andres and his company Winsome Investment Trust and California resident Robert L. Holloway and his company US Ventures LC to pay a civil penalty of $32M and restitution for defrauded customers totaling $12M for their fraud in the operation of a commodity futures pool.  Specifically, the Order found that the defendants fraudulently solicited and accepted at least $50M from at least 243 individuals to invest in a commodity futures pool by falsely claiming successful track record and guaranteeing the return of participants’ principal and profits.  In reality, however, their futures trading was not successful, sustaining overall net losses of approximately $10.7 million and they operated it like a Ponzi scheme and used participants' funds to pay personal and unrelated business expenses, and to pay for houses, cars, home furnishings, jewelry, lawn and maid services, and credit card bills.  In parallel criminal actions, Andres and Holloway were indicted on multiple counts of wire fraud.  CFTC