Misrepresentations

June 15, 2021

Real estate settlement services company First American Financial Corporation will pay a penalty of $487,616 to resolve allegations that the publicly-traded company released incomplete information about a cybersecurity vulnerability in its document sharing platform that exposed over 800 million document images dating back to 2003, including images containing sensitive personal data such as social security numbers and financial information. The SEC charged that First American had deficient disclosure controls that left senior management unaware of the company's earlier discovery of the vulnerability and its attempts to remediate it.  SEC

June 3, 2021

The CFTC obtained a default judgment against Florida resident James Frederick Walsh, who was ordered to pay a penalty of more than $500,000.  Walsh, who was not registered with the CFTC, marketed himself through social media as an experienced foreign exchange trader who could conduct retail forex trades for customers.  Walsh advertised that the COVID-19 pandemic created an opportunity for increased forex trading profits,  guaranteed returns, and claimed to have inside information about forex markets.   CFTC

June 3, 2021

A man in Kansas, Christopher Matthew Meredith, has been ordered to spend 14 years in prison and pay over $6.8 million in restitution for defrauding investors to his company, Strategic Pharma, Inc. (SPI).  In addition to failing to disclose that he was under investigation for an investment fraud scheme in Florida, Meredith had falsely represented to investors that SPI had entered into lucrative agreements, including with the Department of Veterans Affairs, that would result in substantial revenue for SPI.  USAO WDTX

June 2, 2021

Pennsylvania-based fuel distributor Naughton Energy Corporation and two of its owners, Mariette and Joseph Naughton, have agreed to pay $692,000 over the next five years to settle claims of causing false claims to be submitted to the Department of Transportation (DOT).  As a subcontractor on the federally funded New NY Bridge Project, Naughton Energy, a Disadvantaged Business Enterprise (DBE), had represented to the prime contractor that it could deliver fuel to the worksite wholly independently.  However, lacking the requisite vehicle and employees to deliver fuel, and without the knowledge of the prime contractor, Naughton Energy arranged for a non-DBE subcontractor to supply the missing components in exchange for half of its profits from the project.  USAO SDNY

May 14, 2021

A consent order was entered against Leonard Cipolla, who fraudulently solicited individuals for a commodity pool operated by his company Tate Street Trading.  Cipolla received over $7 million from pool participants and misappropriated more than $5 million of it.  The order requires Cipolla to pay restitution of $5.1 million.  CFTC  (see criminal sentencing)

May 13, 2021

Financial services company State Street Corporation will pay a $115 million criminal penalty and enter into a deferred prosecution agreement following its voluntary disclosure to authorities that, over the course of 17 years, the bank defrauded its clients out of $290 million.  State Street  admitted that it secretly marked up “out-of-pocket” (OOP) expenses charged to clients, despite telling clients that OOP expenses were passed through without markups. State Street executives took steps to conceal the mark-ups from clients, including by misleading clients when they inquired about what they were being charged for OOP expenses. As part of the settlement, defendant agreed to cooperate with ongoing investigations, to enhance its compliance program, and to retain an independent corporate compliance monitor for a period of two years. DOJ

May 4, 2021

DaRayl Davis, who owned and operated Financial Assurance Corp. and Affluent Advisory Group LLC, has been sentenced to 13 years in prison and ordered to pay restitution of $7.1 million on charges arising from his sale of fictitious financial products to investors with false promises that the investors would receive fixed annual interest payments and guaranteed protection against losses.  In fact, Davis diverted investor funds to his personal use.  USAO ND IL; SEC

April 27, 2021

A man who defrauded his clients out of more than $4 million has been sentenced to 7 years in prison.  In a scheme running from 2013 to 2020, Edgardo Zeta Montalban convinced his clients to invest cash in a fake federal grant program that he called “Suppressed IRS Accounts” by claiming to be an accountant and tax preparer.  However, no such program existed, and he did not hold any of those positions.  Montalban was originally recommended to serve 10 years, but due to significant health issues, the 70-year-old’s sentence was reduced.  USAO CDCA

April 27, 2021

Indivior plc and Indivior Inc., will pay $300 million to settle claims from all 50 states, the District of Columbia, and Puerto Rico, alleging they caused the misuse of state Medicaid funds by falsely marketing the drug Suboxone.  Suboxone is used by recovering opioid addicts to reduce withdrawal symptoms.  According to the governments, Indivior promoted the sale and use of Suboxone for unsafe, ineffective, and medically unnecessary purposes, including by claiming it was less susceptible to abuse even though the active ingredient, buprenorphine, is a powerful opioid itself.  Additionally, the company took steps to fraudulently delay the entry of generic alternatives in order to control pricing.  The settlement resolves six whistleblower suits pending in New Jersey and Virginia.  Indivior previously paid $600 million to resolve federal claims, and former parent company Reckitt Benckiser previously paid $1.4 billion to resolve the same.  CA AG; FL AG; MI AG