Attorney General Lynch and Solicitor General Verrilli Statements on the Passing of Supreme Court Justice Antonin Scalia
Attorney General Loretta E. Lynch and Solicitor General Donald B. Verrilli Jr. released the following statements regarding the passing of Supreme Court Justice Antonin Scalia:
“Justice Antonin Scalia was, and will always be remembered as, one of the most influential and eloquent Justices ever to serve on the U.S. Supreme Court,” said Attorney General Lynch. “His indomitable conviction and his fierce intelligence left a lasting imprint – not just on the way the Supreme Court resolves cases, but on the legal landscape that he helped to transform. A lion of American law has left the stage, and it is up to all of us – every American – to keep our national constitutional dialogue as lively and as learned as he left it.”
“I am saddened by the passing of Justice Antonin Scalia,” said Solicitor General Verrilli. “He was a great jurist and a great man who served the Court and the country with honor and distinction. We will miss him very much. On behalf of my colleagues in the Office of the Solicitor General, I extend our deepest condolences to Mrs. Scalia and to the rest of his family.”
EU President’s Proposal for a New Settlement for the United Kingdom within the European Union
Keeping the unity of the European Union is the biggest challenge for all of us and so it is the key objective of my mandate. It is in this spirit that I put forward a proposal for a new settlement of the United Kingdom within the EU. To my mind it goes really far in addressing all the concerns raised by Prime Minister Cameron. The line I did not cross, however, were the principles on which the European project is founded.
I deeply believe that our community of interests is much stronger than what divides us. To be, or not to be together, that is the question which must be answered not only by the British people in a referendum, but also by the other 27 members of the EU in the next two weeks.
This has been a difficult process and there are still challenging negotiations ahead. Nothing is agreed until everything is agreed. I am convinced that the proposal is a good basis for a compromise. It could not have been drafted without the close and good cooperation of the European Commission. In order to facilitate this process the Commission also made political declarations that are included in this package.
Let me briefly refer to all the four baskets of the proposal.
On economic governance, the draft Decision of the Heads sets out principles to ensure mutual respect between the Member States taking part in further deepening of the Economic and Monetary Union and those which do not. By doing that we can pave the way for the further integration within the euro area while safeguarding the rights and competences of non-participating Member States.
The respect for these principles is backed up by a draft Decision establishing a mechanism that while giving necessary reassurances on the concerns of non-euro area Member States, cannot constitute a veto nor delay urgent decisions. The exact conditions for triggering this mechanism remain to be further discussed.
On competitiveness, the draft Decision of the Heads, together with a more detailed European Council Declaration and a draft Commission Declaration, will set out our commitment to increase efforts to enhance competitiveness. We will regularly assess progress in simplifying legislation and reducing burden on business so that red tape is cut.
On sovereignty, the proposed Decision of the Heads recognises that in light of the United Kingdom’s special situation under the Treaties, it is not committed to further political integration. It also reinforces respect for subsidiarity, and I propose that the Member States discontinue the consideration of a draft legislative act where a number of national parliaments object to it on the grounds of subsidiarity, unless the concerns raised can be accommodated. The importance of respecting the opt-out regime of Protocols 21 and 22, as well as national security responsibilities is also underlined.
On social benefits and free movement, we need to fully respect the current treaties, in particular the principles of freedom of movement and non-discrimination. Therefore the proposed solution to address the UK concerns builds on the clarification of the interpretation of current rules, including a draft Commission Declaration on a number of issues relating to better fighting abuse of free movement.
The draft Decision of the Heads notes, in particular, the Commission’s intention to propose changes to EU legislation as regards the export of child benefits and the creation of a safeguard mechanism to respond to exceptional situations of inflow of workers from other Member States. A draft Commission Declaration also relates to this mechanism. This approach, as well as the exact duration of the application of such a mechanism need to be further discussed at our level.
Most of the substance of this proposal takes the form of a legally binding Decision of the Heads of State or Governments. We should also be prepared to discuss the possible incorporation of the substance of a few elements covered by the Decision into the Treaties at the time of their next revision.
Our Sherpas and Permanent Representatives will meet on Friday this week to have the first discussion of the proposal. The clear objective is to have an agreement of all 28 at the February European Council. To succeed we will all need to compromise. To fail would be compromising our common future.
Donald Tusk, President of the European Council
UN Experts Urge US to Address Legacies of the Past, Police Impunity and ‘Crisis of Racial Injustice’
29 January 2016 – The legacy of slavery, post-Reconstruction ‘Jim Crow’ laws and racial subordination in the United States remains a “serious challenge” as there has been no real commitment to recognition and reparations for people of African descent, a United Nations expert panel said today in Washington D.C., at the end of its second official visit to the country.
“Despite substantial changes since the end of the enforcement of Jim Crow and the fight for civil rights, ideology ensuring the domination of one group over another continues to negatively impact the civil, political, economic, social, cultural and environmental rights of African Americans today,” said human rights expert Mireille Fanon Mendes France, who currently heads the group of experts, who added that: “We understand these changes are part of a larger effort to pass criminal justice reforms now pending in Congress, and a lot more needs to be done.”
Indeed, the experts found that contemporary police killings and the trauma it creates are reminiscent of the “racial terror and lynching” of the past. Impunity for state violence has resulted in the current human rights crisis and must be addressed as a matter of urgency, they said.
Chairperson Mireille Fanon Mendes France (centre) and other members of the UN Expert Group on People of African Descent brief the press in Washington, D.C., on their fact-finding mission to the United States. Photo: UNIC Washington/Liam Murphy
From 9 to 29 January, a delegation of the UN Working Group of experts on people of African descent visited Washington D.C., Baltimore, the town of Jackson, Mississippi, Chicago, and New York City, to address current concerns, and assess progress made in the fight against racial discrimination, ‘Afrophobia,’ xenophobia, and protecting and promoting the human rights of African- Americans.
The Working Group of Experts on People of African Descent, visiting delegation, which also included human rights experts Sabelo Gumedze and Ricardo A. Sunga III, welcomed various efforts undertaken by the Government to address the issue, like a ban on solitary confinement for juveniles in the federal prison system announced this week.
The Group noted that the US has a growing human rights movement which has successful advocated for social change. Following the epidemic of racial violence by the police, civil society networks calling for justice together with other activists are strongly advocating for legal and policy reforms and community control over policing and other areas which directly affect African Americans.
However, the experts expressed serious concerns about the police killings, the presence of police in schools, and violence targeting the African American community with impunity, and racial bias in the criminal justice system, mass incarceration and the criminalization of poverty which disproportionately affects African Americans.
During its 11-day mission, the Working Group’s delegation heard from civil society, researchers and families of victims of police killings about racial discrimination and Afrophobia.
“The persistent gap in almost all the human development indicators, such as life expectancy, income and wealth, level of education, housing, employment and labour, and even food security, among African Americans and the rest of the US population, reflects the level of structural discrimination that creates de facto barriers for people of African descent to fully exercise their human rights,” Ms. Mendes France stressed.
The human rights experts met representatives of the Government at the federal and the state levels, and the US Congress and Senate, as well as hundreds of civil society organization representatives, lawyers and human rights activists from more than 20 states who had gathered in the different cities.
The Working Group regretted however that it did not receive access according to the terms of reference for special procedure mandate holders to visit Mississippi State Penitentiary Parchman. It also regretted that it was not possible to meet with all of the high-level state and local-level authorities requested.
Among other activities, they also promoted the International Decade for People of African Descent , which runs from 2015 to 2024 and aims both to highlight the contribution of people of African descent to societies and strengthen national, regional and international cooperation to ensure the human rights of people of African descent are respected, promoted and fulfilled.
The Working group will present a report containing its findings and recommendations to the Geneva-based UN Human Rights Council in September 2016. Independent experts or special rapporteurs are appointed by the Council to examine and report back on a country situation or a specific human rights theme. The positions are honorary and the experts are not UN staff, nor are they paid for their work.
‘Alarming’ new patterns of violations emerging in Burundi – UN rights chief
15 January 2016 – The United Nations human rights chief today warned that deeply worrying new trends are emerging in Burundi, including cases of sexual violence by security forces and a sharp increase in enforced disappearances and torture cases.
He also called for an urgent investigation into the events that took place in Bujumbura on 11 and 12 December, including the reported existence of at least nine mass graves.
“The 11 December attacks against three military camps and the large-scale human rights violations that occurred in their immediate aftermath appear to have triggered new and extremely disturbing patterns of violations,” said UN High Commissioner for Human Rights, Zeid Ra’ad Al Hussein, in a news release.
“We have documented 13 cases of sexual violence against women, which began during the search and arrest operations that took place after the December events in the neighbourhoods perceived as supportive of the opposition,” he reported. “The pattern was similar in all cases: security forces allegedly entered the victims’ houses, separated the women from their families, and raped – in some cases gang-raped – them.”
He added that new cases of sexual violence have continued to emerge since mid-December, including the reported rape of five women in a single house during a search operation in Bujumbura Mairie province.
“We’ve also received numerous allegations that during the initial search operations on 11 and 12 December in the Musaga, Nyakabiga, Ngagara, Citiboke and Mutakura neighbourhoods of Bujumbura, police and army forces arrested considerable numbers of young men, many of whom were later tortured, killed or taken to unknown destinations. Members of the Imbonerakure militia reportedly took part in these operations,” he said.
Despite these allegations of large-scale arrests, the Office of the High Commissioner for Human Rights (OHCHR) is reportedly finding that only a small proportion of them appear to be in official places of detention.
“The increasing number of enforced disappearances, coupled with allegations of secret detention facilities and mass graves is extremely alarming,” Mr. Zeid warned.
The High Commissioner said that, according to numerous witnesses, many dead bodies were taken to unknown locations from the neighbourhoods where the search operations took place.
He added that witnesses had reported the existence of at least nine mass graves in Bujumbura and its surroundings – including one in a military camp –containing more than 100 bodies in total, all of them allegedly killed on 11 December.
According to OHCHR, it was reported in some cases that members of the Imbonerakure forced people to dig the graves, either under threat of being killed themselves or with the promise that they would be paid. It was also reported that some of these grave-diggers were indeed subsequently executed.
“My Office is analysing satellite images in an effort to shed more light on these extremely serious allegations,” Mr. Zeid said. “All the alarm signals, including the increasing ethnic dimension of the crisis, are flashing red,” he added.
According to information gathered from inhabitants of various neighbourhoods, some of the victims of human rights violations during the search operations that followed the 11 December events were targeted because they were Tutsis. The suggestion that an ethnic dimension is now starting to emerge, is reinforced by one of the sexually abused women who said that her abuser told her she was paying the price for being a Tutsi.
In Bujumbura’s Nyakabiga neighbourhood, another witness claimed that Tutsis were systematically killed, while Hutus were spared. And, in the Muramvya neighbourhood, the decision to arrest people was also reportedly largely made on an ethnic basis, with most Hutus being released, according to several different witnesses.
The High Commissioner welcomed the Ministry of Justice’s recent request to the General Prosecutor of Bujumbura Mairie to investigate the allegations of mass graves.
“However, it is now abundantly clear that we also urgently need an independent, thorough, credible and impartial investigation, and that the alleged grave sites need to be safeguarded,” Mr. Zeid said.
The High Commissioner also stressed the importance of ensuring that family members of people who have been arrested, forcibly disappeared or extrajudicially executed are informed of the whereabouts of their loved ones.
He noted that the reported increasing use of torture and ill-treatment was also of serious concern. “The number of torture cases almost tripled in the space of a month,” Mr. Zeid said, citing 29 cases of torture and 42 cases of ill-treatment documented in December.
According to victims and witnesses, members of the Service national de renseignements (SNR) and the national police are responsible for most cases, with victims allegedly often forced to confess that they belong to, or intend to join, an armed group.
The High Commissioner also noted that the total number of people killed rose to at least 130 in December, double the number of killings during the previous month. As of 14 January, at least 439 people had been killed since 26 April.
“There is rampant impunity for all the human rights violations being committed by security forces and the Imbonerakure, despite ample evidence that they are responsible for more and more serious crimes,” Mr. Zeid said. “This is an indication that a complete breakdown in law and order is just around the corner and, with armed opposition groups also becoming more active, and the potentially lethal ethnic dimension starting to rear its head, this will inevitably end in disaster if the current rapidly deteriorating trajectory continues.”
Justice Department Announces Four Banks Reach Resolutions Under Swiss Bank Program
The Department of Justice announced today that Bank J. Safra Sarasin AG (Safra Sarasin), Coutts & Co Ltd (Coutts), Gonet & Cie (Gonet) and Banque Cantonal du Valais (BC Valais) reached resolutions under the department’s Swiss Bank Program. These banks collectively will pay penalties of more than $178 million.
“With today’s resolutions under the Swiss Bank Program, the department has reached agreements with 75 Swiss banks, imposed penalties in excess of $1 billion, and secured voluminous and detailed information regarding the illegal conduct of financial institutions, professionals and accountholders around the world,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division. “Building on the success of the Swiss Bank Program, the civil and criminal offshore enforcement efforts of the department and its partners in the IRS will be a top priority in 2016.”
The Swiss Bank Program, which was announced on Aug. 29, 2013, provides a path for Swiss banks to resolve potential criminal liabilities in the United States. Swiss banks eligible to enter the program were required to advise the department by Dec. 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts. Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.
Under the program, banks are required to:
Make a complete disclosure of their cross-border activities;
Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
Cooperate in treaty requests for account information;
Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;
Agree to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations; and
Pay appropriate penalties.
Swiss banks meeting all of the above requirements are eligible for a non-prosecution agreement.
According to the terms of the non-prosecution agreements signed today, each bank agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay a penalty in return for the department’s agreement not to prosecute these banks for tax-related criminal offenses.
Safra Sarasin is a Swiss bank with its head office in Basel. Safra Sarasin was formed in June of 2013 through the merger of two Swiss banks, Banque J. Safra (Suisse) SA (Safra) and Bank Sarasin & Cie AG (Sarasin). In Switzerland, Safra Sarasin has branches in Berne, Geneva, Lucerne, Lugano and Zurich. Safra Sarasin specializes in providing investment advice and asset management services to private and institutional clients, as well as to investment funds. It offers clients portfolio management, secured lending and financial analysis, among other services.
In 2001, Safra and Sarasin each entered into a Qualified Intermediary (QI) Agreement with the Internal Revenue Service (IRS). The QI regime provided a comprehensive framework for U.S. information reporting and tax withholding by a non-U.S. financial institution with respect to U.S. securities. After signing their respective QI Agreements, Safra and Sarasin continued to service certain U.S. customers without disclosing the customers’ identity to the IRS and without regard for the impact of U.S. criminal law on that decision.
Through at least 2014, Safra Sarasin knew that it was highly probable that some U.S. taxpayers who had opened and maintained accounts at Safra Sarasin were not complying with their U.S. income tax and reporting obligations. Safra and Sarasin took the position that they could service U.S. clients that they knew or had reason to believe were engaged in tax evasion so long as Safra and Sarasin prohibited their accountholders from trading in U.S.-based securities or required that the account be nominally structured in the name of a non-U.S.-based entity.
With respect to structured accounts, U.S. clients would create an entity, such as a Liechtenstein foundation, a Panama corporation or a British Virgin Islands corporation, and pay a fee to third parties to act as corporate directors. Those third parties, at the direction of the U.S. client, would then open an account at Safra or Sarasin in the name of the entity or transfer a pre-existing Swiss bank account from another Swiss bank. In certain cases that involved a non-U.S.-based entity, Safra or Sarasin was aware that a U.S. taxpayer was the true beneficial owner of an account. Despite this, the respective bank would obtain from the entity’s directors an IRS Form W-8BEN or equivalent bank document in which the directors falsely declared that the beneficial owner was not a U.S. taxpayer. Although it was highly probable that in such cases the U.S. taxpayer was avoiding U.S. taxes, some of these accounts were permitted to trade in U.S. securities without the respective bank reporting account earnings or transmitting any withholding taxes to the IRS, as required by its QI Agreement.
In some instances, relationship managers at Safra and Sarasin met with or took directions or instructions from the U.S. taxpayer beneficial owner of an offshore structure account, instead of the directors or other authorized parties on the account. Some of these relationship managers interacted with corporate service providers, including Swiss lawyers, who assisted U.S. taxpayers in setting up nominee entities for their undeclared accounts. In some instances, relationship managers referred U.S. clients who were interested in creating nominee offshore entities to these corporate service providers. After these entities were created, relationship managers assisted these clients in opening and maintaining accounts at Safra Sarasin.
For example, a Geneva-based lawyer assisted U.S. clients in opening undeclared accounts in the names of Panama corporations. These accounts had high balances totaling approximately $250 million during the period since Aug. 1, 2008. The Geneva-based lawyer had signature authority and power of attorney over these accounts and was a director of some of these entities. With respect to one of these accounts, the lawyer signed an IRS Form W-8BEN falsely certifying that a Panama entity was the taxpayer, and not the U.S. client. In December 2010, in connection with the closing of one of these accounts, the lawyer assisted a U.S. client in transferring the funds to a bank in Hong Kong. During 2011, in connection with the closing of seven of these accounts, the lawyer assisted the U.S. clients in transferring the funds to a Swiss bank under investigation by the department.
Safra Sarasin assisted some U.S. clients in other ways, in concealing assets and income from the IRS upon the closure of their accounts. Approximately 20 percent of the funds in U.S.-related accounts closed by Safra Sarasin were transferred to banks in countries other than Switzerland and the United States, including Israel, Hong Kong and Liechtenstein. In one instance, Safra Sarasin assisted a U.S. client, whose account was held in the name of a Panama company, to withdraw $2.9 million in gold at the account closing. In another instance, Safra Sarasin processed five cash withdrawals of $190,000 each for a U.S. client, comprising a total aggregate amount of $950,000 in cash over a two-day period.
A number of U.S.-related accounts held at Sarasin were managed by external asset managers. From June through August 2008, one of these external asset managers used intermediary accounts at Sarasin to assist five U.S. clients in transferring $21.1 million from a large Swiss bank into undeclared bank accounts at Sarasin. These intermediary accounts were opened in the name of the external asset manager’s company and were used when a U.S. client wanted to deposit funds into his or her account or transfer funds to a third party. This added a layer of concealment when transferring the assets of a client or third party to or from the U.S. client’s bank account at Sarasin. In 2012, this same external asset manager was charged, in a U.S. federal court, with conspiring to impede and impair the IRS in the ascertainment, computation, assessment and collection of U.S. income taxes, in connection with the external asset manager’s activities at Swiss banks other than Safra Sarasin.
In the period since Aug. 1, 2008, Sarasin maintained six accounts, with an aggregate value of $24 million, that were owned by insurance companies and held assets relating to insurance products that were issued to U.S. taxpayer clients of the respective insurance companies. Such accounts, known commonly as “insurance wrappers,” were titled in the names of insurance companies but funded with assets that were transferred to the accounts for the beneficial owners of the insurance products. Two of the six insurance wrapper accounts were held in the name of a Cayman Islands corporation, and another account was held in the name of a Singapore company.
Since Aug. 1, 2008, Safra Sarasin had 1,275 U.S.-related accounts with an aggregate maximum value of approximately $2.2 billion. Safra Sarasin will pay a penalty of $85.809 million.
Coutts is a Swiss private bank headquartered in Zurich with branches in Geneva, Hong Kong, Monaco and Singapore. Coutts also has operating subsidiaries in Geneva and on the Isle of Man. During the period since Aug. 1, 2008, Coutts was part of the international Wealth Management Division of The Royal Bank of Scotland Group plc, which is majority-owned by the United Kingdom government, and had no offices, branches or subsidiaries in the United States. Coutts closed its New York branch in 1997, and the bank closed its representative office in Florida in 2005, shortly after Coutts had acquired the Florida office as part of its acquisition of Bank von Ernst & Cie AG in 2003.
Coutts was aware that U.S. taxpayers had a legal duty to report to the IRS and pay taxes on all of their income, including income earned in accounts that these U.S. taxpayers maintained at Coutts. Coutts nonetheless opened, serviced and profited from accounts for U.S. clients who Coutts knew or had reason to know were likely not complying with these obligations. Since August 2008, Coutts has accepted over $150 million in inflows from other Swiss banks that were being investigated by the department, and Coutts opened 465 accounts for U.S. clients, some of whom did not comply with their obligations regarding U.S. tax or Reports of Foreign Bank and Financial Accounts (FBARs).
Prior to December 2008, several relationship managers from the Coutts private banking desks traveled to the United States to maintain existing relationships with U.S. clients and recruit new clients. After 2008, Coutts relationship managers continued to travel to the United States to meet with clients, including three relationship managers employed by other group entities located outside of Switzerland who made 11 trips to the United States.
Coutts relationship managers in Switzerland aided and assisted certain U.S. clients with undeclared accounts at Coutts to evade their income taxes by placing their assets in the names of structures formed, maintained and managed by various subsidiary trust companies of Coutts. Coutts has operated its own trust companies in Liechtenstein and Switzerland. These companies provided structuring services to Coutts clients, including the creation of foundations, trusts and companies incorporated or based in offshore locations such as the Bahamas, British Virgin Islands, Channel Islands, Liechtenstein and Panama. By operation of Swiss bank secrecy laws, the U.S. client’s ownership of these structures would not be disclosed to U.S. authorities. In all, more than 500 of the 1,337 U.S. client accounts held at Coutts since August of 2008, with more than $1 billion in assets under management, had some type of structure with a U.S. beneficial owner.
In addition to the relationships they had with affiliated trust companies, Coutts relationship managers coordinated with external trust companies to create and administer offshore structures for its U.S. clients that were incorporated or based in offshore locations such as the British Virgin Islands, Liechtenstein and Panama. For example, one relationship manager had three U.S. clients with undeclared accounts held in the names of British Virgin Islands companies. These three accounts totaled approximately $130 million.
Because Swiss law requires Coutts to identify the true beneficial owner of structures on a document called a Form A, it knew that these were U.S. client accounts. Nonetheless, for numerous such accounts, Coutts relationship managers and other employees knowingly accepted and included in Coutts’ account records IRS Forms W-8BEN or equivalent bank documents provided by the directors of the offshore companies that falsely represented under penalty of perjury that such companies were the beneficial owners, for U.S. income tax purposes, of the assets in the Coutts accounts. This aided and assisted the U.S. clients in concealing these assets and income from the IRS.
Coutts also assisted U.S. clients in concealing the assets and income in their undeclared accounts by processing requests from U.S. taxpayers to transfer assets from accounts being closed to non-U.S.-related Coutts accounts, or to Coutts accounts that were restructured to eliminate the U.S. connection. For example, in one instance in 2001, a joint account was opened by couple living in Singapore. The husband was a U.S. citizen, and the wife was a French citizen. After Coutts asked the accountholder to provide an IRS Form W-9, the husband instructed Coutts to close the joint account and internally transfer assets totaling $15.1 million to a Coutts account held jointly by his wife and children. The husband had signatory authority over the newly opened account based on a general power of attorney, and he continued to manage the assets and was the only contact person for Coutts with respect to this account. In another case, between July 2011 and April 2014, Coutts assisted a U.S. client in transferring $33 million from an undeclared account held in the name of a Belize corporation to 11 other accounts at Coutts held in the names of nominee entities.
Since Aug. 1, 2008, Coutts held and managed 1,337 U.S.-related accounts, which included both declared and undeclared accounts, with a peak of assets under management of approximately $2.1 billion. Coutts will pay a penalty of $78.484 million.
Gonet is a family-owned private bank headquartered in Geneva, Switzerland. Gonet operates a branch office in Lausanne, Switzerland, which was opened in 2011, and a representative office in Abu Dhabi, United Arab Emirates, which was opened in 2014. In 1982, Gonet opened a subsidiary in Nassau, Bahamas, which offers traditional private banking services. In 2008, Gonet acquired a minority interest in an entity in Monaco, and three years later Gonet established a subsidiary in Singapore. In 2014, Gonet sold the entities in Monaco and Singapore.
Gonet enabled some U.S. taxpayers to evade their U.S. tax and filing obligations, resulting in the filing of false income tax returns with the IRS and allowing U.S. taxpayers to hide offshore assets from the IRS. Gonet opened accounts for U.S. taxpayers who had left other Swiss banks that were known targets of investigations by the department, including UBS and Credit Suisse. With respect to the majority of these accounts, Gonet knew or should have known that the beneficial owners were attempting to evade U.S. taxes and foreign account reporting requirements. Gonet also opened and maintained a number of U.S.-related accounts held by non-U.S. entities with the knowledge that U.S. persons were the true beneficial owners of the assets maintained in the accounts. Two of the accounts held by non-U.S. entities were insurance wrapper accounts.
With respect to structured accounts, U.S. clients, with the assistance of their external advisors, would create an entity, such as a Liechtenstein foundation, Panamanian corporation or British Virgin Islands corporation, and pay a fee to third parties to act as corporate directors. Those third parties, at the direction of the U.S. client, would then open a bank account at Gonet in the name of the non-U.S. entity or transfer funds from a pre-existing account from another bank. Gonet employees provided prospective U.S. clients with referrals to external advisors who could assist with the creation and management of such an entity. In certain cases, Gonet was aware that a U.S. client was the true beneficial owner of the account. Despite this, Gonet would sometimes obtain from the entity’s directors an IRS Form W-8BEN or equivalent bank document that falsely declared that the beneficial owner was not a U.S. taxpayer.
Since Aug. 1, 2008, Gonet held 150 U.S.-related accounts with an aggregate maximum balance of approximately $254.5 million. Gonet will pay a penalty of $11.454 million.
BC Valais, founded in 1917, is headquartered in the Canton of Valais, Switzerland. BC Valais was founded by the government of the Canton of Valais to provide banking services to assist in the development of the regional economy and to provide credit services to residents of the Canton of Valais. As a cantonal bank, the Canton of Valais is BC Valais’ majority shareholder, and pursuant to cantonal law, the Canton of Valais guarantees all of the bank’s liabilities.
In 2001, BC Valais entered into a QI Agreement with the IRS. If an accountholder wanted to trade in U.S. securities without being subjected to mandatory U.S. tax withholding, the agreement required BC Valais to obtain the consent of the accountholder to disclose the client’s identity to the IRS. In the years following the signing of its QI Agreement, BC Valais’ position was that it could service U.S. clients that it knew or had reason to believe were non-compliant with their U.S. tax obligations as long as the account did not trade or hold U.S. securities. For example, an internal memorandum written to BC Valais’ board of directors in October 2009 stated that BC Valais had 63 American clients whose accounts traded securities, but only seven of those 63 clients submitted Forms W-9 to BC Valais that authorized income generated from those securities to be reported to the IRS. The other 56 American clients had not authorized their names to be disclosed to the IRS and, because of the QI Agreement, “[t]he other clients [did] not hold any American securities.”
Prior to the time that BC Valais signed its QI Agreement in 2001, BC Valais requested that its accountholders sign an IRS Form W-9 if they wished to continue to trade in U.S. securities. One accountholder, who lived in New York and had an open BC Valais account for more than 25 years, signed a form declaring that “I am an American taxpayer … [and I] prohibit the Bank from divulging my name and authorize it to sell in the course of the year 2000 all of my American securities held by the Bank. I take note of the fact that the Bank will not invest in American securities for me anymore.”
Since Aug. 1, 2008, BC Valais maintained 185 U.S.-related accounts with a maximum aggregate value of approximately $72 million. BC Valais will pay a penalty of $2.311 million.
In accordance with the terms of the Swiss Bank Program, each bank mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations. While U.S. accountholders at these banks who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.
Most U.S. taxpayers who enter the IRS Offshore Voluntary Disclosure Program to resolve undeclared offshore accounts will pay a penalty equal to 27.5 percent of the high value of the accounts. On Aug. 4, 2014, the IRS increased the penalty to 50 percent if, at the time the taxpayer initiated their disclosure, either a foreign financial institution at which the taxpayer had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement had been publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement. With today’s announcement of these non-prosecution agreements, noncompliant U.S. accountholders at these banks must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.
“Today’s resolutions reflect the continued, strong progress of the Department of Justice’s Swiss Bank Program,” said acting Deputy Commissioner International David Horton of the IRS Large Business & International Division (LB&I). “Financial institutions that aided non-compliance and evasion are putting this conduct behind them and cooperating, leading us to those U.S. taxpayers who have failed to report their foreign accounts and pay their income taxes.”
“The end of the year does not signal the end to our enforcement efforts to bring to justice those who would circumvent our nation’s tax laws by hiding their money overseas,” said Chief Richard Weber of IRS Criminal Investigation (CI). “In fact, with the wealth of information gathered from the Swiss Bank Program, we have already begun to track those individuals who think they are above the law and continue to hide their money offshore. The decision to evade taxes will certainly be one they regret when they face criminal sanctions.”
Acting Assistant Attorney General Ciraolo thanked the IRS and in particular, IRS-CI and the IRS LB&I Division for their substantial assistance. Acting Assistant Attorney General Ciraolo also thanked the counsel on these matters, John E. Sullivan, Mark W. Kotila, Thomas G. Voracek and Thomas J. Sawyer, who serves as Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program, as well as Senior Litigation Counsel Nanette L. Davis and Attorney Kimberle E. Dodd of the Tax Division.
Global Forced Displacement for 2015 on Track to Break all Records, Topping 60 million – UN
Forced displacement this year is likely exceed all previous records, for the first time topping 60 million, meaning that one out of every 122 persons on Earth has been forced to flee their home, the United Nations refugee agency warned today.
“Never has there been a greater need for tolerance, compassion and solidarity with people who have lost everything,” UN High Commissioner for Refugees António Guterres saidof the agency’s new report, based on projections from the first half of 2015.
“Forced displacement is now profoundly affecting our times. It touches the lives of millions of our fellow human beings – both those forced to flee and those who provide them with shelter and protection.”
The Mid-Year Trends 2015 report form the High Commissioner’s Office (OHCHR), looking at worldwide displacement from conflict and persecution from January to June, shows markers firmly in the red in each of the three major categories – refugees, asylum-seekers, and internally displaced persons (IDPs).
The global refugee total, which a year ago was 19.5 million, had as of mid-2015 passed the 20 million threshold (20.2 million) for the first time since 1992, while asylum applications were up 78 per cent (993,600) over the same period in 2014, and the number IDPs jumped by around two million to an estimated 34 million.
The report shows worsening indicators in several key areas. Voluntary return rates – a measure of how many refugees can safely go back home and a barometer of the global state of conflict – are at their lowest in over three decades – an estimated 84,000 compared to 107,000 in the same period a year ago.
In effect, if you become a refugee today your chances of going home are lower than at any time in more than 30 years.
New refugee numbers are also up sharply: some 839,000 people in just six months, equivalent to an average rate of almost 4,600 forced to flee their countries every day. Syria’s war remains the single biggest generator of both new refugees and continuing mass internal displacement. But even excluding Syria, the underlying trend remains one of rising displacement globally.
The report stressed that with more refugees being stuck in exile, pressures on hots countries are growing too – something which unmanaged can increase resentment and abet politicization of refugees. But despite this, the first half of 2015 was also marked by extraordinary generosity.
On an absolute basis, and counting refugees who fall under UNHCR’s mandate, Turkey is the world’s biggest host country with 1.84 million refugees as of 30 June, while Lebanon hosts more refugees compared to population size than any other – 209 refugees per 1,000. Ethiopia pays most in relation to its economy with 469 refugees for every dollar of gross domestic product.
Overall, the lion’s share of hosting refugees continues to be carried by countries immediately bordering zones of conflict, many of them in the developing world.
Europe’s influx of people arriving by boat via the Mediterranean is only partly reflected in the report, mainly since arrivals escalated in the second half of 2015. Still, in the first six months, Germany was the world’s biggest recipient of new asylum claims – 159,000, close to the entire total for all of 2014.
The second largest recipient was Russia with 100,000 claims, mainly people fleeing the conflict in Ukraine.
Yemen: UN Envoy Adjourns Peace Talks Till January Pending Enforcement of a Proper Ceasefire
In the face of numerous violations of the cessation of hostilities in Yemen, the Special United Nations Envoy today decided to adjourn peace talks in Switzerland for a month to allow for bi-lateral in-country and regional consultations to achieve a ceasefire.
“Given the centrality of the cessation of hostilities to the success of talks, the Special Envoy has elected to adjourn the talks until the middle of January 2016,” Secretary-General Ban Ki-moon’s Special Envoy for Yemen Ismail Ould Cheikh Ahmed said in a communiqué.
“In order to ensure adherence to the cessation of hostilities and enable sustainability, the Special Envoy judges that additional bilateral consultations will be required in Yemen and in the region in the coming weeks. The Special Envoy shall continue to work with the parties to identify and implement confidence-building measures that will help build respect for a durable ceasefire and peace process.”
The conflict between the factions has worsened Yemen’s already poor food situation, adding over 3 million people to the ranks of the hungry in less than a year, the UN World Food Programme (WFP) has reported, with 7.6 million people severely food insecure – a level that requires urgent, external, food aid.
Last week, the UN World Health Organization (WHO) and its partners today appealed for $31 million to ensure the continuity of medical services for nearly 15 million Yemenis following the collapse of the country’s health system.
In his communiqué, Mr. Ould Cheikh Ahmed cited the parties’ constructive engagement in the UN-facilitated talks, but said progress was affected by numerous violations of the cessation of hostilities.
“Despite this, the parties made serious progress through identifying a framework for negotiations towards a comprehensive settlement, in addition to defining a set of relevant confidence-building measures relating to prisoner release, improved social services and improving the flow of humanitarian aid to Taiz (central Yemen) and other Yemeni governorates,” it said.
He noted that the parties agreed to develop a package of confidence-building measures including a mechanism for the release of prisoners to include all detainees and prisoners once a permanent ceasefire is in place, to establish a Co-ordination and De-escalation Committee of military advisors from both sides, facilitated by the UN, and to lift all forms of blockade and allow safe and rapid access for humanitarian supplies.
The participants also agreed to a negotiating framework for a comprehensive agreement to end the conflict and allow the resumption of inclusive political dialogue, to continue the work of the Coordination and De-escalation Committee and identify a suitable location for it in the region, to meet again for a second round of UN-facilitated talks, and to ensure a greater involvement of women in the talks.
“The Special Envoy wishes to commend the participants for the work so far undertaken and plans to convene the next round of these talks on 14 January 2016,” the communiqué concluded.
Alstom Sentenced to Pay $772 Million Criminal Fine to Resolve Foreign Bribery Charges
Alstom S.A., a French power and transportation company, was sentenced today to pay a $772,290,000 fine to resolve criminal charges related to a widespread corruption scheme involving at least $75 million in secret bribes paid to government officials in countries around the world, including Indonesia, Saudi Arabia, Egypt, the Bahamas and Taiwan.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, First Assistant U.S. Attorney Michael J. Gustafson the District of Connecticut and Assistant Director in Charge Paul M. Abbate of the FBI’s Washington Field Office made the announcement.
Alstom was sentenced by U.S. District Judge Janet Bond Arterton of the District of Connecticut. Alstom pleaded guilty on Dec. 22, 2014, to a two-count criminal information charging the company with violating the Foreign Corrupt Practices Act (FCPA) by falsifying its books and records and failing to implement adequate internal controls.
In addition, Alstom Network Schweiz AG, formerly Alstom Prom AG (Alstom Prom), Alstom’s Swiss subsidiary, which pleaded guilty on Dec. 22, 2014, to a criminal information charging the company with conspiracy to violate the anti-bribery provisions of the FCPA, was also sentenced today pursuant to its plea agreement. Alstom Power Inc. and Alstom Grid Inc., formerly Alstom T&D Inc., two U.S. subsidiaries, both entered into deferred prosecution agreements on Dec. 22, 2014, admitting that they conspired to violate the anti-bribery provisions of the FCPA.
According to the companies’ admissions, Alstom, Alstom Prom, Alstom Power and Alstom T&D, through various executives and employees, paid bribes to government officials and falsified books and records in connection with power, grid and transportation projects for state-owned entities around the world, including in Indonesia, Egypt, Saudi Arabia, the Bahamas and Taiwan. In Indonesia, for example, Alstom, Alstom Prom and Alstom Power paid bribes to government officials—including a high-ranking member of the Indonesian Parliament and high-ranking members of Perusahaan Listrik Negara, the state-owned electricity company in Indonesia—in exchange for assistance in securing several contracts to provide power-related services valued at approximately $375 million. In total, Alstom paid more than $75 million to secure more than $4 billion in projects around the world, with a profit to the company of approximately $300 million.
Alstom and its subsidiaries also attempted to conceal the bribery scheme by retaining consultants who purportedly provided consulting services on behalf of the companies, but who actually served as conduits for corrupt payments to the government officials. Internal Alstom documents refer to some of the consultants in code, including “Mr. Geneva,” “Mr. Paris,” “London,” “Quiet Man” and “Old Friend.”
The sentence, which is the largest criminal fine ever imposed in an FCPA case, reflects a number of factors, including: Alstom’s failure to voluntarily disclose the misconduct, even though it was aware of related misconduct at a U.S. subsidiary that previously resolved corruption charges with the department in connection with a power project in Italy; Alstom’s refusal to fully cooperate with the department’s investigation for several years; the breadth of the companies’ misconduct, which spanned many years, occurred in countries around the globe and in several business lines, and involved sophisticated schemes to bribe high-level government officials; Alstom’s lack of an effective compliance and ethics program at the time of the conduct; and Alstom’s prior criminal misconduct, including conduct that led to resolutions with various other governments and the World Bank.
After the department publicly charged several Alstom executives, however, Alstom began providing thorough cooperation, including assisting the department’s prosecution of other companies and individuals.
To date, the department has announced charges against five corporate executives for alleged corrupt conduct involving Alstom. Frederic Pierucci, Alstom’s former vice president of global boiler sales, pleaded guilty on July 29, 2013, to conspiring to violate the FCPA and a charge of violating the FCPA for his role in the Indonesia bribery scheme. David Rothschild, Alstom Power’s former vice president of regional sales, pleaded guilty on Nov. 2, 2012, to conspiracy to violate the FCPA. William Pomponi, Alstom Power’s former vice president of regional sales, pleaded guilty on July 17, 2014, to conspiracy to violate the FCPA. Lawrence Hoskins, Alstom’s former senior vice president for the Asia region, was charged in an indictment in connection with the Indonesia bribery scheme, and is pending trial in the District of Connecticut in April 2016. The charges against Hoskins are merely allegations, and he is presumed innocent unless and until proven guilty. The high-ranking member of Indonesian Parliament was also convicted in Indonesia of accepting bribes from Alstom, and is currently serving a three-year prison term. In addition, Marubeni Corporation, which partnered with Alstom on the Indonesia project, pleaded guilty on March 19, 2014 to a criminal information charging conspiracy to violate the FCPA and seven counts of violating the FCPA, and was sentenced on May 15, 2014, to pay an $88 million criminal fine.
In connection with a corrupt scheme in Egypt, Asem Elgawhary, the general manager of an entity working on behalf of the Egyptian Electricity Holding Company, a state-owned electricity company, was the fifth individual charge and pleaded guilty on Dec. 4, 2014, in the District of Maryland to mail fraud, conspiring to launder money and tax fraud for accepting kickbacks from Alstom and other companies, and was sentenced on March 23, 2015, to serve 42 months in prison and forfeit approximately $5.2 million in proceeds.
This case is being investigated by the FBI’s Washington Field Office, with assistance from the FBI’s Meriden, Connecticut, Resident Agency. The department appreciates the significant cooperation provided by its law enforcement colleagues in Indonesia at the Komisi Pemberantasan Korupsi (Corruption Eradication Commission), the Switzerland Office of the Attorney General and the United Kingdom’s Serious Fraud Office, as well as authorities in France, Germany, Italy, Singapore and Taiwan.
The case is being prosecuted by Assistant Chief Daniel S. Kahn of the Criminal Division’s Fraud Section and Assistant U.S. Attorney David E. Novick of the District of Connecticut, together with Assistant U.S. Attorney Zach Intrater of the District of New Jersey on the investigation of Alstom T&D, and Assistant U.S. Attorney David I. Salem of the District of Maryland on the investigation of Asem Elgawhary. The Criminal Division’s Office of International Affairs also provided substantial assistance.
‘Racial Superiority’ Myth Must be Debunked, Experts tell UN Event on Challenges Faced by People of African Descent
Debunking the myth of racial hierarchy, United Nations experts on racial discrimination today said that it is imperative to deconstruct, on a global scale, the ideological myth of a superior race and the resulting conviction of a superior culture.
Addressing a special event at UN Headquarters on Confronting the Silence: Perspectives and Dialogue on Structural Racism against people of African Descent Worldwide, Mireille Fanon-Mendes, Chair of the UN Working Group of Experts on People of African Descent said that the attacks on human dignity are elaborated due to “supposed hierarchy of races and cultures and do not concern only one or [another], but the entire international community.”
The discussion was organized by the Office of the UN High Commissioner for Human Rights, with the co-sponsorship of the Unitarian Universalist Association, the UN Department of Public Information, UN Educational, Scientific and Cultural Organization (UNESCO), the Organisation Internationale de la Francophonie, Black Lives Matter, and Amnesty International USA.
Among other speakers, the event featured welcoming remarks by Ivan Šimonović, UN Assistant Secretary-General for Human Rights, who recalled that the gathering was being held in the context of the International Decade for People of African Descent, who, he said are a distinct group that regrettably faces racism and structural discrimination, and continue to face impediments to the realization of their rights.
“Slavery and the slave trade are the basis of the widespread and systemic manifestations of racism, racial discrimination and xenophobia…that we see people of African descent face today,” he said, adding that colonialism reinforced the challenges and they were further reinforced by, among others, modern day social and economic marginalization.
In her remarks, Ms. Fanon-Mendes said that in addition to historical consequences [people of African descent] had to face, they and Africans – with colonialism and economic migration or because of war¬¬ – are the only ones subject to discrimination based on skin colour; a biological parameter that completely escapes the control of the victim of this ostracism. She added: “The hierarchy of races is scientifically false, morally condemnable, and socially unjust.”
She urged Member States to reverse the “process of invisibility and inferiority” that the people of African descent face and to acknowledge their legitimate aspirations.
Ms. Fanon-Mendes said that coordination of Member States and civil society will help in ensuring that “the legacy of this terrible history” is overcome. She further called for historicizing of slave trade in in order to achieve an assumed and shared history and to form an accurate sequence of the order of construction of racism.
“To question the political and social construction of race, including its role at the time of the abolition of slavery [during which the freemen] had no other choice than to continue working on the plantations of their former masters, is an essential step if we want to emerge from a traumatic past,” she explained.
She also stressed the need to deconstruct all assumed racial myths by “flushing out” any factor that contributes to inequality and structural discrimination.
Another keynote speaker, UNICEF Goodwill Ambassador Harry Belafonte, recalled his time with legendary African American actor, Paul Robeson, who had said artist are the gatekeepers of truth; humanity’s moral compass. As such, Mr. Belafonte continued, he sought to use the arts as a tool to bring the human family together.
Continuing, he said that while the “mighty alliance” of the Second World War was supposed to have brought an end to fascism and intolerance, “one serious flaw was that the Allies were as guilty of racial oppression as was Hitler.” Decades of racial oppression, discrimination and intolerance, before and since the war, have meant that “most people of colour know very little about the diaspora…the depth of us as African descendants, is not known one to the other.
Yet, Mr. Belafonte stressed that the United Nations is “the place to sit and have a conversation about settling the affairs of the cruelty of racism and classicism,” and he looked forward to the discussions that were ahead and the presentations of the other speakers and participants.
Also addressing the event, Mutuma Ruteere, UN Special Rapporteur on contemporary forms of racism, racial discrimination, xenophobia and related intolerance said the grave issue of racial profiling across the world “impairs the fundamental rights of individuals and groups and expands on discrimination already suffered as a result of ethnic origin or minority status.”
He emphasized that racial and ethnic profiling is prohibited under international human rights law, as it violates multiple human rights, including the right to live free from discrimination, the right to equality before the law, the right to personal freedom and security and the right to the presumption of innocence.
“The manifestation of racial profiling has often been observed in stop and check operations which in some places disproportionately target minority groups. In Europe for instance, minorities including Roma people suffer unequal levels of stops by police. Similarly people of African descent have historically been subjected to practices of racial profiling,” said Mr. Ruteere.
He also remarked that newer patterns of racial and ethnic profiling have surfaced since Member States took measures to counter terrorism in the recent years.
“Migrants and minority groups have been particularly susceptible to the adverse effects of these new law enforcement practices. In the context of immigration, official border crossings and hubs of transportation, such as airports, railway stations, and bus depots, have been consistent places where racial and ethnic profiling takes place,” Mr. Ruteere explained.
He expressed concern at the creation of “risk profiles” for specific ethic groups by law enforcement agencies, as this generates fear “that racial and ethnic profiling may become a regularized and permanent fixture of immigration and border control management systems around the world.”
Additionally, he also said that racial profiling in administration of justice has led to “unjust and disproportionate punishment of individuals of traditionally discriminated against groups including People of African descent.”
He said that such practices have led to criminalization and handing out harsher punishment for using certain kinds of recreational drugs, which disproportionately affect minorities. “Studies have identified correlations between racial status and harsher criminal sentences, and evidence from different countries around the world shows that implicit biases have noticeable effects on criminal investigations,” said Mr. Ruteere.
At the same time, Mr. Ruteere observed that a number of Member States have made efforts to tackle racial profiling through the adoption of laws and policies, the establishment of adequate institutional frameworks such as oversight and equality bodies; and the implementation of training and awareness-raising initiatives.
“I also recommend that States gather law enforcement data, including statistics disaggregated by ethnicity and race, which are essential in order to prove the existence and the extent of racial and ethnic profiling,” said Mr. Ruteere, stressing that more should be done to effectively address the issue of racial profiling.
Lastly, he stressed that investigative oversight bodies should have the authority to address allegations of racial and ethnic profiling, and make practical recommendations for policy changes and called for the effective regulation of the discretionary powers of law enforcement personnel in order to reduce the risks.
United States Settles with Pitney Bowes Presort Services for Underpaying Postage Owed to U.S. Postal Service
The Department of Justice announced today that Pitney Bowes Presort Services Inc. (Pitney Bowes) has agreed to pay the United States $9.4 million to resolve allegations that it underpaid postage for mail processed at its Reading, Pennsylvania, facility by claiming discounts to which it was not entitled. Pitney Bowes, which is based in Omaha, Nebraska, helps prepare mailings for large mailers by, among other things, gathering, sorting and presenting the mail to the U.S. Postal Service.
“Those who obtain government benefits are expected to comply with the terms of those benefits,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “This settlement demonstrates that there will be consequences for those who do not live up to their obligations.”
The settlement announced today resolves allegations that Pitney Bowes claimed discounted postage rates for mail that failed to comply with the Move Update standard, which requires that mail be updated with change-of-address information provided by the Postal Service. Pitney Bowes was obligated to ensure that mail it submitted on behalf of its customers at discounted postage rates complied with Move Update, by either updating addresses on the mail directly or having its customers perform the updates. The Postal Service offered lower postage rates to Pitney Bowes for complying with Move Update and other requirements.
“When mailers don’t adhere to Move Update standards it negatively affects the entire mailing community,” said Inspector in Charge David W. Bosch of the U.S. Postal Inspection Service’s (USPIS) Philadelphia Division. “The U.S. Postal Inspection Service will continue to investigate mailers who fail to comply with postal regulations.”
This matter was jointly investigated by USPIS and the Civil Division’s Commercial Litigation Branch. The claims settled in this case are allegations only, and there has been no determination of liability.
U.S. and Five Gulf States Reach Historic Settlement with BP to Resolve Civil Lawsuit Over Deepwater Horizon Oil Spill
The United States today joins the five Gulf states in announcing a settlement to resolve civil claims against BP arising from the April 20, 2010 Macondo well blowout and the massive oil spill that followed in the Gulf of Mexico.
This global settlement resolves the governments’ civil claims under the Clean Water Act and natural resources damage claims under the Oil Pollution Act, as well as economic damage claims of the five Gulf states and local governments. Taken together this global resolution of civil claims is worth $20.8 billion, and is the largest settlement with a single entity in the department’s history.
Also today, consistent with the settlement, the Deepwater Horizon Trustees Council, made up of representatives of the five Gulf states and four federal agencies, has published a draft damage assessment and restoration plan and a draft environmental impact statement. The plan includes a comprehensive assessment of natural resource injuries resulting from the oil spill and provides a detailed framework for how the trustees will use the natural resource damage recoveries from BP to restore the Gulf environment.
“Building on prior actions against BP and its subsidiaries by the Department of Justice, this historic resolution is a strong and fitting response to the worst environmental disaster in American history,” said Attorney General Loretta Lynch. “BP is receiving the punishment it deserves, while also providing critical compensation for the injuries it caused to the environment and the economy of the Gulf region. I am proud that the Department of Justice has helped lead the way from tragedy to opportunity, and I am confident that our actions today will help to ensure that Gulf communities emerge from this disaster stronger and more resilient than ever before.”
“Five years after one of the worst environmental disasters in our nation's history, which claimed 11 lives and caused untold damage, we have reached a historic milestone with today's settlement,” said Secretary of Commerce Penny Pritzker. “With this settlement, federal, state and local governments and the Gulf coast communities will have the resources to make significant progress toward restoring ecosystems, economies, and businesses of the region. We are committed to ensuring the Gulf Coast comes back stronger and more vibrant than before the disaster. If made final, the settlement will provide the U.S. and Gulf states with the resources and certainty needed for effective restoration planning and improvements.”
“This agreement brings renewed hope for a fully restored Gulf of Mexico to millions of Americans who value the Gulf for its contributions to our economy, our environment and plentiful recreational opportunities,” said Interior Secretary Sally Jewell. “Today’s settlement is a significant step in restoring the natural resources that were impacted by the Deepwater Horizon oil spill and a breakthrough for building back the resilience of this region. The Trustees will continue to work with people along the coast to ensure they have every opportunity to be engaged in these meaningful recovery and restoration efforts that will generate jobs, improve water quality, support our tribal responsibilities and result in an improved wildlife habitat for migratory birds and hundreds of vulnerable species.”
“Through this historic settlement, USDA will continue working with rural communities, landowners and other partners to conserve watersheds and working lands,” said Agriculture Secretary Tom Vilsack. “This work will benefit the Gulf of Mexico and its associated natural resources as well as help local economies that were damaged by the Deepwater Horizon Oil Spill.”
“Today is a day of justice for every family and every Gulf community whose health, land, water, and livelihoods were threatened by the Deepwater Horizon disaster,” said Administrator Gina McCarthy of EPA. “This settlement puts billions of dollars to work to help restore the Gulf, and holds BP publically accountable for changes to its practices, to prevent this kind of disaster from happening again.”
“Today’s settlement ensures that BP repays the Government for its costs in responding to the Deepwater Horizon tragedy,” said Admiral Paul Zukunft of the U.S. Coast Guard Commandant. “The historic civil penalty also sends a clear message of accountability for those who pollute the U.S. environment. In addition, this settlement is a positive step toward restoring our Gulf Coast to health and to ensure that it remains a national centerpiece for economic prosperity, a place of recreation and, most importantly, a pristine home to the generations of Americans who work and reside along its bays, rivers and estuaries.”
On April 10, 2010, less than 50 miles off the coast of Louisiana, the Macondo well suffered a catastrophic blowout. The ensuing explosion and fire destroyed the Deepwater Horizon drilling rig, killing 11 men aboard and sending more than three million barrels of oil into the Gulf of Mexico over a period of nearly three months. Oil flowed within deep ocean water currents hundreds of miles away from the blown-out well, resulting in oil slicks that extended across more than 43,000 square miles, affecting water quality and exposing aquatic plants and wildlife to harmful chemicals. Oil was deposited onto at least 400 square miles of the sea floor and washed up onto more than 1,300 miles of shoreline from Texas to Florida.
The spill damaged and temporarily closed fisheries vital to the Gulf economy, oiled hundreds of miles of beaches, coastal wetlands and marshes and killed thousands of birds and other marine wildlife, among other economic and natural resource injuries.
On Dec. 15, 2010, Attorney General Eric Holder announced a civil lawsuit against BP and several co-defendants, seeking to hold them accountable for the Deepwater Horizon disaster. The federal lawsuit culminated in a three-phase civil trial in which the United States proved, among other things, that the spill was caused by BP’s gross negligence.
Each of the Gulf States – Alabama, Florida, Louisiana, Mississippi and Texas – also filed civil claims against BP relating to the spill, including claims for economic losses and natural resource damages.
Under the terms of a consent decree lodged in federal court in New Orleans this morning, BP must pay the following:
$5.5 billion federal Clean Water Act penalty, plus interest, 80 percent of which will go to restoration efforts in the Gulf region pursuant to a Deepwater-specific statute, the RESTORE Act. This is the largest civil penalty in the history of environmental law.
$8.1 billion in natural resource damages, this includes $1 billion BP already committed to pay for early restoration, for joint use by the federal and state trustees in restoring injured resources. BP will also pay up to an additional $700 million, some of which is in the form of accrued interest, specifically to address any later-discovered natural resource conditions that were unknown at the time of the agreement and to assist in adaptive management needs. The natural resource damages money will fund Gulf restoration projects that will be selected by the federal and state trustees to meet five different restoration goals and 13 restoration project categories. These include restoration focusing on supporting habitats such as coastal wetlands, but also provide for specific resource types, such as marine mammals, fish and water column invertebrates, sturgeon, submerged aquatic vegetation, oysters, sea turtles, birds and lost recreational use, among others.
$600 million for other claims, including claims for reimbursement of federal and state natural resource damage assessment costs and other unreimbursed federal expenses and to resolve a False Claims Act investigation due to this incident.
The payments will be made over time and are backed by parent company guarantees from BP Corporation North America Inc. and BP P.L.C.
Additionally, BP has entered into separate agreements to pay $4.9 billion to the five Gulf states and up to a total of $1 billion to several hundred local governmental bodies to settle claims for economic damages they have suffered as a result of the spill.
Notice of both the consent decree and the draft damage assessment and restoration plan are published in the federal register. Both will be available for public comment for 60 days. The materials and instructions for commenting on the consent decree can be found at http://www.justice.gov/enrd/deepwater-horizon. The materials and instructions for commenting on the draft damage assessment and restoration plan and draft environmental impact statement can be found at www.gulfspillrestoration.noaa.gov. A series of public meetings will be held in the Gulf region and Washington, D.C. to solicit comments on the proposed consent decree and the draft restoration plan.
Earlier settlements:
The settlements announced today are in addition to several earlier criminal and civil settlements of federal government claims concerning the Deepwater Horizon disaster.
First, on Feb. 17, 2012, MOEX Offshore 2007 LLC, which had a 10 percent stake in the well, agreed to settle its liability for the Deepwater Horizon oil spill in a settlement with the United States valued at $90 million. Approximately $45 million of the $90 million settlement was dedicated to directly benefit the Gulf in the form of penalties, as well as coastal and habitat protection projects.
On Jan. 29, 2013, BP Exploration and Production Inc. pleaded guilty to illegal conduct leading to and after the 2010 Deepwater Horizon disaster, and was sentenced to pay $4 billion in criminal fines, penalties and restitution, including $2.4 billion for natural resource restoration.
On Feb. 14, 2013, Transocean Deepwater Inc., the Deepwater Horizon’s owner and operator, pleaded guilty to violating the Clean Water Act and was sentenced to pay $400 million in criminal fines and penalties, for its conduct in relation to the disaster. A separate civil settlement imposed a record $1 billion Clean Water Act penalty on Transocean and required the company to take significant measures to improve its performance and prevent recurrence of this conduct.
Urging Global Assistance for Syrian refugees, European Union at UN says ‘Everyone Can Offer Help’
With Europe confronting its worst refugee crisis since World War II, the continent’s leaders mounted the podium of the United Nations General Assembly today to call for global action to end the conflict in war-torn Syria and elsewhere that has sent hundreds of thousands of people fleeing to their shores.
“The crisis we are talking about has global dimensions and demands a global solution,” European Council President Donald Tusk told world leaders on the second day of the Assembly’s 70th annual General Debate, chiding those who cite European tensions over how to tackle the influx as an example of ill treatment.
“If in Europe we are engaged in animated discussions on relocation quotas, it is because we care. It is because we seek to be as effective and as inclusive as possible. But quotas are just a fraction of what Europe is already doing to help those who flee wars and persecution,” he said.
“By contrast, many countries represented here deal with this problem in a much more simple way; namely by not allowing migrants and refugees to enter their territories at all. This is why suggesting that Europe is an example of poor treatment or indifference towards asylum-seekers is sheer hypocrisy,” he declared.
“Everyone can offer help to the refugees. And those who do not want to, at least shouldn’t hide their indifference by criticizing Europe for doing too little.”
Mr. Tusk said Syria’s crisis will not be solved unless a common denominator of interests is found among the regional players. He warned, however, that a peace plan must not just define a new division into spheres of influence but above all must safeguard the interests of millions of Syrians, including those internally displaced those that have fled the country.
The fight against terrorism is important in this context, he added, but stressed that many refugees are fleeing the state terrorism of Syrian President Bashar al-Assad.
“Today the circle of proponents of the idea that Bashar al-Assad should be part of Syria’s transition is growing. Yet we cannot forget that millions of people have fled his horrific methods of trying to secure stability in Syria,” he declared.
Mr. Tusk’s message was echoed by national leaders. “Not helping is not an option for us,” Finnish President Sauli Niinisto told the Assembly, stressing that Finland is receiving proportionally a very high number of asylum-seekers.
President Sauli Niinistö of Finland addresses the general debate of the General Assembly’s seventieth session. UN Photo/Cia Pak
“But we have to find more effective and sustainable ways to help those in need. Solving the conflict in Syria and elsewhere is essential for any lasting solution,” he said, calling the “horrendous terror” of the [Islamic State of Iraq and the Levant] group in Syria and Iraq a direct product of the conflicts there.
“The international community must now show that we do care. Especially the UN Security Council and the countries in the region, must work together on finding a political solution to the crisis in Syria,” he added, reaffirming Finland’s commitment to international coalition to counter the so-called ‘Islamic State.’
Mr. Niinisto also said Russia’s “illegal” annexation of Crimea must not be recognized, announced that Finland would increase its contribution to UN peacekeeping operations at a time of ever more violent conflicts, stressed the need for urgent action at December’s climate change conference in Paris, and suggested that the next UN Secretary-General should be a woman.
Estonian President Toomas Hendrik Ilves stressed the need to deal with the root causes of the migration crisis. “But this truly biblical movement of peoples demands a global response,” he said, noting that the European Union (EU), the main donor, has already mobilized some €4 billion already mobilised to Syrian refugees and internally displaced persons (IDPs).
President Toomas Hendrik Ilves of Estonia addresses the general debate of the General Assembly’s seventieth session. UN Photo/Cia Pak
He voiced extreme concern at the rising support for far right or far left political movements in Europe, often fuelled by anti-immigrant, racist sentiments. “Short-sighted, populist policies exploiting fears of ordinary people will lead to nowhere,” he said.
Mr. Ilves deplored Russia’s “illegal” occupation of Crimea and called for an end to the aggression against Ukraine.
He noted that this year is the l0th anniversary of the Responsibility to Protect, under which all UN Member States commit to protecting their people from genocide, war crimes, ethnic cleansing and crimes against humanity.
“The Security Council bears primary responsibility in this regard,” he stressed. “Unfortunately, in most serious situations, the Security Council has failed to act due to the use of the veto. It is disappointing that in cases of Syria and Ukraine the Council debates have brought no result.
“Council members must not vote against actions aimed at preventing and stopping mass atrocity crimes,” he said, calling for the right of veto by the five permanent members – China, France, Russia, the United Kingdom and the United States – to be excluded in cases of genocide, crimes against humanity, war crimes or other atrocities.
Also calling for a global response, Italian Prime Minister Matteo Renzi said Europe was born to tear down walls, not to build them. “This is why Italy is in the front line in rescuing thousands of migrants who are fleeing war and despair,” he declared.
Prime Minister Matteo Renzi of Italy addresses the general debate of the General Assembly’s seventieth session. UN Photo/Kim Haughton
“All of us acknowledge and have touched with our own hands the failure of inertia… more than ever before a very dangerous enemy is at our doors,” he added, referring to the Islamic State. “We have to unite our forces and fight against the threat of terrorism.”
He said Italy was also ready to cooperate with the new Libyan Government and would be ready, if asked, to take a leading role in a mechanism to stabilize the violence-torn North African country.
For his part, Romanian President Klaus Werner Iohannis also called for addressing the full dimensions of the current massive waves of migration.
Klaus Werner Iohannis, President of Romania, addresses the general debate of the General Assembly’s seventieth session. UN Photo/Cia Pak
“This phenomenon needs not just responses to the immediate humanitarian needs of the refugees of migration but to the root causes,” he said.
Like his Estonian counterpart he, too, called for the non-use of the veto in the Security Council when dealing with mass atrocities, warning that inaction created the impression that unlawful territorial gains, such as in Ukraine, were tolerated.
The need for restricting the right to veto was also emphasized by Lithuanian President Dalia Grybauskaité, who said this would have been beneficial in Syria to stop the Government’s use of barrel bombs and gross human rights violations.
President Dalia Grybauskaite of Lithuania addresses the general debate of the General Assembly’s seventieth session. UN Photo/Cia Pak
“The Security Council failed to do so and millions of Syrians had to flee,” she declared. “The four vetoes on resolutions on Syria did nothing to solve the situation. As a result today we have the largest humanitarian crisis in the world.”
Turning to Ukraine, Ms. Grybauskaité said the UN Charter has been breached with no consequences as Russia seeks to revise history and redraw borders, with Russian aggression in Crimea and eastern Ukraine striking at the very core of international principles.
“Our collective failure to stand up for the undeniable principles of independence, sovereignty, unity and territorial integrity of Ukraine will have far-reaching repercussions for the international order.
“The occupied territories of Ukraine, Georgia and Moldova are full of red lines that we have drawn ourselves but never acted upon,” she added, stressing that the UN must have the tools to operate in the 21st century.
Czech Republic President Miloš Zeman called for coordinated action under the umbrella of the Security Council to combat terrorism.
President Miloš Zeman of the Czech Republic addresses the general debate of the General Assembly’s seventieth session. UN Photo/Cia Pak
“What we need are small military units equipped by drones, by helicopters, by cooperation of secret services by commandos or, if you wish rangers, the small blue helmets of some sort which would eliminate the leaders of terroristic organizations, the nerve centres of those organizations, and not the occupation of territory.”
He called on Security Council members to introduce such a resolution.
In his remarks, Philip Hammond, Secretary of State of the United Kingdom, said the world faces deep challenges from those that would undermine international peace and security. Indeed, conflict and tyranny the North Africa and the Middle East has driven millions of people to abandon their homes, sparking a humanitarian emergency on an unprecedented scale.
Philip Hammond, Secretary of State for Foreign and Commonwealth Affairs of the United Kingdom, addresses the general debate of the General Assembly’s seventieth session. UN Photo/Cia Pak
“And many millions more still live under regimes in which they have no say about how they are governed and in which human rights and fundamental freedoms are denied,” he said, adding that the multilateral system is also being undermined by States willing to violate the territorial integrity of others or to breach the most fundamental prohibitions on weapons of mass destruction.
“Alongside these, we face the longer-term threats posed by climate change, pandemics and anti-microbial resistance; threats that we must tackle collectively now if we are not to put the lives of future generations at risk,” said Mr. Hammond, emphasizing however that: “It is in Iraq and Syria…that our collective values and our will to act are being most immediately challenged.
The “twin evils of [Syrian leader] Bashar al-Assad’s murderous regime and the brutality of ISIL” have inflicted suffering on the Syrian people “on an almost unimaginable scale.” He said that the humanitarian consequences, as well as the refugee and migration crisis, were testaments to the dire situation. He urged all countries to ensure that the UN appeals for Syria are fully funded.
After Latest Round of Peace Talks, Colombia on ‘Final Path’ to End 50-year Conflict, President tells UN
30 September 2015 – President Juan Manuel Santos told the United Nations General Assembly today that Colombia’s 50-year conflict is coming to an end, following the latest advances in the three-year peace process between the Government and Revolutionary Armed Forces of Colombia (FARC) rebels.
“Colombia is on the path to peace,” President Santos declared, telling officials gathered for the Assembly’s annual high-level debate that in a world in which there were more than 20 armed conflicts taking place, he was proud to announce that the conflict in Colombia was on the final path to a genuine solution.
Colombia had put an end to the longest armed conflict in the Western Hemisphere. “Using courage and responsibility,” Colombia he said, was bringing an end to more than 50 years of internal warfare. “Peace is a difficult path, but not an impossible one, and [we] are dedicated to it. Peace “requires that every person inside opens their mind, heart and soul to reconciliation,” he added.
Providing details about the latest steps in the peace process, Mr. Santos said that less than a week ago, in Havana, Cuba, which had been hosting the talks between the sides, Colombia had reached an agreement on the most significant obstacle to peace in the country.
The accord laid down a system of transitional justice to ensure that there was no impunity for the perpetrators of the crimes. The system respected the principles of international and national law. “Our goal was maximum justice, which would allow us to move to peace,” he said.
The agreement set out an accountability system in the form of a national court for crimes. The system could serve as a precedent for other armed conflicts in the world. Significantly, a deadline for the signing of a final agreement by 23 March 2016 had been set. In addition, the FARC would begin to lay down its arms no later than 60 days after the signing. He could return to the Assembly next year representing a Government in peace.
“On behalf of 48 million Colombians, I thank the international community for its efforts,” he said, underscoring that a Colombia at peace would help the country deal with global challenges, such as climate change, the eradication of extreme poverty and other pressing concerns on the agenda of the UN. Colombia was the most biodiverse country, for its size, and it was extremely vulnerable to changes in climate. As such, he said that Colombia was keen to see forward movement on the environment-relegated elements of the Sustainable Development Goals (SDGs).
‘When We Stand Together, There Is No Limit To What We Can Achieve,’ Ban tells UN Assembly
Facing a world where inequality is growing, trust is fading, and impatience with leadership can be seen and felt far and wide, Secretary-General Ban Ki-moon set the stage for 70th General Debate of the United Nations General Assembly today with a call to “translate promises on paper to action on the ground” by backing a bold new sustainability agenda that aims to wipe out poverty and build a sustainable future for all.
“Our aim is clear. Our mission is possible. And our destination is in our sights: an end to extreme poverty by 2030; a life of peace and dignity for all,” the Secretary-General declared, noting that this session of the General Assembly had opened with a “towering achievement”: the adoption of the 2030 Agenda for, including 17 inspiring Sustainable Development Goals (SDGs).
What counts now is translating those promises on paper into real change, said the UN chief, adding: “We owe this and much more to the vulnerable, the oppressed, the displaced and the forgotten people in our world. We owe this to ‘succeeding generations,’ in the memorable words the Charter.
“In this year in which we mark the 70th anniversary of the United Nations, we must heed the call of the Charter, and hear the voices of ‘we the peoples.’ That is how we can overcome the grim realities of the present – and seize the remarkable opportunities of our era,” declared the Secretary-General.
Mr. Ban’s annual opening message, which draws from his yearly report on the work of the Organization turned next to the pressing challenges of the day. Suffering is at heights not seen in a generation, he said, explaining that one hundred million people require humanitarian assistance. At least 60 million people have been forced to flee their homes or their countries.
“The United Nations has asked for nearly $20 billion to meet this year’s needs – six times the level of a decade ago. UN humanitarian agencies and our partners are braving difficult conditions to reach people. Member States have been generous, but demands continue to dwarf funding,” said the Secretary-General, urging all countries to do more to alleviate suffering in countries across the world, from war–torn Iraq, South Sudan, Yemen and Syria, to Gambia, where one in four children suffers from stunting, and the UN appeal “has been met with silence.
“Our aim is not just to keep people alive, but to give them a life ¬ a decent life,” Mr. Ban stressed, noting that Lebanon, Jordan and Turkey are generously hosting several million Syrian and Iraqi refugees, and that people are also on the move as never before in the Americas and the Sahel, in the Mediterranean and Andaman Seas.
Commending those in Europe that are upholding the European Union’s values and providing asylum, he urged countries to do more to shoulder their responsibilities, and recalled that he is convening in New York a high-level meeting on 30 September aimed at promoting a comprehensive approach to the refugee and migration crisis. “We must combat discrimination,” he added. “In the 21st century, we should not be building fences or walls.”
Turning to the crisis in Syria, the Secretary-General said four years of diplomatic paralysis by the Security Council and others have allowed it to spin out of control, despite the responsibility for ending the conflict lying first and foremost with the Syrian warring parties.
“My Special Envoy is doing everything he can to forge the basis for a peaceful settlement. It is time now for others, primarily the Security Council and key regional actors, to step forward,” he declared, stating that five countries in particular hold the key: Russia, the United States, Saudi Arabia, Iran and Turkey.
Meanwhile in Yemen, 21 million people – 80 per cent of the population – need humanitarian assistance. While calling for an end to the bombings, Mr. Ban said all sides are showing disregard for human life, but most of the casualties are being caused by air-strikes.
Regarding the Middle East Peace Process, the Secretary-General said “the world can no longer wait for leaders to finally choose a path to peace.”
“With settlements expanding and incitement and provocations on the rise, it is essential for Israelis and Palestinians to re-engage – and for the international community to pressure the parties to do so,” he stressed.
He also announced that early next year he will present to the General Assembly a comprehensive plan of action on addressing the menace of violent extremism, as Da’esh [also known as the Islamic State of Iraq and the Levant, or ISIL], Boko Haram and Al-Shabaab remain major threats, especially to the women and girls who have been systematically targeted.
Furthermore, the Secretary-General commended progress made on several global issues, such as the nuclear agreement between Iran and the P5+1countries [China, France, Germany, Russia, the United Kingdom and the United States] and recent agreements in South Sudan. He called on the international community to finalize the agreement in Libya and to continue the dialogue to address tensions on the Korean Peninsula.
He voiced that he is deeply troubled by growing restrictions on media freedoms and civil society across the world and urged leaders to abide by the constitutional limits on their terms.
“Earlier this month, I put forward my vision for strengthening UN peace operations, building on the recommendations of an independent panel,” Mr. Ban explained, highlighting that the potential of women to advance peace must be unlocked.
To this effect, the Secretary-General is co-hosting a meeting today on the margins of the General Assembly, focused on UN peacekeeping and how to strengthen it in concrete and meaningful ways.
“Over the past 70 years, we have helped to liberate millions from colonialism and supported the successful struggle against apartheid,” he declared. “We have defeated deadly diseases, defended human rights and deepened the rule of law. This and more we have done – but that is far from enough.”
Mr. Ban said he is inspired by the world’s young people whose voices must be integrated more fully in decision-making everywhere.
“There is nothing we can say to the world’s children that can convince them the world needs to be the way it is,” he stated. “That means we must do everything we can to close the gap between the world as it is, and the world as it should be.”
“That is the mission of the United Nations,” he concluded.
Hudson City Savings Bank Gets Settlement to Resolve Allegations of Mortgage Lending Discrimination
The Justice Department and Consumer Financial Protection Bureau (CFPB) filed a consent order today to resolve allegations that Hudson City Savings Bank (Hudson City) engaged in a pattern or practice of “redlining” predominantly Black and Hispanic neighborhoods in its residential mortgage lending practices. “Redlining” is the discriminatory practice by banks or other financial institutions to deny or avoid providing credit services to a consumer because of the racial demographics of the neighborhood in which the consumer lives. This resolution represents the Justice Department’s largest residential mortgage redlining settlement in its history.
The settlement, which is subject to court approval, was filed in conjunction with the agencies’ complaint in the U.S. District Court for the District of New Jersey. The complaint alleges that Hudson City violated the Fair Housing Act and Equal Credit Opportunity Act (ECOA), which prohibit financial institutions from discriminating on the basis of race, color or national origin in their mortgage lending practices. Specifically, the complaint alleges that from at least 2009 to 2013, Hudson City failed to serve the credit needs of majority-Black-and-Hispanic neighborhoods throughout its major market areas, including in New Jersey, New York City and its surrounding counties, and the Philadelphia and Bridgeport, Connecticut, metropolitan areas. Hudson City has agreed to settle this matter without contested litigation.
“This case should send a message to lenders throughout the country that the Justice Department will not tolerate racial discrimination in the extension of credit,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division. “A lending institution must treat all potential borrowers equally, regardless of their race or the racial composition of their neighborhood, when deciding to offer its loan services. We encourage all lenders to proactively identify responsible lending opportunities that exist in predominantly minority neighborhoods within their lending areas.”
“Hudson City Savings Bank structured its business operations to systemically avoid providing credit services in predominantly minority neighborhoods,” said U.S. Attorney Paul J. Fishman of the District of New Jersey. “There is no room for such behavior in our banking system. In addition to paying $25 million for a loan subsidy program, today’s settlement agreement will require the bank to take a number of concrete steps to ensure that they improve access to responsible and affordable credit to qualified borrowers in Black and Hispanic neighborhoods.”
“We allege that Hudson City’s redlining practices illegally cut off opportunities for consumers in predominantly Black and Hispanic neighborhoods to get a mortgage and achieve the dream of homeownership,” said CFPB Director Richard Cordray. “Without access to affordable credit, neighborhoods deteriorate in the long shadow cast by unfair lending. Today’s action seeks to remove the redline by bringing $27 million in mortgage subsidies and outreach programs, along with new bank branches to the communities who should have had access from the beginning.”
The lawsuit originated from a joint investigation with the CFPB that commenced in March 2015.
Under the terms of the proposed settlement, Hudson City will invest $25 million in a loan subsidy fund to increase the amount of credit the bank extends to majority-Black-and-Hispanic neighborhoods across its market areas. In order to make residential mortgage loans available to residents of minority neighborhoods that were not adequately served by Hudson City, the bank will further invest $2.25 million in advertising, outreach, financial education, and community partnership efforts and open two full-service branches in these neighborhoods. The settlement will require Hudson City to further develop robust internal controls to ensure compliance with fair lending obligations, provide fair lending training to its employees, senior management, and the Board of Directors, and create a comprehensive long-term plan to increase lending in previously redlined areas. Hudson City will further pay a civil monetary penalty of $5.5 million.
The Justice Department’s enforcement of fair lending laws and the Servicemembers Civil Relief Act is conducted by the Housing and Civil Enforcement Section in the Civil Rights Division. Since 2010, the Civil Rights Division has provided approximately $1.3 billion in monetary relief for individual borrowers and impacted communities through its enforcement of the Fair Housing Act, ECOA and the SCRA. The Attorney General’s annual reports to Congress on ECOA enforcement highlight the department’s accomplishments in fair lending and are available at www.justice.gov/crt/publications/.
The Civil Rights Division, the U.S. Attorney’s Office for the District of New Jersey, and the Consumer Financial Protection Bureau are members of the Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit www.StopFraud.gov.
Former Peanut Company President Receives Largest Criminal Sentence in Salmonella-Tainted Peanut Product Outbreak
Two former officials of and one broker for the Peanut Corporation of America (PCA) were sentenced to prison today in Albany, Georgia, for their roles in a conspiracy to defraud their customers by shipping salmonella-positive peanut products before the results of microbiological testing were received and falsifying microbiological test results, the Department of Justice announced today.
Stewart Parnell, 61, of Lynchburg, Virginia, the former owner and president of PCA, was sentenced by Senior U.S. District Court Judge W. Louis Sands of the Middle District of Georgia to serve 336 months in prison to be followed by three years of supervised release. Michael Parnell, 56, of Midlothian, Virginia, who worked at P.P. Sales and was a food broker who worked on behalf of PCA, and is Stewart Parnell’s brother, was sentenced to serve 240 months in prison to be followed by three years of supervised release. Mary Wilkerson, 41, of Edison, Georgia, who held various positions at PCA’s Blakely, Georgia, plant including receptionist, office manager and quality assurance manager, was sentenced to serve 60 months in prison to be followed by two years of supervised release. Judge Sands will issue a restitution order at a later date.
The Parnell brothers were convicted by a federal jury on Sept. 19, 2014, of multiple counts of conspiracy, mail and wire fraud and the sale of misbranded food. Stewart Parnell was also convicted of the introduction of adulterated food into interstate commerce. Stewart Parnell and Mary Wilkerson were also convicted of obstruction of justice. Stewart Parnell was found guilty of all but one of the 68 felony counts with which he was charged on Feb. 15, 2013.
Expert evidence at trial showed that tainted food led to a salmonella outbreak in 2009 with more than 700 reported cases of salmonella poisoning in 46 states. According to the Centers for Disease Control and Prevention (CDC), based on epidemiological projections, that number translates to more than 22,000 total cases including nine deaths. The court found that the evidence presented at trial linked Stewart and Michael Parnell’s conduct, and specifically PCA’s contaminated peanut products, to the victims’ illnesses. The court also found that steps taken by the CDC to link reported illnesses to the specific strain of salmonella found in PCA products established that Stewart and Michael Parnell’s conduct was the proximate cause of the victims’ illnesses.
“Americans should be able to trust that the food we buy for ourselves and our families is safe,” said Acting Associate Attorney General Stuart F. Delery. “The sentences handed down today to officials associated with the Peanut Corporation of America demonstrate the consequences for those whose criminal actions threaten that trust by introducing contaminated food into the marketplace. Our prosecution is just one more example of the forceful actions that the Department of Justice, with its agency partners, takes against any individual or company who compromises the safety of America’s food supply for financial gain.”
The government presented evidence at trial to establish that Stewart Parnell and Michael Parnell – with former PCA operations manager Samuel Lightsey, 50, and Daniel Kilgore, 46, both of Blakely – participated in several schemes by which they defrauded PCA customers and jeopardized the quality and purity of their peanut products. Specifically, the government presented evidence that the defendants misled customers about the presence of salmonella in their products. For example, the Parnells, Lightsey and Kilgore fabricated certificates of analysis (COAs) accompanying various shipments of peanut products. COAs are documents that summarize laboratory results, including test results concerning the presence or absence of pathogens in food. According to the evidence, on several occasions, the Parnells, Lightsey and Kilgore participated in a scheme to fabricate COAs that stated that the food at issue was free of pathogens when in fact there had been no testing of the food or tests had revealed the presence of pathogens.
The government also presented evidence that when the U.S. Food and Drug Administration (FDA) officials visited PCA’s Blakely plant to investigate the outbreak, Stewart Parnell, Lightsey and Wilkerson gave untrue or misleading answers to questions posed by those officials.
“Today’s sentencing sends a powerful message to officials in the food industry that they stand in a special position of trust with the American consumer, and those who put profit above the welfare of their customers and knowingly sell contaminated food will face serious consequences,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “The Department of Justice will continue to work aggressively with its partners to ensure that the American people are protected from food that is adulterated or misbranded within the meaning of the Food, Drug, and Cosmetic Act and pursue any person who fails to abide by the vital food safety protections in the law. We are dedicated to using all the tools that we have at our disposal to ensure that the processors and handlers of our food have the public’s safety forefront in their minds.”
“The sentence that was handed down today means that executives will no longer be able to hide behind the corporate veil,” said U.S. Attorney Michael J. Moore of the Middle District of Georgia. “The tragedy of this case is that at a peanut processing plant in Middle Georgia, protecting the public lost out to increasing of profits. This case was never just about shipping tainted peanut product; it was about making sure individual wrong doers were held accountable and the losses suffered by the victims and their families are never forgotten.”
Judge Sands took into account the fraud loss of PCA’s corporate victims when imposing today’s sentence. The court found that Stewart Parnell and Mary Wilkerson should be held accountable for more than $100 million but less than $200 million in losses, and Michael Parnell should be held accountable for more than $20 million but less than $50 million in losses. The court also found the government established evidence that Stewart Parnell and Mary Wilkerson should be accountable for harming more than 250 victims, and Michael Parnell should be accountable under federal sentencing guidelines for harming more than 50 victims. The court additionally found that the Parnells should have known that their actions presented a reckless risk of death or serious bodily injury.
“At the outset, the FBI saw this case as a serious breach of the public’s trust by a corporation and its officers who were expected to comply with the various regulations that would ensure their products safe for consumption,” said Special Agent in Charge J. Britt Johnson of FBI Atlanta Field Office. “They did not and lives were lost. The lengthy prison sentences handed down today in federal court clearly reflects the magnitude of the criminal conduct of these corporate officers and it is hoped that these sentences can provide some solace to those victims or their families who suffered so much from that criminal conduct and waited so long for justice.”
“Americans expect and deserve the highest standards of food safety and integrity,” said Dr. Stephen Ostroff, FDA Acting Commissioner. “Those who choose profits over the health and safety of U.S. consumers are now on notice that the FDA, working with the Department of Justice, will strive to use the full force of our justice system against them.”
Lightsey and Kilgore are scheduled to be sentenced on Thursday, Oct. 1, in Albany.
The case was prosecuted by Trial Attorneys Patrick Hearn and Mary M. Englehart of the Civil Division’s Consumer Protection Branch and Assistant U.S. Attorney Alan Dasher of the Middle District of Georgia. Acting Associate Attorney General Delery, Principal Deputy Assistant Attorney General Mizer and U.S. Attorney Moore thank the investigative efforts of the FBI and FDA’s Office of Criminal Investigations.
Interior, Justice Departments Announce $940 Million Landmark Settlement with Nationwide Class of Tribes and Tribal Entities
The U.S. Department of Justice and the U.S. Department of the Interior (Interior) today announced a $940 million proposed settlement with a nationwide class of Native American Tribes and tribal entities that, if approved by the federal district court, would resolve a 25-year-old legal dispute related to contract support costs for tribal agencies. The proposed settlement would address claims that the United States contracted with tribes to run programs but did not pay the full amounts required by law.
“This landmark settlement represents another important step in the Obama Administration’s efforts to turn the page on past challenges in our government-to-government relationship with tribes,” said Interior Secretary Sally Jewell. “Tribal self-determination and self-governance will continue to be our North Star as we navigate a new chapter in this important relationship and we are committed to fully funding contract support costs so that tribal contracting can be more successful. Congress can and should make this happen. Today’s announcement resolves past claims and allows money wrapped up in litigation to be used more productively.”
The proposed settlement, announced today by Interior Secretary Jewell, Assistant Secretary for Indian Affairs Kevin Washburn and Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division, would address claims that the government contracted with tribes and tribal agencies to run Bureau of Indian Affairs (BIA) programs like law enforcement, forest management, fire suppression, road maintenance, housing, federal education and other support programs, but failed to appropriate sufficient funds to pay the costs under the agreements. Native American tribal agencies manage these programs under the Indian Self-Determination Act of 1975.
“The Department of Justice is pleased that the parties have reached an agreement to finally resolve this litigation that has spanned four administrations,” said Principal Deputy Assistant Attorney General Mizer. “This agreement was long in the making – reached only after years of complex negotiations – and both sides can be proud of the result.”
This proposed settlement was filed yesterday in U.S. District Court in Albuquerque, New Mexico, and will require court approval. The proposed settlement would resolve the government’s liability and avoid years of tedious contract-by-contract litigation that would require tens of thousands of hours of work by federal and tribal attorneys as well as expert auditors and accountants.
The claims arose because of a mismatch between federal self-determination laws and available appropriations. While the federal government has signed contracts that provided for certain amounts to cover administrative costs of implementing contracts – such as workers’ compensation costs for tribal employees – Congress capped appropriated funds available to pay for these costs. This funding gap was one of the sources of the claims, which were raised in a class action lawsuit filed in 1990.
“Time and again, we have seen that when a tribal government runs a federal program, the program is more successful and more responsive to the tribal community,” said Assistant Secretary Washburn. “Today’s proposed settlement, together with President Obama’s request for full, mandatory funding of tribal contract support costs in the future, removes one of the significant obstacles to tribal self-determination and self-governance. Tribes can now be confident that the federal government will pay sufficient costs to allow them to be successful in running federal programs.”
In 2012, the issue reached the Supreme Court, which ultimately agreed with the Tribes that the government was liable for the payments, regardless of whether Congress had appropriated adequate funds. Since 2012, the United States has been negotiating with tribal entities to find a fair and efficient resolution of this dispute and to pay the money owed.
In the president’s fiscal year 2016 budget request to Congress for the Departments of the Interior and Health and Human Services, the administration proposed a long-term solution to this persistent problem: mandatory, non-discretionary funding, beginning in fiscal year 2017, for contract support costs.
The proposed settlement marks another significant effort by the Obama Administration to address long-running litigation concerning federal policy in Indian Country, so that Tribes and the federal government can enjoy a more fruitful and constructive relationship in the future. Since 2010, the Departments of Justice and the Interior have settled the Cobell class action lawsuit, and more than 80 similar lawsuits brought by various American Indian tribes, alleging breach of trust for federal mismanagement of their financial assets and natural resources.
Criminal Charges Against General Motors and Deferred Prosecution Agreement with $900 Million Forfeiture
Attorney General Loretta E. Lynch, Secretary Anthony Foxx of the Department of Transportation, U.S. Attorney Preet Bharara of the Southern District of New York, Administrator Mark R. Rosekind of the National Highway Traffic Safety Administration (NHTSA), Inspector General Calvin L. Scovel III of the U.S. Department of Transportation (DOT-OIG), Special Inspector General Christy Goldsmith Romero of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), and Assistant Director in charge Diego Rodriguez of the FBI’s New York Field Office, announced the filing of criminal charges against General Motors Company (GM or the company), an automotive company headquartered in Detroit, that has designed, manufactured, assembled and sold Chevrolet, Pontiac and Saturn brand vehicles, among others. GM is charged with concealing a potentially deadly safety defect from its U.S. regulator, the National Highway Traffic Safety Administration (NHTSA), from the spring of 2012 through February 2014, and, in the process, misleading consumers concerning the safety of certain of GM’s cars. The defect consisted of an ignition switch that had been designed and manufactured with too-low torque resistance and could therefore move easily out of the “Run” position into “Accessory” or “Off” (the defective switch). When the switch moved out of Run, it could disable the affected car’s frontal airbags – increasing the risk of death and serious injury in certain types of crashes in which airbags were otherwise designed to deploy. The models equipped with the defective switch were the 2005, 2006 and 2007 Chevrolet Cobalt; the 2005, 2006 and 2007 Pontiac G5; the 2003, 2004, 2005, 2006 and 2007 Saturn Ion; the 2006 and 2007 Chevrolet HHR; the 2007 Saturn Sky; and the 2006 and 2007 Pontiac Solstice. To date, GM has acknowledged a total of 15 deaths, as well as a number of serious injuries, caused by the defective switch.
U.S. Attorney Bharara also announced a deferred prosecution agreement with GM (the agreement) under which the company admits that it failed to disclose a safety defect to NHTSA and misled U.S. consumers about that same defect. The admissions are contained in a detailed statement of facts attached to the agreement. The agreement imposes on GM an independent monitor to review and assess policies, practices and procedures relating to GM’s safety-related public statements, sharing of engineering data and recall processes. The agreement also requires GM to transfer $900 million to the United States by no later than Sept. 24, 2015, and agree to the forfeiture of those funds pursuant to a parallel civil action also filed today in the Southern District of New York.
The criminal charges are contained in an information (the information) alleging one count of engaging in a scheme to conceal material facts from NHTSA and one count of wire fraud. If GM abides by all of the terms of the agreement, the government will defer prosecution on the information for three years and then seek to dismiss the charges.
“Every consumer has the right to expect that car manufacturers are taking their safety seriously,” said Attorney General Lynch. “The Department of Justice is committed to ensuring that the products Americans buy are safe; that consumers are protected from harm; and that auto companies follow the law.”
“General Motors not only failed to disclose this deadly defect, but as the Department of Justice investigation shows, it actively concealed the truth from NHTSA and the public,” said Transportation Secretary Foxx. “Today’s announcement sends a message to manufacturers: deception and delay are unacceptable, and the price for engaging in such behavior is high.”
“For nearly two years, GM failed to disclose a deadly safety defect to the public and its regulator,” said U.S. Attorney Bharara. “By doing so, GM put its customers and the driving public at serious risk. Justice requires the filing of criminal charges, detailed admissions, a significant financial penalty, and the appointment of a federal monitor. These measures are designed to make sure that this never happens again.”
“Today’s action strengthens NHTSA’s efforts to protect the driving public,” said Administrator Rosekind. “It sends a message not only to GM, but to the entire auto industry, that when it comes to safety, telling the full truth is the only option.”
“To the families and friends of those who died and to those who were injured as a result of crashes related to GM’s defective ignition switches, I offer my deepest sympathies for your loss and my highest admiration for the strength you demonstrate every day,” said Inspector General Scovel III. “As is true for Secretary Foxx and the Department of Transportation, safety is and will remain the highest priority of my office, and we will continue to work relentlessly to ensure accountability throughout the Department and transportation sector. The OIG is committed to working with our law enforcement and prosecutorial partners in pursuing those who commit criminal violations. The efforts of this dedicated multi-agency team and the agreement reached with General Motors, and that with Toyota in March 2014, must continue to serve as a clarion call to all auto manufacturers and their suppliers of the need to be vigilant and forthcoming to keep the public safe.”
“General Motors’ criminal conduct found by SIGTARP and our law enforcement partners defies comprehension,” said Special Inspector General Goldsmith Romero. “Our investigation uncovered that GM learned about a life-threatening ignition switch defect that would cause air bags not to inflate, but concealed the deadly safety defect from its regulator, and from people buying used cars from GM dealers. The worst part about this tragedy is that it was entirely avoidable. GM could have significantly reduced the risk of this deadly defect by improving the key design for less than one dollar per vehicle but GM chose not to because of the cost. Americans stepped up and bailed out General Motors with $50 billion; and General Motors must step up and make substantial corporate changes to prevent anything like this from happening again. SIGTARP commends U.S. Attorney Bharara for bringing these charges and standing united in the fight against TARP-related crime.”
“GM concealed a safety defect from consumers and regulators, which put drivers at risk,” said Assistant Director in Charge Rodriguez. “The resolution of this case shows that safety should never take a backseat to expediency.”
According to the allegations in the information, as well as other documents filed today in the Southern District of New York, including the statement of facts:
From the spring of 2012 through February 2014, GM deceived consumers and failed to make a required disclosure to NHTSA, its U.S. regulator, by regarding the connection that certain of its personnel had identified between the defective switch and airbag non-deployment. GM also falsely represented to consumers that vehicles equipped with the defective switch posed no safety concern.
Early Knowledge of the Defective Switch
GM engineers knew before the defective switch even went into production in 2002 that it was prone to easy movement out of the Run position. Testing of a prototype showed that the torque return between the Run and Accessory positions fell below GM’s own internal specifications. But the engineer in charge of the defective switch approved its production anyway.
In 2004 and 2005, as GM employees, media representatives and GM customers began to experience sudden stalls and engine shutoffs caused by the defective switch, GM considered fixing the problem. However, having decided that the switch did not pose a safety concern, and citing cost and other factors, engineers responsible for decision-making on the issue opted to leave the defective switch as it was and simply promulgate an advisory to dealerships with tips on how to minimize the risk of unexpected movement out of the Run position. GM even rejected a simple improvement to the head of the key that would have significantly reduced unexpected shutoffs at a price of less than a dollar a car.
At the same time, in June 2005, GM made public statements that, while acknowledging the existence of the defective switch, gave assurance that the defect did not pose a safety concern.
GM’s Knowledge that the Defective Switch Causes Airbag Non-Deployment
By the spring of 2012, GM knew that the defective switch presented a safety defect because it could cause airbag non-deployment in certain GM cars. Specifically, GM personnel investigating the cause of a series of airbag non-deployment incidents learned that the defective switch could cause frontal airbag non-deployment in at least some model years of the Cobalt, and were aware of several fatal incidents and serious injuries that occurred as a result of accidents in which the defective switch may have caused or contributed to airbag non-deployment. This knowledge extended well above the ranks of investigating engineers to certain supervisors and attorneys at the company.
GM’s Failure to Disclose the Defect and Recall Affected Cars
Yet not until approximately 20 months later, in February 2014, did GM first notify NHTSA and the public of the connection it had identified between the defective switch and airbag non-deployment incidents. The company thus egregiously disregarded NHTSA’s five-day regulatory reporting requirement for safety defects.
Moreover, for much of the period during which GM failed to disclose this safety defect, it not only failed to correct its June 2005 assurance that the defective switch posed no safety concern but also actively touted the reliability and safety of cars equipped with the defective switch, with a view to promoting sales of used GM cars. Although GM sold no new cars equipped with the defective switch during this period, GM dealers were still, from in or about the spring of 2012 through in or about the spring of 2013, selling pre-owned Chevrolet, Pontiac and Saturn brand cars that would later become subject to the February 2014 recalls. These sales were accompanied by certifications from GM, assuring the unwitting consumers that the vehicles’ components, including their ignition systems and keys, met all safety standards.
GM’s delay in disclosing the defect at issue was the product of actions by certain personnel responsible for shepherding safety defects through GM’s internal recall process, who delayed the recall until GM could fully package, present, explain and handle the deadly problem. Rather than move swiftly and efficiently toward recall of at least the population of cars known to be affected by the safety defect and thus certainly destined for recall, GM personnel took affirmative steps to keep the company’s internal investigation into airbag non-deployment caused by the defective switch “offline” – outside of GM’s regular recall process.
Moreover, on at least two occasions while the defective switch condition was well known by some within GM but not disclosed to the public or NHTSA, GM personnel made incomplete and therefore misleading presentations to NHTSA assuring the regulator that GM would and did act promptly, effectively and in accordance with its formal recall policy to respond to safety problems – including airbag-related safety defects.
GM’s Acceptance of Responsibility and Cooperation in the Government Investigation
In February 2014, GM finally conducted a recall of approximately 700,000 vehicles affected by the defective switch. By March 2014, the recall population had grown to more than 2 million vehicles.
Since February 2014 and the inception of this federal criminal investigation, GM has taken exemplary actions to demonstrate acceptance and acknowledgement of responsibility for its conduct. GM, among other things, conducted a swift and robust internal investigation, furnished the government with a continuous flow of unvarnished facts gathered during the course of that internal investigation, voluntarily provided, without prompting, certain documents and information otherwise protected by the attorney-client privilege, provided timely and meaningful cooperation more generally in the federal criminal investigation, terminated wrongdoers and established a full and independent victim compensation program that has to date paid out hundreds of millions of dollars in awards.
Valiant Bank AG Reaches Resolution under Justice Department’s Swiss Bank Program
The Department of Justice announced today that Valiant Bank AG has reached a resolution under the department’s Swiss Bank Program.
“Offshore enforcement remains a top priority of the department, and banks seeking to avoid prosecution pursuant to the terms of the Swiss Bank Program continue to accept responsibility, provide a detailed account of the ways in which they have assisted U.S. individuals in willfully evading their U.S. tax obligations and fully cooperate with our ongoing investigations that are stretching around the globe,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division. “Those engaged in this criminal conduct who choose not to come forward, or come forward but offer only limited cooperation, picking and choosing the facts disclosed and attempting to minimize culpability, will quickly learn that the department is committed to aggressively investigating and prosecuting these offenses, and holding both individuals and entities accountable.”
The Swiss Bank Program, which was announced on Aug. 29, 2013, provides a path for Swiss banks to resolve potential criminal liabilities in the United States. Swiss banks eligible to enter the program were required to advise the department by Dec. 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts. Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.
Under the program, banks are required to:
Make a complete disclosure of their cross-border activities;
Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
Cooperate in treaty requests for account information;
Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;
Agree to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations; and
Pay appropriate penalties.
Swiss banks meeting all of the above requirements are eligible for a non-prosecution agreement.
According to the terms of the non-prosecution agreement signed today, Valiant agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay penalties in return for the department’s agreement not to prosecute this bank for tax-related criminal offenses.
Valiant traces its origins to 1824 and is headquartered in Bern, the capital of Switzerland. Today, Valiant is the successor of 40 banks.
Valiant offered hold mail services and numbered accounts to its U.S. clients, including some U.S. clients who had not provided Valiant with an Internal Revenue Service (IRS) Form W-9. Valiant also accepted funds from 19 UBS accountholders who exited UBS. Eleven of these 19 U.S. persons provided a signed Form W-9. The remaining eight U.S. persons who did not were later forced to close their Valiant accounts.
For 26 accountholders who refused to sign a Form W-9, Valiant cashed out or converted into gold hundreds of thousands (and even millions) of dollars in account balances. In late November 2011, one accountholder withdrew more than one million Swiss francs in various currencies and 114,000 Swiss francs in gold coins, gold bars and precious metal. Another accountholder withdrew $2 million in cash and wired 400,000 Swiss francs to a U.S. bank. In both instances, the accountholders refused to sign a Form W-9. Other accountholders withdrew only amounts under $10,000 either by U.S. dollar cash withdrawals or by check or wire transfer to the United States, or transferred large sums to non-U.S. institutions. For example, one accountholder transferred over 435,000 euros to France and $350,000 to Luxembourg. Two other accountholders each transferred 75,000 Swiss francs to Dubai and closed their accounts with cash withdrawals of over 300,000 Swiss francs.
In 2009, an accountholder refused to sign a Form W-9 and requested that Valiant ignore the accountholder’s U.S. status. The accountholder’s non-U.S. spouse later opened a separate account at Valiant, and the accountholder transferred more than $1 million into that account. According to an “Agreement of Donation” between the accountholder and the accountholder’s non-U.S. spouse, the purpose of the transfer was “to make a donation” and “without any consideration.” The agreement provided that the donation was “irrevocable.” The non-U.S. spouse then transferred the funds to UBS and instructed Valiant to close the account.
Some U.S.-related accounts at Valiant were held in the name of non-U.S. entities with one or more U.S. beneficial owners. In one case, a British Virgin Islands entity opened an account at Valiant through a third-party Swiss entity assigned to manage the account. The entity holding the account designated four U.S. persons as beneficial owners, but signed a Valiant form declaring that the account was for the benefit of non-U.S. persons.
Since Aug. 1, 2008, Valiant had 330 U.S.-related accounts, out of a total of 600,000 accounts. The maximum aggregate dollar value of the U.S.-related accounts was $147.4 million. Valiant will pay a penalty of $3.304 million.
In accordance with the terms of the Swiss Bank Program, Valiant mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations. While U.S. accountholders at Valiant who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.
Most U.S. taxpayers who enter the IRS Offshore Voluntary Disclosure Program to resolve undeclared offshore accounts will pay a penalty equal to 27.5 percent of the high value of the accounts. On Aug. 4, 2014, the IRS increased the penalty to 50 percent if, at the time the taxpayer initiated their disclosure, either a foreign financial institution at which the taxpayer had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement had been publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement. With today’s announcement of this non-prosecution agreement, noncompliant U.S. accountholders at Valiant must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.
“Today’s resolution with Valiant Bank AG marks another significant milestone in DOJ’s Swiss Bank Program,” said Acting Deputy Commissioner David Horton of the IRS Large Business & International Division. “These settlements ensure that U.S. taxpayers report their foreign accounts and pay their taxes on the income earned on those accounts. They also provide additional information that supports our efforts to fight offshore tax evasion and those who may be aiding this unlawful behavior.”
“Today is another example of the success of the Swiss Bank Program and our partnership with the Department of Justice,” said Chief Richard Weber of IRS-Criminal Investigation (CI). “We are proud of our joint efforts and the resulting success of the program to date. Each of these agreements is a recognition of that collaboration leading to increased international tax compliance. With each new partnership, we gain a wealth of information and assistance to put an end to the abusive practice of illegally concealing offshore accounts.”
Acting Assistant Attorney General Ciraolo thanked the IRS, and in particular, IRS-CI and the IRS Large Business & International Division for their substantial assistance. Ciraolo also thanked Brian D. Bailey, who served as counsel on this matter, as well as Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program Thomas J. Sawyer and Senior Litigation Counsel Nanette L. Davis of the Tax Division.
Quiksilver U.S. Launches Pre-Arranged Chapter 11 Restructuring With Support of 73% of U.S. Secured Noteholders
HUNTINGTON BEACH, Calif.- Sep. 9, 2015- Quiksilver, Inc. (NYSE:ZQK) (the “Company”) today announced that it commenced voluntary proceedings for relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) for its U.S. subsidiaries. The chapter 11 filing, which is supported by 73% of the Company’s senior most class of debt, will facilitate Quiksilver’s financial and operational restructuring, which is designed to restore the Company to long-term financial health.
The Company’s European and Asia-Pacific businesses and operations remain strong and are not part of this filing. Additionally, holders of the Company’s Eurobonds sufficient to waive any technical default arising from the filling have agreed to allow the Company to reorganize its U.S. operations in chapter 11.
Following the filing, Quiksilver will continue to operate in the ordinary course of business as a “debtor-in-possession” under the jurisdiction of the Bankruptcy Court. Contemporaneously with the filing, the Company has requested that the Bankruptcy Court approve $175 million in new debtor-in-possession financing (“DIP”) with affiliates of Oaktree Capital Management, L.P. (“Oaktree”) and Bank of America, N.A. The Company anticipates that such financing, in conjunction with other existing sources of liquidity, will be more than sufficient to fund its ongoing operations in the U.S. and abroad. The Company also requested various forms of “first day” relief from the Bankruptcy Court to ease the U.S. subsidiaries’ transition into chapter 11 and protect its stakeholders and customers.
The Plan Sponsor Agreement (“PSA”) with Oaktree provides a comprehensive blueprint for the Company’s emergence from chapter 11 as a going concern pursuant to a plan of reorganization, under which Oaktree has agreed to provide all necessary funding for the chapter 11 process and will convert its substantial debt holdings into a majority of the stock in the reorganized Company on exit. The PSA contains certain conditions, including confirmation of a plan of reorganization by the Bankruptcy Court.
Oaktree is a leader among global investment managers specializing in alternative investments, with over $100 billion in assets under management. The firm, which emphasizes a value-oriented and risk controlled approach to investments, has a proven track record of success assisting companies through the restructuring process and in the action sports industry.
“After careful consideration, we have taken this difficult but necessary step to secure a bright future for Quiksilver,” said Pierre Agnes, Chief Executive Officer of Quiksilver. “With the protections afforded by the Bankruptcy Code and the financing provided by Oaktree, we will not only be able to satisfy our ongoing obligations to customers, vendors and employees, but we will also have the flexibility needed to complete the turnaround of our U.S. operations and re-establish Quiksilver as the leader in the action sports industry. Our fresh capital structure, with a very low level of debt for our industry, will enable us to invest in and reinvigorate our brands and products. We are confident we will emerge a stronger business, better positioned to grow and prosper into the future.”
Agnes continued: “Oaktree’s financial strength and expertise, deep experience working with companies in situations similar to ours, and successful history operating in our industry make them an exceptional partner for us going forward. We value our wholesale customers as well as our vendors and suppliers and appreciate their support through this process. In addition, we thank our passionate and dedicated employees and athletes who remain our greatest assets. Quiksilver is, and as a result of this process will continue to be, an iconic leader in the action sports market.”
In connection with the filing, the Company intends to continue its existing store closing program to rationalize its store base in the Americas. As is customary, it is anticipated that the Bankruptcy Court will consider the Company’s request for “first day” relief promptly. The requested relief includes requests for the authority to make wage and salary payments, continue various benefits for employees, and honor certain customer programs, such as gift cards and returns on merchandise purchased prior to the bankruptcy filing.
Skadden, Arps, Slate, Meagher & Flom LLP is serving as the Company’s legal advisor, FTI Consulting, Inc. as its restructuring advisor, and Peter J. Solomon Company as its investment banker.
The Company indicated that it expects to provide additional details with respect to the chapter 11 filing as soon as they are available. Court filings and other documents related to the reorganization proceedings are available on a separate website administered by the Company’s claims agent, KCC, at http://www.kccllc.net/quiksilver, or www.deb.uscourts.gov, the official Bankruptcy Court website.
About Quiksilver:
Quiksilver, Inc., one of the world’s leading outdoor sports lifestyle companies, designs, produces and distributes branded apparel, footwear and accessories. The Company’s apparel and footwear brands, inspired by a passion for outdoor action sports, represent a casual lifestyle for young-minded people who connect with its boardriding culture and heritage. The Company’s Quiksilver, Roxy, and DC brands have authentic roots and heritage in surf, snow and skate. The Company’s products are sold in more than 100 countries in a wide range of distribution, including surf shops, skate shops, snow shops, its proprietary Boardriders shops and other Company-owned retail stores, other specialty stores, select department stores and through various e-commerce channels. For additional information, please visit our brand websites at www.quiksilver.com, www.roxy.com and www.dcshoes.com.
