Our Legal Challenge To A US Government Search Warrant – Microsoft
Last evening, we filed our reply brief in our ongoing legal challenge to the U.S. government’s attempt to force us to turn over a customer’s email stored in our Irish data center. As we stated in our brief, we believe the law is on the side of privacy in this case.
We were gratified by the large number of organizations and individuals that filed amicus briefs in this case in December. They include leading technology and media companies, expert computer scientists, and trade associations and advocacy organizations that together represent millions of members on both sides of the Atlantic. As we said then, this case involves a broad policy issue that is important to the future of cloud computing.
In a nutshell, this case is about how we best protect privacy, ensure that governments keep people safe, and respect national sovereignty while preserving the global nature of the internet.
While there are many areas where we disagree with the government, we both agree that outdated electronic privacy laws need to be modernized. The statute in this case, the Electronics Communications Privacy Act, is almost 30 years old. That’s an eternity in the era of information technology.
In the U.S. we believe there is an important debate to be held about the best way to reform the law and our international relationships, and there are critical policy considerations on both sides. Law enforcement needs to be able to do its job, but it needs to do it in a way that respects fundamental rights, including the personal privacy of people around the world and the sovereignty of other nations. We hope the U.S. government will work with Congress and with other governments to reform the laws, rather than simply seek to reinterpret them, which risks happening in this case.
Solutions are closer to hand than the government acknowledges in this case. Congress already is looking at potential ideas that we believe would address the issues that the government raises in this case. A good example is the bipartisan LEADS Act, which has been introduced in both the House and Senate. It would address a number of the government’s concerns about the needs of law enforcement while offering strong privacy protections for people everywhere, including non-US citizens and residents.
Even more important, the LEADS Act embodies an approach that can serve as an example for other countries to follow. We need a model that works, not just for the United States, but for the rest of the world as well.
Existing legal agreements, such as Mutual Legal Assistance Treaties, need to be modernized. These agreement already provide a mechanism for governments including the U.S. government to obtain digital information stored outside their borders, but there’s room for improvement. Ultimately we need an updated set of broadly accepted rules that preserve the rule of law and work effectively across national borders. The U.S. government can play a leading role in working with other countries to reform and streamline their assistance in investigations and prosecutions. And new national laws passed to address these issues must respect the sovereignty of other countries and the fundamental human rights and online privacy of all users – they cannot be a blunt instrument to seek unilateral and unfettered access to information.
Until U.S. law is rewritten, we believe that the court in our case should honor well-established precedents that limit the government’s reach from extending beyond U.S. borders. Looking back, there’s no indication that Congress intended to expand the geographic reach of search warrants when the statute was written in 1986, long before the dawn of the era of cloud computing. (It’s worth noting as well that the government doesn’t dispute this point.)
To the contrary, it is clear Congress’s intent was to ensure that your digital information is afforded the same legal protections as your physical documents and correspondence, a principle we at Microsoft believe should be preserved. As we’ve said before, we believe you own your data.
We continue to believe that 2015 needs to be a year for solutions. We believe these solutions are close at hand. We urge Congress and the White House to seize this opportunity to update the law and advance international solutions.
Treasury Sanctions Members of Revolutionary Armed Forces of Colombia Drug Trafficking and Money Laundering Network
WASHINGTON – Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated four Colombian nationals residing in Switzerland as Specially Designated Narcotics Traffickers pursuant to the Foreign Narcotics Kingpin Designation Act (Kingpin Act). These individuals provided support for narcotics trafficking and money laundering activities conducted by the Revolutionary Armed Forces of Colombia (FARC) and Omar Arturo Zabala Padilla (alias Lucas Gualdron), the FARC’s International Commission member for France, Italy, and Switzerland. As a result of today’s action, any assets these entities and individuals may have under U.S. jurisdiction are frozen, and U.S. persons are generally prohibited from engaging in transactions with them.
“Today’s action combats the FARC’s efforts to finance its ruthless operation and expand the flow of drugs to U.S. and world markets,” said John E. Smith, Acting Director of the Office of Foreign Assets Control. “The FARC is a narcotics trafficking organization and Treasury will continue to isolate its financial operatives.”
OFAC closely coordinated with the Drug Enforcement Administration, Homeland Security Investigations, and Customs and Border Protection to execute today’s action.
“The U.S. government continues to expose facilitators of the FARC’s global drug and money laundering empire,” said DEA Chief of Financial Operations Anthony Marotta. “The goal of DEA, OFAC, and our partner agencies is to attack worldwide criminal networks such as the FARC and their associates with coordinated, sustained efforts utilizing every available tool to disrupt and dismantle their financial and operational infrastructure. The FARC is a designated foreign terrorist organization, and we will remain vigilant in our efforts to hold them accountable.”
The following four Colombian nationals were designated today because of their ties to the FARC: Jose Vicente Peña Pacheco, Adolfo Fonnegra Espejo, Ivan Gonzalez Zamorano, and Cristian David Gonzalez Mejia. Pacheco, in partnership with Padilla, leads a Swiss-based drug trafficking and money laundering network. This criminal network operates a Zurich-based business, the Colombiano Latin Shop, which provides members of the FARC with money remittance services and access to the international financial system. Espejo, Zamorano, and Mejia sourced narcotics from Colombia and Panama and distributed narcotics in Switzerland.
On May 29, 2003, the President identified the FARC as a significant foreign narcotics trafficker pursuant to the Kingpin Act. This followed the designation of the FARC as a Specially Designated Global Terrorist in 2001 pursuant to Executive Order 13224 and the FARC’s 1997 designation as a Foreign Terrorist Organization pursuant to the Immigration and Nationality Act. Padilla was designated on January 14, 2009 for his role as a FARC International Commission member. Today’s action continues OFAC’s ongoing efforts under the Kingpin Act to apply financial measures against significant foreign narcotics traffickers, narco-terrorists, and their organizations worldwide.
Since June 2000, more than 1,800 individuals and entities have been named pursuant to the Kingpin Act for their role in international narcotics trafficking. Penalties for violations of the Kingpin Act range from civil penalties of up to $1.075 million per violation to more severe criminal penalties. Criminal penalties for corporate officers may include up to 30 years in prison and fines up to $5 million. Criminal fines for corporations may reach $10 million. Other individuals could face up to 10 years in prison and fines pursuant to Title 18 of the United States Code for criminal violations of the Kingpin Act.
Ruling in Arbitration Proceedings: Cooperation Between Volkswagen and Suzuki Deemed Terminated
An arbitral tribunal in London has announced its ruling in the dispute between Suzuki Motor Corporation and Volkswagen Aktiengesellschaft. As a result, cooperation between the two parties is deemed terminated. The arbitrators confirmed that Volkswagen met its contractual obligations under the cooperation agreement and found that Suzuki has terminated the agreement upon reasonable notice. Volkswagen will therefore now dispose of its 19.9 percent stake in Suzuki and expects a positive effect on the Company’s earnings and liquidity from the transaction. The arbitral tribunal also confirmed that Suzuki breached its contractual obligations to Volkswagen under the agreement and that Volkswagen has the right to claim damages.
“We welcome the clarity created by this ruling. The tribunal rejected Suzuki’s claims of breach and found that Volkswagen met its contractual obligations under the cooperation agreement. Nevertheless, the arbitrators found that termination of the cooperation agreement by Suzuki on reasonable notice was valid, and that Volkswagen must dispose of the shares purchased. This decision is based on the principle that a contract may be terminated upon reasonable notice. Volkswagen expects a positive effect on the Company’s earnings and liquidity through the sale of the Suzuki shares”, the Group said on Sunday.
Furthermore, the arbitration court confirmed that Suzuki committed an infringement of the agreement. Suzuki broke off an ongoing cooperation project at the end of 2010/beginning of 2011 and failed to give Volkswagen last-call rights for the delivery of diesel engines. Volkswagen reserves the right to claim damages against Suzuki.
In December 2009, Volkswagen and Suzuki agreed to cooperate on the joint development of innovative and eco-friendly budget cars and on expanding their presence in dynamic emerging automotive markets. At the same time as this strategic cooperation was agreed, Volkswagen purchased a 19.9 percent stake in Suzuki. In return, Suzuki purchased approx. 1.5 percent of the ordinary shares in Volkswagen Aktiengesellschaft. In November 2011, Suzuki initiated arbitration proceedings in London.
As Suzuki received an award on 29 August 2015 regarding the arbitration that Suzuki filed with the International Court of Arbitration of the International Chamber of Commerce on 24 November 2011, Suzuki informs you as follows:
1. History leading up to Request for Arbitration
Suzuki requested Volkswagen AG (“VW”) to terminate their business and capital alliance through amicable negotiation. However, as VW failed to respond to Suzuki’s request, Suzuki served on 18 November 2011 a notice of termination of the Framework Agreement that was made with VW.
Further, on 24 November 2011, based on the parties’ agreement, Suzuki filed a request for arbitration in London, which is the place of arbitration with the International Court of Arbitration of the International Chamber of Commerce. Thereafter, a tribunal was organized in accordance with the ICC arbitration rules. Suzuki made certain requests to the Tribunal, including asking the Tribunal to make a declaration that the Framework Agreement was validly terminated and order VW to divest its shares in Suzuki to Suzuki or a third party designated by Suzuki pursuant to that termination.
On the other hand, VW also requested the Tribunal to dismiss all of Suzuki’s claims and uphold VW’s claims including its claim that Suzuki breached the Framework Agreement.
2. Outline of the Award
(i) Termination of Framework Agreement
The Tribunal found that the Framework Agreement was validly terminated by Suzuki’s notice of termination dated 18 November 2011 mentioned above, such termination being effective from 18 May 2012.
(ii) Divestment of Shares in Suzuki
The Tribunal upheld Suzuki’s claim regarding VW’s disposal of its shares in Suzuki and ordered VW to divest forthwith those shares to Suzuki or a third party designated by Suzuki using a method which is reasonably determined by Suzuki.
(iii) Suzuki’s Breaches of Agreement
VW’s counterclaims of Suzuki’s breach of the agreement were partially upheld and the Tribunal indicated that the amount of damages, if any, would be addressed in a further stage of the arbitration proceedings.
3. Outlook for the Future
Suzuki will closely review the award and will take appropriate measures. As announced on 9 December 2014, Suzuki intends to acquire the shares in Suzuki from VW through the ToSTNeT-3 system. Suzuki will disclose details regarding the acquisition of these shares as soon as they are determined.
As a result of VW disposing of its shares in Suzuki, there will be a change in our largest shareholder, which is also a major shareholder.
At this stage, Suzuki does not foresee any need to amend its forecast of consolidated results for the fiscal year ending March 31, 2016, however, if any matters that need to be disclosed occur, such matter will be promptly disclosed.
Secretary of State John Kerry Re-opens US Embassy in Havana after more than 50 years
On July 1, President Obama announced that the United States had agreed to formally re-establish diplomatic relations with the Republic of Cuba and re-open embassies in our respective countries.
The last time we had an embassy in Cuba was in January of 1961, when we severed diplomatic relations at the height of the Cold War.
Today, more than 54 years later, Secretary of State John Kerry is traveling to Havana to re-open our embassy and take a historic step forward in our efforts to normalize relations with the Cuban government and people.
My visit to Havana, the first by a U.S. Secretary of State in 70 years, comes nine months after President Obama announced a new approach to relations with Cuba. It is an approach based on the ties that bind our people, the interests shared by our governments, and the mutual respect that should characterize relations between two proud nationsóeven when our policies collide.
Hausfeld Announces 9 Settlements Totaling More Than $2 Billion in FX Antitrust Litigation
Washington, DC — Hausfeld, a global claimants’ law firm dedicated to handling complex litigation, announced today that the plaintiffs in In re Foreign Exchange Benchmark Rates Antitrust Litigation, 13-cv-7789 (S.D.N.Y.), have reached settlements totaling more than $2 billion with Bank of America, Barclays, BNP Paribas, Citi, Goldman Sachs, HSBC, JPMorgan, RBS, and UBS. The completion of these settlements were announced in open court this afternoon; the settlements are expected to be submitted for preliminary approval in the near future.
In addition to the billions of dollars in compensation, these settling banks have agreed to cooperate with investors in their continuing litigation against the twelve remaining defendants: Credit Suisse Group AG, Credit Suisse AG, Credit Suisse Securities (USA) LLC, Deutsche Bank AG, Deutsche Bank Securities Inc., Morgan Stanley, Morgan Stanley & Co., LLC, Morgan Stanley & Co. International plc, Bank of Tokyo-Mitsubishi UFJ Ltd., RBC Capital Markets, LLC, Société Générale S.A., and Standard Chartered plc. Several of these defendants were added to the action in an amended complaint filed on July 16, 2015 reflecting additional facts unearthed through Hausfeld’s investigation to date.
Michael D. Hausfeld, Chairman of Hausfeld praised the settlements: “As a result of lengthy, hard-fought negotiations, we have obtained historic recoveries on behalf of U.S. investors. Apart from the monetary component, each defendant has agreed to provide substantial cooperation, which will assist investors in their continued litigation against the non-settling defendants. While the recoveries here are tremendous, they are just the beginning. Investors around the world should take note of the significant recoveries secured in the United States and recognize that these settlements cover a fraction of the world’s largest financial market.”
Anthony Maton, managing partner at Hausfeld (London) said: “The extent of collusive conduct in the FX market is now clear. US investors will see compensation from these settlements. Others will not. There is no doubt that anyone who traded FX in or through the London or Asian markets – which transact trillions of dollars of business every day – will have suffered significant loss as a result of the actions of the banks. Compensation for these losses will require concerted action in London.”
The Foreign Exchange Benchmark Rates Antitrust Litigation alleges that the world’s largest financial institutions conspired to manipulate prices paid in the $5.3-trillion-per-day foreign exchange market from 2003 to present. The case is currently pending before Judge Lorna G. Schofield in the Southern District of New York. Hausfeld serves as plaintiffs’ co-lead counsel with Scott + Scott LLP.
Hausfeld attorneys working on the case are Michael D. Hausfeld, William P. Butterfield, Bonny E. Sweeney, Reena A. Gambhir, Timothy S. Kearns, and Nathaniel C. Giddings.
About Hausfeld:
Hausfeld is a leading global law firm with offices in Brussels, London, New York, Philadelphia, San Francisco, and Washington, DC. The firm has a broad range of complex litigation expertise, particularly in antitrust/competition, financial services, sports and entertainment, environmental, mass torts, consumer protection, and human rights matters, often with an international dimension. Hausfeld aims to achieve the best possible results for clients through its practical and commercial approach, avoiding litigation where feasible, yet litigating robustly when necessary. Hausfeld’s extensive experience with alternative and innovative fee models offers clients a diverse menu of engagement options and maximum flexibility in terms of managing their cost exposure.
President Obama Speaks On The Historic Deal That Will Prevent Iran from Obtaining Nuclear Weapons
After many months of principled diplomacy, the P5+1 — the United States, the United Kingdom, France, China, Russia and Germany — along with the European Union, have achieved a long-term comprehensive nuclear deal with Iran that will verifiably prevent Iran from acquiring a nuclear weapon and ensure that Iran’s nuclear program will be exclusively peaceful going forward.
This deal stands on the foundation of the Joint Plan of Action (JPOA), achieved in November of 2013, and the framework for this Joint Comprehensive Plan of Action (JCPOA), announced in Lausanne on April 2, 2015 that set the requirements for the deal with the P5+ 1 and Iran, alongside the European Union announced today.
Blocking the Four Pathways to a Nuclear Weapon
Building a nuclear bomb requires either uranium or plutonium. But thanks to this deal, Iran’s four possible ways to leverage those fissile materials are blocked.
The Uranium pathways at Natanz and Fordow
Iran would need two key elements to construct a uranium bomb: tens of thousands of centrifuges and enough highly enriched uranium to produce enough material to construct a uranium bomb.
There are currently two uranium enrichment facilities in the country: the Natanz facility and the Fordow facility.
Let’s take a look at Iran’s uranium stockpile first. Currently, Iran has a uranium stockpile to create 8 to ten nuclear bombs.
But thanks to this nuclear deal, Iran must reduce its stockpile of uranium by 98%, and will keep its level of uranium enrichment at 3.67% — significantly below the enrichment level needed to create a bomb.
Iran also needs tens of thousands of centrifuges to create highly enriched uranium for a bomb. Right now, Iran has nearly 20,000 centrifuges between their Natanz and Fordow facilities. But under this deal, Iran must reduce its centrifuges to 6,104 for the next ten years. No enrichment will be allowed at the Fordow facility at all, and the only centrifuges Iran will be allowed to use are their oldest and least efficient models.
The Plutonium pathway at the Arak reactor
The third way Iran could build a nuclear weapon is by using weapons-grade plutonium. The only site where Iran could accomplish this is the Arak reactor, a heavy-water nuclear reactor. Right now, this reactor could be used in a weapons program, but under this deal, the Arak reactor will be redesigned so it cannot produce any weapons-grade plutonium. And all the spent fuel rods (which could also be source material for weapons-grade plutonium) will be sent out of the country as long as this reactor exists. What’s more, Iran will not be able to build a single heavy-water reactor for at least 15 years. That means, because of this deal, Iran will no longer have a source for weapons-grade plutonium.
A covert pathway to building a secret nuclear program
The previous three pathways occur at facilities that Iran has declared. But what if they try to build a nuclear program in secret? That’s why this deal is so important. Under the new nuclear deal, Iran has committed to extraordinary and robust monitoring, verification, and inspection. International inspectors from the International Atomic Energy Agency (IAEA) will not only be continuously monitoring every element of Iran’s declared nuclear program, but they will also be verifying that no fissile material is covertly carted off to a secret location to build a bomb. And if IAEA inspectors become aware of a suspicious location, Iran has agreed to implement the Additional Protocol to their IAEA Safeguards Agreement, which will allow inspectors to access and inspect any site they deem suspicious. Such suspicions can be triggered by holes in the ground that could be uranium mines, intelligence reports, unexplained purchases, or isotope alarms.
Basically, from the minute materials that could be used for a weapon comes out of the ground to the minute it is shipped out of the country, the IAEA will have eyes on it and anywhere Iran could try and take it:
What Iran’s Nuclear Program Would Look Like Without This Deal
As it stands today, Iran has a large stockpile of enriched uranium and nearly 20,000 centrifuges, enough to create 8 to 10 bombs. If Iran decided to rush to make a bomb without the deal in place, it would take them 2 to 3 months until they had enough weapon-ready uranium (or highly enriched uranium) to build their first nuclear weapon. Left unchecked, that stockpile and that number of centrifuges would grow exponentially, practically guaranteeing that Iran could create a bomb—and create one quickly – if it so chose.
This deal removes the key elements needed to create a bomb and prolongs Iran’s breakout time from 2-3 months to 1 year or more if Iran broke its commitments. Importantly, Iran won’t garner any new sanctions relief until the IAEA confirms that Iran has followed through with its end of the deal. And should Iran violate any aspect of this deal, the U.N., U.S., and E.U. can snap the sanctions that have crippled Iran’s economy back into place.
US Reaches Agreement Over ADA Violations by Carnival Cruise Line, Holland America Line and Princess Cruises
The Justice Department and Carnival Corp. today announced a comprehensive, landmark settlement agreement under the Americans with Disabilities Act (ADA) to advance equal access for individuals with disabilities who travel on cruise ships.
Carnival Corp. is one of the largest cruise companies in the world, owning and operating several cruise lines. Today’s settlement agreement addresses accessibility on 62 ships among the Carnival Cruise Line, Holland America Line and Princess Cruises brands and implements accessibility standards and policies to provide greater access on cruises that embark and disembark from U.S. waters or those of its territories.
“The ADA guarantees people with disabilities equal access to public accommodations,” said head of the Civil Rights Division, Principal Deputy Assistant Attorney General Vanita Gupta. “Cruise ships are ‘floating cities’ and provide a wide range of facilities and activities subject to the requirements of the ADA, such as lodging, dining, entertainment, recreation, and medical facilities. People with disabilities who travel must be able to count on getting the accessible cabin they reserve, and the cruise lines must provide equal access to the choice of amenities and attractions that passengers expect from a major cruise company like Carnival Corporation.”
“This landmark ADA agreement will enable individuals with disabilities the opportunity to equally enjoy a full range of cabins and services that previously were unavailable while vacationing on cruise ships,” said U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida.
The settlement agreement is the result of an investigation of complaints by the Justice Department. Carnival officials cooperated with the department throughout the process. Among the complaints were allegations that the company failed to: properly provide and reserve accessible cabins for individuals with mobility disabilities; reasonably modify policies, practices and procedures to accommodate individuals with disabilities; afford individuals with disabilities the same opportunities to participate in programs and services, including embarkation and disembarkation; and provide effective communication during muster and emergency drills.
Under the agreement:
42 existing ships, and 7 ships in various stages of design and construction, will be surveyed and remediated to comply with the ADA regulations. Accessible cabins will be dispersed among the various classes of accommodations and will provide a range of accessible features, including features for guests with hearing impairments;
Three percent of the cabins on 49 ships will be accessible according to three levels of accessibility: fully accessible cabins, fully accessible cabins with a single side approach to the bed, and ambulatory accessible cabins. The remaining 13 ships will be subject to possible remediation if they continue to be in service in U.S. ports four years after the agreement is entered.
Carnival Corp. has created brand standards that address an array of accessibility issues and policies to implement them;
Carnival Corp. will provide specific ADA training to employees and managers;
Reservations systems will allow individuals with disabilities to reserve accessible cabins and suites with specific available options and amenities, and to guarantee reservations for accessible cabins;
The accessibility of Carnival Corp. websites and mobile applications will comply with WCAG 2.0 Level A and AA;
Carnival Corp. will appoint an ADA compliance officer at the executive level, two ADA responsibility officers – one for Carnival Cruises and one for Holland America Group, which includes Holland America Line and Princess Cruises, and ADA shipboard officers for each ship who are responsible for resolving ADA-related issues that arise at sea; and
Carnival Corp. will pay a civil penalty of $55,000 to the United States and $350,000 in damages to individuals harmed by past discrimination.
Today’s settlement represents the first time the Department of Justice has required a cruise company to provide a minimum number of accessible cabins, to conduct a survey of its ships and to develop a remediation plan to comply with the ADA. It is also the first time that an agreement under the ADA has specifically identified three types of accessible cabins on cruise ships – fully accessible cabins, fully accessible cabins-single side approach and ambulatory accessible cabins – that will be available to individuals with disabilities.
Justice Department and CFPB Reach Settlement to Resolve Allegations of Auto Lending Discrimination by Honda
The Department of Justice and the Consumer Financial Protection Bureau (CFPB) announced today a groundbreaking settlement to resolve allegations that American Honda Finance Corporation (Honda) engaged in a pattern or practice of discrimination against African-American, Hispanic and Asian/Pacific Islander borrowers in auto lending. Honda is based in Torrance, California.
The settlement is especially noteworthy because of the company’s commitment to significantly limit the discretion of car dealers to charge interest rate markups on Honda loans. Specifically, Honda has agreed to change the way it prices its loans by limiting dealer markup to 125 basis points (or 1.25 percentage points) for loans of 60 months or less, and to 100 basis points (or 1 percentage point) for loans greater than 60 months. The settlement also provides $24 million in compensation for alleged victims of past discrimination by the nation’s ninth largest auto lender.
“We commend Honda for its leadership in agreeing to impose lower caps on discretionary markups and for its commitment to treating all of its customers fairly without regard to race or national origin,” said Vanita Gupta, head of the Civil Rights Division. “We recognize that dealerships perform a valuable service in connecting customers with lenders and that they should be fairly compensated for that service. We believe that Honda’s new compensation system balances fair compensation for dealers and fair lending for consumers. We hope that Honda’s leadership will spur the rest of the industry to constrain dealer markup to address discriminatory pricing.”
The coordinated investigations by the department and the CFPB that preceded today’s settlement determined this system of subjective and unguided pricing discretion directly results in Honda’s qualified African-American, Hispanic and Asian/Pacific Islander borrowers paying more than qualified non-Hispanic white borrowers. The department and CFPB anticipate that Honda’s new caps on discretionary markups will substantially reduce or eliminate these disparities.
Honda is known as an “indirect” auto lender because, rather than taking applications directly from consumers, the company makes most of its loans through car dealers nationwide who help their customers pay for their new or used car by submitting their loan application to Honda. Honda’s business practice, like most other major auto lenders, allows car dealers discretion to vary a loan’s interest rate from the price Honda initially sets based on the borrower’s objective credit-related factors. Dealers receive greater payments from Honda on loans that include a higher interest rate markup.
The settlement resolves claims by the department and the CFPB that Honda discriminated by charging thousands of African-American, Hispanic and Asian/Pacific Islander borrowers higher interest rates than non-Hispanic white borrowers. The agencies claim that Honda charged borrowers higher interest rates because of their race or national origin, and not because of the borrowers’ creditworthiness or other objective criteria related to borrower risk. The United States’ complaint alleges that the average African-American victim was obligated to pay over $250 more during the term of the loan because of discrimination, the average Hispanic victim was obligated to pay over $200 more during the term of the loan because of discrimination and the average Asian/Pacific Islander victim was obligated to pay over $150 more during the term of the loan because of discrimination. The Equal Credit Opportunity Act (ECOA) prohibits such discrimination in all forms of lending, including auto lending. Honda’s settlement with the Justice Department, which is subject to court approval, was filed today in the U.S. District Court of the Central District of California in conjunction with the Justice Department’s complaint. Honda resolved the CFPB’s claims by entering into a public administrative settlement.
“The CFPB is committed to creating a fair marketplace for all consumers, and other auto lenders should take note of today’s action,” said Director Richard Cordray of the Consumer Financial Protection Bureau. “Honda’s proactive decision to move to a new pricing and compensation system demonstrates industry leadership and represents a significant step towards protecting consumers from discrimination.”
“Honda’s financing practices that allowed dealerships to mark up individual loans resulted in illegal discrimination, with minority car buyers paying more for their loans than non-minority buyers with similar credit histories,” said U.S. Attorney Eileen M. Decker of the Central District of California. “This settlement provides for Honda to contribute $24 million to a settlement fund to provide redress for thousands of minority borrowers, not only in this district, where Honda’s United States operations are based, but throughout the country. It sends the clear message that discrimination of any kind is intolerable, and that other auto companies should follow Honda’s lead in taking steps to ensure that their sale and financing practices do not result in discrimination.”
In addition to the $24 million in payments for its past conduct, under the Justice Department consent order, Honda will also pay $1 million to fund a consumer financial education program focused on consumer auto finance that is designed to benefit African-American, Hispanic and Asian/Pacific Islander populations.
The settlement also requires Honda to improve its monitoring and compliance systems. The settlement allows the lender to experiment with different approaches toward lessening discrimination and requires it to regularly report to the department and the CFPB on the results of its efforts as well as discuss potential ways to improve results. The department commends Honda for working cooperatively to reach an appropriate resolution of this case.
The settlement provides for an administrator to locate victims and distribute payments of compensation at no cost to borrowers whom the department and the CFPB identify as victims of Honda’s discrimination. The department and the CFPB will make a public announcement and post information on their websites once more details about the compensation process become available. Borrowers who are eligible for compensation from the settlement will be contacted by the administrator, and do not need to contact the department or the CFPB at this time.
The Civil Rights Division, the U.S. Attorney’s Office of the Central District of California and the CFPB 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 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.
Swiss Banks Banque Pasche and ARVEST Privatbank Will Pay over $8 Million as Penalties and Work With Justice Department
The Department of Justice announced today that two banks, Banque Pasche SA and ARVEST Privatbank AG, have reached resolutions under the department’s Swiss Bank Program.
“Banque Pasche and ARVEST have provided detailed information regarding the ways in which Swiss banks helped U.S. taxpayers conceal foreign accounts and evade their U.S. tax obligations, including through the use of numbered and coded accounts and sham offshore entities,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Department of Justice’s Tax Division. “As required under the program, these banks will continue to cooperate as we aggressively pursue those individuals and the professionals who facilitated their criminal conduct.”
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 penalties in return for the department’s agreement not to prosecute these banks for tax-related criminal offenses.
Banque Pasche SA is headquartered in Geneva, Switzerland, and owns and controls a group of companies in various jurisdictions, including Monaco and the Bahamas. From at least August 2008 to August 2013, Banque Pasche assisted certain U.S. taxpayers in evading their U.S. taxes and filing obligations, filing false income tax returns with the IRS and hiding offshore assets from the IRS.
Banque Pasche offered a variety of traditional Swiss banking services that it knew could and did assist U.S. taxpayers in concealing assets and income from the IRS. For example, Banque Pasche offered hold mail service, as well as code name or numbered account services. These services allowed certain U.S. taxpayers to minimize the paper trail associated with their undeclared assets and income.
Banque Pasche also permitted certain U.S. taxpayers to open accounts held in the name of sham, conduit or nominee offshore structures where the U.S. taxpayer’s interest in the account was not reported to the IRS. With respect to these accounts, Banque Pasche would 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. As of Dec. 31, 2008, Banque Pasche had U.S.-related accounts held by entities created in Panama or the British Virgin Islands with U.S. beneficial owners. The majority of these accounts had false IRS Forms W-8BEN in the file.
Banque Pasche also opened accounts for U.S. taxpayers who had left other Swiss banks that were being investigated by the department, including UBS and Credit Suisse. Banque Pasche knew or should have known that the beneficial owners of the majority of these accounts were attempting to evade U.S. tax and foreign account reporting requirements. Many of these accounts were held by Panamanian corporations with U.S. beneficial owners. Some of these accounts were managed by a particular Geneva-based attorney who held a power of attorney over them. When these accounts were subsequently closed, the assets were transferred to banks located in Israel and Hong Kong in an attempt to further escape detection from U.S. authorities.
Banque Pasche has fully cooperated with the department during its participation in the Swiss Bank Program. For example, it described in detail the structure of its business with U.S. persons, which included the policies concerning U.S. accountholders. Banque Pasche also provided the names of members of its management committee and information about its relationships with external asset managers.
Since Aug. 1, 2008, Banque Pasche had 186 U.S.-related accounts, as defined under the Swiss Bank Program, with an aggregate maximum balance of approximately $655 million. Of these 186 accounts, 110 had U.S. beneficial owners and an aggregate maximum balance of approximately $111 million. Banque Pasche will pay a penalty of $7.229 million.
ARVEST Privatbank AG was a private bank headquartered in Pfaffikon, Switzerland. It provided portfolio management and related private banking services primarily to high net worth clients. On April 15, 2015, it ceased being a licensed Swiss bank.
ARVEST opened, maintained and serviced accounts for U.S. persons that it knew or had reason to know were likely not declared to the IRS or the U.S. Department of the Treasury, as required by U.S. law. The bank helped clients set up entities, including trusts and foundations, in Liechtenstein, St. Kitts and other jurisdictions, with bank representatives serving as officers of certain of these entities, and opened ARVEST accounts in the names of these entities.
For several U.S. customers, ARVEST gave the accountholders a travel debit card, which did not have a name imprinted on the card. These cards were tied to accounts that the accountholders held in their names at a third-party Swiss Bank specializing in this service.
Since Aug. 1, 2008, ARVEST had 52 U.S.-related accounts, with a maximum aggregate asset value of over $134 million. ARVEST will pay a penalty of $1.044 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.
“The growing number of non-prosecution agreements for the Swiss Bank Program demonstrates the DOJ and IRS resolve to make it increasingly difficult for taxpayers to leave offshore accounts undeclared,” said Deputy Commissioner Douglas O’Donnell of the IRS Large Business and International Division. “Two additional agreements by ARVEST and Banque Pasche highlight the momentum of resolving these potential criminal liabilities and eliminating institutions holding undeclared funds for U.S. account holders.”
“Today’s agreements are significant both individually and in conjunction with the previous Swiss Bank Program agreements,” said Chief Richard Weber of IRS-Criminal Investigation. “Individually, each bank agreement provides additional information to the IRS to assist us in going after illegally concealed offshore accounts and the financial professionals who helped U.S. taxpayers hide assets abroad. Collectively, the bank agreements are a testament to the progress of the Swiss Bank Program and our commitment to the ongoing work with Swiss banks still in the process.”
Acting Assistant Attorney General Ciraolo thanked the IRS, in particular, IRS-Criminal Investigation and the IRS Large Business and International Division for their substantial assistance, as well as John E. Sullivan, Thomas G. Voracek, and Brian D. Bailey, who served as counsel on these matters, Senior Litigation Counsel Nanette L. Davis, and Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program Thomas J. Sawyer of the Tax Division.
Copyright 2.0: Why Existing Rules Need an Update to Make Them Fit for the Digital Age
Copyright rules haven’t caught up with today’s technological world. For example, consumers are sometimes denied access to online content because of the country they live in. German Greens/EFA member Julia Reda wrote an own initiative report on copyright to feed into upcoming proposals by the European Commission to update current legislation. MEPs debate the report on Thursday 9 July and vote on it afterwards. Check out our infographic and follow the debate.
Reda analysed in the report the implementation of the information society directive from 2001 and made recommendations on how to adapt it to make it suitable for the digital age. “When the [current] directive was composed, there were neither smartphones, nor YouTube nor Facebook,” said Reda. She also pointed out that the exchange of copyright protected content across countries had increased significantly since the directive entered into force.
The report’s main points
Geo-blocking is when companies stop consumers in another country from using their on-line services, often without justification. The report stressed that copyright protected content should be accessible across borders. For example, geo-blocking should not prevent Europe’s cultural minorities from accessing content or services in their own language. However, the text also underlined the importance of territorial licences, particularly for financing audio-visual and film production.
Freedom of panorama means people have the right to create and share images and photographs of public buildings without having to compensate for the use of copyright. It exists in some EU countries, but not all. The report adopted by the committee says that pictures of public buildings need the authorisation of the rightholder for commercial use. However, following a heated debate in the media, this could still change in the final vote.
The report also calls for a number of exception and limitations, for example for research and education purposes. This should especially apply to online and cross-border activities, such as school exchange programmes. The Commission should assess whether to include exceptions allowing libraries to lend e-books.
Next steps
Once adopted, the report can be used by the European Commission to draft its proposal, which is expected by the end of 2015.
After Over fifty Years President Obama Announces that the U.S. Will Now Reopen Our Embassy in Cuba
“The progress that we mark today is yet another demonstration that we don’t have to be imprisoned by the past. When something isn’t working, we can and will change.”
— President Obama
Under President Obama, America is charting a new course in our relationship with Cuba. Today, he announced the next step on this path: Re-opening a U.S. Embassy in Havana.
The last time we had an embassy in Cuba was in January of 1961, when we severed diplomatic relations at the height of the Cold War. Reopening the doors is more than a symbolic step. “With this change, we will be able to substantially increase our contacts with the Cuban people,” the President said.
Watch his remarks:
BP to Settle Deepwater Horizon Claims for up to $18.7 Billion With Payments to be Spread Over 18 Years
The Disclosure and Transparency Rules (“DTR”) made by the Financial Conduct Authority govern amongst other matters the disclosure of inside information. Accordingly in compliance with Rule 2.2, BP plc makes the following announcement
Five years on from the Deepwater Horizon accident and spill in 2010, BP has reached agreements in principle to settle all federal and state claims arising from the event.
BP today announced that its US Upstream subsidiary, BP Exploration and Production Inc (BPXP) has executed the agreements with the US federal government and five Gulf Coast states.
The agreement with the states of Alabama, Florida, Louisiana, Mississippi and Texas also includes settlement of claims made by more than 400 local government entities.
The principal payments are as follows:
BPXP is to pay the United States a civil penalty of $5.5 billion under the Clean Water Act (CWA) – payable over 15 years.
BPXP will pay $7.1 billion to the United States and the five Gulf states over 15 years for natural resource damages (NRD). This is in addition to the $1 billion already committed for early restoration. BPXP will also set aside an additional amount of $232 million to be added to the NRD interest payment at the end of the payment period to cover any further natural resource damages that are unknown at the time of the agreement.
A total of $4.9 billion will be paid over 18 years to settle economic and other claims made by the five Gulf Coast states.
Up to $1 billion will be paid to resolve claims made by more than 400 local government entities.
The expected impact of these agreements would be to increase the cumulative pre-tax charge associated with the Deepwater Horizon accident and spill by around $10 billion from $43.8 billion at the end of the first quarter. Separately to these agreements, the total charge reported in BP’s second quarter results will also reflect other items including charges for additional business economic loss determinations.
The principal payments arising from the agreements will be made over extended periods of time as set out in the attached schedule of payments.
NRD and CWA payments are scheduled to start 12 months after the agreements becomes final. Total payments for NRD, CWA and State claims will be made at a rate of around $1.1 billion a year for the majority of the payment period.
Carl-Henric Svanberg, BP’s chairman, said: “Five years ago we committed to restore the Gulf economy and environment and we have worked ever since to deliver on that promise. We have made significant progress, and with this agreement we provide a path to closure for BP and the Gulf. It resolves the company’s largest remaining legal exposures, provides clarity on costs and creates certainty of payment for all parties involved.
“In deciding to follow this path, the Board has balanced the risks, timing and consequences associated with many years of litigation against its wish for the company to be able to set a clear course for the future.
“The Board therefore believes that this agreement is in the best long-term interest of BP and its shareholders. The Board set out its position on the dividend at the first quarter and this remains unchanged by the agreement.”
Bob Dudley, BP’s group chief executive, said: “This is a realistic outcome which provides clarity and certainty for all parties.
“For BP, this agreement will resolve the largest liabilities remaining from the tragic accident and enable BP to focus on safely delivering the energy the world needs.
“For the United States and the Gulf in particular, this agreement will deliver a significant income stream over many years for further restoration of natural resources and for losses related to the spill.
“When concluded, this will resolve not only the Clean Water Act proceedings but also the Natural Resource Damage claims as well as other claims brought by Gulf States and local government entities.”
BP’s chief financial officer, Brian Gilvary, said: “The negotiations were carried out with the goal of reaching a collective solution that would be acceptable for all parties. For BP this will provide certainty with respect to BP’s financial obligations for the matters settled, particularly with the ability to spread payments smoothly over many years.
“The impact of the settlement on our balance sheet and cashflow will be manageable and enables BP to continue to invest in and grow its business, underpinned by a resilient and robust financial framework.”
The agreements in principle are subject to execution of definitive agreements. These will comprise a Consent Decree with the United States and Gulf states with respect to the civil penalty and natural resource damages, a settlement agreement with five Gulf states with respect to State and local claims for economic and property losses, and release agreements with local government entities.
The Consent Decree will be subject to public comment and final court approval. The Consent Decree and settlement agreement with the Gulf states are conditional upon each other and neither will become effective unless (1) there is final court approval for the Consent Decree and (2) local government entities execute releases to BP’s satisfaction.
The agreements do not cover the remaining costs of the 2012 class action settlements with the Plaintiffs’ Steering Committee for economic and property damage and medical claims. They also do not cover claims by individuals and businesses that opted out of the 2012 settlements and/or whose claims were excluded from them. BP will continue to defend those claims vigorously. Today’s agreements in principle also do not resolve private securities litigation pending in MDL 2185.
Interest will accrue at a fixed rate on the unpaid balance of the civil penalty and natural resource damages payments, compounded annually and payable in years 15 (CWA) and 16 (NRD).
The interest rate will be fixed at the average market yield on U.S. Treasury securities at 2-year and 3-year constant maturities, quoted on an investment basis by the US Federal Reserve (H.15 Release), for the period from 28 May 2014 to 27 May 2015.
To address possible natural resource damages unknown at the time of the settlement, beginning ten years after the settlement, the federal government and the Gulf states may request accelerated payment of accrued but unpaid interest on the natural resource damages payments.
Parent company guarantees for these payments will be provided by BP Corporation North America Inc. as the primary guarantor and BP p.l.c. as the secondary guarantor.
The federal government and the Gulf states may jointly elect to accelerate the civil penalty and natural resource damages payments in the event of a change of control or insolvency of BP p.l.c.
In addition to these agreed settlement payments, set out in the table above and the payment of up to $1 billion for local government claims, BPXP has also agreed to pay $350 million to cover outstanding NRD assessment costs and $250 million to cover the full settlement of outstanding response costs, claims related to the False Claims Act and royalties owed for the Macondo well. These additional payments will be paid over nine years, beginning in 2015.
The Deepwater Horizon Trust Fund, established to meet claims in 2010 after the oil spill, is expected to be used to make payments (other than CWA fines and penalties), including $1 billion of state claims and up to $1 billion to settle local claims.
Departments of Justice, Labor and Homeland Security Announce Phase II of Anti-Trafficking Coordination Team Initiative
The Departments of Justice, Labor (DOL) and Homeland Security (DHS) today announced the launch of Phase II of the Anti-Trafficking Coordination Team (ACTeam) Initiative aimed at streamlining federal criminal investigations and prosecutions of human trafficking offenses.
Phase II ACTeams will be convened in up to six selected districts around the country, following a competitive, nationwide, interagency selection process. The ACTeams, comprised of federal prosecutors and investigators representing multiple federal enforcement agencies, will implement a joint strategic action plan to develop high-impact federal investigations and prosecutions, vindicate the rights of human trafficking victims, bring traffickers to justice and dismantle human trafficking networks.
“Human traffickers prey on some of the most vulnerable members of our society to exploit them for labor, for sex and for servitude of all kinds,” said Attorney General Loretta E. Lynch. “Their crimes, appropriately described as modern-day slavery, have no place in a nation that has overcome the scourge of slavery. That’s why the Department of Justice is committed—and I am personally determined—to hold human traffickers accountable, provide support to trafficking survivors, and stand up for the rights and the dignity that they deserve.”
“Labor trafficking affects workers who are vulnerable to exploitation for a number of reasons, who may not know their workplace rights, and may be afraid to raise their voices,” said Secretary Thomas E. Perez of DOL. “The challenges we face as a nation and a government demand unprecedented levels of interagency collaboration. Through these ACTeams, we’re bringing our respective departments’ collective resources and expertise to bear, building a whole even greater than the sum of our individual parts. DOL will remain a vigorous and unfaltering partner during phase II. Together we can ensure workers receive the wages they’ve earned, restore victims’ basic human rights and bring traffickers to justice.”
“The ACTeam Initiative has been an important tool in our collective ability to combat sex trafficking, forced labor and domestic servitude here in the United States,” said Secretary Jeh Johnson of DHS. “This is not a problem that we can afford to ignore which is why, under a banner of shared responsibility and collaboration, the Departments of Justice, Labor and Homeland Security are recommitting ourselves to the fight against human trafficking by expanding the ACTeam Initiative. Through the unified voice of the Blue Campaign, the Department of Homeland Security will continue to combat human trafficking through the guiding philosophy that we are at our best when we work together.”
These departments collaborated to develop the ACTeam Initiative to streamline rapidly expanding human trafficking enforcement efforts, focusing on forced labor, international sex trafficking and sex trafficking of adults by force, fraud and coercion. Project Safe Childhood and the Innocence Lost National Initiative continue to focus on sex trafficking of minors and sexual exploitation of minors.
Drawing together federal prosecutors and federal agents from multiple investigative agencies, ACTeams streamline coordination on the front lines of federal human trafficking investigations and prosecutions, while also enhancing collaboration between front-line enforcement efforts and national human trafficking subject matter experts in the Justice Department’s Human Trafficking Prosecution Unit, Executive Office of U.S. Attorneys and FBI Civil Rights Unit, DHS’s Immigration and Customs Enforcement-Homeland Security Investigations, DOL’s Wage and Hour Division and the Office of the Inspector General. In 2011, the Attorney General and the Secretaries of DHS and DOL announced Phase I of the ACTeam Initiative and the designation of six Phase I Pilot ACTeam sites in Atlanta; El Paso, Texas; Kansas City, Missouri; Los Angeles; Memphis, Tennessee; and Miami, following a rigorous interagency selection process.
During the ACTeam Phase I period, Fiscal Years 2012-2013, federal human trafficking prosecutions involving forced labor, international sex trafficking and sex trafficking of adults rose by 35 percent nationwide, reflecting strong partnerships among U.S. Attorneys’ Offices, the Civil Rights Division’s Human Trafficking Prosecution Unit, federal, state and local law enforcement agencies, and non-governmental victim assistance organizations and task forces led by U.S. Attorneys’ Offices.
The ACTeams played a significant role in leading these nationwide advances. In ACTeam Districts, prosecutions of forced labor, international sex trafficking and adult sex trafficking rose even more markedly than they did nationally, due to the force-multiplier effect of interagency commitment to implementing coordinated, joint anti-trafficking strategies and due to advanced training, expertise and operational support provided to the Phase I ACTeams. Comparing federal forced labor, international sex trafficking and adult sex trafficking prosecutions during the ACTeam Phase I period of Fiscal Years 2012-2013, to the pre-Phase I period of Fiscal Years 2010-2011:
Cases filed increased by:
119 percent in ACTeam Districts,
18 percent in non-ACTeam Districts; and
35 percent nationwide.
Defendants charged increased by:
114 percent in ACTeam Districts,
12 percent in non-ACTeam Districts; and
28 percent nationwide.
Defendants convicted increased by:
86 percent in ACTeam Districts,
14 percent in non-ACTeam Districts; and
26 percent nationwide.
Justice Department Settles Immigration-Related Discrimination Claim Against Abercrombie & Fitch Inc.
The Justice Department announced today that it reached an agreement with Abercrombie & Fitch Inc. (Abercrombie), a clothing retailer headquartered in Columbus, Ohio. The agreement resolves a complaint filed with the Office of Special Counsel for Immigration-Related Unfair Employment Practices (OSC), claiming that the company discriminated against a non-U.S. citizen in violation of the Immigration and Nationality Act (INA).
The department’s investigation found that Abercrombie required a non-U.S. citizen, but not similarly-situated U.S. citizens, to produce specific documentary proof of her immigration status for the purpose of verifying her employment eligibility. Specifically, the Department found that Abercrombie required the individual to present a green card. The INA’s anti-discrimination provision prohibits employers from making specific documentary demands based on citizenship status or national origin when verifying an employee’s employment eligibility.
Under the settlement agreement, Abercrombie will pay $3,661.14 in back pay to the complainant and a civil penalty to the United States; establish a back pay fund of $153, 932.00 to compensate other individuals who may have been harmed; and be subject to monitoring of its employment eligibility verification practices for two years.
“The division is committed to identifying and tearing down illegal barriers that prevent authorized workers from working,” said Principal Deputy Assistant Attorney General Vanita Gupta of the Civil Rights Division. “The Civil Rights Division commends Abercrombie for working with the division to resolve this matter expeditiously.”
OSC is responsible for enforcing the anti-discrimination provision of the INA. Among other things, the statute prohibits citizenship status and national origin discrimination in hiring, firing, or recruitment or referral for a fee; unfair documentary practices; retaliation and intimidation. Trial Attorney Luz V. Lopez-Ortiz and Paralegal Ryan Thompson investigated this matter.
Coordinated Strike Against Colombia’s Largest and Most Influential Drug Trafficking and Armed BACRIM Criminal Group
U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida, Acting U.S. Attorney Kelly T. Currie of the Eastern District of New York and Regional Director Jay Bergman of the Andean Region of the Drug Enforcement Administration (DEA) announced today the unsealing of five indictments in U.S. federal courts in Brooklyn, New York, and Miami charging 17 alleged leaders and associates of Colombia’s largest and most influential BACRIM (banda criminal or criminal group), Clan Usuga (formerly referred to as Los Urabeños). The alleged leaders and other high-ranking members of Clan Usuga are charged with operating continuing criminal enterprises, participating in international cocaine trafficking conspiracies and using firearms in furtherance of drug trafficking crimes. Clan Usuga and many of its principal leaders have been previously designated by the President of the United States and the Department of the Treasury, Office of Foreign Assets Control as specially designated narcotics traffickers pursuant to the Foreign Narcotics Kingpin Designation Act. The Department of State has posted a $5 million reward for information leading to the arrest and/or conviction of alleged Clan Usuga principal leader Dairo Antonio Usuga David, also known as Otoniel.
“The cases referenced today demonstrate that the U.S. government, in collaboration with our international law enforcement partners, continues to successfully combat leaders and associates of BACRIM criminal enterprises that seek to supply narcotics to the United States,” said U.S. Attorney Ferrer. “Together, the U.S. Attorney’s Offices and the Colombian authorities strive to systematically dismantle one BACRIM structure after another and eliminate the threat they pose to our communities.”
“The indictments announced today are the result of a sweeping national and international effort to stem the flow of drugs across the world and into our communities,” said Acting U.S. Attorney Currie. “We stand united with our partners in Colombia in our unwavering commitment to root out the leaders of drug trafficking criminal enterprises wherever they may be found.”
U.S. Attorney Ferrer and Acting U.S. Attorney Currie extended their grateful appreciation to the DEA’s New York Field Division, Miami Field Division and the Bogotá Country Office as well as the Department of Homeland Security, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI) New York El Dorado Task Force and the Colombian National Police, the agencies responsible for leading the investigations. Mr. Ferrer and Mr. Currie also expressed their gratitude for the invaluable assistance provided by the Colombian Fiscalia General and the Department of Justice’s Office of International Affairs.
“These indictments are the culmination of years of work and far too often heartfelt sacrifice by the brave men and women of the Colombian National Police and the Office of the Prosecutor General of Colombia,” said DEA Regional Director Bergman. “These indictments represent the United States’ steadfast bilateral commitment to conclusively dismantle what is the largest and arguably the last of the nationally structured criminal bands in Colombia.”
“Today’s indictments illustrate our commitment, along with our international law enforcement partners to disrupt a criminal network responsible for smuggling tons of cocaine into the United States,” said Country Attaché Luis Sierra of ICE-HSI in Colombia. “HSI will continue to use its unique customs authorities to attack and dismantle these types of organizations and will aggressively pursue leads, regardless of where that information may lead us.”
Six of the Clan Usuga leaders were charged in both Brooklyn and Miami. Dairo Antonio Usuga-David aka “Otoniel,” “Mao,” “Gallo,” and “Mauricio-Gallo,” is alleged to be the principal leader of CLAN USUGA. Roberto Vargas Gutierrez aka “Gavilan,” Carlos Alberto Moreno Turberquia aka “Nicolas,” Aristides Manuel Mesa Paez aka “El Indio,” and Cesar Daniel Anaya Martinez aka “Tierra,” are alleged commanders of Clan Usuga responsible for collecting drug taxes, managing armed combatants and maintaining control over specific territorial areas within Colombia. Also charged in Brooklyn and Miami is an alleged manager of Clan Usuga, Ramiro Caro Pineda aka “Nolasco,” who was in charge of collecting drug taxes, coordinating drug shipments and maintaining control over airstrips and ports on the coast of Colombia.
The Brooklyn indictments also charge seven other cartel leaders, including Daniel Rendon-Herrera aka “Don Mario,” the original founder and prior leader of Clan Usuga; Luis Orlando Padierna Pena aka “Inglaterra,” and Jobanis de Jesus Avila Villadiego aka “Chiquito” and “Chiquito Malo,” commanders of Clan Usuga; and Jhoni Alberto Grajales aka “Guajiro,” Orlando Gutierrez-Rendon aka “Negro Orlando,” Gustavo Palomino Araujo aka “Camilo,” and Eduard Fernando Cardoza-Giraldo aka “Boliqueso” – alleged leaders of drug collections offices and paramilitary armed groups aligned with Clan Usuga.
A Miami indictment unsealed today charges Dairo Antonio Usuga-David aka “Otoniel,” “Mao,” and “Mauricio,” Jairo De Jesus Durango Restrepo aka “Gua Gua,” Roberto Vargas Gutierrez aka “Gavilan,” Aristides Manuel Mesa Paez aka “El Indio,” Alverio Feo Alvarado aka “Benevides,” Oscar David Pulgarin-Ganan aka “Nino” and “Coroso,” Ramiro Caro-Pineda aka “Nolasco” and “Hugo,” Cesar Daniel Anaya Martinez aka “Tierra,” and Eduardo Luis Vargas Gutierrez aka “Pipon,” with conspiring to distribute five kilograms or more of cocaine, knowing that it would be imported into the United States. Specifically, the defendants are charged with the distribution from as early as 2002 through June 2015, in Colombia, Venezuela, Ecuador, Guatemala, Panama, Honduras, Costa Rica, Nicaragua, Mexico and elsewhere.
According to a previously unsealed superseding indictment out of Miami, beginning around October 2006 through Feb. 10, 2012, defendants Henry De Jesus Lopez Londono aka “Mi Sangre,” “Salvador,” “Carlos Mario,” “Brother,” “Krackin,” and “Federico,” Jhon Fernando Giraldo Usuga aka “Simon,” and “Revenlino,” Arley Usuga Torres aka “07,” “Siete,” and “Samuel,” Jose Carlos Londono Robledo aka “Tito” and “Wolverine,” Carlos Antonio Moreno Tuberquia aka “Nicholas,” Edison Gomez Molina aka “El Doctor,” and Juan Diego Giraldo Usuga aka “Menor” and “Camilo,” are charged with conspiring to distribute five kilograms or more of cocaine knowing that it would be imported into the United States. Gomez Molina, Giraldo Usuga and Fernando Usuga pleaded guilty to the superseding indictment on Nov. 26, 2013, March 20, 2014, and May 8, 2014, respectively. According to their stipulated factual proffers, from at least October 2006 through February 2012, Gomez Molina, Giraldo Usuga and Fernando Usuga, along with others, used airplanes and other means of transportation to ship multiple loads of cocaine from Colombia to Central America. The loads ranged anywhere from 300 to 600 kilograms each. From there, the cocaine would be delivered to representatives of other organizations, who would take the cocaine and ultimately import it into the United States. Each defendant admitted that he was responsible for the shipment or attempted shipment of at least 150 kilograms of cocaine and knew that the cocaine would ultimately be imported into the United States. Gomez Molina was sentenced to serve 63 months in prison on Feb. 4, 2014. Girlado Usuga was sentenced to serve 63 months in prison on June 9, 2014. Fernando Usuga was sentenced to serve 168 months in prison on Aug. 29, 2014.
In another Miami indictment, Victor Alfonso Mosquera Perez aka “Negro,” is charged with conspiring to distribute five kilograms or more of cocaine, knowing that it would be imported into the United States. Specifically, the distribution allegedly occurred from as early as 2008 until approximately May 9, 2014, in Colombia, Honduras, Nicaragua and elsewhere.
According to another indictment, Andres Fernandez Perez-Restrepo aka “Anthrax,” is charged with conspiring to distribute five kilograms or more of cocaine, knowing that it would imported into the United States. Specifically, the defendant is alleged to have committed the distribution from at least as early as July 2012 through March 2, 2014, in Colombia, Honduras and elsewhere.
As detailed in one of the Brooklyn indictments, between June 2003 and December 2014, Usuga-David, Vargas Gutierrez, Moreno Turberquia, Padierna Pena, Avila Villadiego, Anaya Martinez and others, as leaders of Clan Usuga, conspired to import more than 73 metric tons of cocaine into the United States. Clan Usuga coordinated the production, purchase and transfer of multi-ton shipments of cocaine, as well as the receipt of shipments of cocaine in Mexico and Central America, for ultimate importation into the United States. Clan Usuga also controlled territory in various areas in Colombia and imposed a tax on any drug traffickers operating in those territories – a set fee for every kilogram of cocaine that was manufactured, stored or transported through areas under their control. The indictment further alleges that these defendants employed sicarios, or hitmen, who carried out acts of violence including murders, assaults, kidnappings and assassinations to collect drug debts, maintain discipline, control and expand drug territory and to promote and enhance the position of the organization.
In a second of the indictments unsealed in Brooklyn, Orlando Gutierrez-Rendon aka “Negro Orlando,” is charged with leading the Gutierrez-Rendon drug trafficking organization, a cocaine trafficking and cocaine-debt collection organization based in Cali, Colombia, that was aligned with Clan Usuga. According to the indictment, the Gutierrez-Rendon’s organization was involved in multi-ton shipments of cocaine from Colombia to Mexico, El Salvador and Panama for ultimate importation into the United States. The organization is also alleged to have acted as a collection agency, using violence and murder to collect payments and outstanding debts related to cocaine shipments on behalf of Clan Usuga. In exchange for its role in collecting funds, the organization received ownership interests in the cocaine shipments. Gutierrez-Rendon is also charged with conspiring to murder rival drug traffickers, including the murder of Samir Garcia. Between January 2006 and May 2013, Gutierrez-Rendon allegedly imported more than 30,000 kilograms of cocaine into the United States.
In a third Brooklyn indictment, Gustavo Palomino Araujo aka “Soldado,” “Zarco,” and “Camilo,” is charged with leading the Palomino Araujo, an organization responsible for cocaine trafficking, cocaine-debt collection and a paramilitary organization based in Cali, Colombia, that was aligned with Clan Usuga. The organization allegedly facilitated the transfer of multi-ton shipments of cocaine from Colombia to Mexico and Central America for importation into the United States, controlled territory in various areas in Colombia, imposed a tax on any drug traffickers operating in regions under its control and employed sicarios, or hitmen, to collect debts. Palomino Araujo is also charged with conspiring to murder numerous drug rivals.
In the fourth Brooklyn indictment, Eduard Fernando Cardoza-Giraldo aka “Boliqueso,” is charged with international cocaine trafficking in connection with his role in controlling a drug debt collection office aligned with Clan Usuga.
In all, 25 individuals have been charged in the investigations coordinated between the U.S. Attorneys’ Offices in Brooklyn and Miami. All of the defendants face a maximum sentence of life in prison, if convicted of the charges against them. Certain individuals named in indictments unsealed today have also been charged by other U.S. Attorneys’ Offices around the country. These cases are the result of the ongoing efforts by the Organized Crime Drug Enforcement Task Force (OCDETF), a partnership between federal, state and local law enforcement agencies. The OCDETF mission is to identify, investigate and prosecute high level members of drug trafficking enterprises, bringing together the combined expertise and unique abilities of federal, state and local law enforcement.
The cases in the U.S. Attorney’s Office of the Eastern District of New York are being prosecuted by Assistant U.S. Attorneys Steven L. Tiscione, Gina M. Parlovecchio and Margaret Lee of the office’s International Narcotics and Money Laundering Section.
The cases in the U.S. Attorney’s Office of the Southern District of Florida are being prosecuted by Assistant U.S. Attorney Michael Nadler of the office’s Narcotics Section.
An indictment is a formal charging document notifying the defendant of the charges. All persons charged in an indictment are presumed innocent until proven guilty.
‘Essential Shifts’ Needed for UN to Tackle New Peacekeeping Challenges, Report Reveals
Focus on political solutions, responsive and flexible operations, stronger partnerships and field-focused and people-centered mandates; these are the essential shifts the United Nations must urgently address as it faces challenging new landscapes in peacekeeping and conflict prevention, the chair of a high-level expert panel said today, introducing a long-awaited report at the world body’s New York Headquarters.
“Primacy of politics means that lasting peace is achieved through political solutions and not through military and technical engagements alone. Political solutions must guide all UN peace operations,” said José Ramos Horta, former President of Timor-Leste and Nobel Laureate at a press briefing where he presented on behalf of the 16-member panel key recommendations and areas where the group agreed reforms should be implemented.Primacy of politics means that lasting peace is achieved through political solutions and not through military and technical engagements alone. Political solutions must guide all UN peace operations.
On 31 October 2014, UN Secretary-General Ban Ki-moon announced the establishment of a High-Level Independent Panel on Peace Operations, chaired by Mr. Ramos-Horta. Responsible for making a comprehensive assessment of the state of UN peace operations today and the emerging needs of the future, the panel was also tasked with examining special political missions.
The new survey is being made public 15 years after the release of the groundbreaking Brahimi Report, named after long-time UN adviser and renowned Algerian diplomat Lakhdar Brahimi who chaired a similar high-level panel convened by former UN Secretary-General Kofi Annan.
Earlier today, the new report was handed over to Mr. Ban, who said he would study its findings “carefully” before transmitting it to the UN General Assembly and the Security Council.
“We will be leading the implementation phase from my Office, with the close participation of all the key departments”, the UN chief stated. “My instruction to them will be to carry on the spirit the Panel employed; to be bold; and to see the task as nothing less than preparing the United Nations to rise to the challenges of the future.”
Speaking on behalf of the Panel with the Vice-Chair, Ameerah Haq, former UN Under-Secretary-General for the Department of Field Support, Mr. Ramos-Horta emphasized the need for UN missions to be “tailored to context,” the UN being encouraged to embrace the term ‘peace operations’ to denote the full spectrum of responses in one articulated sequence, without isolating military components from police and civilian ones.
In addition, a “more resilient global and regional architecture for international peace and security” is required for the future; he said, convinced that the UN Headquarters must lay out a “vision” and focus more on enabling field missions, while personnel should renew “their resolve to serve and protect the people,” with one goal in mind: the well-being of civilians on the ground.
The Panel worked primarily through consultations, thematic workshops, review of submissions and relevant literature, capital visits, and targeted interviews, Mr. Ramos-Horta. Consultations with Member States, civil society and academia were held and the Panel received more than 80 written submissions from more than 50 Member States, regional and other organizations – such as the African Union – UN partner entities, civil society, academia and research outfits.
Calling for a stronger push for prevention, the Panel recommends the establishment of an “international forum on prevention drawing on external resources and knowledge,” as well as an “earlier engagement” by the Security Council to address “emerging threats”.
On rapid deployment, the group was unanimous in recommending the UN to lay out a “vision” and “roadmap for a stronger network of national and regional standby capabilities.”
Taking note of complaints expressed by a number of troop and police contributing countries about the lack of consultations, the Panel has concluded that such consultations should be institutionalized “to forge a common purpose for missions from the outset,” the Chair continued.
Among other recommendations, the report says the UN Secretariat should consider the establishment of a position of an “additional Deputy Secretary-General responsible for peace and security”, as well as a proposal for a single ‘peace operations account’ to finance all missions and related back-stopping activities in future.
Four Banks Reach Resolutions Under Department of Justice Swiss Bank Program
The Department of Justice announced today that the following four banks reached a resolution under the department’s Swiss Bank Program:
Société Générale Private Banking (Lugano-Svizzera)
MediBank AG
LBBW (Schweiz) AG
Scobag Privatbank AG
“Today’s agreements reflect the Tax Division’s continued progress towards reaching appropriate resolutions with the banks that self-reported and voluntarily entered the Swiss Bank Program,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Department of Justice’s Tax Division. “The department is currently investigating accountholders, bank employees, and other facilitators and institutions based on information supplied by various sources, including the banks participating in this Program. Our message is clear – there is no safe haven.”
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 the penalties in return for the department’s agreement not to prosecute these banks for tax-related criminal offenses.
Société Générale Private Banking (Lugano-Svizzera) SA (SGPB-Lugano) was established in 1974 and is headquartered in Lugano, Switzerland. Through referrals and pre-existing relationships, SGPB-Lugano accepted, opened and maintained accounts for U.S. taxpayers, and knew that it was likely that certain U.S. taxpayers who maintained accounts there were not complying with their U.S. reporting obligations. Since Aug. 1, 2008, SGPB-Lugano held and managed approximately 109 U.S.-related accounts, with a peak of assets under management of approximately $139.6 million, and offered a variety of services that it knew assisted U.S. clients in the concealment of assets and income from the Internal Revenue Service (IRS), including “hold mail” services and numbered accounts. Some U.S. taxpayers expressly instructed SGPB-Lugano not to disclose their names to the IRS, to sell their U.S. securities and to not invest in U.S. securities, which would have required disclosure and withholding. In addition, certain relationship managers actively assisted or otherwise facilitated U.S. taxpayers in establishing and maintaining undeclared accounts in a manner designed to conceal the true ownership or beneficial interest in the accounts, including concealing undeclared accounts by opening and maintaining accounts in the name of non-U.S. entities, including sham entities, having an officer of SGPB-Lugano act as an officer of the sham entities, processing cash withdrawals from accounts being closed and then maintaining the funds in a safe deposit box at the bank and making “transitory” accounts available, thereby allowing multiple accountholders to transfer funds in such a way as to shield the identity and account number of the accountholder. SGPB-Lugano will pay a penalty of $1.363 million.
Created in 1979 and headquartered in Zug, Switzerland, MediBank AG (MediBank) provided private banking services to U.S. taxpayers and assisted in the evasion of U.S. tax obligations by opening and maintaining undeclared accounts. In furtherance of a scheme to help U.S. taxpayers hide assets from the IRS and evade taxes, MediBank failed to comply with its withholding and reporting obligations, providing “hold mail” services and offering numbered accounts, thus reducing the ability of U.S. authorities to learn the identity of the taxpayers. After it became public that the Department of Justice was investigating UBS, MediBank hired a relationship manager from UBS and permitted some of that person’s U.S. clients to open accounts at MediBank. Since Aug. 1, 2008, MediBank had 14 U.S. related accounts with assets under management of $8,620,675. MediBank opened, serviced and profited from accounts for U.S. clients with the knowledge that many likely were not complying with their U.S. tax obligations. MediBank will pay a penalty of $826,000.
LBBW (Schweiz) AG (LBBW-Schweiz) was established in Zurich in 1995. Since August 2008, LBBW-Schweiz held 35 U.S. related accounts with $128,664,130 in assets under management. After it became public that the department was investigating UBS, LBBW-Schweiz opened accounts from former clients at UBS and Credit Suisse. Despite its knowledge that U.S. taxpayers had a legal duty to report and pay tax on income earned on their accounts, LLB permitted undeclared accounts to be opened and maintained, and offered a variety of services that would and did assist U.S. clients in the concealment of assets and income from the IRS. These services included following U.S. accountholders instructions not to invest in U.S. securities and not reporting the accounts to the IRS and agreeing to hold statements and other mail, causing documents regarding the accounts to remain outside the United States. LBBW-Schweiz will pay a penalty of $34,000.
Headquartered in Basel, Switzerland, Scobag Privatbank AG (Scobag) was founded in 1968 to provide financial and other services to its founders, and obtained its banking license in 1986. Since August 2008, Scobag had 13 U.S. related accounts, the maximum dollar value of which was $6,945,700. Scobag offered a variety of services that it knew could assist, and that did assist, U.S. clients in the concealment of assets and income from the IRS, including “hold mail” services and numbered accounts. Scobag will pay a penalty of $9,090.
In accordance with the terms of the 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.
“These four additional bank agreements signal a change in terrain for offshore banking,” said Chief Richard Weber for the IRS-Criminal Investigation (CI). “No longer is it safe to hide money offshore and expect that it will not be discovered. IRS CI Special Agents will continue to follow the money to find those who circumvent the offshore disclosure laws and hold them accountable.”
Acting Assistant Attorney General Ciraolo thanked the IRS and in particular, IRS-CI and IRS’s Large Business and International Division for their substantial assistance, as well as Karen M. Quesnel, Sean P. Beaty, Gregory S. Seador, W. Damon Dennis and Brian D. Bailey, who served as counsel on these matters, and Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program Thomas J. Sawyer of the Tax Division.
Attorney General Lynch Announces Five Major Banks Agree to Parent-Level Guilty Pleas
Five major banks – Citicorp, JPMorgan Chase & Co., Barclays PLC, The Royal Bank of Scotland plc and UBS AG – have agreed to plead guilty to felony charges. Citicorp, JPMorgan Chase & Co., Barclays PLC, and The Royal Bank of Scotland plc have agreed to plead guilty to conspiring to manipulate the price of U.S. dollars and euros exchanged in the foreign currency exchange (FX) spot market and the banks have agreed to pay criminal fines totaling more than $2.5 billion. A fifth bank, UBS AG, has agreed to plead guilty to manipulating the London Interbank Offered Rate (LIBOR) and other benchmark interest rates and pay a $203 million criminal penalty, after breaching its December 2012 non-prosecution agreement resolving the LIBOR investigation.
Nine FIFA Officials and Five Corporate Executives Indicted for Racketeering Conspiracy and Corruption
A 47-count indictment was unsealed early this morning in federal court in Brooklyn, New York, charging 14 defendants with racketeering, wire fraud and money laundering conspiracies, among other offenses, in connection with the defendants’ participation in a 24-year scheme to enrich themselves through the corruption of international soccer. The guilty pleas of four individual defendants and two corporate defendants were also unsealed today.
The defendants charged in the indictment include high-ranking officials of the Fédération Internationale de Football Association (FIFA), the organization responsible for the regulation and promotion of soccer worldwide, as well as leading officials of other soccer governing bodies that operate under the FIFA umbrella. Jeffrey Webb and Jack Warner – the current and former presidents of CONCACAF, the continental confederation under FIFA headquartered in the United States – are among the soccer officials charged with racketeering and bribery offenses. The defendants also include U.S. and South American sports marketing executives who are alleged to have systematically paid and agreed to pay well over $150 million in bribes and kickbacks to obtain lucrative media and marketing rights to international soccer tournaments.
The charges were announced by Attorney General Loretta E. Lynch, Acting U.S. Attorney Kelly T. Currie of the Eastern District of New York, Director James B. Comey of the FBI, Assistant Director in Charge Diego W. Rodriguez of the FBI’s New York Field Office, Chief Richard Weber of the Internal Revenue Service-Criminal Investigation (IRS-CI) and Special Agent in Charge Erick Martinez of the IRS-CI’s Los Angeles Field Office.
Also earlier this morning, Swiss authorities in Zurich arrested seven of the defendants charged in the indictment, the defendants Jeffrey Webb, Eduardo Li, Julio Rocha, Costas Takkas, Eugenio Figueredo, Rafael Esquivel and José Maria Marin, at the request of the United States. Also this morning, a search warrant is being executed at CONCACAF headquarters in Miami, Florida.
The guilty pleas of the four individual and two corporate defendants that were also unsealed today include the guilty pleas of Charles Blazer, the long-serving former general secretary of CONCACAF and former U.S. representative on the FIFA executive committee; José Hawilla, the owner and founder of the Traffic Group, a multinational sports marketing conglomerate headquartered in Brazil; and two of Hawilla’s companies, Traffic Sports International Inc. and Traffic Sports USA Inc., which is based in Florida.
“The indictment alleges corruption that is rampant, systemic, and deep-rooted both abroad and here in the United States,” said Attorney General Lynch. “It spans at least two generations of soccer officials who, as alleged, have abused their positions of trust to acquire millions of dollars in bribes and kickbacks. And it has profoundly harmed a multitude of victims, from the youth leagues and developing countries that should benefit from the revenue generated by the commercial rights these organizations hold, to the fans at home and throughout the world whose support for the game makes those rights valuable. Today’s action makes clear that this Department of Justice intends to end any such corrupt practices, to root out misconduct, and to bring wrongdoers to justice – and we look forward to continuing to work with other countries in this effort.”
Attorney General Lynch extended her grateful appreciation to the authorities of the government of Switzerland, as well as several other international partners, for their outstanding assistance in this investigation.
“Today’s announcement should send a message that enough is enough,” said Acting U.S. Attorney Currie. “After decades of what the indictment alleges to be brazen corruption, organized international soccer needs a new start – a new chance for its governing institutions to provide honest oversight and support of a sport that is beloved across the world, increasingly so here in the United States. Let me be clear: this indictment is not the final chapter in our investigation.”
Acting U.S. Attorney Currie extended his thanks to the agents, analysts and other investigative personnel with the FBI New York Eurasian Joint Organized Crime Squad and the IRS-CI Los Angeles Field Office, as well as their colleagues abroad, for their tremendous effort in this case.
“As charged in the indictment, the defendants fostered a culture of corruption and greed that created an uneven playing field for the biggest sport in the world,” said Director Comey. “Undisclosed and illegal payments, kickbacks, and bribes became a way of doing business at FIFA. I want to commend the investigators and prosecutors around the world who have pursued this case so diligently, for so many years.”
“When leaders in an organization resort to cheating the very members that they are supposed to represent, they must be held accountable,” said Chief Weber. “Corruption, tax evasion and money laundering are certainly not the cornerstones of any successful business. Whether you call it soccer or football, the fans, players and sponsors around the world who love this game should not have to worry about officials corrupting their sport. This case isn’t about soccer, it is about fairness and following the law. IRS-CI will continue to investigate financial crimes and follow the money wherever it may lead around the world, leveling the playing field for those who obey the law.”
The charges in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
The Enterprise
FIFA is composed of 209 member associations, each representing organized soccer in a particular nation or territory, including the United States and four of its overseas territories. FIFA also recognizes six continental confederations that assist it in governing soccer in different regions of the world. The U.S. Soccer Federation is one of 41 member associations of the confederation known as CONCACAF, which has been headquartered in the United States throughout the period charged in the indictment. The South American confederation, called CONMEBOL, is also a focus of the indictment.
As alleged in the indictment, FIFA and its six continental confederations, together with affiliated regional federations, national member associations and sports marketing companies, constitute an enterprise of legal entities associated in fact for purposes of the federal racketeering laws. The principal – and entirely legitimate – purpose of the enterprise is to regulate and promote the sport of soccer worldwide.
As alleged in the indictment, one key way the enterprise derives revenue is to commercialize the media and marketing rights associated with soccer events and tournaments. The organizing entity that owns those rights – as FIFA and CONCACAF do with respect to the World Cup and Gold Cup, their respective flagship tournaments – sells them to sports marketing companies, often through multi-year contracts covering multiple editions of the tournaments. The sports marketing companies, in turn, sell the rights downstream to TV and radio broadcast networks, major corporate sponsors and other sub-licensees who want to broadcast the matches or promote their brands. The revenue generated from these contracts is substantial: according to FIFA, 70% of its $5.7 billion in total revenues between 2011 and 2014 was attributable to the sale of TV and marketing rights to the 2014 World Cup.
The Racketeering Conspiracy
The indictment alleges that, between 1991 and the present, the defendants and their co-conspirators corrupted the enterprise by engaging in various criminal activities, including fraud, bribery and money laundering. Two generations of soccer officials abused their positions of trust for personal gain, frequently through an alliance with unscrupulous sports marketing executives who shut out competitors and kept highly lucrative contracts for themselves through the systematic payment of bribes and kickbacks. All told, the soccer officials are charged with conspiring to solicit and receive well over $150 million in bribes and kickbacks in exchange for their official support of the sports marketing executives who agreed to make the unlawful payments.
Most of the schemes alleged in the indictment relate to the solicitation and receipt of bribes and kickbacks by soccer officials from sports marketing executives in connection with the commercialization of the media and marketing rights associated with various soccer matches and tournaments, including FIFA World Cup qualifiers in the CONCACAF region, the CONCACAF Gold Cup, the CONCACAF Champions League, the jointly organized CONMEBOL/CONCACAF Copa América Centenario, the CONMEBOL Copa América, the CONMEBOL Copa Libertadores and the Copa do Brasil, which is organized by the Brazilian national soccer federation (CBF). Other alleged schemes relate to the payment and receipt of bribes and kickbacks in connection with the sponsorship of CBF by a major U.S. sportswear company, the selection of the host country for the 2010 World Cup and the 2011 FIFA presidential election.
The Indicted Defendants
As set forth in the indictment, the defendants and their co-conspirators fall generally into three categories: soccer officials acting in a fiduciary capacity within FIFA and one or more of its constituent organizations; sports media and marketing company executives; and businessmen, bankers and other trusted intermediaries who laundered illicit payments.
Nine of the defendants were FIFA officials by operation of the FIFA statutes, as well as officials of one or more other bodies:
Jeffrey Webb: Current FIFA vice president and executive committee member, CONCACAF president, Caribbean Football Union (CFU) executive committee member and Cayman Islands Football Association (CIFA) president.
Eduardo Li: Current FIFA executive committee member-elect, CONCACAF executive committee member and Costa Rican soccer federation (FEDEFUT) president.
Julio Rocha: Current FIFA development officer. Former Central American Football Union (UNCAF) president and Nicaraguan soccer federation (FENIFUT) president.
Costas Takkas: Current attaché to the CONCACAF president. Former CIFA general secretary.
Jack Warner: Former FIFA vice president and executive committee member, CONCACAF president, CFU president and Trinidad and Tobago Football Federation (TTFF) special adviser.
Eugenio Figueredo: Current FIFA vice president and executive committee member. Former CONMEBOL president and Uruguayan soccer federation (AUF) president.
Rafael Esquivel: Current CONMEBOL executive committee member and Venezuelan soccer federation (FVF) president.
José Maria Marin: Current member of the FIFA organizing committee for the Olympic football tournaments. Former CBF president.
Nicolás Leoz: Former FIFA executive committee member and CONMEBOL president.
Four of the defendants were sports marketing executives:
Alejandro Burzaco: Controlling principal of Torneos y Competencias S.A., a sports marketing business based in Argentina, and its affiliates.
Aaron Davidson: President of Traffic Sports USA Inc. (Traffic USA).
Hugo and Mariano Jinkis: Controlling principals of Full Play Group S.A., a sports marketing business based in Argentina, and its affiliates.
And one of the defendants was in the broadcasting business but allegedly served as an intermediary to facilitate illicit payments between sports marketing executives and soccer officials:
José Margulies: Controlling principal of Valente Corp. and Somerton Ltd.
The Convicted Individuals and Corporations
The following individuals and corporations previously pleaded guilty under seal:
On July 15, 2013, the defendant Daryll Warner, son of defendant Jack Warner and a former FIFA development officer, waived indictment and pleaded guilty to a two-count information charging him with wire fraud and the structuring of financial transactions.
On Oct. 25, 2013, the defendant Daryan Warner waived indictment and pleaded guilty to a three-count information charging him with wire fraud conspiracy, money laundering conspiracy and the structuring of financial transactions. Daryan Warner forfeited over $1.1 million around the time of his plea and has agreed to pay a second forfeiture money judgment at the time of sentencing.
On Nov. 25, 2013, the defendant Charles Blazer, the former CONCACAF general secretary and a former FIFA executive committee member, waived indictment and pleaded guilty to a 10-count information charging him with racketeering conspiracy, wire fraud conspiracy, money laundering conspiracy, income tax evasion and failure to file a Report of Foreign Bank and Financial Accounts (FBAR). Blazer forfeited over $1.9 million at the time of his plea and has agreed to pay a second amount to be determined at the time of sentencing.
On Dec. 12, 2014, the defendant José Hawilla, the owner and founder of the Traffic Group, the Brazilian sports marketing conglomerate, waived indictment and pleaded guilty to a four-count information charging him with racketeering conspiracy, wire fraud conspiracy, money laundering conspiracy and obstruction of justice. Hawilla also agreed to forfeit over $151 million, $25 million of which was paid at the time of his plea.
On May 14, 2015, the defendants Traffic Sports USA Inc. and Traffic Sports International Inc. pleaded guilty to wire fraud conspiracy.
All money forfeited by the defendants is being held in reserve to ensure its availability to satisfy any order of restitution entered at sentencing for the benefit of any individuals or entities that qualify as victims of the defendants’ crimes under federal law.
* * * *
The indictment unsealed today has been assigned to U.S. District Court Judge Raymond J. Dearie of the Eastern District of New York.
The indicted and convicted individual defendants face maximum terms of incarceration of 20 years for the RICO conspiracy, wire fraud conspiracy, wire fraud, money laundering conspiracy, money laundering and obstruction of justice charges. In addition, Eugenio Figueredo faces a maximum term of incarceration of 10 years for a charge of naturalization fraud and could have his U.S. citizenship revoked. He also faces a maximum term of incarceration of five years for each tax charge. Charles Blazer faces a maximum term of incarceration of 10 years for the FBAR charge and five years for the tax evasion charges; and Daryan and Daryll Warner face maximum terms of incarceration of 10 years for structuring financial transactions to evade currency reporting requirements. Each individual defendant also faces mandatory restitution, forfeiture and a fine. By the terms of their plea agreements, the corporate defendants face fines of $500,000 and one year of probation.
The government’s investigation is ongoing.
The government’s case is being prosecuted by Assistant U.S. Attorneys Evan M. Norris, Amanda Hector, Darren A. LaVerne, Samuel P. Nitze, Keith D. Edelman and Brian D. Morris of the Eastern District of New York, with assistance provided by the Justice Department’s Office of International Affairs and Organized Crime and Gang Section.
Why President Obama Is Taking Steps to Demilitarize Local Police Forces
Today, President Obama traveled to Camden, New Jersey -- a city that has struggled with one of the nation's highest violent crime rates.
Dedicated to building a stronger, safer community, the Camden County Police Department and the community have worked together to help police do their jobs more safely, to reduce crime, and to create more economic opportunity in communities that have been saddled with a history of isolation.
As President Obama said, it will take a concerted, "all-hands-on-deck" effort to change the odds for these communities:
If we as a society don’t do more to expand opportunity to everybody who’s willing to work for it, then we’ll end up seeing conflicts between law enforcement and residents. If we as a society aren’t willing to deal honestly with issue of race, then we can't just expect police departments to solve these problems. If communities are being isolated and segregated, without opportunity and without investment and without jobs -- if we politicians are simply ramping up long sentences for nonviolent drug crimes that end up devastating communities, we can't then ask the police to be the ones to solve the problem when there are no able-bodied men in the community, or kids are growing up without intact households.
That is why President Obama created the Task Force on 21st Century Policing, a coalition of community leaders and law enforcement that have been developing solutions that will help build and maintain trust and transparency in community policing.
In accordance with some of the Task Force recommendations, the President is taking steps to end practices that stress community-police relations and promote practices that build trust between a community and its police force:
What We Won't Do: Militarizing the Police
The first step the Administration is taking is to prohibit and limit the kinds of military equipment that law enforcement agencies can procure from the federal government. Here's what that means:
Law enforcement are now prohibited from acquiring:
Tracked armored vehicles
Bayonets
Grenade launchers
Large caliber weapons and ammunition
Local police departments will also face limits on other federal enforcement equipment, including explosives, riot equipment, and wheeled armored or tactical vehicles. And if a department wants to acquire any controlled equipment, they must apply and provide detailed, clear, and persuasive explanation that justifies the request.
What We Will Do: Using Data to Build Trust
The President launched the Police Data Initiative with police chiefs and technology officers from 16 jurisdictions across the country to work alongside community organizations and police associations to leverage open data that will identify problems early, increase internal accountability, and decrease inappropriate uses of force.
