Sep 7, 2018 | Consumer Protection, Employment & Technology Archive
On September 7, 2018, the FTC reported that the operators of a Georgia-based debt collection business that allegedly used false claims and threats to get people to pay debts – including debts they did not owe or that the defendants had no authority to collect – have been banned from the debt collection business and from buying or selling debt, under settlements with the Federal Trade Commission.
According to the FTC’s complaint, the defendants’ debt collection business model was based on falsely claiming to consumers that they had committed a crime and would be sued, have their wages garnished, or be put in prison if they did not pay purported debts. In many instances, the defendants collected on debts consumers had already paid or that the defendants otherwise had no authority to collect. They also, according to the FTC, illegally contacted consumers’ employers and other third parties, as well as failed to provide written notices and disclaimers required by law.
The settlement orders also prohibit the defendants from misrepresentations regarding any financial products and services, and from profiting from or failing to properly dispose of customers’ personal information collected as part of the challenged practices.
Each order imposes a $3,462,664 judgment that will be partially suspended, due to the defendants’ inability to pay, when they have surrendered certain assets. In each case, the full judgment will become due immediately if the defendants are found to have misrepresented their financial condition.
The FTC vote approving the proposed stipulated orders against Lamar Snow, Global Processing Solutions LLC, Intrinsic Solutions LLC, North Center Collections Inc and Diverse Financial Enterprises Inc., Jahaan McDuffie, Capital Security Investments LLC and American Credit Adjusters LLC, and Glentis Wallace, also known as Glen Wallace, was 5-0. The United States District Court, Northern District of Georgia, Atlanta Division, entered the orders on July 17, 2018.
Default judgment was entered by the Court against the remaining defendants—Advanced Mediation Group, LLC, Apex National Services, LLC, Mirage Distribution, LLC, and Mitchell & Maxwell, LLC—on September 4, 2018.
For related case information, please click here.
Source: FTC.gov
Sep 4, 2018 | Consumer Protection, Employment & Technology Archive
On September 4, 2018, the Securities and Exchange Commission announced that it charged a telecommunications expense management company for its use of fraudulent accounting practices that artificially boosted company revenues between 2013 and 2015. Four former members of the company’s senior management team were also charged for their roles in the alleged misconduct.
As alleged in the SEC’s complaint, Tangoe Inc., formerly a public company headquartered in Connecticut, improperly recognized approximately $40 million of revenue out of the total of $566 million reported between 2013 and 2015. In some instances, Tangoe allegedly reported revenue prematurely for work that had not been performed, including service prepayments, and for transactions that did not produce any revenue at all. The SEC alleged that Donald J. Farias, a Tangoe executive, falsified business records, some of which were provided to Tangoe’s external auditors to support revenue recognition decisions.
The SEC’s complaint, filed in federal court in Connecticut, charged Tangoe, its former CEO, Albert R. Subbloie, former CFO, Gary R. Martino, former vice president of finance, Thomas H. Beach, and former senior vice president of expense management operations, Donald J. Farias. Each is charged with violating provisions of the federal securities laws.
Tangoe, Subbloie, Martino, and Beach have agreed to settle the SEC’s charges without admitting or denying the allegations. They agreed to pay penalties in the amount of $1.5 million, $100,000, $50,000, and $20,000, respectively. The settlement is subject to court approval.
Source: SEC.gov
Sep 4, 2018 | Shareholder & Investor Protection
On September 4, 2018, the Securities and Exchange Commission announced that Paris-based pharmaceutical company Sanofi has agreed to pay more than $25 million to resolve charges that its Kazakhstan and the Middle East subsidiaries made corrupt payments to win business.
According to the SEC’s order, the schemes spanned multiple countries and involved bribe payments to government procurement officials and healthcare providers in order to be awarded tenders and to increase prescriptions of its products. In Kazakhstan, distributors were used as part of a kickback scheme to generate funds from which bribes were paid to officials to ensure that Sanofi was awarded tenders at public institutions. The kickbacks were tracked in internal spreadsheets where they were coded as “marzipans.” In the Middle East, various pay-to-prescribe schemes were used to induce healthcare providers to increase their prescriptions of Sanofi products.
Charles Cain, FCPA Unit Chief, SEC Enforcement Division, stated, “Bribery in connection with pharmaceutical sales remains as a significant problem despite numerous prior enforcement actions involving the industry and life sciences more generally.” Further, Mr. Cain stated, “While bribery risk can impact any industry, this matter illustrates that more work needs to be done to address the particular risks posed in the pharmaceutical industry.”
The SEC’s order finds that Sanofi violated the books and records and internal accounting controls provisions of the federal securities laws. Without admitting or denying the findings, Sanofi agreed to a cease-and-desist order and to pay $17.5 million in disgorgement, $2.7 million in prejudgment interest, and a civil penalty of $5 million.
Source: SEC.gov
Aug 28, 2018 | Shareholder & Investor Protection
On August 28, 2017, the Securities and Exchange Commission announced that Moody’s Investors Service Inc. has agreed to pay a total of $16.25 million in penalties to settle charges involving internal control failures and failing to clearly define and consistently apply credit rating symbols. According to the SEC, this marks the first time the SEC has filed an enforcement action involving rating symbol deficiencies.
Moody’s agreed to pay $15 million to settle charges of internal controls failures involving models it used in rating U.S. residential mortgage-backed securities (“RMBS”) and will retain an independent consultant to assess and improve its internal controls. Moody’s separately agreed to pay $1.25 million and to review its policies, procedures, and internal controls regarding rating symbols. Moody’s did not admit or deny the SEC’s charges.
According to the SEC’s order in the internal controls proceeding, Moody’s failed to establish and document an effective internal control structure as to models that Moody’s had outsourced from a corporate affiliate and used in rating RMBS from 2010 through 2013. Moreover, Moody’s failed to maintain and enforce existing internal controls that should have been applied to the models. Ultimately, Moody’s corrected more than 650 RMBS ratings with a notional value exceeding $49 billion, due, in part, to errors in the models. Also, in 54 instances, Moody’s failed to document its rationale for issuing final RMBS ratings that deviated materially from model-implied ratings.
In the SEC’s order relating to ratings symbols, for 26 ratings of securities known as “combo notes” with a total notional value of about $2 billion, Moody’s assigned ratings to combo notes in a manner that was inconsistent with other types of securities that used the same rating symbols.
Source: SEC.gov
Aug 27, 2018 | Shareholder & Investor Protection
On August 27, 2018, the Securities and Exchange Commission announced charges against four Transamerica entities for misconduct involving faulty investment models and ordered the entities to refund $97 million to misled retail investors.
According to the SEC’s order investors put billions of dollars into mutual funds and strategies using the faulty models developed by investment adviser AEGON USA Investment Management LLC (AUIM). AUIM, its affiliated investment advisers Transamerica Asset Management Inc. (TAM) and Transamerica Financial Advisors Inc., and its affiliated broker-dealer Transamerica Capital Inc., claimed that investment decisions would be based on AUIM’s quantitative models. The SEC’s order finds that the models, which were developed solely by an inexperienced, junior AUIM analyst, contained numerous errors, and did not work as promised. The SEC found that when AUIM and TAM learned about the errors, they stopped using the models without telling investors or disclosing the errors.
Without admitting or denying the SEC’s findings, the four Transamerica entities agreed to settle the SEC’s charges and pay nearly $53.3 million in disgorgement, $8 million in interest, and a $36.3 million penalty, and will create and administer a fair fund to distribute the entire $97.6 million to affected investors.
In separate orders, the SEC also found that AUIM’s former Global Chief Investment Officer, Bradley Beman, and AUIM’s former Director of New Initiatives, Kevin Giles, each were a cause of certain of AUIM’s violations. In particular, the Commission found that Beman did not take reasonable steps to make sure the mutual funds’ models worked as intended and that Beman and Giles both contributed to AUIM’s compliance failings related to the development and use of models. Beman and Giles agreed to settle the SEC’s charges without admitting or denying the findings and pay, respectively, $65,000 and $25,000 in penalties that also will be distributed to affected investors.
Source: SEC.gov
