Apr 13, 2018 | Antitrust
DOJ Settlement Prohibits Knorr and Wabtec from Maintaining Employee “No-Poach” Agreements and Requires Cooperation in Ongoing Antitrust Division Investigation of Such Agreements
On April 3, 2018, the U.S. Department of Justice (“DOJ”) announced that it reached a settlement with Knorr-Bremse AG (“Knorr”) and Westinghouse Air Brake Technologies Corporation (“Wabtec”), two of the world’s largest rail equipment suppliers, to resolve a lawsuit alleging that the companies had for years maintained unlawful agreements not to compete for each other’s employees. The lawsuit further alleges that the companies entered into similar “no-poach” agreements with rail equipment supplier Faiveley Transport S.A. (“Faiveley”) before Faiveley was acquired by Wabtec in November 2016.
The Justice Department’s Antitrust Division filed a civil antitrust lawsuit in United States District Court for the District of Columbia to challenge Knorr and Wabtec’s no-poach agreements. At the same time, DOJ filed a proposed settlement that, if approved by the Court, would resolve DOJ’s competitive concerns and restore competition for employees, to the benefit of U.S. workers.
Assistant Attorney General Makan Delrahim stated, “The unlawful no-poach agreements challenged today restrained competition for employees and deprived rail industry workers of important opportunities, information, and the ability to obtain better terms of employment.”
WERE YOU EMPLOYED AS A PROJECT MANAGER, ENGINEER, SALES EXECUTIVE, BUSINESS UNIT HEAD OR CORPORATE OFFICER BY KNORR-BREMSE AG, WABTEC (WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORPORATION), FAIVELEY TRANSPORT S.A., NEW YORK AIR BRAKE CORPORATION, KNORR BRAKE COMPANY, OR FAIVELEY TRANSPORT NORTH AMERICA BETWEEN 2009 AND THE PRESENT?
If so, then you may have a claim for compensation arising from the anticompetitive conduct. Please contact Kehoe Law Firm, P.C. to discuss your potential legal claims. If you wish to discuss your concerns privately with an attorney, please contact Michael Yarnoff, Esq., (215) 792-6676, Ext. 804, [email protected].
The Civil Antitrust Complaint Against Knorr-Bremse AG and Wabtec (Westinghouse Air Brake Technologies Corporation)
According to DOJ’s complaint:
Knorr and Wabtec compete with each other to attract, hire, and retain various skilled employees, including project managers, engineers, executives, business unit heads, and corporate officers.
Beginning no later than 2009, Knorr and Wabtec reached agreements not to solicit, recruit, hire without prior approval, or otherwise compete with one another for employees. For example, in a letter dated January 28, 2009, a director of Knorr Brake Company wrote to a senior executive at Wabtec’s headquarters, “[Y]ou and I both agreed that our practice of not targeting each other’s personnel is a prudent cause for both companies. As you so accurately put it, ‘we compete in the market.’”
Beginning no later than 2011, Knorr Brake Company (a wholly-owned subsidiary of Knorr) and Faiveley Transport North America (the U.S. subsidiary of Faiveley before Faiveley was acquired by Wabtec) agreed to get the other’s permission before pursuing each other’s employees. For example, in October 2011, a senior executive at Knorr Brake Company explained that he had a discussion with an executive at Faiveley’s U.S. subsidiary that “resulted in an agreement between us that we do not poach each other’s employees. We agreed to talk if there was one trying to get a job[.]”
Beginning no later than 2014, Wabtec Passenger Transit, a U.S. business unit of Wabtec, and Faiveley Transport North America similarly agreed not to hire each other’s employees without prior approval. For example, in an e-mail to his colleagues, a Wabtec Passenger Transit executive explained that a candidate for employment “is a good guy, but I don’t want to violate my own agreement with [Faiveley Transport North America].”
The no-poach agreements between Knorr, Wabtec, and Faiveley restricted competition for U.S. rail industry workers, which limited their access to better job opportunities, restricted their mobility, and deprived them of competitively significant information that they could have used to negotiate for better terms of employment.
Under the terms of the proposed settlement, Wabtec and Knorr are prohibited from entering, maintaining, or enforcing no-poach agreements with any other companies, subject to limited exceptions. The settlement also requires Knorr and Wabtec to implement rigorous notification and compliance measures to preclude their entry into these types of anticompetitive agreements in the future.
Project Managers, Engineers, Sales Executives, Business Unit Heads, and Corporate Officers employed by Knorr-Bremse AG, Wabtec (Westinghouse Air Brake Technologies Corporation), Faiveley Transport S.A., New York Air Brake Corporation, Knorr Brake Company, or Faiveley Transport North America between 2009 and the present are encouraged to contact Kehoe Law Firm, P.C. to discuss their potential legal claims and options.
Apr 13, 2018 | Whistleblower
Former Company Insider’s Voluntarily-Provided Information Strongly Supported the Findings in the Underlying Actions
On April 12, 2018, the Securities and Exchange Commission announced a whistleblower award of more than $2.1 million to a former company insider whose information led to multiple successful enforcement actions.
The whistleblower’s information strongly supported the findings in the underlying actions and the whistleblower provided ongoing assistance to SEC staff during the investigation.
According to the Order Determining Whistleblower Award Claim:
The recommendation of the CRS [Claims Review Staff] with respect to the Covered Actions is adopted. We find that the record demonstrates that the Claimant voluntarily provided original information to the Commission that led to the successful enforcement of the Covered Actions pursuant to Section 21F(b)(1) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. § 78u-6(b)(1), and Rule 21F-3(a) thereunder, 17 C.F.R. § 240.21F-3(a).
Turning to the award amount, we have applied the award criteria identified in Rule 21F-6 of the Exchange Act to the specific facts and circumstances here.2 In doing so, we find that the CRS’s proposed award determination is appropriate. We positively assessed the facts that the Claimant was a former company insider whose information strongly supported the findings in the Covered Actions and who thereafter continued to provide ongoing helpful assistance to the staff during the Commission’s investigation.
Since issuing its first award in 2012, the SEC has awarded more than $266 million to 55 individuals under the whistleblower program. In that time, almost $1.5 billion in monetary sanctions have been ordered against wrongdoers based on actionable information received from whistleblowers, including more than $740 million in disgorgement of ill-gotten gains and interest, the majority of which has been or is scheduled to be returned to harmed investors.
All whistleblower payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators. No money has been taken or withheld from harmed investors to pay whistleblower awards. Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action. Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million.
By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.
If you voluntarily provide original, high-quality information (i.e., information derived from your independent knowledge, NOT facts derived from publicly-available information) about the possible violation of the federal securities laws that has occurred, is ongoing or is about to occur AND which leads to a successful SEC enforcement action, resulting in an order of monetary sanctions exceeding $1 million, then you MAY be eligible for an SEC whistleblower award of between 10% and 30% of the monetary sanctions collected in actions brought by the SEC and related actions brought by certain other regulatory and law enforcement authorities.
Remember, information is voluntarily provided if you provide information to the SEC or another regulatory or law enforcement authority before a) the SEC requests it from you or your lawyer or b) Congress, another regulatory or enforcement agency or self-regulatory organization asks you to provide the information in connection with an investigation or certain examinations or inspections.
Can You Submit Information Anonymously to the SEC?
Yes, however, if you wish to submit information to the SEC anonymously, you MUST be represented by an attorney in connection with the anonymous information submission to be eligible for an award.
What Kind of Wrongful Conduct Is of Interest to the SEC?
Examples of the kind of conduct about which the SEC is interested include:
- Ponzi scheme, Pyramid Scheme, or a High-Yield Investment Program
- Theft or misappropriation of funds or securities
- Manipulation of a security’s price or volume
- Insider trading
- Fraudulent or unregistered securities offering
- False or misleading statements about a company (including false or misleading SEC reports or financial statements)
- Abusive naked short selling
- Bribery of, or improper payments to, foreign officials
- Fraudulent conduct associated with municipal securities transactions or public pension plans
- Other fraudulent conduct involving securities
SEC Investigations and The Federal Securities Laws
The SEC conducts investigations into possible violations of the federal securities laws. Again, the more specific, credible, and timely a whistleblower tip, the more likely it is that the tip will be forwarded to SEC investigative staff for further follow-up or investigation. For example, if the tip identifies individuals involved in the scheme, provides examples of particular fraudulent transactions, or points to non-public materials evidencing the fraud, the tip is more likely to be assigned to SEC Enforcement staff for investigation.
It is important to keep in mind that the SEC does not have jurisdiction to take action on information that is outside the scope or coverage of the federal securities laws. The SEC may, in appropriate circumstances, refer your matter to another regulatory or law enforcement agency.
Do You Have Questions or Concerns About Providing Information to the SEC About Securities Fraud?
If so, please know that Kehoe Law Firm’s legal team understands the issues associated with making the difficult decision to voluntarily come forward with information about securities fraud or other wrongdoing. Moreover, the Firm’s legal staff has extensive experience investigating and prosecuting fraud, as well as interacting with sources of information, especially brave, honest individuals who are willing to expose fraud committed against the United States government.
If you have questions or concerns about voluntarily providing information as a whistleblower to the SEC about violations of the federal securities laws, including questions about whistleblower award eligibility or the form and manner in which the information is required to be provided to the SEC, please contact Kehoe Law Firm, P.C. by completing the form above on the right or sending an e-mail to [email protected]. If you prefer to speak privately with an attorney, please contact either Michael Yarnoff, Esq., [email protected], (215) 792-6676, Ext. 804, or John Kehoe, Esq., [email protected], (215) 792-6676, Ext. 801.
For additional SEC Whistleblower Program information, please see Frequently Asked Questions, Submit a Tip, Claim an Award, Final Orders, and Section 21F of the Securities Exchange Act of 1934 (Securities Whistleblower Incentives and Protection).
Source: SEC.gov.
Apr 11, 2018 | Blog, Consumer Protection
Is it Illegal to Condition Warranty Coverage on the Use of Specified Parts or Services?
On April 10, 2018, the Federal Trade Commission announced that it sent warning letters to six major companies that market and sell automobiles, cellular devices, and video gaming systems in the United States.
The letters warn about the FTC’s concerns about the statements of the companies that consumers must use specified parts or service providers to keep their warranties intact. Unless warrantors provide the parts or services for free or receive a waiver from the FTC, such statements, generally, are prohibited by the Magnuson-Moss Warranty Act, a law that governs consumer product warranties. Similarly, such statements may be deceptive under the FTC Act.
FTC staff recently took a closer look at the warranties and promotional materials of the various companies and saw language that raised concerns that some businesses were telling consumers that their warranty would be void if they used unauthorized parts or service. The following are examples of the language of the questionable warranty provisions:
The use of [the company’s parts] is required to keep your . . . manufacturer’s warranties and any extended warranties intact.
This warranty shall not apply if this product . . . is used with products not sold or licensed by [company name].
This warranty does not apply if this product . . . had had the warranty seal on the [product] altered, defaced, or removed.
FTC staff suggested that the companies review the Magnuson-Moss Warranty Act and, if necessary, revise their practices accordingly. The letters put the companies on notice that after 30 days, the FTC will be taking another look at their written warranties and promotional materials. FTC staff has requested that each company review its promotional and warranty materials to ensure that such materials do not state or imply that warranty coverage is conditioned on the use of specific parts of services.
Warranties Under the Magnuson-Moss Warranty Act and Its Two Exceptions
According to the Magnuson-Moss Warranty Act:
No warrantor of a consumer product may condition his written or implied warranty of such product on the consumer’s using, in connection with such product, any article or service (other than article or service provided without charge under the terms of the warranty) which is identified by brand, trade, or corporate name.
Thus, according to the FTC, a company cannot void a consumer’s warranty or deny warranty coverage solely because the consumer uses a part made by someone else or gets someone not authorized by the company to perform service on the product.
There are only two exceptions:
1) If the company provides the article or service to consumers for free; or
2) If the company gets a waiver from the FTC. Under 15 U.S.C. § 2302(c), the FTC may grant a waiver only if the company proves that “the warranted product will function properly only if the article or service so identified is used in connection with the warranted product, and the waiver is in the public interest.” Companies, according to the FTC, may, however, disclaim warranty coverage for defects or damage caused by the use of unauthorized parts or service.
Section 5 of the FTC Act’s Prohibition on Deception Applies to Misleading Warranty Claims
A violation of the Magnuson-Moss Warranty Act, according to the FTC, is a violation of Section 5 of the FTC Act. But separate and apart from Magnuson-Moss, a claim that creates a false impression that a warranty would be void due to the use of unauthorized parts or service may be a stand-alone deceptive practice under the FTC Act.
Source: FTC.gov
Apr 9, 2018 | Shareholder & Investor Protection
$2.4 Million Ponzi Scheme and Related $1.4 Million Offering Fraud Targeting Retirees
On April 6, 2018, the Securities and Exchange Commission announced charges against two Texas companies and their principals in a $2.4 million Ponzi scheme and in a related, $1.4 million offering fraud targeting retirees.
The SEC’s complaint alleges that, from 2010 to 2017, Clifton E. Stanley (“Stanley”) ran a Ponzi scheme through his retirement planning and real estate investment business, The Lifepay Group, LLC. Stanley is alleged to have lured at least 30 elderly victims to invest approximately $2.4 million of their retirement savings with baseless promises and claims of outsized investment returns.
Stanley kept the scheme afloat for years by paying early investors with later investors’ funds and by convincing investors to roll over their investments. The SEC further alleges that Stanley pilfered from the estate of an elderly woman’s family trust, diverting nearly $100,000 to fund the Lifepay Ponzi scheme.
The SEC’s complaint also alleges that, beginning in 2015, Stanley and Michael E. Watts (“Watts”) orchestrated a second offering fraud through a company they controlled, SMDRE, LLC. Allegedly, Stanley and Watts used a collection of misrepresentations and empty promises to convince a group of predominantly elderly victims to invest roughly $1.4 million in SMDRE.
Stanley is alleged to have used roughly $1.3 million of the Lifepay offering proceeds for personal expenses, including country club memberships, daily living expenses, travel, and entertainment expenses. In addition, Watts and Stanley allegedly engaged in shell game transactions so they could use the vast majority of SMDRE investor funds for personal expenses and to keep the Lifepay Ponzi scheme afloat.
The SEC’s complaint charges Stanley, Watts, Lifepay, and SMDRE with violating the registration and antifraud provisions of the federal securities laws. Stanley also was charged for conduct stemming from his role as an unregistered broker.
For additional information, please review a recently issued investor alert from the SEC’s Office of Investor Education and Advocacy and the Division of Enforcement’s recently-formed Retail Strategy Task Force to help seniors spot the warning signs (“red flags”) of Ponzi schemes.
Source: SEC.gov
Apr 9, 2018 | Shareholder & Investor Protection
Important Things to Know About Ponzi Schemes Which Target Seniors
The SEC’s Office of Investor Education and Advocacy and Retail Strategy Task Force issued a warning to senior investors, many of whom have spent many years saving and investing, about fraudulent Ponzi schemes. In a Ponzi scheme, fraudsters use money they collect from new investors to pay existing investors. And what appears to be a return on your investment is actually money from another investor who has been swindled.
Ponzi Scheme Warning Signs
Promises of High Returns with Little or No Risk.
Guaranteed, high-investment returns are the hallmark of a Ponzi scheme. Every investment has risk, and the potential for high returns usually comes with high risk. If it sounds too good to be true, it probably is.
Unlicensed and Unregistered Sellers.
Most Ponzi schemes involve individuals or firms that are not licensed or registered. Even if an investment professional comes across as likeable or trustworthy, research the individual here to determine whether he or she is licensed and registered.
Overly Consistent Returns & Aggressive Sales Ploys
Investment values tend to fluctuate over time. Be skeptical of an investment that generates steady positive returns regardless of market conditions.
Be wary of aggressive sales ploys, such as pressure to buy immediately and persuasion tactics such as offering investment seminars with a free meal. Take your time deciding whether an investment is right for you and don’t give any money until you have confirmed for yourself that the seller is licensed and registered.
For investments that you already have, be suspicious if you have problems getting paid or if you are pressured to rollover your investments. Ponzi scheme promoters sometimes try to prevent investors from cashing out by offering even higher returns for staying invested.
SEC Ponzi Scheme Enforcement Actions
The SEC has brought enforcement actions involving Ponzi schemes aimed at seniors, including:
In the Lifepay Group, LLC matter, two defendants conducted an alleged Ponzi scheme that targeted seniors and their retirement savings. The SEC alleged that the defendants offered investors unregistered promissory notes, telling them that their money would be used for real estate investments that would generate high returns. To keep the Lifepay scam going, the defendants, allegedly, used the money of new investors to pay earlier investors and convinced investors to rollover their investments into new promissory notes for larger amounts. According to the SEC’s complaint, the defendants only invested a small portion of investor money in real estate and stole roughly $1.3 million to pay for personal expenses.
In the Woodbridge matter, the defendants, allegedly, conducted a $1.2 billion Ponzi scheme in which thousands of people invested their retirement savings. The SEC alleged that the defendants employed hundreds of sales agents to advertise through television, radio, newspaper, cold calls, social media, websites, seminars, and in-person presentations. According to the SEC’s complaint, although the defendants claimed that investors would get paid revenue from high-interest loans to third parties, the defendants really used money from new investors to pay returns owed to existing investors. One defendant allegedly used $21 million of investor money for his own extravagant personal expenditures.
Source: Investor.gov
