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KPMG Senior Exec Charged in Insider Trading Case

19 Apr 2013
Written by World Watch

Prosecutors filed insider trading charges against former KPMG senior account executive Scott London. London’s co-conspirator Bryan Shaw was not criminally charged but was named in a related civil action taken by the Securities and Exchange Commission (SEC). Both men publicly confessed to their misconduct prior to the charges being filed.

Published in Insider Trading

The United States (US) Department of Justice (DoJ) has announced that health system operator Intermountain Health Care Inc (Intermountain) has agreed to pay US$25.5 million to settle claims it violated the Stark Statute and the False Claims Act through improper financial relationships between hospitals and the doctors referring patients to them. According to the DoJ, the relationships allegedly in violation included "employment agreements under which the physicians received bonuses that improperly took into account the value of some of their patient referrals" and "office leases and compensation arrangements between Intermountain and referring physicians".

The Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) have opened preliminary bribery investigations into Microsoft’s possible violation of the Foreign Corrupt Practices Act (FCPA). According to a person briefed on the inquiry, an unnamed whistleblower came forward last year claiming a Microsoft official in China instructed the whistleblower to pay bribes to government officials in order to win business. The agencies are also investigating claims of misconduct in Italy and Romania. According to the person briefed on the inquiry, Microsoft conducted an internal investigation on the China accusations in 2010 with the aid of an outside law firm and found no evidence of improper behavior.

U.S. District Judge Richard Sullivan ruled last week that the U.S. Securities and Exchange Commission could continue to pursue bribery charges against three former Deutsche Telekom AG executives. Sullivan rejected a motion filed by the three executives to dismiss the case alleging violations of the Foreign Corrupt Practices Act (FCPA). The defendants, Elek Straub, Andras Balogh, and Tamas Morval, argued that the SEC did not have jurisdiction to sue them in the U.S. because the case hinged on only a few emails that were sent through U.S. servers. However, Sullivan ruled there was enough evidence to suggest the defendants intended harm in the U.S.

Wal-Mart Stores Inc. (Wal-Mart) has named Karen Roberts as its new general counsel. Roberts will assume her new role beginning on February 1. The previous general counsel, Jeff Gearhart will continue to lead the legal department as executive vice president and corporate secretary and focus his efforts on global compliance efforts as Wal-Mart continues to deal with bribery allegations in Mexico. Wal-Mart has been under investigation by the U.S. Department of Justice and The Securities and Exchange Commission regarding allegations that the company bribed Mexican officials in order to more quickly open stores in the country.

According to Executive Vice President Susan Axelrod, the Financial Industry Regulatory Authority (Finra) will soon start to examine how major investment banks and brokerage firms define and manage conflicts of interest with their clients. Axelrod indicated the self-regulatory organization funded by the securities industry will examine 14 big firms, but declined to name the actual firms. Earlier in the year, Finra chief executive, Richard Ketchum indicated this would be taking place, stating “we will look to have a focused conversation with you about the conflicts you have identified and the steps you have taken to eliminate, mitigate or disclose each of them." Ketchum also stated that he’d like to see reviews of conflicts of interest “become a standard part of operating procedure" on Wall Street. This will be the first call from regulators in nearly a decade to review how Wall Street handles conflicts of interest. However, it might be difficult for Wall Street to identify its own conflicts.

Published in Conflicts of Interest

As part of its continuing response to a series of scandals in the United Kingdom, News Corp. has announced its new ethics and compliance structure. Gerson Zweifach, senior executive vice president and group general counsel, was named as the new chief compliance officer. Lisa Fleischman, vice president and associate general counsel, was named as deputy compliance officer. Both will retain their prior positions. The company also organized each of its business units into five compliance groups. Each of the groups will be headed by a group chief compliance officer. The group chief compliance officers will report directly to Zweifach. The company also said that is has started a review of its anti-corruption controls “in selected locations around the world.” News Corp.’s U.K. newspaper unit has been embroiled in a series of scandals since last summer. Since news of the phone-hacking at its tabloids first broke, allegations of bribery, money laundering and computer hacking have also emerged. Recently the company announced it took a US$224 million charge in the last fiscal year attributed to costs related to the scandals.

Wall Street Journal: News Corp. Changes Compliance Structures (15 August 2012)
(Source: Wall Street Journal)


The United States (US) Securities and Exchange Commission (SEC) has announced that it has adopted rules mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act requiring oil, gas and mining companies to disclose certain payments made to the US Government or foreign governments. The rules also apply to subsidiaries of these companies.

SEC's media release (22 August 2012)

Related news item:
Reuters: U.S. SEC forces disclosure of oil, mining payments abroad (22 August 2012)
(Source: SEC; Reuters)

The United States (US) Securities and Exchange Commission (SEC) has announced that pharmaceutical company Pfizer has agreed to settle SEC charges that its subsidiary, Wyeth, bribed doctors and other health care professionals employed by foreign governments "to obtain regulatory and formulary approvals, sales, and increased prescriptions for the company's pharmaceutical products". According to SEC, Wyeth attempted to conceal the bribery by recording the transactions as "legitimate expenses for promotional activities, marketing, training, travel and entertainment, clinical trials, freight, conferences, and advertising". Pfizer and Wyeth have agreed to pay over US$45 million in total to settle the bribery allegations.

SEC's media release (7 August 2012)

Related media item:
US Department of Justice's (DoJ) media release (7 August 2012)
(Source: SEC; DoJ)

Data Systems & Solutions (Data Systems) has agreed to a settlement with the U.S. Department of Justice (DOJ) regarding allegations the company violated the U.S. Foreign Corrupt Practices Act (FCPA). According to court documents, the company bribed high level officials, through subcontractors in the U.S. and abroad, at the Ignalina Nuclear Power Plant, a state-owned power plant in Lithuania, in order to win contracts. According to the DOJ, one incident involved a Data Systems executive paying for the Florida vacation of an Ignalina official. The executive also sent an email to other executives about his feeling nervous about the incident. In another instance, the company purchased a $2,700 Cartier watch for another Ignalina official. The agreement requires Data Systems to pay $8.8 million in criminal penalties, implement an improved compliance program and report to the DOJ regarding its efforts. The DOJ cited the company’s cooperation with the investigation, its firing of those responsible for the payments and its implementation of a more rigorous compliance program. The revamped compliance program includes improved third party due diligence, training, and increased review of most foreign transactions.

Wall Street Journal: Data Systems & Solutions Pays $8.8 Million to Settle FCPA Violations. (18 June 2012)
(Source: Wall Street Journal)

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