U.S. Attorney’s Office For The Southern District Of New York Recovers Nearly $12 Billion In Forfeitures And Civil Actions

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the Office obtained recoveries of more than $8.6 billion in forfeiture actions, more than $3 billion in civil actions, and more than $1.3 billion from restitution, criminal fines, and special assessments, between January 1, 2014, and December 31, 2015.   The amounts collected include criminal and civil forfeitures of nearly $3.44 billion for calendar year 2014 and more than $5.24 billion for 2015.

Manhattan U.S. Attorney Preet Bharara said: “Our Office’s more than $12 billion in forfeitures, penalties, and fines for the calendar years 2014 and 2015 includes more than $8.6 billion in forfeitures, the most that this Office or any U.S. Attorney’s Office has forfeited in a two-year period.  These recoveries demonstrate that those who break the law or commit civil offenses, whether institutions or individuals, are not free to profit from their misconduct.  These recoveries not only serve to deter bad conduct.  These recoveries not only serve to deter bad conduct, but also a significant portion of the money recovered will go toward compensating victims of crime or other misconduct who suffered real financial loss.”

Forfeitures

Forfeited funds are generally deposited into the Department of Justice Assets Forfeiture Fund (the “Assets Forfeiture Fund”) and the Department of Treasury Forfeiture Fund. The forfeited funds are used to restore money to crime victims and for a variety of law enforcement purposes.

BNP Paribas

$8.8336 billion forfeiture order; $3.8388 billion collected; total financial penalties collected $8.9736 billion 

In July 2014, BNP Paribas S.A. (“BNPP”) pled guilty to conspiring to violate the International Emergency Economic Powers Act and the Trading with the Enemy Act by knowingly and willfully moving more than $8.8 billion through the U.S. financial system on behalf of Sudanese, Iranian, and Cuban entities subject to U.S. economic sanctions.  In May 2015, BNPP was sentenced to forfeit $8.8336 billion, with penalties paid to the Federal Reserve Bank, New York State Department of Financial Services, and the New York County District Attorney to be credited against that forfeiture money judgment.  After crediting those penalties, $3.8 billion was forfeited to the United States in connection with the case in 2015.  Pursuant to recently enacted legislation, a substantial portion of these funds will be placed in a Congressionally-created terror victim compensation fund.

JPMorgan Chase

$1.7 billion forfeited

On January 7, 2014, as part of a deferred prosecution agreement, JPMorgan Chase agreed to pay a non-tax deductible penalty of $1.7 billion, in the form of a civil forfeiture for its violations of the Bank Secrecy Act committed in connection with the Bernard Madoff multibillion-dollar Ponzi scheme.  The full amount was forfeited to the United States in 2014.

Toyota Motor Corporation

$1.2 billion forfeited

In March 2014, the Toyota Motor Corporation entered into a deferred prosecution agreement with this Office based on charges that Toyota misled U.S. consumers by concealing and making deceptive statements regarding two safety issues affecting its vehicles, each of which caused a type of unintended acceleration.  Pursuant to the agreement, Toyota, among other things, agreed to a $1.2 billion penalty in the form of a civil forfeiture, constituting the largest criminal penalty ever imposed by the Department of Justice on an automotive company.  This amount was forfeited to the United States in 2014.

General Motors

$900 million forfeited

In September 2015, the General Motors Company (“GM”) entered into a deferred prosecution agreement with this Office based on charges that GM concealed a potentially deadly safety defect from its U.S. regulator, the National Highway Traffic Safety Administration, and, in the process, misled consumers concerning the safety of certain of GM’s cars.  Pursuant to the deferred prosecution agreement, GM, among other things, agreed to the forfeiture of $900 million to the United States, which was completed in 2015.

Commerzbank

$300 million forfeited

In March 2015, Commerzbank entered into a deferred prosecution agreement with this Office and other components of the Department of Justice, including the Department’s Asset Forfeiture and Money Laundering Section, based in part on this Office’s charges that Commerzbank violated the Bank Secrecy Act (“BSA”) by willfully failing to have an effective anti-money laundering program, willfully failing to conduct due diligence on its foreign correspondent accounts, and willfully failing to file suspicious activity reports, which allowed the perpetrators of a major accounting fraud involving the Olympus Corporation to transfer more than $1.6 billion through Commerzbank in furtherance of the fraud.  Pursuant to the deferred prosecution agreement, Commerzbank, among other things, agreed to the forfeiture of $300 million to the United States based on the BSA charges, which was completed in 2015.

SAC Capital Advisors, L.P.

$284 million forfeited

In July 2013, this Office filed a civil money laundering and forfeiture action seeking the forfeiture of all of the assets of the SAC Companies (“SAC”) on the basis that SAC engaged in money laundering by commingling the illegal profits from insider trading with other assets, using the profits to promote additional insider trading, and transferring the profits with the assistance of financial institutions.  In November 2013, this Office entered into an agreement with SAC in which SAC, among other things, agreed to forfeit $900 million to the United States, including the $616 million payment to the Securities and Exchange Commission (“SEC”).  The agreement also involved a criminal fine of another $900 million, resulting in a total penalty of approximately $1.2 billion, on top of the $616 million SEC fine. The Stipulation and Order of Settlement in connection with the civil case was entered on November 6, 2013, and the Judgment in a Criminal Case was entered on April 11, 2014.  $284 million was forfeited to the United States in 2014.

PokerStars and Related Cases

$213,047,848 forfeited

In July 2012, the United States reached an agreement with the two largest online poker companies in the United States, Full Tilt Poker and PokerStars.  The United States had brought a civil forfeiture and money laundering action against these companies and their assets.  Under the terms of the settlement, Full Tilt forfeited essentially all of its assets to the United States.   PokerStars agreed to forfeit $547 Million, to be paid in several installments, and to reimburse the approximately $184 million owed by Full Tilt to foreign players.  The settlement further provides that PokerStars will acquire the Forfeited Full Tilt Assets from the Government.  In 2014 and 2015, $197 million was forfeited to the United States by PokerStars and more than $16 million was forfeited by other parties in related actions.  To date, in excess of $1.2 billion has been forfeited in the PokerStars civil forfeiture action and related cases.

US v. Tokhtakhounov, et al.

$39,455,928 forfeited

In April 2013, this Office brought charges against more than 30 alleged members and associates of two related Russian-American organized crime enterprises, including a Russian “Vor,” for a range of offenses including the operation of at least two international bookmaking organizations – or “sportsbooks” – that catered to multimillionaires and billionaires in the U.S., Russia, and Ukraine – and the laundering of tens of millions of dollars from Russia and Ukraine through Cyprus and into the U.S.  Thirty-one of the defendants have since been convicted and sentenced to up to five years in prison and forfeiture of the proceeds of the offenses and all property involved in the money laundering operation.  In 2014 and 2015, the United States forfeited nearly $40 million in connection with the case.

US v. Robert C. Trosten

$30,742,072 forfeited 

On February 20, 2008, Robert C. Trosten, the former Chief Financial Officer of Refco, pled guilty to five counts charged in a superseding indictment to a $2.4 billion fraud.  Pursuant to the plea agreement, Trosten agreed to forfeit $2.4 billion, along with other funds and property, to the United States.  Trosten was sentenced on June 5, 2014.  $30,742,072 was forfeited to the United States in 2014.  To date, in excess of $680 million has been forfeited to the United States.

Silk Road

$18,742,916 forfeited

On September 30, 2013, the United States filed a civil action against the assets of Silk Road, the subject of a criminal prosecution, including its domain name and approximately 173,991 Bitcoins.  The civil complaint alleges that Silk Road was a global illegal cyber business designed to broker criminal transactions.  On January 14, 2014, a forfeiture order was entered forfeiting 29,655 Bitcoins to the United States.  The remaining 144,336 Bitcoins are restrained pending the conclusion of the criminal appeal in United States v. Ross William Ulbricht.  Since the entry of the forfeiture order, a portion of the Bitcoins have been auctioned and sold for a total of $18,742,916.

Civil Actions and Restitution, Criminal Fines, and Special Assessments

From January 1, 2014, through December 31, 2015, the Office also has recovered more than $1.3 billion in restitution, criminal fines, and special assessments, and more than $3 billion from civil actions.

The $3 billion collected in civil actions came from a combination of cases in which the Office recouped government money lost due to fraud or other misconduct, collected fines imposed on individuals and/or corporations for violations of federal health, safety, civil rights, or environmental laws, or recovered funds owed to the Internal Revenue Service.

Below are summaries of some of the civil actions in which the Office has obtained significant recoveries:

Tronox bankruptcy; United States and Tronox v. Anadarko Petroleum Corp., et al. 

More than $5.15 billion in total recovery, with more than $1.8 billion paid directly to the United States

This Office and a litigation trust created in the bankruptcy of Tronox, Inc., obtained a $5.15 billion settlement of a fraudulent conveyance lawsuit.  The United States and the litigation trust alleged that Tronox’s predecessor, the Kerr-McGee Corporation, had transferred billions of dollars of assets to companies that became subsidiaries of Anadarko Petroleum Corp., and that as a result of these transfers, Tronox was left insolvent and unable to clean up contaminated sites around the country for which it was liable.  After a lengthy bench trial, the bankruptcy court found Anadarko’s subsidiaries liable.  Thereafter, a settlement was reached.  On January 23, 2015, defendants paid $5.15 billion (plus interest since April 3, 2014) to the litigation trust, which then distributed the funds to the United States, certain states, and four environmental response trusts created in the Tronox bankruptcy to clean up contaminated sites. The total distribution to the United States was more than $1.8 billion.

Bank of America and Countrywide

More than $1 billion paid to the United States

The Office conducted investigations into the origination of defective residential mortgage loans by Countrywide’s Consumer Markets Division and Bank of America’s Retail Lending Division, as well as the fraudulent sale of such loans to the government-sponsored enterprises Fannie Mae and Freddie Mac.  The Office’s investigation into these practices, as well as three private whistleblower lawsuits filed under seal in the Southern District of New York pursuant to the False Claims Act, were resolved in connection with a broad settlement with Bank of America announced by the Department of Justice in Washington in August 2014.  As part of the settlement, Countrywide and Bank of America paid $1 billion to resolve their liability under the False Claims Act in the SDNY cases.  Bank of America also paid a total penalty of $5 billion to settle the Department of Justice’s claims under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”).

JPMorgan Chase Bank

$614 million paid to the United States

In February 2014, the Office filed, and simultaneously settled, a civil fraud lawsuit against JPMorgan Chase for improperly approving thousands of residential home mortgage loans for government insurance and refinancing.  In the settlement, JPMorgan Chase admitted, acknowledged, and accepted responsibility for, among other things, submitting false certifications to the U.S. Department of Housing and Urban Development (“HUD”), the U.S. Department of Veterans Affairs (“VA”), and the Federal Housing Administration (“FHA”) that induced HUD-FHA and the VA to accept for government insurance and refinancing thousands of loans that were not eligible for such insurance or refinancing, and ultimately resulted in substantial losses to the Government when the loans defaulted.  JPMorgan Chase also admitted to failing to self-report to HUD-FHA hundreds of loans that it had identified as fraudulent or otherwise deficient, and to submitting loan data to HUD-FHA that lacked integrity.  To resolve the claims against it, the bank agreed to pay $614 million to the United States under the False Claims Act and to implement an enhanced quality control program to address the misconduct concerning the integrity of loan data submitted to HUD-FHA.

Bank of New York Mellon

$167.5 million paid to the United States

In March 2015, the Office settled civil fraud charges filed in 2011 against Bank of New York Mellon (“BNYM”) and David Nichols, one of its former executives, as part of a $714 million global settlement with private litigants and other regulators concerning BNYM’s foreign exchange practices.  In October 2011, this Office filed a civil fraud action against BNYM seeking civil penalties under FIRREA and alleging that BNYM had defrauded clients using one of its foreign exchange products.  In April 2014, the district court issued a landmark ruling affirming the novel FIRREA theory that a bank could be “affected” by its own fraudulent conduct.  The case was coordinated with a multi-district litigation involving class actions brought by BNYM customers and a lawsuit filed by the New York State Attorney General (“NYAG”).  Under the settlement, BNYM paid $167.5 million to this Office as a FIRREA penalty.  BNYM also paid $167.5 million to the NYAG and $335 million to customer classes, as well as $30 million to the SEC and $14 million to the Department of Labor, which had ongoing investigations.  As part of the settlement, BNYM and Nichols admitted and accepted responsibility for conduct alleged in this Office’s complaint, including that, contrary to statements to clients that BNYM offered “best rates” and “best execution,” it actually assigned clients the worst interbank rates available during the trading day or session.  BNYM was also required to reform its business practices and terminate employment relationships with responsible individuals, including Nichols.  The settlement proceeds were held in escrow pending approvals by the court and disbursed in October 2015.

Fifth Third Bankcorp.

$84.9 million paid to the United States

In October 2015, this Office filed and simultaneously settled a civil fraud lawsuit against Fifth Third Bancorp and its subsidiaries (“FTB”) for misconduct in connection with FTB’s origination of residential mortgage loans insured by FHA.  FTB made a voluntary disclosure to this Office and HUD of approximately 1,400 mortgage loans that the bank had certified as eligible for FHA insurance, later determined were materially defective and thus ineligible for FHA insurance, but never self-reported to HUD, resulting in millions of dollars in HUD losses.  As part of the settlement, FTB paid $84,911,018 to cover federal losses on approximately 500 of the loans that defaulted and for which HUD paid insurance claims, and agreed to indemnify HUD for all losses HUD may incur on the other approximately 900 defective loans that had not yet defaulted.  FTB admitted and accepted responsibility for failing to self-report mortgage loans it knew to be defective, contrary to HUD requirements.  FTB also reformed its business practices and terminated the employment of responsible employees.

Accredo

$45 million paid to the United States

In April 2015, the Office settled civil fraud claims against Accredo Healthcare Group, Inc. (“Accredo”) relating to Accredo’s participation in an alleged kickback scheme with Novartis in connection with Accredo’s distribution of the blood chelation drug Exjade.  In the settlement, Accredo admitted and accepted responsibility for participating in a patient referral allocation system created by Novartis under which, in order to get more patient referrals and related benefits from Novartis, Accredo assigned a nurse to call Exjade patients and tell them that it was extremely important to continue taking Exjade, but without advising patients about the less common and more severe adverse reactions associated with Exjade.  Accredo also paid $45.06 million to resolve its liability to the United States for this conduct.

L-3/EOTech

$25.6 million paid to the United States

In November 2015, the Office filed and simultaneously settled a civil fraud lawsuit against L-3 Communications EOTech, Inc. (“EOTech”), L-3 Communications Corporation (“L-3”), and EOTech president Paul Mangano for selling defective holographic weapon sights to the U.S. Department of Defense (“DOD”), the U.S. Department of Homeland Security, and the Federal Bureau of Investigation.  The sights were designed to allow users to quickly acquire targets, return fire, and hit targets, in a range of extreme environmental conditions.  In the settlement, L-3 and EOTech admitted that EOTech knew the sights failed in extreme temperatures and humid environments, but delayed disclosure of these defects to the Government for years, despite EOTech’s representations to DOD that the sights performed in hot, cold, and humid conditions, and despite EOTech’s contractual obligation to disclose to DOD performance-related data affecting the reliability of the sights.  Mangano also admitted knowing that the sights experienced failures in cold temperatures or humid environments.  EOTech and L-3 agreed to pay $25.6 million to resolve their liability to the United States under the False Claims Act.

Qualitest

$22.4 million paid to the United States

In December 2015, the Office settled civil fraud claims against Endo Pharmaceuticals, Inc., and subsidiaries of Endo that, doing business as Qualitest Pharmaceuticals (collectively, the “Qualitest entities”), manufactured and sold chewable fluoride tablets that contained less than half of the amount of fluoride ion indicated by the product labeling.  In the settlement, the Qualitest entities admitted and accepted responsibility for their manufacturing and labeling practices that caused children, including children covered by Medicaid, to receive only approximately 44% of the fluoride ion as recommended by guidelines issued by the American Dental Association and the American Academy of Pediatrics.  The Qualitest entities also paid $22.44 million to the United States, as well as $16.56 million to plaintiff states, to resolve their liability for this conduct.

Lyondell

$18.8 million paid to the United States

In 2014, the Office recovered more than $18 million pursuant to a previously approved bankruptcy settlement agreement between federal and state environmental regulators and Lyondell Chemical Company and its subsidiaries.  Pursuant to the 2010 settlement, Lyondell paid approximately $162 million to the United States and an environmental response trust on account of federal and state environmental claims at certain sites and provided the government an unsecured bankruptcy claim for clean-up costs at other sites.  The 2014 recovery of $18.8 million was a partial payment by Lyondell, through a stock distribution, on the bankruptcy claim.  Prior to its bankruptcy, Lyondell had been one of the largest chemical manufacturers in the United States and was liable for contamination at numerous sites around the country.

HSBC

$10 million paid to the United States

In June 2014, the Office settled civil fraud claims against HSBC Bank USA and other HSBC entities (collectively “HSBC”) relating to HSBC’s failure to oversee the reasonableness of foreclosure-related charges HSBC submitted for reimbursement to FHA and Fannie Mae, contrary to program requirements and HSBC’s certifications that it had done so.  In the settlement, HSBC accepted responsibility for failing to create or maintain systems to review fees and charges submitted by outside counsel and other third-party providers to HSBC during 2009 and 2010, fees and charges which HSBC then submitted to FHA and Fannie Mae for reimbursement without the requisite oversight and review.  HSBC also paid $10 million to resolve its liability to the United States for this conduct.

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The Criminal Division’s Money Laundering and Asset Forfeiture Unit is led by Chief Jason Cowley and Deputy Chief Alexander Wilson and handles all criminal and civil forfeiture actions for the Office.  Civil recoveries are handled by the Office’s Civil Division, which is led by Sara L. Shudofsky.  Criminal and civil collections are handled by the Civil Division’s Financial Litigation Unit, which is led by Kathleen Zebrowski.

For further information, the United States Attorneys’ Annual Statistical Reports can be found online at http://www.justice.gov/usao/reading_room/foiamanuals.html.