Defendant sentenced for a second time for using counterfeit checks to buy United States Postage Stamps (DOJ Release) Two BMO Advisory Firms Pay Over $37 Million to Harmed Clients for Failing to Disclose Conflicts of Interest (SEC Release)
[I]investors were drawn to Hologram USA's website by a TV commercial regarding an investment opportunity. The website contained information about a purported pending Regulation A securities offering, and a separate unregistered offering of convertible notes. As alleged in the complaint, Hologram USA used general solicitation and allowed non-accredited investors to purchase convertible shares, in violation of certain federal registration requirements. As presented on the website, Hologram USA's business plan included, in major part, the creation of "resurrection" performances in which the holograms of famous deceased artists would be used to create "live" concerts with the deceased. As alleged in the SEC's complaint, a slide deck available on the website for investors and potential investors contained false and misleading information concerning Hologram USA's right to present these shows, and its current theater network in which it planned to broadcast them.
From September 2018 through March 2019, John Lamb a/k/a Johnny Lamb engaged in a scheme to defraud the USPS throughout the Southeastern United States, including North Georgia. Lamb negotiated over 200 counterfeit and forged checks at post offices in Georgia, Tennessee, North Carolina, Alabama, and Kentucky, defrauding the United States Postal Service of over $140,000. The value of these checks ranged from $500 to $950, which he used to buy U.S. postage stamps.The U.S. Attorney's Office for the Northern District of Georgia prosecuted Lamb in 2014 for using counterfeit checks to buy over $500,000 worth of U.S. Postal Service products, including stamps and services. He served a sentence in federal prison.
[M]ylan classified EpiPen as a "generic" drug under the Medicaid Drug Rebate Program, which resulted in Mylan paying much lower rebates to the government than if EpiPen had been classified as a "branded" drug. The complaint alleges that in October 2014, the Centers for Medicare and Medicaid Services (CMS) informed Mylan that EpiPen was misclassified as a generic drug. Starting in November 2014, and continuing for nearly two years, the DOJ conducted a civil investigation into whether Mylan misclassified EpiPen and thereby overcharged the government for EpiPen sales to Medicaid patients. During the investigation, DOJ issued multiple subpoenas and investigative demands, rejected Mylan's arguments to close the investigation, and indicated its intent to sue Mylan if Mylan failed to make a settlement offer. As alleged in the complaint, Mylan produced documents and other information to DOJ, including providing potential damages calculations and making offers of settlement.As alleged in the complaint, public companies facing possible material losses from a lawsuit or government investigation must (1) disclose the loss contingency if a loss is reasonably possible; and (2) record an accrual for the estimated loss if the loss is probable and reasonably estimable. Mylan, however, failed to disclose or accrue for the loss relating to the DOJ investigation before October 2016, when it announced a $465 million settlement with DOJ. As a result, Mylan's public filings were false and misleading. Further, as alleged in the complaint, Mylan's 2014 and 2015 risk factor disclosures that a governmental authority may take a contrary position on Mylan's Medicaid submissions, when CMS had already informed Mylan that EpiPen was misclassified, were misleading.
[B]etween 2012 and 2016, FCA US issued monthly press releases falsely reporting new vehicle sales and falsely touting a "streak" of uninterrupted monthly year-over-year sales growth, when in fact, the growth streak had been broken in September 2013. FCA US and Fiat Chrysler Automobiles included the press releases in their SEC filings. New vehicle sales and the growth streak were key performance indicators that illustrated the company's competitive position and demand for its vehicles. The SEC's order finds that FCA US inflated new vehicle sales results by paying dealers to report fake vehicle sales and maintaining a database of actual but unreported sales, which employees often referred to as a "cookie jar." In months when the growth streak would have ended or when FCA US fell short of other targets, FCA US dipped into the "cookie jar" and reported old sales as if they had just occurred.
[W]hen selecting investments for clients, BMO Harris Financial Advisors Inc. (BMO Harris) and BMO Asset Management Corp. (BMO Asset Mgmt) preferred mutual funds managed by BMO Asset Mgmt (proprietary funds) and invested approximately 50% of MAAP client assets in proprietary funds. This practice resulted in payment of additional management fees to BMO Asset Mgmt, however, the SEC's order found that neither BMO adviser disclosed this practice or the associated conflict of interest to clients. Moreover, the SEC's order found that, when considering mutual funds for MAAP, BMO Asset Mgmt evaluated the lower-cost institutional share class for both proprietary and non-proprietary funds, but the higher-cost, non-institutional share class for proprietary mutual funds always was selected for MAAP.In addition, the SEC found that BMO Harris failed to disclose its conflicts of interest arising from investing MAAP client assets in higher-cost share classes of certain mutual funds, including funds managed by BMO Asset Mgmt, when lower-cost share classes were available. By selecting the higher-cost share classes, BMO Harris received revenue sharing payments and avoided paying certain transaction costs, while clients received lower returns on these investments.
"Today's award demonstrates how integral whistleblowers have become to our enforcement efforts," said CFTC Director of Enforcement James McDonald. "Forty percent of our investigations now involve whistleblowers. We expect that number to increase as the CFTC continues to expand its whistleblower program.""This award shows that, in some cases, whistleblowers may provide information about wrongdoing that is not completely accurate, but if any information they provide leads us to open an investigation resulting in a successful enforcement action, we will reward them accordingly," said CFTC Whistleblower Office Director Christopher Ehrman.
[C]laimant 1 did not provide particularly significant information to the Commission. The charges the Commission brought were ultimately different from Claimant 1's allegations In addition, Clamant 1 provided limited assistance because Claimant 1 could not provide specifics to CFTC staff investigating the matter and did not understand how the violations under investigation worked. The breakthrough in the investigation came from [REDACTED].