An experienced whistleblower attorney, successful trial attorney, former criminal prosecutor, and former reporter Representing whistleblowers reporting fraud on the Federal State Governments

The Securities and Exchange Commission today announced that Domenick Migliorato, a former supervisor of the securities lending desk at Industrial and Commercial Bank of China Financial Services LLC (ICBCFS), has agreed to settle charges for his supervisory failures involving the improper handling of transactions involving American Depositary Receipts (ADRs). Earlier this year, ICBCFS agreed to pay more than $42 million to settle the SEC’s charges against the firm.

ADRs are U.S. securities that represent foreign shares of a foreign company and require a corresponding number of foreign shares to be held in custody at a depositary bank. The practice of “pre-release” allows ADRs to be issued without the deposit of foreign shares, provided brokers receiving them have an agreement with a depositary bank and the broker or its customer owns the number of foreign shares that corresponds to the number of shares the ADRs represent.

The SEC’s order finds that from 2011 through 2014, Migliorato was responsible for the firm’s compliance with these requirements of pre-release. Under Migliorato’s watch, personnel on ICBCFS’s securities lending desk failed to take reasonable steps to determine whether the proper number of foreign shares were owned and held by ICBCFS or its customers. This failure opened up the possibility that the ADRs could be used improperly for short selling or dividend arbitrage.

The Securities and Exchange Commission today announced that it has filed an emergency action and obtained temporary restraining order against two offshore entities conducting an alleged unregistered, ongoing digital token offering in the U.S. and overseas that has raised more than $1.7 billion of investor funds.Telegram and its subsidiary sold approximately 2.9 billion digital tokens called “Grams” at discounted prices to 171 initial purchasers worldwide, including more than 1 billion Grams to 39 U.S. purchasers.

According to the SEC’s complaint, Telegram Group Inc. and its wholly-owned subsidiary TON Issuer Inc. began raising capital in January 2018 to finance the companies’ business, including the development of their own blockchain, the “Telegram Open Network” or “TON Blockchain,” as well as the mobile messaging application Telegram Messenger.  Telegram promised to deliver the Grams to the initial purchasers upon the launch of its blockchain by no later than October 31, 2019, at which time the purchasers and Telegram will be able to sell billions of Grams into U.S. markets. The complaint alleges that defendants failed to register their offers and sales of Grams, which are securities, in violation of the registration provisions of the Securities Act of 1933.

“Our emergency action today is intended to prevent Telegram from flooding the U.S. markets with digital tokens that we allege were unlawfully sold,” said Stephanie Avakian, Co-Director of the SEC’s Division of Enforcement. “We allege that the defendants have failed to provide investors with information regarding Grams and Telegram’s business operations, financial condition, risk factors, and management that the securities laws require.”

The Government of the Cayman islands has announced that it will publish the identities of everyone who owns a company there by 2023. That would bring the island nation in line with a law passed last year by the United Kingdom, and with EU directives and should reduce the significant amount of tax evasion by persons using the Cayman Island bank accounts to hide their assets from the US Government.“We will advance legislation to introduce public registers of beneficial ownership information,” the islands’ government said in a statement.

The Cayman Islands are a British Overseas Territory and it has had its share of large corporate scandals. Enron used nearly 700 entities there to hide enormous debts from its balance sheet. Bear Sterns and Lehman Brothers, the two American casualties of the 2008 financial crisis, both placed billions worth of toxic assets there. In the run-up to that crisis, Citigroup parked enormous investment vehicles in the Caymans to remove them from its balance sheet. When they collapsed, the debts moved to the US and American taxpayers footed the bailout.

The territory has also been linked to alleged government corruption. Mining giant Glencore allegedly routed more than $75 million, which should have gone to a Congolese state company, to a Cayman entity owned by an Israeli billionaire friend of the Congolese president. The billionaire, who denies any wrongdoing, is alleged to have paid bribes to Congolese officials.

UTC Laboratories, Inc. (RenRX) has agreed to pay $41.6 million, and its three principals, Tarun Jolly, M.D., Patrick Ridgeway, and Barry Griffith, have agreed to pay $1 million to resolve allegations that they violated the False Claims Act by paying kickbacks in exchange for laboratory referrals for pharmacogenetic testing and for furnishing and billing for tests that were not medically necessary.  RenRX, a laboratory company headquartered in New Orleans, Louisiana, also agreed to a twenty-five year period of exclusion from participation in any federal health care program.

“The payment of kickbacks in exchange for medical referrals undermines the integrity of our healthcare system.  Today’s settlement reflects the Department of Justice’s commitment to ensuring that taxpayer monies are well spent and not wasted on unnecessary medical testing,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division.

The government alleged that between 2013 and 2017, UTC and its principals offered and paid remuneration to physicians to induce the ordering of pharmacogenetic tests, purportedly in return for their participation in a clinical trial known as the Diagnosing Adverse Drug Reactions Registry (DART), clinical trial identifier NCT01970709.  The government also alleged that UTC and its principals offered and paid remuneration, including sales commissions, to entities and individuals as part of the scheme, and furnished pharmacogenetic tests that were not medically necessary and billed the Medicare program.

A Philadelphia jury has ordered Johnson & Johnson pay $8 billion in punitive damages in a case where a man said the drug company didn’t warn that an antipsychotic drug could lead to breast growth in boys, a Philadelphia jury ruled Tuesday. The drug Risperdal is used to treat schizophrenia, bipolar disorder, and irritability associated with autistic disorder.  Johnson & Johnson is defending  thousands of lawsuits claiming the drug is linked with abnormal breast growth in males, known as gynecomastia, and that the company did not adequately warn of those risks.

Ryan Sheridan, former owner of Braking Point Recovery Centers in Austintown and Whitehall, pleaded guilty to a 60-count indictment. He and five associates were charged in February with conspiracy to commit health care fraud, health care fraud, use of a registration number issued to another to obtain a controlled substance, operating a drug premises, money laundering and conspiracy to distribute controlled substances. The government alleged  Sheridan and his co-defendants billed Medicaid $48 million for drug and alcohol recovery services, many of which were not provided, not medically necessary, lacked proper documentation, or had other issues that made them ineligible for reimbursement.

Co-defendants Jennifer Sheridan, Kortney Gherardi, Lisa Pertee, Thomas Bailey and Arthur Smith previously entered guilty pleas to charges in the indictment.

In addition to any prison time, the government seeks restitution of  $24.48 million from the defendants on behalf of the Ohio Department of Medicaid. Sheridan  could face up to 14 years of incarceration if sentences are applied concurrently rather than consecutively. He faces a related case in Columbiana County that could impact the sentencing.

The U.S. Supreme Court agreed to hear an appeal by Dominion Energy Inc of a lower court ruling that halted construction on a $7.5 billion natural gas pipeline due to run underneath a section of the  Appalachian Trail in rural Virginia. A lower court ruling recently  found that the U.S. Forest Service lacked the authority to grant a right of way for the pipeline. Environmental groups had sued to stop the pipeline after the Forest Service gave the green light for the project through protected National Park Service land. The December 2018 ruling by the Richmond, Virginia-based 4th U.S. Circuit Court of Appeals put a stop to construction of the 600-mile (965-km) Atlantic Coast Pipeline, intended to run from West Virginia to North Carolina.

Dominion Energy leads a consortium of companies in the project that also includes Duke Energy Corp.

A ruling is due by the end of the court’s new term, which starts on Monday and ends in June. The Supreme Court’s eventual ruling may also affect the proposed 300-mile (480-km) Mountain Valley Pipeline, which is intended to run from West Virginia to southern Virginia and crosses the trail in the Jefferson National Forest. After an application process involving multiple federal agencies, the Forest Service granted the consortium a right of way under the trail in January 2018, prompting environmental groups to file a lawsuit.

A whistleblower has filed a False Claims Act in Federal Court alleging that the sound-dampening coating was improperly affixed  causing the coating to “de-bond” and slip off the submarines while underway. According to the complaint, “since the inception of the program, Virginia-class submarines have been plagued with problems with their exterior hull coating system,” including an incident in 2007 on the USS Virginia, the first submarine of its class.
The complaint asserts that the failure of the Special Hull Treatment on Virginia-class submarines squarely on Huntington Ingalls’ Newport News Shipbuilding facility: “The failure of the sound-absorbing material is a direct result of NNS’ failure to adhere to proper Navy contract specifications and a direct effort to conceal that lack of qualifications and certifications required by the Navy.”

A newly signed Executive Order 13224 expands the State and Treasury’s ability to engage financial sanctions against terrorists. With the newly updated executive order, the U.S. can now impose secondary sanctions for any person, business or financial institution found to have handled transactions with all individuals and entities designated as terrorists by the U.S., Ms. Mandelker said in the speech. Of significance is control over foreign financial institutions sanctions include money services businesses, cryptocurrency exchangers and administrators, in addition to banks, she said. Such sanctions would cut off their access to the world’s biggest economy and most-used currency critical to most of the world’s trade and finance.

Under the new rules, the two departments responsible for imposing sanctions no longer need to develop detailed dossiers tying top officials or agents involved in terror groups to specific attacks or acts, said Nathan Sales, the State Department’s top counterterror official. Many of the targets also have operations in Turkey, highlighting a major concern among U.S. officials that lax financial and corporate oversight by the government in Ankara has allowed terror financing and evasion of sanctions to proliferate in the country. The Turkish Embassy in Washington didn’t immediately respond to a request for comment.

E.O. 13224 section 1F(b),  gives the secretary of the Treasury, in consultation with the Secretary of State, the ability to take action against bankers and account managers that allow their services to be utilized by terrorists. This new language means that even foreign banks and other companies in the financial industry could lose access to the U.S. dollar if they provide correspondent banking services to terrorists.

Federal court judge entered final judgments against New York-based brokerage firm Lek Securities Corp. and Chief Executive Officer Sam Lek, who were charged by the Securities and Exchange Commission with facilitating manipulative U.S. trading by a Ukraine-based firm over a three-year period.

The SEC’s complaint, filed in March 2017, alleged that Lek Securities and Sam Lek helped facilitate manipulative trading schemes by its customer, Avalon FA Ltd., headquartered in Kiev. According to the complaint, Avalon illegally profited from layering, which involved placing and canceling orders to trick others into buying or selling stocks at artificial prices, and cross-market manipulation, which involved buying or selling stocks to artificially impact options prices. The SEC’s complaint alleged that Lek Securities and Sam Lek made the schemes possible by giving Avalon access to the U.S. markets, relaxing the brokerage firm’s layering controls after Avalon complained, allowing Avalon to conduct the trading activity, and improving Lek Securities’ technology to assist Avalon’s trading.

“The final judgments provide important remedies, including admissions, a conduct-based injunction and a compliance monitor, designed to protect U.S. markets and address the significant failings at Lek Securities,” said Melissa R. Hodgman, Associate Director of the Division of Enforcement.