Read on for the latest news and updates in bribery and corruption; fraud; health and safety and more...
Bribery and Corruption
Novartis AG settles charges for FCPA violations
Swiss healthcare company Novartis AG has agreed to pay over $112 million to settle US SEC charges for violations of the Foreign Corrupt Practices Act (FCPA). The SEC alleges that Novartis AG violated the books and records and internal accounting controls provisions of the FCPA. The allegations state that between 2012 and 2016, subsidiaries or affiliates of Novartis or its former subsidiary Alcon Inc. were involved in making improper payments and providing benefits to public and private healthcare providers in Greece, South Korea and Vietnam in return for these providers prescribing or using Novartis or Alcon products.
As part of the settlement, Novartis has agreed to pay disgorgement of $92.3 million and $20.5 million in prejudgment interest, as well as to comply with a three-year undertaking to self-report on the status of its remediation measures. The subsidiaries of Novartis and Alcon have entered into deferred prosecution agreements with the U.S. Department of Justice and agreed to pay more than $233 million in criminal fines.
SEC, 25 June 2020
SFO obtains more time to serve confiscation order on Gulnara Karimova
The High Court has granted the UK Serious Fraud Office an additional six months to issue a civil recovery order to Gulnara Karimova, because they have been unable to contact her in Uzbekistan.
Karimova is the daughter of the former president of Uzbekistan, who died in 2016. The SFO is seeking to seize three London properties worth a total of £23 million, as well as several bank accounts containing £11 million. The SFO alleges that the properties were purchased using the proceeds of corrupt payments that Karimova received between 2004 and 2012. It is believed that Karimova and her former partner Rustam Madumarov are currently in prison in Uzbekistan, but the SFO does not know their exact location.
Bloomberg, 26 June 2020
SEC charges NAC Foundation, CEO and lobbyist for defrauding investors in connection with the sale of AML Bitcoin
The US SEC has charged the National Aten Coin (NAC) Foundation, its Chief Executive Officer Marcus Andrade and political lobbyist Jack Abramoff with conducting a fraudulent, unregistered offering of AML Bitcoin tokens. NAC Foundation marketed AML Bitcoin as a digital asset security as a new and improved version of bitcoin. The SEC alleges that NAC Foundation raised at least $5.6 million from more than 2,400 investors but had misled investors as to the anti-money laundering, anti-terrorism, and theft-resistant capabilities of AML Bitcoin as these developments were still in the early stages.
The SEC complaint also details how Andrade and Abramoff made false claims as to NAC Foundation's plans for advertising AML Bitcoin during the US Super Bowl in order to generate interest in the product. The SEC alleges that Andrade manipulated the marketing of the AML Bitcoin to be able to divert approximately $1.1 million from the offering for his personal use.
SEC, 25 June 2020
Brothers charged for Barclaycard fraud
Two individuals from London have received suspended sentences having pleaded guilty for conspiracy to defraud and being in possession of articles in use for fraud. Barclaycard initially identified the fraud on the victims' bank accounts and the Dedicated Card and Payment Crime Unit (DCPCU), a specialist police unit supported by UK Finance, conducted the investigation.
Benjamin and Jesse Ackim were found to have committed fraud of a total value of £11,428 between 27 April 2016 and 15 March 2017 and attempted further fraud for a value of £25,644 that was successfully blocked. The individuals had harvested account details from Barclaycard customers and made a series of online purchases using the victims' card details. A search at the individuals' home address also revealed that the defendants possessed equipment that could be used for manufacturing fraudulent cards.
UK Finance, 29 June 2020
Russian cybercriminal pleads guilty to racketeering conspiracy
The US Department of Justice has announced that Sergey Medvedev, one of the leaders of the cybercriminal enterprise Infraud Organisation, has pleaded guilty to racketeering conspiracy. The Russian national was one of the leaders of the cybercriminal organisation which had approximately 10,901 registered members in March 2017. The criminal activities of the Infraud Organisation included buying and selling retail goods using stolen or counterfeit credit cards, in addition to facilitating the sale of stolen identification, financial and banking information, computer malware and other illicit goods. The Infraud Organisation also provided an escrow service to facilitate illicit digital currency transactions among its members.
The DOJ alleges that during the seven-year history of the organisation's operation there were approximately $2.2 billion in intended losses and more than $568 million in actual losses, suffered by financial institutions, merchants and private individuals.
US Department of Justice, 26 June 2020
Court of Appeal confirms that US secondary sanctions are mandatory provision of law in UK contract
The Court of Appeal of England and Wales has dismissed an appeal brought by Cypriot company Lamesa Investments Limited relating to the interpretation of sanctions provisions in a contract governed by English law.
A UK investment firm, Cynergy Capital Ltd had borrowed £30 million from Lamesa in 2017. Lamesa's parent company was owned by Viktor Vekselberg, who was listed as a US sanctions target in April 2018. Cynergy refused to repay interest due on the loan because it was concerned that it would be subject to US secondary sanctions by facilitating a significant transaction with a US sanctions target. A clause in the facility agreement provided that Cynergy would not be in default if it did not make the payment in order to comply with a "mandatory provision of law". The Court of Appeal found that US secondary sanctions could be considered an "effective prohibition" that prevented Cynergy from repaying, notwithstanding the fact that there was no strict UK legal requirement preventing the payment.
BAILII, 30 June 2020
US Department of State announces restrictions on exports of defence equipment to Hong Kong
Following China's adoption of a new national security law in Hong Kong, the US Department of State has announced that it will end exports of US-origin defence equipment to Hong Kong and will take steps towards imposing the same restrictions on US defence and dual-use technologies to Hong Kong as it does for China. The press statement notes that this decision has been made as the US "can no longer distinguish between the export of controlled items to Hong Kong or to mainland China". The US has for some time restricted exports of US defence items to mainland China.
US Department of State, 29 June 2020
Corporate Tax Evasion
VAT scammers evade approximately €9.7 million in tax
An international law enforcement operation, led by the Hungarian National Tax and Customs Administration (Nemzeti Adó és Vámhivatal), has been investigating a criminal organisation that has caused a loss of approximately €9.7 million in tax to the Hungarian state budget. Two of the leaders of the tax evasion scam were arrested and one property worth approximately €36,200 was seized as part of the investigation.
The criminal organisation purchased high demand food products in various countries and transferred these products to Hungary without paying VAT (at a rate of 27%). The organisation was able to dispatch the products to retailers on the domestic market at competitive prices due to the unlawful advantage the organisation gained over the compliant traders.
Europol, 1 July 2020
High Court rules against two pensions introducers and their directors
The High Court ruled in favour of the Financial Conduct Authority in a civil action against two pension firms and three individual directors who provided pension services to consumers without FCA authorisation. The High Court found that Avacade Limited (in liquidation) and Alexandra Associates (UK) Limited trading as Avacade Future Solutions (AA) had acted unlawfully when they engaged in the regulated activities of arranging and advising on investments, made unapproved financial promotions through their websites, promotional material and in telephone calls to consumers and made false or misleading statements.
The FCA alleged that Avacade Limited and Avacade Future Solutions provided a pension report service which induced consumers to transfer their pensions into self-invested personal pensions (SIPPs). Many consumers then invested into alternative investments such as office rental spaces, tree plantations and Brazilian property developments, many of which have failed or are currently in liquidation. More than 2,000 consumers transferred a total of approximately £91.8m of pension funds into SIPPs. Of these funds, approximately £68m was invested in products promoted by Avacade Limited and approximately £905,000 was invested into a product promoted by Avacade Future Solutions. The two companies earned commissions in the region of £10.8m from these investments.
FCA, 30 June 2020
Homewares and furniture company ordered to pay £17k for missing recycling targets
A home furnishings company based in Swindon failed to register as a packaging producer, leading to enforcement action by the Environment Agency. For 13 years, Neptune (Europe) Ltd breached its recycling obligations by failing to recycle sufficient volumes of cardboard, plastic, paint tins and wooden pallets pursuant to the Producer Responsibility Obligations (Packaging Waste) Regulations 2007. Under the terms of the civil penalty, the £17,350 fine will be donated to local charity project the Wiltshire Wildlife Trust and used to restore, protect and enhance the natural environment in the area.
Environment Agency, 29 June 2020
Health and Safety
AG updates COVID-19 sectoral guidance
AG has updated its sectoral guidance notes for a range of work settings: construction; offices and contact centres; working in other people's homes; indoor labs and research facilities; shops and branches; factories, plants and warehouses; and vehicles. The updated guidance follows changes by the Department for Business, Energy and Industrial Strategy enabling a range of businesses to reopen from 4 July 2020 including a relaxation of the 2 metre social distancing guidance in England to 1 metre plus risk mitigation where 2 metres are not viable. The updated guidance also stresses the requirement for employers to complete a risk assessment which takes account of COVID-19. Social distancing in Scotland and Wales has not changed and will not be relaxed until their respective Governments amend their legislation.
Addleshaw Goddard, 24 June 2020
Scottish Government issues Phase 2 physical distancing guidance
Addleshaw Goddard has published a series of notes following updates issued by the Scottish Government to its guidance for businesses under Phase 2 of its Route Map for easing lockdown measures. The notes include guidance for universities, colleges and retail, tourism and hospitality customers, as well as guidance on business and physical distancing. Non-essential, indoor non-office-based workplaces – including factories and warehouses, lab and research facilities – can resume once relevant guidance has been implemented with physical distancing.
Addleshaw Goddard, 1 July 2020
HSE publishes annual workplace fatality figures for 2019/20
HSE's publication confirms that 111 workers were fatally injured at work between April 2019 and March 2020. This equates to a rate of 0.34 deaths per 100,000 workers which HSE reports is the lowest year on record. HSE has stressed that the spread of COVID-19 and its impact on the economy has probably contributed towards the decline. HSE also reports that mesothelioma deaths for 2018 were slightly lower than the past 5 year average. A full assessment and review of the data will be published by HSE as part of the annual Health and Safety Statistics release in November 2020.
Addleshaw Goddard, 1 July 2020
Blackpool hotel owner sentenced for "extremely serious" fire safety failings
The owner of a hotel has been handed a 9 month sentence suspended for 18 months after putting guests at risk of death or serious injury. This followed a 2 year investigation by Lancashire Fire and Rescue Service. The Blackpool seafront hotel was said to have failed to comply with 9 out of 10 improvement notices issued by HSE officers. The fire safety failings leading to the prosecution included the fire alarm being switched off and failure to make a "suitable and sufficient" fire risk assessment. The hotel owner pleaded guilty in February to offences under the Regulatory Reform (Fire Safety) Order 2005.
SHP, 30 June 2020
School fined after pupil severely injured
Cargilfield School in Edinburgh has been fined following the incident where a pupil sustained severe cuts to his middle and index finger on his right hand and serious tendon damage when using a band saw during a Design and Technology workshop. An investigation by the HSE found that Cargilfield School had failed to make a suitable and sufficient assessment of the risks arising out of or in connection with use of the band saw and failed to adequately supervise pupils while they were carrying out tasks using the band saw. The school pleaded guilty to breaching Sections 3(1) of the Health and Safety at Work Act and was fined £3,350.
HSE, 25 June 2020