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The Morning Risk Report: Flaws Emerge in Justice Department Strategy for Prosecuting Wall Street
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U.S. Deputy Attorney General Sally Yates testifies during a Senate Judiciary Committee in 2015.
PHOTO: KEVIN LAMARQUE/REUTERS
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Early one July morning in 2016, Robert Bogucki, a senior executive at Barclays PLC, walked into what he expected to be a short meeting with the British bank’s lawyers to go over a five-year-old transaction before he joined his family on vacation.
Instead, he emerged after 11 hours of questions that 18 months later led to his criminal indictment—and ultimately to a trial that would expose some flaws in a broad Justice Department push to police Wall Street that continues to this day.
[Continued below...]
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Mr. Bogucki oversaw over-the-counter foreign exchange trading, including options, a private corner of financial markets used by companies, banks, hedge funds and other sophisticated investors with no regulatory oversight at the time. The DOJ alleged he committed fraud by using a corporate client’s information to make money for the bank at the client’s expense.
Propelling the case was an aggressive DOJ push, starting several years after the 2008 financial crisis, to pursue individual wrongdoing on Wall Street—a response in part to criticism from lawmakers and others that the government’ was too focused on extracting fines from banks without punishing people.
Sally Yates, who became deputy attorney general in 2015, formalized one of the strategies in a memo that year saying companies wouldn’t get full cooperation credit unless they turned over everything they knew about employees’ wrongdoing.
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resident Biden’s policy on the use of sanctions will be guided by a review due out this summer.
PHOTO: MANDEL NGAN/AGENCE FRANCE-PRESSE/GETTY IMAGES
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The Biden administration is revamping the way the U.S. uses punitive sanctions, aiming to stem sweeping pressure campaigns, avoid collateral economic damage and act jointly with allies rather than unilaterally, according to people involved in the planning process.
The administration has nearly completed an extensive review of U.S. sanctions policy, which is expected out near the end of summer, according to one official. While details are still being ironed out, Biden administration officials have foreshadowed elements of the new strategy in a series of actions, including the planned easing of economywide sanctions against Iran.
Details of President Biden’s approach also were described by current and former administration officials as well as by incoming officials during congressional meetings.
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The Justice Department is probing embattled electric-truck startup Lordstown Motors Corp., according to people familiar with the matter. The inquiry into Lordstown Motors is being handled by the U.S. attorney’s office in Manhattan and is in early stages, the people said. A spokesman for Lordstown Motors said the company is committed to cooperating with any investigations and inquiries and looks forward to focusing on production with its new leadership team.
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The indictment of the Trump Organization and its chief financial officer grew out of an investigation into a seemingly unrelated matter: the now-infamous $130,000 payment to adult-film actress Stormy Daniels. The indictment of Allen Weisselberg is an example of how executives responsible for managing a company’s finances and internal controls also could be subject to a variety of civil and criminal liabilities, lawyers said.
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A trader at a Canada-based hedge fund was arrested and charged Friday by U.S. authorities for allegedly misusing information about customer orders for personal gain. The U.S. Department of Justice charged Sean Wygovsky with both wire fraud and securities fraud tied to the front-running scheme.
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China’s regulatory probes into three technology companies shortly after their U.S. listings have caught global investors off guard, showing the risks of owning shares in fast-growing businesses that have come under Beijing’s microscope. In a span of four days, a unit of China’s cybersecurity regulator said it launched data-security reviews into popular mobile apps operated by Didi Global Inc., Full Truck Alliance Co. and Kanzhun Ltd. The three raised close to $7 billion in total from U.S. initial public offerings in June.
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The Federal Trade Commission and Broadcom Inc. have agreed to settle charges that the company used its dominance in some chip markets to squeeze out potential rivals. The FTC on Friday said that under a proposed consent order, Broadcom must stop requiring its customers to source three types of chips from the company on an exclusive or near-exclusive basis.
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Brazil’s Supreme Court authorized prosecutors to investigate President Jair Bolsonaro over accusations he ignored alleged irregularities in his government’s procurement process to buy India’s Covaxin Covid-19 vaccine.
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A Honduran court convicted the former chairman of a local construction company Monday of ordering the 2016 assassination of Berta Cáceres, an indigenous-rights leader and environmental crusader whose killing shocked the world.
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The SEC says it is considering a refinement of its rules for corporate insiders who trade their own stock.
PHOTO: ILLUSTRATION: MIKEL JASO
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Insider trading catches regulators’ attention and garners headlines, but another type of insider activity is also widespread—and far less likely to be detected or prosecuted.
That’s the conclusion of new research that looks into the practice of insider giving: timing the donation of a stock to a charity around inside information about the stock. That way, you take a tax deduction before bad news sends the share price tumbling or after good news sends the price higher—and the gift delivers a bigger deduction than you would have gotten otherwise.
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Amec Foster Wheeler to Pay $143 Million to Settle Bribery Allegations in U.K.
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Amec Foster Wheeler Energy Ltd., a unit of U.K-based oil and energy engineering company John Wood Group PLC, has agreed to pay £103 million, or about $143 million, to resolve accusations by the U.K. Serious Fraud Office that it used corrupt agents in the oil and gas sector in five countries, the regulator said Friday.
The penalty, part of Amec's deferred prosecution agreement with the regulator, was approved by a U.K. judge Thursday. The DPA is part of Amec’s resolution of bribery allegations with several regulators in the U.K., U.S. and Brazil.
The U.K. penalty is part of a total of $177 million that John Wood, which acquired Amec in 2017, has agreed to pay in compensation, disgorgement and fines to the regulators.
By entering into the three-year DPA, Amec has taken responsibility for 10 corruption offenses related to Foster Wheeler's alleged use of third-party agents who bribed officials to secure contracts in Nigeria, Saudi Arabia, Malaysia, India and Brazil between 1996 and 2014, according to the SFO. Amec PLC acquired Foster Wheeler AG in November 2014, according to a statement from John Wood last week.
As part of the settlement, John Wood also agreed to continue cooperating with the SFO and other law-enforcement authorities, and to report annually to the SFO on its ethics and compliance program, the regulator said.
A company spokesman didn’t immediately respond to a request seeking additional comment.
“Since our acquisition of Amec Foster Wheeler, we have cooperated fully with the authorities and have taken steps to further improve our ethics and compliance programme from an already strong foundation,” Robin Watson, chief executive of John Wood, said in a statement last week. “I’m pleased that...we have been able to resolve these issues and can now look to the future.”
The SFO said while the DPA ends an almost four-year investigation, it continues to probe the conduct of individuals in the case.
—Mengqi Sun
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Tensions have emerged between some U.S. firms and Hong Kong authorities.
PHOTO: ROY LIU/BLOOMBERG NEWS
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Facebook Inc., Twitter Inc. and Alphabet Inc.’s Google have privately warned the Hong Kong government that they could stop offering their services in the city if authorities proceed with planned changes to data-protection laws that could make them liable for the malicious sharing of individuals’ information online.
A letter sent by an industry group that includes the internet firms said companies are concerned that the planned rules to address doxing could put their staff at risk of criminal investigations or prosecutions related to what the firms’ users post online. Doxing refers to the practice of putting people’s personal information online so they can be harassed by others.
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Business litigants overall have fared well at the Supreme Court in recent years but their gains were more incremental during the court’s just-ended term, and while they won a few big cases, others ended in one-sided defeats. Wins for the business community included rulings that cut back on unions’ physical access to farmworkers, raised a new bar for some consumer class-action lawsuits and removed a hurdle for the construction of natural-gas pipelines.
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Coop, one of Sweden's biggest supermarket chains, had to temporarily close hundreds of stores nationwide after a cyberattack blocked access to its checkouts.
PHOTO: ALI LORESTANI/AGENCE FRANCE-PRESSE/GETTY IMAGES
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The boss of the company at the heart of a widespread hack that has affected hundreds of businesses said he briefed the White House and that attackers are demanding a single $70 million ransomware payment.
The cyberattack that started to unfold Friday is estimated to have hit hundreds of mostly small and medium-size businesses and tens of thousands of computers. It quickly set off alarms in U.S. national security circles over concern that it could have far-reaching effects.
On Monday, Fred Voccola, the chief executive of Kaseya Ltd., whose software was targeted in the attack, spoke with Deputy National Security Advisor Anne Neuberger about the event while the company was still scrambling to restore services to its customers, Mr. Voccola said. Mr. Voccola told the White House that Kaseya wasn’t aware of any critical infrastructure that had been hit by the ransomware or of any victims related to national security, he said in an interview Monday.
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Joanne Hannaford worked at Goldman Sachs for 24 years.
PHOTO: PAULO DUARTE/BLOOMBERG NEWS
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Credit Suisse Group AG hired a top technology executive from Goldman Sachs Group Inc., the latest revamp to the Swiss bank’s management team in the wake of twin scandals. Joanne Hannaford will become the bank’s new chief technology officer and chief operating officer, replacing James Walker in the COO role.
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Tony Hayward, who stepped down leading BP PLC in the wake of the fatal Deepwater Horizon oil spill in the Gulf of Mexico, is retiring as chairman of Glencore PLC, the commodities giant he presided over for eight years. Mr. Hayward’s departure was expected and comes after his tenure had been extended beyond that typical of a U.K. chairperson, as Glencore’s board looked for a new CEO and managed a succession of regulatory probes.
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