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Daily Briefing: DOJ garners $1.4 billion in opioid action, Deutsche Bank graft penalty, and more

Monday, July 15, 2019   (2 Comments)
Posted by: Brian Monroe
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By Brian Monroe
July 14, 2019

Quote of the Day: “Do the one thing you think you cannot do. Fail at it. Try again. Do better the second time. The only people who never tumble are those who never mount the high wire. This is your moment. Own it.” – Oprah Winfrey

In today’s ACFCS Fincrime Briefing, DOJ captures $1.4 billion in action tied to nationwide opioid scourge, Deutsche Bank pays nearly $200 million in corruption penalty, SocGen sued for $800 million for alleged Cuban ownership ties, and more.

Please enjoy this unlocked story, part of the many benefits of being an ACFCS member.

Want to talk about industry trends, story ideas or get published? Feel free to reach out to ACFCS Vice President of Content Brian Monroe at the email address above. Now, on to more sweet sweet content!

Opioid epidemic

DOJ penalizes consumer conglomerate $1.4 billion for illicitly marketing, over-prescribing counter-addiction drug in largest ever recovery tied to country’s deadly opioid epidemic

Federal prosecutors Thursday garnered $1.4 billion in fines and forfeitures from a global consumer goods conglomerate that illicitly marketed an opioid treatment drug to recovering addicts– eventually exchanging one addiction for another while reaping hundreds of millions of dollars in profits.

The U.S. Department of Justice (DOJ), Federal Trade Commission (FTC) and more than a dozen other government investigative, consumer protection and counter-fraud agencies negotiated the historic settlement – the largest ever recovery against a company tied to the country’s deadly opioid epidemic – with Reckitt Benckiser Group plc (RB Group) to resolve criminal and civil charges around the marketing of opioid addiction treatment drug Suboxone.

The resolution includes the forfeiture of proceeds totaling $647 million, civil settlements with the federal government and the states totaling $700 million, and an administrative resolution with the Federal Trade Commission for $50 million.

Suboxone is a drug product approved for use by recovering opioid addicts to avoid or reduce withdrawal symptoms while they undergo treatment. Suboxone and its active ingredient, buprenorphine, are powerful and addictive opioids. 

According to the indictment, Indivior—including during the time when it was a subsidiary of RB Group—promoted the film version of Suboxone (Suboxone Film) to physicians, pharmacists, Medicaid administrators, and others across the country as less-divertible and less-abusable and safer around children, families, and communities than other buprenorphine drugs, even though such claims have never been established.

The indictment further alleges that Indivior touted its “Here to Help” internet and telephone program as a resource for opioid-addicted patients.

Instead, however, Indivior used the program, in part, to connect patients to doctors it knew were prescribing Suboxone and other opioids to more patients than allowed by federal law, at high doses, and in a careless and clinically unwarranted manner.

The indictment also alleges that, to further its scheme, Indivior announced a “discontinuance” of its tablet form of Suboxone based on supposed “concerns regarding pediatric exposure” to tablets, despite Indivior executives’ knowledge that the primary reason for the discontinuance was to delay the Food and Drug Administration’s approval of generic tablet forms of the drug.

The indictment alleges Indivior’s scheme was highly successful, fraudulently converting thousands of opioid-addicted patients over to Suboxone Film and causing state Medicaid programs to expand and maintain coverage of Suboxone Film at substantial cost to the government.

Under a separate agreement with the Federal Trade Commission (FTC), RB Group has agreed to pay $50 million to resolve claims that it engaged in unfair methods of competition in violation of the Federal Trade Commission Act

The United States’ criminal trial against Indivior is scheduled to begin on May 11, 2020, in the United States District Court in Abingdon, Virginia. Indivior is presumed innocent until proven guilty.

To resolve its potential criminal liability stemming from the conduct alleged in the indictment of Indivior, RB Group has executed a non-prosecution agreement that requires the company to forfeit $647 million of proceeds it received from Indivior and not to manufacture, market, or sell Schedule I, II, or III controlled substances in the United States for three years.

In addition, RB Group has agreed to cooperate fully with all investigations and prosecutions by the Department of Justice related, in any way, to Suboxone, (via DOJ).

Monroe’s Musings:

DOJ has stated that countering the opioid epidemic would be a national priority. Investigators have already shut down clinics and arrested doctors and nurses who were over-prescribing opioids – in some cases even getting kickbacks or plying sexual favors from addicts.

So it’s a logical leap for DOJ to jump up a step to the drug companies, manufacturers and marketers to see how they are illicitly profiting from addicts who will do anything, pay any price, to get their fix.

Other drug companies better get their compliance house in order and make sure they are not taking advantage of individuals at their weakest point. In tandem, banks should consider how they deal with this companies, and others in the same field, to determine if they are engaging in transactions with a company part of the problem, feeding the nation’s opioid addiction.


Deutsche Bank pays nearly $200 million to settle Vestia bribery case

Deutsche Bank AG settled a lawsuit from a Dutch affordable-housing provider that said the lender was responsible for bribery over derivatives trades, paying nearly $200 million – one legal issue settled, but many compliance failures still outstanding.

The bank paid 175 million euros, or $197 million, to settle the case with no admission of liability, it said Friday in a statement. The deal brings an end to a long-running court battle that had featured testimony from a middleman who's confessed to bribery, and tales of expensive sushi, "bubbly" wine and meals at a Michelin-starred restaurant.

In the London suit, Stichting Vestia - a housing provider that nearly collapsed as a result of derivatives losses totaling more than 2 billion euros - sought to recoup some of the money, saying some of those derivatives transactions were "flawed."

That's because the bank paid fees to a middleman when it entered into derivatives trades with the housing group, Vestia said. The bank said during the trial that the middleman seemed to be a legitimate intermediary.

The case is just one of a lengthy list of legal issues that Deutsche Bank is grappling with. The US Department of Justice is investigating the bank as part of a broadened probe of Malaysia's scandal-plagued 1MDB investment fund.

The Vestia trial started in early May and had been scheduled to last until July 18, (via the Business Times, citing Bloomberg).

Monroe’s Musings:

Deutsche Bank has a huge target on its bank right now for a variety of fincrime compliance failings. It has exposure related to 1MDB and even reportedly has tendrils tied to the massive money laundering scandals rocking the Nordic and Baltic regions.

So even though this lawsuit has been settled, the bank – currently going through layoffs in the tens of thousands – will have to renew its focus on improving compliance in all areas, even as the bank hemorrhages talent across the board.


Societe Generale sued for $792 million by heirs of Cuban bank seized by Castro

The family of the former owners of a Cuban bank seized by Fidel Castro’s government nearly six decades ago sued Societe Generale for approximately $792 million, saying the French bank owes damages for circumventing U.S. sanctions against Cuba.

In a complaint filed on Wednesday with the U.S. District Court in Miami, 14 grandchildren of Carlos and Pura Nuñez, who once owned Banco Nuñez, want to hold Societe Generale liable under U.S. law for doing business with Cuba’s central bank, which nationalized Banco Nuñez and other lenders in 1960.

A lawyer for the plaintiffs said he believed the case was the first against a bank that allegedly “trafficked” in property expropriated by the Castro regime, since the Trump administration said in April it would begin letting U.S. nationals sue companies for such conduct.

“Victims of the Cuban regime who had their property confiscated now have a vehicle to get justice,” Javier Lopez, the lawyer, said in an interview. “We have multiple financial institutions that we’re looking to target.”

The lawsuit was filed eight months after Societe Generale agreed to pay $1.34 billion and enter a deferred prosecution agreement to settle U.S. and New York regulatory charges that it handled billions of dollars of transactions related to Cuba and other countries under U.S. sanctions.

According to the plaintiffs, Societe Generale generated hundreds of millions of dollars of fees by lending money to and processing transactions for Banco Nacional de Cuba from 2000 to 2010.

The plaintiffs said they own a claim to 10.5% of the equity in Banco Nacional de Cuba, roughly the percentage that Banco Nuñez represented when it was seized.

Lawyers for the plaintiffs at Kozyak Tropin & Throckmorton based the $792 million damages estimate on Banco Nuñez’s $7.8 million worth at the time, plus 6% annual interest and triple damages under the Helms-Burton Act, a 1996 federal law.

The right to sue under that law had been suspended for 23 years because of opposition from the international community and concern that U.S. courts could be overrun by lawsuits, (via Reuters).

Monroe’s Musings:

If this lawsuit gains traction, many banks that have paid billions of dollars, individually and cumulatively, in sanctions penalties for dealing with rogue regimes will have new liability and lawsuit risk exposure to look forward to – and defend against.

This latest lawsuit has similarities to the still relatively nascent area of law tied to terror lawsuits – where many banks tied to blacklisted regimes and even certain organized criminal and terror groups later got sued by the families of victims who died in terror attacks.

But there will be challenges to overcome. Banks have deep pockets and will fight this tooth and nail, because they realize once one bank pays – or settles – it will be open season for others that engaged in similar actions and paid related sanctions penalties.

Money laundering

Swiss authorities probe Credit Suisse over alleged money laundering tied to narco cartel

Credit Suisse is ensnared in a Swiss criminal probe into alleged money laundering involving a criminal organization and the illegal drug trade.

The Swiss attorney general has named the investigation Bulco: prosecutors are investigating alleged money laundering by a criminal organization, weekly “Schweiz am Wochenende” (in German) reported.

The wider probe, which began in 2008, centers on an alleged drug-running from South America by a Bulgarian mafia kingpin.

“In addition to ten people currently accused, the criminal probe was widened in 2013 to include Credit Suisse on suspicions of organizational deficiencies in connection with money laundering,” the outlet quoted a spokesman for Switzerland's prosecutor. Credit Suisse hasn't been charged with wrongdoing.

The crimes were allegedly masked by real estate and financial activity, including in Switzerland. The drug proceeds were either transferred to a bank in Bulgaria, or hidden in vehicles and moved physically.

The funds were allegedly also invested in boats and in real estate, including in Swiss lakeside cities Montreux and Geneva, (via FI News).

Monroe’s Musings:

Credit Suisse has paid more than a half a billion dollars in the U.S. for sanctions failings alone, so it is no stranger to compliance scrapes.

It has also paid tens of millions of dollars for corruption gaps, a tax fracas, rate rigging and U.S. securities regulators fined it for AML gaps in its trading arm. There are still more lawsuits outstanding.

So it’s no surprise regulators in its home country are finally deciding to engage in a deeper dive for broader compliance practices, particularly in a very serious case dealing with criminal organizations and the drug trade.

Overall, European authorities in recent months have finally laid out plans to centralize power and oversight to put more pressure on member state regulators, so look for more exam teams to strengthen scrutiny, formal actions and penalties against banks as a way to beat the EU to the punch. 


Brian Monroe says...
Posted Tuesday, July 16, 2019
Thank you, Joann! I always appreciate your knowledge and passion. Keep up the fire and the fight old friend!
Joann Alicea, CFCI, CHTI says...
Posted Monday, July 15, 2019
Great Quote! Quote of the Day: “Do the one thing you think you cannot do. Fail at it. Try again. Do better the second time. The only people who never tumble are those who never mount the high wire. This is your moment. Own it.” – Oprah Winfrey

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