“These 17 companies fixed prices for baths, sinks, taps and other bathroom fittings for 12 years in six countries covering 240 million people. The cartel will have harmed businesses such as builders and plumbers and, ultimately, a large number of families. However, as the objective of anti-cartel enforcement is not to precipitate the fall of companies in financial difficulties, the Commission reduced the fines on five companies to a level they could afford. Companies should be in no doubt that the Commission will continue its fight on cartels and the level of fines will continue to be such that it should dissuade them from engaging in illegal behaviour in the first place,” said Joaquín Almunia, Commission Vice President and Competition Commissioner.

Ideal Standard, owned by U.S. private equity company Bain Capital LLC, received the single biggest fine of 326 million euros. Villeroy & Boch was fined 71 million euros.

Back in 2004, the EU raided the offices of Grohe, American Standard and other bathroom-products makers in five European countries and in March 2007 sent official objections to a number of the companies, including Grohe and American Standard.

According to the EU, the coordination took place during meetings of national trade associations in Germany (over 100 meetings), Austria (over 80), Italy (65), and also Belgium, France and The Netherlands, and in bilateral contacts. It consisted of fixing price increases, minimum prices, and rebates, and exchanging sensitive business information.

How did all of this came to light? US firm Masco, whose main subsidiaries are Hansgrohe and Hüppe, got full immunity under the Leniency Program as it was the first to provide information about the cartel to the European Commission.

Financial problems of related companies made the EU decide to lower the fines for these specific companies. The size of the fines “shouldn’t push the companies off the cliff,” Almunia said. “We wouldn’t want a company to go bankrupt because of a fine.”

The fine against Villeroy & Boch is “not justified” according to the company and it announced it will take legal measures to respond. Ideal Standard’s fine was cut by 30 percent reduction because it cooperated with the investigation. Still the penalty is claimed to be “ excessive” and the company sees “strong grounds to appeal.”

Villeroy & Boch shares Villeroy & Boch fell 1.24 euros, or 24 percent, to 3.883 euros in Frankfurt trading, the biggest drop since October 1998. Would this be the time to finally do some home improvement? Will we actually see a drop in bathroom furniture prices now the price rigging is behind us?

http://europa.eu/rapid/pressReleasesAction.do?reference=IP/10/790&format=HTML&aged=0&language=EN&guiLanguage=en

http://www.businessweek.com/news/2010-06-23/ideal-standard-villeroy-fined-on-eu-bathroom-cartel.html

From a ‘fraud triangle’ point of view, we have 2 out of 3 covered already; rationalization (the pay cut) and opportunity (inadequate internal controls). Who knows what caused the (financial or psychological) pressure to finalize the triangle?

http://www.justice.gov/opa/pr/2010/June/10-crm-637.html

http://www.bankinfosecurity.com/articles.php?art_id=2602

Sources claim the the investigation started when a drug trafficker informed the police about the banker’s role in a money laundering scheme. Based on the suspicions, investigators infiltrated a drug network and sought help from the banker to launder money that the police spy pretended came from trafficking, the government office said in a statement. The banker took the bait. Based on the suspicions, investigators infiltrated a drug network and sought help from the banker to launder money that the police spy pretended came from trafficking, the government office said in a statement. The Swiss government alleges that Holenweger made false representations to banks in the process, while the money from the offshore accounts was used by industrial giant Alstom to bribe officials to win projects and increase market share in foreign countries.

In March 2003 the UK Serious Fraud Office (SFO) arrested three Alstom executives in a corruption probe. UK sources claim that Alstom used money on an offshore account to bribe officials abroad for approx $65 million to secure contracts. According to Swisster, bribes – commonly labeled as “commissions” – were long seen as a way for European businesses to secure business in overseas markets but France outlawed such practices in 2000 after the OECD called for states to stop approving them. Alstom updated its code of ethics this year and maintains it now has “rules and control procedures at the best international standards”.

Banker’s taking customer service to the next (illegal) level; a blast from the past or still common practice? Some things really change.

http://www.swisster.ch/news/business/zurich-banker-charged-alstom-fraud-case.htm

http://www.businessweek.com/ap/financialnews/D9FHECQ80.htm

The New York investigation has prompted several other states to examine how their pension funds solicit investments, and firms including the Carlyle Group have settled related cases.

“This case has started a national investigation of public pension funds all across the nation,” attorney general Mr. Cuomo said in a conference call with reporters on Thursday. “A significant amount of this country’s wealth is in these public pension funds and I fear — seeing what we’ve seen in New York — that it’s going to be a serious problem for the nation.”

http://www.nytimes.com/2010/04/16/business/16pension.html?src=me&ref=business

http://www.businessweek.com/news/2010-04-15/quadrangle-settles-with-cuomo-in-state-pension-probe-update1-.html

The SEC alleges that one of the world’s largest hedge funds, Paulson & Co., paid Goldman Sachs to structure a transaction in which Paulson & Co. could take short positions against mortgage securities chosen by Paulson & Co. based on a belief that the securities would experience credit events.  At the heart of the fraud claim is the allegation that Goldman sold the mortgage securities to other investors commenting that the portfolio was selected by an independent third party specialized in credit risk, while in fact Paulson & Co had a big influence on the selection. Goldman allegedly did not disclose that side of the deal to its clients, who would possible have made a different decision if they would have that information. ‘Regular’ investors, including giant like AIG, lost billions on the portfolio. Paulson & Co filled its pockets to the max; it is a zero sum game after all (not taking Goldman’s fees into account).

The SEC allegations are part of a civil suit, not a criminal one. It is one of the first cases against behavior in US financial institutions that caused the housing/financial crisis. More to follow…

http://www.nytimes.com/2010/04/17/business/17goldman.html?hp

http://www.sec.gov/news/press/2010/2010-59.htm

http://www.nytimes.com/2009/12/24/business/24trading.html?_r=1&src=me&ref=business

http://www.nytimes.com/2010/04/17/business/17nocera.html?hp

http://financialcrimeonline.com/archives/24

http://financialcrimeonline.com/archives/780

The justice department produced evidence that Daimler companies paid bribed in 22 countries, including China, Russia and Iraq. The total amount of bribes paid by Daimler (or should we say: received by as corrupt officials globally) is said to be in the tens of millions.

As a part of its deferred prosecution agreement, Daimler agreed to retain an independent compliance monitor for three years to oversee its implementation of an effective compliance program. The monitor is former FBI Director Louis Freeh, who was brought in two years ago to help Daimler with its compliance program after it began talks with the Justice Department.

http://www.mainjustice.com/2010/04/01/daimler-settles-fcpa-charges/

http://www.washingtonpost.com/wp-dyn/content/article/2010/04/01/AR2010040103680.html

The (DEA) investigation apparently started when in 2005 dogs sniffed cocaine in an airplane in Miami. The money used to buy the plane was traced back to Mexican exhange houses; that is how the interest for the money flow from the exhange houses from Wachovia started.

Wachovia admitted offering correspondent banking services to 22 Casa de Cabio’s  (CDC) through three methods: wire-transferring money on behalf of third-party customers; accepting bulk cash transfers made by armored cars and other methods; and accepting checks and traveler’s checks put in pouches or digitally scanned through “remote deposit capture.”

From May 2004 to May 2007, Wachovia processed at least $373 billion in wire transfers on behalf of CDCs, the bank admitted. It processed $4.7 billion in bulk cash and $47 billion in ‘remote deposite capture’ deposits for all correspondent banking customers, including Mexican exchange houses, Wachovia admitted.

The case is USA v. Wachovia Bank, 10-cr-20165, U.S. District Court, Southern District of Florida (Miami).

http://www.businessweek.com/news/2010-03-17/wachovia-to-pay-160-million-to-end-laundering-probe-update1-.html

http://www.nytimes.com/2010/03/18/business/18launder.html

The store’s opening has reportedly been delayed on eight separate occasions, with local officials refusing each time to supply the necessary documents. The latest objection, according to Ikea, is that the store is insufficiently resistant to hurricanes. That’s a highly unusual requirement, in a region not previously noted for its high-power winds.

Ikea does not give in to corruption and builds a public case against Russian practices. It has plenty of experience to counter Russian pressure.

Weeks before the opening of its flagship store outside Moscow in 2000, Ikea was approached by employees of a local utility company. If the Swedish retailer wanted to have electricity for its grand opening, it had to pay a bribe. Instead, Ikea rented diesel generators large enough to power a shopping mall. The generators roared to life in a loud rebuke to the corrupt executives who thought they had the retailer cornered, and soon the utility turned on the power.

Some Ikea stores apparently still run on generators.

But Russian graft may have proved more stubborn than Ikea. The board of Ikea’s operating company, which is based in the Netherlands, has concluded that the Russian executive hired to manage the generators was taking kickbacks from the rental company to substantially inflate the price of the service. Ikea said that such a fraud could cost it about $196 million over two years. Ikea canceled the contract and sought redress in Russian civil court. But in rulings over the last two weeks, Ikea has lost another 5 million euros in damages that the judges awarded the generator rental company for breach of contract.

Two Ikea execs were fired because of the kickback charges. Ikea expressed disappointment over the issue. So the Russian corruption tentacles finally found its way into Ikea. With these tentacles now cut off, let’s wait and see what the  next attempt to struggle Ikea will be. If you can’t beat them, join them… or keep fighting all the way.

http://www.nytimes.com/2010/02/16/business/global/16ikea.html

http://www.nytimes.com/2009/09/12/business/global/12ikea.html

http://www.spiegel.de/international/business/0,1518,632507,00.html

Now Germany takes it a step further; the German Ministry of Finance allegedly considers to buy the same ‘stolen’ ‘HSBC files’ on Swiss bank accounts held by German citizens. German media reported over the weekend that an informant had offered data of up to 1,500 possible tax evaders with accounts in Switzerland which could lead to 100 million euros for state coffers…. for the reasonable price of 2.5 million euros….

The incident follows a similar case two years ago, when German authorities opened a tax-evasion probe aimed at hundreds of investors in Liechtenstein, using data purchased from a former employee of LGT Group. Crown Prince Alois, who rules Liechtenstein, called the probe an “attack” on his country.

Now The Netherlands’ tax authorities intend to use international tax treaties to get the file for free from the Germans. If the files hold data that is relevant for The Netherlands’ revenue service, there is a fair chance the data will be shared with them.. And so the stolen data spreads across Europe.

So while governments make a economic and ethical decision to pay for stolen data, banks are left with a challenge. What if word got out (yes it just did) that foreign governments are willing to pay millions of dollars for client files related to their (wealthy) citizens? Better get your bank’s security right.

http://www.businessweek.com/news/2010-02-01/germany-says-stolen-tax-data-won-t-harm-stable-swiss-ties.html

http://www.dw-world.de/dw/article/0,,5196492,00.html

http://financialcrimeonline.com/archives/773

This week the feds took down a ring of Medicare fraudsters in Florida. A physician and 29 nurses and health care operators got busted. The doctor is accused of accepting bribes to write prescriptions for about 1,300 homebound patients at Courtesy and other local clinics. But the patients didn’t need the prescribed diabetic, physical therapy and other costly services billed to Medicare, according to a federal indictment.

The arrests underscored the federal push to stamp out the latest fraud scheme in South Florida: billing Medicare for phony home healthcare claims such as treating diabetics who don’t have the disease. Previous schemes in the region, dubbed the nation’s Medicare fraud capital, were dominated by false claims for medical equipment and HIV infusion services.

Some patients were also implicated; they allegedly accepted kickbacks to use their medical files and medicare number for the false claims. Authorities said a patient was paid $100 for each prescription and referral to a home-care agency, and patients were given between $700 and $1,500 in monthly kickbacks for their Medicare numbers. Home-care operators also bribed patients with groceries, housekeeping, even flat-screen TVs, authorities said.

CBS news ’60 minutes’ ran a good story on Medicare fraud a good month ago. It documented non existing medical offices with registered addresses in shopping malls and strips full of pharmacies with hardly any patients visiting them. But the steady stream of invoices originating from these ‘fake’ offices are very real. And they get reimbursed by Medicare. CBS reported that according to the FBI, all you have to do to get into this business is rent a cheap storefront office, find or create a front man to get an occupational license, bribe a doctor or forge a prescription pad, and obtain the names and ID numbers of legitimate Medicare patients you can bill the phony charges to. “There’s a whole industry of people out there that do nothing but provide lists of patients, people’s names, Social Security numbers, addresses, and date of birth. With those four things, you can bill for a patient”. Medicare is obliged to pay the invoices within a month. It doesn’t have the resources to perform effective (fraud) controls on the waterfall of invoices. Medicare has just three field inspectors in all of South Florida to check up on thousands of questionable medical equipment companies.

Fraud is sometimes caught by patients earlier than Medicare. When patients review their Medicare statements and see all sorts of medicine and medical procedures they have absolutely no knowledge of, they ring the fraud bell. The FBI calls it “pay and chase”. First Medicare pays, then they chase. But the phony offices move every two months or so, just to be sure they won’t get caught. What an industry….. Guess what we would choose if we had to pick a criminal career; drugs or Medicare fraud?

http://www.miamiherald.com/news/southflorida/story/1383909.html

http://www.cbsnews.com/stories/2009/10/23/60minutes/main5414390.shtml

http://financialcrimeonline.com/archives/649

http://www.npr.org/templates/story/story.php?storyId=15178883

http://www.stopmedicarefraud.gov/