Business Crimes Hotline

According to the Information filed in the case, and as reportedly admitted by Yuen in his plea agreement, after receiving a subpoena pursuant to an SEC investigation of Gemstar, Yuen deleted from his computer e-mails and corporate documents that the subpoena required him to produce. According to the prosecutors, the day before Yuen was to appear before SEC investigators, he installed and ran a program called “Eraser 2003″ on his computer that made recovery of the deleted files nearly impossible. The U.S. Attorney reports that under the terms of the plea agreement, Yuen will serve 6 months' home detention as part of 2 years of probation, provide community service by donating $1 million to charities, and pay an additional $250,000 fine. He will also be barred from serving as an officer or director of any publicly traded company during the period of probation.

Samsung Agrees to Pay $300 Million Criminal Antitrust Fine

According to the Department of Justice, Samsung Electronics Company Ltd. has agreed to plead guilty and to pay a $300 million fine for participating in an international conspiracy to fix prices in the DRAM market. The announced fine, which must be approved by the court, would be the second largest criminal antitrust fine in U.S. history.

The DOJ announced that the plea had come as part of its ongoing antitrust investigation into price fixing in the DRAM industry. DRAM is the type of memory used by most personal computers. Samsung was charged with carrying out the alleged conspiracy by meeting with others in the industry and agreeing to set DRAM prices at certain levels for certain customers, issuing price quotations in accordance with the agreements reached, and exchanging information on DRAM sales for the purpose of monitoring and enforcing the agreement. Samsung is the third company that has agreed to plead guilty to DRAM price fixing.

CONNECTICUT

Health Care Company Pleads Guilty to False Statements

According to the Department of Justice, Performance Health of Bridgeport, P.C., pleaded guilty to a charge of making false statements to the federal Medicare program. The U.S. Attorney for Connecticut reports that the case arises from an investigation conducted by the Health Care Fraud Task Force, a task force coordinated by the FBI and the Department of Health and Human Services. Federal investigators determined, and Performance Health reportedly admitted in court statements, that Performance Health submitted Provider Enrollment Appli-cations to the Medicare Program that contained forged signatures of providers and other false statements. Performance Health faces a maximum term of probation of 5 years and a fine of up to $500,000.

MASSACHUSETTS

Former Securities Broker Convicted in Fraudulent Market Timing Scheme

Federal prosecutors in Boston announced that Martin Druffner, formerly a broker with the Boston offices of Prudential Securities, Inc. and Wachovia Securities LLC, pleaded guilty to four counts of wire fraud and four counts of securities fraud for a scheme to execute prohibited market timing trades on behalf of hedge fund clients.

The prosecutors told the court that over a 5-year period, from 1999 to 2004, while working as a broker at Prudential Services, Inc., Druffner engaged in deceptive and fraudulent trading in shares of mutual funds. Specifically, it is alleged that Druffner, along with other Prudential Services brokers, defrauded mutual fund companies by fraudulently executing prohibited market timing trades on the behalf of seven hedge fund clients. According to the government, the fraudulent trades generated over $1 million in commissions for Druffner.

Former CEO of Health Center Indicted for Fraud and False Statements

Fred Swan, the former Director, President and CEO of a Springfield Massachusetts Health Center has been indicted for 11 counts of mail fraud, wire fraud, and false statements, according to the U.S. Attorney for Massachusetts.

The indictment alleges that the executive encountered financial difficulties in 1997, which resulted in foreclosure on his home. It is alleged that Swan arranged for an individual to purchase the home from the bank with the intention that Swan would reimburse the individual for the monthly payments and eventually repurchase the house. Prosecutors allege that Swan did not make those payments but that from 1998 through 2003, Swan steered no-bid and rigged contracts to entities controlled by the individual, contracts with a total value of approximately $1 million. If convicted, Swan faces 5 years in prison and a $250,000 fine for each of the 11 charges.

Business Crimes Hotline and In the Courts were written by Thomas M. Craig, Associate with Williams & Connolly LLP, Washington, DC, and Associate Editor of this newsletter.

CALIFORNIA

Former Chairman of Gemstar Pleads Guilty to Obstructing SEC Investigation

The U.S. Attorney for the Central District of California has announced that Henry C. Yuen, formerly Chairman of the Board and CEO of Gemstar-TV Guide International Inc., will plead guilty to a felony charge of obstructing an investigation by the SEC.

According to the Information filed in the case, and as reportedly admitted by Yuen in his plea agreement, after receiving a subpoena pursuant to an SEC investigation of Gemstar, Yuen deleted from his computer e-mails and corporate documents that the subpoena required him to produce. According to the prosecutors, the day before Yuen was to appear before SEC investigators, he installed and ran a program called “Eraser 2003″ on his computer that made recovery of the deleted files nearly impossible. The U.S. Attorney reports that under the terms of the plea agreement, Yuen will serve 6 months' home detention as part of 2 years of probation, provide community service by donating $1 million to charities, and pay an additional $250,000 fine. He will also be barred from serving as an officer or director of any publicly traded company during the period of probation.

Samsung Agrees to Pay $300 Million Criminal Antitrust Fine

According to the Department of Justice, Samsung Electronics Company Ltd. has agreed to plead guilty and to pay a $300 million fine for participating in an international conspiracy to fix prices in the DRAM market. The announced fine, which must be approved by the court, would be the second largest criminal antitrust fine in U.S. history.

The DOJ announced that the plea had come as part of its ongoing antitrust investigation into price fixing in the DRAM industry. DRAM is the type of memory used by most personal computers. Samsung was charged with carrying out the alleged conspiracy by meeting with others in the industry and agreeing to set DRAM prices at certain levels for certain customers, issuing price quotations in accordance with the agreements reached, and exchanging information on DRAM sales for the purpose of monitoring and enforcing the agreement. Samsung is the third company that has agreed to plead guilty to DRAM price fixing.

CONNECTICUT

Health Care Company Pleads Guilty to False Statements

According to the Department of Justice, Performance Health of Bridgeport, P.C., pleaded guilty to a charge of making false statements to the federal Medicare program. The U.S. Attorney for Connecticut reports that the case arises from an investigation conducted by the Health Care Fraud Task Force, a task force coordinated by the FBI and the Department of Health and Human Services. Federal investigators determined, and Performance Health reportedly admitted in court statements, that Performance Health submitted Provider Enrollment Appli-cations to the Medicare Program that contained forged signatures of providers and other false statements. Performance Health faces a maximum term of probation of 5 years and a fine of up to $500,000.

MASSACHUSETTS

Former Securities Broker Convicted in Fraudulent Market Timing Scheme

Federal prosecutors in Boston announced that Martin Druffner, formerly a broker with the Boston offices of Prudential Securities, Inc. and Wachovia Securities LLC, pleaded guilty to four counts of wire fraud and four counts of securities fraud for a scheme to execute prohibited market timing trades on behalf of hedge fund clients.

The prosecutors told the court that over a 5-year period, from 1999 to 2004, while working as a broker at Prudential Services, Inc., Druffner engaged in deceptive and fraudulent trading in shares of mutual funds. Specifically, it is alleged that Druffner, along with other Prudential Services brokers, defrauded mutual fund companies by fraudulently executing prohibited market timing trades on the behalf of seven hedge fund clients. According to the government, the fraudulent trades generated over $1 million in commissions for Druffner.

Former CEO of Health Center Indicted for Fraud and False Statements

Fred Swan, the former Director, President and CEO of a Springfield Massachusetts Health Center has been indicted for 11 counts of mail fraud, wire fraud, and false statements, according to the U.S. Attorney for Massachusetts.

The indictment alleges that the executive encountered financial difficulties in 1997, which resulted in foreclosure on his home. It is alleged that Swan arranged for an individual to purchase the home from the bank with the intention that Swan would reimburse the individual for the monthly payments and eventually repurchase the house. Prosecutors allege that Swan did not make those payments but that from 1998 through 2003, Swan steered no-bid and rigged contracts to entities controlled by the individual, contracts with a total value of approximately $1 million. If convicted, Swan faces 5 years in prison and a $250,000 fine for each of the 11 charges.

Business Crimes Hotline and In the Courts were written by Thomas M. Craig, Associate with Williams & Connolly LLP, Washington, DC, and Associate Editor of this newsletter.