Business Crimes Hotline

Pang also faces an SEC complaint alleging fraud based in both an insurance and a real estate scheme. On April 27, 2009 the SEC froze Pang's assets and those of two Irvine, CA-based PEM Group companies. The SEC has also obtained an order requiring Pang to turn over his passports and return overseas funds to the United States. It alleges that Pang assured investors that proceeds would come from real estate and insurance investments but, in fact, some of those returns were simply paid out from funds received from more recent investors (a basic Ponzi scheme). The government also alleges that Pang lied about his background to attract investors and engaged in the fraudulent offering of securities ' neither Pang nor his companies have registered with the SEC despite raising hundreds of millions of dollars. The receiver appointed by the court has already determined that the current value of the $823 million Pang took from investors is between $213 million and $426 million.

If convicted of the structuring charges, Pang faces up to 10 years in prison.

MASSACHUSETTS

ExxonMobil to Pay Fine for River Oil Spill

The U.S. District Court for the District of Massachusetts has sentenced ExxonMobil subsidiary ExxonMobil Pipeline Co. to pay fines and contributions totaling $6.1 million.

ExxonMobil Pipeline was originally charged with violations of the Clean Water Act based on a January 2006 spill of approximately 15,000 gallons of diesel oil into the Mystic River. The company operates an oil terminal in Everett, MA, on the banks of the river. Prosecutors alleged that a leak during off-loading from an oil tanker caused the spill, which ultimately spread into the Boston Harbor. The company was alleged to have been informed about the leak months earlier, but failed to repair it. The government claimed that ExxonMobil Pipeline was negligent in overseeing the terminal operations and identifying and reacting to the spill.

ExxonMobil Pipeline will pay cleanup costs of $179,634 and a fine of twice the cost of the cleanup. Further, the company will pay $4.6 million to the North American Wetlands Conservation Act fund and $1 million to the Massachusetts Environmental Trust. ExxonMobil has agreed to have a court-appointed observer monitor the terminal.

MONTANA

W.R. Grace and Three Executives Acquitted

A federal district court jury found W.R. Grace and its former executives ' Henry A. Eschenbach, Jack W. Wolter, and Robert J. Bettachi ' not guilty of alleged crimes surrounding the company's operation of a vermiculite mine in Libby, MT. Grace operated the mine from 1963 to 1990. The vermiculite, mined in Libby for many years, was contaminated with tremolite asbestos. Over time, the vermiculite was transported on miners' clothing and spread throughout the town of Libby, including on people's gardens and at one point serving as a surface for the high school track. The government alleged that the company exposed Libby's residents to this asbestos, which resulted in 1,000 illnesses and 200 deaths, over several decades of mining.

The government had alleged a long-standing conspiracy by Grace and its employees to knowingly release asbestos into the community. As a part of that claim, the government asserted that the company hid the dangers of the contaminated vermiculite in order to further profit from the mine at the expense of the health of employees and community members. The government also alleged that the company concealed important information from the EPA, and obstructed justice.

After 11 weeks of testimony, the jury disagreed. Judge Donald Molloy sent the case to the jury on Wednesday, May 6, and it reached a verdict of not guilty on all counts by the morning of Friday, May 8.

Charges against William McCaig and Robert Walsh, two other former Grace executives, had been dropped earlier in the trial. Grace's former in-house counsel, O. Mario Favorito, is awaiting trial in September.

TEXAS

U.S. District Judge Sentenced to 33 Months in Prison

A federal district court sentenced retired U.S. District Judge Samuel Kent to 33 months in prison for one count of obstruction of justice.

Kent's conduct was first raised two years ago when his former case manager filed a complaint claiming sexual harassment. Judge Kent was indicted by a grand jury in August 2008. After a superseding indictment was filed on Jan. 6, 2009, he had faced a total of five counts relating to sexual misconduct and one count of obstruction of justice. The government alleged that Kent molested both his case manager and secretary, and lied about his actions to a judicial panel investigating complaints of sexual harassment.

In February, Kent reached a plea agreement with prosecutors in which he agreed to plead guilty to the obstruction of justice count and admit harassment of two employees in exchange for the dismissal of the sexual misconduct counts.

Until recently, Kent had been the lone federal district court judge in Galveston, TX. On top of his sentencing, Kent now faces potential impeachment proceedings. Although he retired from the bench following his guilty plea, he still draws his annual salary. If he does not resign the Judiciary Committee of the U.S. House of Representatives has threatened to open an inquiry into impeachment, according to a joint statement from the ranking members on both sides of the aisle. Further, a previously resolved disciplinary case by the Judicial Council of the Fifth Circuit has been reopened as a result of Kent's guilty plea. Kent was ordered to begin serving his sentence on June 15, 2009.

Washington, DC

Novo Nordisk Agrees to Fine and Deferred Prosecution Agreement Related to Iraqi Oil for Food Program Payments

Danish corporation Novo Nordisk A/S agreed to pay $9 million in penalties as part of a deferred prosecution agreement it reached with the DOJ.

The DOJ alleged that the company improperly paid $1.4 million in kickbacks to the Hussein regime in Iraq as a part of contracts obtained under the United Nations Oil for Food Program. In order to obtain contracts for insulin and other medicines under the program, agents of Novo Nordisk allegedly made payments of 10% of the contract value, which it recouped by charging an additional 10% to the UN program. The government also alleged that the company improperly recorded these payments as “commissions.” As a result, the DOJ charged the company with one count of conspiracy to commit wire fraud and to violate the books and records portion of the Foreign Corrupt Practices Act (FCPA).

In addition to the fine, Novo Nordisk will be subject to compliance with the terms of a three-year deferred prosecution agreement. The DOJ cited the company's extensive review of the payments and its enhancement of compliance measures as part of its decision to resolve the matter. Novo Nordisk also settled a related Securities and Exchange Commission (SEC) complaint, agreeing to pay $3 million in civil penalties and $6 million in disgorgement of profits.

Business Crimes Hotline and In the Courts were written by Associate Editor Kenneth S. Clark, an associate at Kirkland & Ellis LLP, Washington, DC.

CALIFORNIA

Founder of PEM Group Charged with Structuring Transactions

Danny Pang, former CEO of Private Equity Management Group, Inc. (PEM Group), was arrested on charges related to his use of cash transactions to avoid financial reporting requirements. Prosecutors allege that Pang was responsible for at least 38 checks, all just under the $10,000 reporting requirement, cashed at a bank in Southern California.

Pang also faces an SEC complaint alleging fraud based in both an insurance and a real estate scheme. On April 27, 2009 the SEC froze Pang's assets and those of two Irvine, CA-based PEM Group companies. The SEC has also obtained an order requiring Pang to turn over his passports and return overseas funds to the United States. It alleges that Pang assured investors that proceeds would come from real estate and insurance investments but, in fact, some of those returns were simply paid out from funds received from more recent investors (a basic Ponzi scheme). The government also alleges that Pang lied about his background to attract investors and engaged in the fraudulent offering of securities ' neither Pang nor his companies have registered with the SEC despite raising hundreds of millions of dollars. The receiver appointed by the court has already determined that the current value of the $823 million Pang took from investors is between $213 million and $426 million.

If convicted of the structuring charges, Pang faces up to 10 years in prison.

MASSACHUSETTS

ExxonMobil to Pay Fine for River Oil Spill

The U.S. District Court for the District of Massachusetts has sentenced ExxonMobil subsidiary ExxonMobil Pipeline Co. to pay fines and contributions totaling $6.1 million.

ExxonMobil Pipeline was originally charged with violations of the Clean Water Act based on a January 2006 spill of approximately 15,000 gallons of diesel oil into the Mystic River. The company operates an oil terminal in Everett, MA, on the banks of the river. Prosecutors alleged that a leak during off-loading from an oil tanker caused the spill, which ultimately spread into the Boston Harbor. The company was alleged to have been informed about the leak months earlier, but failed to repair it. The government claimed that ExxonMobil Pipeline was negligent in overseeing the terminal operations and identifying and reacting to the spill.

ExxonMobil Pipeline will pay cleanup costs of $179,634 and a fine of twice the cost of the cleanup. Further, the company will pay $4.6 million to the North American Wetlands Conservation Act fund and $1 million to the Massachusetts Environmental Trust. ExxonMobil has agreed to have a court-appointed observer monitor the terminal.

MONTANA

W.R. Grace and Three Executives Acquitted

A federal district court jury found W.R. Grace and its former executives ' Henry A. Eschenbach, Jack W. Wolter, and Robert J. Bettachi ' not guilty of alleged crimes surrounding the company's operation of a vermiculite mine in Libby, MT. Grace operated the mine from 1963 to 1990. The vermiculite, mined in Libby for many years, was contaminated with tremolite asbestos. Over time, the vermiculite was transported on miners' clothing and spread throughout the town of Libby, including on people's gardens and at one point serving as a surface for the high school track. The government alleged that the company exposed Libby's residents to this asbestos, which resulted in 1,000 illnesses and 200 deaths, over several decades of mining.

The government had alleged a long-standing conspiracy by Grace and its employees to knowingly release asbestos into the community. As a part of that claim, the government asserted that the company hid the dangers of the contaminated vermiculite in order to further profit from the mine at the expense of the health of employees and community members. The government also alleged that the company concealed important information from the EPA, and obstructed justice.

After 11 weeks of testimony, the jury disagreed. Judge Donald Molloy sent the case to the jury on Wednesday, May 6, and it reached a verdict of not guilty on all counts by the morning of Friday, May 8.

Charges against William McCaig and Robert Walsh, two other former Grace executives, had been dropped earlier in the trial. Grace's former in-house counsel, O. Mario Favorito, is awaiting trial in September.

TEXAS

U.S. District Judge Sentenced to 33 Months in Prison

A federal district court sentenced retired U.S. District Judge Samuel Kent to 33 months in prison for one count of obstruction of justice.

Kent's conduct was first raised two years ago when his former case manager filed a complaint claiming sexual harassment. Judge Kent was indicted by a grand jury in August 2008. After a superseding indictment was filed on Jan. 6, 2009, he had faced a total of five counts relating to sexual misconduct and one count of obstruction of justice. The government alleged that Kent molested both his case manager and secretary, and lied about his actions to a judicial panel investigating complaints of sexual harassment.

In February, Kent reached a plea agreement with prosecutors in which he agreed to plead guilty to the obstruction of justice count and admit harassment of two employees in exchange for the dismissal of the sexual misconduct counts.

Until recently, Kent had been the lone federal district court judge in Galveston, TX. On top of his sentencing, Kent now faces potential impeachment proceedings. Although he retired from the bench following his guilty plea, he still draws his annual salary. If he does not resign the Judiciary Committee of the U.S. House of Representatives has threatened to open an inquiry into impeachment, according to a joint statement from the ranking members on both sides of the aisle. Further, a previously resolved disciplinary case by the Judicial Council of the Fifth Circuit has been reopened as a result of Kent's guilty plea. Kent was ordered to begin serving his sentence on June 15, 2009.

Washington, DC

Novo Nordisk Agrees to Fine and Deferred Prosecution Agreement Related to Iraqi Oil for Food Program Payments

Danish corporation Novo Nordisk A/S agreed to pay $9 million in penalties as part of a deferred prosecution agreement it reached with the DOJ.

The DOJ alleged that the company improperly paid $1.4 million in kickbacks to the Hussein regime in Iraq as a part of contracts obtained under the United Nations Oil for Food Program. In order to obtain contracts for insulin and other medicines under the program, agents of Novo Nordisk allegedly made payments of 10% of the contract value, which it recouped by charging an additional 10% to the UN program. The government also alleged that the company improperly recorded these payments as “commissions.” As a result, the DOJ charged the company with one count of conspiracy to commit wire fraud and to violate the books and records portion of the Foreign Corrupt Practices Act (FCPA).

In addition to the fine, Novo Nordisk will be subject to compliance with the terms of a three-year deferred prosecution agreement. The DOJ cited the company's extensive review of the payments and its enhancement of compliance measures as part of its decision to resolve the matter. Novo Nordisk also settled a related Securities and Exchange Commission (SEC) complaint, agreeing to pay $3 million in civil penalties and $6 million in disgorgement of profits.

Business Crimes Hotline and In the Courts were written by Associate Editor Kenneth S. Clark, an associate at Kirkland & Ellis LLP, Washington, DC.