Form I-9s are one of the most misunderstood federal government forms.  The form is not a simple linear document with blanks that need to be filled.  Rather, the Form I-9 is an interactive process with numerous rules (most of which do not appear on the face of the form) that must be followed.  To ICE and the DOJ, the procedure and manner by which the Form I-9 is completed is just as important as the information provided on the form.  And, it is the procedure and manner by which a Form I-9 is completed that most often gets employers into trouble (e.g., Abercrombie & Fitch settlement). 

As a result, employers can get themselves into a heap of trouble by trying to correct mistakes on the Form I-9 in an inappropriate manner.  For example, I’ve heard many times, “Why can’t we just populate the missing information from our HR system into Section 1 of the Form?” (only the employee can complete Section 1) or another one of my favorites, “The employee only completed List B and List C, but did not complete List A.  We need to call her in and have her complete List A” (employers should not accept more than the required documentation).  These procedural missteps could cost the employer significant penalties including, but not limited to fines, debarment and negative publicity.

Corrections to the Form I-9, like those described above, can make matters far worse for the employer than the original error.  As another example, some employers will correct a missing employee signature in Section 1 by creating a new Form I-9, often stating that the old Form I-9 is “out of date” and needs to be “redone.”  The employer then destroys the original Form I-9 leaving it no method to prove that it complied with the timing requirements of the Form I-9.  Further, the employer has just made it clear to ICE that not only was the employer not fully compliant with the Form I-9 procedure when that employee was hired (which may have been as early as 1986), the employer is even worse at it now – not a good position to be in. 

Unfortunately, these mistakes occur because most HR personnel responsible for the Form I-9 process have little to no formal training.  While lack of Form I-9 training is extremely risky in today’s enforcement environment, even more risky is allowing HR personnel to conduct an audit of their own work.  The use of independent, experienced auditors is key.

All employers should absolutely be conducting Form I-9 audits.  However, employers should tread carefully and ensure that they involve experienced immigration counsel in their auditing.  With the assistance of competent counsel, audits can play double duty and not only get existing Form I-9s in order, but also serve as an excellent training exercise for the employer’s HR personnel.

North Carolina

In June 2011, North Carolina enacted a law (North Carolina HB 36) requiring all state agencies, counties and municipalities to use E-Verify by October 1, 2011.  All other North Carolina employers must implement E-Verify by the following deadlines:

• Employers with more than 500 employees: October 1, 2012
• Employers with 100-499 employees: January 1, 2013
• Employers with 25-99 employees: July 1, 2013

The North Carolina law exempts seasonal temporary employees who are employed for 90 or fewer days during a 12-month period.  However, employers need to be careful with these state mandated exemptions.  In order to participate in E-Verify, employers have to sign a Memorandum of Understanding with the Department of Homeland Security which requires the employer to use E-Verify for all new employees and prohibits the employer from verifying selectively. 

The North Carolina law imposes civil monetary penalties for violations.

South Carolina

In June 2011, South Carolina enacted a law (South Carolina Act 69) requiring all employers to participate in E-Verify by January 1, 2012.  The new law removed the option of only hiring employees who possess or qualify for a South Carolina driver’s license (or other state license with similarly strict requirements) in lieu of using E-Verify.  The South Carolina law includes a grace period of one year for employers, during which penalties are probationary.  After the one year grace period, employers can face suspension of their business license.

The South Carolina law also requires private employers to maintain contact information for all of its subcontractors and sub-subcontractors performing services for the private employer and to provide such information pursuant to an audit or investigation within seventy-two hours of the request.

Like many other states, certain provisions of the South Carolina immigration law have been blocked from taking effect by a challenge in federal court (see United States v. South Carolina, No. 2:11-cv-2958 (D.S.C. December 22, 2011)), including a provision that requires law enforcement officers to check the immigration status of people they pull over for traffic violations.  However, the provisions regarding participation in E-Verify remain in effect.

Two of the new members bring strong regulatory experience to their new positions.  In addition to being a partner at a firm that represented the PCAOB in connection with its Constitutional challenge, Mr. Doty is a well respected securities lawyer who previously served as the SEC’s General Counsel.  Similarly, Mr. Ferguson served as the PCAOB’s first General Counsel and will now return to the Board following time in private practice.

Meanwhile, Mr. Hanson will draw on his thirty-plus years of experience with McGladrey & Pullen LLP, where he currently serves as a Partner and the National Director of Accounting.  His practical experience in the industry will bring an excellent new perspective to the PCAOB, as Mr. Hanson will be the first former audit partner to sit on the Board – something that should serve the PCAOB well.   

With these new appointments, the PCAOB will also be saying farewell to Charley Niemeier and Bill Gradison, two of the Board’s founding members.  Mr. Niemeier, who was the Acting Chairman when the PCAOB first opened its doors, should be credited for much of the successes and accomplishments the PCAOB has experienced since its inception, including the development of the PCAOB’s inspection program.  Mr. Gradison also served as an Acting Chairman during his term as a Board Member, and both agreed to stay on the Board for far longer than their terms while the SEC searched for their replacements.

Judge Susan Phillips Read wrote the opinion for the 4-3 majority and noted that the court was “not convinced that altering [its] precedent to expand remedies for these or similarly situated plaintiffs would produce a meaningful additional deterrent to professional misconduct or malpractice.”  Judge Read confirmed that that “the principles of in pari delicto and imputation, … which are imbedded in New York law, remain sound.” 

The in pari delicto defense allows a defendant in a lawsuit to claim that the plaintiff is at least equally at fault.  If the defense is successful, the plaintiff’s claim must be dismissed.  For the defense to be successful, the court must hold the corporation responsible for its employees’ actions by imputing the illegal actions of the corporation’s senior officers to the corporation.

This ruling is another victory in the ongoing fight against third party liability.  This issue keeps popping up across the country in courts and in Congress.  The ruling answers Delaware’s question to New York from earlier this summer.  And the decision comes only three months after the Texas Supreme Court made a similar ruling in denying third party claims against Grant Thornton.  On the other hand, the Pennsylvania Supreme Court limited the availability of in pari delicto earlier this year.

It will be important to pay close attention as more and more courts weigh in on this evolving issue and as Congress considers whether to create a private right of action for third party wrongdoing.

Since January 2011, FINRA has brought actions against at least five broker-dealers and ten individuals for either failing to conduct adequate due diligence into private placements or failing to implement adequate supervisory systems and procedures for private offerings.  These actions consistently involve the following shortcomings:

• Reviewing solely the issuer’s unverified and uncorroborated statements in the offering document;
• Failing to obtain or review the issuer’s financial statements;
• Failing to visit the issuer’s facilities or meet with its key personnel;
• Failing to research the background information on the offering’s officers;
• Failing to use the services of third-party due diligence providers; and
• Failing to identify in supervisory procedures the specific due diligence steps to be taken and firm personnel responsible for such steps.

FINRA requires that firms have written procedures outlining the steps it will undertake in conducting due diligence on its securities products.  These due diligence procedures should be designed to help firms understand the inherent risks of these products and to determine whether these products are suitable for its customers.  FINRA stated in a recent Letter of Acceptance, Waiver and Consent that “[d]etailed and robust written procedures are particularly important for private offerings, because there is no registration of the securities with the SEC and public information regarding the offering may be limited.”

Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, recently said the agency will continue its focus on sales of private placements to determine whether the selling firms fulfilled their responsibility to customers.  Broker-dealers should note FINRA’s fixation in this area.  If your firm engages in private placements, it would behoove you to assess whether your internal controls, supervisory systems and risk management practices properly address your due diligence obligations. 

Currently, broker-dealers and investment advisers are subject to different standards of care under federal law when providing investment advice about securities.  Investment advisers are regulated under the Investment Advisers Act of 1940 as fiduciaries who have a duty to serve the best interests of their clients, including an obligation not to subordinate clients’ interests to their own.  Broker-dealers, however, are regulated under the Securities Act of 1933 and the Securities Exchange Act of 1934, specific Exchange Act Rules, and FINRA Rules, among others.  Generally, broker-dealers are not subject to a statutory fiduciary duty, but rather a standard requiring suitability, fairness and transparency.

The Study’s Findings and Recommendations

-Uniform Fiduciary Standard – adoption of a standard of care “no less stringent than currently applied to investment advisers under [the] Advisers Act.”

-Harmonization of Regulation – SEC to engage in rulemaking to develop a more consistent regulatory regime.

The Opposition

Commissioners Casey and Paredes, in opposition to the Study, stated that it “does not identify whether retail investors are systematically being harmed or disadvantaged under one regulatory regime as compared to the other and, therefore, the Study lacks a basis to reasonably conclude that a uniform standard or harmonization would enhance investor protection.”  In three separate letters to the SEC, members of the U.S. House and Senate have urged the SEC to conduct a cost-benefit analysis of what changing the standard for broker-dealers will mean for investors.

As a result, it is unclear whether any new rules will ultimately result from the SEC’s Study.  However, we can be certain that they will not go into effect until late 2011, at the earliest.  At a recent Investment Company Institute (ICI) conference, a senior advisor to SEC Chairman Mary Schapiro and coordinator of the fiduciary study, Jennifer McHugh, said that SEC action will “likely occur later in the year.”  She added that the Commission had not formed a “rulemaking team” and continues to meet with outsiders “to get their reaction, rather than [move] straight to rulemaking.” 

Allison D. Charney contributed to this post. 

The Bank Integrity Unit, as Mr. Breuer called it for short in a speech before a joint conference of the American Bankers’ Association and the American Bar Association, was established to focus criminal investigation and prosecution efforts on three types of money laundering violators: (1) financial institutions, including officers and other employees; (2) professional money launderers who service criminal organizations; and (3) persons engaged in money laundering using sophisticated techniques, such as virtual currency and mobile payment systems.  Mr. Breuer acknowledged that effective compliance programs are costly, but he stated that, considering the Justice Department’s record of going after banks – big and small – for inadequate AML compliance programs, it makes business sense for banks to get into compliance.

In light of the Justice Department’s deferred prosecution agreement with Wachovia Bank, N.A., in which Wachovia was required to pay $160 million in forfeited funds and civil monetary penalties in March 2010 for lapses in AML compliance, it is understandable that the Department would take every opportunity to remind financial institutions of their Bank Secrecy Act obligations.  However, no less an AML compliance authority than John Byrne, who, since 2010, has served as Executive Vice President of the Association of Certified Anti-Money Laundering Specialists (ACAMS), was taken aback by a warning of sorts issued by Mr. Breuer to the conference attendees.  Mr. Breuer stated that if there was one message he could leave with the audience, it would be that “financial institutions simply cannot cut corners on compliance [because] having a compliance program that works is worth it. . . . [and] failing to adopt and maintain a real compliance structure will have serious consequences.”  Mr. Byrne, who works closely with all types of financial institutions, wonders what prompted Mr. Breuer to fire such a “shot across the bows” at an industry that is so committed to AML compliance. 

Committed or not, financial institutions must acknowledge that the compliance obligation is a continuous one.  It requires, at a minimum, periodic risk assessments, training, recordkeeping, reporting, and audits, as well as necessary adjustments in order to keep pace with the criminals who would use the financial institution to commit crime and to conceal the origin of illicit funds.  The failure of CommunityONE Bank to take these steps led to criminal prosecution, culminating with an agreement deferring prosecution in the Western District of North Carolina.  In its deferred prosecution agreement, the bank agreed to pay restitution to victims of an investment fraud scheme run through the bank by an individual who was convicted of fraud in December 2010.

It is abundantly clear that the Justice Department is increasing its enforcement of Bank Secrecy Act requirements against financial institutions of all sizes.  As a result, banks and other financial institutions covered by the Bank Secrecy Act can no longer claim to be the victims of fraud under circumstances in which the underlying misconduct could have been detected, and perhaps even prevented, with a robust AML compliance program.

In the words of Anne Tompkins, the U.S. Attorney for the Western District of North Carolina, “Banks asleep at the switch need to wake up. . . .  [T]he Bank Secrecy Act applies to more than just drug and terrorist financing.”

Now that’s a warning.

Money laundering is, generally speaking, conduct that involves transporting, concealing, or avoiding reporting requirements in connection with the proceeds of a Specified Unlawful Activity (SUA) or property used to facilitate an SUA.  By definition, then, money laundering requires the existence of an underlying SUA, such as fraud.  So where there is fraud, there may be money laundering.  Financial institutions risk the non-detection of money laundering whenever they withhold information about potential fraud from AML analysts.  Failing to detect money laundering exposes them to further financial losses and regulatory scrutiny. 

Even where there is no known or suspected connection between a fraudulent transaction and money laundering, banks and other financial institutions still have a legal obligation to file a Suspicious Activity Report (SAR) relating to the fraud, assuming the transaction meets a minimal threshold.  The legal obligation (as well as the voluntary option) to file a SAR must be addressed in the written AML program and is subject to regulatory oversight by AML examiners.  Thus, it seems clear that financial institutions should integrate their AML and anti-fraud capabilities.

Since September 2008, when he spoke to the Florida Bankers Association, James H. Freis, Jr., Director of the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), has been extolling the virtues of understanding the intersection of AML and anti-fraud efforts and urging financial institutions to take a landscape approach toward compliance.  Director Freis has repeatedly made the point that, especially in this economic downturn where resources are scarce, corporate compliance departments can and should combine their AML and anti-fraud resources.

Recently, in a talk to the Institute of International Bankers, Director Freis stated that a robust AML program can pay for itself through the prevention and detection of fraud.  He explained that a recent study indicated that, in 2008, banks suffered $788 million in card fraud-related losses, $1 billion in check fraud-related losses, and another $100 million in ACH fraud-related losses.  Rather than accept this nearly $2 billion in annual losses as a cost of doing business, Director Freis suggested that banks would increase their detection and prevention of fraud, and therefore significantly cut their losses due to fraud, by more closely aligning their AML and anti-fraud functions.

AML and anti-fraud efforts should also be combined for purposes of taking full advantage of FinCEN’s voluntary information sharing program, which is authorized by section 314(b) of the USA PATRIOT Act of 2001.  Section 314(b) is a program in which financial institutions (and associations of financial institutions) are protected from liability when they share information with other financial institutions that may involve possible money laundering and terrorist financing.  Because money laundering requires an SUA as a predicate, FinCEN issued guidance reminding financial institutions that information may be shared under section 314(b) if financial institutions suspect that a questionable transaction may involve the proceeds of an SUA.  By sharing information under section 314(b), financial institutions can combat money laundering and terrorist financing while saving money on fraud prevention.

Financial institutions should not wait for a significant law enforcement or regulatory action to be taken before they integrate their AML and anti-fraud efforts.  Integration is a win-win proposition and now is the time to do it.

 On July 1, 2010, President Obama signed into law H.R. 2194, the “Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010” (“CISADA” or “the Act”).    CISADA follows and builds upon the recently-passed United Nations Security Council Resolution 1929, which imposed sanctions upon Iran for its ongoing illicit nuclear activities.  CISADA amends the Iran Sanctions Act and strengthens the sanctions regulations targeting Iran that are administered by OFAC.

 While U.S. companies have been prohibited from providing goods or services to Iran for some time, recently there has been increased attention focused on foreign companies, including overseas subsidiaries of U.S. companies, with substantial business ties to Iran’s energy sector.  The revenue from energy exports drives Iran’s economy and its ability to fund its nuclear program.  Deterring investments in Iran’s energy sector is therefore considered an important part of U.S. efforts to prevent Iran from acquiring nuclear weapons. 

Legislation passed in 1996 authorized the President to impose sanctions on any foreign entity that invested $20 million or more in Iran’s energy sector, but no Administration has used the power.  CISADA ratchets up the pressure on those doing business in Iran in several ways.  First, the Act now requires the imposition of sanctions and broadens the categories of transactions that trigger sanctions, focusing on companies that sell refined petroleum to Iran or assist Iran in developing its own domestic refining capacity.  While the President continues to have the power to waive the imposition of sanctions on foreign companies, there must be a determination that the waiver is “necessary to the U.S. national interest,” a higher standard than previously existed.  The Act also includes a waiver mechanism that the President may use to avoid sanctioning an overseas business if the government with primary jurisdiction over the business is “closely cooperating” with the United States in its efforts against Iran.

In response to the attention focused on foreign companies with substantial business ties to Iran, a number of state and local governments, universities, and pension and mutual funds have decided to divest from companies with significant operations in Iran.   The Act provides a legal framework by which state and local governments and certain other investors can carry out divestment.  Among other things, the Act recognizes the authority of state and local governments to divest from companies involved in investments of $20 million or more in Iran’s energy sector and sets standards for them to do so.  The Act also provides a safe harbor for changes of investment policies by private asset managers, and it expresses the sense of Congress that divestments do not constitute a breach of fiduciary duties under ERISA.

In addition to targeting the Iranian energy sector, the Act imposes significant new obligations and restrictions on financial institutions.  Pursuant to the Act, the Treasury Department has now issued regulations that prohibit, or impose strict conditions on, the opening or maintenance in the U.S. of a correspondent or payable-through account by a foreign financial institution that Treasury finds knowingly assists key Iranian banks or the Islamic Revolutionary Guard Corps (“IRGC”).  In a sign of the urgency felt within the government on all matters Iran-related, Treasury completed the regulations within half the time allotted under the Act.  They were released on August 16, 2010 and can be found here: http://edocket.access.gpo.gov/2010/2010-20238.htm.  Treasury intends to publish the names of the foreign financial institution subject to the prohibition in an appendix to the regulations.  A domestic bank that opens a prohibited account and the foreign bank that “attempts,” or “causes” the account to be opened both face substantial civil and criminal penalties. The regulations also make clear that foreign subsidiaries of U.S. financial institutions may not engage in any transaction with Specially Designated Nationals (http://www.treas.gov/offices/enforcement/ofac/sdn/) that are agents or affiliates of the IRGC. 

There is another set of regulations still to come:  Under the Act, Treasury must issue regulations that will require U.S. banks that maintain correspondent or payable-through accounts in the U.S. for foreign banks to take steps to ensure that the foreign banks are not engaging in prohibited activities through the accounts.  The Act does not set a time within which this set of regulations is to be issued, but one assumes they will be out soon.  Given the circumstances, banks subject to these regulations should pay close attention.

The Administration still intends to go forward with a trial, but it appears that the trial decision has become ensnared in complex negotiations with the Hill.  Politico recently reported that the White House is bargaining with Senator Lindsey Grahamin an attempt to forge a comprehensive deal on detainee policy. According to the article, in return for military trials for the 9/11 plotters, Graham would support congressional funding to establish a detention facility in Illinois for some current Guantanamo prisoners, reform of laws as to who is an enemy combatant, and a preventive detention statute.

According to press reports, the President initially asked Attorney General Holder to choose the site of the trial in an effort to maintain an independent Justice Department.  So a decision that was originally intended to be insulated from politics has now become entirely entangled in politics. The detainee issues that are being negotiated are extremely difficult to resolve (they have been under discussion for years), and there is no reason to think that a grand deal can be achieved with Senator Graham, let alone the whole Congress, anytime soon.  If the KSM trial decision won’t come until the other detainee issues are worked out, we are in for a long wait.

DOJ has traditionally resisted any political intrusion into its charging decisions.  Indeed, as part of that resistance, the staff in the Main Justice building spends lots of time and energy fighting off Congressional requests for information concerning pending investigations and prosecutions.  To be sure, the KSM case is different than the ordinary federal prosecution in lots of important ways and the trial decision deserves a full discussion.  But the current uncertain status of the KSM prosecution is another demonstration of the utility of the traditional DOJ approach.

With any luck, the trial question will be decoupled from the rest of the detainee issues and decided soon.  Whether the prosecution is in a military or civilian courtroom, it will take a long time to complete.  And however the KSM decision is resolved, I hope it yields a consensus on the way forward that will permit prosecutors to move in other terrorism cases without delay.

The honest services provision expands the federal mail and wire fraud statutes to proscribe any scheme or artifice to defraud another not only of tangible property, but also of “the intangible right of honest services.”  (18 U.S.C. § 1346.)  This broadly-phrased provision has become a favorite of prosecutors precisely because of its malleability.  Following Enron’s spectacular collapse, prosecutors indicted Skilling for, among other crimes, conspiring to commit honest services wire fraud by misrepresenting Enron’s financial health to inflate its stock price, thus depriving Enron of his “honest services.”  Skilling argued that this language was unconstitutionally vague and that it criminalized complex business decisions.

Although the Supreme Court acknowledged that Skilling’s argument had force, the Court declined to rule the statute unconstitutional.  Instead, the Court narrowly construed the law, holding that the law properly criminalizes only acts of bribery or kickback schemes.  In so holding, the Court rejected the government’s contention that the statute also proscribes undisclosed self-dealing by a public official or a private employee (yet the Court left open the door for Congress to amend the statute to “speak more clearly than it has”).

The Court found that Skilling did not violate the honest services provision because the government had not alleged that Skilling solicited or received bribes or kickbacks in connection with the alleged fraudulent scheme.  Because Skilling’s indictment alleged “honest services fraud” as one of three objects of the conspiracy for which he was convicted, the Court concluded that his conviction was “flawed,” and remanded the matter to the Fifth Circuit Court of Appeals to determine whether the error was “harmless” as to the conspiracy conviction and whether it tainted all of Skilling’s myriad other convictions.  Thus, it remains questionable whether Skilling’s victory will provide him any actual relief.

The Court’s ruling does, however, clearly undermine the continued viability of the honest services law.  Gone are the days when prosecutors can freely use the law as a means to introduce evidence of immoral or unethical behavior by public officials or private executives.  Now they will have to adduce evidence that those persons engaged in bribery or kickbacks – actual criminal violations.

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By Robert Plotkin and Kurt Wolfe

This article was also featured in Law360’s White Collar and Securities news sections. 

The new policy does not require admissions or adjudications of fact beyond those already made in criminal cases, but eliminates language that may be construed as inconsistent with admissions or findings that have already been made in the criminal cases.

The Wall Street Journal’s Joe Palazzolo explains, “The policy change eliminates what had been a strange feature of parallel criminal and civil proceedings. Even when companies admitted to broad criminal violations in settlements with the Justice Department, which carry greater consequences than civil charges, they weren’t required to make an admission in their settlements with the SEC.”

As Law360 reports, Khuzami stressed that the policy change will apply only in a minority of cases where there are parallel criminal proceedings arising from the same misconduct.  And, importantly, SEC settlements will not require companies to admit to broader misconduct than admitted in the concurrent criminal proceedings. 

Many do not view the new directive as a significant shift in SEC policy.  John Carney of CNBC, for example, insists that “the change will have very little impact on most of the cases the SEC brings.”   Carney believes most companies seeking to settle SEC matters can still avail themselves of the “neither admit nor deny” language, because “[o]nly companies that admit or are convicted in a criminal court will actually be denied those familiar words of settlement blather.” 

Still, for companies faced with parallel enforcement proceedings, the shift in policy may in fact shape their litigation strategy.  Companies in such a situation should consider, first, the timing of any settlement with the Commission.  Settlement on a “neither admit nor deny” basis may be available until the company admits guilt in the parallel criminal matter.  Thus, settling with the SEC first may present an opportunity to secure settlement on favorable terms. 

Second, for companies forced to admit guilt in an SEC settlement under the new policy, it is essential to make sure the admission covers the same conduct or elements described in the criminal matter.  While the SEC insists it will not ask companies to admit to broader misconduct, it is ultimately up to the companies to ensure any admission is sufficiently narrowly tailored. 

The announcement comes as no surprise on the heels of MacBride’s widely-reported announcements over the last several months concerning the expansion of his office’s capabilities to tackle financial crime.

The new task force will enhance the Eastern District’s ability to prosecute major national financial fraud cases.  This is but one more step in the Eastern District’s apparent competition with the Southern District of New York for these high profile cases.  The Southern District has historically been the most prominentvenue for financial fraud cases, but the Eastern District has been ramping up its efforts over the last six months and appears ready to give the Southern District a run for its money.

Known as the “rocket docket” because its judges push cases forward on an extremely expedited schedule, and armed with new prosecutors with financial expertise, the Eastern District is poised to prosecute these high-profile financial fraud cases quickly and expertly.

The Eastern District can claim jurisdiction over almost all securities fraud and other financial fraud cases involving public companies because the reports those companies are required to file with the SEC are sent to the EDGAR computer server located in Alexandria, Virginia.

In addition, the Eastern District’s proximity to Main Justice, as well as the federal agencies that will participate in the new task force, will be key to its ability to pursue these investigations aggressively and efficiently. 

The public demanded action in response to the financial crisis and the government promised a swift and aggressive response.  The Eastern District’s announcement is the latest evidence of the government’s preparations to punish financial fraud with its full weight.

The Quarterly Report highlights other investigations that showcase the breadth of SIGTARP’s reach.  As part of a mortgage fraud interagency task force, SIGTARP is investigating potential fraud at Omni National Bank (before its failure and Government takeover) and whether it had an impact on Omni’s application for TARP funds under the Capital Purchase Program.  Notably, Omni never actually received those funds.  SIGTARP investigations have also resulted in bank fraud charges against Mount Vernon Money Center executives which are connected to TARP because some of the allegedly misappropriated funds came from institutions in which taxpayers are invested through TARP.  In another fraud and money laundering case, TARP is implicated because the indicted telemarketing firm operators “took advantage of the publicity surrounding the Administration’s mortgage modification efforts” under the TARP-funded Making Home Affordable initiative to induce customers to purchase modification services that were never provided. 

These investigations – launched from multiple agencies and aimed at a range of activity emanating from TARP assets – make clear that the enforcement landscape stretches far beyond obvious misuses of TARP funds.