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Barclays Deferred Prosecution, EU, BofA: Compliance

05 Dec 2012

Barclays Plc (BARC)’s deferred prosecution for improper dealings with sanctioned countries ended after the judge overseeing the U.S. case weighed whether the bank’s admissions in a probe involving manipulation of the London interbank offered rate should affect the deal.

U.S. District Judge Emmet Sullivan, in a decision made public yesterday, granted a request by the U.S. Justice Department to dismiss the criminal charges pending under the agreement in Washington since 2010. His one-page order offers no explanation.

Sullivan’s ruling comes almost five months after Barclays and prosecutors said in a court filing that the bank’s June 27 settlement of allegations involving Libor has “no effect” on the two-year deferred-prosecution agreement requiring the bank to stay out of criminal trouble.

The judge on June 28 ordered the parties to explain how the Libor settlement affected the 2010 agreement, which involves a $298 million settlement with the U.S. over illegal dealings with such nations as Sudan and Iran.

Barclays, Britain’s second-biggest bank by assets, was fined 290 million pounds ($467 million), after admitting it submitted false London and euro interbank offered rates. Part of that fine went to the Justice Department, which agreed not to prosecute the bank for what it called “illegal conduct.”

Mark Lane, a spokesman for London-based Barclays, declined to comment on the dismissal.

The case is U.S. v. Barclays Bank Plc, 10-cr-00218, U.S. District Court, District of Columbia (Washington).

Compliance Policy

EU Finance Chiefs to Meet Next Week as Banking Talks Bog Down

European Union finance ministers called an emergency meeting next week in Brussels on establishing a banking supervisor as disagreements reduced the chance of meeting a year-end deadline.

Talks bogged down in a gathering yesterday in Brussels over how much power to give the European Central Bank. Germany, the biggest European economy, sought to shield its small banks and demand more proof that monetary policy will be walled off from financial supervision.

“Of course we have difficult decisions to make, otherwise we wouldn’t have to meet again,” German Finance MinisterWolfgang Schaeuble said yesterday. “But the number of open points is being reduced.”

Governments are racing to meet a year-end deadline to set up a single bank supervisor at the Frankfurt-based ECB, which would be mandatory for the 17 euro-zone nations and optional for other EU members.

ECB oversight is a required first step before banks can directly tap the currency area’s firewall fund.

Loans from the firewall fund, such as for Spain’s financial-sector rescue, now must pass through national authorities. In addition to helping establish the new supervisor, finance ministers must design guidelines for how the 500 billion-euro ($653 billion) European Stability Mechanism could provide direct aid to banks and what conditions would apply.

The new supervisor would oversee all banks in its coverage area by Jan. 1, 2014, according to documents obtained byBloomberg News. It would be phased in over the course of 2013, and the ECB would have until July 2013 to design how it will work with national regulators. The dates are provisional and could change.

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SEC Auditor Case Seen Jeopardizing Chinese Firms’ U.S. Listings

U.S. regulators, in a move to sanction auditors for blocking investigations at China-based companies, have set a course that jeopardizes the listing of more than 100 stocks from the world’s most populous nation.

In an enforcement action against the China-based affiliates of the Big Four accounting firms Dec. 3, the U.S. Securities and Exchange Commission escalated a three-year impasse between the two nations over whether auditors can share work documents with regulators investigating possible accounting fraud at companies selling securities in the U.S.

“Chinese companies that are listed on U.S. exchanges are being held captive in a sovereignty dispute,” Jim Feltman, senior managing director at Mesirow Financial Consulting in New York. “This is a step in the process to deregister companies that can’t comply with U.S. audit rules. They’ll have to leave the U.S. marketplace if their auditors cannot or will not be responsive to the SEC.”

Of about 400 Chinese companies that trade in the U.S., at least 115 have been audited by the domestic subsidiaries of the Big Four accounting firms, according to data on stocks with market values of at least $5 million compiled by Bloomberg. More than half are audited by units of Deloitte, Ernst & Young, KPMG or PricewaterhouseCoopers.

The auditors say Chinese law prevents them from complying with the SEC’s demands, hindering U.S. efforts to probe allegations of fraud that have wiped 61 percent from a gauge of Chinese and Hong Kong stocks traded in North America since January 2011.

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Compliance Action

Ex-Rochdale Trader Arrested in $1 Billion Apple Stock Case

A former Rochdale Securities LLC trader was arrested on wire fraud charges in connection with an unauthorized $1 billion purchase of Apple Inc. (AAPL) stock that backfired, costing his company $5 million, the U.S. said.

David Miller, 40, appeared before U.S. Magistrate Judge Holly Fitzsimmons in Bridgeport, Connecticut, yesterday after surrendering to the Federal Bureau of Investigation, prosecutors said. He was released on $300,000 bail, they said.

The Stamford, Connecticut-based brokerage has been struggling to survive and hold on to its staff after Miller’s trade, made about the time of the Cupertino, California-based technology company’s October earnings release.

Kenneth “Casey” Murphy, Miller’s lawyer at Simon & Partners LLP, declined to comment in an e-mail.

The case is U.S. v. Miller, 3:12-mj-288, U.S. District Court, District of Connecticut (Bridgeport).

Ex-Federal Reserve Programmer Gets Home Confinement in Theft

A computer programmer who worked for a contractor at the Federal Reserve Bank of New York was sentenced to six months of home confinement for stealing U.S. Treasury Department software used to track federal collections and payments.

Bo Zhang, a 33-year-old Chinese citizen, was sentenced yesterday in federal court in Manhattan. Zhang pleaded guilty in May to one count of theft of government property and one count of immigration fraud for lying to immigration authorities in support of other people’s visas.

The software, which cost millions of dollars to develop, wasn’t given to anyone else and is still used by the government, U.S. District Judge Paul Gardephe said in court yesterday.

Zhang was sentenced three years of supervised release along with home confinement. Defense lawyer Jeffrey Lichtman said during the hearing that Zhang, who was in the U.S. on a work visa, probably will be deported.

The case is U.S. v. Zhang, 1:12-cr-00390, U.S. District Court, Southern District of New York (Manhattan).