French Concrete Contractor to Pay $3.9 Million FCA Penalty
On February 17, 2021, the Department of Justice (DOJ) announced that a French company, COLAS Djibouti SARL, agreed to pay $3.9 million to resolve allegations that it violated the False Claims Act by selling substandard concrete used to construct US Navy airfields in the Republic of Djibouti. The settlement resolves allegations that the company, a subsidiary of the French civil engineering company Colas SA, provided contractually non-compliant concrete in conditions that had the potential to significantly impair the long-term durability of the concrete utilized on US military bases.
The DOJ simultaneously announced that the company would enter into a Deferred Prosecution Agreement (DPA), under which it will admit to the facts set forth in a one-count information for conspiracy to commit wire fraud and will pay $12,524,002 in penalties, fines, forfeiture, and restitution. According to DOJ, the civil settlement will credit $1,957,998 of the company’s payment under the DPA and require an additional payment of $1,957,998.
The DOJ press release can be found here.
Former US Marines Subcontractor Sentenced to 18 Months for Destroying Text Messages
On February 17, 2021, DOJ announced that a former subcontractor for the US Marines Corps was sentenced to 18 months in prison for destroying records related to a federal investigation into bribery and procurement fraud at Marine Corps Base Camp Lejeune in North Carolina. The former subcontractor pled guilty to one count of obstruction of justice. According to DOJ, federal investigators interviewed the former subcontractor in connection with an investigation into an alleged bribery conspiracy concerning work his company completed at the military base and about renovations he performed at the residence of a Marine Corps employee who directed the procurement of information technology services and equipment. Following the interview, the subcontractor allegedly alerted the Marine Corps employee via text message about the federal investigation and then deleted the text messages, despite knowing that they constituted evidence related to the investigation.
See DOJ press release can be found here.
SEC Accuses Ratings Agency of Disclosure and Internal Controls Failures
On February 16, 2021, the Securities and Exchange Commission (SEC) announced that it filed a civil action in US District Court for the Southern District of New York alleging that former credit ratings agency Morningstar Credit Ratings LLC violated disclosure and internal controls provisions of the Securities Exchange Act of 1934 in rating commercial mortgage-backed securities (CMBS).
According to the SEC’s complaint, from 2015 to 2016, the credit rating agency permitted analysts to make undisclosed adjustments to key stresses in the model that it used to determine the rating for 30 CMBS transactions, which totaled $30 billion. The SEC’s complaint also alleges that the credit rating agency failed to establish and enforce effective internal controls to govern the adjustments for a total of 31 transactions. The SEC alleges that, in some instances, this eased stresses in the model, thereby benefitting the issuers that paid for the ratings by allowing them to pay investors less interest than they would have without the adjustments. The SEC’s action seeks injunctive relief, disgorgement with prejudgment interest, and civil penalties.
The SEC press release can be found here.