There’s been a few smaller stories this first week of November that would be of interest to securities whistleblowers, so we thought that we would briefly touch on them in a mid-week update. Here they are:
VimpelCom Reserves $900 Million for Bribery Fines
Russia’s third largest telecommunications company set aside $900 million from its third quarter earnings to handle potential losses from bribery investigations by the United States and Dutch governments. VimpelCom is subject to the U.S. Foreign Corrupt Practices Act because its has American Depository Receipts listed on the NASDAQ under the stock symbol VIP. The U.S. has been asking European governments to seize assets of the companies it is investigating for bribes paid to Uzbekistan officials to enter the country’s mobile telecommunications market, which is estimated to be worth $1.8 billion a year.
Fenway Partners Fined $10+ Million
The SEC has fined a private equity firm and four executives more than $10 million as part of a settlement into its investigation of the company for payments made to employees without disclosing the conflict of interest to its investors and a client.
The investigation concerned the transfer of consulting services provided to a company owned by the fund to a related party. The investors continued to pay management fees to the firm as the company paid consulting fees to the related party and former firm employees. The firm did not offset the consulting fees paid from its management fees and did not appropriately disclose the fees paid to its related party to the investors. At issue were more than $20 million in payments out of fund assets or portfolio companies.
Fund managers have fiduciary obligations to disclose conflicted arrangements to fund clients and fund investors. The SEC has previously sanctioned Blackstone and KKR for problems with the disclosure of their fees as part of the industrywide investigation into asset management disclosures.
Treasury Debt Auction Probe Continues
Goldman Sachs appeared to disclose the government’s investigation into manipulation of the Treasury Bond Auction as well as the securities class action litigation brought in the judicial system in its latest 10-Q filing. The Justice Department and the CFTC have requested information in their investigation into whether banks have rigged Treasury auctions. New York’s Department of Financial Services has also sent out requests for information to nine large banks operating in New York.
The Wall Street Journal coverage suggests that the government is looking both at manipulation in the offering and auction of the securities as well as transactions in the futures market, known as when-issued trading, that place bets on the interest rate where government debt will be auctioned.
The Treasury market is the latest source of government investigations into manipulation by banks. The government has conducted extensive investigations over the past few years into collusion and manipulation of LIBOR rates and the Forex market. These investigations have resulted in billions of dollars paid by banks in settlements, and the government continues to investigate other areas such as the ISDAFIX benchmark rates.