Manhattan U.S. Attorney Announces $72.6 Million Settlement Of Fraud Lawsuit Against Wells Fargo Bank For Overcharging Foreign Exchange Customers Over Seven Years

 

Wells Fargo Admits to Overcharging and Providing False Information to Customers, Pays Restitution and Civil Penalties, and Makes Asset Forfeiture Payment

 Audrey Strauss, the United States Attorney for the Southern District of New York, and  Michael J. Driscoll, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that the United States has simultaneously filed and settled a civil fraud lawsuit against Wells Fargo Bank, N.A. (“Wells Fargo” or the “Bank”) alleging that it violated the Financial Institutions Reform Recovery and Enforcement Act (“FIRREA”) by fraudulently overcharging hundreds of commercial customers, many of them small and medium-sized businesses and federally-insured financial institutions, who used the Bank’s foreign exchange (“FX”) service.  Specifically, the United States alleged that, from 2010 through 2017, Wells Fargo FX sales specialists defrauded 771 customers by systematically charging them higher markups on FX transactions than they represented the Bank would charge, and concealing these overcharges through various misrepresentations and deceptive practices.

As part of the settlement, approved today by U.S. District Judge John G. Koeltl, Wells Fargo will pay a total of approximately $72.6 million, with approximately $35.3 million having been paid directly to the 771 customers collectively as restitution and approximately $37.3 million to be paid to the United States as civil penalties under FIRREA and as asset forfeiture.  Wells Fargo also made extensive admissions of certain conduct alleged in the Government’s complaint, including that many FX sales specialists overcharged hundreds of commercial customers by applying larger sales margins or spreads than they represented they would, and that, in certain instances, when customers contacted the Bank to inquire about higher-than-agreed-upon pricing, FX sales specialists would give customers false explanations for the inflated prices.

U.S. Attorney Audrey Strauss said:  “We all put trust in our banking institutions to deal with us honestly, fairly, and transparently when we are their customers.  For the better part of a decade, Wells Fargo abused this trust, using tricks, false information, and other deceptive practices to fraudulently overcharge customers who used the Bank’s foreign exchange service.  This settlement, which requires Wells Fargo to make its customers whole for their losses and pay a substantial penalty, sends a strong message to the banking industry that financial institutions who take advantage of their customers will be held to account.”

As alleged in the Government’s complaint:

During 2010 through 2017 (the “Covered Period”), Wells Fargo offered FX services to commercial customers located throughout the United States, such as converting the customers’ US dollars into foreign currency for outgoing wire transfers and converting incoming wire transfers of foreign currency into U.S. dollars.  Wells Fargo profited from these transactions by marking up the prices on currency it was selling to and marking down the prices on currency it was buying from its customers.  Wells Fargo employees referred internally to this currency mark-up as a “spread” or “sales margin.”  Wells Fargo FX sales specialists frequently entered into agreements with the Bank’s customers pursuant to which they represented that the Bank would charge specific spreads or sales margins on their FX transactions.  These agreements, referred to internally as “fixed-pricing agreements,” were both written and oral in nature. 

During the Covered Period, Wells Fargo defrauded 771 of its commercial customers with fixed-pricing agreements, many of them small or medium-sized companies and federally-insured financial institutions, by falsely representing to the customers that the Bank would charge specific fixed FX spreads on FX transactions, when, in fact, Wells Fargo was surreptitiously and systematically charging significantly higher spreads and pocketing tens of millions of dollars in ill-gotten FX revenue.  By financially incentivizing its FX sales specialists to overcharge FX customers while failing to take steps to ensure that FX sales specialists honored pricing representations, Wells Fargo created an atmosphere in which employees openly joked about and celebrated taking advantage of the Bank’s customers. 

Wells Fargo FX sales specialists used a variety of misrepresentations and deceptive practices to defraud customers.  For example, instead of applying agreed-upon fixed spreads to customers’ outgoing wires, FX sales specialists would charge inflated spreads that were as large as the FX sales specialists thought they could get away with.  Furthermore, rather than charging the agreed-upon fixed spread to the FX market rate at the time the outgoing wire was converted, FX sales specialists would select the best rate for the Bank and worst rate for the customer from the FX price fluctuations from the beginning of the trading day until the time of the transaction.  This practice was referred to internally as “Range of Day” Pricing.

In addition, FX sales specialists sometimes would give customers fictitious underlying FX market rates and spread calculations to create the false impression that Wells Fargo was complying with pricing representations when that was not the case. Other times, FX sales specialists would make intentional “errors” to the exchange rate given to a customer to make the Bank’s spread much larger.  If caught, the FX sales specialist would falsely claim that digits in the price had been mistakenly transposed.  This practice was known as the “Big Figure Trick.”

FX sales specialists also at times would charge a customer different spreads depending on which customer representative initiated the transaction.  Because Wells Fargo’s online FX service tracked user identities, FX sales specialists would impose larger spreads on transactions initiated by those representatives thought to be less sophisticated or experienced in FX trading.  This practice was known internally as “User-Based Pricing.”

FX sales specialists frequently would apply an even more egregious form of Range of Day pricing to customers’ incoming wire transfers, called “BSwift” wires.  Because Wells Fargo generally did not notify customers when they received incoming wires of foreign currency or when those wires were converted, FX sales specialist could wait until the end of the day and select the best rate for the Bank and worst rate for the customer from price fluctuations throughout the entire trading day.  One FX specialist called this practice the “BSwift Pinata.”

As part of the settlement, Wells Fargo admitted and accepted responsibility for the following conduct:

• • During the Covered Period, many FX sales specialists overcharged hundreds of commercial customers by applying larger sales margins or spreads to customer FX transactions than they represented they would.
  • Wells Fargo received millions of dollars from customers to which the Bank was not entitled.
  • FX sales specialists internally discussed and even celebrated transactions resulting in larger FX spreads than agreed to with customers or transactions generating large FX revenue.  For example, FX sales specialists on Wells Fargo’s San Francisco FX desk would celebrate transactions with large spreads or sales margins by ringing a bell located on the trading floor.  Other FX sales specialists would use expressions such as, “back the truck up,” and “when in doubt, spread them out,” to jokingly describe how Wells Fargo and its FX sales specialists were making money on transactions by charging large FX spreads, including larger FX spreads than agreed to with customers.
  • Wells Fargo’s own internal CMR database indicated that FX sales specialists were charging customers FX spreads that were higher than those the Bank had represented.  Certain CMR notes reflected that while a customer thought it would receive the rate that the Bank had represented to the customer, the Bank in fact charged the customer undisclosed higher spreads.  For example, an FX sales specialist stated in one CMR note concerning Customer A that there was an “agreement w/the customer” to charge “25 pips [points in percentage]on spot trades” but that the Bank would “take 30-35 . . . if possible.”   

False Information

• • In certain instances, when customers contacted the Bank to inquire about higher-than-agreed-upon pricing, FX sales specialists would give false explanations for the prices such as “time fluctuations” or other supposed events in the market.
  • In a few cases, FX sales specialists provided customers false transaction data.  In one instance, an FX sales specialist represented to Customer E that it would charge a spread of 5 basis points on certain BSwift wire transactions.  Contrary to this agreement, the Bank actually charged higher spreads on a series of FX transactions.  Then, in email correspondence with representatives of Customer E, the FX sales specialist provided inaccurate market rate information to the customer to make the FX spread falsely appear consistent with the agreement terms.

The Big Figure Trick

• • For some customers, FX sales specialists also used what they internally called the “big figure trick” or the “transposition error game” to increase the FX sales margin by switching digits in the price of the transactions in a way that would cost customers more money.  For example, if the correct hypothetical price to purchase a Euro was 1.0123 dollars, an FX sales specialist would use the big figure trick to switch the price to 1.0213 dollars, thus taking more spread (in this example, an additional 89 basis points) from the customer.
  • If caught by the customer, the FX sales specialist would claim that it was simply a mistake of adjusting the wrong digit in the price.  One FX sales specialist explained, “You can play the transposition error game if you get called out.”  Another FX sales specialist noted to a colleague about a previous transaction that a customer “didn’t flinch at the big fig the other day.  Want to take a bit more?”

User-Based Pricing

• • At times, Wells Fargo’s FX sales specialists charged the same customers different spreads depending on which representative of the customer happened to be involved in executing the trade.  Specifically, Wells Fargo’s FX sales specialists would charge larger spreads on transactions requested by certain customer representatives thought to be less sophisticated or experienced in FX trading.

BSwift Piñata

• • As noted above, because Wells Fargo generally did not provide immediate notice to customers when they received incoming wires, known as BSwifts, Wells Fargo’s FX sales specialists took advantage of this time delay to charge higher spreads than the Bank had represented it would. 
  • An FX sales specialist in a written instant message to another sales specialist referred to the Bank’s pricing of BSwift wire transfers as the “BSWIFT pinata.” An additional FX sales specialist noted in a recorded call that she preferred to book her own BSwifts to stretch the spread and could take more spread because she was doing the pricing herself.  She observed that she could “dance around it” if the customer called with questions.  
  • Another FX sales specialist observed in an internal email communication that customers would not notice higher spreads on BSwift wires.  He wrote, after noting that he “bumped spreads up a pinch,” that “these clients who are in the mode of just processing wires will most likely not notice this slight change in pricing” and that it “could have a very quick positive impact on revenue without a lot of risk.”

Financial Incentives and Lack of Meaningful or Effective Oversight

• • Wells Fargo incentivized its FX sales specialists to generate FX sales revenue by tying their bonuses exclusively to the amount of sales revenue they generated for the Bank from FX transactions.  Specifically, before 2017, Wells Fargo paid bonuses to FX sales specialists based upon the percentage of the FX sales revenue that each FX sales specialist and FX desk generated.  Each year during the Covered Period, Wells Fargo paid hundreds of thousands of dollars in bonuses to various FX sales specialists based on FX revenue.  Some FX sales specialists received bonus compensation exceeding $1 million in a single year.
  • Prior to 2017, Wells Fargo failed to put meaningful or effective safeguards in place to ensure that FX sales specialists priced customer FX transactions in accordance with the terms represented in fixed-pricing agreements.  For example, during the Covered Period, Wells Fargo:  (i) had no meaningful or effective policies or procedures governing how fixed-pricing agreements should be negotiated, memorialized, recorded, or implemented; (ii) provided no training to FX sales specialists concerning fixed-pricing agreements; (iii) had no meaningful or effective process to systematically track the existence or terms of fixed-pricing agreements; (iv) had no systemic process in place to monitor whether FX sales specialists were pricing FX transactions in a manner that was consistent with fixed-pricing agreements; (v) did not implement any electronic safeguards that would have prevented FX sales specialists from pricing transactions in a manner that deviated from fixed-pricing agreements; and (vi) did not conduct any audits or reviews of FX transactions to determine whether FX pricing matched fixed-pricing agreements until 2017.                                                                                                        

In the settlement, Wells Fargo acknowledged that it took adverse employment actions against more than 20 Wells Fargo employees who were involved in the FX business, including various disciplinary actions and separation of employment, and affirmed that it has taken various steps in an effort to comply with industry FX best practices.This matter was initially brought to the Government’s attention by a whistleblower who filed a confidential declaration with the U.S. Department of Justice pursuant to the Financial Institutions Anti-Fraud Enforcement Act.

Ms. Strauss praised the investigative work of the FBI.

Amid Continued Crisis at Rikers Island, Governor Hochul Signs Executive Order to Expand Remote Court Hearings

 

Helps Ease Capacity Constraints in Court Houses, Allow Corrections Staff to be Reallocated to Housing Supervision and Safety, and Expedite Hearings to Reduce Number of Detainees on Rikers

Governor's Office Commits Additional Resources to Increase Video Capacity as Necessary and Works with Office of Court Administration to Ensure Swift Review of Cases

Order Comes 10 Days After Governor Hochul Signed Less is More Act and Announced Actions to Improve Justice and Safety in City Jails—125 Individuals Transferred from Rikers to State Facilities and 185 Individuals Released from Rikers to Date

Read Executive Order Here

 Amid the continued crisis at Rikers Island, Governor Kathy Hochul today signed an executive order to expand remote court hearings. The order temporarily modifies Article 182 of the Criminal Procedure Law to expand discretion to conduct court appearances virtually. The expanded use of virtual court appearances will expedite proceedings and allow corrections staff to be reallocated from transportation of detainees to housing supervision and safety at Rikers Island.

"When I signed the Less is More Act into law 10 days ago, it was the beginning, not the end, of my Administration's work to help find solutions to the crisis on Rikers Island," Governor Hochul said. "Improving safety and justice at Rikers is about protecting human rights and human dignity. No incarcerated person, no corrections officer, and no family member should have to endure the reality of Rikers as it exists today, and we must do everything in our power to prevent New Yorkers from languishing in Rikers awaiting their day in court. While more work needs to be done collaboratively with all levels of government, this executive order is an important step to alleviate capacity concerns and help protect New Yorkers."

The Governor's Office is working with the Office of Court Administration to explore other methods to expedite hearings, and as part of this work OCA has committed to ensuring the swift review of cases for pre-trial release, clearing warrants and holds, writs, and hearing resentencing motions for individuals detained. The Governor's Office has also committed to providing additional resources to increase video capacity as necessary.

On September 17, Governor Hochul announced major actions to improve justice and safety in city jails, including signing the Less is More Act and announcing an agreement with the Department of Corrections and the City to allow for incarcerated individuals to be transferred from Rikers Island to State custody. To date, 125 individuals have been transferred from Rikers to a State facility under the agreement, and 185 individuals have been released from Rikers in the spirit of Less is More.

MAYOR DE BLASIO ANNOUNCES THAT GOVERNORS ISLAND WILL BE OPEN TO THE PUBLIC YEAR-ROUND BEGINNING THIS FALL

 

NYC Ferry to serve Governors Island daily and year-round

  Mayor Bill de Blasio and the Trust for Governors Island announced today that Governors Island will be open to the public year-round, beginning this fall. Starting November 1, New Yorkers will be able to access Governors Island’s open space, cultural programming, and recreational resources beyond its traditional May through October season for the first time. 

Mayor de Blasio, the Trust, and the New York City Economic Development Corporation (NYCEDC) also announced today that NYC Ferry will serve Governors Island daily, year-round beginning with the launch of the Coney Island Route this fall. NYC Ferry will serve Governors Island’s Yankee Pier via the South Brooklyn Route, expanding direct access from Red Hook, Atlantic Ave/Brooklyn Bridge Park-Pier 6, DUMBO/Fulton Ferry, and Corlears Hook in the Lower East Side for Governors Island visitors and growing community of tenants.

 

“The COVID-19 pandemic has created an unprecedented opportunity to reimagine public space in this city – and now, we’re proud to keep the crown jewel of our harbor open to New Yorkers all year round,” said Mayor Bill de Blasio. “From expanded ferry service, to more amenities than ever, to year-round visitors from all over the city, there’s no better time to experience and invest in Governors Island.”

 

"Governors Island has been an oasis for New Yorkers for nearly two decades, and I'm so pleased that it will now become a destination in all seasons," said Vicki Been, Deputy Mayor for Housing and Economic Development. "The Governors Island team has been working hard to expand the type and number of partner organizations on the Island -- not to mention the Climate Solutions Center we have in the works -- and this year-round public ferry access is a critical part of realizing our full vision for this green, cultural, and educational hub."

 

“Over the past two decades, a visionary idea to put Governors Island on the map as a public destination was outlined, and today we are proud to announce that Governors Island will now be open for New Yorkers to enjoy year-round,” said Clare Newman, President and CEO of the Trust for Governors Island. “This announcement is an exciting moment in realizing our vision to increase equitable access to this remarkable resource and is an important step in realizing Governors Island’s full potential. I thank Mayor Bill de Blasio and NYCEDC for their partnership in this extraordinary achievement, as well as Council Members Margaret Chin, Carlina Rivera, State Senator Brian Kavanagh and all of our elected leaders for their advocacy and support.”

 

“We are pleased to support Governors Island as it opens year-round to the public with our expanded NYC Ferry service later this year. Waterway transportation is key to our recovery and opening Governors Island 12 months of the year is another illustration of New York City’s wonderful future,” said Rachel Loeb, President and CEO of the New York City Economic Development Corporation. “Congratulations to the Trust for Governors Island and everyone who has made this vision become a reality.”

 

Today’s announcement marks a significant milestone in the transformation of Governors Island into a remarkable resource for New Yorkers. Following its transfer from federal to local control in 2003, the City of New York and the Trust for Governors Island have worked to invest in expanding public access to Governors Island, which has traditionally welcomed visitors in the summer months but has long been envisioned as a destination accessible year-round.

JUMAANE WILLIAMS ANNOUNCES COMMITTEE TO EXPLORE 2022 GUBERNATORIAL RUN

 

 New York City Public Advocate Jumaane D. Williams announced today that he has launched an exploratory committee to run for Governor of New York in 2022, which comes after filing paperwork today with the Board of Elections to create a statewide campaign committee account. 

As part of the exploratory committee, the Public Advocate is convening an advisory council of elected officials, advocates and community leaders from across the state to advise on policy, politics, and strategy of a campaign, and will tour the city and state throughout the month of October to hear directly from New Yorkers about the issues most important in their communities. 

“I’ve spent my entire career, most of my life, pushing and advocating and fighting on behalf of the people and against injustice and inertia. What’s wrong in New York, and what’s stopping the people in power from changing it. I’m proud to have had many successes in that fight,” said Jumaane D. Williams in announcing the exploratory committee. “Now, our state is attempting to recover from a pandemic and move forward from an era of toxicity, of scandal, of ego, and personality standing in the way of progress. I’ve always been dedicated to public service, and over the coming weeks, I’m considering how best I can serve in that work to renew New York.”

Prior to being elected Public Advocate, the second-highest ranking elected office in New York City, in 2019, Jumaane served over nine years in the New York City Council. He mounted a progressive insurgent primary campaign for Lieutenant Governor in 2018 while a City Council Member, winning New York City and garnering over 46% of the vote statewide. He has also served as Director of a statewide housing justice organization and continues to work to unite communities across the state to solve shared issues and pursue shared goals. 

Since becoming Public Advocate in 2019, Jumaane has passed more legislation than any of his predecessors throughout their tenure, ranging from protecting affordable housing and promoting racial equity in development to codifying the right to record police activity. In his time in public office, he has passed 68 bills into law, including legislation to curb the abuses of stop and frisk, to ban the box on job applications, to promote sustainable infrastructure, and to protect against discrimination on the basis of reproductive health decisions.

“It’s going to take bold, principled, consistent progressive leadership to get us through these next months and years,” said Jumaane. “The culture that created, enabled, and empowered Andrew Cuomo and his administration, and others like him is still there. Andrew Cuomo’s Albany is still there. We need to reject the systems and people that created this leadership crisis in order to move New York forward and better serve New Yorkers.”

Jumaane D. Williams is a first generation American of Caribbean heritage who in 2010 became the first elected official in the nation with Tourette Syndrome. His areas of focus throughout his time in public service have included housing affordability and housing justice, public safety, gun violence prevention, and racial and economic equity, among others.

The advisory committee will be made up of voices from across the New York City and state, and include among them Brad Lander, NYC Council Member and Democratic nominee for New York City Comptroller, Antonio Reynoso, NYC Council Member and Democratic nominee for Brooklyn Borough President, and Tiffany Garriga, Second Ward Alderwoman and Majority Leader of the Hudson Common Council.

“From Brooklyn to Buffalo, there is a real hunger for a more just and equal New York. Jumaane Williams brings both a powerful voice for justice and a strong track record to the task of delivering on that vision and I’m excited to be joining his exploratory committee as an adviser. Jumaane’s courage and compassion guide his work on behalf of New Yorkers, and that’s certainly something we need much more of.” – NYC Council Member Brad Lander.

“In the Hudson community and statewide, there’s been a clear receptiveness to and demand for progressive policies - both in the wake of the pandemic and prior to it. This movement has been building for years, and Jumaane is the perfect person to unite that energy from all across the state and bring it to the Governor’s mansion. He’s been out there, and each time he comes to Hudson, it’s clear to my constituents that he understands the challenges we’re facing and the need to unite to confront them. Throughout his career as a community organizer and activist elected official, he's demonstrated clear leadership in New York City and across the state. I’m honored to help work with him in the coming weeks to determine the best ways to bring the state together around common needs and goals.” – Majority Leader of the Hudson Common Council, Alderwoman Tiffany Garriga.

“This year in races from mine in Brooklyn, to India Walton’s in Buffalo, to Council seats across the five boroughs, true, courageous progressives won. We need that movement to carry into the Governor’s mansion, so that when difficult challenges arise, we can trust that the Governor will make the right choice, not the politically expedient one. Over the years I’ve worked with him, Jumaane has been principled, progressive, consistent and effective. He’s managed to have successes in spite of systems standing in the way, and he’s used his power and voice to uproot those systems. As he explores a run for Governor, I’m excited to help support him in extending that mission throughout New York State.” – NYC Council Member Antonio Reynoso.

Governor Hochul Updates New Yorkers on State's Progress Combating COVID-19 - SEPTEMBER 27, 2021

 

New York State School COVID-19 Report Card Updated and Available to the Public Here

45,576 Vaccine Doses Administered Over Last 24 Hours  

24 COVID-19 Deaths Statewide Yesterday 

 Governor Kathy Hochul today updated New Yorkers on the state's progress combating COVID-19.  

In addition, the New York State School COVID-19 Report Card, an online dashboard which tracks near real-time COVID-19 infections and testing operations reported by New York schools and school districts, is now updated and available to the public as another source of information for families and communities. As of Monday, September 13th, all schools are required to submit a daily report to the Department on each operational day of the school year. This includes information on cases reported to the school and broken out by students, staff and teachers. Report card data includes: positive cases by date; number of students and staff on site; percentage of on-site positive cases; number of tests administered by school and test type; and date of last submission and update. The website has been updated to simplify reporting for schools, and all information reported since September 13th is now available online. Local school districts should also have this information readily available on their websites. The dashboard also includes lab-reported cases of COVID-19 for students 5-17 years old, as all COVID-19 test results for New York State residents 5-17 years old are reported by laboratories to the Department of Health. This reflects the number of COVID-19 tests and test results for students living in a school district. There may be discrepancies in the two data sets due to reporting lag times and other variables.

"The school COVID-19 report card will help the state as we keep track of infections and trends among students, teachers, staff to provide additional information," Governor Hochul said. "Keeping our children safe and healthy is our number one priority - we can do that by wearing a mask, washing our hands and getting vaccinated if we are eligible to be. Our vaccines have proven effective and safe, they are free and readily available. Getting yours is the best way to protect your community against the virus."

 

Today's data is summarized briefly below:

 

•          Test Results Reported - 128,700
•          Total Positive - 4,004
•          Percent Positive - 3.11%
•          7-Day Average Percent Positive - 2.72%
•          Patient Hospitalization - 2,341 (+42)
•          Patients Newly Admitted - 236
•          Patients in ICU - 564 (+16)
•          Patients in ICU with Intubation - 316 (-1)
•          Total Discharges - 199,996 (+190)
•          New deaths reported by healthcare facilities through HERDS - 24
•          Total deaths reported by healthcare facilities through HERDS - 44,431

The Health Electronic Response Data System is a NYS DOH data source that collects confirmed daily death data as reported by hospitals, nursing homes and adult care facilities only.

•          Total deaths reported to and compiled by the CDC - 56,611

This daily COVID-19 provisional death certificate data reported by NYS DOH and NYC to the CDC includes those who died in any location, including hospitals, nursing homes, adult care facilities, at home, in hospice and other settings.

•          Total vaccine doses administered - 25,067,235
•          Total vaccine doses administered over past 24 hours - 45,576
•          Total vaccine doses administered over past 7 days - 361,108
•          Percent of New Yorkers ages 18 and older with at least one vaccine dose - 81.2%
•          Percent of New Yorkers ages 18 and older with completed vaccine series - 73.2%
•          Percent of New Yorkers ages 18 and older with at least one vaccine dose (CDC) - 83.7%
•          Percent of New Yorkers ages 18 and older with completed vaccine series (CDC) - 75.1%
•          Percent of all New Yorkers with at least one vaccine dose - 68.7%
•          Percent of all New Yorkers with completed vaccine series - 61.8%
•          Percent of all New Yorkers with at least one vaccine dose (CDC) - 70.9%
•          Percent of all New Yorkers with completed vaccine series (CDC) - 63.4%

United States Citizen Pleads Guilty To Conspiring To Assist North Korea In Evading Sanctions

 

 Audrey Strauss, the United States Attorney for the Southern District of New York, announced today that VIRGIL GRIFFITH, a U.S. citizen, pled guilty to conspiring to violate the International Emergency Economic Powers Act (“IEEPA”) by providing services to the Democratic People’s Republic of Korea (“DPRK” or “North Korea”) including technical advice on using cryptocurrency and blockchain technology to evade sanctions. GRIFFITH pled guilty today before U.S. District Judge P. Kevin Castel.

U.S. Attorney Audrey Strauss stated: “As he admitted in court today, Virgil Griffith agreed to help one of our nation’s most dangerous foreign adversaries, North Korea.  Griffith worked with others to provide cryptocurrency services to North Korea and assist North Korea in evading sanctions, and traveled to North Korea to do so.  In the process, Griffith jeopardized the national security of the United States by undermining the sanctions that both Congress and the President have enacted to place maximum pressure on the threat posed by North Korea’s treacherous regime.”

According to the Indictment and other documents in the public record, as well as statements made in public court proceedings:

Pursuant to the IEEPA and Executive Order 13466, United States Persons are prohibited from exporting any goods, services, or technology to the DPRK without a license from the Department of the Treasury, Office of Foreign Assets Control (“OFAC”).

GRIFFITH, a cryptocurrency expert, began formulating plans as early as 2018 to provide services to individuals in the DPRK by developing and funding cryptocurrency infrastructure there, including to mine cryptocurrency.  GRIFFITH knew that the DPRK could use these services to evade and avoid U.S. sanctions, and to fund its nuclear weapons program and other illicit activities.

In April 2019, GRIFFITH traveled to the DPRK to attend and present at the “Pyongyang Blockchain and Cryptocurrency Conference” (the “DPRK Cryptocurrency Conference”).  Despite the fact that the U.S. Department of State had denied GRIFFITH permission to travel to the DPRK, GRIFFITH delivered presentations at the DPRK Cryptocurrency Conference, tailored to the DPRK audience, knowing that doing so violated sanctions against the DPRK.

At the DPRK Cryptocurrency Conference, GRIFFITH and his co-conspirators provided instruction on how the DPRK could use blockchain and cryptocurrency technology to launder money and evade sanctions.  GRIFFITH’s presentations at the DPRK Cryptocurrency Conference had been approved by DPRK officials and focused on, among other things, how blockchain technology such as “smart contracts” could be used to benefit the DPRK, including in nuclear weapons negotiations with the United States.  GRIFFITH and his co-conspirators also answered specific questions about blockchain and cryptocurrency technologies for the DPRK audience, including individuals whom GRIFFITH understood worked for the North Korean government.

After the DPRK Cryptocurrency Conference, GRIFFITH pursued plans to facilitate the exchange of cryptocurrency between the DPRK and South Korea, despite knowing that assisting with such an exchange would violate sanctions against the DPRK.  GRIFFITH also attempted to recruit other U.S. citizens to travel to North Korea and provide similar services to DPRK persons, and attempted to broker introductions for the DPRK to other cryptocurrency and blockchain service providers.  At no time did GRIFFITH obtain permission from OFAC to provide goods, services, or technology to the DPRK.

VIRGIL GRIFFITH, 38, a resident of Singapore and citizen of the United States, pled guilty to one count of conspiring to violate IEEPA, which carries a maximum term of 20 years in prison.  GRIFFITH is scheduled to be sentenced by Judge Castel on January 18, 2022, at 11:00 a.m.

The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.

Ms. Strauss praised the outstanding investigative work of the Federal Bureau of Investigation and its New York Field Office, Counterintelligence Division, and thanked the Department of Justice’s National Security Division, Counterintelligence and Export Control Section, the Department of Justice’s Office of International Affairs, and the Singapore Police Force for their assistance.

Attorney General James Secures $6 Million From National Grid to Assist Low-Income Long Islanders

 

National Grid Knowingly Misreported Number of Accounts Using Electricity Without Being Billed to Long Island Power Authority

Agreement Will Fund Low-Income Heating Assistance Program

 New York Attorney General Letitia James today announced that her office has secured $6 million from National Grid to resolve allegations that it knowingly provided false reports to the Long Island Power Authority (LIPA) on the amount of electricity that was being delivered, but not billed for at homes and businesses across Long Island. LIPA powers homes and businesses across Nassau and Suffolk counties and the Rockaways, but while LIPA provides the actual electricity to customers, the company contracted with National Grid to manage its operations, which included reading meters, collecting payments, providing customer service, and more. Over the course of more than four years, National Grid underreported to LIPA power output from homes where customers moved out and new customers moved in, costing the state public authority millions. Today’s agreement collects $6 million from National Grid to subsidize heat pump modernization and replacement for low- and moderate-income Long Islanders.  

“When powerful companies skirt the law at the expense of the state, we will not hesitate to step in and hold them accountable,” said Attorney General James. “For more than four years, National Grid undercounted and falsely reported electrical usage of more than 1,000 homes and businesses, costing the Long Island Power Authority and the state millions. We’re holding National Grid responsible for their shocking behavior and delivering $6 million to help low- and moderate- income Long Islanders modernize and replace their heat pumps. These upgrades will not only help lower the energy costs for 350 families across Nassau and Suffolk counties — especially important as so many continue to suffer the detrimental financial impacts of Hurricane Ida — but will provide Long Islands homes with the necessary improvements to utilize cleaner energy options.”

“The settlement funds recovered for LIPA customers by the Office of the New York Attorney General will be used to establish a new program to assist low-income Long Island and Rockaways residents to replace fossil-fuel powered home heating systems with clean, lower-cost electric heat pumps and home efficiency upgrades,” said LIPA Chief Executive Officer Thomas Falcone. “LIPA appreciates the opportunity to work with the Office of the Attorney General to ensure that the benefits of this settlement are directed to helping communities in need make the transition to cleaner, more affordable energy.”

During the period from October 2007 to December 31, 2013, National Grid managed and operated LIPA’s electricity transmission and distribution system, and was contractually obligated to bill and collect for all electric service provided on behalf of LIPA. In order to ensure that National Grid was meeting its obligations to timely bill for electric service, LIPA required National Grid to provide various regular reports, including on the amount of advanced consumption. “Advanced consumption” occurs when a meter reflects that electricity is being used but there is no party of record to bill. For example, advanced consumption can occur when a residential tenant moves out of an apartment building, the meter is not turned off, and a new tenant moves into the apartment and begins using the electricity without establishing a new account.

Attorney General James’ investigation found that, between April 2008 and August 2012, National Grid knowingly provided LIPA with monthly reports and other statements that falsely under-reported the number of advanced consumption accounts and the number of advanced consumption accounts that remained unresolved. Specifically, National Grid reported to LIPA that, at the end of July 2009, there were 436 advanced consumption accounts that had not yet been resolved. But a contemporaneous snapshot of National Grid’s internal advance consumption database revealed that there were at least 1,347 unresolved advance consumption accounts. And in their internal communications, National Grid employees admitted that the numbers reported to LIPA were false.

Additionally, on June 7, 2012 a National Grid manager who was responsible for generating the reports to LIPA on advance consumption admitted that although National Grid was “reporting on a monthly basis that we are completing” certain advance consumption accounts, those accounts were “not complete from LIPA’s perspective, because [they are] still advancing.” The National Grid manager repeatedly conceded that National Grid’s reports to LIPA regarding advance consumption were “not true.”

National Grid’s false reporting covered up National Grid’s failure to address many advanced consumption accounts in a timely manner. Further, National Grid’s failure to issue timely bills for these accounts directly caused a monetary loss to LIPA, a state public authority.

The investigation began with a whistleblower lawsuit filed under the qui tam provisions of the New York False Claims Act, which allows people to file civil actions on behalf of the government and share in any recovery. The whistleblower here will receive $1.41 million of the proceeds for bringing National Grid’s misconduct to light. 

The proceeds of this agreement will allow LIPA to completely subsidize the installation of more efficient heat pumps for roughly 350 Long Island families with low or moderate incomes. Heat pumps are typically two to three times more efficient than electric resistance and oil and gas heating systems, and thus they are both cheaper to operate and better for the environment. But the significant up-front installation costs often prevent low- and moderate-income New Yorkers from upgrading their existing heating systems.

The Office of the Attorney General (OAG) extends its appreciation to the whistleblower, without whose information the misconduct might have remained concealed, and to the whistleblower’s attorneys. The OAG also wishes to thank LIPA for their assistance in this matter. 

MAYOR DE BLASIO TOURS RIKERS ISLAND AND SPEAKS TO REPORTERS

 

Mayor Bill de Blasio: I'm going to give you a couple of minutes of updates, followed by a minute from Commissioner Schiraldi, a minute from Deputy Commissioner Richards, a minute from Chief Stukes, and a minute from Dr. Katz. So, you're going to get the whole lineup of people who are addressing these issues.  

 

Here's the bottom line, we’ve got a lot changes we have to make. And what I came here to see was the work that is being done to immediately address the problems. Hold on, guys – what's going on over there? Are you good over there or not? No, back behind you, I keep hearing a lot of talking. Are you good back there? Everyone good? Okay.  

 

The mission for me today is to come and see the specific changes that are being made to address the immediate problem. Let me give you an idea of what those are. First of all, we’ve got to reduce the inmate population. So, I was looking at the places where that reduction is happening, what it is causing in terms of improving the situation for officers and inmates alike. We have a lot of additional actions we're going to take in the next few days. As I said, our goal is to get overall population down under 5,000 for the jail system very, very quickly. Second – guys, you good over there or not? Hello, over there – are you good or not? Okay, guys, please, I really want to go through this fast so everyone could hear us. So, everyone, focus for a second.  

 

Second, we needed to make sure that the health care teams are getting the support they need. Their role is crucial. They need to be supported. They need to be safe. We talked about the changes they need in terms of staffing, in terms of the physical reality, additional help we can bring in, that was a crucial component of this. Third, the intake process – the intake process has to be sped up. We looked at the facilities, looked at the changes that have been made, the changes that have to be made. The bottom line is all these things have to happen immediately. Fewer inmates, a faster intake, a better, more secure health care situation, and getting back to work the folks who have not been working. And I think that message has been received loud and clear. We want to support the officers who are doing the work. We care about them. We appreciate them. We're going to support them, incentivize them, give them real support. But the folks who are not doing their job are going to suffer the consequences, because they're letting down their fellow officers and everyone in this city. So, that's abundantly clear.  

 

The final point, what we have to do – we can't do it today, we can't do it tomorrow, but what we have to do as quickly as possible in this city is get off Rikers Island once and for all. That plan is in place. It is moving rapidly. That is the bigger solution. This is not a place that should continue for the long haul. We need to move these community-based jails. They are – they will be humane. They will be modern. They will be an environment that's right to rehabilitate people. That work can happen quickly enough. But, in the meantime, we're going to keep driving down the population and making the other changes we need.  

Now, in order again – Commissioner Schiraldi, Deputy Commissioner Richards, Chief Stukes, Dr. Katz. 

 

Commissioner Vincent Schiraldi, Department of Correction: Hello, everyone. I'm Vinnie Schiraldi, Commissioner of the New York City Department of Correction. And I want – I think for those of you who know me, I've established a record for being blunt and forthcoming. I want to say that when I got here, I was really upset by the conditions that were in existence in these facilities. I still think we have a way to go. But over the last several weeks, when the Mayor has been putting enormous resources into this and enormous pressure on me and our department to make things better, things have demonstrably improved. I still think we have a lot of work to do and we're going to do that work, but triples are down, sick leave is down, AWOLs are down, the population is down. And now, every – every living unit has programming available to them in units. We can't get them all out to rec, because we still don't have enough staff to take them outside to recreation, but they have in-unit recreation available to them. And these are exactly the kind of conversations I have with the Mayor. He said, what's it going to take, Vinnie? What do we got to do? And we said, everybody needs to have the ability to have rec. And everybody's got the ability to have rec now. And we said, the population has got to decline. They called the Governor, she signed Less Is More, she started taking people out of here, and the population’s declined.  

 

So, if we have fewer people incarcerated here, if we have more staff coming to work, if we have help from places like the New York Police Department, NYPD, then we'll be able to, bit by bit, gradually reduce triples. And then, we'll start to improve even further, because we'll start to be able to create the kind of environment we want for everyone who's here. Our goal is nothing short of, if my son or daughter worked here, what would the environment I would want to be like? And if my son or daughter was incarcerated here, what conditions would I want for them here? We are not there yet, but that's our goal and we'll never stop for anything short of that. Thank you. 

 

First Deputy Commissioner of Programs and Operations Stanley Richards, Department of Correction: Good afternoon, everyone. I’m Stanley Richards, First Deputy Commissioner of Programs and Operations. As Commissioner Schiraldi said, we work every single day to try to improve conditions, make sure people are connected to programming so that people can rebuild their lives so they don't have to come back here. And as a formerly incarcerated man who spent time in HDM, the facility that's right behind this facility, we moved our office out here, because we knew that this work wasn't about being at distance, it was about being up close and personal. And I want to thank the Mayor and the First Deputy Mayor for being bold and leaning in and saying that it's not good enough what we've done. We've done some things, but we need to do better, because at stake are the lives of our officers and lives of those who are incarcerated and their families. And we work every single day to make it better. So, thank you. 

 

Chief of Department Kenneth Stukes, Department of Correction: Good evening, everyone. Chief of Department Kenneth Stukes. I would just like to – first, thanks to Mayor and his office for their support to the agency, for giving us the support that we need to create a safe and secure environment. And a safe and secure environment is just not for our person in custody, but for our staff. And it's important that we acknowledge our staff who, throughout COVID has championed and came to work every day. And some of those staff members who became ill, after getting well, returned back to work. Definitely, we will be – remain a correctional department that is one that is leading the country. 

 

Mayor: Thank you, Chief. Dr. Katz? 

 

President and CEO Mitchell Katz, Health + Hospitals: Hello, everyone. Dr. Mitch Katz, the CEO of Health + Hospitals. We’re responsible for the medical care of all the inmates on Rikers. We have great doctors and nurses. In order for the system to work, though, we have to have a close partnership with Corrections, so that our staff are safe to provide the services in the clinic, safe to go out into the areas where the inmates are and provide them with the care, and that the areas where patients-inmates come in through intake, they are safe from being exposed to infectious diseases. And there was clearly a problem with the previous intake area. It was too small. It did not allow us to move inmates quickly through the process so that we could be sure that people were not exposing each other. Thanks to the Mayor and to the Commissioner, we now have a new intake area, which is much larger, allows excellent flow of patients-inmates, make sure that they're not spreading communicable diseases like COVID. Thank you.  

Mayor: We have, every step along the way, tried to fix the problems here. When I came into office, there were immense problems here. We were able to fix a number of them, but we also have a massive, massive challenge with COVID that honestly setback so much of what we had done. The bottom line is, we're fixing the problems again. But, most importantly, we've done the big things we need to do, which is get off Rikers once and for all.

 

Mayor: I was upset when I took office. I was upset four years ago. I remain upset. This is a place that should have been shut down a long, long time ago.

Mayor: Additional hiring. Okay, the – we're hiring more because now we are calling into question on the officers we have. Folks need to understand that they have to come to work, they have to support each other, or they're not going to be a part of this organization anymore. We're bringing in additional officers to make sure that we will have enough under any situation. In terms of 6A, we're going to literally announce the exact number as soon as we have it. But I'm telling you right now, it's not going to be a large number. It is a different environment now than when we were dealing with COVID in the worst of the COVID crisis in the spring of 2020. So, we're going to balance public safety with what we have to do here. But the bottom line is, more and more officers are coming back to work. That's going to allow us to do a lot more here. We're making investments. This is going to take some real work. I couldn't be blunter about this, but I also see, and I'm going over the numbers with these folks every single day, and I want to give this team credit, this is a very difficult circumstance, but they are making changes rapidly, and that's how we address this situation.  

 

Mayor: Thank you. So, in conclusion – look, we've got a hell of a lot of work to do. I want to be very clear about that. The last few weeks we've been able to change some things that needed changing immediately, but there's a huge amount more work to do. We're going to stay focused on it. I have daily calls with this group. We're going to make every change we need to. Most importantly, get that population down, get people back to work, end the triples – these are all things we intend to do in October, that can make a very big and real impact. Thank you.