TIME Companies

U.S. Hits Deutsche Bank With $190 Million Tax Fraud Lawsuit

A general view of Deutsche Bank on Sept. 5, 2011 in London.
A general view of Deutsche Bank on Sept. 5, 2011 in London. Dan Kitwood—Getty Images

Justice Department has accused the banking giant of using shell companies to conceal profits and avoid paying taxes

The Justice Department has sued Deutsche Bank for fraud over an alleged scheme to avoid paying federal taxes.

The government is seeking more than $190 million in back taxes plus penalties and interest.

The lawsuit, which was filed on Monday in federal court in New York, alleges that Deutsche Bank DB -1.23% engaged in a series of transactions meant to evade federal income taxes — leaving the U.S. government “with a significant, uncollectable tax bill,” according to the Justice Department.

“Through fraudulent conveyances involving shell companies, Deutsche Bank tried to make its potential tax liabilities disappear,”Manhattan U.S. Attorney Preet Bharara said in a statement. “This was nothing more than a shell game.”

The government went on to describe the alleged fraud, which included the German bank’s creation of three separate “shell companies” as well as a series of subsequent transactions involving those companies that federal authorities claim were designed to avoid federal tax laws.

Deutsche Bank responded to the allegation in a statement to Fortune, saying: “We fully addressed the government’s concerns about this 14-year old transaction in a 2009 agreement with the IRS. In connection with that agreement they abandoned their theory that [Deutsche Bank] was liable for these taxes, and while it is not clear to us why we are being pursued again for the same taxes, we plan to again defend vigorously against these claims.”

This article originally appeared on Fortune.com

TIME Ferguson

Department of Justice to Announce New Anti-Profiling Guidelines

Eric Holder
U.S. Attorney General Eric Holder, center, meets with law enforcement and community leaders for a roundtable discussion at Ebenezer Baptist Church, Monday, Dec. 1, 2014, in Atlanta. David Goldman—AP

Attorney General Eric Holder made the announcement at a church where Martin Luther King preached

—The U.S. Department of Justice will announce stiff new protocols to curtail profiling by federal law enforcement in the coming days, Attorney General Eric Holder announced Monday evening.

Speaking at an interfaith service and community forum at Ebenezer Baptist Church in Atlanta following last week’s grand jury decision in Ferguson, Missouri, Holder previewed the long-awaited announcement, which would be the first change to federal law enforcement guidelines on racial profiling in more than a decade.

“In the coming days, I will announce updated Justice Department guidance regarding profiling by federal law enforcement, which will institute rigorous new standards—and robust safeguards—to help end racial profiling, once and for all,” Holder said at the first of several planned regional community discussions in the aftermath of the Ferguson grand jury decision. “This new guidance will codify our commitment to the very highest standards of fair and effective policing.”

President George W. Bush banned the use of profiling for race in 2003 through the Department of Justice’s Guidance Regarding the Use of Race by Federal Law Enforcement Agencies, but left loopholes for national security investigations and border security. In his 2001 Address to a Joint Session of Congress, Bush said the practice is “wrong and we will end it in America.” Those guidelines, which have been under review by the Justice Department for years, only ended profiling for race, not religion, sexual orientation, national origin, or other factors.

Holder has spoken previously about having been the subject of profiling, even when he was a federal prosecutor in Washington. Speaking to students at a St. Louis Community College in August after the death of Michael Brown, Holder told of being stopped by a police officer as he ran to catch a movie in Georgetown, a predominately white neighborhood of Washington, as well as unwarranted traffic stops and car searches on the New Jersey Turnpike.

“I remember how humiliating that was and how angry I was and the impact it had on me,” Holder said at the time.

Holder’s comments Monday evening come as he is has become the face of the Obama administration’s response to the Brown shooting and subsequent community unrest. Obama tapped Holder in August to take steps to bridge the trust gap that has emerged between law enforcement and the communities they serve, particularly in minority neighborhoods.

“We are dealing with concerns that are truly national in scope and that threaten the entire nation,” Holder told the thousands of attendees. “Broadly speaking, without mutual understanding between citizens–whose rights must be respected–and law enforcement officers–who make tremendous and often-unheralded personal sacrifices every day to preserve public safety–without that trust, without that interaction, there can be no meaningful progress. Our police officers cannot be seen as an occupying force disconnected from the communities they serve. Bonds that have been broken must be restored. Bonds that never existed must now be created.”

Earlier Monday, President Barack Obama announced executive orders to create a Task Force on 21st Century Policing and to order a review of the federal government’s support of state and local law enforcement purchases of military-style equipment. The White House also announced a request to Congress for $75 million over three years to help put 50,000 body-cameras on state and local police officers.

Before a meeting with Georgia community, faith, and law enforcement leaders, Holder said the situation in Ferguson, while tragic, “presents this nation a really unique opportunity” to address “issues that have for too long been ignored.”

Holder appeared to signal that the new guidelines would not eradicate profiling in every instance, but would further curtail its use, though how was not clear Monday. Department of Justice officials declined to further preview the official announcement.

Minority and civil rights groups have long called for the Obama administration to stiffen federal profiling rules, particularly in response to the use of profiling against the Muslim community. They have also called on the department to impose the guidelines on state and local jurisdictions that receive federal funding or work in concert with federal officers.

Speaking at the packed church where Martin Luther King, Jr. preached, Holder assured the audience that the Department of Justice’s investigation into Brown’s shooting death by Ferguson police officer Darren Wilson and its inquiry into the practices of the city’s police department are “ongoing and active.” Acknowledging that federal law sets an “extremely high legal bar in these types of cases,” Holder reiterated that the investigations would be “conducted both thoroughly and in a timely manner—following the facts and the law wherever they may lead.”

But Holder also spoke out against protests in Ferguson and other places that have turned violent at times. “It is deeply unfortunate that this vital conversation was interrupted, and this young man’s memory dishonored, by destruction and looting on the part of a relatively small criminal element,” Holder said.

TIME Companies

Justice Department Investigating J.P. Morgan Over Foreign Exchange Trading

JPMorgan Holders Led by Chairmen-CEOs to Vote on Dimon's Titles
Pedestrians walk by the offices of JPMorgan Chase & Co. in New York, U.S., on Friday, May 17, 2013. Victor J. Blue—Bloomberg/Getty Images

The criminal investigation is looking at foreign-exchange trading activities and controls

The Department of Justice is leading a criminal investigation into the foreign-exchange trading of J.P. Morgan Chase, the bank announced Monday in a regulatory filing.

Alongside other civil-enforcement regulators, the Justice Department is looking into the bank’s foreign-exchange trading activities and controls related to them, the Wall Street Journal reports.

The bank said it “continues to cooperate with these investigations” but that there is “no assurance that such discussions will result in settlements.”

J.P. Morgan, which is the largest bank in the U.S., estimated that its loses from legal proceedings could top $5.9 billion, as of Sept. 30. Three months earlier, the estimate was $4.6 billion.

[WSJ]

TIME justice

Obama Nominates Vanita Gupta to Be Civil Rights Chief

Vanita Gupta.
Vanita Gupta. AP

Gupta has been praised for her ability to bring opposing parties together in matters of criminal justice and civil rights.

President Obama has tapped the deputy legal director of the American Civil Liberties Union, Vanita Gupta, to head the Department of Justice’s Civil Rights Division, Attorney General Eric Holder announced Wednesday. In a statement, Holder praised Gupta’s “trailblazing work” as a civil rights lawyer, and said she “has spent her entire career working to ensure that our nation lives up to its promise of equal justice for all.”

Strongly supported by the left, Gupta has also won unexpected praise from conservatives normally critical of the Obama administration and Holder’s leadership of the Justice Department. Conservatives including Grover Norquist and former president of the National Rifle Association David Keene are among her supporters.

“We come from a different side of spectrum than ACLU,” says Marc Levin, policy director for the conservative criminal justice reform organization Right on Crime which has an informal relationship with the ACLU. “But, I’ve found her interested in identifying areas where we can work together.”

Gupta started her career at the NAACP Legal Defense Fund (LDF), where she won a challenge to reverse the convictions of a group of black men who were wrongfully convicted of selling drugs in Texas. In 2003, Gov. Rick Perry pardoned the defendants. At the ACLU she led a lawsuit against a Texas immigration detention facility that led to widespread detention policy reform.

As outrage has erupted in Ferguson, Mo. over the killing of an unarmed black teenager by a white police officer, Gupta and the ACLU have been among the loudest voices calling for accountability and transparency from the police department. Sherrilyn Ifill, President and Director-Counsel of LDF, said Wednesday that Gupta has “expertise in bringing law enforcement and communities of color to the same table, in pursuit of common goals of fairness and accountability.

Former U.S. Pardon Attorney Margaret Love says Gupta’s appointment is a “happy confirmation of the Obama Administration’s appreciation of the relationship between civil rights and the criminal justice system.”

Gupta may prove a less divisive choice than Obama’s prior nominee for the civil rights post, Debo Adegbile. His nomination was blocked in Congress because he once represented death row inmate Mumia Abu-Jamal, who was convicted of murdering a Philadelphia police officer. The Obama administration stood by their nomination of Adegbile, but he later withdrew and returned to private practice.

Gupta has her own legal history, however. She made her name in part by fighting to reform the nation’s drug laws, including embracing broad decriminalization of some drugs. In an opinion piece for the New York Times last September, she called for the elimination of the mandatory minimum sentences that have left many first-time offenders locked up for life. She supports of decriminalizing marijuana, the criminalization of which she has said has contributed to our nation’s overcrowded prison system.

“Those who seek a fairer criminal justice system, unclouded by racial bias, must at a minimum demand that the government eliminate mandatory minimum sentences, which tie judges’ hands; rescind three-strikes laws, which often make no distinction between, say, armed assault and auto theft; amend ‘truth in sentencing’ statutes, which prohibit early release for good behavior; and recalibrate drug policies, starting with decriminalization of marijuana possession and investment in substance-abuse prevention and treatment,” Gupta wrote in the New York Times.

TIME justice

Obama Mulls Replacements for Holder

Attorney General Eric Holder Announces Civil Rights Investigation Into Michael Brown Death
U.S. Attorney General Eric Holder announces a Justice Department 'patterns and practice' investigation of the Ferguson, Missouri, police department during a news conference at the department's headquarters Sept. 4, 2014 in Washington, DC. Chip Somodevilla—Getty Images

The President announced Eric Holder will remain in office until a successor is confirmed

The White House is already working with a narrow list of possible successors to outgoing Attorney General Eric Holder, Democratic sources familiar with the selection process tell TIME.

The candidates include former Homeland Security Secretary Janet Napolitano, U.S. Attorney for the Western District of Washington State Jenny Durkan, U.S. Attorney for the Southern District of New York Preet Bharara, Solicitor General Donald Verrilli, Labor Secretary Thomas Perez, Deputy Homeland Security Secretary Alejandro Mayorkas, and former Associate Attorney General Tony West, the Democratic sources say.

President Barack Obama has not yet decided whom he will choose to succeed Holder, White House officials say, and Holder will stay in office until a successor is confirmed by the Senate. The sources caution that the list of seven names is not exhaustive, and that some on it are being more seriously considered than others. The White House has initiated a formal selection process run by a team that will include White House Counsel Neil Eggleston and will involve interviews and background checks both for security and for political viability.

That latter consideration will be important as the Administration intends to bring the nominee up for Senate consideration during the lame-duck session after the midterm elections in November. Already Republicans, including the ranking minority member of the Senate Judiciary Committee, Sen. Charles Grassley (R-Iowa), have said the confirmation process should be put off until January, when a new, possibly Republican-led Senate convenes.

That is unlikely, though.

“This is a high-priority position; it’s important not just for the President in terms of offering some advice and counsel, it also is important to the country in terms of enforcing our laws,” White House Press Secretary Josh Earnest told reporters Thursday afternoon. “So this is something that will get a fair amount of attention and I’m confident that whoever is nominated to this position will be the kind of candidate that deserves bipartisan support in the Senate.”

But in a sign of how cold relations between the White House and Hill Republicans have become, an aide to Grassley said the senator was not informed of Holder’s imminent resignation before the announcement Thursday, and as of 6 p.m. that evening, he had not been contacted by the Administration. An aide to Senate Judiciary Committee’s Democratic chairman, Patrick Leahy of Vermont, said the senator and Holder had spoken “in the last couple of days.”

It is unclear whether the White House intends to consult Republicans as part of the process of selecting a nominee. Holder’s predecessor, Attorney General Michael Mukasey, was picked by then-President George W. Bush after lengthy discussions with Senate Democrats, though the circumstances were quite different. In the wake of the scandal surrounding the politically-motivated firing of federal prosecutors by then-Attorney General Alberto Gonzales, the Bush White House had secret conversations with powerful Democrats, who controlled the Senate. One Democratic aide then on the Judiciary Committee said Bush’s White House counsel Fred Fielding consulted Sen. Charles Schumer (D-N.Y.) over possible successors and that Sen. Harry Reid (R-Nev.) rejected one candidate, former Solicitor General Ted Olson. Both sides eventually settled on Mukasey.

The candidates this time represent a fairly broad cross section of legal backgrounds. Two have limited experience on national security matters. At least one has a rocky record of confirmation in the Senate.

Perez faced a tough battle in the Senate to become Labor Secretary, getting confirmed 54-46 on a party-line vote after overcoming a GOP filibuster. Mayorkas was confirmed as Homeland deputy last December after heading the U.S. Citizenship and Immigration Services; he was previously a U.S. attorney in California during the Clinton administration. Napolitano served as Obama’s Homeland Security secretary from 2009-13. Durkan has said she intends to step down as the top prosecutor in Seattle this month; she prosecuted financial and national security cases. Bharara has successfully pursued scores of insider trading cases on Wall Street and several high profile national security cases. Verrilli is the Administration’s top lawyer at the Supreme Court and argued high-profile cases including the successful defense of Obamacare. West stepped down Sept. 15 as the No. 3 Justice Department official after successfully winning more than $30 billion in settlements from Wall Street banks in the wake of the financial crisis.

TIME Mental Health/Psychology

70% of People Suffer After Violent Crime, But Few Get Help

Victims who knew the perpetrator were more likely to report it

Nearly 70% of people endure severe social or emotional problems after being the victim of a violent crime, but only about 12% of those who had problems received help from victim services, according to a new report from the Department of Justice. Just over half of victims who suffered from socio-emotional problems reported the crime to the police.

“A victim with socio-emotional problems may experience a range of emotional and physical symptoms,” the report reads, citing anxiety, trouble sleeping and depression.

Trends varied across demographic groups, particularly gender. Women were much more likely than men to experience socio-emotional problems. Nearly 80% of women who suffered from a serious violent crime said they had such problems, while only 58% percent of their male counterparts said the same.

Whether the victim knew the crime’s perpetrator also affected whether they experienced social or emotional problems. Victims harmed in acts of intimate partner violence were more likely to experience issues, regardless of the type of crime. Nearly three in four victims of intimate partner violence suffered from physical problems, with 61 percent saying they had trouble sleeping.

The report, which looked at data from more than 160,000 people across the U.S., also found low rates of reporting violent crime. Only about a third of victims who experienced severe distress reported the crime to the police. About half of victims who knew the perpetrator reported the crime, while 41% of those who didn’t know the offender did so.

TIME Innovation

Five Best Ideas of the Day: September 9

1. Energy poverty isn’t about climate change. It’s about powering innovation in energy distribution.

By Jigar Shah in LinkedIn

2. With the investigation in Ferguson, the U.S. Department of Justice has an opportunity to revive its poor civil rights record.

By Michael Selmi in Politico

3. Young people aren’t getting enough sleep, which can lead to poor academic performance, depression and worse. We should start school days later.

By Jessica Lahey in the Atlantic

4. In the Internet age, we must enact new laws protecting sexual privacy.

By Mary Anne Franks in Brookings Institution

5. Tunisia – where the Arab Spring began – is a working model of a post-revolutionary Arab state. The world should take notice.

By by the Editorial Board of the Christian Science Monitor

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

TIME Civil Rights

Justice Department Opens Civil Rights Probe Into Ferguson Police

US Attorney General Eric Holder delivers remarks on the Justice Department’s efforts in Ferguson, Missouri.
US Attorney General Eric Holder responds to a question from the news media on the Justice Department’s efforts in Ferguson, Missouri during a press conference at the Justice Department in Washington, DC, on Sept. 4, 2014. Shawn Thew—EPA

"Our investigation will assess the police department’s use of force, including deadly force. It will analyze stops, searches, and arrests."

Attorney General Eric Holder announced Thursday that the Justice Department would open a civil rights investigation into the Ferguson Police Department in the wake of the fatal police shooting of an unarmed black teenager last month.

The Aug. 9 encounter prompted riots and days of protests in the St. Louis suburb, and the Department of Justice is already separately investigating whether any civil rights laws were violated during the shooting of the teenager, Michael Brown.

Attorney General Eric Holder said at a news conference on Thursday that city leaders would be cooperating with the investigation into whether there was a pattern or practice of discrimination in the force. He also said the so-called “pattern or practice” investigation could be expanded to include police departments in neighboring jurisdictions.

“In Ferguson, our investigation will assess the police department’s use of force, including deadly force. It will analyze stops, searches, and arrests. And it will examine the treatment of individuals detained at Ferguson’s city jail, in addition to other potentially discriminatory policing techniques and tactics that are brought to light,” Holder said.

The Department was given the legal authority to open “pattern or practice” investigations in 1994 and in the past five years it has opened 20 such investigations across the country.

MONEY Banks

Bank of America Is Paying Up for the Mortgage Mess, But Who Will Get the Money?

Affordable housing construction
Kiet Thai—Getty Images

The banks has agreed to provide billions of dollars in "consumer relief." Here's what that actually means.

Last week, Bank of America agreed to pay almost $17 billion dollars in a settlement with the Justice Department. The settlement is about what Bank of America (and Merrill Lynch and Countrywide, which BoA later acquired) disclosed to investors about mortgage-backed securities, not about how it treated homeowners. Nonetheless, a large portion of the settlement—$7 billion—will be used for consumer relief.

So who will actually see some of that money? Bank of America can pay off its new obligation in four ways:

Reducing the principal or modifying payments on some mortgages. Mortgage modification isn’t anything new—the government has had programs to encourage banks to do this for years, though they’ve been criticized as too little or too late. However, compared to past settlements, the BoA deal does break some ground by targeting the relief. For the first time, 50% of principal reductions will go to borrowers in the areas hardest hit by the housing crisis. The Office of Housing and Urban Development has published an interactive map of these areas here. The settlement also gives the bank incentives to prioritize FHA and VA loans.

Bank of America’s agreement with the government also provides more substantial aid than previous settlements in certain cases. For example, BoA is required to provide $2.15 billion in principal forgiveness, which consists of lowering underwater mortgages to 75% of the property’s long term value, and reducing the mortgage’s interest rate to 2%.

“Those borrowers who do get assistance through the settlement are getting pretty substantial assistance,” says Paul Leonard, founder of the Center for Responsible Lending.

In addition to principal reduction, BoA will receive credit toward the settlement amount by forgiving mortgage payments, allowing for delayed payments, or extinguishing some second liens and other debts.

Who actually gets this help, though, is up to BoA. “Bank of America still gets to make all the final calls,” Leonard explains. “Even if I’m a borrower in default in a hardest hit area, who would seem like natural candidate for assistance, there is no entitlement to me.” As for the timetable, the bank has until 2018 to provide this aid, although the agreement includes incentive to finish early. BoA suggests anyone in serious hardship call 877-488-7814 to see if they qualify for an existing program.

More low and moderate income lending. For low-income Americans, first time homebuyers, or those who lost their home in a short sale or foreclosure, it can be extremely difficult to get a loan—even with a good credit. This settlement offers BoA credit for giving mortgages to these groups, or those in hardest hit areas, as long as they have respectable FICO score.

Building affordable rental housing. It’s also hard to find cheap rental housing, and financing for such development is scarce. As part of BoA’s agreement with the Justice Department, the bank will provide $100 million in financing for construction, rehabilitation or preservation of affordable rental multi-family housing. Half of these units must be built in Critical Family Need Housing developments.

Getting rid of blight and preventing future foreclosures. One side effect of the housing crisis was the large number of abandoned or foreclosed homes plaguing neighborhoods across the nation. BoA will earn credit for demolishing abandoned homes, donating properties to land banks, non-profits, or local governments, and providing funds for legal aid organizations and housing counseling agencies. The bank will also receive credit for forgiving the principal of loans where foreclosure isn’t being pursued.

Housing advocates say they’ll be keeping an eye on how quickly BoA and other banks that have agreed to consumer relief act on these programs. One worry is that by going slowly they could end up paying off the settlements with modifications and lending they would have done anyway. “If the promised relief arrives, as written, then it will bring a measure of relief that is badly needed by a lot of communities out there,” acknowledges Kevin Whelan, national campaign director of Home Defenders League. “But compared to the damage these institutions caused, it’s not really a large amount of money.”

Related:
What Bank of America Did to Warrant a $17 Billion Penalty
How to Get a Mortgage When Your Credit is Bad
Behind on Your Mortgage? You May Be Eligible for Some Help

TIME Crime

Former Government Cybersecurity Head Convicted on Child Pornography Charges

The US Department of Health and Human Se
The U.S. Department of Health and Human Services building is shown in Washington, D.C., 21 July 2007. Saul Loeb—AFP/Getty Images

He is the sixth person convicted in an ongoing DOJ investigation of three child pornography sites

The former acting head of cybersecurity at the U.S. Department of Health and Human Services was convicted on child pornography charges in a Nebraska federal court, the Department of Justice said Tuesday.

The former official, Timothy DeFoggi, allegedly expressed interest in the violent rape and murder of children in online exchanges and at one point suggested meeting up with another web user to fulfill such fantasies, the Justice Department said in a statement.

DeFoggi, 56, was convicted of engaging in a child exploitation enterprise, conspiracy to advertise and distribute child pornography, and accessing a computer with intent to view child pornography, according to the DOJ.

He was the sixth person convicted in an ongoing investigation into three child pornography websites, the DOJ said. The administrator of the sites has previously been convicted of engaging in a child exploitation enterprise. According to the Justice Department, DeFoggi registered on the site in March 2012 and was active until it was taken down in December of that year.

It’s unclear if his illegal activity overlapped with his work for the government. In an HHS budget report for Fiscal Year 2014 that was found by the Washington Post, a Tim DeFoggi is identified as head of OS IT Security Operations for the department.

 

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