Under a settlement announced Monday on civil insider trading charges with the Securities and Exchange Commission, Martha Stewart will pay about $195,000 and cannot serve as the director of a public company for five years. Stewart also agreed to an injunction barring her from being a director of a public company for five years.

Stewart, the founder of multimedia empire, Martha Stewart Living Omnimedia Inc, dedicated to stylish living, agreed to pay a total of about $195,000 relating to losses the government said she avoided on her sale of ImClone Systems Inc. stock in December 2001, a day before the Food and Drug Administration announced it had declined to review ImClone's application for its cancer. The stock fell about 16 percent in the wake of that FDA announcement.

The SEC said Monday, Peter Bacanovic, Stewart's broker, and former Merrill Lynch employee, agreed to pay a penalty totaling about $75,000. In a previous order, the SEC barred Bacanovic, from associating with a broker, dealer or investment adviser.

Shares in Omnimedia Inc rose 12 cents to $17 in morning trading on the New York Stock Exchange.

Breaking Legal News.Com
Robin Sheen
Staff Writer

Thursday, President Bush signed into law the Pension Protection Act of 2006 which he called the "most sweeping reform" of US pension law since the enactment of the 1974 Employment Retirement Income Security Act. Passed by the House of Representatives in July and the Senate in August, the bill is intended to encourage employers to fund pensions adequately so that promised pensions will be available when workers reach retirement age.

The new law allows bankrupt airlines with frozen pension plans to claim the pensions are financially sound despite large liabilities, which gives them an additional ten years beyond the seven years hat was allotted to most companies to fund their pensions. The measure's, opponenents claim it gives companies too much authority to terminate pension plans and it unfairly eases the obligations of the airline industry. Supporters say it will preserve the workability of traditional employer-employee pension benefits packages while at the same time opening new savings options, reducing the likelihood of government bailouts.

Bush said after he signed the bill, "The Pension Protection Act of 2006 will help shore up our pension insurance system in several key ways. It requires companies who underfund their pension plans to pay additional premiums. It extends the requirement that companies that terminate their pensions must provide extra funding for the system. This legislation insists that companies measure their obligations of their pension plans more accurately. It closes loopholes that allow underfunded plans to skip pension payments. It raises caps on the amount that employers can put into their pension plans so they can add more money during good times and build up a cushion that can keep pensions solvent in lean times. Finally, this legislation prevents companies with underfunded pension plans from digging the hole deeper by promising extra benefits to their workers without paying for those promises up front. The problem of underfunded pensions will not be eliminated overnight. This bill establishes sound standards for pension funding, yet, in the end, the primary responsibility rests with employers to fund the pension promises as soon as they can."

Breaking Legal News.Com
Neal Andrea
Staff Writer

WASHINGTON – Deputy Attorney General Paul J. McNulty announced today that the United States reached final agreement with The Boeing Company on a record $615 million settlement to resolve criminal and civil allegations that the company improperly used competitors’ information to procure contracts for launch services worth billions of dollars from the Air Force and the National Aeronautics and Space Administration. Assistant Attorney General Peter D. Keisler, and the U.S. Attorneys for the Central District of California and the Eastern District of Virginia, Debra Wong Yang and Chuck Rosenberg, joined Deputy Attorney General McNulty in the announcement.

Boeing has agreed to pay a total of $615 million dollars to resolve the government’s investigations and claims relating to the company’s hiring of the former Principal Deputy Assistant Secretary of the Air Force for Acquisition and Management, Darleen A. Druyun, by its then Chief Financial Officer, Michael Sears, and its handling of competitors information in connection with the Evolved Expendable Launch Vehicle (EELV) Program and certain NASA launch services contracts.

“The American people rightly expect government officials and contractors to act with integrity,” said Deputy Attorney General Paul J. McNulty. “The outcome of these investigations sends a clear message to those doing business with the government: harsh consequences await anyone whose conduct falls short of the highest legal and ethical standards.”

The $615 million settlement includes a $565 million civil settlement and a $50 million monetary penalty according to a separate criminal agreement. The amount is a record for government procurement fraud, for the Department of Defense (DOD), and for NASA.

Under the agreement with the U.S. Attorneys’ Offices, the United States agrees not to bring criminal charges related to the conduct that is the subject of the settlement agreement in part because the company is fully cooperating with the government’s investigation. Boeing has agreed to accept responsibility for the conduct of its employees in these matters, continue its cooperation with federal investigators, pay a monetary penalty of $50 million, and maintain an effective ethics and compliance program, with particular attention to the hiring of former government officials and the handling of competitor information. The U.S. Attorneys’ Offices may seek to prosecute Boeing for charges relating to the Druyun conduct, or to assess a further penalty of up to $10 million, if during the two year term of the criminal agreement, an executive management employee of Boeing commits federal crimes as outlined in the agreement, and the company fails to report the misconduct to the Department of Justice.

The settlement with the Justice Department’s Civil Division provides for Boeing to pay $565 million in exchange for a complete release from any civil liability arising from the Druyan matter as well as the Evolved Expendable Launch Vehicle Program (EELV) and certain NASA launch services contract.

The government’s investigation focused on Boeing’s relationship with the former Principal Deputy Assistant Secretary of the Air Force for Acquisition and Management, Darleen A. Druyun. Druyun was the Air Force’s top career procurement officer before she retired from the Air Force in 2002. In that position, she wielded influence over billions of dollars in contract awards, modifications, and settlements. In 2000, Boeing, at Druyun’s request, hired Druyun’s daughter and future son-in-law. Then in 2002, Boeing’s then Chief Financial Officer, Michael M. Sears, recruited Druyun for an executive position with Boeing following her retirement. During this period (2000 - 2002), Druyun was responsible for dozens of Boeing contracts, as well as for the controversial $23 billion procurement to lease a fleet of KC-767 aerial refueling tankers that has since been canceled.

Sears and Druyun both pleaded guilty to violations of the conflict of interest statutes. In documents filed with the criminal court, Druyun admitted that Boeing’s favors in hiring her children and in offering her a position influenced her contracting decisions.

The government’s investigation also focused on the EELV program, with which the Air Force sought to usher in a new generation of space launch vehicles to serve the government’s critical satellite needs through 2020. Air Force strategy called for two sources to reduce the risk of failure and cost through competition. Those sources ended up being Boeing and Lockheed, with Boeing’s low pricing leading the Air Force to favor Boeing in awarding it 19 of the original 28 launch services contracts awarded in October 1998. The United States alleged that, prior to this award, Boeing obtained more than 22,000 pages of documents from Lockheed Martin, certain of which contained confidential competition-sensitive or other proprietary information that related to Lockheed’s EELV program and that some of this information was used to unfairly assist Boeing in the EELV competition. When this was subsequently discovered by the Air Force, it sought to “right the wrong” by re-balancing the contracts, at great expense. Boeing’s conduct resulted in a record 20-month suspension of three of its business units from government contracting.

NASA also had launch services contracts with Boeing and Lockheed that required the contractors to compete for missions. The United States alleged that Boeing’s possession and use of Lockheed’s proprietary information, including additional documents obtained through different channels than the EELV documents, plus the unfair advantage the company had gained in the EELV, enabled Boeing to persuade NASA to award 19 missions, known as the 19 Pack, on a sole source basis. The United States further alleged that the lack of competition plus Boeing’s false claims for certain costs, resulted in Boeing charging NASA much more for the 19 Pack than NASA should have paid.

NASA Inspector General Robert W. Cobb expressed his appreciation for the “superb efforts of the DOJ, DOD, and NASA team that brought about this historic settlement. In addition to fulfilling our statutory mandate to protect the public’s and NASA’s fiscal interests, this settlement also serves as a testament for holding accountable those who abuse the government’s procurement system. Indeed, the settlement represents a significant accomplishment in our continuing fight against fraud, waste, and abuse.”

“Now, the Boeing settlement is behind us,” said Dr. Ron Sega, Under Secretary of the Air Force. “It wasn’t a proud time in their history and in some ways it wasn’t a proud time in our history, but Boeing is a competent and capable contractor and we look forward to a positive working relationship.”

“This settlement sends a clear message that integrity in DOD contracting is indispensable and that the American public deserves no less than honest government and aggressive vigilance over the expenditure of the nation's resources,” said Acting Department of Defense Inspector General Thomas F. Gimble.

The Druyun investigation was conducted by the U.S. Attorney’s Office for the Eastern District of Virginia, the Mid-Atlantic Field Office of DCIS (DOD OIG) and the Air Force Office of Special Investigations. The EELV and 19 Pack investigations were conducted by the U.S. Attorney’s Office for the Central District of California, the Air Force’s Space and Missile Systems Center at Los Angeles Air Force Base, the Western Field Office of the Defense Criminal Investigative Service (DCIS) within the Defense Department’s Office of the Inspector General (OIG), the Air Force of Special Investigations, and the NASA Office of the Inspector General at the Kennedy Space Center. The civil investigation and negotiations were conducted by the Civil Division of the Department of Justice, with the assistance of the U.S. Attorneys’ Offices’ civil attorneys and the investigative agencies.

http://www.usdoj.gov/opa/pr/2006/June/06_civ_412.html

WASHINGTON – (USDOJ) The Puerto Rico Aqueduct and Sewer Authority (PRASA) entered into an agreement to plead guilty to an indictment charging 15 felony counts of violating the federal Clean Water Act (CWA) through the illegal discharge of pollutants from nine sanitary wastewater treatment plants and five drinking water treatment plants, the Justice Department and Environmental Protection Agency (EPA) announced today.  Under the plea agreement, PRASA will pay a criminal fine of $9 million—the largest fine ever paid by a utility for violating the CWA. In addition, a comprehensive civil settlement was reached between PRASA and the United States of America resolving repeated environmental violations at 61 wastewater treatment plants throughout the Commonwealth.

In the civil settlement, PRASA will spend an estimated $1.7 billion implementing capital improvement projects (CIPs) and other remedial measures at all of its 61 wastewater treatment plants and related collection systems over the next 15 years.  To comply with the settlement, PRASA will complete 145 short-, mid-, and long-term CIPs, which will include installing dechlorination equipment, installing flow proportional chlorination equipment, repairing and replacing equipment, and implementing a chemical treatment program for phosphorous removal, among other things.   

“Today’s criminal and civil actions are a landmark step in assisting PRASA, an offender with a pervasive history of violations, to comply with the Clean Water Act, a law that protects both the people and the environment of Puerto Rico from undue exposure to harmful pollutants,” said Sue Ellen Wooldridge, Assistant Attorney General for the Justice Department’s Environment and Natural Resources Division.  “We are pleased that we have reached a resolution to these matters, and that PRASA has agreed to make the necessary improvements and committed funds to ensure significant improvements to its wastewater treatment plants.”

“The Bush Administration is holding polluters accountable for their actions and using enforcement tools to enhance our environment and protect public health,” said Granta Y. Nakayama, EPA’s Assistant Administrator for Enforcement and Compliance Assurance. “This action is the largest criminal fine ever paid by a utility under the Clean Water Act.”

This morning, the federal grand jury in San Juan returned a 15-count indictment charging PRASA with criminal violations of the Clean Water Act arising out of PRASA’s role, as owner and operator, and its conduct in the operation and management of the wastewater and drinking water treatment systems in Puerto Rico.  The Justice Department also filed this morning, a plea agreement with PRASA under which the utility will plead guilty to the indictment filed by the grand jury. Under the plea agreement, PRASA will pay a fine of $9 million, complete capital improvements to the nine wastewater treatment systems for nearly $109 million, spend $10 million to correct the discharges to the Martin PeZa Creek, and serve a five-year term of probation. Further, under the agreement, PRASA is required to fully comply with the terms in the civil consent decree and has agreed that the court may extend PRASA’s term of probation, with all available sentencing options, to ensure that PRASA comes into substantial compliance with the conditions of probation.

“This record settlement reaffirms the Bush Administration’s commitment to protecting public health and the environment,” said Alan J. Steinberg, EPA Regional Administrator. “The proposed settlement and plea agreement address a history of noncompliance on the part of PRASA that has resulted in the discharge of millions of gallons of inadequately treated sewage and raw sewage through illegal discharges. Once actions are taken under the civil consent decree and plea agreement, the quality of the environment in the Commonwealth of Puerto Rico will be improved.”

“The United States Attorney’s Office in Puerto Rico is committed to environmental enforcement aimed at improving the quality of life in Puerto Rico especially the quality of water,” said Rosa Emilia Rodríguez Vélez, U.S. Attorney for the District of Puerto Rico.

Today’s civil settlement resolves allegations that PRASA violated pollution discharge permits issued by the EPA under the CWA; failed to properly operate and maintain all 61 treatment facilities; and discharged raw sewage from seven collection systems in violation of the CWA.  In addition to the nearly $1.7 billion in capital improvements and other remedial measures, PRASA will pay a $1 million civil penalty and implement a supplemental environmental project at an estimated cost of $3 million.  The project requires PRASA to provide sewer service to at least one community on the Island that has not been connected to PRASA’s facilities.   

Senior Litigation Counsel Howard Stewart, of the U.S. Department of Justice, Environmental Crimes Section and Special Assistant U.S. Attorney Silvia Carreño of the U.S. Attorney’s Office in Puerto Rico are the criminal prosecutors in this case. Senior Attorney Patricia A. McKenna, of the U.S. Department of Justice Environmental Enforcement Section and Assistant U.S. Attorney Isabel Muñoz of the U. S. Attorney’s Office in Puerto Rico are the civil prosecutors in this case. At the EPA, Diane Gomes, Assistant Regional Counsel; Charles Hoffmann, Associate Regional Counsel for Criminal Enforcement; Jaime Geliga, Caribbean Environmental Protection Division; Special Agent in Charge William Lometti; and Associate Special Agent in Charge Jonathan Thalasinos were instrumental in this action.