French banking giant BNP Paribas' regulatory troubles continue after the bank agreed this week to pay $80 million to the Department of Justice to resolve allegations that it violated the False Claims Act.
The United States filed a lawsuit, United States v. BNP Paribas, against BNP Paribas to resolve allegations that it submitted false claims for payment guarantees issued by the Department of Agriculture’s Supplier Credit Guarantee (SCG) Program. The program provides payment guarantees to U.S.-based exporters for their sales of grain and other agricultural commodities to importers in foreign countries.
The program encourages U.S. exporters to sell U.S. agricultural commodities to foreign importers and covered part of the losses if the foreign importers failed to pay. U.S. exporters are ineligible to participate in the SCG Program if the exporter and foreign importer are under common ownership or control.
According to the government’s allegations, from 1998 to 2005, BNP Paribas participated in a sustained scheme to defraud the SCG Program. American exporters and Mexican importers who were under common control improperly obtained SCG Program export credit guarantees for transactions between the affiliated exporters and importers. “In some cases, the underlying transactions were shams and did not involve any real shipment of grain,” the Justice Department stated.
BNP Paribas accepted assignment of the credit guarantees from the American exporters, even though it knew that the affiliated exporters and importers were ineligible for SCG Program financing. Beginning in April 2005, when the Mexican importers began defaulting on their payment obligations, BNP Paribas submitted claims to the Department of Agriculture for the resulting losses.
Jerry Cruz, a vice president of BNP Paribas, received bribes from the exporters. In January 2012, he pleaded guilty to conspiracy to commit bank, mail and wire fraud, and conspiracy to commit money laundering.
BNP's settlement to resolve violations of the FCA come in the same month that the bank entered into a guilty plea, and a record $8.9 billion settlement--the largest penalty ever obtained by the Justice Department in a criminal economic sanctions case, and the largest in a criminal case involving a bank.