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Goldman Sachs faces $50 million fine to settle document leak case

This week, Goldman Sachs agreed to pay a $50 million fine to settle a case in which a former employee leaked confidential information from the New York Fed. Also in the news: Bristol-Myers Squibb and other pharma companies face foreign bribery probes; a study found that earnings misstatements are “contagious”; and an extensive investigation of Wal-Mart’s operations in Mexico has found little wrongdoing.

Goldman Sachs faces $50 million fine, criminal charges for ex-banker

A former Goldman Sachs’ banker is pleading guilty to federal criminal charges, a rarity on Wall Street. Last year, the banker allegedly obtained confidential documents from an employee at the Federal Reserve Bank of New York, one of Goldman’s regulators, and shared that information with his team. Both the Goldman banker and the New York Fed worker will accept a plea deal that could put them behind bars for up to a year, anonymous sources briefed on the matter told The New York Times.

Both men were fired after the leak. Goldman Sachs representatives said that once the company discovered the leak, it immediately notified regulators and began an investigation. Still, under a settlement with the Department of Financial Services, the bank is expected to pay a penalty of $50 million and come up against new constraints for handling sensitive regulatory information. According to the NYT, Goldman will also have to acknowledge that it failed to sufficiently supervise the former banker.

More pharma companies to be probed for foreign bribery

In the wake of Bristol-Myers Squibb’s settlement of foreign bribery charges with the federal government earlier this month, more pharmaceutical companies may be put under the microscope.

New York-based pharmaceutical company Bristol-Myers Squibb agreed to pay a $14 million penalty to settle U.S. Securities and Exchange Commission (SEC) charges that it violated the Foreign Corrupt Practices Act (FCPA) by bribing healthcare providers in China in exchange for prescription sales.

Now, according to Forbes, AstraZeneca, Eli Lilly, GlaxoSmithKline, Novartis, Novo Nordisk, Sanofi, Teva Pharmaceutical Industries Ltd., UCB and probably other pharmaceutical companies will reportedly be investigated for FCPA violations. The U.S. Department of Justice also plans to beef up its enforcement staff and resources dedicated to “high-impact” foreign bribery cases.

Study: Earnings misstatement is infectious

A study that examined 2,376 financial restatements made by companies between 1997 and 2008 found that firms are more likely to misstate their own earnings after another company in their industry or region publicly announced a restatement. However, when a misstating firm was penalized by the SEC, faced lawsuits, or media reports surfaced regarding their malpractices, their peers did not imitate misconduct, the study discovered. This finding, the authors said, suggests the “deterrent effects of enforcement activity.”

The study, which was published by the American Accounting Association, did not identify particular companies, but uncovered that when larger and higher-profile firms manipulated their earnings, misconduct was more likely to be copied by others in their industry. The study also found that imitation stopped during the years between 2003 and 2005, likely due to enforcement actions related to the Sarbanes-Oxley (SOX) Act. The trend resurfaced between 2006 and 2008, possibly because “the sting associated with SOX has worn off,” the authors said.

Wal-Mart bribery probe turns up little proof of major violations

A high-profile federal investigation of Wal-Mart Stores’ operations in Mexico will likely end up becoming a smaller case than investigators had anticipated, sources familiar with the matter told The Wall Street Journal.

While the three-year probe of corruption allegations remains ongoing, the work is approaching completion and the case could be settled with a fine and no criminal charges. The investigation was launched by the U.S. Department of Justice after articles by the NYT described alleged bribes paid by the retailer to get permits to build stores in Mexico. The articles also detailed how company executives allegedly terminated an internal inquiry into the questionable payments. The federal investigation, however, found evidence that contradicted some of the claims made in the NYT articles.

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