A team from Williams & Connolly in Washington represented MoneyGram International, Inc. in a $100 million settlement to resolve criminal charges the U.S. Justice Department has filed in Pennsylvania.
MoneyGram, the Dallas-based money services provider, on November 9 admitted wrongdoing to wire fraud allegations and to the company’s failure to maintain an effective program to combat money laundering. An information charging the company for its role in mass marketing and consumer fraud schemes was filed in U.S. District Court for the Middle District of Pennsylvania.
MoneyGram, which operates a network of 270,000 outlets in 190 countries, was charged in a scheme that prosecutors said involved fraudulent transactions that bilked tens of thousands of victims. Forfeited funds will be returned to victims, the government said. The company entered a deferred prosecution agreement with DOJ that runs for five years.
“MoneyGram’s broken corporate culture led the company to privilege profits over everything else,” Assistant Attorney General Lanny Breuer, the head of the DOJ Criminal Division, said in a statement. “MoneyGram knowingly turned a blind eye to scam artists and money launderers who used the company to perpetrate fraudulent schemes targeting the elderly and other vulnerable victims.”
MoneyGram’s attorneys, Williams & Connolly litigation partners David Zinn and John Villa, did not immediately respond to a request for comment. Zinn practices in white-collar defense. Villa, a member of the firm’s executive committee, focuses on corporate, securities and financial-services civil and criminal litigation.
Pamela Patsley, the MoneyGram chief executive, said in a statement that “the conduct described in the DPA’s statement of facts is unacceptable to MoneyGram and counter to everything we strive to stand for.” The statement said “nothing angers us more than when our services are used to perpetrate illegal activity.”
MoneyGram has implemented new anti-fraud and anti-money laundering compliance standards, Patsley said. The company also said it has “terminated relationships with agents suspected to be involved in consumer fraud.” MoneyGram has agreed to retain a corporate monitor who will report to DOJ.
The government said it entered a deferred prosecution agreement with MoneyGram based on the company’s “willingness to acknowledge and accept responsibility for its actions” and the company’s commitment to enhance anti-fraud and anti-money laundering programs.
Federal prosecutors said MoneyGram agents and others participated in scams that generally targeted the elderly and other vulnerable groups. The scams, according to DOJ officials, included “posing as victims’ relatives in urgent need of money and falsely promising victims large cash prizes, various high-ticket items for sale over the Internet.”
Between 2004 and 2009, DOJ said, the company violated federal law in the processing of thousands of transactions for MoneyGram agents known to involved in a criminal fraud scheme. MoneyGram, the government said, profited from the scheme through the collection of fees and other revenue on fraudulent transactions.
MoneyGram, according to DOJ, received tens of thousands of customer complaints about fraud during that five-year window. Prosecutors said the “total scope of the fraud, however, was more expansive because not every victim of the fraud scheme reported the fraud to MoneyGram.” The company failed to terminate agents known to be involved in criminal activity, prosecutors said.
Kim Daniel, an assistant U.S. attorney in Harrisburg, Pa., prosecuted the case against MoneyGram with Craig Timm, a trial attorney in the DOJ Asset Forfeiture and Money Laundering Section in Washington.
Since 2007, prosecutors in the U.S. Attorney’s Office for the Middle District of Pennsylvania, which includes Harrisburg, have been working with the U.S. Postal Inspection Service agents to investigate and prosecute telemarketing scams that used MoneyGram’s money transfer services. Twenty-eight former MoneyGram agents have been charged to date with conspiracy, fraud and money laundering charges.
Peter Smith, the U.S. Attorney for the Middle District of Pennsylvania, said in a statement that “thousands of citizens in Pennsylvania and other states suffered heartbreaking financial losses for years” because of international telemarketing schemes in which MoneyGram provided an “electronic highway to move their illegal profits out of the country.”
The government, Smith said, “disrupted and closed that electronic highway, hopefully for good.”
Mike Scarcella is a reporter for The National Law Journal, a Legal affiliate based in New York.
