Two Former Executives of a US Broker-Dealer Sentenced for Participation in South American Bribery Scheme
Benito Chinea, the former chief executive officer of U.S. broker-dealer Direct Access Partners (DAP), and Joseph DeMeneses, the company’s former managing director, were sentenced on March 27, 2015 by U.S. District Judge Denise L. Cote in connection with their roles in an international bribery scheme. Chinea and DeMeneses made payments to a high-level official of Banco de Desarrollo Económico y Social de Venezuela (“Bandes”), a state economic development bank, in exchange for business that produced more than US$60 million in commissions for the broker-dealer.
Both individuals were sentenced to four years in prison, the longest prison term yet in any Foreign Corrupt Practices Act (FCPA) action in the 2nd Circuit. They were also ordered to forfeit more than US$6 million, an amount equal to their earnings from the bribery scheme—a US$3.6 million fine for Chinea and a US$2.7 million fine for DeMeneses. Both defendants pleaded guilty to one count of conspiracy to violate the FCPA and the Travel Act in December 2014.
As we reported in May 2014, Chinea and DeMeneses, in collaboration with other colleagues, coordinated bribes between 2008 and 2012 to a Bandes official, Maria De Los Angeles Gonzalez. Gonzales was responsible for supervising the bank’s overseas trading transactions and used her position to direct Bandes’ trading activity to DAP. In exchange, DAP agents and employees would overcharge Bandes for purchases and undercharge it for sales, and then divide the profits from the resulting revenues with Gonzales. In an attempt to cover up the scheme, the payments to Gonzalez were transmitted through third parties veiled as “foreign finders” and into offshore banking accounts. Chinea and DeMeneses also admitted that they used DAP funds, which were disguised as “loans” in DAP’s accounting records, to reimburse DeMeneses and another co-conspirator, for the nearly US$1.5 million of personal funds they used to pay the bribes.
Prior to announcing the sentences, Judge Cote also denied DAP’s request for restitution of more than US$14 million, stating that she regarded DAP as an uncharged co-conspirator.
To date, five DAP employees, as well as Gonzalez, have pleaded guilty to their roles in this bribery plot. According to the DOJ press release, this conviction demonstrates the DOJ’s continued focus on individual accountability in anticorruption enforcement.
Islamic State-Linked Engineering Firm Hit with Bribery Charges
The Australian Federal Police (AFP) announced at the end of February that three directors of Lifese Engineering, an Australian engineering and construction firm, have been charged with conspiracy to bribe a foreign public official. Earlier in February, the AFP raided the homes and offices of Lifese directors John Jousif and brothers Mamdouh and Ibrahim Elomar, and arrests promptly followed. The three directors are accused of scheming to launder more than AU$1 million, which they then sought to pass on to Iraqi government officials in order to secure multimillion-dollar contracts for their firm.
The Elomar family is notorious in the Australian press—Mamdouh’s son, Mohamad Elomar, is reported to have prominent ties to terrorist groups, including the radical Islamic State network. Mohamad’s older brother, Mohammed Ali Elomar, is currently incarcerated in an Australian prison for his role in an Australian terror plot.
Although the AFP currently has 14 public, active investigations related to foreign bribery, this case is only the second of its kind to reach the Australian courts, signaling increased attention by the Australian federal authorities to the issue of foreign bribery.
“Foreign bribery undermines the credibility of Australian businesses here and overseas, and where there are allegations that Australian companies or citizens are circumventing lawful processes when pursuing business opportunities, the AFP will investigate,” said Manager AFP Fraud and Anti-Corruption, Commander Linda Champion.
Mamdouh and Ibrahim Elomar could each face up to 10 years in prison if convicted of the bribery charges. Jousif, who is facing an additional count of money laundering, could serve up to 25 years in prison if he is convicted.
Bribery Charges Announced for Employees of Colombian State-Run Oil Company Ecopetrol SA
In mid-March, Colombian officials arrested six current and former employees of the state-run oil company Ecopetrol SA and one individual with close ties to the oil services company PetroTiger Ltd. These seven individuals face charges for their alleged role in a bribery scheme in which British Virgin Islands-based PetroTiger is alleged to have paid 2 billion Colombian pesos (approximately US$800,000) to the defendants in exchange for the award of a lucrative oil services contract with Ecopetrol SA.
Two of the individuals arrested by Colombian officials are also involved in the ongoing investigation into PetroTiger executives’ role in the bribery scheme in the United States. The DOJ alleged that Ecopetrol employee David Duran received US$333,500 in bribes from PetroTiger executives in exchange for contracts with Ecopetrol. According to charging documents, the bribes were funneled through a fraudulent consulting agreement under which Duran’s wife, Johanna Navarro, was hired to provide consulting services to PetroTiger. Navarro also has been arrested by Colombian officials for her role in the scheme.
PetroTiger’s board of directors first reported the bribery scheme to U.S. and Colombian officials back in 2011. Since that time, several PetroTiger executives have been arrested and charged for FCPA violations. PetroTiger co-CEO Knut Hammarskjold and former PetroTiger General Counsel Gregory Weisman both pleaded guilty, in February 2014 and November 2013, respectively, to charges in connection with their roles in the scheme. As we reported in June 2014, PetroTiger co-CEO Joseph Sigelman has been charged in connection with the scheme and is awaiting trial scheduled for May in Camden, New Jersey.
Mr. Sigelman’s case has been reported as an opportunity for a federal court to hear and evaluate the government’s methods of investigating and prosecuting overseas FCPA cases, including the increased use of undercover informants and wiretapping.
US Tech Company Self-Reports Internal FCPA Probe to SEC
Akamai Technologies, Inc., a Cambridge, Massachusetts-based cloud services provider, disclosed earlier this month that it has retained outside counsel to conduct an internal investigation into the company’s sales practices in an unnamed foreign country. According to the company’s March 2, 2015 annual Form 10-K filing, in which the investigation was first publicly disclosed, the probe will assess Akamai’s compliance with the FCPA and other applicable local laws and regulations. A company spokesperson stated that in February 2015, the company voluntarily disclosed the investigation to the DOJ and the SEC. Although limited details were immediately available, Akamai represented that the business revenue from sales in this undisclosed country represented less than one percent of its total annual revenue since 2012.
General Cable Allocates US$24 Million in Connection with FCPA Investigation
At the end of February, Kentucky-based utility developer General Cable announced that it reserved US$24 million for possible disgorgement of profits related to an ongoing investigation of an alleged bribery scheme in violation of the FCPA. In September, we reported that General Cable disclosed potential FCPA violations related to business transactions in Angola, Thailand, India and Portugal in its 8-K filed on September 22, 2014.
The company self-disclosed the potential violations involving illicit payments made by employees of the company’s Angola and Portugal operations to Angolan public utility officials for more than a decade. In the company’s recent amended 8-K filing, the company revealed that the reserved US$24 million “does not include provisions for any fines, civil or criminal penalties, or other relief, any or all of which could be substantial.”
The company said it is cooperating with ongoing related DOJ and SEC investigations.
GlaxoSmithKline Fires 110 Employees in China for 2013 Bribery
British pharmaceutical conglomerate GlaxoSmithKline (GSK) recently dismissed 110 employees from its Chinese operation. In a statement released by the company, GSK explained that the dismissals were the result of an internal investigation into employee misconduct that took place prior to mid-2013. The dismissals come on the heels of GSK’s September bribery conviction in a Chinese court. The company confirmed the dismissals in an official statement, but did not disclose the specifics of the alleged misconduct, noting only that “[w]here evidence of misconduct has been found, we take appropriate disciplinary action up to and including termination of employment.”
The number of disciplinary cases reported in the company’s annual report reached 652 in 2014, more than a 1,200 percent increase from the 48 disciplinary actions reported by GSK in 2013. GSK indicated that the large increase in disciplinary cases in China is due to increased employee and expense-claims monitoring, as well as the conduct of an ongoing internal investigation into GSK’s China operations.
Bloomberg has reported that the laid-off employees issued a statement protesting their dismissals.
Red Notice previously covered enforcement efforts related to GSK inSeptember and October 2014, when GSK was fined a record 3 billion yuan ($479 million) in China for funneling that amount of money to travel agencies to facilitate bribes to doctors and officials. In those cases, five GSK executives received suspended jail sentences, including the former head of GSK in China.
South Korea Kleptocrat Forfeits More Than US$1 Million to DOJ
In early March, the DOJ announced in a press release that it reached a settlement to forfeiture of nearly US$1.2 million in a civil case involving the former president of South Korea, Chun Doo Hwan. This follows Chun’s 1997 conviction in connection with bribery charges in Korea for receiving approximately US$200 million in bribes from Korean companies and businesses.
According to settlement documents, the ex-president and his family members laundered a portion of the funds through various trusts and shell companies, both in South Korea and the United States. Assistant Director in Charge of the FBI David Bowdich made it clear that “[t]he U.S. will not idly standby and serve as a money laundering haven for foreign officials to hide corrupt activities.”
In addition to securing the forfeiture assets through the U.S. settlement, the DOJ also revealed that it successfully assisted the government of South Korea in recovering more than US$27.5 million in funds from an outstanding criminal restitution order against the former president. According to the settlement documents, a former associate of Chun’s paid the US$27.5 million to partially satisfy Chun’s outstanding judgment from his previous 1997 criminal conviction in which Chun was ordered to return the bribe money.