Why it matters: As we reported in our December 2015 newsletter, both SEC Enforcement Director Andrew Ceresney and DOJ Assistant Attorney General Leslie Caldwell gave speeches on November 17, 2015 at the American Conference Institute's 32nd Annual International Conference on the FCPA reviewing their respective agencies' FCPA enforcement efforts in Fiscal Year 2015 and discussing their goals and expectations for Fiscal Year 2016. One of the topics Enforcement Director Ceresney addressed was the vital importance of effective coordination between the SEC and international regulators and law enforcement. Just a little over a week later on November 30, 2015, the SEC and the U.K. Serious Fraud Office announced a coordinated effort that resulted in a $36.9 million global settlement with ICBC Standard Bank as well as the Serious Fraud Office's first-ever deferred prosecution agreement. Assistant Attorney General Caldwell spoke about the DOJ's renewed focus on holding individuals accountable for FCPA corporate wrongdoing, and December 2015 saw numerous announcements about criminal charges and prison sentences involving individuals in FCPA cases. We recap it for you here.
Detailed discussion: In their separate "state of the union" addresses at the American Conference Institute's 32nd Annual International Conference on the FCPA on November 17, 2015, SEC Enforcement Director Andrew Ceresney and Assistant Attorney General Leslie Caldwell spoke about the important FCPA enforcement actions and developments for their agencies in Fiscal Year 2015 and gave strong indications that we can look forward to the same if not increased FCPA focus in Fiscal Year 2016. In this article, we discuss two of the areas Ceresney and Caldwell focused on in their speeches, and the announcements within weeks thereafter that proved illustrative of their points.
In his speech, Enforcement Director Ceresney attributed a large part of the success of the SEC's FCPA program in recent years to the SEC's increasingly effective coordination with international regulators and law enforcement. Ceresney pointed to the "important trend of significant growth in focus and legislation on corruption issues worldwide over the last few years" which has greatly assisted the SEC's FCPA investigations because they "routinely rely on evidence obtained from foreign jurisdictions, and often are conducted in parallel with foreign governments." Case in point: Roughly a week after Ceresney's speech on November 30, 2015, the SEC and the U.K.'s Serious Fraud Office (SFO) jointly announced that, in a coordinated effort, they had reached a $36.9 million global settlement with London-based ICBC Standard Bank involving a $6 million bribe paid in connection with a 2013 private placement of debt in Tanzania. Particularly noteworthy was the SFO's announcement of two "firsts": Its first prosecution brought under Section 7 of the Bribery Act of 2010 (the U.K.'s version of the FCPA) and its first-ever deferred prosecution agreement (DPA).
Briefly, the background: The admitted facts show that, in March 2013, a former sister company of Standard Bank, Stanbic Bank Tanzania (SBT), made a $6 million payment to Enterprise Growth Market Advisors (EGMA), a private Tanzanian firm. One of the directors of EGMA was a Tanzanian government official, and the payment by SBT to EGMA was made for the purpose of inducing Tanzanian government officials to select a proposal by Standard Bank and SBT for a $600 million private placement of debt. The private placement generated transaction fees of $8.4 million, shared by Standard Bank and STB. In its private placement materials circulated to investors, Standard Bank failed to disclose SBT's $6 million payment to EGMA.
The SEC charged Standard Bank with materially misleading investors in violation of the Securities Act of 1933 by failing to disclose the $6 million bribe in its private placement offering materials. Standard Bank paid a fine of $4.2 million to the SEC to resolve its portion of the investigation. In its press release, the SEC stated that "[t]he SEC would not have jurisdiction to bring charges under the FCPA because Standard was not an 'issuer' as defined by that Act."
The SFO indicted Standard Bank for failure to prevent bribery under Section 7 of the Bribery Act of 2010. As stated in the SFO's press release, "This was … the first use of Section 7 of the Bribery Act of 2010 by any prosecutor." Under the SFO's first ever DPA entered into with Standard Bank—of which SFO Director David Green said "[t]his landmark DPA will serve as a template for future agreements"—Standard Bank is required to pay penalties to the U.K. and Tanzanian governments of $25.2 million and $7 million, respectively. The DPA also requires, among other things, that Standard Bank cooperate with the SFO and retain an independent consultant to review its "existing anti-bribery and corruption controls, policies and procedures regarding compliance with the Bribery Act of 2010 and other applicable anti-corruption laws." In its press release, the SFO noted its great appreciation to the SEC and other U.K. and U.S. agencies, including the DOJ, "for their assistance in resolving this investigation and deferred prosecution."
In her remarks, Assistant Attorney General Caldwell spoke about the DOJ's renewed focus on holding individuals accountable for corporate criminal conduct in the context of FCPA investigations, stating that companies seeking credit "must affirmatively work to identify and discover relevant information about the individuals involved through independent, thorough investigations. Companies cannot just disclose facts relating to general corporate misconduct and withhold facts about the individuals involved. And internal investigations cannot end with a conclusion of corporate liability, while stopping short of identifying those who committed the underlying conduct." In the six weeks following Caldwell's speech, individuals involved in corporate FCPA investigations were criminally charged or sentenced to prison in the following cases, underscoring that individual accountability for corporate wrongdoing in FCPA cases will remain a priority for the DOJ in 2016:
- December 21, 2015—Two men arrested and charged with FCPA violations and money laundering relating to $1 billion bribery scheme to secure energy contracts from state-owned Petroleos de Venezuela S.A. (PDVSA): The indictment unsealed in the Southern District of Texas on December 21, 2015 stated that Roberto Rincon, a U.S. lawful permanent resident residing in Texas, and Abraham Shiera, a Venezuelan national residing in Florida, were involved in a scheme to pay approximately $1 billion in bribes to PDVSA officials between 2009 and 2014 in order to secure energy contracts from PDVSA.
- December 16, 2015—A former executive of SAP International was sentenced in the Northern District of California to 22 months in prison for his role in a scheme to bribe Panamanian officials to secure the award of government technology contracts in violation of the FCPA: Vicente Eduardo Garcia pleaded guilty in August 2015 to one count of conspiracy to violate the FCPA. On July 15, 2015, Garcia and the SEC entered into a settlement in the parallel SEC investigation under which Garcia agreed to disgorge $85,965.
- December 15, 2015—A former broker-dealer for Direct Access Partners LLP was sentenced in the Southern District of New York to three years in prison for his role as the middleman in a scheme to bribe a Venezuela state bank official in exchange for bond trading work in violation of the FCPA: Jose Alejandro Hurtado, who pleaded guilty to FCPA violations and money laundering in 2013, was also ordered to forfeit $11.9 million. Four other executives of Direct Access Partners LLP pleaded guilty to similar charges and were also recently sentenced to prison and/or ordered to forfeit monetary penalties in connection with the case.
- December 15, 2015—A former Russian nuclear energy official was sentenced to 48 months in prison for money laundering in connection with FCPA violations: The Maryland-based individual, Vadim Mikerin, was sentenced in the District of Maryland to 48 months in prison for conspiracy to commit money laundering in connection with his role in arranging and receiving more than $2 million in corrupt payments to secure improper business advantages for U.S. companies from the Pan American Department of JSC Techsnabexport (TENEX), the sole supplier and exporter of Russian Federation uranium and uranium enrichment and a subsidiary of Russia's State Atomic Energy Corporation. Two other individuals pleaded guilty to similar charges in connection with the payment scheme.
We will watch with interest what 2016 brings from the SEC and the DOJ by way of FCPA investigations and resolutions and report back.
See here to read the U.K. Serious Fraud Office's 11/30/15 press release titled "SFO agrees first UK DPA with Standard Bank."
See here to read the SEC's 11/30/15 press release titled "Standard Bank to Pay $4.2 Million to Settle SEC Charges."
See here to read the 12/21/15 New York Times article titled "U.S. Charges 2 With Corruption Linked to Venezuelan Oil Company," by William Neuman.
See here to read the DOJ's 12/16/15 press release titled "Former Executive Sentenced for Conspiracy to Bribe Panamanian Officials."
See here to read the 12/15/15 Reuters article titled "Brokerage employee gets three years in U.S. prison over Venezuelan bribes," by Nate Raymond.
See here to read the DOJ's 12/15/15 press release titled "Former Russian Nuclear Energy Official Sentenced to 48 Months in Prison for Money Laundering Conspiracy Involving Foreign Corrupt Practices Act Violations."
For more on this topic, read (1) the SEC's 11/17/15 press release of the text of Enforcement Director Andrew Ceresney's speech titled "ACI's 32nd FCPA Conference Keynote Address" and (2) the DOJ's 11/17/15 press release of the text of Assistant Attorney General Leslie Caldwell's speech titled "Assistant Attorney General Leslie R. Caldwell Delivers Remarks at American Conference Institute's 32nd Annual International Conference on Foreign Corrupt Practices Act."