PETROTIGER CEO PLEADS GUILTY TO FCPA CHARGES
Joseph Sigelman, the former co-CEO of PetroTiger Ltd. ("PetroTiger") pleaded guilty to conspiracy to violate the FCPA on June 15. Sigelman admitted to conspiring with other PetroTiger employees to make payments of $333,500 to an employee of Ecopetrol, the Colombian national oil company in order to secure an oil services contract. He was sentenced to probation with no jail time on June 16. Sigelman entered his guilty plea mid-way through trial for conspiracy, money laundering and FCPA charges (which began on June 1) after a critical prosecution witness gave inconsistent testimony relating to his cooperation with the government. As part of the plea agreement, the government agreed to seek dismissal of all but the FCPA conspiracy charge.
The DOJ's announcement of its plea agreement with Sigelman also confirmed that it has declined to prosecute PetroTiger itself, based on its "voluntary disclosure, cooperation and remediation, among other factors". PetroTiger has previously been referenced in speeches by DOJ officials as a model for self-reporting and cooperation with the government, leading to the DOJ's declination.
PetroTiger's former general counsel pleaded guilty to conspiracy to violate the FCPA and commit wire fraud in November 2013 and Sigelman's co-CEO pleaded guilty in February 2014. The Ecopetrol employee alleged to have received the bribes was arrested earlier this year in Colombia, together with his wife, a former PetroTiger employee and several other Ecopetrol officials.
IAP WORLDWIDE SERVICES INC. ENTERS INTO NON-PROSECUTION AGREEMENT WITH DOJ
On June 16, the Department of Justice (the "DOJ") announced that it was entering into a non-prosecution agreement ("NPA") with IAP Worldwide Services Inc. ("IAP") following an investigation into payments to Kuwaiti officials. Under the NPA, IAP agreed to pay a penalty of $7.1 million. A former vice president of IAP also entered into a plea agreement in which he plead guilty to conspiracy to violate the FCPA for his involvement in the scheme. He is due to be sentenced on September 11, 2015.
The agreed statement of facts appended to the NPA states that IAP set up a shell company to bid for the first phase of a project to provide surveillance capabilities for several Kuwaiti government agencies. They agreed that half the amount paid to that company in connection with phase 1 of the project would be paid to a "consultant" who would pay bribes to government officials to assist IAP in obtaining and retaining the Phase I contract, and in obtaining the contract for Phase II of the project. The consultant was paid approximately $1,783,688 over the course of two years.
The DOJ stated that its decision to enter into an NPA with IAP was based on a variety of factors, including but not limited to the company's cooperation. The NPA requires IAP to conduct a review of its existing internal controls and to make periodic reports to the government regarding remediation and the implementation of its compliance program.
SEC RECOMMENDS NO ENFORCEMENT ACTION IN SOUTH AFRICAN FCPA INVESTIGATIONS
On June 8, Net 1 UEPS Technologies, Inc. ("Net 1"), a South African alternative payments systems company, announced that it had received a letter from the FCPA unit of the Securities and Exchange Commission ("SEC") Division of Enforcement, confirming that the SEC does not intend to recommend an enforcement action. Net 1 confirmed that the SEC's investigation began in December 2012 as a result of allegations of irregularities in the tender process for a contract. Net 1 stated that it believed that a losing bidder was responsible for these allegations.
Net 1's statement confirms that a separate investigation by the South African Police's Commercial Crimes Unit is expected to be concluded shortly but that the DOJ's investigation (which commenced at the same time as the SEC's) is understood to remain open. As a practical matter, however, it would be surprising for the DOJ to bring charges in a case where the SEC has declined to do so.
A second South African company, gold mining company Gold Fields Limited ("Gold Fields"), also announced that it had received a similar letter from the SEC on June 22. The SEC confirmed to Gold Fields that they would not recommend enforcement action following an investigation into the granting of a financial stake in one of its mines to a group of black investors, including the parliamentary speaker, as part of a Black Economic Empowerment ("BEE") transaction. The BEE program was launched to redress inequality created by the apartheid regime in South Africa.
Although the conduct in both investigations reportedly involved payments by South Africans to South Africans, the FCPA's territorial jurisdiction would have been engaged by virtue of Net 1 and Gold Fields' US listings.
NINTH CIRCUIT INSIDER TRADING DECISION MAY CONFLICT WITH SECOND CIRCUIT'S NEWMAN DECISION
As set out in more detail in our previous briefing, a Ninth Circuit decision of July 6 upheld the insider trading conviction of Bassam Yacoub Salman (United States v. Salman, 2015 WL 4068903 (9th Cir. 2015)). Salman traded based upon material non-public information he received from a friend who had in turn received the information from his investment banker brother. Salman's conviction was upheld despite his contention that the Second Circuit decision in United States v. Newman, 773 F.3d 438 (2d Cir. 2014) required the insider tipper to receive a greater level of personal benefit than was present in Salman's case. In upholding Salman's conviction, the Ninth Circuit declined to adopt the reading of Newman advocated by the defendant. Viewing the evidence in light of the Supreme Court cases in Dirks v. SEC, 463 U.S. 646 (1983), the Ninth Circuit held that there was adequate evidence to establish that the tipper received a benefit for the information he shared and that Salman knew the tipper and knew about the benefit.
In related news, the Department of Justice has sought to appeal the Second Circuit's decision in Newman to the Supreme Court. The petition for a writ of certiorari argues that the Second Circuit's decision conflicts with Dirks and with the decisions of other circuits which applied Dirks "correctly", including Salman. The rule created by the Second Circuit is stated to "hurt market participants, disadvantage scrupulous market analysts, and impair the government's ability to protect the fairness and integrity of the securities market". The potential circuit split caused by Salman makes it more likely that the Supreme Court will hear the case.
LATEST FIFA DEVELOPMENTS
Arrests continue to be made in the ongoing DOJ investigation of allegations of bribery within the Fédération Internationale de Football Association ("FIFA"). Press reports indicate that on June 9, Alejandro Buzarco, the CEO of an Argentine sports communications firm, was arrested in Italy and, on June 18, two Argentine businessmen connected with a sports marketing company surrendered to a court in Buenos Aires.
The Swiss Federal Office of Justice announced on July 2 that the US has requested the extradition of the seven FIFA officials arrested in Zurich in May. It confirmed on July 10 that one (unnamed) official had agreed to the extradition. The status of the remaining extradition requests has yet to be announced.
FIFA's ethics committee has banned Charles "Chuck" Blazer from participating in soccer activities for life, following his admissions regarding his involvement in the bribery scandal. FIFA also announced that the bidding process for the 2026 World Cup will be delayed in light of the ongoing investigations.
OFAC PUBLISHES VENEZUELA REGULATIONS
Following the imposition of an asset freeze against certain Venezuelan individuals in March 2015, OFAC announced the publication of the Venezuela Sanctions Regulations on July 10. The announcement notes that these regulations have been published in abbreviated form for the purpose of providing immediate guidance to the public but that OFAC intends to supplement them with a more comprehensive set of regulations, which may include additional interpretive and definitional guidance and additional general licenses and statements of licensing policy.
LOUIS BERGER INTERNATIONAL AGREES TO PAY $17.1 MILLION PENALTY TO RESOLVE FCPA CHARGES
On July 17, the DOJ announced that it had entered into a deferred prosecution agreement ("DPA") with Louis Berger International Inc. ("LBI"), a New Jersey-based construction management company. Under the DPA, LBI admitted to FCPA violations involving payments to foreign officials in India, Indonesia, Vietnam and Kuwait. According to admissions in the DPA, LBI and its employees paid $3.9m in bribes to officials over a 12 year period in order to secure government contracts. The payments were disguised as "commitment fees" and "counterpart per diems" (among other things). LBI has also agreed to improve its internal controls framework and to retain a compliance monitor for at least three years. The DOJ stated that its decision to enter into a DPA with LBI was based on: (i) its self-reporting of the conduct, (ii) its cooperation (including making US and non-US employees available for interview), (iii) its remediation efforts, including the termination of employees involved in the scheme, and (iv) its "demonstrated commitment to improving its compliance program and internal controls".
Two former LBI employees also pleaded guilty to conspiracy and FCPA charges in connection with the scheme and are due to be sentenced in November 2015.