Canadian Transportation Company Probed for Suspect South Africa Payments

In April, South Africa’s public corruption watchdog began investigating whether Canadian transit company Bombardier made illegal payments to a third-party middleman, Peter-Paul Ngwenya, in an effort to secure a $3 billion railway construction contract. The group is investigating allegations that the transportation giant paid millions of dollars in success fees under the multibillion dollar contract to participate in a consortium of five partners that were constructing the “Gautrain”—an 80 kilometer high speed transit rail connecting Johannesburg and Pretoria with OR Tambo, South Africa’s biggest airport. Gautrain construction was completed in 2012. 

South Africa’s Public Protector, Thuli Madonsela, is probing allegations of political interference, relating to political and financial decisions made regarding the Gautrain construction. Bombardier released a statement indicating that it would cooperate with Madonsela’s investigation if it was “invited to collaborate with the public protector’s investigation.” The company also stated that, “Bombardier has always maintained and will continue to maintain the highest standards of ethical behaviour in all of our business operations worldwide.”

The investigators are also scrutinizing a $5 million deal with Ngwenya, the alleged South African middleman involved in obtaining the construction contract. At least one independent watchdog organization has criticized the middleman payment for being “totally disproportionate” and has suggested that there may be concerns of bribery and corruption in the deal. Bombardier has disputed these claims, which are also the subject of pending civil litigation in South Africa. 

Similarly, Ngwenya denies paying any bribes on behalf of Bombardier.

To learn more, see coverage at the FCPA Blog and CBC News.

Oregon-Based Defense Contractor Agrees to Pay Almost $10 million to Settle SEC FCPA Charges

In early April, Oregon-based technology company, FLIR Systems Inc., agreed to pay $9.5 million to settle FCPA violations. After discovering the violations internally, the company self-reported the misconduct to U.S. officials and terminated the employees involved. As we reported in an earlier Red Notice, two former FLIR employees, Stephen Timms and Yasser Ramahi, agreed to pay $50,000 and $20,000 respectively to settle U.S. Securities and Exchange Commission (SEC) FCPA violation charges in November 2014. While working in FLIR’s Dubai office, Timms and Ramahi organized a “world tour” for Middle Eastern government officials involved in fulfilling key provisions of contracts with the company. The 20-night trip included stops in Casablanca, Paris, Dubai, Beirut and New York City. In addition to receiving approximately $40,000 in travel expenses in connection with factory acceptance test visits, the government officials also received nearly $7,000 in miscellaneous gifts. Timms and Ramahi later attempted to conceal their misconduct by falsifying corporate records.

In a press release issued by the SEC, Kara Brockmeyer, chief of the SEC Enforcement Division’s FCPA Unit, stated, “Flir’s deficient financial controls failed to identify and stop the activities of employees who served as de facto travel agents for influential foreign officials to travel around the world on the company’s dime.” Without admitting or denying the charges in the order, FLIR agreed to pay a $1 million civil penalty and a disgorgement of $7,534,000 plus $970,584 in prejudgment interest for a total penalty of more than $9.5 million.

The SEC noted that after disclosing the violation, FLIR cooperated with the SEC’s investigation. Under the settlement agreement with the SEC, FLIR also agreed to update the SEC periodically over the next two years regarding the status of the company’s FCPA compliance policies, trainings and monitoring activities. The U.S. Department of Justice (DOJ) declined to bring charges.

To learn more, read FLIR's announcement to investors and new coverage from The Hill and the Portland Business Journal.

French-Based Telecommunications Company Debarred by World Bank for 18 Months

In late April, the World Bank announced the 18-month debarment of the French telecommunications company, Alcatel-Lucent Trade International A.G. (Alcatel-Lucent), and an affiliated entity, Alcatel Saudi Arabia Limited, for failing to disclose that two agents hired by Alcatel-Lucent assisted company affiliates in securing various contracts in 2006. 

According to an investigation conducted by the World Bank Integrity Vice Presidency, Alcatel-Lucent hired two agents to assist Egyptian and Italian affiliates of the company, Alcatel-Lucent Egypt for Telecommunications, S.A.E. and Alcatel-Lucent Italia, S.p.A., to secure a World Bank training and services contract for more than $30 million. The contract was part of an estimated $65 million World Bank-financed private and finance sector development project in the Republic of Iraq.

The debarment of Alcatel-Lucent and Alcatel Saudia Arabia Limited was imposed as part of a Negotiated Resolution Agreement (NRA) with the World Bank. The NRA also includes the conditional non-debarment of the Egyptian and Italian Alcatel affiliates for failing to disclose the conduct in connection with their work to secure the training and services contract as well as Alcatel subsidiaries, Telettra International S.A and Telettra Saudi Arabia, under the condition that these entities fulfill certain conditions. According to the NRA, to avoid debarment, the affiliates are required to cooperate with the World Bank Integrity Vice President and adopt a compliance program that satisfies the World Bank Integrity principles. Leonard McCarthy, World Bank Integrity Vice President, pointed to the case an example “of how companies need to use caution when working with agents.”

See more at The Financial and the National Mirror.

Montreal-Based Engineering Firm Sues Former Executives over Canadian Charges of Corporate Bribery

This month, SNC-Lavalin Group Inc. filed suit against two former company executives, who it alleges were at the center of the bribery that resulted in SNC-Lavalin being criminally charged by Canadian authorities in February 2015.

In our February Red Notice edition, we reported that the Royal Canadian Mounted Police (RCMP) charged SNC-Lavalin with bribery under Canada’s Corruption of Foreign Public Officials Act and fraud in connection with work performed by the company in Libya between 2001 and 2011. At that time, the company claimed that the charges “are without merit” and contended that “if charges are appropriate, we believe that they would be correctly applied against the individuals in question and not the company.”

Consistent with its claim at the time that the RCMP levied charges, SNC-Lavalin has now brought suit against Riadh Ben Aissa and Sami Bebawi, former senior SNC managers, alleging that they embezzled CAD $127 million from the company. This is the same amount of which the RCMP alleged the company defrauded the Libyan government. SNC-Lavalin has also named a Swiss lawyer and a private Swiss banker as defendants in its civil complaint, alleging that they helped facilitate the crime.

Specifically, in its civil complaint, SNC-Lavalin alleges that Ben Aissa, who oversaw the company’s international construction business in the early 2000s, set up agent firms that SNC-Lavalin used to help it win contracts in certain countries. According to the complaint, unbeknownst to SNC-Lavalin, the firms were actually “alter egos” controlled by Ben Aissa, that he personally vouched for the legitimacy of one of the agent firms and that the fees that he negotiated for the agent firms were for his own gain. While based in the Tunisia office, Ben Aissa allegedly used these agent firms to funnel bribes to Libyan officials in an attempt to secure lucrative utilities and infrastructure contracts in Libya between 2001 and 2011. The complaint further alleges that Ben Aissa did not disclose the scheme to company senior management other than Bebawi, with whom he agreed to share the proceeds. According to the complaint, SNC-Lavalin did not learn that Ben Aissa owned and controlled the agent firms until the RCMP raided the company’s headquarters in April 2012.

Separately, Ben Aissa was reported to have been the subject of Swiss enforcement proceedings resulting in his conviction and a three-year sentence for bribing the son of former Libyan dictator Moammar Gadhafi in order to win construction projects for SNC-Lavalin while collecting tens of millions of dollars for himself. Ben Aissa is reportedly now cooperating with the RCMP in its ongoing investigation of SNC-Lavalin’s business dealings in Libya.

See additional coverage at The Globe and Mail and the Toronto Sun.

OECD Says Iceland Has Demonstrated Lack of Progress in Fighting Bribery

The Organization for Economic Cooperation and Development (OECD) Working Group on Bribery has expressed “serious concerns” about Iceland’s lack of progress in implementing recommendations made to the country in 2010 to help fight foreign bribery.

The OECD Working Group on Bribery assesses the anti-bribery measures of the 41 countries that are signatories to the OECD Anti-Bribery Convention through a multiphase monitoring process. In addition to regular reports, in 2014, the Working Group began issuing targeted public statements for those countries that had not implemented key recommendations.

In one such statement released on April 9, 2015, the OECD group noted that since 2010, Iceland has taken steps to fully implement only two of 17 recommendations and stated, “The Working Group is especially disappointed that Iceland has not implemented recommendations to effectively criminalize bribery of officials in foreign state-owned entities.” The Working Group noted that Iceland had formed a steering group to implement the remaining recommendations, but had made little additional effort to implement them. Other recommendations that Iceland has not implemented include clarifying the obligation of officials to report foreign bribery, criminalizing bribery of officials in foreign state-owned companies, implementing legislation to protect whistleblowers and raising maximum penalties for foreign bribery.

The OECD gave Iceland until October to demonstrate that it has taken steps to implement the recommendations and stated that if “significant progress” is not made by that time, the OECD will consider unspecified “additional measures.”

To learn more, see coverage at WSJ and the Reykjavík Grapevine.

Former Export-Import Bank Official Pleads Guilty to Bribery While Congress Debates the Future of the Bank

On April 22, 2015, Johnny Gutierrez, a former loan officer with the Export-Import Bank of the United States (Ex-Im Bank), pleadedguilty before U.S. District Judge Gladys Kessler of the District of Columbia to one count of bribery of a public official. Gutierrez admitted that on 19 occasions between 2006 and 2013, he accepted cash and other things of value in return for “being influenced in the performance of his official acts.” Gutierrez admitted to endorsing the approval of unqualified loan applications and improperly expediting other applications in exchange for the illicit payments.

According to the DOJ’s press release, Gutierrez admitted he “intentionally ignored the fact that one company had previously defaulted in 10 previous transactions guaranteed by the bank[.]” Despite the fact that the applicant had already cost the Ex-Im Bank more than $20 million in its previous dealings, Gutierrez continued to accept bribes from the applicant in exchange for recommending the approval of the applicant’s loan.

The investigation was conducted by the Ex-Im Bank’s Inspector General’s Office and the Federal Bureau of Investigation (FBI). 

At the same time, the House Committee on Oversight and Government Reform, chaired by Rep. Jason Chaffetz (R-UT) has been holding hearings scrutinizing the Ex-Im Bank. The Bank is a federal agency that serves as the official export agency of the United States, providing loan guarantees or direct financing to assist U.S. firms, or U.S. divisions of foreign firms, export goods. Congress is considering reauthorization of the agency, which was created more than 80 years ago and is scheduled to expire on June 30, 2015.

Press reports have indicated that Gutierrez allegedly accepted cash payments in exchange for trying to help a Florida company obtain financing through Ex-Im Bank, and that a total of four agency employees have been suspended or removed in connection with investigations into their behavior (although they were not all related to the investigation into Gutierrez). It appears that additional charges may follow. The Deputy Inspector General of the Bank, Michael T. McCarthy, responded to inquiries from Rep. Chaffetz on behalf of the Committee and stated that he could not provide certain requested information in his letter or in testimony scheduled before the Committee on April 15 because of the pending charges and because the bribery investigation “remains open as to other subjects.”

See more at the WSJ and the Daily Caller.