The summer of 2017 saw the U.S. Department of Justice’s docket still teeming with Foreign Corrupt Practices Act (FCPA) cases. In this post, we draw a few lessons from three of them, which bring together three threads that seem often to weave together: bribery, kleptocracy, and money laundering.
Former Guinean Minister Convicted of Receiving and Laundering Bribes
Mahmoud Thiam, the former Minister of Mines and Geology of the Republic of Guinea, was convicted on May 3, 2017 of accepting and laundering bribes allegedly paid to him by the China International Fund (CIF) and executives of China Sonangol International Ltd. The bribes were allegedly paid to guarantee access to Guinea’s natural resources, and to buy exclusive rights to conduct certain mining business activities. According to evidence presented by the U.S. DOJ Criminal Division, Thiam laundered $8.5 million between 2009 and 2011, transferring portions of the money to US bank accounts and using the money to buy luxury goods, a multi-million dollar estate, and private school educations for his children. In an attempt to conceal the source of the funds, Thiam told banks in the United States and Hong Kong that the funds were the proceeds from land sales that took place before his tenure as a government minister. On August 25, 2017, Thiam was sentenced to seven years in U.S. prison and three years of supervised release for his offenses.
Middleman Pleads Guilty in Bribery and Fraud Scheme
On June 21, 2017, Malcolm Harris pled guilty to wire fraud and money laundering charges for the role he played in an alleged scheme to bribe a Middle Eastern foreign official. The bribes were allegedly paid to facilitate the sale by a South Korean construction company of a 72-story commercial building in Hanoi, Vietnam to the sovereign wealth fund of a Middle Eastern country for $800 million. From March 2013 to May 2015, Harris’ co-defendants paid bribes to Harris, who promised to pay them to a Middle Eastern foreign official. As part of the scheme, Harris played two distinct roles: told the bribe payers he was the agent of the foreign official; and he also pretended to be the foreign official in numerous emails he sent to the payers. In one of those emails, Harris negotiated bribes totaling $2.5 million (an initial payment of $500,000 and a final payment of $2 million due upon closing the deal). Harris claimed that the bribes would influence the foreign official to cause the sovereign wealth fund to choose the bribe payer’s company for the project. In reality, Harris did not have a relationship with the foreign official at all. The initial payment of $500,000 was paid, which Harris kept for himself. He used the money to purchase a luxury penthouse in Brooklyn. On October 5, 2017, Harris was sentenced to 42 months in prison, three years of supervised release, and ordered to pay forfeiture of $500,000 and restitution of $760,148.57. The trial of one co-defendant is scheduled to begin on February 5, 2018. Harris’ other co-defendant is a fugitive currently believed to be in South Korea.
U.S. Seeks to Recover $540 Million Lost in International Laundering Conspiracy
On June 15, 2017, the DOJ filed civil forfeiture complaints seeking the forfeiture and recovery of approximately $540 million in assets allegedly lost in an international money laundering conspiracy. The complaints allege that more than $4.5 billion was misappropriated by high-level officials of a strategic development company created by the Malaysian government to promote economic development in the country through global partnerships and foreign direct investments. Between 2009 and 2015, Company officials, their relatives, and other associates allegedly used fraudulent documents and promises to launder $4.5 billion. They allegedly did so through a complicated system of transactions and shell companies with bank accounts in the United States and abroad. The complaints allege that these transactions were designed to conceal the origin, source, and ownership of the funds and used U.S. financial institutions to invest in assets in the United States and abroad. These complaints join civil forfeiture complaints filed the week of June 5, 2017 and in July 2016, which sought $100 million and $1 billion in assets respectively, as the largest actions brought under DOJ’s Kleptocracy Asset Recovery Initiative to date.
We expect these cases to signal an increase in prosecution of complex FCPA, money laundering, and Kleptocracy cases. Your Sheppard Mullin Global Trade Team will monitor these developments, and keep you updated. In the meantime, please check out the other posts we have written about the FCPA:
Who’s a “Foreign Official”? Supreme Court Could Clarify Key FCPA Term, Growing Pains for Expanding Tech Companies: Uber Investigated for FCPA Violations, and The Schrems Decision: How the End of Safe Harbor Affects Your FCPA Compliance Plan