On August 30, the Justice Department announced that three former employees of a New York-based broker-dealer, Direct Access Partners (DAP), entered guilty pleas for their roles in bribery schemes involving Venezuelan economic development banks. As discussed in this previous post, the three were arrested in May and June of this year on charges relating to a scheme to bribe a foreign official at Banco de Desarrollo Economico y Social de Venezuela (“BANDES”), in exchange for receiving trading business from the bank. They were also charged with having conspired to obstruct an examination conducted by the SEC.

Each of the three former employees waived their right to indictment and pleaded guilty to a six-count felony information, including conspiracy to violate the FCPA, the Travel Act, and to commit money laundering; violation of the FCPA, violation of the Travel Act; money laundering; and conspiracy to obstruct justice. The maximum penalties associated with the offenses go as high as 20 years in prison and fines of up to $500,000. Sentencing is scheduled for February 11 and March 6, 2014. The foreign official at BANDES was also arrested and charged in May, and her case remains pending.

There are two noteworthy observations from this case. First, each of the three former employees waived their right to indictment, pleaded guilty to a criminal information, and did not enter into plea agreements with the Justice Department. Plea agreements are typically offered by DOJ to confer defendants with sentencing benefits in return for prompt guilty pleas. The absence of plea agreements in this case may reflect the strength of the evidence that the government has accumulated against each of the three defendants.

Second, the investigation that led to the charges was initiated by an SEC periodic examination. The SEC is authorized under the 1934 Securities Act to examine any registered firm to make sure it is “conducting its activities in accordance with the federal securities laws and rules . . . and implementing supervisory systems and/or compliance policies and procedures that are reasonably designed to ensure that the firm’s operations are in compliance with the law.” Given the results of this investigation, it is likely that SEC staff will be looking more closely at potential FCPA issues during future periodic examinations. Firms that are subject to periodic examinations must therefore be vigilant that they are FCPA-compliant.