THE USA

INVESTIGATION

Mayoral Graft

Several U.S. mayors are on trial for, under investigation for, or have just been found guilty of charges related to extortion and bribery. A brief rundown:

  • Detroit, Michigan: Kwame Kilpatrick, former mayor of Detroit, his father, Bernard, and a Detroit contractor, are more than four weeks into their trial on charges of fraud, bribery, racketeering, and tax evasion. Several witnesses, including Karl Kado, a service provider at Cobo Center, a large Detroit entertainment venue whose service contracts are ultimately approved by the city, and Jon Rutherford, a former homeless shelter owner, testified that Kilpatrick personally asked them for cash to obtain or retain contracts or permits. It is alleged that Kilpatrick’s father, Bernard, was also personally involved in the extortion and bribery.
  • New Orleans, Louisiana: Former mayor Ray Nagin and his attorney apparently met with federal prosecutors on Friday, December 12, possibly to produce some documents related to an investigation into allegations of bribery against him. In early December, New Orleans businessman Rodney Williams pled guilty to bribing “Public Official A” with $72,250. At least one other local businessman, Frank Fradella, has also pled guilty to bribing “Public Official A.” “Public Official A” has a tenure that exactly matches Nagin’s, and the alleged bribes were funneled through a granite company Nagin created for his sons.
  • Trenton, New Jersey: Trenton Mayor Tony Mack, his brother, Ralphiel, and one of Mack’s associates, have been indicted on charges of extortion, bribery, and mail and wire fraud. They were initially charged in September 2012 with one count of conspiracy to commit extortion, but this new indictment adds seven charges, including one against Mack and his brother for acceptance of bribes. The charges relate to an alleged scheme to accept $119,000 in bribes in exchange for Mayor Mack’s assistance in developing an automated parking garage on cityowned land.
  • Hamilton Township, New Jersey: Former Hamilton Township Mayor John Bencivengo was convicted by a federal jury sitting in Trenton, of soliciting and accepting $12,400 in bribes. In exchange for the bribes, Bencivengo used his position to assist a health insurance broker in maintaining her contract with the township’s school district.

HSBC agrees to $1.9B money-laundering fine

On December 11, HSBC entered into a deferred prosecution agreement (DPA) with the United States Department of Justice (DOJ), regarding allegations that it allowed money from Mexican drug cartels, as well as Iran, Libya, Sudan, and Burma, to be laundered through its U.S. locations, including at least $7 billion in cash sent from Mexico to the U.S. in 2007 and 2008.

Under the terms of the DPA, HSBC will forfeit approximately $1.25 billion, the largest forfeiture ever for a bank, and will pay $655 million in civil penalties. In addition, HSBC has agreed to implement enhanced internal controls, put in place for five years an independent monitor, and restrict bonuses for senior executives for five years. It has also made some management changes, including hiring as CLO a former Treasury undersecretary for terrorism and financial intelligence.

Because it is structured as a DPA, HSBC will not plead guilty to any criminal act. The DPA simply accuses the Bank of violating the U.S.’s Bank Secrecy Act and the Trading with the Enemy Act, but seeks no criminal indictment. Since 2009, Credit Suisse, Barclays, Lloyds, ING, and Royal Bank of Scotland each have paid settlements ranging from $298 million to $619 million, related to their participation in money laundering activities for people and companies on the U.S. sanctions list.

Also on December 11, Standard Chartered PLC, another British bank, and New York regulators settled for $340 million a moneylaundering investigation involving Iran.

March 2011 Settlement between IBM and SEC Still Not Approved

In March 2011, IBM agreed to pay the U.S. Securities and Exchange Commission (SEC) $10 million in disgorgement and penalties, related to allegations of violations of the books and records and internal controls provisions of the Foreign Corrupt Practices Act (FCPA) for payments allegedly made to foreign officials in South Korea and China from 1998 through 2009. However, the settlement still has not received judicial approval.

U.S. District Judge Richard Leon of the District of Washington, D.C. is managing the case, and has held numerous off-the-record hearings and phone meetings with the parties. However, he has not made any decision regarding approval of the settlement terms.

Approximately 33 settlements related to foreign bribery have been reached by the SEC since 2010. Of those, only one, prior to IBM, failed to receive judicial approval within 90 days. This settlement has been waiting for approval for more than 600 days. Some observers have speculated that disgorgement and penalties of $10 million for a books and records violation with no mention of any underlying bribe may be the reason for Judge Leon’s hesitation.

Allianz charged with FCPA violations

The SEC has charged the German-based insurance company Allianz SE with violating the books and records and internal controls provisions of the Foreign Corrupt Practices Act (FCPA) for “improper payments to government officials in Indonesia”. Allianz has agreed to pay more than $12.3 million to settle the SEC’s charges.

The SEC’s investigation found that Allianz’s subsidiary obtained or retained 295 insurance contracts on large government projects in Indonesia by making improper payments of $650,626 to employees of state-owned entities in the country. The SEC stated that Allianz made more than $5.3 million in profits as a result of the improper payments which were made between 2001 and 2008. The company’s shares and bonds were registered with the SEC and traded on the New York Stock Exchange during that time.

Ms Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit, stated: “Allianz’s subsidiary created an 'off-the-books' account that served as a slush fund for bribe payments to foreign officials to win insurance contracts worth several million dollars”.

Without admitting or denying the findings, Allianz agreed to cease and desist from further violations and pay a disgorgement of $5,315,649, prejudgment interest of $1,765,125, and a penalty of $5,315,649 for a total of $12,396,423.

Military Graft

Marine staff sergeant Gilbert Mendez pled guilty in San Diego federal court to accepting $150,000 in bribes in 2006 to award $2.6 million in contracts to three foreign-owned contractors who supplied goods and services to Mendez’s base in Fallujah, Iraq. The three government contractors were not named in the indictment. Mendez’s money launderer, Francisco Mungia III, who received a 20% pay cut from the proceeds of the bribe, pled guilty earlier this year and was sentenced to four months in prison.

THE UNITED KINGDOM

Rolls-Royce passes information to SFO

It has been reported that Rolls-Royce has passed information to the Serious Fraud Office (SFO) relating to concerns about bribery and corruption involving Indonesia, China and other overseas countries.

Allegedly the company paid $20m to Mr Tommy Suharto, son of the former President of Indonesia, to win a contract. It is claimed Mr Suharto persuaded the Indonesian national airline, Garuda, to buy engines from Rolls- Royce.

Mr John Rishton, the company’s Chief Executive stated: “I want to make it crystal clear that neither I nor the board will tolerate improper business conduct of any sort and will take all necessary action to ensure compliance”.

The alleged bribery and corruption is believed to have occurred both before and after the Bribery Act came into force in 2011.

The company stated that it would fully cooperate with the investigation and that it had strengthened its compliance procedures in recent years. The company said it would also appoint an “independent senior figure who would lead a review of current procedures and report to the ethics committee of the board”.

£5.6 million payment by Abbot Group

It has been reported that a Scottish drilling firm, the Abbot Group, is to be stripped of almost £6 million after admitting using bribes to secure a lucrative contract. The company accepted making corrupt payments for the contract between one of its overseas subsidiaries and a foreign oil and gas company. Prosecutors revealed that the company had agreed to pay £5.6million of profits from the deal under proceeds of crime laws.

The company is the first in Scotland to enter into a civil settlement with the Crown Office under new corruption and bribery legislation. The Abbot Group self-reported details of the corrupt payments to authorities after launching an investigation last year. Details of the corrupt deal or the country in which it took place have not been disclosed.

The Scottish Solicitor General Lesley Thomson QC said: “Bribery and corruption cause worldwide damage to business and economic development” and that the “self-reporting initiative creates a mechanism for businesses to recognise their corporate responsibility and take a rigorous approach to the investigation and elimination of such practices”.

Ms Louise Andrew, general counsel at Abbot Group, said: “None of the personnel involved in those payments remain with the group. The settlement also means there will be no criminal investigation of Abbot. We are deeply disappointed this improper payment took place. We believe in conducting business legally and ethically and do not tolerate bribery in any form”.

News Corporation could be forced to account for profits

It has been reported that News Corporation could be forced to surrender any profits it made from information secured through bribery.

Ms Bettina Jordan–Barber, a senior Ministry of Defence official, allegedly received around £100,000 in payments between 2004 and 2011 for information which formed the basis of a series of stories in The Sun newspaper.

It is reported that the company is at risk of facing charges of false accounting by the SEC in the US if any bribes were not declared. Although any alleged bribes would have been paid in the UK, the US based parent company News Corp could be liable in the US.

News Corporation also faces pressure from the DOJ, after the CPS said that Mrs Jordan– Barber is to be charged alongside Ms Rebekah Brooks, the former chief executive of News International, and John Kay, The Sun's former chief reporter, over the alleged illegal payments.

Businessman cleared of paying bribes to officials

Mr Bill Lowther, who was accused of paying for a bank governor's son to attend Durham University in exchange for a £90 million printing contract was cleared earlier this month by the Southwark Crown Court of conspiracy to corrupt.

It had been alleged that Mr Lowther paid for the son of Le Duc Thuy to study for an MBA and these bribes were used to ensure the Vietnamese official awarded Mr Lowther’s banknote printing firm, Securency, a lucrative contract.

THE REST OF THE WORLD

Corruption Perceptions Index 2012

The Corruption Perceptions Index (CPI) 2012 was published this month. The CPI 2012 ranks the UK at 17 with a score of 74 out of 100. The index scores countries and territories from 0 (highly corrupt) to 100 (very clean) based on perceived levels of public sector corruption.

Mr Chandu Krishnan, the Executive Director of Transparency International (TI) UK has stated: “Despite the passing of the Bribery Act, and measures to improve transparency in government, the perception of experts is that the UK continues to be more vulnerable to corruption than the political establishment is willing to admit. The UK is struggling to remain in the top 20, let alone achieve a place in the top 10.”

Furthermore, “the steady stream of political scandals has exposed a worrying complacency at the heart of UK politics. Until the Government acts with urgency to put a cap on party funding and introduce tougher regulation of lobbying and the revolving door, the UK will not be able to rise higher in global anticorruption league tables”.

The international results show corruption is still prevalent across the globe.

Two thirds of the countries ranked in the 2012 index scored below 50. However, Denmark, Finland and New Zealand tied for first place with scores of 90. TI has stated that this is in large part due to strong access to information systems and rules governing the behaviour of those in public positions.

Afghanistan, North Korea and Somalia are trailing at the bottom of the 2012 index with a score of 8 out of 100. TI suggests that in these countries the lack of accountable leadership and effective public institutions underscores the need for these countries to take a much stronger stance against corruption.

The 2012 Index is available at the following link: http://www.transparency.org/cpi2012/results

Canada

The former chief executive of SNC-Lavalin, Mr Pierre Duhaime, was arrested in a raid by Canada’s anti-corruption squad investigators last month.

The arrest warrant alleges that Mr Duhaime and Mr Riadh Ben Aissa, another former executive, committed conspiracy to commit fraud in connection with a contract relating to the multibillion dollar McGill University Health Centre between 2009 and 2011.

Anti-corruption squad chief, Mr Robert Lafreniere said that “international proceedings” have been instigated against Mr Ben Aissa, who is currently in Switzerland. Mr Ben Aissa was the company’s former head of construction.

A spokeswoman for SNC-Lavalin said the company had been cooperating with police and will continue to help with the investigation: “We are categorical, no unethical or illegal acts should be tolerated”. The statement continued: “We believe that anyone who has committed an offence… should be brought to justice”.

The company refused to comment on the allegations against Mr Duhaime.

Greece

Greece has slipped to 94th position this year in the Transparency International Corruption Perceptions Index according to the 2012 results. The country is currently ranked jointly with Colombia and Moldova. Mr Costas Bakouris, the head of Transparency International’s Greek chapter stated: “we need to create a political system where politicians care more about the fate of the country than themselves”.

Earlier this month TI Greece and the European Commission presented a plan for tackling corruption in the country.

India

It has been reported by officials at the country’s anti-corruption bureau (ACB), that corrupt government officials are avoiding making demands for bribes on the telephone fearing that the call may get tapped and instead prefer to meet complainants to demand bribes.

It has been reported that the ACB has laid 99 successful traps in Pune division in the last 11 months. The officials have claimed that in 80 cases, government officials have not demanded money on the telephone. They either used a middleman or asked the concerned person to meet them.

Mr Sarang Awad, of the ACB, Pune, said, “We have been observing that government officials have adopted a new modus operandi while demanding bribes from people. Initially, the officials used to demand bribes over phones. They are asking people to come to their office and demanding bribes”.

According to Mr Awad, officials are finding new methods to accept bribes. “However, we are also studying their methods. We study each case and accordingly we prepare a trap. As a result, we are laying the traps successfully”.

Slovenia

It has been reported that Slovenia’s former Prime Minister is on trial accused of involvement in a bribery scandal. The main opposition leader who is mayor of the country’s capital city, Ljubljana, is under investigation for alleged corruption and so is the mayor of the country’s second largest city, Maribor.

Several thousand people took to the streets earlier this month rejecting the “corrupt elite”. The rallies have been directed against the centre-right government and its anti-crisis measures.