Designed for busy in-house counsel, compliance professionals, and anti-corruption lawyers, this newsletter summarizes some of the most important international anti-corruption developments from the past month, with links to primary resources. This month we ask: Did a U.S. appellate court affirm a business executive’s conviction under the Foreign Corrupt Practices Act (FCPA) related to an alleged Russian bribery scheme? What were the conclusions of an independent review of the performance of the UK Serious Fraud Office (SFO) in a major foreign bribery prosecution? Which major South American country significantly revised the way it will evaluate corporate compliance programs? The answers to these questions and more are here in our July 2022 Top 10.

1. U.S. Appeals Court Upholds Senior Executive’s FCPA and Wire Fraud Convictions

On July 21, 2022, the United States Court of Appeals for the Fourth Circuit affirmed the conviction of Mark Lambert on FCPA and wire fraud charges related to an alleged scheme to pay more than $1.5 million in bribes to a Russian official in exchange for lucrative contracts for transporting uranium. Lambert was the co-president of Transport Logistics International, a Maryland-based nuclear transportation company that reached a related corporate resolution with the U.S. Department of Justice (DOJ) in March 2018. Vadim Mikerin, an official at a subsidiary of Russia’s State Atomic Energy Corporation (TENEX), the sole supplier and exporter of Russian uranium and uranium enrichment services to nuclear power companies worldwide, pleaded guilty to related charges in August 2015. Following a jury trial in the District of Maryland, Lambert was convicted of one count of conspiracy to violate the FCPA and to commit wire fraud, four substantive FCPA counts, and two substantive wire fraud counts in November 2019 and unsuccessfully sought a post-trial acquittal on the wire fraud charges in February 2020. He was sentenced to four years’ imprisonment in October 2020.On appeal, Lambert raised several evidentiary and procedural challenges and again argued that the government had failed to adduce sufficient evidence to support the wire fraud convictions.The Fourth Circuit rejected all of Lambert’s arguments. With respect to the wire fraud convictions, the court held that the government had proved that Lambert and his coconspirators quoted and charged TENEX an artificially and materially inflated price in order to cover the cost of bribing Mikerin and then concealed the presence of those bribes from TENEX by using fake invoices, coded language, fictitious email addresses, and wire transfers to an unrelated company. Unlike in several other recent cases (see, for example, our August 2019 Top 10 regarding the Ng Lap Seng case), Lambert did not raise any FCPA-specific legal challenges.

2. Houston and Florida District Courts Reach Conflicting Decisions on Money Laundering Jurisdiction

On July 11, 2022, Judge Kenneth Hoyt of the Southern District of Texas granted Paulo Casquireo-Murta’s motion to dismiss money laundering and FCPA charges related to an alleged scheme by U.S. businesses to bribe officials of Venezuela’s national oil company, Petróleos de Venezuela, S.A. (PDVSA), in exchange for assistance in obtaining PDVSA contracts and receiving payment priority.[1] According to the indictment, from 2012 to 2013, Murta, a non-U.S. citizen who worked for an unnamed Swiss company, assisted the U.S. businesses in opening offshore bank accounts that received bribe payments, creating false documents to justify the payments, and taking other steps to facilitate the laundering of the bribe payments. The indictment alleges that on at least one occasion, Murta traveled to the United States to meet with the owner of one of the U.S. businesses to discuss the money laundering scheme. Following his earlier ruling from November 2021, Judge Hoyt held that conduct outside of the United States cannot be used to prove that a defendant acted as an agent of a “domestic concern” under the FCPA. Judge Hoyt further held (rather remarkably) that attending a meeting in the United States to discuss with others the laundering of bribe payments intended for foreign officials cannot be used to prove a conspiracy to violate the FCPA’s territorial jurisdiction provisions and cannot establish a sufficient nexus with the United States to satisfy the due process requirement of the Fifth Amendment. Also following his earlier ruling, Judge Hoyt held that DOJ cannot establish jurisdiction over a money laundering charge unless the defendant was physically present in the United States when the alleged transactions occurred or that he initiated, or attempted to initiate them, from within the United States. Judge Hoyt also found that the charges against Murta were time barred. Accordingly, Judge Hoyt dismissed the FCPA and money laundering charges against Murta. As with the November 2021 order, we think that DOJ has a fairly good chance of success if it appeals the Murta decision.

On July 12, 2022, Judge William P. Dimitrouleas of the Southern District of Florida expressly declined to follow Judge Hoyt’s November 2021 and July 2022 rulings in rejecting a motion to dismiss money laundering charges against former Venezuelan National Treasurer Claudia Patricia Díaz Guillen.[2]DOJ first announced charges against Díaz in December 2020, alleging that she and another former Venezuelan national treasurer, Alejandro Andrade Cedeno, had received bribes from Venezuelan media magnate Raul Gorrin Belisario in exchange for allowing his company to conduct foreign exchange transactions at favorable rates. Although DOJ alleged that Díaz received laundered bribe payments through bank accounts in the United States, Díaz argued that the money laundering charges against her should be dismissed because she did not commit any conduct in the United States. Judge Dimitrouleas held that the superseding indictment contained sufficient factual allegations to support the charges against Díaz. According to the opinion, “The Court is not necessarily persuaded by the opinions in U.S. v. Rafai-Bleuler and Murta, 17-514-CR (S.D. Tex. Nov. 12, 2021, July 11, 2022).”

3. Financial Asset Managers Charged in Venezuela Bribery Scheme

On July 12, 2022, DOJ announced that two financial asset managers—Ralph Steinmann of Switzerland and Luis Fernando Vuteff of Argentina—had been indicted in the Southern District of Florida on one count of conspiracy to commit money laundering related to an alleged $1.2 billion bribery and money laundering scheme involving PDVSA. From December 2014 through August 2018, Steinmann and Vuteff allegedly assisted members of the underlying conspiracy in laundering more than $200 million by various mechanisms. For example, according to the criminal complaint that preceded the indictment, Steinmann and Vuteff helped facilitate the purchase of a condominium in Miami using tainted funds. According to DOJ, Vuteff has been arrested and is pending extradition from Switzerland, while Steinmann remains at large. DOJ has obtained money laundering charges against other financial professionals in connection with this alleged scheme (see, for example our October 2018 and April 2021 Top 10s), as well as several former Venezuelan officials (see, for example, our May 2021 and June 2022 Top 10s).

4. Florida Man and Two Ecuadorian Citizens Charged in Ecuador Bribery Scheme

On July 19, 2022, DOJ announced that Esteban Eduardo Merlo Hidalgo, Christian Patricio Pintado Garcia, and Luis Lenin Maldonado Matute had been indicted in the Southern District of Florida on FCPA and money laundering charges related to an alleged scheme to pay bribes to officials of Ecuador’s state-owned insurance companies Seguros Sucre S.A. and Seguros Rocafuerte S.A. to obtain and retain business for themselves, an intermediary company, and reinsurance clients. Among other things, the conspirators allegedly used bank accounts in Florida as part of the scheme. According to the DOJ press release, Merlo, of Miami, made his initial court appearance on July 19, 2022, while Pintado and Maldonado remain at large. The charges against Merlo, Pintado, and Maldonado are the latest chapter in DOJ’s investigation into corruption in Ecuador’s state insurance industry. (See our March 2021, April 2021, and March 2022 Top 10s for more.)

5. U.S. State Department Announces New Global Anti-Corruption Coordinator

On July 5, 2022, the U.S. State Department announced Richard Nephew as its new Coordinator on Global Anti-Corruption. According to Secretary of State Antony J. Blinken, “Creating and filling this position demonstrates the importance the United States places on anti-corruption as a core national security interest and reiterates the central role global partnerships play in this fight. Richard and his team will strengthen U.S. government alignment on anti-corruption issues and work closely with international partners to advance U.S. anti-corruption policy. Part of this effort includes leading the State Department’s implementation of the first-ever U.S. Strategy on Countering Corruption, and advancing efforts through the Summit for Democracy, as we bring all our resources to advance the Administration’s anti-corruption and broader democratic renewal agenda.” Nephew is a veteran of the State Department and other federal agencies, having previously worked on sanctions and nuclear nonproliferation issues. Secretary Blinken first announced the creation of the Coordinator position in December 2021 to “integrate and elevate the fight against corruption across all aspects of U.S. diplomacy and foreign assistance.”

6. UK Attorney General Publishes Independent Review of Problems Identified in the UK SFO’s Unaoil Investigation

On July 21, 2022, the UK Attorney General’s Office published an “Independent Review into the Serious Fraud Office’s handling of the Unaoil Case – R v Akle & Anor” by Sir David Calvert-Smith, a former director of public prosecutions and high court judge. The UK Attorney General commissioned the review after the UK Court of Appeal overturned the conspiracy conviction of former Unaoil executive Ziad Akle in December 2021 and, in doing so, heavily criticized the SFO’s handling of the case for, among other things, failing to disclose to defense attorneys that an individual associated with Unaoil had pressured another defendant, Basil Al Jarha, to plead guilty in July 2019. Although the review noted that the circumstances in the Unaoil case are “unique” and the likelihood of similar issues coming together again in one case are “remote,” it nevertheless found that the case highlights a “significant number of fundamental failures” by the SFO, including a lack of quality assurance, insufficient resources, poor record keeping, non-compliance with policies, and mistrust between case teams and senior management. The review identified failings on the part of particular individuals and “cultural” issues within the SFO. The review made 11 recommendations to correct the problems that were identified during the review. SFO Director Lisa Osofsky accepted the “sobering” review of her office’s performance and stressed that implementing the report’s recommendations was the SFO’s “pressing priority.”

7. Third Unaoil Conviction Overturned

On July 21, 2022, the UK Court of Appeal overturned the bribery conviction of Stephen Whitely, Unaoil’s former Iraq territory manager. The court held that the same problems that led it to overturn the conviction of Akle and Paul Bond (see #6 above) required it to overturn Whitely’s conviction. Akle and Whitely were found guilty by a jury of conspiracy to give corrupt payments in July 2020. According to SFO, Akle, Whitely, Al Jarha, and Bond conspired with others to pay bribes to public officials at the Iraqi South Oil Company (and, in Al Jarha’s case, the Iraqi Ministry of Oil) to secure oil contracts for Unaoil and its clients. The SFO did not contest the appeal.

8. France Resolves Two Foreign Bribery Cases

On July 7, 2022, France’s National Financial Prosecutor (PNF) announced that the Paris Court of Justice had approved two judicial public interest agreements (CJIP) involving allegations of foreign bribery. A French digital security company agreed to pay a nearly €8 million fine to the French treasury to resolve allegations that it had paid bribes in connection with work on developing a national ID system for Bangladesh. These allegations were also the subject of a November 2017 World Bank resolution with the company. A French engineering company agreed to pay a nearly €3.5 million fine to the French treasury and to undergo audits by the French Anti-corruption Agency (AFA) for a period of three years to resolve allegations that it bribed a foreign official. According to the PNF, these are the eleventh and twelfth CJIPs signed by the PNF. As we have commented in the past, France’s entry into the foreign bribery enforcement arena is a significant development.

9. Transparency International Calls for Strengthened Anti-Corruption Efforts in the Pacific

On July 10, 2022, Transparency International (TI) called upon leaders of Pacific Island nations, meeting at the Pacific Islands Forum Leaders Meeting in Fiji, to address corruption in the region. According to TI, “While climate change persists as the greatest threat to the livelihood, security and well-being of the Pacific people, corruption also plays a major role in undermining progress towards a secure, peaceful and prosperous region.” TI cited worrying trends identified in the 2021 TI Corruption Perceptions Index (CPI) (see our client alert for more on the 2021 CPI results for the Asia-Pacific region), as well as the 2022 TI Report on Corruption and Money Laundering in the Pacific, which indicated that corruption and money laundering present significant challenges in the region. TI recommended a series of recommendations to counter corruption in the region, including, among other things, empowering the police and courts to properly investigate and punish corruption, ensuring that all public contracts are awarded fairly and competitively, and enacting whistleblower protection laws.

10. Brazil Significantly Revises Guidelines for Evaluating Corporate Compliance Programs

On July 12, 2022, a Brazilian presidential decree modified the regulation of Brazil’s Clean Companies Act, updating and providing additional guidance on the practices of the Office of the Comptroller General (CGU). Taking effect on July 18, 2022, the new regulations affect administrative fines, leniency agreements, and the CGU’s evaluation of compliance programs and provide a much-anticipated first step towards independent compliance monitorships. The parameters for the calculation of fines were revamped and could lead to potentially more severe penalties, such as for repeat offenders or where senior executives condoned violations, although discounts were increased for voluntary disclosures and compliance programs. Changes to leniency agreements include the possible sharing of related information and documents between enforcement authorities, a new requirement for admissions of strict liability on the part of malfeasors (as opposed to a recognizance of misconduct), and the possibility of ending leniency agreements early if the CGU determines that doing so would be in the public interest. The CGU’s evaluation of compliance programs will now assess the appropriateness of due diligence with regard to donations, sponsorships, and the hiring and supervision of politically exposed persons, as well as sufficient resource allocation toward integrity compliance. Lastly, the decree provides for the CGU’s direct and indirect monitoring of compliance programsin the context of leniency agreements, opening the way for the CGU to appoint third-party monitors, such as law firms or consultancies. Although compliance monitorships in Brazil are nothing new, the practice had not been formally regulated, and this change may signal the CGU’s desire to increase the prevalence of independent corporate monitors.