Kwame Kilpatrick Guilty
Former Detroit mayor Kwame Kilpatrick has been found guilty of 24 charges ranging from racketeering to bribery. The verdict followed over 70 days of testimony dating back to September 2012, and weeks of jury deliberations.
Much of the testimony focused on Kilpatrick’s friend and co-defendant, Bobby Ferguson, whose excavating company was awarded millions of dollars in contracts from Detroit’s water department in exchange for kickbacks to Kilpatrick. Ferguson was also convicted of racketeering conspiracy.
Other testimony in the trial related to fundraising kickbacks, including from Kilpatrick fundraiser Emma Bell, who considered him “like a son,” but testified that Kilpatrick forced her to kick back to him approximately 50% of her fundraising commissions, over $200,000.
Also on trial was Kilpatrick’s father, Bernard. The jury was unable to reach a verdict on the racketeering conspiracy charge against him, but did convict him of submitting a false tax return.
The United States and Australian governments are investigating BHP Billiton Ltd., the world’s largest mining company, for possible violations of anti-corruption laws related to its sponsorship of the 2008 Beijing Olympics. BHP, which supplied materials for the approximately 6,000 gold, silver, and bronze medals awarded for the 2008 Olympics and Paralympics, reportedly spent millions on a major sponsorship and hospitality package targeted at approximately 170 of its most important Chinese buyers and employees, including senior government officials and Chinese steel and mineral company CEOs.
The company and some of the clients who attended the events said nothing about the events were out of the ordinary, and that all laws were complied with. This investigation follows a 2010 inquiry by the U.S. Securities and Exchange Commission (SEC) into BHP’s possible violations of anti-corruption laws related to various exploration projects outside of China.
In its most recent quarterly SEC filing, Hewlett-Packard Co. (HP) disclosed that the DOJ and SEC have initiated an FCPA investigation into allegations that HP executives paid bribes of over $10 million to Russian officials for a $45 million contract to deliver and install an information technology network for the Russian government.
For the past two years, the German government has been investigating the related actions of one current and two former HP senior executives, as well as seven accomplices. As was also disclosed in HP’s quarterly report, however, the German government has recently asked that HP be made an associated party to the case. This would expose HP to potential disgorgement of profits based on the employees’ conduct.
Las Vegas Sands
Casino giant Las Vegas Sands Corporation (LVSC), the reported in its annual 10-K filing with the SEC that its Audit Committee had made a preliminary finding that LVSC likely violated the books and records and internal controls provisions of the FCPA.
The investigation began a year ago when the SEC requested documents related to LVSC’s FCPA compliance. The company believes the subpoena was triggered by information provided in a wrongful discharge and defamation lawsuit by former LVSC Macau CEO Steven Jacobs against LVSC and its CEO and chairman, Sheldon Adelson.
FCPA Jurisdictional Ruling
U.S. District Judge Shira Scheindlin (S.D.N.Y.) granted Herbert Steffen’s motion to dismiss an SEC suit against him for lack of jurisdiction. Steffen is a German citizen who was the CEO of Siemens’ Argentine subsidiary at a time when bribes were allegedly paid by Siemens in Argentina. Judge Scheindlin ruled that the SEC failed to show Steffen had the requisite “minimum contacts” with the United States in order to establish jurisdiction over him, since “he neither authorized the bribe, nor directed the cover up, much less played any role in the falsified [SEC] filings.”
Judge Scheindlin distinguished her ruling from the February 8 ruling by U.S. District Judge Richard Sullivan, also of S.D.N.Y., that the SEC had jurisdiction over two former Magyar Telekom PLC executives for their alleged roles in a bribery scheme. Judge Scheindlin noted that the Magyar Telekom executives had actually signed the false SEC filings. As discussed in last month’s Digest, Judge Sullivan also held that the five-year statute of limitations applicable to FCPA claims does not begin to run until a defendant enters the U.S., and that the SEC’s jurisdiction does not require a finding that the foreign defendants intended to engage in corruption through interstate commerce.
Cost of FCPA Investigations
Compliance Week recently analyzed and reported on the latest FCPA investigation costs (http://www.complianceweek.com/analysis-the-rising-costs-of-fcpa-investigations/article/282957/).
Avon’s FCPA investigation and related compliance reviews of operations in China, Latin America and elsewhere cost $59 million in 2009 and just under $100 million in each of 2010, 2011, and 2012, for a total cost of $339.7 million.
Through January 2013, Walmart spent $157 million, approximately $604,000 per day, on an FCPA investigation that began less than a year ago. The investigation’s initial focus was on possible bribery and corruption in its Mexican operations, but has since expanded into Brazil, India, and China.
News Corp. has spent $179 million on legal and professional fees and $191 million on civil settlements related to its two-year-old investigation of alleged bribery payments made in connection with its phone hacking scandal.
Microsoft Bribery Claim is Probed by the DOJ and SEC
Microsoft is under preliminary investigation into bribery accusations involving its operations in China. It has been reported that a whistleblower has accused an executive at Microsoft’s China subsidiary of offering bribes to foreign government officials in return for software contracts.
John Frank, a vice president and deputy general counsel at Microsoft, responded that “we take all allegations brought to our attention seriously and we cooperate fully in any government inquiries”. The DOJ and SEC made no to comment.
It is further claimed that Microsoft’s operations in both Romania and Italy are also under investigation.
THE UNITED KINGDOM
Charities advised not to ignore Bribery Act
Ms Helen Simmons, the Finance Director at the Diocese of London, has said charity leaders risk ignoring the Bribery Act “at their peril” and that many charity directors and trustees have not given the Bribery Act “sufficient attention.”
Ms Simmons stated:
“It [incentivising] is considered innovative, entrepreneurial, proactive and particularly attractive to any charity fighting a cause that it cares deeply about and wishes to see quicker progress on.”
She went on to say:
“Bribes can come in forms other than cash and include gifts, hospitality such as travel and entertainment, promises of future business, or even donations to a chosen charity.”
Ms Simmons acknowledged that it may be time for charities to “look again” at the legislation.
THE REST OF THE WORLD
According to the 2012 Americas Barometer survey, in most countries, less than one in six respondents feel paying bribes is sometimes justifiable. In six of the countries surveyed, Guyana, Trinidad and Tobago, Mexico, Colombia, Jamaica and Ecuador, approximately 20% said bribe paying could be justified.
The report which covers 26 nations, suggests such justification is a response to citizens’ expectations of corrupt behaviour on the part of state actors.
The report goes on to say:
“… we should not expect anti-bribery or anti-corruption norms to spring automatically from the processes of modernisation and democracy. It will require state actors to change their behaviour and, in so doing, reshape citizens’ expectations about them. Until then, we should expect many citizens to continue to see paying the occasional bribe as in their own best interest and to act accordingly.”
Further, it is only through governance and rule of law reforms which will generate anti-corruption norms and make bribery and corruption a “non-starter” in the Americas.
For the report on the joint US/Australian investigation into BHP Billiton, see the USA section of the Digest.
The head of the Chinese Communist Party (CCP), Mr Xi Jinping, has introduced a new anti-corruption campaign. Mr Jinping has spoken out against corruption, describing it as a threat to the survival of the CCP. During a speech to the CCP’s anti-corruption watchdog, the Central Commission for Discipline Inspection (CCDI), Mr Jinping warned of the dangers corruption posed for the country.
Those investigated to date include, Mr Li Chuncheng, the former Deputy Party Secretary of Sichuan and another official, Mr Zjhao Haibin. It is alleged that Mr Li Chuncheng received kickbacks in relation to land development projects in Chengdu, the capital of Sichuan. Mr Zjhao Haibin, a Public Security Official, is alleged to have illegally acquired around 200 properties across several cities.
It has been reported that police in India have raided the home of the former air force chief, Mr SP Tyagi, over allegations of corruption in a helicopter deal with AgustaWestland.
The Central Bureau of Investigation (CBI) has registered a case against the firm and its Italian parent company, Finmeccanica. Four firms and 12 individuals are reportedly being investigated in the case.
It has been reported that Indonesia’s anti-corruption commission has named the head of the country’s ruling party as an alleged suspect in a corruption case.
Mr Anas Urbaningrum, the Chairman of the Democratic Party, is accused of accepting a car as a bribe for his part in allegedly fixing government contracts.
Mr Johan Budi, a spokesman for the Corruption Eradication Commission (KPK) stated:
“The KPK preliminary investigation has found strong evidence that unveils the suspect’s involvement in a bribery case and other cases related to the construction of the Hambalong Sports Center.”
Mr Urbaningrum has been charged under Article 12 of the country’s Counter Corruption Law and has been banned from travelling abroad.
It has been reported that the Italian investigation into suspected bribery by workers at Eni and its Saipem unit to secure Algerian oil and gas industry contracts has led prosecutors to a vineyard outside Naples. The vineyard is part owned by two central figures in the case.
A warrant was issued on 6 February to search the homes and offices of executives of Eni and Saipem. The two executives named are, Mr Pietro Varone, the former chief operating officer of Saipem’s engineering arm, and Mr Farid Noureddine Bedjaoui.
Mr Bedjaoui is reportedly suspected of channeling 198 million euros in bribes to officials in Algeria via a company called Pearl Partners Limited for eight contracts totaling $11 billion awarded to Saipem, between 2007-2009.
The warrant says that Mr Varone was one of Eni and Saipem’s main interlocutors with Mr Bedjaoui.
According to a study published last month, bribery presents a major trade barrier within Kenya. It was reported that Kenyan exporters and importers pay an average Sh500,000 (US$5,800) to bribe officials for shipments.
The study which was commissioned by the International Trade Center and conducted by Ipsos Synovate revealed that approximately Sh250,000 goes to custom officials, Sh150,000 to port officials and Sh100,000 to police officers.
The International Trade Center has recommended the prosecution of those who solicit bribes.
The country’s Social Protection Minister, Mr Ravshan Sabirov, has been convicted of corruption and sentenced to five years in prison. The Bishkek City Court ruled that Mr Sabirov will serve his term in a maximum-security prison and his property will be confiscated. Mr Sabirov's former deputy, Mr Takhir Mirzakhmedov, was sentenced to three years in prison. Both men were found guilty of accepting bribes in connection with arranging the adoptions of Kyrgyz children by foreign nationals.
According to Supreme Court Chairman, Mr Vyacheslav Lebedev, approximately 250 people in Russia were charged with taking a bribe exceeding 10,000 rubles ($330) in 2012. The remaining 1,000 cases concerned small bribes.
Mr Vyacheslav Lebedev stated, “Bribery is the most cynical and widespread corruption offence. Last year we [the Supreme Court] heard around 1,300 of these cases, while in 2009 we heard 1,500.”
Mr Lebedev said that 60% of the 1,300 offenders were sentenced for taking less than 5,000 rubles.
“Another 21% took bribes ranging from 5,000 to 10,000 rubles. You can make your own conclusions. The remaining percentage concerned major bribes.”
He also said that teachers and doctors account for 22% of all small bribe cases.
“Small bribes differ from large bribes and so the courts need to differentiate punishment assessing the reasons behind each given crime and the offenders character. The main punishment for small bribes is a fine.”
It was reported last month that Singaporean businessman, Mr Gary Lim Kim Seng, has been convicted of 80 charges of bribery and sentenced to 70 weeks in prison.
Mr Seng along with his accomplice, Mr Andrew Tee, allegedly made payments of $2.4 million in bribes over a period of six and a half years. The payments were allegedly made to Mr Chris Leng Kah Poh, who was employed as food and beverage manager by Ikano, the owners of the Ikea franchise in Singapore. It has been reported that Ikano was overcharged by at least $8 million for the food supplies. Mr Leng was sentenced to 98 weeks in prison and ordered to pay $2,341,508.
Deputy Public Prosecutor Sandy Baggett said the case was “unprecedented” and one of the largest cases of private sector corruption in the country to date.
It has been reported that South Africa’s Justice Minister, Mr Jeff Radebe, has stated that the names of government officials convicted of corruption will be made public.
He said: “…we will be publishing all the names of people who have been convicted in cases of corruption and all those whose assets have either been frozen or have been forfeited to the state.”
Mr Radebe said the government’s anti-corruption task team had made “good progress” recovering the proceeds of corruption.
Over the past three years, 237 corrupt officials had been arrested. Mr Radebe said “[A total of] 32 have been convicted, while only two have been acquitted. The other 203 [cases] are still in the courts.”
Mr Radebe said the use of freezing orders was a useful weapon in the fight against corruption
“to prevent those involved … from benefiting from ill-gotten gains while their cases are being finalised.”