In order to provide an overview for busy in-house counsel and compliance professionals, we summarize below some of the most important international anti-corruption developments from the past month, with links to primary resources. This month we ask: What did several federal courts have to say about the elements of a Foreign Corrupt Practices Act (FCPA) violation? What was the latest development in Mexico’s growing investigation into alleged bribery at its national oil company? Why was February a busy month for foreign bribery enforcement in Switzerland? The answers to these questions and more are here in our February 2020 Top 10.
1. Federal Judge Overturns FCPA Conviction Related to Indonesia Bribery Scheme. On February 26, 2020, District of Connecticut Judge Janet Bond Arterton granted former Alstom executive Lawrence Hoskins’ post-trial motion for acquittal of FCPA charges. In November 2019, a federal jury convicted Hoskins of FCPA and money laundering charges for his role in a scheme to bribe Indonesian officials to secure a power plant project for an Alstom subsidiary in Connecticut. In August 2018, the U.S. Court of Appeals for the Second Circuit held that the U.S. Department of Justice (DOJ) would have to prove at trial that Hoskins, a non-U.S. person working for a non-U.S. subsidiary of a non-U.S. company who did not set foot in the United States during the scheme, was an “agent” of a domestic concern in order to win an FCPA conviction. As discussed in our April 2019 Top 10, the definition of “agent” under the FCPA became a key pre-trial issue as the parties wrangled over the jury instructions. That issue was also key post-trial. Judge Arterton acknowledged that a rational jury could conclude that the Connecticut subsidiary both (1) controlled the hiring of consultants for the power plant project and (2) gave Hoskins instructions, which he followed. The court found, however, that this evidence was insufficient to establish that Hoskins was an agent of the Connecticut subsidiary. According to the court, the subsidiary only generally controlled the hiring of consultants for the project and did not have the right or ability to exercise “interim control” over Hoskins’s actions. The court also noted a lack of any of the “indicia of control which are typical of an agency relationship,” such as a principal’s capacity to assess the agent’s performance, provide instructions to the agent, or terminate the agency relationship by revoking the agent’s authority. Judge Arterton denied Hoskins’ motion for acquittal on money laundering charges. The acquittal on the FCPA charges could affect DOJ’s willingness to pursue “agency-based” theories of prosecution in other FCPA cases. For more on the Hoskins decision, see our client alert.
2. Additional FCPA Charges in Indonesia Bribery Scheme Unsealed. On February 18, 2020, DOJ announced the unsealing of a superseding indictment of two former executives of an Indonesian subsidiary of Alstom S.A. and a former executive of Marubeni Corporation for their alleged participation in the same alleged bribery scheme for which Lawrence Hoskins was charged (see No. 1 above). Reza Moenaf and Eko Sulianto, respectively the ex-president and former director of sales of Alstom’s subsidiary in Indonesia, were each charged with one count of conspiracy to violate the FCPA, two counts of violating the FCPA, and one count of money laundering. Junju Kusunoki, the former deputy general of Marubeni’s Overseas Power Project Department, was charged with one count of conspiracy to violate the FCPA, six counts of violating the FCPA, and four counts of money laundering. The indictment was originally returned by a federal grand jury sitting in the District of Connecticut in 2013 and was superseded in 2015. DOJ did not explain in its press release why the superseding indictment was unsealed in February 2020.
3. Ohio-based Pharmaceutical Company Resolves China Allegations with SEC. On February 28, 2020, the United States Securities and Exchange Commission (SEC) announced that Cardinal Health, Inc. had agreed to pay more than $8 million in combined disgorgement, prejudgment interest, and civil penalties to resolve allegations that it violated the FCPA’s accounting provisions. According to the SEC order, between 2010 and 2016, the company’s internal accounting controls failed to detect improper payments made by employees of its former Chinese subsidiary to government-employed healthcare professionals and employees of state-owned retail companies who had influence over purchasing decisions. The SEC order also alleged that the company failed to maintain complete and accurate books and records concerning the marketing accounts used for these payments. The company neither admitted nor denied the SEC’s findings.>
4. Federal Judge Upholds Fraud Conviction Related to Russia Bribery Scheme. On February 11, 2020, District of Maryland Judge Theodore Chuang denied Mark Lambert’s motion for acquittal following his November 2019 conviction on wire fraud charges related to an alleged scheme to bribe Vadim Mikerin, an official at a subsidiary of Russia’s State Atomic Energy Corporation (TENEX). TENEX was the sole supplier and exporter of Russian uranium and uranium enrichment services to nuclear power companies worldwide. Lambert allegedly bribed Mikerin to secure contracts between TENEX and his company, Transport Logistics International (TLI), which provides services for the transportation of nuclear materials. In his motion, Lambert argued that the trial evidence was insufficient to establish that he made material, false representations or omissions to TENEX because he was under no obligation to disclose the fact that TLI’s contract quotes included a sum of money to pay a bribe or kickback to Mikerin or that TENEX would have rejected TLI’s offers had it known of such payments. Relying heavily on trial testimony by alleged co-conspirator Daren Condrey, whose guilty plea to related charges was announced in August 2015, the court found that there was sufficient evidence that Lambert had actively concealed the bribe payments from TENEX to sustain the convictions. Lambert was also convicted of FCPA violations, which were not the subject of his motion.
5. Federal Judge Holds that Multiple Emails Can Be Charged as Separate FCPA Violations. On February 14, 2020, District of New Jersey Judge Kevin McNulty denied the a former technology executive’s motion to dismiss three FCPA counts as multiplicitous. According to the indictment, the defendant sent three emails in furtherance of a scheme to bribe Indian officials to secure a required construction permit. In his motion to dismiss, the defendant contended that the essence of an FCPA violation is the payment, offer, promise, or authorization of payment to a foreign official and, therefore, the three emails should have been charged as one FCPA violation, rather than three separate violations. In a case of first impression, the court denied the motion. Drawing on analogies to the wire and mail fraud statutes and the Travel Act, the court held that the operative language of the FCPA supported an interpretation that each interstate email sent in furtherance of a foreign bribery scheme is a unit of prosecution.
6. Connecticut-based Industrial Conglomerate Discloses DOJ and SEC Declinations. In a February 6, 2020 securities filing, United Technologies Corporation (UTC) disclosed that DOJ and SEC had notified the company that they had closed their investigations into meal, entertainment, and gift expenditures, as well as a potential conflict of interest involving a third party sales agent in China. According to the filing, the investigation focused on the activities of a predecessor aerospace company that were discovered during a post-acquisition review by a company that UTC acquired in November 2018. In September 2018, UTC resolved separate FCPA allegations with SEC.
7. Venezuelan Citizen Charged and Pleads Guilty in Connection with Venezuela Bribery Scheme. On February 7, 2020, Tulio Anibal Farias-Perez was indicted in the Southern District of Texas on one count of conspiracy to violate the FCPA. According to the indictment, Farias was a 50% partner in several closely held companies that he controlled together with Jose Manuel Gonzalez Testino. Farias and Gonzalez allegedly paid bribes—including cash and Super Bowl tickets—to officials of Venezuela’s national oil company, Petroleos de Venezuela S.A. (PDVSA) to win PDVSA supply contracts, obtain bidding information, and receive priority over other vendors in getting paid. Farias pleaded guilty on February 19, 2020. Gonzalez, who was arrested in August 2018, pleaded guilty to related charges in May 2019.
8. Florida Man Sentenced for Laundering Ecuadorian Oil Bribes. On February 19, 2020, Southern District of Florida Judge Rodney Smith sentenced Jose Melquiades Cisneros Alarcón to 20 months’ imprisonment for conspiring to launder approximately $4.4 million in bribes paid to officials of Ecuador’s national oil company, PetroEcuador. According to DOJ, Cisneros and a co-defendant, Armengol Alfonso Cevallos Diaz, created a shell company for the benefit of PetroEcuador official Marcelo Reyes Lopez, transferred bribery proceeds into the shell company’s bank account, and used the proceeds to purchase several Miami-area properties for Reyes and another senior PetroEcuador official. Cisneros was originally charged with 11 counts, including one count of conspiracy to violate the FCPA, but ultimately pleaded guilty to one count of conspiracy to commit money laundering in August 2019. Reyes pleaded guilty to related charges in April 2018.
9. Pemex Investigation Expands. In our May 2019 and October 2019 Top 10s, we discussed several developments suggesting that Mexico and its state oil company Petróleos Mexicanos (Pemex), “could join Brazil as a major source of anti-corruption investigations and prosecutions in Latin America in the years to come.” In February 2020, there were more indications of this potential development. On February 12, 2020, Emilio Lozoya Austin, Pemex’s former Chief Executive, was arrested in Spain on Mexican tax fraud and bribery charges. Spain’s high court ordered Lozoya to be detained pending an extradition request from Mexico. Later in February 2020, it was reported that former Mexican President Enrique Peña Nieto was also a subject of the investigation. Lozoya allegedly accepted $10 million in bribes from the former executive of a Brazilian construction company while he served as an official in Peña Nieto’s 2012 presidential campaign. This investigation continues to be an important one to watch, especially for companies who did business with Pemex during Peña Nieto’s presidency.
10. Switzerland Active in February. Switzerland has long been one of the more active jurisdictions for foreign bribery enforcement. In February 2020, the country took several steps to reinforce that status. On February 20, 2020, Swiss prosecutors charged former Fédération Internationale de Football Association (FIFA) Secretary General Jerome Valcke, Paris Saint Germain president Nasser Al-Khelaifi and a third business executive in connection with an alleged scheme to bribe Valcke to direct media rights for important football events to certain media partners. (See our May 2015, November 2017, and February 2018 Top 10s for more on the FIFA investigation.) On February 26, 2020, a Swiss court convicted Bernardo Schiller Freiburghas, a Swiss-Brazilian dual national, of complicity in bribery and money laundering involving $35 million in payments made between 2007 and 2014 to employees of Brazil’s national oil company, Petroleos do Brasil (Petrobras). This is reportedly the first Swiss conviction related to Operation Lava Jato (Car Wash). (See our May 2015, May 2016, March 2017, September 2018, and October 2019 Top 10s for some of our prior discussions of Operation Car Wash.) And on February 20, 2020, the Swiss Financial Market Supervisory Authority (FINMA) reprimanded Swiss bank Julius Baer for allegedly ignoring money laundering risks in handling millions of francs of suspect payments linked to corruption in Venezuela and at FIFA. (See our September 2018 Top 10 for a similar action by FINMA.)
 Ruling on Def.’s Rule 29(c) and Rule 33 Mots., No. 3:12-cr-238-JBA (D. Conn. Feb. 26, 2020), ECF No. 617.
 Memorandum Order, Crim. No. 8:18-cr-0012-TDC (D. Md. Feb. 11, 2020), ECF No. 192.
 Memorandum and Order, No. 2:19-cr-120-KM (D.N.J. Feb. 14, 2020), ECF No. 74.
 Judgment in a Criminal Case, No. 1:19-cr-20284-RS (S.D. Fla. Feb. 19, 2020), ECF No. 95.
 Position of the United States on Sentencing and Objections and Clarifications to Presentence Investigation Report, No. 1:19-cr-20284-RS (S.D. Fla. Oct. 17, 2019), ECF No. 60.
In order to provide an overview for busy in-house counsel and compliance professionals, we summarize below some of the most important international anti-corruption developments from the past month, with links to primary resources. This month we ask: Which company entered into a Foreign Corrupt Practices Act (FCPA) resolution for allegedly providing World Cup tickets to government officials? Is a Mexican version of Operation Car Wash brewing? What was the political fallout from Austria’s “Ibiza-gate?” The answers to these questions and more are here in our May 2019 Top 10.
1. Brazilian Telecommunications Company Resolves FCPA Violations related to World Cup. On May 9, 2019, the U.S. Securities and Exchange Commission (SEC) announced that Telefônica Brasil S.A. had resolved allegations that it failed to accurately record payments for tickets and hospitality amenities for dozens of government officials for the 2014 World Cup and the 2013 Confederations Cup, in violation of the FCPA’s accounting provisions. According to the SEC order, the company provided World Cup and Confederations Cup tickets to a total of more than 120 government officials who were directly involved with, or in a position to influence, legislative actions, regulatory approvals, and business dealings involving the company. The order further found that the company improperly booked the ticket costs as being for general advertising and promotional purposes. The company agreed to pay a $4.125 million civil penalty without admitting or denying the SEC findings. There was no parallel resolution with the U.S. Department of Justice (DOJ), suggesting that DOJ declined the matter.
2. Mexico Unveils Bribery-Related Charges Against Former Pemex and Steelmaker Executives. On May 28, 2019, Mexican authorities reportedly issued an arrest warrant for Emilio Lozoya, the former Chief Executive of Mexico’s state oil company, Petroleos Mexicanos (Pemex). The charges, first reported as potential bribery and tax fraud charges and later clarified as money laundering charges, stem from Lozoya’s alleged role in facilitating Pemex’s 2014 purchase of a fertilizer plant from steelmaker Altos Hornos de Mexico (AHMSA) and his alleged acceptance of $10 million in bribes from the former executive of a Brazilian construction company in 2012. The Mexican government previously banned Lozoya, who played a significant role in former Mexican president Enrique Pena Nieto’s election campaign and administration, from public service for 10 years due to the fertilizer plant investigation. Also on May 28, 2019, AHMSA chairman Alonso Ancira was arrested in Spain for allegedly bribing Lozoya. This is the first major bribery prosecution under the administration of Mexican president Andrés Manuel López Obrador, who ran on an anti-corruption platform. Mexico has been criticized by the Organization for Economic Cooperation and Development (OECD) for its deficient anti-corruption efforts, including its delay in enacting reforms under the National Anti-Corruption System (NACS), the implementing legislation for which was signed into law in July 2016. It remains to be seen whether the probe sweeps in more Mexican officials and business executives, as many politicians have urged, and gives teeth to the NACS. If so, Mexico could join Brazil as a major source of anti-corruption investigations and prosecutions in Latin America in the years to come.
3. Malaysian Investment Banker Extradited to United States to Face FCPA Charges. On May 3, 2019, DOJ announced that a Malaysian national and former investment banker, Roger Ng, had been extradited from Malaysia to the United States to face money laundering and FCPA charges related to 1Malaysia Development Berhad (1MDB), Malaysia’s investment development fund. In October 2018, DOJ announced that Ng had been charged in the Eastern District of New York with conspiring to launder billions of dollars embezzled from 1MDB, conspiring to violate the FCPA by paying bribes to multiple government officials in Malaysia and Abu Dhabi, and conspiring to violate the FCPA by circumventing the internal accounting controls of a major New York-headquartered financial institution. Ng pleaded not guilty to the charges on May 6, 2019, and was released on a $20 million bond. On May 23, 2019, DOJ reportedly produced to Ng’s counsel the first subset of 1 million documents it intends to provide on a rolling basis before trial. Ng faces up to 30 years’ imprisonment if convicted of all three charges. (For more on the 1MDB case, see our July 2016, August 2016, June 2017, December 2017, May 2018, June 2018, August 2018, October 2018, and February 2019 Top 10s.)
4. Hawaiian Engineering Firm Owner Sentenced for Micronesia Bribery Scheme. May 14, 2019, DOJ announced that Frank James Lyon had been sentenced in the District of Hawaii to two-and-a-half years in prison for conspiring to violate the FCPA. In February 2019, DOJ announced that Lyon had admitted that, over a 10-year period, he and his co-conspirators paid at least $200,000 in bribes to officials of the Federated States of Micronesia (FSM), to obtain and retain contracts worth approximately $7.8 million. One of the alleged bribe recipients, Master Halbert, an official with the FSM’s Department of Transportation, Communications and Infrastructure, pleaded guilty to a related money laundering charge in April 2019 and is awaiting sentencing. Between 2011 and 2016, Lyon also allegedly paid a Hawaiian state employee $240,000 to win a $2.5 million contract.
5. American-Argentinian Citizen Pleads Guilty to Violating FCPA. On May 29, 2019, DOJ announced that dual U.S.-Argentinian citizen Jose Manuel Gonzalez Testino had pleaded guilty to one count of conspiracy to violate the FCPA and one count of failing to report foreign bank accounts. According to DOJ, between 2012 and 2018, Gonzalez paid hundreds of thousands of dollars to officials of Venezuela’s state-owned oil company, Petroleos de Venezuela S.A. (PDVSA), and its Texas-based subsidiary, Citgo Petroleum Corporation, in exchange for inside information on PDVSA’s bidding process, prioritizing Gonzalez’s invoices, and concealing Gonzalez’s ownership stake in companies that placed bids on PDVSA projects. DOJ had announced Gonzalez’s arrest in August 2018. Sentencing is scheduled for August 28, 2019.
6. PDVSA Officials Sentenced in Connection with Alleged Bribery Scheme. On May 23, 2019, two former PDVSA purchasing officials accused of accepting bribes in exchange for putting companies on PDVSA bidding panels were sentenced in the Southern District of Texas. Karina Del Carmen Nunez-Arias, who admitted to accepting a multi-million-dollar home in Florida, expensive watches, and a trip to Paris, was sentenced to 36 months in prison and ordered to forfeit $3.2 million. Christian Javier Maldonado-Barillas, who cooperated with the government’s investigation, including by recording people allegedly attempting to bribe him, was sentenced to probation and ordered to pay $165,000.
7. Former Venezuelan Minister of Electrical Development Arrested in Spain on U.S. Warrant. On May 9, 2019, Spanish police reportedly arrested Javier Alvarado Ochoa, Venezuela’s former minister of electrical development, on a U.S. warrant for PDVSA-related money laundering charges. Extradition proceedings are still pending against Alvarado, who is also being investigated by Spain and Portugal. Alvarado’s arrest is an example of the growing internationalization of anti-corruption investigations.
8. Investment Bank Executive Charged with Bribery in Hong Kong. In May 2019, Catherine Leung, former Asia investment banking vice-chair of a large financial institution, was reportedly charged with two counts of bribery by Hong Kong’s Independent Commission Against Corruption (ICAC) for allegedly offering employment to the son of a company chairman in 2010 and 2011 in return for favoring the bank’s Hong Kong-based subsidiary for IPO work. In November 2016, the bank and its subsidiary resolved related allegations with DOJ, SEC, and the Federal Reserve. The charges against Leung are another instance of the potential international ramifications of a U.S. enforcement action.
9. Two Former Defense Group Executives Acquitted in Italy of Indian Bribery Charges. On May 22, 2019, Italy’s Supreme Court acquitted two former executives of Leonardo, an Italian state-controlled defense group formerly known as Finmeccanica, of charges related to a 2010 helicopter contract with the Indian government. Giuseppe Orsi, former group chief executive, and Bruno Spagnolini, former head of the group’s helicopter business, had been convicted in 2016 of corruption charges related to the €560-million contract for 12 helicopters. Charges against the group were dropped in July 2014, while the helicopter business agreed to a €7.5 million settlement in August 2014. Orsi and Spagnolini still face corruption and money laundering charges in India.
10. Austrian Politicians Ousted Following Russian Corruption Allegations. On May 17, 2019, Austrian Vice Chancellor and head of the country’s far-right Freedom Party, Hans-Christian Strache, resigned following the release of a video in which he appears to enter into a corrupt deal with the purported niece of a Russian oligarch. In the video, recorded in July 2017 in a mansion on the Spanish island of Ibiza, the Russian woman agrees to purchase 50% of a major Austrian newspaper, which she would use to support the Freedom Party, and to make illegal campaign donations in return for Strache’s agreement to secure lucrative government contracts for her. The exchange turned out to be a sting, apparently staged by a civil-society organization rather than by law enforcement. The video’s release had further ramifications for Austria’s government. Most significantly, on May 28, 2019, Sebastian Kurz, Austria’s Chancellor and head of the country’s center-right People’s Party, which governed in a coalition with the Freedom Party, was ousted after a no-confidence vote by the Austrian parliament. Kurz’s removal was the first time an Austrian leader had been removed from office since World War II. Despite his removal, the 32-year-old Kurz remains popular and some experts predict he and the People’s Party will fare well in the upcoming elections, scheduled to take place in September 2019.
 United States v. Nunez-Arias, 4:16-CR-00436 (S.D. Tex. May 28, 2019), ECF No. 43
 United States v. Maldonado-Barillas, 4:15-CR-00635 (S.D. Tex. May 28, 2019), ECF No. 47.
By MoFo’s FCPA and Global Anti-Corruption Team
In order to provide an overview for busy in-house counsel and compliance professionals, we summarize below some of the most important international anti-corruption developments from the past month, with links to primary resources. This month we ask: How will the Supreme Court’s limitation on the U.S. Securities and Exchange Commission’s (SEC) disgorgement authority influence FCPA enforcement? Will the U.S. Department of Justice (DOJ) continue to seek “declinations with disgorgement?” What is the latest sector to fall under the microscope in China’s ongoing anti-anticorruption campaign? The answers to these questions and more are here in our June 2017 Top Ten list.
1. Personnel Moves at DOJ’s Fraud Section.
- DOJ Compliance Counsel Departs Ahead of Schedule. In November 2015, DOJ announced that it had selected Hui Chen, formerly head of Standard Chartered’s anti-bribery and corruption compliance, for the newly created role of compliance counsel. The appointment was intended to assist prosecutors in assessing a company’s compliance program, particularly when determining the sufficiency of any remediation. Chen’s influence was seen publicly in the FCPA Pilot Program, issued by the Fraud Section in April 2016, and in the “Evaluation of Corporate Compliance Programs,” issued by the Fraud Section in February 2017, and she became a fixture at Filip Factors presentations and other compliance-related meetings at the Fraud Section. Chen’s contract was set to run until September 2017, but in early June 2017, DOJ began advertising for the position. Later in the month, it was announced that Chen had left her position as of June 23, 2017. Following her resignation, Chen posted a statement explaining that her decision was based on disagreements and concerns with the Trump Administration, the prohibition on her public speaking on compliance issues imposed by DOJ, and the limitations the Hatch Act would impose on her ability to be politically active. The addition of a compliance expert was seen by most observers as a positive development at the Fraud Section, and it is welcome news that DOJ appears intent on continuing the role in the future.
- Changes in Leadership Positions at DOJ’s FCPA Unit. In June 2017, Laura Perkins, an assistant chief in DOJ’s FCPA Unit for several years, departed the Fraud Section for private practice. As we discussed in last month’s Top Ten, FCPA Unit Assistant Chief Albert “B.J.” Stieglitz is expected to depart for a two-year detail to the United Kingdom in the near future. Meanwhile, the Fraud Section has hired two new FCPA assistant chiefs in 2017: David Johnson, a veteran of the D.C. U.S. Attorney’s Office and SEC who tried a securities fraud case with FCPA Unit Deputy Chief Dan Kahn in 2014, and Chris Cestaro, who transferred to the FCPA Unit in 2014 following a successful run in the Fraud Section’s Health Care Fraud Unit. While Perkins and Stieglitz’s expertise will be missed by the close-knit FCPA Unit, the unit has added two more talented prosecutors in Johnson and Cestaro to the management ranks.
2. U.S. Supreme Court Limits SEC’s Ability to Obtain Disgorgement. On June 6, 2017, in Kokesh v. SEC, the U.S. Supreme Court unanimously held that SEC’s ability to disgorge allegedly ill-gotten gains from defendants was subject to the five-year statute of limitation set out in 28 U.S.C. § 2462 for suits brought by the government to enforce “any civil fine, penalty, or forfeiture.” The court held that disgorgement operates as a “penalty” within the meaning of that statute. The ruling reverses an August 2016 appellate court opinion and resolves a circuit split. (Interestingly, in the May 2016 decision that caused the circuit split, the appellate court held that disgorgement constituted “forfeiture” within the meaning of Section 2462.) It also deals a potentially significant blow to SEC’s FCPA enforcement efforts. SEC had consistently argued that disgorgement was an equitable remedy not subject to any statute of limitations. This gave SEC the ability to reach alleged misconduct from the distant past, an important tool in FCPA investigations, which tend to be lengthy and tend to involve conduct occurring years in the past. Although Kokesh may provide companies with more leverage in some FCPA investigations, we will likely see countermeasures from SEC. For example, SEC may increase the pressure to move more quickly in FCPA investigations, rely on tolling agreements more heavily, and make more use of its authority to seek civil penalties for conduct that is not time barred.
3. DOJ Continues to Pursue “Declinations with Disgorgement.” “Declinations with disgorgement” were first announced as an enforcement tool in DOJ’s April 2016 FCPA Pilot Program, and it was unclear whether they would survive the change in administration. Two resolutions brought in June 2017 suggest they are here to stay—at least for the time being.
- U.S.-based Units of German Oil and Gas Supplier Receive Declination with Disgorgement in Connection with Georgia Bribery Allegations. On June 16, 2017, in its first public FCPA action under the Trump Administration, DOJ’s FCPA Unit published a letter it sent to Linde North America Inc. and Linde Gas North America LLC declining to prosecute the companies in connection with payments allegedly made by Spectra Gases, a New Jersey-based company acquired by Linde in 2006, to Republic of Georgia officials to ensure continuity of business. The letter further stated that Linde agreed to disgorge and forfeit a combined $11.2 million in connection with the investigation. The letter highlighted the companies’ timely and voluntary self-disclosure, comprehensive internal investigation, compliance program enhancement, and full remediation, including termination of the employees involved in the misconduct and withholding of payments owed to certain executives.
- Boston-based Construction Company Receives Declination with Disgorgement in Connection with India Bribery Allegations. On June 29, 2017, DOJ revealed that it had also resolved its second public FCPA action under the Trump Administration as a declination with disgorgement. In a letter to CDM Smith Inc., DOJ’s FCPA Unit declined to prosecute the company in connection with $1.18 million in improper payments allegedly made by its Indian subsidiary to Indian government officials in connection with securing highway and water project construction contracts from 2011 through 2015. The company agreed to disgorge $4,037,138, pursuant to the terms of the letter agreement. In reaching its decision, DOJ cited the company’s timely and voluntary self-disclosure, thorough and comprehensive investigation, full cooperation, compliance program enhancements, and termination of all executives and employees involved in the misconduct.
4. Guilty Plea in Vietnam Skyscraper Case. In January 2017, DOJ announced charges against four individuals, including the brother and nephew of former UN Secretary General Ban Ki-moon, in the Southern District of New York for allegedly conspiring to bribe a foreign official in connection with a deal to sell Vietnam’s tallest skyscraper. On June 21, 2017, DOJ announced that one of the defendants, Malcolm Harris, had pleaded guilty to wire fraud and money laundering charges in connection with his role as middleman in the scheme. According to DOJ, Harris convinced his co-defendants to send him $500,000 to pay an upfront bribe to a foreign official who could purportedly influence the sale of the skyscraper; in reality, Harris did not have a relationship with the foreign official and instead stole the money, which he spent on “lavish personal expenses, including rent for a luxury penthouse apartment in Williamsburg, Brooklyn.” Harris, who faces up to 30 years’ imprisonment in connection with his guilty plea, is scheduled to be sentenced on September 27, 2017.
5. FIFA Releases Internal Investigation Report Following Additional Guilty Pleas in U.S. Prosecution. In June 2017, two more individuals pleaded guilty to charges arising from DOJ’s sprawling investigation into the Fédération Internationale de Football Association (FIFA), which has been the subject of client alerts, updates, and advice here, here, here, and here.
- Former Guatemalan Judge Pleads Guilty to Wire Fraud. On June 2, 2017, Hector Trujillo, former judge of the Constitutional Court of Guatemala and general secretary of the Guatemalan soccer federation from 2009 to 2015, pleaded guilty to one count of wire fraud and one count of wire fraud conspiracy for his role in awarding lucrative media and marketing rights to the Guatemalan national soccer team’s home World Cup qualifier matches in exchange for hundreds of thousands of dollars. He faces a maximum sentence of 20 years’ imprisonment for each of the two counts for which he pleaded guilty. Trujillo also agreed to forfeit $175,000.
- Former Swiss Bank Managing Director Pleads Guilty to Money Laundering Charge. On June 15, 2017, Jorge Luis Arzuaga, an Argentine citizen and former Swiss private banker, pleaded guilty to money laundering charges for his role in facilitating millions of dollars in bribes to soccer officials, including the late president of the Argentinian soccer federation. From 2010 through 2015, Arzuaga used his position to facilitate bribes by opening bank accounts for shell companies on behalf of soccer officials and transferring funds to officials and their families in exchange for bonus payments. Arzuaga received approximately $1,046,000 in payments and agreed to forfeit that amount.
- FIFA Releases Internal Investigation Report. On June 27, 2017, FIFA released a 400-page plus report of its internal investigation into allegations of corruption surrounding the selection of Russia and Qatar to host the 2018 and 2022 World Cup tournaments, respectively. Although the newly released report is much more detailed than the 42-page “summary” report released in 2014, Russia and Qatar are not expected to be stripped of the rights to host the tournaments. FIFA’s decision to release the report, or at least the timing of the release, appears to have been motivated by a German newspaper’s announcement that it intended to publish a leaked version of the report on June 27, 2017.
6. DOJ Files Forfeiture Complaint in Connection with Alleged Malaysia Bribery Scheme. On June 15, 2017, DOJ announced the filing of civil forfeiture complaints seeking to recover approximately $540 million in assets associated with an alleged international conspiracy to launder funds misappropriated from a Malaysian sovereign wealth fund. The complaints supplement complaints filed in July 2016 arising from the same matter seeking more than $1 billion. Together, the complaints represent the largest action brought under DOJ’s Kleptocracy Asset Recovery Initiative. According to the complaints, from 2009 through 2015, more than $4.5 billion in funds belonging to 1Malaysia Development Berhad (1MDB), an entity designed by the Malaysian government to further Malaysian economic development, was allegedly misappropriated by high-level officials of 1MDB and their associates. Officials at 1MDB, along with their relatives and others, allegedly diverted more than $4.5 billion in 1MDB funds using fraudulent documents and representations and laundered the funds through a series of complex transactions and shell companies with bank accounts located in the United States and abroad. The funds were allegedly used to purchase, among other things, a 300 foot luxury yacht valued at over $260 million, certain movie rights, high-end properties, tens of millions of dollars of jewelry, and artwork. A portion of the proceeds was also allegedly used in an elaborate, Ponzi-like scheme to create the false appearance that an earlier 1MDB investment had been profitable. Malaysian press has reported that the forfeiture actions have caused significant political turmoil, with the governing party denying the allegations and the opposition party organizing protests.
7. Multilateral Development Bank Official Sentenced by UK Court. In the first indictment of 2015, Pennsylvania-based business executive Dimitrij Harder was charged with bribing senior officials at the European Bank for Reconstruction and Development (“EBRD”) to secure millions of dollars of business in development projects in Eastern Europe. After losing several motions, including a challenge regarding the EBRD’s status as a “public international organization” within the meaning of the FCPA, Harder pleaded guilty in April 2016. On June 20, 2017, a UK court sentenced former EBRD banker Andrey Ryjenko to six years’ imprisonment for conspiring to make or accept corrupt payments and money laundering in connection with the Harder scheme. According to the facts presented to the sentencing court, Ryjenko introduced Harder to a number of businesses in former Soviet states to help them apply for EBRD funding. Once the applications were approved, Harder transferred approximately $3.5 million, representing half of his consultancy fees, to Ryjenko through accounts held in the name of Ryjenko’s sister. The Harder-Ryjenko case is an excellent example of cooperation between development banks and law enforcement authorities in multiple jurisdictions. Indeed, the sentencing court and Crown Prosecution Service both credited the assistance they received from U.S. authorities—which included making Harder available to testify via videoconference—for the successful prosecution of Ryjenko.
8. OECD Working Group on Bribery Calls for Increased Foreign Bribery Enforcement in Czech Republic. On June 22, 2017, the OECD Working Group on Bribery released its Phase 4 evaluation report of the Czech Republic. The Working Group called for the Czech Republic, which has yet to prosecute a case involving the bribery of foreign public officials despite its exports in the machinery and defense materials sectors, to “strengthen its efforts to detect, investigate and prosecute foreign bribery.” Nevertheless, the Working Group also recognized improvements made by the Czech Republic over the last several years and its “strong determination to improve its system for combating foreign bribery.” (See our March 2017 Top Ten for more discussion of the Phase 4 evaluation process.)
9. Brazil’s President Charged with Accepting Bribes. On June 26, 2017, Brazil’s President, Michel Temer, was indicted on corruption charges in connection with allegations that he accepted millions of dollars in bribes from a Brazilian meat-packing company in exchange for resolving tax issues and facilitating loans from state-run banks on the company’s behalf. The allegations followed the release of a secret recording between Temer and a company executive in which Temer apparently offered money to buy the silence of Eduardo Cunha, a member of Temer’s party currently serving a 15-year sentence for corruption. (See our May 2017 discussion of these allegations.) Temer, the first sitting Brazilian president to be charged with a crime, became president in May 2016, after his predecessor, Dilma Rousseff, was removed from office to stand trial for impeachment. Rousseff’s predecessor, Luiz Inacio Lula da Silva, has also been charged with numerous crimes (see, for example, our December 2016 Top Ten). Under Brazilian law, the lower house of Congress (the Chamber of Deputies) must now vote on whether to allow a trial against Temer to move forward, with a two-thirds majority required to permit a trial. It appears that Temer may have sufficient votes to resist trial, at least for the time being. However, Brazilian prosecutors are also expected to bring additional charges against him in the coming months.
10. Chinese Anti-Corruption Efforts Continue with Inspection of 31 Major Universities. According to the Chinese press, Chinese authorities recently concluded a political and disciplinary inspection of 31 major universities, including Peking and Tsinghua universities, as part of its continued anti-corruption efforts. Findings from the inspection were reported to the Communist Party of China’s Central Committee on June 28, 2017. According to the report, universities were found to have permitted the private use of public vehicles, banquets at the public expense, and unauthorized overseas business trips. Additionally, the report identified certain university functions, such as university construction projects and management of research funds, as high risk for potential graft. This continued anti-corruption focus is particularly important for those companies engaged in business or research with Chinese universities or affiliated companies.