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 U.S. agency brought its first foreign bribery-related enforcement action? What major anti-corruption reforms were included in the U.S. National Defense Authorization Act for Fiscal Year 2021? What measures are contained in Brazil’s five-year anti-corruption plan? The answers to these questions and more are here in our December 2020 Top 10.

1. U.S. Commodity Futures Trading Commission Resolves First Foreign Bribery Case. On December 3, 2020, the U.S. Department of Justice (DOJ) announced that Vitol Inc., a U.S. subsidiary of the Dutch energy and commodities trader, had entered into a deferred prosecution agreement (DPA) relating to bribes allegedly paid to officials in Brazil, Ecuador, and Mexico between 2005 and 2020 in violation of the Foreign Corrupt Practices Act (FCPA). As part of the DPA, the company agreed to pay a criminal penalty of $135 million, $45 million of which will be paid to Brazilian authorities. In September 2020, DOJ announced charges against Javier Aguilar, a Vitol trader, for his role in the alleged Ecuador scheme. The December 2020 press release stated that DOJ had recently unsealed charges against a former official of Brazil’s national oil company, Petróleo Brasileiro S.A. (“Petrobras”), and an intermediary for their roles in the alleged Brazil scheme. Also on December 3, 2020, the U.S. Commodity Futures Trading Commission (CFTC) announced that the company had agreed to pay more than $95 million in civil monetary penalties and disgorgement to resolve related allegations that the alleged foreign bribery defrauded counterparties, harmed other market participants, and undermined the integrity of the U.S. and global physical and derivatives oil markets. The criminal penalty will offset a portion of the CFTC penalty, resulting in a total payment to the CFTC of approximately $12.8 million in disgorgement and $16 million as a penalty for attempted market manipulation, which is not covered in the DPA. The Vitol resolution marks the CFTC’s first foreign bribery-related resolution since it announced its intention to enter the foreign bribery enforcement arena in March 2019.

2. Second Circuit Affirms Foreign Bribery and Money Laundering Convictions of NGO Officer. On December 29, 2020, the U.S. Court of Appeals for the Second Circuit affirmed the conviction and sentence of Chi Ping Patrick Ho relating to his conduct in bribing foreign public officials in Chad and Uganda. In March 2019, Ho, an officer/director of a U.S.-based non-governmental organization (NGO), which was funded by a Chinese energy company, was found guilty of numerous violations of and conspiracy to violate the FCPA’s anti-bribery provisions and the federal money laundering statute. Ho challenged his FCPA convictions on the grounds that (1) the evidence showed only that he was acting to benefit foreign entities, not the U.S.-based NGO that formed the predicate for his conviction under the FCPA’s domestic concern provision (15 U.S.C. § 78dd-2), and (2) he could not be charged under both the domestic concern (15 U.S.C. § 78dd-2) and territorial jurisdiction (15 U.S.C. § 78dd-3) provisions of the FCPA, which he characterized as “mutually exclusive.” (Ho cited the Hoskins decision as support for the second argument. For more on Hoskins, read our August 2015, March 2017, August 2018, and April 2019 Top 10s and our March 2020 client alert.) The Second Circuit rejected both arguments. First, the court held that the FCPA does not require a U.S. entity to be the beneficiary of the corruption, but rather requires only that the defendant was acting on behalf of a domestic concern to procure corrupt business “for . . . any person,” which can include a foreign entity. Second, the court held that dd-2 and dd-3 are not mutually exclusive: “the FCPA’s statutory language contains no indication that the provisions are mutually exclusive, or that both sections would not cover a director, like Ho, who acts on behalf of both a domestic concern—here, the U.S. NGO—and on behalf of a person other than a domestic concern—here, [the Chinese] NGO. … Nothing in the language of the statute, or Hoskins, prevents an individual from fitting within more than one of [the FCPA’s] three categories, particularly where, as here, that individual acts on U.S. soil on behalf of both domestic and foreign entities.” Ho also challenged his money laundering convictions on the grounds that (1) the FCPA’s territorial jurisdiction provision (15 U.S.C. § 78dd-3) cannot constitute a “specified unlawful activity” (SUA) under the money laundering statute and (2) the government failed to prove that the transfer of bribe funds went “to” or “from” the United States. The Second Circuit rejected both arguments. First, the court held that even though dd-3 was added to the FCPA after the enactment of the money laundering statute, the latter’s inclusion of “any felony violation of the Foreign Corrupt Practices Act” as an SUA signaled Congress’s intent to incorporate the FCPA “in its entirety,” without the need to expressly incorporate later amendments. Second, the court held that a wire transfer from Hong Kong to Uganda that passed through a correspondent U.S. dollar bank account in New York was a transaction “to” or “from”—and not simply “through”—the United States for purposes of the money laundering statute. By addressing several issues of first impression under the FCPA, the Ho decision adds to the growing body of jurisprudence under that statute. (See, for example, our discussion of the development of FCPA case law here. For more on the Ho case specifically, see our November 2017, September 2018, December 2018, March 2019 and March 2020 Top 10s.)

3. Congress Includes Significant Anti-Corruption Reforms in the National Defense Authorization Act. On December 11, 2020, Congress passed the National Defense Authorization Act for Fiscal Year 2021 (NDAA), which establishes the U.S. Department of Defense’s annual budget and expenditures for the upcoming year. This year’s NDAA includes several important anti-corruption measures. According to the Corporate Transparency Act, it is the “sense of Congress” that “malign actors seek to conceal their ownership” of certain corporations, limited liability companies, and similar entities formed under state law to facilitate foreign corruption, money laundering, and other illicit activities. In response, the Act requires certain entities to report their beneficial owners—meaning an individual who exercises substantial control over the entity or controls 25 percent or more of the entity’s ownership interest—to the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”). A second provision requires all federal contractors to declare their beneficial ownership in a public database. (For more detail on the Corporate Transparency Act and other provisions of the Anti-Money Laundering Act of 2020, see our client alert.) The Kleptocracy Asset Recovery Rewards Act (KARRA) establishes a three-year pilot program, overseen by the U.S. Treasury Department, to compensate, up to $5 million, any individual who provides U.S. authorities with information that leads to the recovery of stolen assets tied to foreign government corruption. The KARRA program will supplement the Dodd-Frank Whistleblower Program, administered by the U.S. Securities and Exchange Commission (SEC), which provides for whistleblower awards for information leading to successful enforcement actions related to the FCPA and other federal laws. (For recent discussions of the SEC program, see our September 2020 and November 2020 Top 10s.)

4. New Jersey Business Executive Admits to Bribing Korean Public Official. On December 17, 2020, DOJ announced that Deck Won Kang had pleaded guilty in the District of New Jersey to one count of violating the FCPA’s anti-bribery provisions. Kang allegedly promised a high-ranking official of the Korean Ministry of Defense’s Defense Acquisition Program Administration (DAPA) that he would provide something of value once the official left public office in exchange for awarding contracts to two closely held (but unnamed in the charging document) New Jersey companies. In fulfillment of this promise, between April 2012 and February 2013, Kang allegedly caused $100,000 to be wired from New Jersey to Australia for the benefit of the then-retired official. Kang is scheduled to be sentenced in April 2021.

5. Former Venezuelan National Treasurer and Spouse Charged in Connection with International Bribery and Money Laundering Scheme. On December 16, 2020, DOJ announced that former Venezuelan National Treasurer Claudia Patricia Diaz Guillen and her husband had been charged in the Southern District of Florida with conspiring to violate, and violating, the federal money laundering statute related to their alleged participation in a billion dollar currency exchange and money laundering scheme. A third defendant, Raul Gorrin Belisario, allegedly bribed Diaz, directly and through her husband, and another former Venezuelan national treasurer, Alejandro Andrade Cedeno, to corruptly secure the right to conduct, at favorable rates, foreign exchange transactions for the benefit of the Venezuelan government. In November 2018, DOJ announced charges against Gorrin and a 10-year prison sentence for Andrade. The superseding indictment alleges that Gorrin paid Diaz and her husband millions of dollars through U.S. bank accounts.

6. SEC Relaxes Extractive Companies’ Disclosure Obligations Regarding Payments to Governments. On December 16, 2020, the SEC voted 3-to-2 to adopt changes to its “resources extraction” disclosure rule which was originally implemented to satisfy requirements of the Dodd-Frank Act and the Congressional Review Act. The latest iteration of the rule comes after nearly a decade of debate and two prior attempts to revise it. The revised rule requires covered companies in the extractive industries to disclose the payments they make (directly or by subsidiaries) to the U.S. government and foreign governments. Notably, however, the new rule only requires covered companies to disclose aggregated payment information at a national level instead of providing a contract-by-contract disclosure. The 3-to-2 vote occurred along party lines, with three Republicans voting in favor of the rule and two Democrats voting against it. While an industry consensus has yet to form regarding the new rule, the ability to provide aggregated disclosure is considered generally industry-friendly and may ease the burden of compliance. (For more on the extraction disclosure rules, see our February 2017 and December 2019 Top 10s.)

7. Brazilian Father and Son Plead Guilty in the United States to Petrobras Bribery Scheme. On December 10, 2020, Jorge Luz and his son, Bruno Luz, pleaded guilty in the Eastern District of New York to one count of conspiring to violate the FCPA’s anti-bribery provisions.[1] According to the charging documents,[2] between 2010 and 2015, the Luzes utilized shell companies, sham consulting agreements, and Swiss bank accounts to assist Sargeant Marine, Inc. and others in paying over $5 million in bribes to Petrobras employees and Brazilian governmental officials, including a member of the Brazilian Congress and a Brazilian government minister, in order to secure business from Petrobras. DOJ announced in September 2020 that Sargeant Marine and several other individuals had pleaded guilty to related charges. Sentencing for the Luzes has not yet been scheduled. They are currently serving sentences received in Brazil in 2017 in connection with Operation Lava Jato (“Operation Car Wash”), an expansive investigation into alleged corruption involving Petrobras. (See our May 2015, May 2016, March 2017, September 2018, October 2019, February 2020, and September 2020 Top 10s for some of our prior discussions of Operation Car Wash.)

8. Dutch Multinational Technology Company Settles Brazilian Bribery Investigation. On December 9, 2020, Brazil’s Federal Prosecution Service (MPF) announced that it had approved the clemency agreement entered into by Koninklijke Philips N.V. and the Operation Car Wash task force. In addition to paying an $11.6 million settlement amount, the agreement requires the company to enhance its compliance program, which will be monitored by an independent consultancy firm approved by MPF.

9. Brazilian Government Releases Five-Year Anti-Corruption Plan. On December 9, 2020, the Brazilian government announced a five-year anti-corruption plan. According to the head of Brazil’s Comptroller-General Office (CGU), the plan adopts recommendations from the United Nations, the Organization for Economic Co-operation and Development (OECD), and the Organization of American States. The plan’s primary objective is to coordinate cooperation among government agencies as they each work to combat corruption. (Notably, however, the MPF does not appear to have held a seat on the interagency committee that developed the plan.) The plan has 142 actions—78 focused on prevention, 34 focused on detection, and 30 focused on fiscal responsibility and accountability. It contains measures related to private sector compliance programs, lobbying and public integrity, whistleblowers, investigations, leniency agreements, and international cooperation, among other measures. The plan signals Brazil’s continued focus on anti-corruption, even as Operation Car Wash appears to be winding down.

10. OECD Working Group on Bribery Criticizes Iceland’s Foreign Bribery Enforcement Record. On December 17, 2020, the OECD Working Group on Bribery announced the results of its Phase 4 evaluation of Iceland’s implementation of the OECD Anti-Bribery Convention. The Working Group concluded in its report that Iceland must improve its efforts to detect and enforce its foreign bribery offenses, noting that, despite being one of the first countries to sign the Convention, Iceland had only recently commenced its first foreign bribery investigation. Iceland is expected to submit a report to the Working Group on the implementation of the recommendations contained in the report and on its enforcement efforts by December 2022.

[1] Minute Entry, United States v. Bruno Luz, 20-cr-558-ENV, ECF No. 7 (Dec. 10, 2020); Minute Entry, United States v. Jorge Luz, 20-cr-559-ENV, ECF No. 7 (Dec. 10, 2020).

[2] Information, United States v. Bruno Luz, 20-cr-558-ENV, ECF No. 6 (Dec. 9, 2020); Information, United States v. Jorge Luz, 20-cr-559-ENV, ECF No. 6 (Dec. 9, 2020).

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 did the U.S. Department of Justice (DOJ) revise its stance on ephemeral messaging systems? Which U.S. enforcement agency announced that it had entered the foreign bribery arena? What steps has the U.S. Federal Bureau of Investigation (FBI) taken to combat foreign bribery in Latin America? Which Asian country appointed its first-ever anti-corruption ombudsman? The answers to these questions and more are here in our March 2019 Top Ten list.

    1. DOJ Revises Foreign Corrupt Practices Act (FCPA) Corporate Enforcement Policy. On March 8, 2019, Assistant Attorney General Brian Benczkowski announced that DOJ had revised the FCPA Corporate Enforcement Policy (the “Policy”). First announced in November 2017, the Policy was designed to encourage companies to self-report FCPA violations and to cooperate with DOJ FCPA investigations. The revised Policy includes a number of changes, but most notably softens DOJ’s stance on ephemeral messaging systems. Whereas the original Policy required companies seeking remediation credit under the Policy to prohibit ephemeral messaging systems, the revised Policy requires companies to “implement[] appropriate guidance and controls on the use of personal communications and ephemeral messaging platforms that undermine the company’s ability to appropriately retain business records or communications or otherwise comply with the company’s document retention policies or legal obligations.” The revised Policy also clarifies when a company seeking full credit for cooperation must coordinate (or “de-conflict”) its internal investigation with DOJ and makes explicit that companies undergoing mergers and acquisitions can avail themselves of the Policy if they uncover wrongdoing at the target entity. Overall, the revisions are a positive development that seem to reflect that the Department listened to and incorporated feedback from the business community on the challenges posed by the original Policy. For more on the revised Policy and an extended discussion of the implications of the revised ephemeral messaging requirements, please see our client alert and our Socially Aware blog post.

    2. U.S. Commodity Futures Trading Commission (CFTC) Announces Entry into Foreign Bribery Enforcement Arena. On March 6, 2019, the CFTC Division of Enforcement announced that it had issued an Enforcement Advisory on self-reporting and cooperation for violations of the Commodity Exchange Act (CEA) involving foreign corrupt practices. In a speech delivered the same day, James McDonald, the CFTC’s enforcement chief, explained that foreign bribery “might constitute fraud, manipulation, false reporting, or a number of other types of violations under the CEA, and thus be subject to enforcement actions brought by the CFTC. Bribes might be employed, for example, to secure business in connection with regulated activities like trading, advising, or dealing in swaps or derivatives . . . [or] to manipulate benchmarks that serve as the basis for related derivatives contracts . . . [and] might alter the prices in commodity markets that drive U.S. derivatives prices. We currently have open investigations involving similar conduct. But regardless of the specific factual scenario, we are committed at the CFTC to enforcing the CEA provisions that encompass foreign corrupt practices.” Similar to the DOJ FCPA Corporate Enforcement Policy, the Enforcement Advisory states that, absent aggravating circumstances, there will be a presumption against a civil monetary penalty for companies and individuals that are not registered, or not required to be registered with the CFTC, that self-disclose and cooperate in the investigation of violations of the CEA involving foreign corrupt practices. The presumption will not apply to CFTC registrants, but the CFTC will recommend a “substantial reduction in the civil monetary penalty” for registrants who self-report and cooperate. In his speech, McDonald sought to reassure the public that the CFTC would work closely with other enforcement agencies, including DOJ and SEC, and, echoing DOJ policy, “will not pile onto other existing investigations.” How much of an impact the CFTC’s entry into the foreign bribery enforcement arena will have is yet to be seen but, for companies that fall within the CFTC’s scope, this development adds further complexity to the process of reaching a global settlement of foreign bribery allegations.

    3. FBI Establishes Miami-Based International Corruption Squad. On March 5, 2019, the FBI announced that it had created a dedicated international anti-corruption squad based in its Miami Field Office. The FBI had previously created similar squads in its New York, Los Angeles, and Washington, D.C. Field Offices. These squads focus on foreign bribery, kleptocracy, and antitrust matters that occur outside U.S. borders but have a nexus to the United States. The creation of the Miami squad is a reflection of the significant ongoing investigations into alleged corruption in Latin America (see, for example, our coverage of ongoing investigations involving national oil companies in Brazil, Ecuador, and Venezuela) and, more broadly, the importance of Miami as a hub for activities that violate the FCPA and related laws.

    4. Former Uzbek Official and Former Telecommunications Executive Charged in Alleged Bribery and Money Laundering Scheme, While Third Telecommunications Company Resolves Related Allegations. On March 7, 2019, DOJ announced that money laundering charges had been unsealed against Gulnara Karimova, a former Uzbek government official and daughter of former Uzbek president Islam Karimov. Bekhzod Akhmedov, a former telecommunications executive, was also charged with money laundering and FCPA violations. According to the indictment, filed in the Southern District of New York, Akhmedov helped three telecommunications companies pay more than $865 million in bribes to Karimova between 2011 and 2012 in return for lucrative business opportunities and to operate in the Uzbek market. Two of the three telecommunications companies, Amsterdam-based VimpelCom and Stockholm-based Telia, had previously resolved related allegations in February 2016 and September 2017, respectively. On March 6 and 7, 2019, the U.S. Securities and Exchange Commission (SEC) and DOJ announced that the third company, Russia-based Mobile TeleSystems PJSC (MTS), and its subsidiary Kolorit Dizayn Ink LLC, had agreed to resolve allegations that they paid $420 million to Karimova between 2004 and 2012. MTS agreed to pay a total combined penalty of approximately $850 million pursuant to a deferred prosecution agreement (DPA) with DOJ and an administrative cease-and-desist order with SEC and a guilty plea for Kolorit. Taken as a whole, these actions have led to the recovery by U.S. and foreign authorities of approximately $2.6 billion, and involved cooperation and coordination between enforcement authorities in the United States, the Netherlands, Sweden, Switzerland, Norway, Latvia, the UK, France, and Ireland.

    5. Germany-Based Provider of Medical Products and Services Resolves FCPA Allegations. On March 29, 2019, DOJ and SEC announced that Fresenius Medical Care AG & Co. KGaA had agreed to pay a total of approximately $231 million to resolve allegations that it made improper payments to health care providers or health officials in several countries, in violation of the FCPA’s anti-bribery and accounting provisions. The company entered into a non-prosecution agreement (NPA) with DOJ, while the SEC entered an administrative cease-and-desist order.

    6. Mozambique’s Former Finance Minister and Several Others Charged in “Tuna Boat” Case. On March 7, 2019, DOJ announced the unsealing of an indictment, filed in the Eastern District of New York, alleging a $2 billion bribery, fraud, and money laundering scheme perpetrated by government officials from Mozambique, shipbuilding executives, and investment bankers. The indictment alleges that three former Mozambique officials—Manuel Chang, the country’s former minister of finance, Antonio do Rosario, an official with Mozambique’s State Information and Security Office, and Teofilo Nhangumele, a representative of Mozambique’s Office of the President—coordinated with three former London-based investment bankers and two executives at a shipbuilding company to steal approximately $200 million from a total of $2 billion in loans issued to state-controlled companies between 2013 and 2016 for three maritime projects, including one related to tuna fishing. One of the shipbuilding executives was arrested at John F. Kennedy Airport in New York in January 2019 and has pleaded not guilty; a trial date has not yet been set. The United States is seeking extradition of three investment bankers arrested in London in January 2019 and Chang, who was arrested in South Africa in December 2018. Do Rosario, Nhangumele, and the remaining shipbuilding executive are not currently in U.S. custody, although do Rosario and Nhangumele have reportedly been arrested in Mozambique. The tuna boat case is another reminder that DOJ will pursue FCPA and related charges against non-U.S. citizens, including against the officials who allegedly received the bribes.

    7. Ex-Hong Kong Minister Sentenced for African Bribery Schemes. On March 25, 2019, DOJ announced that former Hong Kong home affairs minister Patrick Ho had been sentenced in the Southern District of New York to 36 months’ imprisonment and a fine of $400,000. Ho was convicted in December 2018, following a week-long trial, of FCPA and money laundering charges stemming from allegations that, while acting as the head of a Virginia-based non-governmental organization, he offered to pay $2.9 million in bribes to prominent African politicians, including the president of Chad and Uganda’s foreign minister, in order to secure contracts for a Chinese energy conglomerate. Ho’s sentence was two years shorter than DOJ had sought, in part because the court took into account what it deemed to be Ho’s “extraordinary” history of charity.

    8. Canadian Court Sentences UK and U.S. Nationals to 30-Month Prison Terms Over Failed India Bribery Scheme. On March 7, 2019, an Ontario Superior Court judge sentenced Robert Barra, a U.S. citizen, and Shailesh Govindia, a UK national, to 30 months’ imprisonment in connection with a failed plot to bribe officials at India’s national airline, Air India, to secure a biometrics contract for U.S.-based Cryptometrics and its Canadian subsidiary. Barra’s and Govindia’s January 2019 convictions were the result of the second-ever trial under Canada’s foreign bribery law, the Corruption of Foreign Public Officials Act (CFPOA). In July 2017, the Court of Appeal of Ontario affirmed the first-ever conviction under the CFPOA in connection with related charges against Nazir Karigar, a former agent of the Canadian subsidiary. The Barra and Govindia case was also noteworthy because the court held that prosecutors were required to prove that the defendants had knowledge that the intended bribe recipient was a “foreign public official” under the CFPOA. The court found the evidence sufficient to prove that the defendants knew that India’s Minister of Civil Aviation was a foreign public official but insufficient to prove the same regarding the Air India employees.

    9. OECD Working Group on Bribery Reports on the UK’s Foreign Bribery Enforcement Record. In March 2017, the Organization for Economic Cooperation and Development’s Working Group on Bribery released its first “Phase 4” evaluations, of the United Kingdom and Finland. The Phase 4 monitoring process, launched in March 2016, focuses on the evaluated country’s enforcement of the OECD Anti-Bribery Convention and considers the country’s particular challenges and positive achievements. On March 21, 2019, the Working Group published its “Phase 4 Two-Year Follow-Up Report” for the UK. The report concluded that the UK had fully or partially implemented roughly three-quarters of the 2017 report’s recommendations. The report commended the passage of the Criminal Finances Act of 2017 and the increased level of, and capacity for, enforcement of the UK’s foreign bribery laws. But the report expressed concern that the “total number of finalised and ongoing cases relative to the UK economy remains relatively low,” including just three concluded foreign bribery cases since the Phase 4 evaluation in 2017. Other areas for improvement noted in the report include increasing collaboration between government agencies to promote information sharing and bribery detection; increasing transparency surrounding court decisions on foreign bribery cases, including routine publication of sentencing remarks; and ensuring the independence of foreign bribery investigations and prosecutions. The Working Group requested that the UK file an update on its implementation progress in another two years.

    10. India Appoints First Anti-Corruption Ombudsman. On March 19, 2019, Indian President Nath Kovind cleared the way for former Indian Supreme Court Justice Pinaki Chandra Ghose to become the first anti-corruption ombudsman, or Lokpal, of India. Ghose was appointed under the Lokpal Act, which authorizes the Lokpal to investigate corruption allegations against any public official, other than officials in the armed forces. The Act also provides for analogous positions at the state level. Although passed in 2013, no ombudsman had been appointed until the Indian Supreme Court ordered the Indian government to appoint a Lokpal in January 2019. India, which ranked 78th out of 180 countries on the 2018 Transparency International Corruption Perception Index, is predicted to be the fastest growing major economy in the world over the next two years. As such, it will be interesting to see the impact that this appointment will have on anti-corruption enforcement.