Canadian-based Nordion, Inc. has indicated to US and Canadian regulators that it may have uncovered possible violations of the FCPA and the corresponding Canadian anti-corruption statute, the Canadian Corruption of Foreign Public Officials Act. Nordion, based in Ottawa, supplies medical isotopes and had revenue of $274 million in the US in 2011.
Nordion has not provided details on the investigation, but has indicated that “these issues relate to potential improper payments and other related financial irregularities in connection with the supply of materials and services to the company.” The potentially problematic payments were discovered during an internal audit. The company is taking a proactive approach to investigating them, and voluntarily contacted regulators.
Two US congressmen have alleged that Wal-Mart has possibly engaged in tax evasion and money laundering in connection with its Mexican subsidiary. The New York Times previously reported in April of this year that Wal-Mart had reported potential violations of the FCPA in Mexico, and that those potential violations were under investigation by the DOJ and SEC.
The new allegations were made by Representatives Elijah Cummings and Henry Waxman in a letter to Wal-Mart Chief Executive Michael Duke; the two congressmen are heading the Congressional investigation into Wal-Mart’s potentially corrupt activities.
In the letter to Mr. Duke, Representatives Cummings and Waxman urge Wal-Mart to respond to requests for information regarding its potential FCPA violations and note that Wal-Mart may “have had compliance issues relating not only to bribery, but also to 'questionable financial behaviour' including tax evasion and money laundering in Mexico." The letter further indicated that, thus far, Wal-Mart had not cooperated with the Congressional investigation, by failing to produce requested documents and failing to provide access to key witnesses.
Wal-Mart had no immediate comment on the letter. Wal-Mart’s Mexican subsidiary, Walmex, indicated that it had no knowledge of any investigation by Mexican authorities into tax evasion or money laundering issues.
According to the New York Times, Pfizer, Inc. and the SEC and DOJ have agreed to a settlement of FCPA claims against the drug manufacturer. The settlement totals $60 million: $45 million in claims against Pfizer and Wyeth (which is owned by Pfizer) subsidiaries that the companies bribed doctors and other health care workers abroad in order to increase drug sales, and $15 million in similar claims against Pfizer H.C.P. Corporation, another Pfizer subsidiary.
The SEC alleged, in a statement, that the overseas Pfizer and Wyeth subsidiaries “had bribery so entwined in their sales culture that they offered points and bonus programs to improperly reward foreign officials who proved to be their best customers,” and that the charges “illustrate[d] the pitfalls that exist for companies that fail to appropriately monitor potential risks in their global operations.”
Pfizer indicated that it had reported the potential violations to the SEC in 2004, when it discovered improper payments made by a newly acquired subsidiary in Croatia. The charges involved improper payments made in numerous countries, including Bulgaria, Italy, Croatia, Czech Republic, Kazakhstan, Serbia, China, Indonesia, Pakistan, and Russia. A particular issue was the type of “point program” set up in China, under which physicians received points for writing prescriptions for Pfizer products, and could then redeem the points for products such as cellphones or tea sets. In China, Indonesia and Pakistan, doctors received “cash payments and other gifts” for recommending Wyeth nutritional products; the bribes were then concealed by fake invoices.
Pfizer is said to have implemented a rigorous compliance program, and has thereby avoided more stringent oversight by the SEC or other regulators as part of the settlement. The DOJ cited Pfizer’s “extraordinary” cooperation in the investigation.
The settlement is also said to have implications for successor liability.
Oracle Corp., the software manufacturer, has agreed to a $2 million settlement with the SEC to resolve civil FCPA charges. The SEC had alleged that Oracle violated the FCPA by allowing an Indian subsidiary to set aside secret funds that went to falsified local vendors; the SEC noted that the secret funds could potentially be used for bribes in violation of the FCPA. More specifically, the SEC noted in a statement that, “through its subsidiary's use of secret cash cushions, Oracle exposed itself to the risk that these hidden funds would be put to illegal use.”
The alleged secret funds were maintained from 2005 to 2007, and kept Oracle from reporting certain amounts of revenue. The at-issue Oracle subsidiary sold software licenses and services to the Indian government.
The settlement is notable for the fact that it does not involve any actual payments to officials, but rather the “risk” of such payments created by the secret side funds. Commentators report that the settlement thus indicates the SEC’s broadening of its investigation and pursuit of potential FCPA violations.
Oracle reports that it has complied with the investigation and has terminated the employees involved in the alleged violations.
THE UNITED KINGDOM
Serious Fraud Office launch criminal investigation into allegations that EADS subsidiary paid bribes
The Director of the Serious Fraud Office has decided to formally open a criminal investigation into allegations that a EADS’s subsidiary based in Britain, GPT Special Project Management Ltd, bribed Saudi Arabian officials to secure a US$3.3bn communications contract to provide communications and intranet services to the Saudi National Guard.
Details of the investigation were first published last year but the investigation was suspended. The initial allegations were made by former GPT employee, Lieutenant Colonel Ian Foxely who sued the company after he was fired for expressing concerns about possible bribery at the firm.
EADS said in a statement that they “will continue to fully and constructively engage with the SFO”.
Shell is accused of paying bribes to warlords
Shell allegedly paid ‘protection’ money to dangerous warlords and militants to stop attacks on its pipelines in the Niger Delta.
It is reported that Shell battles against oil theft and the threat of kidnapping every day. In order to resolve the security situation the Company has allegedly been forced to go to great lengths.
Campaign group Platform argue that bribing such individuals creates instability in the area. A Platform report states that “from 2005 to 2010, Shell’s routine contracts and payments to armed militants fuelled a range of conflicts”.
Despite SPDC’s (Shell’s Nigerian joint venture) 2003 announcement that it had ordered staff to make ‘no cash payments to communities other than those specified for legitimate business relations’, three months later Shell was allegedly still offering informal cash payments to local groups.
Whilst Shell describes some of the payments as ‘surveillance contracts’, Platform argues that these contracts are “simply a fig leaf for illegitimate protection payments”.
A Shell spokesperson stated: “Protecting our people and our assets is Shell’s highest priority, and we have always acknowledged the difficulties of working in countries like Nigeria. We comply fully with local legislation when making payments to any third party”.
Prison officer arrested over alleged bribes
A prison officer has been arrested by detectives investigating alleged corrupt payments to public officials.
The arrests bring the total number of people arrested by officers from Operation Elveden to 44.
THE REST OF THE WORLD
House of Representatives
Legislator, Mr Farouk Lawan, who was the lead author of a parliamentary report that stated that Nigeria had lost US$6.8bn between 2009 and 2011 through a corruption-riddled fuel subsidy programme, allegedly told the head of Zenon Oil, Mr Femi Otedola, that he would delete the company’s name from the report in return for US$3m.
It is claimed that a video tape exists which shows Mr Lawan stuffing the bribes into his pockets. It is also reported that Mr Lawan put some money under his hat when his pockets were full.
The allegations have been rejected by Mr Lawan, who reportedly told a closed-door hearing of the ethics committee in the House of Representatives that Mr Otedola proposed the deal and that he quickly informed the authorities. Mr Lawan claims that he collected the money not as a bribe but as evidence to prove that the oil marketer had attempted to influence the report.
The Economic and Financial Crimes Commission have charged a group of companies and individuals. However, as Mr Debo Adeniran, Head of the Coalition Against Corruption Leaders, remarks “All of this […] doesn’t paint a glowing picture of a regime that is trying to crack down on the fuel subsidy scandal”.
Former President on trial for bribery
Former President, Mr Fernando de la Rua, allegedly paid $5 million to secure the votes of a group of senators in favour of legislation removing workers rights.
It is reported that a three judge panel has already accepted the bribery as fact. Prosecutors are now tasked with proving that Mr de la Rua ordered the payments.
300 witnesses have been lined up for the trial including President Cristina Fernandez.
Mr de la Rua denies the charges.
Reserve Bank of Australia
Further to the July 2011, September 2011, March 2012 and April 2012 editions of the Anti-Corruption Digest, Reserve Bank of Australia (RBA) executives are to make an appearance in front of the House of Representatives economics committee for three hours of testimony and questions.
The spotlight will be on the RBA’s wholly owned company Note Printing Australia (NPA) and part-owned company Securency who allegedly bribed foreign officials to obtain contracts.
The RBA has recently rejected claims that senior officials misled the committee when it was first made aware of the concerns. The parliamentary committee had been assured last year that the bank’s board members did not know about the bribes allegedly paid by Securency and NPA until 2009 when they were exposed in the media. However, a leaked memo by the former NPA secretary, Mr Brian Hood, to the former RBA deputy governor, Mr Ric Battellino, apparently details corrupt behaviour inside NPA back in 2007.
The leaked memo comes a day after Securency’s former chief financial officer, Mr David Ellery, pleaded guilty to false accounting, allegedly concealing bribes made to a Malaysian agent. Mr Ellery was sentenced to six months imprisonment, suspended for two years.
The former managing director of the now defunct wheat exporter AWB Ltd, Mr Andrew Lindberg, has been fined AUS$100,000 (US$106,000) and banned from being a company director until September 2014 for his part in the Iraqi oil-for-food scandal.
It is alleged that AWB officials paid almost AUS$300m in bribes to Iraq’s former dictatorship in return for wheat contracts.
Mr Lindberg admitted to breaching the Corporations Act by failing to inform the United Nations or the AWB board about the bribes.
He told reporters: “I think in any market, particularly overseas when you deal with third-world countries, I think you’ve got to be very careful, and it’s perhaps easier than you think to make mistakes”.
The Australian Securities and Investments Commission continues to investigate four other AWB executives over the scandal.
Former Central Bohemia Governor
It has been alleged that the seven million crowns found on the former Central Bohemia governor, Mr David Rath, in May, was a bribe for the reconstruction of the Bustehrad chateau.
In June Mr Rath suggested that the money might have been partially destined for funding the Czech Social Democratic Party (CSSD). However, this notion has been dismissed by the CSSD.
Social Democrat leader, Mr Bohuslav Sabotka remarked: “The Social Democrats have nothing to keep secret when it comes to their financial management […] Rath’s case is not connected in any way with the CSSD’s funding or the financing of our election campaign”.
The Chamber of Deputies has now released Mr Rath for criminal prosecution.
A Paris Court has fined Safran EUR500,000 (US$630,000) for allegedly bribing Nigerian officials to secure a EUR170m contract to make 70m identity cards in 2000/2003. Two Safran executives were spared the suspended sentence and fines sought by the prosecution.
Safran has said it will appeal.
Member of the Legislative Assembly
It is reported that a Bellary Member of the Legislative Assembly (MLA), Mr Somasekhar Reddy, has been arrested and put before court after he allegedly confessed that he actively participated in conspiring to secure bail for his brother, Mr Janardhan Reddy, accused in relation to Obulapuram Mining Company.
Mr Janardhan Reddy was granted bail in May in return for RS20 crore. Mr Somasekhar Reddy is said to have admitted that the bribe money was arranged by Kampli MLA, Mr T.H. Suresh Babu and his brothers personal assistant, known as Prakash.
We have reported the Oracle settlement with the SEC under the US section of this Digest.
Member of the House of Representatives
A House of Representatives member and former beauty queen, Ms Angelina Sondakh is accused of abusing her position as a member of the DPR’s Budget Committee and Coordinator of the Budget Working Group by accepting a Rp33.73bn bribe.
According to the public prosecutor, Mr Angus Salim, Ms Sondakh received the money in return for helping Permai Group “[…] to get the budget it demanded for projects of the high learning institute programs of the ministry of education and facility procurement programs of the ministry of sports and youth affairs”.
Ms Sondakh could face life imprisonment if convicted. In response to the corruption charges, it is reported that she said she would submit herself to fate.
Former Prime Minister, Mr Omurbek Babanov, has been accused by the Ata-Meken party of granting government contracts in return for a racehorse.
Party deputy Mr Zhoomart Saparbayev claims that the horse, allegedly valued at between $500,000 and $1.5 million, was imported without import duties by a company which secured licences to build an air traffic control tower at Bishkek’s Manas Airport. The horse is now understood to belong to Mr Babonov.
Mr Babonov’s office released a statement rejecting the accusations. They argue that Mr Babonov bought the horse with his own money and that its value is much less than that suggested.
Pakistan People’s Party
The government has been accused of bribing some media houses and TV anchors to prevent them from criticising the Pakistan People’s Party and encourage favourable coverage.
It has been reported that Transparency International has written to the Chief Justice of Pakistan complaining that the government is trying to influence the media houses by allegedly bribing them through advertisements. The letter suggests that the government is allegedly using a secret fund of 2.97bn rupees to buy loyalties.
Federal Service for Financial Markets
The deputy director from the Federal Service for Financial Markets’ regional branch in the Southern Federal District has been accused of accepting large bribes in return for protecting businesses in the Rostov and Volgograd regions.
During a undercover operation the deputy director allegedly took bribes for not charging a number of regional businesses who had violated federal law on joint-stock companies. Investigators in the Rostov region have begun an inquiry into the allegations.
Lukhovitsky municipal district
The head of the Lukhovitsky municipal district Mr Nikolai Isaenkov and his deputy Mr Nikolai Kuskov have been arrested after they allegedly demanded a three million rouble bribe from a businessman.
The businessman was allegedly trying to rent 4,000 sq.m of land to construct a production line. He was allegedly required to pay the bribe under the guise of a donation for building an Orthodox temple.
The police also arrested an intermediary who was allegedly tasked with receiving the money in Mr Kuskov’s service car.
Democratic United Party
A veteran member of the Democratic United Party (DUP), Ms Yang Gyeong-suk, and three lawmakers have been detained following bribery allegations.
Ms Gyeong-suk is accused of meeting with the lawmakers on the eve of the April legislative elections and accepting a total of 4 billion won (US$3.52m) in exchange for using her connections with the DUP to win nominations.
Ms Gyeong-suk denies the allegations and claims that these were legitimate investment deals supported by investment contracts. The prosecution rejects this argument and believes that the documents were produced to disguise the real purpose of the deals.
The prosecution has detained Ms Gyeong-suk and the three alleged bribe givers who are reported as the head of a district-run institution in Seoul, a businessman from Busan and the head of a tax accounting firm.
Four former lawmakers have been found guilty of accepting NT$40 million in bribes from the National Chinese Herbal Apothecary Association in return for endorsing an amendment to Article 103 of the Pharmaceutical Affairs Act reinstating the right of herbalists to issue medical prescriptions.
Mr Chiu Chui-chen, Mr Lin Kuang-hua, Mr Hsu Shu-po and Mr Feng Ting-kuo all received lengthy prison terms, had their civil rights temporarily suspended and were ordered to return part of the illicit funds.
Abu Dhabi Water and Electricity Authority
A former insurance chief at the Abu Dhabi Water and Electricity Authority, reported as M.G.H, continues to deny allegations that over a period of 10 years she accepted Dh297m in bribes in return for awarding insurance contracts.
M.G.H claims that the payments were a legitimate form of commission paid in full knowledge of her bosses. However, the prosecution argued that the payments were effectively bribes and whether her bosses knew of the transactions was irrelevant.
Dh180 million was reportedly offered to settle the case but this was rejected by the prosecution. M.G.H was charged with forgery and acquiring illicit profits for herself and others. The Criminal Court sentenced her to three years imprisonment, ordered her to repay Dh297m and ordered her pay the same again as a fine.
The sentence was upheld in the Appeals Court, however, the case is due to be re-heard following a referral by the Cassation Court as various requests by the defence lawyers were not granted. The case continues in October.