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: When was the last time the U.S. Department of Justice (DOJ) issued a Foreign Corrupt Practices Act (FCPA) Opinion Procedure Release? What did the Council of Europe have to say about Russia’s progress in combatting corruption within its legislative, judicial, and prosecutorial functions? Which U.S.-based companies resolved FCPA investigations involving China and Mexico? The answers to these questions and more are here in our September 2020 Top 10.

1. DOJ Issues its First FCPA Opinion Procedure Release in Nearly Six Years. On August 14, 2020, DOJ issued its first FCPA Opinion Procedure Release since November 2014, in response to a request from a U.S.-headquartered investment advisor concerning a proposed fee payment to a subsidiary of a foreign government-owned investment bank. The FCPA opinion procedure enables certain entities and individuals, including U.S. “domestic concerns,” to request an opinion from DOJ regarding whether certain specific, prospective—not hypothetical—conduct conforms with DOJ’s enforcement policy regarding the anti-bribery provisions of the FCPA. DOJ releases the typically anonymized opinions to provide non-binding guidance on its FCPA enforcement practices. In this case, the investment advisor (the “Requestor”) worked over a two-year period with a subsidiary of a foreign investment bank (the “Country B Office”) to purchase a portfolio of assets. After failing to agree with Country B Office on a price for the assets, the Requestor enlisted the services of an unaffiliated U.S.-based finance company, although the Country B Office also continued its efforts on behalf of the Requestor. When the Requestor ultimately closed the transaction, the Country B Office sought a fee of $237,500 for its work on behalf of the Requestor. The Requestor asked DOJ whether payment of the fee would violate the anti-bribery provisions of the FCPA, given that the Country B Office is an “instrumentality of a foreign government” and its employees are “foreign officials” under the FCPA. DOJ determined that because (1) the payment would be to the Country B Office, (2) there was no indication that the payment would be diverted to an individual, and (3) the Requestor sought and received specific, legitimate services from the Country B Office for which it sought to make a commercially reasonable payment, the proposed payment does not reflect a corrupt intent to influence a foreign official. As a result, DOJ stated it did not intend to take enforcement action under the FCPA in response to the Requestor’s payment of the fee. Over the past decade, many companies have concluded that seeking an opinion from qualified outside counsel as to whether a particular transaction will violate the FCPA is less cumbersome, and potentially less risky, than seeking an opinion from DOJ. This opinion procedure release shows that, under certain circumstances, companies might still prefer to receive more formal assurance that DOJ will not pursue an enforcement action based on a proposed transaction.

2. U.S.-based Consumer Loan Company Resolves Mexico Bribery Allegations with SEC. On August 6, 2020, the U.S. Securities and Exchange Commission (SEC) announced that World Acceptance Corporation had agreed to pay $17.8 million in disgorgement, $1.9 million in prejudgment interest, and a civil penalty of $2 million to resolve alleged violations of the FCPA’s anti-bribery and accounting provisions involving Mexico. According to the SEC order, the company’s former Mexican subsidiary paid $4.1 million in bribes to Mexican government and union officials for the ability to provide loans to government employees and to obtain timely repayment of the loans. The subsidiary allegedly deposited money into bank accounts linked to the Mexican officials and paid an intermediary to distribute “bags of cash” as payments to the officials. The SEC found that the parent company failed to implement internal accounting controls and “the appropriate tone at the top regarding internal audit and compliance” necessary to detect and prevent these types of bribe payments. Concurrently, DOJ issued a declination letter saying that it would not separately prosecute this matter, based on the company’s voluntary self-disclosure of the misconduct, cooperation with the investigation, remediation efforts, and other factors.

3. U.S.-based Nutrition Company Resolves China Bribery Allegations with DOJ and SEC. On August 28, 2020, DOJ and SEC announced that Herbalife Nutrition Ltd. had agreed to resolve allegations that the company and its wholly owned subsidiaries in China violated the FCPA’s accounting provisions by falsifying books and records related to improper payments to Chinese officials. According to DOJ and SEC, the companies conspired over a 10-year period to falsify books and records related to corrupt payments and other benefits provided to Chinese government officials to promote and expand Herbalife’s business in China by obtaining direct selling licenses, influencing governmental investigations, and removing negative reports from state-controlled media. The parent company was ordered to pay $58.7 million in disgorgement and $8.6 million in prejudgment interest under the SEC administrative order and agreed to pay a criminal penalty of $55.7 million as part of a three-year deferred prosecution agreement (DPA) with DOJ filed in the Southern District of New York. DOJ did not require a guilty plea from the Chinese subsidiary, possibly because it charged two of the subsidiary’s former executives, Yanliang Li and Hongwei Yang, with violations of the FCPA’s anti-bribery and accounting controls provisions in November 2019.

4. DOJ and OFAC Respond to Corruption Involving Uganda and Poland Adoptions. On August 14, 2020, DOJ announced a 13-count indictment filed in the Northern District of Ohio charging three women—two American employees of the now-defunct European Adoption Consultants (EAC) agency and one Ugandan attorney—for their alleged roles in a scheme to bribe Ugandan officials and defraud U.S. adoptive parents, U.S. authorities, and a Polish regulatory authority. The charges included violations of the FCPA, money laundering, mail fraud, and false statements, among others. The indictment alleges that Debra Parris of Texas and Dorah Mirembe of Uganda bribed Ugandan social welfare officials, judges, and other court officials to corruptly procure the adoption of Ugandan children, including some who were not properly determined to be orphaned, by American families. The indictment further alleges that Parris and Margaret Cole of Ohio concealed information regarding adoption abuses from U.S. and Polish entities with responsibility for intercountry adoptions. Three days later, on

August 17, 2020, the U.S. Department of the Treasury’s Office of Foreign Asset Control (OFAC) announced it was imposing sanctions under the Global Magnitsky Human Rights Accountability Act against four Ugandans who were part of the scheme—two Ugandan judges who allegedly received bribes, the Ugandan lawyer charged in the DOJ indictment, and the lawyer’s husband. The alleged adoption scheme was first revealed in August 2019 when EAC’s former manager, Robin Longoria, pleaded guilty in August 2019 to FCPA and fraud charges in what appeared to be the first FCPA enforcement action involving international adoption.

5. Former Procurement Official at PDVSA Subsidiary Charged in Bribery and Money Laundering Scheme. On August 6, 2020, DOJ announced that money laundering charges had been unsealed in the Southern District of Texas against Jose Luis De Jongh Atencio (“De Jongh”), a former procurement official at Citgo Petroleum Company, a Houston-based subsidiary of Venezuela’s national oil company, Petróleos de Venezuela SA (PDVSA). De Jongh, a dual U.S.-Venezuelan citizen, allegedly laundered bribes he received in exchange for helping two businessmen, Jose Manuel Gonzalez Testino and Tulio Anibal Farias Perez, and their related companies secure business advantages from Citgo and PDVSA. Gonzalez was arrested in August 2018 and pleaded guilty to related charges in February 2020, while Faris was indicted and pleaded guilty in February 2020. De Jongh allegedly directed the bribe payments to bank accounts in the name of shell companies in Panama and Switzerland, and then laundered the proceeds through U.S. bank accounts, using most of the funds to purchase real property in Texas. In addition to the payments, De Jongh allegedly received gifts such as tickets to a 2014 World Series Game, Super Bowl XLIX, and a U2 concert. The DOJ press release noted that De Jongh is the 27th individual to be charged in the ongoing U.S. government investigation into bribery at PDVSA. (For more on the PDVSA investigation, see our December 2015, March 2016, June 2016, October 2016, January 2017, October 2017, February 2018, April 2018, July 2018, August 2018, September 2018, October 2018, November 2018, December 2018, February 2019, May 2019, August 2019, September 2019, November 2019, January 2020, and February 2020 Top 10s.)

6. Two Guilty Pleas in PDVSA Joint Venture Bribery Scheme. On August 20, 2020, Lennys Rangel, a former procurement chief of Petrocedeño, a joint venture between PDVSA and two European oil companies, pleaded guilty in the Southern District of Florida to one count of conspiracy to commit money laundering. Rangel allegedly received bribes from various contractors to secure contracts with the joint venture. On August 25, 2020, former Petrocedeño and PDVSA general counsel Edoardo Orsoni pleaded guilty to one count of conspiracy to commit money laundering in connection with the same alleged scheme.

7. U.S. Consultant Pleads Guilty in Connection with Attempt to Interfere in 1MDB Investigation. On August 17, 2020, Nickie Lum Davis was charged in an illegal lobbying effort on behalf of a fugitive Malaysian financier to influence the U.S. administration to quash an investigation into alleged corruption and money laundering involving 1Malaysia Development Berhad (1MDB), a Malaysian sovereign wealth fund. Davis pleaded guilty on August 31, 2020, to one count of aiding and abetting a violation of the Foreign Agents Registrations Act (FARA) for failing to register her relationship with the Malaysian financier in the lobbying effort. According to DOJ, Davis was offered an $8 million retainer fee to lobby the U.S. government, including efforts to secure meetings with the President of the United States, the Attorney General, and other high-level officials, to convince DOJ to drop its civil forfeiture proceedings and criminal investigation into 1MDB. The lobbying attempt was ultimately unsuccessful. (For more on the 1MDB case, see our July 2016, August 2016, June 2017, December 2017, May 2018, June 2018, August 2018, October 2018, February 2019, May 2019, December 2019, April 2020, and July 2020 Top 10s.)

8. U.S. and UK End Corruption Investigations Into U.S.-Based Engineering Company. In its financial results published on August 6, 2020, KBR Inc. disclosed that DOJ and SEC had informed the company that they had closed their investigations in connection with KBR’s interactions with Unaoil, the Monaco oil consultancy under investigation in the United States and the United Kingdom for allegedly assisting multinational companies in procuring business through bribery. The company further disclosed that the UK’s Serious Fraud Office (SFO) had informed the company that its investigation into the company is no longer focused on allegations of corruption involving Unaoil, although some lines of inquiry remain open. The SFO announced the commencement of criminal proceedings against Unaoil in June 2018, while the former CEO and COO of Unaoil pleaded guilty in October 2019 in the Southern District of Texas to charges in connection with a bribery scheme to secure contracts on behalf of major multinational clients in nine countries in Africa, the Middle East, and Central Asia. (For more on the Unaoil investigation, see our November 2017, May 2018, June 2018, December 2018, July 2019, March 2020, and May 2020 Top 10s.)

9. Council of Europe Urges Russia for More Anti-Corruption Progress; Anti-Corruption Opposition Leader in Russia Apparently Poisoned Two Days Later

  • On August 18, 2020, the Group of States Against Corruption (GRECO), the anti-corruption body of the Council of Europe, published its latest Compliance Report on the Russian Federation regarding corruption prevention for members of parliament, judges, and prosecutors. GRECO determined that Russia had satisfactorily or partially implemented 18 of the 22 recommendations from GRECO’s Fourth Round Evaluation Report on Russia, adopted in 2017. Among other things, GRECO noted that Russia still needs to strengthen the transparency of its legislative process, include contacts with third parties and post-employment restrictions in its legislative codes of ethics, strengthen conflict of interest provisions in its judicial code of ethics, limit immunity of judges to functional immunity, and strengthen prosecutorial independence.
  • On August 20, 2020, two days after the GRECO report was released, opposition leader and prominent critic of corruption within the Putin government Alexey Navalny was reportedly hospitalized after a suspected poisoning. Nalvalny fell ill on a flight returning to Moscow from Siberia, where he had been campaigning against Putin’s United Russia party and highlighting allegations of corruption against a Siberian politician and property developer. Navalny was flown to Germany from Russia after his family demanded his transfer. German doctors concluded Navalny was poisoned with the Soviet-era Novichok nerve agent, leading to suspicions that the Russian government was involved. In late August, Russian prosecutors reportedly stated that they saw no need for a criminal investigation into Navalny’s illness, dismissing allegations of Kremlin involvement as “hot air.”

10. Kazakhstan President Instructs Government to Step Up Anti-Corruption Efforts. On August 21, 2020, Kazakhstan President Kassym-Jomart Tokayev urged the government to tighten anti-corruption measures in the country during a meeting that focused on efforts to curb corruption. Tokayev listed the fight against corruption as one of the top priorities for Kazakhstan’s development. According to Tokayev, fighting corruption is particularly important amid the COVID-19 pandemic, which increased the risk that funds allocated to support the economy would be embezzled. Tokayev called for major improvements and asked the public and non-government organizations to be involved in anti-corruption efforts. In January 2020, Kazakhstan became the first Asian member of GRECO, the anti-corruption body of the Council of Europe.

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 in the past month, with links to primary resources.This month we ask: What did a U.S. appellate court say about a plaintiff’s ability to bring retaliation claims based on FCPA allegations? What long-standing foreign bribery investigations ended in the UK? What new anti-corruption and whistleblower laws were proposed in Brazil? The answers to these questions and more are here in our February 2019 Top 10 list.

  1. Micronesian Official and Executive of Hawaii-based Engineering Company Charged in Connection with Bribery Scheme. On February 12, 2019, the U.S. Department of Justice (DOJ) announced charges against Master Halbert, an official in the Federated States of Micronesia’s (FSM) Department of Transportation, Communication and Infrastructure, and Frank James Lyon, the owner of a Honolulu-headquartered engineering and consulting company. Lyon pleaded guilty in the District of Hawaii in January 2019 to violating the anti-bribery provisions of the FCPA and to paying a bribe to an agent of an organization receiving federal funds. Lyon admitted that, over a 10-year period, he and his co‑conspirators paid at least $200,000 in bribes to FSM officials, including Halbert, to obtain and retain contracts worth around $7.8 million. Halbert, who administered FSM’s aviation programs, was charged in a criminal complaint filed in the District of Hawaii on January 24, 2019 with one count of conspiracy to commit money laundering. The complaint alleges that Halbert and Lyon agreed to transport the cash bribes from the United States to FSM. Lyon is scheduled to be sentenced on May 13, 2019.
  2. Florida-based Executive and Sales Representative Charged with FCPA Violations in Connection with Venezuela Bribery Scheme. On February 26, 2019, DOJ announced that the president and a former sales representative of an unidentified Miami-based company had been indicted in the Southern District of Texas for allegedly conspiring to bribe officials of Venezuela’s state-owned oil company, Petroleos de Venezuela SA (PDVSA), in order to obtain business. From 2009 to 2013, company president Franz Herman Muller Huber and sales representative Rafael Enrique Pinto Franceschi allegedly conspired to bribe three PDVSA officials in exchange for their assisting the company, a PDVSA supplier, in obtaining additional contracts, inside information, and payment on past due invoices. Muller and Pinto are also alleged to have received more than $985,000 and $285,000, respectively, in kickbacks in connection with the scheme. Muller and Pinto were charged with one count of conspiracy to violate the FCPA, one count of conspiracy to commit wire fraud, one count of conspiracy to commit money laundering, and two counts of wire fraud. Including Muller and Pinto, DOJ has announced charges against 21 individuals, 15 of whom have pleaded guilty, in connection with its ongoing investigation into alleged bribery at PDVSA.
  3. UK-based Offshore Drilling Company Discloses DOJ and SEC Declinations in Connection with Brazil Investigation. In a February 21, 2019 securities filing, Noble Corporation disclosed that DOJ and the U.S. Securities and Exchange Commission (SEC) had informed the company that they had closed their investigations into potential FCPA violations without further action. According to the filing, in 2015, the company opened an investigation after one of its commercial agents pleaded guilty in connection with an alleged bribery scheme involving Brazil’s state-owned oil company, Petróleo Brasileiro S.A. (Petrobras). The company stated that it had cooperated with DOJ, SEC, and Brazilian authorities about this matter.
  4. DOJ Files $38 Million Civil Forfeiture Action in Connection with Malaysia Sovereign Wealth Fund Scandal. On February 22, 2019, DOJ announced the filing of civil forfeiture complaints in the Central District of California seeking the forfeiture and recovery of approximately $38 million in assets associated with an alleged international conspiracy to launder funds misappropriated from Malaysian sovereign wealth fund 1Malaysia Development Berhad (1MDB). According to the complaints, from 2009 through 2015, high-level 1MDB officials and their associates misappropriated more than $4.5 billion in funds belonging to 1MDB, including more than $2.6 billion in funds raised through bond offerings in 2012 and 2013. The complaints identify assets traceable to the funds from these bond offerings, including luxury real estate in London, proceeds from the sale of luxury real estate in New York, and converted equity in a company headquartered in Kentucky. Together with civil forfeiture complaints filed in July 2016 and June 2017, the 1MDB case represents the largest action brought under DOJ’s Kleptocracy and Asset Recovery Initiative, with total assets subject to forfeiture now totaling approximately $1.7 billion. (For more on 1MDB, see our July 2016, August 2016, June 2017, December 2017, May 2018, June 2018, August 2018, and October 2018 Top 10s.)
  5. Appellate Court Vacates Federal Whistleblower Retaliation Verdict Against Life Sciences Company. In February 2017, a jury in the Northern District of California found that Bio-Rad Laboratories, Inc. violated the Sarbanes-Oxley Act’s (SOX) whistleblower protections when it fired its former general counsel, Sanford Wadler, for reporting possible FCPA violations. On February 26, 2019, the Ninth Circuit Court of Appeals vacated the verdict, holding that the district court erred in instructing the jury that the statutory provisions of the FCPA constitute “rules or regulations” of the SEC for purposes of determining whether Wadler engaged in protected activity under SOX. However, because an SEC regulation provides that “No person shall directly or indirectly, falsify or cause to be falsified, any book, record or account,” 17 C.F.R. § 240.13b2-1, the court further held that a properly instructed jury could have reasonably found that Wadler reported conduct that he reasonably believed violated that regulation. Among other things, the court found that there was sufficient evidence to support the objective reasonableness of Wadler’s belief that the company had falsified books and records and held that SOX “generally does not require an employee to undertake an investigation before reporting his concerns. . . . Such a requirement would undermine the purpose of SOX, particularly where, as here, a general counsel reports his concerns to the Board of Directors because he believes that senior management is complicit in unlawful conduct.” Accordingly, the court remanded the case to the district court to determine whether a new trial was warranted.
  6. SEC and DOJ Resolve India Bribery Allegations with U.S.-based Technology Company. On February 15, 2019, DOJ and SEC announced resolutions with a U.S.-based technology company over allegations that the company bribed Indian government officials through a third-party. Without admitting or denying the allegations, the company agreed to pay disgorgement and prejudgment interest of approximately $19 million and a civil penalty of $6 million pursuant to an SEC administrative order and agreed to pay approximately $19 million pursuant to a DOJ declination with disgorgement. On the same day that the corporate resolutions were announced, DOJ and SEC announced that they had brought FCPA charges against former employees of the company in the District of New Jersey.
  7. Former Executive of British Oil Company Pleads Guilty in the UK to Iraq and Saudi Arabia Bribery Charges. On February 7, 2019, the UK Serious Fraud Office (SFO) announced that David Lufkin, a British national and the previous head of sales for Petrofac International Limited, had pleaded guilty at Westminster Magistrates’ Court in London to 11 counts of bribery, in violation of the UK Bribery Act 2010. The charges related to allegedly corrupt payments of over $51 million made by Petrofac Limited and its subsidiaries and the making of additional corrupt offers to agents to influence the award of contracts to the company worth over $730 million in Iraq and over $3.5 billion in Saudi Arabia. Lufkin has not yet been sentenced.
  8. UK Serious Fraud Office Closes Two Foreign Bribery Cases. On February 22, 2019, the SFO announced that it had closed two long-running foreign bribery investigations. The SFO announced that, following further investigation, a detailed review of the available evidence, and an assessment of the public interest, it would not prosecute individuals in the Rolls-Royce bribery investigation. In January 2017, the company entered into a Deferred Prosecution Agreement (DPA) with the SFO, under which the company agreed to pay $604.8 million in connection with an indictment, suspended for the term of the agreement, which covers 12 counts of conspiracy to corrupt, false accounting, and failure to prevent bribery. In January 2019, the SFO confirmed that it had notified several unidentified individuals that they were no longer suspects in the case. The SFO also announced that, following a detailed review of the available evidence and an assessment of the public interest, it would not prosecute individuals in the GSK bribery investigation. The investigation, opened by the SFO in May 2014, focused on commercial practices by the company, its subsidiaries, and associated persons, including the company’s use of third-party advisors in China and other unnamed countries.
  9. Swedish Court Acquits Former Executives of Stockholm-Based Telecommunications Company of Uzbekistan Bribery Charges. On February 15, 2019, a Swedish district court acquitted Lars Nyberg, the former CEO of Telia Company, along with two other former executives, of charges of bribery in connection with the company’s entry into the Uzbek telecommunications market. In September 2017, the company agreed to a combined penalty of $966 million to be paid to U.S., Dutch, and Swedish authorities to resolve allegations that it had paid over $330 million to an Uzbek official between 2007 and 2010 in order to enter and continue operating in the Uzbek telecommunications market. Swedish authorities charged Nyberg and two other former Telia executives the day after the resolution was announced for their alleged involvement in the bribery scheme. The court explained that the basis for the acquittal was that the prosecution had failed to prove that the official to whom the payments were made held any official position connected to the telecommunications sector.
  10. Brazilian Minister of Justice Presents Anti-Crime Bill. On February 4, 2019, Brazil’s Minister of Justice, Sergio Moro, announced an anti-crime bill to establish measures against corruption, organized crime, and crimes committed with serious violence. The bill proposes changes to 14 laws covering 19 areas, including a proposed amendment to Law No. 13,608/2018 to protect whistleblowers against retaliation and establish the right of the whistleblower to preserve his or her identity. The proposed amendment provides for a reward for whistleblowers of up to 5% of the amount recovered when information provided results in recovery by the public administration. The bill also proposes changes to the Criminal Procedure Code (Decree-Law No. 3,689/1941) and Law on Administrative Improbity (Law No. 8,429/1992) to set out rules in relation to negotiated settlements and allow for cooperation or leniency agreements. Given the prominent role Brazil has played in international anti-corruption enforcement over the last several years, the progress of this bill is worth following.