Subscribe to our FinCrimes Update for news about the Foreign Corrupt Practices Act and related prosecutions and enforcement actions.
On December 22, 2017, Singapore-based shipyard operator and shipping vessel repair company Keppel Offshore & Marine Ltd. (KOM), and its wholly owned U.S. subsidiary, agreed to pay a combined total penalty of $422 million to resolve foreign bribery charges by the DOJ. Authorities in the United States, Brazil, and Singapore alleged that the companies engaged in a decade-long scheme to pay tens of millions of dollars in bribes to officials in Brazil, including those of state-owned oil company Petrobras. As part of the resolution, KOM entered into a deferred prosecution agreement while its U.S. subsidiary, KOM USA, pleaded guilty, as did a former senior member of KOM’s legal department. The settlement is one of the largest FCPA enforcement penalties and also represents DOJ’s first coordinated FCPA resolution with Singapore. The settlement represents a 25 percent reduction off the bottom of the applicable U.S. Sentencing Guidelines fine range due to substantial cooperation by the companies with the investigation and the taking of remedial measures, including disciplining employees and implementing an enhanced compliance system.
On January 3, 2018, Petrobras announced that it has agreed to pay $2.95 billion to resolve the securities class action pending in the U.S. District Court for the Southern District of New York regarding the company’s well-known corruption scandal in Brazil. The class action claimed that investors were harmed by alleged corruption when contractors overcharged Petrobras and kicked back some of the overcharges through bribes to Petrobras officials. Under the proposed settlement, Petrobras has agreed to pay the funds in three installments. The agreement does not constitute any admission of wrongdoing or misconduct by Petrobras and Petrobras claims that this reflects its status as a victim of the acts uncovered in Operation Car Wash, as the corruption investigation in Brazil is known. The settlement agreement is still subject to approval by the District Court.
Past ScoreCard coverage related to the Petrobras corruption allegations and investigation can be found here.
In a recent speech before the Atlantic Council Inter-American Dialogue Event, Acting Assistant Attorney General Kenneth Blanco discussed the importance of foreign law enforcement cooperation in FCPA investigations. Blanco focused his remarks on cooperation between the United States and Brazil and also touched on the Justice Department’s Kleptocracy Asset Recovery Initiative.
Blanco noted: “As transnational crime continues to grow in scope and complexity, we increasingly find ourselves looking across the globe to collect evidence and identify witnesses necessary to build cases, requiring greater and closer collaboration with our foreign counterparts. As a result, we find ourselves relying more and more on the use of the various mechanisms of international cooperation with our foreign partners that permit for evidence exchange, fugitive apprehension, and asset recovery.”
Blanco’s remarks highlight the DOJ’s continued focus on international and transnational conduct with the cooperation of foreign law enforcement agencies. He concluded: “We at the Department of Justice will continue, like we have for years, pushing forward hard against corruption, wherever it is, and we welcome our fellow counterparts around the world who are fighting this important fight against corruption.”
On February 8, authorities in Panama raided the offices of Mossack Fonseca, the law firm at the center of the sprawling Panama Papers scandal, and arrested the firm’s founders, Juergen Mossack and Ramon Fonseca. Reuters reports that Panama’s Attorney General announced on Twitter that the raid and arrests were tied to the investigation of Odebrecht S.A., the Brazilian construction company that in December reached a $3.5 billion combined global settlement with U.S., Brazilian, and Swiss authorities to resolve FCPA allegations. Until now, the investigations spawned by the 2016 release of millions of documents stolen from the law firm were focused on money laundering and tax evasion. The tie to the Odebrecht investigation brings anti-bribery investigations into the mix.
On January 18, Texas-based medical device company Orthofix International N.V. (Orthofix) admitted wrongdoing and agreed to pay approximately $6 million to the SEC to settle FCPA books and records and internal controls charges in connection with improper payments made by its Brazilian subsidiary to doctors through third parties. In related non-FCPA proceedings, Orthofix also agreed to pay a $8.25 million penalty to resolve various accounting violations, and former executives Jeff Hammel, Kenneth Mack, Bryan McMillan, and Brian McCollum each consented to accounting-related SEC orders without admitting or denying the findings.
According to the Administrative Order Instituting Cease-and-Desist Proceedings, Orthofix’s Brazilian subsidiary Orthofix do Brasil LTDA employed third-party commercial representatives and distributors to make improper payments to doctors employed at government-owned hospitals to induce them to use Orthofix’s products, thereby increasing sales. Orthofix also improperly recorded revenue, leading to the related accounting charges.
In settling with the SEC, Orthofix has now resolved two separate FCPA cases in the span of five years. In 2012, Orthofix resolved FCPA actions with both the SEC and DOJ in connection with bribes paid to Mexican officials by its Mexican subsidiary. Given the prior corruption and internal controls issues, the SEC found that Orthofix failed to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances to detect and prevent such payments. Orthofix agreed to hire a compliance consultant for one year.
On January 22, 2016, the Ministerio Publico Federal (MPF), Brazil's Public Prosecutor's Office, reportedly entered into a settlement with Dutch drilling company SBM Offshore's CEO and a member of its supervisory board, resolving misdemeanor allegations apparently tied to the ongoing Petrobras probe in Brazil. If the settlement is approved by the Brazilian judge handling the case, both individuals will be fined approximately $60,000 each, with no admission of guilt. SBM Offshore stated in response that while it "believes that accepting the settlement offers a pragmatic opportunity to expeditiously resolve this matter that avoids long and costly legal proceedings," it remains of the opinion that the accusations are without merit and that it stands behind both individuals. While SBM Offshore declined to comment on the specific accusations of misconduct in this case, the settlement comes a little over a year after SBM Offshore resolved an enforcement action in the Netherlands involving alleged bribes in Angola, Brazil, and Equatorial Guinea between 2007 and 2011. Click here to view previous FCPA Scorecard coverage of SBM Offshore and Brazil's Petrobras investigation.
On December 21, Brazilian officials charged twelve individuals with corruption-related offenses in connection with a probe into the relationship between Petrobras and Dutch oilfield company SBM Offshore N.V. Those charged include several former SBM Offshore executives, former SBM Offshore sales agents, and several former Petrobras executives. News reports state that the charges center on $46 million in allegedly corrupt payments made between 1998 and 2012. On December 17, SBM Offshore issued a statement that referred to ongoing discussions with Brazils Comptroller Generals Office and Attorney Generals Office to reach a settlement agreement and to secure disclosure of information relevant to the ongoing investigation into Petrobras. Brazils actions follow SBM Offshores prior settlement with Dutch authorities over allegations that it bribed officials in Brazil, Angola, and Equitorial Guinea; SBM Offshore agreed to pay the Dutch Public Prosecutors Office $240 million as part of the settlement. The company also had announced the conclusion of the DOJs investigation into the matters resolved with the Dutch. Previous FCPA Scorecard coverage of SBM Offshore settlement and the Petrobas investigation can be found here and here.
Former President of Brazilian Football Confederation Waives Extradition and Pleads Not Guilty in U.S. FIFA Investigation
On October 28, the Swiss Federal Office of Justice announced that Jose Maria Marin, former President of the Brazilian Football Confederation, had agreed to be extradited from Switzerland to the United States as part of the U.S. governments investigation of alleged money laundering and bribery at FIFA. Marin is accused of having taken bribes worth millions of dollars from sports marketing companies in connection with the sale of marketing rights for Copa America and Copa do Brasil tournaments, and to have shared these bribes with other soccer officials. Marin previously had opposed extradition. On November 3, Marin appeared before Judge Raymond Dearie of the United States District Court in of the Eastern District of New York. Marin pleaded not guilty to an array of federal charges including conspiracy to commit racketeering, wire fraud, and money laundering. He was released on a $15 million personal recognizance bond with home detention and electronic monitoring. Marin is the second FIFA official to waive extradition. As noted in a previous post, Jeffrey Webb, a former vice president of FIFA, agreed to be extradited to the United States in July. Several other defendants are currently fighting extradition efforts.
On August 4, Vantage Drilling Company, an international offshore drilling contractor, acknowledged that an overseas agent had entered into plea discussions with Brazilian authorities and provided evidence in the ongoing corruption investigation focused on Petrobras. Vantage acknowledged that the agent had purportedly provided evidence related to a former director of Vantage and Petrobras. The company disclosed that it had opened an internal investigation and self-reported the matter to the DOJ and the SEC. The Brazilian corruption investigations into Petrobras and its affiliates and counterparties continue to expand with no end in sight, and the expected related U.S. investigations are beginning to be disclosed.
On June 10, Eletrobras, Brazil's state-run power company, announced that it had hired Hogan Lovells to investigate potential violations of the FCPA and other anti-corruption laws and corporate policies. The focus of the investigation will be "projects in which Eletrobras Companies take part in a corporate form or as minority shareholder, through special purpose entities." According to an earlier Eletrobras filing, the investigation was triggered by testimony taken in conjunction with the Brazilian government's ongoing investigation of corruption allegations against Petrobras, dubbed "Operation Car Wash." That testimony alleged that the CEO of an Eletrobras subsidiary received illicit payments from a consortium of companies bidding for the Angra 3 power plant project.
- Valerie L. Hletko to discuss "Forecasting litigation and settlement trends in the mortgage servicing and fair lending context" at the American Conference Institute National Forum on Residential Mortgage Regulatory Enforcement & Litigation
- Michelle L. Rogers and Jonice Gray Tucker to discuss “Building a govt affairs program; Government investigations” at the TechGC National Summit
- Tina Tchen to deliver keynote address at the American Bar Foundation Montgomery Summer Research Diversity Fellowship 30th Anniversary Celebration
- Douglas F. Gansler to discuss "Privacy, security and protection of your assets in contracts; Security exercises and tactical measures" at the TechGC National Summit
- H Joshua Kotin will discuss federal regulatory developments in mortgage lending and servicing at the Mortgage Bankers Association of Arkansas Fall Conference
- Kate Shrout to discuss "Conducting workplace investigations" at the TechGC National Summit
- Kathryn R. Goodman to discuss "HECM servicing policies and updates" at the National Reverse Mortgage Lenders Association Annual Meeting & Expo
- Fredrick S. Levin to discuss "Reverse mortgage litigation trends" at the National Reverse Mortgage Lenders Association Annual Meeting & Expo
- Melissa Klimkiewicz to speak at the "Digital marketing compliance roundtable" at the National Reverse Mortgage Lenders Association Annual Meeting & Expo
- Hank Asbill to discuss "The role of the media in white collar criminal investigations and the Mueller probe" at the American Bar Association White Collar Crime Town Hall
- John C. Redding to discuss "Regulatory compliance update" at PowerSports Finance
- Matthew P. Previn to discuss "Enforcement trends: Who is doing what and how?" at the Cambridge Forums Inc. Forum on Consumer Finance Litigation & Enforcement
- Jonice Gray Tucker to discuss "Protect yourself from a CFPB investigation" at the National Association of Settlement Purchasers Conference
- Tina Tchen to deliver keynote address at the American Bar Association Professional Success Summit
- Andrea K. Mitchell to discuss "Developments in fair lending law" at the Mortgage Bankers Association Summit on Diversity and Inclusion
- Jonice Gray Tucker to discuss "Consumer financial services" at the Practising Law Institute Banking Law Institute
- Daniel P. Stipano to discuss "New CDD Rule: Pitfalls in compliance" at the American Bankers Association/American Bar Association Financial Crimes Enforcement Conference