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  • Two Telecom Executives Pay FCPA Penalties

    Two former executives of a Hungarian telecommunications company, Magyar Telekom, recently agreed to settle their FCPA claims with the SEC and pay related penalties, along with five-year bars against serving as an officer or director of any SEC-registered public company. The company’s former CEO agreed to pay a $250,000 penalty, while its former Chief Strategy Officer agreed to pay a $150,000 penalty. The settlements are still subject to court approval.

    The SEC’s case against these individuals was heading to trial this month prior to this week’s settlement. The SEC’s complaint alleged that these individuals used sham contracts to funnel millions of dollars in bribes to foreign officials in Macedonia and Montenegro to win contracts and, importantly, block out competitors including U.S.-traded telecoms. This action was related to similar claims previously brought against Magyar Telekom and its majority owner Deutsche Telekom AG, who settled civil and criminal FCPA charges in December 2011 for $95 million. In February 2017, another former Magyar Telekom executive settled FCPA charges, agreeing to pay a $60,000 penalty without admitting or denying the charges.

    These settlements underscore the FCPA’s broad territorial and jurisdictional reach, which can encompass transactions that facially do not even involve U.S. companies. As the SEC’s Stephanie Avakian noted, these individuals were ultimately charged because they “spearhead[ed] secret agreements with a prime minister and others to block out telecom competitors,” and “[the SEC] persevered in order to hold these overseas executives culpable for corrupting a company that traded in the U.S. market”.

    SEC FCPA Magyar Telekom

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  • Senators Introduce Combating Global Corruption Act of 2017

    Senator Ben Cardin and Republican co-sponsors recently introduced a bill titled the “Combating Global Corruption Act of 2017,” which seeks “to identify and combat corruption in countries, to establish a tiered system of countries with respect to levels of corruption by their governments and their efforts to combat such corruption, and to assess United States assistance to designated countries in order to advance anti-corruption efforts in those countries and better serve United States taxpayers.”

    This bill, if enacted, would require the Secretary of State to publish annual rankings of foreign countries split up into three tiers that depend on whether those countries’ governments comply with “minimum standards for the elimination of corruption.” The introduced bill defines corruption as “the exercise of public power for private gain, including by bribery, nepotism, fraud, or embezzlement.”

    Once a country’s tier-rank is established, the bill would then require the Secretary of State, Administrator of USAID, and the Secretary of Defense to take various steps, including the creation of a “corruption risk assessment” and “corruption mitigation strategy” for U.S. foreign assistance programs; fortified anti-corruption and clawback provisions in contracts, grants and other agreements; disclosure of beneficial ownership for contractors and other participants; and mechanisms to investigate misappropriated funds.

    If passed into law, this bill would create substantial new enforcement powers to combat international corruption activities. And, unlike the current ambiguity under the FCPA regarding its applicability to state-owned or state-controlled enterprises (“SOEs”), as drafted, this bill expressly would cover SOEs. Like the FCPA, however, this bill also contains a broad national security waiver component, if the Secretary of State “certifies to the appropriate congressional committees that such waiver is important to the national security interest of the United States.”

    FCPA Update Anti-Corruption FCPA Bribery Fraud

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  • SEC’S FCPA Chief to Leave Agency Later in April

    On April 4, the SEC announced that FCPA Unit Chief Kara Brockmeyer will leave the agency later this month. Ms. Brockmeyer joined the SEC in 2000 and has led the FCPA Unit since September 2011. Under her supervision of the unit, the SEC brought 72 FCPA enforcement actions resulting in judgments and orders totaling more than $2 billion in disgorgement, prejudgment interest, and penalties.

    SEC FCPA

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  • Second Circuit Hears Oral Arguments on Accomplice Theory of Liability Under FCPA

    On March 2, 2017, a three judge panel for the United States Court of Appeals for the Second Circuit heard oral arguments in U.S. v. Hoskins.  The government charged U.K. citizen Lawrence Hoskins with FCPA violations as part of a larger scheme involving a U.S. subsidiary of French company Alstom S.A.  Hoskins, a non-resident foreign national who did not act on U.S. soil and who was an executive of a non-U.S. company (Alstom UK), argued in federal district court that Congress did not intend for people like him to be subject to direct FCPA liability, and that the government cannot circumvent Congressional intent by charging him with accomplice liability.  In August of 2015, the federal district court in Connecticut ruled in Hoskins’ favor, holding that the government would first have to show that Hoskins was subject to direct liability as an agent of a U.S. concern in order to reach accomplice liability.  The legal issues at hand are detailed in previous FCPA Scorecard posts here and here

    In addition to the important question of the scope of liability of foreign nationals under the FCPA, this argument has a secondary importance related to the right of the government to appeal criminal matters under Title 18 U.S.C. § 3731.  Section 3731 allows the government to appeal “from a decision, judgment, or order of a district court dismissing an indictment or information or granting a new trial after verdict or judgment, as to any one or more counts, or any part thereof….”  Here, Hoskins argues that the court did not dismiss any counts, so the government had no right to make the interlocutory appeal.  For its part, the government argues that the court’s ruling was effectively a dismissal of a portion of a count, making the matter appealable. 

    In ruling on the Hoskins case, the Second Circuit will have the potential to expand or limit both the reach of the FCPA, and the power of the federal government to bring interlocutory appeals when a trial court rules against it in a criminal matter. 

    An mp3 of the oral arguments may be downloaded here.

    FCPA Update FCPA Alstom SA

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  • Claims Management Company Reports Conclusion of SEC FCPA Investigation

    As previously covered here, Crawford & Co., an Atlanta-based claims management firm, disclosed in November 2015 that it self-reported possible FCPA violations to the DOJ and SEC.  These potential violations were identified during an internal audit.  On February 27, 2017, Crawford announced that it had received notice that the SEC “concluded its investigation and did not intend to recommend an enforcement action” related to this matter.   The company did not reference the DOJ in its announcement.

    DOJ SEC Crawford & Co. FCPA

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  • Financial Services Institution Discloses SEC FCPA Investigation into Hiring Practices

    On February 24, a major financial services institution disclosed in its 10-K that government and regulatory agencies, including the SEC, are conducting investigations concerning potential violations of the FCPA related to hiring of candidates referred by or related to foreign government officials.  The institution stated that it was cooperating with the investigations.

    This is not the first FCPA-related investigation of a company’s hiring practices.  As previously reported here in November 2016, a global financial company and a Hong Kong subsidiary agreed to pay approximately $264 million to the DOJ, SEC, and the Federal Reserve, ending a nearly three year, multi-agency investigation of the subsidiary’s “Sons and Daughters” referral program through which the children of influential Chinese officials were allegedly given prestigious and lucrative jobs as a quid pro quo to retain and obtain business in Asia.  Similarly, as reported here, in August 2015, the SEC announced a settlement with a multinational financial services company over allegations that the company violated the FCPA by giving internships to family members of government officials working at a Middle Eastern sovereign wealth fund in hopes of retaining or gaining more business from that fund. The company paid $14.8 million to settle the charges.

    Nor are the inquiries confined to financial services companies.  For example, the SEC announced in March 2016, as covered here, that it settled charges with Qualcomm Inc., the San Diego-based mobile chip maker.  Qualcomm agreed to pay a $7.5 million civil penalty to resolve charges that it violated the FCPA by hiring relatives of Chinese government officials and providing things of value to foreign officials and their family members, in an attempt to influence these officials to take actions that would assist Qualcomm in obtaining or retaining business in China.

    DOJ SEC FCPA Federal Reserve Qualcomm Inc.

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  • Former Magyar Telekom Executive Settles with SEC

    On February 8th, Tamas Morvai, a former executive of the Hungarian telecommunications company, Magyar Telekom, settled a 2011 civil complaint filed by the SEC.  The trial of the remaining co-defendants is scheduled for May 8.  As part of the settlement, Morvai agreed to pay a $60,000 civil penalty and did not admit or deny the SEC’s allegations.  Morvai also admitted that U.S. courts had jurisdiction over the case. The issue of jurisdiction had been contested; in 2013, the court denied the defendants’ motion to dismiss for lack of personal jurisdiction.

    The SEC’s complaint alleged that Morvai, along with two other co-defendants, authorized bribes to Macedonian government officials and others.  In 2014, the SEC dropped allegations regarding payments to government officials in Montenegro, substantially narrowing the allegations in the case.  Magyar Telekom and its parent, Deutsche Telekom AG, settled allegations regarding payments to government officials in Macedonia and Montenegro with the SEC and DOJ in 2011.  Prior Scorecard coverage of the Magyar Telekom investigation can be found here.

    This outcome of this lengthy case illustrates that individual defendants can still achieve relatively favorable outcomes when they choose to litigate FCPA cases, even after the corporate defendants have reached a resolution.

    FCPA Hungary Magyar Telekom

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  • Medical Device Company Reaches Second FCPA Settlement in the Span of Five Years

    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 HammelKenneth MackBryan 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.

    DOJ SEC Brazil Orthofix FCPA SEC DOJ

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  • Two Additional Businessmen Plead Guilty in Petroleos Scheme

    On January 10, it was announced that two additional defendants, Juan Jose Hernandez Comerma and Charles Quintard Beech III, owners of Florida and Texas-based energy companies, had pleaded guilty to foreign bribery charges related to a scheme to corruptly secure energy contracts from Venezuela’s state-owned oil company, Petroleos de Venezuela S.A.

    According to admissions by Hernandez and Beech, they conspired with other previously charged defendants from 2008 through 2012 to pay bribes and other things of value, including recreational travel, meals, and entertainment to Petroleos officials to obtain energy contracts or receive payment for previously awarded contracts. Some of the bribes were paid to a Petroleos official’s relative to conceal the nature, source, and ownership of the bribe.

    In total, eight individuals have now pleaded guilty in cases related to the government’s investigation into bribery at Petroleos. The government’s investigation is ongoing. Previous FCPA Scorecard coverage on the Petroleos investigations can be found here.

    Score Card Bribery FCPA Petroleos de Venezuela

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  • Four Individuals, Including Ban Ki-moon’s Brother and Nephew, Face FCPA Charges Related to Vietnam Project

    On January 10, the DOJ announced the unsealing of an indictment charging four individuals, including the nephew and brother of former UN Secretary-General Ban Ki-moon, with violations of the FCPA and other offenses in connection with the attempted $800 million sale of a commercial building known as Landmark 72 in Hanoi, Vietnam. According to the government, Ban Ki Sang and Joo Hyun Bahn conspired to bribe a governmental official of an unnamed Middle Eastern country to get his country to purchase the building from Keangnam Enterprises Co., where Ban was then a senior executive. To facilitate the sale of Landmark 72, Keangnam hired Ban’s son Bahn to secure an investor for the deal.

    According to the allegations, Bahn and Ban agreed to pay the foreign official $500,000 initially, and $2 million upon completion of the sale, through co-defendant Malcolm Harris, who had falsely held himself out as an agent of the foreign official; Harris Sang Woo allegedly assisted in obtaining the initial $500,000. In a twist, according to the DOJ, Harris then stole the money and used it for personal expenses instead of paying any bribes. After the Landmark 72 deal failed to go through, Bahn allegedly lied and provided forged emails from the foreign official and other documents to Keangnam regarding the status of the deal and stole approximately $225,000 that was advanced by Keangnam to cover brokerage expenses.

    DOJ Bribery FCPA DOJ UN Keangnam Enterprises Co.

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