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On October 30, 2018, a Texas businessman, Ivan Alexis Guedez, who was a former procurement officer for PDVSA, pleaded guilty to conspiracy to launder the bribe payments he and his co-conspirators at PDVSA received for directing PDVSA business to a Miami-based supplier. The scheme involved false invoices, false e-mail addresses, and shell companies with a Swiss bank account.
For prior coverage of PDVSA actions, please see here.
Swiss banker sentenced to 10 years related to PDVSA embezzlement and bribery scheme, and PDVSA official pleads guilty in same scheme
On October 29, Matthias Krull, a former banker at Julius Baer, was sentenced to serve 10 years in prison for his role in a scheme to launder funds embezzled from Petróleos de Venezuela, S.A. (PDVSA), the Venezuelan state-owned oil company. Krull had pleaded guilty to one count of conspiracy to commit money laundering on August 22, 2018. Krull admitted to using his position at the bank to attract clients from Venezuela. He helped some of those clients launder proceeds from a PDVSA foreign-exchange embezzlement scheme using false-investment schemes and Miami real estate. The PDVSA money was originally obtained through bribery and fraud.
Two days later, on October 31, Abraham Edgardo Ortega, the former executive director of financial planning at Petróleos de Venezuela, S.A. (PDVSA), the Venezuelan state-owned oil company, pleaded guilty to charges related to his role in the same scheme. Ortega admitted to accepting $5 million in bribes to give priority loan status to a French company and Russian bank. Ortega was paid with the proceeds of the same foreign-exchange embezzlement scheme. Ortega admitted that he ultimately received $12 million in bribes for his participation in the embezzlement scheme and laundered that money with a co-defendant through a false-investment scheme. Ortega is expected to be sentenced on January 9, 2019.
In late September, Meng Hongwei, the Chief of Interpol at the time and a former Vice Minister of China’s national police, reportedly went missing during a trip home to China. According to his wife, Meng’s last known communication was a text message to her containing a knife emoji and an instruction to “wait for my call.” According to reports, after Meng’s wife, French authorities, and Interpol issued public pleas, Chinese authorities disclosed this week that Meng has been detained pursuant to a government investigation into bribery and other allegations. Meng abruptly resigned his post at Interpol and has not been available for comment.
Meng’s detention is notable due to his international stature as Interpol chief, however, he is just the latest in a string of high-ranking Chinese officials to reportedly have been swept up in widespread graft investigations by the Governing Communist Party under President Xi Jingping. A release from the Ministry of Public Security reportedly claims that Meng’s arrest demonstrates that “there is no privilege and no exception before the law.” It goes on to state: “Anyone who violates the law must be severely punished. We must resolutely uphold the authority and dignity of the law, bearing in mind that the red line of the law cannot be overstepped. . . It is necessary to make the legal system a ‘high-voltage line’ of electricity.”
Non-profit advocacy organizations accuses Bank of England of deceptive report on US whistleblower tip rewards programs
On June 20, the National Whistleblower Center, an American non-profit advocacy organization for whistleblowers, and the European Center for Whistleblower Rights formally requested that the Bank of England retract a report that they allege
smischaracterizes US whistleblower tip rewards programs, including regarding FCPA tips. The report, originally released in 2014 by the Bank of England in conjunction with the UK’s Financial Conduct Authority, had criticized the use of financial incentives for whistleblowers in the US, arguing that they were ineffective, “don’t generate quality tips,” and “impose expensive and unnecessary governance structures.” The report concluded that the UK should adopt regulatory changes to improve protections for all whistleblowers rather than provide rewards, which allegedly allot large financial payouts to a tiny minority of whistleblowers.
The Whistleblower Center disputed these assertions in a rebuttal report, released this year. According to the whistleblower advocacy organizations, many of the assertions in the Bank of England’s report “are simply false” and the continued use of the report “inhibit[s] the implementation of effective anti-fraud laws in the UK.” The organizations further complained that the 2014 report has been used as justification for stakeholders in UK to not create financial incentives for whistleblowers and that it has stifled momentum in the UK for an effective whistleblower program.
A class action against Embraer, the Brazilian aerospace firm, was recently dismissed by U.S. District Judge Richard Berman. The class action, which was brought in federal district court in New York, alleged that Embraer had failed to adequately disclose the scope and possible financial impact of ongoing corruption investigations by the DOJ and SEC, harming the company’s investors.
In granting Embraer’s motion to dismiss, Judge Berman held that the company’s disclosures were sufficient as a matter of law, and that requiring disclosures advocated by the putative class plaintiffs would effectively require reporting companies to acknowledge guilt for conduct that was still being investigated and had not yet been charged.
The underlying bribery alleged in the complaint (and being investigated by regulators) involves Embraer’s October 2016 admissions that from 2007 to 2011, company executives made payments to government officials in several countries, including the Dominican Republic, Saudi Arabia, Mozambique, and India, totaling $11.5 million. Embraer received government contracts resulting in profits over $83 million in exchange.
This decision is a clear win for publicly traded companies currently under investigation for corruption-related conduct. Had the case proceeded, companies may have faced difficult choices between making more detailed disclosures to investors regarding the potential merits of ongoing investigations and protecting themselves against incriminatory public statements about these same matters.
A former sales executive of Brazilian-based aircraft manufacturer Embraer S.A. pleaded guilty on December 21 in connection with a scheme to pay bribes to a Saudi Arabian government official. Colin Steven, a U.K. resident living in the United Arab Emirates, pleaded guilty to a count each of violating the FCPA, conspiracy to violate the FCPA, wire fraud, conspiracy to commit wire fraud, money laundering, conspiracy to launder money, and making a false statement. As part of his plea, he admitted that he engaged in a scheme to have Embraer pay bribes to a foreign official in exchange for assistance in getting an aircraft sales contract. Steven also admitted getting a kickback as part of the scheme and lying to law enforcement officials about the kickback.
Embraer previously paid $205 million to the DOJ and SEC in October 2016 to resolve related FCPA violations in Saudi Arabia, Mozambique, and the Dominican Republic.
The World Bank recently sanctioned two French companies for separate allegations of corruption in developing countries. On November 30, the World Bank announced that Oberthur Technologies SA, a French digital security company, was debarred for 2.5 years for “corrupt and collusive practices” related to a project that would establish a national ID system in Bangladesh. As part of its Negotiated Resolution Agreement (NRA), Oberthur acknowledged “improper payments to a sub-contractor and collusive misconduct to obtain and modify bid specifications to narrow competition and secure the award of the contract.” Oberthur was credited for its “extensive cooperation” with the World Bank’s investigation, including voluntarily acknowledging the misconduct, proactively conducting an internal investigation, holding individuals accountable, and taking “preliminary steps to improve its governance and compliance procedures.”
On December 5, the World Bank separately announced that Sediver SAS, a French manufacturing company, was debarred for two years for a “corrupt practice” related to a project that would improve electricity infrastructure in the Congo. A World Bank investigation found evidence that the company “made improper payments to an employee of a consulting company to influence a tender process.” Under the NRA, Sediver’s parent company was also “conditionally non-debarred” for an 18-month probationary period. The holding company for the entities agreed to pay €6.8 million to the Congo, and the companies agreed to develop and implement a “group-wide integrity compliance program.” The holding company was credited for its “ongoing cooperation” with World Bank investigators, “acceptance of responsibility,” and “voluntary corrective and remedial actions.”
Court Reduces Sentence for Former Cayman Islands Soccer Executive Who Pleaded Guilty in FIFA Investigation
On December 12, Judge Chen of the U.S. District Court for the E.D.N.Y. amended the recent sentence entered against Costas Takkas, former general secretary of the Cayman Islands Football Association. On October 31, Mr. Takkas was sentenced to serve 15 months in prison, pay $3 million in restitution, and observe a ban from international soccer organizations FIFA, Caribbean Football Union (CFU), and the Confederation of North, Central American and Caribbean Association Football (CONCACAF). Under the amended sentence, Mr. Takkas was credited 10 months for time served in a Swiss jail prior to extradition; the other terms remained the same.
Mr. Takkas was arrested in Zurich in 2015, as part of the U.S. government’s investigation into corruption involving FIFA. Earlier this year, Mr. Takkas pleaded guilty to a conspiracy charge, admitting that he laundered millions of dollars in bribes from sports marketing companies to Jeffrey Webb, his longtime associate and the former president of CONCACAF. Mr. Takkas is the second individual sentenced among a group of more than 40 who have been indicted or pleaded guilty since 2015. Previous FCPA Scorecard coverage of the FIFA investigation can be found here.
Florida Energy Company Owner Pleads Guilty to Conspiracy to Violate the FCPA in Venezuelan Bribery Scheme
On October 11, the DOJ announced that Fernando Ardila Rued – a co-owner of several Florida-based energy companies – pleaded guilty to FCPA charges that he conspired to bribe foreign officials in exchange for obtaining contracts from Venezuela’s state-owned energy company, Petroleos de Venezuela S.A. (PDVSA). In his plea, Ardila admitted to conspiring with two other individuals – Abraham Jose Shiera Bastidas and Roberto Enrique Rincon Fernandez – from 2008 through 2014 to bribe PDVSA purchasing analysts through cash payments and other entertainment in order to win contracts for Shiera and Rincon’s companies. Ardila is the tenth individual who has pleaded guilty in connection with the PDVSA scheme.
This investigation has been a collaboration between the DOJ, ICE-HSI, and IRS-Criminal Investigation Division. Previous FCPA Scorecard coverage of the PDVSA investigation can be found here.
- Tina Tchen to deliver keynote address at the American Bar Association Professional Success Summit
- Jeffrey P. Naimon and Jonice Gray Tucker to discuss "Enforcement and litigation trends" at the American Bankers Association General Counsel Meeting
- Andrea K. Mitchell to discuss "Developments in fair lending law" at the Mortgage Bankers Association Summit on Diversity and Inclusion
- David S. Krakoff to discuss "The DOJ corporate enforcement policy and your disclosure calculus one year in: Are companies benefitting?" at the American Conference Institute International Conference on the Foreign Corrupt Practices Act
- Moorari K. Shah to discuss "Legal & regulatory issues" at the Opal Group Marketplace Lending & Alternative Financing Summit
- Jonice Gray Tucker to discuss "Hot topics in 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
- Daniel P. Stipano to discuss "Anti-money laundering/OFAC compliance" at the Institute of International Bankers U.S. Regulatory/Compliance Orientation Program