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Foreign Corrupt Practices Act & Anti-Corruption

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  • DOJ Issues Strict Charging and Sentencing Policy for All Federal Crimes

    On May 10, 2017, U.S. Attorney General Jeff Sessions issued a memorandum ordering all federal prosecutors, in all criminal cases, to “charge and pursue the most serious, readily provable offense,” and to “disclose to the sentencing court all facts that impact the sentencing guidelines or mandatory minimum sentences.” The new policy – which immediately rescinds Obama-era leniency policies – is likely primarily aimed at drug-related cases, but it will impact white collar and FCPA cases as well. For instance, under the policy, prosecutors may charge more defendants with money laundering or wire fraud in addition to FCPA violations, taking into account the FCPA’s relatively low five-year maximum sentences. Prosecutors seeking an exception must secure supervisory approval and document their reasoning in the case file, which may complicate plea deals. In a May 12 speech, Sessions said of the new policy: “Charging and sentencing recommendations are bedrock responsibilities of any prosecutor. And I trust our prosecutors in the field to make good judgments. They deserve to be unhandcuffed and not micro-managed from Washington.”

    DOJ Sessions

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  • Ukrainian Billionaire Files Motion to Dismiss Indictment

    Dmiitry Firtash, the Ukrainian billionaire indicted in 2013 for his alleged role in a conspiracy to bribe government officials in India to permit the mining of titanium minerals, filed a motion to dismiss the indictment on May 9 in a federal district court in Illinois. Firtash also faces money laundering and RICO charges along with five alleged coconspirators. In 2015, an Austrian court denied the United States’ extradition request, but that decision was eventually reversed and Firtash was extradited earlier this year. See previous Scorecard coverage here.

    Firtash’s motion to dismiss focuses on the lack of jurisdictional contact between the charged conduct and the United States. It vigorously challenges the jurisdictional basis alleged in the indictment, which was that Firtash’s coconspirators, but not Firtash himself, transferred money through United States correspondent banks, traveled to the United states, and used email accounts and cellular phones hosted on servers in the United States. However, Firtash claims that the indictment fails to allege that any of these contacts have any connection to the alleged bribery scheme and that Firtash himself never entered the United States in connection with the charged conduct, and never made or received any phone calls or sent or received any emails regarding the allegations in the indictment.

    The amount and quality of contacts with the United States required to support jurisdiction under the FCPA is a frequently contested issue. The United States has repeatedly taken the position that jurisdiction is proper even where the wrongful conduct took place outside the United States and did not involve any United States companies or citizens, so long as there was some contact with the United States. For example, in the recent Magyar Telekom cases, emails sent through servers hosted in the United States were held to be sufficient to support jurisdiction. See previous Scorecard coverage here. The outcome of Firtash’s motion to dismiss will shed further light on the jurisdictional standard.

    Indictment India RICO Bribery Magyar Telekom

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  • Reports: Wal-Mart Nearing Resolution of Bribery Probe

    Bloomberg reports that Wal-Mart is nearing a resolution of a five-year old joint inquiry by the DOJ and SEC. Citing an unnamed source familiar with the matter, Bloomberg reports that the company is preparing to pay $300 million to settle allegations that company employees paid bribes in Mexico, China, and India. The same source reported that the resolution will also include at least one guilty plea by a Wal-Mart subsidiary, a non-prosecution agreement for the parent company, and a monitorship.

    In March of 2015, a federal district court in Arkansas dismissed with prejudice a consolidated shareholder derivative suit accusing Wal-Mart Stores Inc.’s (Wal-Mart) board of directors of concealing Mexican bribery claims from investors. The lawsuit was filed after a 2012 article by the New York Times reported that top officials at Wal-Mart’s Mexican subsidiary oversaw millions of dollars in bribes in connection with the company’s expansion in Mexico. See previous Scorecard coverage here. The same article is believed to have touched off the DOJ’s and SEC’s inquiry. If true, a $300 million resolution would not be near the top end of FCPA resolutions.

    DOJ SEC Score Card Bribery Wal-Mart

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  • Former Guinean Mining Minister Convicted on Bribery and Money Laundering Charges

    A former Guinean mining minister was found guilty earlier this week on bribery and money laundering charges following a seven-day jury trial in Manhattan federal court. He was charged with receiving and laundering $8.5 million in bribes allegedly for securing mining rights for two Chinese companies. 

    The conviction came one day after the former minister took the stand in his own defense and admitted to lying to banks about his status as a government official, as well as failing to report the payments on his IRS tax return.

    The conviction also follows other notable enforcement actions involving the mining industry in the Republic of Guinea. Earlier this year, the SEC charged former Och-Ziff executives with bribing government officials across Africa to secure mining deals, including in Guinea.

    SEC Guinea Africa China Och-Ziff Bribery Anti-Money Laundering

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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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  • DOJ Voices Continued Support for Robust FCPA Enforcement

    On April 24, 2017, in a speech at the Ethics and Compliance Initiative Annual Conference in Washington, D.C., Attorney General Jeff Sessions appeared to commit to the continued aggressive enforcement of the FCPA. He noted that bribery "increases the cost of doing business and hurts honest companies that don’t pay these bribes,” and he explained that the Trump administration’s DOJ will enforce laws that protect honest businesses: “One area where this is critical is enforcement of the Foreign Corrupt Practices Act (FCPA). Congress enacted this law 40 years ago, when some companies considered it a routine expense to bribe foreign officials in order to gain business advantages abroad.” AG Sessions also emphasized that individuals, not just companies, may face increased FCPA focus.

    These remarks come on the heels of comments from another senior DOJ official who recently noted that robust FCPA enforcement will continue. As previously reported, Trevor McFadden, the DOJ’s Criminal Division's Acting Principal Deputy Assistant Attorney General, noted that the DOJ remains "intent on creating an even playing field for honest businesses."

    These remarks suggest that the DOJ will remain active in enforcing FCPA compliance issues, despite comments from then-candidate Trump that FCPA enforcement may be scaled back under his watch.

    DOJ FCPA Enforcement Action Bribery Trump

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  • DOJ’s Trevor McFadden Addresses Anti-Corruption, Export Controls and Sanctions Compliance Summit

    On April 18, Acting Principal Deputy Assistant Attorney General Trevor McFadden spoke at the 10th annual Anti-Corruption, Export Controls and Sanctions Compliance Summit in Washington, D.C. According to Mr. McFadden, the Justice Department “remains committed to enforcing the FCPA and to prosecuting fraud and corruption more generally.” He emphasized the importance of company cooperation, stating that that the department considers voluntary self-disclosures and remedial efforts when making charging decisions. Mr. McFadden also stated that the department is making a “concerted effort to move corporate investigations expeditiously,” adding that FCPA investigations should be “measured in months, not years.”

    Mr. McFadden also discussed an increased prioritization of anti-corruption prosecutions around the world and stated that the DOJ will “seek to reach global resolutions that apportion penalties between the relevant jurisdictions so that companies that want to accept responsibility for misconduct are not unfairly penalized by multiple agencies.”

    Additionally, the department is assessing its FCPA Pilot Program. Last year, as part of the Program, the department began publishing information on cases it declined to prosecute due to voluntary self-disclosure, full cooperation, and comprehensive remediation. Mr. McFadden stated that the Program is “one example of an effort to provide more transparency and consistency for our corporate resolutions” and “will continue in full force.”

    DOJ Anti-Corruption Export Controls Sanctions

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  • South Korea’s Former President, Park Geun-hye, Formally Indicted on Corruption Charges

    On April 17, former South Korean president Park Geun-hye was formally indicted on 18 charges of corruption including bribery, extortion, abuse of power, and leaking state secrets. Ms. Park was impeached in December after months of public protests. Last month, she was removed from office and arrested.

    The corruption scandal has also implicated Ms. Park’s longtime confidante, Choi Soon-sil, who is currently on trial on corruption charges. The pair is accused of coercing Korean businesses into donating $68 million to two non-profit foundations that Ms. Choi controlled. Ms. Park and Ms. Choi are also accused of collecting or demanding $52 million in bribes from businesses, including $38 million from Korean conglomerate Samsung, $6.2 million from the retail conglomerate Lotte, and $7.8 million from the telecommunications and semiconductor conglomerate SK. Shin Dong-bin, the chairman of Lotte, was indicted on bribery charges on Monday.

    FCPA Enforcement Action Anti-Corruption Bribery

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  • DOJ Reduces Odebrecht Penalty Based on Inability to Pay

    On April 11, the DOJ filed a memorandum in its case against Odebrecht S.A., requesting that the Court approve a lower sentence than originally proposed based on Odebrecht’s inability to pay. On December 21, Brazilian construction company Odebrecht and its petrochemical affiliate, Braskem S.A., reached a $4.5 billion combined global settlement with U.S., Brazilian, and Swiss authorities to resolve FCPA allegations, in which both companies agreed to plead guilty in the U.S. to conspiracy to violate the FCPA. As part of that agreement, the U.S. and Brazilian authorities agreed to conduct an independent analysis to confirm the accuracy of Odebrecht’s representation that it had an inability to pay a penalty in excess of $2.6 billion. The memorandum set forth the DOJ’s determination that Odebrecht lacks the ability to pay a criminal penalty in excess of $2.6 billion and included adjustments for the requested penalty to match that ability. In particular, the portion of the penalty paid to the United States would be lowered from approximately $117 million to approximately $93 million. The sentencing hearing is scheduled for April 17.

    Prior Scorecard coverage of the Odebrecht settlement can be found here.

    DOJ FCPA Enforcement Action Odebrecht Braskem SA

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