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On November 30, a U.S.-based agriculture company, CHS Inc., disclosed in an SEC filing that it is cooperating with an investigation being conducted by the SEC and DOJ involving payments made to Mexican customs officials. The payments were made in connection with grain shipments crossing the U.S.-Mexican border by train. CHS Inc. is a Fortune 100 company that is owned primarily by farmer and rancher cooperatives and has extensive operations in the energy sector in addition to agriculture.
The SEC filing states that the company voluntarily self-disclosed the potential violations and stressed the company’s full cooperation with the investigation, which includes “investigating other areas of potential interest to the government.” The DOJ has placed great emphasis on the importance of voluntary self-disclosure and cooperation in recent policy statements. See previous Scorecard coverage here. This investigation is noteworthy because while investigations in the energy sector are common, investigations in the agricultural sector are less so. The eventual resolution of this investigation may provide useful guidance for other agribusiness companies.
Buckley Sandler Special Alert: DOJ announces new policy on pursuing individuals in corporate resolutions
U.S. Deputy Attorney General Rod Rosenstein said at a conference this morning that the U.S. Department of Justice has revised its guidelines relating to corporate resolutions with the DOJ, particularly as those guidelines relate to charging culpable individuals. The revised guidelines modify the 2015 Yates Memo, and affirmatively obligate companies seeking leniency from the DOJ to investigate and furnish information about culpable employees and agents substantially involved in wrongdoing.
Corporations now will receive cooperation credit in criminal resolutions only if all employees substantially involved in the alleged wrongdoing are identified to the government. And in civil resolutions, corporations will receive cooperation credit only if the corporation reveals the involvement of senior management and board members in the alleged wrongdoing. The new policy highlights the DOJ’s ongoing focus on criminal and civil enforcement actions against individuals and emphasizes the importance of giving serious consideration to obtaining individual counsel very early in the process of an investigation.
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Click here to read the full special alert.
If you have questions about the DOJ’s new policy or other related issues, please visit our White Collar practice page or contact one of Buckley Sandler’s 15 partners in that practice.
On November 19, the SEC announced a settlement with Vantage Drilling International (“Vantage”) based on the improper activities of Vantage’s predecessor, Vantage Drilling Company, in connection with the Petrobras bribery scheme. The Administrative Order found that Vantage Drilling Company had “failed to devise a system of internal accounting controls with regard to [its] transactions with [its] former outside director, largest shareholder, and only supplier of drilling assets . . . and failed to properly implement internal accounting controls related to its use of third-party marketing agents,” noting the company’s “ineffective anticorruption compliance program.” According to the Order, these failures permitted payments that “created a risk that [it] was providing or reimbursing funds that [a director] intended to use to make improper payments to [Petrobras],” a Brazilian company at the center of a massive FCPA scheme.
The settlement with the SEC concludes Vantage’s involvement in the Petrobras investigations. According to Vantage, the company received a cooperation letter from the DOJ last year confirming Vantage’s full cooperation in the Petrobras investigation, and that the DOJ would not move forward with any actions against Vantage.
Further coverage of the Petrobras matter is available here.
Two co-conspirators of billionaire news network Globovision owner Raul Gorrin Belisario were sentenced this week as part of the DOJ’s recently unsealed prosecution of a bribery scheme involving over $1 billion paid in bribes to members of the Venezuelan government. According to the DOJ, Gorrin was indicted under seal in August for conspiracy to violate the FCPA, conspiracy to commit money laundering, and nine counts of money laundering. Two co-conspirators, Florida resident and former Venezuelan National Treasurer Alejandro Andrade Cedeno, and Chicago resident and former owner of Banco Peravia Gabriel Arturo Jimenez Aray, each pleaded guilty under seal to one count of conspiracy to commit money laundering, and were sentenced in federal court earlier this week.
According to Gorrin’s indictment, he allegedly bribed members of the Venezuelan government—including Andrade—in exchange for the right to handle the government’s foreign currency exchange transactions, and then acquired a bank in order to launder the bribe money and other illicit proceeds. To do so, Gorrin allegedly moved money from Switzerland to accounts in Florida and New York and used it to purchase luxury items such as “jets, a yacht, multiple champion horses, and numerous high-end watches.”
In December 2017, Andrade pleaded guilty to one count of conspiracy to commit money laundering, admitting to taking bribes in exchange for helping his co-conspirators—including Gorrin—by choosing them to conduct currency exchanges at favorable rates to the Venezuelan government. As part of his plea, Andrade agreed to cooperate and pay a forfeiture money judgment of $1 billion through the forfeiture of “real estate, vehicles, horses, watches, aircraft, and bank accounts.” On November 27, 2018, U.S. Southern District of Florida Judge Robin L. Rosenberg sentenced Andrade to 10 years in prison, the maximum under his plea deal.
In March 2018, Chicago resident and former owner of Banco Peravia Gabriel Arturo Jimenez Aray took a similar plea deal, pleading guilty to one count of conspiracy to commit money laundering, admitting to helping Gorrin and others acquire and then launder money through Banco Peravia. On November 29, 2018, Jimenez was sentenced to 3 years in prison.
The Miami Herald has also reported that Gorrin’s personal banker is Matthias Krull, formerly of Julius Baer Panama, who was sentenced last month for his role in another money laundering scheme involving Venezuela’s Petroleos de Venezuela S.A. (PDVSA). Coverage of the PDVSA prosecutions is available here.
On November 14, 2018, a three judge panel for the United States Court of Appeals for the Ninth Circuit heard oral arguments in Sanford Wadler v. Bio-Rad Laboratories, Inc., et al. Bio-Rad, a life science research and diagnostics company, is hoping to overturn a February 2017 jury verdict ordering the company to pay its former General Counsel and Secretary, Sanford Wadler, $11 million in punitive and compensatory damages. Wadler’s complaint alleged that the company had fired him for being an FCPA whistleblower. As detailed in a previous FCPA Scorecard post, Bio-Rad paid $55 million in November 2014 to settle DOJ and SEC allegations that the company violated the FCPA in Russia, Thailand, and Vietnam. Wadler’s report to the Audit Committee had involved separate allegations that the company violated the FCPA in China, allegations that did not result in additional penalties against Bio-Rad.
Bio-Rad appealed the Wadler award on the grounds that the jury was erroneously instructed that the SEC’s rules or regulations forbid bribery of a foreign official; that the company’s alleged FCPA violations were the result of Wadler’s lack of due diligence; that the trial court wrongly excluded certain impeachment testimony and evidence related to the timing of Wadler’s pursuit and hiring of a whistleblower attorney; and that Wadler did not qualify as a “whistleblower” under Dodd-Frank in light of his reporting only internally and not to the SEC (pursuant to the U.S. Supreme Court’s decision in Digital Realty Trust, Inc. v. Somers, No. 10-1276, 583 U.S. ___ (2018)). During the argument, one member of the circuit panel reportedly expressed doubt concerning Bio-Rad’s jury instruction argument, and another told counsel for Bio-Rad, “I don’t see how this can be reversed on the theory you’re offering.”
On November 2, a New York-based financial institution disclosed in its Form 10-Q filing that it had received subpoenas and requests for documents and information from multiple government agencies as part of investigations relating to matters involving 1Malaysia Development Berhad (1MDB). The filing acknowledged the indictments and guilty plea of Tim Leissner, a former participating managing director of the financial institution, and Ng Chong Hwa (also known as Roger Ng), a former managing director, which indicated that Leissner and Ng “knowingly and willfully circumvented” the financial institution’s internal accounting controls. The filing further stated that the financial institution is cooperating with the DOJ and other investigations relating to 1MDB.
The DOJ unsealed two indictments and a guilty plea related to the sprawling 1Malaysia Development Berhad (1MDB) fraud on November 1 in the Eastern District of New York. Malaysian financier Low Taek Jho (also known as Jho Low) and former banker Ng Chong Hwa (also known as Roger Ng) were charged with conspiring to launder billions of dollars embezzled from 1MDB, Malaysia’s investment development fund, and conspiracy to violate the anti-bribery provisions of the FCPA. Ng was also charged with conspiring to violate the FCPA by circumventing the internal accounting controls of a U.S. financial institution, which underwrote $6 billion in bonds issued by 1MDB. Ng was a managing director at the bank. Tim Leissner, another former banker at the same financial institution, pleaded guilty to the same charges. Leissner has been ordered to forfeit $43.7 million.
Low, Ng, Leissner, and others allegedly conspired to bribe Malaysian and Abu Dhabi officials to obtain business for the financial institution, including the 1MDB bond deals. They also allegedly conspired to launder the proceeds through purchasing luxury New York real estate, artwork, and financing major Hollywood films, such as The Wolf of Wall Street.
For prior coverage of the 1MDB scheme, please see here.
On October 30, the DOJ charged Roger Richard Bouncy, a dual U.S.-Haitian citizen, with conspiracy to violate the FCPA, commit money laundering, and violate the Travel Act, as well as substantive Travel Act violations. Bouncy is a licensed attorney and the CEO of Haiti Invest, LLC, a Haitian development and reconstruction company. The indictment is part of an ongoing case against retired U.S. Army Colonel, Joseph Baptiste, who was indicted in 2017 related to an alleged plan to solicit bribes from potential investors for infrastructure projects in Haiti. (For prior coverage of the charges against Baptiste, please see here.) According to the indictment, at a meeting in 2015, Bouncy and Baptiste met with undercover FBI agents posing as potential investors in the development project, and allegedly asked the agents to invest $84 million in the project. Baptiste told them that 5% of that total would be paid to Haitian officials to secure approval for the project. Baptiste allegedly planned to disguise the funds through a non-profit he controlled. The FBI then wired money to the non-profit.
On October 11, Assistant Attorney General Brian A. Benczkowski issued a memorandum to the DOJ’s Criminal Division that revises the framework for assessing when DOJ will require a corporate monitor as part of a resolution.
Under the revised framework, Criminal Division attorneys must now consider whether the company’s “remedial measures” or changes to “corporate culture” are enough to protect against future misconduct. For instance, “[w]here misconduct occurred under different corporate leadership” that has since left the company, a monitor may not be needed. Criminal Division attorneys must also consider not just the monetary costs to the company of imposing a corporate monitor, but also the burden to the company’s operations, and should impose a monitor only when a “clear benefit” would outweigh the costs and burdens.
As AAG Benczkowski remarked in a speech given the day after the memorandum was issued, the new corporate monitor policy is based on the “foundational principle” that “the imposition of a corporate monitor is never meant to be punitive,” and a corporate monitor ultimately “will not be necessary in many corporate criminal resolutions.”
The memorandum also refines the monitor selection process with the goal of, as AAG Benczkowski described in his speech, ensuring “that the process is fair,” that the “best candidate” is selected, and that “even the perception of any conflicts of interest” is avoided.
On September 27, Deputy Assistant Attorney General Matthew Miner gave a speech that provided clarification of DOJ enforcement policies, continuing to emphasize voluntary disclosure and underscoring the notion that companies should view DOJ “as partners, not adversaries.” In his speech, Miner announced that DOJ’s FCPA Corporate Enforcement Policy is not limited to just FCPA violations, and that DOJ “will also look to these principles in the context of mergers and acquisitions that uncover other types of potential wrongdoing,” encouraging companies that discover such wrongdoing to voluntarily disclose it. Miner also pointed to recent published declinations, and noted that declinations under DOJ’s Policy can still be appropriate even when “aggravating circumstances” are present. Miner also referenced the increase in “global enforcement and cooperation with foreign authorities” and emphasized DOJ’s “Anti-Piling On Policy.”