Subscribe to our FinCrimes Update for news about the Foreign Corrupt Practices Act and related prosecutions and enforcement actions.
Based on media reports, DOJ’s Fraud Section is reportedly investigating some part of Major League Baseball (MLB) for possible FCPA violations related to recruitment of international players, particularly related to immigration issues for players from Latin America. Reports indicate that the investigation was initiated when a MLB whistleblower provided the FBI with information and documents last year during spring training. Since then, several witnesses have reportedly already been subpoenaed and testified before a federal grand jury in connection with the investigation.
A spokesperson for the MLB stated that the organization had not been contacted by federal authorities regarding an investigation, and the two franchises that appear to be most at issue declined to comment to the media on the matter.
On September 28, the DOJ announced that a former CEO and a former executive of oil services company SBM Offshore, N.V. (SBM) had been sentenced to prison and fined for their roles in a scheme to bribe foreign government officials in Brazil (at Petrobras), Angola (Sonangol), and Equatorial Guinea (GEPetrol) in exchange for oil-services contracts. In November 2017, the former CEO of SBM, Anthony “Tony” Mace, and a former sales and marketing executive at SBM USA, Robert Zubiate, each had pleaded guilty to one count of conspiracy to violate the FCPA. Mace was sentenced to 36 months in prison and a fine of $150,000 for authorizing payments in furtherance of the bribery scheme, and Zubiate was sentenced to 30 months in prison and a fine of $50,000 for using a third-party sales agent to pay bribes to Petrobras officials.
SBM itself entered into a $238 million three-year deferred prosecution agreement and its subsidiary, SBM USA, pleaded guilty to one count of conspiracy to violate the FCPA.
Prior Scorecard coverage of the company can be found here.
On September 27, 2018, the DOJ announced that Petrobras, the Brazilian state-owned oil company, had entered into a Non-Prosecution Agreement with the DOJ, as well as settlement agreements with the SEC and Brazilian authorities, and agreed to pay a total $853.2 million in penalties to all jurisdictions. Under the terms of the settlement, DOJ and SEC will each receive 10 percent of the penalty amount, with Brazilian authorities receiving the remaining 80 percent.
As part of the settlement, Petrobras admitted that its Executive Board members “were involved in facilitating and directing millions of dollars in corrupt payments to politicians and political parties in Brazil,” while directors were “involved in facilitating bribes that a major Petrobras contractor was paying to Brazilian politicians.” The conduct included bribes related to several refineries, as well as shipyard and drillship contracts, as well as payments to “stop a parliamentary inquiry into Petrobras contracts.”
Petrobras’ penalty reflects a 25 percent discount off the low end of the applicable U.S. Sentencing Guidelines due to its cooperation and remediation. While the company did not voluntary disclose its conduct, it cooperated with authorities by disclosing the findings of its internal investigation, providing document discovery, and facilitating the interview of foreign witnesses. It also took remedial measures by replacing its Board of Directors and Executive Board, as well as implementing reforms in its policies and procedures.
In addition to the criminal penalty, the SEC announced that Petrobras agreed to an administrative order requiring it to pay almost $1 billion in disgorgement and prejudgment interest. However, Petrobras received full credit for payments it already made to resolve a class action for $2.95 billion earlier this year. The net result is that Petrobras will not have to pay any additional funds to the SEC in the separate disgorgement action.
Prior ScoreCard coverage of the Petrobras and related investigations can be found here.
On September 25, 2018, the SEC announced a settlement of FCPA charges against the former CEO of Chilean-based chemical and mining company Sociedad Química y Minera de Chile, S.A. (SQM) for $125,000. According to the SEC, over the course of seven years, SQM’s then-CEO Patricio Contesse González “caused SQM to make nearly $15 million in improper payments to Chilean political figures and others connected to them.” Contesse agreed to the settlement without admitting the findings in the SEC’s order. According to the SEC’s order, Contesse signed false certifications related to financial reporting in the United States.
Last year, SQM agreed to pay $30 million to settle parallel DOJ and SEC charges against the company. That settlement demonstrated the jurisdictional reach of U.S. government enforcement of the FCPA – while SQM is a Chilean company with no U.S. operations, it is registered with the SEC as a foreign private issuer.
On September 14, a New York federal district court granted class certification to a group of shareholder investors suing an American hedge fund management firm and two of its senior executives on the grounds that the investors were misled about a government investigation into the company’s activities in Africa. In finding that the proposed class met all the requirements for certification, the court certified a class of investors that held some of the more than 100 million outstanding shares between February 2012 and August 2014, the time period in which the firm allegedly violated the Securities Exchange Act. Plaintiffs claim that the firm told investors it was not under any pending judicial or administrative proceeding that might have a material impact on the firm, when in fact it was under DOJ and SEC investigation over allegations that its employees were bribing government officials in Africa. The allegations against the firm were made public in 2014 media reports detailing government scrutiny into its dealings in Africa.
Click here for prior FCPA Scorecard’s coverage of this matter.
On September 12, the SEC announced that United Technologies Corporation (UTC) agreed to pay $13.9 million to settle FCPA charges related to payments made through a subsidiary in connection with the sales of elevator and airline equipment in Azerbaijan and China. According the SEC’s Order, from 2012 through 2014, the Connecticut-based company, through its wholly owned subsidiary Otis Elevator Company, made illicit payments to Azerbaijani officials to facilitate the sales of elevator equipment.
The Order also included other conduct that both the DOJ and SEC have focused on in recent years, including the use of agents and gifts and entertainment. For example, the Order detailed conduct by UTC and a joint venture partner from 2009 to 2013 in which an agent in China received improper commissions totaling $55 million in connection with the company’s attempt to win airline business in China. The Order also found that the company, from 2009 through 2015, improperly “provided trips and gifts to various foreign officials in China, Kuwait, South Korea, Pakistan, Thailand, and Indonesia” in order to obtain business. UTC consented to the SEC’s order without admitting or denying the findings that it violated the anti-bribery, books and records, and internal accounting controls provisions of the FCPA.
On September 13, the DOJ announced two additional guilty pleas in its wide-ranging foreign bribery investigation into payments to officials of Venezuela’s state-owned energy company, Petroleos de Venezuela S.A. (PDVSA). Juan Carlos Castillo Rincon (Castillo), a former manager of a Texas-based logistics and freight forwarding company, pleaded guilty to one count of conspiracy to violate the FCPA in connection with corruptly securing contracts, contract extensions, and favorable contract terms from PDVSA. Castillo pleaded guilty in the Southern District of Texas, as did Jose Orlando Camacho (Camacho), the PDVSA official who accepted the bribes, and whose guilty plea was also unsealed. As now revealed, in July 2017, Camacho pleaded guilty under seal to conspiracy to commit money laundering. Both Camacho and Castillo are scheduled to be sentenced in February 2019. Prior Scorecard coverage of the PDVSA matter can be viewed here.
With these guilty pleas, DOJ has now brought charges against 18 individuals as part of its investigation into bribery at PDVSA. Fourteen individuals have pleaded guilty. Due to the limits inherent in the FCPA, the DOJ’s charges against the corrupt foreign officials such as Camacho (i.e., PDVSA employees) have been based on money laundering and not FCPA (see Prior FCPA Scorecard Coverage here and here) whereas the charges against the U.S.-based individuals who made and/or directed the corrupt payments generally have included FCPA violations (see Prior FCPA Scorecard Coverage here).
On September 4, Ensco PLC, a London-based offshore drilling company, announced in its Form 8-K filing that the DOJ and the SEC will not take action against the company, ending their investigations into alleged corruption related to a drilling services agreement between Pride International LLC (“Pride”), an acquired subsidiary, and Petrobras, the Brazilian state-owned oil company. According to the filing, the SEC letter stated that the agency “did not intend to recommend any enforcement action” related to the alleged irregularities. The DOJ letter acknowledged Ensco’s full cooperation in the investigation.
Barbadian insurance company receives first declination with disgorgement under FCPA Corporate Enforcement Policy
On August 23, the Insurance Corporation of Barbados Limited (ICBL) received the first declination with disgorgement from the DOJ under the FCPA Corporate Enforcement Policy, which was made effective in November 2017. The conduct at issue involved payments made by ICBL to a Barbadian official in exchange for insurance contracts. The DOJ stated that the official, who is a U.S. legal permanent resident, laundered the payments through a New York-based company owned by a friend of the official. The declination was offered in consideration of numerous factors, including ICBL’s timely and voluntary disclosure of the conduct, its thorough internal investigation and cooperation with the DOJ’s investigation, its agreement to disgorge $93,900 in profits, and its efforts to enhance compliance and to remediate the matter by terminating all involved in the misconduct.
On August 27, the SEC issued an administrative order settling allegations against Maryland-based investment manager Legg Mason which remained outstanding after the company’s June 4 NPA with the DOJ. The June 4 NPA resolved claims of FCPA violations in Libya and included a criminal penalty of $32.6 million and disgorgement of $31.6 million [see prior FCPA Scorecard coverage here]. The SEC order stated that Legg Mason’s actions were in violation of the internal accounting controls provision of the Securities Exchange Act of 1934. The SEC settlement did not include a seprate penalty beyond the disgorgement already agreed to in June, and pre-judgment interest.