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  • Global bank settles two FCPA actions for $10.5 million

    On August 16, the SEC announced that a global bank had settled two enforcement actions involving alleged violations of the FCPA’s books and records and internal control provisions.  The FCPA’s anti-bribery provisions were not implicated in either action.

    The first action alleged that three traders employed by a U.S. subsidiary of the bank had mismarked positions in certain proprietary accounts, causing $81 million in losses that were not reflected in the company’s books and records. Some of these losses were from allegedly “widespread unauthorized trading.” The second action alleged that the bank had “failed to devise and maintain adequate internal accounting controls,” causing $475 million in losses, when the company did not identify that a Mexican subsidiary had loaned nearly $3.3 billion to a counterparty on the basis of fraudulent documentation provided by the counterparty. Without admitting or denying the SEC’s findings, the bank “agreed to pay $10.5 million in penalties”: $5.75 million for the first action, and $4.75 million for the second.

    SEC FCPA

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  • UK SFO charges former Güralp Systems employees with bribery conspiracy as DOJ declines to prosecute the company for FCPA violations

    On August 17, the UK Serious Fraud Office (SFO) announced that it was charging two former employees of Reading-based engineering company Güralp Systems Ltd. with “conspiracy to make corrupt payments.” The SFO alleged that the founder and former Managing Director of the company, Cansun Güralp and Andrew Bell, respectively, had “conspired to corruptly make payments to a public official and employee of the Korea Institute of Geoscience and Mineral Resources (KIGAM).” The conduct allegedly occurred over a period of 13 years, from April 2002 to September 2015.

    A few days later, on August 20, the DOJ published a letter informing Güralp Systems that it was declining to prosecute the company for potential FCPA and money laundering violations related to payments it had made to Heon-Cheol Chi, a former director of KIGAM. In October 2017, Chi was sentenced to 14 months in federal prison on a U.S. money laundering charge related to the bribery scheme. The DOJ’s letter stated that it was declining to prosecute because, among other reasons, the company voluntarily disclosed the misconduct, provided cooperation that assisted with the prosecution of Chi, undertook “significant remedial efforts,” and “committed to accepting responsibility” for its conduct in the parallel SFO investigation.

    DOJ FCPA Anti-Money Laundering Bribery

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  • Colombia’s former anti-corruption chief pleads guilty to money laundering conspiracy related to foreign bribes

    On August 14, the DOJ announced that Colombia’s former National Director of Anti-Corruption, Luis Gustavo Moreno Rivera, pleaded guilty to “participat[ing] in a conspiracy to launder money with the intent to promote foreign bribery.” A Colombian attorney, Leonardo Luis Pinilla Gomez, also pleaded guilty to the conspiracy. According to the press release, the two men admitted that they “attempted to entice a bribe” from a Colombian politician who was facing a corruption investigation by Moreno’s office by promising to provide statements made by cooperating witnesses in exchange for $34,500. Working undercover for the DEA, the politician paid the two men a $10,000 deposit of the bribe money during a June 2017 meeting in Miami. At that meeting, the two men were also recorded promising to obstruct the investigation in exchange for an additional $132,000 bribe. Cash from the deposit was found on Moreno when he boarded his flight back to Colombia. The two men were arrested in Colombia and extradited to the U.S. in May 2018. Sentencing is scheduled for November 19, 2018.

    DOJ Anti-Corruption

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  • Former Malaysia Prime Minister charged with money laundering

    On August 8, Malaysia’s former Prime Minister Najib Razak pleaded not guilty to money laundering charges filed against him in Malaysia in connection with the ongoing investigation of state fund 1MDB. Razak had previously pleaded not guilty to three charges of criminal breach of trust and one charge of abuse of power. The money laundering charges relate to approximately $10 million that was allegedly deposited into the former Prime Minister’s personal bank account. That is a small portion of the total funds under investigation as misappropriated from the state fund.

    The day before, a $250 million super yacht was returned to Malaysia after it was previously seized in Indonesia following claims by the U.S. Department of Justice that is was purchased with funds misappropriated from 1MDB. Back in July 2016, DOJ filed civil forfeiture complaints seeking recovery of more than $1 billion in assets associated with the alleged “international conspiracy to launder funds misappropriated from [1MDB].” In June 2017, DOJ filed additional civil forfeiture complaints to recover another $540 million in assets. The investigation into assets linked to the state fund 1MDB continues with DOJ alleging that more than $3.5 billion in total funds were misappropriated from 1MDB from 2009 through 2015.

    DOJ Anti-Money Laundering

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  • Former Barbadian Minister of Industry charged with money laundering

    On August 6, the Department of Justice announced the arrest and first court appearance of Donville Inniss, former Minister of Industry of Barbados, who DOJ has charged with “laundering bribes that he allegedly received from a Barbadian insurance company in exchange for official actions he took to secure government contracts for the insurance company.” The indictment, which was initially issued under seal on March 15, charges Inniss with one count of conspiracy to launder money and two counts of money laundering. It also seeks forfeiture of the funds he received as alleged bribes. The indictment alleges that as Minister of Industry, Inniss caused the Barbados Investment & Development Corporation, an agency of the Barbados Government, to renew two contracts with the Barbadian insurance company. In return, the insurance company purportedly paid him approximately $36,000, routing the payments through a dental company and its bank account located in New York. The indictment also references as co-conspirator, but does not name, the CEO of the dental company, a United States citizen and resident of Tampa, Florida. Inniss is also a lawful permanent resident of Tampa, Florida.

    DOJ Anti-Money Laundering

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  • Another executive arrested in PDVSA bribery case

    On August 1, DOJ announced the arrest of Jose Manuel Gonzalez Testino, a dual U.S.-Venezuelan citizen, on foreign bribery charges for making and conspiring to make corrupt payments to an official of Venezuela’s state-owned energy company, Petroleos de Venezuela S.A. (PDVSA). Gonzalez was arrested at Miami International Airport on an arrest warrant based on a criminal complaint in the Southern District of Texas, which was unsealed on July 31. Gonzalez made an initial appearance before a magistrate judge in the Southern District of Florida.

    According to the criminal complaint, Gonzalez and a co-conspirator paid at least $629,000 in bribes to a former PDVSA official in exchange for favorable business treatment for Gonzalez’s companies, including: (1) directing PDVSA contracts to Gonzalez’s companies, (2) giving Gonzalez’s companies priority over other vendors to receive payments, and (3) awarding Gonzalez’s companies contracts in U.S. dollars rather than Venezuelan bolivars.

    DOJ has announced charges against 17 individuals, including Gonzalez, as part of its investigation into bribery at PDVSA. 12 individuals have pleaded guilty.

    DOJ FCPA Bribery Petroleos de Venezuela

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  • DOJ supervisor over fraud section addresses Global Forum on Anti-Corruption Compliance

    On July 25, Deputy Assistant Attorney General Matthew Miner, who oversees the Fraud Section as well as other parts of the Criminal Division, spoke at ACI’s 9th Global Forum on Anti-Corruption Compliance in High Risk Markets. His speech focused on the DOJ’s efforts to combat global corruption, with a focus on merger and acquisition activity. Miner emphasized, among other things, the efforts the Department was taking to reduce global corruption, highlighting in particular the DOJ’s permanent enshrinement of the FCPA self-disclosure program. He pointed to a recent success of that program, the DOJ’s declination of prosecution against a commercial data company for hiring-related misconduct by its recently acquired China subsidiaries, previously discussed here. Miner also discussed the Department recent “anti-piling on policy,” under which it gives credit for penalties paid to other enforcement authorities for the same misconduct. As an example of this policy, he noted how the Department credited 50% of the fine a French multinational banking and financial services company paid to French authorities for FCPA-related misconduct in a recent enforcement action.

    Miner asserted that the Department would like to do a better job providing guidance to companies facing FCPA risk through mergers and acquisitions, particularly when such activity is in high-risk industries and markets. He quoted from the DOJ’s 2012 Resource Guide, noting that in an acquisition, “a successor company’s voluntary disclosure, appropriate due diligence, and implementation of an effective compliance program may also decrease the likelihood of an enforcement action regarding an acquired company’s post-acquisition conduct when pre-acquisition due diligence is not possible.” Addressing pre-acquisition diligence, Miner stated that when an acquiring company encounters corruption issues during the diligence process, it should come to the Department for guidance through its FCPA Opinion Procedures before moving forward. Miner stated that not enough companies are taking advantage of this “tremendous resource.”

    Miner commented overall that with these policies and procedures, the Department hopes “to incentivize companies to invest in effective compliance programs and robust control systems to prevent misconduct and, in the event of a detected violation, to take full advantage of [the DOJ’s] enforcement approach.”

    DOJ FCPA Anti-Corruption

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  • Court dismisses SEC allegations against executives of hedge fund management firm as time-barred

    Judge Nicholas Garaufis of the Eastern District of New York issued a 32-page memorandum opinion this week dismissing the SEC’s civil suit against two former executives of an American hedge fund management firm (earlier coverage can be found here and here).

    The SEC’s complaint alleged that the executives violated the FCPA between May 2007 and April 2011 by causing the firm “to pay tens of millions of dollars in bribes to government officials on the continent of Africa.” Specifically, the defendants allegedly induced Libyan authorities to invest in firm managed funds, and directed illicit efforts to secure mining deals by bribing government officials in Libya, Chad, Niger, Guinea, and the Democratic Republic of the Congo. The case against the two executives was the latest in a line of civil and criminal proceedings involving the hedge fund management firm and its employees and executives, and the firm paid $412 million in criminal and civil penalties to settle its FCPA enforcement actions.

    Judge Garaufis, in dismissing the complaint in its entirety with prejudice, found that the claims were barred by the FCPA’s five-year statute of limitations, and he rejected the SEC’s tolling arguments. A cornerstone of this dismissal is the Supreme Court’s ruling last year in Kokesh v. SEC, which held that SEC disgorgement actions are subject to a five-year statute of limitations.

    SEC FCPA Africa

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  • Latest conviction in PDVSA bribery case

    On July 16, 2018, Luis Carlos De Leon-Perez, a dual U.S.-Venezuelan citizen, pleaded guilty to one count of conspiracy to violate the FCPA and one count of conspiracy to commit money laundering. De Leon’s convictions relate to allegations that he bribed officials at Venezuela’s state-owned oil company, Petroleos de Venezuela S.A. (PDVSA), and laundered money for bribes to other company employees. FCPA Scorecard provided earlier coverage of this case here.

    De Leon admitted to soliciting and directing bribes from two U.S. citizens, including Cesar David Rincon Godoy, in exchange for securing payment priority for their companies from PDVSA and for awards of PDVSA contracts. De Leon also admitted to conspiring with these individuals to launder and conceal the proceeds of the scheme through a series of financial transactions, including wire transfers to offshore accounts. Sentencing is scheduled for September 24, 2018.

    De Leon’s conviction underscores how wide investigations can become as the DOJ continues pulling threads and obtaining guilty pleas. The DOJ has charged 15 defendants in the PDVSA cases, 12 of whom have pleaded guilty to date, including De Leon. DOJ also credited the assistance of the Swiss Federal Office of Justice and the Spanish Guardia Civil.

    DOJ FCPA Anti-Money Laundering Bribery Petroleos de Venezuela

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  • Global bank pays $76.7 million to settle hiring practices case

    A global bank and its Hong Kong subsidiary reached a settlement with the DOJ and the SEC related to its alleged practice of “awarding employment to friends and family of Chinese officials” to win business. The subsidiary agreed to pay a $47 million criminal penalty as part of a non-prosecution agreement with the DOJ. It also agreed to continue to cooperate in any ongoing investigations. The DOJ noted that the subsidiary had not self-reported the conduct or properly disciplined the employees involved, although it did receive partial credit for cooperating with the investigation once it began. 

    The parent bank agreed to disgorge nearly $30 million in profits and prejudgment interest in an SEC administrative proceeding. The SEC noted the criminal fine imposed by the DOJ in deciding not to impose a civil penalty. 

    For prior coverage of the sons and daughters investigations into hiring practices in Asia, please see here

    DOJ FCPA Sons and Daughters

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