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McDonnell rule does not apply to the FCPA, says 2nd Circuit
On August 9, the U.S. Court of Appeals for the 2nd Circuit affirmed the conviction of a Chinese real estate developer arising from the alleged bribery of United Nations officials. In affirming the conviction, the court held that the U.S. Supreme Court’s holding in McDonnell v. U.S.—that, in cases brought under the domestic federal anti-bribery statute, the government must show that the bribe was paid in exchange for an “official act”—does not apply to prosecutions under the Foreign Corrupt Practices Act (FCPA) or 18 U.S.C. § 666, a federal anti-corruption law related to federal funds.
In the most recent case, a federal jury convicted the developer of paying bribes and gratuities to United Nations officials in violation of the FCPA and 18 U.S.C. § 666. The developer appealed the conviction and argued, among other things, that the jury should have been instructed that the bribe must have be paid for an “official act,” in light of McDonnell. On appeal, the 2nd Circuit rejected the developer’s arguments, explaining that the FCPA and 18 U.S.C. § 666 target a broader set of bribery goals than the statute at issue in McDonnell. Specifically, the court noted that the FCPA and 18 U.S.C. § 666 prohibit giving anything of value in exchange for specific “quos” that do not include reference to an “official act.” Thus, based on the “textual differences among various bribery statutes,” the appellate court concluded that the “official act” standard does not apply to prosecutions under the FCPA or 18. U.S.C. § 666.
OFAC sanctions corruption network linked to Venezuela’s food subsidy program; DOJ charges two of same individuals for money laundering related to bribery
On July 25, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against two Colombian nationals responsible for “orchestrating a vast corruption network,” which has enabled former President Maduro and his regime “to significantly profit from food imports and distribution in Venezuela.” According to OFAC, the Colombian nationals created a network comprised of shell companies, business partners, and family members—all of whom have also been designated for their involvement in the network—that illicitly profited from their involvement in Venezuela’s food subsidy program as well as other contracts with the Venezuelan government. The sanctioned network—which also included Maduro’s three stepsons—allegedly “laundered hundreds of millions of dollars in corruption proceeds around the world.” As a result of the sanctions, “all property and interests in property of the individuals and entities designated today, and of any entities that are owned, directly or indirectly, 50 percent or more by those individuals or entities, that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC.” OFAC noted that its regulations “generally prohibit” U.S. persons from participating in transactions with the designated entities and individuals. OFAC also referred financial institutions to Financial Crimes Enforcement Network advisories FIN-2019-A002, FIN-2017-A006, and FIN-2018-A003 for further information concerning the efforts of Venezuelan government agencies and individuals to use the U.S. financial system and real estate market to launder corrupt proceeds, as well as human rights abuses connected to corrupt foreign political figures and their financial facilitators.
The same day, the DOJ announced charges, pursuant to an indictment filed in the U.S. District Court for the Southern District of Florida, against two of the same sanctioned Colombian nationals for money laundering and conspiracy to commit money laundering. The charges relate to the Colombian nationals’ alleged roles in laundering the proceeds of an illegal bribery scheme from bank accounts located in Venezuela to and through bank accounts located in the United States. The bribery scheme resulted in the transfer of approximately $350 million, and allegedly involved contracts to build low-income housing units and efforts to take advantage of Venezuela’s government-controlled exchange rates through the use of “false and fraudulent import documents for goods and materials.”
Hungarian subsidiary of multinational technology company settles FCPA claims
On July 22, the DOJ announced an $8.7 million settlement with the Hungarian subsidiary of an American multinational technology company to resolve allegations of bid-rigging and bribery in violation of the FCPA. The SEC simultaneously announced a related resolution with the parent technology company over the operations of subsidiaries in four countries, with the parent company paying an additional $16.5 million.
According to the DOJ announcement, between 2013 and 2015, executives and employees of the Hungarian subsidiary falsely represented to the parent company that discounts were necessary to finalize deals with resellers to sell company licenses to government customers; however, the savings were allegedly used for “corrupt purposes” in violation of the FCPA. The subsidiary entered into a non-prosecution agreement with DOJ, which noted that while the subsidiary did not voluntarily self-disclose the misconduct, it received credit for the company’s “substantial cooperation with the Department’s investigation and for taking extensive remedial measures.” Specifically, the subsidiary terminated four licensing partners and the company implemented an enhanced compliance system and internal controls to address corruption risks.
Jury acquits former metal industry supplier executives of U.K. SFO bribery charges
On July 16, a London jury acquitted three former metal industry supplier executives who had been charged with foreign bribery by the U.K. Serious Fraud Office (SFO). The SFO reportedly failed to prove that the former executives – a managing director, sales head, and project manager – had paid bribes to secure overseas contracts. The acquittal comes three years after the company entered into the SFO’s second-ever deferred prosecution agreement (DPA). The July 2016 DPA resolved, at a corporate level, some of the same bribery allegations that the executives faced at trial, and resulted in the company paying a £6.5 million fine. The company’s identity in the DPA was not publicly known until restrictions were lifted at the conclusion of the trial.
Two businessmen and two former Venezuelan officials charged in bribery investigation
On June 24, two businessmen, Luis Alberto Chacin Haddad and Jesus Ramon Veroes, pleaded guilty in federal court in Miami to conspiracy to violate the FCPA. The charges relate to bribes paid to Venezuelan officials at a state-owned and state-run electricity company in an effort to obtain $60 million in contracts for their Florida-based businesses. Pursuant to their plea agreements, the businessmen will each forfeit at least $5.5 million in profits, as well as Miami-area real estate obtained with the ill-gotten gains. Sentencing is scheduled for September 4.
In addition, on June 27 the Venezuelan officials they allegedly bribed, Luis Alfredo Motta Dominguez (former minister of electrical energy in Venezuela and the head of the company) and Eustiquio Jose Lugo Gomez (former procurement director at the company), were charged by eight-count indictment in the Southern District of Florida. On the same day, the same officials were also sanctioned by OFAC. See related InfoBytes coverage here.
Two Ecuadorians charged with FCPA conspiracy related to oil company investigation
On May 9, pursuant to an indictment filed in federal court in Miami without announcement by DOJ, two Ecuadorian citizens were charged with conspiracy to violate FCPA, conspiracy to commit money laundering, and nine counts of money laundering. The indictment was first reported on July 1 by the Financial Times.
The charges against Armengol Alfonso Cevallos Diaz and Jose Melquiades Cisneros Alarcon, who both live in Florida, relate to the ongoing investigation and prosecution of bribery and money laundering at Ecuador’s state oil company. To date, the investigation has yielded four guilty pleas. One additional defendant has pleaded not guilty; his case is pending.
See prior FCPA Scorecard coverage here.
CEO and director of investment firm convicted of conspiracy to bribe Haitian officials
After a two-week jury trial in the United States District Court for the District of Massachusetts, the CEO of an investment firm and one of its directors were convicted of conspiracy to violate the FCPA and the Travel Act. Joseph Baptiste, a retired U.S. Army Colonel, was also found guilty of violating the Travel Act and conspiracy to commit money laundering. For prior coverage of the charges against Baptiste and CEO Roger Richard Boncy, please see here.
The evidence that federal prosecutors presented against Boncy and Baptiste included intercepted phone calls in which they discussed their plan to bribe Haitian officials “at all levels of government” in order to obtain governmental approval of a proposed $84 million project to develop a port in northwestern Haiti. In a recorded conversation with undercover agents posing as investors, Boncy and Baptiste allegedly solicited funds and told agents that the funds would be used to bribe the aide of a high-level elected official in Haiti. To conceal the bribes, Boncy and Baptiste allegedly said that they would funnel the agents’ funds through a U.S.-based non-profit organization that Baptiste controlled, which purported to sponsor social programs for Haitian residents.
The case against Boncy and Baptiste began with a sting operation conducted by the FBI in 2017. Boncy and Baptiste are scheduled to be sentenced by Judge Allison D. Burroughs on September 12, 2019.
SFO fines shipping and logistics company over $1 million for bribery scheme
On June 3, the UK Serious Fraud Office (SFO) announced that it had fined a shipping and logistics company £850,000 (approximately $1.08 million) for bribes paid to secure contracts in Angola. The SFO started investigating the company in September 2014 and announced in July 2016 that it had charged the company and seven individuals with making corrupt payments. The company pleaded guilty in 2017. The SFO found that executives had bribed an agent of the Angolan state oil company to obtain $20 million worth of shipping contracts.
Executive pleads guilty in oil company bribery case
On May 29, the DOJ announced that a dual U.S.-Venezuelan citizen pleaded guilty for his role in a bribery scheme involving oil and natural gas company officials. The citizen pleaded guilty in the Southern District of Texas to conspiracy to violate the FCPA, violating the FCPA, and failing to report foreign bank accounts. His sentencing is set for August 28.
He controlled multiple U.S. and international companies that provided goods and services to the company. According to the DOJ, the U.S. citizen and a co-conspirator paid at least $629,000 in bribes to a former company official in exchange for favorable business treatment for his companies. Prior FCPA Scorecard coverage is available here.
Hawaii man sentenced to 30 months for bribery conspiracy
On May 13, a Hawaiian businessman was sentenced to 30 months imprisonment to be followed by three years of supervised release after pleading guilty in January to a charge of conspiracy to bribe a Micronesian official in violation of the FCPA. The DOJ alleged that the businessman’s consulting company paid $440,000 in bribes to officials to obtain and keep contracts with the Micronesian government worth more than $10 million. One of the officials also pleaded guilty in April. See more previous coverage here.