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Brazilian Aircraft Maker Resolves FCPA Charges for Over $205 Million
A Brazilian aircraft manufacturer, will pay more than $205 million to the SEC and the DOJ to resolve alleged FCPA violations stemming from payments made through its third-party agents to officials in the Dominican Republic, Saudi Arabia, and Mozambique that allegedly resulted in more than $83 million in profits for the company. Pursuant to a Deferred Prosecution Agreement with DOJ, the Brazilian company must pay a penalty of more than $107 million and must retain an independent corporate compliance monitor for three years. The company will also pay more than $98 million in disgorgement and interest to the SEC, but it may receive a credit of up to a $20 million depending on the amount of disgorgement it pays in a parallel civil proceeding in Brazil. Additional FCPA Scorecard coverage of the company's investigation can be found here, here, and here.
Sports Marketing Executive Pleads Guilty in FIFA Investigation
On October 20, the DOJ announced that a former president of a soccer event management company pleaded guilty to racketeering conspiracy and wire fraud conspiracy charges. His guilty plea came in response to allegations that, as the company’s former president, he negotiated and made bribe payments totaling more than $14 million on behalf of the company to a high ranking soccer official in exchange for media and marketing rights to international soccer tournaments and matches. As part of the plea, the company's former president agreed to forfeit approximately half a million dollars and could be sentenced to a maximum of 20 years for each count.
The guilty plea came as part of the U.S. government’s investigation into corruption in international soccer. It follows guilty pleas from the soccer event management company itself, its international parent company, and the parent company’s owner, in connection with related charges brought by the DOJ.
Previous FCPA Scorecard coverage of the FIFA investigation can be found here.
DOJ Issues Two Declination Letters Requiring Disgorgement
On September 29, the DOJ issued two declination letters concerning suspected FCPA violations, closing their investigations of two Texas-based corporations. The DOJ claims that its investigation of one of the corporations found that the company’s employees paid approximately $500,000 in bribes to Venezuela and China government officials in order to influence those officials’ purchasing decisions and thereby secure approximately $2.7 million in profits. With respect to its investigation of the second corporation, DOJ claims that the company’s China subsidiary provided approximately $45,000 worth of benefits to China government officials to obtain sales which generated profits of approximately $335,000. In connection with the issuance of the declination letters, the companies agreed to the disgorgement of their profits from the sales associated with their purportedly illegal conduct.
The declinations were made pursuant to the FCPA Pilot Program, a one-year program launched in April 2016 to encourage companies to voluntarily self-disclose FCPA-related misconduct, cooperate with DOJ, and make appropriate remediation efforts. The DOJ’s decision to close the investigations was based on a number of factors including the companies’ (i) voluntary disclosures; (ii) thorough internal investigations; (iii) full cooperation in providing DOJ with information about the individuals responsible for the purported misconduct; (iv) agreement to disgorge all profits made from the purported misconduct; (v) enhancement of compliance programs and internal accounting controls; and (vi) remediation in the form of terminating or sanctioning employees responsible for the purported misconduct. These are the fourth and fifth declination letters issued under the Pilot Program.
The disgorgement of profits in connection with the declination letters to the two corporations raises the question of whether such disgorgement may be a prerequisite to obtaining a declination letter under the Pilot Program. Companies that previously received declination letters under the Pilot Program were required to disgorge profits as part of settling related SEC enforcement actions. Past FCPA Scorecard coverage of the Pilot Program and associated declination letters may be found here.
DOJ Teams Up With OFAC to Bring Enforcement against Chinese Front Company
On September 26, the DOJ announced charges against a Chinese trading company and its executives for conspiracy to violate the International Emergency Economic Powers Act (IEEPA), and to defraud the United States; as well as for conspiracy to launder monetary instruments through U.S. financial institutions. The criminal complaint alleges that the company served as a third-party payer, using an illicit network of front companies, financial facilitators, and trade representatives to purchase sugar and fertilizer for a banking entity based in North Korea that OFAC had designated as a Specially Designated National (SDN) in 2009. The civil forfeiture complaint seeks forfeiture of funds spread out across 25 different bank accounts located in China and connected to the affairs of the company. In addition, OFAC imposed sanctions on the company, which is located near the North Korean border and openly worked with the SDN banking entity after 2009.
DOJ Settles False Claims Act Lawsuit Over HUD and FHA Mortgages
On September 29, the DOJ announced a settlement with a large regional bank, whereby the bank agreed to pay $83 million to resolve allegations that it violated the False Claims Act by originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) that did not meet applicable FHA requirements. In addition to underwriting defects, the DOJ alleged deficiencies in the bank’s quality control function, especially during periods of increased loan volume, as well as failures to adequately self-report loans with material defects. The settlement is not an admission of liability by the bank. BuckleySandler represented the bank in this matter.
DOJ and OCC Reach Consent Agreement With Bank Over Alleged SCRA Violations
On September 29, the DOJ and OCC announced separate settlement agreements with a major U.S. bank regarding alleged violations of the Servicemembers Civil Relief Act (SCRA). The DOJ’s complaint alleged that the bank repossessed vehicles owned by active duty servicemembers without the required court orders. Under the DOJ consent order, the bank agreed to pay $10,000 to each affected servicemembers whose vehicles were repossessed between from January 2008 to July 2015 not in compliance with SCRA, plus any lost equity in the repossessed vehicle, with interest. The DOJ identified 413 affected servicemembers and the bank agreed to set aside $4,130,000 (or more if needed) to pay the required compensation. The bank also agreed to pay a $60,000 civil penalty. The DOJ acknowledged that the bank had in 2014, prior to the investigation, taken steps to ensure SCRA compliance with a full-scale review of its portfolio to identify servicemembers for SCRA protection, and had previously and voluntarily commenced efforts to compensate any affected borrowers. In the OCC consent order, the OCC found errors and deficiencies by the bank in four areas: (i) applying the 6% interest rate cap; (ii) filing accurate military status affidavits; (iii) repossessing servicemembers automobiles while they were on active duty; and (iv) implementing its SCRA compliance program. Under the consent order for a civil money penalty, the bank agreed to pay a civil money penalty of $20 million, to create a remediation plan for affected servicemembers, and to bolster its SCRA-related policies and procedures.
New York Hedge Fund Enters Into Fourth-Largest FCPA Enforcement Action of All Time
On September 29, a New York-based publicly-traded hedge fund agreed to pay approximately $412 million to the DOJ and SEC to resolve related criminal and civil charges of violating the FCPA in connection with the bribery of high-level government officials across Africa. This is the fourth-largest FCPA enforcement settlement of all time, and the first time a hedge fund has been held accountable for violating the FCPA. In the criminal case, the hedge fund entered into a three-year deferred prosecution agreement (DPA) to resolve charges of conspiracy to violate the FCPA, falsification of books and records, and failure to implement adequate internal controls. The hedge fund agreed to pay a criminal penalty of approximately $213 million, and to retain a compliance monitor for three years. The DPA’s Statement of Facts describes bribes paid to government officials in the Democratic Republic of Congo (Congo) and Libya to help the hedge fund obtain special access and preferential prices for investment opportunities in government controlled-mining sectors in Congo, and secure an investment from the Libyan Investment Authority, Libya’s sovereign wealth fund. In parallel proceedings, the hedge fund agreed to pay $199 million to the SEC and entered into an Administrative Order Instituting Cease-and-Desist Proceedings to settle the FCPA civil charges. The SEC’s allegations covered Libya, Chad, Niger, and the Congo, and alleged that the fund used intermediaries, agents, and business partners to corruptly influence foreign officials. The Order found that the hedge fund executives ignored red flags and corruption risks and permitted the corrupt transactions to proceed. Both the fund’s CEO and CFO agreed to settle related allegations, without admitting or denying the findings. The CEO agreed to pay nearly $2.2 million to the SEC in the settlement, and a penalty will be assessed against the CFO at a future date.
Multiple Federal Agencies Pursue International Payment Processor
The DOJ, OFAC and the U.S. Postal Inspection Service (USPIS), as part of an effort to stop an international network of mass mailing fraud schemes that target elderly and vulnerable victims, conducted a joint enforcement action against an international payments processor and money services business based in Canada. The agencies alleged that the payment processor engaged in money laundering and mail fraud by knowingly processing payments on behalf of the perpetrators of more than 100 different mail fraud campaigns, collectively involving tens of millions of dollars. OFAC designated the payments processor as a significant transnational criminal organization (TCO) pursuant to Executive Order 13581. OFAC also designated as TCOs a global network of 12 individuals and 24 entities across 18 countries based on their association with the payment processor. As a result of today’s action, all property and interests in property of the designated persons subject to U.S. jurisdiction are blocked, and U.S. persons are prohibited from engaging in transactions with them. Additionally, USPIS obtained a warrant through the Eastern District of New York to seize the funds in a U.S. bank account that was allegedly used to process payments received through fraudulent mailings. According to OFAC, the payment processor “has a nearly 20-year history of knowingly processing payments relating to these fraudulent solicitation schemes, which result in the loss of millions of dollars to U.S. consumers.”
FTC and DOJ Settle With Texas Debt Collector
On September 21, the DOJ and FTC entered into an agreement with the former vice president of a Texas-based debt collection company, to resolve allegations that that he violated Section 5 of the FTC Act and Section 807 of the FDCPA. The stipulated order enters a civil penalty of $496,000, but suspends the majority of the judgment based on certain conditions, including cooperation in the ongoing lawsuit against his former company.
DOJ Declines FCPA Charges Against UK-Based Pharmaceutical Company Following SEC Settlement
In conjunction with the SEC’s recent settlement with a U.K.-based pharmaceutical company, the company announced on August 30 that the DOJ has closed its parallel foreign bribery investigation. As detailed here, the SEC settled charges against the company for allegedly improper payments made by its wholly owned subsidiaries in China and Russia. Under the SEC settlement, the company agreed to disgorge $4.325 million and pay a $375,000 civil penalty with $822,000 in prejudgment interest.