Designed for busy in-house counsel, compliance professionals, and anti-corruption lawyers, this newsletter summarizes some of the most important international anti-corruption law and enforcement developments from the past month, with links to primary resources. This month we ask: How will two major U.S. Supreme Court decisions, one relating to a federal bribery statute and the other relating to the use of U.S. Securities and Exchange Commission (SEC) administrative proceedings, impact enforcement of the U.S. Foreign Corrupt Practices Act (FCPA)? How effective has Türkiye been in combatting foreign bribery? What changes are expected in German and European Union bribery laws? The answers to these questions and more are here in our June 2024 Top 10.
1. U.S. Supreme Court Narrows Scope of Federal Bribery Statute
On June 26, 2024, a 6-3 majority of the U.S. Supreme Court held in Snyder v. United States that a significant federal bribery statute, 18 U.S.C. § 666, proscribes bribes to state and local officials but does not make it a crime for those officials to accept gratuities for their past acts. James Snyder, a former Indiana mayor, was convicted under 18 U.S.C. § 666(a)(1)(B) for accepting an illegal gratuity related to a $13,000 check he received from a local truck company in 2014 after the city awarded two contracts to the company in 2013, while Snyder was in office. The Supreme Court reversed and remanded, with the majority finding that six reasons—text, statutory history, statutory structure, statutory punishments, federalism, and fair notice—when taken together, meant that § 666 only covers bribes, not gratuities. Snyder is not likely to directly impact enforcement of the FCPA; most significantly, the FCPA is already limited to bribes, not gratuities, meaning that the FCPA does not implicate many of the Snyder majority’s concerns. However, in some FCPA cases, it can be difficult to discern whether a gift or payment is a bribe or a gratuity, and companies and individuals being investigated for potential FCPA violations could potentially use Snyder to argue that the U.S. Department of Justice (DOJ) or SEC should not take an aggressive position in close cases.
2. U.S. Supreme Court Limits Use of SEC Administrative Proceedings
On June 27, 2024, a 6-3 majority of the U.S. Supreme Court held in SEC v. Jarkesy that when the SEC seeks civil penalties against a defendant for securities fraud, the Seventh Amendment to the United States Constitution entitles the defendant to a jury trial in federal court, as opposed to an administrative proceeding before an SEC administrative law judge (ALJ). In 2013, the SEC filed an administrative action alleging securities fraud by hedge fund manager George Jarkesy and his company Patriot28. The ALJ determined by a preponderance of the evidence that Jarkesy violated the antifraud provisions of federal securities laws. After an appeal to the Commission, the SEC (i) ordered Jarkesy and his company to cease further violations, disgorge $685,000 in what it said were illicit gains, and pay a civil penalty of $300,000; and (ii) barred Jarkesy from working in the securities industry. Jarkesy and his company appealed the judgment, the U.S. Court of Appeals for the Fifth Circuit reversed, and the SEC sought a writ of certiorari from the Supreme Court. In affirming the Fifth Circuit, the Supreme Court majority reasoned that “[t]he SEC’s anti-fraud provisions replicate common law fraud, and it is well established that common law claims must be heard by a jury.” Thus, “[a] defendant facing a fraud suit has the right to be tried by a jury of his peers before a neutral adjudicator.” The opinion further noted that allowing the executive to play “the roles of prosecutor, judge, and jury . . . is the very opposite of the separation of powers that the Constitution demands.” Although Jarkesy involved securities fraud, it almost certainly would apply to the SEC’s use of administrative proceedings to pursue civil penalties in FCPA cases as well. To date, there has never been a contested FCPA administrative proceeding, but Jarkesy raises questions about whether the SEC will continue to use administrative proceedings for settled cases, as it may be more difficult to enforce violations of an administrative order in federal court if there are lingering concerns about the constitutionality of the forum. (For more on the Jarkesy opinion and its implications, see our client alert.)
3. U.S. Subsidiary of Dutch Commodities Trader Successfully Completes FCPA DPA
In December 2020, DOJ announced that Vitol Inc. had entered into a three-year deferred prosecution agreement (DPA) relating to bribes allegedly paid to officials in Brazil, Ecuador, and Mexico between 2005 and 2020. On June 6, 2024, a judge in the Eastern District of New York granted DOJ’s motion to dismiss FCPA charges against the company.[1] According to the motion to dismiss, the company fully met its obligations under the DPA, including cooperating with the government investigation and fully implementing an enhanced compliance program. In February 2024, a jury in the Eastern District of New York convicted former Vitol oil and gas trader Javier Aguilar of related charges.
4. DOJ Returns More Misappropriated Assets to Malaysia
On June 13, 2024, DOJ announced that it had repatriated an additional $156 million in funds allegedly misappropriated from 1Malaysia Development Berhad (1MDB), a state-owned strategic financing company formed to promote economic development in Malaysia through global partnerships and foreign direct investment. According to DOJ, the misappropriation was facilitated by bribes paid to 1MDB officials and other Malaysian officials. To date, DOJ has returned a total of $1.4 billion, nearly 33% of the $4.5 billion allegedly misappropriated from 1MDB, to Malaysia. (For more on 1MDB, see our July 2016, August 2016, June 2017, December 2017, May 2018, June 2018, August 2018, October 2018, February 2019, May 2019, April 2020, August 2021, September 2021, December 2021, February 2022, March 2023, April 2023, and December 2023 Top 10s.)
5. World Bank Debars Kenyan Firm for Allegedly Improper Conduct in Somalia
On June 26, 2024, the World Bank Group announced its decision to debar for 30 months a Kenyan assurance, tax, consulting, advisory, and information technology firm for allegedly failing to disclose conflicts of interest during the selection and implementation of four contracts related to the Somali Core Economic Institutions and Opportunities Program and the Second Public Financial Management Capacity Strengthening Project in Somalia, the involvement of an agent in those contracts, and the provision for allowances to be paid to project officials during the execution of one of the contracts. Under the settlement agreement, the firm agreed to develop and implement an integrity compliance program. The World Bank debarment could result in cross-debarment by other multilateral development banks under the April 9, 2010 Agreement for Mutual Enforcement of Debarment Decisions.
6. Swiss Commodities Trader Reaches Foreign Bribery Resolution with Ecuador
On June 11, 2024, the Attorney General’s Office of Ecuador announced that Gunvor S.A. had transferred approximately $93.6 million to Ecuador’s National Treasury. According to the announcement, the AG’s Office and the company agreed to that amount following the company’s March 2024 guilty plea in the United States related to allegations that the company paid more than $97 million to third-party intermediaries knowing that some portion of those funds would be used to bribe officials at the Ecuadorian Ministry of Hydrocarbons and at Ecuador’s national oil company, Empresa Publica de Hidrocarburos del Ecuador, in exchange for contracts to acquire oil products. As part of the plea agreement, DOJ agreed to credit up to one quarter of the $374.5 million monetary penalty the company paid to resolve related investigations by Ecuadorian authorities, meaning the company should get full credit for its payment to Ecuador.
7. Norwegian Shipping Group Reaches Foreign Bribery Resolution with Brazil
On June 13, 2024, Brazil’s Office of the Comptroller General and Attorney General’s Office announced that they had signed a leniency agreement with Viken Shuttle AS, Viken Shipping AS, and Viken Fleet I AS, resolving allegations that the companies paid commercial brokerage commissions to a third party that paid bribes to the former president of Petrobras Transporte S.A., a subsidiary of Brazil’s national oil company. According to the Brazilian authorities, the bribes were paid in the context of executing contracts for the use of the companies’ oil tankers in the shipment of oil to and from Brazil, resulting in an “undue advantage” for the companies. The companies agreed to pay $28.3 million under the agreement, constituting compensation for damages, return of the undue advantage, and an administrative fine.
8. OECD Urges Türkiye to Overhaul Foreign Bribery Enforcement Efforts
On June 21, 2024, the OECD’s Working Group on Bribery announced the results of its Phase 4 evaluation of Türkiye’s implementation of the OECD Anti-Bribery Convention. All parties to the Convention are subject to a rigorous peer-review process, Phase 4 of which focuses on the evaluated country’s enforcement of the Convention and considers the country’s particular challenges and positive achievements. The Working Group found that Türkiye has substantially increased available corporate fines for foreign bribery, improved its framework for mutual legal assistance and extradition, and strengthened its anti-money laundering regulations and corporate transparency. But the Working Group also determined that Türkiye’s “failure to pursue foreign bribery cases raises serious concerns.” According to the Working Group, “no individual or company has ever been held liable [in Türkiye] for bribing foreign officials,” and “[m]ost [foreign bribery] allegations have not been investigated at all,” which is particularly concerning as Turkish firms expand their activities in countries and sectors at high risk for corruption, including the defense and construction sectors. The Working Group recommended, among other things, that Türkiye make efforts to proactively detect, investigate, and prosecute foreign bribery allegations, and to assign responsibility for pursuing foreign bribery offenses to a specific prosecutorial unit.
9. New German Public Corruption Offense Goes Into Effect
On June 18, 2024, new criminal provisions targeting improper lobbying went into effect in Germany. New section 108f of the German Criminal Code aims to close a criminal liability gap which became apparent in a case during the COVID-19 pandemic: two legislators had received money from private companies for facilitating the sale of face masks to the government using their status as legislators and their personal connections. Under the old legal regime, they could not be held criminally responsible for these actions. As the German Federal Supreme Court found, the actions were not committed in the exercise of their mandate, which was a requirement for criminal punishment. New section 108f of the German Criminal Code, passed under Bundestag matter 20/10376, aims to close this liability gap and is thereby intended to contribute to achieving the sustainability goal of combating corruption in all its forms set out in the United Nations 2030 Agenda. From now on, anyone who offers, promises, or grants a member of certain legislative bodies (including the German Federal Parliament and the European Parliament) an unjustified financial advantage for a mere representation of their or a third person’s interests faces a criminal sentence of up to three years’ imprisonment if this representation of interests violates the provisions relevant to the legal status of the legislator. This applies vice versa to members of these legislative bodies who demand, are promised, or receive unjustified financial advantages for the same actions. Any type of service of the legislator directly or indirectly linked to his or her mandate can now potentially trigger criminal liability. New section 108f of the German Criminal Code is a strong signal against corruption and complements earlier adjustments to the German Criminal Code. In 2021, the penalty for the bribery of legislators (section 108e German Criminal Code) was increased from a maximum of five years to a maximum of ten years’ imprisonment along with other severe procedural consequences. With section 108f German Criminal Code now in effect, any type of business-related relationship with legislators in Germany should be carefully scrutinized for admissibility in order to avoid the risk of criminal liability.
10. The Council of the European Union Takes a Major Step Toward Strengthening Anti-Corruption Laws
On June 14, 2024, one of the two legislative branches of the European Union accepted draft legislation that would consolidate all EU rules on corrupt practices into a single act, with harmonized definitions of offenses and penalties. The Council of the European Union, which together with the European Parliament serves to approve or disapprove of legislation proposed by the European Commission, stated in its favorable adoption of the EU law that the law’s “main novelty is that, for the first time at EU level, it brings together in one legal act rules on corruption in the public and private sectors.” With the law’s very favorable acceptance by the European Parliament this past February 2024, EU lawmakers will now hammer out the details of what will be a completely new EU sanctions regime for corruption. First of all, the draft law would replace two existing EU laws—one from 2003 that criminalized bribery in the private sector and the other a 1997 convention that outlawed the bribery of EU officials—with a new law codifying definitions and offenses for corruption and bribery, and establishing minimum criminal penalties and sanctions for each offense, which will be binding across all EU member states. Novel aspects of the law include expanding the definitions of criminal corruption offenses beyond “classic bribery offenses” to encompass “misappropriation, trading in influence, abuse of functions, as well as obstruction of justice and illicit enrichment,” as explained by the European Commission, which first proposed the bill. Two new offenses are also proposed under the act—concealment of property gained by means of corruption and misconduct in public office—which were praised by the European Parliament as being “equally important” in the prosecution of corruption rings. One area where further deliberations may be expected involves whether expanded corruption offenses and investigative powers can come into conflict with “the fundamental rights of all persons involved,” a point for which the European Parliament has proposed amendments. As stated in its June 2024 announcement, the Council of the EU stated that the new law, “will make fighting corruption more effective.” (For more on the effort to strengthen anti-corruption laws in the EU, see our February 2022 and May 2023 Top 10s.)
[1] Government’s Unopposed Motion to Dismiss Information, United States v. Vitol Inc., Case No. 1:20-cr-539-ENV, ECF No. 10 (E.D.N.Y. June 5, 2024).
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