In order to provide an overview for busy in-house counsel and compliance professionals, we summarize below some of the most important international anti-corruption developments from the past month, with links to primary resources. This month we ask: What leadership changes were made in the U.S. Department of Justice’s (DOJ) Foreign Corrupt Practices Act (FCPA) Unit? What made July such a busy month for news from the UK Serious Fraud Office (SFO)? What did the Organization for Economic Cooperation and Development (OECD) Working Group on Bribery have to say about Japan’s foreign bribery enforcement record? The answers to these questions and more are here in our July 2019 Top 10 list.
1. Leadership Changes in DOJ’s FCPA Unit. On July 29, 2019, DOJ FCPA Unit Chief Dan Kahn was promoted to Senior Deputy Chief of the Fraud Section, while FCPA Unit Assistant Chief Chris Cestaro was made acting FCPA Unit Chief. Kahn had been FCPA Unit Chief for just over three years, having been named Acting Unit Chief in March 2016 and permanent Unit Chief in June 2016. Cestaro was promoted to Assistant Chief in 2017, after serving as a trial attorney in the Fraud Section’s Health Care Fraud and FCPA Units. Kahn is expected to stay involved with the FCPA Unit both in a supervisory capacity—as Senior Deputy Chief, Kahn will assist Fraud Section Chief Robert Zink in supervising the Unit—and in a more direct role—Kahn continues to serve as lead counsel in the prosecution of former Alstom executive Lawrence Hoskins, which is set for trial in September 2019 following the Second Circuit’s August 2018 decision allowing DOJ to pursue an FCPA agency theory against Hoskins.
2. U.S. Technology Company and Its Hungarian Subsidiary Resolve FCPA Allegations in Hungary, Thailand, Turkey, and Saudi Arabia. On July 22, 2019, SEC announced that Microsoft Corporation had agreed to pay approximately $16.6 million in disgorgement and pretrial interest to resolve FCPA accounting provision allegations in relation to its operations in Hungary, Saudi Arabia, Thailand, and Turkey. On the same day, DOJ announced that the company’s Hungarian subsidiary had agreed to pay approximately $8.8 million in criminal penalties as part of a three-year non-prosecution agreement (NPA). The resolution documents allege a number of third-party issues, including allegations of sham or excessive discounts to third parties in Hungary, Saudi Arabia, and Turkey. The SEC cease-and-desist order also includes an allegation of commercial bribery in Thailand, demonstrating again SEC’s willingness to use the FCPA’s accounting provisions to pursue more than suspected violations of the FCPA’s anti-bribery provisions. The company neither admitted nor denied the allegations in the SEC order.
3. Two Colombians Charged in the United States in Connection with Venezuela Bribery Scheme.On July 25, 2019, DOJ announced an indictment in the Southern District of Florida charging Alex Nain Saab Moran (Saab) and Alvaro Pulido Vargas (Pulido) with conspiring to launder and laundering the proceeds of a bribery scheme in Venezuela. According to the announcement, the two Colombian citizens submitted false and fraudulent import documents for goods and materials that were purportedly to be used in connection with a November 2011 contract with the Venezuelan government to build low-income housing. Saab and Pulido allegedly bribed Venezuelan officials to approve the documents, allowing them to obtain U.S. dollars at a favorable rate through the Venezuelan government-controlled exchange rate. In addition to the money laundering charges, the indictment seeks forfeiture of the approximately $350 million in funds that the defendants allegedly transferred out of Venezuela, through the United States, to overseas accounts that they owned or controlled.
4. Update on Mozambique and Micronesia Bribery Prosecutions.
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Former Bank Managing Director Pleads Guilty in Connection with Mozambique Bribery Scheme. On July 19, 2019, Andrew Pearse pleaded guilty in the Eastern District of New York to conspiracy to commit wire fraud, in connection with his role in an alleged bribery and investor fraud scheme involving $2 billion in loans to state-backed companies in Mozambique.[1] Pearse also pleaded not guilty to other charges, including conspiracy to violate the anti-bribery and internal-controls provisions of the FCPA, conspiracy to commit money laundering, and securities fraud. Although the filings related to his plea are under seal, Pearse, who waived extradition from the United Kingdom to face U.S. charges, reportedly admitted to helping arrange bank loans to three companies owned and controlled by the Mozambican government and receiving millions of dollars in kickbacks in return. Pearse was indicted in January 2019, along with fellow Credit Suisse executives Detelina Subeva (who pleaded guilty in May 2019) and Surjan Singh.
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Micronesian Government Official Sentenced to Prison for Role in Laundering Bribe Payments. On July 30, 2019, DOJ announced that Master Halbert was sentenced to 18 months in prison, with three years of supervised release, for his role in laundering bribe payments he received from a Hawaii-based engineering and consulting company. Halbert, an official in the Federated States of Micronesia’s Department of Transportation, Communications, and Infrastructure, previously pleaded guilty to a money laundering charge in April 2019, admitting that from 2006 to 2016, he and other Micronesian government officials were paid bribes by the Hawaiian company in order to obtain or retain government contracts valued at nearly $8 million.
5. UK Court Rejects Transportation Company’s Request to Appeal Bribery Conviction. On July 23, 2019, the UK Court of Appeal upheld the 2018 conviction of Alstom Network UK Ltd. of one count of conspiracy to corrupt for making a €2.4 million bribe payment to a Canadian shell company to help secure an infrastructure and trams contract in Tunisia. Alstom argued that the trial judge gave insufficient directions to the jury on how to convict a corporate defendant when its “directing minds”—executives who can testify about their own knowledge and actions—are unable to attend the trial. The Court found that the SFO’s decision not to charge the “directing minds” of the bribery scheme did not violate Alstom’s right to a fair trial. According to the court, while the presence of a directing mind may be relevant to a case, the absence of a directing mind at trial by itself does not constitute an abuse of process.
6. UK Defendants Acquitted by Jury of Foreign Bribery Scheme, Depsite Corporate DPA Between Metals Company and SFO Regarding the Same Conduct. On July 16, 2019, the UK Serious Fraud Office (SFO) announced that a jury found Michael Sorby, Adrian Leek, and David Justice not guilty of conspiring with various agents to agree to bribes in relation to 27 separate overseas contracts for their employer, Sarclad Ltd., from 2004 to 2011. In its press release, the SFO confirmed that it had entered into a DPA with the company in July 2016. As part of the DPA, the company agreed to charges of corruption and failure to prevent bribery from 2004 to 2012, in connection with contracts valued at over £17 million. The DPA also required the company to fully cooperate with the SFO and fulfill certain reporting requirements for one year.
7.Former Oil Company Executive Pleads Guilty in the UK to Bribery Conspiracy. On July 19, 2019, the SFO announced that Basil Al Jarah, a former partner at Unaoil, had pleaded guilty to five charges of conspiracy to make corrupt payments. According to the SFO, the payments related to contracts to supply and install single-point moorings and oil pipelines in southern Iraq. The SFO announced charges against Al Jarah and others in November 2017 and May 2018. Three others charged alongside Al Jarah—Ziad Akle, Paul Bond, and Stephen Whiteley—are scheduled to face trial in January 2020.
8. Greece Convicts Three UK Nationals in Bribery Case Against Medical Device Company. On July 29, 2019, the Athens criminal court in Greece convicted 13 individuals of offenses, including fraud and money laundering, in connection with alleged corruption in state hospital purchases from DePuy, a subsidiary of Johnson & Johnson (J&J). The charges stem from state hospital procurements between 2000 and 2006, during which time the Greek government was allegedly overcharged by approximately €11.5 million. The convicted individuals included several Greek hospital doctors, who allegedly accepted bribes to prescribe orthopedic products, as well as three UK nationals, all former DePuy executives, who received sentences of seven years in prison, which are suspended pending appeal. The court also acquitted seven people in the same case. In 2011, J&J resolved related FCPA allegations with DOJ and SEC, demonstrating the potentially long lag time between FCPA resolutions in the United States and related proceedings in other countries.
9. OECD Urges Japan to Increase Foreign Bribery Enforcement. On July 3, 2019, the OECD Working Group on Bribery announced that it had completed its Phase 4 evaluation of Japan’s implementation of the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (the “Anti-Bribery Convention”). The Working Group concluded that “Japan’s enforcement rate is not commensurate with the size and export-oriented nature of its economy or the high-risk regions and sectors in which its companies operate.” Accordingly, the Working Group stated, “Japan must step up enforcement of its foreign bribery laws and strengthen the capacities of its law enforcement agencies to proactively detect, investigate and prosecute the foreign bribery offence.” The Working Group recommended a number of measures that Japan should take, including increasing the sanctions and limitation period for foreign bribery, broadening the framework for establishing national jurisdiction over companies, and implementing various measures designed to increase the efficiency of foreign bribery investigators and prosecutors. On a more positive note, the Working Group found that Japan had improved its asset forfeiture and money laundering laws and had developed, and is enforcing, a “rigorous debarment policy for companies implicated in foreign bribery offenses.”
10. Malaysia Announces New Corporate Anti-Corruption Requirements. On July 22, 2019, the Securities Commission Malaysia (the “Securities Commission”) announced that it would implement an action plan to strengthen standards of corporate governance to prevent corruption, misconduct, and fraud in Malaysia. The Securities Commission’s recommendations, which were approved by the Cabinet Special Committee on Anti‑Corruption, include a requirement that companies listed in Malaysia put in place anti‑corruption measures. These recommendations build on and dovetail with new corporate liability provisions (and the associated “adequate procedures” defense) of the amended Malaysian Anti‑Corruption Commission Act (the “MACC Act”), the amendments to which will come into effect in June 2020. For more on the MACC Act and the new provisions, please see our client alert.
[1] United States v. Boustani, et al., 1:18-cr-00681-WFK-6, ECF No. 117 (E.D.N.Y. Jul. 17, 2019).
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