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: Why did two federal courts refuse to throw out Foreign Corrupt Practices Act (FCPA) charges against two different commodities traders? What revisions did Congress make to the Foreign Extortion Prevention Act (FEPA)? How has China increased its anti-corruption scrutiny of the financial services sector? The answers to these questions and more are here in our July 2024 Top 10.
1. U.S. Executive Pleads Guilty in Connection with South Africa Bribery Scheme
On July 15, 2024, the U.S. District Court for the District of Columbia unsealed a criminal information against Julian Aires, the president of U.S.-based aircraft component services company JM International, charging him with one count of conspiring to violate the FCPA’s anti-bribery provisions. Aires pleaded guilty to the charge the same day. According to court records, press reports, and a January 2022 report by South Africa’s Zondo Commission, Aires and his co-conspirators bribed South African officials to secure and maintain a five-year contract for JM Aviation South Africa (Pty) Ltd, a joint venture between JM International and Illinois-based air services provider AAR Corp., to provide components and repair services to South African Airways Technical (SAAT), a wholly owned subsidiary of state-owned South African Airways (SAA). Between 2016 and 2020, the co-conspirators allegedly used a portion of over $5.3 million in “commissions, success fees, and advance payments” to pay bribes to SAAT officials. According to court records, press reports, and the Zondo Commission report, Aires and other co-conspirators also conspired to pay $2.7 million into a bank account that was used to bribe SAAT officials to obtain and retain airport ground handling services business for Swissport, a Swiss airport services company. In its July 19, 2024 annual report, AAR Corp. stated that the company self-disclosed potential FCPA violations in Nepal and South Africa to the U.S. Department of Justice (DOJ), the U.S. Securities and Exchange Commission (SEC), and the UK Serious Fraud Office (SFO), and is “fully cooperating with the reviews by these agencies.”
2. U.S. Senator Found Guilty in Egyptian and Qatari Bribery Schemes
On July 16, 2024, a jury in the Southern District of New York found U.S. Senator Bob Menendez of New Jersey guilty of all 16 counts of bribery, conspiracy, acting as a foreign agent, wire fraud, extortion, and obstruction of justice. The trial focused on overlapping bribery schemes in which the senator and his wife allegedly accepted hundreds of thousands of dollars of bribes in the form of cash, gold bars, a car, and mortgage payments in exchange for, among other things, helping to steer billions of dollars in American aid to Egypt and making favorable statements about Qatar. Menendez was first charged in September 2023, with additional charges added in October 2023 and January 2024. U.S. prosecutors described the case against the former chair of the influential U.S. Senate Foreign Relations Committee as involving “shocking levels of corruption.” The senator announced on July 23, 2024, that he will resign his seat in the Senate effective August 20, 2024. (For more on Menendez’s trial and convictions, see MoFo’s coverage including on how his trial put a spotlight on the risks of using visual aids in attorney proffers and how his conviction was a big win for DOJ’s crackdown on foreign agents.)
3. Commodity Traders in Two Different Cases Fail to Set Aside FCPA Charges
- Former Commodities Trader Fails in Bid to Overturn FCPA and Money Laundering Verdicts. On July 26, 2024, Eastern District of New York Judge Eric N. Vitaliano denied former Vitol trader Javier Aguilar’s motion for an acquittal or new trial following his February 2024 convictions for conspiracy to violate the FCPA, violating the FCPA, and conspiracy to commit money laundering. The charges against Aguilar related to his alleged role in schemes to bribe officials of Ecuador’s national oil company, Petroecuador, and PEMEX Procurement International (PPI), a subsidiary of Mexico’s national oil company, Petróleos Mexicanos (PEMEX). The Court rejected Aguilar’s arguments that prosecutors failed to establish that PPI was an “instrumentality” of Mexico under United States v. Esquenazi, which set out five non-exhaustive factors that a jury should consider when determining whether a state-owned company is a government “instrumentality” and, therefore, whether its employees are “foreign officials,” under the FCPA. The Court held that its earlier ruling that payments to PPI officials could not be considered bribes under Mexican law for purposes of the money laundering statute “does not foreclose a jury from concluding that PPI is an instrumentality of Mexico and therefore [its employees] were ‘foreign officials’ for FCPA purposes” because “[t]he inquiries are separate.”[1] Although the jury could consider Mexico’s formal designation of PPI as one factor, the Esquenazi framework “does not require that every evidentiary box must be checked in favor of the prosecution to sustain a conviction,” and “the government introduced ample evidence permitting the jury to conclude that PPI is an instrumentality under the FCPA”[2]—and, therefore, that its employees are “foreign officials” within the meaning of the FCPA. The Court also rejected Aguilar’s arguments that there was insufficient evidence to establish his knowledge that bribes were being paid to Ecuadorian officials. Although no witness testified to having used the word “bribe” during the alleged conspiracy, the Court found that “the unvarnished evidence in its totality” supported the jury’s finding that Aguilar knew he was involved in a corrupt scheme to bribe Petroecuador officials.[3] The Court further rejected Aguilar’s challenges to the introduction of certain evidence, the jury instructions, and what he contended were constructive amendments to his indictment. For more on the Vitol and Aguilar prosecutions, see our September 2020, December 2020, December 2022, May 2023, August 2023, January 2024, February 2024, and June 2024 Top 10s.
- Commodities Trader Fails in Bid to Obtain Pre-Trial Dismissal of FCPA and Money Laundering Charges. On July 2, 2024, District of Connecticut Judge Kari Dooley denied Connecticut-based oil and gas trader Glenn Oztemel’s motion to dismiss[4] FCPA and money laundering charges. In February 2023, DOJ announced the unsealing of an indictment in the District of Connecticut charging Oztemel and Eduardo Innecco, a Brazil‑based oil and gas broker and agent, with conspiracy to violate the FCPA, conspiracy to commit money laundering, three counts of violating the FCPA, and two counts of money laundering in connection with an alleged scheme to bribe officials of Brazil’s national oil company, Petróleo Brasileiro, S.A (Petrobras), to help two trading companies secure contracts. One of the alleged bribe recipients was Rodrigo Berkowitz, a trader who worked at a wholly-owned Petrobras subsidiary. (DOJ filed a related money laundering conspiracy charge against Berkowitz in February 2019. In August 2023, DOJ announced that a federal grand jury in the District of Connecticut had returned a superseding indictment charging Gary Oztemel, Oztemel’s brother, for his role in the alleged scheme.) In denying the motion to dismiss, the Court rejected Oztemel’s argument that the FCPA requires that the use of an instrumentality of interstate commerce (such as a wire transfer) must itself facilitate an actual bribe. Relying on United States v. Kay, the Court held that “the Defendant’s argument that [the FCPA charges] must be dismissed is premised on an incorrect and narrow reading of the FCPA.”[5] The Court also rejected arguments that certain wire transfers and overt acts could not as a matter of law be considered to have been “in furtherance” of the bribery scheme and could not save the FCPA and money laundering counts from being time barred. The Court also found that the questions of whether Petrobras is an “instrumentality” of Brazil and, therefore, whether Berkowitz was a “foreign official” under the FCPA were for the jury to decide. “The issue of whether Berkowitz was a foreign official, or more to the point, the nature of the relationship between Petrobras and Brazil, goes to the merits of the case and the evidence to be offered at trial.”[6]
4. Former Banker Extradited from the UK to the United States in connection with Ghana Bribery Scheme
On July 15, 2024, DOJ announced that Asante Kwaku Berko, a dual citizen of the United States and Ghana, was extradited from the UK to the United States to stand trial in the Eastern District of New York on one count of conspiring to violate the FCPA, one count of violating the FCPA, and one count of conspiring to commit money laundering. Between December 2014 and March 2017, Berko, an executive director in the Investment Banking Division of a wholly owned subsidiary of a U.S. global investment bank, allegedly conspired with others to offer and pay more than $70,000 in bribes to government officials in Ghana in exchange for assistance in ensuring that the bank’s client, a Turkish energy company, was successful in winning a bid to build and operate a power plant in Ghana and to provide financing for the plant. In June 2021, Berko resolved related allegations with the SEC, agreeing to pay approximately $329,000 without admitting or denying the SEC’s charges. He was arrested in the criminal case in London in November 2022.
5. U.S. Amends the FEPA
In December 2023, President Biden signed into law the National Defense Authorization Act (NDAA) for Fiscal Year 2024, which included FEPA, a law designed to complement the FCPA, which prohibits certain individuals and companies from paying bribes to foreign officials, by making it a crime for foreign officials to demand or accept bribes from certain individuals and companies. On July 22, 2024, Congress revised FEPA through the enactment of the Foreign Extortion Prevention Technical Corrections Act (FEPTCA). As explained by Congressman Darrell Issa (R-CA), “the FEPA text that was enacted last year in the NDAA had several flaws.” First, FEPA was added to the domestic bribery statute, 18 U.S.C. § 201, creating an inconsistency in the definitions used in that statute that could “prevent the FEPA and domestic bribery statute from operating in the way that Congress intended.” To correct this flaw, the FEPTCA moved the FEPA to 18 U.S.C. § 1352. Second, there were inconsistencies between the language of the FCPA and the FEPA. “Because these statutes are intended to be complementary . . . we need to harmonize them.” Among other things, the FEPTCA brought the FEPA’s jurisdictional and quid pro requirements and definition of foreign official closer to their counterparts in the FCPA. (For more on the FEPA, see our August 2019 and July 2023 Top 10s, as well as our commentary in Dissecting The Proposed Foreign Extortion Prevention Act, Foreign Bribe Taking Targeted in US Defense Authorization Bill, and Newly Signed Foreign Extortion Prevention Act Complements FCPA.)
6. Gabonese Company Resolves Bribery Allegations in France
On July 23, 2024, the Paris prosecutor’s office announced that a local court approved a public interest judicial agreement (CJIP) between the Paris prosecutor and the Gabonese company Sotec. The agreement resolved allegations that the company had served as an intermediary for paying bribes to officials of Gabon’s defense ministry to help secure a public contract worth €7 million for the French company Marck, a manufacturer of military uniforms. Under the agreement, Sotec agreed to pay a €520,000 fine, which was lower than the potential maximum fine, due in part to the company and its owner, Seydou Kane, having cooperated with the investigation, which began in 2007 following a report from France’s anti-money laundering agency, TRACFIN. Prior to the CJIP, Kane pleaded guilty and was sentenced to pay a €500,000 fine, of which €200,000 was suspended. According to statements made in court, in February 2024, the Paris prosecutor requested a trial against Marck and a former Gabonese official, Maixent Accrombessi, on money laundering charges.
7. French Court Convicts Current and Former French Executives for Bribery in Nigeria, Cameroon, and Equatorial Guinea
On July 12, 2024, a French court in Marseille issued suspended prison sentences and fines to seven current and former executives of the French shipping company Bourbon after convicting them for bribing officials in Nigeria, Cameroon, and Equatorial Guinea in exchange for reducing the company’s tax assessments. The executives, including the company’s CEO and former tax director, were convicted after a ten-day trial that began in May 2024. An eighth defendant was acquitted due to insufficient evidence. The longest suspended imprisonment term imposed by the Marseille court was 30 months. The case began in October 2012 when the former tax director was caught at a French airport returning from Nigeria with $250,000 in cash in his suitcase.
8. World Bank Group Debars Indonesia Consulting Company for Fraudulent, Obstructive, and Corrupt Practices
On July 10, 2024, the World Bank Group announced its decision to debar PT. LPPSLH Konsultan for 65 months for fraudulent, corrupt, and obstructive practices. According to the World Bank, in connection with the “Investing in Nutrition and Early Years Project,” a project designed to increase access and use of nutrition interventions by pregnant mothers and young children in priority districts in Indonesia, the company “overbilled the project, improperly hired a project official’s family member, and withheld documents material to the World Bank’s investigation.” According to the World Bank, the settlement agreement provides for a reduced debarment period given the company’s voluntary remedial actions. The World Bank debarment qualifies for cross-debarment by other multilateral development banks under the 2010 Agreement for Mutual Enforcement of Debarment Decisions.
9. China Establishes New Anti-Graft Watchdog Focused on the Finance Sector
On July 22, 2024, China’s Central Commission for Discipline Inspection (CCDI), the country’s top graft watchdog, announced the establishment of a new committee to combat corruption in the financial sector. The Central Financial Discipline Inspection and Supervision Work Committee was established to “strengthen political supervision and promote the strengthening of party building in the financial system.” The new committee highlights China’s increased focus on combating corruption in key sectors, in line with President Xi Jinping’s pledge to deepen the country’s anti-corruption crackdown (an issue we highlighted in our analysis of Transparency International’s Corruption Perceptions Index 2023 earlier this year). Recent enforcement activity suggests that the anti-corruption scrutiny on China’s financial sector will continue, and we expect this new committee to be at the forefront of this fight against corruption in the industry.
10. SFO Releases First Annual Report and Accounts Since Change of Director in September 2023
On July 30, 2024, SFO director Nick Ephgrave presented the SFO’s Annual Report and Accounts for the reporting period between April 1, 2023, and March 31, 2024. This is the SFO’s first such report since Ephgrave replaced Lisa Osofsky in September 2023. (See our July 2023 Top 10 for more on this transition.) The report highlights the SFO’s achievements during the reporting period, including its “significant progress on existing cases” and its use of new legislative tools such as the Economic Crime and Corporate Transparency Act 2023 to “secure high-value information early and progress cases to full investigation more quickly.” The report noted that the SFO’s intelligence-related work during the reporting period focused on “the developing threats posted by cryptoassets, international bribery and corruption, kleptocracy and domestic bribery and corruption.”
[1] Memorandum & Order, United States v. Aguilar, Case No. 1:20-cr-00390-ENV (E.D.N.Y. July 26, 2024), ECF No. 365, at 5.
[2] Id. at 7.
[3] Id. at 8-11.
[4] Memorandum of Decision, United States v. Glenn Oztemel, Case No. 3:23-CR-00026 (D. Conn. July 2, 2024), ECF No. 112.
[5] Id. at 9-10.
[6] Id. at 7.
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