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 compliance and enforcement guidance did the U.S. Department of Justice (“DOJ”) and France’s Ministry of Justice provide?  How will an appellate ruling in the FIFA case impact foreign bribery enforcement?  Did the UK National Crime Agency (“NCA”) succeed in its efforts to reinstate Unexplained Wealth Order targeting expensive London real estate?  The answers to those questions and more are here in our June 2020 Top Ten. 

1. DOJ Updates its Guidance on Corporate Compliance Programs. On June 1, 2020, DOJ’s Fraud Section published a second revised version of its guidance on the “Evaluation of Corporate Compliance Programs” (the Guidance). In February 2017, the Fraud Section published the original version of the Guidance, which provided a list of “some important topics and sample questions that the Fraud Section has frequently found relevant in evaluating a corporate compliance program.” In April 2019, the Guidance was broadened to the entire DOJ Criminal Division and included further information on how prosecutors conducting corporate investigations should assess a company’s compliance program. In announcing the June 2020 Guidance, AAG Brian Benczkowski explained that the document “reflects additions based on our own experience and important feedback from the business and compliance communities.”[1] The latest updates provide insight into DOJ’s views on how the corporate compliance environment is evolving. Of particular note, the revisions focus on using data analytics, incorporating “lessons learned” into compliance and training programs, assessing the effectiveness of training programs and the accessibility of compliance policies and procedures, integrating acquired entities into a company’s compliance program, and ensuring that compliance programs are adequately resourced and empowered to function effectively. As with the prior versions, the revised Guidance is another example of DOJ’s efforts to be more transparent in its expectations for corporate compliance programs and its responsiveness to the experiences and concerns of the business community. For a more detailed review of the updated Guidance, please see our client alert.

2. U.S. Appellate Court Affirms Bribery Convictions of Two FIFA Officials. On June 22, 2020, the U.S. Court of Appeals for the Second Circuit affirmed the honest services wire fraud convictions of Juan Angel Napout, former Vice President of the Fédération Internationale de Football Association (“FIFA”), and Jose Maria Marin, former head of Brazil’s soccer association. Napout and Marin were convicted in December 2017 in the Eastern District of New York in the first jury trial in the FIFA bribery investigation. (For more on the trial, see our November 2017 Top 10. For more on the ongoing investigations into allegations of corruption in international soccer, see our May 2015, December 2016, December 2017, February 2018, February 2020, April 2020 and May 2020 Top 10s.) As framed by the Second Circuit, “Napout and Marin argue principally [on appeal] that their convictions rest upon impermissible extraterritorial applications of the honest services wire fraud statute, 18 U.S.C. §1346.” The Second Circuit rejected this argument, finding that there was “ample evidence” that the appellants used American wire facilities and financial institutions to carry out their fraudulent schemes and that the “use of wires in the United States was … integral to the transmission of the bribes in issue to the appellants”— the trial evidence established that approximately 75% of the bribe payments were wired either into or out of U.S. bank accounts in furtherance of the scheme. Most notably, the court held that, when considering an international wire fraud scheme, the use of domestic wires must be essential, rather than merely incidental, to the scheme to defraud. “This ensures that the domestic tail not wag, as it were, the foreign dog.” Although not an FCPA case per se, the honest services wire fraud statute and the FCPA share several critical aspects, and the Napout decision relied in part on United States v. Hoskins in examining the wire fraud statute’s extraterritorial reach. Napout may thus provide the FCPA defense bar with additional arguments in challenging FCPA charges that have an arguably tenuous connection to the United States.

3. Ex-FIFA Vice President Sentenced on Bribery Charges. On June 29, 2020, Eastern District of New York Judge Pamela Chen sentenced Alfredo Hawit, former vice president of FIFA and former president of the Confederation of North, Central American, and Caribbean Association Football (“CONCACAF”), to time served and two years of supervised release following his April 2016 guilty plea to wire fraud, racketeering, and obstruction charges. Hawit allegedly accepted over $1.6 million in bribes in exchange for awarding media rights at soccer events. Hawit was arrested in Switzerland in 2015 and was extradited to the United States shortly thereafter. He served a brief period in custody, and has been under house arrest since that time. Judge Chen also barred Hawit from holding any title in a professional soccer organization for his period of supervised release.

4. U.S. Supreme Court Declines to Consider Foreign Bribery-Related Convictions.

• U.S. Supreme Court Declines to Consider Macau Billionaire’s FCPA Conviction. On June 29, 2020, the U.S. Supreme Court denied Ng Lap Seng’s petition for a writ of certiorari seeking review of his July 2017 conviction on FCPA and related charges in connection with an alleged scheme to bribe United Nations officials to help him build a conference center in Macau. Ng had previously lost an appeal in August 2019 in the U.S. Court of Appeals for the Second Circuit, which rejected his argument that the FCPA is limited to prohibiting bribes that are paid in exchange for “official acts,” as established by the Supreme Court for domestic bribery cases in June 2016 in McDonnell v. United States.
• U.S. Supreme Court Declines to Consider Korean Official’s Money Laundering Conviction. On June 1, 2020, the U.S. Supreme Court denied former South Korean official Heon-Cheol Chi’s petition for a writ of certiorari seeking review of his July 2017 conviction for laundering bribes he allegedly received from two seismological companies. The Ninth Circuit affirmed Chi’s conviction in August 2019.

5. U.S. Supreme Court Upholds SEC’s Ability to Obtain Disgorgement but Suggests Potential Limits.  On June 22, 2020, the U.S. Supreme Court issued its decision in Liu v. SEC, a case involving a challenge to the Securities and Exchange Commission’s (“SEC”) ability to obtain disgorgement in civil injunctive actions filed in federal court. In an 8-1 decision, the Court held that the SEC may seek disgorgement in federal civil actions, at least in certain cases.  At a minimum, the SEC may seek disgorgement that is not greater than the net profit made from the illegal activity and that is intended to be used as compensation for the victims of the illegal scheme. Because the parties in Liu focused on whether disgorgement is permissible at all, rather than on whether the specific underlying disgorgement award exceeded the lower court’s authority, the Supreme Court remanded the case for the district court to consider the precise measure of appropriate disgorgement.  In doing so, the court provided guidance as to when disgorgement awards are appropriate and instructed district courts to fashion such awards consistent with several principles articulated in its opinion. Among other things, in cases where SEC does not intend to return the disgorged amounts to investors, SEC would have to show that disgorgement does “more than simply benefit the public at large by depriving a wrong-doer of ill-gotten gains.” For example, one can imagine SEC arguing that FCPA disgorgement awards, which are typically not returned to investors, protect investors by encouraging whistleblowers to expose FCPA violations. But SEC may never have to make this argument, as Liu did not address disgorgement in SEC administrative proceedings, where the vast majority of SEC FCPA corporate enforcement actions are brought. The Court’s opinion in Liu comes three years after its June 2017 decision in Kokesh v. SEC, which held that disgorgement is a penalty subject to the 5-year statute of limitations for such claims. (For more on Liu, see our March 2020 Top 10 and our article here.)

6. SEC Announces Largest Ever Whistleblower Award. On June 4, 2020, SEC announced that it had awarded nearly $50 million to an individual who provided detailed, firsthand observations of misconduct by a company, which “resulted in a successful enforcement action that returned a significant amount of money to harmed investors.” Although the award does not appear to have been related to an FCPA enforcement action, it is nevertheless notable because it is the largest amount ever awarded under the SEC whistleblower program and another reminder of the importance of establishing a robust internal reporting system. SEC also stated that it has already awarded $100 million in whistleblower awards in FY 2020, surpassing last year’s total of $60 million, as announced in November 2019.

7. Swiss Pharmaceutical Company Resolves FCPA Allegations. On June 25, 2020, DOJ and SEC announced that Novartis AG, its Greek subsidiary, and a former subsidiary in Asia had agreed to pay a combined total of approximately $346 million to resolve FCPA allegations. The Greek subsidiary and former Asia subsidiary entered into DPAs with DOJ, alleging doctor-related misconduct in Greece and Vietnam.  SEC entered an order alleging accounting violations involving the company’s subsidiaries in Greece and Korea and former subsidiaries in China and Vietnam.

8. Corporate Declinations in the U.S. and UK.

• Utah Health Products Company Discloses DOJ and SEC FCPA Declinations. On June 29, 2020, Usana Health Sciences, Inc. disclosed in an SEC filing that both DOJ and SEC had closed their investigations into potential FCPA violations by the company’s Chinese subsidiary, BabyCare Ltd. The company first disclosed the issue in February 2017, when it announced it was conducting an internal investigation into BabyCare’s expense reimbursement policies.
• UK SFO Closes Corruption Investigation into Banknote and Passport Printer. On June 16, 2020, the UK Serious Fraud Office (“SFO”) announced that it had ended its investigation into De La Rue plc.  In July 2019, the SFO announced that it was investigating the company and associated persons “in relation to suspected corruption in South Sudan.” The company had won the contract to print the South Susan pound following that country’s independence in 2011.  In its latest announcement, the SFO stated it had conducted an “extensive investigation” and concluded that the case did not meet the relevant test for prosecution under the Code for Crown Prosecutors.

9. English Court of Appeal Upholds High Court’s Decision to Discharge Unexplained Wealth Order. On June 17, 2020, the English Court of Appeal refused the UK National Crime Agency (“NCA”) permission to appeal the London High Court’s April 2020 discharge of Unexplained Wealth Orders (“UWO”) against companies that owned three London properties linked to relatives of Nursultan Nazarbayev, the former president of Khazakhstan.[2] The High Court found that the NCA had failed to meet its burden to prove that the homes were bought with illicit funds. In the Court of Appeal, Lady Justice Carr found that the NCA’s appeal “had no real prospect of success and that there is no other compelling reason why the appeal should be heard.” Lady Justice Carr found that the lower court had applied the proper standards in considering the UWOs and was entitled to credit the Respondents’ evidence over the evidence advanced by the NCA in concluding that there were no reasonable grounds for suspecting that the property in question was obtained from crime. Lady Justice Carr observed that, as a relatively new tool (UWOs were introduced as part of the Criminal Finances Act 2017, which entered into force in January 2018), UWOs would “benefit from further judicial interpretation,” but that this appeal was not the appropriate time to do so.  According to Lady Justice Carr, “UWOs are onerous orders, and in the absence of any real prospect of success, it is not appropriate to subject the Respondents to the full appellate process.”

10. French Minister of Justice Announces New Corporate Corruption Guidelines. On June 2, 2020, the French Minister of Justice, Nicole Belloubet, issued guidelines to French prosecutors on the enforcement of France’s anti-corruption legislation, known as Sapin II, which was announced in March 2016, and enacted in December 2016. Among other things, the guidelines suggest a more aggressive posture toward extraterritoriality that could capture bribery by non-French companies, discuss factors to be considered when deciding whether to enter into the French equivalent of a DPA (see our November 2017 and January 2020 Top 10s for discussions of French DPAs), explore means to encourage companies to self-disclose misconduct, and largely adopt DOJ’s policy on individual accountability for corporate wrongdoing under the Yates Memo (see our September 2015 and November 2018 Top 10s for more on the Yates Memo). With France becoming more active in enforcing foreign bribery laws, the guidelines are an important step to ensuring transparency in enforcement decisions.

[1] Dylan Tokar, Justice Department Adds New Detail to Compliance Evaluation Guidance, Wall Street Journal (June 1, 2020).

[2] Her Majesty’s Court of Appeal, Civil Division, Case No. C1/2020/0723.

[View source.]