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: How will the reversal of the “Bridgegate” convictions impact FCPA enforcement? What factors will the U.S. Commodities Futures Trading Commission (“CFTC”) consider when determining the penalty amount for a foreign bribery violation? How many officials were prosecuted and convicted in China in 2019? The answers to those questions and more are here in our May 2020 Top Ten.
1. Unanimous Supreme Court Reverses “Bridgegate” Convictions. On May 7, 2020, a unanimous United States Supreme Court reversed the wire fraud and federal program fraud convictions of three former New Jersey officials who reduced toll lanes to a bridge to Manhattan to punish a local mayor’s refusal to support then-New Jersey Governor Chris Christie’s 2013 reelection campaign. According to the Court in Kelly v. United States, “The evidence the jury heard no doubt shows wrongdoing—deception, corruption, abuse of power,” “[b]ut not every corrupt act by state or local officials is a federal crime.” The Court held that realignment of the toll lanes was “an exercise of regulatory power,” which does not constitute “money or property” for purposes of the relevant statutes, even considering the “incidental costs” incurred when bridge authority employees implemented the lane closures. The Court observed that the money or property requirement “prevents these statutes from criminalizing all acts of dishonesty by state and local officials” and “leaves much public corruption to the States (or their electorates) to rectify”; without it, “the Federal Government could use the criminal law to enforce (its view of) integrity in broad swaths of state and local policymaking.” Although relying on decades-old precedent, Kelly is yet another example of the Supreme Court limiting the scope of a federal corruption statute (see, e.g., our June 2016 coverage of the McDonnell decision), which invariably raises questions of the potential impact of such decisions on the FCPA. Here, the answer is probably “very little.” The FCPA’s “business nexus” requirement would likely harmonize with the “money or property” test under the facts in Kelly. Thus, for example, a U.S. issuer that bribes an official of a foreign bridge authority solely to extract political revenge against a local official likely does not violate the FCPA because that decision lacks a business nexus. But if the object of the lane closure is to force the local official to award a contract to the issuer or to disadvantage a business competitor, then the issuer has more likely violated the FCPA, which has a more “expansive” reach than some other corruption statutes. (See, e.g., our August 2019 coverage of the Ng Lap Seng case, in which the Second Circuit upheld an FCPA conviction for similar reasons.) Nevertheless, Kelly is worth considering in the FCPA context to the extent that it could foreshadow the Supreme Court’s inclination to circumscribe the statute’s scope if ever presented with the opportunity.
2. U.S. Appellate Court Rejects National Oil Company’s Attempt to Be Recognized as Victim of Bribery Scheme. On May 26, 2020, the U.S. Eleventh Circuit Court of Appeals denied a petition for writ of mandamus from Ecuador’s national oil company seeking to set aside the Southern District of Florida’s March 2020 denial of its motion to be considered a “victim” of an alleged bribery and money-laundering scheme under the Crime Victims’ Rights Act (“CVRA”) and Mandatory Victims Restitution Act (“MVRA”).[1] The Eleventh Circuit concluded that the district court did not err in denying PetroEcuador’s motion on two grounds. First, the court held that the record demonstrated that at least five PetroEcuador employees, including a member of the Board of Directors and other high-level employees, were involved in the underlying bribery scheme, acted within the scope of their employment, and acted, at least in part, for PetroEcuador’s benefit. As such, the court found that their actions could be imputed to the company itself. Second, the court held that PetroEcuador had not proven that it had been harmed by the bribes, as it had not shown that the contract prices were higher because of the bribes. Because it was not a victim of the alleged scheme, PetroEcuador is not entitled to restitution. When PetroEcuador first moved to be recognized as a victim in November 2018, we noted that the company “likely face[d] an uphill battle.” The Eleventh Circuit’s reasoning in the PetroEcuador case will likely increase the challenges faced by other state-owned enterprises seeking restitution in bribery cases.
3. British Engineering Company’s FCPA Deferred Prosecution Agreement Ends. On May 19, 2020, the Southern District of Ohio granted the motion from the U.S. Department of Justice (“DOJ”) to dismiss FCPA charges against UK-based Rolls-Royce plc.[2] In its motion, DOJ stated that the company had met all of its obligations under its three-year DPA, announced in January 2017. Simultaneously with DOJ’s 2017 announcement, a London court approved a five-year DPA with the UK Serious Fraud Office (“SFO”). That DPA is expected to end sometime between 2021 and 2022. (For more on this case, read our November 2017 and May 2018 Top 10s.)
4. U.S. Commodities Futures Trading Commission Announces Penalty Guidelines. On May 20, 2020, the CFTC announced new guidance outlining the factors that its Enforcement Division considers in recommending to the Commission civil monetary penalties to be imposed in CFTC enforcement actions. The guidance provides a three-pronged approach to evaluate the appropriate penalty: (1) the “gravity of the violation”; (2) “mitigating and aggravating circumstances,” including self-reporting, cooperation, and remediation; and (3) “other considerations,” including “remedies and sanctions to be imposed in parallel actions by other civil or criminal authorities or self-regulatory agencies.” These guidelines are particularly important for practitioners in the foreign bribery space to understand in light of the CFTC’s March 2019 announcement of its intent to pursue foreign bribery cases. Among other things, companies that fall within the CFTC’s scope will want to consider simultaneously self-reporting foreign bribery violations to the CFTC, DOJ, and U.S. Securities Exchange Commission (“SEC”) (as applicable) and seeking credit from the CFTC for penalties, disgorgement, and forfeitures paid to other enforcement agencies, both in the United States and abroad.
5. UK Serious Fraud Office Closes Investigation into Swiss Engineering Company. On May 19, 2020, the SFO announced that it had closed its investigation into the UK subsidiaries of ABB Ltd. The investigation began after the company reported potentially improper payments involving Unaoil, a Monaco-based energy services consultancy that is under investigation by the SFO for suspected foreign bribery. In its announcement, the SFO stated that the case did not meet the relevant test for prosecution as defined in the Code for Crown Prosecutors, which requires the evidence to support a realistic prospect of conviction and for the prosecution to be in the public interest. (For more on the SFO’s Unaoil investigation, see our November 2017, May 2018, June 2018, December 2018, July 2019, and March 2020 Top 10s.)
6. World Bank and UK Serious Fraud Office Announce New Appointments.
- World Bank Appoints New Vice President of Integrity. On May 1, 2020, the World Bank announced the appointment of Mouhamadou Diagne as Vice President of Integrity (INT). Diagne, a dual citizen of Senegal and the United States, most recently served as the Inspector General of the Global Fund to Fight AIDS, Tuberculosis, and Malaria, where he oversaw investigations of alleged fraud, corruption, misappropriation, and other forms of abuse in Global Fund financed programs. Diagne replaces Pasacale Dubois, who led INT from July 2017 (see here) until November 2019.
- UK Serious Fraud Office Appoints New Chief Capability Officer To Direct Strategy. On May 28, 2020, the SFO announced the appointment of Michelle Crotty to the newly created position of Chief Capability Officer. Crotty has served as both a criminal defense attorney and in a number of government positions, most recently serving as the Director of Strategy at the UK National Crime Agency, where she was responsible for the agency’s strategic, performance, and communications arms. As Chief Capability Officer, Crotty will be responsible for overseeing the SFO’s corporate and technology functions, as well as leading the agency’s strategic objectives and business plans, with the aim of maximizing value for money and leading new initiatives in the corporate sphere. She is expected to work alongside the SFO’s Chief Operating Officer, who will be responsible for the day-to-day running of the agency’s operational functions as well as for the organization’s values, strategic engagement, organizational learning, and professional standards.
7. World Bank Debars British Transportation Expert for Collusive, Corrupt, and Fraudulent Practices in Vietnam. On May 13, 2020, the World Bank announced the six‑year debarment of British-born James Tinnion-Morgan for allegedly collusive, corrupt, and fraudulent practices in relation to two World Bank-funded development projects in Vietnam collectively valued at over $560 million. According to the Bank, Tinnion-Morgan, who is based in New Zealand, improperly influenced the tendering processes of the two projects, solicited bribes, and failed to disclose his business relationship with a bidder. The settlement agreement provides for a reduced period of debarment with conditional release because of Tinnion-Morgan’s cooperation and voluntary remedial actions. Tinnion-Morgan also committed to taking compliance training consistent with the principles set out in the World Bank Group Integrity Compliance Guidelines and to continue his full cooperation with the World Bank Group Integrity Vice Presidency. Under the Agreement for Mutual Enforcement Decisions that was signed on April 9, 2010, the World Bank’s debarment qualifies for cross-debarment by the Asian Development Bank, the European Bank for Reconstruction and Development, the Inter-American Development Bank, and the African Development Bank.
8. China’s Top Prosecutor Reports Significant Increases in Corruption Referrals and Prosecutions in 2019. On May 25, 2020, the Supreme People’s Procuratorate submitted its annual report to China’s national parliament, the National People’s Congress. According to the report, in 2019, the Chinese Supervisory Commission referred 23,234 officials for criminal prosecution, a 50.6% increase from 2018, and 18,585 officials were prosecuted, an 89.6% increase from the previous year. In a separate report issued the same day, the Supreme People’s Court reported that a total of 25,000 trials involving corruption, malfeasance, and bribery were conducted in 2019, leading to 29,000 people being convicted. According to reports, more than a million officials have been punished as part of President Xi Jinping’s anti-corruption campaign.
9. Current Mexican President Calls for Investigation of Company Tied to Former Mexican President, Among Others. On May 20, 2020, current Mexican president Andres Manuel Lopez Obrador reportedly ordered an investigation into allegations that the former government improperly awarded contracts to a company allegedly tied to Peña Nieto’s family. (In March 2020, a large majority of respondents to a national survey in Mexico favored opening a corruption probe against former Mexican president Enrique Peña Nieto.) Separately, on May 4, 2020, Lopez Obrador said that the Mexican government would investigate a report that a company owned by the son of Mexico’s national electricity company had sold overpriced ventilators to IMSS, Mexico’s social security institute, during the COVID-19 crisis. Also in May 2020, Lopez Obrador reportedly urged the United States to investigate U.S. law enforcement and intelligence agencies who dealt with former Mexican Security Minister Genaro Garcia Luna, who was arrested in the United States in 2019 for reportedly accepting millions of dollars in bribes from the Sinaloa Cartel. Although the three investigations are unrelated, some observers have suggested that Lopez Obrador, who ran on an anti-corruption platform, may be ramping up corruption investigations in an effort to shore up his flagging popularity. Companies that are doing or have done business in Mexico should pay particularly close attention to these developments.
10. Switzerland Begins Impeachment Process Against Attorney General in Connection with International Soccer Probe. On May 20, 2020, the Judicial Committee of the Swiss Parliament voted to open an impeachment process against Attorney General Michael Lauber, whom they suspect of committing a “serious breach of duty” during the investigation of alleged bribery of officials from the Fédération Internationale de Football Association (FIFA). In March 2020, a parliamentary oversight panel disciplined Lauber for meetings he had with FIFA President Gianni Infantino in 2016 and 2017 during the investigation. Lauber came under additional heat as a result of the April 2020 collapse of Switzerland’s first FIFA trial. By that time, Lauber had already been recused from the FIFA investigation by Switzerland’s federal criminal court. If the Judicial Committee files a motion to remove Lauber from office, the Swiss Parliament would vote on it in September 2020 at the earliest. (For more on the FIFA investigation, see our May 2015, December 2016, November 2017, February 2018, February 2020, and April 2020 Top 10s.)
Morrison & Foerster associate Haydn Forrest contributed to the writing of this alert.
[1] In re Empresa Publica de Hidrocarburos del Ecuador, No. 20-11340 (11th Cir. May 26, 2020).
[2] United States v. Rolls-Royce PLC, No. 2:16-cr-247, Docket No. 15 (S.D. Ohio May 19, 2020).
[View source.]
