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: Which insurance companies entered into Foreign Corrupt Practices Act (FCPA) resolutions related to an alleged scheme to bribe Ecuadorian officials? Why does the U.S. Department of Justice (DOJ) not intend to bring an FCPA enforcement action against a U.S. government contractor that intends to pay stipends to foreign officials? What do current DOJ and U.S. Securities and Exchange Commission (SEC) officials have to say about FCPA enforcement practices? The answers to these questions and more are here in our November 2023 Top 10.
1. U.K.-Based Reinsurance Broker Resolves Ecuador FCPA Allegations
On November 20, 2023, DOJ announced that it had entered into a Deferred Prosecution Agreement (DPA) with Tysers Insurance Brokers Limited resolving allegations that the company conspired to violate the FCPA in a bribery scheme involving Ecuadorian officials. According to DOJ, between 2013 and 2017, Tysers and others agreed to pay approximately $2.8 million in bribes to the chairman of two Ecuadorian state-owned insurance agencies, Seguros Sucre S.A. and Seguros Rocafuerte S.A., and three other Ecuadorian officials to secure lucrative contracts from the Ecuadorian government. The bribes were allegedly facilitated by a Miami-based third-party intermediary company, and some of the bribes were paid to accounts held in Florida. DOJ alleged that Tysers employees and employees of the intermediary company took actions in the United States in furtherance of the bribery scheme (satisfying the FCPA’s territorial jurisdiction requirements under 15 U.S.C. § 78dd-3). As part of the DPA, which was filed in the Southern District of Florida, the company agreed to pay a $36 million criminal penalty, which DOJ stated reflected a 25% reduction off the low end of the U.S. Sentencing Guidelines (USSG) fine range to reward the company’s cooperation and remediation, and to forfeit approximately $10.5 million. Since the end of 2022, DOJ has routinely included in its corporate criminal resolutions a requirement that companies forfeit their allegedly ill-gotten profits, a new practice that the acting Assistant Attorney General (AAG) for DOJ’s Criminal Division recently stated is meant to ensure the equal treatment of non-issuers and issuers, who typically must disgorge their illicit profits as part of an SEC resolution. (See number 6 below for more on the acting AAG’s speech.) The acting AAG also pointed out that another UK insurance company, Jardine Lloyd Thompson Group Holdings Limited, had received a declination with disgorgement in March 2022 for a similar alleged scheme to bribe Seguros Sucre officials. According to the AAG, Jardine’s cooperation led to the prosecution of individuals and of Tysers and H.W. Wood (see number 2 below) and that, combined with Jardine’s voluntary self-disclosure and remediation, resulted in more lenient treatment. (For more on the Ecuadorian insurance prosecutions, see our March 2021, April 2021, March 2022, and July 2022 Top 10s and number 2 below.)
2. Second U.K.-Based Reinsurance Broker Resolves Ecuador FCPA Allegations
On November 20, 2023, DOJ also announced that it entered into a DPA with H.W. Wood Limited for its part in the Ecuadorian bribery scheme discussed in number 1 above. Pursuant to the DPA, which was filed in the Southern District of Florida, H.W. Wood agreed that the appropriate criminal penalty was $22.5 million, reflecting a 25% discount off the bottom of the USSG fine range, and the appropriate forfeiture amount was $2.3 million. However, because H.W. Wood demonstrated an inability to pay the full amount, DOJ agreed to reduce the criminal penalty to $508,000.
3. U.S.-Based Pharmaceutical Manufacturer Receives Declination with Disgorgement for Mexican Bribery Scheme
On November 11, 2023, DOJ issued a declination letter stating that it would not prosecute Lifecore Biomedical, Inc. for its alleged violation of the FCPA involving bribes to Mexican government officials. According to the letter, from May 2018 to August 2019, the company’s former subsidiary, Yucatan Foods L.P., paid approximately $14,000 in bribes to an intermediary to secure a wastewater discharge permit. The letter further stated that Yucatan’s maquiladora in Guanajuato paid approximately $310,000 to a third-party service provider to prepare fraudulent wastewater disposal manifests signed by bribed Mexican government officials. According to DOJ, during the pre-acquisition due diligence process, Yucatan attempted to conceal from Lifecore the bribery scheme, which was later discovered during the post-acquisition integration process, investigated, remediated, and voluntarily disclosed to DOJ. DOJ required the company to disgorge $406,505, representing the difference between the $1.286 million in financial benefits attributable to the alleged bribery scheme and the $879,555 in expenses the company incurred in constructing a wastewater treatment plant and paying Mexican regulators the duties it owed. The Lifecore declination with disgorgement was the second such resolution in 2023. (For a discussion on the other resolution, see our March 2023 Top 10.)
4. DOJ Publishes Opinion Procedure Release on Stipend Payments for Foreign Officials
On November 7, 2023, DOJ published Opinion Procedure Release No. 23-2 (dated October 25, 2023), stating that it did not intend to take enforcement action against a U.S.-based company that sought to provide stipend payments to foreign officials who attend its training events. The company was awarded a task order, issued pursuant to its contract with a U.S. government agency, that requires the company to establish training events for which the company provides logistical support for foreign personnel. The logistical support includes stipend payments intended to pay for mileage costs and meals that are not required to be served during the event. According to the U.S. government agency, the stipends are authorized under the Foreign Assistance Act of 1961. The company proposed to pay the stipend amounts to a U.S. government officer, who would then deliver the stipend amounts to the foreign officials. DOJ stated that it does not presently intend to take any enforcement action against the company for paying these stipends, which DOJ concluded did not reflect corrupt intent and did not appear to be for the purpose of assisting the company in obtaining and retaining business.
5. Fifth Circuit Affirms Speedy Trial Act Dismissal of FCPA and Money Laundering Charges
On November 28, 2023, the Fifth Circuit affirmed a May 2023 order from the Southern District of Texas dismissing with prejudice FCPA and money laundering charges against Swiss-Portuguese banker Paulo Jorge Da Costa Casqueiro Murta on speedy trial grounds. The charges against Murta related to an alleged scheme by U.S. businesses to bribe officials of Venezuela’s national oil company, Petróleos de Venezuela, S.A. (PDVSA), in exchange for assistance in obtaining PDVSA contracts and receiving payment priority. The Fifth Circuit held that the district court’s admission that it failed to provide sufficient reasons for sua sponte continuing Murta’s trial date meant that the resulting delay was non‑excludable under the Speedy Trial Act and, when combined with additional non-excludable delay from earlier in the case, that the Act had been violated and the charges properly dismissed. The Fifth Circuit further held, however, that the district court had failed to properly consider the statutory factors when determining that the dismissal should be with prejudice. In particular, the Fifth Circuit rejected the district court’s finding that a criminal prosecution of Murta in Portugal weighed in favor of dismissing the U.S. charges with prejudice. Accordingly, the Fifth Circuit affirmed the Speedy Trial Act dismissal but remanded for further consideration of whether the dismissal should be with or without prejudice. The Fifth Circuit also ordered that the case be reassigned to another district judge. (For more on the Murta prosecution, see our September 2019, July 2022, February 2023, May 2023, and June 2023 Top 10s.)
6. Acting Assistant Attorney General for the DOJ Criminal Division Delivers Speech on FCPA Enforcement
On November 29, 2023, Acting Assistant Attorney General for the Criminal Division Nicole M. Argentieri delivered the keynote address at the 40th International Conference on the Foreign Corrupt Practices Act. The acting AAG touted the Criminal Division’s 2023 enforcement record, which included 11 corporate resolutions and declinations with disgorgement and charges against more than 240 individuals. The acting AAG cited several recent cases, including the Jardine, Tysers, and H.W. Wood cases discussed in numbers 1 and 2 above, as demonstrating the benefits to companies of voluntary self-disclosures, cooperation, and remediation.
The acting AAG stated that the Criminal Division has “proactively used data to generate FCPA cases” and planned to “double down on these efforts to allow us to identify additional misconduct that may otherwise have gone undetected and bring to bear even more data, along with the tools that can interpret and synthesize that information.” As an example, the AAG stated that the Criminal Division had “proactively developed” the foreign-bribery-related money laundering case against former Bolivian official Arturo Murillo “by looking at information and data available to the department, including from financial records.” (See our May 2021, September 2021, June 2022, October 2022, and January 2023 Top 10s for more on the Murillo case.) The acting AAG encouraged companies to “take note of these efforts when considering the tough decision of whether or not to disclose misconduct” and to use data analytics themselves in their corporate compliance programs.
The acting AAG also announced the International Corporate Anti-Bribery initiative (ICAB), a new resource to fight corruption that will be led by “three experienced prosecutors, who will build on our existing bilateral and multilateral partnerships, as well as form new partnerships,” and work with other DOJ and U.S. government components. The ICAB will start by “focusing on regions where we can have the most impact in both coordination and case generation, with a focus on key threats to financial markets and the rule of law.” The ICAB will facilitate cooperation and information sharing with partners and use data analytics to proactively identify incidents of foreign bribery and initiate investigations.
7. Two SEC Commissioners Criticize SEC’s Use of the FCPA’s Internal Accounting Controls Provision
In a November 14, 2023, dissent to settled charges against Charter Communications, two SEC commissioners, Hester M. Peirce and Mark T. Uyeda, criticized the agency’s use of the FCPA’s internal accounting controls provisions (Exchange Act Section 13(b)(2)(B), 15 U.S.C. § 78m(b)(2)(b)). In the settled action, SEC alleged that the company violated the internal accounting controls provision by failing to implement a reasonable process to ensure that the company’s trading plans conformed with Rule 10b5-1. Peirce and Uyeda, however, warned that SEC’s theory was an “unsupportable and ill‑considered interpretation” of Section 13(b)(2)(B) and an “inappropriate extension[] of the agency’s authority.” The dissenting Commissioners emphasized that Section 13(b)(2)(B) requires certain standards of internal accounting controls, and that the SEC order failed to recite any facts suggesting that the company’s internal accounting controls were insufficient. According to the dissent, “[c]ontrols designed to answer a legal question” (i.e., whether its trading plans complied with Rule 10b5-1) “are simply not internal accounting controls within Section 13(b)(2)(B)’s scope.” (emphasis in original). Peirce and Uyeda expressed concern that SEC has in recent years applied Section 13(b)(2)(B) too broadly, using it “to tell companies how to run themselves,” which “we do not have the authority” to do. Although the Charter Communications case involved a stock trading plan, Peirce and Uyeda’s dissent echoes criticism in some circles that SEC has similarly used the FCPA’s internal accounting controls provision too broadly in the foreign bribery context. (See, e.g., our analysis of the 2020 revisions to the FCPA Resource Guide, which noted that “Some critics have argued that the loss of the word ‘accounting’ [in the first version of the Resource Guide] is more than symbolic and that certain enforcement actions have penalized companies for shortcomings in compliance programs that go beyond the more limited reach intended by the term ‘internal accounting controls.’”) This bi-partisan criticism could signal a potential reduction in the scope of 13(b)(2)(B) enforcement actions moving forward. (For more on the Charter Communications case, see our client alert.)
8. SEC Reports Record-Setting Whistleblower Tips, and Increase in FCPA Tips, in FY2023
On November 14, 2023, SEC released its annual Report to Congress regarding its Whistleblower Program. According to the report, SEC received more than 18,000 tips in 2023, which is almost 50% more than the previous record set in FY2022. SEC reported that it awarded nearly $600 million across 68 awards, making FY2023 the highest award year ever. This number includes a single award for almost $279 million, the largest in Program history. According to the report, SEC received 237 FCPA‑related tips in FY2023, up from 202 FCPA-related tips received in the previous fiscal year. (The most common complaint category reported by whistleblowers was manipulation (4,337), with municipal securities and public pension (47) being the least common.) The annual Whistleblower Report serves to remind companies to ensure that their reporting mechanisms, anti-retaliation policies, and investigation procedures are up to date and equipped to handle whistleblower reports.
9. World Bank Group Debars Consulting Firm for Bribery in Bangladesh
On November 1, 2023, the World Bank Group announced that it had debarred BETS Consulting Services Limited, an engineering consulting company based in the People’s Republic of Bangladesh, in connection with corrupt and fraudulent practices related to the Chittagong Water Supply Improvement and Sanitation Project in Bangladesh. According to the World Bank, the company made payments to project officials that were intended to influence the officials’ contract implementation decisions. The company also allegedly assisted its lead consultant company in invoicing the project for expenses that were not actually incurred. This debarment makes BETS ineligible to participate in projects financed by institutions of the World Bank Group for 22 months. The settlement provided for this limited period of debarment in light of the company’s cooperation and voluntary remedial actions, which include a commitment to developing an integrity compliance program.
10. Basel Institute on Governance Releases 2023 Anti-Money Laundering Index
On November 13, 2023, the Basel Institute on Governance released the 2023 version of its Anti-Money Laundering Index (AML Index). The Basel AML Index is an independent ranking that assesses countries’ money laundering risks and capacity to counter them. One of the five domains measured by the AML index is corruption and bribery risk, which increased overall from 2022 to 2023, while the efficacy of anti-money laundering countermeasures dropped. Haiti topped the rankings as the jurisdiction most at risk for money laundering and terrorist financing while Iceland was deemed the least at risk. The United States was ranked 119 out of 152 jurisdictions (with a larger number indicating a lower risk).
[View source.]
