In order to provide an overview for busy in-house counsel and compliance professionals, we’ve summarized 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 new U.S. Department of Justice (DOJ) guidance affect cash-strapped companies seeking to resolve criminal matters? What are the latest developments in the investigations into corruption at Mexico’s national oil company? How will a new whistleblower law affect anti-corruption enforcement in the European Union? The answers to these questions and more are here in our October 2019 Top 10 list.
1. DOJ Issues Guidance on Corporate Inability-to-Pay Claims. On October 8, 2019, the Assistant Attorney General for DOJ’s Criminal Division, Brian Benczkowski, issued a memorandum entitled “Evaluating a Business Organization’s Inability to Pay a Criminal Fine or Criminal Monetary Penalty.” The memorandum provides guidance to Criminal Division prosecutors on how to assess claims that a corporate defendant cannot pay an otherwise appropriate fine or monetary penalty to resolve a criminal case. The guidance and framework are applicable only in circumstances where the prosecutors and the company have reached agreement about both the form of resolution and the appropriate amount of the penalty, irrespective of the organization’s ability to pay. Under the guidance, a company will be required to complete an “Inability-to-Pay Questionnaire.” Prosecutors will then consider several factors in assessing whether the company has met its burden of establishing its inability to pay the agreed-upon penalty, including background on the company’s financial condition, alternative sources of capital, collateral consequences of the monetary penalty, and whether the penalty will impede the company from making restitution to victims. The guidance provides a list of considerations that “are generally not relevant” to the collateral consequences factor, such as adverse impacts on growth and other “future” but non-existential considerations. If prosecutors determine that the company has met its burden, then they may recommend an adjustment to the monetary penalty amount “but only to the extent necessary to avoid (1) threatening the continued viability of the organization and/or (2) impairing the organization’s ability to make restitution to victims.” The adjustment may take the form of either a reduced monetary amount or an installment schedule. While statutes and the U.S. Sentencing Guidelines provide a legal basis for inability-to-pay claims, this memorandum provides the first detailed public guidance on how Criminal Division prosecutors evaluate such claims, which have factored into a number of FCPA resolutions, such as the NORDAM resolution in 2012 and more recently in the Transport Logistics International resolution in March 2018 and the Odebrecht sentencing in April 2017. As such, the guidance is another welcome effort from the Criminal Division to provide more transparency in how it exercises its discretion in fashioning corporate resolutions. (For other such efforts, see our October 2018 Top 10 on the monitor selection process and our April 2019 Top 10 on the evaluation of corporate compliance programs.)
2. Miami-Based Financial Advisor Pleads Guilty in Connection with Ecuadorian Bribery Scheme. On October 11, 2019, DOJ announced that Miami-based financial advisor Frank Roberto Chatburn Ripalda had pleaded guilty in the Southern District of Florida to one count of conspiracy to commit money laundering in connection with a scheme to disguise bribe payments to officials of Ecuadorian state-owned oil company Petroecuador. At the plea hearing, Chatburn admitted that he conspired with an oil services contractor, for whom he was serving as a financial advisor, to pay nearly $3 million in bribes to government officials in order to obtain and retain contracts with Petroecuador. Chatburn established shell companies in Panama and bank accounts in Switzerland on behalf of two Ecuadorian officials in order to conceal the bribe payments. Chatburn also admitted to conspiring with another Ecuadorian official to conceal bribe payments received from Odebrecht S.A., which pleaded guilty to FCPA violations in December 2016. Chatburn is the tenth individual to plead guilty in connection with the Petroecuador bribery and money-laundering investigation. (For more on the Petroecuador prosecutions, read our April 2018, September 2018, November 2018, and April 2019 Top 10s.)
3. Former Executives of Monaco-Based Oil Services Company Plead Guilty to Sweeping Bribery Scheme. On October 30, 2019, DOJ announced that Cyrus and Saman Ahsani, respectively the former CEO and COO of Monaco-based oil consultancy Unaoil, had pleaded guilty in the Southern District of Texas in connection with a scheme to pay millions of dollars in bribes to public officials in Africa, Asia, and the Middle East over a 17-year period. The Ahsanis, both UK residents, pleaded guilty to one count of conspiracy to violate the FCPA by conspiring to facilitate bribes paid to government officials in order to secure oil and gas contracts in Algeria, Angola, Azerbaijan, the Democratic Republic of Congo, Iraq, Iran, Kazakhstan, Libya, and Syria. DOJ also announced that Steven Hunter, Unaoil’s former business development director and also a UK resident, had pleaded guilty in the Southern District of Texas to one count of conspiracy to violate the FCPA, for facilitating bribe payments to Libyan government officials between 2009 and 2015. The Ahsanis are scheduled to be sentenced in April 2020, and Hunter is scheduled to be sentenced in March 2020. The UK Serious Fraud Office (SFO), which is also investigating Unaoil, lost its bid to secure Saman Ahsani’s extradition from Monaco in 2018. (For more on the SFO’s Unaoil investigation, see our November 2017, May 2018, June 2018, December 2018, and July 2019 Top 10s.)
4. Venezuelan National Sentenced to Four Years’ Imprisonment for Venezuela Bribery Scheme. On October 29, 2019, Jesus Ramon Veroes was sentenced in the Southern District of Florida to four years in prison following his June 2019 guilty plea to a charge of conspiracy to violate the FCPA. According to his plea agreement, Veroes and his co-conspirators agreed to make corrupt payments to officials at Venezuelan national power company Corporación Eléctrica Nacional, S.A. (Corpoelec) in exchange for the award of procurement contracts to Florida-based companies. As part of his plea agreement, Veroes agreed to forfeit $5.5 million and a Miami-area home that represent gains allegedly derived from the conspiracy. Two Corpoelec officials were charged and one of Veroes’s co-conspirators pleaded guilty in connection with the scheme in June 2019.
5. Netherlands-Based Oil and Gas Company Discloses DOJ Declination. On October 2, 2019, Shell announced that it had received confirmation that DOJ had closed its investigation into the company’s involvement in a $1.3 billion acquisition of a Nigerian oilfield in 2011. Eni S.p.A, an Italian oil company, made a similar announcement on October 1, 2019 (as we reported here).
6. Swiss-Based Commodities Trader Fined for Failure to Prevent Bribery. On October 17, 2019, the Office of the Attorney General of Switzerland (OAG) announced that it had ordered energy trader Gunvor to pay almost CHF 94 million, including a CHF 4 million fine and CHF 90 million in disgorged profits plus interest, following the company’s conviction for failing to take all organizational measures that were reasonable and necessary to prevent its employees and agents from bribing public officials in order to gain access to the petroleum markets in the Republic of Congo and Ivory Coast. According to OAG, the company lacked a code of conduct, a compliance program, an internal audit procedure, internal anti-corruption guidelines, anti-corruption training, and a third-party management system. The company also allegedly ignored warning signs of corruption. OAG stated that the investigation into the company’s activities in the Republic of Congo and the Ivory Coast began in December 2011. This decision is reportedly the first time that a major trading firm has been found guilty on such charges in Switzerland.
7. European Union Council Approves Whistleblower Protection Law. On October 7, 2019, the European Union’s Council of Ministers (the EU’s principal legislative body) adopted new laws to provide widespread protection for whistleblowers. The new law will entitle whistleblowers to free legal advice and interim relief such as protection from dismissal, demotion, and other forms of retaliation. The new law will also require national authorities in the EU to inform citizens of the new law and to provide training for its public authorities on how to deal with whistleblowers. Member states will be required to set up reporting channels to allow whistleblowers to report incidents first to their employer and, failing that, to national authorities. The new law covers several areas of European law, including anti-money laundering, data protection, food and product safety, public health, and nuclear safety. The new law was initially proposed as a result of only ten EU member states offering protection for whistleblowers, namely France, Hungary, Ireland, Italy, Lithuania, Malta, the Netherlands, Slovakia, Sweden, and the UK. The new law will come into force 20 days after it has been published in the Official Journal (the official gazette of record for the EU). Member states will then have two years to implement the law, as is customary with EU directives. Given the role of whistleblowers in anti-corruption investigations, this is an important development in this space.
8. OECD Expresses Concern over Brazil’s Foreign Bribery Enforcement. Over the last several years, Brazilian prosecutors have spearheaded arguably the most important anti-corruption investigation in the world, Operation Car Wash (“Lava Jato”). On October 21, 2019, however, the Organization for Economic Cooperation and Development (OECD) expressed concern that recent developments in Brazil had compromised the country’s ability to investigate and prosecute foreign bribery offenses. Among those developments, the OECD cited Brazil’s August 2019 passage of the Law on Abuse of Authority by judges and prosecutors, the president of the Supreme Court’s decision to halt all investigations and criminal proceedings based on reports by the Financial Intelligence Unit and other administrative agencies, and attempts to restrict tax authorities’ capacity to detect, report, and investigate foreign bribery and money laundering. As a result of its concerns, the OECD intends to send a high-level mission to Brasilia in November 2019 to meet with senior officials to reinforce Brazil’s obligations under the OECD Anti-Bribery Convention. Given Brazil’s significant position in foreign bribery investigations, the trend identified by the OECD is one to monitor.
9. Pemex Investigations Heating Up? In our May 2019 Top 10, we discussed several developments in Mexico suggesting that Mexico and its state oil company, Petróleos Mexicanos (Pemex), “could join Brazil as a major source of anti-corruption investigations and prosecutions in Latin America in the years to come.” In October 2019, there were more indications of this potential development. On October 11, 2019, the Wall Street Journal reported that audio recordings filed in a lawsuit between Pemex and a Mexican oil-field drilling company called Oro Negro suggested evidence of bribery of Pemex officials through success fees paid to their family members or sham consultancies. The report further indicated that DOJ and the U.S. Securities and Exchange Commission (SEC) had opened an investigation into Pemex. In separate news, Carlos Romero Deschamps resigned as head of Mexico’s oil workers union on October 16, 2019, a day after Mexican President Andrés Manuel López Obrador said that the attorney general’s office had received complaints about Romero Deschamps. López Obrador did not provide specifics about the complaints. Romero Deschamps, who had been head of the oil workers union since 1993, was implicated, but never convicted, in the 2000 “Pemexgate” scandal, which involved allegations that Pemex funds were diverted to the campaign account of a PRI presidential contender. While it remains to be seen whether these early Pemex investigations are the harbingers of a Mexican Lava Jato, this is a story to watch in the coming months.
10. The United Nations and China Sign Anti-Corruption Cooperation Agreement. On October 17, 2019, the United Nations (UN) announced that it had signed a memorandum of understanding on cooperation in combatting corruption with the National Commission of Supervision of the People’s Republic of China. According to the announcement, the new agreement will allow the UN’s Office on Drugs and Crime (UNODC) and China to strengthen cooperation on implementing the UN Convention Against Corruption (UNCAC) in key areas such as prevention, criminal justice responses to corruption offenses, law enforcement cooperation, and stolen asset recovery. Given China’s significant role in the world economy, any effort to combat corruption involving China has the potential to significantly impact foreign bribery enforcement.