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 made September 2020 such a busy month for news about Latin American national oil companies? What revisions did the U.S. Securities and Exchange Commission (SEC) make to its whistleblower award program? Will the fate of anti-corruption charges against five former Mexican presidents be left to the electorate? The answers to these questions and more are here in our September 2020 Top 10.
1. Florida-based Asphalt Company and Several Individuals Plead Guilty to Brazil, Ecuador, and Venezuela Bribery Allegations. On September 22, 2020, the U.S. Department of Justice (DOJ) announced that asphalt company Sargeant Marine Inc. had pleaded guilty in the Eastern District of New York to charges of conspiracy to violate the U.S. Foreign Corrupt Practices Act (FCPA) in connection with millions of dollars in bribes allegedly paid to officials in Brazil, Ecuador, and Venezuela in order to secure approximately $38 million in contracts from those countries’ national oil companies, Petróleo Brasileiro S.A. (“Petrobras”), Empresa Publica de Hidrocarburos del Ecuador (“Petroecuador”), and Petroleos de Venezuela S.A. (PDVSA). The company allegedly concealed the bribes by creating fake consulting contracts and invoices and transferring funds to offshore bank accounts held in the name of shell companies owned by intermediaries involved in the bribery scheme. While DOJ determined that the appropriate criminal penalty was $90 million, the fine was reduced to $16.6 million due to Sargeant Marine’s inability to pay, as determined under DOJ’s Inability to Pay Guidance, released in October 2019. In the same press release, DOJ disclosed several previously unannounced individual guilty pleas by three Sargeant Marine executives and traders (Daniel Sargeant, Roberto Finocchi, and Jose Tomas Meneses), an agent and a consultant in Brazil and Venezuela (Luiz Eduardo Andrade and David Diaz), and a former Venezuelan government official and alleged bribe recipient (Hector Nunez Troyano), as well as the unsealing of a criminal complaint against another former Venezuelan official (see #2 below).
2. Another Former PDVSA Official Charged for Allegedly Laundering Bribe Money. On September 10, 2020, a magistrate judge in the Eastern District of New York ordered unsealed a criminal complaint against former PDVSA trader Daniel Comoretto, alleging that he had conspired to commit money laundering and receive $229,000 in bribes from multiple asphalt companies in order to facilitate those companies’ business with PDVSA. According to the charges, a consultant billed asphalt companies for a commission of approximately 45 cents per barrel of asphalt sold to PDVSA and then passed those funds on to Comoretto and his co-conspirator, another PDVSA official. Comoretto was arrested in Tennessee and made an initial court appearance on September 18, 2020. (For more on the PDVSA investigation, see our December 2015, March 2016, June 2016, October 2016, January 2017, October 2017, February 2018, April 2018, July 2018, August 2018, September 2018, October 2018, November 2018, December 2018, February 2019, May 2019, August 2019, September 2019, November 2019, January 2020, February 2020, and August 2020 Top 10s.)
3. Oil Trader Charged with Bribing Ecuadorian Officials. On September 22, 2020, DOJ announced charges against Javier Aguilar, an oil trader at Vitol Inc., the U.S. subsidiary of a multinational oil distributor and trading company, in connection with his involvement in an alleged scheme to bribe Ecuadorian officials to secure contracts with Petroecuador. According to the indictment, which was filed in the Eastern District of New York, Aguilar utilized fake consulting agreements to pay $1.4 million to intermediaries via U.S. and offshore bank accounts, $870,000 of which was used to pay bribes to Ecuadorian officials. Aguilar was arrested in Houston, Texas, and faces one count each of conspiracy to violate the FCPA and conspiracy to commit money laundering.
4. SEC Brings No FCPA Cases in Last Month of 2020 Fiscal Year. As we have noted in the past, September often brings a flurry of SEC FCPA enforcement actions as the agency tries to wrap matters up before the end of its fiscal year. For example, SEC brought five FCPA enforcement actions in September 2016, two FCPA enforcement actions in September 2017, six FCPA enforcement actions in September 2018, and four FCPA enforcement actions in September 2019. But while DOJ was busy bringing cases involving Latin American national oil companies, SEC did not bring a single FCPA enforcement action in September 2020. It is unclear whether this is a result of the effects of the global pandemic or simply the natural ebb and flow of the enforcement cycle. In total, SEC brought ten FCPA enforcement actions in FY 2020.
5. SEC Amends Rules Governing Whistleblower Awards. On September 23, 2020, SEC published amendments to the rules governing whistleblower awards under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. According to SEC, “After ten years of experience administering the [whistleblower] program, the Commission is adopting various amendments that are intended to provide greater transparency, efficiency and clarity to whistleblowers, to ensure whistleblowers are properly incentivized, and to continue to properly award whistleblowers to the maximum extent appropriate and with maximum efficiency.” Among other things, the amendments (1) create a presumption in favor of the statutory maximum amount for awards under $5 million, (2) allow awards based on DOJ non-prosecution agreements (NPAs) and deferred prosecution agreements (DPAs), (3) introduce provisions designed to expedite resolution of clearly non-meritorious whistleblower claims, and (4) adopt a uniform definition of “whistleblower” for purposes of the award program and the anti-retaliation protections (in response to the U.S. Supreme Court’s February 2018 decision in Digital Realty Trust, Inc. v. Somers). Since the implementation of its whistleblower program in 2011, SEC has recovered over $2.5 billion in financial remedies as a result of original information provided by whistleblowers and awarded over $523 million to 97 individuals in 80 enforcement actions. The amendments could increase reporting to SEC, by incentivizing whistleblowers (and whistleblower attorneys) to report claims to SEC rather than internally and by incentivizing whistleblowers to report smaller matters. (For more on the amendments, see our June 2018 Top 10.)
6. SEC Awards $2.5 Million to Whistleblowers in FCPA Case. On September 1, 2020, the SEC announced an award of over $2.5 million to joint whistleblowers whose tips led to “several successful enforcement actions.” Although not named in the SEC press release, attorneys for one of the whistleblowers confirmed that their client, a doctor in Brazil, received an award of $1.8 million for a 2014 tip that led to a January 2017 SEC enforcement action against Texas-based medical device company Orthofix International for FCPA violations based on allegedly improper payments to doctors at government-owned hospitals in Brazil to increase sales. DOJ declined to take action in the case.
7. DOJ Recovers $60 Million, Seeks Recovery of $300 Million More, in Malaysian Sovereign Wealth Fund Investigation. On September 2, 2020, DOJ announced that it had reached a settlement in the Central District of California to recover $60 million in assets allegedly embezzled from 1Malaysia Development Berhad (1MDB) and acquired by Malaysian film producer Riza Aziz. The forfeited assets included, among other things, real estate in Beverly Hills, London, and New York and a film poster for the 1927 film “Metropolis.” On September 16, 2020, DOJ announced the filing of civil forfeiture complaints filed in the Central District of California seeking recovery of more than $300 million in additional assets allegedly associated with the 1MDB scheme. The assets include, among other things, more than $300 million allegedly traceable to a line of credit extended by PDVSA for use of drill ships and dozens of rare movie posters. Together with other civil forfeiture complaints, the United States has sought the forfeiture of more than $2.1 billion in assets traceable to funds allegedly embezzled from 1MDB, and has to date recovered or assisted Malaysia in recovering nearly $1.1 billion in assets.
8. Mexico Considers Referendum on Trying Former Presidents for Corruption. On September 15, 2020, Mexican President Andres Manuel López Obrador signed a formal request asking the Mexican Senate to schedule a national referendum on whether to prosecute his five predecessors—Carlos Salinas, Ernesto Zedillo, Vicente Fox, Felipe Calderón and Enrique Peña Nieto—whom he accused of corruption and other “evils,” such as privatization of public goods. Earlier in the month, it was reported that Mexican activists had begun gathering signatures supporting such a referendum, but it appeared that they would fall short of the almost two million signatures required by law, prompting López Obrador to turn to the Senate. In July 2020, Emilio Lozoya Austin, the former Chief Executive of Mexico’s national oil company, Petroleos Mexicanos (“Pemex”), reportedly provided evidence to Mexican authorities that top officials in the Peña Nieto administration were involved in corruption, including bribing politicians to support the former president’s energy reform plan. Lozoya reportedly also accused Calderon and Salinas, as well as a host of other officials, of “acts possibly constituting crimes.” Critics contend that López Obrador, who ran on an anti-corruption platform, is using the allegations against his predecessors to distract from his mishandling of the economy and the coronavirus pandemic. Nevertheless, the prosecution of Lozoya and the potential prosecution of the five former presidents could become a major national and international anti-corruption development. (See our May 2019, February 2020, and July 2020 Top 10s for more.)
9. Brazil’s Operation Car Wash To Be Extended? On September 9, 2020, the day before it was due to expire, the Brazilian Attorney General’s Office reportedly extended the mandate for Operation Car Wash (Lava Jato) until January 31, 2021. Launched in March 2014, Operation Car Wash is a sprawling investigation into alleged corruption involving Petrobras that has resulted in numerous domestic and international enforcement actions. Shortly before the extension, Deltan Dallagnol, the head of Operation Car Wash for the previous six years, announced that he was stepping down from the role for personal reasons. Brazil’s Federal Prosecution Service (MPF) announced that the state of Paraná’s public prosecutor, Alessandro José Fernandes de Oliveira, would replace Dallagnol. It is unclear whether Operation Car Wash will be extended beyond January 2021, but Deputy Attorney General Humberto Jacques de Medeiros has rejected prosecutors’ requests for a year-long extension, citing budget shortfalls. (As this Top 10 was going to press, Brazilian President Jair Bolsonaro reportedly announced that he had ended Operation Car Wash because there is “no more corruption in the government.” However, on the same day as President Bolsonaro’s announcement, the MPF announced that Operation Car Wash would be expanded into its 76th phase. Clearly, this is a developing story to watch. See our May 2015, May 2016, March 2017, September 2018, and October 2019 Top 10s for some of our prior discussions of Operation Car Wash.)
10. Further Developments in Brazil.
- Former Brazilian President Cleared of One Set of Accusations—and Charged with Another. On September 1, 2020, a Federal Court in Brasilia annulled one of the nine criminal corruption cases against former Brazilian president Luiz Ignacio Lula da Silva on grounds of insufficient evidence to continue the process. On September 14, 2020, however, prosecutors brought new money laundering charges against Lula. In the new charges, prosecutors allege that between December 2013 and March 2014 Lula received bribes from a Brazilian construction company disguised as donations to Instituto Lula, a non-profit foundation dedicated to international cooperation between Brazil, Africa, and other Latin American countries named after the former president, who also serves as its honorary president, in exchange for granting contracts with Petrobras.
- Brazilian and Dutch Authorities Raid Oil Services Companies. On September 24, 2020, federal prosecutors in Brazil announced that they had carried out 25 searches in Rio de Janeiro and São Paulo, and that Dutch authorities had carried out their own parallel searches, related to an alleged scheme by Norway’s Seadrill Ltd. and Malaysia’s Sapura Energy Bhd to pay bribes to secure contracts from Petrobras for the construction and charter of three pipe-laying support vessels. This is a strong indication that, at least from the operational side (see #9 above), Operation Car Wash still has plenty of steam.
 United States v. Comoretto, No. 20-mj-00125, ECF No. 2 (E.D.N.Y. Feb. 6, 2020).