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 does the U.S. Department of Justice’s (DOJ) FCPA Corporate Enforcement Policy differ from the FCPA Pilot Program that it replaced? What are the key provisions of Argentina’s new corporate anti-corruption law? Who were the first defendants to stand trial in the FIFA corruption case? The answers to these questions and more are here in our November 2017 Top Ten list.
1. DOJ Announces New FCPA Corporate Enforcement Policy. On November 29, 2017, Deputy Attorney General Rod Rosenstein announced a new FCPA Corporate Enforcement Policy (“the Policy”) that supersedes the FCPA Pilot Program announced in April 2016. In his announcement, DAG Rosenstein explained that the Policy would be incorporated into the United States Attorneys’ Manual (USAM)—the internal DOJ document that sets forth policies and guidance for federal prosecutors. In contrast, the FCPA Pilot Program had been issued as a stand-alone document by DOJ’s Criminal Division, Fraud Section. The Policy largely replicates elements of the FCPA Pilot Program—but with some key modifications. Most notably, the Policy newly provides that when a company voluntarily self-discloses, fully cooperates, and timely and appropriately remediates, all in accordance with specified standards set forth in the Policy, there is a “presumption that the company will receive a declination,” absent aggravating circumstances relating to the seriousness of the offense or the nature of the offender, including criminal recidivism. The Policy also enshrines in the USAM “declinations with disgorgements,” which was (in our view) one of the most significant changes created by the Pilot Program. For a more in-depth discussion and analysis of the Policy, please see our December 4, 2017 Client Alert.
2. SEC Announces New Head of FCPA Unit. On November 2, 2017, SEC announced that Charles E. Cain, who had been serving as Acting Chief of SEC’s FCPA Unit since April 2017, would permanently lead the unit. Prior to taking on his role as Acting Chief, Cain served as Deputy Chief since 2011. Cain co-authored the joint SEC and DOJ Resource Guide to the U.S. Foreign Corrupt Practices Act in 2013. Cain has been credited with supervising many of SEC’s most significant FCPA matters over the last several years, including the combined $965 million settlement with Telia Company AB in September 2017, the combined $795 million settlement with VimpelCom Ltd. in February 2016, and the combined $90.8 million settlement with Magyar Telecom in December 2011. While there has been much speculation regarding the direction of FCPA enforcement under the Trump administration, Cain’s appointment sends an additional signal that companies should not expect drastic changes in the near future. Steve Peikin, recently appointed Co-Director of Enforcement, made this clear in statements delivered shortly after Cain’s appointment. Peikin stated that SEC would continue its commitment to robust FCPA enforcement and its focus on individual wrongdoing.
3. Dutch Oilfield Services Company Resolves FCPA Allegations Spanning Three Continents. On November 29, 2017, DOJ announced that SBM Offshore NV and its wholly owned U.S. subsidiary, SBM Offshore USA Inc., agreed to resolve allegations that they paid more than $180 million in commissions to intermediaries with the knowledge that a portion of those commissions would be used to pay bribes to officials in Angola, Brazil, Equatorial Guinea, Iraq, and Kazakhstan, resulting in $2.8 billion in business from state-owned oil companies. The parent company entered into a three-year Deferred Prosecution Agreement (DPA), while the U.S. subsidiary pleaded guilty to a one-count criminal information, filed in the Southern District of Texas, charging it with conspiracy to violate the anti-bribery provisions of the FCPA. According to DOJ, the total penalty of $238 million reflected a 25% reduction off the bottom of the Sentencing Guidelines range; $240 million paid to Dutch authorities and additional penalties that will likely be paid to Brazilian authorities; and a determination that SBM would not be able to pay a larger fine. When SBM reached its resolution with Dutch authorities in November 2014, it announced that DOJ had declined to prosecute the company; in February 2016, however, the company announced that DOJ had reopened its investigation, a fairly unusual development that neither the company nor the Department has publicly explained.
4. Former Executives and Agents of Dutch Oilfield Services Company Charged in the United Kingdom and United States. In addition to the corporate resolution discussed above, on November 9, 2017, DOJ announced that two former SBM executives, Anthony Mace and Robert Zubiate, pleaded guilty in the Southern District of Texas to conspiracy to violate the FCPA in connection with alleged misconduct in Angola, Brazil, and Equatorial Guinea. On November 16, 2017 the UK’s Serious Fraud Office (SFO) announced that two executives of Monaco-based consulting company Unaoil, Ziad Akle and Basil Al Jarah, had been charged with conspiring to pay bribes to assist SBM Offshore NV in winning oil contracts in Iraq. According to the SFO, a third Unaoil executive, Saman Ashani, is subject to an extradition request to Monaco on related charges. On November 30, 2017, the SFO announced that it had charged two former SBM executives, Paul Bond and Stephen Whiteley, with conspiracy to make corrupt payments in Iraq. The U.S. defendants are expected to be sentenced in early 2018, while all of the UK defendants other than Ashani are scheduled to appear in the Westminster Magistrates’ Court in London on December 7, 2017.
5. DOJ Charges Two Individuals with Bribing African Officials. On November 20, 2017, DOJ unsealed a criminal complaint charging Chi Ping Patrick Ho, the former Hong Kong home secretary and head of a Hong Kong and Virginia-based NGO, and Cheikh Gadio, the former foreign minister of Senegal, with violating, and conspiring to violate, the FCPA and money laundering statutes in connection with a scheme to assist an unnamed Chinese energy conglomerate in winning business by bribing officials in Chad and Uganda. According to the allegations in the complaint, Ho, with Gadio’s help, offered $2 million in bribes to the president of Chad for help in securing oil rights from the Chadian government. According to DOJ, Ho’s Ugandan scheme was hatched in the halls of the United Nations in New York, when the country’s current foreign minister served as the president of the U.N. General Assembly and continued upon his return to Uganda. The scheme allegedly involved $500,000 in bribes paid via wires transmitted through New York, as well as gifts and promises of future benefits to Ugandan officials in exchange for assistance in obtaining business advantages for the unnamed conglomerate.
6. Executives and Agents of UK-Based Engineering Group Charged in connection with Kazakh Bribery Scheme. On November 7, 2017, DOJ announced that FCPA and FCPA-related charges had been unsealed against five individuals—three former Rolls-Royce executives and employees and two third parties—in connection with an alleged scheme to bribe a Kazakh official to win a $145 million equipment contract on a gas pipeline from Central Asia to China for the benefit of a U.S. subsidiary of Rolls-Royce. According to the announcement, the three former executives, James Finley, Keith Barnett, and Aloysius Johannes Jozef Zuurhout, and one of the third parties, Andreas Kohler, pleaded guilty under seal between June 2016 and July 2017 in the Southern District of Ohio, while the remaining defendant, Petros Contoguris, is believed to be living abroad. Indeed, of the five charged individuals, only one was a U.S. citizen, while the other four were non-U.S. citizens residing in Taiwan, the Netherlands, Austria, and Turkey. The DOJ’s decision to keep the guilty pleas under seal for over a year likely reflects covert efforts to apprehend at least some of the defendants. In January 2017, Rolls-Royce entered into an $800 million global settlement, which included a $169.9 million DPA with DOJ, to resolve bribery allegations involving more than a dozen countries.
7. World Bank Debars Two Entities for Bribery and Corruption. In November 2017, the World Bank barred two different firms from participating in World Bank-funded projects for bribery and corruption-related misconduct.
World Bank Debars Canada-Based Financial Management Software Company for Liberian Misconduct. On November 9, 2017, the World Bank announced that it had debarred FreeBalance Inc. based on allegations that the company failed to disclose the identity and payment terms of a local agent in Liberia in connection with the company’s development of financial management software for Liberia’s public finances. As part of a Negotiated Resolution Agreement (NRA), the company will be debarred for six months and then enter a 12-month probationary period during which it can participate in World Bank-financed projects so long as it does not violate the terms of the NRA. The company also agreed to enhance its integrity compliance program and fully cooperate with the World Bank.
World Bank Debars French Digital Security Firm for Bangladeshi Misconduct. On November 30, 2017, the World Bank announced that it had debarred Oberthur Technologies for 2.5 years for allegedly corrupt and collusive practices related to its development of a national ID system for the People’s Republic of Bangladesh. As part of an NRA, the company acknowledged that it had made improper payments to a subcontractor to obtain and modify bid specifications to narrow competition and ultimately secure the contract. The World Bank credited the company with extensively cooperating with the World Bank’s investigation, voluntarily acknowledging its misconduct, pursuing corrective action, conducting an internal investigation, and holding the responsible individuals accountable. The company also committed to implementing an integrity compliance program and cooperating fully with the World Bank.
8. Argentina Enacts New Anti-Bribery and Corruption Legislation. On November 8, 2017, Argentina’s legislature passed a law targeted at corporate corruption. The new legislation, which will come into effect in early 2018, provides that companies that have been found to have engaged in corrupt activities can be fined by up to five times the amount they obtained by illicit means or barred from bidding for public contracts for up to 10 years. The legislation also permits companies to sign “leniency agreements” which would lessen their punishments in exchange for providing helpful information to Argentine prosecutors. As discussed in our March 2017 Top Ten, the OECD had urged Argentina to pass the law in order to bring Argentina into compliance with the OECD Anti-Bribery Convention. President Mauricio Macri stated that the new legislation was necessary given the ongoing and wide-reaching corruption investigation into Brazilian construction company Odebrecht S.A. (detailed in our previous alerts here, here, and here). The legislation follows the arrest of two different Argentine officials on corruption charges over the last month.
9. French Authorities Announce First DPA. On November 14, 2017, France’s Public Prosecutors’ Office (PNF) announced that a Paris high court had approved the country’s first-ever deferred prosecution agreement. The DPA is the first reached by French authorities since France adopted deferred prosecution agreements as part of new anti-corruption legislation in November 2016. The legislation was motivated in part by concerns that France was not doing enough to combat domestic corporate wrongdoing. Although not an anti-bribery case, given that French companies have been at the center of some of the largest FCPA resolutions in history, this first DPA indicates a willingness by French authorities to rely on its enhanced authority that may eventually lead to corporate foreign bribery resolutions in France. (See our April 2017 and September 2017 for discussions of other countries’ interest in DPAs.)
10. FIFA Trial Begins. In November 2017, trial began in the Eastern District of New York against three defendants in the FIFA prosecution that shocked the soccer world when it was announced in May 2015. The defendants, Jose Maria Marin (former head of Brazil’s soccer association), Juan Angel Napout (former FIFA Vice President), and Manuel Burga (former head of Peru’s soccer association), are accused of accepting millions of dollars in bribes in exchange for lucrative contracts for the hosting rights of South American soccer tournaments. The trial was marked by dramatic moments, from one of the defendants being accused of witness intimidation to the reported suicide of a former Argentine soccer official after he was implicated in trial testimony as a bribe recipient. On November 16, 2017, a judge in Paraguay approved a DOJ request to extradite Nicolás Leoz, the former president of that country’s soccer association, pending a medical examination given Leoz’s advanced age and health issues. According to trial testimony, Leoz was one of three South American soccer officials who received $1 million bribes in exchange for their votes to award the 2022 World Cup to Qatar.