[co-author: Margot Benedict]
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 Europe’s new data privacy law affect anti-corruption efforts? What impact will the new “Piling On” policy of the U.S. Department of Justice (DOJ) have on foreign bribery resolutions? How did a major foreign bribery investigation contribute to the electoral defeat of Malaysia’s now-former Prime Minister? The answers to these questions and more are here in our May 2018 Top Ten list.
1. GDPR Comes Into Effect. On May 25, 2018, the European Union’s new data privacy regime, known as the General Data Protection Regulation or GDPR, came into effect. The GDPR imposes far-reaching obligations on companies that collect, use, or process personal information in the European Union. Although not an anti-corruption law, the GDPR has the potential to affect the way companies conduct anti-corruption compliance (such as third party due diligence), undertake internal investigations, and interact with government enforcement authorities. With possible penalties of up to €20 million or 4% of global annual revenue for non-compliance, companies cannot afford to turn a blind eye to the GDPR. At Morrison & Foerster, our FCPA and Anti-Corruption Group works closely with our Privacy and Data Security Group to ensure that compliance programs and internal investigations address relevant data privacy concerns. For more information on what your company should be doing to remain compliant and for updates as the GDPR is locally implemented in EU member states, visit MoFo’s GDPR Readiness Center.
2. DOJ Announces New “Piling On” Policy. On May 9, 2018, Deputy Attorney General Rod Rosenstein announced a new policy instructing DOJ components to coordinate with one another and with other enforcement agencies in imposing multiple penalties on a company for the same conduct. The new “Piling On” policy has four parts: (1) it reaffirms that DOJ cannot use the threat of criminal enforcement to persuade a company to pay a larger settlement in a civil case; (2) it directs DOJ components to coordinate with one another, and to achieve an overall equitable result, including by crediting and apportionment of financial fines, forfeitures, and penalties; (3) it encourages DOJ components to coordinate with other federal, state, local, or foreign enforcement authorities seeking to resolve a case with a company for the same misconduct; and (4) it sets forth factors that DOJ may evaluate in determining whether multiple penalties serve the interests of justice in a particular case, such as the egregiousness of the wrongdoing, statutory mandates regarding penalties, the risk of delay in finalizing a resolution, and the adequacy and timeliness of a company’s disclosures and cooperation with DOJ. DOJ’s FCPA Unit has effectively been pursuing a similar policy for many years—for example, in November 2017, DOJ announced that it had credited money paid to Singapore and to be paid to Brazil as part of its FCPA resolution with SBM Offshore NV—but the new policy is significant in that it has been incorporated into the United States Attorney’s Manual and applies to all DOJ components.
3. Switzerland-based Drilling Company Discloses DOJ and SEC Declinations. In a May 1, 2018 securities filing, Transocean Ltd. disclosed that DOJ and SEC had informed the company that they had closed their inquiry “into statements made by a former employee of Petroleo Brasilerio S.A. (“Petrobras”) related to the award . . . of a drilling services contract in Brazil.” According to reports, former Petrobras official Eduardo Musa told Brazilian prosecutors conducting Operation Lava Jato (“Car Wash”) that a person claiming to be a commercial representative of the company had given him money after it had been awarded a contract to operate a Petrobras drilling rig.
4. Three Foreign Nationals Charged in Connection with Gas Pipeline Bribery Scheme. On May 24, 2018, DOJ announced that two foreign nationals—Azat Martirossian, the former Armenian ambassador to China, and Vitaly Leshkov, a Russian citizen—had been charged in the Southern District of Ohio with one count of conspiracy to launder money and 10 counts of money laundering in connection with an alleged scheme to assist a U.S.-based subsidiary of Rolls Royce plc in securing a contract to supply equipment and services to power a gas pipeline from Kazakhstan to China. Petros Contuguris, a Greek citizen who was previously charged in October 2017, was also included in the charges. In November 2017, DOJ announced the original charges against Contuguris and four other individuals who had pleaded guilty in connection with the same alleged scheme. According to the new charges, Rolls Royce made consulting payments to Contuguris, who then passed on a portion of those payments to Martirossian and Leshkov, who were employees of an international engineering consulting firm, knowing that some of the money would be used to bribe a Kazakh official to help win pipeline-related contracts. Martirossian, Leshkov, and Contuguris are all believed to be living outside the United States, meaning no trial date is imminent. Rolls Royce entered into a corporate FCPA resolution in January 2017.
5. Honduran National Charged with Laundering Honduran Kleptocracy Proceeds. On May 1, 2018, DOJ announced that Carlos Alberto Zelaya Rojas had been charged in the Eastern District of Louisiana with money laundering and various obstruction of justice violations. According to the indictment, Carlos Zelaya conspired with his brother, the former Executive Director of the Honduran Institute of Social Security, to launder over $1.3 million in bribe payments from two Honduran businessmen. Zelaya also allegedly used his brother’s high-ranking official position to profit from lucrative Honduran government contracts. The illicit funds were allegedly laundered into the New Orleans area through international wire transfers and used to purchase real estate. The indictment further alleges that Zelaya illegally spent rental income subject to a preservation order and lied to a federal judge about the rental income. The charges in this case were brought as part of DOJ’s Kleptocracy Initiative.
6. Chinese Billionaire Sentenced to Four Years’ Imprisonment in United Nations Bribery Case. On May 11, 2018, DOJ announced that Chinese billionaire Ng Lap Seng had been sentenced in the Southern District of New York to four years’ imprisonment following his July 2017 trial conviction on charges related to allegations that he had participated in a scheme to bribe two former UN ambassadors to win UN support to build a conference center in Macau. In addition to his four-year prison term, Ng Lap Seng was ordered to pay a fine of $1 million, forfeit $1.5 million, and make restitution to the United Nations for its legal fees.
7. UK Serious Fraud Office Brings Additional Charges Against Individuals in Iraq Bribery Investigation. On May 22, 2018, the UK Serious Fraud Office (SFO) announced that it had brought conspiracy charges against Basil Al Jarah and Ziad Akle for their alleged role in making corrupt payments to secure the award of a $733 million contract to Leighton Contractors Singapore PTE Ltd. for a project to build two oil pipelines in southern Iraq. In November 2017, the SFO announced that it had charged Al Jarah, Akle and two former SBM executives, Paul Bond and Stephen Whiteley, with conspiring to pay bribes to assist SBM Offshore NV in winning oil contracts in Iraq. The SFO lost its bid to secure the extradition from Monaco of a fifth individual, Saman Ashani, earlier this year. Al Jarah, Akle, and Ashani were associated with Unaoil, a Monaco-based consulting company that has been under investigation by the SFO since March 2016.
8. UK Parliament Questions Presence and Implications of Russian Kleptocracy Proceeds in London. On May 21, 2018, the UK Parliament Foreign Affairs Committee issued a report entitled “Moscow’s Gold: Russian Corruption in the U.K.” that argued that the proceeds of “Kremlin-connected corruption” were being hidden in London and had “clear implications for our national security.” According to the report, London is a “‘top destination’ for Russian oligarchs with links to the Kremlin to launder proceeds of corruption and to hide their assets.” The report then argues that “[t]here is a direct relationship between the oligarch’s wealth and the ability of [Russian] President [Vladimir] Putin to execute his aggressive foreign policy and domestic agenda,” which the report found to be a threat to UK national security. The Committee called on the government to expend more resources aimed at “ending the flow of dirty money into the UK,” including by allocating sufficient resources to law enforcement, improving mechanisms for information sharing, and assisting Overseas Territories and Crown Dependencies in increasing transparency in their beneficial ownership registries. The Committee further urged the government to increase sanctions on more Kremlin-connected individuals and to work with the European Union, United States, and G7 to tighten loopholes in the sanction regime that allow Russia to issue new sovereign debt with the assistance of sanctioned entities. While it is not clear that the government will act on any of these suggestions, they could have important impacts on companies doing business related to the UK.
9. Irish Legislature Passes Comprehensive New Anti-Corruption Legislation. On May 30, 2018, the Irish Minister for Justice and Equality, Charlie Flanagan, announced that the Criminal Justice (Corruption Offenses) Bill 2017 had been passed by the Irish legislature, known as the Oierachtas. Minister Flanagan described the bill as “a complete modernisation of our anti-corruption laws.” Among other things, the bill creates a corporate liability offense in which a company may be found guilty of an offense if anyone acting on its behalf is found guilty of a corruption offense and a new offense of making payments to a third party knowing that the payment will be used for a bribe. The bill also creates a “reasonable procedures” defense to corporate liability. The bill was intended to address recommendations made by several international organizations, including the Organisation for Economic Co-operation and Development (OECD).
10. Sovereign Wealth Fund Bribery Scandal Contributes to Electoral Defeat of Malaysian Prime Minister. On May 10, 2018, Najib Razak, who had served as Malaysia’s Prime Minister since 2009, was defeated in a national election by Mahathir Mohamad. Mahathir, a former ally of Najib, previously served as prime minister from 1981 to 2003. Observers noted that the long-running corruption investigation involving Malaysian sovereign wealth fund 1Malaysia Development Berhad (1MDB) was a major issue during the election and contributed heavily to Najib’s defeat. Najib, who established 1MDB in 2009 and previously served as chairman of the fund’s advisory board, is accused of siphoning off approximately $700 million from the fund. Several countries, including the United States, Switzerland, and Singapore, have launched money laundering investigations into 1MDB. (See our July 2016, August 2016, June 2017, and December 2017 Top Tens for more on 1MDB.) Immediately following his victory, Mahathir vowed that his administration would “get most of the 1MDB money back.” On May 17, 2018, a new committee was established to look into 1MDB and Malaysian police searched a number of locations linked to Najib. On May 22, 2018, Najib was questioned by the Malaysian Anti-Corruption Commission (MACC) regarding 1MDB. The multi-national investigations into 1MDB are expected to continue for some time.