The Department of Justice is starting to launch its FCPA enforcement profile after a brief lull in DOJ’s transition to a new administration. This enforcement lull occurred in the transition to the prior administration in 2016, and there is nothing to glean from it since it is a natural occurrence when a new Justice Department administration takes the reins of power.
Last week, we had some rumblings of FCPA enforcement with the announcement of three separate criminal cases against individuals. Each enforcement actions deserves a separate blog posting. DOJ’s criminal FCPA program continues to ramp up and mature. But for COVID-19 last year, DOJ’s criminal case numbers would have increased steadily year-over-year for the last three years.
In the first interesting criminal case, the US Attorneys Office for the Eastern District of New York (Brooklyn) unsealed an indictment charging Peter Weinzierl, 55, and Alexander Waldstein, 73, with laundering more than $170 million as part of the Odebrecht bribery scheme.
In 2016, Odebrecht, the Brazilian engineering and construction conglomerate, reached a global settlement of $2.6 billion with Brazil, the U.S. and other international law enforcement, as part of Operation Car Wash, for its conduct of a massive global bribery operation.
Weinzierl and Waldstein used their high-ranking positions in banks in Antigua and Austria to facilitate the bribery scheme and facilitate Odebrecht’s evasion of more than $100 million in tax liabilities. Both men were charged with four counts of money laundering, including one count of an overarching money laundering conspiracy.
As charged in the indictment, Weinzierl and Waldstein used fake transactions and sham financial service to move more than $170 million from Odebrecht’s books to offshore shell company accounts using an Austrian bank. Odebrecht falsely deducted the transfers as business expenses to evade large tax liabilities in Brazil.
Weinzierl was arrested in the United Kingdom and is being extradited to the United States. Waldstein has not been apprehended.
In addition, Weinzierl and Waldstein transferred millions of dollars in illicit proceeds to a brokerage account in the U.S., where they invested in corporate stocks, bonds and U.S. treasury securities. In exchange, Weinzierl and Waldstein earned million in fees.
Weinzierl and Waldstein helped Odebrecht set up offshore accounts for shell companies for “tax planning purposes.” Starting in 2010, the bankers implemented a back-to-back transaction scheme in which Odebrecht wired millions from a subsidiary to a foreign bank in accordance with a sham service agreement. After earning a substantial fee, the bankers secretly sent the remaining funds to Odebrecht shell companies in order to disguise the pass through to another entity.
Weinzierl was the CEO and Waldstein an officer of an Austrian bank, and both served as board members of an Antiguan bank. The off-the-books slush funds were used by Odebrecht to pay hundreds of millions of dollars in bribes to government officials around the globe.