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Foreign Corrupt Practices Act & Anti-Corruption

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  • Micronesian official charged with money laundering conspiracy after guilty plea to bribery by Hawaiian executive

    On February 11, the Department of Justice (DOJ) unsealed conspiracy to commit money laundering charges against a Micronesian government official alleged to have taken bribes to secure engineering and project management contracts from the government of the Federated States of Micronesia (FSM). The charges follow the recent guilty plea by Frank James Lyon, a Hawaiian executive, to a charge of conspiracy to bribe the Micronesian official in violation of the FCPA. 

    According to the DOJ, Master Halbert was a government official in the FSM Department of Transportation, Communications and Infrastructure who administered FSM’s aviation programs. Between 2006 and 2016, Lyon’s Hawaii-based engineering and consulting company allegedly paid around $440,000 in bribes in the form of cash, vehicles, and entertainment to FSM officials, including Halbert, to obtain and retain contracts with the FSM government valued at nearly $8 million. The complaint unsealed on Monday contains specific examples of requests by Halbert to Lyon for cash gifts and a 2014 Chevy Silverado. According to Lyon’s guilty plea, he fulfilled Halbert’s requests and sent wire transfers and the automobile internationally for Halbert’s personal use.

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  • Former insurance executives charged with laundering bribes to Barbados Minister of Industry

    On January 28, DOJ announced charges against the former chief executive and a former senior vice president of a Barbados-based insurance company, Insurance Corporation of Barbados Limited (ICBL). The indictment alleges that the ICBL executives, Ingrid Innes and Alex Tasker, participated in a scheme to launder approximately $36,000 in bribes to the then-Minister of Industry of Barbados in exchange for his assistance in securing government contracts for ICBL. According to the indictment, the bribes were laundered through a United States bank account in the name of a dental company located in New York. The former Minister of Industry, Donville Inniss, was arrested in August 2018 and the indictment against him referenced, but did not name, his alleged co-conspirators. The superseding indictment against the three co-defendants and another still unnamed former insurance executive was unsealed on January 18, 2019. Prior Scorecard coverage of the arrest and indictment of the former Minister of Industry can be found here.

    ICBL voluntarily self-disclosed the case to DOJ and received a declination letter from DOJ for its cooperation pursuant to the FCPA Corporate Enforcement Policy. The declination letter required ICBL to disgorge $93,940.19 in profits received through the conduct at issue. The declination was based, in part, on ICBL’s termination of all executives and employees involved in the alleged misconduct and in helping DOJ identify the culpable individuals. Prior Scorecard coverage of the declination letter can be found here.

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  • Polycom reaches settlement of FCPA violations in China

    On December 26, Polycom, Inc. (Polycom or the company), a wholly-owned subsidiary of Plantronics, Inc., entered into an administrative order to settle claims by the SEC that Polycom violated the books and records and internal accounting controls provisions of the FCPA. The alleged conduct involved improper payments made through distributors and resellers of Polycom Communications Solutions (Beijing) Co., Ltd. (“Polycom China”) to Chinese government officials from 2006 through 2014 in an effort to obtain business from public sector customers.

    According to the administrative order, at the instruction of the Vice President of Polycom China, sales personnel used a sales management system outside of the U.S.-based company-approved database to parallel-track sales to public sector customers in China. The scheme involved providing discounts to distributors and resellers that were used to cover the costs of payments to Chinese government officials. These discounts were not passed on to the end customer, and the purpose of those discounts was not tracked in the company-approved database. Polycom China sales personnel were also instructed by the VP to use non-company email addresses when discussing and arranging these deals.

    Pursuant to the administrative order, Polycom will pay to the SEC approximately $10.7 million in disgorgement, $1.8 million in prejudgment interest, and a $3.8 million civil monetary penalty.

    On the same day, DOJ released a December 20, 2018 declination letter settling its investigation of the same conduct.  Pursuant to the declination letter, Polycom agreed to disgorge approximately $10.15 million to the U.S. Treasury Department and $10.15 to the U.S. Postal Inspection Service Consumer Fraud Fund.

    In settling these matters, both the SEC and DOJ cited Polycom’s identification of the misconduct, thorough internal investigation conducted by outside counsel, prompt voluntary disclosure, full cooperation, and remediation efforts. Polycom’s lauded cooperative efforts included making certain employees available for interviews, as well as producing all requested documents and translating large volumes of those documents from Mandarin to English. The remedial efforts cited included termination of eight employees and discipline of eighteen others, termination or reorganization of certain channel partner relationships, enhancement of third party oversight, and improvements to anticorruption and related trainings provided to China-based employees (certain materials of which had previously not been translated into Mandarin, the first language of many Polycom China employees).

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  • U.S.-based agriculture company discloses investigation

    On November 30, a U.S.-based agriculture company, CHS Inc., disclosed in an SEC filing that it is cooperating with an investigation being conducted by the SEC and DOJ involving payments made to Mexican customs officials. The payments were made in connection with grain shipments crossing the U.S.-Mexican border by train. CHS Inc. is a Fortune 100 company that is owned primarily by farmer and rancher cooperatives and has extensive operations in the energy sector in addition to agriculture. 

    The SEC filing states that the company voluntarily self-disclosed the potential violations and stressed the company’s full cooperation with the investigation, which includes “investigating other areas of potential interest to the government.” The DOJ has placed great emphasis on the importance of voluntary self-disclosure and cooperation in recent policy statements. See previous Scorecard coverage here. This investigation is noteworthy because while investigations in the energy sector are common, investigations in the agricultural sector are less so. The eventual resolution of this investigation may provide useful guidance for other agribusiness companies. 

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  • Buckley Sandler Special Alert: DOJ announces new policy on pursuing individuals in corporate resolutions

    U.S. Deputy Attorney General Rod Rosenstein said at a conference this morning that the U.S. Department of Justice has revised its guidelines relating to corporate resolutions with the DOJ, particularly as those guidelines relate to charging culpable individuals. The revised guidelines modify the 2015 Yates Memo, and affirmatively obligate companies seeking leniency from the DOJ to investigate and furnish information about culpable employees and agents substantially involved in wrongdoing.

    Corporations now will receive cooperation credit in criminal resolutions only if all employees substantially involved in the alleged wrongdoing are identified to the government. And in civil resolutions, corporations will receive cooperation credit only if the corporation reveals the involvement of senior management and board members in the alleged wrongdoing. The new policy highlights the DOJ’s ongoing focus on criminal and civil enforcement actions against individuals and emphasizes the importance of giving serious consideration to obtaining individual counsel very early in the process of an investigation.

    * * *

    Click here to read the full special alert.

    If you have questions about the DOJ’s new policy or other related issues, please visit our White Collar practice page or contact one of Buckley Sandler’s 15 partners in that practice.

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  • SEC settles with Texas offshore drilling company for violations of FCPA internal controls provision

    On November 19, the SEC announced a settlement with Vantage Drilling International (“Vantage”) based on the improper activities of Vantage’s predecessor, Vantage Drilling Company, in connection with the Petrobras bribery scheme. The Administrative Order found that Vantage Drilling Company had “failed to devise a system of internal accounting controls with regard to [its] transactions with [its] former outside director, largest shareholder, and only supplier of drilling assets . . . and failed to properly implement internal accounting controls related to its use of third-party marketing agents,” noting the company’s “ineffective anticorruption compliance program.” According to the Order, these failures permitted payments that “created a risk that [it] was providing or reimbursing funds that [a director] intended to use to make improper payments to [Petrobras],” a Brazilian company at the center of a massive FCPA scheme.

    The settlement with the SEC concludes Vantage’s involvement in the Petrobras investigations. According to Vantage, the company received a cooperation letter from the DOJ last year confirming Vantage’s full cooperation in the Petrobras investigation, and that the DOJ would not move forward with any actions against Vantage.

    Further coverage of the Petrobras matter is available here.

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  • Co-conspirators sentenced in Venezuelan bribery scheme involving Venezuelan TV mogul

    Two co-conspirators of billionaire news network Globovision owner Raul Gorrin Belisario were sentenced this week as part of the DOJ’s recently unsealed prosecution of a bribery scheme involving over $1 billion paid in bribes to members of the Venezuelan government. According to the DOJ, Gorrin was indicted under seal in August for conspiracy to violate the FCPA, conspiracy to commit money laundering, and nine counts of money laundering. Two co-conspirators, Florida resident and former Venezuelan National Treasurer Alejandro Andrade Cedeno, and Chicago resident and former owner of Banco Peravia Gabriel Arturo Jimenez Aray, each pleaded guilty under seal to one count of conspiracy to commit money laundering, and were sentenced in federal court earlier this week.

    According to Gorrin’s indictment, he allegedly bribed members of the Venezuelan government—including Andrade—in exchange for the right to handle the government’s foreign currency exchange transactions, and then acquired a bank in order to launder the bribe money and other illicit proceeds. To do so, Gorrin allegedly moved money from Switzerland to accounts in Florida and New York and used it to purchase luxury items such as “jets, a yacht, multiple champion horses, and numerous high-end watches.”

    In December 2017, Andrade pleaded guilty to one count of conspiracy to commit money laundering, admitting to taking bribes in exchange for helping his co-conspirators—including Gorrin—by choosing them to conduct currency exchanges at favorable rates to the Venezuelan government. As part of his plea, Andrade agreed to cooperate and pay a forfeiture money judgment of $1 billion through the forfeiture of “real estate, vehicles, horses, watches, aircraft, and bank accounts.” On November 27, 2018, U.S. Southern District of Florida Judge Robin L. Rosenberg sentenced Andrade to 10 years in prison, the maximum under his plea deal.

    In March 2018, Chicago resident and former owner of Banco Peravia Gabriel Arturo Jimenez Aray took a similar plea deal, pleading guilty to one count of conspiracy to commit money laundering, admitting to helping Gorrin and others acquire and then launder money through Banco Peravia.  On November 29, 2018, Jimenez was sentenced to 3 years in prison.

    The Miami Herald has also reported that Gorrin’s personal banker is Matthias Krull, formerly of Julius Baer Panama, who was sentenced last month for his role in another money laundering scheme involving Venezuela’s Petroleos de Venezuela S.A. (PDVSA). Coverage of the PDVSA prosecutions is available here.

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  • 9th Circuit hears oral arguments on overturning FCPA whistleblower retaliation award

    On November 14, 2018, a three judge panel for the United States Court of Appeals for the Ninth Circuit heard oral arguments in Sanford Wadler v. Bio-Rad Laboratories, Inc., et al. Bio-Rad, a life science research and diagnostics company, is hoping to overturn a February 2017 jury verdict ordering the company to pay its former General Counsel and Secretary, Sanford Wadler, $11 million in punitive and compensatory damages. Wadler’s complaint alleged that the company had fired him for being an FCPA whistleblower. As detailed in a previous FCPA Scorecard post, Bio-Rad paid $55 million in November 2014 to settle DOJ and SEC allegations that the company violated the FCPA in Russia, Thailand, and Vietnam. Wadler’s report to the Audit Committee had involved separate allegations that the company violated the FCPA in China, allegations that did not result in additional penalties against Bio-Rad.

    Bio-Rad appealed the Wadler award on the grounds that the jury was erroneously instructed that the SEC’s rules or regulations forbid bribery of a foreign official; that the company’s alleged FCPA violations were the result of Wadler’s lack of due diligence; that the trial court wrongly excluded certain impeachment testimony and evidence related to the timing of Wadler’s pursuit and hiring of a whistleblower attorney; and that Wadler did not qualify as a “whistleblower” under Dodd-Frank in light of his reporting only internally and not to the SEC (pursuant to the U.S. Supreme Court’s decision in Digital Realty Trust, Inc. v. Somers, No. 10-1276, 583 U.S. ___ (2018)). During the argument, one member of the circuit panel reportedly expressed doubt concerning Bio-Rad’s jury instruction argument, and another told counsel for Bio-Rad, “I don’t see how this can be reversed on the theory you’re offering.”

    For prior coverage of the Bio-Rad matter, please see here and here.

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  • U.S. financial institution acknowledges investigations related to Malaysian development fund scheme

    On November 2, a New York-based financial institution disclosed in its Form 10-Q filing that it had received subpoenas and requests for documents and information from multiple government agencies as part of investigations relating to matters involving 1Malaysia Development Berhad (1MDB). The filing acknowledged the indictments and guilty plea of Tim Leissner, a former participating managing director of the financial institution, and Ng Chong Hwa (also known as Roger Ng), a former managing director, which indicated that Leissner and Ng “knowingly and willfully circumvented” the financial institution’s internal accounting controls.  The filing further stated that the financial institution is cooperating with the DOJ and other investigations relating to 1MDB.

    For prior coverage of the 1MDB scheme, please see here and here.

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  • U.S. announces charges and guilty plea stemming from Malaysian development fund scheme

    The DOJ unsealed two indictments and a guilty plea related to the sprawling 1Malaysia Development Berhad (1MDB) fraud on November 1 in the Eastern District of New York. Malaysian financier Low Taek Jho (also known as Jho Low) and former banker Ng Chong Hwa (also known as Roger Ng) were charged with conspiring to launder billions of dollars embezzled from 1MDB, Malaysia’s investment development fund, and conspiracy to violate the anti-bribery provisions of the FCPA. Ng was also charged with conspiring to violate the FCPA by circumventing the internal accounting controls of a U.S. financial institution, which underwrote $6 billion in bonds issued by 1MDB. Ng was a managing director at the bank. Tim Leissner, another former banker at the same financial institution, pleaded guilty to the same charges. Leissner has been ordered to forfeit $43.7 million.

    Low, Ng, Leissner, and others allegedly conspired to bribe Malaysian and Abu Dhabi officials to obtain business for the financial institution, including the 1MDB bond deals. They also allegedly conspired to launder the proceeds through purchasing luxury New York real estate, artwork, and financing major Hollywood films, such as The Wolf of Wall Street.

    For prior coverage of the 1MDB scheme, please see here.

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