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DOJ unseals charges against former Venezuelan government officials for money laundering and FCPA violations in Petroleos scheme
On February 12, the DOJ unsealed charges against five former Venezuelan government officials for their involvement in a money laundering scheme at Venezuela’s state-owned energy company Petroleos de Venezuela (Petroleos). The five defendants—Luis Carlos De Leon Perez (De Leon), Nervis Gerardo Villalobos Cardenas (Villalobos), Cesar David Rincon Godoy (Cesar Rincon), Alejandro Isturiz-Chiesa, and Rafael Ernesto Reiter Munozare (Reiter)—are each charged with conspiracy to commit money laundering. De Leon and Villalobos are also charged with conspiracy to violate the FCPA.
De Leon, Villalobos, Cesar Rincon, and Reiter were arrested in Spain in October 2017 on arrest warrants based on an indictment filed in the Southern District of Texas last August. Cesar Rincon has been extradited from Spain, while the others are pending extradition.
The indictment alleges that the five defendants possessed significant influence within Petroleos, which permitted them to solicit PDVSA vendors for “bribes and kickbacks in exchange for providing assistance to those vendors in connection with their PDVSA business.” The Petroleos vendors included residents of the U.S. and vendors who owned U.S.-based businesses. According to the indictment, two Petroleos vendors, Roberto Enrique Rincon Fernandez and Jose Shiera-Bastidas, transferred more than $27 million to accounts in Switzerland that were connected to De Leon and Villalobos. Rincon and Shiera previously pleaded guilty in the Southern District of Texas to FCPA charges related to the bribery of Petroleos officials.
The charges are part of an ongoing investigation by the DOJ and ICE-HSI into bribery at Petroleos, which has resulted in charges against fifteen individuals, ten of whom have pleaded guilty. Previous FCPA Scorecard coverage of the Petroleos investigation can be found here.
On January 3, 2018, Petrobras announced that it has agreed to pay $2.95 billion to resolve the securities class action pending in the U.S. District Court for the Southern District of New York regarding the company’s well-known corruption scandal in Brazil. The class action claimed that investors were harmed by alleged corruption when contractors overcharged Petrobras and kicked back some of the overcharges through bribes to Petrobras officials. Under the proposed settlement, Petrobras has agreed to pay the funds in three installments. The agreement does not constitute any admission of wrongdoing or misconduct by Petrobras and Petrobras claims that this reflects its status as a victim of the acts uncovered in Operation Car Wash, as the corruption investigation in Brazil is known. The settlement agreement is still subject to approval by the District Court.
Past ScoreCard coverage related to the Petrobras corruption allegations and investigation can be found here.
Florida Energy Company Owner Pleads Guilty to Conspiracy to Violate the FCPA in Venezuelan Bribery Scheme
On October 11, the DOJ announced that Fernando Ardila Rued – a co-owner of several Florida-based energy companies – pleaded guilty to FCPA charges that he conspired to bribe foreign officials in exchange for obtaining contracts from Venezuela’s state-owned energy company, Petroleos de Venezuela S.A. (PDVSA). In his plea, Ardila admitted to conspiring with two other individuals – Abraham Jose Shiera Bastidas and Roberto Enrique Rincon Fernandez – from 2008 through 2014 to bribe PDVSA purchasing analysts through cash payments and other entertainment in order to win contracts for Shiera and Rincon’s companies. Ardila is the tenth individual who has pleaded guilty in connection with the PDVSA scheme.
This investigation has been a collaboration between the DOJ, ICE-HSI, and IRS-Criminal Investigation Division. Previous FCPA Scorecard coverage of the PDVSA investigation can be found here.
On June 15, the U.S. Attorney’s Office for the Eastern District of New York announced that Jorge Luis Arzuaga, a citizen of Argentina and a former managing director of the Swiss Bank Julius Baer, pleaded guilty to money laundering conspiracy charges. His guilty plea came in connection with allegations that he facilitated the payment of more than $25 million in bribes to soccer officials by opening and managing bank accounts for those officials. In exchange for his assistance in facilitating these bribes, Arzuaga received over $1 million in bonus payments from other co-conspirators, an amount he agreed to forfeit in connection with his plea.
The guilty plea came as part of the U.S. government’s investigation into corruption in international soccer which has been ongoing since May 2015. Previous FCPA Scorecard coverage of the FIFA investigation can be found here.
Bloomberg reports that Wal-Mart is nearing a resolution of a five-year old joint inquiry by the DOJ and SEC. Citing an unnamed source familiar with the matter, Bloomberg reports that the company is preparing to pay $300 million to settle allegations that company employees paid bribes in Mexico, China, and India. The same source reported that the resolution will also include at least one guilty plea by a Wal-Mart subsidiary, a non-prosecution agreement for the parent company, and a monitorship.
In March of 2015, a federal district court in Arkansas dismissed with prejudice a consolidated shareholder derivative suit accusing Wal-Mart Stores Inc.’s (Wal-Mart) board of directors of concealing Mexican bribery claims from investors. The lawsuit was filed after a 2012 article by the New York Times reported that top officials at Wal-Mart’s Mexican subsidiary oversaw millions of dollars in bribes in connection with the company’s expansion in Mexico. See previous Scorecard coverage here. The same article is believed to have touched off the DOJ’s and SEC’s inquiry. If true, a $300 million resolution would not be near the top end of FCPA resolutions.
Less than a month ago, as previously reported on FCPA Scorecard, Rolls Royce, a UK-based manufacturer and global distributor for the civil aerospace, defense aerospace, marine, and energy sectors, entered into deferred prosecution agreements with the DOJ and UK SFO to resolve allegations that the company conspired to violate anti-bribery laws around the world. Now, Reuters reports that the company’s CEO has been questioned by the SFO regarding bribery allegations. According to the article, the SFO refused to comment on the report, citing concerns about an ongoing investigation.
Both the DOJ and SFO have repeatedly stated that they intend to pursue bribery cases against individuals. But there is so far no indication that the DOJ is also investigating the Rolls Royce CEO. Although DOJ could pursue such an investigation in the future, the agency may also defer to the SFO to handle the matter.
On February 8th, Tamas Morvai, a former executive of the Hungarian telecommunications company, Magyar Telekom, settled a 2011 civil complaint filed by the SEC. The trial of the remaining co-defendants is scheduled for May 8. As part of the settlement, Morvai agreed to pay a $60,000 civil penalty and did not admit or deny the SEC’s allegations. Morvai also admitted that U.S. courts had jurisdiction over the case. The issue of jurisdiction had been contested; in 2013, the court denied the defendants’ motion to dismiss for lack of personal jurisdiction.
The SEC’s complaint alleged that Morvai, along with two other co-defendants, authorized bribes to Macedonian government officials and others. In 2014, the SEC dropped allegations regarding payments to government officials in Montenegro, substantially narrowing the allegations in the case. Magyar Telekom and its parent, Deutsche Telekom AG, settled allegations regarding payments to government officials in Macedonia and Montenegro with the SEC and DOJ in 2011. Prior Scorecard coverage of the Magyar Telekom investigation can be found here.
This outcome of this lengthy case illustrates that individual defendants can still achieve relatively favorable outcomes when they choose to litigate FCPA cases, even after the corporate defendants have reached a resolution.
Federal Court Releases Transcript of Wire Recording Between Former PetroTiger CEO and General Counsel
On January 12, the U.S. District Court for the District of New Jersey released the transcript of a December 2012 wire recording between the former CEO of PetroTiger and the companys general counsel. In rejecting the former CEOs argument that the recording was subject to the attorney-client privilege, the court ruled the recording did not indicate he was receiving or actively seeking legal counsel from his attorney. The former CEO was indicted in May 2014 on charges of violating the FCPA and conspiring to violate the FCPA, as well as wire fraud and money laundering charges. The former CEO, co-CEO, and general counsel allegedly conspired to secure a $39 million oil services contract by making illicit payments of approximately $335,000 to an official at Colombias national oil company which had ultimate authority to approve the contract. They also allegedly defrauded PetroTiger by taking kickbacks in connection with the acquisition of another company by PetroTiger. The former general counsel pleaded guilty in November 2013 to one count of conspiracy to violate the FCPA and commit wire fraud. The former co-CEO also pleaded guilty to the same charges in February 2014.
On December 22, 2014, Alstom S.A. (Alstom), a French power and transportation company, and various subsidiaries pleaded guilty to a range of FCPA violations and agreed to pay a $772 million criminal fine, the largest on record for an FCPA case. According to DOJ officials, the bribery scheme "spanned many years, occurred in countries around the globe and in several business lines." The size of the fine was also no doubt influenced by DOJ's perception that Alstom was insufficiently cooperative, at least until several of its executives were indicted.
On December 29, 2014, the U.S. District Court for the District of Connecticut denied a motion to dismiss the indictment brought by Lawrence Hoskins, a former employee of Alstom S.A., the French power and transportation company that recently pleaded guilty to a massive scheme to violate the FCPA and agreed to a record $772 million criminal fine. Hoskins was charged in connection with activities involving a Connecticut-based Alstom subsidiary, Alstom Power, Inc. Alstom Power entered into a Deferred Prosecution Agreement as part of the broader Alstom settlement. Hoskins offered several arguments to dismiss the indictment, including that he had left Alstom (and therefore withdrawn from any conspiracy) outside the statute of limitations, that he was not actually an agent of Alstom Power and that the FCPA cannot be applied to purely extraterritorial conduct. With regard to the withdrawal claim, the court noted that the defendant bears the burden of proving some type of affirmative act of disavowal, not just a mere cessation of activity. Because the indictment did not contain facts establishing the defense and the government had not made a full proffer of its evidence, the court held that it could not determine pretrial whether the defendant had in fact withdrawn from the conspiracy. The court also held that a trial was required to resolve Hoskins's claim that he was not an agent of Alstom Power, noting that "the existence of an agency relationship is a highly factual inquiry" dependent on a number of factors. Lastly, while Hoskins claimed that the FCPA could not apply to him because he engaged in no conduct in the United States, the indictment alleged "that he used domestic wire transfers to promote the conspiracy."
- Sherry-Maria Safchuk to speak on the "California Consumer Privacy Act (CCPA) Workshop" panel at the California Mortgage Banker's 2019 Legal Issues & Regulatory Compliance Conference
- Jon David D. Langlois to discuss "Legal and operational considerations" at the Mortgage Bankers Association's Whole Loan Trading Workshop
- Daniel P. Stipano to discuss “Connecting the dots on your CDD program” at the ABA/ABA Financial Crimes Enforcement Conference
- Daniel P. Stipano to discuss “Beneficial Ownership: You have questions – We have quick answers” at the ABA/ABA Financial Crimes Enforcement Conference
- Daniel P. Stipano to discuss "Risk management in enforcement actions: Managing risk or micromanaging it" at an American Bar Association webinar
- Kari K. Hall and Christopher M. Walczyszyn to speak on the "Understanding updates to Regulation CC to ensure effective check processing" at a National Association of Federal Credit Unions webinar