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Two businessmen and two former Venezuelan officials charged in investigation related to bribery at state-owned electricity company
On June 24, two businessmen, Luis Alberto Chacin Haddad and Jesus Ramon Veroes, pleaded guilty in federal court in Miami to conspiracy to violate the FCPA. The charges relate to bribes paid to Venezuelan officials at the state-owned and state-run electricity company, Corporación Eléctrica Nacional, S.A. (Corpoelec), in an effort to obtain $60 million in contracts for their Florida-based businesses. Pursuant to their plea agreements, the businessmen will each forfeit at least $5.5 million in profits, as well as Miami-area real estate obtained with the ill-gotten gains. Sentencing is scheduled for September 4.
In addition, on June 27 the Venezuelan officials they allegedly bribed, Luis Alfredo Motta Dominguez (former minister of electrical energy in Venezuela and the head of Corpoelec) and Eustiquio Jose Lugo Gomez (former procurement director at Corpoelec), were charged by eight-count indictment in the Southern District of Florida. On the same day, the same officials were also sanctioned by OFAC. See related InfoBytes coverage here.
Federal Judge denies Ukrainian billionaire’s motion to dismiss criminal charges, and Austrian Supreme Court grants U.S. extradition request
Judge Rebecca Pallmeyer of the United States District Court for the Eastern District of Illinois denied a motion to dismiss filed by Ukrainian billionaire Dmitry Firtash, allowing several criminal charges––including one count of aiding and abetting an FCPA violation––to proceed. Shortly thereafter, the Austrian Supreme Court reportedly agreed to extradite Firtash to the United States, subject to final review by Austria’s Justice Minister. For prior coverage of Firtash’s motion to dismiss, please see here.
Firtash’s motion argued, inter alia, that he could not be liable under the FCPA as a Ukrainian citizen who does not belong to any class of foreign nationals subject to that statute. Because the Seventh Circuit had not reached the precise question that Firtash raised, Firtash cited Second Circuit precedent holding that “foreign nationals may only violate the [FCPA] outside the United States if they are agents, employees, directors, or shareholders of an American issuer or domestic concern.” United States v. Hoskins, 902 F.3d 69, 97 (2d Cir. 2018). Because Firtash is none of these, he claimed to be exempt from FCPA liability.
Judge Pallmeyer disagreed. Putting aside Hoskins, the judge analyzed generally applicable Seventh Circuit and Supreme Court jurisprudence regarding secondary liability, and concluded that a defendant can be liable for aiding and abetting or conspiring to commit a crime even if he or she would be exempt from primary liability for that crime. Judge Pallmeyer acknowledged that the presumption against extraterritorial application “arguably undermined” the Seventh Circuit precedent upon which her opinion relied, but stated that she was “unwilling to disregard clear guidance from the Seventh Circuit” on the subject of secondary liability. In addition to conflicting with Hoskins, Judge Pallmeyer’s opinion supports the broader scope of FCPA liability for foreign nationals that the DOJ has been pushing for years, and marks the beginning of a potential circuit split on the issue of secondary liability under the FCPA.
After a two-week jury trial in the United States District Court for the District of Massachusetts, the CEO of investment firm Haiti Invest, LLC and one of its directors were convicted of conspiracy to violate the FCPA and the Travel Act. Joseph Baptiste, a retired U.S. Army Colonel, was also found guilty of violating the Travel Act and conspiracy to commit money laundering. For prior coverage of the charges against Baptiste and CEO Roger Richard Boncy, please see here.
The evidence that federal prosecutors presented against Boncy and Baptiste included intercepted phone calls in which they discussed their plan to bribe Haitian officials “at all levels of government” in order to obtain governmental approval of a proposed $84 million project to develop a port in northwestern Haiti. In a recorded conversation with undercover agents posing as investors, Boncy and Baptiste allegedly solicited funds and told agents that the funds would be used to bribe the aide of a high-level elected official in Haiti. To conceal the bribes, Boncy and Baptiste allegedly said that they would funnel the agents’ funds through a U.S.-based non-profit organization that Baptiste controlled, which purported to sponsor social programs for Haitian residents.
The case against Boncy and Baptiste began with a sting operation conducted by the FBI in 2017. Boncy and Baptiste are scheduled to be sentenced by Judge Allison D. Burroughs on September 12, 2019.
On May 13, a Hawaiian businessman was sentenced to 30 months imprisonment to be followed by three years of supervised release after pleading guilty in January to a charge of conspiracy to bribe a Micronesian official in violation of the FCPA. The DOJ alleged that the businessman’s consulting company paid $440,000 in bribes to officials to obtain and keep contracts with the Micronesian government worth more than $10 million. One of the officials also pleaded guilty in April. See more previous coverage here.
On April 8, the Ninth Circuit denied a petition to rehear its February order affirming most of the jury’s award – $8 million of the original $11 million – in a landmark FCPA whistleblower-retaliation case, Wadler v. Bio-Rad Laboratories, Inc. The court denied Bio-Rad’s petition without explanation.
On February 15, Cognizant Technology Solutions Corporation, an information technology and business process outsourcing company, paid $25 million to settle SEC civil charges that it violated the FCPA. The SEC alleged that Cognizant paid $3.6 million in bribes through its construction contractor to senior government officials in India in order to obtain permits needed to build, among other things, a large office campus in Chennai. The SEC alleged that by paying the bribes, Cognizant thereby avoided millions of dollars in costs it would have otherwise incurred. To resolve the SEC’s allegations, Cognizant paid $19 million in disgorgement and a $6 million penalty.
The DOJ declined to bring criminal charges against Cognizant, citing, among other factors, the company’s voluntary self-disclosure, comprehensive investigation, full cooperation and remediation, and its preexisting compliance program. Cognizant issued a statement highlighting that the matter did not concern any of the company’s work with clients and did not affect any of the services it provides to clients.
On the same day the settlement was announced, two former Cognizant executives – the president and chief legal officer – were hit with civil and criminal charges for allegedly authorizing $2 million in bribes and directing the creation of false contractor change orders to mask payment of the bribes. The former executives are charged with violating the anti-bribery, books and records, and internal accounting controls provisions of the FCPA. Pursuant to its letter agreement with DOJ, Cognizant is required to fully cooperate in the ongoing prosecutions.
On January 11, the U.K.’s Serious Fraud Office (SFO) announced that four more individuals were sentenced in connection with a bribery scheme involving an F.H. Bertling Ltd. oil exploration project in the North Sea. Three of the individuals—one former agent of ConocoPhillips and two former F.H. Bertling directors—pleaded guilty prior to the trial. They received 6, 12, and 15 month prison sentences, although their terms are suspended for two years. The two former directors were also ordered to pay fines of £15,000 and £20,000. The fourth individual, F.H. Bertling’s former chief commercial officer, was convicted at trial. He received 9 months’ imprisonment (also suspended for two years), and was ordered to pay a £5,000 fine.
On January 8, the Treasury Department’s Office of Foreign Assets Control (OFAC) sanctioned Venezuelan individuals and companies, including billionaire news network Globovision owner Raul Gorrin Belisario and former Venezuelan National Treasurer Claudia Patricia Diaz Guillen, for their participation in a bribery scheme involving bribes to members of the Venezuelan government. According to the Treasury Department, OFAC designated or blocked seven individuals, including Diaz and Gorrin, and 23 entities, including Globovision, pursuant to Executive Order 13850, for their roles in bribing the Venezuelan Office of the National Treasury in exchange for the right to conduct illicit foreign currency exchanges in Venezuela.
As a result of the designation, all property and interests in property of the designated individuals and entities “subject to or transiting U.S. jurisdiction are blocked,” and any U.S. transactions with them are prohibited. However, two Globovision companies owned by Gorrin and his business partner will be permitted to continue to conduct U.S. business for a one-year period. This period is intended to allow the Venezuelan-based Globovision news network to continue operating while Gorrin and his business partner divest their holdings in the company.
As FCPA Scorecard previously reported, Gorrin was indicted under seal in August for conspiracy to violate the FCPA, conspiracy to commit money laundering, and nine counts of money laundering.
On December 19, a UK Court found former Alstom Power Ltd. Global Sales Director Nicholas Reynolds guilty of conspiracy to corrupt in connection with his role in bribing Lithuanian officials to win lucrative power station contracts for the French power and transportation company. Mr. Reynolds will be sentenced on December 21.
The conviction follows the guilty pleas of Alstom and two other individuals in the UK in connection with the company’s Lithuanian bribery scheme. According to the SFO, Alstom companies paid Lithuanian politicians more than €5 million (~$6.3 million in today’s USD) in bribes to secure the contracts, valued at €240 million (~$304 million in today’s USD). The SFO also has charged Alstom and former Alstom executives for alleged corruption spanning Hungary, India, Poland, and Tunisia.
In late 2014, Alstom and various subsidiaries agreed to pay a then-record $772 million fine in connection with FCPA violations spanning numerous countries. For prior FCPA Scorecard coverage of Alstom, please see here.
On December 17 and 19, press reports indicate Malaysian prosecutors filed criminal charges against a New York-based financial institution and numerous individuals, including former executives of the financial institution, in connection with their alleged roles in a multi-billion bribery and money laundering scheme involving Malaysia sovereign wealth fund 1Malaysia Development Berhad (1MDB).
Malaysian prosecutors charged the financial institution with making false and misleading statements when raising money for 1MDB. Among individuals, Tim Leissner, a former participating managing director of the financial institution, and Ng Chong Hwa (also known as Roger Ng), a former managing director, also were charged. These charges follow the U.S. government’s investigation and charges related to the same 1MDB scheme.
As detailed in prior FCPA Scorecard coverage, Leissner pleaded guilty in November to Conspiracy to Violate the FCPA and Conspiracy to Commit Money Laundering and agreed to forfeit $43.7 million. The DOJ charged NG with similar offenses and, according to press reports, is fighting extradition to the United States.
According to press reports, in response to the filing of the criminal charges in Malaysia, the financial institution stated: “Under the Malaysian legal process, the firm was not afforded an opportunity to be heard prior to the filing of these charges against certain Goldman Sachs entities, which we intend to vigorously contest. These charges do not affect our ability to conduct our current business globally.”
The DOJ has not charged or reached a resolution with the financial institution, which previously announced that it was cooperating with the DOJ’s and all regulators’ investigations. The announcement of the Malaysian charges suggests that the U.S. DOJ and Malaysian prosecutors may not be coordinating efforts.
- Jeffrey P. Naimon to provide “Fair lending update” at the Colorado Mortgage Lenders Association Operational and Compliance Forum
- Jonice Gray Tucker to discuss “Justice for all: Achieving racial equity through fair lending” at CBA Live
- Warren W. Traiger to discuss “On the horizon for CRA modernization” at CBA Live
- Jonice Gray Tucker to discuss "Fair lending" at the Mortgage Bankers Association Regulatory Compliance Conference
- Michelle L. Rogers to discuss “State law regulatory and enforcement trends” at the Mortgage Bankers Association Regulatory Compliance Conference
- Jonice Gray Tucker to discuss “Government investigations, and compliance 2021 trends” at the Corporate Counsel Women of Color Career Strategies Conference
- Max Bonici to discuss “BSA/AML trends: What to expect with the implementation of the AML Act of 2020” at the American Bar Association Banking Law Fall Meeting
- H Joshua Kotin to discuss “Modifications and exiting forbearance” at the National Association of Federal Credit Unions Regulatory Compliance Seminar
- Jonice Gray Tucker to discuss “Fintech trends” at the BIHC Network Elevating Black Excellence Regional Summit
- Jonice Gray Tucker to discuss "Consumer financial services" at the Practising Law Institute Banking Law Institute