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FIFA Investigation Expands in Scope; Former FIFA VP Extradited to United States
On September 14, U.S. Attorney General Loretta Lynch announced that the DOJ is expanding its FIFA investigation to pursue additional charges against individuals and companies. AG Lynch made these comments at a press conference in Zurich with Switzerlands Attorney General, Michael Lauber. The DOJ has been working closely with Swiss officials in its investigation, and has charged 14 FIFA officials with racketeering, wire fraud, and money laundering. Additionally, on September 17, the Swiss Federal Office of Justice approved the extradition of Eugenio Figueredo, a former vice president of the South American Football Confederation and former vice president of FIFA, to the United States. Figueredo was one of seven defendants fighting extradition from Switzerland. In July, Jeffrey Webb, a former vice president of FIFA, agreed to be extradited to the United States, but the remaining five defendants are awaiting decisions on extradition. Previous FCPA Scorecard coverage of this investigation can be found here.
DOJ Unveils New Policy on Individual Liability in White-Collar Prosecutions
On September 9, the Department of Justice (DOJ), issued a policy memorandum concerning DOJ's goal of holding individuals accountable for corporate fraud or other misconduct. While some of the guidelines set forth in the memorandum are statements of practices already being followed by DOJ, or by specific U.S. Attorney's Offices, some of the measures are new and reflect an enhanced focus on DOJ's goal of holding individuals criminally or civilly liable for corporate wrongdoing. The memo sets forth "six key steps" to accomplish this goal and further DOJ's underlying policies of deterring future illegal activity, incentivizing change in corporate behavior, holding proper parties responsible for their actions, and promoting public confidence in the justice system. First, the memo provides that, to be eligible to receive any credit for cooperating with the government in a civil or criminal investigation, a company must completely disclose to DOJ all relevant facts about individual misconduct, regardless of the individual's position, status or seniority at the company. If a company provides incomplete information about individual employees' misconduct, then the company's cooperation will not be considered a mitigating factor in a criminal investigation and will not support, in the case of a prosecution, a cooperation-related reduction at sentencing. Likewise, where the company is not completely forthcoming about individual wrongdoing in a civil investigation, DOJ will not consider the company's cooperation in negotiating a settlement agreement. Second, the memo provides that both criminal and civil investigations should focus on individuals from the outset of the investigation, in order to discern the full extent of alleged misconduct, increase the likelihood of cooperation by individuals with knowledge of the misconduct, and maximize the chances that resolution of the investigation will include civil or criminal charges against both the company and culpable individuals. Third, the memo emphasizes that DOJ criminal and civil attorneys should be in routine communication with one another, so that the DOJ can consider the full range of potential remedies to address alleged misconduct by individuals. Fourth, the memo provides that, absent "extraordinary circumstances," no corporate resolution will provide protection for criminal or civil liability for any individuals. Fifth, the memo states that DOJ attorneys should not resolve civil or criminal investigations of a corporation without a "clear plan" to resolve related individual cases. In addition, if a decision is made not to prosecute or proceed civilly against individuals who committed the misconduct, DOJ attorneys must memorialize and submit for approval the reasons for that decision. Finally, the memo provides that civil prosecutors should consistently focus on individuals as well as the company, and evaluate the decision whether to sue an individual based on considerations beyond the individual's ability to pay. The memo notes that, while DOJ attorneys may validly consider an individual corporate wrongdoer's ability to satisfy a judgment in determining whether to pursue an action against that person, DOJ attorneys also should consider other goals and concerns in making this determination, including such things as the seriousness of a person's misconduct, the person's past history, the ability to obtain and sustain a judgment, and the long-term deterrent effects of holding an individual accountable.
Two Additional Former PetroTiger Employees Sentenced Following FCPA Conspiracy Guilty Pleas
On September 10, Gregory Weisman, former general counsel of oil and gas services company PetroTiger, and Knut Hammarskjold, PetroTiger's co-founder, were each sentenced to two years probation stemming from their prior guilty pleas to conspiring to violate the FCPA and commit wire fraud in connection with a bribe paid to an employee of Colombia's state-run oil company in order to win a $45 million oil-services contract. Both Mr. Weisman and Hammarskjold were ordered to pay restitution as well as fines of $30,000 and $15,000, respectively. Mr. Weisman's and Mr. Hammarskjold's sentencing occurred almost three months after the third PetroTiger co-conspirator, former CEO Joseph Sigelman, received a three-year probation sentence in connection with the same bribes. Mr. Weisman had been the key witness against Mr. Sigelman at Mr. Sigelman's June 2015 trial, but the trial abruptly ended after Mr. Sigelman entered a plea deal.
The DOJ announced the plea after Mr. Weisman informed the court that he gave false testimony regarding the terms of his cooperation agreement. At Mr. Weisman's sentencing, the District Judge referred to the abrupt turn of events at Mr. Sigelman's trial as "the elephant in the room" but noted that misstatements by Mr. Weisman were "peripheral" to the charged offenses.
Former SAP Executive Pleads Guilty to Paying "Necessary" Bribes
On August 12, the DOJ and SEC announced joint enforcement actions against software giant SAP International's former head of Latin American sales, Vicente Garcia. Garcia pleaded guilty to conspiracy to violate the FCPA and will be sentenced on December 16, 2015 in the Northern District of California. The DOJ alleges that SAP paid bribes to Panamanian officials to secure software license sales in late 2009, using sham contracts and fake invoices. Garcia "admitted that he believed paying such bribes was necessary" to secure the contracts.
The SEC simultaneously issued an administrative cease and desist order against Garcia describing a scheme by which Garcia, in violation of SAP's internal controls, gave discounts to a local business partner to generate excess earnings, which were used to create the slush fund used to pay at least $145,000 in bribes to secure approximately $3.7 million in sales. Garcia and others also arranged to receive kickbacks from the sales. Garcia agreed to pay disgorgement of the kickbacks he received plus prejudgment interest, totaling $92,395.
Orthofix Deferred Prosecution Agreement Extended for Two Months
In a recently-filed status report, the DOJ and medical device manufacturer Orthofix revealed that the company's Deferred Prosecution Agreement (DPA) will be extended by two months. The DPA was due to expire on July 17, 2015, but the status report states that Orthofix agreed to the extension in June to give DOJ "additional time to (1) evaluate Orthofixs compliance with the internal controls and compliance undertakings in the DPA and (2) further investigate potentially improper conduct the company disclosed during the term of the DPA." The report continued that DOJ intended to complete its investigation in August and inform Orthofix "of its proposed course of action shortly thereafter." Orthofix entered into the DPA on July 10, 2012 to resolve allegations that a Mexico-based subsidiary paid bribes to employees of Mexico's government-operated health system (see prior FCPA scorecard coverage). Earlier this year, another medical device manufacturer, Biomet, announced that its DPA would be extended for one year after it disclosed additional potential FCPA violations to the DOJ and SEC.
Mead Johnson Nutrition Settles SEC FCPA Charges for $12.03 Million
On July 28, Mead Johnson Nutrition Co. ("Mead"), an infant formula maker, agreed to pay $12.03 million to settle civil FCPA charges with the SEC. The SEC alleged that a majority-owned subsidiary in China used discounts given to third-party distributors to make over $2 million in bribes from 2008 to 2013 to healthcare professionals at state-owned hospitals, to get them to push the use of Mead's products to new mothers, reaping profits of over $7 million. The SEC also alleged that the subsidiary's books and records were false as a result of the improper payments, and were then consolidated into the parent company's books and records; Mead's internal controls were also alleged to be deficient. Mead did not admit or deny liability. Of note, the settlement came through the SEC's administrative process, continuing the trend at the SEC of sending cases to its internal decision-makers instead of to a federal court. The alleged facts also highlight the danger of directing the activities of third-party distributors (here, related to the use of discounts provided to them).
SEC Opens FIFA-Related Investigations
Although not yet confirmed by the SEC, media reports suggest that the SEC has opened several investigations of publicly traded companies who contracted with FIFA. Indictments in the FIFA cases have alleged that certain companies paid kickbacks to officials of FIFA and related organizations in order to win marketing and apparel contracts. The specific companies targeted in the SECs new probe have not yet been named. Without the apparent involvement of a foreign official in the FIFA cases, presumably the SEC will be focusing on the books and records and internal controls provisions of the FCPA, along with other potential violations. Previous FCPA Scorecard coverage of this investigation can be found here.
FIFA Investigation Updates: United States Requests Extradition of FIFA Officials
On July 1, the United States formally requested the extradition of seven FIFA officials associated with DOJ's ongoing corruption investigation. These extradition requests were submitted to Switzerland's Federal Office of Justice ("FOJ") and were based on allegations of criminal activity conducted in the United States. These seven officials were formally indicted by the DOJ on May 27. With the formal extradition requests submitted, the Zurich Cantonal Police, acting for the FOJ, will oversee hearings on the extradition requests. According to Swiss officials, the FOJ will rule on the extradition requests within a few weeks. Once the FOJ rules on the requests, the ruling may be challenged before the Federal Criminal Court and ultimately the Federal Supreme Court, a process that could take months. Despite the potential delays, Swiss officials have stated that the officials will not be granted bail because they are considered flight risks. Previous FCPA Scorecard coverage of this investigation can be found here and here.
SEC Declines to Pursue FCPA Enforcement Action Against Gold Fields
On June 22, Gold Fields Ltd., a South African mining company, announced that the SEC had concluded its investigation related to a mining license in South Africa and would not recommend that the SEC pursue an enforcement action against the company. According to Gold Fields, the investigation had been related to a 2010 Black Economic Empowerment (BEE) transaction associated with the granting of a mining license for the company's South Deep operation — one of the largest gold deposits in the world. The BEE is a program launched by the South African government to give certain historically disadvantaged racial groups special economic privileges, including increased ownership opportunities. Under South African law, mining companies must sell or cede at least 26% of their operations to non-white citizens. The investigation apparently centered on a $210 million BEE transaction involving the transfer of a roughly 10% stake in South Deep, a gold mine located near Johannesburg that is owned and operated by Gold Fields, to a black-owned group. In September 2013, Gold Fields had revealed that it was being investigated by the SEC following news reports that the company had bribed an African National Congress official, by increasing her "cut" from the BEE deal in order to get a license for the South Deep operation. The decision not to pursue an FCPA action against Gold Fields comes on the heels of the announcement earlier this month by Net 1 UEPS Technologies, Inc., a South African mobile payments company, that the SEC had closed without charges an FCPA investigation arising out of a contract with the South African Social Security Agency.
Surprise Plea Agreement Ends PetroTiger CEO's Trial; Sigelman Sentenced to Probation
On June 15, Joseph Sigelman, former CEO of oil and gas services company PetroTiger, pleaded guilty to one count of conspiracy to violate the FCPA in connection with a bribe paid to an employee of Colombia's state-run oil company in order to win a $45 million oil-services contract. The DOJ dismissed the remaining five charges originally brought against him. Mr. Sigelman's plea abruptly ended his trial, which was entering its third week in front of a jury in the U.S. District Court for the District of New Jersey. The DOJ announced the plea after the its key witness, PetroTiger's former general counsel Gregory Weisman, informed the court that he gave false testimony regarding the terms of his cooperation agreement. On Tuesday, June 16, Mr. Sigelman was sentenced to probation and ordered to pay $239,000 restitution and a $100,000 fine. The DOJ had requested a sentence of one year in prison under the plea agreement. Mr. Sigelman is the third PetroTiger official to plead guilty in connection with the matter. The government alleged that Mr. Sigelman, Mr. Weisman, and a third co-conspirator, PetroTiger's former co-CEO Knut Hammarskjold, made at least four payments totaling $333,500 to the Colombian official. The DOJ's press release on Mr. Sigelman's plea agreement noted the cooperation of PetroTiger and self-disclosure of the bribes, stating that "[b]ased on PetroTigers voluntary disclosure, cooperation, and remediation, among other factors, [DOJ] declined to prosecute PetroTiger." This is one of the only times the DOJ has publicly commented on a specific declination given to a company.
- Keisha Whitehall Wolfe to discuss “Tips for successfully engaging your state regulator” at the MBA's State and Local Workshop
- Max Bonici to discuss “Enforcement risk and trends for crypto and digital assets (Part 2)” at ABA’s 2023 Business Law Section Hybrid Spring Meeting
- Jedd R. Bellman to present “An insider’s look at handling regulatory investigations” at the Maryland State Bar Association Legal Summit