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On June 15, the U.S. District Court for the Southern District of New York unsealed a 2013 plea agreement under which American FIFA Executive Committee Member Chuck Blazer secretly pleaded guilty to ten charges related to corruption in the soccer organization. Mr. Blazer agreed to forfeit more than $1.9 million, and to pay back-taxes and penalties on more than $11 million in unreported income. According to the plea agreement, Mr. Blazer began cooperating with the DOJs investigation in December of 2011, even agreeing to work undercover making secret recordings. The unsealing of the plea agreement is the latest development in the ongoing fallout from the racketeering, wire fraud, and money laundering indictments announced three weeks ago by the DOJ against soccer executives at FIFA and others tied to the organization. Mr. Blazers testimony at his plea hearing in November 2013 was unsealed two weeks ago.
On June 10, Eletrobras, Brazil's state-run power company, announced that it had hired Hogan Lovells to investigate potential violations of the FCPA and other anti-corruption laws and corporate policies. The focus of the investigation will be "projects in which Eletrobras Companies take part in a corporate form or as minority shareholder, through special purpose entities." According to an earlier Eletrobras filing, the investigation was triggered by testimony taken in conjunction with the Brazilian government's ongoing investigation of corruption allegations against Petrobras, dubbed "Operation Car Wash." That testimony alleged that the CEO of an Eletrobras subsidiary received illicit payments from a consortium of companies bidding for the Angra 3 power plant project.
On May 12, the UK Serious Fraud Office announced yet more corruption charges against Alstom SA, the beleaguered French power and transportation company that last year pleaded guilty in the US to allegations of bribery and agreed to pay the largest criminal penalty for FCPA violations ever to the DOJ. The new charges were brought against the former senior vice president of ethics and compliance and director of Alstom International Limited for alleged bribery in Hungary related to a Budapest Metro contract for trains. The charges arise from the same conduct as last months bribery charges against another company and employee affiliated with Alstom, and continue the recent trend of compliance professionals facing increased personal liability. The SFO has now charged six individuals in its long-running investigation of Alstom.
During a May 13 speech at the University of Texas School of Law, Andrew Ceresney, chief of the SEC's enforcement division, extolled the benefits of cooperation for individuals and companies embroiled in an SEC investigation. For individuals, Ceresney first emphasized the possibility that individuals who are "on the bubble" in terms of whether charges will be brought — for example, "peripheral or lower-level player[s]," or where the evidence is "less clear," as opposed to more senior employees, who engaged in serious misconduct, and against whom there is significant evidence — could face reduced charges as a result of cooperation, or may not be charged at all. According to Ceresney, a "significant percentage" of the SECs cooperation agreements involved instances where the SEC declined to recommend charges. Another potential benefit of cooperation according to Ceresney is that it can lead to a "significant reduction" in monetary relief. Ceresney emphasized that the "numbers bear out that cooperators receive significant benefits," such that "[i]n cases where a cooperator has been charged and we have resolved the penalty question, two-thirds of the time the cooperator has paid no penalty at all." Concerning disgorgement, Ceresney said that, even though the SEC will typically seek disgorgement of all of the proceeds of wrongdoing, the SEC may nonetheless take a "narrower view" of what should be disgorged in recognition of cooperation. A third benefit to individuals of cooperation, Ceresney said, is its potential "impact on the need for remedial relief such as industry suspensions or bars." The reason being that "true cooperation" bears directly on some of the factors the SEC and courts consider when deciding whether, and what type of, remedial relief is necessary. Those factors may include recognition of the wrongful nature of the conduct, sincerity of assurances against future violations, and the degree of future risk to investors and the markets that is posed by the individual. Ceresney also offered advice to corporations considering a cooperative stance with the SEC. He opined that corporations "are gambling" if they fail to self-report FCPA misconduct to the SEC, in part because they risk that the SEC will be notified by another source, especially in light of the SEC's whistleblower program. Ceresney warned of "significant consequences" to a company that fails to self-report, because if the SEC uncovers the misconduct on its own it will raise a number of troubling questions, such as concerns about the company's supervisory systems, compliance program and other controls, or about an intentional effort to conceal the misconduct. Ceresney also said that "the bar has been raised for what counts as good corporate citizenship" in terms of corporate cooperation. Specifically, he noted that internal investigations are now common and "a clear best practice for any company that discovers significant potential misconduct," and that sharing the results of an internal investigation with the government has become "commonplace" and can accrue "immense benefits" for a company. Ceresney also "wholeheartedly agree[d]" with the recent comments by Leslie Caldwell, the Assistant Attorney General for the DOJ's Criminal Division, in which she "reemphasized . . . the need for companies to share information on individual wrongdoers in order to receive credit for their cooperation." Ceresney added that, for a company to receive cooperation credit, the SEC expects the company to provide "all relevant facts, including facts implicating senior officials and other individuals."
On April 30, an Austrian court refused the United States' request to extradite Ukrainian billionaire Dmitry V. Firtash on racketeering, bribery, money laundering, and other charges. In June 2013, a federal grand jury in Chicago returned a sealed indictment for Firtash and five others for their alleged participation in a racketeering conspiracy to bribe government officials in India to permit the mining of titanium materials. Five of the six defendants, including Firtash, were charged with conspiracy to violate the FCPA, among other offenses. Firtash was arrested in Austria in March 2014 and was released after he posted $174 million in bail. The grand jury's indictment was unsealed in April 2014. The Austrian court ruled that the United States' request was politically motivated and that there was not sufficient evidence to justify Firtash's extradition under the applicable treaty. In so ruling, the Austrian Judge explained from the bench: "America obviously saw Firtash as somebody who was threatening their economic interests . . . . There just wasn't sufficient proof." The DOJ has denied any political motivations and has appealed the ruling.
On March 30, the Federal Bureau of Investigation ("FBI") announced the establishment of three international corruption squads dedicated to investigating incidents of foreign bribery and kleptocracy-related criminal activity. The squads, based in New York, Los Angeles, and Washington, D.C., will work closely with the DOJ's Fraud Section and the SEC in investigating violations of the FCPA. Special Agent George McEachern, who heads the International Corruption Unit at FBI Headquarters, stated that the squads were created to address the national and international implications of corruption. The establishment of these new dedicated corruption squads has been spurred, at least in part, by the rise in cooperation among regulatory and law enforcement authorities across the globe to investigate and prosecute foreign corruption. Indeed, the FBI press release noted the Bureau's partnerships with overseas law enforcement agencies as well as its participation in international working groups such as the Foreign Bribery Task Force. The increased FBI attention is also notable in the context of the rising use of so-called "traditional" white-collar investigative techniques such as wiretaps and confidential informants in FCPA cases, including in the current PetroTiger prosecution and the DOJ's failed Africa Sting case.
On December 2, the Organisation for Economic Co-operation and Development ("OECD") released a report that analyzed more than 400 bribery cases worldwide, from February 1999 to June 2014, involving companies or individuals from the 41 signatory countries to the OECD Anti-Bribery Convention who were involved in bribing foreign public officials. The OECD concluded that "most international bribes are paid by large companies, usually with the knowledge of senior management." The OECD found that bribes are generally paid to win contracts from state-owned or controlled companies in advanced economies, rather than in the developing world, and most bribe payers and takers are from wealthy countries. Notably, almost two-thirds of the cases occurred in just four sectors: extractive (19%), construction (15%), transportation and storage (15%), and information and communication (10%). Furthermore, the bribes were offered most often to employees of state-owned enterprises (27%), followed by customs officials (11%), health officials (7%), and defense officials (6%). The OECD report revealed that the time needed to resolve cases has increased over time, from around two years on average for cases concluded in 1999 to just over seven years today. According to the OECD, "this may reflect the increasing sophistication of bribers, the complexity for law enforcement agencies to investigate cases in several countries or that companies and individuals are less willing to settle than in the past." The OECD's bribery report can be found here.
On December 3, Transparency International released its 2014 Corruption Perceptions Index (CPI). The CPI ranks 175 countries based on the perception of public sector corruption and found that more than two-thirds of the countries had a score below 50 on a scale from 0 to 100 which shows that the levels of bribery and corruption in the public sector are still perceived to be very high. Denmark is at the top of the list with a CPI score of 92. The United States was 17th with a score of 74 but scored lower than numerous other G20 countries, including Australia, Germany, Japan, and the United Kingdom. China had one of the biggest falls, dropping four points from 40 in 2013 to 36 in 2014, despite the fact that its government launched an anti-corruption campaign targeting corrupt public officials. Transparency International called on countries where public sector corruption is limited to stop encouraging it elsewhere by doing more to prevent money laundering and to stop secret companies from hiding corruption. The 2014 CPI can be found at here.
On December 4, Asem Elgawhary, a former vice president of Bechtel Corporation, pled guilty in federal district court in Maryland to mail fraud, conspiracy to commit money laundering, and obstruction and interference with the administration of the tax laws for his role in a kickback scheme to manipulate the bidding process for state-run power contracts in Egypt. From 1996 to 2011, Elgawhary was the general manager of Power Generation Engineering and Services Company (PGESCo), a joint venture between Bechtel and Egypts state-owned electric company. PGESCo helped the Egyptian electric company select subcontractors by soliciting bids and awarding contracts for power projects. Elgawhary admitted to taking $5.2 million in kickbacks from three power companies to give them an unfair advantage in the bidding process. The power companies and their consultants paid the kickback payments into various off-shore and Swiss bank accounts under the control of Elgawhary. Elgawhary, a dual United States and Egyptian citizen, was indicted in February 2014 and is due to be sentenced on March 23, 2015. It is worth noting that this case was not brought under the FCPA. The DOJ did not allege that Elgawhary was a Egyptian government official or that PGESCo, while a joint venture between Bechtel and the Egyptian state-owned electric company, was a state-owned enterprise for FCPA purposes. The case, though, follows in the footsteps of similar prosecutions of foreign government officials who received bribes and shows the U.S. governments increasing willingness to police foreign recipients of bribes, even if those bribes are only commercial bribes.
SBM Offshore Settles Corruption Investigation with Dutch and U.S. Authorities as Investigation Widens in Brazil
On November 12, Dutch oilfield company SBM Offshore N.V. announced that it had agreed to pay $240 million to the Dutch Public Prosecutor's Office to resolve an investigation into allegedly corrupt payments made to win contracts in several countries around the world. SBM also stated that the U.S. Department of Justice had simultaneously closed its investigation into the same matter, but news reports indicated that Brazilian and U.S. authorities were investigating payments made by SBM to Petrobras, the Brazilian state-owned oil company. The investigation in Brazil is part of a widening investigation into various allegations of corruption involving Petrobras, which has portrayed itself as a victim rather than perpetrator of misconduct. As to SBM Offshore, the Department of Justice's apparent willingness to accept the company's resolution with Dutch authorities is an encouraging indication that U.S. authorities are increasingly cognizant of the need to avoid imposing "double jeopardy" on multinationals. Moreover, while the Netherlands were termed as having "little or no enforcement" in Transparency International's recent "Exporting Corruption -- Progress Report 2014: Assessing Enforcement of the OECD Convention on Combating Foreign Bribery," this action seems certain to change perceptions about Dutch anti-corruption enforcement activity.
- Daniel P. Stipano to discuss "Wait wait ... do tell me! Where the panelists answer to you" at the ACAMS AML & Anti-Financial Crime Conference
- Matthew P. Previn and Walter E. Zalenski to discuss "Is valid when made ... valid?" at the Women in Housing & Finance Partner Series webinar
- Warren W. Traiger and Caroline K. Eisner to discuss "CRA modernization and the OCC final rule" at CBA Live
- Daniel R. Alonso to discuss "Transnational corruption: A chat with former U.S. federal prosecutors in New York" at Marval Live Talks
- Sherry-Maria Safchuk and Lauren Frank to discuss "New CFPB interpretation on UDAAP" at a California Mortgage Bankers Association Mortgage Quality and Compliance Committee webinar
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- Kathryn L. Ryan to discuss "NMLS mortgage call report – Where’s NMLS 2.0?" at the QuestSoft Lending Compliance Conference
- Thomas A. Sporkin to discuss "Managing internal investigations and advanced government defense" at the Securities Enforcement Forum
- H Joshua Kotin to discuss "Mortgage servicing in a recession: Early intervention, loss mitigation and more" at the NAFCU Virtual Regulatory Compliance Seminar
- Daniel R. Alonso to discuss "Independent monitoring in the United States" at the World Compliance Association Peru Chapter IV International Conference on Compliance and the Fight Against Corruption
- Jonice Gray Tucker to discuss "The future of fair lending" at the Mortgage Bankers Association Regulatory Compliance Conference
- Michelle L. Rogers to discuss "Major litigation" at the Mortgage Bankers Association Regulatory Compliance Conference
- Kathryn L. Ryan to discuss "Pandemic fallout – Navigating practical operational challenges" at the Mortgage Bankers Association Regulatory Compliance Conference
- Jonice Gray Tucker to discuss "Consumer financial services" at the Practising Law Institute Banking Law Institute