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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.
On May 9, pursuant to an indictment filed in federal court in Miami without announcement by DOJ, two Ecuadorian citizens were charged with conspiracy to violate FCPA, conspiracy to commit money laundering, and nine counts of money laundering. The indictment was first reported on July 1 by the Financial Times.
The charges against Armengol Alfonso Cevallos Diaz and Jose Melquiades Cisneros Alarcon, who both live in Florida, relate to the ongoing investigation and prosecution of bribery and money laundering at Ecuador’s state oil company, PetroEcuador. To date, the investigation has yielded four guilty pleas. One additional defendant has pleaded not guilty; his case is pending.
See prior FCPA Scorecard 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 29, the DOJ announced that Jose Manuel Gonzalez Testino, a dual U.S.-Venezuelan citizen, pleaded guilty for his role in a bribery scheme involving Petróleos de Venezuela, S.A. (PDVSA) officials. Gonzalez pleaded guilty in the Southern District of Texas to conspiracy to violate the FCPA, violating the FCPA, and failing to report foreign bank accounts. Gonzalez’s sentencing is set for August 28.
Gonzalez controlled multiple U.S. and international companies that provided goods and services to PDVSA. According to the DOJ, Gonzalez and a co-conspirator paid at least $629,000 in bribes to a former PDVSA official in exchange for favorable business treatment for Gonzalez’s companies. Prior FCPA Scorecard coverage is available here.
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 April 3, the DOJ announced that a Micronesian government official, Master Halbert, pleaded guilty in the District of Hawaii to a money laundering conspiracy “involving bribes made to corruptly secure engineering and project management contracts from the government of the Federated States of Micronesia (FSM), in violation of the” FCPA. Halbert was arrested in February after Frank James Lyon, a Hawaiian executive, pleaded guilty to a related FCPA conspiracy charge the prior month (see previous FCPA Scorecard coverage here).
According to the DOJ, “Halbert was a government official in the FSM Department of Transportation, Communications and Infrastructure who administered FSM’s aviation programs, including the management of its airports.” Halbert admitted that, between 2006 and 2016, Lyon’s engineering and consulting company “paid bribes to FSM officials, including Halbert, to obtain and retain contracts with the FSM government valued at nearly $8 million.” Halbert’s sentencing is scheduled for July 29.
On March 29, DOJ publicly released a non-prosecution agreement it had entered into in late February with Fresenius Medical Care AG & Co. KGaA (“FMC”), a Germany-based provider of medical equipment and services, in which FMC agreed to pay over $230 million to settle claims that it violated the anti-bribery, books and records, and internal accounting controls provisions of the FCPA. The alleged misconduct, which included various schemes to pay bribes to public and/or government officials in exchange for business opportunities, occurred over the course of at least a decade and spanned 17 or more countries in Africa, Europe, and the Middle East. On the same day, FMC also entered into an administrative order with the SEC. The SEC stated that the company had failed to timely address “numerous red flags of corruption in its operations” that were known to the company as far back as the early 2000s, and that FMC “failed to properly assess and manage its worldwide risks, and devoted insufficient resources to compliance.”
While FMC received credit for making a voluntary disclosure to DOJ in April 2012 and for remedial measures undertaken since that time, DOJ stated that the company failed to timely respond to certain of its requests and, at times, provided incomplete responses to those requests. Accordingly, the company did not receive full credit for cooperation and did not qualify for a declination under the FCPA Corporate Enforcement Policy. In its non-prosecution agreement, among other things, FMC agreed to: (i) the appointment of an independent compliance monitor for a two-year term, followed by one year of self-reporting, (ii) continuation of its efforts to cooperate with the DOJ’s investigation, and (iii) disgorgement of approximately $147 million to the SEC and payment of approximately $85 million in fines to the U.S. Treasury. The fine amount was calculated with a 40% discount off of the bottom of the United States Sentencing Guidelines fine range based on $141 million in profits from the alleged misconduct.
Notably, the alleged misconduct involved no U.S.-based conduct, individuals, subsidiaries, or third parties. Instead, the individuals alleged to have engaged in misconduct apparently used internet-based email accounts hosted by service providers in the U.S. (and therefore utilized means and instrumentalities of U.S. interstate commerce), and FMC’s American Depository Shares trade on the NYSE so the company files periodic reports with the SEC.
According to the DOJ, on March 25 a Hong Kong executive, Chi Ping Patrick Ho, was sentenced in the SDNY to a 36-month prison sentence. Ho headed up CEFC China Energy Company Limited and was sentenced “for his role in a multi-year, multimillion-dollar scheme to bribe top officials of Chad and Uganda in exchange for business advantages.”
Ho was convicted of money laundering, violating the FCPA, and conspiracy after a week-long trial in December 2018. The DOJ alleged that starting in the fall of 2014, Ho used his US-based NGO to cover up a scheme in which Ho offered $2 million in cash to Idriss Déby, the President of Chad, concealed in gift boxes, in exchange for CEFC receiving oil rights from the government; the President rejected the bribe. In Uganda, the DOJ alleged that Ho gave $1,000,000 in cash payments to Sam Kutsea, the Foreign Minister of Uganda, and Yoweri Museveni, the President of Uganda.
- Daniel R. Alonso to discuss anti-money-laundering at FELABAN Spanish-language webinar “Perspective for banks: LAFT, FINCEN, OFAC, Cryptocurrency”
- Daniel R. Alonso to discuss "What’s new in BSA/AML compliance?" at the Institute of International Bankers Regulatory Compliance Seminar
- Marshall T. Bell and John R. Coleman to speak at 2021 AFSA Annual Meeting
- Jon David D. Langlois to discuss "Regulatory update: What you need to know under the new boss; It won’t be the same as the old boss" at the IMN Residential Mortgage Service Rights Forum (East)
- Benjamin B. Klubes to discuss “Creating a Fantastic Workplace Culture”
- John R. Coleman and Amanda R. Lawrence to discuss “Consumer financial services government enforcement actions – The CFPB and beyond” at the Government Investigations & Civil Litigation Institute Annual Meeting
- Jonice Gray Tucker to discuss "Consumer financial services" at the Practising Law Institute Banking Law Institute
- Jonice Gray Tucker to discuss “Regulators always ring twice: Responding to a government request” at ALM Legalweek