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The U.K.’s Serious Fraud Office (SFO) announced on February 22 that it was ending two long-running corruption-related investigations – one of aviation company Rolls-Royce and the other of pharmaceutical giant GlaxoSmithKline – without bringing charges against any individuals.
In 2017, Rolls-Royce paid $650 million to settle an SFO investigation into a government kickbacks scheme. In connection with the resolution of the SFO’s charges, Rolls-Royce admitted to bribing government officials in Russia, India, China, Nigeria, and elsewhere in exchange for contracts worth hundreds of millions of pounds. Rolls-Royce also paid $170 million to resolve related charges brought by the DOJ, with the DOJ later charging five individuals for their alleged participation in the bribery scheme.
Although the SFO announced in 2014 that GlaxoSmithKline was under investigation, the SFO never disclosed the subject matter of that investigation. In its only announcements about the case, the SFO has noted simply that the investigation concerned the company’s “commercial practices.” In 2012, GlaxoSmithKline had paid $3 billion in the U.S. to settle charges brought by U.S. prosecutors concerning alleged off-label marketing, and in 2014 was convicted in China of bribing doctors and hospitals to improve sales, but it remains unknown whether the SFO’s investigation related to one of these known issues or something different.
The SFO Director explained in a public statement that the decision to decline prosecution of any individuals in connection with these investigations was because “there is either insufficient evidence to provide a realistic prospect of conviction, or it is not in the public interest to bring a prosecution in these cases.”
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.
Micronesian official charged with money laundering conspiracy after guilty plea to bribery by Hawaiian executive
On February 11, the Department of Justice (DOJ) unsealed conspiracy to commit money laundering charges against a Micronesian government official alleged to have taken bribes to secure engineering and project management contracts from the government of the Federated States of Micronesia (FSM). The charges follow the recent guilty plea by Frank James Lyon, a Hawaiian executive, to a charge of conspiracy to bribe the Micronesian official in violation of the FCPA.
According to the DOJ, Master Halbert was a government official in the FSM Department of Transportation, Communications and Infrastructure who administered FSM’s aviation programs. Between 2006 and 2016, Lyon’s Hawaii-based engineering and consulting company allegedly paid around $440,000 in bribes in the form of cash, vehicles, and entertainment to FSM officials, including Halbert, to obtain and retain contracts with the FSM government valued at nearly $8 million. The complaint unsealed on Monday contains specific examples of requests by Halbert to Lyon for cash gifts and a 2014 Chevy Silverado. According to Lyon’s guilty plea, he fulfilled Halbert’s requests and sent wire transfers and the automobile internationally for Halbert’s personal use.
On January 28, DOJ announced charges against the former chief executive and a former senior vice president of a Barbados-based insurance company, Insurance Corporation of Barbados Limited (ICBL). The indictment alleges that the ICBL executives, Ingrid Innes and Alex Tasker, participated in a scheme to launder approximately $36,000 in bribes to the then-Minister of Industry of Barbados in exchange for his assistance in securing government contracts for ICBL. According to the indictment, the bribes were laundered through a United States bank account in the name of a dental company located in New York. The former Minister of Industry, Donville Inniss, was arrested in August 2018 and the indictment against him referenced, but did not name, his alleged co-conspirators. The superseding indictment against the three co-defendants and another still unnamed former insurance executive was unsealed on January 18, 2019. Prior Scorecard coverage of the arrest and indictment of the former Minister of Industry can be found here.
ICBL voluntarily self-disclosed the case to DOJ and received a declination letter from DOJ for its cooperation pursuant to the FCPA Corporate Enforcement Policy. The declination letter required ICBL to disgorge $93,940.19 in profits received through the conduct at issue. The declination was based, in part, on ICBL’s termination of all executives and employees involved in the alleged misconduct and in helping DOJ identify the culpable individuals. Prior Scorecard coverage of the declination letter can be found here.
On December 26, Polycom, Inc. (Polycom or the company), a wholly-owned subsidiary of Plantronics, Inc., entered into an administrative order to settle claims by the SEC that Polycom violated the books and records and internal accounting controls provisions of the FCPA. The alleged conduct involved improper payments made through distributors and resellers of Polycom Communications Solutions (Beijing) Co., Ltd. (“Polycom China”) to Chinese government officials from 2006 through 2014 in an effort to obtain business from public sector customers.
According to the administrative order, at the instruction of the Vice President of Polycom China, sales personnel used a sales management system outside of the U.S.-based company-approved database to parallel-track sales to public sector customers in China. The scheme involved providing discounts to distributors and resellers that were used to cover the costs of payments to Chinese government officials. These discounts were not passed on to the end customer, and the purpose of those discounts was not tracked in the company-approved database. Polycom China sales personnel were also instructed by the VP to use non-company email addresses when discussing and arranging these deals.
Pursuant to the administrative order, Polycom will pay to the SEC approximately $10.7 million in disgorgement, $1.8 million in prejudgment interest, and a $3.8 million civil monetary penalty.
On the same day, DOJ released a December 20, 2018 declination letter settling its investigation of the same conduct. Pursuant to the declination letter, Polycom agreed to disgorge approximately $10.15 million to the U.S. Treasury Department and $10.15 to the U.S. Postal Inspection Service Consumer Fraud Fund.
In settling these matters, both the SEC and DOJ cited Polycom’s identification of the misconduct, thorough internal investigation conducted by outside counsel, prompt voluntary disclosure, full cooperation, and remediation efforts. Polycom’s lauded cooperative efforts included making certain employees available for interviews, as well as producing all requested documents and translating large volumes of those documents from Mandarin to English. The remedial efforts cited included termination of eight employees and discipline of eighteen others, termination or reorganization of certain channel partner relationships, enhancement of third party oversight, and improvements to anticorruption and related trainings provided to China-based employees (certain materials of which had previously not been translated into Mandarin, the first language of many Polycom China employees).
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.
On November 30, a U.S.-based agriculture company, CHS Inc., disclosed in an SEC filing that it is cooperating with an investigation being conducted by the SEC and DOJ involving payments made to Mexican customs officials. The payments were made in connection with grain shipments crossing the U.S.-Mexican border by train. CHS Inc. is a Fortune 100 company that is owned primarily by farmer and rancher cooperatives and has extensive operations in the energy sector in addition to agriculture.
The SEC filing states that the company voluntarily self-disclosed the potential violations and stressed the company’s full cooperation with the investigation, which includes “investigating other areas of potential interest to the government.” The DOJ has placed great emphasis on the importance of voluntary self-disclosure and cooperation in recent policy statements. See previous Scorecard coverage here. This investigation is noteworthy because while investigations in the energy sector are common, investigations in the agricultural sector are less so. The eventual resolution of this investigation may provide useful guidance for other agribusiness companies.
Buckley Sandler Special Alert: DOJ announces new policy on pursuing individuals in corporate resolutions
U.S. Deputy Attorney General Rod Rosenstein said at a conference this morning that the U.S. Department of Justice has revised its guidelines relating to corporate resolutions with the DOJ, particularly as those guidelines relate to charging culpable individuals. The revised guidelines modify the 2015 Yates Memo, and affirmatively obligate companies seeking leniency from the DOJ to investigate and furnish information about culpable employees and agents substantially involved in wrongdoing.
Corporations now will receive cooperation credit in criminal resolutions only if all employees substantially involved in the alleged wrongdoing are identified to the government. And in civil resolutions, corporations will receive cooperation credit only if the corporation reveals the involvement of senior management and board members in the alleged wrongdoing. The new policy highlights the DOJ’s ongoing focus on criminal and civil enforcement actions against individuals and emphasizes the importance of giving serious consideration to obtaining individual counsel very early in the process of an investigation.
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Click here to read the full special alert.
If you have questions about the DOJ’s new policy or other related issues, please visit our White Collar practice page or contact one of Buckley Sandler’s 15 partners in that practice.
On November 19, the SEC announced a settlement with Vantage Drilling International (“Vantage”) based on the improper activities of Vantage’s predecessor, Vantage Drilling Company, in connection with the Petrobras bribery scheme. The Administrative Order found that Vantage Drilling Company had “failed to devise a system of internal accounting controls with regard to [its] transactions with [its] former outside director, largest shareholder, and only supplier of drilling assets . . . and failed to properly implement internal accounting controls related to its use of third-party marketing agents,” noting the company’s “ineffective anticorruption compliance program.” According to the Order, these failures permitted payments that “created a risk that [it] was providing or reimbursing funds that [a director] intended to use to make improper payments to [Petrobras],” a Brazilian company at the center of a massive FCPA scheme.
The settlement with the SEC concludes Vantage’s involvement in the Petrobras investigations. According to Vantage, the company received a cooperation letter from the DOJ last year confirming Vantage’s full cooperation in the Petrobras investigation, and that the DOJ would not move forward with any actions against Vantage.
Further coverage of the Petrobras matter is available here.
Two co-conspirators of billionaire news network Globovision owner Raul Gorrin Belisario were sentenced this week as part of the DOJ’s recently unsealed prosecution of a bribery scheme involving over $1 billion paid in bribes to members of the Venezuelan government. According to the DOJ, Gorrin was indicted under seal in August for conspiracy to violate the FCPA, conspiracy to commit money laundering, and nine counts of money laundering. Two co-conspirators, Florida resident and former Venezuelan National Treasurer Alejandro Andrade Cedeno, and Chicago resident and former owner of Banco Peravia Gabriel Arturo Jimenez Aray, each pleaded guilty under seal to one count of conspiracy to commit money laundering, and were sentenced in federal court earlier this week.
According to Gorrin’s indictment, he allegedly bribed members of the Venezuelan government—including Andrade—in exchange for the right to handle the government’s foreign currency exchange transactions, and then acquired a bank in order to launder the bribe money and other illicit proceeds. To do so, Gorrin allegedly moved money from Switzerland to accounts in Florida and New York and used it to purchase luxury items such as “jets, a yacht, multiple champion horses, and numerous high-end watches.”
In December 2017, Andrade pleaded guilty to one count of conspiracy to commit money laundering, admitting to taking bribes in exchange for helping his co-conspirators—including Gorrin—by choosing them to conduct currency exchanges at favorable rates to the Venezuelan government. As part of his plea, Andrade agreed to cooperate and pay a forfeiture money judgment of $1 billion through the forfeiture of “real estate, vehicles, horses, watches, aircraft, and bank accounts.” On November 27, 2018, U.S. Southern District of Florida Judge Robin L. Rosenberg sentenced Andrade to 10 years in prison, the maximum under his plea deal.
In March 2018, Chicago resident and former owner of Banco Peravia Gabriel Arturo Jimenez Aray took a similar plea deal, pleading guilty to one count of conspiracy to commit money laundering, admitting to helping Gorrin and others acquire and then launder money through Banco Peravia. On November 29, 2018, Jimenez was sentenced to 3 years in prison.
The Miami Herald has also reported that Gorrin’s personal banker is Matthias Krull, formerly of Julius Baer Panama, who was sentenced last month for his role in another money laundering scheme involving Venezuela’s Petroleos de Venezuela S.A. (PDVSA). Coverage of the PDVSA prosecutions is available here.