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The DOJ unsealed two indictments and a guilty plea related to the sprawling 1Malaysia Development Berhad (1MDB) fraud on November 1 in the Eastern District of New York. Malaysian financier Low Taek Jho (also known as Jho Low) and former banker Ng Chong Hwa (also known as Roger Ng) were charged with conspiring to launder billions of dollars embezzled from 1MDB, Malaysia’s investment development fund, and conspiracy to violate the anti-bribery provisions of the FCPA. Ng was also charged with conspiring to violate the FCPA by circumventing the internal accounting controls of a U.S. financial institution, which underwrote $6 billion in bonds issued by 1MDB. Ng was a managing director at the bank. Tim Leissner, another former banker at the same financial institution, pleaded guilty to the same charges. Leissner has been ordered to forfeit $43.7 million.
Low, Ng, Leissner, and others allegedly conspired to bribe Malaysian and Abu Dhabi officials to obtain business for the financial institution, including the 1MDB bond deals. They also allegedly conspired to launder the proceeds through purchasing luxury New York real estate, artwork, and financing major Hollywood films, such as The Wolf of Wall Street.
For prior coverage of the 1MDB scheme, please see here.
On October 30, the DOJ charged Roger Richard Bouncy, a dual U.S.-Haitian citizen, with conspiracy to violate the FCPA, commit money laundering, and violate the Travel Act, as well as substantive Travel Act violations. Bouncy is a licensed attorney and the CEO of Haiti Invest, LLC, a Haitian development and reconstruction company. The indictment is part of an ongoing case against retired U.S. Army Colonel, Joseph Baptiste, who was indicted in 2017 related to an alleged plan to solicit bribes from potential investors for infrastructure projects in Haiti. (For prior coverage of the charges against Baptiste, please see here.) According to the indictment, at a meeting in 2015, Bouncy and Baptiste met with undercover FBI agents posing as potential investors in the development project, and allegedly asked the agents to invest $84 million in the project. Baptiste told them that 5% of that total would be paid to Haitian officials to secure approval for the project. Baptiste allegedly planned to disguise the funds through a non-profit he controlled. The FBI then wired money to the non-profit.
On October 11, Assistant Attorney General Brian A. Benczkowski issued a memorandum to the DOJ’s Criminal Division that revises the framework for assessing when DOJ will require a corporate monitor as part of a resolution.
Under the revised framework, Criminal Division attorneys must now consider whether the company’s “remedial measures” or changes to “corporate culture” are enough to protect against future misconduct. For instance, “[w]here misconduct occurred under different corporate leadership” that has since left the company, a monitor may not be needed. Criminal Division attorneys must also consider not just the monetary costs to the company of imposing a corporate monitor, but also the burden to the company’s operations, and should impose a monitor only when a “clear benefit” would outweigh the costs and burdens.
As AAG Benczkowski remarked in a speech given the day after the memorandum was issued, the new corporate monitor policy is based on the “foundational principle” that “the imposition of a corporate monitor is never meant to be punitive,” and a corporate monitor ultimately “will not be necessary in many corporate criminal resolutions.”
The memorandum also refines the monitor selection process with the goal of, as AAG Benczkowski described in his speech, ensuring “that the process is fair,” that the “best candidate” is selected, and that “even the perception of any conflicts of interest” is avoided.
On September 27, Deputy Assistant Attorney General Matthew Miner gave a speech that provided clarification of DOJ enforcement policies, continuing to emphasize voluntary disclosure and underscoring the notion that companies should view DOJ “as partners, not adversaries.” In his speech, Miner announced that DOJ’s FCPA Corporate Enforcement Policy is not limited to just FCPA violations, and that DOJ “will also look to these principles in the context of mergers and acquisitions that uncover other types of potential wrongdoing,” encouraging companies that discover such wrongdoing to voluntarily disclose it. Miner also pointed to recent published declinations, and noted that declinations under DOJ’s Policy can still be appropriate even when “aggravating circumstances” are present. Miner also referenced the increase in “global enforcement and cooperation with foreign authorities” and emphasized DOJ’s “Anti-Piling On Policy.”
Based on media reports, DOJ’s Fraud Section is reportedly investigating some part of Major League Baseball (MLB) for possible FCPA violations related to recruitment of international players, particularly related to immigration issues for players from Latin America. Reports indicate that the investigation was initiated when a MLB whistleblower provided the FBI with information and documents last year during spring training. Since then, several witnesses have reportedly already been subpoenaed and testified before a federal grand jury in connection with the investigation.
A spokesperson for the MLB stated that the organization had not been contacted by federal authorities regarding an investigation, and the two franchises that appear to be most at issue declined to comment to the media on the matter.
On September 28, the DOJ announced that a former CEO and a former executive of oil services company SBM Offshore, N.V. (SBM) had been sentenced to prison and fined for their roles in a scheme to bribe foreign government officials in Brazil (at Petrobras), Angola (Sonangol), and Equatorial Guinea (GEPetrol) in exchange for oil-services contracts. In November 2017, the former CEO of SBM, Anthony “Tony” Mace, and a former sales and marketing executive at SBM USA, Robert Zubiate, each had pleaded guilty to one count of conspiracy to violate the FCPA. Mace was sentenced to 36 months in prison and a fine of $150,000 for authorizing payments in furtherance of the bribery scheme, and Zubiate was sentenced to 30 months in prison and a fine of $50,000 for using a third-party sales agent to pay bribes to Petrobras officials.
SBM itself entered into a $238 million three-year deferred prosecution agreement and its subsidiary, SBM USA, pleaded guilty to one count of conspiracy to violate the FCPA.
Prior Scorecard coverage of the company can be found here.
On September 27, 2018, the DOJ announced that Petrobras, the Brazilian state-owned oil company, had entered into a Non-Prosecution Agreement with the DOJ, as well as settlement agreements with the SEC and Brazilian authorities, and agreed to pay a total $853.2 million in penalties to all jurisdictions. Under the terms of the settlement, DOJ and SEC will each receive 10 percent of the penalty amount, with Brazilian authorities receiving the remaining 80 percent.
As part of the settlement, Petrobras admitted that its Executive Board members “were involved in facilitating and directing millions of dollars in corrupt payments to politicians and political parties in Brazil,” while directors were “involved in facilitating bribes that a major Petrobras contractor was paying to Brazilian politicians.” The conduct included bribes related to several refineries, as well as shipyard and drillship contracts, as well as payments to “stop a parliamentary inquiry into Petrobras contracts.”
Petrobras’ penalty reflects a 25 percent discount off the low end of the applicable U.S. Sentencing Guidelines due to its cooperation and remediation. While the company did not voluntary disclose its conduct, it cooperated with authorities by disclosing the findings of its internal investigation, providing document discovery, and facilitating the interview of foreign witnesses. It also took remedial measures by replacing its Board of Directors and Executive Board, as well as implementing reforms in its policies and procedures.
In addition to the criminal penalty, the SEC announced that Petrobras agreed to an administrative order requiring it to pay almost $1 billion in disgorgement and prejudgment interest. However, Petrobras received full credit for payments it already made to resolve a class action for $2.95 billion earlier this year. The net result is that Petrobras will not have to pay any additional funds to the SEC in the separate disgorgement action.
Prior ScoreCard coverage of the Petrobras and related investigations can be found here.
On September 25, 2018, the SEC announced a settlement of FCPA charges against the former CEO of Chilean-based chemical and mining company Sociedad Química y Minera de Chile, S.A. (SQM) for $125,000. According to the SEC, over the course of seven years, SQM’s then-CEO Patricio Contesse González “caused SQM to make nearly $15 million in improper payments to Chilean political figures and others connected to them.” Contesse agreed to the settlement without admitting the findings in the SEC’s order. According to the SEC’s order, Contesse signed false certifications related to financial reporting in the United States.
Last year, SQM agreed to pay $30 million to settle parallel DOJ and SEC charges against the company. That settlement demonstrated the jurisdictional reach of U.S. government enforcement of the FCPA – while SQM is a Chilean company with no U.S. operations, it is registered with the SEC as a foreign private issuer.
On September 14, a New York federal district court granted class certification to a group of shareholder investors suing an American hedge fund management firm and two of its senior executives on the grounds that the investors were misled about a government investigation into the company’s activities in Africa. In finding that the proposed class met all the requirements for certification, the court certified a class of investors that held some of the more than 100 million outstanding shares between February 2012 and August 2014, the time period in which the firm allegedly violated the Securities Exchange Act. Plaintiffs claim that the firm told investors it was not under any pending judicial or administrative proceeding that might have a material impact on the firm, when in fact it was under DOJ and SEC investigation over allegations that its employees were bribing government officials in Africa. The allegations against the firm were made public in 2014 media reports detailing government scrutiny into its dealings in Africa.
Click here for prior FCPA Scorecard’s coverage of this matter.
On September 12, the SEC announced that United Technologies Corporation (UTC) agreed to pay $13.9 million to settle FCPA charges related to payments made through a subsidiary in connection with the sales of elevator and airline equipment in Azerbaijan and China. According the SEC’s Order, from 2012 through 2014, the Connecticut-based company, through its wholly owned subsidiary Otis Elevator Company, made illicit payments to Azerbaijani officials to facilitate the sales of elevator equipment.
The Order also included other conduct that both the DOJ and SEC have focused on in recent years, including the use of agents and gifts and entertainment. For example, the Order detailed conduct by UTC and a joint venture partner from 2009 to 2013 in which an agent in China received improper commissions totaling $55 million in connection with the company’s attempt to win airline business in China. The Order also found that the company, from 2009 through 2015, improperly “provided trips and gifts to various foreign officials in China, Kuwait, South Korea, Pakistan, Thailand, and Indonesia” in order to obtain business. UTC consented to the SEC’s order without admitting or denying the findings that it violated the anti-bribery, books and records, and internal accounting controls provisions of the FCPA.
- Kathryn L. Ryan to discuss "NMLS usage" at the NMLS Annual Conference & Training
- Jeffrey S. Hydrick to discuss "State legislative update" at the NMLS Annual Conference & Training
- Kathryn L. Ryan to speak at the "Business model primer" at the NMLS Annual Conference & Training
- Daniel P. Stipano to discuss "Dynamic customer due diligence and beneficial ownership from KYC to ongoing CDD and the new rule implementation" at the Puerto Rican Symposium of Anti-Money Laundering
- Michelle L. Rogers to discuss "Preparing for servicing exams in the current regulatory environment" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
- Jon David D. Langlois to discuss "Regulatory risks of convenience fees" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
- APPROVED Webcast: NMLS Annual Conference & Ombudsman Meeting: Review and recap
- Brandy A. Hood to discuss "Keeping your head above water in flood insurance compliance" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
- Melissa Klimkiewicz to discuss "Servicing super session" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
- Daniel P. Stipano to discuss "Lessons learned from recent high profile enforcement actions" at the Florida International Bankers Association AML Compliance Conference
- Moorari K. Shah to provide "Regulatory update – California and beyond" at the National Equipment Finance Association Summit
- Sasha Leonhardt and John B. Williams to discuss "Privacy" at the National Association of Federally-Insured Credit Unions Spring Regulatory Compliance School
- Aaron C. Mahler to discuss "Regulation B/fair lending" at the National Association of Federally-Insured Credit Unions Spring Regulatory Compliance School
- Heidi M. Bauer to discuss "'So you want to form a joint venture' — Licensing strategies for successful JVs" at RESPRO26
- Jonice Gray Tucker to discuss "Small business & regulation: How fair lending has evolved & where are we heading?" at CBA Live
- Jonice Gray Tucker to to discuss "DC policy: Everything but the kitchen sink" at CBA Live
- Daniel P. Stipano to discuss "Lessons learned from ABLV and other major cases involving inadequate compliance oversight" at the ACAMS International AML & Financial Crime Conference
- Daniel P. Stipano to discuss "A year in the life of the CDD final rule: A first anniversary assessment" at the ACAMS International AML & Financial Crime Conference
- Moorari K. Shah to discuss "State regulatory and disclosures" at the Equipment Leasing and Finance Association Legal Forum
- Hank Asbill to discuss "Pay no attention to the man behind the curtain: Addressing prosecutions driven by hidden actors" at the National Association of Criminal Defense Lawyers West Coast White Collar Conference
- Daniel P. Stipano to discuss "Keep off the grass: Mitigating the risks of banking marijuana-related businesses" at the ACAMS AML Risk Management Conference
- Daniel P. Stipano to discuss "Mid-year policy update" at the ACAMS AML Risk Management Conference
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program