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As previously covered, French pharmaceutical company Sanofi S.A. announced in October 2014 that it was investigating whether certain payments made by company employees to healthcare professionals in the Middle East and Africa violated the FCPA. Sanofi launched an investigation to review payments made from 2007 to 2012 as a result of anonymous whistleblower allegations, and self-reported the allegations to the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC). On March 7, 2018, Sanofi announced in its Form 20-F SEC filing that the DOJ notified Sanofi in February 2018 that it was closing the inquiry into the self-reported whistleblower allegations. Sanofi is continuing to cooperate with the SEC’s review of the allegations.
Houston-based energy company sues former Venezuelan government officials for bribery related conduct related to Petroleos
On February 16, 2018, Harvest Natural Resources and HNR Energia B.V (collectively, “Harvest”), a Houston-based energy corporation that formally dissolved in May 2017, filed suit in the Southern District of Texas against two former presidents of Venezuela’s national oil company Petroleos de Venezuela, S.A. (“PDVSA”), Rafael Dario Ramirez Carreno (“Ramirez”) and Eulogio Antonio Del Pino Diaz (“Del Pino), and others who allegedly worked for Ramirez and PDVSA. According to the complaint filed by Harvest, Venezuela’s Ministerio del Poder Popular de Petroleo y Mineria twice refused to allow Harvest to sell energy assets co-owned with PDVSA because Harvest refused to pay bribes requested by the defendants. According to Harvest, the denials forced the company to sell the same assets at a loss of $470 million. Harvest has sued the defendants alleging civil violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), the Sherman Act, the Robinson-Patman Act, and the Texas Free Enterprise and Antitrust Act.
This suit was filed days after the DOJ unsealed charges against five former Venezuelan government officials for their involvement in a money laundering scheme at PDVSA. Previous FCPA Scorecard coverage of the ongoing DOJ and ICE-HIS investigation into bribery at Petroleos can be found here.
California-based Juniper Networks, Inc. announced in a February 9 8K filing that the DOJ has concluded its investigation into possible FCPA violations without taking action against the company. The company disclosed the FCPA investigation by the DOJ and the SEC in August 2013, but has not publicly disclosed any further details about the possible FCPA violations. Juniper’s recent filing stated that the DOJ’s letter acknowledged the company’s “cooperation in the investigation.” The filing also noted that the FCPA investigation by the SEC is still pending.
DOJ unseals charges against former Venezuelan government officials for money laundering and FCPA violations in Petroleos scheme
On February 12, the DOJ unsealed charges against five former Venezuelan government officials for their involvement in a money laundering scheme at Venezuela’s state-owned energy company Petroleos de Venezuela (Petroleos). The five defendants—Luis Carlos De Leon Perez (De Leon), Nervis Gerardo Villalobos Cardenas (Villalobos), Cesar David Rincon Godoy (Cesar Rincon), Alejandro Isturiz-Chiesa, and Rafael Ernesto Reiter Munozare (Reiter)—are each charged with conspiracy to commit money laundering. De Leon and Villalobos are also charged with conspiracy to violate the FCPA.
De Leon, Villalobos, Cesar Rincon, and Reiter were arrested in Spain in October 2017 on arrest warrants based on an indictment filed in the Southern District of Texas last August. Cesar Rincon has been extradited from Spain, while the others are pending extradition.
The indictment alleges that the five defendants possessed significant influence within Petroleos, which permitted them to solicit PDVSA vendors for “bribes and kickbacks in exchange for providing assistance to those vendors in connection with their PDVSA business.” The Petroleos vendors included residents of the U.S. and vendors who owned U.S.-based businesses. According to the indictment, two Petroleos vendors, Roberto Enrique Rincon Fernandez and Jose Shiera-Bastidas, transferred more than $27 million to accounts in Switzerland that were connected to De Leon and Villalobos. Rincon and Shiera previously pleaded guilty in the Southern District of Texas to FCPA charges related to the bribery of Petroleos officials.
The charges are part of an ongoing investigation by the DOJ and ICE-HSI into bribery at Petroleos, which has resulted in charges against fifteen individuals, ten of whom have pleaded guilty. Previous FCPA Scorecard coverage of the Petroleos investigation can be found here.
GSK responding to inquiries from SFO, DOJ, and SEC regarding its use of third party advisors in China
In a securities filing on Wednesday, Feb. 7, U.K.-based pharmaceutical company GlaxoSmithKline PLC (“GSK”) announced that it is responding to requests for information from the DOJ and SEC regarding third-party advisors that GSK engaged in China. These requests came about after GSK, pursuant to its continuing obligation to report to the SEC on its efforts to improve compliance following its September 2016 settlement of allegations that it violated the FCPA, informed the SEC and DOJ that the SFO had sought additional information in the course of its own investigation, which began in May 2014. GSK was also investigated by Chinese authorities and, in September 2014, GSK’s Chinese subsidiary was reportedly found guilty of bribery resulting in GSK’s payment of a $491.5 million fine.
In a securities filing on Thursday, Feb. 1, California-based OSI Systems, Inc. revealed that the DOJ and SEC have launched investigations into its FCPA compliance and regarding trading by company employees in the OSI Systems securities. These investigations were spurred by a report issued in December 2016 by a short seller, Muddy Waters LLC, which accused OSI of paying bribes to win a major contract in Albania. OSI Systems has denied that allegation, and stated in its Form 8-K filing that it is cooperating with the government’s investigations.
The DOJ recently unsealed criminal charges against a former hedge fund executive. This indictment follows a civil suit filed in January 2017 against the executive and others by the SEC regarding FCPA violations. In 2016, the DOJ and SEC also pursued a joint FCPA enforcement action against his former employer, an American hedge fund management firm, alleging various bribes, self-dealing, and other malfeasance relating to the procurement of mineral, oil, and other natural resource contracts in African counties.
While the SEC’s initial January 2017 civil matter against the executive alleged FCPA violations, the recently announced criminal indictment does not directly charge him with violating the FCPA. He is alleged to have obstructed the DOJ and SEC’s investigations of the firm and made false statements, but also to have committed investment advisor fraud.
In an indictment unsealed on January 5, the DOJ charged a former executive of a Maryland company, Mark Lambert, with 11 criminal counts, including seven counts of violating the FCPA and one count of conspiracy to violate the FCPA. The allegations relate to an alleged scheme to bribe Vadim Mikerin, an official at TENEX, a Maryland-based Russian energy company that is a subsidiary of Russia’s State Atomic Energy Corporation, as well as the sole supplier and exporter of Russian Federation uranium and uranium enrichment services. Lambert alleged sought to improperly obtain awards of nuclear transportation contracts from TENEX to his company. Several other key players in the case already have pleaded guilty, including Lambert’s former business associate as well as Mikerin. Although sentencing for a number of the parties is forthcoming, Mikerin already has been ordered to forfeit $2.1 million following his guilty plea. The initial investigation began in 2007 as part of a joint DOE-OIG and FBI probe into Mikerin for laundering the funds derived from the scheme into offshore accounts.
On January 5, 2018, the Department of Justice announced that Joo Hyun Bahn, also known as Dennis Bahn, pleaded guilty to charges that he tried to bribe a Qatari official in connection with a sale of a high rise building complex in Vietnam. He pleaded guilty to one count of conspiracy to violate the FCPA and one count of violating the FCPA before U.S. District Judge Edgardo Ramos of the Southern District of New York. Mr. Bahn was charged with his father Ban Ki Sang, who was an executive at the South Korean construction company Keangnam, and Malcolm Harris, an arts and fashion blogger, in December 2016. Mr. Bahn is the nephew of former UN Secretary-General Ban Ki-moon.
In his guilty plea, Mr. Bahn admitted to joining a conspiracy to make $2.5 million in bribe payments to a Qatari official between February 2014 and May 2015 in an effort to sell the Keangnam-owned Hanoi Landmark Tower and residential buildings in Vietnam, which were worth $800 million. Mr. Bahn admitted that he and Mr. Ban agreed to pay $500,000 to a Qatari official to persuade the official to use the Qatari sovereign wealth fund to purchase the building. The $500,000 was then transferred to Mr. Harris, who posed as an agent for the foreign official, but instead of passing the payment to the foreign official, Mr. Harris double-crossed his codefendants and stole the $500,000.
Although the scheme involved a South Korean construction company and a Qatari foreign official, the Indictment alleged that Mr. Bahn qualified as a “domestic concern” pursuant to 15 USC 78dd-2(h)(1) because he was a lawful permanent resident of the United States and resided in New Jersey at the time.
Mr. Bahn faces up to five years in prison on each count. Mr. Harris previously pleaded guilty to charges of wire fraud and money laundering for his role in the scheme, and was sentenced to 42 months in prison. Mr. Ban has been charged, but not yet arrested.
On December 22, 2017, Singapore-based shipyard operator and shipping vessel repair company Keppel Offshore & Marine Ltd. (KOM), and its wholly owned U.S. subsidiary, agreed to pay a combined total penalty of $422 million to resolve foreign bribery charges by the DOJ. Authorities in the United States, Brazil, and Singapore alleged that the companies engaged in a decade-long scheme to pay tens of millions of dollars in bribes to officials in Brazil, including those of state-owned oil company Petrobras. As part of the resolution, KOM entered into a deferred prosecution agreement while its U.S. subsidiary, KOM USA, pleaded guilty, as did a former senior member of KOM’s legal department. The settlement is one of the largest FCPA enforcement penalties and also represents DOJ’s first coordinated FCPA resolution with Singapore. The settlement represents a 25 percent reduction off the bottom of the applicable U.S. Sentencing Guidelines fine range due to substantial cooperation by the companies with the investigation and the taking of remedial measures, including disciplining employees and implementing an enhanced compliance system.
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