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The U.S. Department of Justice announced Friday, July 14, that prosecutors filed a civil complaint seeking to seize $144 million in assets that were allegedly the proceeds of corruption in Nigeria and were laundered in and through the U.S. According to the complaint, from 2011 to 2015, Nigerian businessmen Kolawole Akanni Aluko and Olajide Omokore bribed Nigeria’s former Minister for Petroleum Resources, Diezani Alison-Madueke, who oversaw Nigeria’s state-owned oil company. In return, Alison-Madueke steered lucrative oil contracts to companies owned by Aluko and Omokore. The proceeds were then allegedly used to purchase assets subject to seizure and forfeiture, including a $50 million New York City condominium and an $80 million yacht.
“The United States is not a safe haven for the proceeds of corruption,” said Acting Assistant Attorney General Blanco. “The complaint announced today demonstrates the Department’s commitment to working with our law enforcement partners around the globe to trace and recover the proceeds of corruption, no matter the source. Corrupt foreign officials and business executives should make no mistake: if illicit funds are within the reach of the United States, we will seek to forfeit them and to return them to the victims from whom they were stolen.”
The suit was part of the Kleptocracy Asset Recovery Initiative.
Hui Chen, formerly Compliance Counsel Expert in the DOJ Fraud Section, is speaking out about the reasons for her May 2017 resignation, which she has attributed to unacceptable conduct by the President and his Administration. Chen was hired by DOJ in November 2015 after serving as Global Head for Anti-Bribery and Corruption and Standard Chartered Bank. She was the first lawyer to hold this position at the DOJ.
In a June 25 LinkedIn post, Chen unleashed several criticisms against the President, including regarding lawsuits, conflicts of interest, and ongoing investigations. She said that she would “not tolerate” those conducts in a company, but “worked under an administration that engaged in exactly those conduct.” Chen further elaborated on her criticisms in a July 4, 2017 interview with CNN, stating that the firing of FBI James Comey tipped the scales in favor of resignation.
The DOJ had previously posted an opening to hire a new Compliance Counsel, but that listing has now expired. It is not clear if anyone has been hired to replace Ms. Chen.
On June 21, the DOJ issued a declination letter to attorneys for CDM Smith, Inc., in which the DOJ declined prosecution and closed an investigation of CDM regarding potential FCPA violations that occurred in India between 2011 and 2015. CDM, a Boston-based privately held engineering and construction firm, agreed to pay DOJ approximately $4 million in disgorgement. The DOJ announced the declination on June 29 with a link posted on its website, making it the second FCPA declination that the DOJ announced in June 2017. Prior to June, the DOJ had last issued an FCPA declination letter in September 2016.
According to the DOJ Letter, CDM paid approximately $1.18 million in bribes to India government officials in exchange for contracts that resulted in approximately $4 million in net profits (the disgorgement amount). The payments were made by CDM’s division responsible for India operations and by CDM’s wholly-owned subsidiary in India through fraudulent subcontractors and generally equaled two to four percent of the contract price.
The DOJ’s letter stated that its decision to close its investigation is consistent with the FCPA Pilot Program, launched in April 2016 to encourage companies to “voluntarily self-disclose FCPA-related misconduct, fully cooperate with the Fraud Section, and, where appropriate, remediate flaws in their controls and compliance programs.” Accordingly, the DOJ determined that CDM had, among other things, made a “timely and voluntary self-disclosure” of potential FCPA violations, conducted and “thorough and comprehensive investigation,” fully cooperated with the DOJ, and performed full remediation, including the termination of all of the executives and employees involved in the conduct at issue. However, the letter provides little detail about these factors.
The DOJ letter makes clear that it does not foreclose future prosecution of any individuals connected to this matter, whether affiliated with CDM or otherwise.
On Friday, June 16, the DOJ issued a declination letter to attorneys for Linde North America Inc. and Linde Gas North America LLC (collectively, “Linde”), in which the DOJ declined prosecution and closed an investigation of Linde and certain of its subsidiaries and affiliates regarding potential FCPA violations that occurred between November 2006 and December 2009. Linde, part of Germany’s Linde Group, which trades only on German stock exchanges and which has no securities registered with the SEC, agreed to pay DOJ a combined $11.2 million in disgorgement and forfeiture.
According to the DOJ letter, Spectra Gases, a New Jersey-based company acquired by Linde in October 2006, made corrupt payments to officials at and related to a Republic of Georgia state-owned and controlled entity to ensure continuity of business. Upon discovering this conduct, Linde initiated an internal investigation and subsequently withheld monies earmarked for a company controlled by the Georgian entity. These monies comprise the approximately $3.4 million that Linde agreed to forfeit.
The DOJ letter stated that its decision is consistent with the FCPA Pilot Program, launched in April 2016 to encourage companies “to voluntarily self-disclose FCPA-related misconduct, fully cooperate with the Fraud Section, and, where appropriate, remediate flaws in their controls and compliance programs.” Accordingly, the DOJ determined that Linde had, among other things, voluntarily self-reported potential FCPA violations, conducted a thorough and proactive internal investigation, and continues to cooperate fully and remediate its compliance program and internal controls. Notably, the DOJ letter does not foreclose future prosecution of any individuals, and the letter explicitly delineates DOJ’s expectation that Linde will continue cooperating fully in any ongoing investigation of individuals.
On May 31, Samuel Mebiame, the son of a former Prime Minister of Gabon, a former consultant to a joint venture between mining company Och-Ziff Capital Management Group LLC (Och-Ziff) and an entity incorporated in the Turks and Caicos, was sentenced to two years in prison for conspiring to violate the FCPA by bribing government officials in several African countries.
As previously reported here, Mebiame previously pleaded guilty to allegations related to payments of approximately $3 million to high-level government officials in Niger, in addition to providing luxury cars, in order to obtain uranium mining concessions. Similarly, the DOJ charged Mebiame with bribing a high-ranking government official in Chad with luxury foreign travel to obtain a uranium mining concession there, and with bribing government officials in Guinea with cash, the use of private jets, and a luxury car in order to obtain confidential government information. Prior Scorecard coverage regarding Och-Ziff is here.
On May 10, 2017, U.S. Attorney General Jeff Sessions issued a memorandum ordering all federal prosecutors, in all criminal cases, to “charge and pursue the most serious, readily provable offense,” and to “disclose to the sentencing court all facts that impact the sentencing guidelines or mandatory minimum sentences.” The new policy – which immediately rescinds Obama-era leniency policies – is likely primarily aimed at drug-related cases, but it will impact white collar and FCPA cases as well. For instance, under the policy, prosecutors may charge more defendants with money laundering or wire fraud in addition to FCPA violations, taking into account the FCPA’s relatively low five-year maximum sentences. Prosecutors seeking an exception must secure supervisory approval and document their reasoning in the case file, which may complicate plea deals. In a May 12 speech, Sessions said of the new policy: “Charging and sentencing recommendations are bedrock responsibilities of any prosecutor. And I trust our prosecutors in the field to make good judgments. They deserve to be unhandcuffed and not micro-managed from Washington.”
Bloomberg reports that Wal-Mart is nearing a resolution of a five-year old joint inquiry by the DOJ and SEC. Citing an unnamed source familiar with the matter, Bloomberg reports that the company is preparing to pay $300 million to settle allegations that company employees paid bribes in Mexico, China, and India. The same source reported that the resolution will also include at least one guilty plea by a Wal-Mart subsidiary, a non-prosecution agreement for the parent company, and a monitorship.
In March of 2015, a federal district court in Arkansas dismissed with prejudice a consolidated shareholder derivative suit accusing Wal-Mart Stores Inc.’s (Wal-Mart) board of directors of concealing Mexican bribery claims from investors. The lawsuit was filed after a 2012 article by the New York Times reported that top officials at Wal-Mart’s Mexican subsidiary oversaw millions of dollars in bribes in connection with the company’s expansion in Mexico. See previous Scorecard coverage here. The same article is believed to have touched off the DOJ’s and SEC’s inquiry. If true, a $300 million resolution would not be near the top end of FCPA resolutions.
On April 24, 2017, in a speech at the Ethics and Compliance Initiative Annual Conference in Washington, D.C., Attorney General Jeff Sessions appeared to commit to the continued aggressive enforcement of the FCPA. He noted that bribery "increases the cost of doing business and hurts honest companies that don’t pay these bribes,” and he explained that the Trump administration’s DOJ will enforce laws that protect honest businesses: “One area where this is critical is enforcement of the Foreign Corrupt Practices Act (FCPA). Congress enacted this law 40 years ago, when some companies considered it a routine expense to bribe foreign officials in order to gain business advantages abroad.” AG Sessions also emphasized that individuals, not just companies, may face increased FCPA focus.
These remarks come on the heels of comments from another senior DOJ official who recently noted that robust FCPA enforcement will continue. As previously reported, Trevor McFadden, the DOJ’s Criminal Division's Acting Principal Deputy Assistant Attorney General, noted that the DOJ remains "intent on creating an even playing field for honest businesses."
These remarks suggest that the DOJ will remain active in enforcing FCPA compliance issues, despite comments from then-candidate Trump that FCPA enforcement may be scaled back under his watch.
On April 18, Acting Principal Deputy Assistant Attorney General Trevor McFadden spoke at the 10th annual Anti-Corruption, Export Controls and Sanctions Compliance Summit in Washington, D.C. According to Mr. McFadden, the Justice Department “remains committed to enforcing the FCPA and to prosecuting fraud and corruption more generally.” He emphasized the importance of company cooperation, stating that that the department considers voluntary self-disclosures and remedial efforts when making charging decisions. Mr. McFadden also stated that the department is making a “concerted effort to move corporate investigations expeditiously,” adding that FCPA investigations should be “measured in months, not years.”
Mr. McFadden also discussed an increased prioritization of anti-corruption prosecutions around the world and stated that the DOJ will “seek to reach global resolutions that apportion penalties between the relevant jurisdictions so that companies that want to accept responsibility for misconduct are not unfairly penalized by multiple agencies.”
Additionally, the department is assessing its FCPA Pilot Program. Last year, as part of the Program, the department began publishing information on cases it declined to prosecute due to voluntary self-disclosure, full cooperation, and comprehensive remediation. Mr. McFadden stated that the Program is “one example of an effort to provide more transparency and consistency for our corporate resolutions” and “will continue in full force.”
On April 11, the DOJ filed a memorandum in its case against Odebrecht S.A., requesting that the Court approve a lower sentence than originally proposed based on Odebrecht’s inability to pay. On December 21, Brazilian construction company Odebrecht and its petrochemical affiliate, Braskem S.A., reached a $4.5 billion combined global settlement with U.S., Brazilian, and Swiss authorities to resolve FCPA allegations, in which both companies agreed to plead guilty in the U.S. to conspiracy to violate the FCPA. As part of that agreement, the U.S. and Brazilian authorities agreed to conduct an independent analysis to confirm the accuracy of Odebrecht’s representation that it had an inability to pay a penalty in excess of $2.6 billion. The memorandum set forth the DOJ’s determination that Odebrecht lacks the ability to pay a criminal penalty in excess of $2.6 billion and included adjustments for the requested penalty to match that ability. In particular, the portion of the penalty paid to the United States would be lowered from approximately $117 million to approximately $93 million. The sentencing hearing is scheduled for April 17.
Prior Scorecard coverage of the Odebrecht settlement can be found here.
- Jonice Gray Tucker to discuss “Getting your company ready: Managing fair lending for IMBs” at the Mortgage Bankers Association Independent Mortgage Bankers Conference
- Jonice Gray Tucker to discuss “Be Your Compliance Best in 2022” at the California Mortgage Bankers Association webinar
- Lauren R. Randell to discuss “Significant legal developments in the Northeast” at the 37th Annual National Institute on White Collar Crime
- Jonice Gray Tucker to discuss “Small business & regulation: How fair lending has evolved & where it is heading?” at the Consumer Bankers Association Live program
- Jonice Gray Tucker to discuss “Regulators always ring twice: Responding to a government request” at ALM Legalweek
- Jonice Gray Tucker and Kari Hall to discuss “Equity, equality, regulation and enforcement – The evolving regulatory landscape of fair lending, redlining, and UDAAP” at the ABA Business Law Committee Hybrid Spring Meeting