Subscribe to our FinCrimes Update for news about the Foreign Corrupt Practices Act and related prosecutions and enforcement actions.
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 Friday, August 18, a Russian employee of Bombardier Transportation AB, a Swedish branch of Bombardier, the Canadian producer of aircraft and train equipment, was charged by a Swedish prosecutor with aggravated bribery. Evgeny Pavlov, a sales executive, is alleged to have bribed a public official in Azerbaijan to win a contract valued over $300 million to supply Azerbaijan with a signaling system for its railways. Pavlov was first detained in March 2017 and has been held in custody since that time. If convicted, he faces six years imprisonment and deportation.
According to a March 2017 report by the Organized Crime and Corruption Reporting Project (OCCRP), an investigative reporting network spread across Europe, Africa, Asia, and Latin America established in 2006 to conduct transnational investigative reporting to expose global organized crime and corruption, Bombardier Transportation AB was suspected of paying “millions of dollars in bribes to unidentified Azerbaijani officials through a shadowy company registered in the United Kingdom,” which the Swedish prosecutor has characterized as having “no employees or business” but which profited substantially in this deal by purchasing equipment from Bombardier Transportation AB and selling the identical equipment to Bombardier’s Azerbaijan affiliate for a profit. According to export records reviewed by the OCCRP, the equipment was delivered directly from Bombardier Transportation AB to Azerbaijan. The report identified the UK intermediary as Multiserv Overseas Ltd., which, according to an earlier OCCRP report is alleged to have ties to Vladimir Yakunin, the former president of Russian Railways, and is alleged to have had similar involvement in a Bombardier contract with Russia.
Teva Pharmaceutical Industries Ltd. (Teva), an Israeli company, stated in its Form 6-K filed with the SEC on November 15, 2016, that it has set aside approximately $520 million for a potential settlement of FCPA matters being investigated by the SEC and DOJ. Teva explained that the reserve relates to conduct that occurred between 2007 and 2013 in Russia, Mexico, and the Ukraine, and that it was discovered in the course of the investigation that began in early 2012 with the issuance of an SEC subpoena to Teva, as well as a concurrent internal investigation of its worldwide business practices.
Should Teva enter into a settlement, it will top the growing list of pharmaceutical companies that have been subject to multimillion dollar penalties for conduct in violation of the FCPA, including the following:
- AstraZeneca ($5.5 million settlement in 2016 of allegations relating to bribery of Chinese and Russian doctors)
- GlaxoSmithKline ($20 million settlement in 2016 of allegations relating to bribery of Chinese health care professionals)
- Novartis ($25 million settlement in 2016 of allegations relating to bribery of Chinese doctors
- Bristol-Myers Squibb & Co. ($14 million settlement in 2015 of allegations relating to bribery of healthcare professionals at state-owned hospitals in China)
- Eli Lily & Co. ($29 million settlement in 2012 of allegations relating to bribery of government employed physicians in Russia, Brazil, China and Poland)
- Johnson & Johnson ($70 million settlement in 2011 of allegations relating to conspiracy and bribery of doctors employed by state-controlled health care systems in Greece)
On September 8, Cisco Systems Inc. disclosed in its annual statement that following an investigation into its operations in Russia and certain of the Commonwealth of Independent States, the DOJ and SEC have both declined to bring enforcement actions under the FCPA. An announcement of possible violations was first disclosed in the December 2013 blog post by Roxane Marenberg, Vice President and Deputy General Counsel in Cisco’s Global Compliance Enablement division. In the post, Marenberg stated that the company was conducting an investigation into alleged FCPA violations at the request of the SEC and DOJ in response to a communication those agencies had received concerning the company’s operations and discounting practices. Cisco’s disclosures did not provide any further detail about the nature of the business activities being investigated.
In conjunction with the SEC’s recent settlement AstraZeneca, the U.K.-based pharmaceutical company announced on August 30 that the DOJ has closed its parallel foreign bribery investigation. As detailed here, the SEC settled charges against Astrazeneca for allegedly improper payments made by the company’s wholly owned subsidiaries in China and Russia. Under the SEC settlement, the company agreed to disgorge $4.325 million and pay a $375,000 civil penalty with $822,000 in prejudgment interest. As reported by Reuters, the company issued a public statement stating it was “pleased to have resolution of these matters.”
SEC Settles with Health Science Company Nordion and Former Employee Over Bribes to Russian Government Officials
On March 3, the SEC announced it had settled FCPA charges with health science company Nordion (Canada) Inc. and a former engineer, Mikhail Gourevitch, for their role in bribing Russian government officials to obtain approvals for a liver cancer drug. Nordion and Gourevitch settled their respective cases with the SEC via separate Administrative Orders Instituting Cease-and-Desist Proceedings. Both Nordion (now a privately held company, but which was publicly-traded on the NYSE during the 2004-2011 time period at issue), and Gourevitch, consented to the SEC orders without admitting or denying the FCPA findings. In the order settling the charges against Nordion, the SEC found that the company violated the FCPAs books and records and internal accounting controls provisions in connection with payments made to a Russian third-party agent. According to the SEC, portions of the payments to the agent were used to bribe government officials in Russia to obtain government approval to license, register, and distribute TheraSphere, a Nordion liver cancer therapy drug. Nordion never ultimately won approval to distribute TheraSphere and did not earn any profits as a result from the improper payments. The order found that Nordion mischaracterized the agent fees as legitimate business expenses and that the company did not (i) have adequate policies and procedures in places to detect corruption risks and (ii) provided little, if any, training regarding how to conduct business in high-risk jurisdictions. Nordion, which is a leading provider of medical isotopes, targeted therapies, and sterilization technologies, agreed to pay a $375,000 penalty to settle the charges. The SEC noted Nordions cooperation, self-reporting, and remedial acts in assessing the penalty. Gourevitch, a dual Canadian and Israeli citizen, agreed to pay $100,000 in disgorgement, $12,950 in prejudgment interest, and a $66,000 penalty to settle the charges that he violated the anti-bribery, books-and-records, and false records provisions of the FCPA. The SEC found that Gourevitch facilitated and monitored the consulting contracts between Nordion and the Russian third-party agent, who was Gourevitchs childhood friend.
Former Russian Government Official Sentenced For Nuclear Energy Conspiracy Involving FCPA Violations
On December 15, a former Russian government official, Vadim Mikerin, was sentenced to 48 months in prison for conspiracy to commit money laundering in connection with $2 million in bribe payments he accepted to award government contracts with a Russian state-owned nuclear energy corporation. U.S. District Judge Theodore D. Chuang of the District of Maryland also ordered Mikerin, who resides in Maryland, to forfeit $2.1 million. Between 2004 and October 2014, Mikerin received bribe payments intended to improperly influence him in his role as a key official at a subsidiary of Russias State Atomic Energy Corporation and to secure improper business advantages for U.S. companies that did business with the subsidiary. Mikerin admitted that, in connection with the FCPA violations, he conspired with others to transmit approximately $2,126,622 from the United States to shell company bank accounts in Cyprus, Latvia and Switzerland. Mikerin also admitted to using consulting agreements and code words to conceal the bribes. Two of Mikerins co-conspirators Daren Condrey and Boris Rubizhevsky also pleaded guilty to conspiracy charges and are awaiting sentencing.
On August 31, 2015, the DOJ announced that Vadim Mikerin, the former president of TENAM Corporation and a director of the Pan American Department of JSC Techsnabexport (TENEX), pleaded guilty to conspiracy to commit money laundering in connection with arranging over $2 million in bribes for contracts with the Russian state-owned nuclear energy corporation. TENEX, a subsidiary of Russias State Atomic Energy Corporation, is based in Moscow and acts as the sole supplier and exporter of Russian Federation uranium and uranium enrichment services to nuclear power companies worldwide. Mr. Mikerin admitted to conspiring to transfer funds from the United States to offshore accounts with the intent to perpetuate a bribery scheme in violation of the FCPA. These bribes were made to influence the award of contracts to transport down-blended uranium to US nuclear utility providers. As part of Mr. Mikerins plea agreement, he agreed to forfeit over $2.1 million he received in bribes. Mr. Mikerin is expected to be sentenced in December, and faces up to five years in prison and a $250,000 fine. In addition to Mr. Mikerin, two other individuals, Darren Condrey and Boris Rubizhevsky, have pleaded guilty for their respective involvement in the scheme, including conspiracy to violate the FCPA and commit wire fraud, and conspiracy to commit money laundering, respectively.
In a February 9, 2015 securities filing, generic drug manufacturer Teva Pharmaceuticals disclosed that in the course of its internal investigation into business practices in various locations around the world, it had discovered certain practices in Russia, Europe, and Latin America that "likely" constitute violations of the FCPA. Teva had previously disclosed in 2012 that it received subpoenas and document requests from the SEC and the DOJ relating to the Company's FCPA compliance in certain countries. Teva had also disclosed at that time that it was conducting an internal investigation into its FCPA-related compliance practice around the world. During the course of the investigation, Teva reported that its affiliates in certain countries under investigation had provided "inaccurate or altered information relating to marketing or promotional practices" to local authorities, and that it had brought such issues to the attention of U.S. authorities. The SEC and DOJ's investigations appear to be ongoing.
On January 6, a federal grand jury in Pennsylvania returned a 14-count indictment charging the former owner of the Chestnut Group financial consulting companies with bribing an official of the European Bank for Reconstruction and Development (EBRD). EBRD is a multilateral development bank owned by 64 sovereign nations that "fosters transition to market economies in countries from central and eastern Europe to central Asia and the southern and eastern Mediterranean." According to the indictment, Dmitrij Harder, a Russian national, paid $3.5 million in bribes to the sister of the EBRD official in order to influence the official's actions on financing applications submitted by two separate clients of the Chestnut Group. The indictment alleges that the two clients, both of which conducted oil-and-gas operations in Russia, retained Chestnut Group "despite its relatively small size, distant location from the EBRD, and unproven track record as a financial advisor." The EBRD approved the two applications. Thereafter, the Chestnut Group made payments to the EBRD official's sister, who was retained as a consultant but actually provided no services to the Chestnut Group. The indictment alleges violations of the Foreign Corrupt Practices Act, the Travel Act, the money laundering statute and conspiracy. Mr. Harder's attorney has disputed the charges in media reports.
- Hank Asbill to discuss "The federal fraud sentencing guidelines: It's time to stop the madness" at a New York Criminal Bar Association webinar
- Daniel P Stipano to moderate "Digital identity: The next gen of CIP" at the American Bankers Association/American Bar Association Financial Crimes Enforcement Conference