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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.
Judge Nicholas Garaufis of the Eastern District of New York issued a 32-page memorandum opinion this week dismissing the SEC’s civil suit against two former executives of an American hedge fund management firm (earlier coverage can be found here and here).
The SEC’s complaint alleged that the executives violated the FCPA between May 2007 and April 2011 by causing the firm “to pay tens of millions of dollars in bribes to government officials on the continent of Africa.” Specifically, the defendants allegedly induced Libyan authorities to invest in firm managed funds, and directed illicit efforts to secure mining deals by bribing government officials in Libya, Chad, Niger, Guinea, and the Democratic Republic of the Congo. The case against the two executives was the latest in a line of civil and criminal proceedings involving the hedge fund management firm and its employees and executives, and the firm paid $412 million in criminal and civil penalties to settle its FCPA enforcement actions.
Judge Garaufis, in dismissing the complaint in its entirety with prejudice, found that the claims were barred by the FCPA’s five-year statute of limitations, and he rejected the SEC’s tolling arguments. A cornerstone of this dismissal is the Supreme Court’s ruling last year in Kokesh v. SEC, which held that SEC disgorgement actions are subject to a five-year statute of limitations.
A former Guinean mining minister was found guilty earlier this week on bribery and money laundering charges following a seven-day jury trial in Manhattan federal court. He was charged with receiving and laundering $8.5 million in bribes allegedly for securing mining rights for two Chinese companies.
The conviction came one day after the former minister took the stand in his own defense and admitted to lying to banks about his status as a government official, as well as failing to report the payments on his IRS tax return.
The conviction also follows other notable enforcement actions involving the mining industry in the Republic of Guinea. Earlier this year, the SEC charged former Och-Ziff executives with bribing government officials across Africa to secure mining deals, including in Guinea.
On October 2, Canadian mining company Kinross Gold Corp. announced that the SEC and DOJ are investigating potentially improper payments to government officials in West Africa. The companys announcement states that it received subpoenas from the SEC in 2014 and 2015, and a request for information from the DOJ in December 2014. The subpoenas came after the company launched an internal investigation in August 2013 to investigate a whistleblower complaint alleging improper payments to government officials and internal control deficiencies in the companys West African mining operations.
Just a month after announcing its internal investigation of possible FCPA violations, news reports indicate that General Cable Corporation's review will be completed or substantially completed by the first quarter of 2015. The company also announced that it "plans to exit all of its Asia Pacific and African manufacturing operations," although it did not link the exit — which affects nine plants in Asia and five plants in Africa, and approximately 17% of its total sales — to its FCPA investigation. In September, the Kentucky-based cable manufacturer announced that it was investigating its payment practices with respect to employees of public utility companies in Angola, Thailand, India and Portugal due to possible FCPA concerns. News reports indicate that, to date, the company has spent millions on the review, which has included a review of over 450,000 documents and interviews of over 20 individuals. The company also disclosed that it was cooperating with investigations by the DOJ and SEC.
On October 27, the SEC settled administrative proceedings via a cease and desist order against Layne Christensen Co., a Texas-based water management company, related to FCPA violations from operations in Africa. The SEC's order cited over $800,000 in improper payments to officials in Mali, Guinea, the Democratic Republic of the Congo, Burkina Faso, and Tanzania, related to tax liabilities, customs clearance, expatriate work permits, and border entry. Some of those payments were as small as $4. The company agreed to pay over $4,750,000 in disgorgement and prejudgment interest, and a $375,000 penalty. The SEC cited the company's self-disclosure, remediation, and "significant cooperation" as reasons for a smaller penalty. In August, the company announced that the DOJ had declined to file charges related to the alleged FCPA violations. Of note, the company has in the past tied its discovery of the irregular payments to an update of its FCPA policy. Periodic evaluations and updates of FCPA policies are a necessary component of any compliance program, but also represent opportunities to evaluate past conduct and uncover issues.
On November 26, the DOJ announced that Weatherford Internationala multinational oil services companyand certain of its subsidiaries agreed to pay approximately $250 million to resolve FCPA, sanctions, and export control violations. The DOJ alleged in a criminal information that the company knowingly failed to establish an effective system of internal accounting controls designed to detect and prevent corruption, including FCPA violations. The alleged compliance failures allowed employees of certain of the companys subsidiaries in Africa and the Middle East to engage in prohibited conduct over the course of many years, including both bribery of foreign officials and fraudulent misuse of the United Nations Oil for Food Program. The company entered into a deferred prosecution agreement, pursuant to which it must pay an approximately $87 million penalty, retain an independent corporate compliance monitor for at least 18 months, and continue to implement an enhanced FCPA compliance program and internal controls. The subsidiaries pleaded guilty to related specific acts of corruption, including those alleged in a separate criminal information. The DOJ alleged, among other things, that employees of certain subsidiaries engaged in at least three schemes to pay bribes to foreign officials in exchange for government contracts. In addition the parent company agreed to pay over $65 million and submit to compliance and monitoring requirements to resolve parallel SEC civil allegations that the company violated the anti-bribery, books and records, and internal accounting controls provisions of the FCPA. Separately, the parent company entered into an agreement with the Treasury Departments Office of Foreign Assets Control (OFAC) and a deferred prosecution agreement with the DOJ, as well as an agreement with the Department of Commerce, to resolve alleged sanctions and export controls violations. Collectively, those agreements require the company to, among other things, pay $100 million in penalties and finesinclusive of a $91 million settlement with OFACand undergo external audits of its efforts to comply with the relevant U.S. sanctions law for calendar years 2012, 2013, and 2014. Those payments resolve allegations, described in part in another DOJ criminal information, that the company and certain subsidiaries exported or re-exported oil and gas drilling equipment to, and conducted business operations in, sanctioned countriesincluding Cuba, Iran, Sudan, and Syriawithout the required U.S. Government authorization.
- Kathryn L. Ryan to host the affiliate members meeting at AARMR’s 2022 Annual Regulatory Conference & Training
- Kathryn L. Ryan and Jedd R. Bellman to discuss “Risk and compliance management: Are you covered?” at a Mortgage Bankers Association webinar
- Melissa Klimkiewicz and Daniel A. Bellovin to discuss “Things to know about flood insurance” at a NAFCU webinar
- Hank Asbill to discuss “Ethical issues at sentencing” at the 31st Annual National Seminar on Federal Sentencing
- Max Bonici will moderate a panel on “Enforcement risk and other regulatory and compliance issues related to crypto and digital assets” at the American Bar Association’s 2022 Annual Meeting
- John R. Coleman to provide a “CFPB Update” at MBA’s 2022 Regulatory Compliance Conference
- Amanda R. Lawrence to discuss “The shifting data privacy and data protection landscape” at MBA’s 2022 Regulatory Compliance Conference
- Benjamin W. Hutten to discuss “Fundamentals of financial crime compliance” at the Practicing Law Institute
- Benjamin W. Hutten to discuss “Ongoing CDD: Operational considerations” at NAFCU’s Regulatory Compliance & BSA Seminar