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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.
A former sales executive of Brazilian-based aircraft manufacturer Embraer S.A. pleaded guilty on December 21 in connection with a scheme to pay bribes to a Saudi Arabian government official. Colin Steven, a U.K. resident living in the United Arab Emirates, pleaded guilty to a count each of violating the FCPA, conspiracy to violate the FCPA, wire fraud, conspiracy to commit wire fraud, money laundering, conspiracy to launder money, and making a false statement. As part of his plea, he admitted that he engaged in a scheme to have Embraer pay bribes to a foreign official in exchange for assistance in getting an aircraft sales contract. Steven also admitted getting a kickback as part of the scheme and lying to law enforcement officials about the kickback.
Embraer previously paid $205 million to the DOJ and SEC in October 2016 to resolve related FCPA violations in Saudi Arabia, Mozambique, and the Dominican Republic.
On November 29, Deputy Attorney General Rod Rosenstein issued remarks announcing that the DOJ’s FCPA Pilot Program will be made permanent and expanded to provide greater incentives for more companies to voluntarily disclose potential FCPA violations. The new program will be formally incorporated into the US Attorney’s Manual. These changes will include greater potential benefits offered to companies that promptly disclose suspected FCPA violations.
Rosenstein identified three components of what will be called the “FCPA Corporate Enforcement Policy.” First, companies who voluntarily disclose, fully cooperate with the DOJ’s investigation, and undertake “timely and appropriate remediation” will be entitled to a presumption that the matter will be resolved through a declination, which “may be overcome only if there are aggravating circumstances related to the nature and seriousness of the offense, or if the offender is a criminal recidivist.” Second, if the company satisfies all other requirements but there are “aggravating circumstances,” the DOJ “will recommend a 50% reduction off the low end of the Sentencing Guidelines fine range,” although “criminal recidivists may not be eligible for such credit.” And third, the policy will provide details on how the DOJ “evaluates an appropriate compliance program, which will vary depending on the size and resources of a business.”
The Pilot Program began in April 2016. It was greeted with some skepticism that the benefits of disclosure would outweigh the potential benefits, as Rosenstein noted in his remarks. Click here to view previous FCPA Scorecard coverage of the Pilot Program.
DOJ Charges Head of Organization Backed by Chinese Energy Conglomerate and Former Foreign Minister of Senegal with Bribing High-Level Officials in Chad and Uganda
On November 20, the DOJ unsealed a criminal complaint charging Ching Ping Patrick Ho and Cheikh Gadio (collectively, the “Defendants”) with participating in a multi-year, multimillion-dollar scheme to bribe high-level officials in Chad and Uganda in exchange for business advantages for a Shanghai-based energy conglomerate (the “Energy Company”). Mr. Ho is the head of a non-governmental organization based in Hong Kong and Virginia that holds “Special Consultative Status” with the United Nations Economic and Social Council. The Energy NGO is funded by the Energy Company. Mr. Gadio is the former Foreign Minister of Senegal and operated an international consulting firm. The DOJ charged Mr. Ho and Mr. Gadio with (i) conspiring to violate the FCPA, (ii) violating the FCPA, (iii) conspiring to commit international money laundering, and (iv) committing international money laundering. The Defendants have both been arrested and presented before Magistrates.
The DOJ alleges that the Defendants conspired to bribe African government officials on behalf of the Energy Company. Specifically, the DOJ alleges that in an effort to secure oil rights from the Chadian government, the Defendants offered a $2 million bribe to the President of Chad – and in return, the Defendants secured exclusive oil rights without competition. The Defendants allegedly wired almost a million dollars through New York’s banking system in furtherance of their scheme. Mr. Ho also allegedly provided Ugandan officials with gifts and promises to share profits derived from the Energy Company.
On Thursday, November 16, 2017, Wal-Mart Stores, Inc. (“Wal-Mart”) disclosed in an SEC filing that it has set aside $283 million for a potential resolution with DOJ and SEC of alleged FCPA violations. The investigation into possible FCPA violations in Mexico was first disclosed in Wal-Mart’s December 2011 SEC filing and, in subsequent filings, Wal-Mart stated that the allegations had been expanded to include possible violations in Brazil, China, and India, among others.
In its November 16 filing, Wal-Mart reiterated that it has been cooperating with the DOJ and SEC in their investigations, and the discussions with these government agencies has progressed such that Wal-Mart can reasonably estimate a probable loss of $283 million, although it noted that the company cannot assure that its efforts to resolve these matters will ultimately succeed as anticipated.
Click here for FCPA Scorecard’s prior coverage of this matter.
After serving as Acting Chief of the SEC’s Enforcement Division’s Foreign Corrupt Practices Act Unit for more than six months, SEC veteran Charles Cain will now officially take on the position of head of the FCPA Unit. According to an SEC press release, Cain intends “to build upon the important work the unit has done to combat corruption and level the playing field globally.” The SEC named Cain to the Acting Chief role in April 2017 after his predecessor, Kara Brockmeyer, left the agency.
After graduating with honors from The George Washington University Law School, Cain spent two years in the private sector before joining the SEC in 1999. In addition to serving as Deputy Chief of the FCPA Unit since 2011, Cain co-authored A Resource Guide to the U.S. Foreign Corrupt Practices Act, an effort for which he received the Irving M. Pollack Award.
Following a $55 million civil and criminal FCPA settlement by Bio-Rad, a life science research and diagnostics company, in November 2014, the company’s former General Counsel and Secretary, Sanford Wadler, filed a civil complaint against Bio-Rad and executive officers and board members alleging that he was fired for blowing the whistle on FCPA issues. In February 2017 a jury awarded Wadler a total of $11 million in punitive and compensatory damages (including double back-pay under Dodd-Frank).
Bio-Rad recently appealed that verdict to the Ninth Circuit on the grounds that the trial court should have directed the verdict in favor of Bio-Rad because, it argues, the alleged FCPA violations were the result of Wadler’s lack of due diligence, because Wadler did not first consult the company’s compliance officers and FCPA lawyers before reporting, and because his allegations were discredited by trial witnesses. Bio-Rad also claims that the trial court wrongly excluded certain impeachment testimony, and that Wadley did not qualify as a “whistleblower” under Dodd-Frank in light of his internal reporting.
Florida Energy Company Owner Pleads Guilty to Conspiracy to Violate the FCPA in Venezuelan Bribery Scheme
On October 11, the DOJ announced that Fernando Ardila Rued – a co-owner of several Florida-based energy companies – pleaded guilty to FCPA charges that he conspired to bribe foreign officials in exchange for obtaining contracts from Venezuela’s state-owned energy company, Petroleos de Venezuela S.A. (PDVSA). In his plea, Ardila admitted to conspiring with two other individuals – Abraham Jose Shiera Bastidas and Roberto Enrique Rincon Fernandez – from 2008 through 2014 to bribe PDVSA purchasing analysts through cash payments and other entertainment in order to win contracts for Shiera and Rincon’s companies. Ardila is the tenth individual who has pleaded guilty in connection with the PDVSA scheme.
This investigation has been a collaboration between the DOJ, ICE-HSI, and IRS-Criminal Investigation Division. Previous FCPA Scorecard coverage of the PDVSA investigation can be found here.
On October 4, the Department of Justice expanded the scope of its indictment against retired U.S. Army colonel Joseph Baptiste. On August 29, Baptiste was charged with conspiracy to violate the Foreign Corrupt Practices Act after he allegedly solicited bribes from undercover agents who posed as potential investors for infrastructure projects in Haiti. The expanded charges include conspiracy to launder money and violate the Federal Travel Act. Prior FCPA Scorecard coverage of the initial indictment and the related FCPA sting operation can be found here.
On September 28, the SEC announced that diagnostic test manufacturer Alere Inc. had settled a variety of FCPA books and records and internal control allegations stemming from its sales practices in Africa, Asia, and Latin America, including the failure to improperly characterize and record payments made to government officials in Columbia and India. In concluding the more than two year investigation, Alere agreed to pay a civil monetary penalty of $9.2 million, and disgorgement and interest of approximately $3.8 million. As part of the settlement agreement, Alere did not admit or deny the SEC’s findings of fact. As discussed in a previous FCPA Scorecard post, the DOJ announced in March 2016 that it is also investigating the company’s foreign sales practices. That investigation is ongoing.
Ongoing FCPA investigations can of course have costly business implications beyond reputational damage; the ongoing FCPA investigation of Alere appears to have taken a toll, likely playing a role in the reduced price paid by Abbott Laboratories in April 2017 to acquire Alere.
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