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As a follow up to its March 2016 reporting about the Unaoil bribery scandal, the Huffington Post recently published an interview with a former Unaoil employee who has admitted to paying bribes to a manager in Libya’s state-owned oil company in order to win a government contract. Lindsey Mitchell, a former Unaoil manager, told the Huffington Post and the Australian newspaper The Age that in the summer of 2009 he was summoned to a meeting with a production manager at Waha, a subsidiary of the Libyan National Oil Company. At the meeting, the production manager provided Mitchell with details relating to an upcoming bid for a $45 million Libyan government contract. Huffington Post reports that “[t]he next morning, Mitchell called Ata, Cyrus and Saman Ahsani, the father and two sons who ran Unaoil. They were pleased. That afternoon, Martin Abram, a Unaoil manager, met Mitchell at the Unaoil staffhouse to deliver an envelope full of cash” which Mitchell delivered to the Waha manager. A few days later, Mitchell resigned. It is unclear whether Unaoil ever won the contract though the manager told Mitchell that “he expected a 5-10 percent kickback ― about $2-4 million ― if Unaoil won the contract.” According to the interview, Mitchell has recently been cooperating with U.S., U.K., Australian, and Canadian law enforcement authorities. Unaoil has denied Mitchells’ allegations and denies paying bribes to foreign officials in order to win deals for its multinational clients. Previous Scorecard coverage on the Unaoil investigations can be found here.
Anheuser-Busch InBev Settles FCPA Civil Charges with SEC, Including Charges of Improper Whistleblower Restrictions
On September 28, Anheuser-Busch InBev (AB InBev) agreed to pay $6 million to the SEC to settle FCPA civil charges in connection with payments to government officials in India through third-party sales promoters. AB InBev entered into an Administrative Order Instituting Cease-and-Desist Proceedings to settle charges that it violated the books and records and internal controls provisions of the FCPA. AB InBev did not admit or deny the charges.
According to the SEC’s Order, Belgium-based brewing company AB InBev made improper payments to Indian government officials via third-party sales promoters in order to obtain beer orders and increase brewery hours (which would increase sales and production). The Order found that AB InBev had inadequate internal accounting controls to detect and prevent these payments and to ensure that transactions were recorded properly.
The SEC’s Order also includes allegations that AB InBev violated Dodd-Frank’s whistleblower provisions by impeding an individual from communicating directly with the SEC. The Order describes an individual who told AB InBev about the improper payments and thereafter entered into a Separation Agreement with AB InBev. This individual had previously been communicating voluntarily with the SEC about the improper payments in India. However, believing that language in the Separation Agreement impeded his communications with the SEC, the SEC alleged that the individual thereafter stopped communicating with the Commission until receiving a subpoena for testimony. According to the Order, the employee feared that communications with the SEC would trigger the liquidated damages provision of the agreement, requiring him to pay $250,000 for violating the deal’s confidentiality terms.
According to an August 9, 2016 news report, six former and current executives of Novartis Korea have been indicted by prosecutors in Seoul for alleged corruption involving payments to physicians intended to boost sales. The news report stated that the officials are alleged to have made payments to the physicians totaling $2.3 million from 2011 to present. Several doctors and publishers of medical journals involved in the payments were also indicted according to the news report.
In March 2016, a different division of the Switzerland-based pharmaceutical company entered into a settlement with the SEC to resolve alleged violations of the FCPA’s book and records and internal controls provisions related to activities in China. Prior FCPA Scorecard coverage of the Novartis AG settlement can be found here. In the past few years, several other pharmaceutical companies have also faced corruption allegations regarding allegedly corrupt payments to employees of Chinese state-owned hospitals. Prior FCPA Scorecard coverage of those investigations can be found here.
On April 20, Dmitrij Harder, the former owner and president of two Pennsylvania consulting companies (referred to as the Chestnut Group) pleaded guilty to violations of the FCPA. Harder pleaded guilty to two counts of violating the FCPA by bribing an official at the European Bank for Reconstruction and Development (“EBRD”) before U.S. District Judge Paul S. Diamond of the Eastern District of Pennsylvania. The EBRD was a development bank based in London that was owned by approximately 65 sovereign nations and provided financing for development projects in Eastern Europe. On March 2, Judge Diamond ruled that the FCPA covered EBRD as a public international organization, rejecting one of Harder’s key defenses at his upcoming trial.
Between 2007 and 2009, Mr. Harder was alleged to have paid approximately $3.5 million in bribes to an EBRD official in exchange for the EBRD’s approval of applications for financing from two of the Chestnut Group’s corporate clients. The Chestnut Group earned approximately $8 million in “success fees” as a result of the two deals, which provided the Chestnut Group’s clients with nearly $300 million in investments and loans.
Mr. Harder’s sentencing is scheduled for July 21, 2016. He faces up to 10 years in prison. In a related action, the EBRD official, Andrey Ryjenko, and his sister, Tatjana Sanderson, were charged by the United Kingdom’s Crown Prosecution Service and are pending trial.
On April 5, 2016, the DOJ announced a one-year pilot program designed to encourage corporations to voluntarily self-report FCPA-related misconduct and cooperate with the DOJ. The program emerges from the DOJ’s heightened focus on individual accountability as highlighted in the Yates Memo. For corporations that (i) voluntarily disclose the misconduct and all relevant facts related to the misconduct “within a reasonably prompt time after becoming aware of the offense,” (ii) fully cooperate with the DOJ investigation, and (iii) take appropriate actions towards remediation, DOJ may offer up to a 50% fine reduction from the bottom of the applicable Sentencing Guidelines fine range calculation, and will generally not require the appointment of a monitor if the corporation has already implemented an effective compliance plan. Furthermore, DOJ notes that in certain circumstances, the Department will consider declining prosecution altogether.
While the pilot program ends in one year, any corporation that voluntarily self-reports or cooperates in FCPA matters during the pilot period will be eligible for the benefits, even if the pilot period expires during the investigation. More details and specific requirements can be found in the DOJ’s Foreign Corrupt Practices Act Enforcement Plan and Guidance.
On March 15, an Ohio-based provider of sand products used in the oil and gas industry, disclosed that in December 2015, the SEC notified it of an investigation of potential violations of the FCPA and other securities laws related to its international operations. The company had previously retained outside counsel to conduct an investigation and determined that no further action was necessary. The company did not estimate the potential costs of the SEC investigation or any potential penalties or fines that could result.
On December 21, the FIFA Ethics Committee announced that it would ban its embattled President, Sepp Blatter, and Vice President, Michel Platini, from all football-related activities for eight years. The ban was imposed as a result of an investigation into a payment of $2 million from FIFA to Platini in 2011 that was authorized by Blatter. The Ethics Committee’s statement on their decision stated that the payment was made without a legal basis. Platini is currently the head of UEFA, the governing body of European football. News reports state that it was widely anticipated that Platini would be elected President of FIFA in the upcoming 2016 election, but he has now withdrawn his candidacy following the Ethics Committee’s decision. Click here to view prior FCPA Scorecard posts on FIFA.
On August 3, a federal district court in New York dismissed with prejudice a securities class action suit filed against Chinese oil and gas company PetroChina Co. Ltd. The suit alleged that statements in the company’s 2011 and 2012 financial statements claiming the company was in compliance with its internal rules and securities regulations were false or misleading. The plaintiffs filed the suit after the Chinese government announced that it was investigating four of the company’s top executives for corruption.
The court dismissed the complaint in its entirety, finding that the plaintiffs failed to allege any acts of bribery or corruption that predated the filing of the 2011 and 2012 financial statements. The court wrote: “[T]his Court is not requiring that Plaintiffs allege a detailed account of the particular illicit deals that PetroChina officials were allegedly engaged in. Plaintiffs are required, nonetheless, to establish—at a bare minimum—that the underlying fraud took place during the time period covered by the purportedly false public statements and that someone at PetroChina knew or had reason to know about it.”
On July 23, Thomas Baxter, General Counsel for the New York Federal Reserve Bank, in public remarks at a risk management conference, questioned the FCPA’s “exception for ‘facilitating or expediting payments’ made in furtherance of routine government action.” Mr. Baxter stated that “official corruption is a problem that some U.S. financial institutions have found challenging during the last year,” and suggested that those problems could derive from an organizational value system undermined by the facilitating payments exception. Mr. Baxter acknowledged that the exception “is grounded in a practical reality,” but expressed his preference for a zero tolerance standard. He explained that “when an organizational policy allows some types of official corruption . . ., this diminishes the efficacy of compliance rules that are directed toward stopping official corruption.” He urged U.S. financial institutions to foster organizational value systems that “go beyond black-letter U.S. law” with regard to official corruption. Mr. Baxter made these comments in the context of a broader speech on organizational culture and its impact on compliance in which he also suggested that foreign banks’ recent sanctions and tax evasion compliance woes could be explained by a difference in the corporate values of foreign and U.S. banks and their employees when it comes to laws designed to support broader U.S. public policy.
- Daniel R. Alonso to discuss "How to become an AUSA" at the New York City Bar Association Minorities in the Courts Committee “How To” series
- Michelle L. Rogers and Kathryn L. Ryan to discuss “Fintech U.S. expansion” at the Tech Nation 3.0 cohort meeting
- Melissa Klimkiewicz to discuss "Flood insurance basics" at the NAFCU Virtual Regulatory Compliance School
- Jonice Gray Tucker to discuss "Compliance under Biden" at the WSJ Risk & Compliance Forum