Subscribe to our FinCrimes Update for news about the Foreign Corrupt Practices Act and related prosecutions and enforcement actions.
The U.K.’s Serious Fraud Office (SFO) announced on February 22 that it was ending two long-running corruption-related investigations – one of aviation company Rolls-Royce and the other of pharmaceutical giant GlaxoSmithKline – without bringing charges against any individuals.
In 2017, Rolls-Royce paid $650 million to settle an SFO investigation into a government kickbacks scheme. In connection with the resolution of the SFO’s charges, Rolls-Royce admitted to bribing government officials in Russia, India, China, Nigeria, and elsewhere in exchange for contracts worth hundreds of millions of pounds. Rolls-Royce also paid $170 million to resolve related charges brought by the DOJ, with the DOJ later charging five individuals for their alleged participation in the bribery scheme.
Although the SFO announced in 2014 that GlaxoSmithKline was under investigation, the SFO never disclosed the subject matter of that investigation. In its only announcements about the case, the SFO has noted simply that the investigation concerned the company’s “commercial practices.” In 2012, GlaxoSmithKline had paid $3 billion in the U.S. to settle charges brought by U.S. prosecutors concerning alleged off-label marketing, and in 2014 was convicted in China of bribing doctors and hospitals to improve sales, but it remains unknown whether the SFO’s investigation related to one of these known issues or something different.
The SFO Director explained in a public statement that the decision to decline prosecution of any individuals in connection with these investigations was because “there is either insufficient evidence to provide a realistic prospect of conviction, or it is not in the public interest to bring a prosecution in these cases.”
On February 15, Cognizant Technology Solutions Corporation, an information technology and business process outsourcing company, paid $25 million to settle SEC civil charges that it violated the FCPA. The SEC alleged that Cognizant paid $3.6 million in bribes through its construction contractor to senior government officials in India in order to obtain permits needed to build, among other things, a large office campus in Chennai. The SEC alleged that by paying the bribes, Cognizant thereby avoided millions of dollars in costs it would have otherwise incurred. To resolve the SEC’s allegations, Cognizant paid $19 million in disgorgement and a $6 million penalty.
The DOJ declined to bring criminal charges against Cognizant, citing, among other factors, the company’s voluntary self-disclosure, comprehensive investigation, full cooperation and remediation, and its preexisting compliance program. Cognizant issued a statement highlighting that the matter did not concern any of the company’s work with clients and did not affect any of the services it provides to clients.
On the same day the settlement was announced, two former Cognizant executives – the president and chief legal officer – were hit with civil and criminal charges for allegedly authorizing $2 million in bribes and directing the creation of false contractor change orders to mask payment of the bribes. The former executives are charged with violating the anti-bribery, books and records, and internal accounting controls provisions of the FCPA. Pursuant to its letter agreement with DOJ, Cognizant is required to fully cooperate in the ongoing prosecutions.
Micronesian official charged with money laundering conspiracy after guilty plea to bribery by Hawaiian executive
On February 11, the Department of Justice (DOJ) unsealed conspiracy to commit money laundering charges against a Micronesian government official alleged to have taken bribes to secure engineering and project management contracts from the government of the Federated States of Micronesia (FSM). The charges follow the recent guilty plea by Frank James Lyon, a Hawaiian executive, to a charge of conspiracy to bribe the Micronesian official in violation of the FCPA.
According to the DOJ, Master Halbert was a government official in the FSM Department of Transportation, Communications and Infrastructure who administered FSM’s aviation programs. Between 2006 and 2016, Lyon’s Hawaii-based engineering and consulting company allegedly paid around $440,000 in bribes in the form of cash, vehicles, and entertainment to FSM officials, including Halbert, to obtain and retain contracts with the FSM government valued at nearly $8 million. The complaint unsealed on Monday contains specific examples of requests by Halbert to Lyon for cash gifts and a 2014 Chevy Silverado. According to Lyon’s guilty plea, he fulfilled Halbert’s requests and sent wire transfers and the automobile internationally for Halbert’s personal use.
On February 6, the U.K. SFO announced that a former sales executive, David Lufkin, of an oil-services company, Petrofac PLC, had pleaded guilty in the U.K. to 11 counts of bribery regarding payments made in exchange for winning oil-services contracts in Iraq and Saudi Arabia. Lufkin – a British citizen and the former global head of sales for a subsidiary of Petrofac – pleaded guilty to participating in payments of more than $6 million to agents to win contracts worth more than $4 billion in Iraq and Saudi Arabia. The SFO’s investigation of Petrofac regarding suspected bribery and money laundering, which was announced in May 2017, is ongoing, but no other officers or employees are currently charged.
On January 28, DOJ announced charges against the former chief executive and a former senior vice president of a Barbados-based insurance company, Insurance Corporation of Barbados Limited (ICBL). The indictment alleges that the ICBL executives, Ingrid Innes and Alex Tasker, participated in a scheme to launder approximately $36,000 in bribes to the then-Minister of Industry of Barbados in exchange for his assistance in securing government contracts for ICBL. According to the indictment, the bribes were laundered through a United States bank account in the name of a dental company located in New York. The former Minister of Industry, Donville Inniss, was arrested in August 2018 and the indictment against him referenced, but did not name, his alleged co-conspirators. The superseding indictment against the three co-defendants and another still unnamed former insurance executive was unsealed on January 18, 2019. Prior Scorecard coverage of the arrest and indictment of the former Minister of Industry can be found here.
ICBL voluntarily self-disclosed the case to DOJ and received a declination letter from DOJ for its cooperation pursuant to the FCPA Corporate Enforcement Policy. The declination letter required ICBL to disgorge $93,940.19 in profits received through the conduct at issue. The declination was based, in part, on ICBL’s termination of all executives and employees involved in the alleged misconduct and in helping DOJ identify the culpable individuals. Prior Scorecard coverage of the declination letter can be found here.
On January 8, the Treasury Department’s Office of Foreign Assets Control (OFAC) sanctioned Venezuelan individuals and companies, including billionaire news network Globovision owner Raul Gorrin Belisario and former Venezuelan National Treasurer Claudia Patricia Diaz Guillen, for their participation in a bribery scheme involving bribes to members of the Venezuelan government. According to the Treasury Department, OFAC designated or blocked seven individuals, including Diaz and Gorrin, and 23 entities, including Globovision, pursuant to Executive Order 13850, for their roles in bribing the Venezuelan Office of the National Treasury in exchange for the right to conduct illicit foreign currency exchanges in Venezuela.
As a result of the designation, all property and interests in property of the designated individuals and entities “subject to or transiting U.S. jurisdiction are blocked,” and any U.S. transactions with them are prohibited. However, two Globovision companies owned by Gorrin and his business partner will be permitted to continue to conduct U.S. business for a one-year period. This period is intended to allow the Venezuelan-based Globovision news network to continue operating while Gorrin and his business partner divest their holdings in the company.
As FCPA Scorecard previously reported, Gorrin was indicted under seal in August for conspiracy to violate the FCPA, conspiracy to commit money laundering, and nine counts of money laundering.
On December 26, Brazil’s Centrais Elétricas Brasileiras S.A. – Eletrobras (Eletrobras or the company) entered into an administrative order to settle the SEC’s claims that Eletrobras violated the books and records and internal accounting controls provisions of the FCPA and agreed to pay a civil monetary penalty of $2.5 million.
Eletrobras, which is majority-owned by the Brazilian government, is alleged to have – through former officers of its nuclear power generation subsidiary – rigged bids and paid bribes through private construction companies in relation to construction of a nuclear power plant in Brazil. This matter was first announced publicly in October 2016 when the company hired outside counsel to conduct an internal investigation into related conduct.
In entering into this administrative order, the SEC consider the company’s cooperation efforts, including sharing facts discovered in its internal investigation and producing and translating related documents, as well as its efforts towards remediation, including discipline of involved employees, enhancement of internal accounting controls and compliance functions, and adoption of new anti-corruption policies and procedures.
Previous coverage can be found here.
On December 19, a UK Court found former Alstom Power Ltd. Global Sales Director Nicholas Reynolds guilty of conspiracy to corrupt in connection with his role in bribing Lithuanian officials to win lucrative power station contracts for the French power and transportation company. Mr. Reynolds will be sentenced on December 21.
The conviction follows the guilty pleas of Alstom and two other individuals in the UK in connection with the company’s Lithuanian bribery scheme. According to the SFO, Alstom companies paid Lithuanian politicians more than €5 million (~$6.3 million in today’s USD) in bribes to secure the contracts, valued at €240 million (~$304 million in today’s USD). The SFO also has charged Alstom and former Alstom executives for alleged corruption spanning Hungary, India, Poland, and Tunisia.
In late 2014, Alstom and various subsidiaries agreed to pay a then-record $772 million fine in connection with FCPA violations spanning numerous countries. For prior FCPA Scorecard coverage of Alstom, please see here.
On December 11, the Organization for Economic Cooperation and Development (OECD) published a study examining the consequences faced by public officials who allegedly accepted bribes. The study analyzed 55 foreign-bribery cases concluded between 2008 and 2013 in which companies based in OECD countries had been sanctioned for bribery. It found that government officials were criminally sanctioned in only one-fifth of the 55 cases studied. An additional 11 actions were still pending at either the investigative or prosecutorial stages. The study also found that none of the countries in which bribes were paid, the demand-side countries, detected that their public officials demanded a bribe. Instead, the study found that the “media plays a major role in international information flow.”
On December 10, a former procurement officer of Petroleos de Venezuela S.A. (PDVSA), Venezuela’s state-owned and state-controlled energy company, pleaded guilty to one count of obstructing an investigation into bribes paid by the owner of U.S.-based companies to Venezuelan government officials in exchange for securing additional business with PDVSA and payment priority on outstanding issues. Alfonso Eliezer Gravina Munoz (Gravina), who previously worked for PDVSA in Houston, Texas, pleaded guilty to one count of conspiracy to obstruct an official proceeding.
The charge stems from a guilty plea Gravina entered on December 10, 2015, to one count of conspiracy to launder money and one count of making false statements on his federal income tax return. Under the terms of a plea agreement in that case, Gravina agreed to cooperate with the investigation by being interviewed by the United States, and to providing “truthful, complete and accurate information” to government agents and attorneys. In the latest plea, though, Gravina admitted that after his earlier plea, he concealed facts about bribes paid to PDVSA by a target of the investigation, referred to as Co-Conspirator 1 in the indictment. Additionally, Gravina informed Co-Conspirator 1 that U.S. government authorities were investigating Co-Conspirator 1, and provided Co-Conspirator 1 with information about the investigation, including the topics discussed in Gravina’s meetings with the government. Consequently, Co-Conspirator 1 destroyed evidence and attempted to flee the country in July 2018. Gravina is scheduled to be sentenced on Feb. 19, 2019.
- Kathryn L. Ryan to discuss "Industry open forum session on NMLS usage" at the NMLS Annual Conference & Training
- Tim Lange to discuss "State legislative update - MSBs and consumer finance" at the NMLS Annual Conference & Training
- Kathryn L. Ryan to discuss "Regulating innovative consumer lending products" at the NMLS Annual Conference & Training
- Daniel P. Stipano to moderate "Washington update" at the Puerto Rican Symposium of Anti Money Laundering
- Melissa Klimkiewicz to discuss "Private flood insurance updates" at the Mortgage Bankers Association Servicing Solutions Conference & Expo
- Jonice Gray Tucker and H Joshua Kotin to discuss regulatory compliance issues in the fintech industry at Protiviti's Risk & Compliance Innovation Roundtable
- APPROVED Checkpoint Webcast: CFL overview
- Amanda R. Lawrence and Sherry-Maria Safchuk to discuss "California privacy rule" on an NAFCU webinar
- Sasha Leonhardt to discuss "MLA & SCRA" on a NAFCU webinar
- Daniel P. Stipano to discuss "Pathway of the SARs: Tracking trajectories of suspicious activity reports from alerts to prosecution" at the ACAMS International AML & Financial Crime Conference
- Daniel P. Stipano to discuss "Which bud’s for you? A deep-dive into evolving marijuana laws" at the ACAMS International AML & Financial Crime Conference
- John P. Kromer to discuss "Navigating the multi-state fintech regulatory regime" at the American Conference Institute Legal, Regulatory and Compliance Forum on Fintech & Emerging Payment Systems