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GSK responding to inquiries from SFO, DOJ, and SEC regarding its use of third party advisors in China
In a securities filing on Wednesday, Feb. 7, U.K.-based pharmaceutical company GlaxoSmithKline PLC (“GSK”) announced that it is responding to requests for information from the DOJ and SEC regarding third-party advisors that GSK engaged in China. These requests came about after GSK, pursuant to its continuing obligation to report to the SEC on its efforts to improve compliance following its September 2016 settlement of allegations that it violated the FCPA, informed the SEC and DOJ that the SFO had sought additional information in the course of its own investigation, which began in May 2014. GSK was also investigated by Chinese authorities and, in September 2014, GSK’s Chinese subsidiary was reportedly found guilty of bribery resulting in GSK’s payment of a $491.5 million fine.
On January 18, the Serious Fraud Office (“SFO”) confirmed the opening of an investigation of Chemring Group PLC (“Chemring”) and its subsidiary, Chemring Technology Solutions Limited (“CTSL”) into alleged bribery, corruption, and money laundering. Chemring, a UK-based company that designs and makes products in the aerospace and defense industries, stated that the investigation followed a voluntary report from CTSL relating to “two specific historic contracts.” According to Chemring, the first of these contracts was awarded before the company took over the business group being investigated, while the second contract occurred after the acquisition. Chemring stated that the company will fully cooperate with the SFO’s investigation and provide further updates.
On January 5, 2018, the Department of Justice announced that Joo Hyun Bahn, also known as Dennis Bahn, pleaded guilty to charges that he tried to bribe a Qatari official in connection with a sale of a high rise building complex in Vietnam. He pleaded guilty to one count of conspiracy to violate the FCPA and one count of violating the FCPA before U.S. District Judge Edgardo Ramos of the Southern District of New York. Mr. Bahn was charged with his father Ban Ki Sang, who was an executive at the South Korean construction company Keangnam, and Malcolm Harris, an arts and fashion blogger, in December 2016. Mr. Bahn is the nephew of former UN Secretary-General Ban Ki-moon.
In his guilty plea, Mr. Bahn admitted to joining a conspiracy to make $2.5 million in bribe payments to a Qatari official between February 2014 and May 2015 in an effort to sell the Keangnam-owned Hanoi Landmark Tower and residential buildings in Vietnam, which were worth $800 million. Mr. Bahn admitted that he and Mr. Ban agreed to pay $500,000 to a Qatari official to persuade the official to use the Qatari sovereign wealth fund to purchase the building. The $500,000 was then transferred to Mr. Harris, who posed as an agent for the foreign official, but instead of passing the payment to the foreign official, Mr. Harris double-crossed his codefendants and stole the $500,000.
Although the scheme involved a South Korean construction company and a Qatari foreign official, the Indictment alleged that Mr. Bahn qualified as a “domestic concern” pursuant to 15 USC 78dd-2(h)(1) because he was a lawful permanent resident of the United States and resided in New Jersey at the time.
Mr. Bahn faces up to five years in prison on each count. Mr. Harris previously pleaded guilty to charges of wire fraud and money laundering for his role in the scheme, and was sentenced to 42 months in prison. Mr. Ban has been charged, but not yet arrested.
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.
Court Reduces Sentence for Former Cayman Islands Soccer Executive Who Pleaded Guilty in FIFA Investigation
On December 12, Judge Chen of the U.S. District Court for the E.D.N.Y. amended the recent sentence entered against Costas Takkas, former general secretary of the Cayman Islands Football Association. On October 31, Mr. Takkas was sentenced to serve 15 months in prison, pay $3 million in restitution, and observe a ban from international soccer organizations FIFA, Caribbean Football Union (CFU), and the Confederation of North, Central American and Caribbean Association Football (CONCACAF). Under the amended sentence, Mr. Takkas was credited 10 months for time served in a Swiss jail prior to extradition; the other terms remained the same.
Mr. Takkas was arrested in Zurich in 2015, as part of the U.S. government’s investigation into corruption involving FIFA. Earlier this year, Mr. Takkas pleaded guilty to a conspiracy charge, admitting that he laundered millions of dollars in bribes from sports marketing companies to Jeffrey Webb, his longtime associate and the former president of CONCACAF. Mr. Takkas is the second individual sentenced among a group of more than 40 who have been indicted or pleaded guilty since 2015. Previous FCPA Scorecard coverage of the FIFA investigation can be found here.
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.
The Department of Justice announced last week that two former executives of SBM Offshore (“SBM”), a Dutch oil and gas services company, pleaded guilty in U.S. District Court for the Southern District of Texas. Anthony Mace, SBM’s CEO from 2008 to 2011, and Robert Zubiate, a former U.S.-based sales and marketing executive, admitted their involvement in a scheme to bribe government officials in Brazil, Angola, and Equatorial Guinea. The government’s allegations relate to payments made and kickbacks provided to foreign officials in exchange for their assistance in securing contracts in those countries.
Zubiate is scheduled for sentencing on January 31, 2018, and Mace is scheduled for sentencing on February 2, 2018.
Click here for FCPA Scorecard’s prior coverage of this matter.
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 2, the former director of the earthquake research center of South Korea’s Institute of Geoscience and Mineral Resources, Mr. Hoen-Cheol Chi, was reportedly sentenced in U.S. federal court to 14 months in prison for laundering bribes he had received in South Korea from seismology companies. Prosecutors argued to the federal jury, which convicted Mr. Chi in July, that Mr. Chi had demanded and received more than $1 million in bribes from two seismological companies in exchange for providing them with insider information and directed some of the funds to be transferred to his personal bank account in California.
Mr. Chi has not been charged in South Korea, and his conviction and sentencing in the United States illustrate the US DOJ’s continued focus on targeting foreign officials who receive bribes and then travel to the US or use its financial system.
On September 21, the Swedish telecom Telia Company AB agreed to pay $965 million as a result of criminal and civil actions brought by the DOJ and SEC charging the company with paying bribes to an Uzbek government official from 2007 to 2010. Telia entered into a deferred prosecution agreement with the DOJ that required the company to pay a $548.6 million criminal penalty for violating the anti-bribery provisions of the FCPA, $274 million of which will be paid to the Swedish Prosecution Authority and credited by the DOJ. $40 million of the total criminal penalty consisted of forfeiture by Telia on behalf of its indirect subsidiary Coscom. According to the criminal information, around 2007, Telia began operating a mobile telecommunications business in Uzbekistan through Coscom, and the companies allegedly then conspired to make approximately $331 million in bribes to an Uzbek government official to expand their share of the telecommunications market.
On the same day, the SEC issued a cease-and-desist order finding that Telia violated the anti-bribery and internal accounting controls provisions of the FCPA and ordering the company to disgorge $457 million in illicit profits (but also agreeing to credit up to half that amount if disgorged to the Swedish Prosecution Authority). The SEC found that over the relevant time period, “Telia paid bribes to a government official in Uzbekistan in order to obtain and retain business that generated more than $2.5 billion in revenues.” It found that Telia paid the Uzbek official $330 million in bribes “funneled through payments for sham lobbying and consulting services to a front company controlled by the official.” The SEC agreed that the $40 million forfeiture to the DOJ would also offset.
- Daniel P. Stipano to discuss “Connecting the dots on your CDD program” at the ABA/ABA Financial Crimes Enforcement Conference
- Daniel P. Stipano to discuss “Beneficial Ownership: You have questions – We have quick answers” at the ABA/ABA Financial Crimes Enforcement Conference
- Moorari K. Shah to discuss "Legal & regulatory issues – Next wave of regulatory policy" at the Marketplace Lending & Alternative Financing Summit
- Daniel P. Stipano to discuss "Risk management in enforcement actions: Managing risk or micromanaging it" at an American Bar Association webinar
- Kari K. Hall and Christopher M. Walczyszyn to speak on the "Understanding updates to Regulation CC to ensure effective check processing" at a National Association of Federal Credit Unions webinar
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- Daniel P. Stipano to discuss "A 20/20 view on 2020’s legislative and regulatory outlook" at the ACAMS Anti-Financial Crime and Public Policy Conference