Subscribe to our FinCrimes Update for news about the Foreign Corrupt Practices Act and related prosecutions and enforcement actions.
On July 17, the DOJ announced that Louis Berger International Inc. ("LBI") had agreed to enter into a Deferred Prosecution Agreement to resolve the DOJ's FCPA investigation into the New Jersey-based construction management company's operations in India, Indonesia, Vietnam, and Kuwait. LBI also agreed to pay a $17.1 criminal penalty. LBI admitted that it bribed foreign officials to secure government construction management contracts around the world. According to the company's admissions regarding a conspiracy to violate the anti-bribery provisions of the FCPA, from 1998 to 2010, LBI concealed $3.9 million in corrupt payments through various methods, including (i) using inflated and fictitious invoices that were used for the payments of bribes through intermediaries, and (ii) paying fictitious "commitment fees," "counterpart per diems," "marketing fees," and "field operation expenses." Under the terms of the DPA, the DOJ will defer criminal prosecution of LBI for a period of three years and the company will retain an independent compliance monitor for three years. In addition, Richard Hirsch of the Philippines and James McClung of the United Arab Emirates, both former executives of LBI, each pleaded guilty to one count of conspiracy to violate the FCPA and one substantive count of violating the FCPA. They are scheduled to be sentenced on Nov. 5, 2015. Continuing its recent trend, the DOJ emphasized the company's self-disclosure and cooperation, as well as remediation efforts.
DOJ Seeks Civil Forfeiture of $34 Million In Bribe Payments Made to Chadian Diplomats by Griffiths Energy
On June 30, the DOJ filed a Complaint to forfeit shares of Griffiths Energy International, a Canadian energy company accused of bribing various Republic of Chad diplomats to receive oil development rights in Chad. The diplomats include the former Chadian Ambassador to the United States and Canada, and Chad's Deputy Chief of Mission to the United States. The assets at issue are currently frozen in the U.K. The DOJ is seeking roughly $34 million in Griffiths Energy shares, as the cash value amount "traceable to, and involved in the laundering of, bribe payments made to the Chadian diplomats" for the rights to develop oil blocks in Chad. According to the Complaint, the former Ambassador, serving from 2004 to 2012, and the Deputy Chief of Mission, serving from approximately 2007 through the end of 2014, used their official positions to assist Griffiths Energy in securing development rights to oil blocks in Chad. The bribes were allegedly paid in several ways, including through issuance of company shares and payments to companies nominally owned by the wives and associates of the diplomats. The Complaint highlighted that before the company pursued the shell company avenue, legal counsel had warned the company that a planned consulting agreement directly with the Ambassador was illegal. This Complaint follows a separate suit by the DOJ in 2014, with sought a "civil forfeiture of over $100,000 in allegedly laundered funds traceable to the $2 million bribe payments."
On April 30, an Austrian court refused the United States' request to extradite Ukrainian billionaire Dmitry V. Firtash on racketeering, bribery, money laundering, and other charges. In June 2013, a federal grand jury in Chicago returned a sealed indictment for Firtash and five others for their alleged participation in a racketeering conspiracy to bribe government officials in India to permit the mining of titanium materials. Five of the six defendants, including Firtash, were charged with conspiracy to violate the FCPA, among other offenses. Firtash was arrested in Austria in March 2014 and was released after he posted $174 million in bail. The grand jury's indictment was unsealed in April 2014. The Austrian court ruled that the United States' request was politically motivated and that there was not sufficient evidence to justify Firtash's extradition under the applicable treaty. In so ruling, the Austrian Judge explained from the bench: "America obviously saw Firtash as somebody who was threatening their economic interests . . . . There just wasn't sufficient proof." The DOJ has denied any political motivations and has appealed the ruling.
On April 21, a federal court in California dismissed an indictment charging three individuals with violations of the wire fraud and federal program bribery statutes (18 U.S.C. §§ 1343, 666) and conspiracy in connection with an alleged foreign bribery scheme. One of the defendants was a Venezuelan citizen employed by the International Civil Aviation Organization (ICAO), an agency of the United Nations based in Canada involved in "standardizing machine readable passports." The other defendants were senior executives of a Ukrainian conglomerate who allegedly bribed the ICAO official in order to obtain business. All of the conduct at issue "occurred outside of the United States between three defendants who are not United States citizens, who never worked in the United States, and whose use of wires did not reach or pass through the United States." However, the government argued that the United States had an interest in prosecuting the conduct because the United States funds a significant portion of ICAO's activities, which implicate national security issues. In dismissing the indictment, the court first held that neither statute contained a clear indication of congressional intent that it apply extra-territorially, as required by Morrison v. National Australia Bank Ltd., 561 U.S. 247, 254 (2010). Second, it held that the indictment violated the Due Process Clause because the defendants, who "neither lived in, worked in, nor directed any of [their] alleged conduct at the United States," could not have reasonably anticipated being haled into court in this country. The court distinguished the cases cited by the government as involving much more contact with the United States or a misuse of federal funds, whereas this case involved "wholly foreign conduct and wholly foreign actors" and there was no indication that "even one dollar of the millions of dollars the United States presumably sent to ICAO was squandered." In sum, the court held, the government's theory would place "no limit to the United States' ability to police foreign individuals, in foreign governments or in foreign organizations, on matters completely unrelated to the United States' investment, so long as the foreign governments or organizations receive at least $10,000 of federal funding. This is not sound foreign policy, it is not a wise use of scarce federal resources, and it is not, in the Court's view, the law." The government has appealed to the Ninth Circuit. Notably, the DOJ did not bring FCPA charges despite what appear to be allegations of bribes paid to employees "of a public international organization." 15 U.S.C. § 78dd-3(f)(2). Presumably the government could not establish any of the FCPA's statutory jurisdiction requirements, however the case is illustrative of the ever-expanding reach of the government's foreign anti-corruption efforts. It is also a reminder that when individual defendants fight foreign corruption charges in court, convictions are not certain.
Continuing the steady drumbeat of corruption allegations against Alstom SA, a French power and transportation company, on April 16 new bribery charges were brought by the UK Serious Fraud Office against a company and employee affiliated with Alstom. These latest charges related to alleged bribery in Hungary related to a Budapest Metro contract for trains. The charges are in addition to 2014 charges in the UK against the same Alstom subsidiary and other former employees related to corruption in India, Poland, and Tunisia, and separately, according to news reports, related to alleged bribes in Lithuania. Alstom also pleaded guilty last year in the US to allegations of bribery in yet a different set of countries, and agreed to pay the largest criminal penalty for FCPA violations ever to the DOJ. Several Alstom employees in the US have either pleaded guilty or are under indictment.
On March 30, the Federal Bureau of Investigation ("FBI") announced the establishment of three international corruption squads dedicated to investigating incidents of foreign bribery and kleptocracy-related criminal activity. The squads, based in New York, Los Angeles, and Washington, D.C., will work closely with the DOJ's Fraud Section and the SEC in investigating violations of the FCPA. Special Agent George McEachern, who heads the International Corruption Unit at FBI Headquarters, stated that the squads were created to address the national and international implications of corruption. The establishment of these new dedicated corruption squads has been spurred, at least in part, by the rise in cooperation among regulatory and law enforcement authorities across the globe to investigate and prosecute foreign corruption. Indeed, the FBI press release noted the Bureau's partnerships with overseas law enforcement agencies as well as its participation in international working groups such as the Foreign Bribery Task Force. The increased FBI attention is also notable in the context of the rising use of so-called "traditional" white-collar investigative techniques such as wiretaps and confidential informants in FCPA cases, including in the current PetroTiger prosecution and the DOJ's failed Africa Sting case.
On March 31, a federal district court in Arkansas dismissed with prejudice a consolidated shareholder derivative suit accusing Wal-Mart Stores Inc.'s (Wal-Mart) board of directors of concealing Mexican bribery claims from investors. The Court found that that the plaintiffs did not establish that a pre-suit demand on the directors to take action would have been futile, and failed to show that the directors knew about or consciously ignored the alleged FCPA violations at the Mexican subsidiary. The Court wrote: "Nothing in the complaint suggests any particularized basis to infer that a majority of the board had actual or constructive knowledge of the alleged misconduct, let alone that they acted improperly with scienter." For the same reasons, the Court dismissed claims that the directors allowed the filing of knowingly false proxy statements. Plaintiffs filed the lawsuit after a 2012 article by the New York Times reported that top officials at Wal-Mart's Mexican subsidiary oversaw millions of dollars in bribes in connection with the company's expansion in Mexico.
- 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
- APPROVED Webcast: Periodic reporting made easier
- 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