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On September 4, Ensco PLC, a London-based offshore drilling company, announced in its Form 8-K filing that the DOJ and the SEC will not take action against the company, ending their investigations into alleged corruption related to a drilling services agreement between Pride International LLC (“Pride”), an acquired subsidiary, and Petrobras, the Brazilian state-owned oil company. According to the filing, the SEC letter stated that the agency “did not intend to recommend any enforcement action” related to the alleged irregularities. The DOJ letter acknowledged Ensco’s full cooperation in the investigation.
On September 4, the SEC announced that French pharmaceutical company Sanofi S.A. had agreed to pay $25.2 million to settle FCPA charges related to payments made by company employees to healthcare professionals in Kazakhstan and the Middle East. According to the SEC’s order, from 2011 to 2015, employees of Sanofi’s subsidiaries acted to provide things of value to foreign officials and healthcare professions “in order to improperly influence them and increase sales of Sanofi products.” Employees generated the funds for the illicit payments by submitting fake reimbursement claims for, among other things, travel and entertainment expenses, product samples, and clinical trial and consulting fees.
The SEC found that Sanofi violated the internal accounting controls and recordkeeping provisions of the FCPA. Sanofi agreed to pay a civil penalty of $5 million, $17.5 million in disgorgement, and $2.7 million in prejudgment interest, without admitting or denying the SEC’s findings.
According to the press release, the chief of the SEC’s FCPA Unit, Charles Cain, called out bribery in the pharmaceutical industry as a continued significant problem.
On August 24, the Second Circuit rejected the government’s argument for a broad interpretation of personal jurisdiction in FCPA cases, ruling in United States v. Hoskins that a non-resident foreign national lacking sufficient ties to a U.S. entity cannot be charged with conspiracy to violate the FCPA or with aiding and abetting an FCPA violation. The three-judge panel upheld the lower court’s finding that Lawrence Hoskins, a British national and former Alstom SA executive, could not be charged with conspiring or aiding and abetting something he could not be directly charged with because he was “not an agent, employee, officer, director or shareholder of an American issuer or domestic concern” within the scope of the FCPA’s jurisdictional provision and had not himself taken actions insider the U.S.
Hoskins was an employee of Alstom’s UK subsidiary and working for a French subsidiary; the government alleged that he was “one of the people responsible for approving the selection of, and authorizing payments to,” consultants used by Alstom’s U.S. subsidiary to bribe Indonesian officials related to a power contract. The government alleged numerous US acts in furtherance of the bribery (including e-mails and calls by Hoskins to the U.S.), although Hoskins himself never traveled to the U.S. during the scheme. Hoskins was one of four executives charged in 2013 in connection with the bribes; the other three executives – all of whom worked for the US-based subsidiary, Alstom Power, Inc. (which entered into a deferred prosecution agreement) – entered guilty pleas. The company pleaded guilty in December 2014 and paid a fine of $772 million.
The charges against Hoskins included an FCPA conspiracy count as well as substantive FCPA bribery violations and related money laundering charges. The District Court granted Hoskins’ motion to dismiss part of the conspiracy count, ruling that if Hoskins was not alleged in that count to be a covered person under the FCPA, then the government could not impose accomplice liability either. Similarly, where the government had not alleged that Hoskins ever traveled to the U.S. during the bribery scheme, then he could not be accused of conspiring to violate the provision proscribing acts by foreign nationals taken within the U.S. The District Court allowed the count to move forward where it separately alleged that Hoskins was also an agent of the US subsidiary, which would bring him within the FCPA’s defined reach.
The Second Circuit agreed with the District Court that if Hoskins was not an agent of Alstom’s U.S. subsidiary (something the court assumed for the purpose of the appeal only), and therefore himself covered under the FCPA, then he could not be charged with conspiracy or complicity liability. The court relied primarily on the idea that Congress enacted an “affirmative legislative policy” in the FCPA that was intended to punish some categories of defendants, taking into account considerations of extraterritoriality, while intentionally omitting others. Secondarily, the court also held that there was no “’clearly expressed congressional intent to’ allow conspiracy and complicity liability to broaden the extraterritorial reach of the statute.” The court summed up its ruling as requiring that the government demonstrate that Hoskins “falls within [a category enumerated in the FCPA] or acted illegally on American soil.”
The court did reverse the District Court’s second ruling that unless Hoskins traveled to the U.S. during the bribery scheme, he could not be charged with conspiring to violate the FCPA provision covering acts by foreign nationals within the U.S. The government had indicated that it still intended, at trial on the other counts, to prove that Hoskins was an agent of the U.S. subsidiary, thereby bringing him back within the categories explicitly covered by the FCPA. (The substantive FCPA counts remaining did allege that Hoskins was acting as an agent).
Barbadian insurance company receives first declination with disgorgement under FCPA Corporate Enforcement Policy
On August 23, the Insurance Corporation of Barbados Limited (ICBL) received the first declination with disgorgement from the DOJ under the FCPA Corporate Enforcement Policy, which was made effective in November 2017. The conduct at issue involved payments made by ICBL to a Barbadian official in exchange for insurance contracts. The DOJ stated that the official, who is a U.S. legal permanent resident, laundered the payments through a New York-based company owned by a friend of the official. The declination was offered in consideration of numerous factors, including ICBL’s timely and voluntary disclosure of the conduct, its thorough internal investigation and cooperation with the DOJ’s investigation, its agreement to disgorge $93,900 in profits, and its efforts to enhance compliance and to remediate the matter by terminating all involved in the misconduct.
On August 27, the SEC issued an administrative order settling allegations against Maryland-based investment manager Legg Mason which remained outstanding after the company’s June 4 NPA with the DOJ. The June 4 NPA resolved claims of FCPA violations in Libya and included a criminal penalty of $32.6 million and disgorgement of $31.6 million [see prior FCPA Scorecard coverage here]. The SEC order stated that Legg Mason’s actions were in violation of the internal accounting controls provision of the Securities Exchange Act of 1934. The SEC settlement did not include a seprate penalty beyond the disgorgement already agreed to in June, and pre-judgment interest.
On August 23, the Wall Street Journal reported that Microsoft is under investigation by the DOJ and the SEC regarding whether bribes and kickbacks were paid to Hungarian officials connected to sales of Microsoft products in Hungary. Microsoft stated in response to the reporting that it had terminated four employees as well as certain business partnerships in response to its own internal probe into potential wrongdoing in the 2013 to 2014 timeframe. In SEC filings over the last couple of years, Microsoft previously disclosed FCPA-related investigations and that it has been cooperating with related U.S. investigations, which have to date yielded no enforcement actions.
On August 16, the SEC announced that a global bank had settled two enforcement actions involving alleged violations of the FCPA’s books and records and internal control provisions. The FCPA’s anti-bribery provisions were not implicated in either action.
The first action alleged that three traders employed by a U.S. subsidiary of the bank had mismarked positions in certain proprietary accounts, causing $81 million in losses that were not reflected in the company’s books and records. Some of these losses were from allegedly “widespread unauthorized trading.” The second action alleged that the bank had “failed to devise and maintain adequate internal accounting controls,” causing $475 million in losses, when the company did not identify that a Mexican subsidiary had loaned nearly $3.3 billion to a counterparty on the basis of fraudulent documentation provided by the counterparty. Without admitting or denying the SEC’s findings, the bank “agreed to pay $10.5 million in penalties”: $5.75 million for the first action, and $4.75 million for the second.
UK SFO charges former Güralp Systems employees with bribery conspiracy as DOJ declines to prosecute the company for FCPA violations
On August 17, the UK Serious Fraud Office (SFO) announced that it was charging two former employees of Reading-based engineering company Güralp Systems Ltd. with “conspiracy to make corrupt payments.” The SFO alleged that the founder and former Managing Director of the company, Cansun Güralp and Andrew Bell, respectively, had “conspired to corruptly make payments to a public official and employee of the Korea Institute of Geoscience and Mineral Resources (KIGAM).” The conduct allegedly occurred over a period of 13 years, from April 2002 to September 2015.
A few days later, on August 20, the DOJ published a letter informing Güralp Systems that it was declining to prosecute the company for potential FCPA and money laundering violations related to payments it had made to Heon-Cheol Chi, a former director of KIGAM. In October 2017, Chi was sentenced to 14 months in federal prison on a U.S. money laundering charge related to the bribery scheme. The DOJ’s letter stated that it was declining to prosecute because, among other reasons, the company voluntarily disclosed the misconduct, provided cooperation that assisted with the prosecution of Chi, undertook “significant remedial efforts,” and “committed to accepting responsibility” for its conduct in the parallel SFO investigation.
Colombia’s former anti-corruption chief pleads guilty to money laundering conspiracy related to foreign bribes
On August 14, the DOJ announced that Colombia’s former National Director of Anti-Corruption, Luis Gustavo Moreno Rivera, pleaded guilty to “participat[ing] in a conspiracy to launder money with the intent to promote foreign bribery.” A Colombian attorney, Leonardo Luis Pinilla Gomez, also pleaded guilty to the conspiracy. According to the press release, the two men admitted that they “attempted to entice a bribe” from a Colombian politician who was facing a corruption investigation by Moreno’s office by promising to provide statements made by cooperating witnesses in exchange for $34,500. Working undercover for the DEA, the politician paid the two men a $10,000 deposit of the bribe money during a June 2017 meeting in Miami. At that meeting, the two men were also recorded promising to obstruct the investigation in exchange for an additional $132,000 bribe. Cash from the deposit was found on Moreno when he boarded his flight back to Colombia. The two men were arrested in Colombia and extradited to the U.S. in May 2018. Sentencing is scheduled for November 19, 2018.
On August 8, Malaysia’s former Prime Minister Najib Razak pleaded not guilty to money laundering charges filed against him in Malaysia in connection with the ongoing investigation of state fund 1MDB. Razak had previously pleaded not guilty to three charges of criminal breach of trust and one charge of abuse of power. The money laundering charges relate to approximately $10 million that was allegedly deposited into the former Prime Minister’s personal bank account. That is a small portion of the total funds under investigation as misappropriated from the state fund.
The day before, a $250 million super yacht was returned to Malaysia after it was previously seized in Indonesia following claims by the U.S. Department of Justice that is was purchased with funds misappropriated from 1MDB. Back in July 2016, DOJ filed civil forfeiture complaints seeking recovery of more than $1 billion in assets associated with the alleged “international conspiracy to launder funds misappropriated from [1MDB].” In June 2017, DOJ filed additional civil forfeiture complaints to recover another $540 million in assets. The investigation into assets linked to the state fund 1MDB continues with DOJ alleging that more than $3.5 billion in total funds were misappropriated from 1MDB from 2009 through 2015.
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