Subscribe to our FinCrimes Update for news about the Foreign Corrupt Practices Act and related prosecutions and enforcement actions.
Buckley Sandler Special Alert: DOJ announces new policy on pursuing individuals in corporate resolutions
U.S. Deputy Attorney General Rod Rosenstein said at a conference this morning that the U.S. Department of Justice has revised its guidelines relating to corporate resolutions with the DOJ, particularly as those guidelines relate to charging culpable individuals. The revised guidelines modify the 2015 Yates Memo, and affirmatively obligate companies seeking leniency from the DOJ to investigate and furnish information about culpable employees and agents substantially involved in wrongdoing.
Corporations now will receive cooperation credit in criminal resolutions only if all employees substantially involved in the alleged wrongdoing are identified to the government. And in civil resolutions, corporations will receive cooperation credit only if the corporation reveals the involvement of senior management and board members in the alleged wrongdoing. The new policy highlights the DOJ’s ongoing focus on criminal and civil enforcement actions against individuals and emphasizes the importance of giving serious consideration to obtaining individual counsel very early in the process of an investigation.
* * *
Click here to read the full special alert.
If you have questions about the DOJ’s new policy or other related issues, please visit our White Collar practice page or contact one of Buckley Sandler’s 15 partners in that practice.
On November 19, the SEC announced a settlement with Vantage Drilling International (“Vantage”) based on the improper activities of Vantage’s predecessor, Vantage Drilling Company, in connection with the Petrobras bribery scheme. The Administrative Order found that Vantage Drilling Company had “failed to devise a system of internal accounting controls with regard to [its] transactions with [its] former outside director, largest shareholder, and only supplier of drilling assets . . . and failed to properly implement internal accounting controls related to its use of third-party marketing agents,” noting the company’s “ineffective anticorruption compliance program.” According to the Order, these failures permitted payments that “created a risk that [it] was providing or reimbursing funds that [a director] intended to use to make improper payments to [Petrobras],” a Brazilian company at the center of a massive FCPA scheme.
The settlement with the SEC concludes Vantage’s involvement in the Petrobras investigations. According to Vantage, the company received a cooperation letter from the DOJ last year confirming Vantage’s full cooperation in the Petrobras investigation, and that the DOJ would not move forward with any actions against Vantage.
Further coverage of the Petrobras matter is available here.
Two co-conspirators of billionaire news network Globovision owner Raul Gorrin Belisario were sentenced this week as part of the DOJ’s recently unsealed prosecution of a bribery scheme involving over $1 billion paid in bribes to members of the Venezuelan government. According to the DOJ, Gorrin was indicted under seal in August for conspiracy to violate the FCPA, conspiracy to commit money laundering, and nine counts of money laundering. Two co-conspirators, Florida resident and former Venezuelan National Treasurer Alejandro Andrade Cedeno, and Chicago resident and former owner of Banco Peravia Gabriel Arturo Jimenez Aray, each pleaded guilty under seal to one count of conspiracy to commit money laundering, and were sentenced in federal court earlier this week.
According to Gorrin’s indictment, he allegedly bribed members of the Venezuelan government—including Andrade—in exchange for the right to handle the government’s foreign currency exchange transactions, and then acquired a bank in order to launder the bribe money and other illicit proceeds. To do so, Gorrin allegedly moved money from Switzerland to accounts in Florida and New York and used it to purchase luxury items such as “jets, a yacht, multiple champion horses, and numerous high-end watches.”
In December 2017, Andrade pleaded guilty to one count of conspiracy to commit money laundering, admitting to taking bribes in exchange for helping his co-conspirators—including Gorrin—by choosing them to conduct currency exchanges at favorable rates to the Venezuelan government. As part of his plea, Andrade agreed to cooperate and pay a forfeiture money judgment of $1 billion through the forfeiture of “real estate, vehicles, horses, watches, aircraft, and bank accounts.” On November 27, 2018, U.S. Southern District of Florida Judge Robin L. Rosenberg sentenced Andrade to 10 years in prison, the maximum under his plea deal.
In March 2018, Chicago resident and former owner of Banco Peravia Gabriel Arturo Jimenez Aray took a similar plea deal, pleading guilty to one count of conspiracy to commit money laundering, admitting to helping Gorrin and others acquire and then launder money through Banco Peravia. On November 29, 2018, Jimenez was sentenced to 3 years in prison.
The Miami Herald has also reported that Gorrin’s personal banker is Matthias Krull, formerly of Julius Baer Panama, who was sentenced last month for his role in another money laundering scheme involving Venezuela’s Petroleos de Venezuela S.A. (PDVSA). Coverage of the PDVSA prosecutions is available here.
On November 15, the SEC released its 2018 Annual Report to Congress on its Whistleblower Program, as required under § 924(d) of the Dodd-Frank Act and § 21(F)(g)(5) of the Securities Exchange Act of 1934. The Report, which covers October 1, 2017 through September 30, 2018, indicates that the SEC received 202 FCPA-related whistleblower tips during the reporting year. Those 202 FCPA tips account for only 3.82% of the tips received in that period. While the overall number of whistleblower tips has steadily risen over the past 4 years, the number of FCPA tips has remained fairly steady. In 2015, there were 186 (4.74% of the tips received); in 2016 there were 238 (5.64% of the tips received); and in 2017 there were 210 (4.68% of the tips received). This relative consistency contrasts with the number of offering fraud tips, which jumped from 758 in 2017 to 1,054 in 2018.
In addition to providing statistics and background on the whistleblower program, the Report discusses rule amendments proposed earlier this year. In particular, the Report reviews proposed amendments to SEC Rule 21F-2 (Whistleblower Status and Retaliation Protection) that are intended to bring the rules in line with the Digital Realty Trust v. Somers decision. The proposed amendments would include instituting a uniform definition of whistleblower that requires the individual to have submitted the information “in writing” to the SEC.
On November 14, 2018, a three judge panel for the United States Court of Appeals for the Ninth Circuit heard oral arguments in Sanford Wadler v. Bio-Rad Laboratories, Inc., et al. Bio-Rad, a life science research and diagnostics company, is hoping to overturn a February 2017 jury verdict ordering the company to pay its former General Counsel and Secretary, Sanford Wadler, $11 million in punitive and compensatory damages. Wadler’s complaint alleged that the company had fired him for being an FCPA whistleblower. As detailed in a previous FCPA Scorecard post, Bio-Rad paid $55 million in November 2014 to settle DOJ and SEC allegations that the company violated the FCPA in Russia, Thailand, and Vietnam. Wadler’s report to the Audit Committee had involved separate allegations that the company violated the FCPA in China, allegations that did not result in additional penalties against Bio-Rad.
Bio-Rad appealed the Wadler award on the grounds that the jury was erroneously instructed that the SEC’s rules or regulations forbid bribery of a foreign official; that the company’s alleged FCPA violations were the result of Wadler’s lack of due diligence; that the trial court wrongly excluded certain impeachment testimony and evidence related to the timing of Wadler’s pursuit and hiring of a whistleblower attorney; and that Wadler did not qualify as a “whistleblower” under Dodd-Frank in light of his reporting only internally and not to the SEC (pursuant to the U.S. Supreme Court’s decision in Digital Realty Trust, Inc. v. Somers, No. 10-1276, 583 U.S. ___ (2018)). During the argument, one member of the circuit panel reportedly expressed doubt concerning Bio-Rad’s jury instruction argument, and another told counsel for Bio-Rad, “I don’t see how this can be reversed on the theory you’re offering.”
On November 2, a New York-based financial institution disclosed in its Form 10-Q filing that it had received subpoenas and requests for documents and information from multiple government agencies as part of investigations relating to matters involving 1Malaysia Development Berhad (1MDB). The filing acknowledged the indictments and guilty plea of Tim Leissner, a former participating managing director of the financial institution, and Ng Chong Hwa (also known as Roger Ng), a former managing director, which indicated that Leissner and Ng “knowingly and willfully circumvented” the financial institution’s internal accounting controls. The filing further stated that the financial institution is cooperating with the DOJ and other investigations relating to 1MDB.
According to the U.K Serious Fraud Office (SFO), the former CEO and CFO of Afren, Plc., an oil and gas exploration and production company, were sentenced in the UK on October 29 for their parts in a kickback scheme in Nigeria. The former CEO was sentenced to up to six years in prison, and the CFO to up to five years. The executives, Osman Shahenshah and Shahid Ullah, were found to have recommended that Afren enter a $300 million deal with an oil field partner in Nigeria without telling the company’s Board that they would personally receive 15% of the deal’s value from the partner. They then laundered more than $45 million, using some of the proceeds to buy luxury Caribbean real estate. The SFO thanked the U.S. DOJ for its assistance with the investigation.
The DOJ unsealed two indictments and a guilty plea related to the sprawling 1Malaysia Development Berhad (1MDB) fraud on November 1 in the Eastern District of New York. Malaysian financier Low Taek Jho (also known as Jho Low) and former banker Ng Chong Hwa (also known as Roger Ng) were charged with conspiring to launder billions of dollars embezzled from 1MDB, Malaysia’s investment development fund, and conspiracy to violate the anti-bribery provisions of the FCPA. Ng was also charged with conspiring to violate the FCPA by circumventing the internal accounting controls of a U.S. financial institution, which underwrote $6 billion in bonds issued by 1MDB. Ng was a managing director at the bank. Tim Leissner, another former banker at the same financial institution, pleaded guilty to the same charges. Leissner has been ordered to forfeit $43.7 million.
Low, Ng, Leissner, and others allegedly conspired to bribe Malaysian and Abu Dhabi officials to obtain business for the financial institution, including the 1MDB bond deals. They also allegedly conspired to launder the proceeds through purchasing luxury New York real estate, artwork, and financing major Hollywood films, such as The Wolf of Wall Street.
For prior coverage of the 1MDB scheme, please see here.
On October 30, 2018, a Texas businessman, Ivan Alexis Guedez, who was a former procurement officer for PDVSA, pleaded guilty to conspiracy to launder the bribe payments he and his co-conspirators at PDVSA received for directing PDVSA business to a Miami-based supplier. The scheme involved false invoices, false e-mail addresses, and shell companies with a Swiss bank account.
For prior coverage of PDVSA actions, please see here.
Swiss banker sentenced to 10 years related to PDVSA embezzlement and bribery scheme, and PDVSA official pleads guilty in same scheme
On October 29, Matthias Krull, a former banker at Julius Baer, was sentenced to serve 10 years in prison for his role in a scheme to launder funds embezzled from Petróleos de Venezuela, S.A. (PDVSA), the Venezuelan state-owned oil company. Krull had pleaded guilty to one count of conspiracy to commit money laundering on August 22, 2018. Krull admitted to using his position at the bank to attract clients from Venezuela. He helped some of those clients launder proceeds from a PDVSA foreign-exchange embezzlement scheme using false-investment schemes and Miami real estate. The PDVSA money was originally obtained through bribery and fraud.
Two days later, on October 31, Abraham Edgardo Ortega, the former executive director of financial planning at Petróleos de Venezuela, S.A. (PDVSA), the Venezuelan state-owned oil company, pleaded guilty to charges related to his role in the same scheme. Ortega admitted to accepting $5 million in bribes to give priority loan status to a French company and Russian bank. Ortega was paid with the proceeds of the same foreign-exchange embezzlement scheme. Ortega admitted that he ultimately received $12 million in bribes for his participation in the embezzlement scheme and laundered that money with a co-defendant through a false-investment scheme. Ortega is expected to be sentenced on January 9, 2019.
- Jeffrey P. Naimon to provide “Fair lending update” at the Colorado Mortgage Lenders Association Operational and Compliance Forum
- Jonice Gray Tucker to discuss “Justice for all: Achieving racial equity through fair lending” at CBA Live
- Warren W. Traiger to discuss “On the horizon for CRA modernization” at CBA Live
- Jonice Gray Tucker to discuss "Fair lending" at the Mortgage Bankers Association Regulatory Compliance Conference
- Michelle L. Rogers to discuss “State law regulatory and enforcement trends” at the Mortgage Bankers Association Regulatory Compliance Conference
- Jonice Gray Tucker to discuss “Government investigations, and compliance 2021 trends” at the Corporate Counsel Women of Color Career Strategies Conference
- Max Bonici to discuss “BSA/AML trends: What to expect with the implementation of the AML Act of 2020” at the American Bar Association Banking Law Fall Meeting
- H Joshua Kotin to discuss “Modifications and exiting forbearance” at the National Association of Federal Credit Unions Regulatory Compliance Seminar
- Jonice Gray Tucker to discuss “Fintech trends” at the BIHC Network Elevating Black Excellence Regional Summit
- Jonice Gray Tucker to discuss "Consumer financial services" at the Practising Law Institute Banking Law Institute