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On September 14, a New York federal district court granted class certification to a group of shareholder investors suing an American hedge fund management firm and two of its senior executives on the grounds that the investors were misled about a government investigation into the company’s activities in Africa. In finding that the proposed class met all the requirements for certification, the court certified a class of investors that held some of the more than 100 million outstanding shares between February 2012 and August 2014, the time period in which the firm allegedly violated the Securities Exchange Act. Plaintiffs claim that the firm told investors it was not under any pending judicial or administrative proceeding that might have a material impact on the firm, when in fact it was under DOJ and SEC investigation over allegations that its employees were bribing government officials in Africa. The allegations against the firm were made public in 2014 media reports detailing government scrutiny into its dealings in Africa.
Click here for prior FCPA Scorecard’s coverage of this matter.
On September 11, a Miami-based financial advisor pleaded guilty to one count of conspiracy to commit money laundering in connection with his role in making corrupt payments to officials of Ecuador’s state-owned and state-controlled energy company, Empresa Pública de Hidrocarburos del Ecuador (PetroEcuador). He is scheduled to be sentenced on Nov. 14 in the Southern District of Florida.
Larrea is the fourth individual, including two former officials of PetroEcuador, to plead guilty in this case, which concerns efforts by an oil services contractor to make payments to PetroEcuador officials in an effort to retain existing contracts and win new business with PetroEcuador. Frank Roberto Chatburn Ripalda (Chatburn), who was charged in the same indictment as Larrea, has pleaded not guilty and is currently set to go to trial on October 15. Unlike Larrea, Chatburn’s charges include one count of conspiring to violate the FCPA and one count of violating the FCPA.
On September 12, the SEC announced that United Technologies Corporation (UTC) agreed to pay $13.9 million to settle FCPA charges related to payments made through a subsidiary in connection with the sales of elevator and airline equipment in Azerbaijan and China. According the SEC’s Order, from 2012 through 2014, the Connecticut-based company, through its wholly owned subsidiary Otis Elevator Company, made illicit payments to Azerbaijani officials to facilitate the sales of elevator equipment.
The Order also included other conduct that both the DOJ and SEC have focused on in recent years, including the use of agents and gifts and entertainment. For example, the Order detailed conduct by UTC and a joint venture partner from 2009 to 2013 in which an agent in China received improper commissions totaling $55 million in connection with the company’s attempt to win airline business in China. The Order also found that the company, from 2009 through 2015, improperly “provided trips and gifts to various foreign officials in China, Kuwait, South Korea, Pakistan, Thailand, and Indonesia” in order to obtain business. UTC consented to the SEC’s order without admitting or denying the findings that it violated the anti-bribery, books and records, and internal accounting controls provisions of the FCPA.
On September 13, the DOJ announced two additional guilty pleas in its wide-ranging foreign bribery investigation into payments to officials of Venezuela’s state-owned energy company, Petroleos de Venezuela S.A. (PDVSA). Juan Carlos Castillo Rincon (Castillo), a former manager of a Texas-based logistics and freight forwarding company, pleaded guilty to one count of conspiracy to violate the FCPA in connection with corruptly securing contracts, contract extensions, and favorable contract terms from PDVSA. Castillo pleaded guilty in the Southern District of Texas, as did Jose Orlando Camacho (Camacho), the PDVSA official who accepted the bribes, and whose guilty plea was also unsealed. As now revealed, in July 2017, Camacho pleaded guilty under seal to conspiracy to commit money laundering. Both Camacho and Castillo are scheduled to be sentenced in February 2019. Prior Scorecard coverage of the PDVSA matter can be viewed here.
With these guilty pleas, DOJ has now brought charges against 18 individuals as part of its investigation into bribery at PDVSA. Fourteen individuals have pleaded guilty. Due to the limits inherent in the FCPA, the DOJ’s charges against the corrupt foreign officials such as Camacho (i.e., PDVSA employees) have been based on money laundering and not FCPA (see Prior FCPA Scorecard Coverage here and here) whereas the charges against the U.S.-based individuals who made and/or directed the corrupt payments generally have included FCPA violations (see Prior FCPA Scorecard Coverage here).
Real estate broker and nephew of former UN Secretary-General sentenced for trying to bribe a foreign official
On September 6, U.S. District Judge Edgardo Ramos of the Southern District of New York reportedly sentenced real estate broker Joo Hyuan Bahn, also known as Dennis Bahn, to six months in prison for trying to pay $2.5 million in bribes to a Qatari official in connection with a sale of a high rise building complex in Vietnam. The New York Times reported that Judge Ramos stated that he believed Bahn deserved a lenient sentence. Law360 reported that Judge Ramos cited, among other factors, the consequences of a longer sentence on Bahn’s immigration status. The sentence was ultimately far below what the government had requested.
As FCPA Scorecard previously reported, Bahn pleaded guilty in January 2018 to one count of conspiracy to violate the FCPA and one count of violating the FCPA. Mr. Bahn is the nephew of former UN Secretary-General Ban Ki-moon.
Additionally, on September 6, the SEC announced that Bahn had agreed to pay $225,000 in disgorgement to settle civil FCPA violations arising from his conduct. The SEC’s order concluded that Bahn violated the anti-bribery and books and records provisions of the FCPA.
See previous FCPA Scorecard coverage here.
ING settles corrupt practices case in the Netherlands for approximately $900 million and receives SEC declination
On September 4, the Netherlands-based financial services company ING Groep, N.V. announced in its Form 6-K filing that it had agreed to pay a penalty of $782 million and disgorgement of $115 million to resolve corruption charges by the Dutch Public Prosecution Service (“DPPS”). The DPPS charges related to ING’s prevention of money laundering, client on-boarding, and corrupt practices. ING acknowledged its “serious shortcomings in the execution of customer due diligence policies to prevent financial economic crime” and “regrets that these shortcomings enabled customers to misuse accounts.”
On September 5, following the settlement with the DPPS, ING announced in a new Form 6-K filing that it received a formal notification from the SEC that it had concluded its own FCPA investigation and did not intend to recommend an enforcement action. ING first disclosed the SEC investigation in March 2017. The response from the SEC is consistent with the new policy against so-called piling on issued by DOJ in May 2018. The policy is intended to encourage coordination among enforcement authorities to avoid duplicative penalties. See previous FCPA Scorecard coverage here.
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.
- Jonice Gray Tucker to discuss “How the new administration sets the tone for 2021” at the American Conference Institute Legal, Regulatory and Compliance Forum on Fintech & Emerging Payment Systems
- Sherry-Maria Safchuk to discuss UDAAP in consumer finance at an American Bar Association webinar
- Jeffrey P. Naimon to discuss "What to expect: The new administration and regulatory changes" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Jonice Gray Tucker to discuss “The future of fair lending” at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Steven R. vonBerg to discuss "LO comp challenges" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Michelle L. Rogers to discuss "Major litigation" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Michelle L. Rogers to discuss “The False Claims Act today” at the Federal Bar Association Qui Tam Section Roundtable