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Allegations by short seller lead to corruption investigation of California-based electronics manufacturer
In a securities filing on February 1, a California-based electronic systems manufacturer revealed that the DOJ and SEC have launched investigations into its FCPA compliance and regarding trading by company employees in the company's securities. These investigations were spurred by a report issued in December 2016 by a short seller, which accused the company of paying bribes to win a major contract in Albania. The company has denied that allegation, and stated in its Form 8-K filing that it is cooperating with the government’s investigations.
OFAC issues sanctions against persons involved in Hizballah financial network
On February 2, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against six individuals and seven entities for providing financial support to terrorists or acts of terrorism. Issued pursuant to Executive Order 13224, which “provides a means by which to disrupt the financial support network for terrorists and terrorist organizations by authorizing the U.S. government to designate and block the assets of foreign individuals and entities that commit, or pose a significant risk of committing, acts of terrorism,” the sanctions target the business operations of Hizballah and serve to further Treasury’s continued measures to “sever Hizballah from the international financial system.” OFAC stressed that, pursuant to the Hizballah Financial Sanctions Regulations, it has the authority to “prohibit or impose strict conditions on the opening or maintaining in the [U.S.] of a correspondent account or a payable-through account by a foreign financial institution that knowingly facilitates a significant transaction for Hizballah, or a person acting on behalf of or at the direction of, or owned or controlled by, Hizballah.” All property, or interests in property, held by the sanctioned individuals and entities within U.S. jurisdiction will be blocked, and transactions between the sanctioned individuals and entities and Americans are also “generally prohibited.”
SEC declines enforcement against global oil exploration company in FCPA investigation for second time
Houston-based global oil exploration company announced in a January 29, 2018 8-K filing that the SEC had concluded its second investigation relating to the company’s operations in Angola, and that SEC staff did not intend to recommend an enforcement action. The SEC’s investigation began in March 2017. As detailed in previous FCPA Scorecard posts, this follows the DOJ’s February 2017 declination and the SEC’s January 2015 declination following other investigations of the company’s Angola operations.
Treasury releases list of Russian senior foreign political figures and oligarchs, does not impose new sanctions
On January 29, the U.S. Treasury Department released an unclassified report to Congress containing a list of 210 individuals who are either senior foreign political figures in the Russian Federation or Russian oligarchs with a net worth of at least $1 billion. Treasury emphasized that the report—which was mandated through Section 241 of the Countering America’s Adversaries Through Sanctions Act of 2017 (CAATSA)— (i) is not a sanctions list; (ii) should not be interpreted as a determination that individuals or entities included in the report or listed within classified appendices or annexes meet the criteria for sanctions designation (individuals and entities subject to separate sanctions are denoted within the report); and (iii) does not serve to indicate that the U.S. Government possesses information about an “individual’s involvement in malign activities.” Classified lists that may include officials and oligarchs of lesser rank and wealth will be submitted as well. Additionally, Treasury submitted to Congress a required classified annex to the report, which lists Russian parastatals entities that are defined as “companies in which state ownership is at least 25 percent and that had 2016 revenues of approximately $2 billion or more.” The annex also presents an analysis of potential impact on the U.S. economy that may result should additional debt and equity restrictions or sanctions be imposed on the identified entities.
Separately, on January 30, Treasury released updated FAQs to address questions related to the report’s release.
See here for additional CAATSA InfoBytes coverage.
OFAC further expands sanctions in connection with Ukrainian conflict
On January 26, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced its decision to sanction an additional 21 individuals and nine entities, pursuant to four executive orders (see Executive Orders 13660, 13661, 13662, and 13685), in connection with the United States’ support of Ukraine’s “sovereignty and territorial integrity” and opposition to Russia’s occupation of Crimea. Among other things, the financial sanctions target Russian government officials, Russian business executives, and Ukrainian separatist leaders involved with Russia’s occupation as part of efforts to hold responsible individuals accountable. Also sanctioned are nine technology, construction, and shipping firms supporting Russia’s occupation. As part of the announcement, Treasury Secretary Steven Mnuchin stated that “[t]he U.S. government is committed to maintaining the sovereignty and territorial integrity of Ukraine and to targeting those who attempt to undermine the Minsk agreements.” He further indicated that “[t]hose who provide goods, services, or material support to individuals and entities sanctioned by the United States for their activities in Ukraine are engaging in behavior that could expose them to U.S. sanctions.” All property, or interests in property, held by the sanctioned individuals and entities within U.S. jurisdiction will be blocked, and transactions between the sanctioned individuals and entities and Americans are also “generally prohibited.”
Visit here for additional InfoBytes coverage on Russian and Ukrainian sanctions.
OFAC continues to expand North Korean sanctions
On January 24, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) imposed additional sanctions in response to North Korea's ongoing weapons development programs, continued sanctions evasions, and United Nations Security Council Resolutions violations. The sanctions were issued against nine entities, 16 individuals, and six vessels pursuant to Executive Orders 13810 or 13687. Five of the sanctioned individuals have links to North Korean financial networks, with several of the individuals in possession of accounts held at Chinese banks. All property held by the sanctioned individuals and entities within U.S. jurisdiction was frozen, and transactions between the sanctioned individuals and entities and Americans are also prohibited.
See here for previous InfoBytes coverage on North Korean sanctions.
SFO confirms opening of criminal investigation into aerospace and defense group
On January 18, the Serious Fraud Office (“SFO”) confirmed the opening of an investigation of an aerospace and defense group and its subsidiary into alleged bribery, corruption, and money laundering. The UK-based company that designs and makes products in the aerospace and defense industries, stated that the investigation followed a voluntary report from the subsidiary relating to “two specific historic contracts.” According to the company, 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. The company stated that they will fully cooperate with the SFO’s investigation and provide further updates.
OFAC releases updated Venezuela-related FAQs
On January 19, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced the release of updated FAQs to address the prohibition of United States persons from purchasing or dealing in the Venezuelan government’s proposed digital currency under Executive Order 13808.
See here for previous InfoBytes coverage of Venezuelan sanctions.
Criminal charges unsealed against former American hedge fund firm executive
The DOJ recently unsealed criminal charges against former hedge fund executive. This indictment follows a civil suit filed in January 2017 against him and others by the SEC regarding FCPA violations. In 2016, the DOJ and SEC also pursued a joint FCPA enforcement action against his former employer, alleging various bribes, self-dealing, and other malfeasance relating to the procurement of mineral, oil, and other natural resource contracts in African counties.
While the SEC’s initial January 2017 civil matter against him alleged FCPA violations, the recently announced criminal indictment does not directly charge him with violating the FCPA. He is alleged to have obstructed the DOJ and SEC’s investigations of his former company and made false statements, but also to have committed investment advisor fraud.
Judge denies bail to former Hong Kong official, who pleads not guilty to alleged African bribery
A former Hong Kong official, reportedly entered a not guilty plea and was denied bail in federal district court in New York related to a number of FCPA, conspiracy, and money laundering counts. He was charged in late 2017, along with his co-defendant, the former Foreign Minister of Senegal, with offering $2 million in bribes to the President of Chad. The former official is also alleged to have paid a half-million dollar bribe to the foreign affairs minister of Uganda. The DOJ alleges that he sought to direct bribe money through an NGO that he ran, which is funded by a Chinese-based oil and gas company.
The prosecution of the former official is noteworthy because the DOJ is seeking to prosecute a non-U.S. citizen for alleged bribery between Chinese and African interests.