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Treasury Department Issues New Sanctions, Launches Terrorist Financing Targeting Center in Middle East
On October 25, Treasury Secretary Steven Mnuchin spoke before the Future Investment Initiative Conference about the newly established Terrorist Financing Targeting Center initiative (Center), co-chaired by the U.S. and Saudi Arabia. Mnuchin praised the new Center, stating, “The creation of this Center is a major step forward in our ability to disrupt the finances and operations of terrorist organizations” and calling the Center “a catalyst for additional multilateral actions against terrorist financiers. The Center is a result of a strategic agreement, signed in May, between Saudi Arabia, the United Arab Emirates, the State of Kuwait, the Sultanate of Oman, the Kingdom of Bahrain, the State of Qatar, and the U.S.
Additionally, the Treasury Department also announced the imposition of sanctions against “nine individuals and entities that finance and facilitate terrorism” and aid other transnational threats in the Middle East.
German Software Company Self-Discloses Approximately $6.8 Million in Payments to Gupta Family-Related South African Entities
On October 26, a German multinational software corporation, announced that it has voluntarily disclosed commission payments of approximately $6.8 million to a wealthy South African family's related entities to the U.S. Department of Justice and the Securities and Exchange Commission. The voluntary disclosure in July has led to an ongoing DOJ and SEC investigation into the company's conduct.
The company acknowledged that between December 2014 and June 2017, contracts with two South African state-owned companies were closed with the assistance of family-related entities. The company’s internal investigation has also led to the initiation of disciplinary proceedings against three employees in South Africa. The family, which is connected to South African President Jacob Zuma, has previously denied wrongdoing associated with receiving such kickbacks. While acknowledging cooperation with the DOJ and the SEC, the company stated that it has had no interaction with South African authorities and has not decided whether the company will approach South African authorities in the future. The U.S. investigation is ongoing and the company has acknowledged that it has begun the process of sharing documents with authorities.
Former Guatemalan Soccer Executive and Judge Sentenced in Investigation
On October 25, Judge Chen of the U.S. District Court for the E.D.N.Y. sentenced the former general secretary of Guatemala’s soccer federation and a former judge to eight months in prison and ordered restitution of $415,000 and forfeiture of $175,000. His sentence comes after a guilty plea to wire fraud and conspiracy in June 2017. He was arrested in 2015 as part of the U.S. government’s investigation into corruption in a soccer association. His sentencing marks the first individual sentenced among a group of more than 40 individuals who have been indicted or pleaded guilty since 2015.
This sentencing comes as part of the U.S. government’s ongoing investigation into corruption in international soccer which has been ongoing. Previous FCPA Scorecard coverage of the investigation can be found here.
Deputy Attorney General Rod Rosenstein Issues Remarks on Individual Accountability for Corporate Wrongdoing
Deputy Attorney General Rod Rosenstein recently issued remarks highlighting the importance of the DOJ’s consistency in enforcing policies “hold[ing] individuals accountable for corporate wrongdoing.” In particular, Deputy AG Rosenstein stated that the agency should focus on improving the recent track record of bringing criminal proceedings against company employees and commented that “consistency promotes fairness and enhances respect for the rule of law.” His remarks also touched on the Yates Memo and the FCPA Pilot Program, noting the appropriateness of focusing on individual officer or director liability.
The comments are yet another in the steady drumbeat of calls, both internal and external to the DOJ, for DOJ enforcement strategy to hold individual corporate employees accountable for FCPA violations, although how much that strategy is being implemented remains to be seen. A recent review of DOJ corporate FCPA enforcement actions notes that the last 20 such actions have lacked related criminal charges against company employees, and going back to 2008, approximately 80% of DOJ corporate FCPA enforcement actions have lacked related criminal charges against company employees. As Deputy AG Rosenstein’s comments concluded: “When we are serious about wanting people to follow rules, it does no good merely to post them. We need to make clear our intent to enforce the rules, with sufficient vigor that people fear the consequences of violating them.”
Life science research company appeals $11 million verdict awarded to FCPA whistleblower
Following a $55 million civil and criminal FCPA settlement by a life science research and diagnostics company in November 2014, the company’s former General Counsel and Secretary filed a civil complaint against the company and executive officers and board members alleging that he was fired for blowing the whistle on FCPA issues. In February 2017 a jury awarded the former employee a total of $11 million in punitive and compensatory damages (including double back-pay under Dodd-Frank).
The company recently appealed that verdict to the Ninth Circuit on the grounds that the trial court should have directed the verdict in favor of the company because, it argues, the alleged FCPA violations were the result of the former employee’s lack of due diligence, because he did not first consult the company’s compliance officers and FCPA lawyers before reporting, and because his allegations were discredited by trial witnesses. The company also claims that the trial court wrongly excluded certain impeachment testimony, and that he did not qualify as a “whistleblower” under Dodd-Frank in light of his internal reporting.
Florida Energy Company Owner Pleads Guilty to Conspiracy to Violate the FCPA in Venezuelan Bribery Scheme
On October 11, the DOJ announced that the co-owner of several Florida-based energy companies pleaded guilty to FCPA charges that he conspired to bribe foreign officials in exchange for obtaining contracts from a Venezuela’s state-owned energy company. In his plea, the defendant admitted to conspiring with two other individuals from 2008 through 2014 to bribe purchasing analysts employed by the energy company through cash payments and other entertainment in order to win contracts for their companies. In total, ten individuals have now pleaded guilty in connection with the scheme.
This investigation has been a collaboration between the DOJ, ICE-HSI, and IRS-Criminal Investigation Division. Previous FCPA Scorecard coverage of the investigation can be found here.
U.S. Government Revokes Certain Sanctions on Sudan Following Review Period of Sudanese Policies and Actions
On October 6, the U.S. Government announced, effective October 12, the revocation of certain economic sanctions against Sudan and the Government of Sudan (GOS) as a recognition of sustained positive actions in connection with efforts to cease hostilities, improve humanitarian access, promote regional stability, and address the threat of terrorism. As previously covered in InfoBytes, the announcement follows a joint review conducted by the Secretary of State, the Secretary of the Treasury, the Director of National Intelligence, and the Administrator of the U.S. Agency for International Development that began in January 2017 as required by Executive Order 13761 and amended by Executive Order 13804. The Secretary of State issued a contemporaneous report concluding that, despite GOS’ demonstrated improvement in the areas that led to the issuance of Executive Order 13761, there remain a range of concerns. As such, while the comprehensive sanctions program has been lifted, certain sanctions and trade restrictions remain in place. Specifically:
- the national emergency, established in Executive Order 13067 with respect to Sudan, remains in effect;
- U.S. sanctions related to the conflict in Darfur, pursuant to Executive Order 13400, remain in place;
- The U.S. Government maintains the authority to designate Sudanese persons according to other relevant sanctions authorities; and
- Sudan remains on the list of state sponsors of terrorism, which will continue to impose restrictions on certain dealings involving Sudan, including U.S. foreign assistance and restrictions on defense exports and sales.
Following revocation of the sanctions, U.S. persons will no longer be banned from engaging in most transactions previously prohibited by the Sudanese Sanctions Regulations (31 C.F.R. Part 538).
The U.S. Treasury Department’s Office of Foreign Assets Control also released updated FAQs to answer questions related to the revocation, along with a new general license that authorizes certain transactions.OFAC Settles Alleged Sudanese Sanction Violations with Connecticut-Based Paper Company
On October 5, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced that it had reached a $372,465 settlement with a Connecticut-based paper company for three alleged violations of Sudanese Sanctions. OFAC asserted that the company “facilitated the sale and shipment of . . . Canadian-origin paper from Canada to Sudan” in April and December 2013. OFAC alleged that each instance of this conduct, which the company did not voluntarily self-disclose, violated OFAC’s Sudanese Sanctions Regulations, 31 C.F.R. part 538. Had the company not settled, OFAC determined that civil monetary penalties ranged from approximately $445,000 to $853,746. In establishing the penalty, OFAC considered that the company: (i) “exhibited reckless disregard for U.S. sanctions requirements by failing to exercise a minimal degree of caution or care with regard to the apparent violations”; (ii) “attempted to conceal the ultimate destination of the goods from its bank”; (iii) knew that supervisory or managerial personnel “had actual knowledge of and were actively involved in, or had reason to know of, the conduct that led to the apparent violations”; (iv) is “sophisticated” but had a non-existent, inadequate compliance program; and (v) failed to initially cooperate with OFAC’s investigation by submitting “materially inaccurate, incomplete, and/or misleading information.” As for mitigating factors, OFAC determined that (i) the company has no prior sanctions history with OFAC, and (ii) the company took remedial action by implementing an OFAC compliance program.
South Korean Earthquake Research Official Sentenced for Laundering Bribes
On October 2, the former director of the earthquake research center of South Korea’s Institute of Geoscience and Mineral Resources was reportedly sentenced in U.S. federal court to 14 months in prison for laundering bribes he had received in South Korea from seismology companies. Prosecutors argued to the federal jury, which convicted him in July, that he had demanded and received more than $1 million in bribes from two seismological companies in exchange for providing them with insider information and directed some of the funds to be transferred to his personal bank account in California.
The former director has not been charged in South Korea, and his conviction and sentencing in the United States illustrate the US DOJ’s continued focus on targeting foreign officials who receive bribes and then travel to the US or use its financial system.
Additional Charges for Retired U.S. Army Colonel
On October 4, the Department of Justice expanded the scope of its indictment against a retired U.S. Army colonel. On August 29, he was charged with conspiracy to violate the Foreign Corrupt Practices Act after he allegedly solicited bribes from undercover agents who posed as potential investors for infrastructure projects in Haiti. The expanded charges include conspiracy to launder money and violate the Federal Travel Act. Prior FCPA Scorecard coverage of the initial indictment and the related FCPA sting operation can be found here.