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  • Global financial institution pays $2.9 billion to settle Malaysian FCPA conspiracy and bribery charges

    Financial Crimes

    On October 22, the DOJ announced that it entered into a deferred prosecution agreement with a global financial institution headquartered in New York (the company), in which the company agreed to pay a criminal fine of over $2.9 billion related to violations of the FCPA’s anti-bribery provisions. The company’s Malaysian subsidiary also pleaded guilty to one count of conspiracy to violate the anti-bribery provisions of the FCPA.

    According to the DOJ, between 2009 and 2014, the company participated in a scheme to pay over $1.6 billion in bribes, directly and indirectly, to Malaysian and Abu Dhabi officials to obtain business, including a role in underwriting approximately $6.5 billion in three bond deals for a Malaysian sovereign wealth fund regarding energy development  (previous InfoBytes coverage on the charges available here). The DOJ stated that the company admitted to engaging in the scheme through certain employees and agents, including (i) the company’s former Southeast Asia Chairman and managing director, who pleaded guilty in 2018 to conspiring to launder money and to violate the FCPA (covered by InfoBytes here); (ii) a former managing director and head of investment banking for the company’s Malaysian subsidiary, who was charged and subsequently extradited to the U.S. in 2019 and is scheduled to stand trial in March 2021 for conspiring to launder money and to violate the FCPA (covered by InfoBytes here); and (iii) a former executive who held leadership positions in Asia. The company admitted that their former employees and agents conspired with a Malaysian financier (who was indicted in 2018, covered by InfoBytes here) to bribe officials involved in the strategic development initiative by using funds diverted and misappropriated from bond offerings underwritten by the company. The employees and financer also retained a portion of the diverted funds for themselves. The company admitted that it did not take significant steps to ensure the Malaysian financier was not involved in the bond transactions even though they were aware his involvement posed “significant risk,” and the company ignored or nominally addressed the “significant red flags” raised during the due diligence process. The company received approximately $606 million in fees and revenue as a result of the scheme.

    The company’s $2.9 billion criminal penalty and disgorgement includes $1.6 billion in payments with respect to separate resolutions with foreign authorities in the United Kingdom, Singapore, Malaysia, and other domestic authorities in the U.S., including $154 million to the Federal Reserve, over $400 million to the SEC, and $150 million to the New York Department of Financial Services.

    Financial Crimes FCPA DOJ SEC NYDFS State Issues Enforcement Bribery Anti-Money Laundering

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  • Brazilian investment company agrees to pay over $284 million to settle FCPA violations

    Financial Crimes

    On October 14, the DOJ announced it had entered into a plea agreement with a Brazil-based investment company that owns companies primarily involved in the meat and agricultural business, in which the company agreed to pay a criminal penalty of over $256 million related to violations of the FCPA’s anti-bribery provisions. According to the DOJ, between 2005 and 2017, to execute the bribery scheme in Brazil, the company “conspired with others to violate the FCPA by paying bribes to Brazilian government officials in order to ensure that Brazilian state-owned and state-controlled banks would enter into debt and equity financing transactions with [the company and company]-owned entities, as well as to obtain approval for a merger from a Brazilian state-owned and state-controlled pension fund.” Specifically, between 2005 and 2014, the company paid or promised more than $148 million in bribes to high-level Brazilian government officials, in exchange for receiving hundreds of millions of dollars in financing from a Brazilian state-owned and state-controlled bank. In another instance, the company paid more than $4.6 million in bribes to a high-ranking executive of a Brazilian state-controlled pension fund in exchange for the fund’s approval of a significant merger that benefited the company. The company also paid approximately $25 million in bribes to a high-level Brazilian government official in order to obtain hundreds of millions of dollars of financing from a different Brazilian state-owned and state-controlled bank. Company executives also “used New York-based bank accounts to facilitate the bribery scheme and to make corrupt payments, purchased and transferred a Manhattan apartment as a bribe, and met in the United States to discuss and further aspects of the illegal scheme.”

    The announcement noted that the company did not voluntarily disclose the violations but still received partial credit and a 10 percent reduction off the U.S. Sentencing Guidelines fine range for its remediation and cooperation with the DOJ’s investigation. Under the terms of the plea agreement, the company will pay the U.S. approximately $128.2 million of the $256 million criminal penalty. The remaining portion will be offset by $128.2 million in penalties the company will pay pursuant to a resolution with the Brazilian authorities. The company also agreed to continue to cooperate with the DOJ in any ongoing or future criminal investigations, and will enhance its compliance program, and report on the implementation of its enhanced compliance program for a three-year period.

    The SEC simultaneously announced a resolution in a related matter with the company, along with a majority-owned subsidiary and two Brazilian nationals who own the company and the subsidiary. According to the SEC, the Brazilian nationals engaged in a bribery scheme to facilitate the subsidiary’s acquisition of a U.S. food corporation. The SEC charged the two companies and individuals with violations of the books and records and internal accounting provisions of the FCPA. Under the terms of the cease and desist order, the subsidiary must pay approximately $27 million in disgorgement and the two Brazilian nationals are required to each pay civil penalties of $550,000. All parties also agreed to self-report on the status of certain remedial measures for a three-year period.

    Financial Crimes FCPA SEC DOJ Bribery Of Interest to Non-US Persons

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  • Asphalt company agrees to pay over $16 million to settle FCPA charges

    Financial Crimes

    On September 22, the DOJ announced that a Florida-based asphalt company pleaded guilty to conspiracy to violate the anti-bribery provisions of the FCPA, agreeing to pay a $16.6 million criminal fine to resolve the charges. According to the information filed in the U.S. District Court for the Eastern District of New York, the company and its affiliates bribed foreign officials in Brazil, Venezuela, and Ecuador with millions of dollars in order to “obtain contracts to purchase or sell asphalt to the countries’ state-owned and state-controlled oil companies, in violation of the FCPA.” Between 2010 and 2015, to execute the bribery scheme in Brazil, the company entered into fake consulting agreements with intermediaries and sent international wires from company bank accounts to offshore bank accounts controlled by the bribe intermediaries. The intermediaries would then pay bribes to Brazilian government officials on the company’s behalf. In Venezuela, between 2012 and 2018, the company used similar fake consulting agreements to bribe Petróleos de Venezuela, S.A. (PDVSA) officials and used code names to hide the names of PDVSA officials in emails and texts. Lastly, in 2014, the company again used similar sham consulting arrangements to bribe Ecuador’s state-owned oil company to secure a contract to supply asphalt.

    The announcement notes that the DOJ recently unsealed charges and guilty pleas of five individuals involved in the bribery scheme, including a company senior executive, a company trader, two bribe intermediaries, and a former PDVSA official. Additionally, the announcement states that a different company trader pleaded guilty in 2017 for his role in the scheme and a pending criminal complaint against a former PDVSA official was also recently unsealed in federal court.

    Financial Crimes DOJ FCPA Of Interest to Non-US Persons Bribery Petroleos de Venezuela

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  • $21.7 million FCPA settlement for consumer lender

    Financial Crimes

    On August 6, the SEC announced that a South Carolina-based consumer loan company agreed to pay over $21.7 million to settle the SEC’s claims that the company violated the books and records and internal accounting controls provisions of the FCPA through its Mexican loan operations. According to the SEC, the company’s former Mexican subsidiary paid more than $4 million in bribes, “directly or through intermediaries, to Mexican government officials and union officials, from at least December 2010 through June 2017 to obtain and retain business” related to the offering of small loans to state and federal government employees. The SEC alleged that in order to “retain the ability to make loans to government employees under all of the contracts” and to ensure loan repayments were made in a timely manner, the former subsidiary paid bribes in several ways, including (i) cash payments; (ii) making deposits into bank accounts linked to government officials and union officials or those of their relatives and friends; and (iii) hiring third-party intermediaries to assist in securing business and making bribe payments, including large bags of cash, to officials.

    These bribes, the SEC alleged, were then inaccurately recorded in the company’s books and records as “legitimate ‘commission’ expenses.” The SEC also found that the company and its former subsidiary lacked “internal accounting controls sufficient to detect or prevent such payments,” and that as a result of the subsidiary’s failure to implement a sufficient accounts payable system, managers pre-signed blank checks, which made “it impossible to enforce authorization limits in place over payments.” The SEC further alleged that while the former subsidiary sent spreadsheets to the parent company each month detailing the payments, the company did not require invoices or back-up support to account for the expenses and failed to identify the high risk of bribery and corruption in Mexico. Additionally, the SEC noted that despite incorporating an FCPA policy into the company’s corporate compliance manual in 2013, there was no effective formal monitoring or internal controls to ensure the former subsidiary complied with the policy. The company also allegedly lacked personnel oversight in Mexico, and “the tone at the top” from company management “did not support robust internal audit and compliance functions,” leading to several material weaknesses.

    In entering into the administrative order, the SEC considered the company’s cooperation and remedial efforts. Without admitting or denying wrongdoing, the company consented to a cease and desist order, and agreed to pay a $2 million civil money penalty and approximately $19.7 million in disgorgement and pre-judgment interest.

    Financial Crimes SEC FCPA Bribery Of Interest to Non-US Persons

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  • Pharmaceutical company settles FCPA-related bribery charges with SEC

    Financial Crimes

    On July 2, a Boston-based global pharmaceutical company agreed to pay over $21 million to settle claims by the SEC that the company violated the books and records and internal accounting controls provisions of the FCPA. According to the SEC, Turkish and Russian subsidiaries of the pharmaceutical company made payments to foreign government officials in those countries to obtain various types of favorable treatment for the pharmaceutical company’s primary drug, including prescription approvals. Specifically, the SEC alleged that from 2010 to 2015, the Turkish subsidiary made payments to a consultant who passed a portion of the funds on to government officials; the Turkish subsidiary also allegedly made payments to “improperly influence” health care providers (HCPs) to make decisions in favor of the pharmaceutical company. Additionally, the SEC claimed that from 2011 to 2015, Russian government health officials received improper payments from the Russian subsidiary in order to influence regional healthcare budget allocations for the primary drug and to increase the number of approved prescriptions. The SEC asserted that the two subsidiaries maintained false books and records of these improper payments, which the pharmaceutical company’s internal accounting controls failed to detect or prevent. As a result, according to the SEC, due to the pharmaceutical company’s lack of an effective anti-corruption compliance program and inadequate internal accounting controls, it was “unjustly enriched by over $14 million.” The SEC also claimed that two additional subsidiaries in Brazil and Colombia failed to maintain accurate books and records regarding third-party payments.

    In entering into the administrative order, the SEC considered the pharmaceutical company’s cooperation and remedial efforts, including efforts to (i) strengthen and expand its global compliance organization; (ii) enhance third-party payment related policies and procedures; (iii) revamp engagement and oversight of HCPs; (iv) improve internal audit functions; (iv) conduct “proactive compliance market reviews”; and (v) improve employee anti-corruption training.

    Without admitting or denying wrongdoing, the pharmaceutical company consented to a cease and desist order, and agreed to pay a $3.5 million civil money penalty and approximately $17.9 million in disgorgement and pre-judgment interest.

    Financial Crimes FCPA SEC Bribery Of Interest to Non-US Persons

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  • Global pharmaceutical company’s current and former subsidiaries settle alleged FCPA violations with DOJ

    Financial Crimes

    On June 25, the DOJ announced it had entered into a deferred prosecution agreement with a subsidiary of a Switzerland-based global pharmaceutical company to pay $225 million in criminal penalties related to alleged violations of the FCPA’s anti-bribery and books and records provisions. The DOJ also entered into a separate deferred prosecution agreement with a former subsidiary of the pharmaceutical company (current subsidiary of a multinational eye care company) for approximately $8.9 million in criminal penalties related to alleged violations of the FCPA’s books and records provisions.

    According to the DOJ, between 2012 and 2015, the current pharmaceutical subsidiary violated the FCPA by engaging in a scheme to bribe employees of state-owned and state-controlled hospitals and clinics in Greece to increase the sales of its products. Moreover, between 2009 and 2010, the pharmaceutical subsidiary made improper payments, in connection with an epidemiological study, to providers in order to increase sales of certain prescription drugs. The DOJ alleged that the pharmaceutical subsidiary “knowingly and willfully conspired with others to cause [the pharmaceutical parent company] to mischaracterize and falsely record improper payments…in [the parent company]’s books, records, and accounts.” Under the terms of the agreement with the pharmaceutical subsidiary, the subsidiary agreed to cooperate with ongoing investigations, and both the subsidiary and its parent agreed to enhance their compliance programs and report to the DOJ on those improvements.

    In the DPA with the former eye care subsidiary, the DOJ alleged that between 2011 and 2014, while still a subsidiary of the pharmaceutical parent company, the former subsidiary “knowingly and willfully conspired with others to cause [the pharmaceutical parent company] to maintain false books, records and accounts, as a result of a scheme to bribe employees of state-owned and state-controlled hospitals and clinics in Vietnam.” The agreement notes that the former eye care subsidiary and its current parent company have since implemented and will continue to implement enhanced FCPA compliance controls and will report to the government on the implementation.

    The DOJ recognized that both subsidiaries engaged in remedial measures, including (i) terminating and disciplining individuals involved in the misconduct; (ii) adopting heightened controls and anti-corruption protocols; and (iii) increasing the resources devoted to compliance.

    The SEC simultaneously announced a resolution with the pharmaceutical parent company to pay over $112 million in a related matter.

    Financial Crimes DOJ FCPA Settlement SEC Of Interest to Non-US Persons Bribery

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  • DOJ unveils charges against Maduro, Venezuelan government officials

    Financial Crimes

    On March 26, the DOJ announced criminal charges against numerous current and former Venezuelan government officials, including “Former President” Nicolás Maduro Moros and two Fuerzas Armadas Revolucionarias de Colombia (FARC) leaders. The charges include allegedly engaging in drug trafficking, laundering drug proceeds using Florida real estate and luxury goods, corruption, and bribery. According to an unsealed four-count superseding indictment filed in the Southern District of New York, Maduro, along with five other high-ranking officials, participated in a “narco-terrorism conspiracy,” conspired to import large-scale cocaine shipments into the U.S., and used—or conspired to use—“machine guns and destructive devices” to further the narco-terrorism conspiracies. The charges also allege that Maduro and the officials negotiated and facilitated FARC-produced cocaine shipments, coordinated “foreign affairs with Honduras and other countries to facilitate large-scale drug trafficking,” and solicited assistance from FARC leadership with respect to militia training.

    A separate indictment unsealed in the District of Columbia charges the current Venezuelan Minister of Defense with conspiracy to distribute cocaine on a U.S.-registered aircraft. That individual was previously sanctioned in 2018 by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC). (Covered by InfoBytes here.)

    A criminal complaint was also filed in the Southern District of Florida charging the current Chief Justice of the Venezuelan Supreme Court with accepting “tens of millions of dollars and bribes to illegally fix dozens of civil and criminal cases,” including a case in which the defendant authorized the dismissal of charges brought against a Venezuelan who was “charged in a multibillion-dollar fraud scheme against the Venezuelan state-owned oil company.” According to the complaint, the defendant laundered the proceeds through U.S. bank accounts, and spent approximately $3 million in South Florida on a private aircraft and luxury goods.

    Another unsealed indictment in the Southern District of New York charges three additional Venezuelans with evading OFAC sanctions by working “with U.S. persons and U.S.-based entities to provide private flight services for the benefit of Maduro’s 2018 presidential campaign.”

    Additional separate indictments accuse various former Venezuelan officials of drug trafficking and military aircraft smuggling. In addition, several individuals were charged with FCPA violations, including: (i) two individuals for allegedly receiving bribes to award business to U.S.-based companies; and (ii) several individuals for allegedly participating in an international money laundering scheme and conspiring to solicit Petróleos de Venezuela, S.A. (PDVSA) vendors “for bribes and kickbacks in exchange for providing assistance to those vendors in connection with their PDVSA business.” According to the DOJ’s press release, the scheme involved “bribes paid by the owners of U.S.-based companies to Venezuelan government officials to corruptly secure energy contracts and payment priority on outstanding invoices.”

    Financial Crimes DOJ Indictment Of Interest to Non-US Persons Venezuela Petroleos de Venezuela Anti-Money Laundering Bribery FCPA OFAC Sanctions Courts

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  • Court overturns foreign bribery conviction of former transportation and energy industry executive

    Financial Crimes

    On February 26, the U.S. District Court for the District of Connecticut acquitted a British national and former executive of a French multinational transportation and energy company who had been convicted by a jury of FCPA violations, citing the government’s failure to prove at trial that the defendant was an “agent” of a domestic concern. The court left intact the jury’s money laundering verdicts against the defendant.

    At trial in November 2019, the jury found the defendant guilty of one count of conspiracy to violate the FCPA, and six counts of substantive FCPA violations, as well as several money laundering counts, for his alleged involvement in a scheme by the company’s U.S. subsidiary, a power generation equipment manufacturer, to bribe Indonesian officials to obtain a power plant construction contract. The defendant filed a Rule 29(a) motion for a judgment of acquittal on all of the counts, arguing as to the FCPA counts that the government “failed to prove that he was an agent of [the subsidiary], the relevant domestic concern,” as required pursuant to the U.S. Court of Appeals for the Second Circuit’s earlier decision in the matter (covered by InfoBytes here). The trial court agreed, ruling that the evidence adduced at trial did not established that the subsidiary exercised “control over [the defendant’s] actions sufficient to demonstrate agency.” The court also granted the defendant’s in-the-alternative request for a new trial on the FCPA counts, in the event that court’s acquittal is later disturbed on appeal.

    Financial Crimes Bribery Of Interest to Non-US Persons FCPA SEC DOJ Indonesia International

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  • French aerospace company to pay more than $3.9 billion to resolve foreign bribery cases

    Financial Crimes

    On January 31, a French aerospace company that manufactures civilian and military aircraft agreed to pay combined penalties of more than $3.9 billion to U.S., French, and UK authorities. The company resolved foreign bribery charges with all three jurisdictions, as well as U.S. violations of the Arms Export Control Act (AECA) and its implementing regulations, and the International Traffic in Arms Regulations (ITAR). (See deferred prosecution agreement and information filed in the U.S. District Court for the District of Columbia.)  The resolutions covered bribes paid in countries including China, Sri Lanka, Malaysia, Indonesia, Taiwan, and Ghana.

    With respect to the FCPA, according to the DOJ’s announcement, beginning in at least 2008 and continuing through at least 2015 the company engaged in a global “scheme to use third-party business partners to bribe government officials, as well as non-governmental airline executives.” The bribes were offered to decision makers, including foreign officials, “in order to obtain improper business advantages and to win business from both privately owned enterprises and entities that were state-owned and state-controlled.” The AECA and ITAR violations involved “fil[ing] numerous applications for the export of defense articles and defense services to foreign armed forces[,]” but failing to provide the U.S. State Department’s Directorate of Defense Trade Controls (DDTC) “with accurate information related to commissions paid by [the company] to third-party brokers who were hired to solicit, promote or otherwise secure the sale of defense articles and defense services to foreign armed forces.”  As part of the deferred prosecution agreement, the company agreed to cooperate with the DOJ’s ongoing investigations and prosecutions and enhance its compliance program. The DOJ also recognized the company’s cooperation and remediation.

    Financial Crimes DOJ FCPA Bribery Of Interest to Non-US Persons UK Serious Fraud Office AECA ITAR

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  • SEC settles FCPA charges stemming from Malaysian development fund scheme

    Financial Crimes

    On December 16, the SEC announced a resolution with a former executive at a U.S. financial institution to settle allegations that he violated the anti-bribery, internal controls, and books and records provisions of the FCPA by using a third party intermediary to bribe government officials in Malaysia and Abu Dhabi. According to the administrative order, the bribes enabled the financial institution to obtain business from a Malaysian investment development fund, including underwriting several bond deals for which the financial institution allegedly earned roughly $600 million. The SEC further found that the former executive personally received more than $43 million in payments for his alleged role in facilitating the bribery scheme.

    The former executive consented to the order without admitting or denying the factual basis, and consented to being permanently barred from the securities industry. He also agreed to pay disgorgement of $43.7 million, which will be offset and “deemed satisfied” by a forfeiture order in a previously instituted parallel DOJ criminal action where he pleaded guilty to FCPA and money laundering conspiracies. (Previous InfoBytes coverage here.)

    Financial Crimes FCPA Of Interest to Non-US Persons SEC DOJ Bribery

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