Designed for busy in-house counsel, compliance professionals, and anti-corruption lawyers, this newsletter summarizes some of the most important international anti-corruption law and enforcement developments from the past month, with links to primary resources. This month we ask: Which companies resolved foreign bribery allegations with the U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC)? How did the Organization for Economic Cooperation and Development (OECD) evaluate foreign bribery enforcement efforts in Austria, Italy, and Romania? How will China’s anti-corruption crackdown in the healthcare sector impact healthcare companies operating in China? The answers to these questions and more are here in our October 2024 Top 10.
On October 16, 2024, DOJ and SEC announced parallel resolutions with Raytheon Company and its parent, RTX Corporation, related to allegations of improper payments in Qatar. According to both agencies, the company bribed a high-level official at the Qatar Emiri Air Force (QEAF), in exchange for his assistance in securing air defense contracts for the Gulf Cooperation Council (GCC) and a potential contract to build a joint operations center (JOC) for Qatar. In connection with the GCC contracts, between 2014 and 2017, the company allegedly paid $2 million to two Qatari entities beneficially owned by the QEAF official to purportedly produce three air defense operations-related studies that were actually prepared by a Raytheon employee. Among other things, company employees and the QEAF official used personal email accounts to exchange drafts of the studies and sham proposals. In connection with the JOC project, in or around 2016, the company allegedly entered into a teaming agreement with a Qatari entity beneficially owned by the QEAF official under which a portion of the JOC contract would have purportedly been subcontracted to the entity. SEC further alleged that, from 2007 through 2020, the company paid over $30 million to a Qatari agent who was a relative of the Qatari Emir and a member of the Council of the Ruling Family, in connection with additional defense contracts. According to SEC, the Qatari agent was engaged on a success fee basis that “provided for vague services” and did not require the Qatari agent to provide invoices or otherwise document or offer proof of his work before being paid. DOJ entered into a three-year deferred prosecution agreement (DPA) with Raytheon for conspiring to violate the FCPA’s anti-bribery provisions (15 U.S.C. § 78dd-1) and conspiracy to violate the Arms Export Control Act (AECA) by failing to disclose the bribes in export licensing applications filed with the Department of State as required by part 130 of the International Traffic in Arms Regulations (ITAR). Under the DPA, which was filed in the Eastern District of New York, the company agreed to pay a criminal monetary penalty of $230.4 million and forfeiture of approximately $36.7 million for the FCPA-related conduct (and an additional $21.9 million financial penalty for the ITAR-related conduct). According to DOJ, the criminal penalty reflects a 20% reduction off the 20th percentile above the low end of the fine range calculated under the U.S. Sentencing Guidelines. The SEC order alleged violations of the FCPA’s anti-bribery and accounting provisions (15 U.S.C. § 78dd-1, 15 U.S.C. §§ 78m(b)(2)(A) and (B)) by RTX. Under the order, the company will pay disgorgement of approximately $37.4 million, prejudgment interest of approximately $11.8 million, and a civil monetary penalty of $75 million. DOJ agreed to credit $22.5 million of the SEC civil penalty against the criminal penalty and $7.4 million of the SEC disgorgement against the forfeiture. Both agencies required the retention of an independent compliance monitor for three years. DOJ stated that the independent compliance monitor was necessary because certain compliance enhancements “are new and have not been fully implemented or tested to demonstrate that they would prevent and detect similar misconduct in the future, and because certain key elements of the Company’s compliance program are still in development[.]”
On October 11, 2024, SEC announced that Moog Inc., a New York-based global manufacturer of motion controls systems for aerospace, defense, industrial, and medical markets, had agreed to pay a civil penalty of $1.1 million to resolve allegations that the company violated the FCPA’s accounting provisions in connection with improper payments made by its wholly owned Indian subsidiary, Moog Motion Controls Private Limited. According to the SEC order, from 2020 through 2022, employees of the subsidiary bribed Indian officials to win business and used various schemes to make the improper payments, including by funneling them through third-party agents and distributors. The same employees also allegedly offered cash bribes to Indian officials in an attempt to cause public tenders in India to favor the company’s products and exclude competitors. The SEC’s order found that the company violated the books and records and internal accounting controls provisions of the FCPA, highlighting a “breakdown in internal accounting controls, training, compliance, and tone at the top of the subsidiary.”
In its October 29, 2024 Form 10-Q filing with SEC, Stanley Black & Decker, Inc., an American manufacturer of power tools, disclosed that SEC and DOJ had informed it that they had each closed their inquiries into the company’s potential FCPA violations with no action taken. The company first announced in a Form 10-K securities filing on February 23, 2023 that it had identified “certain transactions relating to its international operations that may raise compliance questions” under the FCPA and had voluntarily disclosed the information to DOJ and SEC. Neither filing disclosed additional details of the transactions at issue.
On October 23, 2024, DOJ announced that Venezuelan television news network owner, Raul Gorrin Belisario, had been charged by a federal grand jury in the Southern District of Florida with one count of conspiracy to commit money laundering for his alleged role in a $1.2 billion scheme to launder funds corruptly obtained from Venezuela’s state-owned and state-controlled energy company, Petróleos de Venezuela S.A. (PdVSA), in exchange for hundreds of millions of dollars in bribe payments to Venezuelan officials. Between 2014 and 2018, Gorrin and his co-conspirators allegedly paid millions of dollars in bribes to former Venezuelan National Treasurer, Claudia Patricia Díaz Guillén, and her husband, Adrian Jose Velásquez Figueroa, to obtain foreign currency exchange loan contracts with PdVSA and directed the laundering of the illicit proceeds, in part, in the Southern District of Florida, where they purchased real estate, yachts, and other luxury items. To conceal the movement of funds, Gorrin and his co-conspirators allegedly used a series of shell companies and offshore bank accounts. Díaz and Velásquez were convicted on related charges in December 2022 and were each sentenced to 15 years in prison in April 2023. If convicted, Gorrin faces a maximum penalty of 20 years in prison. Gorrin was charged in connection with another Venezuelan bribery and money laundering scheme in November 2018. (For additional details on the new charges, see our December 2020, January 2021, May 2022, July 2022, December 2022, and April 2023 Top 10s.)
On October 3, 2024, an internal three-judge United Nations (UN) Dispute Tribunal ruled[5] that a high-ranking UN official, Vitaly Vanshelboim, secretly took $3 million in gifts from David Kendrick, a British businessman, while steering the agency’s investment portfolio of more than $58 million to Kendrick’s companies. The three-judge court ruled that evidence “clearly and convincingly” showed that Vanshelboim’s misconduct “caused massive financial losses” by the UN Office for Project Services, which provides infrastructure, procurement, and project management services. The UN court found that Vanshelboim committed fraud and “blatant misconduct” by failing to disclose the gifts from Kendrick. The gifts included interest-free loans, home repairs, a new Mercedes, and a $1.2 million sponsorship for Vanshelboim’s teenage son, who was a tennis player. In its ruling, the court said that it did not find proof that Vanshelboim explicitly promised to provide UN money to Kendrick’s companies in exchange for the personal gifts. It also found that Kendrick began paying Vanshelboim in 2017, a year before Vanshelboim’s agency made its first large investments with Kendrick. The tribunal also said that while he was taking money from Kendrick, Vanshelboim “intentionally misrepresented” facts to make Kendrick’s companies look better.
On October 21, 2024, Peru’s former President Alejandro Toledo was sentenced to 20 years and six months in prison for taking $35 million in bribes from Brazilian construction giant Odebrecht S.A. (now known as Novonor) in exchange for letting it win a contract to build the road that now connects Peru’s southern coast with an Amazonian area in western Brazil. In August 2022, DOJ announced the sharing of certain forfeited criminal proceeds to the Republic of Peru linked to Toledo’s bribery scheme. Odebrecht admitted in December 2016 that it bribed officials in a dozen countries to secure public works contracts and agreed to a $3.5 billion global settlement to resolve charges with U.S., Brazilian, and Swiss authorities. Two other ex-presidents of Peru, Pedro Pablo Kuczynski and Ollanta Humala, are also being investigated in the Odebrecht case. (For additional details about Kuczynski and Humala, see our March 2018 Top 10.)
On October 24, 2024, the G20 Anti-Corruption Working Group announced at its ministerial meeting in Natal, Brazil, that it had reached a consensus on enhancing global integrity and combating corruption. The Working Group agreed to submit a ministerial declaration to G20 leaders during the Heads of State and Government Summit, which will take place in Rio de Janeiro on November 18 and 19, 2024. The declaration includes three main commitments to fighting corruption: (1) the active participation of civil society in the construction of anti-corruption agendas; (2) the private sector’s “central responsibility” in fighting corruption, and the need for the countries to develop policies that encourage companies to proactively adopt anti-corruption practices; and (3) sustainable development and fighting corruption in situations of climate disasters.
All parties to the OECD Anti-Bribery Convention are subject to a rigorous peer-review process, Phase 2 of which assesses whether the evaluated country is applying its legislation in practice, and Phase 4 of which focuses on the evaluated country’s enforcement of the Convention and considers the country’s particular challenges and positive achievements.
On October 11, 2024, China’s State Administration for Market Regulation (SAMR) issued the Draft Compliance Guidelines for Healthcare Companies to Prevent Commercial Bribery Risks (“Draft Guidelines”), another step toward targeting anti-corruption risks in the healthcare sector after the Chinese government’s July 2023 national crackdown action. These guidelines largely focus on the same key elements of anti-corruption compliance that are found in long-standing guidance from U.S. enforcement authorities but additionally highlight areas of risk specific to China’s healthcare sector. Revealing the SAMR’s likely areas of focus for future enforcement actions, the Draft Guidelines list nine categories of high-risk activities involving healthcare professionals (HCPs), including fees for service for HCPs, third-party sponsorships, hospitality expenses, distributor and third-party discounts, and outsourcing services to vendors, among others. The Draft Guidelines set out compliance “Dos and Don’ts” for each of these high-risk activities. For example, the Draft Guidelines state that hospitality expenses should be limited to reasonable and modest meals and prohibit the provision of entertainment or tourism to HCPs. Once finalized in the coming months, the Draft Guidelines will be an important point of reference for healthcare companies operating in China and signal the regulators’ focus on improper value transfers disguised as legitimate educational or promotional activities, including transactions that funnel improper benefits via disguised research projects, targeted donations, or using medical foundations as passthroughs for payments to HCPs in exchange for business gains. Healthcare companies are also expected to clearly segregate academic activities from sales personnel, including prohibiting sales personnel from participating in medical education conferences and academic visits. The SAMR also indicated the expectation that healthcare companies thoroughly investigate and self-report anti-bribery misconduct to receive credit for reduced penalties. (For a deeper dive into the Draft Guidelines and key takeaways, read our client alert.)
[1] Order Imposing Money Judgment, United States v. Fernando Ardila-Rueda, Case No. 4:17-cr-00515, ECF No. 99 (S.D. Tex. Oct. 15, 2024).
[2] Judgment, United States v. Oztemel et al., Case No. 3:23-cr-00026 (KAD), ECF No. 329 (D. Conn.
Oct. 28, 2024).
[3] Id., ECF Nos. 186, 187.
[4] Id., ECF Nos. 314, 317.
[5] Judgment, Vanshelboim v. Secretary-General of the United Nations, Case No. UNDT/GVA/2023/020, UNDT/2024/072 (Oct. 3, 2024).