Top 10 International Anti-Corruption Developments for November 2019
Top 10 International Anti-Corruption Developments for November 2019
In order to provide an overview for busy in-house counsel and compliance professionals, we summarize below some of the most important international anti-corruption developments from the past month, with links to primary resources. This month we ask: Was the U.S. Department of Justice (DOJ) able to convince a federal jury that Lawrence Hoskins was an agent of a U.S. company for purposes of the Foreign Corrupt Practices Act (FCPA)? What changes did DOJ make to the FCPA Corporate Enforcement Policy? How many FCPA-related tips did the U.S. Securities and Exchange Commission (SEC) receive from whistleblowers in fiscal year (FY) 2019? The answers to these questions and more are here in our November Top 10 list.
1. Numerous Developments in Alstom-Related Investigations. This month featured several significant developments in the ongoing, multinational foreign bribery investigation of Alstom SA, a French multinational power and transportation company.
2. Former President of Maryland-Based Nuclear Transportation Company Convicted by Jury on Russian Bribery Charges. On November 25, 2019, Mark Lambert, the former president of Transport Logistics International, was convicted following a jury trial in the District of Maryland of one count of conspiracy to violate the FCPA and to commit wire fraud, four substantive FCPA counts, and two substantive wire fraud counts. The jury acquitted Lambert of money laundering and three substantive FCPA counts. In January 2018, DOJ announced that Lambert had been indicted in connection with an alleged scheme to bribe Vadim Mikerin, an official at a subsidiary of Russia’s State Atomic Energy Corporation (TENEX), the sole supplier and exporter of Russian uranium and uranium enrichment services to nuclear power companies worldwide. The bribes, which allegedly started as early as 2009 and continued through 2014, were aimed at securing contracts between TENEX and Transport Logistics, which provides services for the transportation of nuclear materials. Mikerin pleaded guilty in August 2015 to related charges and was sentenced to four years in prison. Transport Logistics reached a corporate resolution with DOJ in March 2018. Lambert’s conviction was the fourth trial victory for DOJ’s FCPA Unit in 2019, following the convictions of Hoskins in November 2019 and of Roger Richard Boncy and Joseph Baptiste in June 2019. He is scheduled to be sentenced on March 9, 2020.
3. DOJ Revises FCPA Corporate Enforcement Policy for the Second Time This Year. In November 2017, DOJ announced a new FCPA Corporate Enforcement Policy designed to encourage self-disclosure, cooperation, and remediation in FCPA investigations. In March 2019, DOJ announced that it had revised the policy, softening its stance on ephemeral messaging policies, clarifying when a company must “de-conflict” its internal investigations with DOJ, and making explicit that the Policy applies in the mergers and acquisitions (M&A) context. On November 20, 2019, DOJ further tweaked the policy to clarify its expectations for companies seeking to qualify for voluntary disclosure and cooperation credit in an FCPA investigation. Under the previous policy, to qualify for the voluntary disclosure credit, a company was required to disclose to DOJ “all relevant facts known to it, including all relevant facts about all individuals substantially involved in or responsible for the violation of law.” The revised policy states that a company is expected to disclose “all relevant facts known to it at the time of the disclosure, including as to any individuals substantially involved in or responsible for the misconduct at issue.” The revised policy also includes a footnote recognizing that companies may not be in a position to know “all relevant facts” at the time of a voluntary disclosure, but that this should not prevent or dissuade companies from making a disclosure based on facts known at the time. Under the previous policy, to receive full cooperation credit, a company was required to alert DOJ when “the company is or should be aware of opportunities for the Department to obtain relevant evidence not in the company’s possession and not otherwise known to the Department.” The revised policy now states that a company should notify DOJ when the company “is aware of relevant evidence not in the company’s possession.” Finally, DOJ clarified that the policy will apply in the M&A context when an acquiring company uncovers, through due diligence or integration efforts, misconduct by the merged or acquiring entity. Although relatively minor, the November 2019 revisions to the policy demonstrate that DOJ is open to feedback from the business community.
4. Korean Shipbuilder Resolves Brazil FCPA Allegations. On November 22, 2019, DOJ announced that Samsung Heavy Industries (SHI) had agreed to pay approximately $75 million in total global penalties to resolve allegations that it bribed Brazilian officials in order to help secure a contract to build a drillship that would ultimately be chartered by Brazil’s national oil company, Petrobras. In connection with a three-year deferred prosecution agreement (DPA), DOJ charged the company in the Eastern District of Virginia with one count of violating the FCPA in connection with the bribery scheme, which allegedly took place between 2007 and 2013. Under the DPA, half of the $75 million penalty will be paid to Brazilian authorities pursuant to agreements that the company reached with several Brazilian agencies.
5. Former Nutrition Company Executives Charged With Bribing Chinese Officials. On November 14, 2019, DOJ announced that Yanliang Li and Hongwei Yang, two former executives of the Chinese subsidiary of a multinational company, later identified as Herbalife Nutrition Ltd., had been charged in the Southern District of New York with violations of the FCPA’s anti-bribery and accounting controls provisions in connection with an alleged scheme to bribe Chinese government officials to obtain direct selling licenses in China and to reduce government and media scrutiny of the company’s Chinese operations. Li was also charged with perjury and document destruction. The bribes allegedly took place between 2007 and 2017, and included cash, entertainment, meals, and travel. Apparently extending the Hoskins agency theory, the indictment alleges that, despite being employed by a Chinese subsidiary, Li and Yang were agents of the parent-issuer for purposes of the anti-bribery violation. However, unlike in Hoskins, where DOJ contended that the defendant was acting on behalf of the U.S. subsidiary on a specific transaction, the Li and Yang indictment seems to allege a much broader agency theory, contending that there was no meaningful corporate distinction between the parent and subsidiary in their businesses generally. Given this novel allegation, it will be important to monitor how this case develops, both factually and legally, and to see whether this case is a harbinger of a more aggressive use of agency theory to hold parents liable for the conduct of their foreign subsidiaries.
6. Former CEO of Brazilian Chemical Company Indicted for FCPA and Money Laundering Offenses. On November 20, 2019, DOJ announced that Jose Carlos Grubisich, a Brazilian citizen and the former CEO of Braskem S.A., had been arrested in connection with an alleged scheme to divert hundreds of millions of dollars into a secret slush fund used in part to pay bribes to government officials, political parties, and others in Brazil to obtain and retain business. Grubisich was charged in the Eastern District of New York with conspiring to violate the FCPA’s anti-bribery and accounting provisions and to commit money laundering. In December 2016, Braskem resolved related FCPA allegations with DOJ and SEC.
7. Former Lawyer for Singapore-Based Oil Rig Builder Sentenced to Time Served for Brazilian Bribery Charges. On November 15, 2019, Jeffrey Shiu Chow, a former attorney at Keppel Offshore & Marine Ltd., was sentenced in the Eastern District of New York to one year of probation, plus a $75,000 fine, after pleading guilty in August 2017 to violating the FCPA by drafting and approving contracts used to conceal approximately $55 million in bribes to officials at Petrobras and in Brazil’s governing political party. Chow’s sentence reflected his cooperation with DOJ. Keppel resolved related bribery allegations in December 2017.
8. DOJ Secures Another Guilty Plea in Petroecuador Bribery Investigation. On November 14, 2019, former Petroecuador adviser José Raúl de la Torre Prado pleaded guilty to conspiracy to launder money in connection with an alleged scheme to solicit millions of dollars in bribes from an unnamed Ecuadorian oil services company in exchange for the company securing favorable contracts with Petroecuador. According to his factual proffer, de la Torre worked at Petroecuador as the adviser to a Petroecuador official who was involved in and had oversight over the awarding of Petroecuador contracts and payments on those contracts. De la Torre admitted to personally receiving approximately $32,508 in luxury items and cash from executives of the oil services company. (For more on the PetroEcuador prosecutions, read our April 2018, September 2018, November 2018, April 2019, and October 2019 Top 10s.)
9. Miami Investment Firm Executive Pleads Guilty in $1.2 Billion Venezuelan Money Laundering Scheme. On November 26, 2019, Gustavo Adolfo Hernandez Frieri, a former executive of the Miami investment firm Global Security Advisers, pleaded guilty to one count of conspiracy to commit money laundering. According to the proffer, Frieri conspired to launder a total of approximately $12 million in bribe payments made to Abraham Edgardo Ortega, the Executive Director of Financial Planning at Venezuela’s national oil company, Petroleos de Venezuela S.A. (PDVSA). Frieri used his advisory firm, which operated from the United States but primarily did business in Latin America, to launder the bribery proceeds. Ortega’s sentencing is scheduled for January 9, 2020 and Frieri’s sentencing is set for March 20, 2020. (For more on the PDVSA investigation, read our September 2018, October 2018, February 2019, August 2019, and May 2019 Top 10s.)
10. SEC Annual Whistleblower Report Documents Another Strong Year for Number of Tips and Total Awards. On November 15, 2019, the SEC Office of the Whistleblower published its annual report to Congress. According to the report, in FY 2019, the office received its second-largest ever number of whistleblower tips (over 5,200), which marks a 74% increase since the program was started. The tips were received from individuals in 70 countries outside the United States, as well as from every state. According to the report, SEC received 200 FCPA-related tips in FY 2019, approximately the same number as it received in FY 2018. Cryptocurrencies were an emerging area of interest, with 289 tips received in FY 2019. SEC awarded approximately $60 million in whistleblower awards to eight individuals whose information and cooperation assisted the agency in bringing successful enforcement actions. This included SEC’s third-largest ever award to an individual of $37 million. SEC flagged that it anticipates new Whistleblower Rule amendments being adopted in FY 2020, which will include clarifying the requirements for anti-retaliation protections following the Supreme Court’s February 2018 ruling in Digital Realty Trust, Inc. v. Somers, and providing tools to increase efficiencies in the claims review process.
 United States v. José Raúl de la Torre Prado, 1:19-CR-20580 (S.D. Fla. Nov. 15, 2019), ECF No. 54.
 United States v. José Raúl de la Torre Prado, 1:19-CR-20580 (S.D. Fla. Nov. 15, 2019), ECF No. 55.
 United States v. Gustavo Hernandez Frieri, 1:18-CR-20685 (S.D. Fla. Nov. 26, 2019), ECF No. 164.