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: Which countries had the best, and the worst, showings in Transparency International’s 2020 Corruption Perceptions Index? What new anti-corruption agency was established in South Korea? What are China’s future anti-corruption enforcement priorities? The answers to these questions and more are here in our January 2021 Top Ten list.
1. Transparency International Releases Annual Corruption Perceptions Index. On January 28, 2021, Transparency International (TI) published its annual Corruption Perceptions Index (CPI) for 2020. The CPI, which measures the perceived levels of public-sector corruption in 180 countries and territories, provides one of the major data points used by compliance professionals, outside counsel, and enforcement officials in assessing the anti-corruption risk of doing business in particular countries. Countries and territories receive scores ranging between 0 (highly corrupt) and 100 (very clean). TI considers scores below 50 to be failing scores, while scores below 30 indicate severe systemic corruption. Similar to last year, the top countries on the CPI 2020 are Denmark and New Zealand (both scoring 88; jointly ranking 1st). They are followed by Finland, Singapore, Sweden, and Switzerland (all scoring 85; jointly ranking 3rd). At the bottom are South Sudan and Somalia (both scoring 12; jointly ranking 179th), followed by Syria (scoring 14; ranking 178th), Yemen, and Venezuela (both scoring 15; jointly ranking 176th). The United States continued its descent in the rankings, falling from 23rd in 2019 with a score of 69 to 25th in 2020 with a score of 67, its lowest CPI score since 2012. As discussed in our client alert examining CPI results in the Asia-Pacific region, China improved slightly from 2019 (scoring 42; ranking 78th), while Malaysia (scoring 51; ranking 57th) and Indonesia (scoring 37; ranking 102nd) both declined. Despite rising awareness, corruption remains a global problem with two-thirds of the 180 countries ranked around the world earning scores below 50; the average score is just 43. The CPI 2020 also suggests that the COVID-19 pandemic may have played a role in increasing public-sector corruption, from bribery for COVID-19 testing, treatment, and other health services, to public procurement of medical supplies and overall emergency preparedness. Those findings are consistent with earlier warnings from the OECD and other organizations about the bribery risks posed by the global pandemic response, as well as anecdotal evidence from the Asia-Pacific region and elsewhere. TI concluded that countries that performed well in the CPI invested more in health care, were “better able to provide universal health coverage and are less likely to violate democratic norms.”
2. German Bank Agrees to Resolve FCPA Accounting Provision Allegations. On January 8, 2021, the U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC) announced that Deutsche Bank AG had agreed to pay more than $130 million as part of coordinated resolutions with DOJ and SEC to resolve alleged Foreign Corrupt Practices Act (FCPA) accounting violations (as well as fraud allegations related to precious metals futures contracts). As part of a three-year deferred prosecution agreement (DPA) filed in the Eastern District of New York, the bank agreed to pay approximately $79.6 million to resolve allegations that it made improper payments to business development consultants (BDCs) in Abu Dhabi, Italy, and Saudi Arabia. In connection with the SEC order, the bank agreed to pay $35 million in disgorgement and $8 million in prejudgment interest to resolve alleged FCPA accounting violations related to payments made to BDCs in Abu Dhabi, China, Italy, and an unnamed “Middle Eastern” country.
3. U.S. Supreme Court Denies Review in Long-Running Corruption Case. On January 25, 2021, the U.S. Supreme Court denied a petition for certiorari by Samir Khoury, a dual U.S. and Lebanese citizen and former engineering consultant for Kellogg Brown & Root, who sought dismissal of charges against him related to an alleged kickback scheme from 1996 to 2003 to secure oil contracts in several countries, including Egypt, Oman, and Qatar. Khoury was charged under seal in 2008 with several counts including wire and mail fraud. The indictment was eventually unsealed in 2018. Khoury had previously argued before the U.S. Court of Appeals for the Fifth Circuit that his due process rights were violated because the indictment sat sealed and dormant for ten years, costing him the right to a speedy trial and impairing his ability to defend himself, as most of the witnesses that could come to his defense are now dead. The U.S. District Court for the Southern District of Texas and the Fifth Circuit denied repeated attempts by Khoury to challenge the indictment, including most recently in July 2020, which preceded Khoury’s certiorari petition.
4. Ex-PDVSA Trader Pleads Guilty to Laundering Bribes from U.S.-Based Asphalt Company. On January 27, 2021, Daniel Comoretto, a former manager and trader for Venezuela’s national oil company, Petroleos de Venezuela S.A. (PDVSA), pleaded guilty in the Eastern District of New York to conspiring to launder bribes he allegedly received from U.S. asphalt companies in exchange for helping them obtain contracts. Comoretto, a dual citizen of Venezuela and Italy and a lawful permanent resident of the United States, and his subordinate Hector Nuñez Troyano, allegedly received bribes through Sargeant Marine Inc., an intermediary asphalt company based in South Florida, and from another unnamed operator, in exchange for helping them obtain contracts from PDVSA. Charges against Comoretto and Troyano were made public in September 2020, the same month as Sargeant Marine pleaded guilty to a related FCPA conspiracy charge.
5. Business Executive Sentenced for Petroecuador Bribery Scheme. On January 28, 2021, DOJ announced that Armengol Alfonso Cevallos Diaz, an Ecuadorian businessman living in the United States, had been sentenced to 35 months in prison following his January 2020 guilty plea in the Southern District of Florida to FCPA and money laundering conspiracy charges in connection with an alleged $4.4 million bribery and money laundering scheme involving officials of Ecuador’s national oil company, Empresa Pública de Hidrocarburos del Ecuador (“Petroecuador”). (For more on the Petroecuador prosecutions, please see our April 2018, September 2018, November 2018, April 2019, October 2019, November 2019, December 2019, January 2020, and February 2020 Top 10s.)
6. UK SFO Ends Foreign Bribery Investigation of UK-Based Tobacco Company. On January 15, 2021, the UK Serious Fraud Office (SFO) announced that it had concluded its foreign bribery investigation into British American Tobacco without bringing charges. As discussed in our February 2016 Top 10, the BBC and other UK media outlets reported that the SFO was investigating allegations that the company was paying bribes to undermine anti-smoking laws in Central and East Africa. The SFO confirmed in August 2017 that it was investigating the company but provided little detail about the subject of the investigation. In its January 2021 press release, the SFO thanked the Kenyan Ethics and Anti-Corruption Commission for its assistance in the investigation.
7. British Executive Pleads Guilty in the UK to Additional Foreign Bribery Charges. On January 14, 2021, the SFO announced that David Lufkin, the previous global head of sales for Petrofac Limited, had pleaded guilty to three counts of bribery, contrary to Sections 1(1) and 1(2) of the UK Bribery Act 2010 (UKBA). The charges related to approximately $30 million in allegedly corrupt offers and payments made between 2012 and 2018 to influence the award of approximately $3.3 billion in Engineering Procurement and Construction (EPC) and Front-End Engineering Design contracts to Petrofac in the United Arab Emirates. This was the second time that Lufkin pleaded guilty in connection with the SFO’s investigation, commenced in May 2017, of Petrofac, its subsidiaries, and their officers, employees, and agents for suspected bribery, corruption, and money laundering. In February 2019, Lufkin pleaded guilty to 11 counts of bribery related to the award of EPC and Operations and Maintenance contracts to Petrofac worth in excess of $730 million in Iraq and in excess of $3.5 billion in Saudi Arabia. Lufkin is due to be sentenced on February 11, 2021.
8. Swiss Court Convicts Israeli Mining Magnate of Bribery in Guinea. On January 22, 2021, Beny Steinmetz was convicted by the Criminal Court of Geneva of corruption and forgery in connection with an alleged scheme to bribe Mamadie Touré, a wife of former Guinean president Lansana Conté, to secure exploration permits for iron ore in Guinea’s Simandou region. Steinmetz was sentenced to five years in prison and a 50 million Swiss franc fine but was allowed to return to Israel while he pursues his appeal. Along with Steinmetz, the Swiss court convicted co-defendants Sandra Merloni-Horemans, a director of Steinmetz’s company, BSGR, and Frederic Cilins, a former BSGR sales agent who had previously been convicted and sentenced in the United States to two years’ imprisonment in 2014 for allegedly obstructing a related DOJ investigation.
9. South Korea Launches New Anti-Corruption Body Focused on High-Ranking Officials. On January 21, 2021, South Korea launched a new organization, the Corruption Investigation Office for High-Ranking Officials (CIO), tasked with “uprooting crimes committed by high-ranking public officials and their families, and rebuilding the country’s transparency and trust in public officials.” The CIO is empowered to investigate the country’s highest-ranking officials, including the president, prosecutors, judges, and lawmakers. The CIO’s authority supersedes the authority of other investigative agencies when it comes to these officials, extends to “related crimes,” such as bribes paid by private companies to high-ranking officials, and includes the authority to prosecute corruption offenses by high-ranking officials, their families, and others, a function previously reserved for the South Korean Prosecutor’s Office. The CIO will be headed by Kim Jin-wook, a former judge and researcher in South Korea’s Constitutional Court. Kim vowed to investigate any high-ranking officials in accordance with the law while maintaining political neutrality and independence. Kim has indicated that the CIO will be poised to begin investigations towards the end of March 2021, after it hires officials and receives the necessary policy and budgetary support. The South Korean National Assembly passed the bill establishing the CIO in December 2020.
10. China Reaffirms Commitment to Anti-Corruption Campaign, Sets Out Priorities. On January 24, 2021, the Chinese Communist Party’s Central Commission for Discipline Inspection (CCDI) issued a communique setting out its upcoming anti-corruption priorities. According to the communique, the CCDI intends to focus on key state-based investment projects, infrastructure construction, project approval, state-owned enterprise reform, public resource allocation, and scientific research management. The CCDI communique highlighted three key areas—the financial sector, state-owned enterprises, and law enforcement—for increased enforcement efforts. The communique also said the CCDI would push for international cooperation efforts and the pursuit of Chinese fugitives living abroad. The latter has become quite controversial in the United States and Canada, as discussed in our November 2020 Top 10.