Top 10 International Anti-Corruption Developments for January 2022
Top 10 International Anti-Corruption Developments for January 2022
Designed for busy in-house counsel, compliance professionals, and anti-corruption lawyers, this newsletter summarizes some of the most important international anti-corruption developments from the past month, with links to primary resources. This month we ask: What did the U.S. Department of Justice (DOJ) have to say about payments made to foreign officials under duress? What lessons can be learned from the latest installment of Transparency International’s annual Corruption Perceptions Index? Which industry was added to the scope of China’s years’ long anti-corruption crackdown? The answers to these questions and more are here in our January 2022 Top 10 list.
In its first FCPA Opinion Procedure release since August 2020, on January 21, 2022, DOJ stated that it did not intend to take enforcement action against a U.S.-based company for making a payment to a third-party intermediary to obtain the release of a captain, his crew, and his vessel from detention in “Country A.” According to the facts presented by the company, the vessel had been detained by Country A’s Navy when the ship inadvertently anchored in that country’s waters. Country A detained the crew and captain, taking the captain onshore and keeping him in jail despite his suffering from serious medical conditions. The company’s appeals for assistance from the U.S. government were unsuccessful. A third party purporting to act on behalf of Country A approached the company and demanded a cash payment of $175,000 to release the captain, crew, and vessel. The company was concerned that the payment was intended for a government official of Country A and sought an opinion as to whether DOJ would take enforcement action if it made the payment. Given the “highly unusual and exigent circumstances,” DOJ provided a previously unpublished “preliminary opinion” within days of receiving the company’s request. According to the more detailed Opinion Procedure release, DOJ concluded that the company would not be making the payment “corruptly” or to “obtain or retain business,” two elements of an FCPA anti-bribery violation under 15 U.S.C. § 78dd-2(a). DOJ determined that the “primary reason for the payment was to avoid imminent and potentially serious harm to the captain and the crew” and, citing United States v. Kozeny and the FCPA Resource Guide, noted that “actions taken under duress do not ordinarily constitute crimes.” DOJ also determined that the company has no ongoing or anticipated business in Country A and found itself in Country A’s water as “the result of an error,” which “triggered the payment demanded by the Third-Party Intermediary.” DOJ credited the transparent manner in which the company sought assistance from the U.S. government and, ultimately, an opinion from DOJ. DOJ also took care to note that the “situation at hand is . . . readily distinguishable from other situations in which a company is threatened with severe economic or financial consequence in the absence of a payment.” According to DOJ, “payments under circumstances that companies may perceive as economically coercive, especially in countries in which they are in historical, pending, ongoing, anticipated, or sought after business relationships with government actors may well give rise to liability under the FCPA.” Thus, FCPA Opinion Procedure Release No. 22-1 provides important guidance to companies and practitioners in distinguishing between payments under duress and bribe payments.
On January 25, 2022, Transparency International (TI) published its annual Corruption Perceptions Index (CPI) for 2021. The CPI, which ranks 180 countries and territories around the world by their perceived levels of public sector corruption on a scale of 0 (highly corrupt) to 100 (very clean), 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. TI considers scores below 50 to be failing scores, while scores below 30 indicate severe systemic corruption. Similar to last year, this year’s top marks go to Denmark, Finland, and New Zealand, which tied for first place with a score of 88. Also similar to last year, the countries perceived to be most corrupt are South Sudan (scoring 11; ranking 180), Syria and Somalia (both scoring 13 and ranking 178), and Venezuela (scoring 14; ranking 177). The United States received the same score as in 2020 (67) but fell two places in the rankings (27, tied with Chile). As discussed in our client alert examining CPI results in the Asia-Pacific region, China (scoring 45; ranking 66) and Vietnam (scoring 39; ranking 87) both improved their scores, while Malaysia (scoring 48; ranking 62), Thailand (scoring 35; ranking 110), and Philippines (scoring 33; ranking 117) all lost points in 2021, and India received the same score (scoring 40; ranking 85). The average score globally was 43, and two‑thirds of countries fell below 50. Since 2012, 25 countries have significantly improved their scores, but 23 countries have seen their scores significantly decline.
On January 27, 2022, Nicholas McQuaid, the principal deputy assistant of DOJ’s Criminal Division, spoke virtually at an FCPA forum hosted by the American Conference Institute in Houston, promising that FCPA enforcement would remain “robust.” In response to statistics showing that enforcement of the FCPA appeared to lag in 2021, McQuaid stated that he “wouldn’t over read or really read much into the number of prosecutions in a given year” and said he “would expect to see some significant resolutions in the next year.” McQuaid highlighted that new enforcement approaches might lead to different types of resolutions: “I would expect to see some resolutions from places that are familiar to folks, and also some new ones that people haven’t seen in the past.” These comments align with messages sent by senior DOJ leadership in October 2021 regarding the Department’s plans to vigorously enforce white collar and corporate crime.
On January 20, 2022, a judge in the Eastern District of New York granted summary judgment against Chinese distributor Cicel, which had claimed that Misonix, a U.S. medical device company, had wrongfully terminated their contract and defamed the distributor due to foreign bribery allegations. Cicel argued that Misonix had used FCPA allegations as a pretext to terminate their contractual relationship with Cicel. But the court found “undisputed evidence establish[ing] that Cicel was using illegal methods in connection with the contract,” rendering the contract unenforceable, and entitling Misonix to summary judgment on the breach of contract claim. Cicel further claimed that Misonix had defamed it by stating in a securities filing that it had voluntarily disclosed Cicel’s sales practices to DOJ and SEC. Agreeing with Misonix that truth is an absolute defense to a civil defamation action, the court also granted summary judgment in its favor on Cicel’s defamation claim. In reaching its conclusion, the court seemed to endorse Misonix’s decisions to terminate the agreement and voluntarily disclose the matter to U.S. enforcement authorities: “Unsurprisingly, given the existential threat to public companies posed by potential Foreign Corrupt Practices Act (FCPA) violations, Misonix quickly terminated its agreement with Cicel and commenced an internal investigation, voluntary self-reporting and public disclosure. Defendants certainly had a right and an obligation to act promptly to protect themselves from FCPA liability.” In June 2019 and August 2019 securities filings, respectively, Misonix announced that SEC and DOJ had declined to pursue charges against the company. (For more interesting developments in the civil litigation, see our April 2019 Top 10.)
On January 21, 2022, prosecutors in the FIFA corruption case argued that Argentine sports marketer Full Play Group and former Fox Sports executives Hernan Lopez and Carlos Martinez could not introduce evidence that bribery was legal in their home nation and others to rebut corruption charges based on alleged bribes and kickbacks to soccer officials to secure broadcasting rights. The defendants have sought to argue that, because commercial bribery is not criminalized in Argentina, Uruguay, or Paraguay, they cannot be held liable for the charges against them. Prosecutors countered that the court should follow precedent from a prior FIFA trial denying the use of such evidence on the grounds that, even if it had some marginal probative value, the benefits were outweighed by the obvious risk of prejudice resulting from possible jury nullification. The FIFA corruption probe has already resulted in dozens of individual and corporate guilty pleas. Charges against Full Play were announced in April 2020. (For more on an earlier FIFA trial, see our November 2017, December 2017, and June 2020 Top 10s.)
On January 26, 2022, several U.S. government agencies, including the Departments of Commerce, Homeland Security, Labor, State, and Treasury, along with the Office of the U.S. Trade Representative, issued a Burma Business Advisory highlighting the risks of doing business in Burma due to corruption, illicit finance, and human rights abuses. Of particular note, the report advises caution when dealing with Burmese state-owned enterprises (SOEs), particularly in the natural resources sector, which are dominated by Burma’s military junta. The report advises businesses and individuals dealing with Burmese SOEs to conduct appropriate due diligence to ensure they are not furthering corruption and other illegal activities in Burma. The report also advises caution when engaging in the gems and precious metals sector, which is “rife with potential for money laundering, corruption, and human rights abuses” due to “the lack of regulation, transparency, and accountability.” According to the report, as of 2018, corruption and bribery generated approximately 63 percent of the estimated $15 billion in annual criminal illicit proceeds in Burma.
On January 3, 2022, Mexico’s attorney general formally charged Emilio Lozoya, the former CEO of Petroleos Mexicanos (Pemex), Mexico’s national oil company, with money laundering, criminal association, and bribery. The charges are based on allegations that Lozoya received more than $9 million in bribes from a Brazilian construction company in exchange for sole-sourced contracts. In July 2020, Lozoya was extradited to Mexico from Spain, where he had been arrested in February 2020 on Mexican charges. Lozoya had reportedly been cooperating with Mexican authorities, but he has pleaded not guilty to the new charges. If convicted, Lozoya could face up to 39 years’ imprisonment. He is also reportedly still under investigation for his alleged role in facilitating Pemex’s 2014 purchase of a fertilizer plant.
On January 22, 2022, Israel’s Cabinet approved the opening of a corruption investigation involving Israel’s $2 billion purchase of submarines and other warships from Germany. On January 24, 2022, Kuwait’s Anti-Corruption Authority said it had referred two senior military officers for prosecution for potential corruption involving the Kuwaiti Air Force’s $8.7 billion purchase of jet fighters from a European consortium. These cases serve as a reminder that, although no industry is immune from foreign bribery risk, the defense industry continues to be in the crosshairs of enforcement authorities globally.
On January 4, 2022, South Africa’s Judicial Commission of Inquiry into Allegations of State Capture, Corruption, and Fraud in the Public Sector including Organs of State – also known as the Zondo Commission after its chairperson, Acting Chief Justice Raymond Zondo – issued a report recommending that the South African government establish “a single, multifunctional, properly resourced and independent anti-corruption authority with a mandate to confront the abuses inherent in the present system.” The report said that the authority could be called the Anti-Corruption Authority or Agency of South Africa (ACASA) and could be modelled along the lines of the country’s Competition Commission. The report further recommended that the South African government, the business sector, and relevant stakeholders adopt “a National Charter against Corruption incorporating a standardized Code of Conduct.” The Zondo Commission was established in January 2018 by former South African president Jacob Zuma, following an October 2016 report into allegations of improper conduct by Zuma and certain members of the Gupta family.
On January 20, 2022, China’s Central Commission for Discipline Inspection announced that it would extend its anti-corruption campaign to “investigate and punish corrupt behaviors behind the disorderly expansion of capital and platform monopolies, and cut off the link between power and capital.” Although China’s ongoing corruption crackdown mainly focuses on Chinese officials and citizens (see, e.g., our March 2017, December 2017, January 2018, and April 2019 Top 10s), companies engaged in the Chinese tech sector should be mindful of this latest development, lest they be caught in the net, too.
 Memorandum & Order, Cicel (Beijing) Science & Tech. Co., Ltd. V. Misonix, Inc., Case No. 2:17-cv-01642-GRB-ARL, ECF No. 220 (E.D.N.Y. Jan. 20, 2022).
 Id. at p. 5 (internal footnotes, italics, quotation marks, and alterations omitted, quoting Fabri v. United Techs. Int’l Inc., 387 F.3d 109, 123 (2d Cir. 2004)).
 Memorandum of Law in Support of Government’s Motion In Limine to Preclude Certain Evidence at Trial, United States v. Full Play Group SA, et al., Case No. 1:15-cr-00252-PKC, ECF No. 1700 (E.D.N.Y. Jan. 21, 2022).