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 was the first corporate Foreign Corrupt Practices Act (FCPA) enforcement action of 2022? What does the annual report from the Fraud Section of the U.S. Department of Justice (DOJ) reveal about criminal FCPA enforcement in 2021? Has the ongoing anti-corruption campaign in China begun to focus more on bribe payers? The answers to these questions and more are here in our February 2022 Top 10 list.
On February 17, 2022, the U.S. Securities and Exchange Commission (SEC) announced the first corporate FCPA resolution of 2022. According to the announcement, Seoul-based KT Corporation, which is considered a U.S. issuer, agreed to pay $6.3 million to resolve FCPA accounting charges related to allegations that it made improper payments to Korean and Vietnamese government officials. According to the SEC cease-and-desist order, for nearly a decade, the company provided gifts and illegal political contributions to government officials in Korea who had influence over its business, and to Vietnamese officials in connection with soliciting business from government customers. In Korea, the money for these payments allegedly came from a slush fund of approximately $1.3 million, created first by inflating bonuses to executives, which were then returned to the company’s then-executive officer in cash, which was either deposited in an executive’s personal bank account or kept in a safe in the company’s office, and later, through gift cards that were converted to cash. The SEC also alleged that, at the urging of the Blue House, South Korea’s presidential residence and office, the company made over $1.6 million in “charitable donations” and “sponsorships” to three sports or cultural organizations and hired two advertising executives. In Vietnam, the company allegedly generated cash by paying “rebates” to a third-party construction company, taking cash advances on credit cards, and making payments for “consulting services” to a third-party agent hired through a consortium partner, to obtain government contracts and to accelerate payments from the government. The SEC order alleges that the company failed to either properly maintain accurate records or maintain a system of internal accounting and controls, in violation of the FCPA’s accounting provisions. The company neither admitted nor denied the SEC’s findings. There has been no public announcement regarding the DOJ’s intention to bring an enforcement action against the company. According to the SEC press release, in November 2021, South Korean authorities indicted the company and 14 executives for criminal violations related to illegal political contributions from the slush funds.
On February 15, 2022, the DOJ Criminal Division, Fraud Section released its annual Year in Review for 2021. The report summarizes the Section’s efforts across its FCPA, Market Integrity and Major Frauds (MIMF), and Health Care Fraud Units. Although 2021 was a relatively quiet year for corporate FCPA enforcement (especially as compared to the record-setting years in 2019 and 2020), the report shows that the FCPA Unit resolved three corporate cases in 2021, totaling $649 million in global monetary penalties, about 40% of which constituted criminal penalties paid to the U.S. government. These cases included two multinational financial services companies and a global engineering company (for more, see our February 2021, June 2021, and October 2021 Top 10s). The report also shows that individual FCPA enforcement remained strong despite the pandemic, with charges against 26 individuals and convictions of 19 individuals announced in 2022. The report highlights individual prosecutions of the former CEO of a Brazilian petrochemical company (see our April 2021 Top 10) and several other individuals allegedly involved in bribing Latin American government officials (see our March 2021, May 2021, and November 2021 Top 10s). Overall, the number of individual convictions in Fraud Section cases increased by approximately 54% from 2021 to 2022, demonstrating the impact of the Criminal Division’s increased emphasis on prosecuting individuals.
In a February 22, 2022, securities filing, Cisco Systems, Inc. disclosed that DOJ and SEC do not plan to take action against the company in relation to allegations of a “self-enrichment scheme” involving now-former employees in China. In its initial disclosure of the investigation a year ago, the company said some of its former employees allegedly “made or directed payments from the funds they received to various third parties, including employees of state-owned enterprises.”
On February 14, 2022, the much anticipated trial of former investment banker Roger Ng began in the Eastern District of New York. Ng was charged in October 2018 with conspiring to launder billions of dollars allegedly embezzled from Malaysian sovereign wealth fund 1Malaysia Development Berhad (1MDB), conspiring to violate the FCPA by paying bribes to multiple government officials in Malaysia and Abu Dhabi, and circumventing the internal accounting controls of a “major New York‑headquartered financial institution.” The government called Tim Leissner, Ng’s former boss, to testify at trial at length. Leissner pleaded guilty to related money laundering and FCPA anti‑bribery and accounting charges in October 2018 and agreed to cooperate. (For more on the 1MDB case, see our July 2016, August 2016, June 2017, December 2017, May 2018, June 2018, August 2018, October 2018, February 2019, May 2019, April 2020, August 2021, and September 2021 Top 10s.)
On February 2, 2022, John Luzuriaga Aguinaga, a former risk director and investment committee member for Ecuador’s public police pension fund (ISSPOL), pleaded guilty in the Southern District of Florida to one count of conspiracy to launder bribe money he allegedly received to direct ISSPOL business to investment advisor Jorge Cherrez Miño. Luzuriaga admitted to accepting nearly $1.4 million from Cherrez. DOJ originally announced the charges against Luzuriaga and Cherrez in March 2021. Luzuriaga is not the first Ecuadorian national to plead guilty to money laundering charges related to bribes from Cherrez. In July 2021, Luis Alvarez Villamar pleaded guilty and admitted accepting bribes totaling more than $3 million from Cherrez. Luzuriaga’s sentencing is scheduled for April 12, 2022.
On February 4, 2022, DOJ announced that Margaret Cole, the former executive director of an international adoption agency, had pleaded guilty in the Northern District of Ohio to conspiracy to defraud the United States and to making a false statement to the Polish Central Authority. The criminal adoption scheme first came to light in August 2019, when DOJ announced that another manager of the adoption agency, Robin Longoria, had pleaded guilty to one count of conspiracy to violate the FCPA, to commit wire fraud, and to commit visa fraud related to the improper removal of children from their home countries of Uganda and Poland by use of bribery and fraud and without verifying that they were actually orphaned. DOJ then announced the indictment of Cole and co-defendants Debra Parris and Dorah Mirembe in August 2020, alleging that they were co-conspirators in the conduct. In November 2021, DOJ announced that co-defendant Parris had pleaded guilty to conspiracy to violate the FCPA and to commit visa fraud related to the bribery of probation officers, court registrars, and High Court judges in Uganda to improperly facilitate the adoption of Ugandan children. Cole’s sentencing is scheduled for May 27, 2022.
On February 23, 2022, the World Bank Group announced the 52-month sanction of AIM Consultants Limited, a consultancy company based in Nigeria, and its Managing Director, Amin Moussalli. According to the announcement, soon after receiving payments from a World-Bank-financed project in Nigeria, the company transferred money to the personal accounts of two resident engineers for onward transmission to various project officials. The World Bank alleged that the company allegedly made over $45,000 in improper payments, all approved by Moussalli. The sanction, which consists of a 34-month debarment followed by an 18‑month conditional non-debarment, is the result of settlement agreements under which the company and its director acknowledged their responsibility for the improper payments, agreed to meet specified corporate compliance conditions, took voluntary corrective action, and cooperated with the investigation. The World Bank debarment could result in cross-debarment by other multilateral development banks under the April 9, 2010, Agreement for Mutual Enforcement of Debarment Decisions.
On February 21, 2022, the United Kingdom and the Federal Government of Nigeria signed a Memorandum of Understanding (MOU), which provides for the transfer of £210,610 in compensation to the Government of Nigeria as a result of the UK Serious Fraud Office’s (SFO) investigation into Amec Foster Wheeler Energy Limited (AFWEL). In June 2021, AFWEL reached a $177 million global settlement with U.S., UK, and Brazilian authorities to resolve bribery and corruption allegations involving several companies. Under the UK‑deferred prosecution agreement (“DPA”), the company accepted responsibility for the use of third-party agents to make improper payments relating to the oil and gas sector in Brazil, India, Malaysia, Nigeria, and Saudi Arabia. The roughly £210,000 payment to the Nigerian government has been earmarked for the exclusive purpose of funding infrastructure projects approved by the Nigerian National Assembly under the 2020 Appropriation Act, including road and bridge projects.
On February 17, 2022, the European Parliament adopted a text recommending that the European Union (EU) Council “swiftly come forward with a legislative proposal” targeting and imposing sanctions on “the economic and financial enablers of human rights abusers detaining assets and properties in the EU.” In the text, the Parliament notes its repeated requests to amend the current EU Global Human Rights Sanctions Regime (GHRSR) to include corruption as a sanctionable offense. For example, in July 2021, the Parliament highlighted the devastating impact that corruption has had on human rights and adopted a resolution calling for corruption to be included as a punishable offense, as it is in the U.S. Global Magnitsky Act and UK Global Anti-Corruption Sanctions Regulations 2021. In the February 17 text, the Parliament suggests amending the GHRSR to include anti-corruption sanctions. Alternatively, Parliament recommends adopting a new anti‑corruption sanctions regime. The text notes the increasing risk of “corrupt actors moving their assets to the EU as more and more countries adopt stricter frameworks” and calls for “swiftly and duly implemented” sanctions by Member States “particularly regarding entry bans [and] the . . . freezing of assets.”
On February 24, 2022, China’s Central Commission for Discipline Inspection reported that in 2021, Chinese anti-corruption authorities punished 4,806 people for paying bribes. Of those cases, 2,822 were referred to prosecutors for trial. The Commission also cited favorably the most recent UN General Assembly Special Session against corruption and indicated an intent to deepen international cooperation against corruption. The report comes in the midst of President Xi Jinping’s major anti-corruption drive and signals a shift in policy from focusing mainly on bribe‑taking officials to imposing increased penalties on the bribe-givers as well. Potential penalties include not only mandatory prison terms and fines, but also the Commission’s recently created blacklist for those companies and individuals caught offering bribes. The report concluded with a statement of the Commission’s intent to continue this anti-corruption push leading up to the CCP’s Twentieth National Congress in late 2022.