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: Which company agreed to pay over a billion dollars to resolve foreign bribery and market manipulation claims involving Africa and South America? Are administrative proceedings brought by the U.S. Securities and Exchange Commission (SEC) constitutional? Which U.S. properties were the subject of forfeiture actions for ties to foreign bribery? The answers to these questions and more are here in our May 2022 Top 10 list.
On May 24, 2022, the U.S. Department of Justice (DOJ) and Commodity Futures Trading Commission (CFTC) announced that Glencore International A.G., a multi-national commodity trading and mining firm headquartered in Switzerland, and certain of its subsidiaries, had reached coordinated foreign-bribery and market-manipulation resolutions with criminal and civil authorities in the United States, the United Kingdom, and Brazil, including by agreeing to plead guilty in the Southern District of New York to one count of violating the Foreign Corrupt Practices Act (FCPA). Also on May 24, 2022, the UK Serious Fraud Office (SFO) announced that it had charged the company’s UK subsidiary with bribery and failure to prevent bribery under the UK Bribery Act (UKBA). According to the U.S. agencies, the companies paid more than $100 million to third-party intermediaries, while intending that a significant portion of those payments would be used to pay bribes to officials in Brazil, Cameroon, the Democratic Republic of Congo, Equatorial Guinea, Ivory Coast, Nigeria, and Venezuela in order to gain business advantages such as obtaining favorable terms from national oil companies and reducing liabilities related to government audits. The SFO also alleged bribery in South Sudan. In total, the companies will pay a combined total of $1.1 billion pursuant to the DOJ and CFTC resolutions, subject to certain offsets for payments eventually made pursuant to the UK resolution and any potential resolution with Swiss authorities. The company also agreed to pay approximately $39.6 million under a resolution signed with the Brazilian Federal Prosecutor's Office (MPF). In July 2021, Anthony Stimler, a former UK-based trader for Glencore, pleaded guilty to conspiracy to violate the FCPA and to commit money laundering in relation to the Nigeria allegations.
As we have discussed in previous Top 10s, the United States Securities and Exchange Commission (SEC) typically brings settled FCPA enforcement actions as administrative proceedings, rather than filing civil complaints in U.S. district courts. Thus, although not an FCPA case, the May 18, 2022 ruling by the U.S. Fifth Circuit Court of Appeals in Jarkesy v. SEC, holding SEC’s use of its in‑house judges to be unconstitutional, is potentially significant for FCPA enforcement. Jarkesy stems from a 2013 administrative proceeding against fund manager George Jarkesy and his funds’ investment adviser, Patriot28. Jarkesy and the adviser were found to have defrauded investors by inflating the value of fund assets, thereby increasing incentive fees. In its 2013 order, the SEC imposed civil penalties, among other remedies. After the SEC rejected respondents’ constitutional challenges to the Administrative Law Judge’s (ALJ) authority, they petitioned the Fifth Circuit for review. The Jarkesy majority held that: (1) SEC’s use of in-house administrative proceedings violated a defendant’s Seventh Amendment right to a jury trial; (2) Congress unconstitutionally delegated legislative powers to SEC without an intelligible principle by which to use that legislative power; and (3) ALJs were unconstitutionally insulated from removal in violation of the Take Care Clause of Article II of the Constitution. This decision appears to create a circuit split with numerous other courts who had rejected similar challenges to SEC’s use of ALJs. Jarkesy may not have a major impact on typical FCPA enforcement—to date, all FCPA enforcement actions brought as administrative proceedings have been negotiated resolutions in which the defendants have expressly admitted to the Commission’s jurisdiction—but it could limit SEC’s options in bringing contested enforcement actions. (For more on Jarkesy, see our client alert.)
On May 13, 2022, former Venezuelan national treasurer Claudia Patricia Díaz Guillén was extradited from Spain to the United States to face money laundering charges related to her alleged participation in a billion dollar currency and money laundering scheme. DOJ first announced charges against Díaz in December 2020, alleging that she and another former Venezuelan national treasurer, Alejandro Andrade Cedeno, had received bribes from Venezuelan media magnate Raul Gorrin Belisario in exchange for allowing his company to conduct foreign exchange transactions at favorable rates. In October 2021, Spain’s National Court rejected Díaz’s argument that she could sufficiently respond to the charges in Spain and approved her extradition to the United States. On May 24, 2022, Díaz pleaded not guilty in the Southern District of Florida.
On May 20, 2022, DOJ announced that Luis and Ricardo Martinelli Linares, the sons of former Panama president Ricardo Martinelli, were sentenced in the Eastern District of New York to 36 months’ imprisonment and ordered to forfeit more than $18.8 million following their December 2021 guilty pleas to conspiring to launder $28 million in connection with a bribery scheme involving a Brazilian construction company. DOJ first announced money-laundering charges against Luis and Ricardo, as well as their arrests in Guatemala, in July 2020, and the two were extradited to the United States in November and December 2021, respectively.
On May 6, 2022, Southern District of Florida Judge Marcia Cooke granted DOJ’s motion for a reduction of sentence for Frank Roberto Chatburn Ripalda, who pleaded guilty in October 2019 to one count of conspiracy to commit money laundering in connection with a scheme to disguise bribe payments to officials of Ecuadorian state-owned oil company Petroecuador and was sentenced to 42 months’ imprisonment in December 2019. According to DOJ, Chatburn provided substantial assistance in the investigation and prosecution of several individuals. Judge Cooke reduced Chatburn’s sentence to time served.
On May 26, 2022, DOJ announced that it had secured the forfeiture of a property in Potomac, Maryland, allegedly acquired by a trust associated with the former President of the Gambia, Yahya Jammeh, with the proceeds of corruption. In July 2020, DOJ announced that it had filed a civil complaint in the District of Maryland, seeking forfeiture of a property in Potomac, Maryland that had been acquired with proceeds allegedly derived from illicit bribes and stolen public funds misappropriated by Jammeh and his wife. According to the complaint, during his over 20 years in office, Jammeh corruptly obtained millions of dollars by embezzling public funds and soliciting bribes from businesses seeking to obtain monopoly rights over various sectors of the Gambian economy, including petroleum imports and telecommunication and internet services. The complaint alleges that the Potomac property was purchased for $3.5 million in 2010 using tainted funds. According to the DOJ press release, the United States intends to sell the property and use the net proceeds to benefit victims of Jammeh’s corruption in Gambia.
On May 2, 2022, DOJ announced that it had filed a civil forfeiture complaint seeking the forfeiture of a more than 30,000-square-foot “mega-mansion” in the Holmby Hills neighborhood of Los Angeles that was allegedly purchased with bribes paid by an Armenian businessman to the family of Gagik Khachatryan, who served as Chairman of the State Revenue Committee of the Republic of Armenia from 2008 to 2014 and as Minister of Finance for the Republic of Armenia from 2014 to 2016. According to DOJ, Khachatryan, also known as the “Super Minister,” illegally used his influence to reduce tax liabilities of businesses affiliated with Sedrak Arustamyan, an executive at Multi Group, an Armenian conglomerate. In exchange, Arustamyan is alleged to have entered into $20.4 million in sham loan agreements with Khachatryan’s sons between 2009 and 2011. Khachatryan and his sons allegedly used trust companies to disguise these illegal payments and to purchase the “mega-mansion” for $14.4 million in 2011.
On May 24, 2022, the Financial Reporting Council, the UK agency responsible for regulating auditors and accountants, sanctioned KMPG Audit plc (KPMG) and one of its Audit Engagement Partners in connection with the firm’s audit of Rolls-Royce Group plc (Rolls-Royce) accounts. KPMG’s audit of Rolls-Royce’s 2010 accounts identified two sets of payments made by Rolls-Royce to agents in India. The UK Serious Fraud Office later brought bribery and corruption charges against Rolls-Royce based in part on these payments, resulting in a $604.8 million fine in January 2017, at the time the largest British fine ever imposed on a company for criminal conduct. The Financial Reporting Council levied nearly £3.5 million ($4.4 million) in fines on KMPG and the Audit Engagement Partner, issued a severe reprimand, and required that KPMG commission an external review of its policies for audit work in the area of the audited entity’s legal and regulatory compliance.
On May 18, 2022, the International Centre for Settlement of Investment Disputes, an international arbitration organization, issued an award in favor of Guinea and against BSG Resources Ltd. (BSG), which had claimed billions in damages after Guinea canceled an iron ore mining concession. BSG, a mining company controlled by Israeli billionaire Beny Steinmetz, alleged that Guinea expropriated the mine. The arbitration panel, however, sided with Guinea, apparently finding that BRG used shell companies to pay at least $9.4 million in bribes during 2006-2010 to Mamadie Touré, a wife of former Guinean president Lansana Conté, in a corrupt bid to obtain mining licenses. (The award remains confidential pending agreement of the parties on redactions.) The arbitration award follows Steinmetz’s January 2021 conviction by the Criminal Court of Geneva of corruption and forgery in connection with this bribery scheme. The Court sentenced Steinmetz to five years in prison and a fine of CHF 50 million ($56 million).
On May 16, 2022, the U.S. Department of State announced that it had designated the Attorney General of Guatemala, Maria Consuelo Porras Argueta de Porres, due to her involvement in significant corruption. According to the State Department, Porras repeatedly obstructed and undermined anticorruption investigations in Guatemala to protect her political allies and gain undue political favor, including by ordering prosecutors in Guatemala’s Public Ministry to ignore cases based on political considerations and firing prosecutors who investigate cases involving acts of corruption. As we previously reported, in July 2021, Porras removed the head of the Guatemalan Special Prosecutor’s Office Against Impunity (FECI), a move which the Biden administration characterized as part of a systematic effort to weaken the fight against corruption in Guatemala and resulted in the suspension of cooperation between the United States and the Guatemalan attorney general’s office. As a result of being designated, Porras and her immediate family members are ineligible for entry into the United States.