Top 10 International Anti-Corruption Developments for June 2022
Top 10 International Anti-Corruption Developments for June 2022
Designed for busy in-house counsel, compliance professionals, and anti-corruption lawyers, this newsletter summarizes some of the most important international anti-corruption law and case developments from the past month, with links to primary resources. This month we ask: Which company resolved Foreign Corrupt Practices Act (FCPA) allegations with the U.S. Securities and Exchange Commission (SEC)? Why did U.S. prosecutors drop a case involving alleged bribery in Haiti? Which country is giving the Organisation for Economic Cooperation and Development (OECD) cause for alarm in the foreign bribery space? The answers to these questions and more are here in our June 2022 Top 10.
On June 2, 2022, SEC announced that Tenaris S.A. had agreed to pay more than $78 million to resolve claims that it violated the FCPA’s anti-bribery and accounting provisions. According to the SEC order, between 2008 and 2013, $10.4 million in bribes were paid on behalf of the company’s Brazilian subsidiary to Brazilian officials to ensure that the subsidiary would continue its status as the only domestic supplier of certain pipes and tubes for Brazil’s national oil company, Petróleo Brasileiro S.A. (“Petrobras”). Interestingly, the SEC order alleges that it was the company’s controlling shareholder and the subsidiary’s agent that were responsible for executing the bribery scheme. Indeed, in a public statement, the company, which neither admitted nor denied SEC’s allegations, said that its internal investigation “found no evidence corroborating any involvement by Tenaris or its directors, officers or employees in respect of improper payments.” Ordinarily, this would seem to present an obstacle for an FCPA anti-bribery charge, but SEC appears to have believed that the company could have done more to prevent the use of funds by individuals who were dually affiliated with both the issuer and its controlling shareholder and to identify related-party transactions. In its public statement, the company also disclosed that it had been informed by the U.S. Department of Justice (DOJ) that the agency had closed its parallel inquiry without taking action. DOJ did not post a formal declination letter on its website. This suggests that DOJ did not decline to pursue charges against the company under the Corporate Enforcement Policy but rather did not believe that it could bring a viable criminal case against the company. In late May 2022, an Italian court dismissed related charges against the company’s chairman and chief executive officer and two other board members. In 2011, the company reached FCPA resolutions with both DOJ and SEC for alleged misconduct in Uzebkistan.
In June 2019, Joseph Baptiste and Richard Boncy were convicted by a jury in the District of Massachusetts on FCPA and other charges related to an alleged scheme to bribe senior Haitian government officials in exchange for the approval of an $84 million port development project. In March 2020, the district court ordered a new trial, finding that Baptiste’s attorney was so constitutionally ineffective that he undermined the convictions of both defendants. The U.S. First Circuit Court of appeals affirmed the trial court’s order in August 2021. The retrial was scheduled to begin in July 2022, but, on June 28, 2022, the district court granted DOJ’s motion for leave to dismiss the charges against both defendants. In its motion, DOJ explained that the Federal Bureau of Investigation (FBI) had only recently provided the prosecution team with contemporaneous writings about the content of calls from December 2015 that had been lost due to computer error. The writings reflected that, during one of the calls, Boncy stated that the money connected to the port project was “absolutely not for bribes.” In light of these writings, the lost recordings, and the district court’s new trial order, DOJ stated that it had decided to exercise its discretion to dismiss the charges.
On June 27, 2022, SEC obtained a $550,092 default judgment in the Southern District of New York against Yanliang (Jerry) Li, former managing director of Herbalife Nutrition Ltd.’s Chinese subsidiary, whom SEC accused of violating the FCPA’s anti-bribery and accounting provisions. According to the SEC complaint, from 2006 to 2016, Li orchestrated a scheme to bribe local, provincial, and national government officials in China to obtain direct selling licenses and to curtail government investigations of the company’s business practices. The complaint further alleged that Li directed that the bribes be made through payments of cash, gifts, travel, meals, and entertainment, and that Li falsified company expense reports to conceal the bribes. Li did not file a responsive pleading by the court’s deadline to respond to the SEC allegations, resulting in the default judgment. DOJ filed still-pending criminal charges against Li and another executive of the Chinese subsidiary in November 2019, and the parent company resolved related allegations with DOJ and SEC in August 2020.
On June 9, 2022, three U.S. citizens and one Bolivian national were sentenced in the Southern District of Florida in connection with an alleged conspiracy to pay $1 million in bribes to Bolivian officials in exchange for a $5.6 million contract to provide tear gas and other non-lethal equipment to the Bolivian Ministry of Defense. According to DOJ, the bribes were laundered through bank accounts in the United States, Bolivia, and Singapore, and cash bribes were delivered in Miami and Bolivia. In September 2021, two of the three U.S. citizens—Bryan Berkman and Philip Lichtenfeld—pleaded guilty to conspiracy to violate the FCPA, while the third—Luis Berkman—pleaded guilty to conspiracy to commit money laundering. Sergio Rodrigo Mendez, the former Chief of Staff of the Ministry of Government of Bolivia and an alleged recipient of a portion of the bribes, also pleaded guilty to conspiracy to commit money laundering. Lichtenfeld, Bryan Berkman, Luis Berkman, and Mendez were sentenced to terms of imprisonment of 26 months, 28 months, 38 months, and 42 months, respectively. DOJ announced charges against them and a fifth defendant, former Minister of the Government of Bolivia Arturo Carlos Murillo Prijic, in May 2021.
On June 16, 2022, former legal adviser to Venezuela’s Ministry of Oil and Mining Carmelo Antonio Urdaneta Aqui was sentenced in the Southern District of Florida to 52 months in prison for his role in an alleged $1.2 billion bribery and money laundering scheme involving Venezuela’s national oil company, Petróleos de Venezuela, S.A. (PDVSA). In July 2021, Urdaneta pleaded guilty to conspiracy to commit money laundering in connection with the alleged scheme. In addition to a term of imprisonment, Urdaneta was ordered to pay a $35,000 fine and to forfeit a condominium in Coral Gables, Florida, estimated to be worth approximately $700,000. Three of Urdaneta’s co-defendants pleaded guilty and were sentenced to terms of imprisonment ranging from 28 to 120 months, while several additional co-defendants remain at large.
On June 29, 2022, a San Diego federal jury convicted four of five Navy officers tried in the “Fat Leonard” bribery case. The officers—former Cmdr. Mario Herrera and former Capts. David Newland, James Dolan, and David Lausman—were charged with accepting bribes, including luxury travel, elaborate dinners, and prostitutes, from Leonard Glenn Francis, the former CEO of Glenn Marine Defense Asia (GMDA), in exchange for classified information about the Navy’s ship schedules. Following a four-month trial, the officers were convicted of conspiracy to commit bribery, receiving bribes, and conspiracy to commit honest services wire fraud. The jury failed to return a verdict against a fifth defendant, former Rear Adm. Bruce Loveless. Francis and 28 others have pleaded guilty to related charges, and many of them testified at trial. Sentencing for the convicted defendants is scheduled for October 11, 2022. (For more on this case, see our May 2016 and September 2021 Top 10s.)
On June 21, 2022, the UK Serious Fraud Office (SFO) announced that Glencore Energy (UK) Ltd. had pleaded guilty in Southwark Crown Court to seven counts of bribery under the UK Bribery Act 2010 (UKBA), including five substantive bribery charges under Section 1 and two counts of failure to prevent bribery under Section 7. According to the SFO, the company paid bribes totaling more than $28 million in exchange for preferential oil access in Cameroon, Equatorial Guinea, Ivory Coast, Nigeria, and South Sudan. Sentencing is scheduled for November 2 and 3, 2022. The SFO stated that it worked on the investigation with law enforcement authorities from the Netherlands, Switzerland, and the United States. The SFO charges, along with related resolutions in the United States and Brazil, were announced in May 2022. Anthony Stimler, a former UK-based trader for Glencore, pleaded guilty in the United States to FCPA and money laundering charges in July 2021.
On June 28, 2022, the Inter-American Development Bank (IDB) announced that it had debarred Construcap CCPS Engenharia e Comércio S.A. for corrupt practices related to a road construction contract in Brazil. According to the IDB, the company admitted to paying and concealing bribes totaling around $1 million between 2013 and 2015 to a public official involved in the contract’s supervision and management. The company allegedly engaged in the bribes to prevent delays in approvals and concealed some of the payments by misrepresenting certain expenses. As part of the debarment, the company is ineligible to participate in any IDB-financed projects and operations for 18 months. The company has also agreed to report on its compliance improvements through an independent monitor and to cooperate with the IDB’s Office of Institutional Integrity (OII). According to IDB, the company fully cooperated with OII during its investigation of potential wrongdoing, proactively investigated the bribery allegations, and self-disclosed them to Brazilian authorities, all of which significantly reduced its potential sanctions.
On June 21, 2022, Sweden’s Solna District Court acquitted four former Ericsson executives of charges related to an alleged scheme to bribe government officials in Djibouti. According to the charges, which were filed in May 2021, between July 2011 and March 2012, the four defendants engaged in a scheme to pay $2.1 million in bribes to high-ranking Djibouti officials to help Ericsson acquire a valuable contract to provide telecommunications equipment to Djibouti Telecom. The court found that the prosecutors had failed to prove that two of the three alleged recipients fit the legal definition of “corruptible persons” because they did not have the ability to influence the award of the contract. The court found that the third alleged recipient did have such ability, but found that the prosecutors had failed to prove that he actually received bribes from a third-party consulting company. Prosecutors have not yet decided whether to appeal the court’s ruling. One acquitted defendant—Afework “Affe” Bereket—is still facing related charges in the United States, which were announced by DOJ in September 2021. In December 2019, DOJ and SEC announced parallel corporate resolutions with Ericsson, with combined penalties exceeding $1 billion, which included allegations related to Djibouti, among other countries.
On June 24, 2022, the OECD Working Group on Bribery announced its concern regarding the persistent lack of foreign bribery enforcement in Mexico. According to the OECD, since the OECD Anti-Bribery Convention entered into force, Mexico has not successfully concluded a single foreign bribery case, and ongoing investigations have declined in number since the Working Group released its Phase 4 report in October 2018. The Working Group urged Mexico to take concrete and deliberate steps to address the Group’s concerns and to resolve outstanding OECD recommendations, including recommendations regarding whistleblower protection and corporate liability for foreign bribery.