Charles E. Duross, James M. Koukios, Amanda Aikman, and Julie A. Nicholson
FCPA + Anti-Corruption, Public Companies Counseling + Compliance, Securities Enforcement, and Investigations + White Collar Defense
By MoFo’s FCPA and Global Anti-Corruption Team
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: How will recent leadership changes in the U.S. government impact Foreign Corrupt Practices Act (FCPA) enforcement? What was the outcome of a money laundering trial in New York federal court that involved allegations of foreign bribery? Are attorney notes from an internal investigation still considered privileged in the United Kingdom? The answers to these questions and more are here in our May 2017 Top Ten list.
1. More Leadership Changes in Key U.S. Government Positions
2. FCPA Assistant Chief Selected for Detail to UK Financial Enforcement Authorities. In May 2017, it was reported that Albert “BJ” Stieglitz, an assistant chief of DOJ’s FCPA Unit, had been selected for a position in the United Kingdom dedicated to further enhancing the already close relationship between DOJ and the UK’s Financial Conduct Authority (FCA) and Serious Fraud Office (SFO). The Fraud Section has worked with its British counterparts on numerous cross-border FCPA and rate manipulation investigations over the past several years. Stieglitz will spend one year at the FCA and another at the SFO, after which he will return to DOJ to provide training to other Fraud Section prosecutors on best practices learned at the UK agencies.
3. DOJ Moves to Terminate Technology Company’s Deferred Prosecution Agreement. On May 25, 2017, DOJ filed a motion in the Northern District of California to dismiss its three-year deferred prosecution agreement (DPA) with Hewlett-Packard Polska, Sp. Z o.o. (HP Poland). In 2014, HP Co. and three of its subsidiaries paid over $108 million to resolve DOJ and SEC allegations that it had paid bribes in Russia, Poland, and Mexico. In its motion to dismiss the charges, DOJ stated that HP Poland had fully complied with its obligations under the DPA.
4. Ex-Republic of Guinea Minister Convicted of Laundering Bribe Payments. On May 4, 2017, DOJ announced the conviction of Mahmoud Thiam, a former Minister of Mines and Geology of the Republic of Guinea, for one count of transacting in criminally derived property and one count of money laundering. A jury in the Southern District of New York convicted Thiam following a seven-day trial and five hours of deliberation. The charges against Thiam were related to his role in a scheme to launder bribes paid to him by executives of China Sonangol International Ltd. and China International Fund, SA in exchange for the award of lucrative mining rights in the Republic of Guinea. Evidence presented at trial showed that the Chinese entities paid Thiam $8.5 million, a portion of which was then transferred to other accounts, including accounts located in the United States, and used to pay for luxury goods and other expenses. Thiam allegedly tried to conceal the source of the funds by claiming to banks in Hong Kong and the United States that he was employed as a consultant and that the money was income from the sale of land before he was a minister. The Thiam prosecution is another example of DOJ’s efforts to combat the use of the U.S. banking system to launder the proceeds of foreign bribery. Sentencing is scheduled for August 2017.
5. Individual Sanctions in FCPA Cases.
6. Ruling in Civil Forfeiture Case Demonstrates DOJ’s Challenges in Obtaining Foreign Evidence. On May 9, 2017, Southern District of New York Judge William H. Pauley III ruled that certain evidence obtained by prosecutors from foreign sources was admissible in a civil asset forfeiture case, notwithstanding that the documents lacked the requisite certifications under the Federal Rules of Evidence. The case, United States v. Prevezon Holdings Ltd., concerned whether a Cypriot-registered real estate company laundered millions of dollars through Manhattan real estate. Prosecutors alleged that the funds could be traced back to a 2007 fraud scheme involving shell companies filing fake lawsuits in Russian courts and then using court judgments to claim tax refunds in Russia. The scheme was allegedly perpetrated with the involvement of Russian government officials and defrauded the Russian treasury of approximately $230 million. In preparation for a May 15, 2017, trial, prosecutors moved in limine to admit copies of bank records obtained from a Russian criminal case file that had been photographed by a witness in connection with his work as a lawyer in an unrelated matter. Prosecutors had initially requested these records directly from the Russian government, but that request was rejected. Instead of providing copies of the bank records, the Russian Federation provided “a selection of non-germane documents and a letter purporting to exonerate all Russian officials and Prevezon personnel”—which the court described as a “counter narrative to the [prosecution’s] theory of liability.” The Prevezon case unexpectedly settled on May 23, 2017, just three days prior to trial, for less than $6 million. Although the court ultimately admitted the photographed bank records, the Prevezon case underscores the unique challenges DOJ faces in obtaining evidence from abroad—especially from uncooperative foreign governments whose officials are accused of wrongdoing.
7. Ukrainian Billionaire Moves to Dismiss FCPA Conspiracy Charge. In February 2017, an Austrian appeals court approved the extradition of Dmitry Firtash to the United States to face accusations that he conspired to pay at least $18.5 million in bribes to government officials in India to allow the mining of titanium minerals, in violation of the FCPA and other statutes. On May 9, 2017, in the Northern District of Illinois, Firtash filed a motion to dismiss the charges filed against him. With respect to the FCPA conspiracy charge, Firtash contends that the indictment does not allege sufficient facts to establish a violation of 15 U.S.C. § 78dd-3, the FCPA’s territorial jurisdiction provision, because neither he nor his alleged co-conspirators are alleged to have “committed bribery” while in the United States. But because the indictment alleges several uses of “a means or instrumentality of interstate commerce [and] other acts” by his co-conspirators while in the United States that were “in furtherance of” the alleged bribery scheme, Firtash seems unlikely to win with this argument. Additionally, Firtash cites the District of Connecticut’s August 2015 opinion in the Hoskins case to argue that he is outside of the class of people who can be charged with an FCPA conspiracy because his companies “had no United States subsidiary and zero United States connection.” The Second Circuit heard the oral argument in the Hoskins case in March 2017. The outcome of that case—and how another federal court in a different district will react to the arguments raised in Hoskins—are stories to watch.
8. World Bank Debars Medical Company for Corrupt Practices in Romania. On May 5, 2017, the World Bank announced the debarment of Tehnoplus Medical S.R.L. for two years. According to the announcement, evidence was uncovered during an investigation that the company paid 168,860 EUR in bribes in exchange for the award of an equipment supply contract in connection with the Romania Health Sector Reform 2 Project. The debarment is part of a negotiated resolution agreement (NRA) between the World Bank and the company and qualifies for cross-debarment by other Multilateral Development Banks under the Agreement of Mutual Recognition of Debarments. Also under the NRA, the company committed to cooperate with the World Bank Group Integrity Vice Presidency and to make its internal compliance program consistent with the Integrity Compliance Guidelines approved by the World Bank Board of Directors.
9. UK Court Finds Attorney Notes of Internal Investigation Interviews Not Privileged. On May 8, 2017, the High Court in London ruled that notes taken during an internal investigation by the Eurasian Natural Resources Corporation’s (ENRC) outside counsel were not protected by the litigation privilege or legal advice privilege. In August 2011, following a news report alleging that ENRC had engaged in corrupt activity, the company and SFO entered into a year and a half of discussions regarding the allegations. Between 2011 and 2013, the company’s outside counsel conducted an internal investigation. In April 2013, the SFO began a formal criminal investigation of the company, focused on allegations of fraud, bribery, and corruption in Kazakhstan and Africa. The SFO later sought a declaration that certain documents generated during the internal investigation were not subject to legal professional privilege. The Court granted the declaration. The Court explained that the litigation privilege, which generally protects documents prepared for litigation, did not apply to documents created during the period of cooperation and dialogue between the company and the SFO because “prosecution only becomes a real prospect once it is discovered that there is some truth in the accusations, or at the very least that there is some material to support the allegations of corrupt practices. In this case, there is no evidence that there was anything beyond the unverified allegations themselves. . . . nothing concrete had materialised by 19 August 2011.” The Court further found that outside counsel’s internal investigation was primarily about gathering information, rather than providing legal advice about contemplated litigation. The Court also rejected the company’s argument that certain individuals interviewed by outside counsel had become part of the “client group” covered by the legal advice privilege, which generally protects communications made in confidence between a lawyer and his or her client for the purpose of providing legal counsel. The company is appealing the decision.
10. Controlling Shareholder of Brazilian Meat-Packing Company Agrees to Pay $3.2 Billion in Connection with Corruption Probe. On May 31, 2017, J&F Investimentos, the controlling shareholder of a Brazilian meat-packing company, announced that it had agreed to pay $3.2 billion as part of a leniency deal with the Brazilian Federal Prosecutor’s Office. Under the deal, J&F would have 25 years to make the payments. The owners of J&F, Joesley and Wesley Batista, reportedly testified that they spent approximately $180 million to bribe almost 1,900 politicians. Joesley Batista also reportedly turned over an audio tape of his conversation with current Brazilian president Michel Temer, in which Mr. Temer purportedly condoned paying hush money to Eduardo Cunha, the former speaker of Brazil’s lower legislative house. In testimony, other executives of the Brazilian meat-packing company have accused Mr. Temer of taking nearly $5 million in bribes from the company. Mr. Temer has denied any wrongdoing.
 United States’ Unopposed Motion to Dismiss Information with Prejudice, United States v. Hewlett-Packard Polska, Sp. Z o.o., No. 5:14-cr-00202-BLF (N. D. Cal. May 25, 2017), ECF No. 22.
 Dmitry Firtash’s Memorandum of Law in Support of His Motion to Dismiss the Indictment, United States v. Dmitry Firtash, No. 1:13-cr-00515 (N. D. Ill. May 9, 2017), ECF No. 120.
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