Charles E. Duross, James M. Koukios, Julie A. Nicholson, and Mary G. Kaiser
FCPA + Anti-Corruption, Public Companies Counseling + Compliance, Securities Enforcement, and 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: Is the U.S. Department of Justice (DOJ) still using undercover operations and wiretaps to make FCPA cases? What foreign bribery enforcement actions were brought in Sweden and Switzerland? Will the UK require companies to make stronger anti-corruption disclosures in their annual reports? The answers to these questions and more are here in our August 2017 Top Ten list.
1. Following Undercover Investigation, DOJ Charges Retired U.S. Army Colonel with Conspiring to Bribe Haitian Officials. On August 29, 2017, DOJ announced that Joseph Baptiste, a dentist and retired U.S. Army colonel, was charged in Massachusetts federal court with one count of conspiring to violate the FCPA and to commit money laundering for his role in an alleged scheme to bribe senior officials in Haiti in connection with an $84 million port development project. Baptiste’s arrest followed an investigation, launched in 2014, into Haitian-American businesspeople who were offering to help bribe Haitian officials in order to obtain or retain business in that country. According to the complaint, Baptiste solicited bribes from undercover agents posing as investors and told them, during a recorded meeting at a Boston hotel, that he would funnel the bribes to Haitian officials through a non-profit he controlled in order to secure approval of the port development project. The complaint also alleges that, during telephone calls caught on a wiretap, Baptiste discussed bribing an aide to a senior Haitian official by giving him a job on the port development project after he left his position. The Baptiste case demonstrates that DOJ remains willing and able to use a broad range of law enforcement tactics, including undercover agents and wiretaps, to investigate and prosecute FCPA violations.
2. Minnesota-based Supplier of Test Systems and Sensing Solutions Discloses DOJ and SEC Declinations. In an August 7, 2017 securities filing, MTS Systems disclosed that DOJ and the U.S. Securities and Exchange Commission (SEC) had informed the company that they had closed their investigations into potential FCPA violations without further action. According to the filing, in 2012, MTS investigated gift, travel, entertainment, and other expenses incurred in connection with its operations in the Asia Pacific region and, in 2014, undertook a similar investigation regarding its business practices in China. MTS stated that it voluntarily disclosed the matters to DOJ and SEC and undertook remedial actions.
3. Texas-based Offshore Drilling Company Announces DOJ Declination. In an August 16, 2017 press release, Vantage Drilling Company announced that DOJ had informed the company that it had closed an FCPA investigation, begun in 2015, into allegations of improper payments to officials at Petróleo Brasileiro S.A (Petrobras), Brazil’s state-owned oil company, in connection with the contracting of a drillship. According to the press release, SEC’s parallel investigation remains open. Vantage also stated that it is fully cooperating with both agencies.
4. Former Guinean Official Sentenced to Seven Years’ Imprisonment for Laundering Bribes from Chinese Conglomerate. On August 25, 2017, DOJ announced that Mahmoud Thiam, the former Minister of Mines and Geology of the Republic of Guinea, was sentenced to seven years’ imprisonment following his May 2017 money laundering conviction in the Southern District of New York. Mr. Thiam, a U.S. citizen, was arrested in Manhattan in December 2016 and charged with laundering $8.5 million in proceeds from bribes he allegedly received from two companies that formed part of a Chinese conglomerate in exchange for awarding investment rights in multiple sectors of the Guinean economy, including the mining sector. In addition to the prison term, Thiam was sentenced to three years of supervised release and was ordered to forfeit $8.5 million.
5. Austrian Court Rejects Spain’s Extradition Request for Ukrainian Billionaire. August saw yet another twist in the U.S.’s years-long effort to extradite Ukrainian billionaire Dmytri Firtash from Austria to face FCPA and other charges in an Illinois federal court. Firtash was indicted in 2013 in the Northern District of Illinois for allegedly conspiring 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. He was arrested in Vienna in 2014, and DOJ requested his extradition to the U.S. In February 2017, an Austrian appeals court reversed a lower court decision denying the U.S. extradition request. The same day, the U.S. extradition request was put on hold when Spain issued its own extradition request for Firtash to face money laundering charges there. On August 30, 2017, an Austrian court denied Spain’s extradition request. Prosecutors acting on behalf of Spain have two weeks to appeal the decision. Meanwhile, Firtash’s May 2017 motion to dismiss the charges against him in the U.S. is still pending.
6. Acting Chairman of Korea-based Conglomerate Convicted and Imprisoned. On August 25, 2017, Lee Jae-yong, Samsung’s acting chairman, was convicted and sentenced to five years’ imprisonment on charges of bribery, embezzlement, illegal overseas transfer of assets, concealment of criminal proceeds, and perjury. Lee was accused of making large donations of over $35 million to foundations run by Choi Soon-sil, a close friend and advisor to former South Korean president Park Geun-hye, who was impeached in December 2016 and indicted on criminal corruption charges in April 2017. Lee allegedly sought political favors and the approval of the merger of two Samsung affiliates in exchange for the donations to the Park-supported foundations. The Park scandal has been dubbed “Choi-gate,” and Lee’s trial has been called South Korea’s “trial of the century.” Samsung’s lawyers said that they would appeal the conviction.
7. Sweden Charges Employee of Canada-based Aircraft and Train Manufacturer with Foreign Bribery. On August 18, 2017, Swedish prosecutors announced that they had charged Evgeny Pavlov, an employee of Bombardier Transportation Sweden AB, a subsidiary of Canada’s Bombardier Inc., with foreign bribery. The charges arise from allegations that Pavlov, a Russian citizen, had bribed an Azerbaijani official in order to secure a train signaling contract worth around $350 million. Pavlov was originally detained in March 2017 following a report by the Organized Crime and Corruption Reporting Project alleging that Bombardier Sweden sold equipment to a UK-based intermediary, which then sold the equipment back to the company in Azerbaijan at an inflated price and channeled money to Azerbaijani officials to influence the award of the contract. Pavlov has pleaded not guilty to the bribery charges.
8. China-based Petroleum Company Resolves Swiss Bribery Probe, Closes Several Offices. In August 2017, Addax Petroleum announced that it would be shutting its offices in Geneva, Houston, and Aberdeen, a month after it settled charges in Switzerland related to suspected foreign bribery. In July 2017, Addax agreed to pay CHF 31 million to resolve an investigation, led by the Geneva prosecutor’s office, into tens of millions of dollars allegedly paid to a company and several lawyers in Nigeria. According to reports, the payments were allegedly intended to resolve a $4 billion dispute between the company and the Nigerian government over the division of royalties and other issues. The Swiss investigation found that the payments were not sufficiently documented and that there were outstanding doubts as to their legality, but the Swiss authorities were unable to establish criminal intent. U.S. enforcement authorities are reportedly investigating the payments.
9. UK Financial Reporting Council Announces Plans to Require Increased Anti-Corruption and Bribery Disclosures. On August 15, 2017, the UK Financial Reporting Council (FRC) announced a consultation on amendments to its Guidance on the Strategic Report. The FRC oversees the UK Company Act, which was amended in December 2016 to incorporate an EU directive requiring large companies and financial institutions to disclose anti-corruption and other matters in their annual reports. As noted in the announcement, “the proposals reflect the enhanced disclosures that certain large companies are required to make in respect of the environment, employees, social matters, respect for human rights and anti-corruption and anti-bribery matters.” The amendments will update the FRC’s 2014 guidance on how firms should prepare their strategic reports. Comments on the draft amendments are due by October 24, 2017.
10. Brazil Update
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