Charles E. Duross, James M. Koukios, Ian K. Bausback, Siena Sofia Magdalena Anstis, and Vanshika Vij
FCPA + Anti-Corruption, Investigations + White Collar Defense, Public Companies Counseling + Compliance, and Securities Enforcement
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: What will be the impact of the first coordinated foreign bribery resolution between French and U.S. authorities? Who has been appointed to lead the UK Serious Fraud Office? What changes are being proposed to the U.S. Securities and Exchange Commission’s whistleblower program? The answers to these questions and more are here in our June 2018 Top Ten list.
1. DOJ Announces First Coordinated Foreign Bribery Resolution with France. On June 4, 2018, the U.S. Department of Justice (DOJ) announced that French financial services company Société Générale S.A. (SocGen) and its wholly owned subsidiary, SGA Société Générale Acceptance N.V. (SGA), had agreed to pay a combined total of $860 million in criminal penalties to resolve charges by U.S. and French authorities that it bribed Libyan officials during the Gaddafi regime and manipulated LIBOR. Between 2004 and 2009, SocGen paid over $90 million in commissions to a Libyan “broker,” who allegedly paid portions of the commissions to high-level Libyan officials to secure thirteen investments and one restructuring from Libyan state-owned financial institutions worth approximately $3.66 billion in total. SocGen agreed to pay a total criminal penalty of $585 million to DOJ in connection with the bribery scheme, pursuant to a deferred prosecution agreement (DPA) filed in the Eastern District of New York against the parent company and a guilty plea by the subsidiary. Half of this penalty will be paid to French authorities and credited by DOJ, marking the first coordinated resolution with French authorities in a foreign bribery case. DOJ declined to impose a monitor, citing significant remediation and ongoing monitoring by L’Agence Française Anticorruption. SocGen also agreed to pay $475 million in regulatory penalties and disgorgement to the Commodity Futures Trading Commission in connection with the alleged LIBOR scheme. Building on recent reforms in its anti-corruption regime (see our March 2016 and November 2017 Top Tens for more), France’s involvement in this foreign bribery prosecution could mark a major turning point in international anti-corruption efforts. France has long been criticized for failing to prosecute its own companies for foreign bribery, often leaving the United States to fill the void.
2. UK Serious Fraud Office Charges Monaco-based Consulting Companies in Iraq Bribery Investigation. On June 28, 2018, the UK Serious Fraud Office (SFO) announced that it had commenced criminal proceedings against Unaoil Ltd. and Unaoil Monaco SAM as part of an ongoing prosecution involving alleged corruption in Iraq. Unaoil Ltd. was summonsed with two offenses of conspiracy to give corrupt payments to secure the award of a contract worth $733 million to Leighton Contractors Singapore PTE Ltd for the construction of two oil pipelines in southern Iraq. Unaoil Monaco SAM was summonsed with two offenses of conspiracy to give corrupt payments to secure the award of contracts in Iraq to its client SBM Offshore NV. In November 2017, the SFO charged two Unaoil executives and two former SBM executives in relation to the alleged corrupt payments to secure the award of contracts in Iraq to SBM, and in May 2018, the SFO charged the same two Unaoil executives in relation to alleged corrupt payments to secure the contract to Leighton Contractors Singapore PTE Ltd. The companies are scheduled to appear in Westminster Magistrate’s Court in London on July 18, 2018.
3. New Director of UK Serious Fraud Office Named. On June 4, 2018, the UK Attorney General announced that Lisa Osofsky has been appointed as the new Director of the SFO. Osofsky has over 30 years’ experience in financial crime in the United States and the United Kingdom. She began her career as a U.S. federal prosecutor dealing with white collar crime and prosecuted over 100 cases on behalf of the U.S. government. She also spent five years as the Deputy General Counsel and Ethics Officer at the Federal Bureau of Investigation, three years as the Money Laundering Reporting Officer at Goldman Sachs International, and seven years in the Corporate Investigation Division of Control Risks. Osofsky comes to the SFO from Exiger’s London office, where she has been leading the firm’s investigative, compliance, and assurance activities. Her tenure starts on September 3, 2018, for a renewable term of five years. Mark Thompson, who was appointed as Interim Director at the end of April 2018, will return to his position as Chief Operating Officer at the SFO.
4. Update on Corruption Prosecutions Involving Aruban and Honduran Nationals.
5. U.S.-based Investment Firm Resolves Libya Bribery Allegations with DOJ. On June 4, 2018, DOJ announced that a U.S.-based investment firm had entered into a non-prosecution agreement and agreed to pay $64.2 million to resolve allegations that the firm, through a subsidiary, participated in the same Gaddafi-era Libyan bribery scheme alleged in the SocGen case. Between 2004 and 2010, the subsidiary partnered with SocGen to solicit business from state-owned financial institutions in Libya. The subsidiary managed seven of the investments allegedly obtained corruptly as a result of payments to the Libyan “broker.” The $64.2 million payment includes a penalty of $32.625 million and disgorgement of $31.617 million. According to the DOJ press release, the latter amount “will be credited against disgorgement paid to other law enforcement authorities within the first year of the agreement.” This likely foreshadows an eventual Securities and Exchange Commission (SEC) resolution for the firm.
6. OECD Working Group on Bribery Releases Phase 4 Reports Focusing on Germany and Norway. On June 21, 2018, the Organisation for Economic Co-operation and Development (OECD) Working Group on Bribery released reports on Germany and Norway’s enforcement of the OECD Anti-Bribery Convention. All parties to the Convention are subject to a rigorous peer review process, Phase 4 of which focuses on the evaluated country’s enforcement of the Convention and considers the country’s particular challenges and positive achievements. The first Phase 4 reports (focusing on the UK and Finland) were released in March 2017.
7. Federal Judge Holds that Certain Corporate Monitorship Documents Cannot be Withheld Under FOIA Exemptions. On June 13, 2018, U.S. District Judge Rudolph Contreras of the District Court for the District of Columbia ruled that DOJ could not withhold certain documents related to Siemens’ FCPA compliance monitorship under the Freedom of Information Act (FOIA). Judge Contreras found that the FOIA exemptions DOJ claimed were overbroad and ordered DOJ to reexamine its redactions and withholdings of other documents related to the monitorship. The litigation began in 2014 when 100Reporters, an investigative news organization, sued DOJ over the Department’s denial of its FOIA request for documents related to the Siemens monitorship, which was imposed in 2008 as part of the company’s landmark $800 million FCPA resolution. The Court found that certain documents, including nearly all of the monitor’s annual work plans and the identities of the monitorship team, were not protected by FOIA’s confidential commercial information exemption because “the monitor’s process and methodology are not ‘instrumental’ to Siemens’ commercial interests.” In contrast, the court found that the monitor’s annual reports fell under FOIA’s deliberative process exemption because they contained the monitor’s analysis of the company’s compliance efforts. If upheld on appeal, the Siemens FOIA case could have implications beyond the FCPA context, wherever a monitorship requirement has been imposed.
8. U.S. Supreme Court Holds that SEC Administrative Law Judges are Subject to the Constitution’s Appointments Clause. On June 21, 2018, in Lucia v. Securities & Exchange Commission, the U.S. Supreme Court held in a 7-2 decision that SEC administrative law judges (ALJs) are “officers of the United States,” subject to the Constitution’s Appointments Clause (Art. II, § 2, cl. 2), because they exercise significant authority in hearing and ruling on disputes, and therefore must be appointed by the president or head of the agency, rather than hired by SEC staff through the civil service process. The Court’s decision reverses the D.C. Circuit’s August 2016 holding that SEC ALJs are employees who did not have to be appointed in conformance with the Appointments Clause. The immediate practical impact of the decision is that petitioner Raymond Lucia, who was found liable by an SEC ALJ of one count of violating the Investment Advisors Act of 1940, will receive a new hearing before “a properly appointed official.” The long-term practical impact of the decision with respect to the SEC remains to be seen. On November 30, 2017, SEC ratified its prior appointment of certain ALJs and directed ALJs to review their actions in all open administrative proceedings to determine whether to ratify those actions, in an effort to resolve constitutionality concerns. Although Lucia argued that the Commission’s ratification order was invalid, the Court declined to address that argument and ruled only that a different, “properly-appointed” ALJ must hear Lucia’s case in the new hearing. Although not an FCPA case, Lucia is important because most settled SEC FCPA resolutions are filed as administrative proceedings.
9. SEC Pursues Legislative and Regulatory Amendments.
10. Malaysian Taskforce Freezes Over 400 Bank Accounts in Connection with Sovereign Wealth Fund Investigation. Last month, we discussed the role of the 1Malaysia Development Berhard (1MDB) corruption investigation in bringing about the electoral defeat of Malaysia’s now former Prime Minister, Najib Razak, and the increased pace of the investigation in Malaysia. On June 29, 2018, a special taskforce of the Malaysian government investigating alleged misappropriation from 1MDB confirmed that it had frozen bank accounts owned by the United Malays National Organization (UMNO), the political party previously led by Najib. UMNO is alleged to have received funds from 1MDB when Najib was party leader. The taskforce claimed to have frozen more than 400 bank accounts belonging to numerous individuals and companies, with funds totaling $273 million, which it believes are linked to the misappropriation and misuse of 1MDB funds. The Malaysian police have also stated that jewelry, luxury watches, and other items valued at up to $274 million were seized from Najib’s residences. 1MDB, which was created by the Malaysian government to promote economic development in Malaysia through global partnerships and foreign direct investment, is being investigated for money laundering in several countries, including the United States, Switzerland, and Singapore. (See our July 2016, August 2016, June 2017, December 2017, and May 2018 Top Tens for more on 1MDB.)
Podcast Highlights: James Koukios’ insights on select Top Tens
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