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 in the past month, with links to primary resources. This month we ask: What were the final Foreign Corrupt Practices Act (FCPA) resolutions of 2018? Who was convicted by a New York jury for violating the FCPA? How often are public officials sanctioned in foreign bribery cases? The answers to these questions and more are here in our December 2018 Top 10 list.
- American Telecommunications Company Settles China FCPA Charges with SEC, Receives Declination With Disgorgement From DOJ. On December 26, 2018, the U.S. Securities and Exchange Commission (SEC) announced that Polycom, Inc. had agreed to pay more than $16 million in disgorgement, prejudgment interest, and a civil penalty to resolve allegations that it violated the FCPA's accounting provisions with regard to its Chinese sales operations. According to SEC, from 2006 to 2014, the company's Chinese subsidiary provided significant discounts to its distributors and resellers, intending that the discounts would be used to make payments to officials at Chinese government agencies and state-owned businesses in exchange for those officials' assistance in purchasing the company's products. Managers of the Chinese subsidiary allegedly provided false justifications for the discounts when recording details about the deals in the company's systems. According to the SEC order, the parent company did not have sufficient accounting controls or an effective anti-corruption program in place for its Chinese sales operations. In a letter dated December 20, 2018, DOJ informed the company that it had "declined prosecution consistent with the FCPA Corporate Enforcement Policy." According to the letter, the company agreed to disgorge over $30 million, including the approximately $10.7 million it agreed to disgorge as part of the SEC resolution. The Polycom resolution is one example of how DOJ and SEC are reacting to the Supreme Court's June 2017 holding in Kokesh v. SEC that SEC's ability to disgorge allegedly ill-gotten gains from defendants was subject to the five-year statute of limitations set out in 28 U.S.C. § 2462. Here, DOJ required the company to disgorge profits earned beyond the limitations period, and SEC also used its authority to impose a civil penalty.
- Brazil-based Electric Company Resolves SEC FCPA Investigation. On December 26, 2018, SEC announced that Centrais Elétricas Brasileiras S.A., also known as Eletrobras, had agreed to pay a $2.5 million civil penalty to resolve charges that it violated the FCPA's accounting provisions in connection with the construction of a nuclear power plant in Brazil. According to the SEC order, former officers at the company's majority-owned subsidiary were involved in an illicit bid-rigging and bribery scheme in which they used their influence to favor specific private Brazilian construction companies, authorized unnecessary contractors, and inflated the subsidiary's costs for the project. In exchange, the construction companies allegedly paid the former officers approximately $9 million. In August 2018, the company disclosed that DOJ had declined to prosecute the company.
- Former Hong Kong Official Convicted by New York Jury of Africa FCPA and Money Laundering Charges. On December 5, 2018, DOJ announced that Chi Ping Patrick Ho, the former Hong Kong home secretary and head of a Hong Kong and Virginia-based non-governmental organization (NGO), had been convicted by a jury in the Southern District of New York of FCPA and money laundering offenses related to an alleged scheme to pay millions of dollars in bribes to foreign leaders in Chad and Uganda in order to secure contracts for a Chinese energy conglomerate. In November 2017, DOJ unsealed a criminal complaint against Ho and Cheikh Gadio, the former foreign minister of Senegal. In September 2018, DOJ moved to dismiss the charges against Gadio, who was called to testify by the government during Ho's trial. Ho is scheduled to be sentenced on March 14, 2019. The Ho trial continues a run of trial victories for DOJ's FCPA Unit since 2017.
- Former Aerospace Executive Sentenced to Time Served and Fined $25,000 After Aiding DOJ in Saudi Arabia Bribery Investigation. On December 12, 2018, Colin Steven, a former sales executive of Brazilian aerospace company Embraer S.A., was sentenced in the Southern District of New York to time served and fined $25,000 following his December 2017 guilty plea to charges of FCPA violations, wire fraud, money laundering, false statement, and conspiracy. As part of his plea agreement, Steven admitted that he engaged in a scheme to bribe a Saudi official in exchange for assistance in obtaining an aircraft sales contract. He also admitted that he had lied to law enforcement about receiving a kickback. In October 2016, the company reached a $205 million settlement with American and Brazilian authorities to resolve charges related to alleged corrupt conduct in Saudi Arabia, as well as the Dominican Republic, Mozambique, and India.
- Executives Settle FCPA Charges with SEC Related to State-Owned Airline. On December 18, 2018, SEC announced that Paul A. Margis and Takeshi Uonaga—former executives of a Panasonic Corporation subsidiary—had settled charges that they knowingly violated the FCPA's accounting provisions in connection with obtaining business from a state-owned airline. As part of the resolutions, Margis was ordered to pay a $75,000 penalty, while Uonaga was ordered to pay $50,000 and was barred from participating in the financial auditing or reporting of public companies for five years. These individual settlements follow April 2018 resolutions with DOJ and SEC in which the company and its subsidiary agreed to pay a combined $280 million.
- Texas Businessman and Former Venezuelan Official Pleads Guilty to Conspiracy to Obstruct Justice in Connection with PDVSA Corruption Investigation. On December 10, 2018, DOJ announced that Alfonso Eliezer Gravina Munoz, a former procurement officer at Venezuela's national oil company, Petroleos de Venezuela S.A. (PDVSA), had pleaded guilty in the Southern District of Texas to conspiracy to obstruct justice. Gravina had previously pleaded guilty to one count of conspiracy to launder money and one count of making false statements on his federal income tax return. The new charges stemmed from Gravina's alleged role in a scheme to obstruct an investigation by U.S. authorities into improper payments to Venezuelan government officials. According to his plea, Gravina concealed information about the bribe payments during his interviews with the government and provided information to a target of the government's investigation, which resulted in the target destroying evidence and attempting to flee the country. Gravina is scheduled to be sentenced on February 19, 2019.
- SFO Announces New Charges Against Former Oil Executive in Connection with Iraq Pipeline Project. On December 21, 2018, the UK Serious Fraud Office (SFO) announced that it had brought additional charges against Stephen Whiteley, a former executive at SBM Offshore and Unaoil Limited, for allegedly assisting Unaoil in becoming a subcontractor for an oil pipeline project in Iraq between March 2009 and May 2010. In November 2017, the SFO announced that Whiteley had been charged with conspiracy to make corrupt payments in Iraq, allegedly to secure the award of contracts in Iraq for SBM Offshore. In June 2018, the SFO announced that it had commenced criminal proceedings against Unaoil Ltd. and Unaoil Monaco SAM as part of its ongoing prosecution of alleged corruption in Iraq. SBM Offshore resolved FCPA allegations with DOJ in November 2017. Whiteley is scheduled to appear before the Westminster Magistrates' Court on January 9, 2019.
- Power Company and its Executives Convicted for Lithuania Bribery Schemes; Transportation Company Convicted for Tunisia Bribery Scheme, but Acquitted, Along with its Executives, of Hungary, India, and Poland Bribery Schemes. On December 19, 2018, the SFO announced that Nicholas Reynolds, former Global Sales Director for Alstom Power Ltd.'s Boiler Retrofits unit, had been convicted of conspiracy to corrupt for his role in an alleged scheme to bribe officials in a Lithuanian power station and senior Lithuanian politicians in order to win two contracts worth €240 million. On December 21, 2018, the SFO announced that Reynolds had been sentenced to 4.5 years in prison and fined £50,000. In its December 19 announcement, the SFO also noted that the company and two other former executives had previously pleaded guilty in connection with the same alleged scheme. The company was ordered to pay £18,038,000 in connection with its plea. The SFO also announced that another Alstom entity, Alstom Network UK Ltd, had been found guilty of one count of conspiracy to corrupt in April 2018 for making corrupt payments to win an €85 million tram and infrastructure contract in Tunisia. The company has yet to be sentenced for this conviction. Finally, the SFO also announced that Alstom Network UK Ltd and five of its executives were acquitted of charges related to alleged bribery in Hungary, India, and Poland.
- French Oil and Gas Company Fined by French Court for Iranian Bribes. On December 21, 2018, a Paris court fined French oil and gas group Total €500,000 for allegedly bribing Iranian officials in order to secure a contract for an Iranian oil field in 1997. The company allegedly paid $30 million in bribes under the guise of a consulting contract. The court rejected the prosecutors' request that the company's assets be seized in an amount equivalent to the estimated value of the proceeds of the corruption, €250 million. In 2013, the company agreed to pay more than $398 million to resolve FCPA charges with SEC and DOJ.
- OECD Reports Lack of Sanctions Against Bribe Takers in Foreign Bribery Cases. On December 11, 2018, the Organisation for Economic Cooperation and Development (OECD) Working Group on Bribery released a report concluding that "[p]ublic officials accepting bribes from OECD-based companies run little risk of being punished." The report, called "Foreign Bribery Enforcement: What Happens to the Public Officials on the Receiving End?" determined that, although investigations of public officials were conducted in more than half of the 55 cases in which OECD-based companies were punished for foreign bribery between 2008 and 2013, formal sanctions were imposed on the officials in only one-fifth of those cases. The report concluded that there is a lack of international cooperation on the "demand side" of foreign bribery and determined that the media plays a major role in the international flow of information.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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