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 did a federal court have to say about the jurisdictional reach of the U.S. Foreign Corrupt Practices Act (FCPA)? How did the U.S. Department of Justice (DOJ) fare in the latest FCPA prosecution to be tried to a jury? Which companies saw their FCPA investigations come to an end? The answers to these questions and more are here in our June 2019 Top Ten list.
- Federal Court in Illinois Declines to Follow Second Circuit Decision Limiting FCPA Jurisdiction. On June 21, 2019, Judge Rebecca Pallmeyer of the Northern District of Illinois denied Dmitry Firtash's and Andras Knopp's motion to dismiss an FCPA conspiracy and aiding and abetting charge arising from an alleged scheme to bribe Indian officials for titanium mining rights. Although the indictment alleges that other co-conspirators took actions in the United States in furtherance of the bribery scheme, it does not allege that either Firtash or Knopp, Ukrainian and Hungarian citizens, respectively, was ever physically present in the United States, nor does it allege that either was acting as an "agent" for a domestic concern or for a foreign national who was present in the United States. On May 9, 2017, Firtash and Knopp moved to dismiss the indictment,1 arguing, among other things, that the indictment failed to state an FCPA offense based on these alleged pleading deficiencies. An August 2018 opinion by the United States Court of Appeals for the Second Circuit in United States v. Hoskins lent considerable support to the defendants' position. There, the Second Circuit held that a similarly situated defendant was outside of the FCPA's jurisdictional reach and could not be convicted of aiding and abetting or conspiring to commit an FCPA violation unless DOJ could prove that he was acting as an "agent" of a domestic concern. Judge Pallmeyer, however, held that the Seventh Circuit, unlike the Second Circuit, would not require an "agency" element under these circumstances. Accordingly, Judge Pallmeyer denied the motion to dismiss. Should Firtash and Knopp ever be tried and convicted on the FCPA charges against them (neither has yet to appear in federal court, and Firtash has been fighting extradition from Austria for years), Judge Pallmeyer's opinion sets the stage for a potential circuit split on an important aspect of the FCPA's jurisdictional reach.
- Two Businessmen Convicted of Conspiracy To Bribe High-Level Haitian Officials. On June 20, 2019, DOJ announced that dual U.S.-Haitian citizen Roger Richard Boncy and co-conspirator Joseph Baptiste were convicted following a two-week jury trial in the District of Massachusetts of FCPA and other charges stemming from allegations that they bribed senior Haitian government officials for approval of an $84 million port development project in Haiti. Boncy, chairman and CEO of an investment firm, and Baptiste, a member of the investment firm's board of directors, were both convicted of one count of conspiracy to violate the FCPA and the Travel Act, and Baptiste was also convicted of one count of violating the Travel Act and one count of conspiracy to commit money laundering. According to DOJ, the evidence presented at trial showed that Boncy and Baptiste solicited bribes from undercover FBI agents posing as potential investors, telling the undercover agents that in order to secure Haitian government approval of the port development project, they would funnel bribes to Haitian officials through a Maryland non-profit entity controlled by Baptiste and that they would hide the bribes through money falsely earmarked for social programs. DOJ had announced charges against Baptiste in October 2017 and against Boncy in October 2018. Sentencing is scheduled for September 2019.
- Officials of Venezuelan Public Utility Charged with Money Laundering, Business Executives Sentenced for FCPA Violations, in Connection with Alleged Bribery Scheme. On June 27, 2019, DOJ announced that Venezuelan citizens Luis Alfredo Motta Dominguez (Motta) and Eustiquio Jose Lugo Gomez (Lugo) were charged in the Southern District of Florida with one count of conspiracy to commit money laundering and seven counts of money laundering. Matta was the minister of electrical energy in Venezuela and head of Corporación Eléctrica Nacional, S.A. (Corpoelec), a state owned and state-controlled electricity company. Luga was the procurement director at Corpoelec. According to DOJ, Motta and Lugo allegedly conspired with others to launder illegal bribery proceeds to and from bank accounts located in South Florida and awarded more than $60 million in procurement contracts with Corpoelec to three Florida-based companies in exchange for bribes, in violation of the FCPA. Also on June 27, 2019, DOJ announced that Jesus Ramon Veroes and Luis Alberto Chacin Haddad had pleaded guilty to one count of conspiracy to violate various provisions of the FCPA. According to DOJ, the businessmen admitted to making corrupt payments to Corpoelec officilas in exchange for procurement contracts awarded to Florida-based companies. As part of their plea agreements, Veroes and Chacin will forfeit at least $5.5 million in profits from contracts illegally obtained, as well as real property in the Miami area. Sentencing is scheduled for September 2019.
- Oil and Gas Services Company Resolves Brazil and Iraq Bribery Allegations. On June 25, 2019, DOJ announced that TechnipFMC plc and its U.S. subsidiary, Technip USA, Inc., agreed to pay over $296 million in criminal fines to resolve foreign bribery charges with authorities in the U.S. and Brazil. TechnipFMC is the product of a 2017 merger between Technip S.A. and FMC Technologies, which were allegedly involved in bribery schemes in Brazil and Iraq, respectively. The parent company entered into a deferred prosecution agreement (DPA), while the U.S. subsidiary pleaded guilty in the Eastern District of New York to one count of conspiring to violate the FCPA. According to the DOJ press release, a former consultant also pleaded guilty to one count of conspiring to violate the FCPA and is awaiting sentencing. In related Brazilian proceedings, the company settled with the Advogado-Geral da União (AGU), the Controladoria-Geral da União (CGU), and the Ministério Público Federal (MPF) over bribes paid in Brazil. DOJ agreed to credit approximately $214 million in penalties paid pursuant to the Brazilian settlement.
- German Engineering Conglomerate's FCPA DPA Dismissed. On June17, 2019, Judge Sim Lake of the Southern District of Texas granted DOJ's motion to dismiss FCPA charges against Bilfinger SE.2 In December 2013, the company agreed to pay a $32 million fine and enter into a three-year DPA to resolve charges that it conspired to pay more than $6 million in bribes to Nigerian government officials in relation to a $387 million gas project. The company's DPA was initially scheduled to expire in December 2016 but, following negative reports from its Swiss monitor, DOJ extended the DPA for an additional two years. For its part, the company complained to DOJ that the monitor was unreasonable and had leaked negative information to the press and even reportedly requested that he be removed. In its motion to dismiss, DOJ stated that the company "fully met the obligations under the extended DPA, including timely payment of the monetary penalty, full cooperation with the government, implementation of an enhanced compliance program and procedures, and successful completion of the compliance monitorship."
- DOJ and SEC End Investigation of California-Based Security and Inspections System Manufacturer for Alleged Bribery in Albania. On June 5, 2019, OSI Systems announced that DOJ and SEC had informed the company that they had closed their respective investigations into potential FCPA violations. In February 2018, the company disclosed the investigations were instigated by a report from short seller Muddy Waters claiming that the company had relied on bribes to win a major contract in Albania. The Muddy Waters allegations prompted a class-action lawsuit filed in December 2017 in California federal court. Those claims were dismissed in May 2018.
- SEC Ends Investigation into New York-Based Ultrasound Device Manufacturer for Alleged Bribery in China. On June 20, 2019, Misonix, Inc. announced that it had received a declination letter from SEC in relation to potential FCPA violations. In September 2016, the company disclosed that it had voluntarily informed SEC and DOJ of potential FCPA violations related to its independent Chinese distributor. Two shareholder derivative suits followed in June 2017. Misonix settled these suits in April 2018, by, among other things, agreeing to enhance its FCPA internal controls and corporate governance best practices. The company's June 2019 announcement did not mention the status of the DOJ investigation.
- Logistics and Freight Operations Company Fined in UK for Angola Bribery Scheme. On June 3, 2019, the UK Serious Fraud Office (SFO) announced that FH Bertling, Ltd. had been fined £850,000 in connection with its September 2017 guilty plea to an alleged scheme to bribe an agent of Angola's national oil company to secure $20 million worth of freight forwarding contract. The fine resolves a four-year investigation by SFO, which, as we previously reported in January 2019, November 2018, September 2017, and July 2016, achieved somewhat mixed results: In addition to the company, 13 individuals were charged, 9 of whom were convicted and 4 of whom were acquitted. The senior executives who were convicted were sentenced to between 6 and 18months' suspended sentences and fined amounts ranging from £5,000 to £20,000. The company is now in liquidation.
- Former Interpol President Pleads Guilty to Bribery in Chinese Court. On June 20, 2019, China's Supreme People's Procuratorate announced that former International Police Agency (Interpol) President Hongwei Meng pleaded guilty in China to accepting more than $2 million in bribes. In pleading guilty, Meng reportedly admitted that he had abused his posts within the Chinese Communist Party between 2005 and 2017 in exchange for special benefits, promotions for his wife, and more than 14 million yuan in bribes. Meng was detained by China's Central Commission for Discipline Inspection (CCDI) and the National Supervisory Commission (NSC) in September 2018 for "suspected illegal activities." Meng's detention did not come to light until October 2018, after his wife reported him missing during a return visit to China. Meng was formally arrested and charged in April 2019. Meng has yet to be sentenced.
- OECD Urges Sweden to Implement Bribery Reforms. On June 12, 2019, the OECD Working Group on Bribery announced that it had urged Sweden to reform its laws to ensure that companies are investigated and prosecuted for bribery of foreign public officials. The announcement followed meetings between the OECD and Swedish officials, including the Swedish Minister for Justice and Migration Morgan Johansson. During these meetings, Swedish officials confirmed that Sweden would implement new legislation consistent with the OECD's recommendations. Since 2012, the OECD has repeatedly pressed Sweden to reform its anti-bribery regime. According to the OECD, Swedish law does not fully comply with the OECD's Anti-Bribery Convention. Sweden's new legislation is anticipated to take effect on January 1, 2020, after which the OECD intends to conduct a follow-up examination.
1 United States v. Firtash, et al., No. 13-cr-515, ECF No. 24 and 30 (N.D. Ill. Apr. 2, 2014).
2 United States v. Bilfinger SE, No. 4:13-cr-745, ECF Nos. 14 and 15 (S.D. Tex. June 14 and 17, 2019).
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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