United States: Top Ten International Anti-Corruption Developments For April 2018

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: Which company received the first declination under the Department of Justice’s (DOJ) new FCPA Corporate Enforcement Policy? How is the International Monetary Fund (IMF) “stepping up” its efforts to combat corruption? What new remedy has China proposed to recover the proceeds of corruption? The answers to these questions and more are here in our April 2018 Top Ten list.

1. New Jersey-based Data and Analytics Firm Resolves China FCPA Allegations with SEC, Receives First Declination Under DOJ FCPA Corporate Enforcement Policy. On April 23, 2018, the Securities and Exchange Commission (SEC) announced that Dun & Bradstreet had agreed to pay more than $9 million, including a $2 million civil penalty, to resolve FCPA accounting provision violations stemming from allegedly improper payments made by two of its Chinese subsidiaries to third parties and government officials in order to obtain non-public financial statement information and non-public personal data in violation of Chinese law. According to the administrative cease and desist order, the improper payments were falsely recorded as legitimate business expenses. On the same day, DOJ sent the company a letter stating that the Department had “declined prosecution consistent with the FCPA Corporate Enforcement Policy.” Notably, this is the first public declination citing the Policy, which was announced in November 2017 and replaced the FCPA Pilot Program. The letter stated that, despite having concluded that bribery had occurred, DOJ chose to decline based on a number of factors, including the company’s (1) identification of the misconduct, (2) prompt voluntary self-disclosure, (3) thorough corporate investigation, (4) full cooperation, (5) enhanced compliance program and internal accounting controls, (6) remediation, which included termination of all employees involved in the misconduct, and (7) disgorgement paid to SEC.

2. Luxembourg-based Telecommunications Company Announces DOJ Declination. On April 24, 2018, Millicom stated that DOJ had informed the company that it was closing its investigation into potential improper payments made on behalf of the company’s joint venture in Guatemala. According to the release, Millicom voluntarily reported the potential improper payments to DOJ in October 2015. Millicom had also reported to Swedish authorities. In a May 9, 2016 press release, Millicom disclosed that the Swedish prosecutor had notified Millicom that it had discontinued its preliminary investigation due to a lack of jurisdiction.

3. Connecticut-based Industrial Conglomerate Discloses DOJ Declination. In an April 27, 2018 securities filing, United Technologies Corporation disclosed that DOJ had dropped its probe into alleged FCPA violations in China. The filing also noted that the company was in talks with SEC about a potential resolution. In December 2013 and January 2014, the company voluntarily disclosed to DOJ, SEC, and the U.K. Serious Fraud Office (SFO) that it was conducting an internal investigation into potential FCPA violations in connection with a non-employee sales representative’s sale of jet engines manufactured by its subsidiaries.

4. World Bank Debars Kenya-based Railroad Company. On April 16, 2018, the World Bank announced the debarment of Africa Railways Logistics Limited (ARLL) for two years in connection with an employee’s alleged attempt to improperly influence the customs and port clearance process for locomotives on two projects in Kenya and Uganda. This was the first debarment related to an investment by the International Finance Corporation (IFC), the private-sector arm of the World Bank. The debarment, which renders ARLL ineligible to participate in World Bank-financed projects, is part of a settlement agreement in which the company acknowledged responsibility for the underlying conduct and agreed to specified corporate compliance requirements as a condition for release from debarment. Related companies Africa Railways Limited and Rift Valley Railways Kenya Limited were sanctioned with conditional non-debarment, which allows them to remain eligible to participate in World Bank projects, so long as they comply with their settlement agreement obligations. According to the World Bank, the companies benefitted from a reduced period of debarment in light of their cooperation and voluntary remedial actions.

5. New Guilty Pleas in Long-Running Bribery Prosecutions.

  • Chinese-born Executive Pleads Guilty in United Nations Bribery Case. On April 4, 2018, more than two years after she was arrested, Chinese-born executive Julia Vivi Wang pleaded guilty in the Southern District of New York to FCPA and tax charges related to a bribe allegedly paid to John Ashe, the former president of the United Nations General Assembly. Wang was a background figure in the trial of Chinese real estate billionaire Ng Lap Seng, whom a jury convicted in July 2017 of bribing Ashe and Francis Lorenzo, formerly the U.N. ambassador from the Dominican Republic. Wang admitted to helping her husband, former Ng ally Forest Cao, pay $500,000 to Ashe in exchange for assistance with Cao’s business interests. Both Ashe and Cao have since passed away.
  • Venezuelan Official Pleads Guilty to Money Laundering in Venezuela Bribery Prosecution. On April 19, 2018, DOJ announced that Cesar David Rincon Godoy (Cesar Rincon), a former general manager of the procurement subsidiary of Venezuela’s state-owned and state-controlled energy company, Petroleos de Venezuela S.A. (PDVSA), had pleaded guilty in the Southern District of Texas to money laundering for his role in an alleged scheme involving payments by U.S.-based companies to Venezuelan government officials to improperly obtain energy contracts and priority payment for outstanding invoices. The charges against Cesar Rincon were announced in February 2018. According to admissions in his plea, Cesar Rincon conspired with four co-defendants and others, all of whom were then-current officials at PDVSA or former officials of other Venezuelan government agencies or instrumentalities, to solicit vendors for bribes and kickbacks in exchange for aiding the vendors with their PDVSA business. Cesar Rincon admitted to conspiring with others to launder over $7 million in proceeds from the various bribery schemes in which he was involved. To date, eleven individuals have pleaded guilty in connection with this investigation. The court accepted Cesar Rincon’s guilty plea and imposed a personal money judgment in the amount of $7,033,504.71; Cesar Rincon agreed to the entry of an order of forfeiture. Sentencing is scheduled for July 9, 2018.

6. Aruban Official and Florida-based Telecom Executive Plead Guilty in Connection with Bribery Scheme. On April 13, 2018, DOJ announced that Egbert Yvan Ferdinand Koolman, a former official of Aruban state-owned Servicio di Telecommunicacion di Aruba N.V. (Setar), had pleaded guilty in the Southern District of Florida to one count of conspiracy to commit money laundering in connection with $1.3 million in bribe payments he received from individuals and companies located in the United States and abroad in exchange for using his position at Setar to award lucrative mobile phone and accessory contracts. According to his guilty plea, the bribe payments were either made in the United States or from bank accounts located in the United States. DOJ simultaneously announced that Lawrence W. Parker, Jr., the owner of five Florida-based telecommunications companies, had pleaded guilty in December 2017 to conspiracy to violate the FCPA and to commit wire fraud in connection with the scheme to bribe Koolman. On April 30, 2018, Parker was sentenced to 35 months in prison and ordered to pay over $700,000 in restitution. Koolman’s sentencing is scheduled for June 27, 2018.

7. Ecuadorean Official Pleads Guilty in Connection with Bribery Scheme. On April 11, 2018, Marcelo Reyes Lopez, a former official of Ecuador’s national oil company, PetroEcuador, pleaded guilty in the Southern District of Florida to one count of conspiracy to commit money laundering. According to reports, Reyes was a contracts executive with PetroEcuador and allegedly accepted bribes in exchange for the awarding of contracts. The indictment alleges that, from 2013 2016, Reyes conspired to launder the proceeds of violations of the FCPA and Ecuador’s public corruption statute.

8. Japan-based Electronics Company and U.S.-based Subsidiary Resolve FCPA Allegations. On April 30, 2018, DOJ and SEC announced that Panasonic Corporation and one of its subsidiaries had agreed to pay a combined $280 million to resolve allegations regarding payments to an employee of an unnamed state owned airline. Pursuant to a deferred prosecution agreement filed in federal court in the District of Columbia, the subsidiary agreed to pay a $137.4 million criminal penalty and to retain an independent compliance monitor for two years, followed by an additional year of self-reporting. Pursuant to an administrative cease and desist order alleging books and records and other violations, the parent agreed to pay approximately $143 million in disgorgement and prejudgment interest to SEC.

9. IMF “Steps Up” Engagement on Governance and Corruption. On April 22, 2018, the IMF announced that its Executive Board had endorsed a new framework for “stepping up” engagement on governance and corruption in its member countries. According to empirical findings in an IMF policy paper, a high level of corruption is associated with significantly lower growth, investment, FDI, and tax revenues. For instance, the paper found that falling from the 50th to the 25th percentile in a corruption index can correlate with a GDP per capita growth rate drop of half a percentage point or more. The report also showed that corruption and poor governance are associated with higher inequality and lower inclusive growth. In light of this, IMF revisited its governance policy, in place since 1997, and adopted the new framework, which includes several steps: (1) developing a clear and transparent methodology for assessing the nature and severity of governance weaknesses; (2) assessing and providing recommendations to address the economic impact of identified weaknesses; (3) assessing the criminalization and prosecution of foreign bribery offenses by member countries (according to the IMF, all G7 nations plus Austria and the Czech Republic have agreed to this assessment); and (4) emphasizing assessment and discussion of governance and corruption in surveillance and lending programs.

10. China Proposes Default Judgments for Certain Corruption Offenses. On April 25, 2018, China’s state news agency announced that China plans to introduce default judgments in corruption related criminal cases for individuals who have fled overseas. As we have noted previously, China has prioritized the repatriation of Chinese kleptocrats and kleptocracy funds over the last several years. (See, for example, our April 2015, November 2016, and March 2017 Top Tens.) According to a government white paper cited by Xinhua News, from 2014 to mid-October 2017, 3,453 fugitives were brought back to the country from more than 90 countries and regions and illegal assets worth 9.5 billion yuan (around $1.5 billion) were recovered. The draft revision to the Criminal Procedure law providing for default judgments has been submitted to the legislature for review.

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.

© Morrison & Foerster LLP. All rights reserved

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Authors
James M. Koukios
Julie A. Nicholson
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