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

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: Who will lead the Criminal Division of the U.S. Department of Justice (DOJ)? What FCPA enforcement action was dismissed as time-barred under recent U.S. Supreme Court precedent? Which offshore oil and gas company resolved corruption allegations with Brazilian authorities? The answers to these questions and more are here in our July 2018 Top Ten list.

1. New Assistant Attorney General for DOJ Criminal Division Confirmed. On July 11, 2018, Attorney General Jeff Sessions announced the Senate confirmation of Brian Allen Benczkowski as the Assistant Attorney General (AAG) for the Criminal Division. Because criminal enforcement of the FCPA resides exclusively with the Criminal Division's Fraud Section, this confirmation is particularly significant for those in the anti-corruption space. Although never a line prosecutor, Benckowski has experience serving in other positions at DOJ. From 2008 to 2009, Benczkowski served as the Chief of Staff for the Office of the Attorney General and the Office of the Deputy Attorney General. He has also served as Principal Deputy Assistant Attorney General for Legislative Affairs, as chief of staff at the Bureau of Alcohol, Tobacco, Firearms and Explosives, and as staff director and senior counsel to DOJ's Office of Legal Policy. Benczkowski was first nominated for the AAG position in June 2017, but his nomination stalled over Democratic Party concerns that he had represented a Russian bank while in private practice. The ultimate vote was close, with only one Democratic Senator breaking ranks. As with prior Trump DOJ appointments, we do not see any reason to believe that FCPA enforcement will cease to be a priority under AAG Benczkowski. (See, for example, our discussion of the nomination of Attorney General Jeff Sessions in November 2016 and the confirmation of Deputy Attorney General Rod Rosenstein in April 2017.)

2. Senior DOJ Official Says FCPA Corporate Enforcement Policy Applies to Acquired Companies. During a July 25, 2018 speech in Washington, D.C., DOJ Criminal Division Deputy Assistant Attorney General (DAAG) Matt Miner emphasized that the FCPA Corporate Enforcement Policy, announced in November 2017, applies in the M&A context. In particular, Miner "ma[d]e clear that we intend to apply the principles contained in the FCPA Corporate Enforcement Policy to successor companies that uncover wrongdoing in connection with mergers and acquisitions and thereafter disclose that wrongdoing and provide cooperation, consistent with the terms of the Policy." In other words, "an acquiring company [that] conducts robust due diligence that unearths wrongdoing, reports that conduct to the Department, and engages in remedial measures, including extending already robust compliance to the acquired company," is eligible for the benefits under the Policy. Recognizing that the ability to conduct robust pre-acquisition due diligence may be limited in some circumstances, Miner also emphasized that the Policy will also apply when the conduct is discovered during post-acquisition due diligence. Miner also encouraged companies to use the FCPA Opinion Procedure process, noting that the last time the process was used was in 2014, when DOJ stated its intention not to bring an enforcement action against a multinational company that discovered during M&A due diligence potentially improper payments made by a target company. (See our Client Alert for more details.) While Miner's statements are generally welcome news, they do leave some open questions. As Miner noted earlier in his speech, a declination under the FCPA Corporate Enforcement is "subject to disgorgement of ill-gotten gains." Does Miner's announcement mean that an acquiring company will always have to "disgorge" profits for pre-acquisition misconduct that it reports to the Department? If so, this is something of a break from past practice, under which DOJ often (but not always) fully declined to pursue an enforcement action for such misconduct. Indeed, in the 2014 Opinion Procedure release that Miner cites, DOJ did not condition its decision not to pursue an enforcement action on the acquiring or target companies disgorging any ill-gotten gains. Regardless, Miner's efforts to provide clarity to DOJ's enforcement policies in the M&A context are welcome and underscore the importance for acquiring companies to conduct both pre- and post-acquisition due diligence and to quickly integrate the target company into the acquiring company's compliance program.

3. Federal Judge Dismisses FCPA Action Against Former Hedge Fund Executives. On July 12, 2018, U.S. District Judge Nicholas G. Garaufis of the Eastern District of New York dismissed as time-barred the SEC's enforcement action against Michael L. Cohen and Vanja Baros, two former employees of Och-Ziff Capital Management LLC. In January 2017, SEC announced that it had brought FCPA charges against Cohen and Baros for allegedly causing Och-Ziff and a subsidiary to pay bribes to officials in several African countries. In dismissing the case, Judge Garaufis relied on the U.S. Supreme Court's June 2017 decision in SEC v. Kokesh that SEC disgorgement actions are subject to the five-year statute of limitations set forth in 28 U.S.C. § 2462, which applies to government actions seeking "any civil fine, penalty, or forfeiture." Extending Kokesh, Judge Garaufis concluded that the five-year statute of limitations also applied to and barred SEC's action against Cohen and Baros for injunctive relief because the requested injunction "would function at least partly to punish defendants and is therefore a penalty." Although the first in the FCPA context, the Cohen case is not the first to address the effects of Kokesh on an SEC enforcement action. In December 2017, the District of New Jersey extended Kokesh to dismiss as time-barred an action seeking an "obey the law" injunction and a "penny stock bar." In contrast, in June 2017, the Eighth Circuit held that Kokesh does not apply to an "obey the law" injunction. Thus, there appears to be an emerging split in how courts apply Kokesh, which may ultimately require the Supreme Court to revisit the decision. In more immediate terms, the issue of whether the SEC's claims were untimely in Cohen largely centered on the terms of the SEC's tolling agreements in that particular case, which suggests that SEC will be more vigilant in seeking broad tolling agreements from companies and individuals in FCPA and other investigations.

4. Switzerland-based Bank and Its Hong Kong-based Subsidiary Resolve FCPA Allegations involving Hiring Practices. On July 5, 2018, SEC and DOJ announced that Credit Suisse Group AG ("Credit Suisse") and its Hong Kong subsidiary had agreed to resolve allegations that the subsidiary was involved in a scheme to obtain banking business with Chinese state-owned entities by hiring and promoting friends and family of Chinese government officials between 2007 and 2013. The subsidiary allegedly made at least $46 million in profits from this practice. As part of a three-year non-prosecution agreement (NPA) with DOJ, the subsidiary agreed to pay a criminal penalty of approximately $47 million. As part of an SEC administrative cease-and-desist order, the parent agreed to pay disgorgement of $24.9 million and $4.8 million in interest. This is the first hiring resolution since the "Sons and Daughters" resolution in November 2016. But, it might not be the last. As we discussed in our August 2015 Top Ten, SEC has reportedly been conducting an industry sweep into hiring practices in the financial services industry for several years. This most recent resolution illustrates that companies should continue to be vigilant in their hiring, internship, and training programs, as these continue to be areas of focus for U.S. enforcement agencies.

5. Chicago-based Spirits Producer Resolves India FCPA Allegations. On July 2, 2018, SEC announced that Beam Suntory Inc. had agreed to pay $5.2 million in disgorgement, $917,498 in prejudgment interest, and a $2 million civil penalty to resolve allegations that an Indian subsidiary had made improper payments to government officials to "increase sales orders, process license and label registrations, and facilitate the distribution of [the company's] distilled spirit products" from 2006 to 2012. According to the SEC order, this conduct violated the FCPA's accounting provisions. The company neither admitted nor denied the allegations. Given the lack of a parallel resolution and the imposition of a civil penalty, it appears that DOJ declined prosecution, potentially because no jurisdiction existed to bring anti-bribery charges against the parent company.

6. Dutch Oil and Gas Company Resolves Corruption Allegations With Brazilian Authorities. In July 2016, we reported that Dutch offshore oil and gas company SBM Offshore N.V. had reached a resolution with multiple Brazilian agencies to resolve allegations that the company won contracts from Petrobras as a result of bribery. But, on September 2, 2016, SBM Offshore informed investors that the Fifth Chamber of the Brazilian Federal Prosecutor Service had rejected the leniency agreement. In November 2017, SBM and a subsidiary entered into a corporate resolution with DOJ that included a $238 million penalty. In its press release, DOJ said that, in calculating the fine, the Department credited, among other things, "the payment of penalties likely to be paid to the Brazilian Ministerio Publico Federal (MPF)." On July 26, 2018, Brazil's Ministry of Transparency (CGU) announced that SBM had entered into a leniency agreement with the CGU, Brazil's Attorney General's Office (AGU), and Petrobras, under which the company would pay a total of approximately $189 million. The MPF, however, is not part of the agreement.

7. Former Venezuelan Official Pleads Guilty to FCPA Violation and Money Laundering in Bribery Scheme. On July 16, 2018, DOJ announced that Luis Carlos De Leon-Perez, a former Venezuelan official with dual U.S.-Venezuelan citizenship, pleaded guilty in the Southern District of Texas to one count of conspiracy to violate the FCPA and one count of conspiracy to commit money laundering for his role in a scheme to bribe officials of Venezuela's state-owned energy company, Petroleos de Venezuela S.A. (PDVSA). According to the plea agreement, between 2011 and 2013, De Leon conspired with others to solicit bribes and kickbacks from PDVSA vendors in exchange for business with PDVSA. De Leon also admitted to an international money laundering scheme to conceal the bribes through a series of financial transactions. De Leon's sentencing hearing is scheduled for September 24, 2018. To date, 12 individuals have entered into guilty pleas in connection with DOJ's investigation into bribery at PDVSA. (See our most recent coverage on the PDVSA investigation for February 2018 and April 2018.)

8. Eight Individuals Charged With Laundering Funds Embezzled from Venezuela's National Oil Company. On July 25, 2018, DOJ announced that eight individuals—described as "former PDVSA officials, professional third-party money launderers, and members of the Venezuelan elite"—were charged in the Southern District of Florida with conspiracy to launder funds embezzled from PDVSA through bribery and fraud. Two of the defendants, Matthias Krull and Gustavo Adolfo Hernandez Frieri, were arrested on the charges, while the other defendants remain at large. The complaint alleges that the money laundering schemes were supported by complicit money managers, brokerage firms, banks, and real estate investment firms in the United States and elsewhere, operating as a network of professional money launderers.

9. Florida- and Spain-based Media Companies Resolve Allegations Related to International Soccer Probe. On July 10, 2018, DOJ announced that US Imagina, LLC ("US Imagina") had pleaded guilty to two counts of wire fraud conspiracy for the involvement of two senior executives (as well as a high-ranking executive of its parent company in Spain) in an alleged scheme to pay more than $6.5 million in bribes to soccer officials of the Caribbean Football Union (CFU) and four Central American national soccer federations in exchange for media and marketing rights to World Cup qualifier matches. Imagina Media Audiovisual SL ("Imagine Media"), US Imagina's Spain-based parent company, entered into an NPA with DOJ in connection with an executive officer's participation in the alleged scheme. Pursuant to the plea agreement, US Imagina agreed to pay $5.3 million in criminal forfeiture and a total of more than $6.6 million in restitution to CFU and various Central American national soccer federations. US Imagina also agreed to pay a criminal fine of $12.9 million, which Imagina Media agreed to pay on its behalf pursuant to the NPA.

10. DPA for New Jersey-based Engineering, Architecture, and Construction Management Company Ends. In July 2015, Louis Berger International entered into a three-year DPA with DOJ in connection with allegations that it bribed foreign officials in India, Indonesia, Vietnam, and Kuwait in violation of the FCPA. In an order dated July 24, 2018, United States Magistrate Judge Mark Falk from the District of New Jersey granted DOJ's request that the matter be continued for six months "to permit the government to evaluate if dismissal of the complaint is warranted."1 DOJ's motion is consistent with the terms of the DPA, which provided that it would seek dismissal of the criminal Complaint against the company within six months of the expiration of the term of the DPA. Thus, the continuance does not necessarily reflect that DOJ suspects that the company has engaged in additional wrongdoing or otherwise failed to comply with the terms of the DPA. Extensions for such reasons have been sought in other cases. Instead, the extra time provided in the DPA and the accompanying order reflect DOJ's experience that issues may come to light only after a DPA or NPA ends.

Footnote

1 United States v. Louis Berger International, Inc., Mag. No. 15-3624 (MF), ECF No. 10 (D.N.J. July 24, 2018).

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

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
James M. Koukios
Julie A. Nicholson
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions