INTERNATIONAL CONVERGENCE (AND SOME) DIVERGENCE
As we reported in the July Trends & Patterns, SNC-Lavalin, a Montreal-based construction company, was charged with attempting to bribe Libyan government officials with almost $48 million in relation to construction projects in Libya. The SNL-Lavalin case gained widespread attention after news outlets reported that the office of Prime Minister Justin Trudeau pressured then-Attorney General Jody Wilson-Raybould to negotiate a remediation agreement with the company. In December, a jury in Montreal found Sami Bebawi, a former vice president at SNC-Lavalin, guilty of fraud, corruption, money laundering, and possession of proceeds of a crime. Bebawi's former subordinate, Riadh Ben Aissa, testified as a witness during trial. In 2014, Aissa pleaded guilty to similar charges in relation to SNC-Lavalin's conduct in Libya and was sentenced to three years in prison by a Swiss court. The trial against the company is expected to go forward in early 2020, although, as we previously reported, Attorney General David Lametti can still intervene and offer an agreement. If SNL-Lavalin is currently engaged in negotiations with prosecutors, it is unclear how Bebawi's recent conviction will impact an agreement. SNC-Lavalin was scheduled to appear in court on December 18, but on that day, it pleaded guilty to a one-count fraud charge. Pursuant to the plea, SNC-Lavalin will pay a fine of $280 million CAD ($213 million USD). Bebawi is scheduled to be sentenced on January 10, 2020.
France's Anticorruption Agency's ("AFA") Sanctions Committee's first decision in a corruption case resulted in a dismissal of all charges against Sonepar, a French distributor of electrical products and related services. In 2017, the company was accused of breaching five obligations under Article 17 of Sapin II, including having a deficient code of conduct, improper third-party due diligence procedures, improper accounting controls, improper implementation of audit processes, and improper implementation of the risk mapping document. The company rebutted the allegations, stating that it had implemented a code of conduct and compliance guide, third-party assessment procedures, an accounting control manual, a two-level control system, and a risk mapping document with input from a compliance expert. After reviewing Sonepar's measures, the committee ruled that the company had implemented a system of detection and prevention that complied with Article 17 of Sapin II and dismissed the case. The committee noted that the AFA's recommendations were intended to be a frame of reference. As such, defendants accused of violating Article 17 of Sapin II can show they have complied with the law using their own methodology. We will be sure to follow future decisions to see how the committee interprets breaches of Article 17 of Sapin II and the types of sanctions the committee imposes on defendants.
Sapin II also allows prosecutors in France to offer the Public Interest Judicial Agreement ("CJIP"), a settlement agreement closely resembling the deferred prosecution agreements offered by enforcement authorities in the U.S. With the CJIP, companies can pay a fine and avoid going to trial or pleading guilty. In December, France's Parquet National Financier ("PNF") settled with Egis Avia, a French engineering company, for €2.6 million over corruption allegations under the CJIP. According to the PNF, Egis Avia bribed foreign government officials in Algeria in relation to an airport terminal project. The CJIP has only been used five times since it was introduced in 2016.
In October, the Italian National Anti-Corruption Authority ("ANAC") imposed its first penalty for retaliation against a whistleblower since enacting whistleblower legislation in 2017. ANAC imposed a €5,000 ($6,200 USD) penalty against a municipal disciplinary committee after it suspended a manager following the submission of a whistleblower report. The manager filed a report with the judicial authority claiming that members of the disciplinary committee were negligent and abusing public office. The manager was then suspended, without pay, for twenty-two days. The ANAC found that there was a conflict of interest created between the whistleblower and the other members of the disciplinary committee because the members cited in the report did not abstain from the whistleblower's disciplinary proceedings. Under the whistleblower legislation, a public employee cannot be retaliated against for reporting misconduct in the interest of protecting the integrity of public administration. Italy's whistleblower protections not only align with those of the U.S., but seem to follow the EU's Whistleblower Protection Directive of 2019 which guarantees protection against all forms of retaliation against whistleblowers and their supporters. The EU directive goes one step beyond protections in the U.S. by providing whistleblowers with access to legal, financial, and psychological support, and requiring that government officials be trained on how to handle whistleblowing.
In November, Israeli Prime Minister Benjamin Netanyahu was indicted on charges of bribery, fraud, and breach of trust, marking the first time a sitting prime minister has been indicted in Israel. There are three cases against Netanyahu. In the first case, Netanyahu has been charged with bribery and is alleged to have provided regulatory benefits to Bezeq, the parent company of Walla News, an Israeli news company, in exchange for favorable news coverage of himself and his family and negative coverage of his adversaries. The ease in regulations is estimated to have saved Bezeq 1.8 billion shekels ($500 million USD). In the second case, Netanyahu is charged with fraud and breach of trust for assisting Arnon Milchan, a film mogul, with a visa application, a merger, and tax breaks in exchange for expensive gifts, such as cigars and bottles of champagne, worth 700,000 shekels (about $200,000). In the third case, Netanyahu is charged with fraud and breach of trust for discussing limiting the free circulation of a newspaper, Israel Hayom, to help a competing newspaper, Yediot Ahronot, corner more of the media market. In exchange for limiting Israel Hayom's circulation, the owner of Yediot Ahronot, Arnon Mozes, offered to increase positive coverage of Netanyahu in the newspaper. Netanyahu did not accept or refuse the bribe but continued discussions with Mozes and received positive election coverage. While Netanyahu's alleged conduct does not constitute foreign bribery, it indicates that prosecutors in Israel remain committed to prosecuting bribery offenses.
In October, Switzerland's Office of the Attorney General ordered energy trader Gunvor Group Ltd. to pay 94 million Swiss francs ($94.8 million) for failing to prevent its employees from bribing officials in the Republic of Congo and the Ivory Coast to secure oil contracts. According to Swiss prosecutors, from 2009 to 2011, consultants hired by Gunvor paid a large portion of their consulting fees to high-ranking foreign government officials in exchange for awarding Gunvor oil contracts worth hundreds of millions of dollars. Specifically, the company secured an oil supply contract from government-owned oil firm SNPC in the Congo. Gunvor also made deals for prepayments for oil cargoes with SNPC and oil cargoes from the Ivory Coast. Swiss prosecutors stated that the company had "serious deficiencies" in its internal controls, including a lack of compliance and internal guidance on preventing corruption and no compliance or audit personnel. The company also ignored warning signs, such as the backdating of supporting letters to banks. The settlement includes 4 million Swiss francs in fines and 90 million Swiss francs in disgorgement of profits derived from the contracts. Swiss prosecutors noted that since 2012, Gunvor has taken steps to improve its compliance program and reduced its use of thirdparty intermediaries.
(MOSTLY) INCREASED ENFORCEMENT IN EMERGING MARKETS
In the July 2019 Trends & Patterns, we reported on increasing corruption legislation and enforcement in foreign jurisdictions, including in Russia, Mexico, Brazil, Peru, India, and China. Since then, there have been several further developments regarding anti-corruption laws and enforcement abroad.
In July, the OECD Working Group on Bribery issued a statement regarding a proposed anti-corruption bill that had been adopted by the Brazilian Senate. According to the Working Group, the bill includes "some positive developments in tackling corruption," but uses an overly broad definition of abuse of discretion by judges and prosecutors. As such, the bill could provide corrupt individuals with a method to "unfairly attack justice-seeking prosecutors and judges for appropriately doing their jobs," which would result in a "significant chilling effect on anti-corruption prosecutions and investigation in Brazil and beyond." Further, the broad definition of abuse of discretion may prevent Brazil from meeting its obligations under the OECD Anti-Bribery Convention, which calls for independent investigations and prosecutions. The Working Group acknowledged the progress made thus far on the bill, namely the full or partial implementation of 31 of its 39 recommendations, but urged Brazil to consider addressing the remaining eight recommendations.
In October, despite the continued warnings from the Working Group that the ability of law enforcement to investigate and prosecute bribery must be protected, Brazil adopted the bill and it will enter into force in 2020. The Working Group raised additional concerns about recent developments in Brazil, including the Supreme Court halting investigations and criminal proceedings and restrictions on tax authorities to detect, report, and investigate bribery and money laundering. We will continue monitoring anti-corruption developments in Brazil as the law goes into effect.
Costa Rica enacted anti-corruption new legislation, Statute 9699, that imposes corporate criminal liability, adds accounting fraud as an offense in the criminal code, and lays out the basic requirements of a compliance program. Under the new law, corporate criminal liability extends to directors, shareholders, employees, third parties acting on behalf of the company, and any individuals within the company with decision-making power. Sanctions for violating Statute 9699 can be imposed on both Costa Rican companies and foreign companies doing business in Costa Rica. Sanctions for companies include an $8 million fine or ten percent of the amount obtained by the bribe, and a prohibition on contracting with the government, receiving tax incentives, obtaining licenses and permits, and maintaining commercial properties, while individuals charged under Statute 9699 can face up to twelve years in prison. Similar to the guidance on compliance programs provided by the DOJ, minimum requirements for a compliance program under Statute 9699 include conducting risk assessments, implementing a code of conduct, maintaining adequate financial controls, providing anti-corruption training, and establishing procurement procedures, among other requirements. If the Costa Rican Attorney General's Office finds that a company has met certain disclosure and cooperation requirements in addition to the compliance program requirements, the company may qualify for a 40 percent reduction in fines. Prosecutors directly notified construction companies of the new law in July. It is yet to be seen if construction companies that fail to meet the requirements after the direct alert will be among the first to be criminally charged.
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