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 U.S. agency brought its first foreign bribery-related enforcement action? What major anti-corruption reforms were included in the U.S. National Defense Authorization Act for Fiscal Year 2021? What measures are contained in Brazil's five-year anti-corruption plan? The answers to these questions and more are here in our December 2020 Top 10.
1. U.S. Commodity Futures Trading Commission Resolves First Foreign Bribery Case. On December 3, 2020, the U.S. Department of Justice (DOJ) announced that Vitol Inc., a U.S. subsidiary of the Dutch energy and commodities trader, had entered into a deferred prosecution agreement (DPA) relating to bribes allegedly paid to officials in Brazil, Ecuador, and Mexico between 2005 and 2020 in violation of the Foreign Corrupt Practices Act (FCPA). As part of the DPA, the company agreed to pay a criminal penalty of $135 million, $45 million of which will be paid to Brazilian authorities. In September 2020, DOJ announced charges against Javier Aguilar, a Vitol trader, for his role in the alleged Ecuador scheme. The December 2020 press release stated that DOJ had recently unsealed charges against a former official of Brazil's national oil company, Petróleo Brasileiro S.A. ("Petrobras"), and an intermediary for their roles in the alleged Brazil scheme. Also on December 3, 2020, the U.S. Commodity Futures Trading Commission (CFTC) announced that the company had agreed to pay more than $95 million in civil monetary penalties and disgorgement to resolve related allegations that the alleged foreign bribery defrauded counterparties, harmed other market participants, and undermined the integrity of the U.S. and global physical and derivatives oil markets. The criminal penalty will offset a portion of the CFTC penalty, resulting in a total payment to the CFTC of approximately $12.8 million in disgorgement and $16 million as a penalty for attempted market manipulation, which is not covered in the DPA. The Vitol resolution marks the CFTC's first foreign bribery-related resolution since it announced its intention to enter the foreign bribery enforcement arena in March 2019.
2. Second Circuit Affirms Foreign Bribery and Money Laundering Convictions of NGO Officer. On December 29, 2020, the U.S. Court of Appeals for the Second Circuit affirmed the conviction and sentence of Chi Ping Patrick Ho relating to his conduct in bribing foreign public officials in Chad and Uganda. In March 2019, Ho, an officer/director of a U.S.-based non-governmental organization (NGO), which was funded by a Chinese energy company, was found guilty of numerous violations of and conspiracy to violate the FCPA's anti-bribery provisions and the federal money laundering statute. Ho challenged his FCPA convictions on the grounds that (1) the evidence showed only that he was acting to benefit foreign entities, not the U.S.-based NGO that formed the predicate for his conviction under the FCPA's domestic concern provision (15 U.S.C. § 78dd-2), and (2) he could not be charged under both the domestic concern (15 U.S.C. § 78dd-2) and territorial jurisdiction (15 U.S.C. § 78dd-3) provisions of the FCPA, which he characterized as "mutually exclusive." (Ho cited the Hoskins decision as support for the second argument. For more on Hoskins, read our August 2015, March 2017, August 2018, and April 2019 Top 10s and our March 2020 client alert.) The Second Circuit rejected both arguments. First, the court held that the FCPA does not require a U.S. entity to be the beneficiary of the corruption, but rather requires only that the defendant was acting on behalf of a domestic concern to procure corrupt business "for . . . any person," which can include a foreign entity. Second, the court held that dd-2 and dd-3 are not mutually exclusive: "the FCPA's statutory language contains no indication that the provisions are mutually exclusive, or that both sections would not cover a director, like Ho, who acts on behalf of both a domestic concern—here, the U.S. NGO—and on behalf of a person other than a domestic concern—here, [the Chinese] NGO. ... Nothing in the language of the statute, or Hoskins, prevents an individual from fitting within more than one of [the FCPA's] three categories, particularly where, as here, that individual acts on U.S. soil on behalf of both domestic and foreign entities." Ho also challenged his money laundering convictions on the grounds that (1) the FCPA's territorial jurisdiction provision (15 U.S.C. § 78dd-3) cannot constitute a "specified unlawful activity" (SUA) under the money laundering statute and (2) the government failed to prove that the transfer of bribe funds went "to" or "from" the United States. The Second Circuit rejected both arguments. First, the court held that even though dd-3 was added to the FCPA after the enactment of the money laundering statute, the latter's inclusion of "any felony violation of the Foreign Corrupt Practices Act" as an SUA signaled Congress's intent to incorporate the FCPA "in its entirety," without the need to expressly incorporate later amendments. Second, the court held that a wire transfer from Hong Kong to Uganda that passed through a correspondent U.S. dollar bank account in New York was a transaction "to" or "from"—and not simply "through"—the United States for purposes of the money laundering statute. By addressing several issues of first impression under the FCPA, the Ho decision adds to the growing body of jurisprudence under that statute. (See, for example, our discussion of the development of FCPA case law here. For more on the Ho case specifically, see our November 2017, September 2018, December 2018, March 2019 and March 2020 Top 10s.)
3. Congress Includes Significant Anti-Corruption Reforms in the National Defense Authorization Act. On December 11, 2020, Congress passed the National Defense Authorization Act for Fiscal Year 2021 (NDAA), which establishes the U.S. Department of Defense's annual budget and expenditures for the upcoming year. This year's NDAA includes several important anti-corruption measures. According to the Corporate Transparency Act, it is the "sense of Congress" that "malign actors seek to conceal their ownership" of certain corporations, limited liability companies, and similar entities formed under state law to facilitate foreign corruption, money laundering, and other illicit activities. In response, the Act requires certain entities to report their beneficial owners—meaning an individual who exercises substantial control over the entity or controls 25 percent or more of the entity's ownership interest—to the U.S. Treasury Department's Financial Crimes Enforcement Network ("FinCEN"). A second provision requires all federal contractors to declare their beneficial ownership in a public database. (For more detail on the Corporate Transparency Act and other provisions of the Anti-Money Laundering Act of 2020, see our client alert.) The Kleptocracy Asset Recovery Rewards Act ( KARRA) establishes a three-year pilot program, overseen by the U.S. Treasury Department, to compensate, up to $5 million, any individual who provides U.S. authorities with information that leads to the recovery of stolen assets tied to foreign government corruption. The KARRA program will supplement the Dodd-Frank Whistleblower Program, administered by the U.S. Securities and Exchange Commission (SEC), which provides for whistleblower awards for information leading to successful enforcement actions related to the FCPA and other federal laws. (For recent discussions of the SEC program, see our September 2020 and November 2020 Top 10s.)
4. New Jersey Business Executive Admits to Bribing Korean Public Official. On December 17, 2020, DOJ announced that Deck Won Kang had pleaded guilty in the District of New Jersey to one count of violating the FCPA's anti-bribery provisions. Kang allegedly promised a high-ranking official of the Korean Ministry of Defense's Defense Acquisition Program Administration (DAPA) that he would provide something of value once the official left public office in exchange for awarding contracts to two closely held (but unnamed in the charging document) New Jersey companies. In fulfillment of this promise, between April 2012 and February 2013, Kang allegedly caused $100,000 to be wired from New Jersey to Australia for the benefit of the then-retired official. Kang is scheduled to be sentenced in April 2021.
5. Former Venezuelan National Treasurer and Spouse Charged in Connection with International Bribery and Money Laundering Scheme. On December 16, 2020, DOJ announced that former Venezuelan National Treasurer Claudia Patricia Diaz Guillen and her husband had been charged in the Southern District of Florida with conspiring to violate, and violating, the federal money laundering statute related to their alleged participation in a billion dollar currency exchange and money laundering scheme. A third defendant, Raul Gorrin Belisario, allegedly bribed Diaz, directly and through her husband, and another former Venezuelan national treasurer, Alejandro Andrade Cedeno, to corruptly secure the right to conduct, at favorable rates, foreign exchange transactions for the benefit of the Venezuelan government. In November 2018, DOJ announced charges against Gorrin and a 10-year prison sentence for Andrade. The superseding indictment alleges that Gorrin paid Diaz and her husband millions of dollars through U.S. bank accounts.
6. SEC Relaxes Extractive Companies' Disclosure Obligations Regarding Payments to Governments. On December 16, 2020, the SEC voted 3-to-2 to adopt changes to its "resources extraction" disclosure rule which was originally implemented to satisfy requirements of the Dodd-Frank Act and the Congressional Review Act. The latest iteration of the rule comes after nearly a decade of debate and two prior attempts to revise it. The revised rule requires covered companies in the extractive industries to disclose the payments they make (directly or by subsidiaries) to the U.S. government and foreign governments. Notably, however, the new rule only requires covered companies to disclose aggregated payment information at a national level instead of providing a contract-by-contract disclosure. The 3-to-2 vote occurred along party lines, with three Republicans voting in favor of the rule and two Democrats voting against it. While an industry consensus has yet to form regarding the new rule, the ability to provide aggregated disclosure is considered generally industry-friendly and may ease the burden of compliance. (For more on the extraction disclosure rules, see our February 2017 and December 2019 Top 10s.)
7. Brazilian Father and Son Plead Guilty in the United States to Petrobras Bribery Scheme. On December 10, 2020, Jorge Luz and his son, Bruno Luz, pleaded guilty in the Eastern District of New York to one count of conspiring to violate the FCPA's anti-bribery provisions.1 According to the charging documents,2 between 2010 and 2015, the Luzes utilized shell companies, sham consulting agreements, and Swiss bank accounts to assist Sargeant Marine, Inc. and others in paying over $5 million in bribes to Petrobras employees and Brazilian governmental officials, including a member of the Brazilian Congress and a Brazilian government minister, in order to secure business from Petrobras. DOJ announced in September 2020 that Sargeant Marine and several other individuals had pleaded guilty to related charges. Sentencing for the Luzes has not yet been scheduled. They are currently serving sentences received in Brazil in 2017 in connection with Operation Lava Jato ("Operation Car Wash"), an expansive investigation into alleged corruption involving Petrobras. (See our May 2015, May 2016, March 2017, September 2018, October 2019, February 2020, and September 2020 Top 10s for some of our prior discussions of Operation Car Wash.)
8. Dutch Multinational Technology Company Settles Brazilian Bribery Investigation. On December 9, 2020, Brazil's Federal Prosecution Service (MPF) announced that it had approved the clemency agreement entered into by Koninklijke Philips N.V. and the Operation Car Wash task force. In addition to paying an $11.6 million settlement amount, the agreement requires the company to enhance its compliance program, which will be monitored by an independent consultancy firm approved by MPF.
9. Brazilian Government Releases Five-Year Anti-Corruption Plan. On December 9, 2020, the Brazilian government announced a five-year anti-corruption plan. According to the head of Brazil's Comptroller-General Office (CGU), the plan adopts recommendations from the United Nations, the Organization for Economic Co-operation and Development (OECD), and the Organization of American States. The plan's primary objective is to coordinate cooperation among government agencies as they each work to combat corruption. (Notably, however, the MPF does not appear to have held a seat on the interagency committee that developed the plan.) The plan has 142 actions—78 focused on prevention, 34 focused on detection, and 30 focused on fiscal responsibility and accountability. It contains measures related to private sector compliance programs, lobbying and public integrity, whistleblowers, investigations, leniency agreements, and international cooperation, among other measures. The plan signals Brazil's continued focus on anti-corruption, even as Operation Car Wash appears to be winding down.
10. OECD Working Group on Bribery Criticizes Iceland's Foreign Bribery Enforcement Record. On December 17, 2020, the OECD Working Group on Bribery announced the results of its Phase 4 evaluation of Iceland's implementation of the OECD Anti-Bribery Convention. The Working Group concluded in its report that Iceland must improve its efforts to detect and enforce its foreign bribery offenses, noting that, despite being one of the first countries to sign the Convention, Iceland had only recently commenced its first foreign bribery investigation. Iceland is expected to submit a report to the Working Group on the implementation of the recommendations contained in the report and on its enforcement efforts by December 2022.
1. Minute Entry, United States v. Bruno Luz, 20-cr-558-ENV, ECF No. 7 (Dec. 10, 2020); Minute Entry, United States v. Jorge Luz, 20-cr-559-ENV, ECF No. 7 (Dec. 10, 2020).
2. Information, United States v. Bruno Luz, 20-cr-558-ENV, ECF No. 6 (Dec. 9, 2020); Information, United States v. Jorge Luz, 20-cr-559-ENV, ECF No. 6 (Dec. 9, 2020).
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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