OFAC Imposes Civil Penalty for Export of Medical Supplies to Iran

On June 23, OFAC announced a $107,691.30 settlement with a North Carolina-based medical device company for apparent violations of the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 (the Regulations). Specifically, the company violated § 560.204 of the Regulations by exporting a number of its medical products to its United Arab Emirates distributor throughout April and May 2011 with the knowledge or reason to know that the products were ultimately destined for Iran. The settlement amount reflects OFAC’s consideration of the following aggravating factors: (i) the company acted willfully by exporting products it knew or had reason to know were ultimately destined for Iran, editing its destination control statement at the request of its distributor and continuing to conduct business with its distributor after receiving confirmation that the distributor had reexported the company’s products to Iran; (ii) the company’s former CEO and International Sales Manager knew the products were ultimately destined for Iran; and (iii) the company did not have a sanctions compliance program at the time of the apparent violations. OFAC considered the following as mitigating factors when determining the settlement amount: (i) limited harm was inflicted on U.S. sanctions program objectives because OFAC likely would have granted the company a license to export the medical products to Iran, had the company sought permission to do so; (ii) the company had no prior OFAC sanctions history; (iii) the company took remedial steps, such as establishing an OFAC compliance program; and (iv) the company “cooperated with OFAC’s investigation and agreed to toll the statute of limitations for a total of 513 days.”

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Massachusetts-based Imaging Company and Danish Subsidiary Settle FCPA Charges with the SEC and DOJ

On June 21, the SEC and DOJ announced a nearly $15 million settlement with a Massachusetts-based imaging company and its wholly-owned Danish subsidiary to resolve parallel civil and criminal actions involving FCPA violations. The SEC alleged that, from at least 2001 through early 2011, the subsidiary paid about $20 million to third parties in hundreds of sham transactions with distributors in Russia and shell companies in Belize, the British Virgin Islands, Cyprus, and Seychelles. The sham transactions involved fictitious inflated invoices to the distributors with the over-payments going to third parties identified by the distributors. The subsidiary did not have a relationship with the third parties and did not know if the payments had any business purpose for the distributors.

The settlement is consistent with the settlement offer that the imaging company disclosed last December, and it reflects the company’s agreement to pay $7.67 million in disgorgement and $3.8 million in prejudgment interest to resolve the SEC’s books and records and internal controls charges, and the subsidiary’s agreement to pay $3.4 million in criminal fines in a non-prosecution agreement with the DOJ. The subsidiary’s former CFO also settled with the SEC, agreeing to pay a $20,000 penalty to settle allegations that he knowingly circumvented internal controls and falsified the subsidiary’s books and records.

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DOJ Determines that Indiana-Based Medical Device Manufacturer Breached FCPA Deferred Prosecution Agreement

On June 6, the DOJ filed a status report with the U.S. District Court for the District of Columbia stating that an Indiana-based medical device manufacturer had violated its 2012 deferred prosecution agreement (DPA) related to FCPA charges. Specifically, the DOJ stated that it notified the medical device manufacturer on April 15, 2016 that “the government had determined that [it] had breached the DPA based on the conduct in Mexico and Brazil and based on [its] failure to implement and maintain a compliance program as required by the DPA.”

The medical device manufacturer had settled FCPA charges with the DOJ and SEC in 2012 related to the company’s conduct in Argentina, Brazil, and China. As previously reported in the FCPA Scorecard, the company’s DPA had been extended twice since 2012: once in March 2015 because the company had discovered additional potential FCPA violations in Brazil and Mexico, and again in March 2016. According to the DOJ, the company and the DOJ are in discussions to resolve the matter without a trial.

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Businessman Pleads Guilty to Foreign Bribery Charges in Connection with Venezuela’s State-Owned Oil Company

On June 16, the DOJ announced that the owner of several U.S.-based energy companies had pleaded guilty to bribery charges related to a scheme to corruptly secure energy contracts from Venezuela’s state-owned oil company. This stems from the previously reported December 2015 charges against the energy companies’ owner and the owner of an oil-field supply company.

According to admissions made by the energy companies’ owner, he worked with the oil-field supply company’s owner to submit bids for equipment and services to Venezuela’s state-owned oil company. Beginning in 2009, the two individuals agreed to pay bribes to purchasing analysts of the state-owned oil company to ensure that their companies were placed on the state-owned oil company’s bidding panels, which enabled the companies to secure lucrative energy contracts. The energy companies’ owner also admitted to making bribe payments to other officials of the state-owned oil company to ensure that his companies were placed on vendor lists approved by the state-owned oil company and given payment priority over other vendors with outstanding invoices. Previous FCPA Scorecard coverage on these investigations can be found here.

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OFAC Updates Iran-Related FAQs

On June 8, OFAC updated its Frequently Asked Questions (FAQs) Relating to the Lifting of Certain U.S. Sanctions Under the Joint Comprehensive Plan of Action (JCPOA). In addition to adding nine FAQs related to Foreign Entities Owned or Controlled by U.S. Persons (see, K.14 through K.22), OFAC added two FAQs, C.15 and C.16, regarding Financial and Banking Measures. Specifically, C.15 clarifies that U.S. financial institutions “can transact with, including by opening or maintaining correspondent accounts for, non-U.S., non-Iranian financial institutions that maintain correspondent banking relationships or otherwise transact with Iranian financial institutions that are not on the SDN List.” Non-U.S. financial institutions remain prohibited from routing Iran-related transactions through U.S. financial institutions or involve U.S. persons in such transactions, unless the transactions are exempt from regulation or licensed by OFAC. FAQ C.16 addresses whether or not a non-U.S., non-Iranian entity may engage in transactions with Iranian persons not on the SDN List if one or more U.S. persons serve on the non-Iranian entity’s Board of Directors or senior managers. While the presence of one or more U.S. persons on the Board of Directors or serving as a senior manager does not, according to C.16, necessarily preclude the entity from transacting with Iranian persons not on the SDN List, OFAC stresses that “U.S. persons must be walled off or “ring-fenced” from Iran-related business.”  OFAC recommended that non-U.S., non-Iranian entities consider implementing broad recusal policies to wall off U.S. persons for the institution’s Iran-related business.

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