Four Individuals Face FCPA Charges Related to Vietnam Project

On January 10, the DOJ announced the unsealing of an indictment charging four individuals, including the nephew and brother of former UN Secretary-General with violations of the FCPA and other offenses in connection with the attempted $800 million sale of a commercial building known as Landmark 72 in Hanoi, Vietnam. According to the government, the brother and nephew conspired to bribe a governmental official of an unnamed Middle Eastern country to get his country to purchase the building from a Korea-based company, where the brother was then a senior executive. To facilitate the sale of Landmark 72, the Korea-based company hired the nephew to secure an investor for the deal.

According to the allegations, the brother and nephew agreed to pay the foreign official $500,000 initially, and $2 million upon completion of the sale, through the co-defendant, who had falsely held himself out as an agent of the foreign official; the fourth individual allegedly assisted in obtaining the initial $500,000. In a twist, according to the DOJ, the co-defendant then stole the money and used it for personal expenses instead of paying any bribes. After the Landmark 72 deal failed to go through, the nephew allegedly lied and provided forged emails from the foreign official and other documents to the Korea-based company regarding the status of the deal and stole approximately $225,000 that was advanced by the Korea-based company to cover brokerage expenses.

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Four Businessmen and Two Mexican Government Officials Plead Guilty in Aircraft Maintenance Bribery Scheme

On December 27, the DOJ announced the unsealing of charges against four businessmen and two Mexican officials involved in a scheme to secure aircraft maintenance and repair contracts with Mexican government-owned companies. The four businessmen all pleaded guilty to conspiracy to violate the FCPA, with two of the businessmen separately pleading guilty to conspiracy to commit wire fraud. Additionally, both former officials with Mexican state-owned companies each pleaded guilty to one count of conspiracy to commit money laundering.

According to the DOJ, the defendants admitted that between 2006 and 2016, millions of dollars were paid to numerous Mexican government officials to secure aircraft parts and servicing contracts with Mexican government-owned companies. The defendants also admitted to laundering the proceeds of the bribery scheme. In total, the four businessmen paid more than $2 million in bribes to Mexican officials, including the two former officials.

One of the former officials was sentenced in May to 15 months in prison; the remaining defendants have yet to be sentenced.

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Manufacturing Company Agrees to NPA, Will Pay More than $75 Million

On December 29, a Kentucky-based manufacturer and distributor of cable and wire, entered into a non-prosecution agreement with the DOJ regarding improper payments to government officials in Angola, Bangladesh, China, Indonesia, and Thailand. The company agreed to pay the DOJ a $20.5 million criminal penalty. The company simultaneously resolved an investigation by the SEC over the same conduct, and agreed to disgorge approximately $55.3 million, along with a $6.5 million penalty regarding accounting violations at its Brazilian subsidiary.

According to the DOJ, beginning in 2002, the company’s employees became aware that the company’s foreign subsidiaries were using third party agents and distributors to make corrupt payments to foreign officials in various countries to secure business. In 2011, employees from the company’s subsidiary expressed concerns to regional and parent-level executives that commission payments were being used for improper purposes but the company failed to investigate the payments or implement a system of internal controls to detect and prevent the abuse. In total, the subsidiaries paid approximately $13 million to third party agents and distributors from 2002 to 2013, a portion of which was used to make unlawful payments to foreign government officials. According to the DOJ, the payments and resulting contracts netted the company more than $51 million in profits on sales to state-owned enterprises around the world. The SEC separately found that due to weak internal controls, the company failed to detect improper inventory accounting at its Brazilian subsidiary, causing the company to materially misstate its financial statements from 2008 to the second quarter of 2012.

Simultaneous with its resolution with the company, SEC also resolved charges against the company’s then-senior vice president and the individual responsible for sales in Angola. The former senior vice president agreed to pay the SEC a $20,000 penalty without admitting or denying that he knowingly circumvented internal accounting controls and caused FCPA violations when he approved over $340,000 in payments to an agent in Angola. The SEC separately noted that while the company’s former CEO and CFO had now returned millions of dollars in compensation they had received during the period of the violations, the SEC had found no personal misconduct by either former officer.

The company’s $20.5 million criminal penalty represented a 50 percent reduction off the bottom of the U.S. Sentencing Guidelines fine range based on the DOJ’s conclusion that the company “voluntarily and timely disclosed the conduct at issue, fully cooperated in the investigation and fully remediated. The benefits the company received from the DOJ are similar to those companies can receive for participating in the Fraud Section’s FCPA Pilot Program for the self-reporting of FCPA violations. Prior coverage of the Fraud Section’s FCPA Pilot Program can be found here.

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Israeli Multinational Pharmaceutical Company Settles FCPA Violations with SEC and DOJ for $519 Million

On December 22, an Israeli multinational pharmaceutical company announced an agreement with the SEC and DOJ to resolve FCPA violations stemming from conduct in Ukraine, Mexico, and Russia, with a $519 million settlement and a deferred prosecution agreement. The company will pay more than $236 million in disgorgement and interest to the SEC, the second largest FCPA-related corporate disgorgement to date. As part of its agreement with the DOJ, the company will pay a $283 million criminal fine and enter into a three-year deferred prosecution agreement under the supervision of an independent compliance monitor.

Prior Scorecard coverage of the company’s investigation can be found here.

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Brazilian Construction Company and Petrochemical Company Reach $3.5 Billion Global FCPA Settlement

On December 21, a Brazilian construction company and its petrochemical affiliate, reached a $3.5 billion combined global settlement with U.S., Brazilian, and Swiss authorities to resolve FCPA allegations, in which both companies agreed to plead guilty in the U.S. to conspiracy to violate the FCPA. The DOJ alleged that the companies operated an extremely broad and profitable global bribery scheme, including creating an internal bribery department to systematically pay hundreds of millions of dollars to corrupt government officials around the world from 2001 to 2016. The companies attempted to conceal the bribes by disguising the source and disbursement of bribe payments by passing funds through a series of shell companies and by using off-shore bank accounts. While the scheme in large part involved bribes paid to a Brazilian multinational company and Brazilian officials, it also included government officials in numerous other South and Central American countries, and in Africa.

The construction company agreed to an overall criminal fine of $4.5 billion, but based on its representation of its ability to pay, may end up paying only $2.6 billion. Ten percent of the criminal fine was earmarked for the U.S., with the remainder to Brazil (80%) and Switzerland (10%). The DOJ faulted the construction company for failing to voluntarily disclose the conduct, but granted full cooperation credit based on Odebrecht’s actions once it started to deal with the government. As part of its own related resolution, the petrochemical company agreed to pay over $632 million in criminal fines, with the vast majority ($443 million) going to Brazil, and 15%, or $94.8 million, to each of the DOJ and Switzerland. The petrochemical company also agreed to disgorge $325 million, with $65 million going to the SEC and the rest to Brazil. The DOJ noted the petrochemical company’s failure to voluntarily disclose the conduct, and granted only partial cooperation credit due to the petrochemical company’s failure to turn over any evidence from its internal investigation until seven months after it first talked to the DOJ. Both the construction company and the petrochemical company agreed to engage independent compliance monitors for at least three years

The resolution is, by far, the largest FCPA resolution ever, with the bulk of the money going to Brazil in apparent recognition of the heavy lifting done by Brazilian prosecutors.

Prior Scorecard coverage of the ongoing Brazilian multinational company investigations can be found here.

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