SEC Opens FIFA-Related Investigations

Although not yet confirmed by the SEC, media reports suggest that the SEC has opened several investigations of publicly traded companies who contracted with FIFA. Indictments in the FIFA cases have alleged that certain companies paid kickbacks to officials of FIFA and related organizations in order to win marketing and apparel contracts. The specific companies targeted in the SEC’s new probe have not yet been named. Without the apparent involvement of a foreign official in the FIFA cases, presumably the SEC will be focusing on the books and records and internal controls provisions of the FCPA, along with other potential violations.

Previous BuckleySandler coverage of this investigation can be found here.

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FIFA Investigation Update: First FIFA Official Extradited to United States

On July 15, after 50 days of detention, a high-ranking FIFA official widely reported to be former FIFA Vice President Jeffrey Webb was extradited from Switzerland to the United States. Webb ultimately agreed to be extradited despite initially contesting his extradition at a hearing following his arrest. Six other FIFA officials arrested in connection with DOJ’S corruption investigation are continuing to fight extradition. The Swiss Federal Office of Justice is overseeing the extradition proceedings.

All seven officials were formally indicted by the DOJ on May 27.

Previous BuckleySandler coverage of this investigation can be found here

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POSTED IN: International, Miscellany

LBI Enters Into DPA and Former Executives Plead Guilty to Resolve DOJ FCPA Investigation

On July 17, the DOJ announced that Louis Berger International Inc. (“LBI”) had agreed to enter into a Deferred Prosecution Agreement to resolve the DOJ’s FCPA investigation into the New Jersey-based construction management company’s operations in India, Indonesia, Vietnam, and Kuwait.  LBI also agreed to pay a $17.1 criminal penalty.  LBI admitted that it bribed foreign officials to secure government construction management contracts around the world.  According to the company’s admissions regarding a conspiracy to violate the anti-bribery provisions of the FCPA, from 1998 to 2010, LBI concealed $3.9 million in corrupt payments through various methods, including (i) using inflated and fictitious invoices that were used for the payments of bribes through intermediaries, and (ii) paying fictitious “commitment fees,” “counterpart per diems,” “marketing fees,” and “field operation expenses.”

Under the terms of the DPA, the DOJ will defer criminal prosecution of LBI for a period of three years and the company will retain an independent compliance monitor for three years.  In addition, Richard Hirsch of the Philippines and James McClung of the United Arab Emirates, both former executives of LBI, each pleaded guilty to one count of conspiracy to violate the FCPA and one substantive count of violating the FCPA.  They are scheduled to be sentenced on Nov. 5, 2015. Continuing its recent trend, the DOJ emphasized the company’s self-disclosure and cooperation, as well as remediation efforts.

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DOJ Seeks Civil Forfeiture of $34 Million in Bribe Payments Made to Chadian Diplomats by Griffiths Energy

On June 30, the DOJ filed a Complaint to forfeit shares of Griffiths Energy International, a Canadian energy company accused of bribing various Republic of Chad diplomats to receive oil development rights in Chad.  The diplomats include the former Chadian Ambassador to the United States and Canada, and Chad’s Deputy Chief of Mission to the United States.  The assets at issue are currently frozen in the U.K.

The DOJ is seeking roughly $34 million in Griffiths Energy shares, as the cash value amount “traceable to, and involved in the laundering of, bribe payments made to the Chadian diplomats” for the rights to develop oil blocks in Chad. According to the Complaint, the former Ambassador, serving from 2004 to 2012, and the Deputy Chief of Mission, serving from approximately 2007 through the end of 2014, used their official positions to assist Griffiths Energy in securing development rights to oil blocks in Chad. The bribes were allegedly paid in several ways, including through issuance of company shares and payments to companies nominally owned by the wives and associates of the diplomats.  The Complaint highlighted that before the company pursued the shell company avenue, legal counsel had warned the company that a planned consulting agreement directly with the Ambassador was illegal.  This Complaint follows a separate suit by the DOJ in 2014, with sought a “civil forfeiture of over $100,000 in allegedly laundered funds traceable to the $2 million bribe payments.”

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FIFA Investigation Updates: Plea Agreement with American FIFA Official Unsealed

On June 15, the U.S. District Court for the Southern District of New York unsealed a 2013 plea agreement under which American FIFA Executive Committee Member Chuck Blazer secretly pleaded guilty to ten charges related to corruption in the soccer organization. Mr. Blazer agreed to forfeit more than $1.9 million, and to pay back-taxes and penalties on more than $11 million in unreported income.

According to the plea agreement, Mr. Blazer began cooperating with the DOJ’s investigation in December of 2011, even agreeing to work undercover making secret recordings. The unsealing of the plea agreement is the latest development in the ongoing fallout from the racketeering, wire fraud, and money laundering indictments announced three weeks ago by the DOJ against soccer executives at FIFA and others tied to the organization. Mr. Blazer’s testimony at his plea hearing in November 2013 was unsealed two weeks ago.

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DOJ Reaches Agreement with Government Contracting Company and Former VP over Alleged Bribery

On June 16, the DOJ entered into a non-prosecution agreement with a Florida-based defense and government contracting company to resolve allegations that it conspired to bribe Kuwaiti officials for the purpose of securing a government contract. In connection with his alleged involvement in the bribery scheme, the company’s former vice president (VP) also pleaded guilty to one count of conspiracy to violate anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA). In 2004, Kuwait’s Ministry of the Interior initiated the Kuwait Security Program, a homeland security project intended to “provide nationwide surveillance for several Kuwaiti government agencies, primarily through the use of closed-circuit television cameras.” The program was divided into two phases: (i) the planning and feasibility period; and (ii) the installment of equipment, methods, and programs suggested during the first phase. According to the non-prosecution agreement, the company and its former VP schemed to ensure that the company won both the Phase I and II contracts. Specifically, the company, its former VP, and other senior employees established a shell company to bid on Phase I, giving the company an advantage in the Phase II bidding, which contained the more lucrative revenues. The shell company secured the Phase I contract for approximately $4 million, and half of those funds were allegedly diverted to a consultant who bribed Kuwaiti officials to assist the government contracting company in obtaining the Phase II contract. Admitting to the DOJ Criminal Division’s charges and cooperating with the federal investigation, the company has agreed to (i) pay a $7.1 million penalty; (ii) conduct a review of its current internal controls, policies, and procedures, and make any necessary changes to ensure that its record keeping and anti-corruption compliance program are sufficient; and (iii) report annually to the Criminal Division and the U.S. Attorney’s Office of the Eastern District of Virginia on the remediation and implementation of its compliance program and internal controls, policies, and procedures.

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Net 1 Announces Closure of SEC FCPA Investigation

On June 8, Net 1 UEPS Technologies, Inc., a South Africa-based mobile payments company incorporated in Florida, announced that the SEC had closed a FCPA investigation arising out of a contract with the South African Social Security Agency. The SEC and the DOJ opened parallel investigations in November 2012, and the DOJ investigation remains ongoing. Net 1 has asserted that the investigation was instigated by one of the losing bidders on the contract.

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POSTED IN: Miscellany, Payments

Eletrobras Hires U.S. Law Firm to Conduct FCPA Investigation

On June 10, Eletrobras, Brazil’s state-run power company, announced that it had hired Hogan Lovells to investigate potential violations of the FCPA and other anti-corruption laws and corporate policies. The focus of the investigation will be “projects in which Eletrobras Companies take part in a corporate form or as minority shareholder, through special purpose entities.” According to an earlier Eletrobras filing, the investigation was triggered by testimony taken in conjunction with the Brazilian government’s ongoing investigation of corruption allegations against Petrobras, dubbed “Operation Car Wash.” That testimony alleged that the CEO of an Eletrobras subsidiary received illicit payments from a consortium of companies bidding for the Angra 3 power plant project.

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FIFA Investigation Updates: President Resigns Amidst Corruption Probe; Interpol Issues Red Notices For Six

On June 2, continuing the fallout from the racketeering, wire fraud, and money laundering indictments announced last week by DOJ against soccer executives at FIFA and others tied to the organization, FIFA President Sepp Blatter announced his resignation, less than a week after being re-elected to lead soccer’s governing body.  It has been reported that Mr. Blatter is the focus of the same federal corruption investigation. Blatter’s announcement was a reversal from his remarks after winning re-election, stating then “Why would I step down?  … That would mean I recognize that I did wrong.”

One day after Blatter’s announcement, Interpol issued Red Notices for six individuals linked to the FIFA corruption investigation, including for two former FIFA officials. The two former FIFA executives, Jack Warner, a Trinidad & Tobago national and former FIFA vice president and executive committee member, and Nicolás Leoz, a Paraguayan national and former FIFA executive committee member, have been arrested in their home countries. The other four Red Notices, which alert Interpol’s member nations that arrest warrants have been issued by a judicial authority (here, the United States) and seek the location and arrest of wanted persons with a view to extradition, were issued for four South American nationals and corporate executives.

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Three Acquitted In UK Trial For Alleged Nigerian Corruption

On May 27, a London jury found three employees of Swift Technical Solutions Ltd (Swift) not guilty of corruption charges in connection with alleged corrupt payments to tax officials in Nigeria.  The SFO announced the verdict on June 2.  As to one defendant, the jury was unable to reach a verdict on one count and was discharged; the SFO informed the Southwark Crown Court that it would not seek to retry that defendant on that count and the court entered a verdict of not guilty.

The SFO brought the corruption charges in late 2012 after  a two-year investigation related to the tax affairs of a Swift Nigerian subsidiary. The SFO alleged that the Swift employees paid bribes totaling approximately £180,000 in 2008 and 2009 to Nigerian tax officials to avoid, reduce, or delay paying tax on behalf of workers placed by Swift.  The alleged bribes occurred before the enactment of the U.K. Bribery Act and allegedly went to agents of two Nigerian Boards of Internal Revenue – the Rivers State Board of Internal Revenue and the Lagos State Board of Internal Revenue.  The SFO did not charge Swift with any criminal offense, citing its cooperation with the agency.

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DOJ Indicts 14 In Global FIFA Corruption Crackdown, Announces 6 Guilty Pleas

The DOJ on May 27 unveiled indictments in one of the most sprawling, long-running alleged corruption rings in recent decades, charging nine executives of FIFA or related soccer governing bodies, as well as five sports marketing or broadcast executives, with racketeering, wire fraud, and money laundering.  The defendants were charged with offering and accepting over $150 million in bribes and kickbacks over a 24-year period related to the media and marketing rights for soccer tournaments.  In addition, the DOJ unsealed guilty pleas previously entered by four individual and two corporate defendants.

Seven of the defendants were arrested in Switzerland as a result of U.S. arrest warrants, pending extradition, continuing the trend of international cooperation between U.S. and foreign anti-corruption enforcement agencies.  Continuing a different trend, one of the individuals who pleaded guilty was a former FIFA executive who acted as an informer for the DOJ, including by taping key conversations.

While the indictment mainly concerned media and marketing rights, at least one reference was made to alleged bribes related to voting for World Cup host countries, and the Swiss government announced an inquiry into the awarding of the 2018 and 2022 World Cups.  Additional charges appear likely to be brought in the future, whether by the U.S. or other jurisdictions.  The U.S.’s jurisdiction to bring the charges is also likely to be challenged.

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Oil and Gas Company with Republic of Guinea Operations Announces Conclusion of DOJ Investigation

Houston-based Hyperdynamics Corp. announced in an 8-K filed on May 26 that the DOJ had closed its investigation into alleged FCPA violations by the company in the Republic of Guinea.  A parallel investigation by the SEC remains ongoing.  The DOJ investigation was originally disclosed by the company in 2013, and was stated to relate to concession rights and relationships with charitable organizations.

The investigation and declination raise two notable issues.  First, the investigation into relationships with charitable organizations continues the government’s focus on the potential use of charitable organizations to influence acts of foreign officials.  Second, the declination letter from the DOJ to Hyperdynamics was released by the company and noted its “cooperation with investigations,” including through providing information and the results of the company’s internal investigation to the government, as well as how much the DOJ values cooperation.  Recent speeches by the DOJ have sought to reassure companies that extensive cooperation can theoretically result in a declination.

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Brazilian Aircraft Maker in Negotiations to Resolve FCPA Violations

According to its May 19 securities filing, a Brazilian manufacturer of commercial jets has entered into discussions with the DOJ to resolve an FCPA probe launched by the Department in 2010. The government’s investigation stems from allegations that the manufacturer’s sales executives bribed various Dominican individuals who, in exchange, influenced legislators in the Dominican Republic to approve a $92 million contract and financing agreement for aircraft. In its filing, the company stated that a resolution of the investigation would result in fines and other sanctions by the DOJ. The Brazilian government’s criminal case against the manufacturer’s eight sales executives is ongoing.

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SEC Imposes $25 Million Penalty for FCPA Violations at 2008 Summer Olympics

On May 20, the SEC announced that it had instituted and settled administrative proceedings against a global resources company to resolve alleged FCPA violations during the 2008 Summer Olympics. According to the SEC’s administrative order, the company invited over 175 government officials and employees of state-owned enterprises, many from countries in Africa and Asia with a “well-known history of corruption,” to attend the Games at its expense. Those who accepted were provided with “hospitality packages” that included event tickets, luxury hotel accommodations, meals and, in many cases, business class airfare. Even though the company was aware that providing high-end hospitality packages to government officials created a heightened risk of violating anti-corruption laws, its internal controls were “insufficient” because there was no independent legal or compliance review of the invited guests or enhanced training of employees regarding the corruption risks. Read more…

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SEC Settles with Global Manufacturer over FCPA Violations

On February 24, the SEC announced charges against a global manufacturer for alleged violations of the FCPA involving bribes paid by its African subsidiaries in order to make sales in Kenya and Angola. Over the course of a four-year period, the manufacturer allegedly failed to detect more than $3.2 million in bribes paid in cash to employees of private companies, government-owned entities, and other local authorities, including police or city council officials. According to the SEC Order, the manufacturer maintained “inadequate FCPA compliance controls,” allowing improper payments to be recorded as legitimate business expenses, which violated the books, records, and internal control provisions of the Securities Exchange Act of 1934. Under the terms of the settlement, the manufacturer will pay over $16 million to settle the SEC’s allegations and report its FCPA remediation efforts to the SEC for three years.

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