Top 10 International Anti-Corruption Developments for February 2020

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: What did several federal courts have to say about the elements of a Foreign Corrupt Practices Act (FCPA) violation? What was the latest development in Mexico’s growing investigation into alleged bribery at its national oil company? Why was February a busy month for foreign bribery enforcement in Switzerland? The answers to these questions and more are here in our February 2020 Top 10.

1. Federal Judge Overturns FCPA Conviction Related to Indonesia Bribery Scheme. On February 26, 2020, District of Connecticut Judge Janet Bond Arterton granted former Alstom executive Lawrence Hoskins’ post-trial motion for acquittal of FCPA charges.[1] In November 2019, a federal jury convicted Hoskins of FCPA and money laundering charges for his role in a scheme to bribe Indonesian officials to secure a power plant project for an Alstom subsidiary in Connecticut. In August 2018, the U.S. Court of Appeals for the Second Circuit held that the U.S. Department of Justice (DOJ) would have to prove at trial that Hoskins, a non-U.S. person working for a non-U.S. subsidiary of a non-U.S. company who did not set foot in the United States during the scheme, was an “agent” of a domestic concern in order to win an FCPA conviction. As discussed in our April 2019 Top 10, the definition of “agent” under the FCPA became a key pre-trial issue as the parties wrangled over the jury instructions.  That issue was also key post-trial. Judge Arterton acknowledged that a rational jury could conclude that the Connecticut subsidiary both (1) controlled the hiring of consultants for the power plant project and (2) gave Hoskins instructions, which he followed. The court found, however, that this evidence was insufficient to establish that Hoskins was an agent of the Connecticut subsidiary. According to the court, the subsidiary only generally controlled the hiring of consultants for the project and did not have the right or ability to exercise “interim control” over Hoskins’s actions. The court also noted a lack of any of the “indicia of control which are typical of an agency relationship,” such as a principal’s capacity to assess the agent’s performance, provide instructions to the agent, or terminate the agency relationship by revoking the agent’s authority. Judge Arterton denied Hoskins’ motion for acquittal on money laundering charges. The acquittal on the FCPA charges could affect DOJ’s willingness to pursue “agency-based” theories of prosecution in other FCPA cases. For more on the Hoskins decision, see our client alert.

2. Additional FCPA Charges in Indonesia Bribery Scheme Unsealed. On February 18, 2020, DOJ announced the unsealing of a superseding indictment of two former executives of an Indonesian subsidiary of Alstom S.A. and a former executive of Marubeni Corporation for their alleged participation in the same alleged bribery scheme for which Lawrence Hoskins was charged (see No. 1 above). Reza Moenaf and Eko Sulianto, respectively the ex-president and former director of sales of Alstom’s subsidiary in Indonesia, were each charged with one count of conspiracy to violate the FCPA, two counts of violating the FCPA, and one count of money laundering. Junji Kusunoki, the former deputy general of Marubeni’s Overseas Power Project Department, was charged with one count of conspiracy to violate the FCPA, six counts of violating the FCPA, and four counts of money laundering. The indictment was originally returned by a federal grand jury sitting in the District of Connecticut in 2013 and was superseded in 2015. DOJ did not explain in its press release why the superseding indictment was unsealed in February 2020.    

3. Ohio-based Pharmaceutical Company Resolves China Allegations with SEC. On February 28, 2020, the United States Securities and Exchange Commission (SEC) announced that Cardinal Health, Inc. had agreed to pay more than $8 million in combined disgorgement, prejudgment interest, and civil penalties to resolve allegations that it violated the FCPA’s accounting provisions. According to the SEC order, between 2010 and 2016, the company’s internal accounting controls failed to detect improper payments made by employees of its former Chinese subsidiary to government-employed healthcare professionals and employees of state-owned retail companies who had influence over purchasing decisions. The SEC order also alleged that the company failed to maintain complete and accurate books and records concerning the marketing accounts used for these payments. The company neither admitted nor denied the SEC’s findings.

4. Federal Judge Upholds Fraud Conviction Related to Russia Bribery Scheme. On February 11, 2020, District of Maryland Judge Theodore Chuang denied Mark Lambert’s motion for acquittal following his November 2019 conviction on wire fraud charges related to an alleged scheme to bribe Vadim Mikerin, an official at a subsidiary of Russia’s State Atomic Energy Corporation (TENEX).[2] TENEX was the sole supplier and exporter of Russian uranium and uranium enrichment services to nuclear power companies worldwide. Lambert allegedly bribed Mikerin to secure contracts between TENEX and his company, Transport Logistics International (TLI), which provides services for the transportation of nuclear materials. In his motion, Lambert argued that the trial evidence was insufficient to establish that he made material, false representations or omissions to TENEX because he was under no obligation to disclose the fact that TLI’s contract quotes included a sum of money to pay a bribe or kickback to Mikerin or that TENEX would have rejected TLI’s offers had it known of such payments. Relying heavily on trial testimony by alleged co-conspirator Daren Condrey, whose guilty plea to related charges was announced in August 2015, the court found that there was sufficient evidence that Lambert had actively concealed the bribe payments from TENEX to sustain the convictions. Lambert was also convicted of FCPA violations, which were not the subject of his motion.

5. Federal Judge Holds that Multiple Emails Can Be Charged as Separate FCPA Violations. On February 14, 2020, District of New Jersey Judge Kevin McNulty denied a former technology executive’s motion to dismiss three FCPA counts as multiplicitous.[3] According to the indictment, the defendant sent three emails in furtherance of a scheme to bribe Indian officials to secure a required construction permit. In his motion to dismiss, the defendant contended that the essence of an FCPA violation is the payment, offer, promise, or authorization of payment to a foreign official and, therefore, the three emails should have been charged as one FCPA violation, rather than three separate violations. In a case of first impression, the court denied the motion.  Drawing on analogies to the wire and mail fraud statutes and the Travel Act, the court held that the operative language of the FCPA supported an interpretation that each interstate email sent in furtherance of a foreign bribery scheme is a unit of prosecution.

6. Connecticut-based Industrial Conglomerate Discloses DOJ and SEC Declinations. In a February 6, 2020 securities filing, United Technologies Corporation (UTC) disclosed that DOJ and SEC had notified the company that they had closed their investigations into meal, entertainment, and gift expenditures, as well as a potential conflict of interest involving a third party sales agent in China. According to the filing, the investigation focused on the activities of a predecessor aerospace company that were discovered during a post-acquisition review by a company that UTC acquired in November 2018. In September 2018, UTC resolved separate FCPA allegations with SEC.

7. Venezuelan Citizen Charged and Pleads Guilty in Connection with Venezuela Bribery Scheme. On February 7, 2020, Tulio Anibal Farias-Perez was indicted in the Southern District of Texas on one count of conspiracy to violate the FCPA. According to the indictment, Farias was a 50% partner in several closely held companies that he controlled together with Jose Manuel Gonzalez Testino. Farias and Gonzalez allegedly paid bribes—including cash and Super Bowl tickets—to officials of Venezuela’s national oil company, Petroleos de Venezuela S.A.  (PDVSA) to win PDVSA supply contracts, obtain bidding information, and receive priority over other vendors in getting paid. Farias pleaded guilty on February 19, 2020. Gonzalez, who was arrested in August 2018, pleaded guilty to related charges in May 2019.

8. Florida Man Sentenced for Laundering Ecuadorian Oil Bribes. On February 19, 2020, Southern District of Florida Judge Rodney Smith sentenced Jose Melquiades Cisneros Alarcón to 20 months’ imprisonment for conspiring to launder approximately $4.4 million in bribes paid to officials of Ecuador’s national oil company, PetroEcuador.[4] According to DOJ, Cisneros and a co-defendant, Armengol Alfonso Cevallos Diaz, created a shell company for the benefit of PetroEcuador official Marcelo Reyes Lopez, transferred bribery proceeds into the shell company’s bank account, and used the proceeds to purchase several Miami-area properties for Reyes and another senior PetroEcuador official.[5] Cisneros was originally charged with 11 counts, including one count of conspiracy to violate the FCPA, but ultimately pleaded guilty to one count of conspiracy to commit money laundering in August 2019. Reyes pleaded guilty to related charges in April 2018.

9. Pemex Investigation Expands.  In our May 2019 and October 2019 Top 10s, we discussed several developments suggesting that Mexico and its state oil company Petróleos Mexicanos (Pemex), “could join Brazil as a major source of anti-corruption investigations and prosecutions in Latin America in the years to come.” In February 2020, there were more indications of this potential development. On February 12, 2020, Emilio Lozoya Austin, Pemex’s former Chief Executive, was arrested in Spain on Mexican tax fraud and bribery charges. Spain’s high court ordered Lozoya to be detained pending an extradition request from Mexico. Later in February 2020, it was reported that former Mexican President Enrique Peña Nieto was also a subject of the investigation. Lozoya allegedly accepted $10 million in bribes from the former executive of a Brazilian construction company while he served as an official in Peña Nieto’s 2012 presidential campaign. This investigation continues to be an important one to watch, especially for companies who did business with Pemex during Peña Nieto’s presidency.

10. Switzerland Active in February. Switzerland has long been one of the more active jurisdictions for foreign bribery enforcement. In February 2020, the country took several steps to reinforce that status. On February 20, 2020, Swiss prosecutors charged former Fédération Internationale de Football Association (FIFA) Secretary General Jerome Valcke, Paris Saint Germain president Nasser Al-Khelaifi, and a third business executive in connection with an alleged scheme to bribe Valcke to direct media rights for important football events to certain media partners. (See our May 2015, November 2017, and February 2018 Top 10s for more on the FIFA investigation.) On February 26, 2020, a Swiss court convicted Bernardo Schiller Freiburghas, a Swiss-Brazilian dual national, of complicity in bribery and money laundering involving $35 million in payments made between 2007 and 2014 to employees of Brazil’s national oil company, Petróleo Brasileiro S.A. (Petrobras). This is reportedly the first Swiss conviction related to Operation Lava Jato (Car Wash). (See our May 2015, May 2016, March 2017, September 2018, and October 2019 Top 10s for some of our prior discussions of Operation Car Wash.) And on February 20, 2020, the Swiss Financial Market Supervisory Authority (FINMA) reprimanded Swiss bank Julius Baer for allegedly ignoring money laundering risks in handling millions of francs of suspect payments linked to corruption in Venezuela and at FIFA. (See our September 2018 Top 10 for a similar action by FINMA.)

[1] Ruling on Def.’s Rule 29(c) and Rule 33 Mots., No. 3:12-cr-238-JBA (D. Conn. Feb. 26, 2020), ECF No. 617.

[2] Memorandum Order, No. 8:18-cr-0012-TDC (D. Md. Feb. 11, 2020), ECF No. 192.

[3] Memorandum and Order, No. 2:19-cr-120-KM (D.N.J. Feb. 14, 2020), ECF No. 74.

[4] Judgment in a Criminal Case, No. 1:19-cr-20284-RS (S.D. Fla. Feb. 19, 2020), ECF No. 95.

[5] Position of the United States on Sentencing and Objections and Clarifications to Presentence Investigation Report, No. 1:19-cr-20284-RS (S.D. Fla. Oct. 17, 2019), ECF No. 60.