Top 10 International Anti-Corruption Developments for March 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: How has the COVID-19 Pandemic impacted anti-corruption enforcement? What did the Organization for Economic Cooperation and Development’s (OECD) Working Group on Bribery have to say about Costa Rica’s foreign bribery enforcement record? What are the latest developments in investigations involving alleged bribery at the national oil companies of Angola, Ecuador, Mexico, and Venezuela? The answers to these questions and more are here in our March 2020 Top 10.

1. COVID-19 Pandemic Impacts Anti-Corruption Enforcement. The main story in March 2020 was, of course, the COVID-19 outbreak. As with all other aspects of life, COVID-19 has dramatically affected anti-corruption enforcement. In the UK, for example, the London criminal trial of former Unaoil executives has been adjourned following the nationwide COVID-19 lockdown. In the United States, the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) announced that they would continue operating effectively during the outbreak, despite court closures and travel restrictions across the country. COVID-19 has had a specific impact on a number of cases in the United States. For example, the sentencing of former Siemens Argentina executive Andres Truppel following his September 2015 guilty plea to conspiring to violate the FCPA and wire fraud statute was accelerated by several weeks to March 13, 2020, after the court was notified that, due to COVID-19 related travel restrictions, Truppel’s last chance to return to Argentina was March 15, 2020.[1] Truppel was sentenced to time served and allowed to depart the United States. On March 30, 2020, Jose Maria Marin, the former president of the Brazilian Football Confederation who was convicted in December 2017 in connection with the FIFA corruption scandal, was granted early release due to COVID-19 concerns and his medical history and advanced age (87 years old). In countries such as South Africa, watchdog groups expressed concern that endemic corruption in policing, health care, and other services would compromise the government’s ability to respond effectively to COVID-19. Looking ahead, as remote work taxes companies’ ability to monitor their employees’ compliance with anti-bribery policies and as sales people face increased pressure to hit their numbers in a stalled economy, COVID-19 could lead to future foreign bribery enforcement actions. (See our COVID-19 Resource Center for more on how to plan for and respond to risks associated with the outbreak as it continues to evolve.)

2. Former Power Company Executive Sentenced for Bribery-Related Money Laundering Conviction, DOJ Appeals Dismissal of FCPA Counts. On March 6, 2020, DOJ announced that former Alstom executive Lawrence Hoskins had been sentenced to 15 months’ imprisonment following his November 2019 conviction on money laundering charges related to a scheme to bribe Indonesian officials to secure a power plant project for an Alstom subsidiary in Connecticut. In February 2020, the presiding judge granted Hoskins’ post-trial motion for acquittal on related FCPA charges, finding insufficient evidence for a jury to conclude that Hoskins was an agent of the Connecticut subsidiary. As we discussed in our March 2020 client alert, that ruling is indicative of the uphill battle that DOJ may face in bringing FCPA charges based on “agency” theory, which is an inherently fact-intensive inquiry. On March 9, 2020, DOJ filed a notice of appeal of that ruling, suggesting that it is not yet ready to concede the issue.[2]

3. DOJ Moves to Dismiss Charges against Israeli Pharmaceutical Company Following Completion of DPA. On March 4, 2020, DOJ moved to dismiss charges filed against Teva Pharmaceutical in connection with its December 2016 Deferred Prosecution Agreement (DPA) related to alleged bribery in Mexico, Ukraine, and Russia.[3] As part of its resolution, the company paid over $500 million dollars and agreed to retain an independent compliance monitor for the three-year term of the DPA, which expired on January 31, 2020. According to the motion, both DOJ and the independent compliance monitor determined that the company had met all of its obligations under the DPA. (The company separately resolved charges with Israel’s Justice Ministry for the same conduct in January 2018.)

4. Ecuador’s National Oil Company Again Fails in Bid to Be Recognized as Victim of Bribery Scheme. In September 2019, a United States Magistrate Judge in the Southern District of Florida rejected a motion by Ecuador’s national oil company, EP PetroEcuador, to be recognized as the victim of an alleged bribery and money-laundering scheme entitled to restitution under the Mandatory Victims Restitution Act (MVRA). The court found that “the level of ‘pervasive, constant, and consistent illegal conduct’. . . among EP Petroecuador’s principals was sufficient to preclude EP Petroecuador from being recognized as a victim under the MVRA.” On March 3, 2020, PetroEcuador lost another bid to be recognized as a victim under the MVRA when Southern District of Florida Judge Rodney Smith found that PetroEcuador was not directly harmed by the laundering of bribes paid to its officials and that, “given the evidence that PetroEcuador was complicit in the underlying activity at issue . . . PetroEcuador’s participation as a conspirator precludes it from attaining victim status.”[4] PetroEcuador’s latest unsuccessful motion was made in connection with the February 2020 sentencing of convicted money-launderer Jose Melquiades Cisneros Alarcón.

5. Judge Orders New Trial in Haitian Bribery Case. On March 11, 2020, District of Massachusetts Judge Allison D. Burroughs granted motions for a new trial filed by Joseph Baptiste and Richard Boncy following their June 2019 convictions on FCPA and other charges related to allegations that they bribed senior Haitian government officials in exchange for approval of a port development project. Judge Burroughs determined that Baptiste’s attorney was constitutionally ineffective because he failed to investigate possible defenses, did not cross-examine most of the government’s witnesses, and did not review all of the discovery produced by prosecutors. Judge Burroughs further found that the performance of Baptiste’s attorney was so poor that it justified a new trial for Boncy as well, because of the additional workload put on his counsel. A new trial date has not yet been set.

6. Current and Former Venezuelan Officials Charged with Corruption Offenses in the United States. On March 26, 2020, DOJ announced charges brought in several U.S. district courts against Venezuelan president Nicolas Maduro Moros and 14 current and former Venezuelan officials on a broad range of charges, ranging from narco-terrorism to FCPA violations. Maduro and several co-defendants were charged in the Southern District of New York with narco-terrorism, drug, and weapons offenses related to allegations that they corrupted Venezuelan governmental institutions in order to facilitate the importation of tons of cocaine into the United States. Among the other corruption cases described in the DOJ press release were the following:

• Maikel Jose Moreno Perez, current Chief Justice of the Venezuelan Supreme Court, was charged in the Southern District of Florida with money laundering in connection with the alleged corrupt receipt or intended receipt of tens of millions of dollars and bribes to illegally fix dozens of civil and criminal cases in Venezuela;
• Luis Motta Dominguez, former Venezuelan Minister of Energy, was charged in the Southern District of Florida for allegedly laundering the proceeds of FCPA violations in connection with bribes paid to award business from state-owned electricity company Corpoelec to U.S.-based companies (for more on the Corpoelec case, see our June 2019, September 2019, and October 2019 Top 10s); and
• Nervis Gerardo Villalobos Cardenes, former Venezuelan Vice Minister of Energy, was charged in the Southern District of Texas with money laundering and FCPA charges for his alleged role in a scheme involving bribes paid by the owners of U.S.-based companies to Venezuelan government officials to corruptly secure energy contracts and payment priority on outstanding invoices (for more on the Villalobos case, see our February 2018 Top 10).  

7. Appellate Updates. In March 2020, there were developments in the appeals of two FCPA convictions and in a case that has the ability to impact civil FCPA enforcement.

• Federal Appellate Court Hears Oral Argument in African Bribery Case. On March 11, 2020, the U.S. Court of Appeals for the Second Circuit heard oral arguments in Chi Ping Patrick Ho’s appeal of his December 2018 conviction on FCPA and money laundering charges relating to bribery of officials in Chad and Uganda. On appeal, Ho argued that his convictions for violating the FCPA both while acting on behalf of a domestic concern (in violation of 15 U.S.C. § 78dd-2) and as a foreign national acting while in the territory of the United States (in violation of 15 U.S.C. § 78dd-3) were mutually exclusive and that the provisions were intended to apply to different categories of individuals.  
• Macao Billionaire Seeks Supreme Court Review of FCPA Conviction. On March 16, 2020, Ng Lap Seng filed a petition for a writ of certiorari with the U.S. Supreme Court, seeking review of his July 2017 conviction on FCPA and other charges in connection with a scheme to bribe United Nations officials to help him build a conference center in Macao. In August 2019, the U.S. Court of Appeals for the Second Circuit denied Ng’s appeal and rejected his argument that the FCPA is limited to prohibiting bribes that are paid in exchange for “official acts,” as established by the Supreme Court for domestic bribery cases in McDonnell v. United States.
• Supreme Court Hears Argument on SEC’s Ability to Seek Disgorgement. On March 3, 2020, the Supreme Court heard oral argument in Liu v. SEC, which involves a challenge to the SEC’s ability to obtain disgorgement in civil injunctive actions filed in federal court. In many ways, Liu is a sequel to the Court’s June 2017 decision in Kokesh v. SEC, which held that disgorgement operates as a “penalty” and is therefore subject to the 5-year statute of limitations for such claims. In a footnote, the Kokesh Court cautioned that its decision should not “be interpreted as an opinion on whether courts possess authority to order disgorgement in SEC enforcement proceedings.” Liu saw this as an opening to challenge a district court order requiring him to disgorge all proceeds raised in a securities filing for violating Section 17(a)(2) of the Securities Act of 1933. In affirming the district court’s disgorgement order, the U.S. Court of Appeals for the Ninth Circuit followed pre-Kokesh authority, noting that the Court had expressly declined in Kokesh to address whether courts’ equitable authority in SEC matters includes the power to award disgorgement. Liu thus provides the Court with the opportunity to define precisely when, and under what circumstances, SEC may seek disgorgement in an enforcement action. Given the prevalence of disgorgement orders in FCPA cases, this case, much like Kokesh before it, has the potential to dramatically impact civil FCPA enforcement. A decision is expected by late June 2020. (For more on Liu, see our prior client alert.)

8. Stanley Sporkin, Key Player in the Development of the FCPA, Dies. On March 23, 2020, Stanley Sporkin, head of enforcement at SEC in the 1970s, died at the age of 88. While at SEC, Sporkin successfully lobbied Congress to pass the FCPA’s accounting provisions in 1977 and played a significant role in bringing some of SEC’s first enforcement actions under the statute. Sporkin later served as the Central Intelligence Agency’s General Counsel and as a federal district judge in Washington, D.C.

9. OECD Expresses Concern over Costa Rica’s Foreign Bribery Enforcement Record. On March 11, 2020, the OECD Working Group on Bribery released its Phase 2 evaluation of Costa Rica’s Implementation of the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (the “Anti-Bribery Convention”). The OECD credited Costa Rica for recently introducing corporate criminal liability but stated that “loopholes in the definition of the foreign bribery offence and its enforcement raise significant concerns.” According to the Working Group, Costa Rica’s foreign bribery offense does not address some of the most common means of committing foreign bribery, provides a defense if the public official solicited the bribe, and contains an “onerous intent requirement” that could hinder its enforcement. The Working Group also found that foreign bribery enforcement was under-resourced and under-prioritized in Costa Rica.

10. Update on Mexico and Angola Investigations.

• Mexico Requests Extradition of Former Pemex Official, May Ramp Up Other Corruption Investigations. In February 2020, Emilio Lozoya Austin, the former Chief Executive of Mexico’s national oil company, Petroleos Mexicanos (Pemex), was arrested in Spain on Mexican tax fraud and bribery charges. On March 24, 2020, it was reported that Mexico had formally requested that Spain extradite Lozoya to stand trial on those charges. Earlier in the month, it was reported that a large majority of respondents polled in a national survey favored opening a corruption probe against Lozoya’s former boss, former Mexican president Enrique Peña Nieto. And on March 25, 2020, current Mexican president Andrés Manuel Lopez Obrador alleged that a U.S. beer producer may have paid bribes to secure permits for a brewery project in the border city of Mexicali. Some observers have suggested that Lopez Obrador, who ran on an anti-corruption platform, may be ramping up corruption investigations in an effort to shore up his flagging popularity.
• Portugal Freezes Assets of Africa’s Richest Woman. On March 13, 2020, Portuguese judge Carlos Alexandre reportedly ordered the seizure of all assets of Isabel dos Santos, the daughter of Angola’s former president and reputedly Africa’s richest woman, in Portugal. While an earlier order had frozen all of dos Santos’s bank accounts in Portugal, the new order appears to extend to her properties and business interests in Portugal, including investments in banks, media, telecoms, energy, and engineering companies. In January 2020, Angola’s top prosecutor announced that dos Santos had been formally charged with a number of offenses related to her tenure as chairwoman of Angola’s national oil company, Sonangol, and called on Portugal for assistance.

[1] United States v. Truppel, Case No. 1:11-cr-01056-DLC, ECF No. 67 (S.D.N.Y. Mar. 12, 2020).

[2] United States v. Hoskins, Case No. 3:12-cr-00238-JBA, ECF No. 622 (D. Conn. Mar. 9, 2020).

[3] United States v. Teva Pharmaceutical Industries Ltd., Case No. 1:16-cr-20986-FAM, ECF No. 15 (S.D. Fla. Mar. 4, 2020).

[4] United States v. Alarcon, Case No. 1:19-20284-RS, ECF No. 103 (S.D. Fla. Mar. 3, 2020).