Top 10 International Anti-Corruption Developments for May 2023

Designed for busy in-house counsel, compliance professionals, and anti-corruption lawyers, this newsletter summarizes some of the most important international anti-corruption law and enforcement developments from the past month, with links to primary resources. This month we ask: Which companies resolved Foreign Corrupt Practices Act (FCPA) allegations with the U.S. Securities and Exchange Commission (SEC)? Why were FCPA charges against individual defendants dismissed in New York and Texas? What are the European Union’s new plans to combat cross-border corruption? The answers to these questions and more are here in our May 2023 Top 10.

1. Dutch Medical Supplier Resolves China Allegations with SEC

On May 11, 2023, SEC announced that Koninklijke Philips N.V. had agreed to pay more than $62 million to resolve allegations that it violated the FCPA’s accounting provisions with respect to conduct related to its sales of medical diagnostic equipment in China. According to the SEC order, the company’s subsidiaries in China allegedly used special price discounts with distributors that created a risk that excessive distributor margins could be used to fund improper payments to officials of public hospitals to influence public tenders. SEC further alleged that the company and its agents engaged in improper bidding practices by preparing bids with other manufacturers’ products to create the appearance of legitimate public tenders and to meet the minimum bids requirement under Chinese public tender laws. The company neither admitted nor denied SEC’s findings. According to the company, the U.S. Department of Justice (DOJ) closed its parallel investigation, apparently without charges.

2. Connecticut-Based Technological Research and Consulting Company Resolves South Africa FCPA Allegations with SEC

On May 26, 2023, SEC announced that Gartner, Inc. had agreed to pay more than $2.4 million to resolve allegations that it violated the FCPA’s anti-bribery and accounting provisions in connection with its engagement of a third party in South Africa. According to the SEC order, Gartner entered a corrupt arrangement with a South African information technology consulting company from December 2014 through August 2015 and knew or consciously disregarded the possibility that the money it paid to the consulting company would be used to bribe government officials to influence the award of consulting contracts to Gartner. SEC alleged that senior officials of the South African Revenue Service (SARS) directed a Gartner manager to retain the consulting company to assist in an assessment of SARS’s information technology systems and that the manager justified the retention as necessary to meet the requirements of South Africa’s Broad-Based Black Economic Empowerment legislation. The order further found that, during the relevant time period, Gartner failed to make and keep accurate books and records regarding payments made to third parties in connection with the scheme and that its policy for hiring third-party consultants did not adequately address its anti-corruption risks. Gartner agreed to pay disgorgement and prejudgment interest totaling approximately $850,000 and a civil penalty of $1.6 million. Gartner neither admitted nor denied SEC’s findings. It is unclear whether DOJ will proceed with a parallel resolution, although that seems rather unlikely given the lack of a simultaneous announcement.

3. FCPA Counts Against Former Oil Trader Dismissed for Improper Venue

On May 31, 2023, Eastern District of New York Judge Eric Vitaliano dismissed without prejudice two FCPA charges against Javier Aguilar, a former trader for the U.S. subsidiary of European oil trader Vitol, for lack of venue.[1] Aguilar was charged in December 2022 with FCPA conspiracy and substantive charges in connection with, among other things, allegations that he facilitated the payment of more than $600,000 in bribes to employees of the procurement subsidiary of Mexico’s national oil company, Petroleos Mexicanos (PemEx), for information to assist his employer in securing a hydrocarbon ethane contract. Judge Vitaliano determined that the Eastern District of New York was not the proper venue to charge Aguilar for violations of the FCPA that, by DOJ’s own admission, took place in the Southern District of Texas. The court, however, denied Aguilar’s motion to dismiss the charge of conspiracy to commit money laundering, finding that the government sufficiently alleged that the conspiracy included financial transactions that were conducted in the Eastern District of New York. Given that the FCPA charges were dismissed without prejudice, they can still be brought in a district in which venue is proper, for example the Southern District of Texas. (For more on the Vitol and Aguilar prosecutions, see our September 2020, December 2020, and December 2022 Top 10s.)

4. FCPA and Money-Laundering Counts Against Swiss-Portuguese Banker Dismissed for Speedy Trial Act Violation

On May 17, 2023, Southern District of Texas Judge Kenneth Hoyt granted Paulo Casquireo-Murta’s motion to dismiss money laundering and FCPA charges based on violations of the constitutional and statutory requirements for a speedy trial. The charges against Murta related to an alleged scheme by U.S. businesses to bribe officials of Venezuela’s national oil company, Petróleos de Venezuela, S.A. (PDVSA), in exchange for assistance in obtaining PDVSA contracts and receiving payment priority.[2] This is the second time that Judge Hoyt has dismissed the same charges against Murta. In July 2022, Judge Hoyt found that DOJ lacked jurisdiction to charge Murta, a non-U.S. citizen who worked for an unnamed Swiss company, for assisting the U.S. companies in laundering the bribe payments to the PDVSA officials. That ruling, however, was reversed by the U.S. Court of Appeals for the Fifth Circuit in February 2023, and the case was sent back to Judge Hoyt for further proceedings. On May 18, 2023, Judge Hoyt temporarily stayed the dismissal pending appeal after DOJ argued that it was “unlikely that Swiss authorities would extradite [Murta] to the United States” if he returned to Switzerland.[3] (For more on the Murta prosecution, see our September 2019, July 2022, and February 2023 Top 10s).

5. Former President of New York-Based NGO Sentenced for Marshall Islands Bribery Scheme

On May 16, 2023, DOJ announced that Cary Yan, a Marshallese national and former president of a New York-based non-governmental organization, had been sentenced to 3.5 years in prison following his December 2022 guilty plea to one count of conspiracy to violate the FCPA’s anti-bribery provisions. In September 2022, DOJ announced that Yan and his assistant Gina Zhou had been charged in the Southern District of New York in connection with a multiyear bribery scheme involving the payment of tens of thousands of dollars in bribes to high-level Republic of the Marshall Islands (RMI) officials in exchange for supporting legislation creating a semi-autonomous region within the RMI that would benefit the business interests of Yan and his associates. (For more on the Yan and Zhou prosecutions, see our September 2022 and December 2022 Top 10s.)

6. Former U.S. Utility Executives Convicted of FCPA Accounting Offenses in Domestic Bribery Case

On May 2, 2023, a federal jury in the Northern District of Illinois found four former Commonwealth Edison (ComEd) executives and associates—Michael McClain, Anne Pramaggiore, John Hooker, and Jay Doherty—guilty on all counts related to a scheme to bribe the former Speaker of the Illinois House of Representatives to assist with the passage of legislation favorable to the U.S. electric utility company—including four counts of violating the FCPA’s books and records provision. The ComEd case is a useful reminder that, although enacted as part of the FCPA, a violation of the FCPA’s accounting provisions does not require DOJ to prove an underlying violation of the FCPA’s anti-bribery provisions. In the ComEd case, DOJ alleged that the defendants falsified books, records, and accounts related to a contract between ComEd and a third-party consultant used to pay bribes to the Illinois House Speaker. Because both ComEd and its parent company were issuers, the indictment alleged that these acts violated the FCPA’s books-and-records provision, and the jury agreed.

7. SEC Awards Record Amount to Whistleblower in Swedish Telecommunication Company’s FCPA Enforcement Action

On May 5, 2023, SEC ordered the payment of a record $279 million whistleblower award. Although SEC did not name the enforcement action underlying the award, public reports said that it was related to the December 2019 FCPA enforcement action against Telefonaktiebolaget LM Ericsson, which produced a combined DOJ and SEC penalty of more than $1 billion. Under SEC rules, a whistleblower can receive an award of between 10% and 30% of the fines collected in SEC civil-enforcement actions and related actions from other enforcement agencies resulting from a tip. Two other individuals also separately applied to receive a whistleblower award from SEC, but their claims were denied because their information did not help the agency’s enforcement action. To put the Ericsson whistleblower award in perspective, SEC reported in November 2022 that it had awarded approximately $229 million across 103 awards in all of FY 2022, the second highest year in terms of total dollar amounts awarded. Awards such as this serve to remind companies to ensure that their reporting mechanisms, anti-retaliation policies, and investigation procedures are up to date and equipped to handle whistleblower reports. (For more on the Ericsson case, see our December 2019, May 2021, September 2021, June 2022, December 2022, and March 2023 Top 10s.)

8. DOJ Names New Acting Head of FCPA Unit

In May 2023, David Fuhr became the acting head of the DOJ FCPA Unit. Fuhr joined the FCPA Unit in March 2013 after serving several years as an associate at a multinational law firm, where he worked on significant FCPA cases from the defense side. While in the FCPA Unit, Fuhr worked on several significant corporate FCPA enforcement actions, including the Odebrecht, Keppel Offshore & Marine, and Vitol enforcement actions, as well as the Volkswagen diesel emissions case and also secured the trial conviction of a South Korean official, Heon-Cheol Chi, for laundering bribery proceeds. Fuhr is known to be a firm, but fair, prosecutor. Fuhr replaces David Last, who became the permanent head of DOJ’s FCPA Unit in August 2021. 

9. Real Estate Company Owned by Chinese Real Estate Developer Sentenced in Los Angeles Bribery Case

On May 12, 2023, DOJ announced that Shenzhen New World I LLC had been sentenced to pay a $4 million fine following its trial conviction in the Central District of California on bribery charges related to allegations that it paid more than $1 million in benefits to Los Angeles City Councilman and Chairman of the Planning and Land Use Management Committee, José Huizar. According to DOJ, the company gave the bribes—which included cash, casino gambling trips, flights on private jets and commercial airlines, stays at luxury Las Vegas hotels and casinos, expensive meals, spa services, prostitution services, political contributions, and a $600,000 collateral for Huizar to confidentially settle a pending sexual harassment lawsuit against Huizar by a former staffer that threatened his career—to obtain approval to build a 77-story skyscraper in Los Angeles. The company was convicted at trial of all eight counts against it, including honest services wire fraud, interstate and foreign travel in aid of bribery, and bribery concerning programs receiving federal funds. In January 2023, Huizar pleaded guilty to related charges and is scheduled for sentencing in September 2023. The company’s owner, Wei Huang, a resident of Shenzhen, China, was also charged, but he has yet to make a court appearance.  

10. EU Proposes Stronger Anti-Corruption Laws

On May 3, 2023, the European Commission (EC) proposed measures designed to strengthen anti-corruption measures across the European Union (EU). The measures “include new and strengthened rules criminalising corruption offenses and harmonising penalties across the EU, as well as a proposal … to establish a dedicated Common Foreign and Security Policy (CFSP) sanctions regime to target serious acts of corruption worldwide. These new measures place a strong focus on prevention and creating a culture of integrity, in which corruption is not tolerated and at the same time, strengthen enforcement tools.” Among other things, the draft directive would require that all member states criminalize misappropriation, trading in influence, abuse of functions, and obstruction of justice and illicit enrichment related to corruption offenses, in addition to bribery, which is currently the only corruption offense criminalized at the EU level. The draft directive would increase the level of criminal sanctions for these offenses for both natural and legal persons. On an enforcement level, the directive would require member states to set up specialized, resourced, and trained anti-corruption bodies, to ensure that privileges and immunities can be lifted during corruption investigations, and to introduce minimum rules on the statute of limitation to ensure sufficient time to investigate and prosecute corruption offenses. Member states would be required to join an “EU network against corruption, bringing together law enforcement, public authorities, practitioners, civil society and other stakeholders,” to develop best practices and practical guidance for fighting corruption and to help develop an EU anti-corruption strategy. The directive would also create a “Magnitsky-style” sanctions regime in the EU, similar to those in place in the United States, the United Kingdom, and Canada, which would allow member states to impose sanctions related to corruption. (See our February 2022 Top 10 for an earlier call for such a regime in the EU, as well as our discussions of the UK and Canadian Magnitsky regimes.) Following on the heels of the Qatargate scandal, the EC described its proposals as “decisive action to fight corruption in the EU and worldwide.” According to observers, the directive will likely be approved by all member states, but implementation could be more challenging.

[1] Memorandum & Order, United States v. Javier Aguilar, Case No. 1:20-cr-390-ENV, ECF No. 154 (E.D.N.Y. May 31, 2023).

[2] Order, United States v. Paulo Jorge da Costa Casqueiro Murta, Case No. 4:17-CR-514, ECF No. 470 (S.D. Tex. May 17, 2023).

[3] Order, United States v. Paulo Jorge da Costa Casqueiro Murta, Case No. 4:17-CR-514, ECF No. 472 (S.D. Tex. May 18, 2023).