2 COMPANIES ENTER INTO $795 MILLION RESOLUTION TO RESOLVE GLOBAL BRIBERY CASE

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, February 18, 2016

VimpelCom Limited and Unitel LLC Enter into Global Foreign Bribery Resolution of More Than $795 Million; United States Seeks $850 Million Forfeiture in Corrupt Proceeds of Bribery Scheme

Companies Agree to Pay $230 Million U.S. Criminal Fine in Connection with Foreign Corrupt Practices Act Resolution; Largest Case Ever Brought under the Kleptocracy Asset Recovery Initiative

Amsterdam-based VimpelCom Limited, the world’s sixth-largest telecommunications company and an issuer of publicly traded securities in the United States, and its wholly owned Uzbek subsidiary, Unitel LLC, entered into resolutions with the Department of Justice today in which they admitted to a conspiracy to make more than $114 million in bribery payments to a government official in Uzbekistan between 2006 and 2012 to enable them to enter and continue operating in the Uzbek telecommunications market.

In a related action, the department also filed a civil complaint today seeking the forfeiture of more than $550 million held in Swiss bank accounts, which constitute bribe payments made by VimpelCom and two separate telecommunications companies, or funds involved in the laundering of those payments, to the Uzbek official.  The forfeiture complaint follows an earlier civil complaint filed on June 29, 2015, which seeks forfeiture of more than $300 million in bank and investment accounts held in Belgium, Luxembourg and Ireland that also constitute funds traceable to bribes, or funds involved in the laundering of the bribes, paid by VimpelCom and another telecommunications company to the same Uzbek official.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Preet Bharara of the Southern District of New York, Chief Richard Weber of Internal Revenue Service-Criminal Investigation (IRS-CI) and Special Agent in Charge Clark E. Settles of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI) Washington, D.C., Field Office.

“These cases combine a landmark FCPA resolution for corporate bribery with one of the largest forfeiture actions we have ever brought to recover bribe proceeds from a corrupt government official,” said Assistant Attorney General Caldwell.  “The Criminal Division’s FCPA enforcement program and our Kleptocracy Initiative are two sides of the same anti-corruption coin.  The FCPA resolution in this case is also one of the most significant coordinated international and multi-agency resolutions in the history of the FCPA, and demonstrates our commitment both to pursuing justice and to bringing about corporate reform.”

“Today we mark the resolution of criminal charges and civil proceedings against corrupt corporate entities that made bribery a foundation of their business model,” said U.S. Attorney Bharara.  “As they have admitted in court filings, VimpelCom, the world’s sixth largest telecommunications company, with securities traded in New York, and its subsidiary, Unitel, built their business in Uzbekistan on over $114 million in bribes funneled to a government official.  Those payments, falsely recorded in the company’s books and records, were then laundered through bank accounts and assets around the world, including through accounts in New York.”

“Today’s admission of guilt by VimpelCom and Unitel to paying bribes to government officials is a victory for all who fight corruption at all levels,” said Chief Weber.  “It also demonstrates the skill and tenacity of IRS Criminal Investigation special agents when it comes to delving underneath layers of financial transactions designed to conceal illegal payments for gain.  The global economy demands a level playing field for all.  When certain VimpelCom and Unitel executives chose to use deception in order to continue this scheme and take advantage of insider knowledge, they also chose to become criminals.  IRS-CI pledges to continue our efforts on the international stage to stop corrupt financial schemes such as this one.”

“HSI special agents and our law enforcement partners will continue to investigate financial crimes committed by corrupt foreign officials,” said Special Agent in Charge Settles.  “We will not permit ill-gotten gains to be laundered through U.S. financial markets.”

The Criminal Resolution

In the criminal case, Unitel pleaded guilty and was sentenced to a one-count criminal information filed today in the Southern District of New York and assigned to U.S. District Judge Edgardo Ramos of the Southern District of New York, charging the company with a conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA).

VimpelCom entered into a deferred prosecution agreement in connection with a criminal information charging the company with conspiracy to violate the anti-bribery and books and records provisions of the FCPA, and a separate count of violating the internal controls provisions of the FCPA.  Pursuant to its agreement with the department, VimpelCom agreed to pay a total criminal penalty of $230,163,199.20 to the United States, including $40 million in criminal forfeiture.  VimpelCom also agreed to implement rigorous internal controls, retain a compliance monitor for a term of three years and cooperate fully with the department’s ongoing investigation, including its investigation of individuals.

In related proceedings, VimpelCom settled with the U.S. Securities and Exchange Commission (SEC) and the Public Prosecution Service of the Netherlands (Openbaar Ministrie, or OM).  Under the terms of its resolution with the SEC, VimpelCom agreed to a total of $375 million in disgorgement of profits and prejudgment interest, to be divided between the SEC and OM.  VimpelCom agreed to pay the OM a criminal penalty of $230,163,199.20, for a total criminal penalty of $460,326,398.40, and a total resolution amount of more than $835 million.  The department agreed to credit the criminal penalty paid to the OM as part of its agreement with the company.  The SEC agreed to credit the forfeiture paid to the department as part of its agreement with the company.  Thus, the combined total amount of U.S. and Dutch criminal and regulatory penalties paid by VimpelCom will be $795,326,398.40, making it one of the largest global foreign bribery resolutions ever.

According to the companies’ admissions, VimpelCom and Unitel, through various executives and employees, paid bribes to an Uzbek government official, who was a close relative of a high-ranking government official and had influence over the Uzbek governmental body that regulated the telecom industry.  The companies structured and concealed the bribes through various payments to a shell company that certain VimpelCom and Unitel management knew was beneficially owned by the foreign official.  The bribes were paid on multiple occasions between approximately 2006 and 2012 so that VimpelCom could enter the Uzbek market and Unitel could gain valuable telecom assets and continue operating in Uzbekistan.  VimpelCom and Unitel contemplated additional bribes in 2013, but those bribes were not completed before VimpelCom opened an internal investigation.

In addition, VimpelCom admitted that it falsified its books and records and attempted to conceal and disguise the bribery scheme by classifying payments as equity transactions, consulting and repudiation agreements and reseller transactions.  VimpelCom also failed to implement and enforce adequate internal accounting controls, which allowed the bribe payments to occur without detection or remediation.  Moreover, when the board of directors sought an FCPA legal opinion assessing corruption risks involved in the transactions, certain VimpelCom management withheld crucial information from outside counsel performing the review that restricted the scope of FCPA opinions, rendering them worthless.  Rather than implement and enforce a strong anti-corruption ethic, certain VimpelCom executives sought ways to give the company plausible deniability of illegality while knowingly proceeding with corrupt business transactions.

A number of significant factors contributed to the department’s criminal resolution with the companies.  Among these, the companies received significant credit for their prompt acknowledgement of wrongdoing after being informed of the department’s investigation, for their willingness to promptly resolve their criminal liability on an expedited basis and for their extensive cooperation with the department’s investigation.  Specifically, the criminal penalty reflects a 45 percent reduction off of the bottom of the U.S. Sentencing Guidelines fine range.  However, the companies did not receive more significant mitigation credit, either in the penalty or the form of resolution, because the companies did not voluntarily self-disclose their misconduct to the department after an internal investigation uncovered wrongdoing.

The Forfeiture Complaints

The department has also filed two civil complaints seeking a total of $850 million in forfeiture.  A complaint filed today seeks forfeiture of approximately $550 million in proceeds of illegal bribes paid, or property involved in the laundering of those payments, to the Uzbek official by VimpelCom and two other telecommunications companies operating in Uzbekistan.  The $550 million is currently located in Swiss bank accounts.  The department also filed a prior complaint seeking forfeiture of an additional $300 million in proceeds of illegal bribes paid, or property involved in the laundering of those payments, to the same Uzbek official.  The assets sought to be forfeited in that complaint are restrained in Belgium, Luxembourg and Ireland.  In that case, on Jan. 11, 2016, the U.S. District Court for the Southern District of New York entered a partial default judgment against all potential claimants other than the Republic of Uzbekistan.

As alleged in the complaints and as is part of the criminal resolutions announced today, the telecom companies paid a total of more than $800 million in bribes so that the Uzbek official would assist VimpelCom and other telecommunications companies in obtaining and retaining business in Uzbekistan.  Thereafter, the official’s associates laundered the corruption proceeds through accounts held in Latvia, the United Kingdom, Hong Kong, Ireland, Belgium, Luxembourg and Switzerland.  The illicit funds were transmitted through financial institutions in the United States before they were deposited into accounts in these countries, thereby subjecting them to U.S. jurisdiction.

The department brought these forfeiture actions under the Kleptocracy Asset Recovery Initiative in the Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS), working in partnership with federal law enforcement agencies to forfeit the proceeds of foreign official corruption and, where appropriate, to use those recovered assets to benefit the people harmed by corruption and abuse of office.

*          *          *

These cases represent the department’s commitment to both prosecute those who pay bribes and to ensure that the corrupt government officials who receive the bribes cannot use the U.S. financial system to launder their illicit gains.  The IRS-CI and ICE-HSI are investigating the cases, along with the IRS Global Illicit Financial Team in Washington, D.C.  Senior Litigation Counsel Nicola J. Mrazek and Trial Attorney Ephraim Wernick of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Edward Imperatore of the Southern District of New York are prosecuting the criminal case, with substantial assistance from AFMLS.  AFMLS Trial Attorney Marie M. Dalton is prosecuting the forfeiture case with substantial assistance from the Fraud Section.

Law enforcement colleagues within the OM, the Swedish Prosecution Authority, the Office of the Attorney General in Switzerland and the Corruption Prevention and Combating Bureau in Latvia provided significant cooperation and assistance in this matter.  Law enforcement colleagues in Belgium, France, Ireland, Luxembourg and the United Kingdom have also provided valuable assistance.  The Criminal Division’s Office of International Affairs provided significant assistance in this matter.  The SEC referred the matter to the department and provided extensive cooperation and assistance.

POWER COMPANY TO PAY $722 MILLION CHEMICAL FINE TO RESOLVE BRIBERY CHARGES

FROM:  U.S. JUSTICE DEPARTMENT 

Friday, November 13, 2015

Alstom Sentenced to Pay $772 Million Criminal Fine to Resolve Foreign Bribery Charges

Represents Largest-Ever Criminal Foreign Bribery Fine

Alstom S.A., a French power and transportation company, was sentenced today to pay a $772,290,000 fine to resolve criminal charges related to a widespread corruption scheme involving at least $75 million in secret bribes paid to government officials in countries around the world, including Indonesia, Saudi Arabia, Egypt, the Bahamas and Taiwan.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, First Assistant U.S. Attorney Michael J. Gustafson the District of Connecticut and Assistant Director in Charge Paul M. Abbate of the FBI’s Washington Field Office made the announcement.

Alstom was sentenced by U.S. District Judge Janet Bond Arterton of the District of Connecticut.  Alstom pleaded guilty on Dec. 22, 2014, to a two-count criminal information charging the company with violating the Foreign Corrupt Practices Act (FCPA) by falsifying its books and records and failing to implement adequate internal controls.

In addition, Alstom Network Schweiz AG, formerly Alstom Prom AG (Alstom Prom), Alstom’s Swiss subsidiary, which pleaded guilty on Dec. 22, 2014, to a criminal information charging the company with conspiracy to violate the anti-bribery provisions of the FCPA, was also sentenced today pursuant to its plea agreement.  Alstom Power Inc. and Alstom Grid Inc., formerly Alstom T&D Inc., two U.S. subsidiaries, both entered into deferred prosecution agreements on Dec. 22, 2014, admitting that they conspired to violate the anti-bribery provisions of the FCPA.

According to the companies’ admissions, Alstom, Alstom Prom, Alstom Power and Alstom T&D, through various executives and employees, paid bribes to government officials and falsified books and records in connection with power, grid and transportation projects for state-owned entities around the world, including in Indonesia, Egypt, Saudi Arabia, the Bahamas and Taiwan.  In Indonesia, for example, Alstom, Alstom Prom and Alstom Power paid bribes to government officials—including a high-ranking member of the Indonesian Parliament and high-ranking members of Perusahaan Listrik Negara, the state-owned electricity company in Indonesia—in exchange for assistance in securing several contracts to provide power-related services valued at approximately $375 million.  In total, Alstom paid more than $75 million to secure more than $4 billion in projects around the world, with a profit to the company of approximately $300 million.

Alstom and its subsidiaries also attempted to conceal the bribery scheme by retaining consultants who purportedly provided consulting services on behalf of the companies, but who actually served as conduits for corrupt payments to the government officials.  Internal Alstom documents refer to some of the consultants in code, including “Mr. Geneva,” “Mr. Paris,” “London,” “Quiet Man” and “Old Friend.”

The sentence, which is the largest criminal fine ever imposed in an FCPA case, reflects a number of factors, including: Alstom’s failure to voluntarily disclose the misconduct, even though it was aware of related misconduct at a U.S. subsidiary that previously resolved corruption charges with the department in connection with a power project in Italy; Alstom’s refusal to fully cooperate with the department’s investigation for several years; the breadth of the companies’ misconduct, which spanned many years, occurred in countries around the globe and in several business lines, and involved sophisticated schemes to bribe high-level government officials; Alstom’s lack of an effective compliance and ethics program at the time of the conduct; and Alstom’s prior criminal misconduct, including conduct that led to resolutions with various other governments and the World Bank.

After the department publicly charged several Alstom executives, however, Alstom began providing thorough cooperation, including assisting the department’s prosecution of other companies and individuals.

To date, the department has announced charges against five corporate executives for alleged corrupt conduct involving Alstom.  Frederic Pierucci, Alstom’s former vice president of global boiler sales, pleaded guilty on July 29, 2013, to conspiring to violate the FCPA and a charge of violating the FCPA for his role in the Indonesia bribery scheme.  David Rothschild, Alstom Power’s former vice president of regional sales, pleaded guilty on Nov. 2, 2012, to conspiracy to violate the FCPA.  William Pomponi, Alstom Power’s former vice president of regional sales, pleaded guilty on July 17, 2014, to conspiracy to violate the FCPA.  Lawrence Hoskins, Alstom’s former senior vice president for the Asia region, was charged in an indictment in connection with the Indonesia bribery scheme, and is pending trial in the District of Connecticut in April 2016.  The charges against Hoskins are merely allegations, and he is presumed innocent unless and until proven guilty.  The high-ranking member of Indonesian Parliament was also convicted in Indonesia of accepting bribes from Alstom, and is currently serving a three-year prison term.  In addition, Marubeni Corporation, which partnered with Alstom on the Indonesia project, pleaded guilty on March 19, 2014 to a criminal information charging conspiracy to violate the FCPA and seven counts of violating the FCPA, and was sentenced on May 15, 2014, to pay an $88 million criminal fine.

In connection with a corrupt scheme in Egypt, Asem Elgawhary, the general manager of an entity working on behalf of the Egyptian Electricity Holding Company, a state-owned electricity company, was the fifth individual charge and pleaded guilty on Dec. 4, 2014, in the District of Maryland to mail fraud, conspiring to launder money and tax fraud for accepting kickbacks from Alstom and other companies, and was sentenced on March 23, 2015, to serve 42 months in prison and forfeit approximately $5.2 million in proceeds.

This case is being investigated by the FBI’s Washington Field Office, with assistance from the FBI’s Meriden, Connecticut, Resident Agency.  The department appreciates the significant cooperation provided by its law enforcement colleagues in Indonesia at the Komisi Pemberantasan Korupsi (Corruption Eradication Commission), the Switzerland Office of the Attorney General and the United Kingdom’s Serious Fraud Office, as well as authorities in France, Germany, Italy, Singapore and Taiwan.

The case is being prosecuted by Assistant Chief Daniel S. Kahn of the Criminal Division’s Fraud Section and Assistant U.S. Attorney David E. Novick of the District of Connecticut, together with Assistant U.S. Attorney Zach Intrater of the District of New Jersey on the investigation of Alstom T&D, and Assistant U.S. Attorney David I. Salem of the District of Maryland on the investigation of Asem Elgawhary.  The Criminal Division’s Office of International Affairs also provided substantial assistance.      

U.S. BROKER-DEALER CEO AND MANAGING DIRECTOR PLEAD GUILTY TO INTERNATIONAL BRIBERY SCHEME

FROM:  U.S. JUSTICE DEPARTMENT 
Wednesday, December 17, 2014
CEO and Managing Director of U.S. Broker-Dealer Plead Guilty to Massive International Bribery Scheme
Senior Venezuelan Banking Official Received at Least $5 Million in Bribes in Exchange for Directing Business to U.S. Defendants

The former chief executive officer and former managing director of a U.S. broker-dealer (the Broker-Dealer), pleaded guilty to bribery charges arising from their scheme to pay bribes to Maria De Los Angeles Gonzalez De Hernandez, who was a senior official in Venezuela’s state economic development bank, Banco de Desarrollo Económico y Social de Venezuela (Bandes), in return for trading business that generated more than $60 million in commissions.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Preet Bharara of the Southern District of New York made the announcement.

“Benito Chinea and Joseph DeMeneses are the fifth and sixth defendants to plead guilty in connection with this far-reaching bribery scheme, which ranged from Wall Street to the streets of Caracas,” said Assistant Attorney General Caldwell.  “The guilty pleas and the forfeiture of assets once again demonstrate that the Department is committed to holding corporate executives who engage in foreign bribery individually accountable and to deny them the proceeds of their corruption.”

According to the allegations in the indictment and other documents previously filed in Manhattan federal court:

Benito Chinea, 48, of Manalapan, New Jersey, and Joseph De Meneses, 45, of Fairfield, Connecticut, working with others, arranged the bribe payments to Gonzalez in exchange for her directing Bandes’s financial trading business to the Broker-Dealer.  Previously, Gonzalez, along with two employees of the Broker-Dealer, Tomas Alberto Clarke Bethancourt (“Clarke”) and Jose Alejandro Hurtado (“Hurtado”), pleaded guilty for their involvement in this bribery scheme.  A managing director of the Broker-Dealer, Ernesto Lujan (“Lujan”), also pleaded guilty for his role in the scheme.

Background on the Broker-Dealer and Bandes

At all times relevant to the charges, Chinea was the chief executive officer and De Meneses was a managing director in the Broker-Dealer, which was headquartered in New York, New York, with offices in Miami, Florida.  In 2008, the Broker-Dealer established a group called the Global Markets Group, which included De Meneses, Lujan, and Clarke, and which offered fixed income trading services to institutional clients.  One of the Broker-Dealer’s clients was Bandes, which operated under the direction of the Venezuelan Ministry of Finance.  The Venezuelan government had a majority ownership interest in Bandes and provided it with substantial funding.  Gonzalez was an official at Bandes and oversaw the development bank’s overseas trading activity.  At her direction, Bandes conducted substantial trading through the Broker-Dealer.  Most of the trades executed by the Broker-Dealer on behalf of Bandes involved fixed income investments for which the Broker-Dealer charged Bandes a mark-up on purchases and a mark-down on sales.

             The Bribery Scheme

As alleged in court documents, from late 2008 through 2012, Chinea and De Meneses, together with three Miami-based Broker-Dealer employees, Lujan, Clarke and Hurtado, participated in a bribery scheme in which Gonzalez directed trading business she controlled at Bandes to the Broker-Dealer, and in return, agents and employees of the Broker-Dealer split the revenue the Broker-Dealer generated from this trading business with Gonzalez.  During this time period, the Broker-Dealer generated over $60 million in commissions from trades with Bandes.

In order to conceal their conduct, Chinea, De Meneses and their co-conspirators routed the payments to Gonzalez, frequently in six-figure amounts, through third-parties posing as “foreign finders” and into offshore bank accounts.  In several instances, Chinea personally signed checks worth millions of dollars that were made payable to one of these purported “foreign finders” and later deposited in a Swiss bank account.

As further alleged in court documents, as a result of the bribery scheme, Bandes quickly became the Broker-Dealer’s most profitable customer.  As the relationship continued, however, Gonzalez became increasingly unhappy about the untimeliness of the payments due her from the Broker-Dealer, and she threatened to suspend Bandes’s business.  In response, De Meneses and Clarke agreed to pay Gonzalez approximately $1.5 million from their personal funds.  Chinea and De Meneses agreed to use Broker-Dealer funds to reimburse De Meneses and Clarke for these bribe payments.  To conceal their true nature, Chinea and De Meneses agreed to hide these reimbursements in the Broker-Dealer’s books as sham loans from the Broker-Dealer to corporate entities associated with De Meneses and Clarke.

Chinea and De Meneses each pleaded guilty before U.S. District Judge Denise L. Cote of the Southern District of New York to one count of conspiracy to violate the Foreign Corrupt Practices Act and the Travel Act.  Chinea and De Meneses have also agreed to pay $3,636,432 and $2,670,612 in forfeiture, respectively, which amounts represent their earnings from the bribery scheme.  Sentencing hearings are scheduled for March 27, 2015.

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations.  For more information on the task force, visit www.stopfraud.gov.

This case is being investigated by the FBI, and prosecuted Senior Deputy Chief James Koukios of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Harry A. Chernoff and Jason H. Cowley of the Southern District of New York.  Assistant U.S. Attorney Carolina Fornos of the Southern District of New York is responsible for the forfeiture aspects of the case.  The U.S. Securities and Exchange Commission also assisted with this investigation.

REMARKS BY ASSISTANT AG CALDWELL REGARDING ALSTON BRIBERY PLEA

FROM:  U.S. JUSTICE DEPARTMENT 
Remarks for Assistant Attorney General Leslie R. Caldwell Press Conference Regarding Alstom Bribery Plea
Washington, DCUnited States ~ Monday, December 22, 2014

Today represents a significant milestone in the global fight against corruption.  It demonstrates the Department of Justice’s strong commitment to fighting foreign bribery and ensuring that both companies and individuals are held accountable when they violate the FCPA.  The guilty pleas and resolutions announced today also highlight what can happen when corporations refuse to disclose wrongdoing and refuse to cooperate with the department’s efforts to identify and prosecute culpable individuals.

Let me first explain how the scheme worked.  To conceal that it was the source of payments to government officials, Alstom funneled the bribes through third-party consultants who did little more than serve as conduits for corruption.  Alstom then dummied up its books and records to cover up the scheme.

Alstom’s corruption spanned the globe, and was its way of winning business.  For example, in Indonesia, Alstom and certain of its subsidiaries used consultants to bribe government officials – including high-ranking members of the Indonesian Parliament and the state-owned and state-controlled electricity company – to win several contracts to provide power-related services.  According to internal documents, when certain officials expressed displeasure that a particular consultant had provided only “pocket money,” Alstom retained a second consultant to ensure that the officials were satisfied.

In Saudi Arabia, Alstom retained at least six consultants, including two close family members of high-ranking government officials, to bribe officials at a state-owned and state-controlled electricity company to win two projects valued at approximately $3 billion.  As evidence that Alstom employees recognized that their conduct was criminal, internal company documents refer to the consultants only by code name.

Alstom similarly used consultants to bribe officials in Egypt and the Bahamas, and again Alstom employees clearly knew that the conduct violated the law.  In connection with a project in Egypt, a member of Alstom’s finance department sent an email questioning an invoice for consultant services and, in response, was advised that her inquiry could have “several people put in jail” and was further instructed to delete all prior emails regarding the consultant.

If approved by the court, Alstom’s criminal penalty of $772 million represents the largest penalty ever assessed by department in a FCPA case.  Through Alstom’s parent-level guilty plea and record-breaking criminal penalty, Alstom is paying a historic price for its criminal conduct -- and for its efforts to insulate culpable corporate employees and other corporate entities.  Alstom did not voluntarily disclose the misconduct to law enforcement authorities, and Alstom refused to cooperate in a meaningful way during the first several years of the investigation.  Indeed, it was only after the department publicly charged several Alstom executives – three years after the investigation began – that the company finally cooperated.  

One important message of this case is this:  While we hope that companies that find themselves in these situations will cooperate with the department of Justice, we do not wait for or depend on that cooperation. When Alstom refused to cooperate with the investigation, we persisted with our own investigation.  We built cases against the various corporate entities and against culpable individuals.  To date, the department publicly has charged four Alstom corporate executives in connection with the corrupt scheme in Indonesia, which also chose not to cooperate, and another company’s executive in connection with the scheme in Egypt.  Four of these individuals already have pleaded guilty.  In addition, Marubeni Corporation, a Japanese trading company that partnered with Alstom in Indonesia, pleaded guilty to conspiracy to violate the anti-bribery provisions of the FCPA and substantive violations of the FCPA, and paid an $88 million criminal penalty.

Another important message from this case is that the U.S. increasingly is not alone in the fight against transnational corruption.  Earlier this year, Indonesia’s Corruption Eradication Commission, the KPK, assisted the department in its investigation.  And, in turn, the department shared with the KPK information that federal investigators had obtained, which the KPK used in its prosecution of a former member of the Indonesian Parliament for accepting bribes from Alstom-funded consultants.  This past spring, that Indonesian official was found guilty and sentenced to three years in an Indonesian prison.  Our partnership with Indonesian law enforcement authorities in this case means that both the bribe payors and bribe takers have been prosecuted.  And our investigation is not over yet.

This case is emblematic of how the Department of Justice will investigate and prosecute FCPA cases – and other corporate crimes.  We encourage companies to maintain robust compliance programs, to voluntarily disclose and eradicate misconduct when it is detected, and to cooperate in the government’s investigation.  But we will not wait for companies to act responsibly.  With cooperation or without it, the department will identify criminal activity at corporations and investigate the conduct ourselves, using all of our resources, employing every law enforcement tool, and considering all possible actions, including charges against both corporations and individuals.

I especially would like to thank the prosecutors from the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the District of Connecticut, and the talented agents from the FBI, for their extraordinary work in this matter.  I also would like to thank the U.S. Attorney’s Office for the District of New Jersey and the U.S. Attorney’s Office for the District of Maryland for their work on related cases.  And I am grateful to the Criminal Division’s Office of International Affairs for the substantial and expert assistance that it provided.

In addition to our Indonesian counterparts, I would like to acknowledge the valuable assistance that our law enforcement partners in Switzerland, the United Kingdom, Singapore, Italy, Saudi Arabia, Taiwan, Cyprus, and Germany have provided in this matter.  We are grateful for their assistance and look forward to working with them and our other international partners in the future.

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SEC ALLEGES AVON PRODUCTS INC. VIOLATED FOREIGN CORRUPT PRACTICES ACT

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

December 17, 2014

The Securities and Exchange Commission today charged global beauty products company Avon Products Inc. with violating the Foreign Corrupt Practices Act (FCPA) by failing to put controls in place to detect and prevent payments and gifts to Chinese government officials from employees and consultants at a subsidiary.

Avon entities agreed to pay a total of $135 million to settle the SEC’s charges and a parallel case announced today by the U.S. Department of Justice and the U.S. Attorney’s Office for the Southern District of New York.

The SEC alleges that Avon’s subsidiary in China made $8 million worth of payments in cash, gifts, travel, and entertainment to gain access to Chinese officials implementing and overseeing direct selling regulations in China.  Avon sought to be among the first allowed to test the regulations, and eventually received the first direct selling business license in China in March 2006.  The improper payments also were made to avoid fines or negative news articles that could have impacted Avon’s clean corporate image required to retain the license.  Examples of improper payments alleged in the SEC’s complaint include paid travel for Chinese government officials within China or to the U.S. or Europe as well as such gifts as Louis Vuitton merchandise, Gucci bags, Tiffany pens, and corporate box tickets to the China Open tennis tournament.

“Avon’s subsidiary in China paid millions of dollars to government officials to obtain a direct selling license and gain an edge over their competitors, and the company reaped substantial financial benefits as a result,” said Scott W. Friestad, an Associate Director in the SEC’s Division of Enforcement.  “Avon missed an opportunity to correct potential FCPA problems at its subsidiary, resulting in years of additional misconduct that could have been avoided.”

According to the SEC’s complaint filed in U.S. District Court for the Southern District of New York, the improper payments occurred from 2004 to 2008.  Avon management learned about potential FCPA problems at the subsidiary through an internal audit report in late 2005.  Avon management consulted an outside law firm, directed that reforms be instituted at the subsidiary, and sent an internal audit team to follow up.  Ultimately, however, no such reforms were instituted at the Chinese subsidiary.  Avon finally began a full-blown internal investigation in 2008 after its CEO received a letter from a whistleblower.

The SEC alleges that Avon’s books and records failed to accurately record the details and purpose of the payments.  In some instances, payments were concealed by falsely recording the transactions as employee business expenses or as reimbursement of a third-party vendor.  In other instances, the records for the payments set forth almost no detail at all.  The resulting books and records did not allow a reviewer to ascertain the government official or state-owned entities that received the payments or the purpose for which the payments were made.

The SEC’s complaint charges Avon with violating Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934.  Avon, which neither admitted nor denied the allegations, agreed to pay disgorgement of $52,850,000 in benefits resulting from the alleged misconduct plus prejudgment interest of $14,515,013.13 for a total of more than $67.36 million.  In the parallel criminal matter, Avon entities agreed to pay $67,648,000 in penalties.  Avon also is required to retain an independent compliance monitor to review its FCPA compliance program for a period of 18 months, followed by an 18-month period of self-reporting on its compliance efforts.  Avon would be permanently enjoined from violating the books and records and internal controls provisions of the federal securities laws.  In reaching the proposed settlement, which is subject to court approval, the SEC considered Avon’s cooperation and significant remedial measures.

The SEC’s investigation was conducted by Paul W. Sharratt and Roger Paszamant and supervised by David Frohlich.  The SEC appreciates the assistance of the Fraud Section of the Department of Justice, the U.S. Attorney’s Office for the Southern District of New York, and the Federal Bureau of Investigation.

AIRCRAFT ENGINE MAINTENANCE CO. TO PAY $14 MILLION FOR PAYING BRIBES TO FOREIGN OFFICIALS

FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, December 10, 2014

Dallas Airmotive Inc. Admits Foreign Corrupt Practices Act Violations and Agrees to Pay $14 Million Criminal Penalty

Dallas Airmotive Inc., a provider of aircraft engine maintenance, repair and overhaul services based in Grapevine, Texas, has admitted to violations of the Foreign Corrupt Practices Act (FCPA) and agreed to pay a $14 million criminal penalty to resolve charges that it bribed Latin American government officials in order to secure lucrative government contracts.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Special Agent in Charge Diego Rodriguez of the FBI’s Dallas Division made the announcement.

A criminal information, filed today in federal court in the Northern District of Texas as part of the deferred prosecution agreement, charges Dallas Airmotive with one count of conspiring to violate the FCPA and one count of violating the FCPA’s anti-bribery provisions.

According to Dallas Airmotive’s detailed admissions in the statement of facts accompanying the deferred prosecution agreement, between 2008 and 2012, the company bribed officials of the Brazilian Air Force, the Peruvian Air Force, the Office of the Governor of the Brazilian State of Roraima, and the Office of the Governor of the San Juan Province in Argentina.  Dallas Airmotive used various methods to convey the bribe payments, including by entering into agreements with front companies affiliated with foreign officials, making payments to third-party representatives with the understanding that funds would be directed to foreign officials, and directly providing things of value, such as paid vacations, to foreign officials.

This case is being investigated by the FBI’s Dallas Field Office and is being prosecuted by Trial Attorney David M. Fuhr of the Criminal Division’s Fraud Section.  Assistant U.S. Attorney Michael C. Elliott from the U.S. Attorney’s Office for the Northern District of Texas has provided assistance in the case.  The department acknowledges the assistance of law enforcement counterparts in Brazil.  The Criminal Division’s Office of International Affairs also provided significant assistance.

ASSISTANT AG CALDWELL SPEAKS AT INTERNATIONAL CONFERENCE ON THE FOREIGN CORRUPT PRACTICES ACT

FROM:  U.S. JUSTICE DEPARTMENT 
Assistant Attorney General Leslie R. Caldwell Speaks at American Conference Institute’s 31st International Conference on the Foreign Corrupt Practices Act
National Harbor, MDUnited States ~ Wednesday, November 19, 2014

Thank you for that kind introduction.  I am honored to be here with you and the other participants in this bribery and corruption conference.

As many of you may know, I have spent most of my professional career handling federal criminal cases, both as a prosecutor and as defense counsel.  For the past six months, I have been honored to serve as the Assistant Attorney General for the Justice Department’s Criminal Division.  As I quickly learned, the work of the Criminal Division is incredibly wide ranging – from fighting financial fraud, to combating cybercrime, corruption, child exploitation and organized crime, just to name a few.  Today, I want to focus my remarks on one of our most important enforcement priorities – our efforts to combat corruption around the world.  

At the Criminal Division, we are stepping up our efforts in the battle against corruption, at home and abroad.  Through our Public Integrity Section, which prosecutes corruption cases involving U.S. federal, state, and local officials, we are attacking domestic corruption.

More relevant to this audience, we are also deeply committed to fighting corruption abroad.  Now, more than ever, we are bringing to justice individuals and corporations who use foreign bribery as a way to gain a business advantage.  In part, we are doing this using the tools and methods that have made our past enforcement efforts so successful – FCPA prosecutions and penalties.

But there have been some really big changes in the Justice Department’s FCPA work since I last worked there.  First, thanks to the expertise and knowledge we have acquired over the years, we are now able to investigate FCPA cases much more quickly.  We also are better equipped to prosecute individuals who are actually making corrupt payments, as well as intermediary entities hired to serve as conduits for bribes.

And now we also are prosecuting the bribe takers, using our money laundering and other laws.  And, importantly, we have begun stripping corrupt officials of the proceeds of their corruption involving both bribes and kleptocracy, using both criminal and civil authorities.

The Criminal Division’s FCPA enforcement program and our Kleptocracy Initiative are really two sides of the same anti-corruption coin.  We bring those who pay bribes to justice, no matter how rich and powerful they are.  But by itself, that is not enough.  We also attack corruption at its source – by prosecuting and seizing the assets of the corrupt officials who betray the trust of their people.

Another big change – one that has been building for years but now has really developed momentum – is that we increasingly find ourselves shoulder-to-shoulder with law enforcement and regulatory authorities in other countries.  Every day, more countries join in the battle against transnational bribery. And this includes not just our long-time partners, but countries in all corners of the globe.

Together with our foreign law enforcement and regulatory partners we are taking a truly global approach to rooting out international corruption.  And make no mistake, this international approach has dramatically advanced our efforts to uncover, punish and deter foreign corruption.  

Increasingly, we and our counterparts share information about bribery schemes.   We report schemes to one another.  And, where appropriate, we discuss strategy and coordinate our use of investigative techniques, so that we can obtain the best possible results, especially in very high-impact cases.

These efforts are incredibly important. The World Bank estimates that more than $1 trillion is paid every year in bribes, which amounts to about 3 percent of the world economy.  That amount is stunningly wasteful.  No one benefits from corruption other than the corrupt officials.

But corruption is far more insidious and harmful than can be measured numerically.  We all know that when corruption takes hold, the fundamental notion of playing-by-the-rules gets pushed to the side, and individuals, businesses and governments instead begin to operate under a fundamentally unfair – and destabilizing – set of norms.  This undermines confidence in the markets and governments, and destroys the sense of fair play that is absolutely critical for the rule of law to prevail.

In emerging economies, corruption stifles economic development that would lift people out of poverty, improve infrastructure, and better people’s lives.  And the fruits of corruption can prop up autocratic and oppressive rulers even in wealthier countries.

Make no mistake, the effects of foreign corruption are not just felt overseas.  In today’s global economy, the negative effects of foreign corruption inevitably flow back to the United States.  For one, American companies are harmed by global corruption.  They are denied the ability to compete in a fair and transparent marketplace.  Instead of being rewarded for their efficiency, innovation, and honest business practices, U.S. companies suffer at the hands of corrupt governments and lose out to corrupt competitors.

International corruption also presents broader public safety concerns.  Indeed, criminal networks of all kinds, including narcotics traffickers, cyber criminals, terrorists, and human traffickers, often take advantage of countries whose commitment to the rule of law is weakened by corruption of its officials.  And, as we’ve seen in the more extreme cases, thoroughly corrupted regimes have created safe havens for criminals by giving them a secure base from which they can orchestrate their criminal activities.

You have no doubt heard my predecessors speak of the evils of corruption.  It is because of these evils that the fight against international bribery has been, and continues to be, a core priority of the Department of Justice.

Our commitment to the fight against foreign bribery is reflected in our robust enforcement record in this area, which includes charges against corporations and individuals alike from all over the world.  Since 2009, we have convicted more than 50 individuals in FCPA and FCPA-related cases, and resolved criminal cases against more than 50 companies with penalties and forfeiture of approximately $3 billion.  Twenty-five of the cases involving individuals have come since 2013 alone.  And those are just the cases that are now public.  These individuals run the gamut of actors involved in bribery schemes: corporate executives, middlemen, and corrupt officials.

These successes are the result of the hard work and diligence of the talented prosecutors in our Fraud Section’s FCPA Unit and our Office of International Affairs, who work in tandem with federal prosecutors across the country at many of the 94 U.S. Attorney’s Offices, the FBI, and other law enforcement agencies.

As our enforcement actions demonstrate, we are focusing our attention on bribes of consequence – ones that fundamentally undermine confidence in the markets and governments.  And our record of success in these prosecutions has allowed us to show – rather than just tell – corporate executives that if they participate in a scheme to improperly influence a foreign official, they will personally risk the very real prospect of going to prison.

I’d like to briefly discuss a few examples of the kinds of corruption cases that we are prioritizing today.

In April of this year, we charged the chief executive officer and a managing partner of Direct Access Partners, a New York-based U.S. broker-dealer, for their involvement in a scheme to pay bribes to a senior official in Venezuela’s state economic development bank, BANDES.  As alleged in the indictment, the chief executive officer, the managing partner, and several employees of the broker-dealer paid more than $5 million in bribes to a Venezuelan official in exchange for the official directing lucrative trading business to the broker-dealer, generating more than $60 million in commissions.

That may have seemed lucrative at the time, but the executives and employees are now paying the price for their corrupt conduct.  To date, five Direct Access Partners executives and employees have been charged in connection with this scheme, and three of those individuals have pleaded guilty.  We have also charged the Venezuelan official for her involvement in the scheme and she has pleaded guilty to several charges, including money laundering and Travel Act violations.

And, notably, we seized several million dollars of illicit proceeds from the defendants, including the Venezuelan official, which will be forfeited following their sentencings.

Stripping individuals of the proceeds of their conduct – and thus depriving them of the very profits that are driving the corrupt conduct in the first place – is one technique that we are using increasingly in our fight against foreign bribery.  And, we are not just pursuing these corrupt proceeds through criminal actions.

The FCPA Unit’s efforts to eradicate foreign corruption also are assisted by the work of our Kleptocracy Asset Recovery Initiative, through which prosecutors in the Criminal Division’s Asset Forfeiture and Money Laundering Section and Office of International Affairs are pursuing ill gotten riches from corrupt officials using our civil authority.  

Again with the assistance of countries around the globe, the Kleptocracy Initiative has achieved significant successes since its inception just a few years ago.  As just one recent example of the initiative’s success, about a month ago, we settled a forfeiture action involving assets of the sitting Second Vice President of the Republic of Equatorial Guinea, who also is the son of the President of that country.

During the son’s more than 16 years in public office, he received an official government salary of less than $100,000.  But, by using – or abusing – his position and influence as a government minister, he amassed tens of millions of dollars through corruption and money laundering.  He used this money to fund a lavish lifestyle, which included a $30 million Malibu mansion, a Ferrari, and hundreds of thousands of dollars in Michael Jackson memorabilia, including the famous glove.  This made for a unique forfeiture case caption:  United States v. One White Crystal-Covered Bad Tour Glove.

Under the terms of the settlement agreement, the son is required to forfeit his assets in the United States, including his Malibu mansion, Ferrari, and certain Michael Jackson memorabilia, as well as a sum of $1 million, which represents the value of the assets he removed from this country, including the famous glove.

This action, and the Kleptocracy Initiative’s other successes demonstrate that we are ready, willing, and able to confiscate the riches of corrupt leaders who drain the resources of their countries for their own benefit.

As I noted, our efforts to hold bribe takers as well as bribe payors accountable for their criminal conduct are greatly aided by our foreign partners.  Transnational bribery is a global problem and an international solution truly is beginning to develop.  Every day, more countries reject the notion that bribery in international business is inevitable and acceptable.  Indeed, in just the last few years several countries have enacted new anti-corruption laws or enhanced existing laws.  Admittedly, the global trend against foreign corruption continues to face many challenges, but the tide has turned and I truly believe that it is now on our side.

This level of collaboration is the product of hard work and strategic coordination, which has allowed us to forge the international partnerships that are essential to fight global corruption.  For example, just a couple of weeks ago, about 200 judges, prosecutors, investigators, and regulators from more than 50 countries, multi-development banks, and international organizations around the world joined prosecutors, investigators, and regulators from the Criminal Division, SEC, and FBI in Washington, D.C., for a week long training course to exchange ideas and best practices on combating foreign corruption.

I had the opportunity to participate in this meeting and saw its value first-hand.  The meeting provided a critical opportunity for the people who fight global corruption in the trenches every day to meet face-to-face, discuss ongoing cases, identify new opportunities to collaborate, and improve intelligence sharing.

The results from this increased international collaboration speak for themselves. For example, earlier this year, countries across the globe worked together to hold accountable individuals and companies engaged in a scheme to bribe government officials in Indonesia.

For many years, executives of Marubeni Corporation, a Japanese trading company, Alstom, a French energy company, along with executives of some of Alstom’s U.S. and Swiss-based subsidiaries, and others engaged in a scheme to pay millions of dollars in bribes to a high ranking member of the Indonesian Parliament and other Indonesian officials in exchange for assistance in securing a $118 million contract to provide power-related services in Indonesia.

The actors and actions in this scheme spanned the globe – from Indonesia, to the United States, Japan, Singapore, Switzerland, France and the United Kingdom.  Because of our cooperative relationships with our law enforcement partners in these countries, we were able to share vital information and evidence among countries and access individuals located overseas.  This coordination enabled us to counter to this intercontinental bribery scheme with an authoritative international response.

We charged Marubeni for its participation in the scheme.  Marubeni pleaded guilty in U.S. federal district court and was assessed an $88 million penalty in connection with its corrupt conduct.  We have also charged four Alstom executives for their role in this scheme, 3 of whom have pleaded guilty and 1 of whom is awaiting trial here in the United States.  We continue to investigate the case and anticipate additional law enforcement actions in the coming months.

The former Indonesian Parliament member was charged in Indonesia with accepting bribes, was found guilty of those charges, and was sentenced by an Indonesian court to serve three years in prison.

Together, these coordinated global actions sent a powerful message – countries all over the world are now engaged in the fight against foreign bribery and together, we can and will hold to account individuals and companies who engage in corruption, regardless of where they operate or reside.

The increase in international collaboration is not only enhancing our own FCPA enforcement efforts but it is also resulting in anti-corruption enforcement actions by other countries.  A good example of this were the coordinated cases brought in the United States and the Colombia against individuals involved in bribing a Colombian official for an oil services contract.

Former executives of PetroTiger, a British Virgin Islands oil and gas company with operations in Colombia and offices in New Jersey, and others engaged in a scheme to pay bribes to a government official in Colombia, in exchange for the official’s assistance in securing approval for an oil services contract worth roughly $39 million.

We charged PetroTiger’s two former CEOs, and former general counsel in the United States for their involvement in the scheme.  To date, two of those individuals have pleaded guilty and one is scheduled to stand trial in New Jersey next year.

The Colombian authorities charged a PetroTiger employee in Colombia for his involvement in the scheme and Colombian authorities are continuing to actively investigate other members of the corrupt scheme. These successes were made possible by the cooperation among nations, which included not only Colombia and the United States, but also the Republic of Panama and the Republic of the Philippines.

I am pleased to say that these are just two examples of successful international cooperation.  There are many other examples, and many more are in the pipeline.  Continued international collaboration is absolutely critical if we are going to have a meaningful impact on corruption across the globe and we are committed to maintaining – and enhancing – our working relationships with our foreign partners.

By enhancing our coordination with our overseas counterparts, continually improving our already successful methods of investigating and prosecuting FCPA cases, and increasing our efforts to prosecute corrupt officials and recover their ill-gotten gains, we are now, more than ever, making a tangible difference in the fight against foreign bribery.

When I last worked at the department and even over the 10 years that I was in private practice, it seemed that many FCPA investigations were initiated by self-disclosures.  While we of course still welcome self-disclosure, today we are far from reliant on it.  Indeed, Marubeni and Direct Access Partners were both situations in which the companies did not self-report. Instead, we developed the cases on our own.

And in a world of whistleblowers and international cooperation, I expect that will be the case more often than not going forward.  That said, we still encourage and reward self-disclosure and cooperation.

When you detect significant potential criminal conduct at your company, or a company that has retained you, I encourage you to disclose it to the Justice Department – and to do so in a timely manner.  As I am sure you all know, the department’s Principles of Federal Prosecution of Business Organizations provides that prosecutors should consider “the corporation’s timely and voluntary disclosure of wrongdoing and its willingness to cooperate in the investigation of its agents” in deciding how to proceed in a corporate investigation.

So, in addition to promptly disclosing the conduct to us, I also encourage you to conduct a thorough internal investigation and to share with us the facts you uncover in that investigation.  We do not expect you to boil the ocean in conducting your investigation but in order to receive full credit for cooperation, we do expect you to conduct a thorough, appropriately tailored investigation of the misconduct.

And we expect you to provide us useful facts in a timely manner.  And that includes, importantly, facts about the individuals responsible for the misconduct, no matter how high their rank may be.  Petro-Tiger is a fine example of the kind of cooperation we expect.  The company self-reported and fully disclosed the relevant facts to us, even though those facts implicated two CEOs and a top in-house counsel.  Petro-Tiger itself has not been charged.

The sooner you disclose the conduct to us, the more avenues we have to investigate culpable individuals.  And, the more open you are with us about the facts you learned about that conduct during your investigation, the more credit you will receive for cooperation.

But, if you delay notifying us about an executive’s conduct or attempt to whitewash the facts about an individual’s involvement, you risk receiving any credit for your “cooperation.”

This does not mean that we expect you to use law-enforcement style techniques to investigate your employees.  To the contrary, it simply means that when you do an internal investigation, and you choose to cooperate with us, you should understand that we will expect to hear not just what happened, but who did what, when, and where.      

We also expect that a truly cooperating company will provide relevant documents in a timely fashion, even if those documents are located overseas.  We recognize that some countries’ laws pose real challenges to data access and transfer of information, but we also know that many do not.

The Criminal Division investigates and prosecutes a large volume of international cases and through these cases, we have developed an understanding of these laws.  We will not give full cooperation credit to companies that hide behind foreign data privacy laws instead of providing overseas documents when they can.  Foreign data privacy laws exist to protect individual privacy, not to shield companies that purport to be cooperating in criminal investigations.    

Put simply, cooperation – and the quality and timeliness of that cooperation – matter.  This is a well-established principle that we have applied in criminal cases across the spectrum – from violent and organized crime cases to corporate fraud cases – for decades.

If a company works with us, it not only helps the Department, but it helps itself.  Petro-Tiger is a fine example.  But if a company chooses not to cooperate, or it cooperates too little and too late, those choices also have consequences.  If you need an example of that, you need look no further than our resolutions with Marubeni and, in another context, BNPP.

Fighting corruption is not a choice we have made. It is, increasingly, a global imperative.  Given the critical nature of this mission, we are bringing more resources to bear than ever before – and we will continue doing so.  We have achieved significant successes using our traditional FCPA enforcement tools.  We are building on those successes and continuing to evolve our enforcement efforts.  Especially with the power of so many countries now standing by our side, we are determined to use every lawful means available to hold the perpetrators of corruption to account.

Thank you again for having me here, and enjoy the conference.

HP RUSSIA PLEADS GUILTY BRIBING RUSSIAN GOVERNMENT OFFICIALS

FROM:  U.S. JUSTICE DEPARTMENT 

FOR IMMEDIATE RELEASE

Thursday, September 11, 2014

Hewlett-Packard Russia Pleads Guilty to and Sentenced for Bribery of Russian Government Officials

ZAO Hewlett-Packard A.O. (HP Russia), an international subsidiary of the California technology company Hewlett-Packard Company (HP Co.), pleaded guilty to felony violations of the Foreign Corrupt Practices Act (FCPA) and was then sentenced for bribing Russian government officials to secure a large technology contract with the Office of the Prosecutor General of the Russian Federation.

Principal Deputy Assistant Attorney General Marshall L. Miller of the Justice Department’s Criminal Division, U.S. Attorney Melinda Haag of the Northern District of California, Assistant Director in Charge Andrew G. McCabe of the FBI’s Washington Field Office and Chief Richard Weber of the Internal Revenue Service – Criminal Investigation (IRS-CI) made the announcement.

HP Russia pleaded guilty this morning before U.S. District Judge D. Lowell Jensen of the Northern District of California to conspiracy and substantive violations of the anti-bribery and accounting provisions of the FCPA. According to the plea agreement, HP Russia executives created a multimillion dollar secret slush fund, at least part of which was used to bribe Russian government officials who awarded the company a contract valued at more than € 35 million.

At the conclusion of the plea proceeding, the court sentenced HP Russia to pay a $58,772,250 fine.

“In a brazen violation of the FCPA, Hewlett Packard’s Russia subsidiary used millions of dollars in bribes from a secret slush fund to secure a lucrative government contract,” said Principal Deputy Assistant Attorney General Miller.  “Even more troubling was that the government contract up for sale was with Russia’s top prosecutor’s office. Tech companies, like all companies, must compete on a level playing field, not resort to secret books and sham transactions to hide millions of dollars in bribes.  The Criminal Division has been at the forefront of this fight because when corruption takes hold overseas, American companies and the rule of law are harmed.  Today’s conviction and sentencing are important steps in our ongoing efforts to hold accountable those who corrupt the international marketplace.”

“Today’s conviction and sentence of HP Russia demonstrates that the United States Attorney’s Office is dedicated to aggressively prosecuting all forms of corporate fraud that touch our district, wherever they may occur,” said U.S. Attorney Haag.  “HP’s cooperation during the investigation is what we expect of major corporate leaders facing the challenges of doing business around the world.”

“For more than a decade HP Russia business executives participated in an elaborate scheme that involved paying bribes to government officials in exchange for large contracts,” said FBI Assistant Director in Charge McCabe. “There is no place for bribery in any business model or corporate culture. Along with the Department of Justice, the IRS and international law enforcement partners, the FBI is committed to investigating corrupt backroom deals that threaten our global commerce.”



“HP Russia thought that they could play by a different set of rules than the rest of the international business community,” said IRS-CI Chief Weber. “Unfortunately, they are not alone. For other companies out there conducting business in this way, let the message be very clear—we will relentlessly follow the money trail. IRS-CI is a trusted leader in the pursuit of corporations and executives who circumvent the law. CI is committed to maintaining fair competition, free of corrupt. practices, through a potent synthesis of global teamwork and our dynamic financial investigative talents.”

According to the statement of facts filed with the plea agreement, HP Russia created excess profit margins to finance the slush fund through an elaborate buy-back deal scheme. HP subsidiaries first sold the computer hardware and other technology products called for under the contract to a Russian channel partner, then bought the same products back from an intermediary at a nearly €8 million mark-up and an additional €4.2 million in purported services, then sold the same products to the Office of the Prosecutor General of the Russian Federation at the increased price. The payments to the intermediary were then largely transferred through multiple layers of shell companies, some of which were directly associated with government officials. Proceeds from the slush fund were spent on travel services, luxury automobiles, expensive jewelry, clothing, furniture and various other items.

To keep track of and conceal these corrupt payments, the conspirators inside HP Russia kept two sets of books: secret spreadsheets that detailed the categories of bribe recipients, and sanitized versions that hid the bribes from others outside of HP Russia. They also entered into off-the-books side agreements to further mask the bribes. As one example, an HP Russia executive executed a letter agreement to pay €2.8 million in purported “commission” fees to a U.K.-registered shell company, which was linked to a director of the Russian government agency responsible for managing the Office of the Prosecutor General of the Russian Federation project. HP Russia never disclosed the existence of the agreement to internal or external auditors or management outside of HP Russia.

On April 9, 2014, the government also announced criminal resolutions with HP subsidiaries in Poland and Mexico which violated the FCPA in connection with contracts with Poland’s national police agency and Mexico’s state-owned petroleum company, respectively. Pursuant to a deferred prosecution agreement, the department filed a criminal information charging Hewlett-Packard Polska, Sp. Z o.o. with violating the accounting provisions of the FCPA. Hewlett-Packard Mexico, S. de R.L. de C.V. entered into a non-prosecution agreement with the government pursuant to which it has agreed to forfeit proceeds and has admitted and accepted responsibility for its misconduct. In total, the three HP entities will pay $76,760,224 in criminal penalties and forfeiture.

In a related FCPA matter, the U.S. Securities and Exchange Commission (SEC) filed a proposed final judgment in April 2014 to which HP Co. consented. Under the terms of the proposed final judgment, HP Co. has paid $31,472,250 in disgorgement, prejudgment interest and civil penalties, bringing the total amount of U.S. criminal and regulatory penalties against HP Co. and its subsidiaries to more than $108 million.  

Court filings acknowledge HP Co.’s extensive cooperation with the department, including conducting a robust internal investigation, voluntarily making U.S. and foreign employees available for interviews, and collecting, analyzing, and organizing voluminous evidence for the department.  Court filings also acknowledge the extensive anti-corruption remedial efforts undertaken by HP Co., including taking appropriate disciplinary action against culpable employees, and enhancing HP Co.’s internal accounting, reporting, and compliance functions.

The case is being investigated by the FBI’s Washington Field Office with assistance from the FBI’s New York Field Office and FBI Legal Attaché offices in Mexico City, Moscow, Berlin and Warsaw, and the IRS-CI’s Oakland Field Office. The case is being prosecuted by Trial Attorneys Ryan Rohlfsen and Jason Linder of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Adam A. Reeves of the Northern District of California. The Criminal Division’s Office of International Affairs also provided significant assistance in this matter.

The Justice Department expresses its deep appreciation for the significant assistance provided by the SEC’s Division of Enforcement, the Polish Anti-Corruption Bureau, the Polish Appellate Prosecutor’s Office, the Public Prosecutor’s Office in Dresden, Germany, and our law enforcement partners in Mexico, the United Kingdom, Lithuania, Latvia, Italy, Spain and Hungary.  

SEC ALLEGES WEATHERFORD INTERNATIONAL AUTHORIZED BRIBES TO FOREIGN OFFICIALS

FROM:  SECURITIES AND EXCHANGE COMMISSION 
SEC Charges Weatherford International with FCPA Violations

The Securities and Exchange Commission today charged oilfield services company Weatherford International with violating the Foreign Corrupt Practices Act (FCPA) by authorizing bribes and improper travel and entertainment for foreign officials in the Middle East and Africa to win business, including kickbacks in Iraq to obtain United Nations Oil-for-Food contracts.

The SEC alleges that Weatherford and its subsidiaries falsified its books and records to conceal not only these illicit payments, but also commercial transactions with Cuba, Iran, Syria, and Sudan that violated U.S. sanctions and export control laws. Weatherford failed to establish an effective system of internal accounting controls to monitor risks of improper payments and prevent or detect misconduct. The company reaped more than $59.3 million in profits from business obtained through improper payments, and more than $30 million in profits from its improper sales to sanctioned countries.

Swiss-based Weatherford, which has substantial operations in Houston, has agreed to pay more than $250 million to settle the SEC’s charges and parallel actions by the Department of Justice’s Fraud Section, U.S. Attorney’s Office for the Southern District of Texas, Department of Commerce’s Bureau of Industry and Security, and Department of Treasury’s Office of Foreign Assets Control.

According to the SEC’s complaint filed in federal court in Houston, the misconduct occurred from at least 2002 to 2011. In Angola, for example, Weatherford’s legal department permitted its subsidiary to use an agent who insisted that an FCPA clause be omitted from the consultancy agreement. The company took no steps to determine whether the agent was paying bribes to foreign officials, and the agent used sham work orders and invoices to pay bribes that ensured the renewal of a lucrative oil services contract for Weatherford in Angola. The same agent made illicit payments to obtain commercial contracts for Weatherford in Congo. The company also allowed its subsidiary to enter into a joint venture agreement with companies whose beneficial owners included Angolan oil company officials and a relative of an Angolan Minister in order to win business. A Weatherford employee reported in a 2006 ethics questionnaire that Weatherford personnel were making payments to government officials in Angola and elsewhere, but the company failed to investigate.

The SEC’s complaint also alleges that Weatherford failed to perform due diligence on a distributor suggested by an official at a national oil company in the Middle East. From 2005 to 2011, Weatherford and its subsidiaries awarded more than $11.8 million in improper “volume discounts” to the distributor – money intended for the creation of a slush fund to pay foreign officials.

According to the SEC’s complaint, the misconduct went beyond the use of agents or other third parties. Weatherford provided improper travel and entertainment to officials of a state-owned company in Algeria with no legitimate business purpose. For example, Weatherford paid for a 2006 FIFA World Cup trip by two of the officials, the July 2006 honeymoon of an official’s daughter, and an October 2005 religious trip to Saudi Arabia by an official and his family that was improperly recorded as a donation in Weatherford’s books and records. Weatherford’s Middle East subsidiary also made more than $1.4 million in improper payments to obtain nine contracts under the Oil-for-Food program in 2002. Iraqi ministries demanded improper “inland transportation fees” in an effort to subvert the UN program. Weatherford’s subsidiary complied with the Iraqi demands and paid more than $115,000 in fees despite invoices that included charges inconsistent with the actual deliveries. Weatherford obtained more than $7 million in profits from the misconduct.

The SEC further alleges that managers at Weatherford’s subsidiary in Italy flouted the lack of internal controls and misappropriated more than $200,000 in company funds, some of which was improperly paid to Albanian tax auditors. The managers misreported cash advances, diverted payments on previously paid invoices, misappropriated government rebate checks, and received reimbursement for such purchases as golf equipment and perfume that did not relate to business activities.

According to the SEC’s complaint, Weatherford employees created false accounting and inventory records from 2002 to 2007 to hide the illegal commercial sales to Cuba, Syria, Sudan, and Iran. During this time period, exporting or re-exporting goods or services from the U.S. to these sanctioned countries was prohibited. The falsified financial statements and books and records of Weatherford subsidiaries involved in the misconduct were consolidated into the financial statements of the parent company.

The SEC’s complaint alleges that Weatherford violated the anti-bribery, books and records, and internal accounting controls provisions of the FCPA, specifically Sections 30A, 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934. Weatherford agreed to pay $90,984,844 in disgorgement, $4,399,423.34 in pre-judgment interest, and a $1.875 million civil penalty assessed in part for lack of cooperation during the investigation. $31,646,907 of the payment to the SEC will be satisfied by Weatherford’s agreement to pay an equal amount to the U.S. Attorney’s Office. Weatherford agreed to pay $87 million in criminal fines to the Department of Justice for the FCPA violations, and $100 million to the other three agencies for the sanctions violations. The company also must comply with certain undertakings, including the retention of an independent compliance monitor for 18 months and self-reporting to the SEC staff for an additional 18 months.

The SEC’s investigation, which is continuing, has been conducted by Tracy L. Price, Kelly G. Kilroy, and Stanley Cichinski of the FCPA Unit as well as Natalie Lentz and Robert Dodge. The SEC appreciates the assistance of the Justice Department, Commerce Department, Treasury Department, and U.S. Attorney’s Office in Houston.

RALPH LAUREN CORPORATION AVOIDS PROSECUTION BY SEC FOR ALLEGED BRIBING OF FOREIGN OFFICIALS

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C., April 22, 2013 — The Securities and Exchange Commission today announced a non-prosecution agreement (NPA) with Ralph Lauren Corporation in which the company will disgorge more than $700,000 in illicit profits and interest obtained in connection with bribes paid by a subsidiary to government officials in Argentina from 2005 to 2009. The misconduct was uncovered in an internal review undertaken by the company and promptly reported to the SEC.

The SEC has determined not to charge Ralph Lauren Corporation with violations of the Foreign Corrupt Practices Act (FCPA) due to the company's prompt reporting of the violations on its own initiative, the completeness of the information it provided, and its extensive, thorough, and real-time cooperation with the SEC's investigation. Ralph Lauren Corporation's cooperation saved the agency substantial time and resources ordinarily consumed in investigations of comparable conduct.

The NPA is the first that the SEC has entered involving FCPA misconduct. NPAs are part of the SEC Enforcement Division's Cooperation Initiative, which rewards cooperation in SEC investigations. In parallel criminal proceedings, the Justice Department entered into an NPA with Ralph Lauren Corporation in which the company will pay an $882,000 penalty.

"When they found a problem, Ralph Lauren Corporation did the right thing by immediately reporting it to the SEC and providing exceptional assistance in our investigation," said George S. Canellos, Acting Director of the SEC's Division of Enforcement. "The NPA in this matter makes clear that we will confer substantial and tangible benefits on companies that respond appropriately to violations and cooperate fully with the SEC."

Kara Brockmeyer, the SEC's FCPA Unit Chief, added, "This NPA shows the benefit of implementing an effective compliance program. Ralph Lauren Corporation discovered this problem after it put in place an enhanced compliance program and began training its employees. That level of self-policing along with its self-reporting and cooperation led to this resolution."

According to the NPA, Ralph Lauren Corporation's cooperation included:
Reporting preliminary findings of its internal investigation to the staff within two weeks of discovering the illegal payments and gifts.
Voluntarily and expeditiously producing documents.
Providing English language translations of documents to the staff.
Summarizing witness interviews that the company's investigators conducted overseas.
Making overseas witnesses available for staff interviews and bringing witnesses to the U.S.
According to the NPA, the bribes occurred during a period when Ralph Lauren Corporation lacked meaningful anti-corruption compliance and control mechanisms over its Argentine subsidiary. The misconduct came to light as a result of the company adopting measures to improve its worldwide internal controls and compliance efforts, including implementation of an FCPA compliance training program in Argentina.

As outlined in the NPA, Ralph Lauren Corporation's Argentine subsidiary paid bribes to government and customs officials to improperly secure the importation of Ralph Lauren Corporation's products in Argentina. The purpose of the bribes, paid through its customs broker, was to obtain entry of Ralph Lauren Corporation's products into the country without necessary paperwork, avoid inspection of prohibited products, and avoid inspection by customs officials. The bribe payments and gifts to Argentine officials totaled $593,000 during a four-year period.

Under the NPA, Ralph Lauren Corporation agreed to pay $593,000 in disgorgement and $141,845.79 in prejudgment interest.

The SEC took into account the significant remedial measures undertaken by Ralph Lauren Corporation, including a comprehensive new compliance program throughout its operations. Among Ralph Lauren Corporation's remedial measures have been new compliance training, termination of employment and business arrangements with all individuals involved in the wrongdoing, and strengthening its internal controls and its procedures for third party due diligence. Ralph Lauren Corporation also conducted a risk assessment of its major operations worldwide to identify any other compliance problems. Ralph Lauren Corporation has ceased operations in Argentina.

The SEC's investigation was conducted by Kristin A. Snyder and Tracy L. Davis in the San Francisco Regional Office. The SEC appreciates the assistance of the U.S. Department of Justice's Fraud Section, the U.S. Attorney's Office for the Eastern District of New York, and the Federal Bureau of Investigation in this matter.

FORMER SIEMENS EXECUTIVE SETTLES CHARGES OF BRIBERY

FROM: U.S. SECURITIES EXCHANGE COMMISSION
Former Siemens Executive Uriel Sharef Settles Bribery Charges

The Securities and Exchange Commission announced today that on April 15, 2013, the U.S. District Court for the Southern District of New York entered a final judgment against Uriel Sharef, a former officer and board member of Siemens Aktiengesellschaft (Siemens). The settlement resolves the Commission's civil action against Sharef for his role in Siemens' decade-long bribery scheme to retain a $1 billion government contract to produce national identity cards for Argentine citizens. The final judgment, to which Sharef consented, enjoins him from violating the anti-bribery and related internal controls provisions of the FCPA and orders him to pay a $275,000 civil penalty, the second highest penalty assessed against an individual in an FCPA case.

On December 13, 2011, the Commission filed a civil action against Uriel Sharef and six other defendants, alleging that between 2001 and 2007, Sharef, along with other Siemens executives, paid bribes to senior government officials in Argentina in connection with a government contract to provide national identity cards to all Argentine citizens. The officials included two Argentine presidents and cabinet ministers in two presidential administrations. During this period, Sharef was a member of Siemens Managing Board, or "Vorstand," and was the most senior officer charged in connection with the scheme. Sharef met with payment intermediaries in the United States and agreed to pay $27 million in bribes to Argentine officials. Sharef also enlisted subordinates to conceal the payments by circumventing Siemens' internal accounting controls.

According to the SEC's complaint, approximately $31.3 million of the $100 million in bribes paid were made after March 12, 2001, when Siemens became a U.S. issuer subject to U.S. securities laws. As a result of the bribe payments it made, Siemens received an arbitration award in 2007 against the government of Argentina of more than $217 million plus interest for the contract. In August 2009, after settling bribery charges with the U.S. and Germany, Siemens waived the arbitration award.

The final judgment permanently enjoins Sharef from violating Sections 30A and 13(b)(5) of the Securities Exchange Act of 1934, and Rule 13b2-1 thereunder, and from aiding and abetting Siemens' violations of Exchange Act Sections 13(b)(2)(A) and13(b)(2)(B). The judgment also orders Sharef to pay a civil penalty of $275,000. Sharef settled the SEC charges without either admitting or denying the allegations in the SEC's complaint.

The SEC appreciates the assistance of the U.S. Department of Justice, Fraud Section, the Federal Bureau of Investigation, and the Office of the Prosecutor General in Munich, Germany in this matter.

PARKER DRILLING CHARGED BY SEC WITH VIOLATING FORIEGN CORRUPT PRACTICES ACT

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
SEC Charges Parker Drilling Company with Violating the Foreign Corrupt Practices Act

The Securities and Exchange Commission today charged Parker Drilling Company, a worldwide drilling services and project management firm, with violating the Foreign Corrupt Practices Act (FCPA) by authorizing improper payments to a third-party intermediary retained to assist the company in resolving customs disputes.

The SEC's complaint, filed in federal district court in Alexandria, Virginia, alleges that in 2004 Parker Drilling authorized payments to a Nigerian agent totaling $1.25 million. The company did so despite former senior executives knowing that the agent intended to use the funds to "entertain" Nigerian officials involved in resolving Parker Drilling's ongoing customs problems. Following the Nigerian agent's work, the company received an unexplained $3,050,000 reduction of a previously assessed customs fine, and the company was permitted to nationalize and sell its Nigerian rigs.

To settle the SEC's charges, Parker Drilling will pay disgorgement of $3,050,000 plus pre-judgment interest of $1,040,818. Parker Drilling consented to the entry of a final judgment permanently enjoining it from violating Sections 30A, 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act. The proposed settlement is subject to court approval.

In the parallel criminal proceedings, the Department of Justice entered into a Deferred Prosecution Agreement with Parker Drilling in which the company will pay an $11,760,000 penalty.

The SEC acknowledges the assistance of the Department of Justice's Fraud Section, the Federal Bureau of Investigation, and the United Kingdom's Crown Prosecution Service and Metropolitan Police Service.

SEC CHARGES TYCO INTERNATIONAL LTD. WITH VIOLATING THE FOREIGN CORRUPT PRACTICES ACT

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C., Sept. 24, 2012 — The Securities and Exchange Commission today charged Tyco International Ltd. with violating the Foreign Corrupt Practices Act (FCPA) when subsidiaries arranged illicit payments to foreign officials in more than a dozen countries.

The SEC alleges that subsidiaries of the Swiss-based global manufacturer perpetuated schemes that typically involved payments of fake "commissions" or the use of third-party agents to funnel money improperly to obtain lucrative contracts. Overall, Tyco reaped illicit benefits amounting to more than $10.5 million as a result of the paid to win business.

Tyco, whose securities are publicly traded in the U.S., agreed to pay more than $26 million to settle the SEC’s charges and resolve a criminal matter announced today by the U.S. Department of Justice.

"Tyco’s subsidiaries operating in Asia and the Middle East saw illicit payment schemes as a typical way of doing business in some countries, and the company illicitly reaped substantial financial benefits as a result," said Scott W. Friestad, Associate Director of the SEC’s Division of Enforcement.

The SEC alleges that Tyco subsidiaries operated 12 different illicit payment schemes around the world starting before 2006 and continuing until 2009. The most profitable scheme occurred in Germany, where agents of a Tyco subsidiary paid third parties to secure contracts or avoid penalties or fines in several countries. These payments were falsely recorded as "commissions" in Tyco’s books and records when they were in fact bribes to pay off government customers. Tyco’s benefit as a result of these illicit payments was more than $4.6 million.

According to the SEC’s complaint, Tyco’s subsidiary in China signed a contract with the Chinese Ministry of Public Security for $770,000 but reportedly paid approximately $3,700 to the "site project team" of a state-owned corporation to be able to obtain the contract. This amount was improperly recorded as a commission. Tyco’s subsidiary in France recorded payments to individuals from 2005 to 2009 for "business introduction services." However, one of the individuals receiving payments was a security officer at a government-owned mining company in Mauritania, and many of the earlier payments were deposited in the official’s personal bank account in France. In Thailand, Tyco’s subsidiary had a contract to install a CCTV system in the Thai Parliament House in 2006, and paid more than $50,000 to a Thai entity that acted as a consultant. The invoice for the payment refers to "renovation work," but Tyco is unable to ascertain what, if any, work was actually done.

The SEC alleges that another scheme occurred in Turkey, where Tyco’s subsidiary retained a New York City-based sales agent who made illicit payments involving the sale of microwave equipment in September 2006 to an entity controlled by the Turkish government. Employees at Tyco’s subsidiary were well aware that the agent was paying foreign government customers to obtain orders. One internal e-mail stated, "Hell, everyone knows you have to bribe somebody to do business in Turkey. Nevertheless, I’ll play it dumb if [the sales agent] should call." The benefit obtained by Tyco as a result of the September 2006 deal was $44,513.

The SEC’s complaint alleges that Tyco’s books and records were misstated as a result of the misconduct, and Tyco failed to devise and maintain internal controls sufficient to detect the violations. The complaint also alleges that the payments by the sales agent to Turkish government officials violated the anti-bribery provisions of the FCPA.

In arriving at the settlement, the Commission considered Tyco’s extensive efforts to identify and remediate its wrongdoing. Tyco conducted a global review and internal investigation for potential FCPA violations and voluntarily disclosed its findings to the SEC while implementing significant, broad-spectrum remedial measures. Tyco consented to a proposed final judgment that orders the company to pay $10,564,992 in disgorgement and $2,566,517 in prejudgment interest. Tyco also agreed to be permanently enjoined from violating Section 13(b)(2)(A), Section 13(b)(2)(B), and Section 30A(a) of the Securities Exchange Act of 1934.

In the parallel criminal proceedings, the Justice Department entered into a Non-Prosecution Agreement with Tyco in which the company will pay a penalty of approximately $13.68 million.

The SEC’s case was investigated by David Frohlich, Stephen E. Jones, Matthew B. Greiner, and Brent S. Mitchell. The Commission acknowledges the assistance of the U.S. Department of Justice’s Fraud Section in this matter.

HAITIAN BRIBE GETS AMERICAN EXECUTIVE 15 YEARS IN PRISON

The following excerpt is from the Department of Justice website:
Tuesday, October 25, 2011
Longest Prison Term Ever Imposed in an FCPA Case
WASHINGTON – The former president of Terra Telecommunications Corp. was sentenced today to 15 years in prison for his role in a scheme to pay bribes to Haitian government officials at Telecommunications D’Haiti S.A.M. (Haiti Teleco), a state-owned telecommunications company. This is the longest sentence ever imposed in a case involving the Foreign Corrupt Practices Act (FCPA). The former executive vice president of Terra was also sentenced today to 84 months in prison for his role in the bribery scheme.
The sentences were announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Wifredo A. Ferrer for the Southern District of Florida; and Special Agent in Charge Jose A. Gonzalez of Internal Revenue Service, Criminal Investigation Division (IRS-CID), Miami Field Office.
Joel Esquenazi, 52, of Miami, and Carlos Rodriguez, 55, of Davie, Fla., were sentenced by U.S. District Judge Jose E. Martinez in the Southern District of Florida. Judge Martinez also ordered the defendants to forfeit $3.09 million.
Esquenazi and Rodriguez were convicted in August 2011 of one count of conspiracy to violate the FCPA and wire fraud; seven counts of FCPA violations; one count of money laundering conspiracy; and 12 counts of money laundering.
“This sentence – the longest sentence ever imposed in an FCPA case – is a stark reminder to executives that bribing government officials to secure business advantages is a serious crime with serious consequences,” said Assistant Attorney General Breuer. “A company’s profits should be driven by the quality of its goods and services, and not by its ability and willingness to pay bribes to corrupt officials to get business. As today’s sentence shows, we will continue to hold accountable individuals and companies who engage in such corruption.”
“Today’s long prison sentences confirm the serious consequences of ignoring corporate ethics when doing business abroad,” said U.S. Attorney Ferrer. “The FCPA ensures that American businesses are not up for sale.”
“These individuals created a sophisticated way to launder funds by creating shell corporations and false records to conceal bribe payments to foreign government officials,” said IRS Special Agent in Charge Gonzalez. “No matter how sophisticated the scheme, IRS special agents will uncover it and unscrupulous individuals and businesses will be held accountable for their actions as indicated by these sentences.”
According to the evidence presented at trial, Esquenazi was the president and Rodriguez was the executive vice president of Terra, which was headquartered in Miami-Dade County, Fla. Haiti Teleco was the sole provider of land line telephone service in Haiti. Terra had a series of contracts with Teleco that allowed the company’s customers to place telephone calls to Haiti.
At trial, the evidence showed that the defendants participated in a scheme to commit foreign bribery and money laundering from November 2001 through March 2005, during which time the telecommunications company paid more than $890,000 to shell companies to be used for bribes to Teleco officials. Esquenazi and Rodriguez authorized these bribe payments to successive directors of international relations at Teleco.
The purpose of these bribes, according to the evidence presented at trial, was to obtain various business advantages from the Haitian officials for Terra, including the issuance of preferred telecommunications rates, reductions in the number of minutes for which payment was owed, and the continuance of Terra’s telecommunications connection with Haiti. To conceal the bribe payments, the defendants used various shell companies to receive and forward the payments. In addition, they created false records claiming that the payments were for “consulting services,” which were never intended to be performed or actually performed.
Four other individuals were previously convicted and sentenced for their roles in the bribery scheme.
On April 27, 2009, Antonio Perez, a former controller at Terra, pleaded guilty to one count of conspiracy to violate the FCPA and money laundering. On Jan. 12, 2010, he was sentenced to 24 months in prison, which he is currently serving.
On May 15, 2009, Juan Diaz, the president of J.D. Locator Services, pleaded guilty to one count of conspiracy to violate the FCPA and money laundering. He admitted to receiving more than $1 million in bribe money from telecommunications companies. On July 30, 2010, he was sentenced to 57 months in prison, which he is currently serving.
On Feb. 19, 2010, Jean Fourcand, the president and director of Fourcand Enterprises Inc., pleaded guilty to one count of money laundering for receiving and transmitting bribe monies in the scheme. On May 5, 2010, he was sentenced to six months in prison.
On March 12, 2010, Robert Antoine, a former director of international affairs for Haiti Teleco, pleaded guilty to one count of conspiracy to commit money laundering. He admitted to receiving more than $1 million in bribes from Miami-based telecommunications companies. On June 2, 2010, he was sentenced to 48 months in prison, which he is currently serving.
In a superseding indictment, Washington Vasconez Cruz, Amadeus Richers, Cinergy Telecommunications Inc., Patrick Joseph, Jean Rene Duperval and Marguerite Grandison are charged in a related scheme to commit foreign bribery and money laundering from December 2001 through January 2006. No trial date is currently set. An indictment is merely an accusation, and defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt.
The government’s investigation is ongoing. The Department of Justice is grateful to the government of Haiti for continuing to provide substantial assistance in gathering evidence during this investigation. In particular, Haiti’s financial intelligence unit, the Unité Centrale de Renseignements Financiers (UCREF), the Bureau des Affaires Financières et Economiques (BAFE), which is a specialized component of the Haitian National Police, and the Ministry of Justice and Public Security provided significant cooperation and coordination in this ongoing investigation.”