3 PLEAD GUILTY TO BRIBERY OF FOREIGN OFFICIALS, MONEY LAUNDERING AND CONSPIRACY TO OBSTRUCT JUSTICE

FROM:  U.S. JUSTICE DEPARTMENT 
Friday, August 30, 2013

Three Former Broker-dealer Employees Plead Guilty in Manhattan Federal Court to Bribery of Foreign Officials, Money Laundering and Conspiracy to Obstruct Justice

Three employees of a New York-based U.S. broker-dealer have pleaded guilty for their roles in bribery schemes involving two state economic development banks in Venezuela.

Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Preet Bharara of the Southern District of New York and Assistant Director in Charge George Venizelos of the New York Office of the FBI made the announcement.

Ernesto Lujan, Jose Alejandro Hurtado and Tomas Alberto Clarke Bethancourt pleaded guilty in New York federal court to conspiring to violate the Foreign Corrupt Practices Act (FCPA), to violate the Travel Act and to commit money laundering, as well as substantive counts of these offenses.  These charges relate to a scheme to bribe a foreign official named Maria de los Angeles Gonzalez de Hernandez at Banco de Desarrollo Económico y Social de Venezuela (BANDES), a state economic development bank in Venezuela, in exchange for receiving trading business from BANDES.  Lujan, Hurtado and Clarke each also pleaded guilty to an additional charge of conspiring to violate the FCPA in connection with a similar scheme to bribe a foreign official employed by Banfoandes (the “Banfoandes Foreign Official”), another state economic development bank in Venezuela, and to conspiring to obstruct an examination by the U.S. Securities and Exchange Commission (SEC) of the New York-based broker-dealer (the “Broker-Dealer”) where all three defendants had worked, to conceal the true facts of the Broker-Dealer’s relationship with BANDES.

Lujan, 50, and Clarke, 43, entered their guilty pleas yesterday before U.S. Magistrate Judge James C. Francis IV, and Hurtado, 38, pleaded guilty today, also before Judge Francis. The men each pleaded guilty to the same six offenses and face a maximum penalty of five years in prison on each count except money laundering, which carries a maximum penalty of 20 years in prison.  Sentencing for Lujan and Clarke is scheduled for Feb. 11, 2014, before U.S. District Judge Paul G. Gardephe.  Hurtado is scheduled for sentencing before U.S. District Judge Harold Baer Jr. on March 6, 2014.

According to the informations filed against Lujan, Hurtado and Clarke this week, the criminal complaints previously filed, and statements made during the plea proceedings, Lujan, Clarke and Hurtado worked or were associated with the Broker-Dealer, principally through its Miami offices.  In 2008, the Broker-Dealer established a group called the Global Markets Group, which included Lujan, Clarke and Hurtado, 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 the bank a mark-up on purchases and a mark-down on sales.

The Broker-Dealer also conducted business with Banfoandes, another state development bank in Venezuela that, along with its 2009 successor Banco Bicentenario, operated under the direction of the Venezuelan Ministry of Finance.  Banfoandes acted as a financial agent of the Venezuelan government in order to promote economic and social development by, among other things, offering credit to low-income Venezuelans.  The Banfoandes Foreign Official was responsible for some of Banfoandes’s foreign investments.

Court records state that from early 2009 through 2012, Lujan, Clarke and Hurtado participated in a bribery scheme in which Gonzalez allegedly 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 mark-ups and mark-downs from trades with BANDES.  Agents and employees of the Broker-Dealer, including Lujan, Clarke and Hurtado, devised a split with Gonzalez of the commissions paid by BANDES to the Broker-Dealer.  Emails, account records and other documents collected from the Broker-Dealer and other sources reveal that Gonzalez allegedly received a substantial share of the revenue generated by the Broker-Dealer for BANDES-related trades.  Specifically, Gonzalez allegedly received kickbacks and payments from Broker-Dealer agents and employees that were frequently in six-figure amounts.

To further conceal the scheme, the kickbacks to Gonzalez were often paid using intermediary corporations and offshore accounts that she held in Switzerland, among other places.  For instance, Lujan, Clarke and Hurtado used accounts they controlled in Switzerland to transfer funds to an account Gonzalez allegedly controlled in Switzerland.  Additionally, Hurtado and his spouse received substantial compensation from the Broker-Dealer, portions of which Hurtado transferred to an account allegedly held by Gonzalez in Miami and to an account held by an associate of Gonzalez in Switzerland.  Hurtado also sought and allegedly received reimbursement from Gonzalez for the U.S. income taxes he had paid on money that he used to make kickback payments to Gonzalez.  Lujan and Clarke also derived substantial profit from their roles in the bribery scheme.
 
According to court records, beginning in or about November 2010, the SEC commenced a periodic examination of the Broker-Dealer, and from November 2010 through March 2011 the SEC’s examination staff made several visits to the Broker-Dealer’s offices in Manhattan.  In early 2011, Lujan, Clarke and Hurtado discussed their concern that the SEC was examining the Broker-Dealer’s relationship with BANDES and asking questions regarding certain emails and other information that the SEC examination staff had discovered.  Lujan, Clarke and Hurtado agreed that they would take steps to conceal the true facts of the Broker-Dealer’s relationship with BANDES, including deleting emails.  Lujan, Clarke and Hurtado then, in fact, deleted emails.  Additionally as part of this effort to obstruct the SEC examination, Clarke lied to SEC examination staff in response to an interview question about his relationship to an individual who had received purported foreign associate payments relating to BANDES.

In a related scheme, from 2008 through mid-2009, Lujan, Clarke and Hurtado paid bribes to the Banfoandes Foreign Official, who, in exchange, directed Banfoandes trading business to the Broker-Dealer.

Gonzalez was charged in a criminal complaint and arrested on May 3, 2013, in connection with the BANDES bribery scheme.  The charges against Gonzalez are merely accusations, and she is presumed innocent unless and until proven guilty.

This ongoing investigation is being conducted by the FBI, with assistance from the SEC and the Justice Department’s Office of International Affairs.

Assistant Chief James Koukios and Trial Attorneys Maria Gonzalez Calvet and Aisling O’Shea 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’s Securities and Commodities Fraud Task Force are in charge of the prosecution.  Assistant U.S. Attorney Carolina Fornos is responsible for the forfeiture aspects of the case.

FORMER CONSULTANT FOR WILLBROS INTERNATIONAL INC., SENTENCED FOR ROLE IN BRIBERY SCHEME

FROM: U.S. DEPARTMENT OF JUSTICE
Friday, May 3, 2013
Former Consultant for Willbros International Sentenced in Connection with Foreign Bribery Scheme

A former consultant for Willbros International Inc. (Willbros International), a subsidiary of Houston-based Willbros Group Inc. (Willbros), was sentenced today for his role in a conspiracy to pay more than $6 million in bribes to government officials of the Federal Republic of Nigeria and officials from a Nigerian political party, Acting Assistant Attorney General Mythili Raman of the Criminal Division and Assistant Director in Charge Valerie Parlave of the FBI’s Washington Field Office announced today.

Paul G. Novak, 46, was sentenced today to serve 15 months in prison by U.S. District Judge Simeon T. Lake III of the Southern District of Texas. The court took into consideration Novak’s cooperation, and the sentence was consistent with the government’s recommendation. In addition to the prison sentence, Novak was ordered to pay a $1 million fine and to serve two years of supervised release following his release from prison. In sentencing Novak, the court took into consideration the assistance Novak provided the government in ongoing investigations.

Novak pleaded guilty to one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and one substantive count of violating the FCPA. Novak admitted that from approximately late-2003 to March 2005, he conspired with others to make a series of corrupt payments totaling more than $6 million to various Nigerian government officials and officials from a Nigerian political party to assist Willbros and its joint venture partner, a construction company based in Mannheim, Germany, in obtaining and retaining the Eastern Gas Gathering System (EGGS) Project, which was valued at approximately $387 million. The EGGS project was a natural gas pipeline system in the Niger Delta designed to relieve existing pipeline capacity constraints.

According to court records, Novak and his alleged co-conspirators Kenneth Tillery, Jason Steph, Jim Bob Brown, three employees from Willbros’s joint venture partner and others agreed to make the corrupt payments to, among others, government officials from the Nigerian National Petroleum Corporation, the National Petroleum Investment Management Services, a senior official in the executive branch of the federal government of Nigeria, and members of a Nigerian political party. Court documents state the bribes were paid to assist in obtaining and retaining the EGGS contract and additional optional scopes of work.

According to information contained in plea documents, to secure the funds for those corrupt payments, Novak and his alleged conspirators caused Willbros West Africa Inc., a subsidiary of Willbros International, to enter into so-called "consultancy agreements" with two consulting companies Novak represented in exchange for purportedly legitimate consultancy services. In reality, those consulting companies were used to facilitate the payment of bribes.

In addition to Novak, to date, two Willbros employees have pleaded guilty for their roles in the EGGS bribery scheme, and Willbros has entered into a deferred prosecution agreement with the government:
On May 14, 2008, Willbros Group Inc. and Willbros International entered into a deferred prosecution agreement with the government and agreed to pay a $22 million penalty, in connection with the company’s payment of bribes to government officials in Nigeria and Ecuador. On March 30, 2012, the government moved to dismiss the charges following Willbros’s satisfaction of its obligations under the deferred prosecution agreement, and on April 2, 2012, the Court granted the United States’ motion.
On Sept. 14, 2006, Jim Bob Brown, a former Willbros executive, pleaded guilty to one count of conspiracy to violate the FCPA, in connection with his role in making corrupt payments to Nigerian government officials to obtain and retain the EGGS contract and in connection with his role in making corrupt payments in Ecuador. After a reduction for cooperation, Brown was sentenced on Jan. 28, 2010, to 12 months and one day in prison, two years of supervised release and a $17,500 fine.
On Nov. 5, 2007, Jason Steph, also a former Willbros executive, pleaded guilty to one count of conspiracy to violate the FCPA, in connection with his role in making corrupt payments to Nigerian government officials to obtain and retain the EGGS contract. After a reduction for cooperation, Steph was sentenced on Jan. 28, 2010, to 15 months in prison, two years of supervised release and a $2,000 fine.
Kenneth Tillery was charged, along with Novak, for his alleged role in the bribery scheme in an indictment unsealed on Dec. 19, 2008. According to the indictment, Tillery was a Willbros International employee and executive from the 1980s through January 2005. From 2002 until January 2005, Tillery served as executive vice president and, later, as president of Willbros International. Tillery remains a fugitive. The charges against Tillery are merely accusations, and he is presumed innocent unless and until proven guilty.

The case is being investigated by FBI agents who are part of the Washington Field Office’s dedicated FCPA squad. Significant assistance was provided by the Criminal Division’s Office of International Affairs. This case is being prosecuted by Senior Trial Attorney Laura N. Perkins of the Criminal Division’s Fraud Section.

FORMER POWER COMPANY EXECUTIVE CHARGED IN FOREIGN BRIBERY SCHEME

FROM: U.S. DEPARTMENT OF JUSTICE
Wednesday, May 1, 2013
Former Executive of French Power Company Subsidiary Charged in Connection with Foreign Bribery Schem
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A former executive of the U.S. subsidiary of a French power and transportation company was charged in a superseding indictment for his alleged participation in a scheme to pay bribes to foreign government officials, Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney for the District of Connecticut David B. Fein and Assistant Director in Charge Valerie Parlave of the FBI’s Washington Field Office announced today.

William Pomponi, 65, a former vice president of sales for the Connecticut-based U.S. subsidiary, was charged in a superseding indictment late yesterday in the District of Connecticut with conspiring to violate the Foreign Corrupt Practices Act (FCPA) and to launder money, as well as substantive charges of FCPA and money laundering violations.

On April 16, 2013, charges against Frederic Pierucci and a guilty plea by David Rothschild in connection with the bribery scheme were announced. Pierucci is charged in the superseding indictment with Pomponi. On Nov. 2, 2012, Rothschild pleaded guilty to a criminal information.

According to the charges, the defendants, together with others, paid bribes to officials in Indonesia, including a member of Indonesian Parliament and high-ranking members of Perusahaan Listrik Negara (PLN), the state-owned and state-controlled electricity company in Indonesia, in exchange for assistance in securing a $118 million contract, known as the Tarahan project, for the company and its consortium partner to provide power-related services for the citizens of Indonesia. The charges allege that, in order to conceal the bribes, the defendants retained two consultants purportedly to provide legitimate consulting services on behalf of the power company and its subsidiaries in connection with the Tarahan project. In reality, however, the primary purpose for hiring the consultants was allegedly to use the consultants to pay bribes to Indonesian officials.

The first consultant retained by the defendants allegedly received hundreds of thousands of dollars into his Maryland bank account to be used to bribe the member of Parliament, according to the charges. The consultant then allegedly transferred the bribe money to a bank account in Indonesia for the benefit of the official. According to court documents, emails between Pomponi, Pierucci, Rothschild and their co-conspirators discuss in detail the use of the first consultant to funnel bribes to the member of Parliament and the influence that the member of Parliament could exert over the Tarahan project. However, when Pomponi, Pierucci and others determined that the first consultant was not effectively bribing key officials at PLN, they allegedly retained a second consultant to accomplish that purpose. The charges allege that the power company deviated from its usual practice of paying consultants on a pro-rata basis in order to make a much larger up-front payment to the second consultant so that the consultant could "get the right influence." An employee at the power company’s subsidiary in Indonesia sent an email to Pomponi, Pierucci and others asking them to finalize the consultancy agreement with the front-loaded payments but stated that in the meantime the employee would give his word to a high-level official at PLN, according to the charges.

The conspiracy to commit violations of the FCPA count carries a maximum penalty of five years in prison and a fine of the greater of $250,000 or twice the value gained or lost. The substantive FCPA counts each carry a maximum penalty of five years in prison and a fine of the greater of $100,000 or twice the value gained or lost. The conspiracy to commit money laundering count carries a maximum penalty of 20 years in prison and a fine of the greater of $500,000 or twice the value of the property involved in the transaction. The substantive money laundering counts each carry a maximum penalty of 20 years in prison and a fine of the greater of $500,000 or twice the value of the property involved in the transaction.

An indictment is merely an accusation, and defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt.

The case is being prosecuted by Trial Attorney Daniel S. Kahn of the Criminal Division’s Fraud Section and Assistant U.S. Attorney David E. Novick of the District of Connecticut. The case is being investigated by FBI agents who are part of the Washington Field Office’s dedicated FCPA squad, with assistance from the Meriden, Conn., Resident Agency of the FBI. Significant assistance was provided by the Criminal Division’s Office of International Affairs, and the department has also worked closely with its law enforcement counterparts in Indonesia at the Komisi Pemberantasan Korupsi (Corruption Eradication Commission) and deeply appreciates KPK’s assistance in this matter.

RALPH LAUREN CORPORATION SETTLES FCPA ALLEGTIONS WITH JUSTICE DEPARTMENT

FROM: U.S. DEPARTMENT OF JUSTICE
Monday, April 22, 2013

Ralph Lauren Corporation Resolves Foreign Corrupt Practices Act Investigation and Agrees to Pay $882,000 Monetary Penalty

Ralph Lauren Corporation (RLC), a New York based apparel company, has agreed to pay an $882,000 penalty to resolve allegations that it violated the Foreign Corrupt Practices Act (FCPA) by bribing government officials in Argentina to obtain improper customs clearance of merchandise, announced Mythili Raman, the Acting Assistant Attorney General for the Criminal Division, and Loretta E. Lynch, the United States Attorney for the Eastern District of New York.

According to the agreement, the manager of RLC’s subsidiary in Argentina bribed customs officials in Argentina over the span of five years to improperly obtain paperwork necessary for goods to clear customs; permit clearance of items without the necessary paperwork and/or the clearance of prohibited items; and on occasion, to avoid inspection entirely. RLC’s employee disguised the payments by funneling them through a customs clearance agency, which created fake invoices to justify the improper payments. During these five years, RLC did not have an anti-corruption program and did not provide any anti-corruption training or oversight with respect to its subsidiary in Argentina.

In addition to the monetary penalty, RLC agreed to cooperate with the Department of Justice, to report periodically to the department concerning RLC’s compliance efforts, and to continue to implement an enhanced compliance program and internal controls designed to prevent and detect FCPA violations. If RLC abides by the terms of the agreement, the Department will not prosecute RLC in connection with the conduct.

The agreement acknowledges RLC’s extensive, thorough, and timely cooperation, including self-disclosure of the misconduct, voluntarily making employees available for interviews, making voluntary document disclosures, conducting a worldwide risk assessment, and making multiple presentations to the Department on the status and findings of the internal investigation and the risk assessment. In addition, RLC has engaged in early and extensive remediation, including conducting extensive FCPA training for employees worldwide, enhancing the company’s existing FCPA policy, implementing an enhanced gift policy and other enhanced compliance, control and anti-corruption policies and procedures, enhancing its due diligence protocol for third-party agents, terminating culpable employees and a third-party agent, instituting a whistleblower hotline, and hiring a designated corporate compliance attorney.

In a related matter, the U.S. Securities and Exchange Commission today announced a non-prosecution agreement with RLC , in which RLC agreed to pay $$734,846 in disgorgement and prejudgment interest.

The case is being prosecuted by Trial Attorney Daniel S. Kahn of the Criminal Division’s Fraud Section and Sarah Coyne, Chief of the Business and Securities Fraud Section of the Eastern District of New York. The case was investigated by the FBI’s New York Field Office. The department acknowledges and expresses its appreciation for the assistance provided by the SEC’s Division of Enforcement.

MAN CHARGED FOR OBSTRUCTION IN GUINEAN MINING RIGHTS BRIBE CASE

FROM: U.S. DEPARTMENT OF JUSTICE
Monday, April 15, 2013
Obstruction Charges Filed in Ongoing FCPA Investigation into Alleged Guinean Mining Rights Bribe Scheme
Frederic Cilins, 50, a French citizen, has been arrested and accused of attempting to obstruct an ongoing investigation into whether a mining company paid bribes to win lucrative mining rights in the Republic of Guinea.

Mythili Raman, Acting Assistant Attorney General for the Justice Department’s Criminal Division; Preet Bharara, the U.S. Attorney for the Southern District of New York; and George Venizelos, the Assistant Director in Charge of the FBI’s New York Field Office, made the announcement.

"Mr. Cilins is charged with scheming to destroy documents and induce a witness to give false testimony to a grand jury investigating potential violations of the Foreign Corrupt Practices Act," said Acting Assistant Attorney General Raman. "The Justice Department is committed to rooting out foreign bribery, and we will not tolerate criminal attempts to thwart our efforts."

"A grand jury can never learn the truth, and justice cannot prevail, where documents are intentionally destroyed and testimony is tainted by lies," said U.S. Attorney Bharara. "As alleged, Frederic Cilins attempted to obstruct a significant investigation by corrupting evidence and testimony in precisely those ways. With today’s arrest, he now begins his own path to justice for his alleged conduct."

"As alleged, Cilins attempted to buy evidence he sought to destroy," said FBI Assistant Director in Charge Venizelos. "The destruction of evidence was in furtherance of Cilins’s alleged effort to obstruct an investigation into a bribery scheme. In effect, he was allegedly willing to commit bribery in an effort to cover up a bribery."

Cilins was arrested in Jacksonville, Fla., on April 14, 2013, and a criminal complaint was filed in the Southern District of New York today charging Cilins with tampering with a witness, victim or informant; obstructing a criminal investigation; and destroying, altering or falsifying records in a federal investigation. The obstruction charge carries a maximum penalty of five years in prison, and the tampering and record-destruction charges each carry a maximum penalty of 20 years in prison. Cilins made an initial appearance in the Middle District of Florida and was detained pending a detention hearing scheduled for April 18, 2013.

According to the complaint, Cilins allegedly attempted to obstruct an ongoing federal grand jury investigation concerning potential violations of the Foreign Corrupt Practices Act and laws proscribing money laundering. The complaint states the federal grand jury is investigating whether a particular mining company and its affiliates – on whose behalf Cilins has been working – transferred into the United States funds in furtherance of a scheme to obtain and retain valuable mining concessions in the Republic of Guinea’s Simandou region. During monitored and recorded phone calls and face-to-face meetings, Cilins allegedly agreed to pay substantial sums of money to induce a witness to the bribery scheme to turn over documents to Cilins for destruction, which Cilins knew had been requested by the FBI and needed to be produced before a federal grand jury. The complaint also alleges that Cilins sought to induce the witness to sign an affidavit containing numerous false statements regarding matters under investigation by the grand jury.

The complaint alleges that the documents Cilins sought to destroy included original copies of contracts between the mining company and its affiliates and the former wife of a now-deceased Guinean government official, who at the relevant time held an office in Guinea that allowed him to influence the award of mining concessions. The contracts allegedly related to a scheme by which the mining company and its affiliates offered the wife of the Guinean official millions of dollars, which were to be distributed to the official’s wife as well as ministers or senior officials of Guinea’s government whose authority might be needed to secure the mining rights.

According to the complaint, the official’s wife incorporated a company in 2008 that agreed to take all necessary steps to secure the valuable mining rights for the mining company’s subsidiary. That same contract stipulated that $2 million was to be transferred to the official’s wife’s company and an additional sum was to be "distributed among persons of good will who may have contributed to facilitating the granting of" the valuable mining rights. According to the complaint, in 2008, the mining company and its affiliates also "commit[ted] to giving 5% of the shares of stock" in particular mining areas in Guinea to the official’s wife.

A complaint is merely an accusation, and the defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.

The case is being prosecuted by Trial Attorney Stephen J. Spiegelhalter of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Elisha J. Kobre of the Southern District of New York. The case is being investigated by the FBI. The Justice Department’s Office of International Affairs and Office of Enforcement Operations have also assisted in the investigation.

SEC CHARGES ORACLE CORPORATION WITH VIOLATING FOREIGN CORRUPT PRACTICES ACT IN INDIA

FROM: U.S. SECURITES AND EXCHANGE COMMISSION

Washington, D.C., Aug. 16, 2012 — The Securities and Exchange Commission today charged Oracle Corporation with violating the Foreign Corrupt Practices Act (FCPA) by failing to prevent a subsidiary from secretly setting aside money off the company's books that was eventually used to make unauthorized payments to phony vendors in India.
　
　
The SEC alleges that certain employees of the India subsidiary of the Redwood Shores, Calif.-based enterprise systems firm structured transactions with India's government on more than a dozen occasions in a way that enabled Oracle India's distributors to hold approximately $2.2 million of the proceeds in unauthorized side funds. Those Oracle India employees then directed the distributors to make payments out of these side funds to purported local vendors, several of which were merely storefronts that did not provide any services to Oracle. Oracle's subsidiary documented certain payments with fake invoices.
　
Oracle agreed to pay a $2 million penalty to settle the SEC's charges.
　
"Through its subsidiary's use of secret cash cushions, Oracle exposed itself to the risk that these hidden funds would be put to illegal use," said Marc J. Fagel, Director of the SEC's San Francisco Regional Office. "It is important for U.S. companies to proactively establish policies and procedures to minimize the potential for payments to foreign officials or other unauthorized uses of company funds."
　
According to the SEC's complaint filed in U.S. District Court for the Northern District of California, the misconduct at Oracle's India subsidiary - Oracle India Private Limited - occurred from 2005 to 2007. Oracle India sold software licenses and services to India's government through local distributors, and then had the distributors "park" excess funds from the sales outside Oracle India's books and records.
　
For example, according to the SEC's complaint, Oracle India secured a $3.9 million deal with India's Ministry of Information Technology and Communications in May 2006. As instructed by Oracle India's then-sales director, only $2.1 million was sent to Oracle to record as revenue on the transaction, and the distributor kept $151,000 for services rendered. Certain other Oracle India employees further instructed the distributor to park the remaining $1.7 million for "marketing development purposes." Two months later, one of those same Oracle India employees created and provided to the distributor eight invoices for payments to purported third-party vendors ranging from $110,000 to $396,000. In fact, none of these storefront-only third parties provided any services or were included on Oracle's approved vendor list. The third-party payments created the risk that the funds could be used for illicit purposes such as bribery or embezzlement.
　
The SEC's complaint alleges that Oracle violated the FCPA's books and records provisions and internal controls provisions by failing to accurately record the side funds that Oracle India maintained with its distributors. Oracle failed to devise and maintain a system of effective internal controls that would have prevented the improper use of company funds.
　
Without admitting or denying the SEC's allegations, Oracle consented to the entry of a final judgment ordering the company to pay the $2 million penalty and permanently enjoining it from future violations of these provisions. The settlement takes into account Oracle's voluntary disclosure of the conduct in India and its cooperation with the SEC's investigation, as well as remedial measures taken by the company, including firing the employees involved in the misconduct and making significant enhancements to its FCPA compliance program.
　
The SEC's investigation was conducted by staff attorney Elena Ro and Assistant Regional Director Jina Choi in the San Francisco Regional Office. The SEC acknowledges the assistance of the U.S. Department of Justice, Federal Bureau of Investigation, and Internal Revenue Service.

SEC CHARGES PFIZER INC. WITH VIOLATING THE FOREIGN CORRUPT PRACTICES ACT IN SEVERAL COUNTRIES

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C., Aug. 7, 2012 – The Securities and Exchange Commission today charged Pfizer Inc. with violating the Foreign Corrupt Practices Act (FCPA) when its subsidiaries bribed doctors and other health care professionals employed by foreign governments in order to win business.
The SEC alleges that employees and agents of Pfizer’s subsidiaries in Bulgaria, China, Croatia, Czech Republic, Italy, Kazakhstan, Russia, and Serbia made improper payments to foreign officials to obtain regulatory and formulary approvals, sales, and increased prescriptions for the company’s pharmaceutical products. They tried to conceal the bribery by improperly recording the transactions in accounting records as legitimate expenses for promotional activities, marketing, training, travel and entertainment, clinical trials, freight, conferences, and advertising.
The SEC separately charged another pharmaceutical company that Pfizer acquired a few years ago – Wyeth LLC – with its own FCPA violations. Pfizer and Wyeth agreed to separate settlements in which they will pay more than $45 million combined to settle their respective charges. In a parallel action, the Department of Justice announced that Pfizer H.C.P. Corporation agreed to pay a $15 million penalty to resolve its investigation of FCPA violations.
“Pfizer subsidiaries in several countries had bribery so entwined in their sales culture that they offered points and bonus programs to improperly reward foreign officials who proved to be their best customers,” said Kara Brockmeyer, Chief of the SEC Enforcement Division’s Foreign Corrupt Practices Act Unit. “These charges illustrate the pitfalls that exist for companies that fail to appropriately monitor potential risks in their global operations.”
According to the SEC’s complaint against Pfizer filed in U.S. District Court for the District of Columbia, the misconduct dates back as far as 2001. Employees of Pfizer’s subsidiaries authorized and made cash payments and provided other incentives to bribe government doctors to utilize Pfizer products. In China, for example, Pfizer employees invited “high-prescribing doctors” in the Chinese government to club-like meetings that included extensive recreational and entertainment activities to reward doctors’ past product sales or prescriptions. Pfizer China also created various “point programs” under which government doctors could accumulate points based on the number of Pfizer prescriptions they wrote. The points were redeemed for various gifts ranging from medical books to cell phones, tea sets, and reading glasses. In Croatia, Pfizer employees created a “bonus program” for Croatian doctors who were employed in senior positions in Croatian government health care institutions. Once a doctor agreed to use Pfizer products, a percentage of the value purchased by a doctor’s institution would be funneled back to the doctor in the form of cash, international travel, or free products.
According to the SEC’s complaint, Pfizer made an initial voluntary disclosure of misconduct by its subsidiaries to the SEC and Department of Justice in October 2004, and fully cooperated with SEC investigators. Pfizer took such extensive remedial actions as undertaking a comprehensive worldwide review of its compliance program.
The SEC further alleges that Wyeth subsidiaries engaged in FCPA violations primarily before but also after the company’s acquisition by Pfizer in late 2009. Starting at least in 2005, subsidiaries marketing Wyeth nutritional products in China, Indonesia, and Pakistan bribed government doctors to recommend their products to patients by making cash payments or in some cases providing BlackBerrys and cell phones or travel incentives. They often used fictitious invoices to conceal the true nature of the payments. In Saudi Arabia, Wyeth’s subsidiary made an improper cash payment to a customs official to secure the release of a shipment of promotional items used for marketing purposes. The promotional items were held in port because Wyeth Saudi Arabia had failed to secure a required Saudi Arabian Standards Organization Certificate of Conformity.
Following Pfizer’s acquisition of Wyeth, Pfizer undertook a risk-based FCPA due diligence review of Wyeth’s global operations and voluntarily reported the findings to the SEC staff. Pfizer diligently and promptly integrated Wyeth’s legacy operations into its compliance program and cooperated fully with SEC investigators.
In settling the SEC’s charges, Pfizer and Wyeth neither admitted nor denied the allegations. Pfizer consented to the entry of a final judgment ordering it to pay disgorgement of $16,032,676 in net profits and prejudgment interest of $10,307,268 for a total of $26,339,944. Wyeth also is required to report to the SEC on the status of its remediation and implementation of compliance measures over a two-year period, and is permanently enjoined from further violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934. Wyeth consented to the entry of a final judgment ordering it to pay disgorgement of $17,217,831 in net profits and prejudgment interest of $1,658,793, for a total of $18,876,624. As a Pfizer subsidiary, the status of Wyeth’s remediation and implementation of compliance measures will be subsumed in Pfizer’s two-year self-reporting period. Wyeth also is permanently enjoined from further violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act. The settlements are subject to court approval.
The SEC’s investigation was conducted by Michael Catoe and Charles Cain of the Enforcement Division’s FCPA Unit. The SEC acknowledges the assistance of the U.S. Department of Justice’s Criminal Division’s Fraud Section and the Federal Bureau of Investigation in this matter.

TWO FORMER EXECUTIVES PLEAD GUILTY IN BRIBERY CONSPIRACY INVOLVING AT LEAST 30 COUNTRIES

FROM:  U.S. DEPARTMENT OF JUSTICE
Tuesday, April 17, 2012
Two Former Executives of California Valve Company Plead Guilty to Foreign Bribery Offenses

WASHINGTON – Stuart Carson, the former president of Rancho Santa Margarita, Calif.-based valve company Control Components Inc. (CCI), and Hong “Rose” Carson, the former CCI director of sales for China and Taiwan, have pleaded guilty to violating the Foreign Corrupt Practices Act (FCPA), announced the Justice Department’s Criminal Division and the U.S. Attorney’s Office for the Central District of California.

The Carsons, who are married and reside in San Clemente, Calif., each pleaded guilty late yesterday before U.S. District Judge James V. Selna in Santa Ana, Calif., to separate one-count superseding informations charging them with making a corrupt payment to a foreign government official in violation of the FCPA.  According to court documents, CCI designed and manufactured service control valves for use in the nuclear, oil and gas, and power generation industries worldwide.  At sentencing, Stuart Carson, 73, faces up to 10 months in prison.  Rose Carson, 48, faces a sentence of three years probation, which may include up to six months of home confinement.  Sentencing is scheduled for Oct. 15, 2012.

On Apr. 8, 2009, the Carsons and four other former executives of CCI were charged in a 16-count indictment for their roles in the foreign bribery scheme.  The four former CCI executives charged include Paul Cosgrove, CCI’s former director of worldwide sales; David Edmonds, CCI’s former vice president of worldwide customer service; Flavio Ricotti, the former CCI vice president of sales for Europe, Africa and the Middle East; and Han Yong Kim, the former president of CCI’s Korean office.  On Apr. 28, 2011, Ricotti pleaded guilty to one count of conspiracy to violate the FCPA.  The trial of Cosgrove and Edmonds is scheduled for Jun. 5, 2012.  The charges against Kim are pending as well.  An indictment merely contains allegations and defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

In related cases, two defendants previously pleaded guilty to conspiring to bribe officers and employees of foreign state-owned companies on behalf of CCI.  On Jan. 8, 2009, Mario Covino, the former director of worldwide factory sales for CCI, pleaded guilty to one count of conspiracy to violate the FCPA.  On Feb. 3, 2009, Richard Morlok, the former CCI finance director, also pleaded guilty to one count of conspiracy to violate the FCPA.  Covino, Morlok and Ricotti are scheduled to be sentenced in November and December 2012.

On July 31, 2009, CCI pleaded guilty to a three-count criminal information charging the company with conspiracy to violate the FCPA and the Travel Act, and two substantive violations of the FCPA.  CCI was ordered to pay an $18.2 million criminal fine, placed on organizational probation for three years, and ordered to create and implement a compliance program and retain an independent compliance monitor for three years.  CCI admitted that from 2003 through 2007, it made corrupt payments in more than 30 countries, which resulted in net profits to the company of approximately $46.5 million from sales related to those corrupt payments.

The case is being prosecuted by Deputy Chief Charles G. La Bella and Trial Attorney Andrew Gentin of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Douglas McCormick and Gregory Staples of the U.S. Attorney’s Office for the Central District of California.  The case was investigated by the FBI’s Washington Field Office, and its team of special agents dedicated to the investigation of foreign bribery cases.