FROM: U.S. JUSTICE DEPARTMENT
Tuesday, June 16, 2015
IAP Worldwide Services Inc. Resolves Foreign Corrupt Practices Act Investigation
Former Company Vice President Pleads Guilty to Participating in Bribery Scheme
A Florida defense and government contracting company, IAP Worldwide Services Inc. (IAP), entered into a non-prosecution agreement and agreed to pay a $7.1 million penalty to resolve the government’s investigation into whether the company conspired to bribe Kuwaiti officials in order to secure a government contract. A former vice president of IAP also pleaded guilty today to conspiracy to violate the Foreign Corrupt Practices Act (FCPA) for his involvement in the bribery scheme.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Dana J. Boente of the Eastern District of Virginia, Assistant Director in Charge Andrew G. McCabe of the FBI’s Washington, D.C., Field Office and Special Agent in Charge Robert E. Craig Jr. of the Defense Criminal Investigative Service (DCIS) Mid-Atlantic Field Office made the announcement.
James Michael Rama, 69, of Lynchburg, Virginia, pleaded guilty before U.S. District Court Judge James C. Cacheris of the Eastern District of Virginia to one count of conspiracy to violate the anti-bribery provisions of the FCPA. Sentencing is scheduled for Sept. 11, 2015.
In 2004, Kuwait’s Ministry of the Interior (MOI) initiated the Kuwait Security Program (KSP), a project that was intended to provide nationwide surveillance capabilities for several Kuwaiti government agencies primarily through the use of closed-circuit television. The project was divided into two phases: a planning and feasibility period called “Phase I” and an installation period called “Phase II.” The MOI was responsible for overseeing the KSP, including selecting contractors to facilitate its implementation. Revenues from the Phase II contract were expected to be substantially greater than from Phase I.
According to admissions made in connection with both the non-prosecution agreement and Rama’s plea agreement, IAP and Rama schemed to ensure that IAP worked as the consultant for Phase I so that it could tailor the requirements for the Phase II contracts to IAP’s strengths, which would give the company an advantage in the Phase II bidding. To that end, both IAP and Rama admitted that in February 2006, executives and senior employees of IAP, including Rama, set up a shell company called “Ramaco” to bid on Phase I, in part to conceal IAP’s role in crafting the Phase II requirements and its conflict of interest in connection with securing the Phase II contract.
Ultimately, Ramaco secured the Phase I contract for approximately $4 million. According to admissions made in connection with both agreements, the Rama and IAP agreed that half of that amount would be diverted to a consultant who would pay bribes to Kuwaiti government officials to assist IAP in obtaining and retaining the Phase I contract and to obtain the Phase II contract. IAP and Rama admitted that they disguised the payments by transferring funds Ramaco received to an IAP bank account and then to the consultant through a series of accounts and intermediaries. According to the factual statements incorporated into both the non-prosecution agreement and Rama’s plea agreement, between September 2006 and March 2008, IAP and its co-conspirators paid the consultant approximately $1,783,688 understanding that some or all of the funds would be used to bribe Kuwaiti government officials.
Based on a variety of factors, including but not limited to IAP’s cooperation, the Criminal Division entered into a non-prosecution agreement with the company. The non-prosecution agreement requires IAP’s continued cooperation. In addition, the non-prosecution agreement requires IAP to conduct a review of its existing internal controls, policies and procedures, and make any necessary modifications to ensure that the company maintains accurate record keeping and a rigorous anti-corruption compliance program. The non-prosecution agreement further requires IAP to report periodically to the Criminal Division and to the U.S. Attorney’s Office of the Eastern District of Virginia regarding remediation and implementation of the aforementioned compliance program and internal controls, policies and procedures.
The investigation is being conducted by the FBI’s Washington, D.C., Field Office and the DCIS Mid-Atlantic Field Office. The case is being prosecuted by Assistant Chief Tarek Helou and Trial Attorney James P. McDonald of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Paul J. Nathanson of the Eastern District of Virginia. The United Kingdom’s Serious Fraud Office and the Criminal Division’s Office of International Affairs also provided assistance during the investigation.
Showing posts with label FOREIGN CORRUPT PRACTICES ACT. Show all posts
Showing posts with label FOREIGN CORRUPT PRACTICES ACT. Show all posts
Thursday, June 18, 2015
Sunday, May 24, 2015
SEC ANNOUNCES FINAL JUDGEMENT AGAINST CHINA VALVES TECHNOLOGY, INC., AND SENIOR OFFICERS
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23266 / May 20, 2015
Securities and Exchange Commission v. China Valves Technology, Inc., et al., Civil Action No. 1:14-cv-01630 (U.S. District Court for the District of Columbia)
SEC Obtains Final Judgments Against China Valves Technology, Inc. and Two Senior Officers in Fraud Case
The Securities and Exchange Commission ("Commission") announced today that on May 13, 2015, the Honorable Reggie B. Walton of the United States District Court for the District of Columbia entered final judgments by consent against defendants China Valves Technology, Inc. ("China Valves"), its Chairman and former CEO, Siping Fang ("Fang"), and its CFO, Renrui Tang ("Tang"). The final judgments: (i) permanently enjoin the defendants from future violations of the anti-fraud, reporting, recordkeeping, and internal controls provisions of the federal securities laws; (ii) order China Valves, Fang, and Tang to pay civil penalties of $575,000, $75,000, and $40,000, respectively; (iii) bar Fang from serving as an officer and director for five years; and (iv) bar Tang from serving as an officer and director for three years. The Commission today also issued an order pursuant to Rule 102(e)(3)(i) denying Tang the privilege of appearing or practicing as an accountant before the Commission with the right to apply for reinstatement after three years.
The case is the latest from the SEC's Cross-Border Working Group that focuses on companies with substantial foreign operations that are publicly traded in the U.S. China Valves was a China-based U.S. issuer formed through a reverse merger in 2007. On March 4, 2015, the Commission issued an order revoking the registration of China Valves securities pursuant to Section 12(j) of the Exchange Act.
The Commission's complaint, filed on September 29, 2014, alleged that China Valves, Fang, Tang, and Jianbao Wang ("Wang"), China Valves's former CEO, intentionally misled investors about the nature of China Valves's 2010 acquisition of Watts Valve Changsha Co., Ltd. ("Changsha Valve") in an effort to mask the subsidiary's prior investigation of violations of the Foreign Corrupt Practices Act ("FCPA") and China Valves's decision to pay sales commissions to employees that potentially violated the FCPA. The complaint further alleged that, in 2011, China Valves materially overstated income and understated liabilities incurred by a wholly-owned subsidiary, Shanghai Pudong Hanwei Valve Co., Ltd ("Hanwei Valve"), when it mischaracterized certain value added tax payments in an attempt to hide the purchase of a valve that it intended to reverse engineer.
The Commission's complaint alleged that China Valves, Fang, Wang, and Tang violated the antifraud provisions of the securities laws, Section 10(b) of the Exchange Act of 1934 (Exchange Act) and Rule 10b-5. The complaint further alleged that China Valves violated reporting, recordkeeping, and internal controls provisions of the federal securities laws, Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13. Finally, the complaint alleged that Fang, Wang, and Tang falsely certified that China Valves's filings contained no material misstatements in violation of Exchange Act Rule 13a-14, and aided and abetted China Valves's violations of the reporting and books and records provisions.
China Valves, Fang, and Tang settled the Commission's charges without admitting or denying the charges in the complaint. The litigation is continuing against Wang.
The SEC's continuing investigation has been conducted by Patrick Feeney, Sarah Nilson, Kelly Dragelin, and Janet Yang, and supervised by Melissa Hodgman. Alfred Day leads the litigation team.
Litigation Release No. 23266 / May 20, 2015
Securities and Exchange Commission v. China Valves Technology, Inc., et al., Civil Action No. 1:14-cv-01630 (U.S. District Court for the District of Columbia)
SEC Obtains Final Judgments Against China Valves Technology, Inc. and Two Senior Officers in Fraud Case
The Securities and Exchange Commission ("Commission") announced today that on May 13, 2015, the Honorable Reggie B. Walton of the United States District Court for the District of Columbia entered final judgments by consent against defendants China Valves Technology, Inc. ("China Valves"), its Chairman and former CEO, Siping Fang ("Fang"), and its CFO, Renrui Tang ("Tang"). The final judgments: (i) permanently enjoin the defendants from future violations of the anti-fraud, reporting, recordkeeping, and internal controls provisions of the federal securities laws; (ii) order China Valves, Fang, and Tang to pay civil penalties of $575,000, $75,000, and $40,000, respectively; (iii) bar Fang from serving as an officer and director for five years; and (iv) bar Tang from serving as an officer and director for three years. The Commission today also issued an order pursuant to Rule 102(e)(3)(i) denying Tang the privilege of appearing or practicing as an accountant before the Commission with the right to apply for reinstatement after three years.
The case is the latest from the SEC's Cross-Border Working Group that focuses on companies with substantial foreign operations that are publicly traded in the U.S. China Valves was a China-based U.S. issuer formed through a reverse merger in 2007. On March 4, 2015, the Commission issued an order revoking the registration of China Valves securities pursuant to Section 12(j) of the Exchange Act.
The Commission's complaint, filed on September 29, 2014, alleged that China Valves, Fang, Tang, and Jianbao Wang ("Wang"), China Valves's former CEO, intentionally misled investors about the nature of China Valves's 2010 acquisition of Watts Valve Changsha Co., Ltd. ("Changsha Valve") in an effort to mask the subsidiary's prior investigation of violations of the Foreign Corrupt Practices Act ("FCPA") and China Valves's decision to pay sales commissions to employees that potentially violated the FCPA. The complaint further alleged that, in 2011, China Valves materially overstated income and understated liabilities incurred by a wholly-owned subsidiary, Shanghai Pudong Hanwei Valve Co., Ltd ("Hanwei Valve"), when it mischaracterized certain value added tax payments in an attempt to hide the purchase of a valve that it intended to reverse engineer.
The Commission's complaint alleged that China Valves, Fang, Wang, and Tang violated the antifraud provisions of the securities laws, Section 10(b) of the Exchange Act of 1934 (Exchange Act) and Rule 10b-5. The complaint further alleged that China Valves violated reporting, recordkeeping, and internal controls provisions of the federal securities laws, Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13. Finally, the complaint alleged that Fang, Wang, and Tang falsely certified that China Valves's filings contained no material misstatements in violation of Exchange Act Rule 13a-14, and aided and abetted China Valves's violations of the reporting and books and records provisions.
China Valves, Fang, and Tang settled the Commission's charges without admitting or denying the charges in the complaint. The litigation is continuing against Wang.
The SEC's continuing investigation has been conducted by Patrick Feeney, Sarah Nilson, Kelly Dragelin, and Janet Yang, and supervised by Melissa Hodgman. Alfred Day leads the litigation team.
Friday, April 10, 2015
SEC CHARGES COMPANY WITH VIOLATING FCPA BY OFFERING TRAVEL, GIFTS TO FOREIGN OFFICIALS IN THE MIDDLE EAST
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
04/08/2015 11:05 AM EDT
The Securities and Exchange Commission charged Oregon-based FLIR Systems Inc. with violating the Foreign Corrupt Practices Act (FCPA) by financing what an employee termed a “world tour” of personal travel for government officials in the Middle East who played key roles in decisions to purchase FLIR products. FLIR earned more than $7 million in profits from sales influenced by the improper travel and gifts.
FLIR, which develops infrared technology for use in binoculars and other sensing products and systems, agreed to settle the SEC’s charges by paying more than $9.5 million and reporting its FCPA compliance efforts to the agency for the next two years. The SEC previously charged two FLIR employees in the case.
“FLIR’s deficient financial controls failed to identify and stop the activities of employees who served as de facto travel agents for influential foreign officials to travel around the world on the company’s dime,” said Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit.
According to the SEC’s order instituting a settled administrative proceeding against FLIR, the company had few internal controls over gifts and travel out of its foreign sales offices. Two employees in its Dubai office provided expensive watches to government officials with the Saudi Arabia Ministry of Interior in 2009, and they arranged for the company to pay for a 20-night excursion by Saudi officials that included stops in Casablanca, Paris, Dubai, Beirut, and New York City. The value of the gifts and the extent and nature of the travel were falsely recorded in FLIR’s books and records as legitimate business expenses, and the company’s internal controls failed to catch the improper payments despite documentation suggesting that extravagant gifts and travel were being provided.
The SEC’s order finds that from 2008 to 2010, FLIR paid approximately $40,000 for additional travel by Saudi government officials, including multiple New Year’s Eve trips to Dubai with airfare, hotel, and expensive dinners and drinks. FLIR also accepted cursory invoices from a FLIR company partner without any supporting documentation to pay extended travel of Egyptian officials in mid-2011.
The SEC’s order finds that FLIR violated the anti-bribery provisions of Section 30A of the Securities Exchange Act of 1934 and the internal controls and books-and-records provisions of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act. FLIR self-reported the misconduct to the SEC and cooperated with the SEC’s investigation. FLIR consented to the order without admitting or denying the findings and agreed to pay disgorgement of $7,534,000, prejudgment interest of $970,584 and a penalty of $1 million for a total of $9,504,584.
The SEC’s investigation was conducted by FCPA Unit members Cameron P. Hoffman and Tracy L. Davis in the San Francisco office. The SEC appreciates the assistance of the Justice Department’s Fraud Section, the U.S. Attorney’s Office for the District of Massachusetts, the Federal Bureau of Investigation, and the United Arab Emirates Securities and Commodities Authority.
04/08/2015 11:05 AM EDT
The Securities and Exchange Commission charged Oregon-based FLIR Systems Inc. with violating the Foreign Corrupt Practices Act (FCPA) by financing what an employee termed a “world tour” of personal travel for government officials in the Middle East who played key roles in decisions to purchase FLIR products. FLIR earned more than $7 million in profits from sales influenced by the improper travel and gifts.
FLIR, which develops infrared technology for use in binoculars and other sensing products and systems, agreed to settle the SEC’s charges by paying more than $9.5 million and reporting its FCPA compliance efforts to the agency for the next two years. The SEC previously charged two FLIR employees in the case.
“FLIR’s deficient financial controls failed to identify and stop the activities of employees who served as de facto travel agents for influential foreign officials to travel around the world on the company’s dime,” said Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit.
According to the SEC’s order instituting a settled administrative proceeding against FLIR, the company had few internal controls over gifts and travel out of its foreign sales offices. Two employees in its Dubai office provided expensive watches to government officials with the Saudi Arabia Ministry of Interior in 2009, and they arranged for the company to pay for a 20-night excursion by Saudi officials that included stops in Casablanca, Paris, Dubai, Beirut, and New York City. The value of the gifts and the extent and nature of the travel were falsely recorded in FLIR’s books and records as legitimate business expenses, and the company’s internal controls failed to catch the improper payments despite documentation suggesting that extravagant gifts and travel were being provided.
The SEC’s order finds that from 2008 to 2010, FLIR paid approximately $40,000 for additional travel by Saudi government officials, including multiple New Year’s Eve trips to Dubai with airfare, hotel, and expensive dinners and drinks. FLIR also accepted cursory invoices from a FLIR company partner without any supporting documentation to pay extended travel of Egyptian officials in mid-2011.
The SEC’s order finds that FLIR violated the anti-bribery provisions of Section 30A of the Securities Exchange Act of 1934 and the internal controls and books-and-records provisions of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act. FLIR self-reported the misconduct to the SEC and cooperated with the SEC’s investigation. FLIR consented to the order without admitting or denying the findings and agreed to pay disgorgement of $7,534,000, prejudgment interest of $970,584 and a penalty of $1 million for a total of $9,504,584.
The SEC’s investigation was conducted by FCPA Unit members Cameron P. Hoffman and Tracy L. Davis in the San Francisco office. The SEC appreciates the assistance of the Justice Department’s Fraud Section, the U.S. Attorney’s Office for the District of Massachusetts, the Federal Bureau of Investigation, and the United Arab Emirates Securities and Commodities Authority.
Monday, March 30, 2015
CEO, MANAGING DIRECTOR OF BROKER-DEALER GIVEN PRISON SENTENCE FOR ROLES IN BRIBERY CASE
FROM: U.S. JUSTICE DEPARTMENT
Friday, March 27, 2015
CEO and Managing Director Of US Broker-Dealer Sentenced for International Bribery Scheme
The former chief executive officer and former managing director of a U.S. broker-dealer (the Broker-Dealer), were sentenced to prison today for their roles in a scheme to pay bribes to 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. The sentences were imposed by U.S. District Judge Denise L. Cote of the Southern District of New York.
Benito Chinea, 48, of Manalapan, New Jersey, and Joseph DeMeneses, 45, of Fairfield, Connecticut, were each sentenced to four years in prison. They were also ordered to pay $3,636,432 and $2,670,612 in forfeiture, respectively, which amounts represent their earnings from the bribery scheme. On Dec. 17, 2014, both defendants pleaded guilty to one count of conspiracy to violate the Foreign Corrupt Practices Act and the Travel Act.
“These Wall Street executives orchestrated a massive bribery scheme with a corrupt official in Venezuela to illegally secure tens of millions of dollars in business for their firm,” said Assistant Attorney General Caldwell. “The convictions and prison sentences of the CEO and Managing Director of a sophisticated Wall Street broker-dealer demonstrate that the Department of Justice will hold individuals accountable for violations of the FCPA and will pursue executives no matter where they are on the corporate ladder.”
“Benito Chinea and Joseph DeMeneses paid bribes to an officer of a state-run development bank in exchange for lucrative business she steered to their firm,” said U.S. Attorney Bharara. “Chinea and DeMeneses profited for a time from the corrupt arrangement, but that profit has turned into prison and now they must forfeit their millions of dollars in ill-gotten gains as well as their liberty.”
Chinea, the chief executive officer, and DeMeneses, a managing director in the Broker-Dealer, admitted that they worked with others, to arrange bribe payments to the Bandes official, Maria De Los Angeles 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, also pleaded guilty for his role in the scheme.
Background on the Broker-Dealer and Bandes
According to court documents, and as admitted by Chinea and DeMeneses at their guilty pleas, the Broker-Dealer, which was headquartered in New York City and had offices in Miami, established a group called the Global Markets Group in 2008, which included DeMeneses, 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
In pleading guilty, Chinea and DeMeneses admitted that, together with three Miami-based Broker-Dealer employees, Lujan, Clarke and Hurtado, they participated in a bribery scheme running from late 2008 through 2012, in which Gonzalez directed trading business 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.
Chinea and DeMeneses also admitted that in order to conceal their conduct, they 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. Chinea and DeMeneses also admitted that they agreed to use Broker-Dealer funds to reimburse DeMeneses and Clarke for the approximately $1.5 million from their personal funds they used to bribe Gonzalez. To conceal their true nature, Chinea and DeMeneses agreed to hide these reimbursements in the Broker-Dealer’s books as sham loans from the Broker-Dealer to corporate entities associated with DeMeneses and Clarke.
This case is being investigated by the FBI, and prosecuted by Senior Deputy Chief James Koukios and Trial Attorney Kevin R. Gingras 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.
Friday, March 27, 2015
CEO and Managing Director Of US Broker-Dealer Sentenced for International Bribery Scheme
The former chief executive officer and former managing director of a U.S. broker-dealer (the Broker-Dealer), were sentenced to prison today for their roles in a scheme to pay bribes to 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. The sentences were imposed by U.S. District Judge Denise L. Cote of the Southern District of New York.
Benito Chinea, 48, of Manalapan, New Jersey, and Joseph DeMeneses, 45, of Fairfield, Connecticut, were each sentenced to four years in prison. They were also ordered to pay $3,636,432 and $2,670,612 in forfeiture, respectively, which amounts represent their earnings from the bribery scheme. On Dec. 17, 2014, both defendants pleaded guilty to one count of conspiracy to violate the Foreign Corrupt Practices Act and the Travel Act.
“These Wall Street executives orchestrated a massive bribery scheme with a corrupt official in Venezuela to illegally secure tens of millions of dollars in business for their firm,” said Assistant Attorney General Caldwell. “The convictions and prison sentences of the CEO and Managing Director of a sophisticated Wall Street broker-dealer demonstrate that the Department of Justice will hold individuals accountable for violations of the FCPA and will pursue executives no matter where they are on the corporate ladder.”
“Benito Chinea and Joseph DeMeneses paid bribes to an officer of a state-run development bank in exchange for lucrative business she steered to their firm,” said U.S. Attorney Bharara. “Chinea and DeMeneses profited for a time from the corrupt arrangement, but that profit has turned into prison and now they must forfeit their millions of dollars in ill-gotten gains as well as their liberty.”
Chinea, the chief executive officer, and DeMeneses, a managing director in the Broker-Dealer, admitted that they worked with others, to arrange bribe payments to the Bandes official, Maria De Los Angeles 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, also pleaded guilty for his role in the scheme.
Background on the Broker-Dealer and Bandes
According to court documents, and as admitted by Chinea and DeMeneses at their guilty pleas, the Broker-Dealer, which was headquartered in New York City and had offices in Miami, established a group called the Global Markets Group in 2008, which included DeMeneses, 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
In pleading guilty, Chinea and DeMeneses admitted that, together with three Miami-based Broker-Dealer employees, Lujan, Clarke and Hurtado, they participated in a bribery scheme running from late 2008 through 2012, in which Gonzalez directed trading business 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.
Chinea and DeMeneses also admitted that in order to conceal their conduct, they 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. Chinea and DeMeneses also admitted that they agreed to use Broker-Dealer funds to reimburse DeMeneses and Clarke for the approximately $1.5 million from their personal funds they used to bribe Gonzalez. To conceal their true nature, Chinea and DeMeneses agreed to hide these reimbursements in the Broker-Dealer’s books as sham loans from the Broker-Dealer to corporate entities associated with DeMeneses and Clarke.
This case is being investigated by the FBI, and prosecuted by Senior Deputy Chief James Koukios and Trial Attorney Kevin R. Gingras 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.
Thursday, February 26, 2015
SEC CHARGES GOODYEAR TIRE & RUBBER WITH VIOLATING FOREIGN CORRUPT PRACTICES ACT
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
02/24/2015 11:15 AM EST
The Securities and Exchange Commission charged Goodyear Tire & Rubber Company with violating the Foreign Corrupt Practices Act (FCPA) when its subsidiaries paid bribes to land tire sales in Kenya and Angola.
Goodyear agreed to pay more than $16 million to settle the SEC’s charges.
According to the SEC’s order instituting a settled administrative proceeding, Goodyear failed to prevent or detect more than $3.2 million in bribes during a four-year period due to inadequate FCPA compliance controls at its subsidiaries in sub-Saharan Africa. Bribes were generally paid in cash to employees of private companies or government-owned entities as well as other local authorities such as police or city council officials. The improper payments were falsely recorded as legitimate business expenses in the books and records of the subsidiaries, which were consolidated into Goodyear’s books and records.
“Public companies must keep accurate accounting records, and Goodyear’s lax compliance controls enabled a routine of corrupt payments by African subsidiaries that were hidden in their books,” said Scott W. Friestad, Associate Director of the SEC’s Enforcement Division. “This settlement ensures that Goodyear must forfeit all of the illicit profits from business obtained through bribes to foreign officials as well as employees at commercial companies in Angola and Kenya.”
The SEC’s order finds that Goodyear’s subsidiary in Kenya bribed employees of the Kenya Ports Authority, Armed Forces Canteen Organization, Nzoia Sugar Company, Kenyan Air Force, Ministry of Roads, Ministry of State for Defense, East African Portland Cement Co., and Telkom Kenya Ltd. Goodyear’s subsidiary in Angola bribed employees of the Catoca Diamond Mine, which is owned by a consortium of mining interests including Angola’s national mining company Endiama E.P. and Russian mining company ALROSA. Others bribed in Angola worked at UNICARGAS, Engevia Construction and Public Works, Electric Company of Luanda, National Service of Alfadega, and Sonangol.
The SEC’s order finds that Goodyear violated the books and records and internal control provisions of the federal securities laws: Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934. Goodyear neither admitted nor denied the SEC’s findings. The settlement reflects the company’s self-reporting, prompt remedial acts, and significant cooperation with the SEC’s investigation. Goodyear must pay disgorgement of $14,122,525 – which comprises the company’s illicit profits in Kenya and Angola – plus prejudgment interest of $2,105,540. Goodyear also must report its FCPA remediation efforts to the SEC for a three-year period.
The SEC’s investigation was conducted by Devon A. Brown and Brian T. Fitzsimons, and the case was supervised by Brian O. Quinn. The SEC thanks the Department of Justice’s Fraud Section and the U.S. Attorney’s Office for the Northern District of Ohio.
02/24/2015 11:15 AM EST
The Securities and Exchange Commission charged Goodyear Tire & Rubber Company with violating the Foreign Corrupt Practices Act (FCPA) when its subsidiaries paid bribes to land tire sales in Kenya and Angola.
Goodyear agreed to pay more than $16 million to settle the SEC’s charges.
According to the SEC’s order instituting a settled administrative proceeding, Goodyear failed to prevent or detect more than $3.2 million in bribes during a four-year period due to inadequate FCPA compliance controls at its subsidiaries in sub-Saharan Africa. Bribes were generally paid in cash to employees of private companies or government-owned entities as well as other local authorities such as police or city council officials. The improper payments were falsely recorded as legitimate business expenses in the books and records of the subsidiaries, which were consolidated into Goodyear’s books and records.
“Public companies must keep accurate accounting records, and Goodyear’s lax compliance controls enabled a routine of corrupt payments by African subsidiaries that were hidden in their books,” said Scott W. Friestad, Associate Director of the SEC’s Enforcement Division. “This settlement ensures that Goodyear must forfeit all of the illicit profits from business obtained through bribes to foreign officials as well as employees at commercial companies in Angola and Kenya.”
The SEC’s order finds that Goodyear’s subsidiary in Kenya bribed employees of the Kenya Ports Authority, Armed Forces Canteen Organization, Nzoia Sugar Company, Kenyan Air Force, Ministry of Roads, Ministry of State for Defense, East African Portland Cement Co., and Telkom Kenya Ltd. Goodyear’s subsidiary in Angola bribed employees of the Catoca Diamond Mine, which is owned by a consortium of mining interests including Angola’s national mining company Endiama E.P. and Russian mining company ALROSA. Others bribed in Angola worked at UNICARGAS, Engevia Construction and Public Works, Electric Company of Luanda, National Service of Alfadega, and Sonangol.
The SEC’s order finds that Goodyear violated the books and records and internal control provisions of the federal securities laws: Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934. Goodyear neither admitted nor denied the SEC’s findings. The settlement reflects the company’s self-reporting, prompt remedial acts, and significant cooperation with the SEC’s investigation. Goodyear must pay disgorgement of $14,122,525 – which comprises the company’s illicit profits in Kenya and Angola – plus prejudgment interest of $2,105,540. Goodyear also must report its FCPA remediation efforts to the SEC for a three-year period.
The SEC’s investigation was conducted by Devon A. Brown and Brian T. Fitzsimons, and the case was supervised by Brian O. Quinn. The SEC thanks the Department of Justice’s Fraud Section and the U.S. Attorney’s Office for the Northern District of Ohio.
Saturday, January 24, 2015
SEC ALLEGES FORMER EXECUTIVE AT ENGINEERING FIRM BRIBED FOREIGN OFFICIAL
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
SEC Charges Former Executive at Tampa-Based Engineering Firm With FCPA Violations
01/22/2015 10:40 AM EST
The Securities and Exchange Commission today charged a former officer at a Tampa, Fla.-based engineering and construction firm with violating the Foreign Corrupt Practices Act (FCPA) by offering and authorizing bribes and employment to foreign officials to secure Qatari government contracts.
The SEC also announced a deferred prosecution agreement (DPA) with The PBSJ Corporation that defers FCPA charges for a period of two years and requires the company to comply with certain undertakings. PBSJ must immediately pay $3.4 million in financial remedies as part of the agreement, which reflects the company’s significant cooperation with the SEC investigation. PBSJ is now known as The Atkins North America Holdings Corporation and no longer offers public stock in the U.S.
An SEC investigation found that Walid Hatoum, who has agreed to settle the SEC’s charges, offered to funnel funds to a local company owned and controlled by a foreign official in order to secure two multi-million Qatari government contracts for PBSJ in 2009. The foreign official subsequently provided Hatoum and PBSJ’s international subsidiary with access to confidential sealed-bid and pricing information that enabled the PBSJ subsidiary to tender winning bids for a hotel resort development project in Morocco and a light rail transit project in Qatar.
“Hatoum offered and authorized nearly $1.4 million in bribes disguised as ‘agency fees’ intended for a foreign official who used an alias to communicate confidential information that assisted PBSJ,” said Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit. “PBSJ ignored multiple red flags that should have enabled other officers and employees to uncover the bribery scheme at an earlier stage. But once discovered, the company self-reported the potential FCPA violations and cooperated substantially.”
According to the SEC’s order instituting a settled administrative proceeding against Hatoum, he also offered employment to a second foreign official in return for assistance as the bribery scheme began to unravel and PBSJ lost the hotel resort contract. Even though the bribes themselves were not consummated before the scheme was uncovered by the company, PBSJ earned approximately $2.9 million in illicit profits because it continued work on the light rail project until a replacement company could be found.
Under the DPA, PBSJ agreed to pay disgorgement and interest of $3,032,875 and a penalty of $375,000. PBSJ took quick steps to end the misconduct after self-reporting to the SEC, and the company voluntarily made witnesses available for interviews and provided factual chronologies, timelines, internal summaries, and full forensic images to cooperate with the SEC’s investigation.
The SEC’s order against Hatoum finds that he violated the anti-bribery, internal accounting controls, books and records, and false records provisions of the Securities Exchange Act of 1934. Without admitting or denying the findings, Hatoum agreed to pay a penalty of $50,000.
The SEC’s investigation was conducted by FCPA Unit members Tracy L. Price and Jim Valentino. The SEC appreciates the assistance of the Justice Department’s Fraud Section and the Federal Bureau of Investigation.
SEC Charges Former Executive at Tampa-Based Engineering Firm With FCPA Violations
01/22/2015 10:40 AM EST
The Securities and Exchange Commission today charged a former officer at a Tampa, Fla.-based engineering and construction firm with violating the Foreign Corrupt Practices Act (FCPA) by offering and authorizing bribes and employment to foreign officials to secure Qatari government contracts.
The SEC also announced a deferred prosecution agreement (DPA) with The PBSJ Corporation that defers FCPA charges for a period of two years and requires the company to comply with certain undertakings. PBSJ must immediately pay $3.4 million in financial remedies as part of the agreement, which reflects the company’s significant cooperation with the SEC investigation. PBSJ is now known as The Atkins North America Holdings Corporation and no longer offers public stock in the U.S.
An SEC investigation found that Walid Hatoum, who has agreed to settle the SEC’s charges, offered to funnel funds to a local company owned and controlled by a foreign official in order to secure two multi-million Qatari government contracts for PBSJ in 2009. The foreign official subsequently provided Hatoum and PBSJ’s international subsidiary with access to confidential sealed-bid and pricing information that enabled the PBSJ subsidiary to tender winning bids for a hotel resort development project in Morocco and a light rail transit project in Qatar.
“Hatoum offered and authorized nearly $1.4 million in bribes disguised as ‘agency fees’ intended for a foreign official who used an alias to communicate confidential information that assisted PBSJ,” said Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit. “PBSJ ignored multiple red flags that should have enabled other officers and employees to uncover the bribery scheme at an earlier stage. But once discovered, the company self-reported the potential FCPA violations and cooperated substantially.”
According to the SEC’s order instituting a settled administrative proceeding against Hatoum, he also offered employment to a second foreign official in return for assistance as the bribery scheme began to unravel and PBSJ lost the hotel resort contract. Even though the bribes themselves were not consummated before the scheme was uncovered by the company, PBSJ earned approximately $2.9 million in illicit profits because it continued work on the light rail project until a replacement company could be found.
Under the DPA, PBSJ agreed to pay disgorgement and interest of $3,032,875 and a penalty of $375,000. PBSJ took quick steps to end the misconduct after self-reporting to the SEC, and the company voluntarily made witnesses available for interviews and provided factual chronologies, timelines, internal summaries, and full forensic images to cooperate with the SEC’s investigation.
The SEC’s order against Hatoum finds that he violated the anti-bribery, internal accounting controls, books and records, and false records provisions of the Securities Exchange Act of 1934. Without admitting or denying the findings, Hatoum agreed to pay a penalty of $50,000.
The SEC’s investigation was conducted by FCPA Unit members Tracy L. Price and Jim Valentino. The SEC appreciates the assistance of the Justice Department’s Fraud Section and the Federal Bureau of Investigation.
Tuesday, December 23, 2014
REMARKS: DEPUTY AG COLE ON ALSTON BRIBERY CASE
FROM: U.S. JUSTICE DEPARTMENT
Remarks for Deputy Attorney General James M. Cole Press Conference Regarding Alstom Bribery Plea
Washington, DCUnited States ~ Monday, December 22, 2014
I am joined today by Assistant Attorney General Leslie Caldwell, of the Justice Department’s Criminal Division; First Assistant United States Attorney Michael Gustafson, of the District of Connecticut; and Executive Assistant Director Robert Anderson Jr., of the FBI. We are here to announce a historic law enforcement action that marks the end of a decade-long transnational bribery scheme – a scheme that was both concocted and concealed by Alstom, a multinational French company, and its subsidiaries in Switzerland, Connecticut, and New Jersey.
Today, those companies admit that, from at least 2000 to 2011, they bribed government officials and falsified accounting records in connection with lucrative power and transportation projects for state-owned entities across the globe. They used bribes to secure contracts in Indonesia, Egypt, Saudi Arabia, and the Bahamas. Altogether, Alstom paid tens of millions of dollars in bribes to win $4 billion in projects – and to secure approximately $300 million in profit for themselves.
Such rampant and flagrant wrongdoing demands an appropriately strong law enforcement response. Today, I can announce that the Justice Department has filed a two-count criminal information in the U.S. District Court for the District of Connecticut, charging Alstom with violating the Foreign Corrupt Practices Act, or FCPA, by falsifying its books and records and failing to implement adequate internal controls. Alstom has agreed to plead guilty to these charges, to admit its criminal conduct, and to pay a criminal penalty of more than $772 million. If approved by the court next year, this will be the largest foreign bribery penalty in the history of the United States Department of Justice.
In addition, I can announce that Alstom’s Swiss subsidiary is pleading guilty to conspiring to violate the FCPA. And the company’s two American subsidiaries have entered into deferred prosecution agreements and admitted that they conspired to violate the FCPA.
Alstom’s corruption scheme was sustained over more than a decade and across several continents. It was breathtaking in its breadth, its brazenness, and its worldwide consequences. And it is both my expectation – and my intention – that the comprehensive resolution we are announcing today will send an unmistakable message to other companies around the world: that this Department of Justice will be relentless in rooting out and punishing corruption to the fullest extent of the law, no matter how sweeping its scale or how daunting its prosecution. Let me be very clear: corruption has no place in the global marketplace. And today’s resolution signals that the United States will continue to play a leading role in its eradication.
The investigation and prosecution of Alstom and its subsidiaries have been exceedingly complex – and they have required the utmost skill and tenacity on the part of a wide consortium of law enforcement officials throughout the country and across the globe. I want to thank the Criminal Division’s Fraud Section and Office of International Affairs; the U.S. Attorney’s Offices in Connecticut, Maryland, and New Jersey; the FBI’s Washington Field Office and its Resident Agency in Meriden, Connecticut; the Corruption Eradication Commission in Indonesia; the Office of the Attorney General in Switzerland; the Serious Fraud Office in the United Kingdom; as well as authorities in Germany, Italy, Singapore, Saudi Arabia, Cyprus, and Taiwan, for their tireless efforts to advance this matter. The remarkable cross-border collaboration that these agencies made possible has led directly to today’s historic resolution. And this outcome demonstrates our unwavering commitment to ending corporate bribery and international corruption. Our hope is that this announcement will serve as an inspiration – and a model – for future efforts.
At this time, I’d like to introduce Assistant Attorney General [Leslie] Caldwell, who will provide additional details on today’s announcement.
Remarks for Deputy Attorney General James M. Cole Press Conference Regarding Alstom Bribery Plea
Washington, DCUnited States ~ Monday, December 22, 2014
I am joined today by Assistant Attorney General Leslie Caldwell, of the Justice Department’s Criminal Division; First Assistant United States Attorney Michael Gustafson, of the District of Connecticut; and Executive Assistant Director Robert Anderson Jr., of the FBI. We are here to announce a historic law enforcement action that marks the end of a decade-long transnational bribery scheme – a scheme that was both concocted and concealed by Alstom, a multinational French company, and its subsidiaries in Switzerland, Connecticut, and New Jersey.
Today, those companies admit that, from at least 2000 to 2011, they bribed government officials and falsified accounting records in connection with lucrative power and transportation projects for state-owned entities across the globe. They used bribes to secure contracts in Indonesia, Egypt, Saudi Arabia, and the Bahamas. Altogether, Alstom paid tens of millions of dollars in bribes to win $4 billion in projects – and to secure approximately $300 million in profit for themselves.
Such rampant and flagrant wrongdoing demands an appropriately strong law enforcement response. Today, I can announce that the Justice Department has filed a two-count criminal information in the U.S. District Court for the District of Connecticut, charging Alstom with violating the Foreign Corrupt Practices Act, or FCPA, by falsifying its books and records and failing to implement adequate internal controls. Alstom has agreed to plead guilty to these charges, to admit its criminal conduct, and to pay a criminal penalty of more than $772 million. If approved by the court next year, this will be the largest foreign bribery penalty in the history of the United States Department of Justice.
In addition, I can announce that Alstom’s Swiss subsidiary is pleading guilty to conspiring to violate the FCPA. And the company’s two American subsidiaries have entered into deferred prosecution agreements and admitted that they conspired to violate the FCPA.
Alstom’s corruption scheme was sustained over more than a decade and across several continents. It was breathtaking in its breadth, its brazenness, and its worldwide consequences. And it is both my expectation – and my intention – that the comprehensive resolution we are announcing today will send an unmistakable message to other companies around the world: that this Department of Justice will be relentless in rooting out and punishing corruption to the fullest extent of the law, no matter how sweeping its scale or how daunting its prosecution. Let me be very clear: corruption has no place in the global marketplace. And today’s resolution signals that the United States will continue to play a leading role in its eradication.
The investigation and prosecution of Alstom and its subsidiaries have been exceedingly complex – and they have required the utmost skill and tenacity on the part of a wide consortium of law enforcement officials throughout the country and across the globe. I want to thank the Criminal Division’s Fraud Section and Office of International Affairs; the U.S. Attorney’s Offices in Connecticut, Maryland, and New Jersey; the FBI’s Washington Field Office and its Resident Agency in Meriden, Connecticut; the Corruption Eradication Commission in Indonesia; the Office of the Attorney General in Switzerland; the Serious Fraud Office in the United Kingdom; as well as authorities in Germany, Italy, Singapore, Saudi Arabia, Cyprus, and Taiwan, for their tireless efforts to advance this matter. The remarkable cross-border collaboration that these agencies made possible has led directly to today’s historic resolution. And this outcome demonstrates our unwavering commitment to ending corporate bribery and international corruption. Our hope is that this announcement will serve as an inspiration – and a model – for future efforts.
At this time, I’d like to introduce Assistant Attorney General [Leslie] Caldwell, who will provide additional details on today’s announcement.
Monday, December 22, 2014
FRENCH COMPANY PLEADS GUILTY, AGREES TO PAY OVER $772 MILLION TO RESOLVE BRIBERY CHARGES
FROM: U.S. JUSTICE DEPARTMENT
Monday, December 22, 2014
Alstom Pleads Guilty and Agrees to Pay $772 Million Criminal Penalty to Resolve Foreign Bribery Charges
Alstom S.A. (Alstom), a French power and transportation company, pleaded guilty today and agreed to pay a $772,290,000 fine to resolve charges related to a widespread scheme involving tens of millions of dollars in bribes in countries around the world, including Indonesia, Saudi Arabia, Egypt and the Bahamas.
Deputy Attorney General James M. Cole, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, First Assistant U.S. Attorney Michael J. Gustafson of the District of Connecticut and FBI Executive Assistant Director Robert Anderson Jr. made the announcement.
“Alstom’s corruption scheme was sustained over more than a decade and across several continents,” said Deputy Attorney General Cole. “It was astounding in its breadth, its brazenness and its worldwide consequences. And it is both my expectation – and my intention – that the comprehensive resolution we are announcing today will send an unmistakable message to other companies around the world: that this Department of Justice will be relentless in rooting out and punishing corruption to the fullest extent of the law, no matter how sweeping its scale or how daunting its prosecution.”
“This case is emblematic of how the Department of Justice will investigate and prosecute FCPA cases – and other corporate crimes,” said Assistant Attorney General Caldwell. “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.”
“Today’s historic resolution is an important reminder that our moral and legal mandate to stamp out corruption does not stop at any border, whether city, state or national,” said First Assistant U.S. Attorney Gustafson. “A significant part of this illicit work was unfortunately carried out from Alstom Power’s offices in Windsor, Connecticut. I am hopeful that this resolution, and in particular the deferred prosecution agreement with Alstom Power, will provide the company an opportunity to reshape its culture and restore its place as a respected corporate citizen.”
“This investigation spanned years and crossed continents, as agents from the FBI Washington and New Haven field offices conducted interviews and collected evidence in every corner of the globe,” said FBI Executive Assistant Director Anderson. “The record dollar amount of the fine is a clear deterrent to companies who would engage in foreign bribery, but an even better deterrent is that we are sending executives who commit these crimes to prison.”
Alstom pleaded guilty to a two-count criminal information filed today in the U.S. District Court for the District of Connecticut, charging the company with violating the Foreign Corrupt Practices Act (FCPA) by falsifying its books and records and failing to implement adequate internal controls. Alstom admitted its criminal conduct and agreed to pay a criminal penalty of $772,290,000. U.S. District Judge Janet B. Arterton of the District of Connecticut scheduled a sentencing hearing for June 23, 2015 at 3pm.
In addition, Alstom Network Schweiz AG, formerly Alstom Prom (Alstom Prom), Alstom’s Swiss subsidiary, pleaded guilty to a criminal information charging the company with conspiracy to violate the anti-bribery provisions of the FCPA. Alstom Power Inc. (Alstom Power) and Alstom Grid Inc. (Alstom Grid), two U.S. subsidiaries, both entered into deferred prosecution agreements, admitting that they conspired to violate the anti-bribery provisions of the FCPA. Alstom Power is headquartered in Windsor, Connecticut, and Alstom Grid, formerly Alstom T&D, was headquartered in New Jersey.
According to the companies’ admissions, Alstom, Alstom Prom, Alstom Power and Alstom Grid, 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 $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 purportedly to provide 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 plea agreement cites many factors considered by the department in reaching the appropriate resolution, 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 individuals, including four corporate executives of Alstom and its subsidiaries, 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 a second superseding indictment on July 30, 2013, and is pending trial in the District of Connecticut in June 2015. 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 term of imprisonment.
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, pleaded guilty on Dec. 4, 2014, in federal court in the District of Maryland to mail fraud, conspiring to launder money, and tax fraud for accepting kickbacks from Alstom and other companies. In his plea agreement, Elgawhary agreed 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, and the FBI’s Newark and Baltimore Divisions. The department appreciates the significant cooperation provided by its law enforcement colleagues in Indonesia at the Komisi Pemberantasan Korupsi (Corruption Eradication Commission), the Office of the Attorney General in Switzerland, the Serious Fraud Office in the United Kingdom, as well as authorities in Germany, Italy, Singapore, Saudi Arabia, Cyprus 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 Grid 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.
Monday, December 22, 2014
Alstom Pleads Guilty and Agrees to Pay $772 Million Criminal Penalty to Resolve Foreign Bribery Charges
Alstom S.A. (Alstom), a French power and transportation company, pleaded guilty today and agreed to pay a $772,290,000 fine to resolve charges related to a widespread scheme involving tens of millions of dollars in bribes in countries around the world, including Indonesia, Saudi Arabia, Egypt and the Bahamas.
Deputy Attorney General James M. Cole, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, First Assistant U.S. Attorney Michael J. Gustafson of the District of Connecticut and FBI Executive Assistant Director Robert Anderson Jr. made the announcement.
“Alstom’s corruption scheme was sustained over more than a decade and across several continents,” said Deputy Attorney General Cole. “It was astounding in its breadth, its brazenness and its worldwide consequences. And it is both my expectation – and my intention – that the comprehensive resolution we are announcing today will send an unmistakable message to other companies around the world: that this Department of Justice will be relentless in rooting out and punishing corruption to the fullest extent of the law, no matter how sweeping its scale or how daunting its prosecution.”
“This case is emblematic of how the Department of Justice will investigate and prosecute FCPA cases – and other corporate crimes,” said Assistant Attorney General Caldwell. “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.”
“Today’s historic resolution is an important reminder that our moral and legal mandate to stamp out corruption does not stop at any border, whether city, state or national,” said First Assistant U.S. Attorney Gustafson. “A significant part of this illicit work was unfortunately carried out from Alstom Power’s offices in Windsor, Connecticut. I am hopeful that this resolution, and in particular the deferred prosecution agreement with Alstom Power, will provide the company an opportunity to reshape its culture and restore its place as a respected corporate citizen.”
“This investigation spanned years and crossed continents, as agents from the FBI Washington and New Haven field offices conducted interviews and collected evidence in every corner of the globe,” said FBI Executive Assistant Director Anderson. “The record dollar amount of the fine is a clear deterrent to companies who would engage in foreign bribery, but an even better deterrent is that we are sending executives who commit these crimes to prison.”
Alstom pleaded guilty to a two-count criminal information filed today in the U.S. District Court for the District of Connecticut, charging the company with violating the Foreign Corrupt Practices Act (FCPA) by falsifying its books and records and failing to implement adequate internal controls. Alstom admitted its criminal conduct and agreed to pay a criminal penalty of $772,290,000. U.S. District Judge Janet B. Arterton of the District of Connecticut scheduled a sentencing hearing for June 23, 2015 at 3pm.
In addition, Alstom Network Schweiz AG, formerly Alstom Prom (Alstom Prom), Alstom’s Swiss subsidiary, pleaded guilty to a criminal information charging the company with conspiracy to violate the anti-bribery provisions of the FCPA. Alstom Power Inc. (Alstom Power) and Alstom Grid Inc. (Alstom Grid), two U.S. subsidiaries, both entered into deferred prosecution agreements, admitting that they conspired to violate the anti-bribery provisions of the FCPA. Alstom Power is headquartered in Windsor, Connecticut, and Alstom Grid, formerly Alstom T&D, was headquartered in New Jersey.
According to the companies’ admissions, Alstom, Alstom Prom, Alstom Power and Alstom Grid, 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 $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 purportedly to provide 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 plea agreement cites many factors considered by the department in reaching the appropriate resolution, 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 individuals, including four corporate executives of Alstom and its subsidiaries, 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 a second superseding indictment on July 30, 2013, and is pending trial in the District of Connecticut in June 2015. 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 term of imprisonment.
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, pleaded guilty on Dec. 4, 2014, in federal court in the District of Maryland to mail fraud, conspiring to launder money, and tax fraud for accepting kickbacks from Alstom and other companies. In his plea agreement, Elgawhary agreed 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, and the FBI’s Newark and Baltimore Divisions. The department appreciates the significant cooperation provided by its law enforcement colleagues in Indonesia at the Komisi Pemberantasan Korupsi (Corruption Eradication Commission), the Office of the Attorney General in Switzerland, the Serious Fraud Office in the United Kingdom, as well as authorities in Germany, Italy, Singapore, Saudi Arabia, Cyprus 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 Grid 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.
Thursday, December 18, 2014
SEC CHARGES AVON PRODUCTS INC. WITH VIOLATING FOREIGN CORRUPT PRACTICES ACT
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
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.
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.
Wednesday, December 17, 2014
SEC CHARGES U.S. TECH FIRM IN CASE INVOLVING PAYMENTS TO CHINESE GOVERNMENT OFFICIALS
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission today charged a Billerica, Mass.-based global manufacturer of scientific instruments with violating the Foreign Corrupt Practices Act (FCPA) by providing non-business related travel and improper payments to various Chinese government officials in an effort to win business.
An SEC investigation found that Bruker Corporation lacked sufficient internal controls to prevent and detect approximately $230,000 in improper payments out of its China-based offices that falsely recorded them in books and records as legitimate business and marketing expenses. The payments enabled Bruker to realize approximately $1.7 million in profits from sales contracts with state-owned entities in China whose officials received the improper payments.
Bruker, which self-reported its misconduct and provided extensive cooperation during the SEC’s investigation, agreed to pay approximately $2.4 million to settle the SEC’s charges.
“Bruker’s lax internal controls allowed employees in its China offices to enter into sham ‘collaboration agreements’ to direct money to foreign officials and send officials on sightseeing trips around the world,” said Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit. “The company has since taken significant remedial steps to revise its compliance program and enhance internal controls over travel and contract approvals.”
According to the SEC’s order instituting a settled administrative proceeding, a Bruker office in China paid more than $111,000 to Chinese government officials under 12 suspicious collaboration agreements contingent on state-owned entities providing research on Bruker products or using Bruker products in demonstration laboratories. The collaboration agreements did not specify the work product that the state-owned entities had to provide in order to be paid, and no work product was actually provided to the Bruker office by the state-owned entities. Certain collaboration agreements were executed directly with a Chinese government official rather than the state-owned entity itself, and in some cases Bruker’s office paid the official directly.
According to the SEC’s order, the other improper payments involved reimbursements to Chinese government officials for leisure travel to the United States, Czech Republic, Norway, Sweden, France, Germany, Switzerland, and Italy. These officials often were responsible for authorizing the purchase of Bruker products, and the leisure trips typically followed business-related travel for the officials funded by the company. For example, Bruker paid for the purported training expenses of a Chinese government official who signed the sales contract on behalf of a state-owned entity, but the payment actually was reimbursement for sightseeing, tour tickets, shopping, and other leisure activities in Frankfurt and Paris. Bruker also funded some trips for Chinese government officials that had no legitimate business component. For example, two Chinese government officials received paid travel to New York despite the lack of any Bruker facilities there, and also to Los Angeles where they engaged in sightseeing activities.
The SEC’s order finds that Bruker violated the internal controls and books and records provisions of the Securities Exchange Act of 1934. The company agreed to pay $1,714,852 in disgorgement, $310,117 in prejudgment interest, and a $375,000 penalty. Bruker consented to the order without admitting or denying the findings, and the SEC considered the company’s significant remedial acts as well as its self-reporting and cooperation with the investigation when determining a settlement.
The SEC’s investigation was conducted by Asita Obeyesekere and Mark Albers of the Boston Regional Office. The case was supervised by Paul G. Block of the FCPA Unit.
The Securities and Exchange Commission today charged a Billerica, Mass.-based global manufacturer of scientific instruments with violating the Foreign Corrupt Practices Act (FCPA) by providing non-business related travel and improper payments to various Chinese government officials in an effort to win business.
An SEC investigation found that Bruker Corporation lacked sufficient internal controls to prevent and detect approximately $230,000 in improper payments out of its China-based offices that falsely recorded them in books and records as legitimate business and marketing expenses. The payments enabled Bruker to realize approximately $1.7 million in profits from sales contracts with state-owned entities in China whose officials received the improper payments.
Bruker, which self-reported its misconduct and provided extensive cooperation during the SEC’s investigation, agreed to pay approximately $2.4 million to settle the SEC’s charges.
“Bruker’s lax internal controls allowed employees in its China offices to enter into sham ‘collaboration agreements’ to direct money to foreign officials and send officials on sightseeing trips around the world,” said Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit. “The company has since taken significant remedial steps to revise its compliance program and enhance internal controls over travel and contract approvals.”
According to the SEC’s order instituting a settled administrative proceeding, a Bruker office in China paid more than $111,000 to Chinese government officials under 12 suspicious collaboration agreements contingent on state-owned entities providing research on Bruker products or using Bruker products in demonstration laboratories. The collaboration agreements did not specify the work product that the state-owned entities had to provide in order to be paid, and no work product was actually provided to the Bruker office by the state-owned entities. Certain collaboration agreements were executed directly with a Chinese government official rather than the state-owned entity itself, and in some cases Bruker’s office paid the official directly.
According to the SEC’s order, the other improper payments involved reimbursements to Chinese government officials for leisure travel to the United States, Czech Republic, Norway, Sweden, France, Germany, Switzerland, and Italy. These officials often were responsible for authorizing the purchase of Bruker products, and the leisure trips typically followed business-related travel for the officials funded by the company. For example, Bruker paid for the purported training expenses of a Chinese government official who signed the sales contract on behalf of a state-owned entity, but the payment actually was reimbursement for sightseeing, tour tickets, shopping, and other leisure activities in Frankfurt and Paris. Bruker also funded some trips for Chinese government officials that had no legitimate business component. For example, two Chinese government officials received paid travel to New York despite the lack of any Bruker facilities there, and also to Los Angeles where they engaged in sightseeing activities.
The SEC’s order finds that Bruker violated the internal controls and books and records provisions of the Securities Exchange Act of 1934. The company agreed to pay $1,714,852 in disgorgement, $310,117 in prejudgment interest, and a $375,000 penalty. Bruker consented to the order without admitting or denying the findings, and the SEC considered the company’s significant remedial acts as well as its self-reporting and cooperation with the investigation when determining a settlement.
The SEC’s investigation was conducted by Asita Obeyesekere and Mark Albers of the Boston Regional Office. The case was supervised by Paul G. Block of the FCPA Unit.
Thursday, December 4, 2014
FORMER EXECUTIVE PLEADS GUILTY IN KICKBACK SCHEME INVOLVING POWER CONTRACTS IN EGYPT
FROM: U.S. JUSTICE DEPARTMENT
Thursday, December 4, 2014
Former Bechtel Executive Pleads Guilty in Connection with a $5.2 Million Kickback Scheme
The former Principal Vice President of Bechtel Corporation and General Manager of the Power Generation Engineering and Services Company (PGESCo) pleaded guilty today in connection with a $5.2 million kickback scheme intended to manipulate the competitive bidding process for state-run power contracts in Egypt.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Rod J. Rosenstein of the District of Maryland, Special Agent in Charge Stephen E. Vogt of the FBI’s Baltimore Division and Special Agent in Charge Thomas J. Kelly of the Internal Revenue Service-Criminal Investigation (IRS-CI) Washington D.C. Field Office made the announcement.
“Asem Elgawhary took more than $5 million in kickbacks from companies trying to manipulate a competitive bidding process in their favor,” said Assistant Attorney General Caldwell. “Foreign corruption is an international scourge, and we will pursue those who take bribes, whether they are government officials or high-ranking corporate executives, like Elgawhary. Every corruption conviction is a step towards rooting out and deterring this global problem.”
“Our economy is so global in this day and age that if we allowed corrupt practices overseas such as taking bribes in exchange for special consideration when comparing bids, it would seriously impact our international trade. What Mr. Elgawhary admitted to doing has a dramatic affect on U.S. companies being able to expand and grow their work forces overseas in a fair market place, which in the long run hurts our economy,” said Special Agent in Charge Vogt of the FBI in Maryland and Delaware. “He displayed his blatant disregard for our rule of law when he used a portion of the bribe payment to purchase a house for $1.6 million in cash. This should send a message to others like Mr. Elgawhary, that hiding behind a foreign government won’t protect you from prosecution.”
“Mr. Elgawhary allowed greed to compromise his business practices by taking kickbacks to provide unfair advantages to companies willing pay for power contracts,” stated Special Agent in Charge Kelly of IRS-CI’s Washington D.C. Field Office. “He compounded his criminal activities by failing to report any of the kickback payments as income on his tax returns. It is imperative that honest companies know IRS Criminal Investigation will investigate and bring to prosecution those willing to line their pockets through unethical business practices.”
Asem Elgawhary, 73, of Potomac, Maryland, pleaded guilty today before U.S. District Judge Deborah K. Chasanow of the District of Maryland to mail fraud, conspiracy to commit money laundering, and obstruction and interference with the administration of the tax laws. Sentencing is scheduled for Mar. 23, 2015.
In his plea agreement, Elgawhary admitted that, from 1996 to 2011, he was assigned by Bechtel – a U.S. corporation engaged in engineering, construction and project management – to be the general manager at PGESCo, a joint venture between Bechtel and Egypt’s state-owned and state-controlled electricity company (EEHC). PGESCo assisted EEHC in identifying possible subcontractors, soliciting bids and awarding contracts to perform power projects for EEHC. Elgawhary admitted to accepting a total of $5.2 million from three power companies, which they paid to secure a competitive and unfair advantage in the bidding process. According to court documents, the power companies and their consultants paid more than $5.2 million in kickback payments into various off-shore bank accounts under the control of Elgawhary, including various Swiss bank accounts.
As Elgawhary admitted in his plea agreement, he attempted to conceal the kickback scheme by routing the payments through various off-shore bank accounts, including Swiss bank accounts, under his control. Elgawhary also sent various documents and “Representation Letters” to Bechtel executives and members of the PGESCo Board of Directors in Maryland, falsely certifying that he had no knowledge of any fraud or suspected fraud at PGESCo, and that there were no violations or possible violations of law or regulations that should have been considered for disclosure in PGESCo’s financial statements. Elgawhary also admitted that, in further attempt to conceal the scheme, he made misrepresentations to counsel for Bechtel when he was interviewed in April 2011.
Elgawhary also admitted to conspiring to launder the proceeds of the scheme and to obstructing and impeding the administration of U.S. tax laws by falsely claiming that he maintained only one foreign bank account, denying that he received any income from a foreign bank account, and failing to report any of the kickback payments as income for the tax years 2008 through 2011.
Elgawhary, a dual U.S. and Egyptian citizen, was arrested on a complaint when he flew into the United States on Nov. 26, 2013, and was indicted on Feb. 10, 2014.
The case is being investigated by the FBI’s Baltimore Division and IRS-CI’s Washington D.C. Field Office. Significant assistance was provided by the Criminal Division’s Office of International Affairs, and law enforcement counterparts in Switzerland, Germany, Italy, Saudi Arabia and Cyprus. The case is being prosecuted by Assistant Chief Daniel S. Kahn of the Criminal Division’s Fraud Section and Assistant U.S. Attorney David I. Salem of the District of Maryland.
Thursday, December 4, 2014
Former Bechtel Executive Pleads Guilty in Connection with a $5.2 Million Kickback Scheme
The former Principal Vice President of Bechtel Corporation and General Manager of the Power Generation Engineering and Services Company (PGESCo) pleaded guilty today in connection with a $5.2 million kickback scheme intended to manipulate the competitive bidding process for state-run power contracts in Egypt.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Rod J. Rosenstein of the District of Maryland, Special Agent in Charge Stephen E. Vogt of the FBI’s Baltimore Division and Special Agent in Charge Thomas J. Kelly of the Internal Revenue Service-Criminal Investigation (IRS-CI) Washington D.C. Field Office made the announcement.
“Asem Elgawhary took more than $5 million in kickbacks from companies trying to manipulate a competitive bidding process in their favor,” said Assistant Attorney General Caldwell. “Foreign corruption is an international scourge, and we will pursue those who take bribes, whether they are government officials or high-ranking corporate executives, like Elgawhary. Every corruption conviction is a step towards rooting out and deterring this global problem.”
“Our economy is so global in this day and age that if we allowed corrupt practices overseas such as taking bribes in exchange for special consideration when comparing bids, it would seriously impact our international trade. What Mr. Elgawhary admitted to doing has a dramatic affect on U.S. companies being able to expand and grow their work forces overseas in a fair market place, which in the long run hurts our economy,” said Special Agent in Charge Vogt of the FBI in Maryland and Delaware. “He displayed his blatant disregard for our rule of law when he used a portion of the bribe payment to purchase a house for $1.6 million in cash. This should send a message to others like Mr. Elgawhary, that hiding behind a foreign government won’t protect you from prosecution.”
“Mr. Elgawhary allowed greed to compromise his business practices by taking kickbacks to provide unfair advantages to companies willing pay for power contracts,” stated Special Agent in Charge Kelly of IRS-CI’s Washington D.C. Field Office. “He compounded his criminal activities by failing to report any of the kickback payments as income on his tax returns. It is imperative that honest companies know IRS Criminal Investigation will investigate and bring to prosecution those willing to line their pockets through unethical business practices.”
Asem Elgawhary, 73, of Potomac, Maryland, pleaded guilty today before U.S. District Judge Deborah K. Chasanow of the District of Maryland to mail fraud, conspiracy to commit money laundering, and obstruction and interference with the administration of the tax laws. Sentencing is scheduled for Mar. 23, 2015.
In his plea agreement, Elgawhary admitted that, from 1996 to 2011, he was assigned by Bechtel – a U.S. corporation engaged in engineering, construction and project management – to be the general manager at PGESCo, a joint venture between Bechtel and Egypt’s state-owned and state-controlled electricity company (EEHC). PGESCo assisted EEHC in identifying possible subcontractors, soliciting bids and awarding contracts to perform power projects for EEHC. Elgawhary admitted to accepting a total of $5.2 million from three power companies, which they paid to secure a competitive and unfair advantage in the bidding process. According to court documents, the power companies and their consultants paid more than $5.2 million in kickback payments into various off-shore bank accounts under the control of Elgawhary, including various Swiss bank accounts.
As Elgawhary admitted in his plea agreement, he attempted to conceal the kickback scheme by routing the payments through various off-shore bank accounts, including Swiss bank accounts, under his control. Elgawhary also sent various documents and “Representation Letters” to Bechtel executives and members of the PGESCo Board of Directors in Maryland, falsely certifying that he had no knowledge of any fraud or suspected fraud at PGESCo, and that there were no violations or possible violations of law or regulations that should have been considered for disclosure in PGESCo’s financial statements. Elgawhary also admitted that, in further attempt to conceal the scheme, he made misrepresentations to counsel for Bechtel when he was interviewed in April 2011.
Elgawhary also admitted to conspiring to launder the proceeds of the scheme and to obstructing and impeding the administration of U.S. tax laws by falsely claiming that he maintained only one foreign bank account, denying that he received any income from a foreign bank account, and failing to report any of the kickback payments as income for the tax years 2008 through 2011.
Elgawhary, a dual U.S. and Egyptian citizen, was arrested on a complaint when he flew into the United States on Nov. 26, 2013, and was indicted on Feb. 10, 2014.
The case is being investigated by the FBI’s Baltimore Division and IRS-CI’s Washington D.C. Field Office. Significant assistance was provided by the Criminal Division’s Office of International Affairs, and law enforcement counterparts in Switzerland, Germany, Italy, Saudi Arabia and Cyprus. The case is being prosecuted by Assistant Chief Daniel S. Kahn of the Criminal Division’s Fraud Section and Assistant U.S. Attorney David I. Salem of the District of Maryland.
Wednesday, November 19, 2014
SEC SANCTIONS TWO FORMER DEFENSE CONTRACTOR EMPLOYEES FOR FOREIGN CORRUPT PRACTICES ACT VIOLATIONS
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
November 17, 2014
The Securities and Exchange Commission sanctioned two former employees in the Dubai office of a U.S.-based defense contractor for violating the Foreign Corrupt Practices Act (FCPA) by taking government officials in Saudi Arabia on a “world tour” to help secure business for the company. The two employees later falsified records in an attempt to hide their misconduct.
Stephen Timms and Yasser Ramahi, who worked in sales at FLIR Systems Inc., agreed to settle the SEC’s charges and pay financial penalties. The SEC’s investigation is continuing.
“This case shows we will pursue employees of public companies who think it is acceptable to buy foreign officials’ loyalty with lavish gifts and travel,” said Andrew J. Ceresney, Director of the SEC Enforcement Division. “By making illegal payments and causing them to be recorded improperly, employees expose not only their firms but also themselves to an enforcement action.”
FLIR is headquartered in Oregon and produces thermal imaging, night vision, and infrared cameras and sensor systems. According to the SEC’s order instituting a settled administrative proceeding, FLIR entered into a multi-million dollar contract to provide thermal binoculars to the Saudi government in November 2008. Timms and Ramahi were the primary sales employees responsible for the contract, and also were involved in negotiations to sell FLIR’s security cameras to the same government officials. At the time, Timms was the head of FLIR’s Middle East office in Dubai and Ramahi reported to him.
The SEC’s order finds that Timms and Ramahi traveled to Saudi Arabia in March 2009 and provided five officials with expensive luxury watches during meetings to discuss several business opportunities. Timms and Ramahi believed these officials were important to sales of both the binoculars and the security cameras. A few months later, they arranged for key officials, including two who received watches, to embark on what Timms referred to as a “world tour” of personal travel before and after they visited FLIR’s Boston facilities for a factory equipment inspection that was a key condition to fulfillment of the contract. The officials traveled for 20 nights with stops in Casablanca, Paris, Dubai, Beirut, and New York City. There was no business purpose for the stops outside of Boston, and the airfare and hotel accommodations were paid for by FLIR. Prior to providing the gifts and travel to the Saudi Arabian officials, Ramahi and Timms each had taken FCPA training at the company that specifically identified luxury watches and side trips as prohibited gifts.
According to the SEC’s order, when FLIR’s finance department flagged the expense reimbursement request for the watches during an unrelated review of expenses in the Dubai office and questioned the $7,000 cost, Timms and Ramahi obtained a second, fabricated invoice showing a cost of 7,000 Saudi Riyal (approximately $1,900 in U.S. dollars) instead of the true cost of $7,000 in U.S. dollars. They directed FLIR’s local third-party agent to provide false information to the company to back up their story that the original submission was merely a mistake. Ramahi and Timms also falsely claimed that FLIR’s payment for the world tour had been a billing mistake by FLIR’s travel agent, and again used false documentation and FLIR’s third-party agent to bolster their cover-up efforts.
Timms and Ramahi are U.S. citizens who reside in Thailand and the United Arab Emirates respectively. The SEC’s order finds that they violated the anti-bribery provisions of Section 30A of the Securities Exchange Act of 1934 and the internal controls and false records provisions of Section 13(b)(5) and Rule 13b2-1 of the Exchange Act. The SEC’s order further finds that Timms and Ramahi caused FLIR’s violations of the books and records provisions of Section 13(b)(2)(A) of the Exchange Act. Without admitting or denying the findings, Timms and Ramahi consented to the entry of the order and agreed to pay financial penalties of $50,000 and $20,000 respectively.
The SEC’s investigation is being conducted by FCPA Unit members Cameron P. Hoffman and Tracy L. Davis in the San Francisco office. The SEC appreciates the assistance of the Justice Department’s Fraud Section, the U.S. Attorney’s Office for the District of Massachusetts, the Federal Bureau of Investigation, and the United Arab Emirates Securities and Commodities Authority.
November 17, 2014
The Securities and Exchange Commission sanctioned two former employees in the Dubai office of a U.S.-based defense contractor for violating the Foreign Corrupt Practices Act (FCPA) by taking government officials in Saudi Arabia on a “world tour” to help secure business for the company. The two employees later falsified records in an attempt to hide their misconduct.
Stephen Timms and Yasser Ramahi, who worked in sales at FLIR Systems Inc., agreed to settle the SEC’s charges and pay financial penalties. The SEC’s investigation is continuing.
“This case shows we will pursue employees of public companies who think it is acceptable to buy foreign officials’ loyalty with lavish gifts and travel,” said Andrew J. Ceresney, Director of the SEC Enforcement Division. “By making illegal payments and causing them to be recorded improperly, employees expose not only their firms but also themselves to an enforcement action.”
FLIR is headquartered in Oregon and produces thermal imaging, night vision, and infrared cameras and sensor systems. According to the SEC’s order instituting a settled administrative proceeding, FLIR entered into a multi-million dollar contract to provide thermal binoculars to the Saudi government in November 2008. Timms and Ramahi were the primary sales employees responsible for the contract, and also were involved in negotiations to sell FLIR’s security cameras to the same government officials. At the time, Timms was the head of FLIR’s Middle East office in Dubai and Ramahi reported to him.
The SEC’s order finds that Timms and Ramahi traveled to Saudi Arabia in March 2009 and provided five officials with expensive luxury watches during meetings to discuss several business opportunities. Timms and Ramahi believed these officials were important to sales of both the binoculars and the security cameras. A few months later, they arranged for key officials, including two who received watches, to embark on what Timms referred to as a “world tour” of personal travel before and after they visited FLIR’s Boston facilities for a factory equipment inspection that was a key condition to fulfillment of the contract. The officials traveled for 20 nights with stops in Casablanca, Paris, Dubai, Beirut, and New York City. There was no business purpose for the stops outside of Boston, and the airfare and hotel accommodations were paid for by FLIR. Prior to providing the gifts and travel to the Saudi Arabian officials, Ramahi and Timms each had taken FCPA training at the company that specifically identified luxury watches and side trips as prohibited gifts.
According to the SEC’s order, when FLIR’s finance department flagged the expense reimbursement request for the watches during an unrelated review of expenses in the Dubai office and questioned the $7,000 cost, Timms and Ramahi obtained a second, fabricated invoice showing a cost of 7,000 Saudi Riyal (approximately $1,900 in U.S. dollars) instead of the true cost of $7,000 in U.S. dollars. They directed FLIR’s local third-party agent to provide false information to the company to back up their story that the original submission was merely a mistake. Ramahi and Timms also falsely claimed that FLIR’s payment for the world tour had been a billing mistake by FLIR’s travel agent, and again used false documentation and FLIR’s third-party agent to bolster their cover-up efforts.
Timms and Ramahi are U.S. citizens who reside in Thailand and the United Arab Emirates respectively. The SEC’s order finds that they violated the anti-bribery provisions of Section 30A of the Securities Exchange Act of 1934 and the internal controls and false records provisions of Section 13(b)(5) and Rule 13b2-1 of the Exchange Act. The SEC’s order further finds that Timms and Ramahi caused FLIR’s violations of the books and records provisions of Section 13(b)(2)(A) of the Exchange Act. Without admitting or denying the findings, Timms and Ramahi consented to the entry of the order and agreed to pay financial penalties of $50,000 and $20,000 respectively.
The SEC’s investigation is being conducted by FCPA Unit members Cameron P. Hoffman and Tracy L. Davis in the San Francisco office. The SEC appreciates the assistance of the Justice Department’s Fraud Section, the U.S. Attorney’s Office for the District of Massachusetts, the Federal Bureau of Investigation, and the United Arab Emirates Securities and Commodities Authority.
Wednesday, November 5, 2014
MEDICAL DIAGNOSTICS COMPANY TO PAY $14.35 MILLION TO RESOLVE FOREIGN CORRUPT PRACTICES ALLEGATIONS
FROM: U.S. JUSTICE DEPARTMENT
Monday, November 3, 2014
Bio-Rad Laboratories Resolves Foreign Corrupt Practices Act Investigation and Agrees to Pay $14.35 Million Penalty
A California-based medical diagnostics and life sciences manufacturing and sales company, Bio-Rad Laboratories Inc. (Bio-Rad), has agreed to pay a $14.35 million penalty to resolve allegations that it violated the Foreign Corrupt Practices Act (FCPA) by falsifying its books and records and failing to implement adequate internal controls in connection with sales it made in Russia.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Special Agent in Charge David J. Johnson of the FBI’s San Francisco Field Office made the announcement.
“Public companies that cook their books and hide improper payments foster corruption,” said Assistant Attorney General Caldwell. “The department pursues corruption from all angles, including the falsification of records and failure to implement adequate internal controls. The department also gives credit to companies, like Bio-Rad, who self-disclose, cooperate and remediate their violations of the FCPA.”
“The FBI remains committed to identifying and investigating violations of the Foreign Corrupt Practices Act,” said Special Agent in Charge Johnson. “This action demonstrates the benefits of self-disclosure, cooperation, and subsequent remediation by companies.”
According to the company’s admissions in the agreement, Bio-Rad SNC, a Bio-Rad subsidiary located in France, retained and paid intermediary companies commissions of 15-30 percent purportedly in exchange for various services in connection with certain governmental sales in Russia. The intermediary companies, however, did not perform these services. Several high-level managers at Bio-Rad, responsible for overseeing Bio-Rad’s business in Russia, reviewed and approved the commission payments to the intermediary companies despite knowing that the intermediary companies were not performing such services. These managers knowingly caused the payments to be falsely recorded on Bio-Rad SNC’s and, ultimately, Bio-Rad’s books. Bio-Rad, through several of its managers, also failed to implement adequate controls, as well as adequate compliance systems, with regard to its Russian operations while knowing that the failure to implement such controls allowed the intermediary companies to be paid significantly above-market commissions for little or no services.
The department entered into a non-prosecution agreement with the company due, in large part, to Bio-Rad’s self-disclosure of the misconduct and full cooperation with the department’s investigation. That cooperation included voluntarily making U.S. and foreign employees available for interviews, voluntarily producing documents from overseas, and summarizing the findings of its internal investigation. In addition, Bio-Rad has engaged in significant remedial actions, including enhancing its anti-corruption policies globally, improving its internal controls and compliance functions, developing and implementing additional due diligence and contracting procedures for intermediaries, and conducting extensive anti-corruption training throughout the organization.
In addition to the monetary penalty, Bio-Rad agreed to continue to cooperate with the department, to report periodically to the department for a two-year period concerning Bio-Rad’s compliance efforts, and to continue to implement an enhanced compliance program and internal controls designed to prevent and detect FCPA violations.
In a related matter, the U.S. Securities and Exchange Commission (SEC) today announced that it had entered into a cease and desist order against Bio-Rad in which the company agreed to pay $40.7 million in disgorgement and prejudgment interest in connection with the company’s sales in Russia, as well as in Thailand and Vietnam.
The department acknowledges and expresses its appreciation for the assistance provided by the SEC’s Division of Enforcement.
The case is being investigated by the FBI’s San Francisco Field Office. The case is being prosecuted by Trial Attorney Andrew Gentin of the Criminal Division’s Fraud Section.
Monday, November 3, 2014
Bio-Rad Laboratories Resolves Foreign Corrupt Practices Act Investigation and Agrees to Pay $14.35 Million Penalty
A California-based medical diagnostics and life sciences manufacturing and sales company, Bio-Rad Laboratories Inc. (Bio-Rad), has agreed to pay a $14.35 million penalty to resolve allegations that it violated the Foreign Corrupt Practices Act (FCPA) by falsifying its books and records and failing to implement adequate internal controls in connection with sales it made in Russia.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Special Agent in Charge David J. Johnson of the FBI’s San Francisco Field Office made the announcement.
“Public companies that cook their books and hide improper payments foster corruption,” said Assistant Attorney General Caldwell. “The department pursues corruption from all angles, including the falsification of records and failure to implement adequate internal controls. The department also gives credit to companies, like Bio-Rad, who self-disclose, cooperate and remediate their violations of the FCPA.”
“The FBI remains committed to identifying and investigating violations of the Foreign Corrupt Practices Act,” said Special Agent in Charge Johnson. “This action demonstrates the benefits of self-disclosure, cooperation, and subsequent remediation by companies.”
According to the company’s admissions in the agreement, Bio-Rad SNC, a Bio-Rad subsidiary located in France, retained and paid intermediary companies commissions of 15-30 percent purportedly in exchange for various services in connection with certain governmental sales in Russia. The intermediary companies, however, did not perform these services. Several high-level managers at Bio-Rad, responsible for overseeing Bio-Rad’s business in Russia, reviewed and approved the commission payments to the intermediary companies despite knowing that the intermediary companies were not performing such services. These managers knowingly caused the payments to be falsely recorded on Bio-Rad SNC’s and, ultimately, Bio-Rad’s books. Bio-Rad, through several of its managers, also failed to implement adequate controls, as well as adequate compliance systems, with regard to its Russian operations while knowing that the failure to implement such controls allowed the intermediary companies to be paid significantly above-market commissions for little or no services.
The department entered into a non-prosecution agreement with the company due, in large part, to Bio-Rad’s self-disclosure of the misconduct and full cooperation with the department’s investigation. That cooperation included voluntarily making U.S. and foreign employees available for interviews, voluntarily producing documents from overseas, and summarizing the findings of its internal investigation. In addition, Bio-Rad has engaged in significant remedial actions, including enhancing its anti-corruption policies globally, improving its internal controls and compliance functions, developing and implementing additional due diligence and contracting procedures for intermediaries, and conducting extensive anti-corruption training throughout the organization.
In addition to the monetary penalty, Bio-Rad agreed to continue to cooperate with the department, to report periodically to the department for a two-year period concerning Bio-Rad’s compliance efforts, and to continue to implement an enhanced compliance program and internal controls designed to prevent and detect FCPA violations.
In a related matter, the U.S. Securities and Exchange Commission (SEC) today announced that it had entered into a cease and desist order against Bio-Rad in which the company agreed to pay $40.7 million in disgorgement and prejudgment interest in connection with the company’s sales in Russia, as well as in Thailand and Vietnam.
The department acknowledges and expresses its appreciation for the assistance provided by the SEC’s Division of Enforcement.
The case is being investigated by the FBI’s San Francisco Field Office. The case is being prosecuted by Trial Attorney Andrew Gentin of the Criminal Division’s Fraud Section.
Saturday, July 26, 2014
FORMER LUFTHANSA SUBSIDIARY CEO PLEADS GUILTY TO FOREIGN BRIBERY CHARGES
FROM: U.S. DEPARTMENT OF JUSTICE
Thursday, July 24, 2014
Former Chief Executive Officer of Lufthansa Subsidiary BizJet Pleads Guilty to Foreign Bribery Charges
The former president and chief executive officer of BizJet International Sales and Support Inc., a U.S.-based subsidiary of Lufthansa Technik AG with headquarters in Tulsa, Oklahoma, that provides aircraft maintenance, repair and overhaul services, pleaded guilty today for his participation in a scheme to pay bribes to foreign government officials.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Danny C. Williams Sr., of the Northern District of Oklahoma and Assistant Director in Charge Valerie Parlave of the FBI’s Washington Field Office made the announcement.
“The former CEO of BizJet, Bernd Kowalewski, has become the third and most senior Bizjet executive to plead guilty to bribing officials in Mexico and Panama to get contracts for aircraft services,” said Assistant Attorney General Caldwell. “While Kowalewski and his fellow executives referred to the corrupt payments as ‘commissions’ and ‘incentives,’ they were bribes, plain and simple. Though he was living abroad when the charges were unsealed, the reach of the law extends beyond U.S. borders, resulting in Kowalewski’s arrest in Amsterdam and his appearance in court today in the United States. Today’s guilty plea is an example of our continued determination to hold corporate executives responsible for criminal wrongdoing whenever the evidence allows.”
“I commend the investigators and prosecutors who worked together across borders and jurisdictions to vigorously enforce the Foreign Corrupt Practices Act,” said U.S. Attorney Williams. “Partnership is a necessity in all investigations. By forging and strengthening international partnerships to combat bribery, the Department of Justice is advancing its efforts to prevent crime and to protect citizens.”
Bernd Kowalewski, 57, the former President and CEO of BizJet, pleaded guilty today in federal court in Tulsa, Oklahoma, to conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and a substantive violation of the FCPA in connection with a scheme to pay bribes to officials in Mexico and Panama in exchange for those officials’ assistance in securing contracts for BizJet to perform aircraft maintenance, repair and overhaul services.
Kowalewski was arrested on a provisional arrest warrant by authorities in Amsterdam on March 13, 2014, and waived extradition on June 20, 2014. Kowalewski is the third BizJet executive to plead guilty in this case. Peter DuBois, the former Vice President of Sales and Marketing, pleaded guilty on Jan. 5, 2012, to conspiracy to violate the FCPA and a substantive violation of the FCPA and Neal Uhl, the former Vice President of Finance, pleaded guilty on Jan. 5, 2012, to conspiracy to violate the FCPA. Jald Jensen, the former sales manager at BizJet, has been indicted for conspiracy as well as substantive FCPA violations and money laundering and is believed to be living abroad. Charges were unsealed against the four defendants on April 5, 2013.
According to court filings, Kowalewski and his co-conspirators paid bribes directly to foreign officials to secure aircraft maintenance repair and overhaul contracts, and in some instances, the defendants funneled bribes to foreign officials through a shell company owned and operated by Jensen. The shell company, Avionica International & Associates Inc., operated under the pretense of providing aircraft maintenance brokerage services but in reality laundered money related to BizJet’s bribery scheme. Bribes were paid to officials employed by the Mexican Policia Federal Preventiva, the Mexican Coordinacion General de Transportes Aereos Presidenciales, the air fleet for the Gobierno del Estado de Sinaloa, the air fleet for the Gobierno del Estado de Sonora and the Republica de Panama Autoridad Aeronautica Civil.
Further according to court filings, the co-conspirators discussed in e-mail correspondence and at corporate meetings the need to pay bribes, which they referred to internally as “commissions” or “incentives,” to officials employed by the foreign government agencies in order to secure the contracts. At one meeting, for example, in response to a question about who the decision-maker was at a particular customer organization, DuBois stated that a director of maintenance or chief pilot was normally responsible for decisions on where an aircraft went for maintenance work. Kowalewski then responded by explaining that the directors of maintenance and chief pilots in the past received “commissions” of $3,000 to $5,000 but were now demanding $30,000 to $40,000 in “commissions.” Similarly, in e-mail correspondence between Uhl, DuBois, Kowalewski, and several others, Uhl responded to a question about BizJet’s financial outlook if “incentives” paid to brokers, directors of maintenance, or chief pilots continued to increase industry wide, stating that they would “work to build these fees into the revenue as much as possible. We must remain competitive in this respect to maintain and gain market share.”
On March 14, 2012, the department announced that it had entered into a deferred prosecution agreement with BizJet, requiring that BizJet pay an $11.8 million monetary penalty to resolve charges related to the corrupt conduct. That agreement acknowledged BizJet’s voluntary disclosure, extraordinary cooperation, and extensive remediation in this case. In addition, the department announced on March 14, 2012, that BizJet’s indirect parent company, Lufthansa Technik AG, entered into an agreement with the department in which the department agreed not to prosecute Lufthansa Technik provided that Lufthansa Technik satisfies its obligations under the agreement for a period of three years.
This case is being investigated by the FBI’s Washington Field Office with substantial assistance form the Oklahoma Field Office. The department has worked closely with its law enforcement counterparts in Amsterdam, Mexico and Panama, and has received significant assistance from Germany and Uruguay. The Criminal Division’s Office of International Affairs has also provided assistance. This case is being prosecuted by Assistant Chief Daniel S. Kahn and Trial Attorney David Fuhr of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Kevin Leitch of the Northern District of Oklahoma.
Sunday, May 11, 2014
FORMER OIL SERVICES COMPANY CEO INDICTED ON FOREIGN BRIBERY AND KICKBACK CHARGES
FROM: U.S. JUSTICE DEPARTMENT
Friday, May 9, 2014
Former Chief Executive Officer of Oil Services Company Indicted in New Jersey on Foreign Bribery and Kickback Charges
The former co-chief executive officer (CEO) of PetroTiger Ltd. – a British Virgin Islands oil and gas company with operations in Colombia and offices in New Jersey – was indicted today for his role in a scheme to pay bribes to foreign government officials in violation of the Foreign Corrupt Practices Act (FCPA) and to defraud PetroTiger.
Acting Principal Deputy Assistant Attorney General Marshall Miller of the Justice Department’s Criminal Division, U.S. Attorney Paul J. Fishman of the District of New Jersey and Special Agent in Charge Aaron T. Ford of the FBI’s Newark Division made the announcement.
Joseph Sigelman, 43, of Miami and the Philippines, was indicted today by a federal grand jury in the District of New Jersey and charged with conspiracy to violate the FCPA and to commit wire fraud, conspiracy to launder money, and substantive FCPA and money laundering violations. Gregory Weisman, 42, of Moorestown, New Jersey, the former general counsel of PetroTiger, pleaded guilty on Nov. 8, 2013, to conspiracy to violate the FCPA and to commit wire fraud. Sigelman’s co-CEO, Knut Hammarskjold, 42, of Greenville, South Carolina, pleaded guilty to the same charge on Feb. 18, 2014.
According to court records, Sigelman and others allegedly paid bribes to an official in Colombia in exchange for the official’s assistance in securing approval for an oil services contract worth roughly $39 million. To conceal the bribes, they first attempted to make the payments to a bank account in the name of the foreign official’s wife for purported consulting services she did not perform. Sigelman and Hammarskjold provided Weisman invoices, including her bank account information. The conspirators made the payments directly to the official’s bank account when attempts to transfer the money to his wife’s account failed. Sigelman and his conspirators then took steps to conceal the bribe payments from PetroTiger’s board members.
In addition, court documents allege that Sigelman and others attempted to secure kickback payments while negotiating an acquisition of another company on behalf of PetroTiger, including on behalf of several members of PetroTiger’s board of directors who were helping to fund the acquisition. In exchange for negotiating more favorable terms for the owners of the target company, two of the owners agreed to kick back to the conspirators a portion of the increased purchase price. To conceal the kickback payments, Sigelman and others had the payments deposited into Sigelman’s bank account in the Philippines, created a “side letter” to falsely justify the payments and used the code name “Manila Split” to refer to the payments amongst themselves.
Sigelman and Hammarskjold were charged by sealed complaints filed in the District of New Jersey on Nov. 8, 2013. Hammarskjold was arrested Nov. 20, 2013, at Newark Liberty International Airport. Sigelman was arrested on Jan. 3, 2014, in the Philippines. The charges against Sigelman, Hammarskjold and Weisman were unsealed on Jan. 6, 2014.
The charges contained in the indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
The case was brought to the attention of the department through a voluntary disclosure by PetroTiger, which cooperated with the department’s investigation. The department has worked closely with and has received significant assistance from its law enforcement counterparts in the Republic of Colombia and greatly appreciates their assistance in this matter. The department also thanks the Republic of the Philippines, including the Bureau of Immigration, and the Republic of Panama for their assistance in this matter. Significant assistance was also provided by the Criminal Division’s Office of International Affairs.
The case is being investigated by the FBI’s Newark Division. The case is being prosecuted by Assistant Chief Daniel S. Kahn of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Zach Intrater of the District of New Jersey.
Tuesday, April 15, 2014
CEO, MANAGING PARTNER OF WALL STREET BROKER-DEALER CHARGED IN CONSPIRACY TO BRIBE FOREIGN OFFICIALS
FROM: U.S. JUSTICE DEPARTMENT
Monday, April 14, 2014
CEO and Managing Partner of Wall Street Broker-Dealer Charged with Massive International Bribery Scheme
The chief executive officer and a managing partner of a New York-based U.S. broker-dealer were arrested today on felony charges arising from a conspiracy to pay bribes to a senior official in Venezuela’s state economic development bank.
Acting Assistant Attorney General David A. O’Neil 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.
According to the indictment unsealed today, Benito Chinea and Joseph DeMeneses, who were the Chief Executive Officer and a managing partner, respectively, of a New York-based broker-dealer (Broker-Dealer), are accused of conspiring with others to pay and launder bribes to Maria de los Angeles Gonzalez de Hernandez, a senior official in Venezuela’s state-owned economic development bank, Banco de Desarollo Económico y Social de Venezuela (BANDES), in exchange for her directing BANDES’s financial trading business to the Broker-Dealer. DeMeneses was also charged with conspiring to obstruct an examination of the Broker-Dealer by the U.S. Securities and Exchange Commission (SEC) to conceal the true facts of the Broker-Dealer’s relationship with BANDES.
Chinea, 47, was arrested today in Manalapan, N.J., where he resides, and DeMeneses, 44, was arrested today in Fairfield, Conn., where he resides. In a separate action, the SEC announced civil charges against Chinea, DeMeneses and others involved in the bribery scheme.
“ These senior Wall Street executives are accused of paying six-figure bribes to an official in Venezuela to secure foreign business for their firm,” said Acting Assistant Attorney General O’Neil. “Today’s charges show once again that we will aggressively pursue individual executives, all the way up the corporate ladder, when they try to bribe their way ahead of the competition. ”
“These two defendants, senior executives at a U.S. brokerage firm, are the fifth and sixth people to be charged in an alleged conspiracy to corrupt the trading business of a state-run economic development bank of Venezuela,” said U.S. Attorney Bharara. “They are alleged to have bribed a willing officer at the bank to steer its overseas trading business to the defendants’ brokerage firm, reaping millions for these defendants and their partners in crime. This Office will not tolerate the kind of outright bribery and concealment that characterized this scheme.”
“As alleged in the indictment, Chinea and Demeneses bribed Gonzalez to secure bank Bandes's financial trading business,” said FBI ADIC Venizelos. “Demeneses compounded the Broker-Dealer’s illegal activities by conspiring to obstruct an investigation by regulators. The arrests today of Chinea and Demeneses should be a reminder to all those in the business community that engaging in bribery schemes to secure business and make a profit is illegal. Together with our law enforcement partners, the FBI will continue to investigate bribery and fraud at all levels.”
According to the allegations in the indictment unsealed today, as well as other documents previously filed in Manhattan federal court, Chinea and DeMeneses worked at the headquarters of the Broker-Dealer in New York City. In 2008, the Broker-Dealer established a group called the Global Markets Group (GMG), which offered fixed income trading services for institutional clients in the purchase and sale of foreign sovereign debt. One of the Broker-Dealer’s GMG clients was BANDES, which operated under the direction of the Venezuelan Ministry of Finance. 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 commission.
As alleged in court documents, from late 2008 through 2012, Chinea and DeMeneses, together with three Miami-based Broker-Dealer employees, Ernesto Lujan, Tomas Alberto Clarke Bethancourt and Jose Alejandro 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, DeMeneses 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, DeMeneses and Clarke agreed to pay Gonzalez approximately $1.5 million from their personal funds. Chinea and DeMeneses agreed to use Broker-Dealer funds to reimburse DeMeneses and Clarke for these bribe payments. To conceal their true nature, Chinea and DeMeneses agreed to hide these reimbursements in the Broker-Dealer’s books as sham loans from the Broker-Dealer to corporate entities associated with DeMeneses and Clarke.
Court documents also allege that beginning in or around November 2010, the SEC commenced a periodic examination of the Broker-Dealer, and from November 2010 through March 2011, the SEC’s exam staff made several visits to the Broker-Dealer’s offices in Manhattan. In or about early 2011, DeMeneses and others involved in the scheme discussed that the SEC was examining the Broker-Dealer’s relationship with BANDES. DeMeneses and others agreed they would take steps to conceal the true facts of the Broker-Dealer’s relationship with BANDES, including by deleting emails, in order to hide the actual relationship from the SEC.
Chinea and DeMeneses were each charged with one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and the Travel Act, five counts of violating the FCPA, and five counts of violating of the Travel Act. Chinea and DeMeneses were also charged with one count of conspiracy to commit money laundering and three counts of money laundering. DeMeneses was further charged with one count of conspiracy to obstruct justice.
Previously, on Aug. 29 and Aug. 30, 2013, Lujan, Hurtado and Clarke each pleaded guilty in Manhattan federal court to conspiring to violate the FCPA, to violate the Travel Act and to commit money laundering, as well as substantive counts of these offenses, relating, among other things, to the scheme involving bribe payments to Gonzalez. On Nov. 18, 2013, Gonzalez pleaded guilty in Manhattan federal court to conspiring to violate the Travel Act and to commit money laundering, as well as substantive counts of these offenses, for her role in the corrupt scheme.
The charges contained in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
This ongoing investigation is being conducted by the FBI, with assistance from the Criminal Division’s Office of International Affairs. The department appreciates the substantial assistance provided by the SEC.
Senior Deputy Chief James Koukios and Trial Attorney Maria Gonzalez Calvet 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.
Wednesday, April 9, 2014
SEC CHARGES HEWLETT-PACKARD WITH FCPA VIOLATIONS RELATED TO ALLEGATIONS HP BRIBED FOREIGN OFFICIALS
FROM: SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission today charged Hewlett-Packard with violating the Foreign Corrupt Practices Act (FCPA) when its subsidiaries in three different countries made improper payments to government officials to obtain or retain lucrative public contracts.
Hewlett-Packard has agreed to pay more than $108 million to settle the SEC’s charges and a parallel criminal case announced today by the U.S. Department of Justice.
The SEC’s order instituting settled administrative proceedings finds that the Palo Alto, Calif.-based technology company’s subsidiary in Russia paid more than $2 million through agents and various shell companies to a Russian government official to retain a multi-million dollar contract with the federal prosecutor’s office. In Poland, Hewlett-Packard’s subsidiary provided gifts and cash bribes worth more than $600,000 to a Polish government official to obtain contracts with the national police agency. And as part of its bid to win a software sale to Mexico’s state-owned petroleum company, Hewlett-Packard’s subsidiary in Mexico paid more than $1 million in inflated commissions to a consultant with close ties to company officials, and money was funneled to one of those officials.
“Hewlett-Packard lacked the internal controls to stop a pattern of illegal payments to win business in Mexico and Eastern Europe. The company’s books and records reflected the payments as legitimate commissions and expenses,” said Kara Brockmeyer, chief of the SEC Enforcement Division’s FCPA Unit. “Companies have a fundamental obligation to ensure that their internal controls are both reasonably designed and appropriately implemented across their entire business operations, and they should take a hard look at the agents conducting business on their behalf.”
According to the SEC’s order, the scheme involving Hewlett-Packard’s Russian subsidiary occurred from approximately 2000 to 2007. The bribes were paid through agents and consultants in order to win a government contract for computer hardware and software. Employees within the subsidiary and elsewhere raised questions about the significant markup being paid to the agent on the deal and the subcontractors that the agent expected to use. Despite the red flags, the deal went forward without any meaningful due diligence on the agent or the subcontractors.
The SEC’s order finds that bribes involving Hewlett-Packard’s subsidiary in Poland occurred from approximately 2006 to 2010. Acting primarily through its public sector sales manager, the subsidiary agreed to pay a Polish government official in order to win contracts for information technology products and services. The official received a percentage of net revenue earned from the contracts, and the bribes were delivered in cash from off-the-books accounts.
According to the SEC’s order, Hewlett-Packard’s subsidiary in Mexico paid a consultant to help the company win a public IT contract worth approximately $6 million. At least $125,000 was funneled to a government official at the state-owned petroleum company with whom the consultant had connections. Although the consultant was not an approved deal partner and had not been subjected to the due diligence required under company policy, HP Mexico sales managers used a pass-through entity to pay inflated commissions to the consultant. This was internally referred to as the “influencer fee.”
Hewlett-Packard consented to the SEC’s order, which finds that it violated the internal controls and books and records provisions of the Securities Exchange Act of 1934. The company agreed to pay $29 million in disgorgement (approximately $26.47 million to the SEC and $2.53 million to satisfy an IRS forfeiture as part of the criminal matter). Hewlett-Packard also agreed to pay prejudgment interest of $5 million to the SEC and fines totaling $74.2 million in the criminal case for a total of more than $108 million in disgorgement and penalties.
The SEC’s investigation was conducted by David A. Berman and Tracy L. Davis of the FCPA Unit in San Francisco. The SEC appreciates the assistance of the U.S. Department of Justice’s Fraud Section and the U.S. Attorney’s Office for the Northern District of California as well as the Federal Bureau of Investigation, Internal Revenue Service, and Public Prosecutor’s Office in Dresden, Germany.
The Securities and Exchange Commission today charged Hewlett-Packard with violating the Foreign Corrupt Practices Act (FCPA) when its subsidiaries in three different countries made improper payments to government officials to obtain or retain lucrative public contracts.
Hewlett-Packard has agreed to pay more than $108 million to settle the SEC’s charges and a parallel criminal case announced today by the U.S. Department of Justice.
The SEC’s order instituting settled administrative proceedings finds that the Palo Alto, Calif.-based technology company’s subsidiary in Russia paid more than $2 million through agents and various shell companies to a Russian government official to retain a multi-million dollar contract with the federal prosecutor’s office. In Poland, Hewlett-Packard’s subsidiary provided gifts and cash bribes worth more than $600,000 to a Polish government official to obtain contracts with the national police agency. And as part of its bid to win a software sale to Mexico’s state-owned petroleum company, Hewlett-Packard’s subsidiary in Mexico paid more than $1 million in inflated commissions to a consultant with close ties to company officials, and money was funneled to one of those officials.
“Hewlett-Packard lacked the internal controls to stop a pattern of illegal payments to win business in Mexico and Eastern Europe. The company’s books and records reflected the payments as legitimate commissions and expenses,” said Kara Brockmeyer, chief of the SEC Enforcement Division’s FCPA Unit. “Companies have a fundamental obligation to ensure that their internal controls are both reasonably designed and appropriately implemented across their entire business operations, and they should take a hard look at the agents conducting business on their behalf.”
According to the SEC’s order, the scheme involving Hewlett-Packard’s Russian subsidiary occurred from approximately 2000 to 2007. The bribes were paid through agents and consultants in order to win a government contract for computer hardware and software. Employees within the subsidiary and elsewhere raised questions about the significant markup being paid to the agent on the deal and the subcontractors that the agent expected to use. Despite the red flags, the deal went forward without any meaningful due diligence on the agent or the subcontractors.
The SEC’s order finds that bribes involving Hewlett-Packard’s subsidiary in Poland occurred from approximately 2006 to 2010. Acting primarily through its public sector sales manager, the subsidiary agreed to pay a Polish government official in order to win contracts for information technology products and services. The official received a percentage of net revenue earned from the contracts, and the bribes were delivered in cash from off-the-books accounts.
According to the SEC’s order, Hewlett-Packard’s subsidiary in Mexico paid a consultant to help the company win a public IT contract worth approximately $6 million. At least $125,000 was funneled to a government official at the state-owned petroleum company with whom the consultant had connections. Although the consultant was not an approved deal partner and had not been subjected to the due diligence required under company policy, HP Mexico sales managers used a pass-through entity to pay inflated commissions to the consultant. This was internally referred to as the “influencer fee.”
Hewlett-Packard consented to the SEC’s order, which finds that it violated the internal controls and books and records provisions of the Securities Exchange Act of 1934. The company agreed to pay $29 million in disgorgement (approximately $26.47 million to the SEC and $2.53 million to satisfy an IRS forfeiture as part of the criminal matter). Hewlett-Packard also agreed to pay prejudgment interest of $5 million to the SEC and fines totaling $74.2 million in the criminal case for a total of more than $108 million in disgorgement and penalties.
The SEC’s investigation was conducted by David A. Berman and Tracy L. Davis of the FCPA Unit in San Francisco. The SEC appreciates the assistance of the U.S. Department of Justice’s Fraud Section and the U.S. Attorney’s Office for the Northern District of California as well as the Federal Bureau of Investigation, Internal Revenue Service, and Public Prosecutor’s Office in Dresden, Germany.
Friday, March 21, 2014
JAPANESE TRADING COMPANY PLEADS GUILTY TO FOREIGN BRIBERY CHARGES
FROM: U.S. JUSTICE DEPARTMENT
Wednesday, March 19, 2014
Marubeni Corporation Agrees to Plead Guilty to Foreign Bribery Charges and to Pay an $88 Million Fine
Marubeni Corporation, a Japanese trading company involved in the handling of products and provision of services in a broad range of sectors around the world, including power generation, entered a plea of guilty today for its participation in a scheme to pay bribes to high-ranking government officials in Indonesia to secure a lucrative power project.
Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, Acting U.S. Attorney Michael J. Gustafson of the District of Connecticut and Assistant Director in Charge Valerie Parlave of the FBI’s Washington Field Office made the announcement.
“Marubeni pleaded guilty to engaging in a seven-year scheme to pay – and conceal – bribes to a high-ranking member of Parliament and other foreign officials in Indonesia,” said Acting Assistant Attorney General Raman. “The company refused to play by the rules, then refused to cooperate with the government’s investigation. Now Marubeni faces the consequences for its crooked business practices in Indonesia .”
“For several years, the Marubeni Corporation worked in concert with a Connecticut company, among others, to bribe Indonesian officials in order to secure a contract to provide power-related services in Indonesia,” said Acting U.S. Attorney Michael J. Gustafson. “Today’s guilty plea by Marubeni Corporation is an important reminder to the business community of the significant consequences of participating in schemes to bribe government officials, whether at home or abroad.”
“Companies that wish to do business in the United States or with U.S. companies must adhere to U.S. law, and that means bribery is unacceptable,” said Assistant Director in Charge Parlave. “The FBI continues to work with our international law enforcement partners as demonstrated in this case to ensure that companies are held accountable for their criminal conduct. I want to thank the agents, analysts and prosecutors who brought this case to today’s conclusion.”
Marubeni entered a plea of guilty to an eight-count criminal information filed today in the U.S. District Court for the District of Connecticut, charging Marubeni with one count of conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA) and seven counts of violating the FCPA. Marubeni admitted its criminal conduct and has agreed to pay a criminal fine of $88 million, subject to the district court’s approval. Sentencing has been scheduled for May 15, 2014.
As part of the plea agreement, Marubeni has agreed to maintain and implement an enhanced global anti-corruption compliance program and to cooperate with the department’s ongoing investigation. The plea agreement cites Marubeni’s decision not to cooperate with the department’s investigation when given the opportunity to do so, its lack of an effective compliance and ethics program at the time of the offense, its failure to properly remediate and the lack of its voluntary disclosure of the conduct as some of the factors considered by the department in reaching an appropriate resolution.
Frederic Pierucci, who was the vice president of global boiler sales at Marubeni’s consortium partner, pleaded guilty on July 29, 2013, to one count of conspiring to violate the FCPA and one count of violating the FCPA. David Rothschild, a former vice president of regional sales at the consortium partner, pleaded guilty on Nov. 2, 2012, to one count of conspiracy to violate the FCPA. Lawrence Hoskins, a former senior vice president for the Asia region for the consortium partner, and William Pomponi, a former vice president of regional sales at the consortium partner, were charged in a second superseding indictment on July 30, 2013. The charges against Hoskins and Pomponi are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
According to court filings, Marubeni and its employees, together with others, paid bribes to officials in Indonesia – including a high-ranking member of the 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 Marubeni and its consortium partner to provide power-related services for the citizens of Indonesia. To conceal the bribes, Marubeni and its consortium partner retained two consultants purportedly to provide legitimate consulting services on behalf of the power company and its subsidiaries in connection with the Tarahan project. The primary purpose for hiring the consultants, however, was to use the consultants to pay bribes to Indonesian officials.
As admitted in court documents, Marubeni and its co-conspirators retained the first consultant in the fall of 2002. However, in the fall of 2003, before the Tarahan contract had been awarded, Marubeni and its co-conspirators determined that the first consultant was not bribing key officials at PLN effectively. One e-mail between employees of the power company’s subsidiary in Indonesia described a meeting between Marubeni employees, employees of its consortium partner, and PLN officials during which the PLN officials expressed “concern” that if Marubeni and its consortium partner win the project, whether the agent would give the officials “rewards” that they would consider “satisfactory,” or “only give them pocket money and disappear. Nothing has been shown by the agent that the agent is willing to spend money.” Shortly thereafter, a Marubeni employee sent an e-mail to other employees at Marubeni and its consortium partner stating that “unfortunately our agent almost did not execute his function at all, so far. In case we don’t take immediate action now now [sic], we don’t have any chance to get this project forever.”
As a result, Marubeni and its consortium partner decided to reduce the first consultant’s commission from three percent of the total contract value to one percent, and pay the remaining two percent to a second consultant who could more effectively bribe officials at PLN. In an e-mail between two employees of Marubeni’s consortium partner, they discussed a meeting between Marubeni, an executive from the consortium partner, and the first consultant, stating that the first consultant “committed to convince [the member of Parliament] that ‘one’ [percent] is enough.”
Marubeni and its co-conspirators were successful in securing the Tarahan project and subsequently made payments to the consultants for the purpose of bribing the Indonesian officials. Marubeni and its co-conspirators paid hundreds of thousands of dollars into the first consultant’s bank account in Maryland to be used to bribe the member of Parliament. The consultant then allegedly transferred the bribe money to a bank account in Indonesia for the benefit of the official.
This case is being investigated by FBI agents from the Washington Field Office, with assistance from the Resident Agency of the FBI in Meriden, Conn. Significant assistance was provided by the Criminal Division’s Office of International Affairs. In addition, the department greatly appreciates the significant cooperation provided by its law enforcement colleagues in Indonesia at the Komisi Pemberantasan Korupsi (Corruption Eradication Commission), the Office of the Attorney General in Switzerland and the Serious Fraud Office in the United Kingdom.
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.
Wednesday, March 19, 2014
Marubeni Corporation Agrees to Plead Guilty to Foreign Bribery Charges and to Pay an $88 Million Fine
Marubeni Corporation, a Japanese trading company involved in the handling of products and provision of services in a broad range of sectors around the world, including power generation, entered a plea of guilty today for its participation in a scheme to pay bribes to high-ranking government officials in Indonesia to secure a lucrative power project.
Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, Acting U.S. Attorney Michael J. Gustafson of the District of Connecticut and Assistant Director in Charge Valerie Parlave of the FBI’s Washington Field Office made the announcement.
“Marubeni pleaded guilty to engaging in a seven-year scheme to pay – and conceal – bribes to a high-ranking member of Parliament and other foreign officials in Indonesia,” said Acting Assistant Attorney General Raman. “The company refused to play by the rules, then refused to cooperate with the government’s investigation. Now Marubeni faces the consequences for its crooked business practices in Indonesia .”
“For several years, the Marubeni Corporation worked in concert with a Connecticut company, among others, to bribe Indonesian officials in order to secure a contract to provide power-related services in Indonesia,” said Acting U.S. Attorney Michael J. Gustafson. “Today’s guilty plea by Marubeni Corporation is an important reminder to the business community of the significant consequences of participating in schemes to bribe government officials, whether at home or abroad.”
“Companies that wish to do business in the United States or with U.S. companies must adhere to U.S. law, and that means bribery is unacceptable,” said Assistant Director in Charge Parlave. “The FBI continues to work with our international law enforcement partners as demonstrated in this case to ensure that companies are held accountable for their criminal conduct. I want to thank the agents, analysts and prosecutors who brought this case to today’s conclusion.”
Marubeni entered a plea of guilty to an eight-count criminal information filed today in the U.S. District Court for the District of Connecticut, charging Marubeni with one count of conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA) and seven counts of violating the FCPA. Marubeni admitted its criminal conduct and has agreed to pay a criminal fine of $88 million, subject to the district court’s approval. Sentencing has been scheduled for May 15, 2014.
As part of the plea agreement, Marubeni has agreed to maintain and implement an enhanced global anti-corruption compliance program and to cooperate with the department’s ongoing investigation. The plea agreement cites Marubeni’s decision not to cooperate with the department’s investigation when given the opportunity to do so, its lack of an effective compliance and ethics program at the time of the offense, its failure to properly remediate and the lack of its voluntary disclosure of the conduct as some of the factors considered by the department in reaching an appropriate resolution.
Frederic Pierucci, who was the vice president of global boiler sales at Marubeni’s consortium partner, pleaded guilty on July 29, 2013, to one count of conspiring to violate the FCPA and one count of violating the FCPA. David Rothschild, a former vice president of regional sales at the consortium partner, pleaded guilty on Nov. 2, 2012, to one count of conspiracy to violate the FCPA. Lawrence Hoskins, a former senior vice president for the Asia region for the consortium partner, and William Pomponi, a former vice president of regional sales at the consortium partner, were charged in a second superseding indictment on July 30, 2013. The charges against Hoskins and Pomponi are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
According to court filings, Marubeni and its employees, together with others, paid bribes to officials in Indonesia – including a high-ranking member of the 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 Marubeni and its consortium partner to provide power-related services for the citizens of Indonesia. To conceal the bribes, Marubeni and its consortium partner retained two consultants purportedly to provide legitimate consulting services on behalf of the power company and its subsidiaries in connection with the Tarahan project. The primary purpose for hiring the consultants, however, was to use the consultants to pay bribes to Indonesian officials.
As admitted in court documents, Marubeni and its co-conspirators retained the first consultant in the fall of 2002. However, in the fall of 2003, before the Tarahan contract had been awarded, Marubeni and its co-conspirators determined that the first consultant was not bribing key officials at PLN effectively. One e-mail between employees of the power company’s subsidiary in Indonesia described a meeting between Marubeni employees, employees of its consortium partner, and PLN officials during which the PLN officials expressed “concern” that if Marubeni and its consortium partner win the project, whether the agent would give the officials “rewards” that they would consider “satisfactory,” or “only give them pocket money and disappear. Nothing has been shown by the agent that the agent is willing to spend money.” Shortly thereafter, a Marubeni employee sent an e-mail to other employees at Marubeni and its consortium partner stating that “unfortunately our agent almost did not execute his function at all, so far. In case we don’t take immediate action now now [sic], we don’t have any chance to get this project forever.”
As a result, Marubeni and its consortium partner decided to reduce the first consultant’s commission from three percent of the total contract value to one percent, and pay the remaining two percent to a second consultant who could more effectively bribe officials at PLN. In an e-mail between two employees of Marubeni’s consortium partner, they discussed a meeting between Marubeni, an executive from the consortium partner, and the first consultant, stating that the first consultant “committed to convince [the member of Parliament] that ‘one’ [percent] is enough.”
Marubeni and its co-conspirators were successful in securing the Tarahan project and subsequently made payments to the consultants for the purpose of bribing the Indonesian officials. Marubeni and its co-conspirators paid hundreds of thousands of dollars into the first consultant’s bank account in Maryland to be used to bribe the member of Parliament. The consultant then allegedly transferred the bribe money to a bank account in Indonesia for the benefit of the official.
This case is being investigated by FBI agents from the Washington Field Office, with assistance from the Resident Agency of the FBI in Meriden, Conn. Significant assistance was provided by the Criminal Division’s Office of International Affairs. In addition, the department greatly appreciates the significant cooperation provided by its law enforcement colleagues in Indonesia at the Komisi Pemberantasan Korupsi (Corruption Eradication Commission), the Office of the Attorney General in Switzerland and the Serious Fraud Office in the United Kingdom.
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.
Tuesday, February 18, 2014
FORMER CEO OF OIL SERVICES COMPANY PLEADS GUILTY TO BRIBERY CHARGES
FROM: U.S. JUSTICE DEPARTMENT
Tuesday, February 18, 2014
Former Chief Executive Officer of Oil Services Company Pleads Guilty to Foreign Bribery Charges
The former chief executive officer of PetroTiger Ltd., a British Virgin Islands oil and gas company with operations in Colombia and offices in New Jersey, pleaded guilty today for his role in a scheme to pay bribes to foreign government officials and to defraud PetroTiger.
Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Paul J. Fishman of the District of New Jersey and Special Agent in Charge Aaron T. Ford of the FBI’s Newark Division made the announcement.
Knut Hammarskjold, 42, of Greenville, S.C., the former co-CEO of PetroTiger, pleaded guilty before U.S. District Judge Josephy E. Irenas in Camden, N.J., to an information charging one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and to commit wire fraud and is scheduled for sentencing on May 16, 2014. Gregory Weisman, 42, of Moorestown, N.J., the former general counsel of PetroTiger, pleaded guilty to the same charges on Nov. 8, 2013. Charges remain pending against Joseph Sigelman, 42, of Miami and the Philippines, the other former co-CEO of PetroTiger, for conspiracy to commit wire fraud, conspiracy to violate the FCPA, conspiracy to launder money and substantive violations of the FCPA.
According to the charges, the defendants allegedly paid bribes to an official in Colombia in exchange for the official’s assistance in securing approval for an oil services contract worth roughly $39 million. To conceal the bribes, the defendants allegedly first attempted to make the payments to a bank account in the name of the foreign official’s wife, for purported consulting services she did not perform. The charges allege that Sigelman and Hammarskjold provided Weisman invoices including her bank account information. The defendants made the payments directly to the official’s bank account when attempts to transfer the money to his wife’s account failed.
In addition, court documents allege that the defendants attempted to secure kickback payments at the expense of several of PetroTiger’s board members. According to the criminal charges, the defendants were negotiating an acquisition of another company on behalf of PetroTiger, including on behalf of several members of PetroTiger’s board of directors who were helping to fund the acquisition. In exchange for negotiating a higher purchase price for the acquisition, two of the owners of the target company agreed to kick back to the defendants a portion of the increased purchase price. According to the charges, to conceal the kickback payments, the defendants had the payments deposited into Sigelman’s bank account in the Philippines, created a “side letter” to falsely justify the payments, and used the code name “Manila Split” to refer to the payments amongst themselves.
Sigelman and Hammarskjold were charged by sealed complaints filed in the District of New Jersey on Nov. 8, 2013. Hammarskjold was arrested on Nov. 20, 2013, at Newark Liberty International Airport. Sigelman was arrested on Jan. 3, 2014, in the Philippines. The charges against Sigelman, Hammarskjold and Weisman were unsealed on Jan. 6, 2014.
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 conspiracy to commit wire fraud count carries a maximum penalty of 20 years in prison and a fine of the greater of $250,000 or twice the value gained or lost.
As to the charges in the complaint pending against Sigelman, they are merely accusations and the defendant is presumed innocent unless and until proven guilty.
The department has worked closely with and has received significant assistance from its law enforcement counterparts in the Republic of Colombia and greatly appreciates their assistance in this matter. The department also thanks the Republic of the Philippines, including the Bureau of Immigration, and the Republic of Panama for their assistance in this matter. Significant assistance was also provided by the Criminal Division’s Office of International Affairs.
The case is being investigated by the FBI’s Newark Division. The case is being prosecuted by Assistant Chief Daniel S. Kahn of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Aaron Mendelsohn of the District of New Jersey.
Tuesday, February 18, 2014
Former Chief Executive Officer of Oil Services Company Pleads Guilty to Foreign Bribery Charges
The former chief executive officer of PetroTiger Ltd., a British Virgin Islands oil and gas company with operations in Colombia and offices in New Jersey, pleaded guilty today for his role in a scheme to pay bribes to foreign government officials and to defraud PetroTiger.
Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Paul J. Fishman of the District of New Jersey and Special Agent in Charge Aaron T. Ford of the FBI’s Newark Division made the announcement.
Knut Hammarskjold, 42, of Greenville, S.C., the former co-CEO of PetroTiger, pleaded guilty before U.S. District Judge Josephy E. Irenas in Camden, N.J., to an information charging one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and to commit wire fraud and is scheduled for sentencing on May 16, 2014. Gregory Weisman, 42, of Moorestown, N.J., the former general counsel of PetroTiger, pleaded guilty to the same charges on Nov. 8, 2013. Charges remain pending against Joseph Sigelman, 42, of Miami and the Philippines, the other former co-CEO of PetroTiger, for conspiracy to commit wire fraud, conspiracy to violate the FCPA, conspiracy to launder money and substantive violations of the FCPA.
According to the charges, the defendants allegedly paid bribes to an official in Colombia in exchange for the official’s assistance in securing approval for an oil services contract worth roughly $39 million. To conceal the bribes, the defendants allegedly first attempted to make the payments to a bank account in the name of the foreign official’s wife, for purported consulting services she did not perform. The charges allege that Sigelman and Hammarskjold provided Weisman invoices including her bank account information. The defendants made the payments directly to the official’s bank account when attempts to transfer the money to his wife’s account failed.
In addition, court documents allege that the defendants attempted to secure kickback payments at the expense of several of PetroTiger’s board members. According to the criminal charges, the defendants were negotiating an acquisition of another company on behalf of PetroTiger, including on behalf of several members of PetroTiger’s board of directors who were helping to fund the acquisition. In exchange for negotiating a higher purchase price for the acquisition, two of the owners of the target company agreed to kick back to the defendants a portion of the increased purchase price. According to the charges, to conceal the kickback payments, the defendants had the payments deposited into Sigelman’s bank account in the Philippines, created a “side letter” to falsely justify the payments, and used the code name “Manila Split” to refer to the payments amongst themselves.
Sigelman and Hammarskjold were charged by sealed complaints filed in the District of New Jersey on Nov. 8, 2013. Hammarskjold was arrested on Nov. 20, 2013, at Newark Liberty International Airport. Sigelman was arrested on Jan. 3, 2014, in the Philippines. The charges against Sigelman, Hammarskjold and Weisman were unsealed on Jan. 6, 2014.
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 conspiracy to commit wire fraud count carries a maximum penalty of 20 years in prison and a fine of the greater of $250,000 or twice the value gained or lost.
As to the charges in the complaint pending against Sigelman, they are merely accusations and the defendant is presumed innocent unless and until proven guilty.
The department has worked closely with and has received significant assistance from its law enforcement counterparts in the Republic of Colombia and greatly appreciates their assistance in this matter. The department also thanks the Republic of the Philippines, including the Bureau of Immigration, and the Republic of Panama for their assistance in this matter. Significant assistance was also provided by the Criminal Division’s Office of International Affairs.
The case is being investigated by the FBI’s Newark Division. The case is being prosecuted by Assistant Chief Daniel S. Kahn of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Aaron Mendelsohn of the District of New Jersey.
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