Global Anti-Corruption Insights: Winter 2021
While the pace of enforcement of the US Foreign Corrupt Practices Act (FCPA) dipped in the initial months of the COVID-19 pandemic, 2020 ended up being a record-breaking year for corporate resolutions of FCPA-related cases. Bookended by two multi-billion-dollar, multi-jurisdictional settlements in the Airbus SE and Goldman Sachs cases, the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) in 2020 resolved FCPA enforcement actions against twelve companies and brought FCPA-related charges against more than thirty individuals. Many of these cases involved coordination and collaboration among DOJ, the SEC, and/or a variety of state, federal, and foreign authorities, in what is increasingly an interagency and international enforcement environment.
This past year saw notable policy developments in the FCPA field, including the DOJ Criminal Division and SEC Enforcement Division's first major update since 2012 to the "Resource Guide to the US Foreign Corrupt Practices Act." DOJ also published updated guidance for prosecutors when evaluating the effectiveness of corporate compliance programs for the purposes of making charging decisions, sentencing recommendations, and determining reporting and monitoring requirements as part of a corporate resolution.
Across the pond, 2020 marked the 10-year anniversary of the United Kingdom's Bribery Act, which the UK Serious Fraud Office (SFO) has continued to enforce against companies and individuals engaged in both public- and private-sector bribery.
We expect global anti-corruption enforcement to remain active in 2021. In the first week of the year, DOJ announced that Deutsche Bank had agreed to pay more than $130 million to resolve DOJ and SEC investigations into FCPA violations stemming from improper payments to business development consultants in multiple countries and a separate investigation into a commodities fraud scheme. Meanwhile, the trial of an Israeli businessman accused of corruption related to mining concessions in west Africa got underway in Switzerland.
Table of Contents
DOJ Enforcement Actions
Enforcement Actions Against Corporations
The DOJ entered into FCPA settlements with eight different companies this year, issuing the following press releases:
- Vitol Inc. Agrees to Pay over $135 Million to Resolve Foreign Bribery Case (12/3/20)
- Beam Suntory Inc. Agrees to Pay Over $19 Million to Resolve Criminal Foreign Bribery Case (10/27/20)
- Goldman Sachs Charged in Foreign Bribery Case and Agrees to Pay Over $2.9 Billion (10/22/20)
- J&F Investimentos S.A. Pleads Guilty and Agrees to Pay Over $256 Million to Resolve Criminal Foreign Bribery Case (10/14/20)
- Sargeant Marine Inc. Pleads Guilty and Agrees to Pay $16.6 Million to Resolve Charges Related to Foreign Bribery Schemes in Brazil, Venezuela, and Ecuador (9/22/20)
- Herbalife Nutrition Ltd. Agrees to Pay Over $122 Million to Resolve FCPA Case (8/28/20)
- Novartis AG and Subsidiaries to Pay $345 Million to Resolve Foreign Corrupt Practices Act Cases (6/25/20)
- Airbus Agrees to Pay over $3.9 Billion in Global Penalties to Resolve Foreign Bribery and ITAR Case (1/31/20)
These settlements—which collectively provided for more than $7 billion in payments to enforcement authorities around the world—covered illegal activities in countries in Asia (China, Malaysia, Vietnam), Europe (Greece), Latin America (Brazil, Ecuador, Mexico, Venezuela), and the Middle East (United Arab Emirates), reflecting the global reach of the FCPA and continued international coordination in bringing enforcement actions.
In August, pursuant to its FCPA Corporate Enforcement Policy, DOJ announced that it was declining to prosecute World Acceptance Corporation (WAC), despite evidence that employees and agents of the company and its subsidiaries in Mexico paid over $4 million in bribes to Mexican union officials and state government officials. DOJ noted that WAC had timely and voluntarily self-disclosed the misconduct, fully and proactively cooperated with the investigation, undertaken full remediation measures, and agreed to disgorge to the SEC the full amount of its ill-gotten gains (as discussed below). This declination demonstrates how companies that voluntarily disclose misconduct, cooperate with authorities, and undertake remedial action can avoid criminal prosecution.
Enforcement Actions Against Individuals
On December 3, DOJ's Criminal Fraud section announced that it had "publicly charged 29 individuals in connection with FCPA matters [in 2020]—the third-highest number ever recorded in a calendar year, behind only the 34 individuals publicly charged in 2019 and the 31 individuals charged publicly in 2018."1 For example, DOJ this year has prosecuted numerous individuals for their alleged roles in corruption schemes involving state-owned oil companies in Brazil, Ecuador, and Venezuela.2 DOJ also prosecuted three individuals for their alleged roles arranging adoptions from Uganda and Poland through bribery and fraud.3
On December 29, 2020, the US Court of Appeals for the Second Circuit affirmed a 2018 conviction of Chi Ping Patrick Ho, following a jury trial, on conspiracy, FCPA, and money laundering charges.4 The court found that the evidence at trial established that Ho, an officer and director of NGOs (including a US-based NGO funded by a Chinese energy conglomerate), had engaged in schemes to pay bribes to the presidents of Chad and Uganda to advance the Chinese energy conglomerate's commercial interests in those countries.
DOJ also suffered two notable setbacks this year in FCPA cases that went to trial. First, in late February, a US District Judge in Connecticut overturned a jury's finding that Lawrence Hoskins, a former Alstom executive in Europe, had violated the FCPA while acting as an "agent" of Alstom's US subsidiary (though Hoskins since has been sentenced to prison for related money laundering).5 In March, a federal judge in Maryland tossed the FCPA conspiracy and Travel Act convictions after trial of Joseph Baptiste, a retired US Army colonel and Maryland dentist, and Richard Boncy, a lawyer and dual citizen of Haiti and the United States, based on ineffective assistance of counsel claims. Both cases are currently on appeal.
SEC Enforcement Actions
In calendar year 2020, the SEC resolved civil FCPA enforcement actions against eight different companies (four of which involved parallel settlements with DOJ). The SEC also brought FCPA enforcement actions against two individuals.
The SEC website lists and summarizes the following other FCPA enforcement actions in calendar year 2020:
- Goldman Sachs Group, Inc.—Goldman Sachs agreed to pay more than more than $1 billion to settle SEC charges that it violated the anti-bribery, books and records, and internal accounting controls provisions of the FCPA in connection with the 1Malaysia Development Berhad (1MDB) bribe scheme. See related action against Tim Leissner (10/22/20)
- J&F Investimentos, S.A.—Brazilian nationals Joesley Batista and Wesley Batista and their companies J&F Investimentos S.A. and JBS S.A., global meat and protein producers, agreed to pay nearly $27 million to resolve charges that they caused Pilgrim's Pride's violations of the books and records and internal accounting controls provisions of the FCPA. The Batistas also each agreed to pay a $550,000 civil penalty. The parties also agreed to a three-year self-reporting undertaking. (10/14/20)
- Herbalife Nutrition, Ltd.—The Los Angeles-based direct selling company agreed to pay more than $67 million to resolve charges that it violated the books and records and internal accounting controls provisions of the FCPA arising out of a bribery scheme orchestrated by its China subsidiary. See related action against Jerry Li. (9/28/20)
- World Acceptance Corp.—Without admitting or denying the SEC's findings, WAC settled to anti-bribery, books and records, and internal accounting controls provisions of the FCPA and paid over $20 million to resolve charges arising out of a bribery scheme orchestrated by its former Mexican subsidiary. (8/6/2020)
- Alexion Pharmaceuticals—Boston-based pharmaceutical company Alexion Pharmaceuticals Inc. agreed to pay more than $21 million to resolve charges that it violated the books and records and internal accounting controls provisions of the FCPA. (7/2/20)
- Novartis AG—Global pharmaceutical and healthcare company and its former Alcon subsidiary agreed to pay over $340 million to resolve SEC and DOJ charges arising out of conduct in multiple jurisdictions. (6/25/20)
- ENI S.p.A.—Italian multinational oil and gas company agreed to resolve charges that it violated the books and records and internal accounting controls provisions of the FCPA in connection with an improper payment scheme in Algeria. (4/17/20)
- Asante Berko—SEC charged a former executive of a financial services company with orchestrating a bribery scheme to help a client to win a government contract to build and operate an electrical power plant in the Republic of Ghana. (4/13/20)
- Cardinal Health—Ohio-based pharmaceutical company Cardinal Health, Inc. agreed to pay more than $8 million to resolve charges that it violated the books and records and internal accounting controls provisions of the FCPA in connection with its operations in China. (2/28/20)
- DOJ Releases First FCPA Advisory Opinion in Six Years
As Arnold & Porter previously discussed, on August 14, 2020, the DOJ released its first FCPA advisory opinion since 2014. This advisory opinion concerned an investor's payment to a government-owned entity in exchange for analytical and advisory services.
- DOJ and SEC Issue First Major Update to the FCPA Guide Since 2012
Arnold & Porter also previously wrote about DOJ Criminal Division and SEC Enforcement Division's first major update to "A Resource Guide to the US Foreign Corrupt Practices Act" in the eight years since it was published. The revised Guide largely mirrors the original version but includes updates on new policies, case law, and enforcement actions; expands on the "Hallmarks of an Effective Compliance Program" section; and addresses complex issues related to successor liability and applicable statutes of limitations.
- Updated DOJ Guidance on Evaluation of Corporate Compliance Programs Provides Additional Detail to the Existing Framework for Program Assessment
Arnold & Porter recapped DOJ's June 1, 2020 publication of updated guidance for prosecutors evaluating the effectiveness of corporate compliance programs. While adding some detail to the prior edition, the updated guidance continues to emphasize the fact-specific nature of such evaluations.
- OECD Phase 4 Report Praises US Anti-Bribery Enforcement But Recommends Areas for Improvement
As Arnold & Porter discussed, a November 2020 report from the Organisation for Economic Co-operation and Development (OECD) Working Group on Bribery commended the United States' anti-bribery efforts over the past decade, noting the country's significant upward trend in enforcement and the leadership role it continues to play in advancing anti-corruption norms globally. Nonetheless, the report also offered a number of areas for improvement, including enhanced whistleblower protections, increased transparency regarding Non-Prosecution Agreements and Deferred Prosecution Agreements, and a continued focus on recidivism.
- Fraud Section Establishes Special Matters Unit to Focus on Issues Related to Privilege and Legal Ethics
As highlighted by Acting Deputy Assistant Attorney General Robert A. Zink in remarks in December 2020, the DOJ Criminal Fraud Section recently created a "first-of-its kind" Special Matters Unit to manage privilege reviews and litigate privilege issues, with the dual purposes of safeguarding the rights of those under investigation and protecting the integrity of the Fraud Section's investigations and prosecutions, including those involving alleged FCPA violations.
2020 marked the ten-year anniversary of enactment of the UK Bribery Act of 2010. In October, the UK Serious Fraud Office (SFO), which enforces the Bribery Act, published an Operational Handbook, offering "comprehensive guidance" on how it approaches Deferred Prosecution Agreements. The SFO has secured nine DPAs since first using this resolution vehicle in 2014—the largest of which was entered this past year in connection with a global settlement of charges against Airbus.
Highlights from enforcement of the Bribery Act in the last quarter of 2020 include:
- SFO investigation into West London property secures £1.2m—The SFO secured £1,198,424.78 from Julio Faerman, owner of a £4.25 million luxury apartment in West London which the SFO suspected to have been partly purchased with the corrupt funds of its owner's criminal conduct in connection with bribes paid to Petrobras officials to secure contracts for SBM Offshore NV, for which Faerman acted as an agent. (11/12/20)
- SFO enters into Deferred Prosecution Agreement with Airline Services Limited—Under the terms of the DPA, Airline Services Limited (ASL) accepted responsibility for three counts of failing to prevent commercial and public bribery arising from the company's use of an agent to win three contracts, together worth over £7.3 million, to refit commercial airliners for Lufthansa. The company agreed to pay a financial penalty of £1,238,714.31, disgorgement of profits representing the gain of the criminal conduct of £990,971.45, and a contribution to the SFO's costs of £750,000. (10/30/20)
- Former Unaoil executive sentenced for paying bribes to win $1.7bn worth of contracts—Basil Al Jarah, Unaoil's former Iraq partner, was sentenced to three years and four months' imprisonment for paying in excess of $17 million in bribes to dishonestly secure approximately $1.7 billion worth of contracts in post-occupation Iraq. (10/8/20)
For additional details on major corruption-related enforcement actions and other events related to economic crime in the United Kingdom in 2020, please see Arnold & Porter's quarterly UK Economic Crime Updates:
Please see Arnold & Porter Publications and Presentations for the most recent installments of this UK publication series.
Justice Dep't News, Remarks of Acting Assistant Attorney General Brian C. Rabbitt at the ACI 37th Annual Conference on the FCPA (12/3/20).
See e.g., Justice Dep't News, Oil Trader Indicted in International Bribery and Money Laundering Conspiracy Involving Corrupt Payments to Ecuadorian Officials (9/22/20); Justice Dep't News, Miami-Based Businessman Pleads Guilty to FCPA and Money Laundering Violations in Scheme Involving PetroEcuador Officials (1/23/20); Justice Dep't News, Sargeant Marine Inc. Pleads Guilty and Agrees to Pay $16.6 Million to Resolve Charges Related to Foreign Bribery Schemes in Brazil, Venezuela, and Ecuador (9/22/20).
Justice Dep't News, Three Individuals Charged with Arranging Adoptions from Uganda and Poland Through Bribery and Fraud (8/17/20).
United States v. Ho, No. 19-761, 2020 WL 7702576 (2d Cir. Dec. 29, 2020).
For more analysis of the Hoskins decision and what it means to be an agent of a multinational company, see Arnold & Porter's Advisory, District Court Limits Reach of the FCPA and Sheds Light on What It Means to Be an Agent of a US Subsidiary (Mar. 3, 2020).