The first quarter of 2020 provided some interesting insights for the compliance professional. While there were only two announced corporate FCPA resolutions, they were both significant. There were a large number of individual FCPA anti-corruption enforcement actions, including plea agreements, indictments and even trial court convictions overturned. As the quarter ended, we had some indications of where enforcement made be headed for the rest of 2020 and beyond.
Corporate Anti-Corruption Enforcements
Airbus was the largest international anti-corruption enforcement action of all-time, coming in at just over $3.9bn in fines and penalties paid to three countries: the US, the UK and France. The case involved a massive corporate wide bribery scheme, countenanced at the highest levels of the company, for multiple years. The Airbus case lays bare any claim that the Department of Justice (DOJ) under Trump is soft on corruption or is cutting back. It also demonstrates that robust cross-border investigations can be done efficiently with the one pie, non-piling on process applied to fines and penalties. DPAs shine in this enforcement action as well as providing solid benefits to companies which have cooperated with the investigations and extensively remediated. Such conduct is clearly rewarded. Finally, it demonstrates once and for all that paper programs will always lead to disaster. Airbus’ compliance function was far more concerned that all the paperwork was filled out neatly than reviewing any of the information submitted by the business folks.
The other enforcement action was Cardinal Health, significantly smaller coming in with a fine and penalty of $8.7 million. Yet the SEC enforcement action had some useful lessons for the compliance professional. The most salient issue was the business structure which led to the FCPA violation. Cardinal “administered the marketing accounts” of the European company. Further, it “retained approximately 2,400 employees” on behalf of the European company. Finally, even the marketing employees were managed day-to-day by, and reported to the European company, “Cardinal China entered into employment contracts with the marketing employees, administered their payroll, and assumed other human resource and administrative functions for them.” What do you call that type of business relationship? Equally important, how would even think about assessing them from a compliance perspective? Pertinent questions raised by this enforcement action.
The DOJ obtained two guilty pleas and indicted three individuals in the first quarter of the year. Tulio Anibal Farias-Perez pled guilty to one count of conspiracy to violate the FCPA for arranging bribes to officials at Venezuela’s state energy company, PDVSA. Armengol Diaz pled guilty for his involvement in a $4.4 million bribery and money laundering scheme involving the state-owned oil company of Ecuador, PetroEcuador. The indictments were for Reza Moenaf, former president of Alstom’s subsidiary in Indonesia; Eko Sulianto, the former director of sales of Alstom’s subsidiary in Indonesia; and Junji Kusunoki, the former deputy general manager of Marubeni Corporation’s overseas power project department. They all involved bribery allegations for a power project in Indonesia. There was one person sentenced, Juan Jose Hernandez Comerma, to 48 months in prison and fined $127,000 for his role in the bribery of officials at PDVSA in exchange for contracts.
Lawrence Hoskins, convicted last November, was granted an acquittal by the trial judge, overturning the jury’s guilty verdict. He was involved in the Alstom bribery in Indonesia for which the company settled and two of four indicted individuals pled guilty. (The fourth died before trial.) Two individuals were granted new trials for ineffective counsel. Joseph Baptiste was granted a new trial because his lawyer’s performance did not live up to prevailing professional norms. Roger Richard Boncy was granted a new trial because Baptiste’s lawyer was so inept it impacted Baptiste’s counsel from doing his job effectively.
Anti-Corruption Enforcements Going Forward
The DOJ has made clear that even in this time of the coronavirus health crisis, FCPA enforcement will continue rigorously. David Fuhr, an assistant chief of the U.S. Justice Department’s anti-foreign-bribery unit, said in an online event that “Reporting and detecting misconduct continue to be very important things for companies to do. Prosecutors are trying to be reasonable given the conditions companies face as a result of the pandemic, but “compliance has to continue”.
All of this information makes clear that FCPA enforcement and greater global anti-corruption enforcements will continue across the globe. Still lurking in the wings is a potential FCPA resolution of the 1MDB scandal involving Goldman Sachs and the various enforcement agencies looking at the former First Daughter of Angola, Isabel Dos Santos, who was also the head of Angola’s national energy concern Sonangol. Businesses would do well to watch the political winds of change and the ongoing Trump trade wars for signs of regime change.