Las Vegas Sands settles FCPA charges with the SEC
On April 7, 2016, the Securities and Exchange Commission ("SEC") announced that it has reached a settlement with Las Vegas Sands Corp. (LVS) over alleged violations of the accounting provisions of the Foreign Corrupt Practices Act ("FCPA") in connection with LVS's engagement of a consultant to facilitate business activities in China and Macao.
According to the SEC order, in 2006, LVS identified a Chinese consultant to assist the company with its business development in China. It made more than US$ 62 million in payments to the consultant, who acted as an intermediary to obscure LVS's role in certain business transactions such as the purchase of a basketball team and a building in China, which LVS, as a casino operator, was not permitted to carry out. A portion of the payments were improperly recorded in LVS's books and records. The allegations do not relate to any potential bribes paid to any government officials. Rather, the enforcement action is based on the concealment of the connection between LVS and the consultant as well as deficiencies in LVS's books, record -keeping and internal controls.
LVS has agreed to pay a fine of US$ 9 million. It also agreed to retain an independent consultant for two years to review its FCPA-related internal controls, recordkeeping, and financial reporting policies and procedures, as well as its ethics and compliance functions.
Novartis settles FCPA charges with the SEC
On March 23, 2016, Novartis AG ("Novartis"), the global pharmaceutical company, entered into a settlement with the SEC over alleged violations of the accounting provisions of the FCPA in connection with its pharmaceutical operations in China.
According to the SEC order, from at least 2009 to 2013, certain employees and agents of Novartis's Chinese subsidiaries provided things of value to Chinese officials, principally healthcare professionals. These payments included gifts, travel, entertainment and favours for families, and the true nature of these transactions was concealed through the use of complicit third parties and improper record-keeping.
Novartis agreed to pay a combined disgorgement and fine of US$ 25 million. It also agreed to provide periodic status reports to the SEC for the next two years on its remediation actions.
It has been reported that Novartis is investigating bribery issues in Turkey and South Korea.
Venezuelan businessmen pleads guilty for bribing PdVSA
We reported in January this year that the Department of Justice ("DOJ") had made two arrests in connection with an investigation into Petróleos de Venezuela ("PdVSA"), the Venezuelan state-owned oil and gas company. On March 23, 2016, the DOJ announced that a business owner and one of his former employees had pled guilty to paying bribes to officials of PdVSA in order to win bids to provide equipment and services to PdVSA. Charges against another businessman for FCPA violations and money laundering offences are still pending.
The US authorities' investigation into PdVSA is ongoing. Recently, it has been reported that the Swiss authorities turned bank records over to the US authorities to assist the investigation.
DOJ extends Zimmer Biomet's DPA amid post-settlement investigations
Medical device company Zimmer Biomet announced in its SEC filing that because the DOJ and the SEC continued to investigate certain alleged misconduct by Zimmer Biomet in Brazil and Mexico, its Deferred Prosecution Agreement ("DPA") would not conclude as originally expected on March 26, 2016. The original DPA was signed on March 26, 2012 between Biomet, Inc. (“Biomet”), which was later acquired by Zimmer to form Zimmer Biomet, and the DOJ, for a term of three years to settle an investigation into Biomet’s sales in Argentina, Brazil and China. In October 2013, Biomet became aware of certain alleged improprieties regarding its operations in Brazil and Mexico, including alleged improprieties that predated its entry into the DPA. The DOJ and the SEC were involved in investigations into these matters, and the DPA was extended for a year on March 26, 2015. Now Zimmer Biomet reports that the DOJ has informed Biomet that it retains its rights under the DPA to bring further action against Biomet or revoke the DPA as the parties continue to discuss issues of alleged misconduct disclosed in 2014 and compliance-related issues.
DOJ announces new FCPA pilot programme
On April 5, 2016, the DOJ announced that it is launching a one-year pilot programme for FCPA enforcement as part of its continued efforts to target FCPA violations. The programme aims to motivate companies to voluntarily self-disclose FCPA-related misconduct by highlighting the requirement that a company self-report its FCPA misconduct in order to receive full mitigation credit. Even if a company does self-report, it will also be required to disgorge all profits resulting from the FCPA violation in order to receive full mitigation credit. The programme provides further guidance on what constitutes "voluntary self-disclosure," "full cooperation" and "remediation."
Latest FIFA developments
The DOJ's probe of corruption associated with the Fédération Internationale de Football Association ("FIFA") continues. On 10 March 2016, the DOJ announced that a FIFA match agent and soccer consultant had pled guilty to money laundering and wire fraud conspiracy in connection with his participation in the FIFA bribery scheme. According to the charges, the match agent paid hundreds of thousands of dollars in bribes to high-ranking officials of FIFA and other regional soccer federations in order to win media and marketing contracts and the rights to host international friendly matches.
In addition, on 28 March 2016, the DOJ announced that the former President of Honduras who later served as the Honduran soccer federation President had pled guilty to racketeering conspiracy and wire fraud conspiracy in connection with his receipt of bribes in exchange for the awarding of contracts for the media and marketing rights to FIFA World Cup qualifier matches.
As we have previously reported, both defendants were charged in a 92-court superseding indictment.
District Court refuses to reconsider its earlier order to limit FCPA's jurisdiction
The District Court for District of Connecticut issued a ruling affirming an earlier ruling that foreign non-residents could not be brought within the application of the jurisdiction of the FCPA based solely on the accomplice theory. The defendant in this case is a former Alstom employee allegedly involved in Alstom's widespread bribery scheme. As a UK citizen hired by Alstom's UK subsidiary the defendant would not ordinarily be subject to the FCPA. However, the US government tried to prosecute him on the grounds that he had conspired with or aided and abetted a domestic concern (Alstom's US entity) in the furtherance of a bribery scheme. The Court’s earlier decision held that the conspiracy theory alone would not bring the defendant within the FCPA's jurisdiction, and that in order to do so the government would have to prove that the defendant acted as an agent of the domestic concern.
The government moved for reconsideration of the earlier decision, and the Court upheld its earlier ruling, stating that the government had failed to satisfy the strict standards for a reconsideration motion, namely showing that the Court's decision was in clear error.
The Government has appealed this ruling.
DC Circuit determines that Judiciary does not have power to substantively review deferred prosecution agreements
In a landmark of the first denial of a deferred prosecution agreement ("DPA'') by a federal court, the United States Court of Appeals for the District of Columbia Circuit held that a district court lacks the authority to deny an exclusion of time under the Speedy Trial Act – a necessary step to effectuating a DPA -on the ground that the district court thinks the government should bring different charges, charge additional defendants, or demand a more stern set of sanctions. This decision will likely curb the recent trend of district courts asserting judicial power to substantively review DPAs and to second-guess the terms of the agreements.
US authorities further ease Cuban sanctions
On 15 March 2016, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the US Department of Commerce’s Bureau of Industry and Security (BIS) announced significant amendments to the Cuban Assets Control Regulations (CACR) and Export Administration Regulations (EAR). The move follows earlier amendments implemented in the last year and further advances the policy goals announced by President Obama on 17 December 2014 concerning US-Cuba relations.
For details, please see our e-bulletin here.
US authorities arrest a Turkish businessman who allegedly conspired to violate US sanctions
The US Attorney for the Southern District of New York recently unsealed an indictment charging three foreign nationals with moving funds cross border on behalf of the Government of Iran and other Iranian entities, following the arrest of one of the defendants in Miami. The arrested defendant, Reza Zarrab, is a businessman based in Turkey. According to the indictment, Zarrab owned and operated several money services businesses in Turkey and the United Arab Emirates. The other defendants include an employee of Zarrab and a senior official at Mallet Exchange, another money service company owned by Bank Mellat, an Iranian state-owned bank. This action indicates that despite the relaxation of US secondary sanctions against Iran following the Joint Comprehensive Plan of Action (JCPOA), US authorities will still vigorously enforce applicable Iran sanctions, including the "primary" sanctions applicable to US persons, which have not been substantially relaxed pursuant to the JCPOA.
For details, please see our e-bulletin here.
Singapore man extradited to US facing charges for illegal exports to Iran
The DOJ announced that a Singaporean has been extradited to US on charges relating to a conspiracy that allegedly caused thousands of US-origin goods to be exported to Iran. The defendant was charged earlier for a conspiracy he participated in causing 6000 modules of improvised explosive devises to be purchased and exported from a US company to Singapore, and later to Iran. The defendant allegedly made misrepresentations and false statement to the manufacturer of the devices, and filed false information with the US government. The modules were later discovered in Iraq.
OFAC issues regulations implementing new sanctions targeting Hizballah
On 15 April 2016, OFAC issued regulations to implement the Hizballah International Financing Prevention Act of 2015, authorizing secondary sanctions against foreign financial institutions ("FFIs") that facilitate or conduct certain activities for the benefit of Hizballah.
The Hizballah International Financing Prevention Act of 2015("HIFPA") was signed into law by President Obama on December 18, 2015. The legislation provides additional tools to impose secondary sanctions targeting Hizballah's financial infrastructure. Section 102(a)(1) of HIFPA requires the Obama administration to promulgate regulations to prohibit or impose strict conditions on the opening or maintaining in the United States of a correspondent account or a payable-through account by an FFI that the President determines to have engaged in certain activities benefitting Hizballah. The sanctionable activities include:
- knowingly facilitating a significant transaction or transactions for Hizballah;
- knowingly facilitating a significant transaction or transactions of a Specially Designated National (SDN) acting on behalf of or at the direction of, or being owned or controlled by, Hizballah;
- knowingly engaging in money laundering to carry out an activity described above; or
- knowingly facilitating a significant transaction or transactions or providing significant financial services to carry out an activity described above.
Our full e-bulletin is available here.
U.S. Department of Treasury's Office of Foreign Asset Controls (OFAC) sanctions supporters of Iran's Ballistic Missile Program and UK/ UAE companies for dealings with terrorism-designated Mahan Air
On 24 March 2016, the U.S. Department of Treasury's Office of Foreign Asset Controls (OFAC) imposed sanctions against various entities and individuals for supporting Iran's ballistic missile program and for dealings with Iranian airline Mahan Air, (itself subject to sanctions by OFAC in October 2011 for providing financial, material, and technological support to the IRGC-Qods Force).
These measures reflect the continuing commitment of the US, despite the recent relaxation of EU and US sanctions against Iran, "to countering Iran’s on-going development of ballistic missiles and its support for terrorism".
Designated entities include UK-based Aviation Capital Solutions and Aircraft, Avionics, Parts & Support Ltd., for providing material, technological, or financial assistance to Mahan Air, as well as two UEA-based entities for facilitating Mahan Air's efforts to circumvent the sanctions.
These actions, taken pursuant to Executive Orders (E.O.) 13224 and 13382, block any property and interests in property under U.S. jurisdiction of the designated entities and individuals. Foreign financial institutions or persons that facilitate significant transactions to designated entities and individuals risk exposure to sanctions that could sever their access to the U.S. financial system or block their property or interests in property under U.S. jurisdiction.
Microsoft challenges US authorities' use of secrecy orders to obtain stored electronic data
Microsoft Corporation has filed suit against the US Department of Justice (DoJ) seeking to declare unconstitutional a provision of federal law that authorizes US authorities to obtain e-mails and other private data under what Microsoft describes as a "veil of prolonged (or even indefinite) secrecy."
In a case that potentially could alter the way US law enforcement seeks to secure electronic data from tech companies, including cloud storage providers, Microsoft asserts that the US government's increasing use of "secrecy orders" in pending investigations to obtain access to customer information stored in Microsoft's "cloud" platform, without that customer's knowledge, violates US constitutional protections that afford people and organizations the right to know if the government searches or seizes their information. See Microsoft Corp. v. US Department of Justice, et al., Case No. 16-cv-00538 (W.D. Washington).
Our full e-bulletin is available here.
