- FCPA Professor - http://fcpaprofessor.com -

Bahn, Et Al – Not A Typical FCPA Enforcement Action

Last week the DOJ announced [1] Foreign Corrupt Practices Act, and related charges, against four individuals for their roles in a scheme to pay $2.5 million in bribes to facilitate the $800 million sale of a commercial building in Vietnam (the so-called Landmark 72 pictured at left) to a Middle Eastern sovereign wealth fund.

It certainly was not a typical FCPA enforcement action.

In fact it was downright strange in that the bribery scheme was unsuccessful and the third party intended to facilitate the bribery scheme simply pocketed the money for himself.

In this criminal indictment [2], the DOJ charged Joo Hyun Bahn and his father Ban Ki Sang with conspiracy to violate the FCPA’s anti-bribery provisions, three substantive FCPA offenses, and other criminal offenses. In addition, Malcom Harris, the third party, was criminally charged with one count of wire fraud, one count of conducting monetary transactions in illegal funds and aggravated identity theft. As noted in the DOJ’s release, San Woo was charged in a separate complaint [3] with one count of conspiracy to violate the FCPA for the same alleged bribery scheme.

As stated in the “Overview” section of the indictment, Bahn and Ban “engaged in an international conspiracy to bribe a foreign official of a country in the Middle East in connection with the attempted $800 million sale of a building complex in Vietnam known as Landmark 72.”

According to the indictment, Keangnam Enterprises Co. Ltd. was a South Korean construction company that built and owned Landmark 72 and Ban was a senior executive at Keangnam. The indictment alleges that in 2013 Keangham was experiencing a liquidity crisis and that as the debts owed to Keangnam’s credits were maturing the company needed to raise capital. According to the indictment, Keangnam then turned to Bahn, a commercial real estate broker in New York, to secure an investor for Landmark 72 who stood to earn a commission of at least $5 million dollars.

[4]

The indictment then alleges:

“Instead of obtaining financing through legitimate channels, Bahn and Ban engaged in a corrupt scheme to pay bribes to Foreign Official through Malcom Harris, who held himself out as an agent of Foreign Official, to induce Foreign Official to use his influence to convince Country 1 sovereign wealth fund to acquire Landmark 72. In or about 2014, based on communications with Harris, Bahn and Ban agreed to pay, through Harris, a $500,000 upfront bribe and a $2 million bribe upon the close of the sale of Landmark 72 to Foreign Official on behalf of Keangnam. Unbeknownst to Bahn and Ban, however, Harris did not have the claimed relationship with Foreign Official and did not intend t pay the bribe money to Foreign Official. Instead, Harris simply stole the $500,000 upfront bribe paid by Bahn and Ban, which Harris then spent on lavish personal expenses.

Over the next year, as the Landmark 72 deal showed no signs of actual progress, Keangnam’s liquidity crisis worsened. Believing that the upfront bribe that Bahn had paid would eventually bear fruit and not wanting to lose a potential multi-million-dollar commission, Bahn engaged in a fraudulent scheme to trick Keangnam and its creditors into believing the Fund was close to acquiring Landmark 72. In furtherance of this scheme, Bahn repeatedly lied to Keangnam and its creditors about the status of the deal, knowing that Keangnam and its creditors would rely upon the misrepresentations. Bahn forged e-mails from Foreign Official and other documents to make the sale of Landmark 72 appear imminent. Ultimately, when the deal with the Fund failed to materialize, Keangnam was forced to enter court receivership in South Korea.”

In the DOJ’s release, Assistant Attorney General Leslie Caldwell stated:

“This alleged conduct proves the adage that there is truly no honor among thieves. The indictment alleges that two defendants wanted to bribe a government official; instead they were defrauded by their co-defendant. Today’s charges are another example of the Criminal Division’s commitment to rooting out all manner of corruption.”

U.S. Attorney Preet Bharara of the Southern District of New York stated:

“The father-son defendants, Ban Ki Sang and Joo Hyun Bahn, allegedly conspired to bribe a foreign official to close an $800 million deal for a 72-story skyscraper in Vietnam, a deal that would have led to a multimillion-dollar commission for the Manhattan real estate broker son and much needed capital for the father’s construction company in Korea. But these alleged schemers were themselves double-crossed, as the man who purportedly set up the bribery scheme, Malcolm Harris, took the bribe money and pocketed it. This alleged bribery and fraud scheme offends all who believe in honest and transparent business, and it stands as a reminder that those who bring international corruption to New York City, as alleged here, will face the scrutiny of American law enforcement.”

Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office stated:

“When Ban, a senior executive at Landmark 72, realized the debts owed to his company’s creditors were mounting, he sought the support of his son Bahn, a broker for a real estate firm in Manhattan. The plan was for Bahn to secure an investor for Landmark 72, and the brokerage agreement they entered into would ultimately secure Bahn a lucrative profit. But instead of lawfully obtaining financing for the deal, they allegedly entered into an illegal agreement with Harris to bribe a foreign official into purchasing the property. In the end, they were hoodwinked by their very own criminal activity.”

Elevate Your FCPA Research

There are several subject matter tags in this post. However, only subscribers to FCPA Professor's premium search feature can see and use them in research. Efficient and cost-effective FCPA research is just a click away.

Elevate Your Research [5]