The DOJ recently announced that Heon-Cheol Chi (Chi) of South Korea, “the Director of South Korea’s Earthquake Research Center at the Korea Institute of Geoscience and Mineral Resources (KIGAM) was convicted … following a four-day jury trial of laundering bribes that he received from two seismological companies based in California and England through the U.S. banking system.”
As noted here, according to court documents the companies are Kinemetrics (a California company that designs technologies, products, and solutions for monitoring earthquakes and their effects on people and structures) and Guralp Systems Ltd. (a U.K. company that designs, manufactures and delivers products, services, systems and solutions for a wide range of applications for the seismological research community as well as the the oil & gas, civil engineering and energy sectors.)
With the Chi guilty verdict, focus shifts to Kinemetrics and Guralp Systems and when asked if there would be an FCPA enforcement action against these companies a DOJ spokesperson informed me via e-mail that “the investigation is ongoing.”
The DOJ’s release announcing the Chi guilty verdict states:
“According to the evidence presented at trial, between at least 2009 and 2015, Chi abused his official position at KIGAM to demand and receive over $1 million in bribes from two seismological companies in exchange for providing them with unfair business advantages in the South Korean seismological market. In particular, the trial evidence showed that Chi advocated the purchase and use of equipment from these two companies by KIGAM and other South Korean customers, and he provided these companies with market intelligence and inside information, including confidential information about their competitors and the KIGAM bidding process. The evidence also showed that Chi directed that his bribe payments be paid in cash or wired to his personal bank account in Glendora, California. From that account, Chi transferred approximately half of those bribe payments to an investment account he held in New York City and spent approximately 70 percent of the remaining funds back in South Korea, where he resided and worked, according to the evidence.
In addition to his use of cash payments and the U.S. banking system, the trial evidence showed that Chi took a number of steps to conceal his bribery scheme, including instructing representatives of the companies to delete or not respond to his emails, requesting that these company representatives not inform his colleagues at KIGAM of his illegal arrangements with these companies, and by sending fictitious invoices listing a false address in New Jersey. As Chi acknowledged in an email to one of the companies in 2005, “Usually I deleted almost all e-mail or papers related to [payments from these companies] because I am the director of earthquake research center and I am not allowed to be involved in it.”
The evidence at trial included numerous additional emails in which Chi admitted that he was acting illegally. For example, Chi wrote to a company representative in 2014, “I am a governmental officer and I should not have any contact with [a] private company. Moreover, it is illegal to assist any company related to the test.”
According to the trial evidence, the total of the bribe payments to Chi exceeded his legitimate income from KIGAM by a substantial margin and, during the relevant time period, Chi was paid more in bribes than in KIGAM salary.”
In the release, Acting Assistant Attorney General Kenneth Blanco stated:
“International corruption undermines the rule of law, threatens our national security, and harms honest companies who are playing by the rules. As this case demonstrates, the Criminal Division will hold responsible the companies and individuals who are paying bribes to foreign government officials, and the foreign government officials themselves. For the second time in recent months, the Criminal Division has convicted a foreign official who solicited bribes and then laundered the illicit proceeds in the United States. We will continue to hold such individuals responsible and accountable.”
Sandra Brown (Acting U.S. Attorney for the C.D. of California) stated:
“The American financial system is not to be used as a storehouse for the proceeds of corrupt activity. This defendant used a bank account here in Southern California to conceal over one million dollars in bribe money obtained through the abuse of his public position. This conviction sends a message that should be heard around the world.”
Assistant Director in Charge Deirdre Fike of the FBI’s Los Angeles Field Office stated:
“Defendant Chi exploited the U.S. banking system to enrich himself and to conceal his corrupt practices. The FBI and our partners will continue to hold accountable international offenders who gain the advantage on the global playing field by breaking U.S. law.”
Because the FCPA’s anti-bribery provisions are extraterritorial as to “domestic concerns,” there are no jurisdictional impediments to an Kinemetrics FCPA enforcement action.
Guralp Systems however is a foreign non-issuer company and thus would be subject to the FCPA’s anti-bribery provisions under the dd-3 prong of the statute. The jurisdictional element of dd-3 is as follows:
“while in the territory of the United States, corruptly to make use of the mails or any means or instrumentality of interstate commerce or to do any other act in furtherance …” a bribery scheme. (emphasis added).
It would be a disputed issue whether mere use of the U.S. banking system satisfies the “while in the territory of the U.S.” standard. Indeed, in the Africa Sting case a federal court judge dismissed FCPA anti-bribery charges against a foreign national defendant premised on sending a DHL package in furtherance of the alleged bribery scheme from the U.K. into the U.S. (See here for the prior post).
In other news regarding alleged corrupt foreign officials, the DOJ recently announced the filing of a civil complaint alleging that ‘from 2011 to 2015, Nigerian businessmen Kolawole Akanni Aluko and Olajide Omokore conspired with others to pay bribes to Nigeria’s former Minister for Petroleum Resources, Diezani Alison-Madueke, who oversaw Nigeria’s state-owned oil company.” According to the DOJ:
“In return for these improper benefits, Alison-Madueke used her influence to steer lucrative oil contracts to companies owned by Aluko and Omokore. The complaint alleges that the proceeds of those illicitly awarded contracts were then laundered in and through the U.S. and used to purchase various assets subject to seizure and forfeiture, including a $50 million condominium located in one of Manhattan’s most expensive buildings – 157 W. 57th Street – and the Galactica Star, an $80 million yacht.”
The DOJ is seeking the forfeiture and recovery of the approximate $144 million that were allegedly laundered in and through the U.S.
In the DOJ’s release: Acting Assistant Attorney General Kenneth Blanco stated:
“The United States is not a safe haven for the proceeds of corruption. The complaint announced today demonstrates the Department’s commitment to working with our law enforcement partners around the globe to trace and recover the proceeds of corruption, no matter the source. Corrupt foreign officials and business executives should make no mistake: if illicit funds are within the reach of the United States, we will seek to forfeit them and to return them to the victims from whom they were stolen.”
Assistant Director in Charge Andrew Vale of the FBI’s Washington Field Office stated:
“Business executives who engage in bribery and illegal pay-offs in order to obtain contracts create an uneven marketplace where honest competitor companies are put at a disadvantage. Along with the Department of Justice, international law enforcement partners and other U.S. federal agencies, the FBI is committed to pursuing all those who attempt to advance their businesses through corrupt practices.”
Assistant Director Stephen Richardson of the FBI’s Criminal Investigative Division stated:
“Today’s announcement would not have been possible without the remarkable work conducted by a group of dedicated investigators, attorneys and international partners who were committed to leaving no stone unturned in this case targeting international corruption. This case demonstrates that the FBI will not tolerate American institutions and property being used to launder proceeds of foreign corruption and today’s filing is an important step towards recovering identified funds. This should serve as a warning to other corrupt foreign officials that the United States is not open for their business.”
Chief Don Fort of the IRS Criminal Investigation stated:
“Today’s actions are the direct result of our agents following the money and unmasking corruption and greed. Working with our law enforcement partners, IRS-CI will continue to investigate and unravel these complex financial transactions.”
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