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The “Foreign Officials” Of 2017

A “foreign official.”

Without one, there can be no FCPA anti-bribery violation (civil or criminal).  Who were the alleged “foreign officials” of 2017?

This post highlights the alleged “foreign officials” from 2017 corporate DOJ and SEC FCPA enforcement actions.

There were 13 core corporate enforcement actions in 2017. Of the 13 enforcement actions 7 (54%) involved, in whole or in part, employees of alleged state-owned or state-controlled entities (“SOEs) with an additional 2 actions (15%) involving, in whole or in part, individuals associated with foreign health care systems.

By way of comparison:

In 2014, in an issue of first impression for an appellate court, the 11th Circuit [9] set forth a control and function test for whether an alleged SOE can be “instrumentality” under the FCPA such that its employees are “foreign officials” under the FCPA.  As highlighted here [10] and more extensively in my Supreme Court amicus brief [11] supporting the cert petition, there were many flaws in the 11th Circuit’s reasoning.  The Supreme Court declined [12] to hear the case.  As to whether Congress intended employees of SOEs to be “foreign officials” under the FCPA, see here [13] for my “foreign official” declaration.

[14]

The remainder of this post describes (as per DOJ/SEC allegations) the “foreign officials” of 2017.  As is apparent from the descriptions below, in certain instances the enforcement agencies describe the “foreign official” with reasonable specificity; in other instances with virtually no specificity.

[Note:  certain of the enforcement actions below technically only involved FCPA books and records and internal control charges or findings.  As most readers know, actual charges in many FCPA enforcement actions hinge on voluntary disclosure, cooperation, collateral consequences, and other non-legal element issues.  Thus, even if an FCPA enforcement action is resolved without FCPA anti-bribery charges, most such actions remain very much about the “foreign officials” involved – a fact evident when reading the actual enforcement action. Nevertheless, in 2017 there appeared to be one “pure” FCPA books and records and internal controls provisions case (Las Vegas Sands) in which it was unclear whether the DOJ believed that “foreign officials” were involved in the alleged improper conduct.

Mondelez

SEC

Indian government officials to obtain licenses and approvals for a chocolate factory

Zimmer Biomet

DOJ/SEC

Mexico customs officials (the Brazil portion of the enforcement concerned using a “prohibited distributor” implicated in the prior, original enforcement action).

SQM

DOJ/SEC

Chilean politicians, political candidates, and individuals connected to them

Orthofix

SEC

“doctors employed at government-owned hospitals”

Las Vegas Sands

DOJ

The enforcement action concerned the transfer of approximately $60 million to a Consultant for the purpose of promoting Sands’ business and brands. According to the DOJ: “Several of Sands’ contracts with and payments to Consultant had no discernible legitimate business purpose, Sands senior executives were repeatedly warned about the Consultant’s dubious business practices and the high risk of Sands’ transactions with Consultant [including those involving Chinese SOEs].”

Rolls-Royce

DOJ

Individuals at PTT Public Company Ltd. [a Thai state-owned and state-controlled oil and gas company, which owned extensive submarine gas pipelines in the Gulf of Thailand, and was controlled by the Thai government and performed government functions that the Thai government treated as its own]

Individuals at Petrobras [a corporation in which the Brazilian government directly owned a majority of common shares with voting rights, while additional shares were controlled by the Brazilian Development Bank and Brazil’s Sovereign Wealth Fund]

Individuals at Asia Gas Pipeline [AGP a joint venture between Kazakh and Chinese state-owned and state-controlled entities that was designed to transport gas through a pipeline between Kazakhstan and China. AGP was controlled by the Kazakh and Chinese governments and performed government functions for Kazakhstan and China]

Individuals at SOCAR [the Azeri state-owned and state-controlled oil and gas company]

Individuals at SOC [South Oil Company, an Iraqi state-owned and state-controlled oil company].

Individuals at Sonangol [an Angolan state-owned and state-controlled oil company]

Linde

DOJ

high-level officials at the National High Technology Center (NHTC) of the Republic of Georgia, a 100% state-owned and-controlled entity

CDM Smith

DOJ

officials in the National Highways Authority of India (“NHAI”), India’s state-owned highway management agency

Halliburton

SEC

Sonangol official

Telia

DOJ/SEC

An Uzbek government official, and a relative of a high-ranking Uzbek government official, with influence over decisions made by the Uzbek Agency for Communications and Information (“UzACI”) – this individual has been widely reported to be Gulnara Karimova]

 Alere

 SEC

Individuals associated with a “set of entities known as an Entidad Promotora de Salud, or EPS, which provided health insurance services for their members. These entities were created by Colombian law as part of the Colombian government’s efforts to provide universal health benefits to its citizens. Under this system, EPSs were responsible for organizing and guaranteeing the provision of health services for their enrolled participants and managing their participants’ health risks. Among other things, EPSs contracted for health services on behalf of their participants through a network of public, private, and their own health service providers. EPSs were both private and government controlled.”

SBM Offshore

DOJ

“state-owned oil companies in Brazil, Angola, Equatorial Guinea, Kazakhstan, Iraq and elsewhere”

Petrobras officials

nine Angolan officials within Sonangol and Sonusa.  [Sonusa refers to Sonangol USA Co. which is described as a Houston-Texas based company that is a wholly-owned subsidiary of Sonangol described as a state-owned and state-controlled oil company. Sonusa was controlled by the Angolan government and performed government functions for Angola.]”

at least nine Equatorial Guinean officials within GEPetrol and MMIE. [GEPetrol is described as the national oil company of Equatorial Guinea, controlled by the country’s Ministry of Mines, Industry and Energy [MMIE] and performed government functions for Equatorial Guinea.”

at least one KazMunayGas officials at least one Company 1 employee. [KazMunayGas is described as Kazakhstan’s state-owned and state-controlled oil company, controlled by the Kazakh government that performed government functions. Company 1 is described as a subsidiary of an Italian oil and gas company in which the government of Kazakhstan granted the company a concession as the operator of the Kashagan oil field development in Kazakhstan. In this capacity, Company 1 was acting in an official capacity for or on behalf of KazMunayGas in awarding contracts].”

at least two Iraqi officials within SOC. [SOC is described as South Oil Company, an Iraqi state-owned and state-controlled oil company, controlled by the Iraqi government that performed government functions.].

Keppel Offshore

DOJ

“Brazilian Official 1 [described as an employee of Petrobras], Brazilian Official 2 [described as an employee of Petrobras] and the Worker’s Party [described as a political party in Brazil].”

Free 90 Minute 2017 FCPA Year In Review Video

A summary of every corporate enforcement action; notable statistics and issues to consider; compliance take-away points; and enforcement agency and related developments. Click below to view the engaging video tutorial.

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