Firtash extradition, scrutiny alerts and updates, spot-on observation, and refreshing words. It’s all here in the Friday roundup.
In April 2014, the DOJ announced the unsealing of a criminal indictment charging six individuals “with participating in an alleged international racketeering conspiracy involving bribes of state and central government officials in India to allow the mining of titanium minerals.” (See here for the prior post).
Among those charged was Dmitry Firtash, a high-profile Ukrainian businessman.
Prior to the April 2014 unsealed indictment, Firtash was arrested in Austria and thereafter paid $174 million to post bail. Responding to the U.S. criminal charges, as noted in this prior post, Firtash released a video which insisted he is an innocent party caught at the center of a “battlefield for the two biggest global players of Russia and the USA”.
As highlighted in this May 2015 post, an Austrian judge denied a U.S. extradition request and called the DOJ’s case against Firtash “politically motivated” and lacking “sufficient proof.”
“An Austrian court on Tuesday approved an American extradition request for Dmytro Firtash.
Mr. Firtash’s American legal team said in an emailed statement that he was “charged concerning a project in India that was never completed — a project entirely outside the U.S. that had no effect on the U.S. and in which the U.S. has no legitimate interest.”
“If and when Mr. Firtash is required to come to the United States, the team will fight to obtain dismissal of this unjust case by the Department of Justice or, if necessary, in U.S. courts, to clear Mr. Firtash’s name,” said the legal team, Daniel Webb, a former United States attorney in Chicago; Michael Chertoff, a former secretary of Homeland Security; and the lawyer Lanny J. Davis.
Shortly after the ruling was announced, Mr. Firtash was detained on a separate European arrest warrant, issued by Spain, Reuters reported.”
Scrutiny Alerts and Updates
Graña y Montero S.A.A.
The Peru-based company with shares traded on the New York Stock Exchange dropped 33% after a local magazine in Peru reported that the construction group knew about $20 million in bribes paid to a former president by its partner, scandal-tainted Brazilian firm Odebrecht SA.
As noted in this Reuters article:
“Hildebrandt en sus trece said the former head of Odebrecht Peru, Jorge Barata, told prosecutors that the firm’s junior partners on a highway project were aware of an agreement to bribe former President Alejandro Toledo in exchange for help securing the contracts. Grana and two other local companies helped Odebrecht build two sections of a road from the Peruvian Amazon to Brazil. Odebrecht is embroiled in a massive corruption scandal stretching across a dozen countries.”
If you read FCPA Professor you already knew (since November 2013) that Citigroup was under FCPA scrutiny for its hiring practices. Curious then as to the amount of coverage based on Citigroup’s recent disclosure:
“Government and regulatory agencies in the U.S., including the SEC, are conducting investigations or making inquiries concerning compliance with the Foreign Corrupt Practices Act and other laws with respect to the hiring of candidates referred by or related to foreign government officials. Citigroup is cooperating with the investigations and inquiries.”
“In October 2016, we self-reported to the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) an alleged payment in the amount of 30,000 rubles (approximately US $475) to a Russian customs broker or official. Under the oversight of our Audit Committee, we initiated an investigation into this matter with the assistance of external legal counsel and external forensic accountants. The alleged payment was purportedly made to release a shipment of goods being held by Russian customs officials due to inaccurate paperwork. The value of the shipment was approximately €62,000 (approximately US $68,500). The allegations are related to our subsidiary in Russia, which had 2016 annual sales of approximately US $4 million. The scope of the investigation was later expanded to include our operations in Poland because our operations in Russia and Poland used the same third-party logistics provider. To date, the investigation has not resulted in any evidence of other potentially improper payments. However, the investigation has raised questions regarding possible irregularities with respect to possible non-compliance with customs documents and procedures related to these operations. The investigation is ongoing. We continue to fully cooperate with the SEC and the DOJ regarding this matter. We do not anticipate any material adverse effect on our business or financial condition as a result of this matter.”
As highlighted in this prior post, in June 2016 the company disclosed FCPA scrutiny regarding conduct in West Africa. In this recent filing, the company disclosed that its pre-enforcement action professional fees and expenses stand at approximately $7.8 million.
The company recently disclosed:
“We co-own interests in several entities (collectively “FloaTEC”) with Keppel Corporation (including its subsidiaries, “Keppel”). We have conducted an internal investigation in connection with allegations by a former Petrobras employee that Keppel’s agent made improper payments to secure project awards from Petrobras on a number of Keppel affiliated projects in Brazil, including a FloaTEC project on which we were also a subcontractor. Keppel’s agent subsequently entered into a plea arrangement with the Brazilian authorities and admitted to having made improper payments on behalf of Keppel to former Petrobras employees on projects unrelated to FloaTEC. We voluntarily contacted the U.S. Department of Justice (“DOJ”) to advise it of the preliminary results of our internal investigation, which identified no evidence to indicate any improper payments were made by us or FloaTEC or that any of our or FloaTEC’s employees authorized, had knowledge of, or direction or control over, any such payments. We have responded to the DOJ’s requests for additional information. If in the future, the DOJ determines that violations of applicable law have occurred involving us, we could be subject to civil or criminal sanctions, including monetary penalties, which could be material. However, based on the preliminary results of our investigation, we do not expect this matter to have a material adverse effect on us or our operations.”
With much breathless, over-the-top, doomsday commentary about the recent repeal of SEC rules implementing Sec. 1504 of Dodd-Frank (the so-called resource extraction disclosure provisions) this press release from Representative Bill Huizenga makes a spot-on observation.
“Some have tried to misconstrue the overturning of section 1504 as promoting corruption; this couldn’t be further from the truth. Despite claims to the contrary, H.J. Res. 41 does nothing to undermine the ability of the SEC and Justice Department to police foreign corruption. Both of these agencies still have at their disposal federal laws, including the Foreign Corrupt Practices Act, which prohibits bribing foreign officials to assist in obtaining or retaining business by public companies or their agents. Even without the SEC’s resource extraction rule in effect, fraud and corruption remain illegal activities that should be punished to the fullest extent of the law.”
This recent Sixth Circuit opinion is a tax case and has nothing to do with the FCPA.
“The words of law (its form) determine content (its substance). How odd, then, to permit the tax collector to reverse the sequence—to allow him to determine the substance of a law and to make it govern “over” the written form of the law—and to call it a “doctrine” no less. As it turns out, the Commissioner does not have such sweeping authority.
[W]hen it comes to the Internal Revenue Code, the Commissioner claims a right to reclassify Code-compliant transactions under the “substance-over-form doctrine” in order to respect “overarching . . . principles of federal taxation.” Overarching indeed. As he sees it, the doctrine allows him to nullify the DISC commissions and dividends to the Roth IRAs on the ground that the purpose of the transactions was to sidestep the contribution limits on Roth IRAs and lower the tax obligations of the Benenson sons in the process. That is a step too far. It’s one thing to permit the Commissioner to recharacterize the economic substance of a transaction—to honor the fiscal realities of what taxpayers have done over the form in which they have done it. But it’s quite another to permit the Commissioner to recharacterize the meaning of statutes—to ignore their form, their words, in favor of his perception of their substance. “
The specific case had nothing to do with the FCPA, but the words are so FCPA relevant.
A good weekend to all.
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