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Friday Roundup

Roundup

Guilty plea, scrutiny alerts, and for the reading stack. It’s all here in the Friday roundup.

Guilty Plea

As highlighted in this prior post, in July 2011 the DOJ criminally charged Amadeus Richers (a former director of Cinergy Telecommunications with one count of conspiracy to violate the FCPA and to commit wire fraud, six counts of FCPA violations, one count of conspiracy to commit money laundering and 19 counts of money laundering) in the sprawling Haiti Teleco enforcement action.

Although Richers was indicted, he remained a fugitive until his arrest and ultimately his extradition from Panama on February 23, 2017.

Last week, the DOJ announced:

“[Richers] pleaded guilty in federal court in Miami to count one of a second superseding indictment charging him with conspiracy to violate the Foreign Corrupt Practices Act (FCPA).  According to admissions in the plea documents, beginning in 2001 and lasting until 2004, Richers and his co-conspirators paid roughly $3 million in bribes directly and indirectly to foreign officials employed by Haiti Teleco and to a foreign official in the executive branch of the Haitian government in order to secure a favorable contract and favorable treatment in connection with that contract from Haiti Teleco.  The co-conspirators funneled some of the money through third-party intermediaries and paid other money directly to officials or relatives of officials, Richers admitted.”

Richers will be sentenced on September 20.

For more on the sprawling Haiti Teleco enforcement action, see here.

Scrutiny Alerts

IBM

The company is a repeat FCPA offender (as highlighted here, in 2000 IBM resolved an FCPA enforcement action and as highlighted here, in 2011 IBM resolved another FCPA enforcement action). The company recently disclosed:

“In early 2012, IBM notified the SEC of an investigation by the Polish Central Anti-Corruption Bureau involving allegations of illegal activity by a former IBM Poland employee in connection with sales to the Polish government. IBM cooperated with the SEC and Polish authorities in this matter. In April 2013, IBM learned that the U.S. Department of Justice (DOJ) was also investigating allegations related to the Poland matter, as well as allegations relating to transactions in Argentina, Bangladesh and Ukraine. The DOJ was seeking information regarding the company’s global FCPA compliance program and its public sector business. The company cooperated with the DOJ in this matter. In June 2017, the DOJ and the SEC each informed IBM that based on the information to date, they closed their respective investigations into these matters without pursuing any enforcement action against the company.”

Net1 UEPS

As highlighted in this prior post, in 2012 Net1 UEPS (a South African telecommunications company with shares traded on a U.S. exchange) disclosed that it had received information requests from the DOJ and SEC following South African media reports concerning civil litigation in that country by an unsuccessful bidder of a telecommunications contract.

Earlier this week, the company released this press release:

“[The company announced] that its legal counsel has received a letter from the Department of Justice, Criminal Division, Fraud Section (“DOJ”), advising the Company that the DOJ has closed its investigation concerning possible violations of the Foreign Corrupt Practices Act (“FCPA”). […] The DOJ investigation commenced in November 2012, following the award of the SASSA national contract to the Company in January 2012. The investigation was initiated largely as a result of one of the losing bidders for the contract, Barclays Africa’s subsidiary AllPay Consolidated Investment Holdings (Pty) Ltd (“AllPay”), referring unsubstantiated South African press articles to the DOJ, alleging or implying that the SASSA tender process was tainted by corruption involving the Company’s subsidiary, Cash Paymaster Services Proprietary Limited. These actions resulted in the DOJ and United States Securities and Exchange Commission (“SEC”) announcing investigations into alleged FCPA and disclosures violations on November 30, 2012.

On June 8, 2015, the Company received a letter from the SEC stating that it had concluded its investigation and that it did not intend to recommend an enforcement action against the Company. The receipt of the letter from the DOJ yesterday therefore concludes the United States government’s investigation into this matter which commenced in 2012.

On February 14, 2013, the Company filed an application pursuant to Section 34 of the South African Prevention of Corrupt Activities Act in South Africa with the South African Police Service to investigate the allegations of corruption that were contained in certain newspaper reports. Section 34 deals with the reporting of suspected fraud, theft, extortion and forgery. In November, 2015, the Company received a written notice from the South African Police Service’s Directorate for Priority Crime Investigation (“the Hawks”), stating this case was investigated and the prosecutors assigned to the case declined to prosecute these matters. The Hawks closed the investigations in November 2015.

As a result of the U.S. government investigations initiated in 2012, on December 24, 2013, the Company, its chief executive officer and its chief financial officer were named as defendants in a purported class action lawsuit filed in the United States District Court for the Southern District of New York alleging violations of the federal securities laws. The lawsuit was brought on behalf of a purported shareholder of Net1 and all other similarly situated shareholders who purchased our securities between August 27, 2009 and November 27, 2013. The U.S. District Court dismissed this class action litigation in September 2015.

“We co-operated with all government agencies and other regulatory bodies regarding these allegations as well as the extensive investigations that followed over the last four and half years,” said Mr. Herman G. Kotzé, chief executive officer of Net1. “The closure of the DOJ investigation concludes a lengthy, arduous and costly exercise involving government agencies in the United States and South Africa, including the DOJ, SEC and the Hawks. This letter from the DOJ is the final step to clear our name, and is consistent with the total absence of any findings of irregularities against us by any United States or South African court or regulator, the SEC or the Hawks. We will continue to focus our energies and resources on the expansion of our businesses in South Africa and internationally,” he concluded.”

Baxter International

As noted here,

“A Mexican congressman has called for U.S.-based Baxter International to be investigated for alleged corruption to win a contract to provide health equipment to the Mexican Social Security Institute (IMSS) in a tender that was later canceled. […]  The Mexican unit of Baxter, a Deerfield, Illinois-based healthcare company, won a more than 40 million Mexican peso (US$2.3 million) contract in a tender launched March 13 to provide automated peritoneal dialysis machines in Puebla, a city of around 2.5 million in Puebla state. However, IMSS annulled the tender on June 12 and subsequently called a new one after its internal affairs department and the Mexican Civil Service Secretariat raised concerns of possible collusion between Baxter executives and IMSS officials. IMSS’ internal affairs found several irregularities that favored Baxter. These include a specification in the tender rules that limited participation to suppliers who make machines for automated peritoneal dialysis through the hydro-pneumatic system. Baxter is the only maker of such equipment in Mexico. Abdalá said Baxter should be sanctioned for violating the U.S. Foreign Corrupt Practices Act, which prohibits U.S. companies and their subsidiaries and employees abroad from participating in acts of corruption or malpractice, Mexico’s La Jornada newspaper reported.”

America Movil

According to this report, the Mexico-based telecommunications company with shares registered with the SEC:

“was auditing its Guatemalan unit after an investigation in the country raised questions about payments made by a former executive at the telecoms company. Guatemalan police on Friday arrested 17 people on suspicion of involvement in a corruption racket allegedly directed by the country’s former communications minister, Alejandro Sinibaldi, who has been on the run since June 2016. During the probe by a United Nations-backed anti-corruption body in Guatemala known as the CICIG, investigators found evidence of payments from Telecomunicaciones de Guatemala S.A. (Telgua), a subsidiary of America Movil, in Sinibaldi’s account. A spokesman for America Movil said the company was auditing Telgua to discover why the payments were made.”

Rio Tinto

As highlighted in this November 2016 post, the company with ADR shares traded on the New York Stock Exchange announced the launch of an internal investigation relating to contractual payments made to a consultant providing advisory services on the Simandou project in Guinea. In the release, the company stated that it notified relevant authorities in the U.K., U.S. and Australia.

Earlier this week, the U.K. Serious Fraud Office announced that it “has opened an investigation into suspected corruption in the conduct of business in the Republic of Guinea by the Rio Tinto group, its employees and others associated with it.”

Reading Stack

Gibson Dunn’s Mid-Year FCPA update is here. The firm’s mid-year update on corporate NPAs and DPAs is here.

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