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Friday Roundup


Scrutiny alerts and updates, guilty pleas, across the pond, and admiration.  It’s all here in the Friday roundup.

Scrutiny Alerts and Updates


The largest FCPA enforcement action of all-time (Siemens) began with a raid by Munich law enforcement on company offices.  Will this be the origin of another large FCPA enforcement action?  Reuters reports:

“Munich prosecutors are carrying out an investigation at Airbus’s defence unit over alleged corruption linked to contracts with Romania and Saudi Arabia […] The Munich prosecutor’s office said it was investigating EADS, as Airbus Group was formerly called, over suspicion of paying bribes to foreign officials and tax evasion in connection with business in the two countries. It said a small number of people were under investigation and that material confiscated from searches related to those people and different companies was now being evaluated. Prosecutors searched offices on suspicion that bribes were paid to enable the company to obtain contracts worth 3 billion euros (2.3 billion pounds) in Saudi Arabia and Romania […] Airbus said prosecutors were investigating irregularities in border security projects awarded to Airbus’s defence business, but declined to confirm details.”

Airbus has American Depositary Receipts that trad on U.S. exchanges.

Och-Ziff Capital Management Group

The Wall Street Journal recently reported:

“U.S. investigators probing Och-Ziff Capital Management Group LLC’s  dealings in Libya are focused on a multimillion-dollar payment by the big hedge-fund firm they believe was funneled in part to a friend of Col. Moammar Gadhafi’s son, said people briefed on the inquiry. The scrutiny is part of a broad, three-year foreign bribery investigation by the Justice Department and Securities and Exchange Commission into how Wall Street firms obtained investments from the regime of the former dictator, who was deposed and killed in the country’s 2011 revolution. A key part of the Och-Ziff investigation relates to a fee that Och-Ziff paid to the company of a London middleman for help winning a $300 million investment in Och-Ziff funds from the Gadhafi regime, the people briefed on the matter said.”


In Petrobras-related news and further to “Foreign Corrupt Practices Act Ripples,” Reuters reports:

“State-controlled oil company Petroleo Brasileiro SA and its top executives face a class-action lawsuit in a federal court in New York over an alleged contract fixing, bribery and kickback scheme that lawyers say inflated the value of the company’s assets. The suit was filed by law firm Wolf Popper LLP in the Southern District of New York on Monday on behalf of investors who bought U.S.-traded shares of the Brazilian company, commonly known as Petrobras, between May 20, 2010, and Nov. 21, 2014. […] The complaint alleges that Rio de Janeiro-based Petrobras “made false and misleading statements by misrepresenting facts and failing to disclose a culture of corruption at the company that consisted of a multi-billion dollar money-laundering and bribery scheme embedded in the company since 2006.”

Guilty Pleas

As highlighted in this prior post, in April 2014 two additional individual defendants (Benito Chinea and Joseph DeMeneses, the Chief Executive Officer and a Managing Partner, respectively of Direct Access Partners) were added to the FCPA (and related) enforcement action against individuals associated with broker dealer Direct Access Partners.  (See here for the original May 2013 enforcement action against Jose Hurtado and Tomas Clarke and here for an additional individual, Ernesto Lujan, being added to the enforcement action in June 2013). Like in the previous enforcement actions, the additional defendants Chinea and DeMeneses  were criminally charged in connection with alleged improper payments to Maria Gonzalez (V.P. of Finance / Executive Manager of Finance and Funds Administration at Bandes, an alleged Venezuelan state-owned banking entity that acted as the financial agent of the state to finance economic development projects).

The DOJ recently announced that:

Chinea and DeMeneses pleaded guilty to one count of conspiracy to violate the Foreign Corrupt Practices Act and the Travel Act.  Chinea and De Meneses have also agreed to pay $3,636,432 and $2,670,612 in forfeiture, respectively, which amounts represent their earnings from the bribery scheme.  Sentencing hearings are scheduled for March 27, 2015.

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

“Benito Chinea and Joseph DeMeneses are the fifth and sixth defendants to plead guilty in connection with this far-reaching bribery scheme, which ranged from Wall Street to the streets of Caracas. The guilty pleas and the forfeiture of assets once again demonstrate that the Department is committed to holding corporate executives who engage in foreign bribery individually accountable and to deny them the proceeds of their corruption.”

Across the Pond

Alstom-Related Charges

The recent FCPA enforcement action against Alstom and related entities was just one prong of the enforcement action.

The enforcement action also involved a United Kingdom component as the Serious Fraud Office announced charges against Alstom Power Limited, Nicholas Reynolds, and John Venskus for violating section 1 of the Prevention of Corruption Act 1906 and conspiracy in violation of section 1 of the Criminal Act 1977.

The charges were based on the following allegation.

Alstom Power Limited, Nicholas Reynolds, John Venskus and others, between February 14, 2002 and March 31, 2010 “did corruptly give or agree to give an official or officials or other agents of AB Lietuvos Elektrine, gifts or consideration, namely money, disguised as payments in respect of a Consultancy Agreement with Vilmentrona UAB as an inducement or reward for showing favour to the Alstom Group in relation to the award or performance of a contract between Alstom Power Limited and said AB Lietuvos Elektrine for the Low NOx Burners project at the Elektrenai Power Plant in Lithuania.”

See here for Alstom’s January 2012 release regarding the project.

According to a SFO release, “Alstom Power Ltd, Nicholas Reynolds and John Venskus’ case has been formally sent from Westminster Magistrates’ Court, for a Preliminary Hearing at Southwark Crown Court on 5 January 2015.”

Smith and Ouzman Ltd., et al

Earlier this week, the SFO announced:

“Smith and Ouzman Ltd and two employees were convicted today at Southwark Crown Court as a result of a Serious Fraud Office investigation into corrupt payments made for the award of business contracts to the company.  The corrupt payments totalling £395,074 were made to public officials for business contracts in Kenya and Mauritania. The company, Smith and Ouzman Ltd, a printing firm based in Eastbourne which specialises in security documents such as ballot papers and certificates, was convicted of three counts of corruptly agreeing to make payments, contrary to section 1(1) of the Prevention of Corruption Act 1906. Christopher John Smith, former chairman of Smith and Ouzman, age 71, from East Sussex, was convicted of two counts of corruptly agreeing to make payments. Nicholas Charles Smith, former sales and marketing director of Smith and Ouzman, age 43, from East Sussex was convicted of three counts of corruptly agreeing to make payments. Timothy Hamilton Forrester, former international sales manager of Smith and Ouzman, age 57, from East Sussex was acquitted of all three counts of corruptly agreeing to make payments. Mr Abdirahman Mohamed Omar, a sales agent for Smith and Ouzman, age 38, from London, was acquitted of one count of corruptly agreeing to make payments in relation to a contract in Somaliland.”

Director of the SFO, David Green commented:

“This is the SFO’s first conviction, after trial, of a corporate for offences involving bribery of foreign public officials. Such criminality, whether involving companies large or small severely damages the UK’s commercial reputation and feeds corrupt governance in the developing world. We are very grateful to the Kenyan authorities for their assistance in this case.”

Sentencing is due to take place on 12 February 2015.

Anti-Corruption Plan

The U.K. government recently released this “Anti-Corruption Plan.” It is described as “bring[ing] together, for the first time, all of the UK’s activity against corruption in one place.”

The pamphlet-style document is so general in nature, it is difficult to offer any constructive comments.


My admiration for Judge Jed Rakoff (S.D.N.Y.) continues.

In this recent piece titled “Why Innocent People Plead Guilty,” Judge Rakoff writes:

“The criminal justice system in the United States today bears little relationship to what the Founding Fathers contemplated, what the movies and television portray, or what the average American believes. To the Founding Fathers, the critical element in the system was the jury trial, which served not only as a truth-seeking mechanism and a means of achieving fairness, but also as a shield against tyranny. As Thomas Jefferson famously said, “I consider [trial by jury] as the only anchor ever yet imagined by man, by which a government can be held to the principles of its constitution.” The Sixth Amendment guarantees that “in all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury.” The Constitution further guarantees that at the trial, the accused will have the assistance of counsel, who can confront and cross-examine his accusers and present evidence on the accused’s behalf. He may be convicted only if an impartial jury of his peers is unanimously of the view that he is guilty beyond a reasonable doubt and so states, publicly, in its verdict. The drama inherent in these guarantees is regularly portrayed in movies and television programs as an open battle played out in public before a judge and jury. But this is all a mirage. In actuality, our criminal justice system is almost exclusively a system of plea bargaining, negotiated behind closed doors and with no judicial oversight. The outcome is very largely determined by the prosecutor alone.”

Job Opening

Sig Sauer Inc. (based in Newington, NH) is actively looking for an Associate General Counsel and Chief Compliance Officer with corporate compliance experience. If interested, please contact


A good weekend to all.


Data Systems & Solutions LLC Resolves FCPA Enforcement Action

Earlier this week, Data Systems & Solutions LLC (“DS&S”), a wholly-owned subsidiary of Rolls Royce Holdings and based in Reston Virginia, resolved a DOJ FCPA enforcement action.  The total fine was $8.82 million.

DS&S’s business includes the design, installation, and maintenance of instrumentation and controls systems at nuclear power plants, fossil fuel power plants, and other critical infrastructure facilities.  According to the information, “DS&S’s instrumentation and controls business customers included state-owned nuclear power plants in Eastern Europe.”  The charged conduct focuses on DS&S’s business with Ignalina Nuclear Power Plant (“INPP”) described as a “state-owned nuclear power plant in Lithuania and an ‘agency’ and ‘instrumentality’ of a foreign government, as that term is used in the FCPA.”  For more on INPP, see its website here.

According to the charging documents, payments were made by DS&S to various INPP employees primarily through subcontractors.  The INPP employees are described as follows.  Official 1 (the Deputy Head of the Instrumentation & Controls Department at INPP with influence over the award of contracts); Official 2 (the Head of Instrumentation & Controls Department at INPP with influence over the award of contracts); Official 3 (the Director General at INPP with influence over the award of contracts); Official 4 (the Head of International Projects Department at INPP with influence over the award of contracts); and Official A (the lead software engineer at INPP with influence over the award of contracts).  All officials are alleged to “foreign officials as that term is used in the FCPA.”

The DOJ enforcement action involved a criminal information (here) against DS&S resolved through a deferred prosecution agreement (here).

Criminal Information

The information charges conspiracy to violate the FCPA’s anti-bribery provisions and one substantive FCPA anti-bribery violation.  As to the conspiracy charge, the information alleges that between 1999 to 2004, DS&S and others conspired to “obtain and retain contracts for DS&S from INPP to design, install, and maintain INPP’s instrumentation and controls systems through the promise and payment of bribes to foreign officials employed by INPP.”

According to the information, DS&S would and did attempt to conceal the payments to foreign officials by using Subcontractor A Subcontractor B and Subcontractor C (an alleged U.S. shell company) to funnel bribes from DS&S to INPP officials.  The information further alleges that: (i) “Subcontractor A would and did pay bribes to INPP officials on behalf of DS&S by issuing tens of thousands of dollars in checks to INPP officials for deposit into the officials’ bank accounts in the United States”; (ii) DS&S “would and did pay INPP employees who were also employed by Subcontractor B significantly above-market rates for services performed by Subcontractor B in connection with DS&S contracts with INPP in exchange for the INPP employees’ support for the award of contracts to DS&S” and in a manner designed to allow those employees to avoid taxes on the payments from DS&S; (iii) DS&S “would and did provide gifts, travel, and entertainment to employees of INPP in exchange for those foreign officials’ agreements to help DS&S secure contracts with INPP.  The travel alleged includes trips to Florida and Hawaii and gifts alleged include a Cartier watch.

Executive A (vice president of marketing and business development at DS&S during the relevant time period responsible for marketing and business development efforts in connection with DS&S’s nuclear services, including power plant customers in Eastern Europe) is alleged to have engaged in a variety of the improper conduct.


The DOJ’s charges against DS&S were resolved via a deferred  prosecution agreement.  Pursuant to the DPA, DS&S admitted, accepted and acknowledged that it is responsible for the acts of its officers, directors, employees, and agents as charged in the information.

The term of the DPA is two years and it states that the DOJ entered into the agreement based on the following factors: “(a) following the receipt of subpoenas in connection with the government’s investigation, DS&S initiated an internal investigation and provided real-time reports and updates of its investigation into the conduct described in the Information; (b) DS&S’s cooperation has been extraordinary, including conducting an extensive, thorough, and swift internal investigation; providing to the Department searchable databases of documents downloaded from servers, computers, laptops, and other electronic devices; collecting, analyzing, and organizing voluminous evidence and information to provide to the Department in a comprehensive report; and responding promptly and fully to the Department’s requests; (c) DS&S has engaged in extensive remediation, including terminating the officers and employees responsible for the corrupt payments; dissolving the joint venture and reorganizing and integrating the Company as a subsidiary with a more rigorous compliance program; enhancing its due diligence protocol for third-party agents and subcontractors, including CEO review and approval of the retention of any agent or subcontractor; strengthening its ethics policies, including the appointment of a Company Ethics Representative who reports directly to the CEO and provides regulator reports to the Members Committee at each Committee meeting; providing FCPA training for all agents and subcontractors; and establishing heightened review of most foreign transactions; (d) DS&S has committed to continue to enhance its compliance program and internal controls …; and (e) DS&S has agreed to continue to cooperate with the Department in any ongoing investigation of the conduct of DS&S and its officers, directors, employees, agents and subcontractors relating to violations of the FCPA.

Pursuant to the DPA, the advisory Sentencing Guidelines range for the conduct at issue was $12.6 – $25.2 million.  The DPA states as follows.  “DS&S agrees to pay a monetary penalty in the amount of $8,820,000, an approximately thirty-percent reduction off the bottom of the fine range […]  DS&S and the Department agree that this fine is appropriate given the facts and circumstances of this case, including the nature and extent of DS&S’s extraordinary cooperation and extensive remediation in this matter.”

Pursuant to the DPA, DS&S agreed to report to the DOJ “periodically, at no less than twelve-month intervals during the two-year term, regarding remediation and implementation of the compliance program and internal controls, policies, and procedures” described in an attachment to the DPA.    As is customary in FCPA DPA’s, DS&S agreed that it shall not make any public statement contradicting its acceptance of responsibility.

See here for the DOJ’s release.  Given the allegation in the information that INPP officials received payments into their bank accounts in the U.S., it will be interesting to see whether the INPP officials are charged with non-FCPA offenses.  Such a U.S. nexus was used to prosecute certain of the “foreign officials” in the Haiti Teleco enforcement action (see here for a summary of those actions) as well as the Siriwan’s in connection with the Green matter (see here for the prior post).

Carl Rauh (Hogan Lovells – here)  represented DS&S.

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