Previous posts here and here highlighted the DOJ’s 2015 Foreign Corrupt Practices Act enforcement action concerning a Russian nuclear bribery scheme.
As highlighted in the previous posts, Daren Condrey pleaded guilty to FCPA violations for allegedly bribing Vadim Mikerin.
Mikerin was an alleged Russian “foreign official” because he worked for TENAM Corp. (a Maryland corporation) because TENAM was a wholly-owned subsidiary on TENEX – an entity “indirectly owned and controlled by, and performed functions of, the government of the [Russian government].”
Unfortunately in this day and age it is difficult to analyze the news. It seems that approximately 40% of Americans have their preferred news sources which report (and do not report) certain things, approximately 40% of other Americans have their preferred news sources which report (and do not report) certain things, which leaves approximately 20% Americans trying to figure what is actually going on.
For instance, certain media outlets this week (but not others) have devoted substantial coverage of the Obama administration approving “a controversial deal in 2010 giving Moscow control of a large swath of American uranium” [even though] the FBI had gathered substantial evidence that Russian nuclear industry officials were engaged in bribery, kickbacks, extortion and money laundering designed to grow Vladimir Putin’s atomic energy business inside the United States.”
Double standard (sports edition), recent sentencing activity, and scrutiny alerts. It’s all here in the Friday roundup.
Double Standard (Sports Edition)
A public official wants tickets to a high-profile sporting event. So, through his aides, he asks the entity hosting the event for free tickets. The entity obliges because it needs the public official’s support in a variety of contexts.
A prudent FCPA practitioner would spot the “red flags” as the free tickets (mostly certainly something of value) could be viewed as a way to curry favor with the public official. Indeed, the competent FCPA practitioner will recall that several FCPA enforcement actions have been based, in whole or in part, on free tickets to sporting events.
However, the public officials in the above example are not “foreign officials,” they are current U.S. officials who want tickets to high-profile college sporting events.
Bribery? Silly you for even mentioning the “b” word. This is the US of A.
Why do interactions with “foreign officials” seem to be subject to different standards than interactions with U.S. officials? Why do we reflexively label a “foreign official” who receives “things of value” from private business interests as corrupt, yet generally turn a blind eye when it happens here at home? Is the FCPA enforced too aggressively or is enforcement of the U.S. domestic bribery statute too lax? Ought not there be some consistently between enforcement of the FCPA and the domestic bribery statute?
As you contemplate these questions, just remember in the words of the DOJ – “we in the United States are in a unique position to spread the gospel of anti-corruption”
For additional reading, see here for the recent article “The Uncomfortable Truths and Double Standards of Bribery Enforcement.” In addition, for approximately 50 other posts highlighting double standards, see this subject matter tag.
“Vicente Eduardo Garcia, 65, … was sentenced to 22 months in prison by U.S. District Judge Charles R. Breyer of the Northern District of California. On Aug. 12, 2015, Garcia pleaded guilty to one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA). On July 15, 2015, Garcia and the U.S. Securities and Exchange Commission (SEC) entered into a settlement of the parallel SEC investigation in which Garcia agreed, among other things, to pay disgorgement of $85,965 plus prejudgment interest. For this reason, the United States did not request, and the court did not order, forfeiture in the criminal action.”
For the specifics of the underlying actions, see this prior post.
Garcia’s sentencing memo contains a section titled “Why Vicente Did It.” It states:
“Vicente participated in the bribery scheme here for two reasons: first, to get $150,000 that Advanced [a Third Party] owed him and, second, to secure the Panamanian government as a new customer for his employer SAP.
Vicente’s did not start his business dealings with the Panamanian government intending to commit a crime. But Vicente ultimately did conspire to bribe Panamanian officials.
He has cooperated with authorities since FBI and IRS agents confronted him at his offices. Other than this instance, Vicente’s business dealings have all been above board and legal.
However, here, once the Minister of Technology made clear to Vicente and his colleagues that for Advanced to receive the contract he would require a bribe, Vicente, rather than refuse, acceded and assisted in the scheme—a decision that he deeply regrets. Though not an excuse, he rationalized it at the time as a way to correct his failure in trying to run his own business.”
Vadim Mikerin
This previous post highlighted the FCPA enforcement action against Daren Condrey, an owner and executive of a Maryland Transportation Company, for allegedly bribing Vadim Mikerin, an alleged foreign official employed by an alleged Russian state-owned / controlled entity.
As highlighted in the prior post, Mikerin was also criminally charged and pleaded guilty to money laundering offenses. Earlier this week, the DOJ announced that Mikerin was sentenced to four years in prison and order to forfeit approximately $2.1 million dollars.
As noted in the release, Condrey awaits sentencing.
Jose Hurtado
In 2013 and 2014 the DOJ brought FCPA and related charges against various individuals associated with broker dealer Direct Access Partners 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).
Recently Jose Hurtado was sentenced to three years in prison, followed by three years of supervised release, and consented to a $11.9 million forfeiture .
Previously:
Ernesto Lujan was sentenced to two years in prison, followed by three years of supervised release, and consented to a $18.5 million forfeiture.
Tomas Clarke was sentenced to two years in prison, followed by three years of supervised release, and consented to a $5.8 million forfeiture.
Benito Chinea was sentenced to four years in prison, followed by three years of supervised release, and consented to a $3.6 million forfeiture; and
Joseph DeMeneses was sentenced to four years in prison, followed by three years of supervised release, and consented to a $2.7 million forfeiture.
Scrutiny Alerts
Sociedad Química y Minera de Chile S.A.
Santiago, Chile based Sociedad Química y Minera de Chile S.A. (SQM), a company with shares traded on the New York Stock Exchange, recently issued this release stating:
“[The] Company’s Board of Directors met … to receive and review a report presented by the U.S. law firm Shearman & Sterling LLP (the Report) for SQM’s AdHoc Committee, which was appointed by the Company’s board in a meeting held February 26, 2015.
[…]
SQM previously informed the relevant authorities and markets that this Committee had been formed and that it had hired the professional services of Shearman & Sterling LLP to investigate and analyze the possible liability for SQM under the Foreign Corrupt Practices Act (FCPA), a United States of America law that applies to the Company as an issuer of securities in the U.S. market. The Chilean law firm Grupo Vial / Serrano Abogados and the international forensic services firm FTI Consulting, Inc. assisted Sherman & Sterling.
The investigation specifically analyzed: (a) Whether the Company had made any payment defined as corrupt for FCPA purposes. (b) Whether the Company had breached the accounting provisions of the FCPA.
The Company’s Management was fully cooperative and transparent during the investigation. Among other procedures, investigators collected more than 3.5 million documents and selected approximately 930,000 for review. In addition, 24 individuals were interviewed, including members of the board prior to April 2015, as well as SQM’s senior executives and other relevant employees. A forensic analysis of the Company’s accounting since 2008 was also conducted. Interviews were also requested from Mr. Patricio Contesse G.—former CEO of SQM—and Mr. Patricio Contesse F.—former director of SQM, but they declined.
After close to nine months of investigation, Shearman & Sterling, assisted by Grupo Vial / Serrano Abogados and FTI Consulting, informed the Committee that for FCPA purposes: (a) payments were identified that had been authorized by SQM’s former CEO, Mr. Patricio Contesse G., for which the Company did not find sufficient supporting documentation; (b) no evidence was identified that demonstrates that payments were made in order to induce a public official to act or refrain from acting in order to assist SQM obtain economic benefits; (c) regarding the cost center managed by SQM’s former CEO, Mr. Patricio Contesse G., it was concluded that the Company’s books did not accurately reflect transactions that have been questioned, notwithstanding the fact that, based on the amounts involved, these transactions were below the materiality threshold defined by the Company’s external auditors determined in comparison to SQM’s equity, revenues, expenses or earnings within the reported period; and (d) SQM’s internal controls were not sufficient to supervise the expenses made by the cost center managed by SQM’s former CEO and that the Company trusted Mr. P. Contesse G. to make a proper use of resources.
Throughout this process, SQM has taken and will continue to take the proper measures to strengthen its corporate governance and internal controls in order to correct the issues identified in the Report. The measures that have already been adopted include: (i) dismissing Mr. P. Contesse G. from his position as SQM’s CEO; (ii) filing corrected tax returns with the Chilean Internal Revenue Service; (iii) creating SQM’s Corporate Governance Committee, which is comprised of three of its directors; (iv) separating and strengthening the team and responsibilities of the Internal Audit and Compliance departments, both of which report to SQM’s board of directors, while the latter also reports to the Company’s CEO; (v) hiring KPMG, the auditing firm, to review SQM’s payment process controls; (vi) improving the Company’s payment process controls and approvals; and, (vii) reformulating SQM’s Code of Ethics.
Lastly, after acknowledging receipt of the Report, the directors expressed that the Company will continue to cooperate with authorities and adopt the appropriate measures to improve its corporate governance and internal controls.”
SNC Lavalin
One reason SNC Lavalin has been pouting about Canada’s lack of deferred prosecution agreements is because of the collateral consequences of a criminal conviction.
On that front, the company recently announced:
“[The Company] has signed an administrative agreement with Public Services and Procurement of the Government of Canada (PSP) under the Government of Canada’s new Integrity Regime. The administrative agreement allows companies – that have federal charges pending against them – to continue to contract with or supply the Government of Canada
“This is another example of our commitment to move forward. I thank PSP for recognizing SNC-Lavalin’s significant efforts and dedication to continuous improvement in ethics and compliance, which have allowed us to meet the difficult criteria of the new Integrity Regime. I am proud of our ethics and compliance program that is an integral part of the way we work every day, here in Canada and globally. Our clients and partners have recognized our concrete actions, efforts and accomplishments over the past three years,” stated Neil Bruce, President and CEO, SNC-Lavalin. “This agreement is a milestone that allows us to continue to be an important contributor to the Canadian economy. It protects the public, and is good for our employees, clients, investors and all of Canada.”
The administrative agreement is due to the federal charges filed against three of the company’s legal entities in , which SNC-Lavalin contests. SNC-Lavalin confirms that, provided the company complies with the terms of the administrative agreement, it will be able to continue to bid on and win contracts to provide procurement goods and services to all Canadian government departments and agencies, in Canada and abroad, until the final conclusion of those charges.”
It’s not often the DOJ announces a Foreign Corrupt Practices Act enforcement action via a one sentence statement in a press release about another enforcement action.
But that is what the DOJ did earlier this week when it announced in this press release that Daren Condrey (50, of Glenwood, Maryland) pleaded guilty on June 17, 2015, to conspiring to violate the FCPA and conspiring to commit wire fraud.
According to the information, Condrey was an owner and executive of Transportation Corporation A (a Maryland headquartered company in the business of providing logistical support services for the transportation of nuclear materials to customers in the United States and to foreign customers) from August 1998 through in or about October 2014.
According to this Wall Street Journal, Transportation Corporation A is Transport Logistics International (TLI). In November 2014, TLI released this statement concerning the DOJ’s investigation.
The Condrey information alleges various bribe payments made to “Foreign Official One” to secure business with TENEX.
JSC Techsnabexport (“TENEX”) is described as a supplier of “uranium and uranium enrichment services to nuclear power companies throughout the world on behalf of the government of the Russian Federation.” According to the information, “TENEX was indirectly owned and controlled by, and performed functions of, the government of the Russian Federation, and thus was an “agency” and “instrumentality” of a foreign government, as those terms are used in the FCPA.” The information further states:
“TENEX established a wholly-owned subsidiary company located in the United States in or about October 2010, TENAM Corporation (“TENAM”). TENAM was TENEX’s official representative office in the United States. TENAM was indirectly owned and controlled by, and performed functions of, the government of the Russian Federation, and thus was an “agency” and “instrumentality” of a foreign government, as those terms are used in the FCPA.”
“Foreign Official One”[Vadim Mikerin – see below] is described in the information as follows:
“[A] national of the Russian Federation, was a Director of TENEX from at least 2004 through in or about October 2010, and was the President of TENAM from in or about October 2010 through in or about October 2014. Foreign Official One was a”foreign official,” as that term is used in the FCPA. From in or about December 2011 through in or about October 2014, Foreign Official One was a resident of Maryland.”
According to the information, Condrey and others:
“with the knowledge of Foreign Official One, caused Transportation Corporation A to provide quotations and invoices to TENEX hiding the cost of the bribe payments promised to Foreign Official One within Transportation Corporation A’s pricing”;
“at the direction of Foreign Official One, attempted to conceal the payments to Foreign Official One by making the bribe payments to bank accounts in Cyprus, Latvia, and Switzerland”;
“sent email communications and used other forms of communication in which they used terms like “lucky figure,” “LF,” “cake,” and “remuneration” as code words to conceal the true nature of the bribe payments, and utilized fraudulent invoices which did not truthfully describe the services provided or the purpose of the payments”;
“caused Transportation Corporation A to act as a conduit for a bribe payment another company made to Foreign Official One in order to conceal that bribe payment;” and
“wired, and caused to be wired, payments from Transportation Corporation A’s bank account in Maryland to bank accounts in Cyprus, Latvia, and Switzerland for the purpose of making bribe payments to Foreign Official One.”
Based on the above allegations, Condrey was charged with conspiracy to violate the FCPA and to commit wire fraud.
In this June plea agreement, Condrey pleaded guilty. The statement of facts attached to the Condrey plea agreement also refers to the following company:
“Cylinder Corporation A was a company, based in Ohio, which engaged in the manufacture of tanks and vessels for the oil and gas, nuclear, and marine markets. Cylinder Corporation A secured contracts with TENEX to supply storage and transportation cylinders. In or about September 2012, Cylinder Corporation A was acquired by another company headquartered in Ohio (“Ohio Corporation”).”
“People familiar with the investigation identified that company as Westerman Cos., which was acquired by [publicly traded] Worthington Industries, Inc. in 2012 and now operates as Worthington Cylinders. Court records refer to the company as Cylinder Corporation A and identify its location as Bremen, Ohio.”
According to the DOJ’s release, Condrey will be sentenced on Nov. 2, 2015. Condrey is represented by Robert Bonsib.
Back to the DOJ’s press release earlier this week which made brief mention of the above FCPA enforcement action. As noted in the release:
“[Vadim Mikerin] a Russian official residing in Maryland pleaded guilty today to conspiracy to commit money laundering in connection with his role in arranging over $2 million in corrupt payments to influence the awarding of contracts with the Russian state-owned nuclear energy corporation. According to court documents, Mikerin was the president of TENAM Corporation and a director of the Pan American Department of JSC Techsnabexport (TENEX). TENAM, based in Bethesda, Maryland, is a wholly-owned subsidiary and the official representative of TENEX in the United States. TENEX, based in Moscow, acts as the sole supplier and exporter of Russian Federation uranium and uranium enrichment services to nuclear power companies worldwide. TENEX is a subsidiary of Russia’s State Atomic Energy Corporation.”
According to the release, Mikerin is to be sentenced on Dec. 8, 2015. See here for the Mikerin plea agreement. Mikerin is represented by former FCPA Unit Assistant Chief William Jacobson and Jonathan Lopez (both with Orrick, Herrington & Sutcliffe).
As noted in the release, “Boris Rubizhevsky, 64, of Closter, New Jersey, pleaded guilty on June 15, 2015, to conspiracy to commit money laundering and will be sentenced on Oct. 19, 2015.” Rubinzhevsky is described in the Mikerin plea agreement as the owner and sole employee of “Consulting Corporation Two,” which was based in New Jersey.
