Once upon a time, a Colombian company (owned and controlled by another Colombian company with shares registered in the U.S.), through a wholly-owned and controlled subsidiary, agreed with a Brazilian company to form a joint venture and consortium to bid for public contracts with the Colombian government.
An executive of the Brazilian company informed an executive of the Colombian company that a Colombian lobbyist would help win projects by making bribe payments to Colombian officials and the Colombian company executive agreed.
That, in a nutshell, describes last week’s net $60.6 million Foreign Corrupt Practice Act enforcement action against Corporacion Financiera Colombiana S.A. (Corficolombiana) and Grupo Aval Acciones y Valores S.A. (Grupo Aval).
The enforcement action involved a DOJ component (in which the entities agreed to pay a net $20.3 million criminal penalty) and an SEC component (in which the entities agreed to pay approximately $40.3 million in disgorgement and prejudgment interest).
DOJ
As described in the information, Corporacion Financiera Colombiana S.A. (Corficolombiana) was a Colombian financial services company that was majority owned and controlled by Grupo Aval Acciones y Valores S.A. (Grupo Aval) – a Colombian holding company which has a class of securities registered in the U.S. and is required to file periodic reports with the SEC.
Estudios y Proectos del Sol SAS (Episol) was a wholly-owned and controlled subsidiary of Corficolombiana and was the principal entity that carried out certain infrastructure projects on behalf of Corficolombiana.
Concesionaria Ruta del Sol S.A.S. (“CRDS”) was a joint venture comprised of three companies: Odebrecht (a Brazilian holding company), as the majority participant, and Corficolombian, through Episol, together with a third company, as the minority participants. CRDS bid for and won large infrastructure projects with the Colombian government.
Construction Consortium Ruta del Sol (“Consol”) was a consortium comprised of three companies: Odebrecht as the majority participant and Corficolombian, through Episol, together with a third company, as the minority participants. Consol was the construction company that executed the large infrastructure projects awarded by the Colombian government to CRDS.
Under the heading “Overview of the Bribery Scheme,” the information alleges:
“Between in or about 2012 and in or about 2015, Corficolombian and Episol, through Corficolombiana Executive [described as a Colombian citizen who served as a high-level executive of Corficolombian and served as a key point person for Odebrecht with respect to Corficolombian and Episol’s involvement with CRDS and Consol], together with others, including Odebrecht, Odebrecht Executives 1 and 2 [described as Brazilian citizens who served as an executive of Odebrecht in Colombia], and Intermediaries 1 and 2 [described as Colombian lobbyists], knowingly and willfully conspired and agreed with others to corruptly offer and pay more than $23 million in bribes to, and for the benefit of, Colombian government officials, including Colombian Official 1 [described as a high-ranking government official in the legislative branch of the Colombian government], Colombian Official 2 [described as an executive at Colombia’s state-owned infrastructure agency Agencia Nacional de Infraestructura – ANI], and Colombian Official 3 [described as a high-ranking official in the executive branch of the Colombian government], to secure improper advantages in order to obtain and retain business for Corficolombian, specifically, to win a contract from ANI for Cansol and CRDS to construct and operate a highway toll road in Colombia known as the “Ocafia-Gamarra Extension.”
The only specific U.S. nexus allegation (a required element for Corficolombiana to be charged with conspiring to violate the FCPA’s anti-bribery provisions) is that in 2015:
“Corficolombiana Executive and Odebrecht Executive 2 caused CRDS to transfer approximately $2.7 million dollars, through U.S. Financial Institution, to a company associated with Intermediary 1. A portion of these funds was passed along as a bribe to Colombian Official 1.”
The conspiracy to violate the FCPA’s anti-bribery provisions charge against Corficolombiana was resolved through a three year deferred prosecution agreement.
The DPA sets forth the following relevant considerations.
“a. the nature and seriousness of the offense conduct … including the involvement of a high-level Corficolombiana executive in a scheme to pay over $23 million in bribes to Colombian government officials in exchange for a substantial public infrastructure project;
b. the Company did not receive voluntary disclosure credit pursuant to the Criminal Division’s Corporate Enforcement and Voluntary Self-Disclosure Policy, or pursuant to U.S. Sentencing Guidelines (“U.S.S.G.” or “Sentencing Guidelines”)§ 8C2.5(g)(l), because it did not voluntarily and timely disclose to the Fraud Section and the Office the conduct described in the Statement of Facts attached hereto as Attachment A;
c. the Company received credit for its cooperation with the Fraud Section’s and the Office’s investigation pursuant to U.S.S.G. § 8C2.5(g)(2) because it cooperated with their investigation and demonstrated recognition and affirmative acceptance of responsibility for its criminal conduct; the Company also received credit for its cooperation pursuant to Criminal Division Corporate Enforcement and Voluntary Self-Disclosure Policy, by, among other things, (i) timely providing facts obtained through the Company’s extensive and robust internal investigation; (ii) making numerous detailed factual presentations that distilled certain key factual information uncovered through the Company’s internal investigation to the Fraud Section and the Office, which assisted the Fraud Section and the Office in preserving and obtaining evidence as part of its own independent investigation; (iii) producing documents to the Fraud Section and the Office from Colombia that the Fraud Section and the Office may not otherwise have had access to in ways that did not implicate foreign data privacy laws and providing translations for those documents; (iv) providing sworn testimony from the Colombian criminal and administrative proceedings of relevant witnesses whom the Fraud Section and the Office were not able to independently interview; (v) proactively identifying information previously unknown to the Fraud Section and the Office; and (vi) collecting and producing voluminous relevant documents and translations to the Fraud Section and the Office, including documents located outside the United States;
d. the Company provided to the Fraud Section and the Office all relevant facts known to it, including information about the individuals involved in the conduct described in the attached Statement of Facts and conduct disclosed to the Fraud Section and the Office prior to the Agreement;
e. the Company engaged in remedial measures, including: (i) conducting a root cause analysis of conduct identified during internal investigations and promptly taking action to enhance corporate governance and controls at joint venture entities and improve oversight of non-controlled joint ventures and investments; (ii) overhauling its compliance program, including strengthening its corporate governance and risk management structures, enhancing the independence and stature of its compliance function, and hiring additional experienced compliance personnel; (iii) enhancing the Company’s third-party intermediary risk management process, including through the implementation of risk-based due diligence, screening, and ongoing monitoring and oversight procedures; (iv) !implementing a robust process for reporting and investigating allegations of misconduct; (v) establishing a disciplinary process overseen by a cross-functional ethics committee; (vi) conducting testing of its anticorruption compliance program to ensure compliance enhancements and remediation have been fully implemented and are working in practice; and (vii) engaging in periodic review and updating of its anticorruption compliance program through regular risk assessments, culture reviews, and compliance audits.
f. the Company has enhanced and has committed to continuing to enhance its compliance program and internal controls, including ensuring that its compliance program satisfies the minimum elements set forth in Attachment C to this Agreement (Corporate Compliance Program);
g. the Company has two prior administrative resolutions-namely a resolution with Colombia’s Superintendency of Industry and Commerce (“SIC”) related to the same conduct described in the attached Statement of Facts and an unrelated administrative resolution with Colombia’s Superintendency of Finance-but no prior criminal history;
h. the Company’s agreement to resolve concurrently an investigation by the U.S. Securities and Exchange Commission (“SEC”) relating to the conduct described in the attached Statement of Facts through a cease-and-desist proceeding and agreeing to pay $40,269,289 million in disgorgement and prejudgment interest;
i. the Company’s agreement to drop its appeal of the resolution of Colombia’s SIC to impose approximately $25,900,000 as a penalty for violations of Colombian antitrust law related to the same conduct described in the attached Statement of Facts (the “Colombian Resolution”), which the Fraud Section and the Office are crediting pursuant to JM 1-12.100, in connection with the penalty in this Agreement;
j. the Company has agreed to continue to cooperate with the Fraud Section and the Office in any ongoing investigation …; and
k. accordingly, after considering (a) through (j) above, the Fraud Section and the Office have determined that the appropriate resolution in this case is a deferred prosecution agreement and a penalty of $40,600,000, which reflects a discount of 30 percent off of the bottom of the otherwise-applicable U.S. Sentencing Guidelines fine range, and forfeiture of $28,630,000, which will be credited against disgorgement of ill-gotten profits that the Company pays to the SEC in a concurrent resolution.
l. Based on the Company’s remediation and the state of its compliance program, and the Company’s agreement to report to the Fraud Section and the Office as set forth in Attachment D to this Agreement (Corporate Compliance Reporting), the Fraud Section and the Office determined that an independent compliance monitor was unnecessary.”
The DPA sets forth an advisory guidelines range of $58 – $116 million and states:
“The Fraud Section and the Office and the Company agree, based on the application of the Sentencing Guidelines, that the appropriate criminal penalty is $40,600,000. This reflects a 30 percent discount off the bottom of the applicable Sentencing Guidelines fine range. The Company and the Fraud Section and the Office agree that the Company will pay the United States Treasury $20,300,000, equal to one-half of the Total Criminal Penalty, within ten business days of the execution of this Agreement. The Fraud Section and the Office agree to credit toward the amount paid by the Company and its subsidiary, Estudios y Proyectos del Sol S.A.S. (“Episol” ), to authorities in Colombia related to the Colombian Resolution, up to a maximum of $20,300,000, so long as the Company and Episol drop their appeals seeking to annul and redress the Colombian Resolution within three months the execution of this Agreement.”
As a condition of settlement, the Company agreed to report to the DOJ annually during the term of the DPA regarding remediation and implementat1on of the compliance measures required by the resolution.
As a further condition of settlement, at the end of the DPA, the Company, by the Chief Executive Officer and Chief Compliance Officer, will certify to the DOJ that the Company has met its compliance and disclosure obligations required by the DPA.
In the DOJ release, Acting Assistant Attorney General Nicole Argentieri of the Justice Department’s Criminal Division stated:
“Corficolombiana, together with its co-conspirators, agreed to pay more than $20 million in bribes to high-ranking government officials across the Colombian government to win a massive infrastructure project. [This] resolution – the first-ever coordinated with Colombian authorities in a foreign bribery case – reflects the Justice Department’s commitment to working shoulder-to-shoulder with our foreign partners to combat transnational corruption and hold accountable companies that brazenly pay bribes for economic gain.”
U.S. Attorney Erek Barron for the District of Maryland stated:
“Corficolombiana has acknowledged its role in a significant foreign bribery scheme, and for that it is being held accountable. “Under the DPA, the company is paying a substantial criminal penalty and will continue to cooperate with the United States in criminal investigations relating to this conduct. My office is pleased to be part of this first-ever joint FCPA bribery prosecution with Colombian authorities.”
Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division stated:
“[This] resolution shows that justice has a steep price for those who attempt to bribe foreign government officials. Schemes like these violate the Foreign Corrupt Practices Act and are an attempt to fundamentally undermine the spirit of economic competition. The FBI is dedicated to protecting the integrity of the global marketplace, which means investigating bribes of any amount, and preventing the corruption of officials at all levels.”
SEC
The SEC enforcement action was based on the same core conduct alleged in the DOJ enforcement action.
This administrative order states in summary fashion:
“These proceedings arise out of Corficolombiana’s involvement, through its former president as described below, in a bribery scheme related to the largest highway construction project in the history of Colombia, known as Ruta del Sol II (“RDS 2”), and specifically the construction of a road extension to the RDS 2 (the “Ocaña-Gamarra Extension”). The bribe scheme took place against a backdrop of a failure to maintain sufficient internal accounting controls and books and records that concealed the bribes as legitimate business expenses. As Grupo Aval’s agent, Corficolombiana violated the anti-bribery provisions of the Foreign Corrupt Practices Act (“FCPA”) and was a cause of Grupo Aval’s violations of the books and records and internal accounting controls provisions of the FCPA.”
The order finds that Corficolombiana violated the FCPA’s anti-bribery provisions and that Grupo Aval violated the books and records provisions and that Corficolombiana caused the violations. According to the order:
“The RDS 2 Joint Venture used no-work contracts and sham invoices to pay bribes to Colombian government officials. These payments were recorded as legitimate business expenses in the books and records of the RDS 2 Joint Venture and of Corficolombiana, and were reported in Grupo Aval’s financial statements. In addition, the Corficolombiana Executive signed various sub-certifications in connection with Grupo Aval’s financial reporting that falsely stated he was unaware of illegal acts.”
The order also finds that Grupo Aval violated the internal controls provisions and that Corficolombiana caused the violations. According to the order:
“[B]ribe payments to intermediaries were approved by Corficolombiana, through the Corficolombiana Executive and its subsidiary, relying on invoices lacking supporting documentation or using contracts for vaguely described services typically handled internally rather than by third parties. As a result, Corficolombiana caused violations of, and Grupo Aval violated [the internal controls provisions] by failing to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that transactions are executed and access to assets is permitted only in accordance with management’s general or specific authorization.”
To resolve the matter, Grupo Aval agreed to pay disgorgement of $32,139,731 and prejudgment interest of $8,129,558.
Under the heading Grupo Aval’s Remedial Efforts, the order states:
“In determining to accept the Offer, the Commission considered remedial acts promptly undertaken by Respondents and cooperation afforded the Commission staff. Respondents’ cooperation included voluntarily summarizing and providing facts developed during their own internal investigation and producing and translating certain documents. Respondents’ remediation included conducting a comprehensive risk assessment; re-evaluating and re-designing their anti-corruption compliance program; improving policies and procedures; and enhancing internal controls, including those related to joint venture entities and investments.”
In the SEC’s release, Charles Cain (Chief of the SEC’s FCPA Unit) stated:
“Lax control environments are fertile ground for mischief, as illustrated here where bribes were funded through payments made for invoices lacking supporting documentation and contracts for vaguely described services typically handled internally rather than by third parties. This case once again highlights the importance of issuers having sufficient internal accounting controls over third-party payments.”
Davis Polk attorneys Tatiana Martins, Angela Burgess and Dennis McInerny represented Corficolombiana and Grupo Aval.
