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FCPA Enforcement Actions Regarding Conduct In Colombia


This prior post highlighted Foreign Corrupt Practices Act enforcement actions regarding conduct in Ecuador.

This post stays in the region by highlighting FCPA enforcement actions regarding conduct (in whole or in part) in Colombia.

Compared to South American countries Brazil, Venezuela, and Ecuador – Colombia has relatively modest oil reserves and thus the FCPA enforcement activity regarding conduct in Colombia represents a diverse range of companies.

Alexion Pharmaceuticals (2020)

As highlighted in this prior post, the company resolved a $21.5 million enforcement action based on the actions of foreign subsidiaries involving the company’s primary drug Soliris.

As to Colombia (and Brazil), the SEC’s order found:

“From 2013 to 2015, certain employees at Alexion Brazil and Alexion Colombia created or directed third parties to create inaccurate financial records concerning payments to third parties, including patient advocacy organizations (“PAOs”).

For example, in 2013 and 2014, an Alexion Brazil manager caused a PAO to pay for the manager’s personal expenses for alcohol and personal travel, and to submit a fictitious invoice, which was then reimbursed by Alexion Brazil. In 2014 and 2015, the same manager and an employee in Alexion Brazil submitted grant requests to Alexion’s global grant review committee that misstated how the requested funds would be allocated to the different activities covered in the grant request.

As a further example, on one occasion in 2014, in order to provide funds to a PAO, an Alexion Colombia senior manager directed a PAO to submit an invoice that falsely described that the funds would be used for “legal support” services. This inaccurate invoice allowed Alexion Colombia to approve the payment locally instead of obtaining approval for the payment through the global grant process, as required by Alexion’s policies.

Further, Alexion Brazil and Alexion Colombia failed to maintain adequate books and records of certain of its financial transactions involving payments to third parties. Notably, both subsidiaries failed to regularly maintain certain documents underlying a substantial number of financial transactions. Additionally, Alexion failed to prevent the destruction of relevant documents by certain employees of Alexion Brazil.”

Alere (2017)

As highlighted in this prior post, the diagnostics company resolved an approximate $13 million enforcement action involving FCPA and revenue recognition issues.

Under the heading “Alere Recorded Improper Payments from BioSystems to a Government Official in Colombia,” the SEC’s order stated:

“During 2007 and 2008, Alere purchased a private Colombian distributer of Alere products called BioSystems, S.A. ultimately renaming it Alere Colombia in 2016. In conjunction with the acquisition, Alere installed Biosystems’ former primary shareholder and owner as Biosystems’ General Manager (the “Colombia GM”).

Biosystems’ customers included a set of entities known as an Entidad Promotora de Salud, or EPS, which provided health insurance services for their members. These entities were created by Colombian law as part of the Colombian government’s efforts to provide universal health benefits to its citizens. Under this system, EPSs were responsible for organizing and guaranteeing the provision of health services for their enrolled participants and managing their participants’ health risks. Among other things, EPSs contracted for health services on behalf of their participants through a network of public, private, and their own health service providers. EPSs were both private and government controlled.

From at least 2006, Biosystems sold products to an EPS that operated as a private entity (the “Customer EPS”). Biosystems’ contact at the Customer EPS was a management level employee (“the “Customer EPS Manager”) responsible for, among other things, recommending and approving products – including Biosystems’ products – for the Customer EPS to purchase and provide to its enrolled participants. The Colombia GM oversaw the Customer EPS account and dealt directly with the Customer EPS Manager.

During 2011 through 2013, due to allegations of mismanagement at the Customer EPS, the Government of Colombia, acting through the Ministry of Health, took control and direction of the Customer EPS. During this time, the Customer EPS was an instrumentality of the Government of Colombia and its employees were officials of the Government of Colombia. In 2013, the Ministry of Health began dissolving the Customer EPS and transferring its members to another EPS.

From 2007 through at least 2012, Biosystems, at the direction of the Colombia GM, made improper payments totaling approximately $275,000 to the Customer EPS Manager in order to obtain and retain business from the Customer EPS. The payments began at least six months before Alere acquired Biosystems. Biosystems disguised these improper payments as payments for purported consulting services from the Customer EPS Manager’s husband, sisterin-law, and friend. In fact, none of the recipients of these improper payments performed legitimate consulting services for Biosystems sufficient to justify the amount of payments received.

From 2011 through 2013, Biosystems sold approximately $7.6 million of products to the Customer EPS. During this time, the Customer EPS Manager continued in her position at the Customer EPS and remained responsible for recommending Biosystems’ products to the Customer EPS. From 2011 through 2013, Biosystems earned approximately $3.18 million in profits from the approximate $7.6 million in sales to the Customer EPS. In 2013, the Colombia GM hired the Customer EPS Manager to work at Biosystems.

In 2015, Alere’s corporate management began an internal investigation into consulting payments at Biosystems and discovered the improper payments. Shortly thereafter, the Customer EPS Manager resigned from Biosystems. The Colombia GM had previously resigned from Biosystems in January 2015.

The improper payments to the Customer EPS Manager were recorded as legitimate consulting expenses in Biosystems’ books and records. Biosystems’ books and records were consolidated into Alere’s books and records thereby causing Alere’s books and records to be inaccurate. Alere also failed to devise and maintain an adequate system of accounting controls sufficient to prevent and detect the improper payments that occurred over several years.”

Olympus Latin America (2016)

As highlighted in this prior post, the medical imaging company resolved an approximate $23 million enforcement action “hundreds of unlawful payments” to publicly employed healthcare professionals in Brazil, Bolivia, Colombia, Argentina, Mexico, and Costa Rica to “induce the purchase of Olympus products, influence public tenders, or prevent public institutions from purchasing or converting to the technology of competitors.”

As to Colombia, the DOJ alleged:

“Between in or about 2008 and 2009, OLA provided a physician employed at Colombia Hospital [a publicly owned and operated hospital] and who participated in the hospital’s tender processes (“Physician #2”), personal or non-Olympus medical education travel valued at more than $20,000, and approximately $4,000 in cash, to improperly influence him to continue purchasing Olympus equipment and to dissuade him from converting Colombia Hospital’s endoscopy equipment to a major Olympus competitor.

In or about December 2009, an OLA employee in Miami, Florida, emailed employees of an OLA distributor and stated (as translated), “[Physician #2] sees the glass half empty and does not appreciate everything that we at Olympus [and its distributor] have done for him. I spoke to him about the trips he has already made . . . which no one else will consistently offer to him and about the almost 100 enteroscopies which have been done at no cost to him and the institution.”

In or about February 2010, an OLA employee in Miami, Florida sent an email concerning an agreement between OLA and Physician #2, which read, in part (as translated): “Dear all, I am re-sending the Agreement, eliminating clauses 3.1 and 3.4, and I also eliminated the one about the Olympus miles. As we said, we are going to offer them but we are not going to put it in writing.”

In or about mid-2010, an OLA employee sent an email stating that Physician #2 had caused a public tender by Colombia Hospital to be awarded to OLA. The email also noted that Olympus’ competitor’s losing bid was fifty-percent less expensive than OLA’s bid.”

Odebrecht/Braskem (2016)

As highlighted in this prior post, the related companies resolved a net $420 million FCPA enforcement action primarily focused on Brazil, but also involving conduct in Angola, Argentina, Brazil, Colombia, Dominican Republic, Ecuador, Guatemala, Mexico, Mozambique, Panama, Peru, and Venezuela.

As to Colombia, the DOJ alleged:

“In or about and between 2009 and 2014, Odebrecht made and caused to be made more than $11 million in corrupt payments in Colombia in order to secure public works contracts. Odebrecht realized benefits of more than $50 million as a result of these corrupt payments.

For example, in or about and between 2009 and 2010, Odebrecht agreed to pay, and later paid through the Division of Structured Operations with Odebrecht Employee 6’s authorization, a $6.5 million bribe to a government official in charge of awarding a construction project with the Colombian government in exchange for assistance with winning the project.”

Joseph Sigelman, Knut Hammarskjold and Gregory Weisman (2014)

As highlighted in this prior post, the DOJ criminally charged the former PetroTiger executives in connection with an alleged bribery scheme in Colombia. According to the DOJ, the individuals “attempted to secure the Mansarovar Contract” and “because Ecopetrol had ultimate authority for approving projects and contracts to perform oil-related services in Colombia, Sigelman [and the other executives] were required to obtain approval from Ecopetrol for the Mansarovar Contract.” According to the complaint, Sigelman and others “in order to secure Ecopetrol’s approval for the Mansarovar Contract,” “paid bribes to the Official, who had the ability to influence the approval process.”

Hammarskjold and Weisman pleaded guilty and Sigelman put the DOJ to its burden of proof at trial. As highlighted in this prior post, the trial was abruptly halted in an early phase after the DOJ’s star witness acknowledged giving false testimony, prompting the trial court judge to remark “did you have a hallucination?”

Shortly thereafter, Sigelman agreed to plead guilty to substantially reduced charges and at sentencing the trial court judge continued to blast the DOJ’s case (see here).

Chiquita Brands Int’l (2001)

As highlighted in this prior post, the banana company resolved a $100,000 enforcement action based entirely on the conduct of an indirect Colombian subsidiary that “indirectly reported” to Chiquita and notwithstanding SEC acknowledgments that the alleged conduct occurred “without the knowledge or consent of any Chiquita employee and in contravention of Chiquita’s policies.”

The SEC’s order stated:

“Chiquita’s Colombian operations consist of, among other things, a number of banana farms located throughout the country and an import/export port facility located in Turbo. The Turbo port facility is owned and operated by [C.I. Bananos de Exportacion S.A.] Banadex, an indirect wholly-owned subsidiary of Chiquita [that indirectly reports to Chiquita]. Beginning in 1993, the Colombian government licensed the Turbo facility as a location where goods could be stored pending inspection by customs officials.

In 1995, the Colombian government issued a decree requiring all current license holders to submit renewal applications. Banadex learned of the decree through CEA [described as a Colombian entity licensed by the Colombian government to act as an intermediary between corporations and Colombian customs officials], its intermediary with Colombian customs. Under Colombian law, companies are required to hire licensed customs brokers who interact with customs officials on behalf of the company.

In September 1995, the Banadex employee in charge of material and supplies advised Banadex management that renewal of the port facility’s customs license was in jeopardy because of two previous citations for failure to comply with Colombian customs regulations. The employee further advised management that replacing the Turbo facility would cost approximately $1 million. Without the knowledge or consent of any Chiquita employee and in contravention of Chiquita’s policies, Banadex’s chief administrative officer authorized Banadex’s CEA agent to make a payment to Colombian customs officials to obtain the license renewal. The chief administrative officer directed Banadex’s security officer and controller to make and process the payment.

Banadex’s CEA agent later advised the company that for the Colombian peso equivalent of approximately $30,000 the citations would be overlooked and the license renewal granted. Banadex agreed to pay two installments – approximately $18,000 in advance and the remainder after renewal. Both installments were made by Banadex’s security officer from a Banadex account used for discretionary expenses. The initial installment was incorrectly identified in the company’s books and records as a maritime donation (“Donacion Maritima”). The second installment was incorrectly identified as relating to a maritime agreement (“Acuerdo Maritima”). Banadex did not request permission from, or otherwise inform, any Chiquita employee within the United States regarding the transaction.

Chiquita’s policies and procedures contain strict guidelines regarding the use of a discretionary expenses account. Banadex did not comply with Chiquita’s procedure requiring that Banadex’s books and records accurately reflect the transaction. During 1996, Chiquita’s internal auditing staff made management aware of a number of instances in which Banadex had not provided documentation required by Chiquita’s internal accounting control procedures regarding discretionary expenses.

Chiquita had strict policies prohibiting payments of the kind made to the customs officials. To monitor and enforce those policies, Chiquita required quarterly identification and disclosure of all payments to government officials or employees, political candidates, or political parties. Contrary to Chiquita’s established procedure, Banadex employees failed to identify and disclose the payment to customs officials on the disclosure forms submitted for the relevant quarters.

In April 1997, Chiquita internal audit discovered the September 1996 payment during an audit review of Banadex. After conducting an internal investigation, Chiquita took corrective action, which included terminating the responsible Banadex employees and reinforcing its internal controls with respect to its Colombian operations.”

Harris Corp., John Iacobucci and Ronald Schultz (1990)

As highlighted in this prior post, the company and its executives were criminally charged in connection with an alleged Colombia bribery scheme.

The conduct at issue involved “The Empress Nacional de Telecomunicaciones or Telecom” an alleged “instrumentality of the Government of Colombia responsible for the operation of telex services, maritime communications, and long distance and international telephone and telegraph services within the country of Colombia.” According to the indictment, “Telecom was an instrumentality of the Government of Colombia within the meaning of the FCPA.” However, as detailed below, none of the improper payments at issue were alleged to have been paid to Telecom officials.

The indictment charged that Harris, Iacobucci, Schultz and others  conspired to violate the FCPA by paying and authorizing the payment of money to a third party “while knowing that a portion of such money” would be offered or given, directly or indirectly, to “foreign officials, that is, officials of the Government of Colombia” in order to influence the officials to award government telecommunications contracts to Harris in violation of the FCPA. The indictment further charged a conspiracy to violate the FCPA’s books and records provisions.

According to the indictment, part of the conspiracy was that Harris retained the third party “as a consultant based upon the representation that he had connections with officials of the Government of Colombia that he would use to assist” Harris in obtaining telecommunications contracts. According to the indictment, Harris agreed to pay the third party a 10% commission of the value of any telecommunications contracts entered into between Harris and Telecom.

The indictment does not allege that any payments went to officials of Telecom, but rather that payments went to a “member of the Camara de Representates (CDR), the national legislative of Colombia;” a local Colombian company “that was owned in part by a foreign official, that is, a member of the CDR;” and “various officials of the Government of Colombia.”

Harris Corp and the individuals put the DOJ to its burden of proof at trial and U.S. District Court Judge Charles Legge (C.D.Cal). granted a judgment of acquittal after the DOJ’s case. According to media reports:

“Shortly after the government rested its case, U.S. District Judge Charles Legge of San Francisco ruled from the bench that ‘no reasonable jury’ could convict the company nor its executives on any of the five bribery-related counts for which they were indicted. Citing insufficient evidence, Legge said the government had failed to show any intent by the defendants to enter into a criminal conspiracy. Legge also said it was the first time in his six years on the federal bench that he had dismissed a criminal case at mid-trial for lack of evidence.”

A Harris executive stated:

“We’re very pleased that our Digital Telephone Systems Division and its employees have been vindicated, but we believe the charges should never have been brought in the first place. The Justice Department’s case was based upon a distorted view of the facts and represented a radical departure from existing enforcement policies. As a result, American taxpayers have been burdened with unnecessary litigation costs, and Harris has incurred more than $3 million in legal fees, spent many hundreds of hours of our people’s time, and suffered a substantial disruption of the corporation’s business to prove an absence of wrongdoing that should have been apparent from the beginning. The case has also placed a heavy strain on our two employees named in the indictment.”

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