This previous post highlighted the net $60.6 million Foreign Corrupt Practices Act enforcement action against Colombian entities Corficolombiana / Grupo Aval.
This post continues the analysis by highlighting additional issues to consider.
Cash Cow?
In the minds of some (including former FCPA enforcement officials), FCPA enforcement is a convenient cash cow for the U.S. government.
Those who believe this will find support in the Corficolombiana / Grupo Aval enforcement action.
The allegations were basically as follows.
A Colombian company (owned and controlled by another Colombian company), 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.
Colombia and Brazil are both parties to OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Convention) and have laws and law enforcement resources to adequately address the conduct at issue.
Nevertheless, the U.S. extracted approximately $60 million because Grupo Aval has shares traded on a U.S. exchange.
Article 4 of OECD Convention states that “when more than one Party has jurisdiction over an alleged offence described in this Convention, the Parties involved shall, at the request of one of them, consult with a view to determining the most appropriate jurisdiction for prosecution.”
Can it truly be said that the U.S. was an appropriate jurisdiction to prosecute the Colombian entities for alleged interactions with Colombian officials?
From a historical perspective, it is worth noting that part of the FCPA reform discussion in the 1980’s were bills – introduced by Democrats – seeking to waive the FCPA’s provisions “in the case of any country which the Attorney General has certified to have (1) effective bribery or corruption statutes; and (2) an established record of aggressive enforcement of such statutes.” (See S. 1797, Competitive America Trade Reform Act of 1985, introduced on October 29, 1985 by Senator Gary Hart (D-CO) and H.R. 3813, Competitive America Trade Reform Act of 1985, introduced on November 21, 1985 by Representative Vic Fazio (D-CA)).
While waiving the FCPA’s provisions – as those bills sought to do – does not seem like a good idea, perhaps the time has come with the maturity of the OECD Convention – for U.S. enforcement agencies to adopt a policy of not bringing FCPA enforcement actions against foreign companies from peer OECD Convention countries.
Timeline
In an April 2017 SEC filing, Grupo Aval disclosed:
“Allegations of corruption against the Colombian Government, politicians and private industry could create economic and political uncertainty should the investigations triggered by these cases reach conclusions or result in further allegations or findings of illicit conduct committed by the accused parties. Furthermore, proven or alleged wrongdoings could have adverse effects on the political stability in Colombia and the Colombian economy. If one of our companies was found to be involved in any way in these activities, these adverse political and economic effects could result in a material adverse effect on our business, including by depressing business volumes and/or negatively affecting our reputation.
As a specific example of the situation described above, on December 21, 2016 the United States Department of Justice announced that Odebrecht S.A. (Odebrecht), a global construction conglomerate based in Brazil, had pled guilty and agreed to pay a monetary penalty to resolve charges with authorities in the United States, Brazil and Switzerland arising out of their schemes to pay approximately $800 million dollars in bribes to government officials in twelve countries around the world, including $11 million dollars in Colombia, where the company confessed to offering bribes in order to obtain infrastructure contracts including a toll road concession “Ruta del Sol Sector 2” awarded to Concesionaria Ruta del Sol S.A.S. (“Concesionaria Ruta del Sol” or “Concessionaire”) in 2009. Episol S.A., or “Episol,” a wholly-owned affiliate of Corficolombiana, is a minority (33%) non-controlling shareholder in the Concessionaire and Odebrecht is the majority controlling and operating shareholder with a participation of 62%. A third shareholder, CSS Constructores S.A., participates with 5%.
As a result of Odebrecht’s plea, Colombia’s Attorney General’s Office (Fiscalía General de la Nación) initiated an investigation that has made findings to date that, among other things, Odebrecht made campaign contributions to both of the contending political parties in the past presidential election, an illegal act under Colombian law. Furthermore, the Fiscalía General de la Nación has determined that Odebrecht effected payments directly from its Brazilian headquarters through its division of structured operations in order to obtain the abovementioned Government concession contract.
The Odebrecht scandal has also prompted additional investigations from other judicial and administrative authorities such as the Superintendency of Industry and Commerce, Superintendency of Corporations and the Superintendency of Transportation.”
In a December 2018 SEC Filing, Grupo Aval disclosed:
“Grupo Aval Acciones y Valores S.A. (“Grupo Aval”) has recently received an inquiry from the United States Department of Justice (“DOJ”) concerning the Ruta del Sol 2 project. Grupo Aval has informed the DOJ, through its U.S. counsel, that it intends to cooperate with the DOJ’s investigation, as it has done with all prior government inquiries into this matter. Grupo Aval takes this and any other government investigation that may arise very seriously. To the extent there are material developments relating to Ruta del Sol 2, Grupo Aval does not intend to disclose those developments other than in its regular quarterly earnings reports.”
Thus, from start to finish, Grupo Aval’s FCPA scrutiny lasted approximately 5 years.
I’ve said it many times, and will continue saying it until the cows come home: if the DOJ/SEC want their FCPA enforcement programs to be viewed as more credible and more effective, the enforcement agencies must resolve instances of FCPA scrutiny much quicker.
This is particularly true in the Grupo Aval matter given the following language from the DOJ about the company’s cooperation:
“(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.”
Likewise, the SEC stated:
“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.”
