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Yet Additional FCPA Enforcement Actions Concerning Ecuador’s Seguros Sucre

seguros

From time to time, there are certain Foreign Corrupt Practices Act enforcement actions in which the core allegations just seem to “keep on giving” and spawn several related enforcement actions.

A prime example were the many FCPA (and related) enforcement actions involving Haiti Teleco from approximately ten years ago (see here) and the many recent enforcement actions concerning Venezuela’s PDVSA.

Enforcement actions concerning Ecuador’s Seguros Sucre S.A. (“Seguros Sucre”), an alleged state-owned insurance company and “instrumentality” of the Ecuadorian government, are beginning to add up as well. In 2022 U.K.-based reinsurance broker, Jardine Lloyd Thompson Group Holdings Ltd. (JLT) resolved a $29 million FCPA enforcement action (see here for the prior post) and eight individuals have been criminally charged (and several have pleaded guilty) in connection with the same underlying conduct.

The latest enforcement action was yesterday’s announcement by the DOJ that Tysers Insurance Brokers Limited (Tysers – formerly known and doing business during the relevant time period as Integro Insurance Brokers Limited an international reinsurance broker based in the United Kingdom) and H.W. Wood Limited (an international reinsurance broker based in the United Kingdom) resolved a Foreign Corrupt Practices Act enforcement action for “participation in a corrupt scheme to pay bribes to Ecuadorian government officials.”

The net settlement amount in the Tysers enforcement action is $46.5 million and the net settlement amount in the H.W. Wood enforcement action is $508,000 based on inability to pay.

As stated in the information:

“As reinsurance brokers, Tysers and H.W. Wood provided insurance for insurance companies, which involved the transfer of all or part of the risk of paying claims under a policy from the insurance company that issued the policy to a reinsurance company. A reinsurance broker, like Tysers or H.W. Wood, arranged the transfer of risk. The broker collected the premium due from the insurance company to the reinsurance company. The broker was typically paid for its services by retaining a portion of the premium as commission.”

The information alleges that Tysers and H.W. Wood were engaged in a conspiracy the purpose of which was for the co-conspirators to enrich themselves by, among other things, corruptly offering bribes to, and for the benefit of Juan Ribas Domenech, Foreign Official 1, Foreign Official 2, and Foreign Official 3, each of whom was a foreign official in Ecuador, within the meaning of the FCPA … to influence the foreign officials and to secure improper advantages in order to obtain or retain reinsurance business from Seguros Sucre and Rocafuerte.

  • Seguros Sucre S.A. is described as a state-owned insurance company of Ecuador controlled by the government of Ecuador that performed a function that Ecuador treated as its own.
  • Seguros Rocafuerte S.A. is described as a state-owned insurance company of Ecuador controlled by the government of Ecuador that performed a function that Ecuador treated as its own.
  • Ribas is described as a citizen of Ecuador who, from at least in or around 2013 through at least in or around 2017, served as the chairman of both Seguros Sucre and Rocafuerte and as an advisor to a then-high ranking executive branch official in the Ecuadorian government.
  • Foreign Officials 1, 2 and 3 are described as officials of Seguros Sucre.

According to the information:

“Intermediary Company [two companies that were registered in Panama and Ecuador, operated in Miami, Florida. and acted as intermediaries for reinsurance companies] paid bribes totaling at least approximately $2.8 million on behalf of and for the benefit of Tysers, H.W. Wood, and Intermediary Company to bank accounts, including those in the Southern District of Florida, as well as Panama and Switzerland. These bank accounts were held in the Ecuadorian officials’ names and in the names of third parties and nominee account holders for the officials’ benefit. The bribes were funded by payments from Tysers and H.W. Wood to Intermediary Company on Seguros Sucre and Rocafuerte reinsurance business.

In carrying out the scheme, the defendants, through Tysers Employee 1, Tysers Employee 2, H.W. Wood Employee, Merlo, Maldonado, Pintado, and others, utilized means and instrumentalities of interstate commerce, including the use of wires.

The conspiracy charge against Tysers and H.W. Wood invokes the so-called 78dd-3 prong of the FCPA which has, as a jurisdictional element, “while in the territory of the United States, corruptly to make use of the mails or any means or instrumentality of interstate commerce or to do any other act in furtherance of” a bribery scheme.”

  • Employees 1 and 2 are described as a United Kingdom citizens and residents who were international reinsurance broker for Tysers with responsibility for developing certain segments of Tysers’ Ecuador reinsurance business.
  • Merlo is described as an Ecuadorian and United States dual citizen who resided in Miami, Florida who operated and controlled Intermediary Company.
  • Maldonado is described as an Ecuadorian citizen and Costa Rican resident and the president of Intermediary Company.
  • Pintado is described as an Ecuadorian and Italian dual citizen and resident of Costa Rica and the general manager of Intermediary Company.

The information alleges the following overt acts.

“On or about January 14, 2014, in an email chain discussing the commission split between Tysers, H.W. Wood, and Intermediary Company on certain Ecuadorian public reinsurance business to be co-brokered by Tysers and H.W. Wood, Maldonado sent an email to H.W. Wood Employee, copying Pintado, in response to H.W. Wood Employee’s request for a breakdown of where the commission was going. Maldonado stated in the email that of a proposed 43.34 commission percentage to be paid to Intermediary Company, 18.34 percent would be retained by Intermediary Company and for “[l]ocal people involved commercial and politically in obtaining and achievement of this business: 25%. More explicit I can’t be.”

On or about January 16, 2014, H.W. Wood Employee forwarded the email chain referenced … to Tysers Employee 3 to confirm Tysers’ agreement with the commission split.

On or about January 16, 2014, Tysers Employee 3 forwarded the email chain referenced … to Tysers Employee 1 and Tysers Employee 2 and asked to discuss.

After conferring with Tysers Employee 3, on or about January 21, 2014, H.W. Wood Employee emailed Maldonado and Pintado to agree to Intermediary Company’s proposed commission split. The final agreed commission split included the 25 percent reserved for “[l]ocal people involved commercial and politically in obtaining and achievement of this business.”

On or about October 2, 2015, Merlo, while in the Southern District of Florida, emailed Ribas’s financial advisor, Martinez, a model contract to be used to provide a justification for bribe payments funded by Tysers and H.W. Wood. The model contract described purported investments to be made in Ribas’s company by Intermediary Company. Merlo advised that Martinez could make any modifications he thought appropriate.

On or about November 6, 2015, Pintado paid a bribe of approximately $175,753 from an account held in the name of Intermediary Company in Panama through a correspondent bank in the United States to a Swiss bank account held for Ribas’s benefit.

On or about April 6, 2016, Merlo texted a picture of himself and H.W. Wood Employee together in the Southern District of Florida with a bottle of champagne to Maldonado and instructed Maldonado about giving H.W. Wood Employee (translated from Spanish) “more production,” asking Maldonado to advise about any new business and to tell Ribas to give business to H.W. WOOD.

On or about October 6, 2016, Pintado paid a bribe of approximately $20,000 from an account held in the name of Intermediary Company in Panama to an account held in the name of Foreign Official 3 in the Southern District of Florida.

On or about April 7, 2017, Pintado paid a bribe of approximately $10,000 from an account he controlled in Panama to an account held in the name of Foreign Official 2 in the Southern District of Florida.”

The conspiracy to violate the FCPA’s anti-bribery provisions charge against Tysers and H.W. Wood was resolved through deferred prosecution agreements.

The Tysers DPA (with a term of three years) sets forth the following relevant considerations.

“a. The nature and seriousness of the offense conduct, as described in the Statement of Facts, including the Company’s participation in a bribery scheme to obtain reinsurance business in Ecuador;

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)(1), because it did not voluntarily and timely disclose to the Fraud Section the conduct described in the Statement of Facts;

c. the Company received credit for its cooperation with the Fraud Section’s investigation pursuant to U.S.S.G. § 8C2.5(g)(2) because it cooperated with the investigation and demonstrated recognition and affirmative acceptance of responsibility for its criminal conduct; the Company also received credit for its cooperation and timely remediation pursuant to the Criminal Division’s Corporate Enforcement and Voluntary Self-Disclosure Policy, by, among other things: (i) meeting the Fraud Section’s requests promptly; (ii) making foreign-based employees available for interviews; (iii) collecting and producing voluminous relevant documents to the Fraud Section, including documents located outside the United States; (iv) making several detailed factual presentations to the Fraud Section and conducting and producing financial analyses of voluminous transactions; and (v) timely accepting responsibility and reaching a prompt resolution.

d. the Company provided to the Fraud Section all relevant facts known to it, including information about the individuals involved in the conduct described in the Statement of Facts attached hereto as Attachment A and conduct disclosed to the Fraud Section prior to the Agreement

e. the Company engaged in timely remedial measures, including: (i) placing employees involved in the misconduct on paid administrative leave; (ii) terminating all business and affiliations with the intermediary company involved in the misconduct described in the Statement of Facts; and (iii) comprehensively reviewing and enhancing its compliance program, including engaging additional resources with appropriate expertise to assist in evaluating and strengthening its compliance program, making enhancements to the governance and oversight of its compliance program, adding new compliance resources and personnel, updating and enhancing its antibribery and anticorruption policies, enhancing procedures related to onboarding and making payments to third-parties, and enhancing training programs.

f. AUB Group Limited [the Company that acquired Tysers in 2022] and the Company have enhanced and have committed to continuing to enhance the Company’s compliance program and internal controls, including ensuring that the Company’s compliance program satisfies the minimum elements set forth in Attachment C to this Agreement (Corporate Compliance Program);

g. the Company has no prior criminal, civil, or regulatory history;

h. the Company and AUB have agreed to continue to cooperate with the Fraud Section in any ongoing investigation …; and

i. accordingly, after considering paragraphs (a) through (h) above, the Fraud Section has determined that the appropriate resolution in this case is a deferred prosecution agreement, a penalty in the amount of $36,000,000, which reflects a discount of 25 percent off of the bottom of the otherwise-applicable U.S. Sentencing Guidelines fine range, and forfeiture of $10,589,275.

j. Based on the Company’s remediation and the state of its compliance program, and the Company’s agreement to report to the Fraud Section as set forth in Attachment C D to this Agreement, the Fraud Section determined that an independent compliance monitor is unnecessary.”

The DPA sets forth an advisory fine range of $48 million to $96 million and states: “The Fraud Section and the Company agree, based on the application of the Sentencing Guidelines, that the appropriate criminal penalty is $36,000,000 (“Criminal Fine”). This reflects a 25 percent discount off the bottom of the applicable Sentencing Guidelines fine range.”

The DPA also states:

“As a result of the Company’s conduct, including the conduct set forth in the attached Statement of Facts, the parties agree the Fraud Section could institute a civil and/or criminal forfeiture action against certain funds held by the Company and that such funds would be forfeitable pursuant to Title 18, United States Code, Sections 981(a)(1)(C) and 982(a)(2) and Title 28, United States Code, Section 2461(c). The Company hereby admits that the facts set forth in the Statement of Facts establish that at least $10,589,275, representing the proceeds traceable to the commission of the offense, is forfeitable to the United States (the “Forfeiture Amount”). The Company releases any and all claims it may have to the Forfeiture Amount, agrees that the forfeiture of such funds may be accomplished either administratively or judicially at the Fraud Section’s election, and waives the requirements of any applicable laws, rules or regulations governing the forfeiture of assets, including notice of the forfeiture. If the Fraud Section seeks to forfeit the Forfeiture Amount judicially or administratively, the Company consents to entry of an order of forfeiture or declaration of forfeiture directed to such funds and waives any defense it may have under Title 18, United States Code, Sections 981-984, including but not limited to notice, statute of limitations, and venue. The Company agrees to sign any additional documents necessary to complete forfeiture of the Forfeiture Amount. The Company also agrees that it shall not file any petitions for remission, restoration, or any other assertion of ownership or request for return relating to the Forfeiture Amount, or any other action or motion seeking to collaterally attach the seizure, restraint, forfeiture, or conveyance of the Forfeiture Amount, nor shall it assist any others in filing any such claims, petitions, actions, or motions. The Company agrees to pay the Forfeiture Amount by wire transfer pursuant to instructions provided by the Fraud Section no later than ten business days after the Agreement is fully executed.”

Notwithstanding the above clause, the DOJ release states: “Pursuant to its DPA, Tysers will pay a $36 million criminal penalty and administrative forfeiture of approximately $10.5 million.”

Latham & Watkins attorneys Benjamin Naftalis and Erin Brown Jones represented Tysers and AUB.

The H.W. Wood DPA (with a term of three years) sets forth the following relevant considerations.

“a. The nature and seriousness of the offense conduct, as described in the Statement of Facts, including the Company’s participation in a bribery scheme to obtain reinsurance business in Ecuador,

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)( I), because it did not voluntarily and timely disclose to the Fraud Section the conduct described in the Statement of Facts;

c. the Company received credit for its cooperation with the Fraud Section’s investigation pursuant to U.S.S.G. § 8C2.5(g)(2) because it cooperated with the investigation and demonstrated recognition and affirmative acceptance of responsibility for its criminal conduct~ the Company also received credit for its cooperation and timely remediation pursuant to the Criminal Division’s Corporate Enforcement and Voluntary Self-Disclosure Policy, by, among other things: (i) meeting the Fraud Section’s requests promptly; (ii) endeavoring to make foreign-based employees available for interviews; (iii) collecting and producing voluminous relevant documents to the Fraud Section, including documents located outside the United States; (iv) making several detailed factual presentations to the Fraud Section and conducting and producing financial analyses of voluminous transactions; and (v) timely accepting responsibility and reaching a prompt resolution.

d. the Company provided to the Fraud Section all relevant facts known to it, including information about the individuals involved in the conduct described in the Statement of Facts … and conduct disclosed to the Fraud Section prior to the Agreement;

e. the Company engaged in timely remedial measures, including: (i) terminating an employee involved in the misconduct; and (ii) enhancing its compliance program, including creating new compliance positions and compliance control improvements, implementing a process to ensure continuous monitoring and review of third-parry relationships, and updating and enhancing its policies and procedures, as well as its compliance training and communications.

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 no prior criminal, civil, or regulatory history;

h. the Company has agreed to continue to cooperate with the Fraud Section in any ongoing investigation …;

i. the Company met its burden of establishing an inability to pay the criminal penalty sought by the Fraud Section. despite agreeing that the proposed amount was otherwise appropriate based on the law and the facts, and fully cooperated by providing information and documents and access to appropriate Company personnel to respond to prosecutors· inquiries. The Fraud Section. with the assistance of a forensic accounting expert, conducted an independent ability to pay analysis, considering a range of factors outlined in the Justice Department’s Inability to Pay Guidance (see Oct. 8, 2019 Memorandum from Assistant Attorney General Brian Benczkowski to All Criminal Division Personnel re: Evaluating a Business Organization’s Inability to Pay a Criminal Fine or Criminal Monetary Penalty), including but not limited to: (i) the factors outlined in 18 U.S.C. § 3572 and Sentencing Guidelines§ 8C3.3(b); (ii) the Company’s current financial condition; and (iii) the Company’s alternative sources of capital. Based on that independent analysis, the Fraud Section determined that paying a criminal penalty greater than $508,000 within ten business days of the beginning of the Tenn would substantially threaten the continued viability of the Company; and J. accordingly, afler considering (a) through (i) above, the Fraud Section has determined that a deferred prosecution agreement and a penalty of $508,000 is sufficient but not greater than necessary to achieve the purposes described in 18 U.S.C. § 3553.

k. Based on the Company’s remediation and the state of its compliance program, and the Company’s agreement to report to the Fraud Section as set forth in Attachment D to this Agreement, the Fraud Section determined that an independent compliance monitor is unnecessary.”

The DPA sets forth an advisory fine range of $30 million to $60 million and states: “The Fraud Section and the Company agree, based on the application of the Sentencing Guidelines, that the appropriate criminal penalty is $22,500,000. This reflects a 25 percent discount off the bottom of the Sentencing Guidelines fine range.”

The DPA then states:

“The Company has made representations to the Fraud Section. and provided supporting evidence, that the Company has an inability to pay a $22,500,000 criminal penalty. Based on those representations, and an independent analysis verifying the accuracy of those representations conducted by the Fraud Section (with the assistance of a forensic accounting expert), the parties agree that a criminal penalty of $508,000 is appropriate.”

The DPA further states:

“As a result of the Company’s conduct, including the conduct set forth in the attached Statement of Facts. the parties agree the Fraud Section could institute a civil and/or criminal forfeiture action against certain funds held by the Company and that such funds would be forfeitable pursuant to Title 18. United States Code, Section 981 (a)( l )(C) and 982(a)(2) and Title 28, United States Code, Section 2461 (c). The Company hereby admits that the facts set forth in the Statement of Facts establish that at least $2,338.735, representing the proceeds traceable to the commission of the offense, is forfeitable to the United States (the “Forfeiture Amount”). However, based on the Company’s representations and independent analysis … and the Company’s agreement to pay a criminal penalty of $508,000, the parties agree that the Company is unable to pay the Forfeiture Amount.”

Sidley Austin attorneys Daniel Rubinstein and Joanna Travalini represented H.W. Wood.

 

In the DOJ release, Acting Assistant Attorney General Nicole Argentieri of the DOJ Criminal Division stated:

“Tysers and H.W. Wood have admitted to engaging in a scheme to bribe multiple Ecuadorian government officials to earn tens of millions of dollars in illicit profits for themselves and their co-conspirators. [These] resolutions, along with the numerous related individual cases, demonstrate the department’s steadfast commitment to hold both corporate and individual wrongdoers accountable for their crimes.”

Chief Jim Lee of IRS Criminal Investigation (IRS-CI) stated:

“Not only have Tysers and H.W. Wood broken any trust held in them by their clients and the market, they have eroded the process of fair and open competition when they paid bribes to foreign officials in exchange for securing lucrative contracts, and kickback for themselves. We will continue to work with our partners to investigate FCPA violations to ensure honest corporations that playing by the rules pays better in the end.”

Assistant Director Luis Quesada of FBI’s Criminal Investigative Division stated:

“The defendants engaged in a multimillion-dollar bribery scheme to influence Ecuadorian government officials into doing business with their companies. This resolution shows the FBI will seek justice for violations of the FCPA to keep marketplaces and governments free from corruption worldwide.”

Regarding the individual prosecutions related to the corporate resolutions, the DOJ release states:

The department has, to date, charged eight individuals in related matters:

  • Juan Ribas Domenech, the former chairman of Seguros Sucre and Seguros Rocafuerte, pleaded guilty in the Southern District of Florida on Sept. 16, 2020, to money laundering conspiracy for his role in this and another scheme.
  • Fernando Martinez Gomez, a financial advisor, pleaded guilty in the Eastern District of New York on March 24, 2022, to two counts, including conspiracy to commit money laundering for on his role in this and another scheme.
  • Esteban Merlo Hidalgo, a co-conspirator and agent of Tysers and H.W. Wood, pleaded guilty in the Southern District of Florida on March 28 to four counts of engaging in transactions in criminally derived property obtained through his participation in this scheme.
  • A federal grand jury in the Southern District of Florida returned a seven-count indictment against two other defendants, Cristian Patricio Pintado Garcia and Luis Lenin Maldonado Matute, both of whom remain fugitives, on July 14, 2022, for their alleged roles in this scheme. […]
  • Separately, the former CEO of JLT’s Colombian subsidiary, Felipe Moncaleano Botero, and two intermediaries, Jose Vicente Gomez Aviles and Roberto Heinert, each pleaded guilty in the Southern District of Florida to one count of money laundering conspiracy, on, respectively, Aug. 4, 2020, June 11, 2020, and Oct. 2, 2020.

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