Scrutiny Alerts and Updates
As highlighted here, in 2012 Net1 UEPS (a South African telecommunications company with shares traded on a U.S. exchange) disclosed that it had received information requests from the DOJ and SEC following South African media reports concerning civil litigation in that country by an unsuccessful bidder of a telecommunications contract.
As highlighted here, in 2013 Net1 announced: “[A] full bench of the South African Supreme Court of Appeal (“Appeal Court”) unanimously ruled that the tender process followed by the South African Social Security Agency (“SASSA”) in awarding a contract to Net1’s wholly owned subsidiary Cash Paymaster Services (Proprietary) Limited (“CPS”) was valid and legal.”
Recently, the company disclosed as follows.
“[We have] received a letter from the Foreign Corrupt Practices Act unit of the Division of Enforcement of the U.S. Securities and Exchange Commission (“SEC”), advising the Company as follows:
“We have concluded the investigation as to Net 1 UEPS Technologies, Inc. Based on the information we have as of this date, we do not intend to recommend an enforcement action by the Commission against Net 1 UEPS Technologies, Inc. We are providing this notice under the guidelines set out in the final paragraph of Securities Act Release No. 5310, which states in part that the notice “must in no way be construed that the party has been exonerated or that no action may ultimately result from the staff’s investigation” [...]
“The investigation commenced in December 2012 following the award of the SASSA national contract to us in January 2012,” said Dr. Serge Belamant, Chairman and CEO of Net1. “It commenced largely as a result of one of the losing bidders for the contract, Barclays Africa’s subsidiary AllPay, referring unsubstantiated South African press articles alleging irregularities in the tender process to the U.S. Department of Justice. We believe that AllPay was responsible for instigating those media allegations. This resulted in the DOJ and SEC initiating investigations into alleged FCPA and disclosures violations. This letter from the SEC is an important step in the Company clearing its name and is in line with the total absence of any findings of irregularities against Net1 by any South African Court or Regulator resulting from actions pursued by AllPay over the past three years,” he concluded.
The separate investigation into these matters initiated by Net1 itself with the South African Police’s Commercial Crimes unit is expected to be concluded shortly.
It is the Company’s understanding that the DOJ investigation remains open at this time.”
As noted here:
“Brazil’s state-run power company Centrais Eletricas Brasileiras SA has hired U.S. law firm Hogan Lovells to assess possible cases of corruption in some of the projects the company is involved in. Eletrobras, as the company is known, said in a filing to the Brazilian market regulator that the law firm will check whether there were practices which violated the U.S. Foreign Corrupt Practices Act. The projects to be scrutinized will be selected based on their financial relevance to the company and on their relationships with construction companies already being investigated by Brazilian authorities in the so-called Operation Car Wash, focused on state-run oil company Petrobras. Eletrobras also said that internal units assigned to investigate possible wrongdoings are progressing with evaluations and that it will inform investors of their findings as soon as they are available.”
The British oil and gas company with ADRs traded on a U.S. exchange was recently the subject of this New York Times article:
“[A]ccording to documents obtained by Global Witness, an advocacy group, SOCO appears to have paid tens of thousands of dollars to a Congolese Army officer who has been accused of leading a brutal campaign against those objecting to the company’s oil exploration in the nature reserve, Virunga National Park. Over the course of two weeks during the spring of 2014, according to the documents, the officer, Maj. Burimba Feruzi, received at least $42,250 in payments from a local bank account associated with SOCO. That is the equivalent of 30 years of salary for the army officer, according to Global Witness.”
Earlier this week Assistant Attorney General Leslie Caldwell spoke at the Annual Association of Certified Fraud Examiners Global Fraud Conference. In pertinent part, she stated:
“The threats posed by international corruption cannot be overlooked. Corruption renders countries less safe and less stable. Corruption thwarts economic development, traps entire populations in poverty and undercuts credible justice systems.
International corruption also inhibits the ability of American companies—and others—to compete overseas on a level playing field. Once bribery and corruption take hold, fair and competitive business practices are eliminated.
A timely example of how corruption can infect international business practices is the FIFA case recently charged by the U.S. Attorney’s Office of the Eastern District of New York. In that case, nine FIFA officials and five corporate executives have been charged with various offenses, including racketeering conspiracy, in connection with a 24-year scheme to enrich themselves through the corruption of international soccer. The Criminal Division’s Office of International Affairs has worked closely with the lead FIFA prosecutors to obtain evidence from numerous countries across the globe. Swiss authorities have opened a separate, parallel probe into FIFA, relating to the selection of World Cup hosts. We are sharing evidence and collaborating closely with governments around the world in connection with the ongoing investigation. This worldwide effort is a profound illustration of the success that can be achieved through a truly global coalition.
In many ways, the FIFA case is very much like the Foreign Corrupt Practices Act (FCPA) cases the Criminal Division is regularly investigating and prosecuting to attack illegal conduct in the global marketplace. These cases protect markets from corruption and the artificial influences of bribery, and ensure that American companies—indeed, all companies—can compete fairly and freely across international boundaries.
But make no mistake: fighting corruption is not some service we provide to the global community; this is a fight in which we have critical international allies. Far from acting as the world’s corruption police, the United States is part of a formidable and growing coalition of international enforcement partners who together combat corruption around the world—at home as well as abroad—that threatens each of our nations.
It is not just the United States that is recognizing the importance of foreign bribery laws. There is a growing chorus of countries voicing support for the fight against this type of corruption. More and more countries are joining international bodies—like the Organisation for Economic Co-operation and Development—that provide uniform standards for the criminalization of bribery of foreign public officials in international business transactions. This type of collaboration is critical if we are going to have a meaningful impact on international corruption.
At the same time that we work to combat corruption overseas, we are also increasing our efforts to ensure that American borders do not protect criminals or their assets. In this regard, the Justice Department launched the Kleptocracy Asset Recovery Initiative in 2010. The initiative relies on the use of U.S. civil forfeiture actions to recover the proceeds of foreign official corruption that pass through the United States.
More simply, it takes the monies and assets stolen by foreign despots and kleptocrats and returns them to the people harmed. This initiative protects the integrity of the U.S. financial system from use by corrupt officials and denies those officials the ability to enjoy luxuries purchased in the United States at the expense of the populations they purport to serve.
In many ways, the Criminal Division’s FCPA enforcement program and our Kleptocracy Initiative are really two sides of the same anti-corruption coin. We bring those who pay bribes to justice, no matter how rich and powerful they are. But by itself, that is not enough. We also attack corruption at its source, by prosecuting and seizing the assets of the corrupt officials who betray the trust of their people.”
The United States is not going to overcome the threat posed by global corruption and international organized crime by going it alone. The Department of Justice is never going to serve as the world’s global police force. But we can—and I believe we should—lead by example: by vigorously investigating and prosecuting international corruption and organized crime when it violates U.S. laws, and by sustaining and increasing our commitment to international collaboration in our nations’ shared struggle to safeguard our markets, our networks and our citizens.
Under my leadership, the Criminal Division will remain steadfastly committed to forging and growing our international partnerships as we fight the scourge of international corruption and organized crime.”
This recent Global Investigations Review article highlights comments made by Matthew Queler ( assistant chief of the DoJ’s FCPA unit) concerning the hiring of so-called princelings (a hiring practice that has resulted in FCPA scrutiny of a variety of companies in the financial services sector). Queler’s comments reminded me of reading an article from the Onion in that he basically said its OK to hire princelings so long as it is legal and we at the DOJ determine what legal is.
For the Reading Stack
From Morrison & Foerster’s most recent Anti-Corruption Developments alert.
“DOJ Revokes Non-Prosecution Agreement (NPA). As we previously reported, Assistant Attorney General Leslie Caldwell publicly stated last month that DOJ would “not hesitate to tear up a DPA or NPA and file criminal charges” if a company breaches its agreement. AAG Caldwell’s statement was likely intended to foreshadow DOJ’s May 20, 2015 announcement that it had revoked an NPA with a corporate defendant, the first action of this kind since the revocation of a DPA with Aibel Group Limited in November 2008. In 2012, DOJ entered into an NPA with UBS AG in which DOJ declined to prosecute the bank for any crimes related to its submission of interest rates for LIBOR and other rate benchmarks. In return, the company was required to abide by several conditions during the pendency of the NPA, including the requirement that it “commit no United States crime whatsoever.” DOJ revoked the NPA after (according to the factual statement attached to the guilty plea) the company “engaged in deceptive FX trading and sales practices.” Although not an FCPA case, the revocation of the NPA in this case is relevant to FCPA enforcement because DOJ’s Fraud Section, which has exclusive authority to bring criminal FCPA cases, was involved in the decision. There are a number of reasons to find this action unfair to companies where, as here, the company implemented an enhanced compliance program, and once it found issues, it brought them forward voluntarily to the Antitrust Division (indeed, qualifying for immunity under the Leniency Program). In other words, the company undertook an enhanced compliance program as it promised to do and then it brought the matter forward, as DOJ has repeatedly encouraged companies to do, only to be punished for it. DOJ’s action, thus, presents a potential disincentive to well-meaning companies to report problems discovered as a product of the enhanced compliance program implemented in the wake of a DOJ resolution.”