Accelerating International Cooperation in Fraud, Corruption, and Other Government Investigations and Enforcement Actions in 2017

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Accelerating International Cooperation in Fraud, Corruption, and Other Government Investigations and Enforcement Actions in 2017

By Steven W. Pelak, Jason E. Prince, and Gwen S. Green*


In 2017, international cooperation continued to accelerate among law enforcement agencies in fraud, corruption, and a wide variety of business-related investigations and prosecutions by governments in the Americas, Europe and Asia. Administrative agencies, law enforcement investigators, and prosecutorial offices around the globe have become increasingly interconnected across international borders, as the United States, Germany, The Netherlands, the United Kingdom, Canada, Australia, and other nations have accelerated their pursuit and coordination of transnational enforcement actions. This reality presents complex challenges for multinational companies in responding to such actions and highlights the importance of having effective compliance measures to deter and detect misconduct in potential violation of anti-corruption, export control, trade sanctions, money laundering, environmental, and other laws.

Four recent enforcement actions in 2017 discussed below reflect the increasing sophistication and scope of cross-border investigations and prosecutions conducted by a growing number of governments:

1. SBM Offshore – Multi-Country Offshore Oil Industry Bribery: Americas, Africa, Asia, and the Middle East

On November 29, 2017, SBM Offshore N.V. (“SBM”), a Netherlands-based offshore oil drilling equipment manufacturer, and its wholly owned U.S. subsidiary, SBM Offshore USA Inc. (“SBM USA”), agreed to resolve criminal charges and pay a criminal penalty of $238 million for bribing foreign officials in Angola, Brazil, Equatorial Guinea, Kazakhstan, and Iraq in violation of the U.S. Foreign Corrupt Practices Act (“FCPA”). In connection with the resolution, SBM entered into a deferred prosecution agreement, and SBM USA pleaded guilty to one count of conspiracy to violate the FCPA and was sentenced by U.S. District Court Judge David Hittner of the U.S. District Court for the Southern District of Texas. Previously, in early November 2017, Anthony Mace, the former CEO of SBM and a former board member of SBM USA, and Robert Zubiate, a former SBM USA executive, each pleaded guilty to one count of conspiracy to violate the FCPA. Mace and Zubiate are currently awaiting sentencing.


SBM and SBM USA admitted that, during approximately 1996 through 2012, the companies conspired to violate the FCPA by paying more than $180 million in commissions to third-party intermediaries, knowing that a portion of those commissions would be used to bribe foreign officials in the five named countries. The third-party intermediaries paid these bribes – in the form of cash, gifts, entertainment, and jobs and tuition for certain foreign officials’ relatives – on SBM’s behalf for the purpose of securing improper advantages and obtaining or retaining a total of at least $2.8 billion in projects with various state-owned oil companies.

The $238 million U.S. criminal penalty comes on top of the $240 million criminal penalty that SBM paid to The Netherlands in 2014 to settle the Dutch Openbaar Ministerie’s (Public Prosecutor’s Office) enforcement action involving related conduct, bringing SBM’s combined worldwide total in criminal penalties to over $478 million. In calculating the U.S. criminal penalty, the DOJ credited SBM’s payment of penalties to the Dutch Openbaar Ministerie, as well as the penalties SBM will likely pay to the Brazilian Ministério Público Federal (“MPF”) at the conclusion of Brazil’s ongoing enforcement action. In the November 29, 2017 press release announcing the SBM resolution, the DOJ expressed its gratitude to the Dutch Openbaar Ministerie, Brazil’s MPF, and Switzerland’s Office of the Attorney General and Federal Office of Justice “for providing substantial assistance in gathering evidence during the investigation.” Moreover, U.S. Acting Attorney General John P. Cronan of the DOJ’s Criminal Division noted that “[t]he resolution announced today demonstrates the Criminal Division’s continuing commitment to work closely with our foreign partners to hold both companies and individuals accountable for their actions as we continue to level the playing field for ethical and honest businesses to compete in the marketplace.” (Emphasis added.)            

2. James Robert Liang – Volkswagen Diesel Emissions Fraud Scandal: Americas, Europe, and Asia

James Robert Liang, a Volkswagen engineer, was sentenced by U.S. District Court Judge Sean F. Cox of the Eastern District of Michigan on August 25, 2017 to forty (40) months in prison for his role in the nearly 10-year conspiracy to defraud regulators and Volkswagen customers by implementing software specifically designed to cheat emissions tests in hundreds of thousands of Volkswagen “clean diesel” vehicles sold in the United States. Last year, Liang, a German national, pleaded guilty to one count of conspiracy to defraud the United States, commit wire fraud, and violate the Clean Air Act.

Liang admitted that he and other Volkswagen employees designed and implemented software for the EA 189 engine to defeat U.S. emission standards on nearly 500,000 Volkswagen diesel vehicles. The so-called “defeat device” detected whether a vehicle was undergoing standard U.S. emissions testing on a dynamometer, versus being driven on the road under normal driving conditions. Liang further admitted that for each new model year from 2009 through 2016, he and other Volkswagen employees falsely certified to the U.S. Environmental Protection Agency and the California Air Resources Board that Volkswagen’s diesel vehicles complied with U.S. emissions standards. At the same time, the Company marketed the Volkswagen diesel vehicles as “clean diesel” and promoted the vehicles’ increased fuel economy, which were claims apparently facilitated by the defeat device.

This past January, Volkswagen pleaded guilty to three criminal felony counts (i.e., conspiracy, obstruction of justice, and making false statements to import cars into the United States) and agreed to pay $4.3 billion in criminal and civil penalties relating to the diesel issue. Volkswagen’s legal troubles are far from over and extend beyond the United States. Since the scandal broke in the United States in 2015, prosecutors in multiple countries, including Italy, France, South Korea, and Germany, have opened investigations into Volkswagen’s emissions testing and related fraud allegations. As just one example of the cooperation between investigators and prosecutors in the United States and these foreign countries, Liang agreed in his Plea Agreement with the U.S. Government to “cooperate fully with the government, and any other law enforcement agency designated by the government, including but not limited to the Staatsanwalschaft Braunshweig in Germany [the German public prosecutor’s office].” (Emphasis added.) 

3. Mahmoud Thiam – Guinean Mining Industry Bribery: Americas, Africa, the Middle East, and Europe

Mahmoud Thiam, a former Minister of Mines and Geology for the government of Guinea, was sentenced on August 25, 2017 by U.S. District Court Judge Denise L. Cote of the Southern District of New York to seven (7) years in prison, and three (3) years of supervised release, for laundering $8.5 million in bribes paid to him by executives of China Sonangol International Ltd. (“China Sonangol”) and China International Fund, SA (“CIF”). Thiam, a Guinea-born U.S. citizen, was convicted on May 3, 2017 of one count of transacting in criminally derived property (18 USC § 1957) and one count of money laundering (18 USC § 1956(a)(1)(B)). The laundered funds were bribe proceeds derived through violations of Guinean bribery laws, according to the indictment.

Thiam formerly served as Guinea’s Minister of Mines and Geology from 2009 to 2010. Evidence presented at trial showed China Sonangol and CIF executives paid Thiam $8.5 million in illegal payments and in exchange Thiam used his position as Minister to help China Sonangol, CIF, and their subsidiaries secure exclusive and lucrative investment rights in a broad range of sectors of Guinea’s economy, including near complete control of Guinea’s mining sector. Bank records presented at trial further showed that Thiam laundered the bribe payments through bank accounts in Hong Kong and the United States. In furtherance of the scheme, Thiam misreported his occupation to banks in Hong Kong and the United States to conceal his position as a public official and falsely claimed that the funds were proceeds from the sale of land in Africa, according to evidence presented at trial. In announcing the conviction, the DOJ noted that it had received substantial assistance from the governments of Guinea, Israel, and Switzerland in gathering evidence and other efforts during the investigation of Thiam.

4. Dmitrij Harder – European Bank for Reconstruction and Development Bribery: Europe and the Americas.

On July 18, 2017, Dmitrij Harder, the former owner and president of Chestnut Consulting Group Inc. and Chestnut Consulting Group Co. (the “Chestnut Group”) located in Southampton, Pennsylvania, was sentenced by U.S. District Court Judge Paul S. Diamond in the Eastern District of Pennsylvania to sixty (60) months imprisonment and ordered to forfeit $1.9 million for bribing an official at the European Bank for Reconstruction and Development (“EBRD”) in violation of the FCPA. Between July 2008 and November 2009, Mr. Harder was alleged to have paid approximately $3.5 million in bribes to Andrej Ryjenko, an official and senior banker at the EBRD, in exchange for Mr. Ryjenko referring EBRD clients to the Chestnut Group. At the same time that the U.S. Government prosecuted Mr. Harder, the U.K. Government prosecuted the alleged recipient of the bribe payment, Mr. Ryjenko. In June 2017, Mr. Ryjenko was convicted in a U.K. court and sentenced to six (6) years imprisonment for conspiring to make or accept corrupt payments and money laundering.

The dual prosecutions in this matter both in the United Kingdom and the United States reflects a careful coordination between the U.K. and U.S. prosecutors, thereby allowing each sovereign to enforce its laws and to seek justice against the alleged conspirator with the greatest connection to it. One might reasonably anticipate that the Harder and Ryjenko investigation and resulting prosecutions may serve as a model for the International Anti-Corruption Coordination Centre (“IACCC”), which was announced in July 2017. See The U.K. and participating governments, which include Australia, Canada, New Zealand, Singapore, and the United States, announced that the IACCC would bring together law enforcement officers from multiple jurisdictions to coordinate law enforcement action against allegations of grand corruption (e.g., bribery of public officials, embezzlement, abuse of function or the laundering of the proceeds of crime). 

Implications and Lessons Learned in 2017

The recent cases discussed above highlight the following “lessons learned” from the growing acceleration and depth of cooperation among law enforcement and administrative agencies in the Americas, Europe, Asia, Africa, and the Middle East:

    • A Presumption of Information Sharing – U.S. law enforcement agents and prosecutors are increasingly working with their foreign counterparts – particularly those in the United Kingdom, the Netherlands, and Germany – to pursue dual or near simultaneous investigations and prosecutions in the same matter both in the United States and in the corresponding foreign country. In some instances, the U.S. Government is requiring in Plea Agreements that defendants cooperate with foreign law enforcement officials. Now more than ever, companies should presume that information or allegations learned by government investigators on one side of an international border likely will flow freely to the other side.
    • Beyond Information Sharing toward Jointly Planned Investigations and Prosecutions – The careful coordination and joint planning by U.S. and foreign authorities noted above requires an additional layer of cross-border cooperation and mutual assistance beyond merely sharing or exchanging information. The cooperation in the cases noted above reflects a willingness by sovereign nations to forego their own prosecutions while partner nations in turn undertake their own prosecutions or administrative enforcement actions. Such international cooperation requires earlier review and collaboration by law enforcement agents and prosecutors in an investigation to ensure that each country’s laws, rules, and customs governing criminal and administrative investigations are followed during the investigation. Without such early review and collaboration, subjects of an investigation may limit or defeat subsequent enforcement action where, for example, the results of an interview conducted by law enforcement officers in Country A are inadmissible in an administrative or judicial proceeding in Country B because the interview technique or procedures were not fully compliant with the laws of Country B.
    • No Industries Immune – Each of the four cases noted above from 2017 involved a different industry, i.e., offshore oil, automotive, mining, and development/reconstruction consulting. The variety of industries demonstrates that no industry and no company is off limits or immune to potential cross-border administrative or criminal investigations and enforcement actions.

In such a global enforcement environment, it has become increasingly invaluable for a multinational company operating or selling goods or services in the United States and abroad:

(i) to implement and monitor effective and audited compliance measures to deter and detect potential fraud and other unlawful conduct by the company’s employees or agents in each of the relevant nations;

(ii) to maintain readily available and organized records of such compliance measures and other good faith efforts to comply with multiple and commonly conflicting legal obligations across the globe;

(iii) to conduct prompt and efficient internal investigations of alleged wrongdoing and to implement, monitor, and document remedial and corrective actions aimed at the principal root causes leading to any violations; and,

(iv) to report voluntarily the potential wrongdoing to relevant governmental agencies where the particular circumstances so warrant or relevant contractual or legal obligations may so require.

Such actions enable multinational companies to reduce the risks and costs presented by simultaneous and coordinated investigations and enforcement actions involving administrative agencies, law enforcement agents, and prosecutors in the United States and multiple foreign countries.

*Steven W. Pelak and Jason E. Prince are Partners, and Gwen S. Green is Of Counsel, in the Washington, D.C. office of Holland & Hart LLP, where they and their colleagues assist multinational companies with federal and local investigations touching upon the United States, particularly in matters involving alleged fraud, export controls, economic sanctions, the FCPA, false claims, or environmental violations.

Boise, ID 
Monday, January 29, 2018
Litigation (Civil, Business and Commercial), Automotive, Criminal Law / White Collar Crime