Top 10 International Anti-Corruption Developments For February 2022 – Anti-trust/Competition Law

Designed for busy in-house counsel, compliance professionals,
and anti-corruption lawyers, this newsletter summarizes some of the
most important international anti-corruption developments from the
past month, with links to primary resources. This month we ask:
What was the first corporate Foreign Corrupt Practices Act (FCPA)
enforcement action of 2022? What does the annual report from the
Fraud Section of the U.S. Department of Justice (DOJ) reveal about
criminal FCPA enforcement in 2021? Has the ongoing anti-corruption
campaign in China begun to focus more on bribe payers? The answers
to these questions and more are here in our February 2022 Top 10
list.

1. South Korean Telecom Company Settles Korea and Vietnam
Allegations with the SEC

On February 17, 2022, the U.S. Securities and Exchange
Commission (SEC) announced the first corporate FCPA
resolution of 2022. According to the announcement, Seoul-based KT
Corporation, which is considered a U.S. issuer, agreed to pay $6.3
million to resolve FCPA accounting charges related to allegations
that it made improper payments to Korean and Vietnamese government
officials. According to the SEC cease-and-desist order, for nearly a decade, the company
provided gifts and illegal political contributions to government
officials in Korea who had influence over its business, and to
Vietnamese officials in connection with soliciting business from
government customers. In Korea, the money for these payments
allegedly came from a slush fund of approximately $1.3 million,
created first by inflating bonuses to executives, which were then
returned to the company’s then-executive officer in cash, which
was either deposited in an executive’s personal bank account or
kept in a safe in the company’s office, and later, through gift
cards that were converted to cash. The SEC also alleged that, at
the urging of the Blue House, South Korea’s presidential
residence and office, the company made over $1.6 million in
“charitable donations” and “sponsorships” to
three sports or cultural organizations and hired two advertising
executives. In Vietnam, the company allegedly generated cash by
paying “rebates” to a third-party construction company,
taking cash advances on credit cards, and making payments for
“consulting services” to a third-party agent hired
through a consortium partner, to obtain government contracts and to
accelerate payments from the government. The SEC order alleges that
the company failed to either properly maintain accurate records or
maintain a system of internal accounting and controls, in violation
of the FCPA’s accounting provisions. The company neither
admitted nor denied the SEC’s findings. There has been no
public announcement regarding the DOJ’s intention to bring an
enforcement action against the company. According to the SEC press
release, in November 2021, South Korean authorities indicted the
company and 14 executives for criminal violations related to
illegal political contributions from the slush funds. 

2. DOJ Fraud Section Releases 2021 Annual Report

On February 15, 2022, the DOJ Criminal Division, Fraud Section
released its annual Year in Review for 2021. The report summarizes
the Section’s efforts across its FCPA, Market Integrity and
Major Frauds (MIMF), and Health Care Fraud Units. Although 2021 was
a relatively quiet year for corporate FCPA enforcement (especially
as compared to the record-setting years in 2019 and 2020),
the report shows that the FCPA Unit resolved three corporate cases
in 2021, totaling $649 million in global monetary penalties, about
40% of which constituted criminal penalties paid to the U.S.
government. These cases included two multinational financial
services companies and a global engineering company (for more, see
our February 2021, June 2021, and October 2021 Top 10s). The report also
shows that individual FCPA enforcement remained strong despite the
pandemic, with charges against 26 individuals and convictions
of 19 individuals announced in 2022. The report highlights
individual prosecutions of the former CEO of a Brazilian
petrochemical company (see our April 2021 Top 10) and several other
individuals allegedly involved in bribing Latin American government
officials (see our March 2021, May 2021, and November 2021 Top 10s). Overall, the
number of individual convictions in Fraud Section cases increased
by approximately 54% from 2021 to 2022, demonstrating the impact of the Criminal
Division’s increased emphasis on prosecuting
individuals. 

3. U.S. Technology Firm Discloses DOJ and SEC Declinations

In a February 22, 2022, securities filing, Cisco Systems, Inc.
disclosed that DOJ and SEC do not plan to take action against the
company in relation to allegations of a “self-enrichment
scheme” involving now-former employees in China. In
its initial disclosure of the investigation a
year ago, the company said some of its former employees allegedly
“made or directed payments from the funds they received to
various third parties, including employees of state-owned
enterprises.”

4. 1MDB Corruption Trial Begins for Former Investment
Banker

On February 14, 2022, the much anticipated trial of former
investment banker Roger Ng began in the Eastern District of
New York. Ng was charged in October 2018 with conspiring to launder
billions of dollars allegedly embezzled from Malaysian sovereign
wealth fund 1Malaysia Development Berhad (1MDB), conspiring to
violate the FCPA by paying bribes to multiple government officials
in Malaysia and Abu Dhabi, and circumventing the internal
accounting controls of a “major New York-headquartered
financial institution.” The government called Tim Leissner,
Ng’s former boss, to testify at trial at length. Leissner
pleaded guilty to related money laundering and FCPA anti-bribery
and accounting charges in October 2018 and agreed to cooperate.
(For more on the 1MDB case, see our July 2016, August 2016, June 2017, December 2017, May 2018, June 2018, August 2018, October 2018, February 2019, May 2019, April 2020, August 2021, and September 2021  Top 10s.)

5. Former Ecuadorian Official Pleads Guilty in Police Pension
Fund Bribery Scheme

On February 2, 2022, John Luzuriaga Aguinaga, a former risk
director and investment committee member for Ecuador’s public
police pension fund (ISSPOL), pleaded guilty in the Southern District of
Florida to one count of conspiracy to launder bribe money he
allegedly received to direct ISSPOL business to investment advisor
Jorge Cherrez Miño. Luzuriaga admitted to accepting nearly $1.4 million
from Cherrez. DOJ originally announced the charges against
Luzuriaga and Cherrez in March 2021. Luzuriaga is not the first
Ecuadorian national to plead guilty to money laundering charges
related to bribes from Cherrez. In July 2021, Luis Alvarez Villamar pleaded guilty and admitted accepting bribes totaling more
than $3 million from Cherrez. Luzuriaga’s sentencing is
scheduled for April 12, 2022.

6. Former Executive Director of International Adoption Agency
Pleads Guilty in Bribery and Fraud Scheme

On February 4, 2022, DOJ announced that Margaret Cole, the former
executive director of an international adoption agency, had pleaded
guilty in the Northern District of Ohio to conspiracy to defraud
the United States and to making a false statement to the Polish
Central Authority. The criminal adoption scheme first came to light
in August 2019, when DOJ announced that another manager of the
adoption agency, Robin Longoria, had pleaded guilty to one count of
conspiracy to violate the FCPA, to commit wire fraud, and to commit
visa fraud related to the improper removal of children from their
home countries of Uganda and Poland by use of bribery and fraud and
without verifying that they were actually orphaned. DOJ
then announced the indictment of Cole and
co-defendants Debra Parris and Dorah Mirembe in August 2020, alleging that they were
co-conspirators in the conduct. In November 2021, DOJ announced that co-defendant Parris had
pleaded guilty to conspiracy to violate the FCPA and to commit visa
fraud related to the bribery of probation officers, court
registrars, and High Court judges in Uganda to improperly
facilitate the adoption of Ugandan children. Cole’s sentencing
is scheduled for May 27, 2022.

7. World Bank Group Debars Consulting Company and its Managing
Director for Improper Payments in Nigeria

On February 23, 2022, the World Bank Group announced the 52-month sanction of AIM
Consultants Limited, a consultancy company based in Nigeria, and
its Managing Director, Amin Moussalli. According to the
announcement, soon after receiving payments from a
World-Bank-financed project in Nigeria, the company transferred
money to the personal accounts of two resident engineers for onward
transmission to various project officials. The World Bank alleged
that the company allegedly made over $45,000 in improper payments,
all approved by Moussalli. The sanction, which consists of a
34-month debarment followed by an 18-month conditional
non-debarment, is the result of settlement agreements under which
the company and its director acknowledged their responsibility for
the improper payments, agreed to meet specified corporate
compliance conditions, took voluntary corrective action, and
cooperated with the investigation. The World Bank debarment could
result in cross-debarment by other multilateral development banks
under the April 9, 2010, Agreement for Mutual Enforcement of
Debarment Decisions.

8. UK Engineering Company Ordered to Pay £210,610 in
Compensation to the Government of Nigeria

On February 21, 2022, the United Kingdom and the Federal
Government of Nigeria signed a Memorandum of Understanding (MOU), which
provides for the transfer of £210,610 in compensation to the
Government of Nigeria as a result of the UK Serious Fraud
Office’s (SFO) investigation into Amec Foster Wheeler Energy
Limited (AFWEL). In June 2021, AFWEL reached a $177 million global
settlement with U.S., UK, and Brazilian authorities to resolve
bribery and corruption allegations involving several companies.
Under the UK-deferred prosecution agreement (“DPA”), the
company accepted responsibility for the use of third-party
agents to make improper payments relating to the oil and gas sector
in Brazil, India, Malaysia, Nigeria, and Saudi Arabia. The roughly
£210,000 payment to the Nigerian government has been
earmarked for the exclusive purpose of funding infrastructure
projects approved by the Nigerian National Assembly under the 2020
Appropriation Act, including road and bridge projects.

9. European Parliament Pushes for Corruption-Related Economic
Sanctions

On February 17, 2022, the European Parliament adopted
text recommending that the European Union
(EU) Council “swiftly come forward with a legislative
proposal” targeting and imposing sanctions on “the
economic and financial enablers of human rights abusers detaining
assets and properties in the EU.” In the text, the Parliament
notes its repeated requests to amend the current EU Global Human
Rights Sanctions Regime (GHRSR) to include corruption as a
sanctionable offense. For example, in July 2021, the Parliament
highlighted the devastating impact that corruption has had on human
rights and adopted a resolution calling for
corruption to be included as a punishable offense, as it is in the
U.S. Global Magnitsky Act and UK Global Anti-Corruption Sanctions
Regulations 2021. In the February 17 text, the Parliament suggests
amending the GHRSR to include anti-corruption sanctions.
Alternatively, Parliament recommends adopting a new anti-corruption
sanctions regime. The text notes the increasing risk of
“corrupt actors moving their assets to the EU as more and more
countries adopt stricter frameworks” and calls for
“swiftly and duly implemented” sanctions by Member States
“particularly regarding entry bans [and] the . . . freezing of
assets.”

10. China’s Top Disciplinary Watchdog Publishes 2021
Anti-Corruption Report

On February 24, 2022, China’s Central
Commission for Discipline Inspection reported that in 2021, Chinese
anti-corruption authorities punished 4,806 people for paying
bribes. Of those cases, 2,822 were referred to prosecutors for
trial. The Commission also cited favorably the most recent UN
General Assembly Special Session against corruption and indicated
an intent to deepen international cooperation against corruption.
The report comes in the midst of President Xi Jinping’s major
anti-corruption drive and signals a shift in policy from focusing
mainly on bribe-taking officials to imposing increased penalties on
the bribe-givers as well. Potential penalties include not only
mandatory prison terms and fines, but also the
Commission’s recently created blacklist for those
companies and individuals caught offering bribes. The report
concluded with a statement of the Commission’s intent to
continue this anti-corruption push leading up to the CCP’s
Twentieth National Congress in late 2022.

Because of the generality of this update, the information
provided herein may not be applicable in all situations and should
not be acted upon without specific legal advice based on particular
situations.

© Morrison & Foerster LLP. All rights reserved