This Week in Compliance

This Week in Compliance: Corruption trial of PetroVietnam executives starts in Vietnam

Here’s what’s been going on in the compliance world this week:

Business

  • Coca-Cola cuts ties with McKinsey: The US soft drinks giant Coca-Cola’s south African units and the oil and gas company Sasol Ltd have stated that they will not enter into any new business agreements with McKinsey & Co. until the latter’s corruption investigation into links with the Gupta family is cleared. McKinsey has been accused of misconduct in connection with work it conducted with Eskom and Trillian Capital Partners, which is linked to the Guptas. The Guptas family, in turn, is accused of using its close connection with South Africa’s President Zuma to win lucrative government contracts. Coca-Cola and its African unit have previously awarded contracts to McKinsey, yet have no historic work ongoing, while Sasol has two long-term projects with the consultancy but isn’t awarding new business for now.
  • Corruption trial of PetroVietnam executives starts in Vietnam: The corruption trial of senior executives at Vietnam’s state oil company PetroVietnam has begun and is due to last until the 21st of January, according to the Vietnam government’s official news website. Twenty-two defendants will be brought in front of a jury, including the ex-head of PetroVietnam Construction, Trinh Xuan Thanh, and Dinh La Thang, a former Politburo member and senior Communist Party official. Thanh, whom German authorities claim was abducted from Berlin, is accused of corruption and could face the death penalty if found guilty. Thang, the most senior official to go on trial in decades, is accused of economic mismanagement and could face up to 20 years’ imprisonment. The trial is part of government initiated efforts to crack down on corruption in the energy and banking sectors. Analysts have claimed, however, that so far, prosecutions have mainly targeted opponents of the Communist Party.
  • Citigroup fined USD 5.5 million and ordered to pay USD 6 million in compensation: The Financial Industry Regulatory Authority (FINRA) fined Citigroup Inc. USD 5.5 million for sending retail customers the wrong research ratings on more than 1,800 stocks, during a period of almost five years, misleading them into buying and holding shares they never would have owned. Reportedly, many retail customers ended up owning stocks with “sell” ratings despite account prohibitions against such ownership. FINRA also ordered Citigroup to pay at least USD 6 million in compensation to retail customers for the ratings errors. According to FINRA, the rating errors were caused by issues in the bank’s electronic feed, yet despite several red flags signaling the issue, it failed to timely fix the wrongly displayed ratings. FINRA also reported that the bank had “failed to conduct testing reasonably designed to verify the accuracy of research ratings data that it used and distributed”. Citigroup reached a settlement with FINRA without denying nor admitting the charges.

Government

  • Hong Kong’s former home secretary denied bail: Patrick Ho, Hong Kong’s former home secretary pleaded not guilty this Monday (8 January) to bribing African officials on behalf on a Chinese energy company. Ho was indicted on several charges last November, including violating the FCPA and international money laundering and has been in federal custody since. According to the DOJ, Ho had used the NGO he led, China Energy Fund Committee or CEFC, to funnel bribes to African officials. The indictment states that Ho collaborated with his co-defendant, the former foreign minister of Senegal Cheikh Gadio, to bribe the president of Chad USD 2 million. Ho allegedly also bribed Uganda’s minister of foreign affairs with USD 500,000. The NGO was fully funded by CEFC China Energy Company Limited, a Shanghai-based oil and gas company. Ho request bail on bond of USD 10 million and under house arrest with electronic monitoring, yet his request was denied.
  • Zuma promises to set up commission of inquiry: Last month a High Court ruling ordered South Africa’s President Zuma to set up a commission of inquiry within 30 days to investigate allegations of influence-peddling, following the Public Protector’s call, in a 2016 anti-graft report, for a judicial inquiry and the appointment of a judge to head it by the chief justice. Zuma, however, challenged the right of the Public Protector to call for such an inquiry, claiming that it was the president’s prerogative. Zuma promised last Tuesday (January 9) to set up the commission and stated that Deputy Chief Justice Raymond Zondo, selected by the Chief Justice, will head it. The president’s statement comes one day before the African National Congress executive committee meeting was to be held with allegations suggesting that the party’s new leader Cyril Ramaphosa and his allies are lobbying to remove Zuma through a motion of no confidence.

Noteworthy

  • Peruvian law on corporate criminal liability now in force: With the turn of the year, the Peruvian law number 30424 entered into force introducing corporate criminal liability applicable to bribery into the country’s anti-corruption legal framework. Legal persons can now be held independently criminally liable for local and foreign bribery and can incur a fine, face debarment from government contracting, and dissolution. The law applies to public and private legal entities of all forms and size. Sanctions under the law are applied on the basis of the benefit obtained from the corrupt act and on the annual income of the company. Companies can mitigate sentences by, among other, demonstrating the existence of an ‘adequate’ compliance program.
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