Welcome to This Week In Compliance: GAN’s weekly news roundup, where we curate the latest stories on compliance and anti-corruption to keep you informed. This week, Audi's former CEO stands trial over the Volkswagen emissions scandal in Germany. Read the full story and more news below:
Former Audi CEO Stands Trial Over Emissions Scandal:
Rupert Stadler, Audi AG's former CEO, was the first executive to stand trial over Volkswagen's dieselgate emissions scandal. In 2018, Audi's parent company Volkswagen admitted to knowingly selling 11M cars that contained software used to fraudulently pass carbon-emissions requirements tests worldwide. Despite Volkswagen's guilty plea, Audi continued to sell cars fitted with the fraudulent software for two more years as the company claimed its diesel vehicles were still legal. Stadler, who appeared in a court in Munich on September 30th, is accused of being aware of the fraud at the time of the car sales. The executive has denied all allegations. In 2018, the former CEO was in pretrial detention for four months after German prosecutors cited evidence that he was planning to interfere with the investigation. Audi, which paid USD 930M in fines in 2018 in the aftermath of the emissions scandal and is not a defendant in this case, has not taken a public position on the charges faced by Stadler. Meanwhile, Volkswagen AG announced its expanded whistleblower program and efforts to improve its compliance culture which have, according to the company's spokesperson, already led to an increase in tips since its implementation in 2019.
Business
SEC Gives USD 1.8 M to Whistleblower in Orthofix Corruption Case:
The U.S. Securities and Exchange Commission (SEC) awarded USD 1.8 M to a Brazilian doctor who provided a whistleblower tip that led to successful enforcement action against medical-device company Orthofix International NV. While the SEC did not name the medical company nor the whistleblower in their announcement of the award, the doctor's legal representatives stated the award has a connection to Orthofix's 2017 bribery settlement with U.S. authorities. Reportedly, the whistleblower raised internal concerns to Orthofix's board before going to the SEC. Orthofix paid USD 6M to settle FCPA offenses in Brazil for bribing doctors in state-owned hospitals. Consistent with the recent amendments to the Dodd-Frank Act, the SEC increased the foreseen amount of the initial award from 15% to 30% of the fine.
U.S. Charges First Tax Evader Revealed in Panama Papers:
Four years after the Panama Papers data leak, U.S. authorities sentenced a former U.S. resident to four years in jail for money laundering, tax evasion, and wire fraud. The defendant, who was charged in relation to global law firm Mossack-Fonseca's criminal scheme, pleaded guilty and agreed to return USD 3.4M as well as to pay a fine to the U.S. Justice Department. Mossack Fonseca, the Panamanian-based law firm that shut down in 2018, facilitated tax evasion through creating shell-companies for wealthy customers all over the world for more than four decades. The leaks, which consist of 11.5 million documents, surfaced in 2016 and revealed information on high-profile tax evasion.
U.S. Charges Two Over Bribery in Iraq:
The U.S. Department of Justice (DOJ) announced an indictment against two individuals who allegedly collaborated to bribe two U.S. military officials in Iraq. According to the DOJ, the individuals concocted a bribery scheme in which they conspired to exchange kickbacks for contracts. The defendants allegedly offered bribery payments of 20% of the value of contracts for the supply of office equipment to the military officials.
Regulatory Updates
Progress in EU's New Mandatory Human Rights Due Diligence Law:
EU Justice Commissioner Didier Reynders announced in April that the EU would be formulating an EU-wide law on mandatory human rights due diligence to be enacted in 2021. In early September, the EU Parliament's Committee on Legal Affairs published the first draft of recommendations to the Commission for the new Directive. While the legislative process is still in an elemental stage, according to Lexology, the draft poses a potential threat of civil or criminal penalties and could potentially be viewed as an additional compliance burden to companies that might not have already implemented human rights due diligence processes. They add that the draft can be seen as an expansion of the UN's Guiding Principles on Business and Human Rights. Among other things, the draft includes proposals for measures such as regular risk assessments in the areas of human rights, environment, and governance as well as mandating stakeholder consultations for establishing due diligence strategies in companies, and mandating the establishment of grievance mechanisms for the previously mentioned areas.
Government
Brazilian President’s Son Charged with Embezzlement:
Brazilian prosecutors charged Flavio Bolsonaro, son of Brazilian President Jair Bolsonaro with money laundering, embezzlement, and heading a criminal organization. The Rio Janeiro prosecutor's office alleges that Flavio obtained USD 480,000 from illicit sources and plotted a bribery scheme in which employees would give parts of their salaries to him while he held office in the Rio de Janeiro state legislature. Additionally, the President's son, who held stakes in a chocolate store, is said to have received USD 282,420 worth from a suspicious equity injection into the company.
