This Week in Compliance

This Week in Compliance: Former Och-Ziff executive indicted for fraud

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

Business

  • Petrobras pays USD 2.95 billion to settle US class action: Petrobras, Brazil’s state-controlled oil company, has agreed to pay USD 2.95 billion to settle a US class action brought by investors who claim they lost money as a result of a corruption case also known as Operation Car Wash. Investigations were initiated when Brazilian prosecutors accused former Petrobras executives of taking more than USD 2 billion in bribes over a decade from construction and engineering companies. Petrobras will pay the agreed settlement in three roughly equal instalments and will affect fourth quarter results. In a statement, the company expressed its hopes that the settlement would resolve all investor claims in the US over the case. The settlement does, however, not include investors who have bought non-U.S.-based Petrobras securities outside the United States. The deal is one of the largest securities class action settlements in the United States, it is however, still to be approved by the US District Judge Jed Rakoff in Manhattan.
  • Former Och-Ziff executive indicted for fraud: Former executive managing director of hedge fund giant Och-Ziff, Michael Cohen, was recently indicted for defrauding a big charitable foundation by hiding his conflicts of interest in a USD multi-million investment deal. Cohen was indicted on charges including investment adviser fraud, wire fraud and obstruction of justice, among other. The DOJ reported that in 2008 Cohen and others advised an investment in an African mining company to Wellcome Trust, an Och-Ziff client, without disclosing that a seller of the African mining company shares owed Cohen USD millions. After selling his shares to Wellcome Trust, the borrower allegedly transferred USD 4 million of the proceeds to Cohen. Reportedly, Cohen also tried to cover facts about the transaction following an SEC investigation into Och-Ziff in 2011. In 2016, Och-Ziff resolved an FCPA enforcement action by agreeing to pay USD 412 million.
  • Alstom concludes a three-year reporting period to the DOJ: Alstom confirmed earlier this week that it has now successfully concluded the three-year period of self-reporting obligations with the Justice Department (DOJ) imposed on it following the resolution of two FCPA charges in late 2014, which also incurred a fine of USD 772.29 million on the company. The enforcement action came after investigations uncovered a global USD multi-million bribery scheme the company ran in countries including Saudi Arabia, Indonesia, Egypt, Taiwan and the Bahamas for a decade in return for securing USD 4 billion in projects. Alstom stated that it will continue to develop its compliance program in order to comply with the various laws and regulations across the countries in which the group operates.

Government

  • Bulgaria’s president vetoes anti-graft bill:Parliament’s anti-graft bill, passed on 20 December, was vetoed by the President of Bulgaria Rumen Radev last Tuesday (2 January), citing weaknesses in the law as the main reasons motivating the veto. The anti-graft bill, aiming to establish an anti-graft unit to crack down on high-level corruption, contained, according to Radev, loopholes that would ultimately undermine the effectiveness of the law. One such flaw was the fact that management of the anti-graft unit was to be selected by parliament itself which would in turn jeopardize the unit’s independence. The government’s failure to make progress in the fight against corruption has left Bulgaria under the continuous supervision of the European commission, with the latter issuing annual progress reports since Bulgaria joined the EU in 2007.
  • Pakistan’s former prime minister’s plea rejected in court: The Supreme Court rejected this Thursday (4 January) Former Pakistani Prime Minister Nawaz Sharif’s plea to club three corruption cases against him for the second time. Nawaz’s petition was initially filed with the apex court, as Nawaz claimed that lodging three corruption cases against him and his family was illegal, yet it was returned by the registar and the Supreme Court later rejected Nawaz’s appeal against the registrar’s decision returning his petition. Back in July 2017, Nawaz was disqualified from office following Panama Papers revelations pertaining to the Azizia Steel Mills and Hill Metals Establishment, the family’s London properties, and over dozen offshore companies allegedly owned by the family. Nawaz’s daughter and son-in-law, Maryam and Safdar are only nominated in the London properties case and got approved bail. The defendant is facing a potential 14 years’ imprisonment, lifelong disqualification from holding public office and the freezing of bank accounts and assets.

Noteworthy

  • Iranians protest economic hardships and corruption: For several days, the people of Iran have taken to the streets to protest broad dissatisfaction with the government, including the suppression of social freedoms and economic hardships while the remote elite, especially supreme leader Ayatollah Ali Khamenei, enjoy broad powers and privileges. Protestors have expressed anger over alleged graft within the clerical and security hierarchies. The government has vowed to crack down on high-level corruption and create economic prosperity for all Iranians. Yet, so far, no real change has occurred, while the Revolutionary Guards, for instance, still control a lucrative economic empire. In defiance of judicial threats of the execution of anyone convicted of rioting, demonstrators have proved resilient. Iran’s elite Revolutionary Guards, whose role was instrumental in containing an uprising over alleged election fraud in 2009, deployed its forces in three of Iran’s sprawling provinces to crack down on demonstrators.
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