This Week in Compliance

This Week in Compliance: SFO Scaled Back Rolls-Royce Investigation

Business

  • SFO scales back Rolls-Royce investigation: The UK’s Serious Fraud Office said on Monday that it has dropped investigations into a number of individuals associated with Rolls-Royce, suggesting that the final decision on which executives to charge could be nearing. The company itself admitted a range of charges back in January 2017 when it signed a deferred prosecution agreement and paid a GBP 671 million in fines related to decades of bribery in numerous markets around the world. The Financial Times has reported that Sir John Rose, the former CEO of the company, is not believed to be among those into whom the investigation has been dropped; Sir John has denied all charges previously. Lisa Osofsky, the SFO’s new director, said in December that she is personally reviewing the evidence in over 70 cases to determine why it’s taking so long to conclude investigations.
  • Three former Credit Suisse bankers arrested over USD 2 billion fraud scheme in Mozambique: Andrew Pearse, Surjan Singh, and Detelina Subeva, three former Credit Suisse bankers, were charged late last week with conspiring to violate the anti-bribery provisions of the FCPA and committing money laundering and securities fraud. The three have been released on bail in London while the United States is seeking their extradition. The development follows the arrest of Mozambique’s former Finance Minister Manuel Chang five days earlier in relation to the same criminal case. Credit Suisse has stated that the indictment alleges that “the former employees worked to defeat the bank’s internal controls, acted out of a motive of personal profit, and sought to hide these activities from the bank”. The indictment alleges that the defendants and other Mozambican government officials diverted at least USD 200 million out of the USD 2 billion borrowed by state-owned companies arranged by Credit Suisse. The companies missed over USD 700 million in loan payments and defaulted on the debt in 2016 and 2017.
  • SFO under scrutiny as Barclays bosses trial begins: The long-awaited fraud trial of four former executives at Barclays for their role in securing a GBP 12 billion rescue package from investors at the height of the financial crisis, finally got underway this week. The defendants, including former chief executive John Varley, former investment banking chief Roger Jenkins, and former Barclays Wealth boss Thomas Kalaris, and ex-European financial institutions head Richard Boath, stand accused of conspiracy to commit fraud in relation to a capital raising in 2008. Through a complicated transaction, a subsequent loan worth USD 3 billion was made to a state-owned Qatari fund, which the SFO says amounted to unlawful financial assistance. All four defendants have pleaded not guilty. The SFO came under scrutiny in December last year when its lawsuit against two former Tesco executives for fraud charges was thrown out because the judge deemed the evidence “too weak” to be heard by a jury. Another trial against a number of brokers accused of helping the convicted trader Tom Hayes rig the Libor rate similarly collapsed in court in 2016. The trial against the Barclays bosses is expected to last at least 12 weeks. Barclays itself still faces the threat of a GBP 1.5 billion civil case over the Qatari funding later this year.
  • Huawei linked to shell companies in Iran and Syria: Huawei, the Chinese telecommunications giant, was linked to two obscure companies in Tehran and Mauritius, according to court documents filed in the U.S. case against Huawei’s chief financial officer, Men Wanzhou. U.S. authorities are alleging that Meng deceived international banks into clearing transactions with Iran claiming that the companies were independent of Huawei, when the company factually controlled them. Reuters reported this week that it had found, after examining corporate filings and other documents, that the firm is closely linked to Iran’s Skycom and shell company Canicula Holdings Ltd. The documents show that a high-level Huawei executive appointed Skycom Iran’s manager and that three Chinese individuals had signing rights for both Huawei and Skycom bank accounts in Iran. The previously unreported ties could have bearing on the case against Meng, who was released on bail on December 11th.

Government

  • Peru’s Attorney General resigns after hindering corruption probePedro Chavarry, Peru’s Attorney General, resigned this week following accusations that he had hindered a corruption probe involving Brazilian construction giant Odebrecht. On New Year’s Eve, Chavarry dismissed two popular prosecutors leading the case against Odebrecht after they allegedly blocked his request into information on the case. The dismissals sparked street protests and Peru’s President Martin Vizcarra called on the country’s congress to declare the office in a state of emergency – under Peru’s constitution, the president does not have the authority to dismiss the attorney general. Chavarry reinstated the prosecutors, but the attention had already turned on him; the offices of one of his closest aides were raided by investigators. Chavarry’s successor, Zoraida Avalos, has promised to rid the Attorney General’s office of corruption by declaring a state of emergency. Odebrecht admitted in US court filings that it had paid bribes of at least USD 29 million in Peru.
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