This Week in Compliance

This Week in Compliance: SFO Under Fire for Failed Tesco Prosecution

Business

  • SFO faces criticism after failed prosecution of Tesco executives for fraud: The prosecution of two former directors at Tesco, the UK-based retail giant, failed this week after a judge at Southwark Crown Court threw out the case after hearing the Serious Fraud Office’s (SFO) evidence. The trial judge, Sir John Royce, told the court that “the prosecution’s case was so weak that it should not be left for a jury’s consideration”. The two executives, Chris Bush and John Scouler, were acquitted on all charges. The case related to a GBP 250 million gap in Tesco’s accounts in 2014. The acquittal of the two executives comes as a blow to the SFO, which has had trouble in recent years securing convictions of individuals in corporate misconduct cases. Tesco agreed to a deferred-prosecution agreement (DPA) over the misconduct in April 2017, which has now been called into question. Several commentators have noted that the SFO’s inability to secure convictions might cause companies to reconsider the advantages of entering into a DPA.
  • Ghosn and Nissan indicted in Tokyo for underreporting pay: Carlos Ghosn, the ex-chairman of automaker Nissan, was formally indicted on Monday for understating his income by USD 43 million. Nissan was also indicted for breaching Japan’s financial instruments and exchange law by under-reporting Ghosn’s compensation, despite the fact that the charges flowed from an internal probe at Nissan. Prosecutors said Ghosn understated his salary by USD 43 million between 2010 and 2015, and by a further USD 37 million between 2015 and 2018. Nissan may be fined up to USD 6 million for the misstatements. The scandal has caused intense distrust in the Nissan and Renault alliance. Bloomberg reported that Renault executives have demanded to see proof from Nissan regarding the accusations against Ghosn.
  • Fourteen people charged with stealing over USD 15 million from Bloomberg: Fourteen people were charged this week for their involvement in a construction fraud scheme involving hundreds of millions of dollars in work contracts for financial news group Bloomberg LP. The accused ran a six-year-long racket in which they stole millions and committed bribery, money laundering, and a number of other felonies. The defendants stand accused of rigging bidding processes to award contracts to conspirators who then paid kickbacks and fees disguised as fees. The accused include four former Bloomberg employees, including Anthony Guzzone, the former head of global construction. All the accused pleaded not guilty, but the Manhattan District Attorney Office said over a dozen people have already pleaded guilty in the case.
  • Odebrecht settles bribery charges in Peru in order to continue operations: The Peruvian arm of embattled construction firm Odebrecht has reportedly reached an agreement with authorities in Peru to pay a fine and provide evidence about the officials that were bribed, in exchange for permission to continue its operations in the country. Sources indicated that the fine would be approximately USD 182 million to be paid over 15 years. Odebrecht will also be required to admit it paid bribes to win six infrastructure contracts. The firm has been at the center of Latin America’s largest graft case since it reached a plea deal with U.S., Brazilian, and Swiss authorities in 2016. The fallout of the scandal has been large in Peru; all four of the country’s most recent former presidents and its opposition leader are under investigation in connection with payments made by Odebrecht. All four have denied wrongdoing.

Government

  • OECD study finds officials receiving bribes face few penalties: A report by the Organization for Economic Cooperation and Development (OECD) released this week found that officials who take bribes from companies based in wealthy countries are rarely punished. The study examined 55 foreign-bribery cases resolved between 2008 and 2013 in OECD countries and found that only in a fifth of cases were the officials taking the bribes formally punished. The findings are surprising, particularly considering the level of detail usually published by U.S. authorities and the strength of media reporting in the countries where the officials took the bribes. The study further found that problems with law enforcement, such as insufficient evidence or statutes of limitations, were frequently the reason why officials were not punished.
  • DOJ cooperator pleads guilty to obstructing government investigation into Venezuelan company: Alfonso Eliezer Gravina, a Houston-based procurement officer for Venezuelan state energy company PDVSA pleaded guilty on Monday to obstructing the government’s investigation into the company, despite the fact that he was supposed to help the DOJ investigate the case. Gravina had pleaded guilty in December 2015 to conspire to money-launder and making false statements on his federal income tax return; as part of that plea, he agreed to help the DOJ investigate corruption at PDVSA. However, the DOJ found that Gravina had concealed facts about another individual. He also warned that individual he was under investigation, leading the individual to destroy evidence and attempting to leave the United States.
  • Former Malaysian PM Najib and 1MDB ex-CEO face new chargesMalaysian prosecutors revealed new charges against former Malaysian Prime Minister Najib Razak and the former CEO of the 1MDB investment fund at the center of a sprawling graft investigation. Prosecutors allege that Najib had “secured protection disciplinary, civil or criminal action related to 1MDB” by directing an audit report to be amended before it was finalized. One of the changes to the audit report was the removal of a mention of Jho Law, a billionaire at the center of the scheme to steal USD 4.5 billion from the investment fund.
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