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 we cover a the conviction of two former Herbalife executives charged for multiple FCPA offenses in China. Read the full story and more news below:
DOJ Charges Former Herbalife Execs with FCPA Conspiracy and Obstruction:
Two former Herbalife executives were charged for bribing Chinese officials and for covering up and destroying connected evidence. According to the indictment, Herbalife’s Chinese subsidiary used USD 25 million in gifts and entertainment expenses to entertain Chinese public officials from 2007-2017. In 2007, the involved executives, Jerry Li, head of Herbalife’s Chinese subsidiary, and Mary Yang, head of the subsidiary’s external affairs division, gave bribes to get an operating license in China. The bribery persisted in order to deter Chinese authorities from conducting investigations into Herbalife’s Chinese subsidiary as well as to suppress negative media coverage from state owned media outlets. Both Li and Yang were reimbursed for the bribe payments by submitting “false and fraudulent expense claims” to circumvent the company’s internal accounting controls. The DOJ also found that Yang gave false statements during the SEC’s 2017 investigation into the company’s anti-corruption compliance in China. While the results of the SEC’s investigation are still pending, Herbalife has confirmed their cooperation with the authorities.
U.S. Jury convicts former Alstom Executive of Multiple FCPA Offenses:
A former Alstom SA executive, Lawrence Hoskins, was found guilty of violating the FCPA as well as of facilitating money laundering and related conspiracy charges. Hoskins, who held a UK passport, worked in France and allegedly had never visited the United States, was convicted for 11 out of 12 charges in a Connecticut court in relation to a bribery scheme in Indonesia. In December 2014, Alstom SA pleaded guilty to bribery charges and admitted that company executives had engaged in bribery schemes with officials in Indonesia, Saudi Arabia, Egypt and the Bahamas. Allegedly, Hoskins acted as a facilitating agent to help Alstom’s Connecticut subsidiary bribe Indonesian officials, including a member of parliament. Hoskins allegedly hired “two consultants” who paid bribes to government officials to help Alstom win a contract worth USD 118 million from Indonesia’s state-owned electricity company. Hoskins’ final sentencing will take place in January 2020.
World Bank debars Portuguese engineering firm for obstructing investigation:
The World Bank debarred a Portuguese engineering services company, PROCESL Engenharia Hidráulica e Ambiental, S.A. (PROCESL), and three of its wholly owned subsidiaries, for 12 months due to fraud and obstruction in relation to a project in Brazil. According to the accusations, the company overstated the amount of hours an employee spent working on the project which constituted a fraudulent practice. The project, which was financed by the World Bank and worth USD 88 million, was aimed at strengthening local economic development in the region of Santos in Brazil. After the indictment, PROCESL pledged to increase internal compliance standards and also committed to continue collaborating with the World Bank Group Integrity Vice Presidency.
Judge orders 14 Peruvian lawyers detained in Odebrecht probe:
A Peruvian judge ordered 14 lawyers to be detained amid a probe alleging favoritism and bribery in the allocation process of public-work contracts to Brazilian construction company Odebrecht worth at least USD 250 million. According to the judge’s order, the lawyers will spend 18 months in preventive detention while Peruvian authorities finish their probe on the contracting processes. Odebrecht has already pleaded guilty for paying hundreds of millions worth of bribes in 12 countries in the region to win infrastructure projects with authorities across Latin America.
German Parliament passes anti-money-laundering package:
The German Parliament passed a raft on anti-money laundering reforms in order to bring the country’s legal framework in line with EU directives. The measures will establish more stringent regulations for auctioneers, real estate agents, notaries and precious metal dealers who will be subjected to greater scrutiny when declaring transactions. In addition, Germany’s Financial Intelligence Unit will be given more resources to prevent the flow of illegal money into the legal economic sector. While the bill still needs to be approved by the upper house of Parliament, Transparency International found that over 30 billion euros of illicit funds were funneled into Germany’s real estate market in 2017.
Judge fines Trump $2 million for misusing charity foundation:
A New York judge ordered Donald Trump to pay USD 2 million to an array of charities for misusing the funds of his own charity organization, the Trump Foundation. While Trump admitted to several wrongdoings, he described the charges as “politically motivated harassment”. One of the charges concerns an event in which Trump gave permission to his presidential staff to arrange a fundraising event together with the Trump Foundation to further Trump’s political campaign. Under US law, charities are prohibited from participating in political campaigns. Among other things, Trump also admitted to having had his charity pay for a 6-foot painting of him worth USD 10,000, which he agreed to pay back. Furthermore, he agreed to repay USD 11,000 he reportedly spent on champagne and sports memorabilia at a charity gala. As a result of the indictment, Trump has accepted restrictions on his future involvement in charitable organizations and his three eldest children, who were members of the board, must receive mandatory training on the duties of members who run charitable organizations.
Brazil’s former President Lula released from prison:
Brazil’s former president Lula Da Silva, was released from prison after the Supreme Court mandated a judgement that could potentially dissolve his corruption charges. The judgment states that a person can only be imprisoned once all appropriate avenues of appeal have been exhausted. The former president served 19 months after having been found guilty of receiving bribes from engineering firms in the form of renovation work at a country house from construction companies. While Da Silva has denied all allegations, his charges are yet to be acquitted. The Supreme Court’s ruling could also have potential implications for other imprisoned individuals serving time for nonviolent offenses and has been criticized by some as a blow to the country’s corruption-busting investigations.