In the first half of 2024, the U.S. Department of Justice (DOJ) reached three settlements for corporate violations of the Foreign Corrupt Practices Act (FCPA), with penalties ranging from US$126 million to US$661 million. The DOJ also won an FCPA trial against an individual, secured guilty pleas from individuals in FCPA-related cases, and brought new indictments against individuals in FCPA-related cases. Enforcement of the FCPA by the U.S. Securities and Exchange Commission (SEC) has been quieter, however, with only one corporate settlement announced and no new individual charges so far this year.
While the FCPA targets bribery of foreign officials, other laws, of course, prohibit the bribery of government officials in the U.S. — and those laws have attracted significant attention over the past few months: A jury this week convicted a sitting U.S. senator, alongside two international businessmen, on charges that the senator and his wife received gold bars, cash, a car, and other bribes to help the businessmen and the governments of Egypt and Qatar. The DOJ charged a sitting congressman with bribery and acting as a foreign agent of an Azerbaijani oil company and Mexican bank in another case implicating the Foreign Agents Registration Act. And the U.S. Supreme Court delivered an opinion limiting federal authority to prosecute "gratuities" (in contrast to bribes) given to certain government officials.
Below we cover recent anti-corruption enforcement actions, the latest DOJ programs meant to incentivize corporations to report corporate misconduct, new Supreme Court decisions that circumscribe the enforcement authority of the DOJ and SEC, and more.
DOJ Resolves a String of FCPA Cases Against Commodities Trading Firms and Associated Individuals
The DOJ's widespread investigation into FCPA violations by commodities traders has now produced six corporate resolutions and at least 20 individual criminal convictions, with significant developments in the first half of the year.1
On March 1, 2024, Gunvor S.A., a commodities trading company based in Switzerland, pleaded guilty and agreed to pay over US$661 million to resolve the DOJ's investigation. Gunvor admitted that it and its co-conspirators had paid over US$97 million to intermediaries — including through banks in the United States and shell companies in Panama and the British Virgin Islands — "knowing that some of the money would be and in fact was used to bribe Ecuadorean officials." In exchange for the bribes, Gunvor avoided a competitive bidding process for rights to oil-backed loan contracts with Ecuador's state oil company, Petroecuador; obtained favorable contract terms; and received confidential Petroecuador information.
While Gunvor did not voluntarily disclose the misconduct to U.S. authorities and had to reckon with a history of corruption-related offenses, the DOJ agreed to a criminal fine toward the lower end of the applicable Sentencing Guidelines as a result of the company's cooperation and remediation efforts. For example, Gunvor received credit from the DOJ for "imaging the phones of relevant custodians at the beginning of Gunvor's internal investigation, thus preserving business communications sent on mobile messaging applications," and also for developing new compliance policies and procedures.
On March 28, 2024, the DOJ announced that Trafigura Beheer B.V. (Trafigura), another Switzerland-based commodities trading company, had pleaded guilty and agreed to pay over US$126 million to resolve an investigation into FCPA violations involving Brazil's state oil company, Petrobras. According to the DOJ, "Trafigura and its co-conspirators, who met in Miami to discuss the bribery scheme, agreed to make bribe payments of up to 20 cents per barrel of oil products bought from or sold to Petrobras by Trafigura and to conceal the bribe payments through the use of shell companies, and by funneling payments through intermediaries who used offshore bank accounts to deliver cash to officials in Brazil." In announcing the resolution, the DOJ noted that, while Trafigura was receiving some credit for its cooperation and remediation, the company had "failed to preserve and produce certain documents and evidence in a timely manner and, at times, took positions that were inconsistent with full cooperation."
The DOJ has notched additional individual convictions this year as well. On February 23, 2024, a federal jury in New York convicted Javier Aguilar, a former trader at the U.S. affiliate of energy trading company Vitol, Inc., on FCPA and money laundering charges related to bribery of officials at Petroecuador and at a subsidiary of Mexico's state oil-and-gas company, PEMEX. Aguilar also is a defendant in another federal case in the Southern District of Texas concerning alleged corruption of Mexican officials. He reportedly is in discussions with the U.S. government about a potential global resolution of the Texas and New York cases.2
In addition, on June 24, 2024, Gary Oztemel, the owner and president of Connecticut-based oil trading companies, pleaded guilty to a money laundering charge related to bribes paid to Brazilian officials to win business with Petrobras.3 These individual prosecutions exemplify the DOJ's continuing use of money laundering statutes to combat international corruption.
SEC Enforcement of the FCPA Remains Slow, Faces Potential New Challenges
The SEC has announced only one new FCPA enforcement action this year: a resolution, in January, with publicly traded global software company SAP SE, as part of a global settlement that includes the DOJ and South African authorities. According to the SEC, "SAP, through its wholly-owned subsidiaries, employed third-party intermediaries and consultants in various schemes to pay bribes to government officials in order to obtain business in South Africa, Malawi, Kenya, Tanzania, Ghana, Indonesia, and Azerbaijan." In total, SAP agreed to pay over US$220 million to resolve the foreign bribery investigations with U.S. and South African authorities. The DOJ stated that the penalty for having paid bribes to win government contracts ... would have been even higher if SAP had not cooperated with the government, including by "imaging the phones of relevant custodians at the beginning of the Company's internal investigation, thus preserving relevant and highly probative business communications sent on mobile messaging."4
The SEC has not brought any new FCPA cases against individuals this year and, in fact, has not brought any new FCPA cases against individuals since 2021. While SEC officials have expressed a commitment to holding individuals accountable, they also have acknowledged certain challenges in bringing civil FCPA cases. For instance, the chief of the SEC's FCPA Unit has noted the need to establish personal jurisdiction over individuals located abroad, as well as the SEC's lack of statutory tools such as money laundering laws that the DOJ often uses when prosecuting individuals for participating in corruption schemes.
Additional enforcement challenges may await the SEC following the Supreme Court's recent decision in Securities and Exchange Commission v. Jarkesy, No. 22-859, 603 U.S. ___, slip op. (2024). In Jarkesy, the Court held that the Seventh Amendment to the U.S. Constitution entitles a defendant to a jury trial when the SEC charges securities fraud and seeks civil penalties pursuant to Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, or Section 206 of the Investment Advisers Act of 1940. The SEC no longer can bring such claims in an SEC administrative proceeding, but instead must bring them in a federal court.
Jarkesy is not an FCPA case and addresses only a subset of administrative enforcement actions that the SEC authorizes. However, it may only be a matter of time until FCPA and other actions brought through SEC administrative proceedings are challenged. For more analysis on Jarkesy, see In "Seismic Shift," Supreme Court Strips SEC of Ability To Seek Civil Penalties for Securities Fraud in Administrative Proceedings.
U.S. Supreme Court Restricts Federal Prosecutions for "Gratuities" to Local, State, and International Organization Officials Receiving Federal Funds
On June 26, 2024, the Supreme Court issued a 6-3 opinion in Snyder v. United States, 603 U.S.___ (2024), holding that 18 U.S.C. § 666 — a federal fraud statute aimed at a variety of misconduct by state, local, tribal, and international organization officials in connection with federal program funds — does not criminalize gratuities received for an official's past acts. This decision continues the Court's ongoing trend of narrowing federal anti-corruption laws and limiting when and how federal prosecutors can bring charges against state and local government officials.
Snyder draws a temporal-based distinction separating a "bribe" from a "gratuity": whether the official agrees to accept payment before an official act (a bribe) or agrees to accept payment after an official act (a gratuity). This distinction may support challenges to federal charges that a state or local official unlawfully accepted a payment as a reward for official action. For example, individuals convicted last year on federal charges concerning efforts to influence and reward the former speaker of the Illinois House of Representatives with respect to legislation beneficial to a publicly traded electric utility company have had their sentencings stayed and are renewing their motions for acquittal in light of Snyder.5
Although Snyder cabins the scope of federal anti-corruption laws, it also serves as a reminder that companies interacting with local, state, federal, and foreign officials, must navigate varying (and potentially inconsistent) laws and regulations. As Justice Kavanaugh pointed out: "Not surprisingly, different governments draw lines in different places." Some jurisdictions bar gifts for specific activities; some make exceptions for certain gifts; and some prohibit all gifts from business entities doing business with or bidding for contracts with the government. As the Court suggested, even if a gratuity does not violate Section 666, "a gratuity offered and accepted after the official act may be unethical or illegal under other federal, state, or local laws."
While the use of Section 666 has declined in recent years (according to the Bureau of Justice Statistics, about 145 people were charged under the statute each year from 1995 to 2010, but over the last five years, the average has dropped to around half of that), time will tell if the Snyder decision — and the Court's six-step analysis — will have rippling effects on other anti-corruption statutes.6
For more commentary from Arnold & Porter, see Tip Not Included: SCOTUS Strips Gratuities From the Scope of 18 U.S.C. § 666 in Snyder v. United States.
DOJ Establishes New Programs To Encourage Individuals To Report Corporate Misconduct
In the first half of 2024, the DOJ rolled out new policies meant to encourage individuals to report suspected corporate criminal activity and to cooperate with government investigators. Specifically, in March, the DOJ announced a monetary whistleblower award program similar to the one operated by the SEC. And in April, DOJ's Criminal Division inaugurated its nationwide Pilot Program on Voluntary Self-Disclosures for Individuals, which took effect immediately. This pilot program offers a substantial new "carrot" to cooperators in the form of an individual non-prosecution agreement if certain conditions are met. By dangling a pass on criminal charges in exchange for cooperation and information not previously known to the DOJ, the government is signaling its continued focus on corporate criminal enforcement. For more analysis from Arnold & Porter, see Help Wanted: DOJ Seeks Cooperators To Address Corporate Crime by Offering Leniency and Using Carrots To Wield Larger Sticks: Deputy Attorney General Lisa Monaco Announces New DOJ Pilot Program for Whistleblowers.
UK Economic Crime Group: Enforcement Update
For recent developments in the United Kingdom, including the five-year strategic plan of the Serious Fraud Office, which enforces the UK Bribery Act, you can read Arnold & Porter's UK Economic Crime Group Enforcement Update.
Footnotes
1. See Press Release, U.S. Dep't of Justice, Justice Department's Investigation into International Commodities Trading Companies' Foreign Bribery Schemes Results in Six Corporate Resolutions and 20 Individuals Convicted (Mar. 28, 2024).
2. See United States v. Aguilar, No. 4:23-cr-00335-1 (S.D. Tex.), ECF No. 55.
3. Plea Agreement, United States v. Oztemel, No. 23-cr-00026 (D. Conn. June 24, 2024), ECF No. 187; see also Press Release, U.S. Dep't of Justice, Executive Charged in International Oil and Gas Trading Bribery and Money Laundering Scheme (Aug. 29, 2023).
4. Deferred Prosecution Agreement, United States v. SAP SE, No. 1:23-cr-00202-RDA (E.D. Va.), ECF No. 17.
5. See United States v. McClain, 1:20-cr-00812 (N.D. Ill.).
6. Prosecutors have charged violations of Section 666, along with the FCPA, in cases involving corruption of United Nations officials, see United States v. Ng Lap Seng, 934 F.3d 110 (2d Cir. 2019), and cases involving corruption of state government officials by persons working for publicly traded companies subject to the FCPA's accounting provisions, see United States v. McClain, 1:20-cr-00812 (N.D. Ill.).
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