The US government fiscal year ends today. Just as in the business world, where many companies try and clear out any unexecuted deals or open contracts, we saw the Securities and Exchange Commission (SEC) clear out three outstanding Foreign Corrupt Practices Act (FCPA) enforcement actions late last week. As usual the stories were first reported in the FCPA world by the FCPA Blog, with the unbeatable father-son duo of Dick and Harry Cassin.
The three enforcement actions involved Quad/Graphics Inc., a Wisconsin-based digital and print marketing provider and its Peruvian subsidiary, Quad/Graphics Peru S.A. The second involved Barclays PLC. The third involved the Canadian clean fuel company Westport Fuels Systems, Inc. and its former Chief Executive Officer (CEO), Nancy Gougarty of Leesville, South Carolina. Over the next week, I will be considering each enforcement action in some depth but today, I wanted to summarize the cases.
According to the SEC Press Release, Quad/Graphics’ Peruvian subsidiary, from at least 2011 to January 2016, repeatedly paid or promised bribes to Peruvian government officials to win sales contracts and avoid penalties and improperly attempted to influence the judicial outcome of a dispute with the Peruvian tax authority. The subsidiary also created false records to conceal transactions with a state-controlled Cuban telecommunications company in violation US sanctions and export controls laws. Finally, Quad/Graphics’ China-based subsidiary, Quad/Tech Shanghai Trading Company, Ltd., from 2010-2015 used sham sales agents to make and promise improper payments to employees of private and governmental customers to secure business. The company agreed to pay $6,936,174 in disgorgement, $959,160 in prejudgment interest, and a $2 million civil penalty, for total monetary relief of nearly $10 million.
Barclays is well known to readers of this blog for its prior regulatory stumbles in the banking sector and in the actions of its Chief Executive to unmask an anonymous whistleblower. Barclays came to FCPA grief for the actions of its Asia Pacific Region which, according to the SEC Press Release, “provided valuable employment to the relatives, friends, and associates of government officials to obtain or retain business or other benefits. Many of these “Relationship Hires” were made through an unofficial intern program, but some were also hired through Barclays’ formal intern program, its graduate program, or as candidates for permanent positions.”
Further, the bank “failed to devise and maintain a system of internal accounting controls around its hiring practices sufficient to provide reasonable assurances that its employees were not bribing foreign officials in violation of company policy and the FCPA. In addition, with respect to certain hires, Barclays’ employees in the Asia Pacific Region falsified corporate records to conceal the true source of the candidates and the reasons for hiring them.” These actions mandated a finding of a violations of the books and records and internal accounting controls provisions of the Securities Exchange Act of 1934. Barclays agreed to pay $6,308,726, consisting of disgorgement of $3,824,686, prejudgment interest of $984,040 and a $1.5 million civil penalty.
The third FCPA resolution involved Westport Fuels Systems, Inc., a Canadian clean fuel technology company headquartered in Vancouver, Canada, and its former CEO, Gougarty. According to the SEC Press Release, beginning no later than 2016, Westport, acting through Gougarty and others, engaged in a scheme to bribe a Chinese government official to obtain business and a cash dividend payment by transferring shares of stock in Westport’s Chinese joint venture (JV) to a Chinese private equity fund in which the government official held a financial interest.
Additionally, the company concealed the identity of the Chinese private equity fund in its public filings, and in its books and records, by falsely identifying a different entity as the counterparty to the transaction. Gougarty caused Westport’s violations by circumventing Westport’s internal accounting controls and signing a false certification concerning the sufficiency of those controls. For all of these FCPA violations, Westport also agreed to pay $2,546,000 in disgorgement and prejudgment interest and a civil penalty of $1,500,000, and Gougarty agreed to pay a civil penalty of $120,000.
There may well be additional cases announced on September 30 as the SEC works to close out its fiscal year.
There was one other FCPA matter which was announced last week which bears noting. As reported by Dick Cassin on the FCPA Blog, Luis Alberto Chacin Haddad, a Miami-based businessman pled guilty to a single FCPA conspiracy count was sentenced Wednesday to 51 months in federal prison. He admitted to bribing officials at Venezuela’s state-owned electricity company, Corpoelec, in exchange for $60 million in contracts for Florida-based businesses he owned with a co-conspirator.
As noted by Cassin, the Department of Justice (DOJ said of Chacin, “The nature and circumstances of the offense were serious: the scheme involved high-ranking officials in Venezuela (one of whom was a Minister); the recipients of the corrupt contracts were U.S. companies; proceeds from those contracts were transferred to and between bank accounts in the United States, thereby tainting the U.S. financial system; at least one kickback payment was made from a U.S. bank account; and the defendant and his co-defendant each profited $5.5 million from the scheme.”
Chacin asked the judge for an 18-month sentence which the DOJ opposed arguing for the full 60 months, as suggested by the Sentencing Guidelines. Judge Cecilia M. Altonaga, who Cassin noted is the “first Cuban-American woman appointed as a U.S. federal judge” sentenced Chacin to 51 months in prison and two years of supervised release.
All in all, it was quite a week in the FCPA.