This week I am mining the guilty pleas of the former Unaoil Chief Executive Officer (CEO), Cyrus Ahsani, and former Chief Operations Officer (COO), Saman Ahsani, for what they might mean for Foreign Corrupt Practices Act (FCPA) enforcement and compliance practitioners going forward. The breadth and scope of the corruption is simply stunning. Today I want to consider the certifications obtained by Unaoil through illegal acts the company engaged in which are identified in the Information.
One of the key questions which will eventually need to be answered is how Unaoil was able to operate with a business model based on bribery and corruption for so long. After all, even if an organization did not suspect that Unaoil was corrupt, the organization would put Unaoil through a due diligence review based upon the high-risk nature of where and whom Unaoil was doing business. Yet none of the due diligence reviews were able to pick up the corrupt nature of the company. The Information began to explain how the company was able to do so.
It stated that from 2006 to 2016 the Ahsanis “conspired with others to conceal the ongoing bribery and money laundering schemes on behalf of itself and its intermediary companies.” The defendants used “code words when communicating about the corrupt scheme, made false statements over international wires to the United States to obtain necessary compliance certifications, caused false certifications to be made in official proceedings and took efforts to conceal the discovery of incriminating information by law enforcement in the United States and elsewhere.”
Moreover, these actions were specifically designed to frustrate due diligence efforts. As further stated in the Information, the defendants “conspired with others to make false statements, through interstate and international wire communications to “Due Diligence Organization,” an anti-bribery organization headquartered in the United States whose identity is known to the United States and defendants. Due Diligence Organization offered companies due diligence services, including screenings and certifications, which were designed to signal whether a company had met certain anticorruption standards.”
This company referred to in the Information is TRACE International, Inc. (TRACE) and from the time the Unaoil story broke back in 2016, TRACE has been a part of the story. In its original groundbreaking story, The Age noted, “Since 2007, Unaoil has been certified by anti-corruption agency Trace International.” However, TRACE was defrauded by a conspiracy of Unaoil, the Ahsanis and corrupt Unaoil customers by providing false and fraudulent information to Trace.
As further noted in the Information, the defendants “and others agreed to cause false and misleading information to be transmitted, through interstate and international wire, to Due Diligence Organization in the United States, including false statements that [Unaoil and the Ahsanis] were not involved in the payment of bribes to foreign officials. Further Defendants C. Ahsani and S. Ahsani and others provided Due Diligence Organization with business references, including executives at Company 3, Company 7, and Company 18 who knew that Intermediary Company paid bribes to win business for Company 3, Company 7 and Company 18, respectively.” Unaoil itself filed false statements with TRACE during the certification process as well.
Alexandra Wrage, President of TRACE, was cited in an article in Raconteur, for the following, “Ms Wrage claims that Unaoil made material misrepresentations to TRACE International during the due diligence process. Their certification was revoked on these grounds.” Wrage’s assertion was backed up in the Information by the following. A Business Executive from Company 18 who was aware that Unaoil was paying bribes on his companies behalf and who was also receiving kickbacks from Unaoil, “executed a Business Reference, in which the executive wrote Unaoil’s “Business Ethics and reputation is among all their Peers of the Highest Standard” and” To my knowledge…there is no family or financial ties between any [Intermediary Company] employee, managers, owner and government agencies/officials.”
Perhaps most ominously for the Business Executive involved the Information then states, “The executive at Company 18 then caused this business reference to be emailed, through interstate and international wire, to Due Diligence Organization.” Why is it ominous? Because 18 U.S.C. § 1343 (prohibiting wire fraud) provides:
Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than 20 years, or both.
This Wire Fraud Statute is above and beyond the obvious conspiracy of Unaoil, the Ahsanis, Executive of Company 18 and all the other persons who lied to TRACE and provided fraudulent misrepresentations in writing and wired through interstate and international wire, all of which violate the FCPA itself. These persons could well be prosecuted under the Wire Fraud Statute as well as perhaps the companies they work for could be prosecuted as well.
In the Information, the Department of Justice (DOJ) claims to know the identities of the corrupt executives who provided the false and fraudulent information to TRACE. Those persons may well face a lengthy prison term. After all, the Ahsanis pled guilty back in March 2018 and as Mike Volkov noted, “The Unaoil executives’ pleas were placed under seal while they cooperated with law enforcement investigations. The unsealing and scheduling of sentencing reflects the fact that the executives have completed their cooperation.”
The Raconteur article further cited to Wrage for the following, “Wrage conceded that no due diligence review or compliance policy is a guarantee against wrongdoing.” Every compliance practitioner needs to take that message to heart and understand that even with a company certified to some compliance standard, you must still maintain vigilance and manage the relationship with your third-parties after the contract is signed.
Tomorrow, I will provide some final thoughts on the Unaoil saga.
This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at firstname.lastname@example.org.
© Thomas R. Fox, 2019