Month in a Minute: August 2023

Hughes Hubbard’s anti-corruption “Month in a Minute” offers a quick look-back at the biggest foreign corruption-related developments from the prior month. The Month in a Minute is intended to provide a quick snapshot of the latest news and developments. We hope you find it a useful and perhaps even enjoyable resource.

Highlights from a busy August 2023 include a DOJ Opinion Procedure Release about sponsored travel of government officials, new charges against former Vitol trader Javier Aguilar in Texas, a jailtime sentence and forfeiture order for a former PDVSA director, the dismissal of charges against Airbus, two corporate resolutions of FCPA charges, and a new indictment related to bribery at Petrobras.

DOJ Issues Opinion Procedure Release Regarding Adoption Service Provider’s Sponsored Travel of Foreign Officials

On August 14, 2023, the DOJ issued Opinion Procedure Release No. 23-1. The Release states that, on June 26, 2023, the DOJ received a request from an adoption service provider seeking an opinion on whether its payment of travel expenses for officials from a foreign country would violate the antibribery provisions of the FCPA. The request came after the foreign country in which the service provider operates implemented a new requirement that its officials must visit with families that have adopted children from the country on an annual basis to “ensure the success of the adoptions.” In the opinion request, the service provider proposed that it would pay for two government officials chosen by a government agency of the foreign country to go on a five-day trip to Massachusetts, New York, and Washington, DC to complete this post-adoption supervision and meet with families and their adopted children. The costs the service provider proposed to cover included, among other items, economy class airfare, lodging at a mid-range hotel, local transportation, meals, and certain recreation costs (museum visits or city tours) not exceeding $100. In stating that it did not intend to take enforcement action against the service provider, the DOJ noted that the proposed expenses reflected no corrupt intent and appeared to be reasonable and related to the service provider’s services. The DOJ’s decision is in line with two of its prior opinion procedure releases, Opinion Procedure Release 11-01 and Opinion Procedure Release 12-02, in which it also declined to take enforcement action against adoption service providers seeking to sponsor travel of foreign officials.

Vitol Trader Javier Aguilar Faces New Charges in Texas

On August 3, 2023, Javier Aguilar, a former trader for Vitol Group (“Vitol”), was charged in the U.S. District Court for the Southern District of Texas with conspiracy to violate the FCPA and with substantive violations of the FCPA, the Travel Act, and money laundering, for his role in paying more than $600,000 in bribes to officials of PEMEX Procurement International, Inc. (“PPI”), a U.S.-based subsidiary of Mexico’s state-owned oil company, Petróleos Mexicanos’ (“PEMEX”). According to the indictment, between August 2017 and July 2020, Aguilar and his co-conspirators paid bribes to Carlos

Espinoza Barba (“Espinoza”) and Gonzalo Guzman Manzanilla (“Guzman”), both procurement managers at PPI, in exchange for inside information that assisted Vitol in winning a contract to supply ethane to PEMEX. To facilitate the scheme, Aguilar and his co-conspirators allegedly created a series of sham invoices and service agreements, and used code words, code names, and encrypted messaging platforms. The scheme was allegedly carried out using intermediaries and an extensive network of shell companies and bank accounts. According to the indictment, Aguilar transferred funds from Vitol bank accounts in the United Kingdom to bank accounts for two shell companies in Curaçao that were controlled by Lionel Hanst (“Hanst”), a Dutch citizen residing in Curaçao. Hanst then made payments into bank accounts for shell companies in Mexico that were controlled by an intermediary who facilitated the payments to Guzman and Espinoza. In total, Aguilar allegedly paid approximately $371,466 in bribes to Guzman and approximately $255,895 in bribes to Espinosa. These charges come after the U.S. District Court for the Eastern District of New York dismissed similar charges against Aguilar for lack of venue in May 2023. Aguilar still faces money laundering charges related to the PEMEX scheme in the Eastern District of New York, as well as charges for his alleged role in paying more than $920,000 in bribes to public officials affiliated with Ecuador’s national oil company and the Ecuadorian Ministry of Hydrocarbons in exchange for securing a $300 million fuel oil contract for Vitol. The trial for those charges is scheduled for January 2024.

Former PDVSA Official Sentenced to Jail Time and Ordered to Forfeit $18 Million

On August 7, 2023, U.S. District Judge Kenneth Hoyt of the U.S. District Court for the Southern District of Texas sentenced Louis Carlos de León Perez, a former director of a subsidiary of Venezuela’s state-owned oil company, Petróleos de Venezuela S.A. (“PDVSA”), to a year and a day in prison and two years of supervised release in connection with de León’s 2018 guilty plea to FCPA and money laundering charges related to his role in a bribery scheme involving PDVSA. Judge Hoyt credited de León with 21 months of time served. Judge Hoyt also ordered de León to forfeit $18 million and pay a fine of $472,064. In connection with his guilty plea, de León admitted to receiving and soliciting bribes and kickbacks in exchange for providing companies in the U.S. and elsewhere with business advantages. He also admitted to working with two U.S. businessmen to launder the proceeds of the scheme in a series of transactions.

Criminal Information Against Airbus Dismissed Following Expiration of DPA

On August 10, 2023, Judge Tanya Chutkan in the U.S. District Court for the District of Columbia granted the DOJ’s motion to dismiss a two-count information against Airbus, a global aerospace and defense manufacturer. On July 28, 2023, the DOJ moved to dismiss the information on the ground that Airbus had fulfilled its obligations under its 2020 deferred prosecution agreement (“DPA”), which included cooperating with investigators, strengthening its compliance program, and paying a U.S. criminal monetary penalty of $527 million. Airbus entered into the DPA to resolve charges that it conspired to violate the FCPA and the Arms Export Controls Act.

Corficolombiana Enters Into DPA and Pays $80 Million To Resolve Bribery Investigations

On August 10, 2023, Grupo Aval Acciones y Valores S.A.’s (“Grupo Aval”) and its subsidiary, Corporación Financiera Colombiana S.A. (“Corficolombiana”), agreed to pay a total of $80.8 million in penalties and disgorgement to resolve allegations by the DOJ and SEC that Corficolombiana paid bribes to Colombian officials in order to win a Colombian toll-road project. Corficolombiana entered into a three year DPA with the DOJ in connection with a one count information charging Corficolombiana with conspiracy to violate the FCPA. Grupo Aval and Corficolombiana also consented to an SEC cease-and-desist order finding that they violated the accounting provisions and, in the case of Corficolombiana, the anti-bribery provisions of the FCPA. According to charging documents, between 2012 and 2015, Corficolombiana conspired with Odebrecht S.A. (“Odebrecht”), a global construction conglomerate headquartered in Brazil, to pay more than $23 million in bribes to three Colombian government officials in order to win a contract to build a highway toll road in Colombia. To facilitate its scheme, Corficolombiana caused other companies to enter into fictitious contracts with companies associated with two unnamed Colombian lobbyists who acted as intermediaries to pass bribes to Colombian officials in the executive and legislative branches.

In connection with the DPA, Corficolombiana agreed to pay a $40.6 million criminal penalty, half of which the DOJ agreed to credit against money Corficolombiana paid to resolve charges brought against it by Colombia’s Superintendencia de Industria y Comercio based on the same conduct. Corficolombiana’s criminal fine reflected a 30% reduction off of the bottom of the applicable U.S. Sentencing Guideline fine range based on its cooperation and remedial efforts, which included timely providing the DOJ with information obtained from its internal investigation, making factual presentations to the DOJ, collecting and producing documents and translations, conducting a root cause analysis, overhauling its compliance program, and enhancing its third-party intermediary risk management process. In connection with the SEC resolution, Grupo Aval and Corficolombiana agreed to pay more than $40 million in disgorgement and prejudgment interest to the SEC. In total, Grupo Aval and Corficolombiana agreed to pay $80.8 million in penalties and disgorgement for the misconduct.

3M Pays $6.5 Million to Resolve FCPA Charges

On August 25, 2023, the SEC announced that the 3M Company (“3M”), a global manufacturer of products and services based in St. Paul, Minnesota, agreed to pay more than $6.5 million to resolve charges that it violated the books and records and internal controls provisions of the FCPA. According to the SEC Order, from 2014 to 2017, employees at one of 3M’s China-based subsidiaries, 3M-China Ltd. (“3M-China”), paid approximately $1 million to fund at least 24 trips for Chinese government officials purportedly to attend overseas conferences, educational events and healthcare facility visits in the U.S. and Australia as part of 3M-China’s marketing and outreach efforts. However, the funds were actually used to pay for tourism activities including guided tours, shopping trips, and other leisure activities to induce the officials to purchase 3M products. The SEC found that 3M-China employees submitted fictitious itineraries to their compliance department while colluding with two Chinese travel agencies to develop secondary itineraries consisting of tourism activities. The 3MChina employees shared the secondary itineraries with trip participants but asked them to keep the actual itineraries hidden. Between February 2016 and September 2018, 3M-China employees allegedly caused 3M to transfer $254,000 to the Chinese travel agencies to pay for some of the tourism activities. 3M-China employees improperly recorded the overseas travel and tourism activities as legitimate business expenses, causing 3M-China’s books to be inaccurate. Although it did not admit or deny the charges, 3M agreed to pay approximately $3.5 million in disgorgement, $1 million in prejudgment interest, and a $2 million civil penalty, for a total of $6.5 million, to resolve the matter. 3M received credit for self-reporting and for its cooperation efforts, which included making witnesses available for interviews, providing translations of documents, and sharing the findings of its own internal investigation, among other actions. 3M also received credit for its remedial efforts, which consisted of disciplining or terminating the employees involved, terminating its relationship with the Chinese travel agencies, and revising and strengthening its internal controls.

Owner of Connecticut-based Oil and Gas Trading Companies Charged in Petrobras Bribery Scheme

On August 29, 2023, a federal grand jury in Connecticut returned a superseding indictment charging Gary Oztemel with one count of conspiring to violate the FCPA, one count of conspiring to commit money laundering, and two counts of money laundering for his role in a bribery scheme involving Brazil’s state-owned oil company Petróleo Brasileiro S.A. – Petrobras (“Petrobras”). Oztemel is the owner of Oil Trade & Transport (“OTT”) and Petro Trade Services (“Petro Trade”). According to the indictment, from 2010 to 2018, Oztemel, along with his brother, Glenn Oztemel, and Eduardo Innecco, an oil broker, engaged in a scheme to pay hundreds of thousands of dollars in bribes to foreign officials at Petrobras in exchange for inside information that led to business advantages for OTT and two unnamed trading companies. To conceal their scheme, the Oztemel brothers, Innecco, and their co-conspirators allegedly used coded language, fictitious names, personal email accounts, and encrypted messages. They also allegedly hid the payments by engaging in sham negotiations and issuing false invoices for consulting fees and commissions. Per the indictment, Oztemel helped facilitate multiple “back-to-back” trades among OTT, Petrobras, and the two unnamed trading companies. He then caused OTT to transmit the profits from these trades from U.S. bank accounts to bank accounts in Switzerland, where Innecco used them to make the corrupt payments to Petrobras officials. The corrupt payments were allegedly made either in cash or by depositing them into a bank account in Uruguay. Oztemel also allegedly used his second company, Petro Trade, to conceal the proceeds of the scheme. Oztemel is the latest individual to be charged in connection with this scheme. He faces more than 30 years in prison if convicted on all counts. Oztemel’s brother, Glenn Oztemel, and Innecco also face multiple charges in connection with the scheme. Rodrigo Berkowitz, a former-Petrobras official, pleaded guilty in 2019 to receiving bribes through the scheme.

Fact of the Month

August, the final full month of summer, is known for its long hot days. However, astronomy enthusiasts also know August as the month in which the Perseid meteor shower peaks. The Perseid meteor shower is visible from mid-July to the end of August, but typically peaks between August 9th and 14th. During the shower’s peak, it is estimated that there are 60 or more meteors per hour, or, as some like to say, a shooting star every minute!