Month in a Minute: January 2024

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 January 2024 include the beginning of a trial for a former Vitol Trader, a coordinated FCPA resolution for German software company SAP SE, a new whistleblower program out of the Southern District of New York, and probation for a PDVSA-related defendant.

Former Vitol Trader’s Bribery Trial Begins

On January 5, 2024, the trial of Javier Aguilar, a former trader for Vitol Group (“Vitol”), began in the U.S. District Court for the Eastern District of New York. Aguilar is facing three counts of conspiracy to violate the FCPA, violating the FCPA, and conspiracy to commit money laundering. In 2020, Aguilar was charged with paying approximately $920,000 in bribes to a former senior manager at Petroecuador, Ecuador’s national oil company, as well as to an official in the Ecuadorian Ministry of Hydrocarbons in exchange for securing a $300 million fuel oil contract for Vitol. In a December 2022 superseding indictment, Aguilar was also charged with paying more than $600,000 in bribes to officials of PEMEX Procurement International, Inc., a U.S.-based subsidiary of Mexico’s state-owned oil company, Petróleos Mexicanos (“PEMEX”), in exchange for information that assisted Vitol in winning a contract to supply ethane to PEMEX. Aguilar and his co-conspirators allegedly concealed the bribe payments in both schemes through the use of shell companies, various bank accounts, and false consulting and service agreements. On May 31, 2023, Judge Eric Vitaliano of the U.S. District Court for the Eastern District of New York dismissed two foreign bribery charges against Aguilar related to the PEMEX scheme for lack of venue—charges Aguilar now faces in the U.S. District Court for the Southern District of Texas. However, Judge Vitaliano declined to dismiss a related money laundering charge, as some of the transactions allegedly occurred in the Eastern District of New York. It is estimated Vitol received energy contracts worth more than half a billion dollars as a result of Aguilar’s schemes.

Aguilar pleaded not guilty and his attorneys have argued that he did not know that Vitol funds were being used to bribe foreign officials. Prosecutors have argued that Aguilar was the architect of the scheme and made a significant sum of money—often more than $1 million a year—as a result of his efforts. The trial is ongoing. If convicted, Aguilar could face more than a decade in prison.

SAP to Pay Over $220 Million to Resolve FCPA Charges

On January 10, 2024, German multinational software company SAP SE (“SAP”) entered into a three- year deferred prosecution agreement (“DPA”) with the DOJ, an agreed cease-and-desist order with the SEC, and agreed to pay approximately $222 million in penalties and disgorgement to resolve allegations that it conspired to violate the FCPA’s anti-bribery and accounting provisions.

According to the DPA, between 2013 and 2017, SAP employees paid bribes to South African government officials in exchange for software and professional service contracts. SAP paid the bribes through a network of intermediaries and falsely recorded them as sales commissions. In addition, from 2015 to 2018, SAP employees bribed officials of Indonesia’s state telecommunication and information accessibility agency and the Indonesian Ministry of Maritime Affairs and Fisheries by providing them with cash and other valuable gifts directly and through intermediaries in exchange for securing software and service contracts with their organizations. SAP obtained approximately $103 million in profits from its illegal conduct. Similarly, the SEC found that between 2014 and 2022, SAP, through its subsidiaries, paid bribes directly and through intermediaries to government officials in South Africa, Indonesia, Malawi, Tanzania, Ghana, Kenya, and Azerbaijan in order to secure public sector contracts with values ranging from $40,000 to $35.4 million. The SEC also found that SAP inaccurately recorded the bribes as legitimate expenses in its books and records and failed to implement sufficient payment approval controls.

Under the DPA, SAP agreed to pay a criminal penalty of $118.8 million—a 40% discount off of the tenth percentile above the low end of the applicable sentencing guidelines range. SAP’s penalty was further reduced by $109,141, to reflect bonuses it withheld from employees suspected of wrongdoing pursuant to the DOJ’s Compensation Incentives and Clawbacks Pilot Program. The DOJ further credited SAP up to $55.1 million of the penalty for any fines it pays to South African authorities in relation to the same conduct. SAP also agreed to forfeit approximately $103.4 million of profits linked to the bribery schemes, and DOJ agreed to credit up to that total amount any disgorgement paid to the SEC or South African authorities for the same conduct. Under the cease-and-desist order, SAP is required to disgorge $98.4 million in ill-gotten profit and interest. SAP is eligible for offsets up to $59.4 million of that amount for any payments made to the South African government or South African state-owned entities in connection with parallel proceedings in South Africa.

Both the DOJ and SEC credited SAP’s extensive cooperation and remedial efforts, including steps to image phones of relevant custodians at the outset of the investigation, adjust its compensation incentives to align with compliance objectives and reduce corruption risk, implement enhancements to its internal controls and compliance program, and eliminate the use of a third-party sales commission model worldwide, among other actions.

SDNY Announces New Whistleblower Pilot Program

On January 10, 2024, Damian Williams, U.S. Attorney for the Southern District of New York, announced a Whistleblower Pilot Program, which offers non-prosecution agreements to individuals who disclose criminal activity in certain circumstances. Under the Whistleblower Pilot Program, individuals with knowledge of criminal conduct undertaken by or through companies or certain other enumerated groups involving fraud, corporate control failures, affecting market integrity, or state or local bribery can receive non-prosecution agreements where: (1) the misconduct is not public or already known to the government; (2) the individual discloses the misconduct voluntarily; (3) the individual provides substantial assistance to the investigation and prosecution of one or more individuals of equal or greater culpability; (4) the individual truthfully discloses all criminal conduct; (5) the individual is not an elected or appointed government official, a member of federal law enforcement, or the CEO or CFO of a public or private company; and (6) the individual has not engaged in certain criminal conduct, including conduct involving the use of force and violence.

Where an individual does not meet all the formal requirements for the Whistleblower Pilot Program, prosecutors have discretion to extend a non-prosecution agreement if it would be in the public interest. This Program, which comes as the DOJ is also taking steps to encourage corporate self- reporting and as SDNY focuses on bringing complex public corruption cases, does not cover the bribery of federal officials or violations of the FCPA.

Participant in PDVSA Scandal Sentenced to Three Years’ Probation

On January 17, 2024, U.S. District Judge Gray Miller of the Southern District of Texas sentenced Tulio Anibal Farias Perez to three years of probation in relation to his March 2020, guilty plea to one count of conspiring to violate the FCPA. Farias was charged with conspiring with his former business partner to pay bribes to a procurement officer at Citgo Petroleum, the U.S. subsidiary of Venezuela’s state- owned oil company, Petróleos de Venezuela S.A. (“PDVSA”), to receive contracts and other perks from PDVSA. Prosecutors sought a sentence of three years imprisonment for Farias but Judge Miller opted for a probationary sentence.

Fact of the Month

January 1 marked the 132nd anniversary of the opening of Ellis Island. Ellis Island, the first and largest federal immigrant processing station, opened its doors on January 1, 1892, and over the next 62 years, approximately 12 million future Americans passed through its doors. Bonus Fact: Hughes Hubbard’s New York Office sits at the southern tip of Manhattan. Its location gives Hughes Hubbard employees, friends, and clients a stunning view of Ellis Island as well as the Statue of Liberty.

2023 FCPA & Anti-Bribery Alert Update!

The latest edition of Hughes Hubbard’s comprehensive annual FCPA & Anti-Bribery Alert is available for download and print copy. For the 15th consecutive year, the Alert discusses the last year’s anti- bribery developments in detail, and once again includes a deep dive into FCPA enforcement, as well as antibribery enforcement and developments in France, Brazil, the UK, and China, and by multilateral development banks.