Month in a Minute: November 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 November 2024 include deferred prosecution agreements (DPAs) for a Venezuelan telecommunications operator and former Chinese sports betting company, and indictments related to a bribery scheme in India.

Telefônica Venezolana Pays $85.2M to Resolve FCPA Charges

On Nov. 8, the U.S. Department of Justice (DOJ) announced that Telefônica Venezolana C.A., a Venezuela-based subsidiary of Telefônica S.A., a publicly traded telecommunications operator based in Spain, entered into a DPA to resolve charges that Telefônica Venezolana conspired to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA). In 2014, Telefônica Venezolana participated in a currency auction sponsored by the Venezuelan government to exchange bolivars for U.S. dollars. To ensure its success in the auction, Telefônica Venezolana agreed to bribe Venezuelan officials. Telefônica Venezolana purchased equipment at inflated prices from two suppliers who paid approximately $28.9 million of the inflated costs to an intermediary. The intermediary then paid a “commission” to Venezuelan officials to positively influence Telefônica Venezolana’s chances at the currency auction. The intermediary also spent more than $500,000 on a lavish vacation and $605,000 on luxury watches and jewelry for a Venezuelan government official and their family.

Telefônica Venezolana won approximately 65% of the currency awarded at the currency auction and was able to exchange Venezuelan bolivars for $110 million. These funds were then used to purchase equipment from the two suppliers that helped carry out the scheme.

In entering into the DPA, Telefônica Venezolana agreed to pay a criminal penalty of more than $85.2 million. Telefônica Venezolana’s penalty reflects a 20% reduction off of the fifth percentile above the low end of the otherwise applicable U.S. Sentencing Guidelines range. Telefônica Venezolana received credit for its cooperation efforts, which included making employees outside of the U.S. available for interviews, collecting and analyzing evidence, and producing documents to the DOJ. It also received credit for its remedial efforts, which included disciplining employees involved in or aware of the misconduct, strengthening its anti-corruption compliance program, and enhancing its processes for engaging and monitoring third parties.

BIT Mining Pays $10M To Resolve Parallel DOJ and SEC Investigations

On Nov. 18, BIT Mining Ltd., formerly Chinese sports betting company 500.com, whose shares traded on the New York Stock Exchange, entered into parallel resolutions with the DOJ and the U.S. Securities and Exchange Commission (SEC) to resolve charges that it conspired to violate and violated the anti-bribery and books and records provisions of the FCPA. On the same day, the DOJ unsealed a June 2024 indictment against BIT’s former CEO, Zhengming Pan, for one count of conspiracy to violate the anti-bribery and books and records provisions of the FCPA, one count of violating the anti-bribery provisions of the FCPA, and two counts of violating the books and records provisions of the FCPA for his role in the scheme.

According to the DPA and the SEC cease-and-desist order, from 2017 to 2019, Pan along with other employees and agents of BIT (then-500.com) bribed Japanese government officials to win a bid to open a gambling resort complex in Japan. To facilitate the bribes, BIT paid approximately $1.9 million to consultants who passed on at least a portion of the funds to Japanese government officials. The scheme was concealed through the use of sham consultancy contracts and by disguising the consultant fees as “management advisory fees” in BIT’s books. The bribes were paid to the officials in the form of cash, travel, entertainment, and gifts. Despite paying the bribes, BIT did not win the bid.

As part of its resolution with the DOJ, BIT entered into a three-year DPA and agreed to pay a criminal penalty of approximately $10 million. The DOJ and BIT agreed that the appropriate calculated criminal penalty was $54 million, but BIT received a reduction after the DOJ determined it would be unable to pay. The DOJ credited BIT for its cooperation with the DOJ’s investigation, which included voluntarily producing documents and financial information and providing information from its internal investigation. The DOJ also recognized BIT’s remediation efforts, which included creating an anti-corruption policy, conducting annual risk assessments, and reducing its presence in high-risk regions. As part of its resolution with the SEC, BIT agreed to pay a $4 million civil penalty, which the DOJ agreed to credit against the criminal penalty.

The case against Pan is pending

Indian Executives Indicted on FCPA Charges

On Nov 20, the DOJ unsealed a five-count criminal indictment charging eight individuals for their roles in a scheme to bribe Indian government officials to obtain solar energy supply contracts. The indictment charged Gautam Adani, the founder of Indian conglomerate Adani Group, his nephew, Sagar Adani, and Vneet Jain, both executives of Adani Green Energy, with conspiracy to commit securities fraud, conspiracy to commit wire fraud and securities fraud. The indictment also charged board members and executives at India-based company, Azure Power, including board member, Cyril Cabanes, with one count of conspiracy to violate the FCPA and a final count of conspiracy to obstruct justice.

According to the indictment, in 2019, the Solar Energy Corporation of India (SECI), a state-owned entity, awarded contracts to Adani Green and Azure Power for a solar project expected to generate more than $2 billion in profits over a 20-year period. Under the planned project, Adani Green and Azure Power would generate energy that the Indian government would sell to state electricity distribution companies. However, due to the high cost of energy, SECI struggled to find buyers To entice the state-owned companies to purchase the energy, executives and directors at Adani Green and Azure Power allegedly agreed to pay more than $250 million in bribes to Indian government officials.

The indictment alleges that defendants carried out the scheme through in-person meetings and the use of electronic messaging applications and code names. The indictment also alleges that Azure Power paid Adani Green its portion of the bribes-roughly $83 million-by withdrawing from contracts with SECI, which Adani Green executives then influenced Indian officials to reallocate to Adani Green. Cabanes allegedly convinced the Azure Power board to withdraw from the contracts under the guise of ongoing litigation and bad economic prospects.

Also, on Nov. 20, the SEC filed a complaint in the Eastern District of New York alleging that Cabanes violated the anti-bribery provisions of the FCPA. That same day, the SEC filed another complaint against Gautam and Sagar Adani alleging securities violations. Neither the DOJ nor the SEC have charged Gautam and Sagar Adani with FCPA violations.

Fact of the Month

Nov. 10, marked the 55th anniversary of the premiere of Sesame Street, which aired on the Public Broadcasting Service and introduced the world to iconic characters like Kermit the Frog, Oscar the Grouch, Bert, Ernie, and Big Bird. Throughout its more than five decade run, Sesame Street has won over 220 Emmy awards and 11 Grammys. Today, Sesame Street reaches more than 190 million children in 160 countries around the world and airs in 70 languages, making it one of the most widely viewed children’s shows in history.

2024 FCPA and Antibribery Alert update!! The latest edition of Hughes Hubbard’s comprehensive annual FCPA and Antibribery Alert is available for download! 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 anti-bribery enforcement and developments in France, Brazil and the UK, and by multilateral development banks. Access your copy here.