Remarks of Acting Principal Deputy Assistant Attorney General Trevor N. McFadden
Thank you for that introduction. Good morning to all of you. I am grateful to be with you today, and it is a pleasure to be here in São Paulo, a truly beautiful city. Many thanks for the invitation to address you and to kick off today’s events. We are here to discuss anti-corruption: a topic of key importance in the United States, Brazil and countries throughout the world.
I want to start with stating what is probably abundantly clear to all of you: over the last few years, Brazil has become one of the U.S. Justice Department’s closest allies in the fight against corruption. Thus far, the Department of Justice and Brazilian authorities have entered into four global resolutions and assisted one another in dozens of other cases. This requires high levels of coordination, trust and resolve between our prosecutors and law enforcement agents. On a nearly daily basis, our prosecutors and agents are in touch, exchanging information and assisting one another as appropriate.
Earlier this week, I had the great honor of meeting with Prosecutor General Janot, Minister of Justice Serraglio, Federal Police Director General Coimbra and DRCI Director Luís Roberto Ungaretti. The close relationships between our agencies on both leadership and staff levels is testament to the productive partnerships our agencies have developed.
Anti-corruption prosecutors everywhere are driven by several similar principles. Bribery of public officials is wrong and intentional violations of anti-corruption laws must be treated as serious attacks on our system of government and on the welfare of our people. Corruption has particularly harmful effects on the most vulnerable citizens of countries in which the corruption occurs. Indeed, if corrupt officials can extort multinational businesses with impunity, think of the expectations that sets for their interactions with the poor and unprotected in their countries. Corruption impedes fair and free competition and creates a high risk that prices will be distorted and products and services will be substandard. Importantly, corruption disadvantages honest businesses that do not pay bribes. And bribes impede economic growth, undermine democratic values and public accountability and weaken the rule of law.
As Attorney General Jeff Sessions stated in his confirmation process and again earlier this month at a meeting with compliance professionals in Washington, D.C., the U.S. Department of Justice remains committed to enforcing the Foreign Corrupt Practices Act (FCPA) and to prosecuting fraud and corruption more generally. The department does not make the law, but it is responsible for enforcing the law, and we will continue to do so. Also, the department continues to prioritize prosecutions of individuals who have willfully and corruptly violated the FCPA. Attorney General Sessions has noted the importance of individual accountability for corporate misconduct. Finally, the department regularly takes into consideration voluntary self-disclosures, cooperation and remedial efforts when making charging decisions involving business organizations.
In my remarks today, I want to focus on a few important matters. First, I want to share with you some recent developments regarding the Department of Justice’s international cooperation efforts. Second, I want to highlight a couple aspects of the FCPA that are highly relevant to our efforts in the anti-corruption arena, namely: some of the diverse tools in our prosecutorial toolbox that allow us to prosecute corruption, and the importance of transparency in our work.
By way of background, allow me to back up slightly to provide a high level summary of the Department of Justice’s Criminal Division, which has an ambitious mission: to combat the most serious and complex criminal threats facing the United States today. The Criminal Division, which I am honored to help lead, employs about 600 attorneys and is comprised of 17 components. The Criminal Division’s investigations and prosecutions run the gamut of white collar crime cases – fraud, bribery, public corruption, organized crime, trade secret theft, money laundering, securities fraud, kleptocracy, healthcare fraud and computer and internet fraud – to name a few. Other cornerstones of our work include facilitating and executing incoming and outgoing requests for extraditions and mutual legal assistance, and providing justice sector capacity building in countries throughout the world. The Criminal Division has also answered our Attorney General’s call to redouble efforts to combat violent crime and drug trafficking organizations: we have teams of prosecutors that specialize in bringing criminal gang members, international drug traffickers and sophisticated human smuggling organizations to justice.
In all of our work at the Criminal Division, our prosecutors and staff are committed to a fair process in which the defendant’s rights are protected throughout criminal proceedings. We believe everyone is entitled to be considered innocent until proven guilty. We are cognizant of our high burden of proof in the criminal context. We seek to gain a meticulous understanding of the facts of each case, which drives so much of our decision-making.
As you know, many of our cases – whether white collar or otherwise – have international implications. Whether uncovering a multinational bribery scheme or seeking to recover illegally derived assets associated with investment funds owned by a foreign government, our investigations almost always have an international nexus, often involving several different countries. This reality necessitates the department’s ever-increasing utilization of the various mechanisms of international cooperation with our foreign partners that permit for evidence exchange and fugitive apprehension.
The landscape of international cooperation continues to evolve. In so many of the cases we handle, and in nearly all of the white collar cases, cooperation with our foreign partners has become a hallmark of our work. And of course, international cooperation is a two-way street, meaning that just as we receive significant assistance from our foreign partners in our investigations and prosecutions, so too do we provide significant assistance to them. This balanced model of reciprocity in information sharing is a vital tool in the modern prosecutor’s toolbox – whether the prosecutor is sitting in the United States, South America, Europe or elsewhere.
This reality – reciprocal information sharing – is giving rise to a developing trend, especially as it relates to international enforcement of criminal laws in the white collar arena. And the emerging trend is this: due in part to the significant assistance we provide to our foreign partners, there has been an increase in multi-jurisdictional prosecutions of criminal conduct, particularly when that conduct is transnational in nature and when several countries have prosecutorial authority over it. We are seeing this trend more and more each year, and it is a trend that will hopefully deter companies and individuals from engaging in conduct that is detrimental to victims around the world.
Indeed, and especially in the area of bribery of government officials, countries around the world are strengthening their laws, investigating and bringing impactful cases. In this context, we have found that not only is there a need to cooperate with our partners, such as Brazil, on the investigative side, but also on global resolutions.
Indeed, as part of our cooperation with our international partners, where appropriate, we seek to reach global resolutions that apportion penalties between the relevant jurisdictions. In this way, companies seeking to accept responsibility for their prior misconduct are not unfairly penalized for the same conduct by multiple countries and agencies. Global investigations and multi-national corporate resolutions are on the rise.
For example, in our prosecution of Rolls Royce, the UK-based company paid the U.S. about $170 million as part of an $800 million global resolution to investigations in three countries – the United States, the UK and Brazil. The multi-national form of resolution reflected the misconduct, which involved payments of $35 million in bribes to officials in half-a-dozen countries.
As another example of the U.S. Department of Justice’s increasing cooperation with its international partners, in the coming months we expect to be detailing one of our anti-corruption prosecutors to the UK’s Financial Conduct Authority. This is part of our ongoing efforts to collaborate with our international partners in the fight against corruption and financial fraud. While the U.S. Department of Justice has a number of attorneys and agents stationed in various cities abroad, including here in Brazil, this will be the first time the Criminal Division our Fraud Section will detail a prosecutor to work in a foreign regulatory agency on white collar crime issues.
While on assignment in the UK, our prosecutor will collaborate on financial fraud and foreign bribery cases with the relevant UK authorities. The cross-border nature of many financial frauds has increased the need for international cooperation and coordination among regulators and prosecutors. We expect that this exchange will be a learning experience that will show our dedication to international cooperation with countries fighting corruption in the UK and around the world.
As I mentioned earlier, I spent the first part of this week meeting with several of my Brazilian counterparts in Brasilia. Meetings like these with foreign counterparts are not rare. Increasingly, prosecutors around the world understand that investigating and prosecuting transnational crime necessitates transnational cooperation. Indeed, just as criminals seek to exploit geographical boundaries to protect themselves and their illegally derived assets, so must the mechanisms of international cooperation serve to disrupt their ability to do so.
Over the past several years, there has been a significant increase in the number of incoming requests for legal assistance from our foreign partners. In fact, in the last five years, there has been an overall increase of 28 percent in the number of annual incoming requests for legal assistance from our foreign partners and, since 2012, we’ve seen an increase of 147 percent in the number of annual requests from foreign counterparts seeking U.S.-based evidence to support foreign bribery and corruption investigations. Similarly, since 2012, there has been a 75 percent increase in the number of annual requests from the United States to our partners abroad for evidence to support U.S. prosecutors conducting FCPA and corruption investigations.
In response, we have grown the Criminal Division’s Office of International Affairs, or OIA, which serves as the Central Authority for the United States on Mutual Legal Assistance (MLA) matters and is our principal coordinating authority for international extradition.
OIA is now better positioned to respond effectively and without undue delay to our foreign counterparts when they request our assistance. To that end, OIA established two units dedicated to executing the abundant incoming requests from our foreign counterparts – the Cyber Unit and the MLA Unit. The Cyber Unit responds to and executes requests for electronic evidence from foreign authorities – requests that have increased exponentially over the last decade. While the MLA Unit is responsible for assisting foreign authorities with gathering non-cyber evidence, Federal prosecutors and law enforcement agents from across the country frequently assist OIA with the execution of these requests. In addition, a relatively new group within the FBI is dedicated to executing requests from foreign authorities made to OIA. These new resources reflect our recognition that it is important to our own prosecutions – and those of our international colleagues – that requests for assistance are handled carefully and expeditiously.
Of course, formal assistance pursuant to bilateral or multilateral treaties are not our only tools. The United States and countries around the world also share evidence and information with one another pursuant to the principle of reciprocity, or through various informal mechanisms. For instance, earlier this month, Roman Seleznev was sentenced by a U.S. district judge to 27 years’ incarceration for his hacking scheme that stole more than two million credit card numbers and defrauded banks of more than $169 million. Seleznev’s reign of terror criminal enterprise was brought to an abrupt end several years ago during his vacation in the Maldives, when local authorities agreed to hand him over to U.S. law enforcement agents even though no formal extradition treaty existed between the U.S. and the Maldives.
The Department of Justice and its investigative agencies post attachés in embassies all over the world, including here in Brazil. One of the primary goals of the attachés is to provide and receive information related to ongoing investigations and prosecutions. Such information may provide significant leads to us or our counterparts.
Now that I have spoken a bit about international cooperation, I want to switch gears and discuss a couple nuances of the FCPA under U.S. law. There are two issues I want to focus on. First, I would like to explain an important but sometimes overlooked aspect of our practice in the United States. Namely, while we often charge foreign bribery under the FCPA, when we cannot, there are several other legal theories we can use to prosecute both the briber and the bribe recipient. Second, I want to explain the importance of transparency in our anti-corruption prosecutions.
The FCPA makes it unlawful for certain categories of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business. The FCPA has been described as a “supply-side” statute in that it governs only the conduct of the bribe payer, not the government official who receives the bribe. Nevertheless, the department has regularly charged certain “foreign official” bribe recipients with other related crimes, such as money laundering.
For example, late last year, the department indicted Mahmoud Thiam, the former Minister of Mines and Geology of the Republic of Guinea. In that case, we alleged that Thiam took part in a scheme to launder approximately $8.5 million in bribes he received from senior representatives of a Chinese conglomerate. In exchange for the bribes, Thiam used his official position in the Guinean government to enable affiliates of the Chinese conglomerate to obtain exclusive and highly-valuable investment rights in a wide range of sectors of the Guinean economy, including near total control of Guinea’s valuable mining sector.
In order to conceal the bribes, Thiam opened a bank account in Hong Kong and misreported his occupation to conceal his status as a government official. Thiam later transferred millions of dollars in bribe proceeds into the United States, where he lied to two U.S. banks to conceal both his position as a foreign government official and the source of the funds. Thiam spent the bribe proceeds on, among other things, construction work on his estate in upstate New York. Earlier this month, a federal jury convicted Thiam for this conduct and he now awaits sentencing. This is an example of how, when the FCPA does not prohibit certain misconduct, other statutes also permit us to fight corruption.
The Criminal Division has formed a Kleptocracy Asset Recovery Initiative, which is specifically designed to target and recover the proceeds of foreign official corruption that have been laundered into or through the United States.
When we cannot charge a crime under the FCPA, in addition to crimes such as money laundering, false statements, and obstruction of justice, there are multiple legal theories we may use in order to prosecute corruption. Here are a few others that we can charge:
Travel Act: If a company pays kickbacks to an employee of a private company who is not a foreign official, such private-to-private bribery could possibly be charged under the Travel Act. The Department has previously charged both individual and corporate defendants in FCPA cases with violations of the Travel Act.
Mail and Wire Fraud: The mail and wire fraud statutes may also apply if a defendant’s fraudulent scheme intentionally deprives another of property or honest services, using mail or wire communication.
Tax Violations: Individuals and companies that violate the FCPA may also violate U.S. tax law, which explicitly prohibits tax deductions for bribes, such as false sales “commissions” deductions intended to conceal corrupt payments.
Indeed, businesses and individuals should be aware that conduct that violates the FCPA’s anti-bribery or accounting provisions may also violate other statutes or regulations. Moreover, payments to government officials and intermediaries may violate these laws even if all of the elements of an FCPA violation are not present.
Of course, even if charges are not appropriate or available under U.S. statutes, other countries may be able to hold the wrongdoers responsible where we cannot. We are under no illusions that we are or should be a global police force, seeking to hold international wrongdoers responsible for conduct that has no connection to the United States.
One of the main benefits of our closer cooperation with other regulators enforcement partners, like Brazil’s Prosecutor General’s office, is to ensure that wrongdoers who are not appropriately prosecuted for prosecution in the United States will be held accountable for their criminal conduct elsewhere. Prosecutors from the U.S. Department of Justice regularly work with your Prosecutor General’s office and other authorities to determine which jurisdiction is the most appropriate authority to bring a case. The arrests that have occurred here recently relating to joint corporate investigations are good examples of this cooperation.
Let me change gears and discuss the importance of transparency in our work. U ltimately, our hope is that companies and individuals voluntarily comply with anti-corruption laws, and I believe transparency and clarity from regulators encourages this compliance. Let me explain some of our efforts in this regard.
Back in 2012, as part of the effort to increase transparency, the department and the U.S. Securities & Exchange Commission published a “Resource Guide to the U.S. Foreign Corrupt Practices Act,” in an effort to educate companies and individuals about the FCPA’s requirements. This guide provides a great deal of information regarding the Department’s role, policy objectives and the legal framework of our FCPA prosecutions.
Also, the Fraud Section’s “Pilot Program” is an example of an effort to provide more transparency and consistency for our corporate resolutions. Last year, we began the program, which delineates specified mitigation credit a company can receive if it acts in accordance with standards of self-disclosure, cooperation, and remediation. Each of these concepts – self-disclosure, cooperation, and remediation – were carefully defined as part of the roll out of the program. The Fraud Section publishes information on our website on cases we have declined to prosecute, where we would have otherwise brought criminal cases. There have already been five such cases. Of course, this number does not include the many cases we routinely decline for various reasons, including insufficient evidence of corporate criminal misconduct.
Indeed, we have found that offering leniency to companies that self-report has led to more companies coming forward with information. In the Pilot Program’s first year, 22 companies have voluntarily disclosed violations, which is an increase from 13 during the previous year. At this point, the program continues as we evaluate it and reach a final decision regarding its permanence.
We are certainly far from seeing an end to the global problem of corruption, but I think it is safe to say that we are headed in the right direction. Increasingly, multinational companies are voluntarily complying with anti-corruption laws not simply to avoid prosecution. Corruption introduces significant uncertainty into business transactions, and it actually increases the cost of doing business. Bribery has destructive effects within a business as well, undermining employee confidence in a company’s management and fostering a permissive atmosphere for other kinds of corporate misconduct, such as employee self-dealing, embezzlement, financial fraud and anti-competitive behavior. Companies that pay bribes to win business ultimately undermine their own long-term interests and the best interests of their investors.
That is not to say that companies that reach a resolution with the Department are “bad companies,” or that they don’t care about corporate compliance. Indeed, many of our resolutions are with companies that voluntarily self-disclose past mistakes, and I know from having been on both sides of this process that companies that reach a resolution with us typically work hard to improve their compliance systems to ensure their compliance failures are not repeated.
Fighting corruption leads to a robust and transparent marketplace. I also hope that the work to root out corruption in Brazil, as well as the Justice Department’s efforts, ultimately serve to create an even playing field for honest businesses. Indeed, the Department of Justice takes a robust attitude towards the jurisdictional reach of the FCPA primarily to help ensure there is an even playing field for honest businesses everywhere.
In closing, the Criminal Division will continue to do its part to punish and deter crime – including corruption – with international implications. Increasing our commitment to international collaboration, we hope, will ultimately have the effect of safeguarding our countries, our markets and our citizens.
May 26, 2017 in AML | Permalink
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