International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Thursday, January 31, 2019

First American Charged With Panama Papers Crimes Appears In Court

Prosecutors allege that Gaffey helped former U.S. resident Joachim von der Goltz evade taxes.  Read the entire unfolding story on ICIJ's website here

January 31, 2019 in AML | Permalink | Comments (0)

Wednesday, January 30, 2019

Fifth Defendant Sentenced to Prison for Sophisticated International Cellphone Fraud Scheme

A former West Palm Beach, Florida resident who was extradited to the United States from the Dominican Republic was sentenced to 65 months in prison for multiple criminal charges in connection with a sophisticated global cell phone fraud scheme that involved compromising cellphone customers’ accounts and “cloning” their phones to make fraudulent international calls.

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Ariana Fajardo Orshan of the Southern District of Florida and Special Agent in Charge George L. Piro of the FBI’s Miami Field Office made the announcement. 

Braulio De la Cruz Vasquez, 54, pleaded guilty earlier to one count of conspiracy to commit wire fraud, access device fraud, the use, production or possession of modified telecommunications instruments, and the use or possession of hardware or software configured to obtain telecommunications services.  De la Cruz also pleaded guilty to one count of wire fraud and one count of aggravated identity theft.  He was sentenced by U.S. District Judge Beth Bloom of the Southern District of Florida.

According to the plea agreement, De le Cruz and his co-conspirators participated in a scheme to steal access to existing cell phone accounts, and fraudulently open new cellphone accounts, using the personal information of individuals around the United States. 

De la Cruz admitted that his role in the scheme included operating a “call site” from his residence in West Palm Beach.  He admitted that he would receive telecommunication identifying information associated with customers’ accounts from his co-conspirators and use that data, as well as other software and hardware, to reprogram cellphones that he controlled.  According to the plea agreement, De la Cruz’s co-conspirators would then transmit thousands of international calls over the internet to De la Cruz’s residence, where he would route them through the re-programmed cellphones to Cuba, Jamaica, the Dominican Republic and other countries with high calling rates.  The calls were billed to the customers’ compromised accounts. 

In addition, De la Cruz admitted that from March 2011 through April 2013, co‑conspirators sent him more than 700 emails containing approximately 2,158 telecommunications identifying numbers associated with cellphone account holders around the United States.  He also admitted that, as part of the conspiracy, he received tens of thousands of dollars from at least one Voice over Internet Protocol (VoIP) company for fraudulently routing international calls through his call center.

De la Cruz is a citizen of the Dominican Republic.  He was arrested in the Dominican Republic at the request of the United States and then, in August 2018, extradited to Miami, where he is currently in custody.

De la Cruz is the fifth defendant to be sentenced in the case.  Previously, defendants Edwin Fana, Farintong Calderon, Jose Santana, and Ramon Batista pleaded guilty to similar charges and have already been sentenced to prison terms ranging from 36 months to 75 months.

The FBI investigated the case, dubbed Operation Toll Free, which is part of the FBI’s ongoing effort to combat large-scale telecommunications fraud.  The Criminal Division’s Office of International Affairs handled the extradition in this matter.  Senior Counsel Matthew A. Lamberti of the Criminal Division’s Computer Crime and Intellectual Property Section and Assistant U.S. Attorney Jared M. Strauss of the Southern District of Florida are prosecuting the case.

January 30, 2019 in AML | Permalink | Comments (0)

Tuesday, January 29, 2019

Chinese Telecommunications Conglomerate Huawei and Huawei CFO Wanzhou Meng Charged With Financial Fraud

Huawei Device USA Inc. and Huawei’s Iranian Subsidiary Skycom Also Named Defendants  

Other Charges Include Money Laundering, Conspiracy to Defraud the United States, Obstruction of Justice and Sanctions Violations

A 13-count indictment was unsealed earlier today in federal court in Brooklyn, New York, charging four defendants,[1]including Huawei Technologies Co. Ltd. (Huawei), the world’s largest telecommunications equipment manufacturer, with headquarters in the People’s Republic of China (PRC) and operations around the world.  The indicted defendants include Huawei and two Huawei affiliates — Huawei Device USA Inc. (Huawei USA) and Skycom Tech Co. Ltd. (Skycom) — as well as Huawei’s Chief Financial Officer (CFO) Wanzhou Meng (Meng).  Download Indictment

The defendants Huawei and Skycom are charged with bank fraud and conspiracy to commit bank fraud, wire fraud and conspiracy to commit wire fraud, violations of the International Emergency Economic Powers Act (IEEPA) and conspiracy to violate IEEPA, and conspiracy to commit money laundering.  Huawei and Huawei USA are charged with conspiracy to obstruct justice related to the grand jury investigation in the Eastern District of New York.  Meng is charged with bank fraud, wire fraud, and conspiracies to commit bank and wire fraud.

Acting U.S. Attorney General Matthew G. Whitaker, Secretary Kirstjen Nielsen of the U.S. Department of Homeland Security, Secretary Wilbur Ross of the U.S. Department of Commerce, U.S. Attorney Richard P. Donoghue for the Eastern District of New York, FBI Director  Christopher A. Wray, Assistant Attorney General Brian A. Benczkowski of the Justice Department's Criminal Division and Assistant Attorney General John C. Demers of the National Security Division, announced the charges.

“Today we are announcing that we are bringing criminal charges against telecommunications giant Huawei and its associates for nearly two dozen alleged crimes," said Acting Attorney General Whitaker.  "As I told Chinese officials in August, China must hold its citizens and Chinese companies accountable for complying with the law.  I’d like to thank the many dedicated criminal investigators from several different federal agencies who contributed to this investigation and the Department of Justice attorneys who are moving the prosecution efforts forward.  They are helping us uphold the rule of law with integrity.”

“As charged in the indictment, Huawei and its Chief Financial Officer broke U.S. law and have engaged in a fraudulent financial scheme that is detrimental to the security of the United States,” said Secretary Nielsen.  “They willfully conducted millions of dollars in transactions that were in direct violation of the Iranian Transactions and Sanctions Regulations, and such behavior will not be tolerated.  The Department of Homeland Security is focused on preventing nefarious actors from accessing or manipulating our financial system, and we will ensure that legitimate economic activity is not exploited by our adversaries.  I would like to thank ICE Homeland Security Investigations for their exceptional work on this case.”

“For years, Chinese firms have broken our export laws and undermined sanctions, often using U.S. financial systems to facilitate their illegal activities,” said Secretary Ross. “This will end.  The Trump Administration continues to be tougher on those who violate our export control laws than any administration in history.  I commend the Commerce Department’s Office of Export Enforcement, and our partners in the FBI, Justice Department, Department of Defense, and Department of Homeland Security for their excellent work on this case.”

“As charged in the indictment, Huawei and its subsidiaries, with the direct and personal involvement of their executives, engaged in serious fraudulent conduct, including conspiracy, bank fraud, wire fraud, sanctions violations, money laundering and the orchestrated obstruction of justice,” stated U.S. Attorney Donoghue.  “For over a decade, Huawei employed a strategy of lies and deceit to conduct and grow its business.  This Office will continue to hold accountable companies and their executives, whether here or abroad, that commit fraud against U.S. financial institutions and their international counterparts and violate U.S. laws designed to maintain our national security.”  Mr. Donoghue thanked the FBI, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI), U.S. Department of Commerce Office of Export Enforcement (OEE) and the Defense Criminal Investigative Service (DCIS) agents who are investigating this case for their tireless work and dedication.

“These charges lay bare Huawei’s alleged blatant disregard for the laws of our country and standard global business practices,” said FBI Director Wray.  “Companies like Huawei pose a dual threat to both our economic and national security, and the magnitude of these charges make clear just how seriously the FBI takes this threat.  Today should serve as a warning that we will not tolerate businesses that violate our laws, obstruct justice, or jeopardize national and economic well-being.”

* * * *

Overview of the Indictment

The charges in this case relate to a long-running scheme by Huawei, its CFO, and other employees to deceive numerous global financial institutions and the U.S. government regarding Huawei’s business activities in Iran.  As alleged in the indictment, beginning in 2007, Huawei employees lied about Huawei’s relationship to a company in Iran called Skycom, falsely asserting it was not an affiliate of Huawei.  The company further claimed that Huawei had only limited operations in Iran and that Huawei did not violate U.S. or other laws or regulations related to Iran.  Most significantly, after news publications in late 2012 and 2013 disclosed that Huawei operated Skycom as an unofficial affiliate in Iran and that Meng had served on the board of directors of Skycom, Huawei employees, and in particular Meng, continued to lie to Huawei’s banking partners about Huawei’s relationship with Skycom.  They falsely claimed that Huawei had sold its interest in Skycom to an unrelated third party in 2007 and that Skycom was merely Huawei’s local business partner in Iran.  In reality, Skycom was Huawei’s longstanding Iranian affiliate, and Huawei orchestrated the 2007 sale to appear as an arm’s length transaction between two unrelated parties, when in fact Huawei actually controlled the company that purchased Skycom. 

As part of this scheme to defraud, Meng allegedly personally made a presentation in August 2013 to an executive of one of Huawei’s major banking partners in which she repeatedly lied about the relationship between Huawei and Skycom. 

According to the indictment, Huawei relied on its global banking relationships for banking services that included processing U.S.-dollar transactions through the United States.  U.S. laws and regulations generally prohibited these banks from processing transactions related to Iran through the United States.  The banks could have faced civil or criminal penalties for processing transactions that violated U.S. laws or regulations.  Relying on the repeated misrepresentations by Huawei, these banks continued their banking relationships with Huawei.  One bank cleared more than $100 million worth of Skycom-related transactions through the United States between 2010 and 2014.

In furtherance of this scheme to defraud, and as alleged in the indictment, Huawei and its principals repeatedly lied to U.S. government authorities about Huawei’s business in Iran in submissions to the U.S. government, and in responses to government inquiries.  For example, Huawei provided false information to the U.S. Congress regarding whether Huawei’s business in Iran violated any U.S. law.  Similarly, as indicated in the indictment, in 2007 — months before Huawei orchestrated the purported sale of Skycom to another Huawei-controlled entity — Huawei’s founder falsely stated to FBI agents that Huawei did not have any direct dealings with Iranian companies and that Huawei operated in compliance with all U.S. export laws. 

After one of Huawei’s major global banking partners (identified as Financial Institution 1 in the indictment) decided to exit the Huawei relationship in 2017 because of Huawei’s risk profile, Huawei allegedly made additional misrepresentations to several of its remaining banking partners in an effort to maintain and expand those relationships.  Huawei and its principals are alleged to have repeatedly and falsely claimed that Huawei had decided to terminate its banking relationship with Financial Institution 1, when in fact it was Financial Institution 1 that had decided to terminate the banking relationship.  Through these misrepresentations, Huawei was able to continue its banking relationships with its other banks.

In 2017, when Huawei became aware of the government’s investigation, Huawei and its subsidiary Huawei USA allegedly tried to obstruct the investigation by making efforts to move witnesses with knowledge about Huawei’s Iran-based business to the PRC, and beyond the jurisdiction of the U.S. government, and by concealing and destroying evidence of Huawei’s Iran-based business that was located in the United States.

In December 2018, Canadian authorities apprehended Meng in Vancouver pursuant to a provisional arrest warrant issued under Canadian law.  The U.S. government is seeking Meng’s extradition to the United States.

The charges in the indictment are merely allegations, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

The indictment unsealed today is assigned to U.S. District Judge Ann M. Donnelly of the Eastern District of New York.

The government’s investigation is ongoing. 

The investigation is being jointly conducted by the FBI’s New York Field Office, HSI’s New York Field Office, OEE’s New York Field Office, and DCIS’s Southwest and Northeast Field Offices.  Agents from the FBI, HSI, and OEE offices in Dallas provided significant support and assistance.  The government’s case is being handled by the National Security and Cybercrime and Business and Securities Fraud Sections of the U.S. Attorney’s Office for the Eastern District of New York, the Justice Department’s Criminal Division’s Money Laundering and Asset Recovery Section (MLARS), and the Justice Department’s National Security Division’s Counterintelligence and Export Control Section (CES). 

Assistant U.S. Attorneys Alexander A. Solomon, Julia Nestor, David K. Kessler, Kaitlin Farrell, and Sarah Evans, MLARS Trial Attorneys Laura Billings and Christian Nauvel, and CES Trial Attorneys Thea D. R. Kendler and David Lim are in charge of the prosecution, with assistance provided by Assistant U.S. Attorney Mark Penley of the Northern District of Texas, Assistant U.S. Attorneys Brian Morris and Brendan King of the Eastern District of New York’s Civil Division and Trial Attorneys Andrew Finkelman and Margaret O’Malley of DOJ’s Office of International Affairs.  Additional Criminal Division and National Security Division Trial Attorneys and Assistant U.S. Attorneys within U.S. Attorney’s Offices for the Northern District of Texas, the Eastern District of Texas, and the Northern District of California have provided valuable assistance with various aspects of this investigation.

The Defendants:

Huawei Technologies Co. Ltd.

Huawei Device USA Inc.

Skycom Tech Co. Ltd.

Meng Wanzhou, also known as “Cathy Meng” and “Sabrina Meng”
Age: 46

Residence: People’s Republic Of China

E.D.N.Y. Docket No. 18-CR-457 (AMD)

[1] The indictment charges other individuals who have not yet been apprehended and whose names will not be publicly released at this time.

January 29, 2019 in AML | Permalink | Comments (0)

Saturday, January 26, 2019

Section 199A Trade or Business Safe Harbor: Rental Real Estate

Notice 2019-07 contains a proposed revenue procedure that provides for a safe harbor under which a rental real estate enterprise will be treated as a trade or business solely for purposes of section 199A of the Internal Revenue Code (Code) and §§ 1.199A-1 through 1.199A-6 of the Income Tax Regulations (Regulations) (26 CFR Part 1), which are being published contemporaneously with this notice.

To qualify for treatment as a trade or business under this safe harbor, the rental real estate enterprise must satisfy the requirements of the proposed revenue procedure. If an enterprise fails to satisfy these requirements, the rental real estate enterprise may still be treated as a trade or business for purposes of section 199A if the enterprise otherwise meets the definition of trade or business in § 1.199A-1(b)(14).

January 26, 2019 in Tax Compliance | Permalink | Comments (0)

Friday, January 25, 2019

Two Ukrainian Nationals Indicted in Computer Hacking and Securities Fraud Scheme Targeting U.S. Securities and Exchange Commission

Hacking and Trading Scheme Involved Theft of Thousands of ‘EDGAR’ Filings, Including Draft Earnings Reports of Publicly Traded Companies before Reports were Made Public

Two Ukrainian men have been charged for their roles in a large-scale, international conspiracy to hack into the Securities and Exchange Commission’s (SEC) computer systems and profit by trading on critical information they stole.

In a 16-count indictment unsealed today in the District of New Jersey, Artem Radchenko, 27, and Oleksandr Ieremenko, 26, both of Kiev, Ukraine, are charged with securities fraud conspiracy, wire fraud conspiracy, computer fraud conspiracy, wire fraud, and computer fraud. The SEC also filed a civil complaint today charging Ieremenko along with several other individuals and entities.

The indictment alleges that Radchenko and Ieremenko hacked into the SEC’s Electronic Data Gathering, Analysis and Retrieval (EDGAR) system and stole thousands of files, including annual and quarterly earnings reports containing confidential, non-public, financial information, which publicly traded companies are required to disclose to the SEC. The defendants and others then profited by selling access to the confidential information in these reports and trading on this stolen information prior to its distribution to the investing public.

“The defendants allegedly orchestrated sophisticated computer intrusions to steal non-public information from the SEC, compromising the integrity of the market and depriving honest investors of a level playing field,” said Assistant Attorney General Benczkowski.  “The Department of Justice will aggressively pursue and prosecute those who attack our financial markets and seek to profit unfairly, no matter where such offenders reside.”

“The defendants charged in the indictment announced today engaged in a sophisticated hacking and insider trading scheme to cheat the securities markets and the investing public,” U.S. Attorney Craig Carpenito said. “They targeted the Securities and Exchange Commission with a series of sophisticated and relentless cyber-attacks, stealing thousands of confidential EDGAR filings from the Commission’s servers and then trading on the inside information in those filings before it was known to the market, all at the expense of the average investor.”

“Today’s indictment sends a strong message to those criminals who choose to use the cyber-world to profit from network intrusion,” Mark McKevitt, Special Agent in Charge of the Secret Service Newark Field Office, said. “The Secret Service will continue to aggressively investigate cyber-enabled financial crimes and develop innovative ways to combat emerging cyber threats.”

 “This indictment is a testament to the countless hours of hard work and dedication by law enforcement in the fight against cyber criminals,” FBI Special Agent in Charge Gregory W. Ehrie said.  “Cybercrime knows no boundaries. Dismantling these operations are possible only by working closely with our partners.”

According to the indictments unsealed today:

From February 2016 to March 2017, Radchenko, Ieremenko, and others conspired to gain unauthorized access to the computer networks of the SEC’s EDGAR system, which is used by publicly traded companies to file required disclosures, such as annual and quarterly earnings reports. These filings contained detailed information about the financial condition and operations of the companies, including their earnings. Such information can, and often does, affect the stock price of the companies when it is made public, and is therefore highly confidential prior to its disclosure to the general public. 

The EDGAR system allows companies to make test filings in advance of a public filing. These test filings often contain information that is the same as, or similar to the information in the final filing. The defendants stole thousands of test filings before they were released to the public, and sought to profit from their theft by using the information in the test filings to trade before the investing public learned the information. 

To gain access to the SEC’s computer networks, the defendants used a series of targeted cyber-attacks, including directory traversal attacks, phishing attacks, and infecting computers with malware. Once the defendants had access to the test filings on the EDGAR system, they stole them by copying the test filings to servers they controlled. For example, between May 2016 and October 2016, the defendants extracted thousands of test filings from the EDGAR servers to a server they controlled in Lithuania.

Ieremenko was previously charged in a hacking and securities fraud scheme in an indictment in the District of New Jersey. That indictment charged Ieremenko with being part of a large-scale, international conspiracy to hack the computer systems of three newswire organizations and steal press releases containing confidential non-public financial information relating to hundreds of companies traded on the NASDAQ and NYSE from three newswires. The members of the conspiracy profited from the theft by trading on the news ahead of its distribution to the investing public. The indictment unsealed today alleges Ieremenko employed some of the same methods to hack the SEC.   

Radchenko recruited to the scheme traders who were provided with the stolen test filings so they could profit by trading on the information before the investing public. Armed with the stolen information, the traders profited by executing various trades in brokerage accounts they controlled. In one instance, a test filing for “Public Company 1” was uploaded to the EDGAR servers at 3:32 p.m. (EDT) on May 19, 2016. Six minutes later, the defendants stole the test filing and uploaded a copy to the Lithuania server. Between 3:42 p.m. and 3:59 p.m., a conspirator purchased approximately $2.4 million worth of shares of Public Company 1. At 4:02 p.m., Public Company 1 released its second quarter earnings report and announced that it expected to deliver record earnings in 2016. Over the next day, the conspirator sold all the acquired shares in Public Company 1 for a profit of more than $270,000.

The wire fraud conspiracy and substantive wire fraud counts with which the defendants are charged carry a maximum potential penalty of 20 years in prison and a $250,000 fine, or twice the gain or loss from the offense. The securities fraud conspiracy, computer fraud conspiracy, and substantive computer fraud counts with which the defendants are charged carry a maximum potential penalty of five years in prison and a $250,000 fine, or twice the gain or loss from the offense. 

This case was investigated by the U.S. States Secret Service and special agents of the FBI, with assistance from the SEC’s Market Abuse and Cyber Units and the Justice Department’s Office of International Affairs.

 The prosecution is being handled by Trial Attorney Aarash Haghighat of the Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS), and by Assistant U.S. Attorney Daniel Shapiro; Chief of the Cybercrimes Unit Justin S. Herring; Attorney-in-Charge, of the U.S. Attorney’s Office in Trenton Nicholas Grippo; and Special Assistant U.S. Attorney Lynn O’Connor.

The charges and allegations contained in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.   

January 25, 2019 in AML | Permalink | Comments (0)

Thursday, January 24, 2019

Deputy Attorney General Rod Rosenstein Issues Memo to U.S. Attorneys on the Recently Published OLC Opinion “Reconsidering Whether the Wire Act Applies to Non-Sports Gambling”

In the January 15, 2019 memorandum to all U.S. Attorneys, the Deputy Attorney General set a 90-day grace period on implementing the Office of Legal Counsel's (OLC) new opinion during which federal prosecutors should not apply the Wire Act to non-sports-related betting or wagering.

This 90-day grace period will allow anyone affected to review the opinion and bring their gambling-related operations into compliance, if necessary. 

The Deputy Attorney General also indicated that, to ensure continuity across the country, any Wire Act charges must be reviewed and approved by the Criminal Division’s Organized Crime and Gang Section.  

This new review-and-approval requirement will be codified in the Justice Manual. See Memo here: Download 2018-11-02-wire-act

January 24, 2019 in AML | Permalink | Comments (0)

Wednesday, January 23, 2019

Skadden & Arps Pays $4.6 million and Agrees to Register as an Agent of a Foreign Principal to Avoid Prosecution

Civil settlement resolves Department of Justice national security inquiry into violations of the Foreign Agents Registration Act Download 2019_01_15_skadden_settlement_agreement_reduced_0

Skadden, Arps, Slate, Meagher & Flom LLP has entered into a settlement agreement with the Department of Justice, resolving its liability for violations of the Foreign Agents Registration Act (FARA), announced Assistant Attorney General for National Security John Demers.

According to the Agreement, Skadden acted as an agent of the Government of Ukraine within the meaning of FARA, 22 U.S.C. § 611 et seq., by contributing to a public relations campaign directed at select members of the U.S. news media in 2012.  Moreover, in 2012 and 2013, Skadden received multiple inquiries from the Department’s FARA Registration Unit about its role in that campaign. A partner then at Skadden made false and misleading statements to the FARA Unit, which led it to conclude in 2013 that the firm was not obligated to register under FARA. The facts, when uncovered, showed that Skadden was indeed required to register in 2012, and, under the Agreement, it will do so retroactively.

“Law firms should handle inquiries from the federal government the same way they would counsel their clients to: with appropriate due diligence to ensure the honesty of their response,” said Assistant Attorney General Demers.  “Skadden’s failure to do so, and reliance on only the representations of the lead partner on the matter, hid from the public that its report was part of a Ukrainian foreign influence campaign.  FARA protects the integrity of the American political system by enabling Americans to consider the identity of the speaker as they evaluate the substance of the speech.”  Assistant Attorney General Demers added, “The Department appreciates Skadden’s more recent extensive cooperation in the investigation of this matter, which facilitated its resolution.” 

In addition to agreeing to register under FARA, Skadden has agreed to pay the U.S. Treasury more than $4.6 million, which it received in fees and expenses for its work with Ukraine, and will ensure that it has formal, robust procedures for responding to inquiries concerning its conduct from any federal government entity and ensuring FARA compliance as to its engagements on behalf of foreign clients.

The Agreement acknowledges that Skadden has already taken substantial steps to comply with its terms, and so long as the firm continues to comply with it, the Department will not undertake any action against the firm relating to any of the conduct described in the Agreement and its Appendix.

Background of the Investigation

According to the Agreement, in the spring of 2012, Ukraine, Ministry of Justice (MOJ), with the assistance of Paul Manafort, hired Skadden to write a report (Report) on the evidence and procedures used during the 2011 prosecution and trial of former Prime Minister Yulia Tymoshenko and to address various questions regarding its fairness.  Skadden also agreed to advise Ukraine in connection with a second, potential future prosecution of Tymoshenko.  Although the engagement letter between Skadden and the MOJ stated that Skadden would be paid its customary fees and expenses, the contract Skadden signed with the MOJ, and which the MOJ made public, stated that the law firm would be paid only 95,000 Ukrainian hryvynas, which is approximately $12,000.  Skadden understood that a Ukrainian business person would be paying its fees, which the law firm received from a Cypriot bank account of an entity named Black Sea View Ltd., which Manafort controlled.  Skadden was eventually paid $4,657,568.91 for its work on behalf of the MOJ.  The arrangements with the Ukrainian business person, the amounts paid, and advice on a second criminal prosecution of Tymoshenko were not disclosed in connection with the issuance of the Report.

Soon after it began work for the MOJ, Skadden became aware that Ukraine intended to use the Report as part of a public relations campaign to influence U.S. policy and public opinion toward Ukraine.  After that point, Skadden’s lead partner for the Ukraine engagement took steps to advance the public relations campaign.  In the fall of 2012, shortly after a meeting in New York with Manafort and a representative from Ukraine’s public relations firm to finalize the Report and discuss the media strategy for its rollout, the lead partner contacted a journalist at a national newspaper and asked whether the journalist would take a call from a lobbyist for Ukraine about the Report in advance of its release.  Then, shortly before Ukraine released the report on December 13, 2012, the lead partner again contacted the journalist and arranged for delivery of the Report to the journalist, both via email and in person.  On December 12, 2012, the lead partner spoke with the national newspaper about the Report and provided a quotation for attribution. 

The lead partner’s pre-release outreach to the journalist was consistent with Ukraine’s media strategy for the Report, which including leaking the Report prior to its official release so as to “effectively set the agenda for subsequent coverage.”

FARA requires those in the U.S. who engage in political activities on behalf of foreign principals, which include foreign governments, to make a variety of written public disclosures to the Department of Justice.  Based on its awareness of and involvement in Ukraine’s public relations campaign, Skadden had an obligation to register with the Department of Justice under FARA, but it failed to do so.  If Skadden had registered, it would have had to disclose, among other things, the full amount it was being paid, the source of those payments, and the full scope of the work it was doing on behalf of the MOJ.

Five days after news articles appeared about the Report, the FARA Unit sent Skadden a letter, seeking information about its activities on behalf of Ukraine in order to assist the FARA Unit in determining whether Skadden had a registration obligation.  This was the first of several requests for information the FARA Unit made to Skadden. 

In both written and oral responses to the FARA Unit between February 6, 2013, and October 11, 2013, Skadden, in reliance on the lead partner, made false and misleading statements including, among other things, that Skadden provided a copy of the Report only in response to requests from the media and spoke to the media to correct misinformation about the report that the media was already reporting.  The firm also submitted documents to the FARA unit that were false.

The FARA Unit made a determination that Skadden did not have a registration obligation in connection with its work for Ukraine, and it based that conclusion on the false and misleading information Skadden had provided.  Before making its representations to the FARA Unit, Skadden had conducted no investigation to confirm the information the lead partner was providing to the FARA Unit and to other partners at the firm.

The investigation and negotiation of the Agreement was handled by Jason B.A. McCullough, a Trial Attorney in the Counterintelligence and Export Control Section, which includes the FARA Registration Unit, with assistance from the Federal Bureau of Investigation’s Counterintelligence Division.

January 23, 2019 in OFAC | Permalink | Comments (0)

Thursday, January 17, 2019

International Tax Cooperation Congress Discuss Proposed UN Multilateral Tax Instrument

The International Tax Cooperation Congress, hosted by the University of Barcelona, chaired by Dr. Eva Andrés Aucejo, is being held Thursday 17th January and Friday 18th January in collaboration with speakers of the EU Commission, OECD, UN Committee of International Tax Experts, CIAT, Spain's Tax Authority, and Texas A&M University Law.  The engaged audience included participants from many IGOs, government participants, civil society organizations, and academics.

The primary topics included a multilateral instrument for tax coordination and administrative cooperation; intra-group pricing and recognition of value, profits, and costs; and tax policy unfolding to address the digital economy.

Pictured from the speaker dinner and pre-Congress discussion, below, include Professor William Byrnes (Texas A&M Law), Professor Eva Andrés Aucejo (Barcelona), chair, Dr. George L. Salis, chief economist of Vertex, Inc and David Deputy, Chief Tax Policy, Vertex Inc.,  and digital economy leader for the industry group of the 50 large stakeholders.  

Int Tax Coop Congress 



January 17, 2019 in Academia | Permalink | Comments (0)

“International Tax Cooperation” Congress 2019: Digital  Economy, Transfer Pricing and Tax Administration. Ongoing 2030 (SDG) and Addis Ababa Agendas

Sol Piccioto, Emeritus Professor, Lancaster University. United Kingdom


CHAIR: MARIA CRUZ BARREIRO CARRIL, Professor of Tax Law of the University of Vigo. Spain

Barcelona,  Wednesday 16th dinner, Thursday and Friday sessions, 17t h, 18t h January 2019

Scientific Committee: E. Andrés, J. Nogueira, A. Turina, C. García-Herrera, S. Bokobo, D. Torregrosa, G. Salis,
M. Mata. This International Congress is one of the outcomes of the research project EXCELLENCE NETWORK: DER 2017-
90874-REDT (G.O.T.A-INTAXCOOP&GOV): The Global Observatory on Tax Agencies: towards the International Administrative Cooperation and Global Tax Governance (PI: Eva Andrés Aucejo). Coordinators: E. Andrés Aucejo (DER 2015-68768-P), C. García-Herrera Blanco (IEF), M. A. Grau Ruiz (DER 2015-653704-R), M. A. Martínez Lago and J. M. Almudí Cid (DER 2015- 65832-P), M. Nicoli (HCBM Project), V. Montesinos Julve (European Project), A. Olesti Rayo (DER 2015-65003-P), A. M. Pita Grandal (DER 2015-66338-P), J. Ramos Prieto (DER 2011-25520), E. Simón Acosta (DER 2012-39342-C03-01). National Committee Advisor (Dirs.: J. Martín Queralt , J. Lasarte Álvarez).

in collaboration with the United Nations, World Bank, OECD, CIAT, and the Spanish Tax Agency 

January 17, 2019 in Academia | Permalink | Comments (0)

Wednesday, January 16, 2019

$200,000 year end associate bonuses at law firms for 2018?

"A handful of boutiques — a number of which were founded in recent years — are positioning themselves as desirable places to be for associates by offering up year-end bonuses topping out, in some cases, above $200,000, a tool experts say allows them to compete with larger and more established law firms for up-and-coming legal stars and, ultimately, clients."

Read the article and analysis here at Law360: Why Some Boutiques Doled Out Behemoth Year-End Bonuses


January 16, 2019 in Education | Permalink | Comments (0)

Tuesday, January 15, 2019

OECD Corporate Tax Statistics launch today

Tax systems worldwide are converging towards lower corporate tax rates. At the same time, the scale of base erosion and profit shifting is significant, and continues affecting the durability of the corporate tax base.

How do corporate tax levels compare across countries? What factors are driving the variation in corporate tax burdens seen worldwide? How important are corporate tax revenues as a percentage of total revenues, on a country-by-country basis?

A new OECD report and dataset to be published on Tuesday 15 January provides internationally comparable statistics and analysis designed to inform the tax policy debate.

Corporate Tax Statistics provides internationally comparable data on corporate tax revenues, statutory corporate income tax rates, corporate effective tax rates and tax incentives related to innovation.

The database is intended to assist in the study of corporate tax policy and expand the quality and range of statistical information available for analysis under the OECD/G20 Base Erosion and Profit Shifting (BEPS) initiative. Future editions will also include an important new data source – aggregated and anonymised statistics of data collected under country-by-country reporting now being implemented under BEPS Action 13.

The publication and data will be freely accessible to accredited journalists on the OECD’s password-protected website from 11:00 a.m. CET on Tuesday 15 January.

January 15, 2019 in Economics | Permalink | Comments (0)

Monday, January 14, 2019

OECD, SARS and National Treasury continue partnership to strengthen tax co-operation

Today, the OECD, the South African Revenue Service (SARS) and National Treasury of South Africa (National Treasury) signed a Memorandum of Co-operation (MoC), agreeing to continue to work together in the area of taxation. The MoC is in place until December 2023.

The three parties have a long history of collaboration and the MoC provides for the continuation of such co-operation towards the achievement of the common objective of promoting fair and efficient tax systems and administrations, strengthening and modernising international taxation areas through the sharing of experiences between SARS, National Treasury and OECD member countries.

The MoC was signed in Pretoria, South Africa, by Mr. Ben Dickinson, Head of the OECD Global Relations and Development Division at the Centre for Tax Policy and Administration, Mr. Mark Kingon, Acting Commissioner of SARS, and Mr. Dondo Mogajane, Director General of the National Treasury.


OECD, SARS and National Treasury continue partnership to strengthen tax co-operation

L-R: Stadi Mngomezulu (Acting Director-General of National Treasury),
Mark Kingon (Acting Commissioner of SARS), and
Ben Dickinson (Head of Global Relations and Development, OECD Centre for Tax Policy and Administration).


During the signing ceremony Ben Dickinson said: "I am delighted we are strengthening our partnership with SARS and National Treasury. We have together delivered successful training events as part of the Global Relations Programmes in the past years and I look forward to expanding our collaboration to blended learning and e-learning in 2019.

"It is through co-operative ventures such as the one we have entered into with the OECD that we can enhance our efforts to collect taxes and strengthen our democracy," said Dondo Mogajane, Director-General of National Treasury.

Mark Kingon commented that "the OECD – South African collaboration in the areas of Tax Policy and Administration over the past years have been immensely beneficial for all parties involved, and extending this by a further five years is the natural thing to do. I'm pleased for the continuation of the structured relationship that the MoC with the OECD will provide SARS with, particularly in focussing on a 'whole of government approach to tax administration' as well as further honing the skills of our officials in international taxation".

January 14, 2019 in Tax Compliance | Permalink | Comments (0)

Sunday, January 13, 2019

Belize signs landmark agreement to strengthen its tax treaties and Monaco deposits its instrument of ratification for the Multilateral BEPS Convention

Today, Belize signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the Convention), becoming the 86th jurisdiction to join the Convention, which now covers almost 1,500 bilateral tax treaties.

In addition, Monaco yesterday deposited its instrument of ratification for the Convention with the OECD’s Secretary-General, Angel Gurría, therewith underlining its strong commitment to prevent the abuse of tax treaties and base erosion and profit shifting (BEPS) by multinational enterprises.

The Convention is the first multilateral treaty of its kind, allowing jurisdictions to integrate results from the OECD/G20 BEPS Project into their existing networks of bilateral tax treaties. The OECD/G20 BEPS Project delivers solutions for governments to close the gaps in existing international rules that allow corporate profits to “disappear” or be artificially shifted to low or no tax environments, where companies have little or no economic activity. Treaty shopping, in particular, is estimated to reduce the effective withholding tax rate by more than 5 percentage points from nearly 8% to 3%, generating large revenue losses for developed and developing countries alike. The Convention will become effective on 1 January 2019 for the first 47 tax treaties concluded among the 18 jurisdictions that have already deposited their acceptance or ratification instrument.

(Left to right: H.E. Mr. Joseph D. Waight, Financial Secretary of Belize, Mr. Ludger Schuknecht, OECD Deputy Secretary-General)

The Convention, negotiated by more than 100 countries and jurisdictions under a mandate from the G20 Finance Ministers and Central Bank Governors, is one of the most prominent results of the OECD/G20 BEPS Project. It is the world’s leading instrument for updating bilateral tax treaties and reducing opportunities for tax avoidance by multinational enterprises. Measures included in the Convention address treaty abuse, strategies to avoid the creation of a “permanent establishment”, and hybrid mismatch arrangements. The Convention also enhances the dispute resolution mechanism, especially through the addition of an optional provision on mandatory binding arbitration, which has been taken up by 28 jurisdictions.

The text of the Convention, the explanatory statement, background information, database, and positions of each signatory are available at

January 13, 2019 in BEPS | Permalink | Comments (0)

Turkish Government Jails Journalist Who Reported on Panama Papers Exposing Former Prime Minister

Turkish journalist Pelin Ünker has been sentenced to more than a year in jail for her work on the Paradise Papers investigation into offshore tax havens, because it revealed details of the business activities of the country’s former prime minister, Binali Yıldırım, and his sons.  Read the ICIJ story here

Journalists have been struggling with these kinds of things in Turkey for years. I’m just one of them – Pelin Ünker  read the full story here on ICIJ

January 13, 2019 in Tax Compliance | Permalink | Comments (0)

Saturday, January 12, 2019

Paying Taxes 2019 A unique report by PwC and the World Bank Group

Fourteen years of data and analysis of tax systems in 190 economies: how is technology affecting tax administration and policy?

Now in its 13th edition, Paying Taxes continues to be a unique study from PwC and the World Bank Group, which investigates and compares tax regimes across 190 economies worldwide using a medium-sized domestic case study company.

This year, we look at how new tax software, real time reporting systems and data analytics are changing the way companies meet their tax compliance obligations and how tax authorities monitor and enforce those obligations.

We consider the balance between labour and income taxes, as economies consider the impact of the changes to the nature of work and the impact this has on revenue streams. And we look at some of the different approaches taken by tax authorities to tax audits and to the provision of training for both tax auditors and taxpayers.

Access report webcast and interactive tools

Webcast discussion

For the first time PwC and the World Bank Group hosted a live webcast on 27 November to present the study results and respond to audience questions.

Watch the webcast replay

Data explorer 

Explore current and historical tax data from all 14 years of the study to find the results for your economy.

You can compare individual economies, geographic regions and economic regions for any year since 2004 and save your results.

Use the data explorer tool

Overall ranking and data table

See this year’s ease of paying taxes ranking and the results for our four indicators for 190 economies.


January 12, 2019 in Tax Compliance | Permalink | Comments (0)

Friday, January 11, 2019

EU State aid investigation opened into Nike’s tax treatment in the Netherlands

Loyens & Loeff reports: On 10 January 2019, the European Commission announced the opening of a formal State aid investigation into five tax rulings granted by the Dutch tax authorities to two Dutch entities of the Nike group between 2006 and 2015. This investigation concerns individual tax rulings and as such should not directly impact other taxpayers. Nonetheless, the investigation forms part of the Commission’s continuing efforts focusing on transfer pricing and valuation issues.  

read the analysis here

January 11, 2019 in Tax Compliance | Permalink | Comments (0)

Thursday, January 10, 2019

State aid: Commission opens in-depth investigation into tax treatment of Nike in the Netherlands

The European Commission has opened an in-depth investigation to examine whether tax rulings granted by the Netherlands to Nike may have given the company an unfair advantage over its competitors, in breach of EU State aid rules.

Margrethe Vestager, Commissioner in charge of competition policy, said: "Member States should not allow companies to set up complex structures that unduly reduce their taxable profits and give them an unfair advantage over competitors. The Commission will investigate carefully the tax treatment of Nike in the Netherlands, to assess whether it is in line with EU State aid rules. At the same time, I welcome the actions taken by the Netherlands to reform their corporate taxation rules and to help ensure that companies will operate on a level playing field in the EU."

The Commission's formal investigation concerns the tax treatment in the Netherlands of two Nike group companies based in the Netherlands, Nike European Operations Netherlands BV and Converse Netherlands BV. These two operating companies develop, market and record the sales of Nike and Converse products in Europe, the Middle East and Africa (the EMEA region).

Nike European Operations Netherlands BV and Converse Netherlands BV obtained licenses to use intellectual property rights relating to, respectively, Nike and Converse products in the EMEA region. The two companies obtained the licenses, in return for a tax-deductible royalty payment, from two Nike group entities, which are currently Dutch entities that are "transparent" for tax purposes (i.e., not taxable in the Netherlands).The Nike group's corporate structure itself is outside the remit of EU State aid rules.

From 2006 to 2015, the Dutch tax authorities issued five tax rulings, two of which are still in force, endorsing a method to calculate the royalty to be paid by Nike European Operations Netherlands and Converse Netherlands for the use of the intellectual property.

As a result of the rulings, Nike European Operations Netherlands BV and Converse Netherlands BV are only taxed in the Netherlands on a limited operating margin based on sales. At this stage, the Commission is concerned that the royalty payments endorsed by the rulings may not reflect economic reality. They appear to be higher than what independent companies negotiating on market terms would have agreed between themselves in accordancewith the arm's length principle.

In particular, a preliminary analysis of the companies' activities found that:

  • Nike European Operations Netherlands BV and Converse Netherlands BV have more than 1,000 employees and are involved in the development, management and exploitation of the intellectual property. For example, Nike European Operations Netherlands BV actively advertises and promotes Nike products in the EMEA region, and bears its own costs for the associated marketing and sales activities.
  • In contrast, the recipients of the royalty are Nike group entities that have no employees and do not carry out any economic activity.

The Commission investigation will focus on whether the Netherlands' tax rulings endorsing these royalty payments may have unduly reduced the taxable base in the Netherlands of Nike European Operations Netherlands BV and Converse Netherlands BV since 2006. As a result, the Netherlands may have granted a selective advantage to the Nike group by allowing it to pay less tax than other stand-alone or group companies whose transactions are priced in accordance with market terms. If confirmed, this would amount to illegal State aid.

The opening of an in-depth investigation gives the Netherlands and interested third parties an opportunity to submit comments. It does not prejudge the outcome of the investigation.


The infographic is available in high resolution here.



Nike is a US based company involved worldwide in the design, marketing and manufacturing of footwear, clothing, equipment and accessories, in particular in the sports area.

Tax rulings as such are not a problem under EU State aid rules if they simply confirm that tax arrangements between companies within the same group comply with the relevant tax legislation. However, tax rulings that confer a selective advantage to specific companies can distort competition within the EU's Single Market, in breach of EU State aid rules.

Since June 2013, the Commission has been investigating individual tax rulings of Member States under EU State aid rules. It extended this information inquiry to all Member States in December 2014.

The following investigations concerning tax rulings have already been concluded by the Commission:

  • In October 2015, the Commission concluded that Luxembourg and the Netherlands had granted selective tax advantages to Fiat and Starbucks, respectively. As a result of these decisions, Luxembourg recovered €23.1 million from Fiat and the Netherlands recovered €25.7 million from Starbucks.
  • In January 2016, the Commission concluded that selective tax advantages granted by Belgium to at least 35 multinationals, mainly from the EU, under its "excess profit" tax scheme are illegal under EU State aid rules. The total amount of aid to be recovered from 35 companies is estimated at approximately €900 million, including interest. Belgium has already recovered over 90% of the aid.
  • In August 2016, the Commission concluded that Ireland granted undue tax benefits to Apple, which led to a recovery of €14.3 billion by Ireland.
  • In October 2017, the Commission concluded that Luxembourg granted undue tax benefits to Amazon, which led to a recovery by Luxembourg of €282.7 million.
  • In June 2018, the Commission concluded that Luxembourg granted undue tax benefits to Engie of around €120 million. The recovery procedure is still ongoing.
  • In September 2018, the Commission found that the non-taxation of certain McDonald's profits in Luxembourg did not lead to illegal State aid, as it is in line with national tax laws and the Luxembourg-US Double Taxation Treaty.
  • In December 2018, the Commission concluded thatGibraltar granted undue tax benefits of around €100 million to several multinational companies, through a corporate tax exemption scheme and through five tax rulings. The recovery procedure is ongoing.

The Commission also has an ongoing in-depth investigation concerning tax rulings issued by the Netherlands in favour of Inter IKEA and an investigation concerning a tax scheme for multinationalsin the United Kingdom.

In addition to implementing comprehensively the Anti-Tax Avoidance Directives (ATAD I and ATAD II), the Netherlands have announced plans for a broad reform tightening the requirements for tax rulings concerning international structures. For example, no rulings will be granted if a tax structure involves a tax haven or if the purpose of the ruling is essentially to avoid Dutch or foreign taxes. Moreover, to enhance transparency and consistency, all Dutch tax rulings involving international structures will be centrally managed and monitored, and the tax authorities will publish an anonymous summary of all these rulings. Finally, the Netherlands have also announced plans to introduce a withholding tax on interest and royalty payments made to companies in tax havens.  

The non-confidential version of the decision will be made available under the case number SA.51284 in the State aid register on the Commission's Competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.

Brussels, 10 January 2019

January 10, 2019 in BEPS | Permalink | Comments (0)

Dutch Tax System Revisions

Dentons explains the Netherlands tax system changes here

On December 18, 2018 the Dutch Senate adopted the Tax Bill 2019 and the Bill implementing the European Union (EU) Anti-Tax Avoidance Directive (ATAD). These Bills came into force on January 1, 2019 and apply in general to tax years starting on or after January 1, 2019. Certain amendments will become effective at a later stage. Please find the highlights below: .... read here.

January 10, 2019 in Tax Compliance | Permalink | Comments (0)

Sunday, January 6, 2019

Patrick Ho, Former Secretary of Home Affairs (Hong Kong) and Former Head Of Organization Backed By Chinese Energy Conglomerate, Convicted Of International Bribery, Money Laundering Offenses

Geoffrey S. Berman, United States Attorney for the Southern District of New York, and Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division announced that CHI PING PATRICK HO, a/k/a “Patrick C.P. Ho,” a/k/a “He Zhiping,” was found guilty today after a jury trial before U.S. District Judge Loretta A. Preska of participating in a multi-year, multimillion-dollar scheme to bribe top officials of Chad and Uganda in exchange for business advantages for CEFC China Energy Company Limited (“CEFC China”).  HO was convicted of violations of the Foreign Corrupt Practices Act (“FCPA”), international money laundering, and conspiracy to commit both.  HO is scheduled to be sentenced before Judge Preska on March 14, 2019, at 10:00 a.m.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Patrick Ho now stands convicted of scheming to pay millions in bribes to foreign leaders in Chad and Uganda, all as part of his efforts to corruptly secure unfair business advantages for a multibillion-dollar Chinese energy company.  As the jury’s verdict makes clear, Ho’s repeated attempts to corrupt foreign leaders were not business as usual, but criminal efforts to undermine the fairness of international markets and erode the public’s faith in its leaders.”

Assistant Attorney General Brian A. Benczkowski:  “Patrick Ho paid millions of dollars in bribes to the leaders of two African countries to secure contracts for a Chinese conglomerate.  Today’s trial conviction demonstrates the Criminal Division’s commitment to prosecuting those who seek to utilize our financial system to secure unfair competition advantages through corruption and bribery.”

According to the Indictment, evidence presented at trial, and other public proceedings in the case:           


HO was involved in two bribery schemes to pay top officials of Chad and Uganda in exchange for business advantages for CEFC China, a Shanghai-based multibillion-dollar conglomerate that operates internationally in multiple sectors, including oil, gas, and banking.  At the center of both schemes was HO, the head of a non-governmental organization based in Hong Kong and Arlington, Virginia, the China Energy Fund Committee (the “CEFC NGO”), which held “Special Consultative Status” with the United Nations (“UN”) Economic and Social Council.  CEFC NGO was funded by CEFC China.

In the first scheme (the “Chad Scheme”), HO, on behalf of CEFC China, offered a $2 million cash bribe, hidden within gift boxes, to Idriss Déby, the President of Chad, in an effort to obtain valuable oil rights from the Chadian government.  In the second scheme (the “Uganda Scheme”), HO caused a $500,000 bribe to be paid, via wires transmitted through New York, New York, to an account designated by Sam Kutesa, the Minister of Foreign Affairs of Uganda, who had recently completed his term as the President of the UN General Assembly.  HO also schemed to pay a $500,000 cash bribe to Yoweri Museveni, the President of Uganda, and offered to provide both Kutesa and Museveni with additional corrupt benefits by “partnering” with them in future joint ventures in Uganda.

The Chad Scheme

The Chad Scheme began in or about September 2014 when HO flew into New York, New York to attend the annual UN General Assembly.  At that time, CEFC China was working to expand its operations to Chad and wanted to meet with President Déby as quickly as possible.  Through a connection, HO was introduced to Cheikh Gadio, the former Minister of Foreign Affairs of Senegal, who had a personal relationship with President Déby.  HO and Gadio met at CEFC China’s suite at Trump World Tower in midtown Manhattan, where HO enlisted Gadio to assist CEFC China in obtaining access to President Déby.

Gadio connected HO and CEFC China to President Déby.  In an initial meeting in Chad in November 2014, President Déby described to HO and CEFC China executives certain lucrative oil rights that were available for CEFC China to acquire.  Following that meeting, Gadio advised HO and CEFC China to send a technical team to Chad to investigate the oil rights and make an offer to President Déby.  Instead, HO insisted on a prompt second meeting with the President.  The second meeting took place a few weeks later, in December 2014.  HO led a CEFC China delegation, which flew into Chad on a corporate jet with $2 million cash concealed within several gift boxes.  At the conclusion of a business meeting with President Déby, HO and the CEFC China executives presented President Déby with the gift boxes.

To the surprise of HO and the CEFC China executives, President Déby rejected the $2 million bribe offer.  HO subsequently drafted a letter to President Déby claiming that the cash had been intended as a donation to Chad.  Ultimately, HO and CEFC China did not obtain the unfair advantage that they had sought through the bribe offer, and by mid-2015, HO had turned his attention to a different “gateway to Africa”: Uganda.

The Uganda Scheme

The Uganda Scheme began around the same time as the Chad Scheme, when HO was in New York, New York for the annual UN General Assembly.  HO met with Sam Kutesa, who had recently begun his term as the 69th President of the UN General Assembly (“PGA”).  HO, purporting to act on behalf of CEFC NGO, met with Kutesa and began to cultivate a relationship with him.  During the year that Kutesa served as PGA, HO and Kutesa discussed a “strategic partnership” between Uganda and CEFC China for various business ventures, to be formed once Kutesa completed his term as PGA and returned to Uganda.

In or about February 2016 – after Kutesa had returned to Uganda and resumed his role as Foreign Minister, and Yoweri Museveni (Kutesa’s relative) had been reelected as the President of Uganda – Kutesa solicited a payment from HO, purportedly for a charitable foundation that Kutesa wished to launch.  HO agreed to provide the requested payment, but simultaneously requested, on behalf of CEFC China, an invitation to Museveni’s inauguration, business meetings with President Museveni and other high-level Ugandan officials, and a list of specific business projects in Uganda that CEFC China could participate in.

In May 2016, HO and CEFC China executives traveled to Uganda.  Prior to departing, HO caused the CEFC NGO to wire $500,000 to the account provided by Kutesa in the name of the so-called “foundation,” which wire was transmitted through banks in New York, New York.  HO also advised his boss, the Chairman of CEFC China, to provide $500,000 in cash to President Museveni, ostensibly as a campaign donation, even though Museveni had already been reelected.  HO intended these payments as bribes to influence Kutesa and Museveni to use their official power to steer business advantages to CEFC China.

HO and CEFC China executives attended President Museveni’s inauguration and obtained business meetings in Uganda with President Museveni and top Ugandan officials, including at the Department of Energy and Mineral Resources.  After the trip, HO requested that Kutesa and Museveni assist CEFC China in acquiring a Ugandan bank, as an initial step before pursuing additional ventures in Uganda.  HO also explicitly offered to “partner” with Kutesa and Museveni and/or their “family businesses,” making clear that both officials would share in CEFC China’s future profits.  In exchange for the bribes offered and paid by HO, Kutesa thereafter steered a bank acquisition opportunity to CEFC China.

*                      *                      *

HO, 69, of Hong Kong, China, was convicted of one count of conspiring to violate the FCPA, four counts of violating the FCPA, one count of conspiring to commit international money laundering, and one count of committing international money laundering.  The maximum penalties for these charges are as follows: five years in prison for conspiring to violate the FCPA; five years in prison for each violation of the FCPA; 20 years in prison for conspiring to commit international money laundering; and 20 years in prison for committing international money laundering.  HO was acquitted of one count of international money laundering.

The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as the sentencing of HO will be determined by the judge.

Mr. Berman praised the outstanding work of the Federal Bureau of Investigation and Internal Revenue Service-Criminal Investigation.  He also thanked the Department of Homeland Security, Homeland Security Investigations, and the Department of Justice, Criminal Division’s Office of International Affairs.

This case is being prosecuted by the Office’s Public Corruption Unit and the Criminal Division’s Fraud Section, FCPA Unit.  Assistant U.S. Attorneys Douglas S. Zolkind, Daniel C. Richenthal, and Catherine E. Ghosh, and Trial Attorney Paul A. Hayden of the Fraud Section, are in charge of the prosecution.

January 6, 2019 in AML | Permalink | Comments (0)

Friday, January 4, 2019

Palantir Deal May Make IRS ‘Big Brother-ish’ While Chasing Cheats

BNA reported that 

A contract with billionaire Peter Thiel’s Palantir Technologies will give the IRS new firepower to pursue tax cheats by connecting the dots in millions of tax filings, bank transactions, phone records, and even social media posts.  

The IRS on Sept. 27 signed the deal for $99 million over seven years, according to the contract

Read the entire BNA report here.


January 4, 2019 in Tax Compliance | Permalink | Comments (0)