OFAC, Anti- Bribery and Mexican Energy Reform Robert L. Soza, Jr. Attorney at Law

Transcription

1 OFAC, Anti- Bribery and Mexican Energy Reform Robert L. Soza, Jr. Attorney at Law October 23, 2015

2 2 Office of Foreign Asset Control (OFAC)

3 Primary U.S. Persons, non-u.s. entities controlled by U.S. Person, U.S. Goods/ Technology Secondary Foreign Persons Sectoral Industry Specific Sanctions List-Based Country Based Sanctions Programs Various sanctions programs 3

4 Embargoed Countries OFAC administers and enforces economic and trade sanctions against countries considered politically hostile Complete embargoes against Cuba, Iran, North Korea, Northern Sudan and Syria Partial embargoes against Libya, Iraq, Burma and others Recent embargoes against Russia OFAC enforces sanctions against particular countries 4

5 Bad Boy Lists U.S. Government (OFAC, BIS) maintains bad boy lists of names and entities with whom you cannot do business Terrorism-sponsoring organizations International narcotics traffickers Consolidated screening list: Screening through government prohibited lists 5

6 Russia Sanctions Prohibits export of goods and services for technology in support of oil production projects involving: Deepwater (500 feet and below) Arctic offshore (north of the Arctic Circle) Extraction of resources from shale (drilling through shale not covered) Does not impact conventional oil and gas projects, refining, or strictly natural gas projects Any lawful sales that occur in conventional oil and gas projects must be paid in less than 30 days to avoid violating prohibitions against issuing credit to sanctioned parties and companies Specific to oil and gas sector 6

7 Russia Sanctions Asset Blocking And Exclusion Sanctions On: Individuals and entities listed in Executive Orders All assets in U.S. or held by U.S. entities/ individuals abroad are frozen No Commercial activity or facilitation permitted with blocked parties Includes all entities where blocked parties own 50% or more of ownership Foreign Financial Institution Prohibited From: Opening and maintaining (except under strict conditions) in the U.S. of Correspondent account or a payable through account For Any Sanctioned Party Russian sanctions are specific 7

8 Russian Sanctions Duty Of Diligence in Dealing with Russian Related Entities Request corporate ownership documents (share registries) Seek declarations Rating Agencies Financial Institutions Diligence 8

9 Venezuela Sanctions On December 19, 2014 Pres. Obama signed into law the Venezuela Defense of Human Rights and Civil Society Act of 2014 Imposes target sanctions against government officials involved in anti-government protests Parties named are all current or former governmental officials New sanctions program 9

10 Cuba Sanctions Cuba removed from list of state sponsors of terrorism Embargo still in place and OFAC continues to monitor Changes allow travel and certain authorized commerce and flow of information to/from Cuba Department of Commerce has rules to authorize export and import of certain items to/from Cuba Status of sanctions program 10

11 Cuban Reforms Private enterprises now licensed by Cuban government 2014 Foreign Investment Law Mariel Special Development Zone Cubans now permitted to sell real estate to other Cubans Changes to Cuba sanctions program 11

12 Iran Sanctions Reached agreement on the Iranian nuclear program on July 15, 2015 Approximately 90 days (late October) until Adoption Day From Adoption Day, signatory states will take legal and administrative preparations to implement agreement Iran must make available information about its nuclear activity and will take at least 6 months; then an additional 1 to 2 months to verify Implementation Day when IAEA verifies Iranian compliance estimated to be Summer 2016 Deal timing for implementation 12

13 Iran Sanctions Termination of E.U. and U.N. Sanctions after Implementation Day U.S. Sanctions remain in place for U.S. citizens and companies Limited U.S. civilian aircraft exports allowed Import of Iranian carpets and food stuff allows What will be allowed? 13

14 14

15 Technology Companies United Technologies - $75 million Arms export violations to China Multiple ITAR compliance failures Esterline Technologies Corp. (DDTC) - $20 million Intersil Corporation - $10 million Penalties for violations of export control laws and OFAC regulations 15

16 Banking In Re: BNP Paribas SA, France (OFAC) - $963 million Processed transactions through U.S. banks for sanctioned companies, entities, and individuals Sanctioned parties included Sudan, Iran, Cuba and Burma In Re: Clearstream Banking SA, Luxemburg (OFAC) - $151 million Violations of Iranian Sanctions Program Bank of America N.A. (OFAC) - $16 million Transactions with Specifically Designated Parties and Narcotics Traffickers Citigroup, Inc. (OFAC) - $217,841 Violations of Iranian Sanctions Program Violations of Weapons of Mass Destruction Violations of Foreign Narcotics Kingpin Sanctions Program OFAC penalties for violations 16

17 Weatherford Oil and Gas 36 transactions for sale of oil and gas equipment exported from the United States to Cuba via Canada 36 transactions for sale of oil and gas equipment for export from the United States to Iran via Weatherford s Dubai subsidiary 11 transactions involving pulsed neutron decay tools from the United States to Venezuela and Mexico without appropriate licenses Sales of liner hanger equipment from the United States to Syria via Weatherford s Dubai subsidiary OFAC and BIS - $100 million penalty 17

18 Weatherford Oil and Gas Required to hire unaffiliated third party consultant to conduct regular external audits Timely completion and submission of the results of the audits to OFAC Agreement not to make any public statements denying directly or indirectly violations Weatherford incurred $115 million in fees and costs for the investigation. No prior disclosure was made Take-away from Weatherford case 18

19 Lessons Learned Effective compliance programs must be audited to ensure it can detect and correct potential violation 50% reduction in fine for prior disclosures Identifying and disciplining wrongdoers is key to an effective prior disclosure Important lessons from cases 19

20 20 Anti-Bribery

21 Amount in Millions FCPA Enforcement Actions 2007 to 2014 $1,800 $1,600 $1,400 $1.4 B $1.6B $1,200 $1,000 $800 $885M $720M $600 $400 $645M $503M $200 $149M $260M $ Year 21

22 22 Corruption Perceptions Index 2014

23 Worldwide Anti-Corruption United States Foreign Corrupt Practices Act Enacted in 1977 Canada In 2014 had first prison sentence under Canada s Corruption of Foreign Public Officials Act although Act came in force in 1999 U.K. Bribery Act Enacted in 2010 and became effective in 2011 In 2014 found 3 men guilty of giving and receiving bribes Includes commercial bribery not just bribery of foreign governmental officials International Conventions Organization for Economic Co-operation and Development (OECD) Anti-Bribery Convention United Nations Convention Against Corruption Require signatory countries to criminalize foreign bribery and cooperate during investigations Includes countries known for corruption such as Russia and China 23

24 FCPA Prohibits subsidiaries of U.S. Companies and their employees from: Giving, promising, or offering anything of value Don t need to actually provide value To any government official [With the intention of gaining a business advantage] 24

25 Payments to Any Person The law does not simply prohibit direct illegal payments Prohibits payments to an intermediary (i.e. sales agent/customs broker/freight forwarder) Most investigations focus on the middlemen, e.g. the agents 25

26 Whistleblower Program Whistleblower - someone who informs on a person or organization engaged in illicit activity FCPA has whistleblower provision with rewards which will encourage more reporting of FCPA violations SEC received 2,766 whistleblower tips in 2011, the first year it began a Whistleblower Program 26

27 Strengthened FCPA Investigation Reported that FBI will triple number of agents for overseas bribery investigation 30 agents will be assigned to squads based in New York, Washington and Los Angeles Despite some recent setbacks in prosecutions, U.S. Justice Department making anti-bribery a key priority 27

28 FCPA Developments 2014 Marubeni Settlement of $88 million Previous settlement in 2012 of $54.6 million 2014 settlement result of admission of bribing Indonesian officials to win electricity contract Alcoa Settlement of $354 million 3 rd largest disgorgement in FCPA history Walmart Mexico case continues Resulted in pension fund suing Walmart SEC brings action against Bruker Corp, a life sciences company Excessive travel and entertainment benefits for Chinese foreign officials 28

29 FCPA Developments 2014 Alstom settled with DOJ for $772 million Alstom is a French power and transportation company but operates in 70 countries 3 Alstom executives pleaded guilty to bribing officials in Indonesia to win a power project and received prison sentences Alstom executives hired two consultants who were used to pay bribes Marubeni, Alstom's consortium partner on Indonesian project plead guilty to FCPA violations and paid $88 million fine Biggest criminal FCPA fine in history 29

30 FCPA -Weatherford Weatherford paid $152.6 million for FCPA violations Weatherford employees in Africa bribed a foreign official to approve renewal of an oil services contract; funneled bribes through a freight forwarding agent Weatherford subsidiary gave volume discounts to a distributor to create a $15 million slush fund for the bribes Weatherford subsidiary also paid $1.5 million in kickbacks to Iraq to provide oil and drilling refining equipment. Hid kickbacks by inflating contract prices by 10% 30

31 Worldwide Anti-Bribery Developments 2014 First prison sentence under Canada s Corruption of Foreign Public Officials Act Came in force in 1999 Previous prosecutions against corporations resulted in guilty pleas and fines Business executive for Cryptometrics Canada bribed India s Minister of Civil Aviation and Air India officials for contract for facial recognition software Sentenced to 3 years in prison 31

32 Worldwide Anti-Bribery Developments 2014 Britain s Serious Fraud Office secures first convictions under UK s Bribery Act Enacted in 2010 and became effective in 2011 Jury found 3 men guilty of giving and receiving bribes Stemming from bio-fuel investment products to UK investors Defendants received 4 and 6 years prison sentences 32

33 FCPA Cases in Mexico Wal-Mart Over $24 million in bribes paid in relation to construction of stores in Mexico Auditors alerted management in 2005 Investigated by New York Times who published a story in 2011 and then Wal-Mart self-reported violations to government Case still pending but Wal-Mart has spent over $650 million in FCPArelated costs so far Tyson de Mexico Charged with FCPA violations for making payments to government veterinarians for plant inspections Payments were made by putting veterinarians wives on Tyson s payroll Executives at Tyson tried to cover up the bribes but eventually stopped and self-reported In February 2011, Tyson settled for $5.2 million 33

34 FCPA Cases in Mexico Lindsey Manufacturing Allegation that company paid bribes to Mexican officials Bribes paid through 30% commissions to sales agent who then shared commissions with Mexican officials Dr. Lindsey, President and his CFO were both convicted by a jury in Los Angeles ABB, Ltd. Engineering firm based in Switzerland Mexican citizens were arrested and charged with violations of FCPA for paying bribes to chief of Comision Federal de Electricidad to secure contracts Bribes included yacht, Ferrari and millions of dollars in cash ABB paid $58.3 million in settlement Mexican national pleaded guilty and faces prison time 34

35 35 Mexican Energy Reforms

36 Mexican Energy Reforms Passed in 2013 and covers: Oil and Gas Exploration Contacts include: Profit Sharing Production Sharing Midstream/Downstream facilities Refining Gas Processing Petrochemicals Transportation, Storage, and Distribution What it covers 36

37 Mexican Energy Reforms Gradual Opening of Retail Gas and Diesel 2018, no price caps Gradual Opening of LPG Sales 2017, no price caps Electricity Market What it covers 37

38 Bidding Process For Oil And Gas Exploration Round Zero Pemex reserves fields for itself Round One 1st Auction Auctioned off 14 shallow offshore blocks, but only 2 were assigned 2nd Auction Auctioned off 5 blocks and 3 were assigned 3rd Auction Deepwater blocks will be auctioned off next year Specific steps in process 38

39 Manufacturing Boom Has Increased Electricity Demand Power Generation is now open to private participation Transmission and distribution of power open to private investors Use of natural gas for power generation has gone from 17% in 2000 to 50% in 2011 Natural gas production in Texas has dramatically increased Two significant pipelines will carry natural gas from Eagle Ford to Permian Basin to Mexico Electricity market 39

40 40 Questions and Answers

41 Contact Robert L. Soza, Jr. Attorney at Law Licensed U.S. Customs Broker Jackson Walker L.L.P. 112 E. Pecan Street, Suite 2400 San Antonio, Texas (210)