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Eight German Company Officials Charged in $100 Million Foreign Bribery Scheme

Thursday, December 15, 2011
Sandler, Travis & Rosenberg Trade Report

The Department of Justice and the Securities and Exchange Commission announced Dec. 13 that eight former executives and agents of a German corporation have been charged with engaging in a decade-long scheme to bribe senior Argentine government officials to secure, implement and enforce a $1 billion contract to produce national identity cards.

According to a DOJ press release, the indictment alleges that during the bidding and implementation phases of the project the defendants and their co-conspirators caused the German company to commit to paying nearly $100 million in bribes to sitting officials of the Argentine government, members of the opposition party and candidates for office who were likely to come to power during the performance of the project. According to the indictment, members of the conspiracy worked to conceal the illicit payments through various means, including using at least 17 offshore shell companies and documenting the payments through fake consulting contracts. When the identity card project was ended members of the conspiracy allegedly responded by causing the company to file a fraudulent arbitration claim in Washington, D.C., asserting that Argentina had wrongfully terminated the contract and demanding nearly $500 million in lost profits and expenses. Members of the conspiracy allegedly caused the company to actively hide from the arbitral tribunal the fact that the contract had been secured by means of bribery and corruption, including tampered witness statements and pleadings that falsely denied the existence of corruption. The tribunal awarded the company nearly $220 million plus interest, although that award was never claimed.

The eight defendants are charged with conspiracy to violate the anti-bribery, books and records and internal control provisions of the Foreign Corrupt Practices Act; conspiracy to commit wire fraud; conspiracy to commit money laundering; and substantive wire fraud. Their parent company and three of its foreign subsidiaries pleaded guilty to related charges in 2008 and agreed to pay more than $1.6 billion in fines and penalties.

DOJ states that the charges against these individuals “follow, in large part, the laudable actions of [the company] and its audit committee in disclosing potential FCPA violations to the department after the Munich Public Prosecutor’s Office initiated an investigation.” The company initiated an internal FCPA investigation of “unprecedented scope,” shared the results of that investigation, cooperated extensively and authentically with DOJ in its investigation, and took remedial action, including the complete restructuring of the company and the implementation of a sophisticated compliance program and organization.

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