Heavy Fines to Settle Separate Bribery Charges Against New York Cosmetics Company, Two Broker-Dealer Execs
The Department of Justice announced Dec. 17 that a New York-based cosmetics company has agreed to pay more than $135 million in criminal and regulatory penalties to settle charges that its China-based subsidiary made improper payments to foreign officials in China in violation of the Foreign Corrupt Practices Act. In a separate action, the Justice Department announced that two executives of a U.S. broker-dealer have pled guilty to bribery charges arising from their scheme to pay bribes to a senior official in Venezuela’s state economic development bank.
In the first case the New York-based cosmetics company will pay $67,365,013 in disgorgement and prejudgment interest to the Securities and Exchange Commission and a $67,648,000 criminal fine to the Department of Justice to settle allegations that it conspired to violate the accounting provisions of the FCPA from at least 2004 through 2008 to conceal more than $8 million in gifts, cash, non-business meals, travel and entertainment it gave to Chinese government officials in order to obtain and retain business benefits for its China-based subsidiary. The subsidiary attempted to conceal these payments and benefits through a variety of means, including by falsely describing the nature or purpose of, or participants associated with such expenses, and falsely recording payments to a third party intermediary as payments for legitimate consulting services.
The companies also admitted that in late 2005 the New York-based company learned that its China-based subsidiary was routinely providing things of value to Chinese government officials and failing to properly document them. Justice states that instead of ensuring the practice was halted, fixing the false books and records, disciplining the culpable individuals and implementing appropriate controls to address this problem, the companies took steps to conceal the conduct. As part of the settlement the companies have agreed to implement rigorous internal controls, cooperate fully with the Justice Department and retain a compliance monitor for at least 18 months.
The second case involves the CEO and managing director of a U.S. broker-dealer who allegedly participated in a bribery scheme in which a Venezuelan official directed business she controlled at Venezuela’s state economic development bank to the broker-dealer in exchange for a share of the revenues. According to the Justice Department, this scheme operated from 2008 through 2012 and generated over $60 million in commissions from trades with the Venezuelan development bank. In order to conceal their conduct the executives routed the payments to the Venezuelan official through third parties posing as “foreign finders” and into offshore bank accounts. In several instances, one of the executives personally signed checks worth millions of dollars that were made payable to one of these purported “foreign finders” and later deposited in a Swiss bank account.
The two executives each pled guilty to one count of conspiracy to violate the FCPA and the Travel Act and agreed to pay approximately $3.6 million and $2.7 million, respectively, in forfeiture.