What Happened?
This week, Kevin Gleaton, 53, was sentenced to 18 months in prison after conspiring to commit wire fraud to defraud the Newark Watershed Conservation and Development Corporation (“NWCDC”) and misusing Social Security numbers in connection with a personal bankruptcy proceeding.
The Rundown
Gleaton’s sentencing comes after a long investigation into the use of taxpayer funds intended for conserving and managing the City of Newark’s water assets. Since the 1970s, the City has delegated the responsibility of operating the City’s water assets to the NWCDC, a non-profit entity. As a result, the NWCDC received taxpayer funds from the City to manage the City’s watershed, reservoirs, and water-treatment plant. What seemed like a good idea, paved way for a fraudulent scheme that took taxpayer money away from the conservation of water and instead placed it into the pockets of the NWCDC officials. Between May 2011 and September 2012, it is alleged that Gleaton conspired with Donald Bernard, Sr., the manager of special projects for the NWCDC, and Linda Watkins Brashear, the executive director of the NWCDC, to defraud the organization of more than $110,000. The plot unfolded by issuing fraudulent invoices to two of Gleaton’s companies (Synergy Group, a printing services company, and Mindshare Media, a digital marketing company) for work that was never actually performed. In total, approximately $110,000 was paid to Gleaton’s companies. After receiving payment, Gleaton then gave $97,000 to Bernard, who shared a portion with Brashear.
Gleaton, Bernard, and Brashear all pleaded guilty to the charges alleged. As a result of partaking in the fraudulent scheme, Gleaton was sentenced to 18 months in prison, three years of supervised release, and $111,600 in restitution. He also pleaded guilty to the use of false Social Security numbers in relation to personal bankruptcy proceedings in 2012 and 2013. As for the other players, both Bernard and Brashear pleaded guilty to using interstate facilities to promote and facilitate bribery by accepting $956,948 in kickbacks from several contractors over several years. They also pleaded guilty to filing false tax returns. Bernard was sentenced to 8 years in prison and Brashear’s sentencing hearing is scheduled for September 11, 2017.
The Take-Home
The NWCDC was dissolved in 2013 and the City of regained control over water distribution ever since. When Gleaton pleaded guilty to the charges in 2016, he became the sixth person to plead guilty in connection to NWDCD’s mismanagement of Newark’s water assets. This case is an example of how a lack in oversight in federal agencies can lead to the misuse of taxpayer dollar for personal gains of agency officials.
If you are aware of any person, corporation or entity that you think may be violating the Federal False Claims Act or a State False Claims Act, contact us today.
What Happened?
On July 27, 2017, the U.S. Securities and Exchange Commission charged Halliburton Company with violating the books and records, as well as the internal controls, provisions of the Foreign Corrupt Practices Act (“FCPA”). The Commission alleged that, in order to obtain contracts in Angola resulting in profits of $14 million, Halliburton inappropriately directed subcontracts to a local Angolan company with ties to an official with the state-owned oil company.
The Rundown
Simply stated, the FCPA, enacted in 1977, prohibits American companies and its representatives from bribing foreign officials. Criminal violations of this law are prosecuted by the U.S. Department of Justice. Violations of the FCPA also carry with them potential civil penalties that are investigated and prosecuted by the Securities and Exchange Commission. 15 U.S.C. § 78m sets forth the “books and records” and “internal controls” provisions of the FCPA. When a company makes inappropriate payments to foreign officials, the books and records of that company do not accurately reflect the financial status of the company and the transactions in which it engaged. Hence, civil liability attaches. Furthermore, companies issuing securities in the United States are required to enact internal controls to ensure compliance with legal mandates. Inappropriate payments and/or bribes reflect a failure to implement effective internal controls.
In this case, the SEC alleges that Halliburton’s Vice President, Jeannot Lorenz, spearheaded efforts to direct projects to a local business with connections to an official at Sonangol, Angola’s state-owned oil company. Instead of determining services that Halliburton needed to outsource and put those projects out for bid to local Angolan-owned businesses, Lorenz was alleged to have worked backwards. Lorenz first identified the companies to be hired and backed into the tasks that were required. No competitive bidding process was implemented. In all, Halliburton is alleged to have directed $13 million worth of work to a business connected to an Angolan official. In return, Halliburton profited by $14 million from the contracts it received.
Without admitting or denying the allegations levied by the Commission, Halliburton has agreed to pay $14 million in disgorgement, $1.2 million in prejudgment interest, and $14 million in civil monetary penalties. In addition, Lorenz has agreed to pay $75,000 in penalties for causing the company’s violations and circumventing the company’s internal controls.
The Take-Home
Violations of the FCPA have both civil and criminal ramifications. When working abroad, companies must be ever vigilant of payments to local officials and/or individuals or entities related to them. Transparency International, a global coalition against corruption, publishes an annual Corruption Perceptions Index of 176 countries. Out of 176 countries, Angola was perceived last year to be more corrupt than 163 other countries. Companies must be on high alert when working in companies perceived to be corrupt. The government has Internet access just like everyone else and can easily target investigations in these locales. Even if criminal charges are not pursued, civil allegations have teeth and can harm a company nearly as much as a criminal prosecution.
What Happens Next?
As part of Halliburton’s settlement, the company must retain an independent compliance consultant for a period of 18 months to review and evaluate its anti-corruption policies and procedures.
