September Has Been A Transitional Month For FCPA Prosecutions In Latin America

Posted On Wednesday, October 3, 2018
By: Marc S. Raspanti

What Happened?

During the month of September alone, the Department of Justice (DOJ) announced charges, accepted guilty pleas, and attained settlements for extensive bribery, money laundering, and embezzlement schemes occurring at three state-owned and state-controlled energy companies located in Latin America in violation of the Foreign Corrupt Practices Act (FCPA).

For the Record

On September 27th, 2018, the DOJ announced that Petróleo Brasileiro S.A. – Petrobras (Petrobras), Brazil’s state-owned and controlled energy company, agreed to pay $853.2 million for its participation in bribery and embezzlement schemes. Petrobras Executive Board members received illegal payments to conceal and pay bribes from contractors to various Brazilian politicians and political parties. Contractors paid these bribes to receive certain contracts and even halt parliamentary investigation into Petrobras’ fraudulent handling of contracts. Petrobras also admitted that it failed to keep records that accurately reflected the company’s assets in order to conceal the bribery and embezzlement scheme whilst the company’s American Depository Shares were traded on the New York Stock Exchange, in violation of the FCPA.

On September 13th, 2018, Juan Carlos Castillo Rincon, a former manager of a U.S. based logistics and freight forwarding company, pleaded guilty for his participation in an international money laundering and bribery scheme at Petroleos de Venezuela S.A. (PDVSA), Venezuela’s state-owned and controlled energy company. Castillo bribed PDVSA official, Jose Orlando Camacho, to acquire PDVSA contracts, contract extensions, and receive favorable contract terms. Camacho admitted to giving Castillo favorable treatment and money laundering the bribery payments with Castillo.  So far, the DOJ has charged 18 individuals and secured 14 guilty pleas in connection with FCPA violations at PDVSA.

On September 11th, 2018, Jose Larrea, a U.S. based financial advisor, pleaded guilty for his role in a transnational money laundering and bribery scheme at Empresa Pública de Hidrocarburos del Ecuador (PetroEcuador), Ecuador’s state-owned and controlled energy company. Larrea conspired with Frank Roberto Chatburn Ripalda, a dual U.S. and Ecuadorian citizen, to wire transfer over $1 million from his own U.S. based bank account to several other accounts in an effort to conceal unlawful payments from an oil services contractor to PetroEcuador officials in order to retain existing contracts and win new business with PetroEcuador. Thus far, Larrea, Chatburn, and two former PetroEcuador officials have pleaded guilty to FCPA violations for their involvement in the money laundering and bribery scheme at PetroEcuador.

The Take Away

During the month of September alone, three Latin American state-owned and state-controlled energy companies have been involved in widespread bribery, money laundering, and embezzlement schemes. The government’s continued prosecution of individuals and costly monetary settlements for companies should act as a wakeup call for companies operating in Latin America. As the DOJ continues to investigate FCPA violations taking place at Petrobras, PDVSA, and PetroEcuador it is likely more prosecutions will ensue.