Investigations and decisions
UK: Arrests made in Rolls-Royce bribery investigation
Two people have been arrested in dawn raids carried out by the Serious Fraud Office (“SFO”) in connection with its investigation in alleged bribery and corruption at Rolls-Royce (“RR”). On 12 February 2014 an SFO spokesman made the following statement: “In connection with a Serious Fraud Office investigation, we can confirm a number of search warrants have been executed at various properties in London today, Wednesday, 12 February 2014. Two men were also arrested. Officers from the National Crime Agency and City of London Police assisted with the operation.”
The two arrested were later named in the UK press as Sudhir Choudhrie and his son Bhanu. Both deny any involvement in misconduct and were released without charge.
The arrests follow allegations last year by two whistle-blowers of bribery in connection with contracts won by RR in Indonesia and China, mostly in the 1990s and early 2000s. However, it has been reported that the latest enquiries relate to conduct allegedly occurring after the Bribery Act 2010 came into force in July 2011. If the investigation does find misconduct, this could result in the first major trial of a corporate under the UK’s new legislation. In January 2014 the SFO announced that it had secured additional “block buster” funding from the Treasury to enable it to pursue the investigation.
For the background to the SFO’s investigation into alleged bribery and corruption at RR, see our earlier report in January 2014’s edition of Financial Crime Update.
U.S.: DOJ and SEC expand FCPA inquiry into banks’ China hiring practices
The Securities and Exchange Commission and federal prosecutors in Brooklyn continue to expand their investigation into whether banks have violated the U.S. Foreign Corrupt Practices Act by allegedly hiring Chinese government-owned companies’ executives’ children in exchange for winning business. The investigation, launched last spring, has expanded beyond its initial target bank to include at least seven global banks.
Since the U.S. investigation began, JPMorgan has disassociated itself from underwriting at least two Chinese Initial Public Offerings (“IPOs”), including what became Hong Kong’s biggest IPO of 2013. Even if U.S. authorities decline to prosecute, the banks’ hiring practices may raise concerns with British and Hong Kong authorities, whose anti-bribery laws not only are stricter than those of the United States, but also apply to deals with private businesses as well as government officials.
U.S.: NGO Challenges $13 Billion JPMorgan Chase Settlement
On February 10, 2014, a non-profit group filed a complaint asking for judicial review of the $13 billion settlement between the United States Department of Justice (“DOJ”) and JPMorgan Chase. The settlement, announced in November 2013, settled allegations that JPMorgan misled investors and the public when it sold bonds backed by faulty residential mortgages. The $13 billion agreement – the largest deal ever signed between U.S. authorities and an individual company – included $9 billion in payments to authorities and $4 billion in relief to consumers.
Better Markets, an NGO that advocates for U.S. financial market reform, filed suit in the U.S. District Court for the District of Columbia claiming that the DOJ’s “secret negotiations” and the lack of judicial oversight concerning this record settlement violated the separation of powers doctrine. The NGO asserts that its standing derives from its public interest purpose having been thwarted by a lack of transparency in the settlement process and a lack of judicial forum in which it could have participated in influencing the outcome. Better Markets is seeking an injunction preventing the DOJ from enforcing the settlement until the DOJ submits the settlement to a court.
The full text of the settlement agreement can be found here.