Odebrecht, Samsung, others caught in bribery prosecutions of former heads of state

21 June 2018 9:37am

18 June 2018. By Robert Thomason.

When Ricardo Martinelli, former president of Panama, was extradited last week from the US to his home country to face a corruption trial, he joined a distinct club of former heads of state facing charges or serving time for taking corporate bribes.

Recent prosecutions of former chiefs of state around the world illustrate a growing willingness and capacity to hold top politicians accountable for bribery, and the corporations accused of paying those bribes often find themselves swept up in parallel prosecutions of their own.

National authorities are cooperating internationally more often on corporate bribery cases, so corporations in countries with corrupt leaders are more within the reach of the law than the heads of state themselves.

Prosecutions have brought stiff punishments to both politicians and companies. Former presidents, such as Inacio Lula de Silva in Brazil and Park Geun-hye in South Korea, as well as Martinelli, are behind bars on charges of accepting bribes from corporations. Corporations have been hit with heavy fines and have incurred deep legal and compliance expenses. Some top executives have gone to jail.

New laws against bribery, the emphasis on international cooperation, and the emergence of democracies in countries once ruled by militaries or minority elites pose as much of a threat to corrupt corporate actors or their agents as they do to corrupt presidents.

— South Africa —

Thint, the South African subsidiary of French arms manufacturer Thales, has been accused along with former president Jacob Zuma in a long-standing arms-deal case. Thint is accused of passing a half-million rand worth of bribes to Zuma in exchange for protection from an investigation when he was a government deputy.

Zuma was ousted from the South African presidency in February, resigning in the wake of a different corruption scandal in which an Indian family, the Guptas, exerted its control over key state corporations and agencies to their own business advantage.

Although Zuma faces inquiries into the Gupta affair, it is the corporate bribery case that immediately put him and Thint before a judge facing formal charges. Zuma had been indicted once before, but the charges were dropped. Last year, as political opposition to him accelerated, the charges were reinstated.

A director of the company stood in court with Zuma in April when the charges were reasserted. Thint has filed court documents arguing that the case against it should be dismissed.

The allegedly corrupt arms deal is a long-standing case, reaching back to 1999. Other corporations, such as UK's BAE, a German consortium including Thyssen-Krupp and Ferrostaal, and Sweden's Saab, have also been investigated over the years.

— Brazil —

In Brazil, in April former president Inacio Lula de Silva surrendered himself to begin a prison sentence on a charge that he accepted an apartment from engineering firm Grupo OAS in exchange for help in securing a contract with Petrobras, the government-owned oil company.

Lula and former President Dilma Rousseff have also been charged with participating in the Lava Jato, or Car Wash, scheme in which construction companies such as Odebrecht paid politicians bribes in the form of kickbacks from over-priced government-related contracts with Petrobras.

Odebrecht, Petrobras and Grupo OAS each have suffered their own consequences.

Odebrecht signed a $3.5 billion settlement with US, Swiss and Brazilian authorities. Former CEO Marcelo Odebrecht was originally sentenced to 19 years for bribery; after paying a $2 billion fine he was released from prison to serve a reduced sentence under house arrest.

Petrobras and its subsidiaries have been fined more than $1 billion through the Lava Jato case. It also settled a shareholder class action in the US for $2.95 billion.

Grupo OAS, which has filed for bankruptcy, saw its Sao Paulo headquarters raided in 2014. Subsequently, executives were arrested in the bribery scandal, and the company itself was charged with bribery in 2015.

— South Korea —

In South Korea, former president Park Geun-hye in April was sentenced to 24 years on charges of accepting bribes from the Lotte Group, Samsung and SK Group, major Korean industrial conglomerates. Her predecessor, Lee Myung-bak, is awaiting trial on charges that he accepted bribes from Samsung. He is also charged with accepting bribes from non-corporate entities.

Samsung Vice-Chairman Lee Jae-yong was released from prison in February after having served a year on charges of bribing a friend of Park .

SK Group and Lotte Group have been disqualified from duty-free licenses in connection with the bribery scheme. Shin Dong-bin, chairman of Lotte Group, in February was sentenced to two and a half years in prison and fined $6.4 million on charges of bribing ex-president Park.

— Panama, Peru —

Last week, former Panamanian president Ricardo Martinelli was extradited from a jail cell in Miami, Florida, to one in Panama City. He faces a raft of corruption charges, including one in which he is accused of soliciting a bribe from a firm in exchange for a contract to collect delinquent taxes.

Martinelli has also been named by the US Justice Department as a participant in a bribery scheme involving software company SAP. An executive for SAP went to jail in the US on a Foreign Corrupt Practices Act charge in the case, and the US Securities and Exchange Commission required SAP to disgorge $3.7 million to settle the case.

Martinelli had been under formal investigation by Panamanian authorities in the SAP case. Last year, a magistrate said that there was not sufficient evidence at that time to advance the case, but explicitly declined to close the case.

Martinelli's two sons are wanted for allegedly taking about $50 million in bribes from Odebrecht as part of its regional scheme to bribe officials in exchange for over-priced government contracts.

In Peru, former heads of state accused of taking bribes from corporations are under investigation or being sought. Last month, Peru issued an extradition request to the US seeking the return of former president Alejandro Toledo. Peru said that he took millions of dollars of bribes from Odebrecht.

Pedro Pablo Kuczynski resigned in March from the presidency amid allegations that he took Odebrecht bribes. He has not been formally charged.

— Proseuctors' tools —

Reasons for the plentiful corporate prosecutions vary. Thomas Carrothers, senior vice president of the Carnegie Endowment for International Peace, told an audience* last week that a transition to democracy over the last two decades, coupled with a legacy of kleptocracy, has led to increased investigation of high-level corruption.

New international tools to fight corruption have emerged at the same time. The OECD Antibribery Convention came into force in 1999. Since then, its signatories have sanctioned more than 500 people.

Further, the UN Convention Against Corruption last month celebrated its 15th anniversary. The UN said that most of the 184 national parties to the convention have found that it helped them strengthen their antibribery enforcement.

Jose Ugaz, who prosecuted the historic corruption cases against Peru ex-President Alberto Fujimori in 2008 and his security aide, Vladimiro Montesino, in 2000, told MLex that the Latin American antibribery convention provided tools, such as new national laws and methods of international cooperation, that aided the cases.

But Ugaz, who was on the same panel as Carrothers, also said that financial intelligence units, such as the international Financial Action Task Force and others, employed their expertise in forensic accounting and were even more helpful in prosecuting the former president of Peru.

— International cooperation —

Countries investigating trans-national corporate bribery are making use of mutual legal assistance treaty provisions to share information and evidence about the roles of both corporate bribe payers and the officials, including presidents, who receive the bribes. The process has not been without obstacles, but investigators and prosecutors have said they will pursue it.

Latin American prosecutors set up a task force to collaborate on the Lava Jato case, looking at the means by which Odebrecht and Petrobras bribed officials throughout the continent to obtain business. Last year, they signed the Lima Statement, in which they called for an end to resistance they have encountered from local officials as they sought evidence in the cases.

Last week Daniel Kahn, head of the US DOJ's FCPA unit, and Andrew Gentin, a senior DOJ bribery prosecutor, told an international audience to expect more international contact and coordinated multinational corporate resolutions.

* When Heads of State Are Embroiled in Cases of Serious Crime and Corruption: International Perspectives, OpenGov Hub, June 12, 2018, Washington, DC

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