Ecuador.
It is on the smaller side of countries in South America in terms of population and land area. However, it has the third largest oil reserves in South America and thus many companies subject to the Foreign Corrupt Practices Act do business in the country.
This post summarizes the many FCPA enforcement actions (and related actions) regarding conduct (in whole or in part) in Ecuador.
As highlighted below, not all of the enforcement actions involve business interactions with PetroEcuador.
Another portion of the Ecuador FCPA enforcement actions involve business interactions with Seguros Sucre and Rocafuerte” (both alleged state-owned insurance companies).
By my count, since 2018, 6 companies and 16 individuals have resolved FCPA (or related) enforcement actions concerning conduct in Ecuador.
Gunvor (2024)
As highlighted here, earlier this month the Switzerland-based commodities firm resolved a net $474.4 million FCPA enforcement action.
The DOJ alleged in summary fashion:
“In or about and between 2012 and 2020, Gunvor, through Kohut, Gunvor Manager #1, and Gunvor Manager #2, knowingly and willfully conspired and agreed with others to corruptly offer and pay bribes to, and for the benefit of, Ecuadorian officials to secure improper advantages in order to obtain and retain business from Petroecuador in connection with the purchase and sale of oil products through contracts between Petroecuador and State-Owned Entity #1 and between Petroecuador and State-Owned Entity #2.’”
See here for the 2021 FCPA enforcement action against Raymond Kohut based on the same core conduct.
Tysers Insurance Brokers Limited and H.W. Wood Limited (2023)
As highlighted in this prior post, the DOJ alleged that “Tysers and H.W. Wood were engaged in a conspiracy the purpose of which was for the co-conspirators to enrich themselves by, among other things, corruptly offering bribes to, and for the benefit of Juan Ribas Domenech, Foreign Official 1, Foreign Official 2, and Foreign Official 3, each of whom was a foreign official in Ecuador, within the meaning of the FCPA … to influence the foreign officials and to secure improper advantages in order to obtain or retain reinsurance business from Seguros Sucre and Rocafuerte” (both alleged to be state-owned insurance companies).
Jardine Lloyd Thompson Group Holdings Ltd. (2022)
As highlighted in this prior post, the DOJ’s so-called “declination with disgorgement letter” stated:
“The Department’s investigation found evidence that beginning in 2014 and continuing through 2016, JLT, through its employee and agents, paid approximately $10,800,000 to a Florida-based third-party intermediary that the employee and agents knew would be used, in part, to pay approximately $3,157,000 in bribes to Ecuadorian government officials in order to obtain and retain contracts with Seguros Sucre, the Ecuadorian state-owned and -controlled surety company. Approximately $1.2 million of these bribe payments were laundered through and into bank accounts in the United States.”
Esteban Eduardo Merlo Hidalgo, Christian Patricio Pintado Garcia, and Luis Lenin Maldonado Matute (2022)
Merlo is described as an Ecuadorian and U.S. dual citizen residing in Miami who operated and controlled Intermediary Company (a term that collectively refers to two companies that were registered in Panama and Ecuador, operated in Miami, Florida, and acted as intermediaries for reinsurance companies). Merlo is described as a “domestic concern” in FCPA speak. Maldonado is described as an Ecuadorian citizen and Costa Rica resident and the President of Intermediary Company. Maldonado is described as an agent of a “domestic concern” in FCPA speak. Pintado is described as an Ecuadorian and Italian dual citizen and resident of Costa Rica and the General Manager of Intermediary Company. Pintado is described as an agent of a “domestic concern” in FCPA speak. In summary fashion, the indictment alleges that the defendants and others conspired to “unlawfully enrich themselves by bribing Ecuadorian officials to obtain and retain business from Ecuadorian entities and instrumentalities controlled by the Ecuadorian government for themselves and others.” (See here for the prior post).
Jorge Cherrez Mino and John Robert Luzuriaga Aguinaga (2021)
According to the criminal complaint, Cherrez (a citizen of Ecuador who is currently located in Mexico) served as the manager, president, and director of the “U.S. Investment Fund Companies” (a domestic concern under the FCPA). Luzuriaga (a citizen of Ecuador served as the Risk Director for Instituto de Seguridad Social de la Policia Nacional (“ISSPOL” – an Ecuadorian public institution responsible for managing the financial contributions by Ecuadorian police officers toward their social security). The complaint alleges that “ISSPOL was controlled by the government of Ecuador and performed a function that Ecuador treated as its own, and was an ‘instrumentality’ of the Ecuadorian government.”) Even though the Cherrez complaint provides a jurisdictional basis for FCPA anti-bribery offenses and indeed alleges that Cherrez violated the FCPA, the Cherrez and Luzuriaga complaints charge money laundering offenses.
Sargeant Marine and Various Individuals (2020)
As highlighted in this prior post, Sargeant Marine (SMI) and various individual associated with the company resolved a net $16.6 million enforcement actions regarding conduct in Brazil, Venezuela and Ecuador.
As to Ecuador, the DOJ alleged:
“In or about 2014, SMI, through certain of its employees and agents, knowingly and willfully conspired and agreed with others to corruptly offer and pay bribes to, and for the benefit of, foreign officials in Ecuador, including Petroecuador Official #1, to secure an improper advantage in order to obtain and retain business with Petroecuador and win lucrative contracts with Petroecuador.
To facilitate the bribery scheme and to conceal the true nature of the bribe payments, SMI and its co-conspirators, among other things, created fake consulting contracts and fake invoices and made payments from bank accounts in the United States to offshore bank accounts held in the name of shell companies that were controlled by [an] Intermediary and the Intermediary close relative.”
Enrique Pere Ycaza and Antonio Pere Ycaza (2020)
As highlighted in this prior post, the brothers pleaded guilty to FCPA offenses in connection with the Ecuador conduct at issue in the Sargeant Marine (SMI) and Vitol FCPA enforcement actions.
As to the Ecuador Bribery Scheme in the SMI matter, the DOJ alleged:
“In or about 2014, SMI, through certain of its employees and agents, knowingly and willfully conspired and agreed with others to corruptly offer and pay bribes to, and for the benefit of, foreign officials in Ecuador, including Petroecuador Official #1, to secure an improper advantage in order to obtain and retain business with Petroecuador and win lucrative contracts with Petroecuador.
To facilitate the bribery scheme and to conceal the true nature of the bribe payments, SMI and its co-conspirators, among other things, created fake consulting contracts and fake invoices and made payments from bank accounts in the United States to offshore bank accounts held in the name of shell companies that were controlled by [an] Intermediary and the Intermediary close relative.”
As to the Ecuador bribery scheme in the Vitol matter, the DOJ alleged under the heading “The Ecuador and Mexico Bribery Scheme” as follows:
“In or about and between 2015 and 2020, Vitol, through certain of its employees and agents, knowingly and willfully conspired and agreed with others to corruptly offer and pay more than $2 million in bribes to, and for the benefit of, officials in Ecuador and Mexico to secure an improper advantage in order to obtain and retain business in connection with the purchase and sale of oil products.
In furtherance of the scheme, Vitol and its co-conspirators entered into several sham consulting agreements, set up shell companies for the purpose of laundering the corrupt payments, created fake invoices for purported consulting services and used email accounts with pseudonyms to transfer funds to offshore shell companies involved in the conspiracy. The illegal payments were made through multiple bank accounts in the United States, including in the Eastern District of New York, and abroad in an effort to conceal the bribes.”
Juan Ribas Domenech, Jose Vicente Gomez Aviles, Felipe Moncaleano Botero (2020)
The individuals were charged with money laundering conspiracy in connection with bribery schemes. (See here for the prior post). Ribas served as the Chairman of Seguros Sucre and as an advisor to the President of Ecuador. Gomez was an owner of a Panama registered company that operated as a reinsurance broker. Moncaleano was an executive and shareholder of the Colombian-based subsidiaries of a U.K. reinsurance broker and risk advisor. The DOJ also charged Roberto Heinert with money laundering conspiracy. Heinert was also an owner of the Panama registered company that operated as a reinsurance broker.
Vitol and Javier Aquilar (2020)
As highlighted in this prior post, Vitol Inc. (the U.S. affiliate of the Vitol group of companies, which together form one of the largest energy trading companies in the world) resolved a net $90 million FCPA enforcement action for conduct in Brazil, Ecuador and Mexico.
Under the heading “The Ecuador and Mexico Bribery Scheme,” the DOJ alleged:
“In or about and between 2015 and 2020, Vitol, through certain of its employees and agents, knowingly and willfully conspired and agreed with others to corruptly offer and pay more than $2 million in bribes to, and for the benefit of, officials in Ecuador and Mexico to secure an improper advantage in order to obtain and retain business in connection with the purchase and sale of oil products.
In furtherance of the scheme, Vitol and its co-conspirators entered into several sham consulting agreements, set up shell companies for the purpose of laundering the corrupt payments, created fake invoices for purported consulting services and used email accounts with pseudonyms to transfer funds to offshore shell companies involved in the conspiracy. The illegal payments were made through multiple bank accounts in the United States, including in the Eastern District of New York, and abroad in an effort to conceal the bribes.”
As highlighted in this prior post, the DOJ announced that Javier Aguilar (identified in certain reports as a former employee of Vitol Inc.) was criminally charged for “his alleged participation in a five-year international bribery and money laundering scheme involving corrupt payments to Ecuadorian officials” associated with PetroEcuador.
In 2023, Aguilar was found guilty at trial “for his role in a scheme to bribe Ecuadorean and Mexican government officials and to launder money to secure contracts worth hundreds of millions of dollars for his then-employer, Vitol Inc. (Vitol), the U.S. affiliate of the largest independent energy trading firm in the world.” (See here).
Armengol Alfonso Cevallas Diaz and Jose Melquiades Cisneros Alarcon (2019)
As highlighted in this prior post, the charged Armengol Alfonso Cevallas Diaz (an Ecuadorian citizen) and Jose Melquiades Cisneros Alarcon (an Ecuadorian citizen and permanent resident of the U.S.) in connection with a bribery scheme involving PetroEcuador.
The indictment charges Cevallos and Cisneros with conspiracy to violate the FCPA’s anti-bribery provisions, conspiracy to commit money laundering, and numerous money laundering offenses. According to the indictment Cevallos, Cisneros, and their co-conspirators “unlawfully enriched themselves by making corrupt payments to PetroEcuador [described as the state-owned oil company of Ecuador] officials in order to obtain and retain contracts from PetroEcuador for companies controlled by or associated with Cevallos and others.
Frank Chatburn and Armengol Cevallos (2018-2019)
As highlighted in prior posts here and here, the DOJ charged Chatburn with conspiring with others by making corrupt payments to PetroEcuador officials in order to obtain and retain contracts for Galileo (described as an Ecuadorian company that provided services in the oil and gas industry) from PetroEcuador. Similarly, the DOJ charged Cevallos with conspiring with others to “unlawfully enriched themselves by making corrupt payments to PetroEcuador officials in order to obtain and retain contracts from PetroEcuador for companies controlled by or associated with Cevallos and others.
Odebrecht/Braskem (2016)
As highlighted in this prior post, the related companies resolved a net $420 million FCPA enforcement action primarily focused on Brazil, but also involving conduct in Angola, Argentina, Brazil, Colombia, Dominican Republic, Ecuador, Guatemala, Mexico, Mozambique, Panama, Peru, and Venezuela.
As to Ecuador, the DOJ alleged:
“In or about and between 2007 and 2016, Odebrecht made and caused to be made more than $33.5 million in corrupt payments to government officials in Ecuador. Odebrecht realized benefits of more than $116 million as a result of these corrupt payments.
For example, in or about and between 2007 and 2008, Odebrecht experienced a number of problems related to a construction contract, and agreed with an intermediary to an Ecuadorian government official with control over public contracts to make corrupt payments to the government official to solve the problems. Odebrecht later delivered these payments in cash to the government official.”
Alcatel Lucent (2010)
As highlighted in this prior post, the telecommunications company resolved an approximate $137 million enforcement action regarding conduct in Costa Rica, Honduras, Malaysia, Taiwan, Kenya, Nigeria, Bangladesh, Ecuador and Nicaragua.
As to Ecuador, according to the DOJ:
“Alcatel conducted business in Ecuador with three major telecommunications customers, all of which were state-owned: Andinatel, Pacifictel, and Empresa Municipl de Telecomunicaciones, Aqua Potable, Alcantarillados y Saneamiento. The information alleges that Alcatel retained a consultant in Ecuador (“a wealthy businessman”), but that the consultant and the entities he controlled “did little legitimate work for Alcatel.” The information alleges as follows. “Instead, it was anticipated that Ecuadorian Consultant would funnel a portion of the funds Alcatel paid him to officials of the Ecuadorian state-owned telecommunications companies in order to secure business and other benefits for Alcatel. Improper payments were anticipated to be made or offered in connection with at least nine contracts with government-owned telecommunication companies.”
In addition, the information alleged:
“Alcatel also paid for trips taken by officials of the three telecommunications companies that were principally for pleasure. For example, both the Vice-President and the Chairman of the Board of Pacifictel received improper all-expenses paid trips to France.”
Misao Hioki (2008)
In 2008 the DOJ criminally charged Hioki (the General Manager of the International Engineered Products Department (“IEP”) of Bridgestone Corp. who oversaw international sales of marine hose and other marine products) with antitrust and FCPA violations.
As to the FCPA, the DOJ alleged that Hioki and is co-conspirators “negotiated with employees of government-owned businesses, who are foreign officials under the FCPA, in at least the following Latin American countries, Argentina, Brazil, Ecuador, Mexico, and Venezuela, to make corrupt payments to those foreign officials to secure business …”.
In 2008, Hioki pled guilty and was “sentenced to serve two years in jail and to pay an $80,000 criminal fine.” (See here).
As highlighted in this prior post, in 2011 Bridgestone agreed to pay $28 million to resolve an antitrust and FCPA enforcement action. The FCPA conspiracy charged was based on “corrupt payments to foreign government officials in Latin America and elsewhere.” However, Mexico is the only country specifically mentioned.
Willbros Group & Brown (2006-2008)
As highlighted here, the oil and gas services company resolved a $22 million enforcement action regarding conduct in Nigeria and Ecuador.
As to Ecuador, the DOJ alleged:
“[C]ertain Willbros employees based in South America agreed to make approximately $300,000 in corrupt payments to Ecuadoran government officials of the state-owned oil company PetroEcuador and its subsidiary, PetroComercial, to assist in obtaining the Santo Domingo project, which involved the rehabilitation of approximately sixteen kilometers of a gas pipeline in Ecuador, running from Santo Domingo to El Beaterio.”
As highlighted here, in 2006, Jim Bob Brown, a former Willbros executive, pleaded guilty to one count of conspiracy to violate the FCPA, in connection with his role in making corrupt payments to Nigerian government officials to obtain and retain the EGGS contract and in connection with his role in making corrupt payments in Ecuador.
The post The Many FCPA Enforcement Actions Concerning Conduct In Ecuador appeared first on FCPA Professor.