Aon Pays $16.2 Million In Settlement

Aon Corporation, one of the biggest insurance brokerage firms in the world, agreed today to resolve FCPA charges with the DOJ and SEC.

It will pay a $1.76 million criminal penalty to the DOJ and $14.5 million in disgorgement and prejudgment interest to the SEC.

A U.K. subsidiary of Chicago-based Aon paid a penalty of £5.25 million to the U.K.'s Financial Services Authority in 2009 to resolve overseas bribery allegations. The fine was the largest the FSA had levied for financial crimes.

Citing Aon’s 'extraordinary cooperation,' the DOJ entered into a non-prosecution agreement with the company and its U.K. subsidiary, Aon Limited.

Aon’s subsidiaries, the SEC said, made over $3.6 million in improper payments between 1983 and 2007 to win or retain insurance business in Costa Rica, Egypt, Vietnam, Indonesia, the United Arab Emirates, Myanmar, and Bangladesh. The company made $11.4 million in profits from the bribes.

'[S]ome of the improper payments,' the SEC said, 'were made directly or indirectly to foreign government officials who could award business directly to Aon subsidiaries, who were in position to influence others who could award business to Aon subsidiaries, or who could otherwise provide favorable business treatment for the company’s interests. . . . [T]hese payments were not accurately reflected in Aon’s books and records, and Aon failed to maintain an adequate internal control system reasonably designed to detect and prevent the improper payments.'

The improper payments were for training, travel, and entertainment provided to employees of foreign government-owned clients, and to 'third-party facilitators.'

The DOJ said Aon was given a non-prosecution agreement because of 'its timely and complete disclosure of improper payments in Costa Rica and other countries that it discovered during its thorough investigation of its global operations; its early and extensive remedial efforts; the prior financial penalty of £5.25 million that Aon Limited paid to the United Kingdom’s Financial Services Authority (FSA); and the FSA’s close and continuous supervisory oversight over Aon Limited.'

Aon Corporation trades on the NYSE under the symbol AON.

View the DOJ's December 20, 2011 release here.

View the SEC's Litigation Release No. 22203 and Accounting and Auditing Enforcement Release No. 3348 (both dated December 20, 2011) in Securities and Exchange Commission vs. Aon Corporation, Civil Action No. 1:11-cv-02256 (D.D.C.) (filed Dec. 20, 2011) here.

BRIC Companies Rank Low On New TI Index

Transparency International yesterday released its 2011 Bribe Payers Index. It’s the fifth version of the index and the first update since 2008.

It ranks 28 of the world’s largest economies, TI said, ‘according to the perceived likelihood of companies from these countries to pay bribes abroad.’

The report is based on a survey of business executives. The countries ranked, TI said, cover all regions of the world and represent almost 80 percent of the total world outflow of goods, services, and investments.

It includes perceptions of public bribery and for the first time private ('business to business') bribery.

The top-ranked countries are the Netherlands and Switzerland, tied in first place. Belgium, Germany, and Japan round out the top five.

Companies from the BRIC economies are led by Brazil at 14. Russia ranked last overall at 28, India at 19, and China at 27.

The UAE, Indonesia, and Mexico complete the bottom five spots.

TI’s 2011 bribe payers index is here.

In Carson Case, DOJ Agrees 'Foreign Official' Knowledge Is Required

Does a defendant need to know a bribe taker is a 'foreign official' to be guilty of an FCPA offense?

According to the DOJ, the answer is 'yes.'

The question came up this month in U.S. v. Carson et al.

Prosecutors and the defendants have been trying to work out jury instructions for the trial, set to start in June next year.

In May, the defendants lost a motion to dismiss the FCPA counts against them based on the definition of 'foreign official.' They claimed employees of state-owned enterprises aren't covered by the FCPA. The court disagreed.

But this month the arguments about 'foreign officials' resurfaced. This time in the discussion about jury instructions. Judge James V. Selna asked both parties to consider whether an element of an FCPA offense is a defendant's knowledge that the individual allegedly taking a bribe is a 'foreign official.'

The DOJ and the Carson defendants have both answered 'yes.'

They haven't agreed yet on the final language for the jury instructions.

The trial is set to begin on June 5, 2012. The defendants -- Stuart Carson, Hong Carson, Paul Cosgrove, David Edmonds, Flavio Ricotti, and Han Yong Kim -- are facing FCPA and Travel Act-related charges.

They're accused of bribing employees at state-owned companies in Korea, China, the UAE, and Malaysia.

The case is US v. Carson et al, U.S. District Court, Central District of California, Southern Division - Santa Ana, Case #: 8:09-cr-00077-JVS-1.

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Here's part of the government's latest brief, filed Monday:

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At the hearing on September 6, 2011, the government requested an opportunity to submit further briefing on the following hypothetical question posed by the Court:

THE COURT: I want to get the business, and I’m going to pay you $50,000. I want you to misuse your position. I may or may not know that you’re a government official. But assume the record establishes that the person is a foreign official and that the conduct solicited, whether he knows it or not, is misuse of an official position. He intended to make the bribe, and his conduct brought about misuse of an official position. Must he know that? Must he know that the individual is in fact a government official?

The Court subsequently ordered the government to submit its brief no later than September 20, 2011, with any defense response to be filed no later than October 4, 2011. On September 21, 2011, the parties filed a stipulation stating, in part, as follows:

Since the hearing, counsel for the government and counsel for the Defendants have discussed the issue raised by the Court. Those discussions have yielded what appears to be at least some consensus that the answer to the questions posed by the Court is “yes.” Accordingly, the parties have exchanged proposed jury instructions to reflect the resolution of this issue. The parties expect that their discussions will result in a joint proposed jury instruction on the elements of a substantive offense under the FCPA. If those discussions do not result in a joint proposed jury instruction, the parties expect that additional submissions will be limited to their respective proposed instructions, and any legal argument explaining how their respective instructions in fact differ.

On September 22, 2011, the Court issued an Order resetting the briefing schedule, with the government’s brief due on September 26, 2011, and the defendants’ brief due on October 10, 2011. The parties have continued to exchange proposed instructions over the course of the past week but have been unable to reach agreement on certain language in elements 4 and 5 of the instruction.

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Download the government's September 26, 2011 supplemental brief regarding jury instructions; memorandum of points and authorities here.

Fit To Lead?

We're off to do our civic duty. But what we're thinking about today, other than which levers to pull, is the 2010 corruption perception index.

More specifically, whether the U.S. should still be leading the charge against international graft? Or has the country now forfeited its leadership role?

For the first time, as we heard a few days ago, America was voted out of the CPI's top 20 -- and is now perceived as more corrupt than Canada, the U.K., Australia, Barbados, Chile, Iceland, Germany, Japan and, yes, even Qatar. 

Why the decline? Rob Walton and Michael Whitener recited a litany yesterday -- shady lending and trading practices that triggered the Great Recession; money-flooded U.S. politics; and Ponzi-schemer Bernie Madoff and his copycats.

And let's not forget two U.S.-led wars -- now unmentionable, apparently, by anyone occupying or running for public office. Before the wall of silence went up, the world found out the Iraq war was sold on a false bill of goods. And in Afghanistan, the U.S. government itself has been shoveling black money into the mix, for purposes no one back home can explain.

So it's no wonder the rest of the world thinks America has lost some of its integrity. And why on the CPI the country landed just ahead of Uruguay, France, and Estonia -- a neighborhood not well known for iron-fisted compliance.

Today, then, as we exercise the greatest of all democratic privileges, we'll also be pondering what the the new ranking might mean for our favorite subject, FCPA enforcement.

More on that later.

Former CCI Exec Extradited

The DOJ said today that Flavio Ricotti, an Italian citizen indicted in April 2009 with five other former executives of California-based valve-maker Control Components Inc. (CCI), has been extradited to the United States from Germany. He's facing trial for his alleged role in a conspiracy to bribe officials of foreign state-owned companies and private parties.

Ricotti, 49, of Bientina, Italy, was arrested in February this year in Germany and extradited from there last week.

The others indicted with Ricotti are Stuart Carson, CCI’s former chief executive officer; Hong (Rose) Carson, CCI’s former director of sales for China and Taiwan; Paul Cosgrove, CCI’s former director of worldwide sales; David Edmonds, CCI’s former vice president of worldwide customer service; and Han Yong Kim, the former president of CCI’s Korean office. Their trial is scheduled to start on November 2, 2010.

Ricotti and his co-defendants are charged with one count of conspiracy to violate the FCPA and the Travel Act, one count of violating the FCPA, and three counts of violating the Travel Act. The conspiracy count carries a maximum penalty of five years in prison and a fine of $250,000 or twice the value gained or lost. The FCPA count carries a maximum penalty of five years in prison and a fine of $100,000 or twice the value gained or lost. The Travel Act counts each carry a maximum penalty of five years in prison and a fine of the greater of $250,000 or twice the pecuniary gain or loss.

Two other former CCI employees pleaded guilty last year to conspiring to bribe officers and employees of foreign state-owned companies on behalf of CCI. In January 2009, Mario Covino, the company's former director of worldwide factory sales, pleaded guilty to one count of conspiracy to violate the FCPA. He admitted arranging bribes of about $1 million to officers and employees of several foreign state-owned companies. In February last year, Richard Morlok, CCI’s former finance director, pleaded guilty to one count of conspiracy to violate the FCPA and admitted arranging about $628,000 in bribes to officers and employees of several foreign state-owned companies. Covino and Morlok are scheduled to be sentenced in January 2011.

In July 2009, CCI pleaded guilty to violating the anti-bribery provisions of the Foreign Corrupt Practices Act (15 U.S.C. §78dd-2) and the Travel Act (18 U.S. C. §1952). It admitted bribing foreign officials in a decade-long scheme to secure contracts in about 36 countries. CCI's three-year plea agreement imposed a criminal fine of $18.2 million and required appointment of a compliance monitor and cooperation with the DOJ's investigation.

The government alleges that Ricotti, who was CCI’s vice president and head of sales for Europe, Africa and the Middle East from 2001 through 2007, arranged bribes of at least $750,000 to officers and employees of state-owned companies (considered "foreign officials" under the FCPA), and bribes of about $380,000 to officers and employees of private companies. The payments allegedly related to projects in the United Arab Emirates, Kazakhstan, India and Qatar.

CCI designs and makes valves for the oil, gas, nuclear, coal and power plant industries. It is owned by British-based IMI plc, which trades on the London Stock Exchange under the symbol IMI.L.

As the DOJ says, an indictment is merely an accusation and the defendants are presumed innocent until proven guilty beyond a reasonable doubt.

A copy of the DOJ's July 6, 2010 release can be viewed here.