Over the past few years, the Department of Justice and the Securities and Exchange Commission have been focusing much of their attention on U.S. companies suspected of bribing government officials abroad. When bribes are offered or taken in another country, criminal corporate bribery allegations are typically prosecuted under the Foreign Corrupt Practices Act or FCPA. One weakness of that law, from a prosecutor's point of view, is that it only gives them jurisdiction over people in the U.S.; foreign officials who receive bribes from U.S. companies cannot be prosecuted under the statute.
In a recent case, however, the Justice Department took a new tack. When the Miami-based affiliate of a New York brokerage called Direct Access Partners was accused of bribing the vice president of a state-controlled development bank in Venezuela, Justice found a way to charge that bank president with U.S. financial crimes -- even though she was a foreign national working abroad.
How? It filed charges under a Kennedy-era law called the Travel Act, which was meant to combat organized crime, and followed that up with money laundering charges.
Physical travel isn't actually one of the elements required for criminal prosecution under the Travel Act. Instead, the law allows federal charges to be brought against anyone, in the U.S. or abroad, for any state or federal offense committed using "any facility in interstate or foreign commerce."
In this case, two brokers from Direct Access Partners were accused of bribing the Venezuelan official with approximately $5 million in kickbacks in order to obtain securities investment business from the state-run bank. In return, for example, the banker allegedly churned nearly $100 million in bonds one day in 2010, which generated over $10 million in profits for the brokerage.
That was enough to bring charges against the two brokers under the FCPA, but not the banker. Since money was transferred to Swiss bank accounts using U.S. processors, however, the Travel Act could be used. Justice is also bringing money laundering charges against the three defendants, because violations of the federal statute "laundering of monetary instruments" are punishable by up to 20 years in federal prison.
Since the banker was in Miami on May 3 and was arrested along with the two brokers, there won't be any need to persuade Venezuela to extradite her, although there may be diplomatic repercussions. As of now, however, foreign nationals are on notice that the Department of Justice will use any means necessary to prosecute all those it suspects of corporate bribery, whether they're under its jurisdiction or not.
Source: The New York Times' DealBook, "The Foreign Bribery Law Comes to Wall Street," Peter J. Henning, May 8, 2013
