Executive Summary & Key Takeaways

As we head into 2024, we reflect on the significant white collar cases impacting corporate executives from the end of 2023 and consider what they may reveal about investigation and prosecution trends going forward. Of note:

• SEC: In a novel case involving corporate disclosures, the U.S. Securities and Exchange Commission (SEC) sued a Chief Information Security Officer (CISO) for allegedly making false statements relating to the company's cybersecurity vulnerabilities, which he is contesting. 
• Antitrust: The Department of Justice's (DOJ) Antitrust Division quietly dismissed two signifcant cases:
  • The last remaining charges against a pharmaceutical executive in the generic drug price-fixing investigation
  • Charges against a company in the "no-poach" labor enforcement investigation
  This may signal the Division's desire to make better charging decisions in cartel cases under new leadership.
• Russian Sanctions: The U.S. Department of State (State) and the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) are increasingly targeting individual executives for violating Russian sanctions, including by designating more than 30 board members, Chief Executive Officers (CEOs), and senior managers on OFAC's List of Specially Designated Nationals and Blocked Persons (SDN List). We expect that the U.S. government will continue to home in on high- and mid-level executives for sanctions violations in 2024.

In this issue, we report on these and other significant cases involving the Foreign Corrupt Practices Act (FCPA), money laundering, and other fraud, as well as noteworthy extraditions and sentencings.

Actions Against Individuals

Economic Sanctions and Export Controls

Sanctions Targeted at Russian and Belarusian Executives: State and OFAC are increasingly targeting individual executives for sanctions, particularly based on their leadership roles and involvement in businesses in sanctioned economic sectors or sanctionable activities (e.g., supplying the Russian military). In November (here and here) and December 2023 alone (here and here), OFAC and State added more than 30 executives – including owners, founders, partners, board members, directors, CEOs, and senior managers – to OFAC's SDN List, primarily under the Russia-related and Belarus sanctions programs. Notably, these recent designations include not only Russian and Belarusian nationals, but also nationals of other countries in Europe and the Middle East. As explained further below, some of these individuals have simultaneously been targeted by other U.S. authorities in coordination with OFAC, such as DOJ and the U.S. Department of Commerce's Bureau of Industry Security (BIS). 

Belgian Businessman Charged with Diverting Military Technology to China and Russia: In December 2023, Belgian national Hans Maria De Geetere was charged in Texas and Oregon federal courts for unlawfully diverting U.S. military technology – including electronic components used in missiles, unmanned aerial vehicles, electronic warfare receivers, and military radar – to China and Russia over the course of several years. De Geetere served as the director of several companies in Belgium, Cyprus, and the Netherlands, which he and others allegedly used in the diversion scheme. In coordination with U.S. authorities, Belgian law enforcement arrested De Geetere, along with several other individuals, and executed search warrants in connection with their own investigation. BIS also added De Geetere, his brother, and five companies involved in the scheme to the BIS Entity List, resulting in their prohibition from receiving U.S. controlled goods or technology. OFAC added De Geetere as well as four other individuals, including his brother, and nine companies involved in the procurement network to the SDN List. These actions illustrate the increased coordination in sanctions and export controls enforcement among agencies within the U.S. government, as well as between the U.S. and its allies. 

Two U.S. Execs Plead Guilty to Money Laundering for Russian Sanctions Evasion: In October 2023, the president of U.S. company Metalhouse LLC pled guilty to a money laundering conspiracy to facilitate sanctions evasion by the sanctioned Belarusian oligarch Sergey Kurchenko. The executive conspired to transfer more than $150 million to Kurchenko and his companies in exchange for tens of thousands of tons of metal products (e.g., steelmaking equipment and raw material). The executive agreed to forfeit over $160 million in proceeds that he obtained through the scheme. He is scheduled to be sentenced in April 2024. Earlier in September 2023, a business associate also pled guilty to a similar charge under the scheme and agreed to forfeit more than $4 million in proceeds. 

Cartel & Government Contracts Fraud

Antitrust Division Drops Two Cartel Indictments, Signaling Reevaluation of Charging Decisions: In November 2023, DOJ voluntarily dismissed two cartel cases that had been pending in federal courts for multiple years. In the first, DOJ moved to dismiss one of its only remaining no-poach cases, against outpatient medical care operator Surgical Care Affiliates, LLC (SCA), citing "the conservation of this Court's time and resources." SCA was charged in January 2021 with conspiring with competitors not to solicit each other's senior-level employees. We have covered the Antitrust Division's devastating track record in criminal labor collusion prosecutions here, here, here, and here. Most recently, in April 2023, a federal judge acquitted six staffing company executives in the middle of trial, finding that DOJ had failed to prove that an illegal no-poach agreement had occurred. We questioned then whether that case was the death knell for DOJ's criminal no-poach cases. 

In the second case, DOJ voluntarily dismissed charges against a former Taro pharmaceutical executive for allegedly participating in a scheme to fix prices of generic drugs, citing the same reasoning of conservation of judicial resources. In February 2020, a grand jury indicted the former pharmaceutical executive for conspiring with competitors to fix prices and rig bids for medications used to treat arthritis, blood clots, and pain. The indictment was the only remaining criminal charge against an executive as part of the government's multi-year price-fixing investigation in the generic drug industry, which has resulted in resolutions with seven companies but only one guilty plea of an executive. 

These dismissals suggest that the Antitrust Division may be shifting its strategy and resources under the new leadership of Manish Kumar, who took the helm of the Division's criminal enforcement sections in January 2023. 

DOJ's Procurement Collusion Strike Force Fails to Convict in Bid-Rigging Cases: The Antitrust Division's Procurement Collusion Strike Force (PCSF) has faced enforcement setbacks in recent months. In September 2023, a federal jury in Florida acquitted three executives accused of rigging bids for U.S. Army contracts for customized promotional products, such as backpacks, water bottles, and clothing, after a three-week trial. Prosecutors alleged that the executives exchanged bid information and drafted sham bids to give the impression of competition for millions of dollars in contracts over a five-year period. According to one executive's attorney, evidence showed that the executives had disclosed information about the companies in a government database and the prices offered were reasonable.

In December 2023, the Fourth Circuit Court of Appeals reversed a bid-rigging conviction against a former executive of Contech Engineered Solutions LLC (Contech), while upholding his fraud convictions based on the same conduct. The Contech executive was found guilty at a jury trial in February 2022 of conspiring to rig bids by submitting and falsely certifying non-competitive bids to the North Carolina Department of Transit to ensure that Contech's North Carolina distributor would win the bids instead. He was sentenced to 18 months in prison. The Fourth Circuit reversed the conspiracy conviction because it found that the government's indictment on this count was deficient and should have been dismissed. The indictment alleged that Contech and its executive's bid-rigging conduct constituted a per se violation of Section 1 of the Sherman Act, but the Court explained that the factual allegations in the indictment did not fall within the category of horizontal restraints that the Supreme Court has found to be per se unreasonable under the Act. Rather, because the agreement was with Contech's distributor, the bid-rigging conduct included vertical restraints that might have had procompetitive effects and thus should have subjected the government to a higher evidentiary burden. This latest development comes as a blow to the PCSF after it won a trial victory in the case, previously covered here. 

Cement Exec Pleads Guilty, Avoids Jail Time: In December 2023, a cement sales executive pled guilty to facilitating the exchange of pricing information between competitors as part of DOJ's investigation into price fixing and bid rigging in the Georgia ready-mix concrete industry. Pleading guilty to a criminal antitrust violation based on a "conduit" theory is rare. As previously reported, the cement sales executive had been indicted in September 2020 for allegedly conspiring to fix prices and rig bids in the ready-mid cement industry and making false statements to government officials. In 2022, he filed a motion to dismiss the false statement charge, arguing that his Fifth Amendment rights were violated when federal agents interviewed him prior to his indictment without counsel present. The district court denied the executive's motion to dismiss in July 2023. While the executive ultimately pled guilty to a Sherman Act Section 1 violation, he admitted only to acting as a messenger between the competitor concrete companies and not a participant in the agreement, ultimately avoiding jail time. 

Medical Exec Avoids Jail After Mistrial, Pleading Guilty to Market Allocation Scheme: In November 2023, a federal judge in Florida sentenced an oncology group executive to three years of probation after he pled guilty to entering into a market allocation scheme to divide oncology services with another Florida oncology practice. The plea and subsequent sentencing come after this case went to trial in 2022, but ended in a mistrial during jury deliberations due to disruption caused by Hurricane Ian. While the parties agreed under the Rule 11(C)(1)(c) plea agreement that the oncology executive would serve only six months' probation, the court ultimately sentenced him to a longer period.

Prisoner Swaps and Prosecutorial Misconduct – the "Fat Leonard" Saga Continues: In December 2023, "Fat Leonard" Francis, the former CEO of defense contractor Glenn Defense Marine Asia (GDMA) at the center of a bribery scheme, was returned to U.S. custody as part of a prisoner exchange with Venezuela. Francis pled guilty in 2015 to bribing numerous Navy officials with parties, prostitutes, and luxury items in exchange for at least $35 million in government contracts, one of the largest government contracts scandals in U.S. history. Francis fled the country prior to his scheduled sentencing in 2022. 

Francis' escape was not the only loss for the U.S. government in this long-running saga, which we originally reported about back in 2017. In September 2023, the convictions of four former Navy officers, charged with accepting bribes as part of the scheme, were vacated after the presiding judge found "flagrant" and "outrageous" prosecutorial misconduct. Specifically, the prosecution, led by Assistant U.S. Attorney Mark Pletcher, concealed evidence that Francis and defense witnesses possessed child pornography and failed to disclose interview details with a prostitute that undermined certain allegations — among other things. The U.S. Attorney's Office for the Southern District of California admitted the misconduct and the prosecutors have been hit with bar complaints. As a result of the misconduct, the four officers avoided jail time, pleading guilty to a single misdemeanor and $100 fine each. In all, the "Fat Leonard" scandal has resulted in the conviction of almost two dozen individuals on fraud or corruption charges thus far. 

Securities and Accounting Fraud

SEC Targets Cybersecurity Executives: In October 2023, the SEC charged the CISO of SolarWinds Corporation and the company with making misleading disclosures regarding the company's cybersecurity vulnerabilities. The contested complaint marks the first time the SEC has charged a CISO for their role in allegedly improper corporate disclosures. This case, along with the cybersecurity disclosure regulation that went into effect on December 15, 2023, reflects the SEC's increased focus on cybersecurity threats and how issuers communicate those threats to investors. Here, the SEC alleges that the cybersecurity disclosures were too general and incomplete given the actual, known cyber-risks and the importance of the underlying risks. The SEC alleged that the CISO signed multiple sub-certifications related to the company's cybersecurity position that were relied upon by the Chief Financial Officer (CFO) and CEO when making disclosures.   

SEC Uses Data Analytics to Nab Execs For Failing to File Timely Transaction Reports: In September 2023, the SEC settled with six officers, directors, and shareholders of public companies, alongside five issuers, for failing to file timely holding and transaction reports. Company executives and insiders are required to file forms reporting any transactions in the company's stock. These forms must be filed within two business days of the relevant transaction and are typically submitted to the SEC by the issuer on behalf of the individual. But as the SEC explained in one of the director's settlements, "an insider retains legal responsibility for compliance with the filing requirements." The SEC used data analytics to conduct a sweep to find repeat late filers, mirroring a 2014 sweep that led to dozens of settlements with individuals. In September 2023, all six of the individuals agreed to pay civil penalties ranging from $66,000 to $150,000. 

FCPA

Fifth Circuit Affirms Dismissal of Bribery-Related Charges Against Swiss-Portuguese Banker: In November 2023, the Fifth Circuit affirmed the dismissal of bribery-related charges against a Swiss-Portuguese banker pursuant to the Speedy Trial Act. The appellate court also found that the district court did not properly consider the statutory factors in reasoning that the dismissal should be with prejudice. In particular, the Fifth Circuit criticized the district court for finding that potential charges in a foreign country or the interests of foreign citizens in prosecuting the defendant either mitigated the severity of the alleged conduct or supplanted the interests of American citizens in seeing the defendant brought to trial domestically. The Fifth Circuit ordered the case reassigned to a different trial judge to determine whether the dismissal should be with prejudice. Without opining on the district court's motion to suppress ruling, the appellate court vacated the order granting the motion and noted that the issues would "only become live again if the [g]overnment has both the ability and desire to refile charges."

CEO Charged with Allegedly Bribing Senegalese Officials: In September 2023, a federal grand jury indicted a California-based CEO for his involvement in a scheme to bribe Senegalese government officials. The superseding indictment alleges that, to obtain a land grant in Senegal, the CEO hosted a Senegalese government official in California. During the official's stay, the CEO allegedly provided him with "luxury accommodations, transportation, and lavish entertainment," including by chartering a helicopter to a Los Angeles Lakers basketball game. The superseding indictment further alleges that when the CEO was subsequently invited to Senegal by another government official, the CEO offered to provide five vehicles to assist the government official with a political campaign and, in return, to persuade the official to authorize the land grant. The CEO is also charged in connection with a scheme to defraud investors. The CEO pled not guilty and the trial is currently scheduled to begin in March 2024.

Trader Indicted in Texas After Charges Dismissed in New York: In August 2023, a Texas grand jury indicted a former oil trader for his role in a scheme to bribe procurement managers at PEMEX Procurement International, Inc. (PPI), a subsidiary of Mexican state-owned oil company Petróleos Mexicanos (PEMEX), to obtain confidential information and win contracts. The trader was previously charged in New York in connection with a bribery scheme involving Petroecuador, a state-owned oil company in Ecuador. In 2022, prosecutors attempted to add charges to the New York indictment related to the Mexican scheme. The U.S. District Court for the Eastern District of New York (EDNY) dismissed the Mexico-related bribery charges in May 2023 for lack of venue. At the same time, the court allowed a conspiracy charge involving proceeds from both the Mexico and Ecuador schemes to proceed because prosecutors alleged the conspiracy involved transactions in the EDNY. The trader now faces potential 2024 trial dates in both jurisdictions. This matter is discussed in greater detail in the FCPA Autumn Review 2023.

Anti-Money Laundering and Fraud

Ex-Chairman of 1 Global Capital Pleads Guilty in $250M+ Securities Fraud Scheme: In October 2023, Carl Ruderman, the former owner of Playgirl magazine and the former Chairman of 1 Global Capital, a now-bankrupt and defunct commercial lender based in Florida, pled guilty to conspiracy to commit securities fraud for his central role in a massive scheme to defraud that cost investors between $150 million and $250 million. Ruderman is the fifth co-conspirator to plead guilty in connection with the 1 Global Capital fraud. Ruderman admitted to misrepresenting profitability to investors, misrepresenting the company's investment offerings, and misappropriating investor funds for lavish personal expenses. Ruderman agreed to a sentence of five years, the statutory maximum, and has agreed to forfeit at least $285 million. Four of Ruderman's co-conspirators, including two lawyers who furthered the scheme, have already been ordered to pay a total of more than $306 million and have been sentenced to prison terms ranging from eight months to five years. In August 2019, Ruderman was ordered to pay nearly $50 million in penalties associated with a separate SEC civil fraud action based on the same conduct. Ruderman is scheduled to be sentenced at the end of January 2024.

Cryptocurrency Prosecutions Highlight SDNY Focus on MLM and Ponzi Schemes: In September 2023, Karl Sebastian Greenwood, co-founder of the Bulgaria-based cryptocurrency OneCoin, was sentenced to 20 years in prison for his central involvement in a $4 billion scheme to defraud millions of investors around the world. Greenwood pled guilty in December 2022 to wire fraud and money laundering charges, as previously reported. Following the sentencing, the Southern District of New York (SDNY) prosecutor highlighted that Greenwood and the other co-founder of OneCoin, Ruja Ignatova, misrepresented the value and underlying technology of OneCoin, which essentially operated as a multi-level marketing scheme (MLM) and was designed to be a fraud from day one. Greenwood was arrested in Thailand in 2019, and Ignatova, who remains at large, was added to the Federal Bureau of Investigation's (FBI) "Ten Most Wanted Fugitives" list last year. In November 2023, OneCoin's head of legal and compliance, Irina Dilkinska, also pled guilty to wire fraud and money laundering charges, and faces sentencing from Judge Ramos in February 2024.

Also in September 2023, Marco Ruiz Ochoa, the former CEO of IcomTech, a cryptocurrency mining and trading company, pled guilty to conspiracy to commit wire fraud in connection with an alleged scheme to entice investors worldwide to invest in cryptocurrency packages, bar them from accessing their funds, and redirect new investments to pay prior investors and finance extravagant events, luxury goods, and real estate. Ochoa, who was charged alongside five other defendants, is the first and only defendant so far to plead guilty. 

Other Fraud and Domestic Bribery

California Attorney Indicted in Billion Dollar Ponzi Scheme Related to Sale of Mobile Solar Generators: In October 2023, a California federal grand jury indicted an outside counsel to DC Solar Solutions Inc., a seller of mobile solar generators, for his role in an alleged Ponzi scheme relating to the sale of the product. According to the indictment, DC Solar sold generators to investors who never took possession of them. DC Solar then typically leased the generators back from the investors and claimed to sublease them to third parties. But due to a lack of a third-party rental demand, the co-conspirators created a circular payment scheme to use money from investors and misrepresent it as revenue. The indictment alleges that investors contributed more than $912 million to purchase 17,000 generators, representing approximately $2.5 billion in value. Six co-conspirators in the scheme have been sentenced to prison terms between three and 30 years and ordered to pay restitution cumulatively amounting to over $2.5 billion. One co-conspirator has pled guilty and is awaiting sentencing.

In September 2022, the SEC filed a complaint against the attorney arising out of the same conduct, alleging that the attorney knowingly helped create misleading transaction documents and provided false information about purported leases to investors in order to hide the lack of a legitimate third-party leasing market from them. In November 2023, the court stayed the SEC's case until the criminal proceedings are concluded.

Former Platinum Partners Execs' Wire Fraud Convictions Overturned Under Ciminelli: In July 2023, a federal district court judge acquitted Platinum Partners hedge fund executives Mark Nordlicht and David Levy of wire fraud conspiracy charges related to their involvement in a scheme to defraud bondholders of an oil and gas company, Black Elk Energy Offshore Operations LLC. The court granted the executives' motion for acquittal as to the wire fraud-related charges based on the Supreme Court's May 2023 decision in Ciminelli v. United States et al., which invalidated the Second Circuit's right-to-control wire fraud theory. The court left in place the executives' securities fraud-related convictions.

As previously reported, the executives had been convicted of securities and wire fraud-related charges in July 2019 following a nine-week trial. The district court granted post-trial motions for acquittal as to Levy and a new trial as to Nordlicht, but the Second Circuit overturned those decisions in 2021 and reinstated the convictions. The executives await sentencing as to the securities fraud charges.

Former Platinum Partners portfolio manager Daniel Small was tried separately for his role in the scheme in the summer of 2022 and found guilty of all charges. Prosecutors argued for a sentence between six and 12 months while defendant's counsel urged the court to order probation. The district court sentenced Small to less than one year of probation because there were no actual or intended victims. 

Extradition & Extraterritoriality

Federal Prosecutors Drop LIBOR Charges Against Former SocGen Bankers who France Refused to Extradite: In March 2023, federal prosecutors in New York dropped charges (previously discussed here) from an August 2017 indictment against former Societe General SA (SocGen) bankers Danielle Sindzingre and Muriel Bescond for a LIBOR rate manipulation scheme. France refused to extradite Bescond and Sindzingre, citing domestic law and policies against extraditing French nationals, one of several hurdles faced by the U.S. government. In August 2021, the Second Circuit opened the door for this dismissal when it overturned a district court decision holding that Bescond had fugitive status and therefore could not seek dismissal of the indictment.

Former Tech CEO Extradited from U.K. to Face Fraud Charges: In May 2023, the former CEO of U.K. tech company Autonomy was extradited to the U.S. to face charges related to allegations that he defrauded Hewlett-Packard into overpaying in its purchase of Autonomy. Lynch's extradition follows lengthy contested proceedings that resulted in an April 2023 decision by two high court judges in London rejecting Lynch's appeal of his extradition order. The U.K.'s then-Home Secretary had approved Lynch's extradition to the U.S. in January 2022 and Lynch contested the decision in the U.K. courts.

Noteworthy Sentencings

Executive Sentenced to Four Years for False and Misleading Social Media Posts: In December 2023, the founder and executive chairman of Nikola Corporation was sentenced to four years and ordered to pay a $1 million fine after a jury found him guilty of a scheme to defraud and mislead investors. According to the indictment, the executive made false and misleading statements advertising the electric and hydrogen-powered vehicle and energy company via social media to induce retail investors to purchase Nikola stock. Nikola's stock value plummeted after certain of the founder's statements were revealed to be false and misleading, resulting in investors losing significant funds.

The court's sentence was well below the government's recommended sentence, which itself was substantially below the U.S. Sentencing Guidelines. The government adopted the U.S. Probation Office's below-Guidelines recommended sentence of 11 years, rather than the Guidelines sentence of 60 years. The government asserted a total loss to investors, based on a per-share inflation calculation, to be at least $660.8 million and highlighted the founder's "lack of remorse and failure to accept any form of responsibility for his actions" as contributing to the need for a substantial sentence, as well as a need for deterrence specific to startups: "Too often startup founders have turned to misrepresentation about the status of their technology or their ability to generate revenue in order to boost their nascent companies and obtain new investments." The executive advocated for a sentence of probation, citing his innovation in the semi-truck industry, accurate SEC disclosures when Nikola was taken public, his inexperience as a corporate executive, and his lack of intent to harm investors. 

Board Member Sentenced to Nine Years for Ponzi Scheme: In September 2023, a board member at MJ Capital LLC was sentenced to over nine years after pleading guilty for his role in a $200 million Ponzi scheme. As part of the plea agreement, the board member proffered that, along with his co-conspirator, the president and CEO of MJ Capital, he solicited investments from the public via investment contracts they claimed would fund small business loans known as Merchant Cash Advances (MCAs). In fact, MJ Capital allocated minimal funds to MCAs and made little money off those investments. According to the proffer, the scheme caused over $25 million in losses to investors and the board member obtained over $42 million in proceeds. The Sentencing Guidelines recommended a sentence of 78 to 97 months, but the government advocated for a one-level variance and a 108-month sentence, based on the defendant's post-conspiracy actions. The government alleged that the defendant continued to spend ill-gotten funds, depleting over $1 million in investor funds in violation of a court ordered freeze, and attempted to coordinate a cover story with his co-conspirator. The court went beyond the government's requested sentence, sentencing the defendant to 110 months. The CEO of MJ Capital was indicted in August 2023 and is currently scheduled for trial in January 2024.

Former Aequitas Executives Receive "Chart-Busting" Offense Levels, but Divergent Sentences for $300M Ponzi Scheme: In September 2023, three former Aequitas executives were sentenced to 14, six, and three years in prison after a federal jury found them guilty of a sophisticated $300 million Ponzi scheme. The government described the offense level calculation for all three defendants who went to trial as "chart-busting," saying it would allow for a life sentence, despite their lack of criminal history. All three defendants received significant enhancements, including for causing hundreds of millions of dollars of losses, financial hardship to a large number of victims, and utilizing sophisticated means to execute the scheme both domestically and internationally. The government recommended sentences of 20 years, 17.5 years, and 10 years. By contrast, for two additional defendants who cooperated with the government's investigation, the government recommended sentences well below the Guidelines, in one case time served and in the other case no more than three years. The government noted both of these defendants' significant cooperation and willingness to testify.

Editors: Katherine E. Pappas, Ian A. Herbert, Lauren E. Briggerman  

Authors: Maame Esi Austin, Alexandra Beaulieu, Connor W. Farrell, Brittany Huamani, Calvin Lee,* Cody Marden, Rachel Mendelson, Sandeep A. Prasanna, Alexandra S. Prime,* Jesse Schwab, Rebecca Tweedie, Caroline J. Watson, Surur Fatema Yonce*  

Contributors: Kirby D. Behre, John E. Davis, Sandra M. Hanna,* Paul A. Leder, Alex L. Sarria, Timothy P. O'Toole

*Former Miller & Chevalier attorney

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