[Post updated] Bribing foreign government officials is obviously a crime in the country where the bribes are paid. If the company making or facilitating the bribes is a U.S. company or happens to be registered with the U.S. Securities and Exchange Commission (SEC), it is also a crime in the United States. Whistleblowers with inside information about these bribes are eligible for cash whistleblower rewards.
Between 2013 and 2016, several Mozambique government companies borrowed over $2 billion. The loans were arranged by Credit Suisse and another investment bank and sold to investors, many of whom were from the United States.
Prosecutors say that the loans were procured fraudulently and that several bankers and others conspired to use hundreds of millions of dollars of the loan proceeds for bribes and kickback payments to Mozambican government officials and bankers. They also say the group lied about the Mozambican government’s ability and intention to pay back the investors.
The loans by the Mozambique government companies were to be used for maritime projects benefiting Mozambique’s people. The recipient of much of the money was an Abu Dhabi based shipbuilding company, Privinvest Group.
According to prosecutors, the maritime projects were really a front for the group to raise money for themselves. Instead of helping the Mozambican people, the group raised over $2 billion to “enrich themselves” and pay at least $200 million in bribes and kickbacks.
Prosecutors say that the three Mozambican companies quickly defaulted on the loans leaving investors holding the bag. The Justice Department indicted 8 people they say were behind the scheme.
Most of those indicted quickly pled guilty and agreed to cooperate with the feds. One of those pleading guilty was a New Zealand citizen, Andrew Pearse. He was the former head of Credit Suisse’s Global Financing Group.
In July 2019, Pearse pled guilty. To a single count of conspiracy to commit wire fraud. At his plea hearing he told the court, “I took these actions to enrich myself and my co-conspirators and to benefit Credit Suisse, which gained substantial profits.”
He faces up to 20 years in prison when sentenced.
Another Credit Suisse employee, former vice president Detelina Subeva, pleaded guilty to money laundering conspiracy.
The mastermind of the entire scheme may be Jean Boustani, the lead negotiator for Privinvest Group. Boustani refused to plead guilty and is currently on trial in Brooklyn for a variety of charges related to the alleged investment scheme.
Last week during the trial, Boustani testified about his dealings with Andrew Pearse, Teofilo Nhangumele (a representative of Mozambique President Armando Guebuza) and even the president himself. Boustani acknowledged that all sought money from him. He characterized that money not as bribes but as “fees.”
According to Law360, which is covering the trial at one point Nhangumele’s requested “50 million chickens” as payment for arranging the $2 billion contract.
“At the time I found it very weird — chickens, I mean. It was a silly discussion,” Boustani told the court. “But I was laughing, so I said whatever.”
“It couldn’t be clearer that it was not about chickens — it was about money,” Boustani said.
“How many chickens did he ultimately get to roost?” U.S. District Judge William Kuntz asked.
“He ultimately got $8.5 million,” Boustani replied.
According to Boustani, his boss Privinvest CEO Iskandar Safa was surprised by the request but said, “Let’s tango dance with these guys and see where it will go.”
While suggesting that he knew government officials were getting massive bribes in order to approve the deal, Boustani denies knowledge of the bribes. According to him, he spoke with President Guebaza who told him that no government official would receive so much as a penny.
Pearse testified against Boustani earlier in the trial. Boustani says that Pearse named him simply to get a shorter prison sentence.
Why does the United States care?
The case is important for many reasons. First, the scheme was an obvious scam. Whether a jury convicts Boustani or not, investors all over the world have been defrauded. At what point Credit Suisse becomes responsible remains to be seen. The bank is already under pressure by Swiss regulators to improve its internal controls
The United States, like many other countries, also wants to ensure a level playing field for businesses. Legitimate businesses can’t compete when other businesses are willing to pay bribes in return for favorable contract awards.
Post update: December 2nd, 2019. A jury has acquitted Jean Boustani. The 41 year old Lebanese national was found not guilty of all charges.
We are shocked but believe in the jury. They heard the evidence and felt prosecutors didn’t meet their burden of proof. The case does not change the other defendants who were convicted or the availability of whistleblower rewards in similar cases. More on that below.
Several defendants have yet to stand trial although they are outside the United States. Three of the people yet to be tried are former Mozambique government officials. One of those officials, former Finance Minister Manuel Chang, was arrested in South Africa and is awaiting extradition to the U.S.
The burden of proof in SEC cases involving the Foreign Corrupt Practices Act is much lower than that required for a criminal conviction.
Whistleblower Rewards under the Foreign Corrupt Practices Act
The case against Pearce, Boustani and others is criminal. Federal prosecutors have not charged the bank itself, although Swiss prosecutors may still do so. The original charges against Credit Suisse bankers Subeva and Pearse included violations of both the internal controls and anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA).
The Justice Department has jurisdiction because Credit Suisse’s stock is listed on the New York Stock Exchange.
According to the indictment, Subeva and Pearse conspired to violate the FCPA by
“Being an employee and agent of an issuer, to corruptly make use of the mails and means of instrumentalities of interstate commerce in furtherance of an offer, payment, promise to pay, and authorization of the payment of any money, offer, gift, promise to give… to one or more foreign officials… had been offered, given, and promised… for purposes of: (i) influencing acts and decisions of such foreign official in his or her official capacity; (ii) inducing such foreign official to do and omit to do acts in violation of the lawful duty of such official; (iii) securing any improper advantage; and (iv) inducing such foreign official to use his or her influence with a foreign government and agencies and instrumentalities thereof to affect and influence acts and decisions of such government and agencies and instrumentalities, in order to assist Investment [Credit Suisse] and others in obtaining and retaining business, for and with, and directing business to Privinvest…”
A second provision of the FCPA mandates companies have strict internal controls to prevent and detect bribery attempts. The two bankers were also charged with violating those requirements.
Often these cases are prosecuted civilly by the SEC under the Foreign Corrupt Practices Act.
Under the SEC Whistleblower Program, people with inside information about foreign bribery schemes can receive up to 30% of whatever the government recovers from the wrongdoers. Multi-million rewards are common.
To qualify for a reward, you must possess inside information about bribery involving foreign government officials. Bribery of private individuals may be also be illegal but isn’t eligible for a reward.
The allegations in this complaint involved various maritime projects including a tuna fishing venture. Mozambique is no stranger to other allegations of fraud and bribery. The discovery of natural gas off the coast of the country suggests there may be other bribery schemes taking place as some oil and gas exploration companies are notorious for paying bribes in order to secure favorable leases or avoid taxes and drilling fees.
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