Ex-exec charged, but Goldman Sachs avoids FCPA liability for due diligence efforts

As a former executive at Goldman’s London subsidiary, Asante Berko was responsible for developing the subsidiary and the holding company’s investment-banking business, “which included identifying and arranging financing, restructuring or merger transactions for clients and assisting with the work necessary to complete those transactions,” according to the SEC’s complaint, filed in the U.S. District Court for the Eastern District of New York.

The Goldman Sachs subsidiary was unidentified in the SEC’s complaint, instead referred to as a “financial services company.”

From approximately 2015 through at least 2016, according to the complaint, Berko helped a Turkish energy company (whose name was not identified in the SEC complaint) funnel as much as $4.5 million to a Ghana-based intermediary company to be used to pay bribes to various Ghanaian government officials in exchange for securing a power-plant contract in Ghana. The SEC further alleges Berko helped the intermediary company pay approximately $210,000 in bribes to various other government officials involved in the power-plant project.

According to the SEC, Berko personally paid at least $66,000 in bribes to members of the Ghanaian parliament and other government officials to advance the corrupt scheme. He did this knowing the subsidiary would earn over $10 million in fees if the energy company secured the contract. Berko himself was paid $2 million as compensation for arranging the bribery scheme.

“Berko’s misconduct was egregious, and individual accountability remains a key component to our FCPA enforcement efforts,” said Charles Cain, chief of the SEC Enforcement Division’s FCPA Unit.

Compliance evasion techniques

According to the complaint, Berko deliberately tried to hide the bribery scheme and evade detection from Goldman’s legal and compliance personnel by circumventing internal controls, including its anti-bribery policy that prohibited employees from “providing anything of value” to, among others, “public officials,” “employees of state-owned enterprises,” and clients.

Berko further circumvented Goldman’s policy that required employees to disclose to compliance personnel payments to intermediaries or to politically exposed persons relating to transactions requiring committee approval. Another policy required approval for any compensated activities “before engaging in any outside activity … for which the individual is or anticipates being compensated.”

Berko allegedly circumvented Goldman’s e-mail usage policy that required employees to use only company-approved e-mail and text messaging for any work-related business. Knowing that compliance personnel could review his e-mail and other documents as part of their due diligence on the power plant project, “Berko deliberately used his personal e-mail when facilitating the bribery scheme,” the complaint states.

Compliance lessons

Ultimately, the SEC credited Goldman for its enhanced due diligence efforts, imparting important lessons for all compliance officers. “The firm’s compliance personnel took appropriate steps to prevent the firm from participating in the transaction, and it is not being charged,” Cain said.

As part of its due diligence efforts, in March 2016, the subsidiary’s compliance personnel discovered the intermediary company’s involvement after a review of Berko’s work e-mails. After interviewing Berko about the intermediary company, according to the SEC complaint, legal and compliance personnel began to investigate the matter further.

At the direction of legal and compliance personnel, “the deal team asked the energy company to clarify the intermediary company’s role and to identify all payments it had made to the intermediary company.” The CEO of the energy company said the intermediary company had initially provided local support—responses from government departments, visas, office space, and accommodation—for which it had been had paid about $300,000 but failed to disclose that it had facilitated the bribery scheme.

Berko assisted the energy company CEO “by drafting false and misleading responses to the questions posed by the compliance personnel,” the complaint stated. Despite Berko’s efforts, the deal team continued to question the energy company about the intermediary company’s services and payments.

In May 2016, the CEO of the energy company refused to answer any further questions. “By August 2016, compliance personnel effectively terminated the subsidiary’s involvement in the power plant project,” the SEC complaint states.

In its complaint, the SEC is seeking disgorgement of Berko’s ill-gotten gains, plus pre-judgment interest, as well as other civil remedies.