Bad actors and other nefarious actors in the corruption space are continually pushing boundaries of how to facilitate their illegal conduct. U.S. businesses responded to earlier corrupt sales agents who would pay bribes in violation of the FCPA with increasing management of the life cycle of third-party relationship. Another area for concern beyond the funding of bribes for corrupt purposes is the laundering of money paid as bribes or appropriated outright from a foreign government. This last issue involves the continuing saga of the 1 MDB scandal involving the Malaysian sovereign wealth fund.
In one of the latest iterations of the scandal, U.S. regulators are investigating a $2.2 billion purchase of a U.S. energy company, Coastal Energy by the Abu Dhabi sovereign wealth fund. The allegation is that $50 million of the purchase price was provided by Jho Low, who is alleged to have been involved in the looting of the 1 MDB fund. Reports indicate that for his $50 million contribution to the purchase price, a shell company controlled by Low received recompense in the amount of $350 million one week later. In a lawsuit, seeking forfeiture of the proceeds of the sale, the U.S. Justice Department dryly noted, “The commercial basis for this nearly immediate 600% return on investment is not immediately apparent.”
All of this intones to The Man From FCPA the need for more robust corporate compliance around all parties. We have previously seen funds for bribery and corruption germinated through overpayment for physical goods, in the example of the sale of the petrochemical refinery in Houston, TX, which was purchased in 2005 for $42.5 million and then sold to Petrobras in 2006 for $1.2 billion. It appears that Petrobras far overpaid for the purchase, and part of this overpayment price was used as funds to pay bribes to corrupt Petrobras officials. One report stated “One former executive admitted being offered a $1.5 million bribe to allow the Pasadena deal to go through, records show, and Brazilian prosecutors are investigating whether politicians also received kickbacks from the purchase.”
We have gone through Know Your Customer and Know Your Third Party. Now we may be on the verge of KnowYourPurchaser.