Financial Crime Case Update – 2021
Market Insight 14 December 2021 14 December 2021
Regulatory & Investigations
As the year draws to a close, we focus on some of the key corruption cases brought by regulators in some of our jurisdictions. These are of specific interest to the Energy, Marine and Extractives industry which has been very challenged by these issues. It is particularly noteworthy that in view of the current zeitgeist, highly mindful of Environmental, Social and Governance factors (ESG), ESG features in some of the more significant decisions.
On 4 August 2021, Abdelmoumene Ould Kaddour (Kaddour), the former CEO of the national state-owned oil company of Algeria, Sonatrach, was extradited from the UAE over alleged involvement in corruption cases. Algerian authorities have alleged that Kaddour was involved in several corruption cases linked to deals signed by Sonatrach, including the acquisition of the Augusta refinery in Italy from Exxon Mobil Corp in 2018. Kaddour is also known to be affiliated with former Algerian President Abdelaziz Bouteflika (Bouteflika) who stepped down from his presidency after mass protests against his plan to seek a fifth term.
In June 2020, a court in Algiers issued an international arrest warrant for Kaddour after his name appeared in 11 different corruption cases, with some being linked to Bouteflika's Algerian military regime. It was not until February 2021 that Interpol issued a red notice for his arrest, which resulted in the Dubai police actioning Kaddour’s arrest as soon as he landed in the UAE from Paris on 20 March 2021. Following Kaddour’s arrest, he was transferred to Abu Dhabi where an Emirati Magistrate questioned him on his involvement in the corruption-linked cases. At the end of his hearing, he was released but his passport was confiscated, and he was forbidden to leave the UAE until Algeria’s justice system agreed to his extradition, this only occurring in August of this year.
UAE's arrest and subsequent handover to Algeria of Kaddour confirms the commitment of both countries to bilateral agreements and treaties pertaining to the extradition of wanted persons and criminals to their respective countries.
On 29 June 2021, in an unprecedented majority ruling by the Constitutional Court of South Africa, the highest court of the land, former President Jacob Gedleyihlekisa Zuma (Zuma) was found to be in contempt of court and ordered to 15 months imprisonment for the failure to appear and participate in the Commission of Inquiry, violating the authority of the court and repeatedly attacking the dignity of the judiciary.
During Zuma’s presidency between 2009 and 2018, large parts of South African national resources were hollowed out through acts of corruption, with Zuma at the centre, in cahoots with wayward politicians, civil servants and influential businessmen known as the Guptas. The grand theft of public resources, worth billions of South African Rands, was labelled as “state capture”.
South Africa’s former public protector ordered that a commission of inquiry be set up to investigate state capture, corruption, and fraud in the public sector (the Commission) where Zuma was summoned to appear before it as a witness. However, on 19 November 2020, when Zuma was required to answer the Commission’s questions, he walked out of the inquiry after an attempt to get the Commission Chair to recuse himself, failed. From that point on, Zuma stopped all cooperation with the Commission, which lead to the Commission turning to the Constitutional Court. The Constitutional Court found that the very legitimate constitutional role of the Commission, to dig for the truth about widespread corruption, could not function properly if the person central to many of the allegations (i.e. Zuma) did not honour a lawful request from the Commission to appear before it. The Constitutional Court instructed Zuma to go back to the Commission and testify on 15 February 2021, but he failed to appear. Instead, Zuma launched countless attacks on the judiciary and the Commission Chair. These actions, in addition to Zuma’s final constitutional delinquency of refusing to file submissions to the Constitutional Court despite an invitation to do so, were the aggravating factors that lead to a judgment that identified the former President’s behaviour as "contemptuous", "outlandish" and "disobedient" and issued an order for imprisonment and to pay legal costs.
The imprisonment of Zuma represents a triumph for constitutionalism and is a victory for the Rule of Law in South Africa, where every person must be equal before the law. The most important lesson for the world and other constitutional states is that the principle of constitutional supremacy can be defended if there is a will to do so.
Synopsis – *ESG is a big focus for regulators and a popular theme to hang their decisions on. *The key corruption prosecutions involved Agents challenging jurisdictions around the world – this is nothing new for our clients who face the challenge of delivering energy and resources globally.
ESG is an important consideration factor for our clients. The UK’s tenth DPA, recently approved between the Serious Fraud Office (SFO) and Amec Foster Wheeler Energy, focused on this when the Court made clear that whilst “no criticism” could be made of the company’s lawyers for their advice that the company had no legal obligation to self-report, the company should nevertheless have self-reported to the SFO “as a matter of ethical corporate governance”. It was further noted that “there is a moral duty on all citizens in this respect which extends at least equally to corporations”.
It will be interesting to see in the future whether, in light of the judgment in the Amec DPA, the SFO and the Court will increasingly expect self-reporting from companies simply because morally and ethically it is the right thing to do.
Following a retrial of his case, the fourth former SBM Offshore executive was convicted and sentenced to jail by the SFO early this year for three and a half years. Paul Bond was a sales manager who conspired with others to bribe Iraqi public officials to secure lucrative oil contracts. This prosecution followed the UNAOIL investigation and no doubt more are likely to follow. It should be noted DPAs are not available to individuals.
The SFO has had little luck prosecuting individuals and there are limited options available to individuals to plea bargain in the UK, which is likely why these cases are always contested. Immunity is only granted where there is risk to life and limb (Serious Organised Crime cases) and the reduced sentence options involve a conviction and are at the discretion of the judge – so no certain outcome can be agreed in advance with the prosecutor.
The repercussions for BooHoo in relation to the 2020 scandal of slavery in its supply chain factories in the UK are beginning to resonate globally, with the USA considering banning imports from both it and its UK suppliers. A second investigation has been launched into whether staff in the factories are being paid below minimum wage, intimidated, and threatened.