DOJ Settles FCPA Cases with Two UK-Based Reinsurance Companies

Corruption Crime & Compliance

In the 300th episode of Crime, Corruption and Compliance, Michael Volkov examines the recent FCPA settlements with two major UK reinsurance brokers - Tysers and H.W. Wood - for their involvement in a bribery scheme in Ecuador. The DOJ took an unorthodox approach by going after individual people before the companies. This helped them get cooperation and gather evidence, resulting in over $36 million in fines and forfeited money. However, it also highlights common issues in FCPA cases, such as a lack of supervision and effective controls that let corruption happen.

You’ll hear Michael discuss:

• The settlements with Tysers ($36M fine + $10.5M forfeiture) and Wood ($508K fine + $2.3M forfeiture) resolve a multi-year FCPA investigation in Ecuador.
• Several individuals were prosecuted first, including the chairman of two state-owned Ecuadorian insurance firms who pleaded guilty in 2020. This allowed the DOJ to build up cooperators and evidence.
• A third-party intermediary played an instrumental role, serving as the "glue" that coordinated all aspects of the scheme in exchange for significant profits.
• Neither Tysers nor Wood voluntarily disclosed. Tysers received a 25% discount for cooperation and remediation; Wood's fine was reduced to $508K based on inability to pay.
• The intermediary demanded a large split of commissions to funnel payments to officials, which Tysers and Wood accepted, triggering disputes among Tysers' own employees.
• The parties used coded language and fake investment contracts to disguise corrupt payments to officials' offshore accounts.
• The lack of financial controls and oversight of third-party payment allocations enabled suspicious activity to occur unchecked. Massive "commissions" paid to intermediaries raised obvious red flags that went unheeded.
• Going after individuals first and securing a declination for one company yielded major penalties for Tysers and Wood, proving the DOJ's strategy highly effective.
• The facts underscore the need for vigorous third-party due diligence and monitoring controls to detect and halt potential corruption.

KEY QUOTES

“DOJ has had a slow year in FCPA enforcement. Everybody knows that we may see a few more coming in the next few weeks before the end of the year…” - Michael Volkov

“Unlike most third party FCPA cases, where a third party may be enlisted to further a bribery scheme by funneling payments directly to a foreign official, the intermediary in the Tysers and Wood cases played an instrumental role in arranging, managing and overseeing the bribery payments and overall scheme. The intermediary company truly operated as the glue that put together a large bribery operation from which it earned significant profits.” - Michael Volkov

“...the timing of the corporate individual resolutions is certainly a unique pattern for DOJ to execute on and certainly raises the prospect that we may see other cases where individuals get prosecuted first and then you see a corporate resolution coming towards the end. So DOJ clearly here built up a reservoir of cooperators and information and intelligence that resulted in them being able to impose significant penalties against Tysers and Wood.” - Michael Volkov

Resources

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The Volkov Law Group