Europol Highlights Match-Fixing by Criminal Rings in Tennis and Other Sports

On January 17, the Associated Press reported that the European Union Agency for Law Enforcement Cooperation (Europol) “has identified links between match-fixing gambling syndicates being unraveled in Spain and Belgium that are thought to have paid off dozens of players and corrupted lower-level tennis tournaments on a massive scale.”  Moreover, Pedro Felicio, the head of Europol’s Economic and Property Crime Unit, said that there are “strong indications” that the match-fixers were also involved in volleyball, beach volleyball, and basketball.

Europol and other European Union (EU) member states’ police forces have made these connections as the result of multiple operations they conducted in 2018 against match-fixing rings.  In a June 2018 law enforcement operation, police made 129 arrests in Spain and France and broke up a match-fixing ring that, according to Europol, had “close contact with many tennis, beach volleyball, basketball, and ice hockey players,” and bribed about 20 players to fix match outcomes on which the group then bet.

In another June 2018 law enforcement operation, against match-fixing in Belgium, police disrupted an apparently more extensive operation that authorities believe “to have paid at least 115 low-ranked players in more than half a dozen countries to fix games, sets and matches in exchange for payments of 500 to 3,000 euros ($570 to $3,400).”  That operation, according to the Belgian Federal Public Prosecutor’s Office, involved 21 house searches in 12 Belgian cities and towns, detention of 13 individuals for questioning, and coordinated operations in Germany, France, Bulgaria, Slovakia, the Netherlands, and the United States.  To date, investigators reportedly “have questioned players in Belgium, the Netherlands, Germany, Slovakia, and Bulgaria and are looking to question others, including both players and managers, in the United States, Chile and Egypt.”

In addition, Europol recently reported that the Spanish Guardia Civil (Civil Guard), with Europol’s support, arrested 83 individuals – 28 of them professional tennis players, one of whom reportedly participated in the 2018 US Open – in an operation that dismantled an organized crime group involved in fixing professional tennis matches.  In that operation, police conducted 11 house searches in Spain in which they seized €167 000 in cash, a shotgun, and more than 50 electronic devices, credit cards, five luxury vehicles, and documents related to the case, and obtained freezes of 42 bank accounts and the balances therein.

One common element in each of these operations was the identification of Armenian nationals as key operators of the match-fixing rings.  With regard to the operation in Spain, Europol stated that the Armenian ring members not only used an unnamed professional tennis player as the link between the gang and the rest of the criminal group, but after bribing the players “attended the matches to ensure that the tennis players complied with what was previously agreed, and gave orders to other members of the group to go ahead with the bets placed at national and international level[s].”

A second common element is the existence of evidence connecting ostensibly different match-fixing rings.  Felicio stated that “cross-checks of suspects’ names, their contacts, company details, places and people they frequented and phone records” pointed to links between the groups.

Multiple countries’ police forces and Europol are continuing to cooperate in these disruption and intelligence-sharing operations.  Just last week, Belgian investigators reportedly traveled to France for police questioning of four low-ranked French tennis players, who had been detained because of suspicions that they had been paid to fix matches by an Armenian national who allegedly ran the Belgium-based match-fixing operation.

Note: Match-fixing in professional tennis remains a blot on the sport that is difficult to eradicate.  In its 2018 Report, the Tennis Integrity Unit, professional tennis’s global anti-corruption body, reported that during 2018 it had taken action against players and chair umpires for match-fixing, ranging from suspension to lifetime bans.  While there are welcome indications that professional tennis is dedicated to enhancing its anti-corruption regime, private-sector efforts that necessarily focus on participants in professional tennis will have little effect on professional criminals who can reap substantial profits from match-fixing.

Furthermore, as this blog recently noted, criminal organizations are conducting match-fixing on a multinational scale in sports beyond tennis and football (soccer).  The spread of match-fixing across multiple professional sports and multiple countries make it imperative that law enforcement agencies in Europe and other countries, especially the United States, closely collaborate on two fronts: (1) intelligence-sharing, including further exploration of linkages between match-fixing operations and Armenian organized crime groups; and (2) law enforcement efforts to target the match-fixing rings’ leaders for criminal prosecution and forfeiture of their criminal proceeds.

United States and Mozambique Authorities Obtain Arrests of Participants in $2 Billion “Tuna Bond” Fraud and Bribery Scheme

Over the past four weeks, a series of law enforcement actions by U.S. and Mozambique authorities have targeted alleged participants in a bribery and corruption scheme, involving $2 billion in loans with which former Credit Suisse Group AG bankers and Mozambique government officials were connected.  Some media reports referred to the underlying situation as the “tuna bond” scandal, because of representations that the loans would be used in part to create a tuna fishing fleet for Mozambique.

The timeline of the law enforcement actions is as follows:

  • December 19, 2018: An indictment returned on December 19, 2018 (later unsealed January 3) in the Eastern District of New York charged three former Credit Suisse Group AG bankers – Andrew Pearce, Surjan Singh, and Detelina Subeva – as well as former Mozambique finance minister Manuel Chang and lead salesman for Abu Dhabi-based shipbuilding holding company Privinvest Group Jean Boustani with four counts of conspiracy to commit wire fraud and securities fraud, to violate the Foreign Corrupt Practices Act (FCPA), and to commit money laundering. (Based on the redactions in the unsealed indictment, there are apparently between two and four additional defendants named in the indictment who presumably have not yet been apprehended.)

The indictment alleges that through a series of financial transactions between approximately 2013 and 2016, three companies owned by the Mozambique government borrowed more than $2 billion through loans that the Mozambique government guaranteed, and that two investment banks arranged and sold to investors worldwide.  Over the course of the transactions, the co-conspirators in the scheme conspired to defraud investors and potential investors in the financings

through numerous material misrepresentations and omissions relating to, among other things: (i) the use of loan proceeds, (ii) bribe and kickback payments to Mozambican government officials and bankers, (iii) the amounts and maturity dates of debt owed by Mozambique, and (iv) Mozambique’s ability and intention to pay back the investors.

It also alleged that each of the three Mozambican companies

entered into contracts with Privinvest to provide equipment and services to complete the maritime contracts.  The loan proceeds were supposed to be used exclusively for the maritime projects, and nearly all of the borrowed money was paid directly to Privinvest, the sole contractor for the projects, to benefit Mozambique and its people.  In reality, the defendants JEAN BOUSTANI, [redaction], MANUEL CHANG, [redaction] ANDREW PEARSE, SURJAN SINGH and DETELINA SUREVA, together with others, created the maritime projects as fronts to raise money to enrich themselves and intentionally diverted portions of the loan proceeds to pay at least $200 million in bribes and kickbacks to themselves, Mozambican government officials and others.

  • December 29, 2018: South African authorities arrested Chang.
  • January 3: United Kingdom authorities arrested Pearce, Singh, and Subeva in London, and U.S. authorities arrested Boustani in New York.
  • January 4: Credit Suisse issued a statement in which it pledged to cooperate with the United States’ investigation and indicated that it was not a target of that investigation.
  • January 8: The Mozambique Attorney General, who had previously filed a legal action in Mozambique’s Administrative Court challenging officials and entities involved in the $2 billion loans, announced the indictment of 18 individuals allegedly connected to the scheme, on charges of abuse of power, abuse of trust, swindling and money laundering.
  • January 10: The Mozambique government reportedly filed its own extradition request for Chang with South African authorities.
  • January 15: The head of the United Kingdom Financial Conduct Authority (FCA), Andrew Bailey, stated that the FCA, which reportedly had begun looking into Credit Suisse’s involvement in Mozambique in 2016, had downgraded its investigation from a criminal investigation. Bailey also stated that “our regulatory powers still apply to both the individuals and the firm, and that would be in respect of systems and controls of the firm, and also in respect to fitness and properness in respect to the individuals.”

Note: These prosecutions are significant not only because of the amount of fraud, bribery, and corruption allegedly involved, but because of the devastating effect of the scheme on Mozambique itself. Previously, as details of the fraudulent loans became public, they reportedly helped to “plunge Mozambique into its worst financial crisis since independence in 1975.  Debt soared to 112 percent of gross domestic product (GDP) by the end of 2017, forcing the country to suspend repayments and arousing distrust from investors.”

Mozambique’s situation now is less catastrophic, but still dire.  As allAfrica reported, all three of the Mozambique companies associated with the scheme “are effectively bankrupt, and so the Mozambican state has become liable for repaying the loans.”  In addition, though the purported reason for setting up the companies “was to provide a sophisticated system of coastal protection and a tuna fishing fleet,” the coastal protection system is nonexistent and the fishing fleet consists of only 24 small boats that do no fishing and have no fishing licenses.  Moreover, the securities-fraud charge reflects the fact that major institutional investors, according to the Wall Street Journal, stand to lose money.

Earlier today, a prominent anti-corruption expert, Rick Messick, posted that South Africa now has a dilemma about which extradition request they should honor first: the United States’ or Mozambique’s.  While Messick may be correct that Mozambique’s request is intended to shield Chang, a leading member of Mozambique’s ruling party FRELIMO, from prosecution or cooperation in the United States, it is more likely that South African courts, after due consideration, will rule in favor of the United States’ “first-in-time” extradition request, while paying appropriate respect to Mozambique’s authority and recognizing the serious effects of the scandal on its economy.  As Chang, Pearce, Singh, and Subeva all can be expected to context their extraditions vigorously, it will likely be some time before the U.S. Department of Justice can pursue plea negotiations with, or prosecutions of, the key players in this case.

Former McGill University Health Centre Executive Sentenced to 39 Months’ Imprisonment in SNC-Lavalin Bribery Case

On December 17, 2018, a Quebec judge sentenced Yanaï Elbaz, a former McGill University Health Centre (MUHC) executive, to 39 months’ imprisonment for accepting CDN$10 million in bribes in return for helping Canadian engineering firm SNC-Lavalin win a CDN$1.3 billion building contract for MUHC. Previously, on November 26, 2018, Elbaz had pleaded guilty to receiving a bribe, breach of trust, conspiring to launder money with the former Chief Executive Officer of MUHC, Arthur Porter, and transporting or transferring the proceeds of a crime.

Elbaz had been the MUHC’s assistant director general of planning and real estate management and a member of the committee that decided which group would win the MUHC contract.  At the time of his plea, Elbaz admitted

that he supplied SNC-Lavalin with insider information that allowed it to adjust its proposal on how the project should be built. He also used the position he held, between 2007 and 2011, to influence members of a selection sub-committee by praising the consortium led by SNC-Lavalin and denigrating the only rival bid made by another consortium.

Elbaz also admitted that he violated rules intended to keep the selection process impartial by communicating with Pierre Duhaime, then-Chief Executive Officer of SNC-Lavalin, and Riadh Ben Äissa, then a vice-president of SNC-Lavalin’s construction division, prior to submission of the MUHC bid.  Subsequently, in July 2018 Äissa pleaded guilty in the case to using forged documents and was sentenced to one day in jail, given the 29-month sentence that a Swiss court had previously imposed for fraud-related charges relating to SNC-Lavalin’s business in Libya and additional time he had spent wearing a tracking device. Duhaime is now facing trial in the case in February 2019.

Note: Elbaz’s plea and sentencing is significant because it is one of the last milestones in a long-running case that Quebec authorities reportedly described “as the largest corruption fraud case in Canadian history.” Since 2012, when Swiss authorities arrested Äissa, and 2013, when the Quebec police anti-corruption unit issued arrest warrants for SNC-Lavalin executives, the record of law enforcement success in this investigation, designated as “Projet Lauréat,” can fairly be described as mixed, based on the following developments:

  • In 2014, Porter’s wife Pamela Porter, who had pleaded guilty to money-laundering charges in the case, was sentenced to two years’ imprisonment. At the time, the Montreal Gazette declared her conviction “a first legal victory for the Crown after it pressed charges against eight other individuals” in connection with the MUHC contract.
  • In 2015, Arthur Porter – who, with Elbaz, allegedly received a total of CDN$22.5 million in bribes for awarding the MUHC contract to SNC-Lavalin – died as a fugitive in Panamanian custody, having fought extradition to Quebec since his arrest in Panama in 2013.
  • In 2016, prosecutors withdrew all charges in the case against Bahamian businessman Jeremy Morris.
  • In 2017, former SNC-Lavalin financial controller Stéphane Roy was acquitted of fraud and using forged documents charges in the case, after prosecutors decided not to present any evidence against Roy.
  • In 2018, at the time of Elbaz’s guilty plea, Elbaz’s brother Yohann Elbaz – who with his brother controlled a company through which Yanaï Elbaz’s $10 million in bribes reportedly passed – was acquitted after Crown prosecutors stated that they would not prosecute Yohann on charges of conspiracy, recycling the proceeds of crime and using false documents.

Even though the convictions of Elbaz and Äissa were significant developments, the outcome of the Duhaime trial may weigh heavily in any ultimate conclusions about the success of the MUHC investigation.

UPDATE: On February 1, Pierre Duhaime pleaded guilty in the case to a charge of helping a public servant commit breach of trust.  The Quebec court judge reportedly accepted a joint recommendation from prosecutors and defense that Duhaime receive a 20-month suspended sentence, to be served under house arrest.  Duhaime will also serve one year of probation and 240 hours of community service, and has been ordered to donate CDN $200,000 to a center that aids victims of crime.

An agreed statement of facts presented to the judge indicated that Duhaime was guilty of “wilful blindness” as SNC-Lavalin’s CEO, that he did not receive any money from the crime, and that he was not connected to and had no knowledge of the $22.5 million in bribes paid to Porter and Elbaz.

Ground Services International Pays $12.3 Million to Settle New York State Fraudulent-Kickback Investigation

On December 13, 2018, the Office of New York State Attorney General Barbara D. Underwood (OAG) announced that airport ground handling company Ground Services International (GSI) had entered into a civil settlement to pay $12.3 million, for making fraudulent kickback payments intended to influence various contracts that GSI had at John F. Kennedy International (JFK) Airport and in other airports across the United States.

This settlement – the third stemming from “Operation Greased Runway,” the OAG’s ongoing investigation into the contracting and procurement processes at JFK Airport – resolves claims pursuant to New York State Executive Law Section 63(12), which prohibits “engag[ing] in repeated fraudulent or illegal acts or otherwise demonstrat[ing] persistent fraud or illegality in the carrying on, conducting or transaction of business.”  According to the OAG’s statement, its ongoing investigation “revealed that GSI expanded its business and won new contracts with two major companies, British Airways and Terminal One Group Association L.P. (‘TOGA’), while at the same time making undisclosed payments to the companies’ key executives.”

The investigation found that the then-President of GSI, Jeff Kinsella, “secretly agreed to provide an ownership interest in GSI to a senior British Airways executive who had influence over procurement decisions at the airline, while that executive was promoting GSI’s services within British Airways.”  From 2009 to 2016, Kinsella made regular payments to the British Airways executive that totaled more than $1.2 million.  During that same period, British Airways substantially expanded its business with GSI, including continuing to service Terminal Seven, which British Airways currently operates, at JFK Airport. When Kinsella sold GSI in 2016, according to the OAG, the British Airways executive received an additional payment of $3.6 million from Kinsella “for his secret ownership interest. GSI never disclosed either its payments to the executive, or the executive’s financial stake in GSI, to British Airways, the Port Authority, or any other entity in the airline industry.”

GSI also made improper payments to the then-Executive Director of TOGA, Edward Paquette, whom the OAG termed “the key decision maker with respect to the contract for ground services at JFK’s Terminal One.”  After Paquette recommended GSI for the Terminal One contract, that contract became GSI’s largest contract nationwide.  Shortly after GSI received the Terminal One contract, Kinsella began directing monthly payments to a company set up by Paquette specifically to receive the kickbacks. From 2015 through 2017, during which Paquette oversaw the contract at TOGA, GSI paid him a total of $640,000.  In 2017, as a result of Operation Greased Runway, Paquette pleaded guilty to New York State felony charges related to stealing from his employer and accepting bribes totaling $1.3 million.

The OAG also stated that GSI, while secretly making these improper payments, “made millions of dollars in profits from its contracts at Terminal One and Terminal Seven at JFK Airport with British Airways and TOGA respectively.”  As a consequence, as part of the settlement GSI acknowledged that its conduct was deceptive, improper, and compromised the integrity of business operations at JFK Airport.  In addition, GSI agreed to injunctive relief to improve its compliance and contracting processes:

GSI is required to implement and maintain an anti-bribery and corruption policy, and to train employees on that policy annually. The company will also establish an anonymous tip line where employees can report suspected violations of the policy. GSI must also submit to review by an outside audit firm, appoint a Chief Ethics and Compliance Officer, reform its internal bidding process to ensure that potential conflicts of interest are identified, and submit an annual affirmation of compliance signed either by the company’s CFO or CEO to the Port Authority Inspector General’s Office.

Note:  This settlement is a timely reminder to corporate compliance officers that bribery and corruption risks can arise domestically as well as internationally, and that failure to extend compliance anti-corruption policies and internal controls to domestic activities and transactions can have severe legal and reputational consequences.  The fact that Kinsella was able, over a nine-year period culminating in his sale of GSI in 2016, to make nearly $5 million in illicit payments to the unnamed British Airways executive indicates the severity of the deficiencies in GSI’s prior compliance regime.

Security Researcher Finds Data from Collection of 772 Million+ Email Accounts on Hacker Forum

On January 17, Troy Hunt, an independent cybersecurity researcher and Microsoft Regional Director, posted that he had found a large collection of files containing email addresses and passwords obtained in numerous data breaches, from which data were being socialized on a hacker forum.  Hunt calculated that the collection of files, located on the MEGA cloud storage service that Internet entrepreneur Kim Dotcom founded, included 1,160,253,228 unique combinations of email addresses and passwords.  After cleanup of the data, Hunt found a total of 772,904,991 unique email addresses and 21,222,975 unique passwords.

Hunt stated that he has now loaded the cleaned-up data on a website, have i been pwned?, on which he has previously loaded similar data from many other data breaches (such as Adobe and Ashley Madison), to allow members of the public to check their own online credentials against the data.  For security reasons, Hunt separated the search features for email addresses and passwords: email addresses can be searched on the have I been pwned? homepage, and their passwords at Pwned Passwords.

Note: Chief information security officers and corporate compliance officers should make use of this report in two ways.  First, in explaining to corporate officers and employees the scope and scale of cybercrime, they can cite Hunt’s calculated total of more than 772 million hacked email addresses and more than 21 million unique passwords – the largest collection of breached data that Hunt has found and loaded onto his site – as a recent instance of the volumes of data that hackers routinely work to target businesses, government agencies, and individuals.  Second, they should consider making use of have i been pwned? and Pwned Passwords in live briefing and training sessions, to show corporate employees that the need to pay attention to cybersecurity and change passwords is urgent and important.  Hunt is a highly knowledgeable and respected cybersecurity researcher, speaker, and trainer, and Fox Business reported that millions of people have used his website since its creation in 2013 to check their identifying data.

In any event, readers of this blog should check their details and, whether or not they find their data have been breached, take to heart fundamental rules of personal cybersecurity that Hunt and others have stated many times: Never reuse a password; if you have, change those passwords; and use a password manager to handle the multiplicity of your passwords.  Simple steps are still key to reducing the risk of having your personal or business data hacked and misused.