European Council Appoints 22 Prosecutors to European Public Prosecutor’s Office

On July 27, the European Council announced the appointment of 22 prosecutors to the European Public Prosecutor’s Office (EPPO).  According to the Council, the EPPO, which is scheduled to start operations in Luxembourg at the end of 2020,

will be an independent body of the EU responsible for investigating, prosecuting and bringing to judgment crimes against the financial interests of the Union (e.g. fraud, corruption, cross-border VAT fraud above 10 million euros). In that respect the EPPO shall undertake investigations, and carry out acts of prosecution and exercise the functions of prosecutor in the competent courts of the member states.

Each of the 22 prosecutors was appointed by the Council after reviewing nominations by the 22 European Union (EU) Member States participating in the EPPO.  The only EU Member States not participating in the EPPO are Hungary, Poland, Ireland, Sweden, and Denmark.

The appointed prosecutors are appointed for a non-renewable term of six years, although the Council may decide to extend the mandate for a maximum of three years at the end of that six-year period.  As part of the transitional process for the EPPO, European prosecutors from one-third of the participating states, as “determined by drawing lots,” will have only a three-year non-renewable mandate.

Note: This is the first significant public development in the formation of the EPPO since the Council’s approval of Laura Codruţa Kövesi in 2019 as the first European chief prosecutor.  It provides some indication of the progress that the EPPO is making toward the commencement of operations by the end of the year.

Although the EPPO was initially contemplated to have 118 full-time positions, as well as up to 90 positions transferred from the European Anti-Fraud Office (OLAF) in Brussels, Kövesi reportedly is still negotiating the size of her staff and budget with the European Commission.  The state of those negotiations is unknown, as some European Parliament members last week were dissatisfied with the EU’s €1.07 trillion draft budget and voiced concern about protecting both the budget and the rule of law.  There seems little doubt, in any event, that the EPPO will open as planned, adding a new and potentially significant prosecutive force to combat corruption and fraud across Europe.

Commonwealth Edison Enters into Bribery-Related Deferred Prosecution Agreement with Justice Department, Will Pay $200 Million Criminal Fine

On July 17, the U.S. Attorney’s Office for the Northern District of Illinois announced that Commonwealth Edison (ComEd), the largest electric utility in Illinois, had entered into a deferred prosecution agreement (DPA) with the U.S. Attorney’s Office “to resolve a federal criminal investigation into a years-long bribery scheme.”  With regard to the DPA, which requires ComEd to pay a $200 million criminal fine, ComEd admitted that “it arranged jobs, vendor subcontracts, and monetary payments associated with those jobs and subcontracts, for various associates of a high-level elected official for the state of Illinois, to influence and reward the official’s efforts to assist ComEd with respect to legislation concerning ComEd and its business.”

As part of the resolution, the U.S. Attorney’s Office filed a one-count information, charging ComEd with bribery concerning programs receiving federal funds.  Under the terms of the DPA, it will seek to dismiss the information after three years “if ComEd abides by certain conditions, including continuing to cooperate with ongoing investigations of individuals or other entities related to the conduct described in the bribery charge.”

Both the information and the Statement of Facts in the case identify the “high-level elected official” as “Public Official A.”  Without naming him, they further state that Public Official A “is the Speaker of the Illinois House of Representatives.”  The Speaker, Michael Madigan, also serves as the boss of the Illinois Democratic Party.

According to the U.S. Attorney’s Office, ComEd admitted that its efforts to influence and reward Madigan

began in or around 2011 and continued through in or around 2019.  During that time, the Illinois General Assembly considered bills and passed legislation that had a substantial impact on ComEd’s operations and profitability, including legislation that affected the regulatory process used to determine the electricity rates ComEd charged its customers.

Madigan allegedly “controlled what measures were called for a vote in the Illinois House of Representatives and exerted substantial influence over fellow lawmakers concerning legislation affecting ComEd.”  ComEd admitted that it arranged for jobs and vendor subcontracts for Madigan’s political allies and workers “even in instances where those people performed little or no work that they were purportedly hired by ComEd to perform.”

ComEd also admitted that it undertook other efforts to influence and reward Madigan, including by appointing an individual to ComEd’s Board of Directors at Madigan’s request; retaining a particular law firm at Madigan’s request; and “accepting into the company’s internship program a certain amount of students who resided in the Chicago ward where [Madigan] was associated.”

The U.S. Attorney’s Office credited ComEd with having provided “substantial cooperation with the federal investigations.”  It noted that under the DPA ComEd “will continue to provide such cooperation until all investigations and prosecutions arising out of the charged conduct are concluded.”  ComEd also agreed to enhance its compliance program and provide annual reports to the government regarding remediation and implementation of its compliance measures.

The DPA is subject to approval by the U.S. District Court in Chicago at a future date.

Note: While the investigation into Madigan is still ongoing, corporate ABC compliance officers should take note of this resolution, as it demonstrates the risks to companies that fail to maintain the effectiveness of their ABC compliance programs when addressing state and local corruption.  For that reason, they should use the DPA and the specific compliance obligations therein to benchmark their ABC programs.

Indivior Announces $600 Million Civil and Criminal Resolution on Suboxone Marketing

On July 24, two announcements by the U.S. Department of Justice and United Kingdom-based pharmaceuticals company Indivior stated that that Indivior had reached an agreement with the U.S. Department of Justice, the Federal Trade Commission (FTC), and state attorneys general to resolve pending criminal and civil cases and an FTC investigation into alleged fraudulent marketing of the Indivior drug Suboxone.

Under the terms of the agreement, according to the Justice Department, wholly-owned Indivior subsidiary Indivior Solutions pleaded guilty today to a one-count felony criminal information charging false statements relating to health care matters.  In connection with its guilty plea, Indivior Solutions admitted to making false statements to promote the film version of Suboxone to the Massachusetts Medicaid program (MassHealth) relating to the safety of Suboxone Film around children.  The resolution includes a criminal fine, forfeiture, and restitution totaling $289 million.

In total, Indivior will pay a total of $600 million over a seven-year period to the Department, the FTC, and state attorneys general.  The Department stated that in addition to the financial provisions, the agreement

includes novel provisions that:

    • Require Indivior Inc. to disband its Suboxone sales force and not reinstate it;
    • Require Indivior Inc.’s CEO to personally certify, under penalty of perjury, on an annual basis that during the prior year (a) Indivior was in compliance with the Food Drug and Cosmetic Act and did not commit health care fraud or (b) list all non-compliant activity and the steps taken by Indivior to remedy these acts;
    • Prohibit Indivior Inc. from using data obtained from surveys of health care providers for marketing, sales, and promotional purposes;
    • Require Indivior Inc. to remove health care providers from their promotional programs who are at a high risk of inappropriate prescribing; and
    • Make Indivior subject to contempt sanctions by the court and reinstatement of the dismissed charges if it violates the agreement.

With regard to Indivior Solutions’s guilty plea, federal District Judge James P. Jones accepted the guilty plea, but deferred acceptance of the plea agreement until after the preparation of a presentence report. Sentencing in that case is scheduled for October 20, 2020.  As for its 2019 indictment, Indivior reported that under the terms of the agreement, the Justice Department will move to dismiss all charges in that case.

In addition to the criminal and civil resolutions, the Department stated that

Indivior executed a five-year Corporate Integrity Agreement (CIA) with the Department of Health and Human Services Office of Inspector General (HHS-OIG).  The CIA requires that Indivior implement numerous accountability and auditing provisions.  On an annual basis, top executives and the Board of Directors must certify about compliance, Indivior must conduct annual risk assessments and other monitoring, and an independent review organization will conduct multi-faceted audits.

Indivior stated that as a consequence of the CIA, Indivior Solutions will be excluded from participating in government health programs, but that the exclusion “will not affect Indivior PLC or its other subsidiaries.”

Note:  This resolution is noteworthy for three reasons.  First, it appears to be the culmination of the Department’s and the FTC’s investigations relating to fraudulent marketing of Suboxone by Indivior and Indivior’s former parent, Reckitt Benckiser Group.  In 2019, Indivior was indicted on charges of fraudulently marketing Suboxone, and Reckitt agreed to its own resolution of $1.4 billion with the Department, the FTC, and various states.  In addition, just last month Indivior’s Chief Executive Officer, Shaun Thaxter, pleaded guilty to one misdemeanor count of violating the Federal Food, Drug, and Cosmetic Act by causing the distribution of misbranded Suboxone in interstate commerce.

Second, Indivior should count itself lucky that it reached the resolution it did.  At the time of its indictment last year, the company’s response went beyond simply declaring that it would contest the indictment vigorously, and declared that the Department’s action was

wholly unsupported by either the facts or the law. Key allegations made by the Justice Department are contradicted by the government’s own scientific agencies, they are almost exclusively based on years-old events from before Indivior became an independent company in 2014, and they are wrong. The department has apparently decided it would rather pursue self-serving headlines on a matter of national significance than achieve an appropriate resolution . . . .

Every company that finds itself under indictment is entitled, of course, to state publicly that it contests the charges.  It is never a good idea, however, to make categorical statements at the start of a criminal case that are contradicted by the company’s own subsequent actions and decisions.  Considering what Indivior stood to lose if it were convicted of the charges in the indictment — which included forfeiture of (1) a monetary judgment of not less than $3 billion, (2) seven Indivior-related business entities (including Indivior Solutions), (3) certain specified Indivior-related bank accounts; and (4) certain specified trademarks and patents – a $600 million resolution and debarring of Indivior Solutions is an onerous but bearable outcome for the company.

Third, the total resolution with the Department, the FTC, and states relating to the marketing of Suboxone is more than $2 billion.  That amount, according to the Department, is “the largest-ever resolution in a case brought by the Department of Justice involving an opioid drug.”

For those reasons, pharma Chief Compliance Officers should brief senior management in their firms about the Indivior resolution, including the novel compliance provisions, and include appropriate details from that resolution in future compliance training.

Former Fernández de Kirchner Aide Who Testified Against Her in “Notebooks” Investigation Is Found Murdered in Argentina

On July 4, the Buenos Aires Times reported that Fabián Gutiérrez, a wealthy Argentinian businessman and former private secretary to former Argentinian presidents Néstor Kirchner and Cristina Fernández de Kirchner, was found murdered in the city of El Calafate in the Patagonia region of Argentina.  Gutiérrez was last seen on July 2 in Santa Cruz province in southern Argentina.

On July 3, the search for Gutiérrez began in earnest after a complaint from his mother.  That same day, reports in the local Argentinian press said that Gutiérrez’s phone had been found at a construction site and that his vehicle had been discovered, with smashed windows and bloodstains.  Investigating Judge Carlos Navarte said that after the first individual who was questioned admitted to the murder and told police that the body could be found at a house in El Calafate, he then ordered a raid on the house.

That same day, police arrived at the house, which was owned by one of four people now accused of participation in the murder. When police arrived at the house, they found Gutiérrez’s body reportedly buried, tied up, and covered with a sheet, and showing signs of having been beaten and a deep stab wound.  They also determined that the house had been broken into, and found a bloody knife on the premises, and that a television, a music system, and other high-value items were reported as missing.  Judge Navarte, who visited the house on the night of July 3, told a reporter that he had the impression that there had been violence in the house.

As of July 4, four men reportedly had already been charged and detained in connection with Gutiérrez’s murder, according to Judge Navarte.  Judge Navarte opined that the presumed motive was theft or extortion, and that a “political motive was not within the hypotheses” on which he was working.

Opposition politicians nonetheless speculated that Gutiérrez had been murdered because of his testifying against Vice-President Fernández in relation to the so-called “notebooks” scandal.  That scandal, which involved public officials allegedly taking bribes “worth hundreds of millions of dollars for public works contracts,” resulted in the arrests and jailing of dozens of Argentinian politicians and businessmen.

Fernández, however, was charged with corruption in 2018, but was protected from prosecution by parliamentary immunity stemming from her positions as a Senator and current Vice-President.  Opposition leaders also demanded that the murder investigation be transferred to the Argentinian federal court because a prosecutor involved in the case, Natalia Mercado, is a niece of Vice-President Fernández.

Note:  In many countries, it is entirely plausible that a prominent businessman could be violently killed solely for financial gain or personal motives.  Recent Argentinian history, however, constricts that notion of plausibility when Fernández is involved.  In 2015, an Argentinian prosecutor, Alberto Nisman, was shot to death only hours before he was scheduled to testify against Fernández, in an investigation directed at her allegedly covering up Iranian involvement in the 1994 bombing of a Jewish center in Buenos Aires.  Although an initial investigation concluded that Nisman committed suicide in his apartment, an Argentinian federal judge ruled in 2017 that Nisman’s fatal wound could not have been self-inflicted and that Nisman had been murdered.

To date, no one has been charged for involvement in Nisman’s murder, the judge who led that investigation died of natural causes earlier this year, and Argentina’s Anti Corruption Office withdrew from that money laundering court cases involving the Kirchner family, Fernández, and two of her siblings.  With that backdrop, observers of Argentinian affairs will need to monitor the Gutiérrez case closely, to see whether the evidence bears out the theory that his death is a tragic but simple case of murder.

Dutch Banks to Collaborate in Establishing Agency to Monitor Transactions

On July 8, the Dutch Banking Association (NVB) announced that five Dutch banks had signed an agreement to establish a new entity, Transaction Monitoring Netherlands (TMNL), that is to monitor transaction activity across all participating banks.  Those banks include industry leaders ABN AMRO, ING, and Rabobank, as well as two smaller banks, Triodos Bank and de Volksbank.

The NVB stated that the TMNL initiative, which will be an addition to the banks’ individual transaction monitoring activities, “will focus on identifying unusual patterns in payments traffic that individual banks cannot identify.”  It also noted that the banks were “working closely” with Dutch government partners such as the Ministries of Finance and Justice and Security, the Fiscal Information and Investigation Service (FIOD), and the Financial Intelligence Unit (FIU).

The genesis of the TMNL initiative was the June 30, 2019 proposed action plan by the Dutch Ministers of Finance of Justice to combat money laundering more effectively.  One of the elements of that action plan was removal of existing legal obstacles to interbank data sharing for cooperation in transaction monitoring and blacklisting of “unusual” customers.

Subsequently, the five banks studied whether collective transaction monitoring is technically and legally feasible under the aegis of the NVB, whether TMNL can add material value in the fight against money laundering.  According to the NVB,

The research showed that collective transaction will allow for better and more effective detection of criminal money flows and networks in addition to what banks can achieve individually with their own transaction data. It also showed that combining transaction data will provide new (inter-bank) information that will be useful in the fight against financial criminality. The study findings have recently been discussed with some of the public parties involved.

The NVB’s announcement indicated that certain legal issues remain concerning banks’ capacity to share transaction data.  Accordingly, the NVB stated that an amendment of the Dutch Anti-Money Laundering and Anti-Terrorist Financing Act (Wwft) “is foreseen to enable full-scale collective transaction monitoring.”

At present, the construction and development of TMNL is to be done in phases.  The NVB reported that the participating banks “have decided to start with this initiative now in anticipation of the proposed amendment to the legislation, due to the urgency of the fight against money laundering and the financing of terrorism and the support from government bodies.”  It added that a basic assumption “is that other banks will also be able to make use of TMNL in due course.”

Note: The TMNL initiative represents a potentially significant breakthrough for the Dutch financial sector in anti-money laundering (AML) capabilities.  As an NVB infographic shows, the Netherlands is ranked number 8 among the top ten countries most attractive to money launderers, with an estimated €16 billion laundered there each year.  If the Dutch States General can approve the necessary amendments to the Wwft soon, TMNL could not only provide consistent sector-wide oversight of financial transactions, but offer a model for other countries to develop similar initiatives.