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DOJ Announces First FCPA Enforcement Action of 2015

Last week, the Department of Justice announced the first Foreign Corrupt Practices Act enforcement action of 2015, against Dmitrij Harder, the former owner and president of the Chestnut Consulting Group.  The allegations are premised, in part, on a seldom-used section of the FCPA: the statutory provision that prohibits bribing officials of public international organizations.

According to the indictment, Harder operated the Chestnut Consulting Group entities, which provided consulting services to companies seeking financing from multilateral development banks.  Harder and the Chestnut Consulting Group assisted two oil and gas companies obtain several hundred million dollars and euros in financing for development projects from the European Bank for Reconstruction and Development (“EBRD”).  The Chestnut Consulting Group’s services were retained “despite its relatively small size, distant location from the EBRD, and unproven track record as a financial advisor.”

In the course of the consultancy, Harder allegedly sent approximately $3.5 million in corrupt payments to the senior EBRD official tasked with reviewing and negotiating the financing applications.  The payments allegedly were funneled through accounts held by the official’s sister, under the guise of a sham consultancy and service arrangement between the sister and the Chestnut Consultant Group, and concealed through the creation of false documentation.  Harder and the Chestnut Consulting Group reportedly earned approximately $8 million in success fees.  In addition to the FCPA counts, the indictment also includes counts for violating the Travel Act and money laundering statutes, and related conspiracy and forfeiture counts.

The Harder indictment is one of the few instances in which an individual has been charged with bribing an official of a public international organization.  The FCPA, which criminalizes corrupt payments to foreign officials made to secure a business advantage, was amended in 1998 to include officers and employees of public international organizations within the definition of “foreign official.”  The EBRD, a multilateral development bank that is headquartered in London and owned by 64 sovereign nations, was designated a public international organization by a 1991 executive order.  A list of entities that have been designated public international organizations, including the U.N., the IMF, the Red Cross, and the WTO, is maintained in the U.S. Department of State Foreign Affairs Manual.

Companies and individuals alike need to be vigilant in monitoring their interactions with foreign officials in all of their various manifestations, whether at a foreign government ministry, sovereign wealth fund, or publicly owned international bank, particularly when retaining third party consultants to facilitate the relationship.

© 2019 Proskauer Rose LLP.

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About this Author

Sigal P. Mandelker, White Collar Defense Attorney, Proskauer Law Firm
Partner

Sigal Mandelker is a Partner in the New York office. She is a member of the firm’s White Collar Defense & Investigations, Appellate, International Practice, and Privacy Groups. Sigal represents individual and corporate clients in connection with government investigations and prosecutions, including white collar criminal defense, the FCPA, anti-money laundering matters, SEC and related enforcement matters, internal investigations, public corruption, and cyber security. She has a broad range of experience in domestic and international enforcement matters, appellate litigation,...

212-969-3360
Phillip J. Caraballo-Garrison, Litigation Attorney, Proskauer Law Firm
Associate

Phil Caraballo is a senior Associate in the Litigation Department, resident in the New York office, where he also represents the Litigation Department on the Associate Council. His practice focuses on white collar criminal defense and corporate investigations, appellate litigation, and complex civil litigation at both the state and federal levels.

As a member of the White Collar Defense & Investigations Group, Phil represents clients in prosecutions involving a broad array of federal and state crimes, including insider trading, racketeering, tax evasion, money laundering, and antitrust charges. He frequently guides corporate clients through internal investigations conducted in cooperation with law enforcement and regulatory agencies, and internal investigations and due diligence processes focused on resolving potential anti-corruption issues under the FCPA.

212-969-3382