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Several days ago the Wall Street Journal published an article about a financial adviser in Beverly Hills, California (article is behind a paywall) named Mr. Kay who had promoted a supposedly high-yield, low-risk investment. Unfortunately, the company behind the investment is now in bankruptcy and is being investigated as a Ponzi Scheme. Mr. Kay himself, it turns out, was “barred from the securities industry for allegedly running a fraud, according to public records, and later fined $5,000 for breaking that ban.” However, he had changed his name since these infractions, which would have made it more difficult for investors to know about his history.

The investment he was promoting falls into the category of “private placements” a type of private investment a surge in popularity among accredited investors and companies looking to raise money for a variety ventures.

However, because they are more lightly regulated than other investments, and many stockbrokers have started marketing private placements to individuals who may not be as sophisticated investors, these kinds of less regulated investments can be very attractive to fraudsters and unscrupulous brokers.

Smith Brandon International has years of experience working in Brazil, and a broad network of investigators in the country. Many of our clients have asked us to help them with expanding their business in Brazil and we have been happy to help them avoid risks to keep their plans on track. We keep a close eye on developments in Brazil so we can be prepared for anything our clients might need. One huge aspect of life in Brazil is professional soccer (football), and with the FIFA 2018 World Cup coming up, Brazilian excitement for the global sport is at a fever pitch. That’s why we were particularly interested in recent events that combine both Brazil’s favorite sport and our ongoing monitoring of anti-corruption efforts.

Recently, the governing body of international soccer, FIFA, banned the head of the Brazilian football federation for life from involvement in professional soccer at the national or international level. The primary allegations against Marco Polo Del Nero are that he took bribes in exchange for awarding contracts to media and marketing companies.

Egbert Koolman, a current resident of Florida and former official at the Aruban state-owned telecommunications company Servicio di Telecommunicacion di Aruba N.V. (Setar), has recently plead guilty in a money laundering and bribery scheme that also led to guilty pleas for FCPA violations from others involved in the scheme.

Between 2005 and 2016, while Product Manager at state-owned Setar, Koolman collected a reported US $1.3 million in bribe payments in exchange for his influence over profitable contracts awarded by Setar.  Under Koolman, Setar reportedly issued approximately US $45 million worth of phone contracts to a handful of vendors, some of which issued refurbished mobile phones that were either faulty or infected with pornography.

Another associate in the scheme, Lawrence W. Parker, Jr. of Miami pleaded guilty to conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and to commit wire fraud. He admitted to being part of a conspiracy to bribe an official in exchange for telecomunications contracts.

Setar has released public statements that Koolman was fired in 2016 after the corrupt scheme was discovered as a result of documents released with the Panama Papers.  It has become apparent that not only did the bribery scheme involve illicit wire transfers in the US, Aruba, and Panama that violated anti-corruption regulations connected with the FCPA, Koolman also sold confidential information from Setar to certain vendors.

It is important to be aware that despite regulations and provisions designed to deter corruption and money laundering, Koolman was able to carry-out this scheme for over a decade. Without effective FCPA compliance and due diligence programs, companies expose themselves to unnecessary and preventable risks. If you have questions about your company’s compliance program, need help establishing internal controls, or need due diligence on current or potential business partners, contact Smith Brandon International.

Smith Brandon International frequently works for our clients in India. So we keep a close eye on the country to make sure we're always up to speed on what's happening there, and how it might effect our clients. Recently, India’s banking fraud problem has become so severe, some economic experts warn that it may hamper the country’s economic growth and development.

On April 27, it was announced that India’s Central Bureau of Investigation has booked 15 officials of IDBI Bank for involvement in an INR 6 billion (approx. US $90 million) fraud scheme. This is hardly the first fraud scheme uncovered, nor is it the largest. In February 2018, it was revealed that famed jeweler Nirav Modi and his uncle Mehul Choksi had defrauded the Punjab National Bank of approximately INR 130 billion (approx. US $1.9 billion); this was the largest fraud case in India’s history. Modi and Choksi fled India In January before the fraud scheme was revealed; Modi is believed to currently be in the United States.

These fraud cases are just two of many plaguing the banking sector. There were a total of 12,553 reported fraud cases in 2017, which cost the banking sector more than INR 180 billion (approx. US $2.7 billion). On top of that, the number of banking fraud cases have more than tripled in the last five years.

Park Geun-hye, the disgraced former president of South Korea, will not appeal her 24-year prison sentence for bribery, corruption, and extortion. This announcement, made on April 16, ends what has been one of the biggest political scandals in South Korean history. A scandal which has shined a light on government and corporate corruption in the nation.

On October 24, 2016, an independent report by South Korean news programs revealed that Choi Soon-sil, a family friend and personal confidante of Park, had access to copies of presidential speeches before they were publicly announced, despite not having an official position within the South Korean government. Further investigations and parliamentary hearings revealed that Park, Choi, and members of Park’s staff extorted billions of won from Korean chaebols (large family-owned conglomerates, such as Samsung) to set up culture and sports-related foundations run by Choi. Choi also used her influence to ensure her daughter Chung Yoo-ra attended Ewha Womans University in Seoul. Choi was eventually sentenced to a total of 23 years for her involvement in this scandal.

While often this blog focuses on corruption and fraud, we also pay close attention to international news generally, so we can be sure we’re prepared for any issues that may come up for our clients. One situation we’ve recently been following is the relationship between the UAE and Somalia.

Relations between the UAE and Somalia have recently become tense. The trouble began in 2016 when the UAE signed an agreement to further develop and operate the Port of Berbera in Somaliland, an internationally recognized autonomous region within Somalia. Somaliland declared independence in 1991, though its independence is not internationally recognized. The government of Somalia feels that the agreement with Somaliland is invalid as it does not recognize Somaliland’s sovereignty, and has argued that the agreement is a violation of international law.

Today brought another big development in the ongoing and multifaceted "Operation Car Wash" anti-corruption investigation that has been going on in Brazil for some time now. We've talked about Operation Car wash a couple of times before. The Brazilian Supreme Court ruled today that former president Luiz Inácio Lula da Silva will be jailed before he can further appeal his corruption conviction.

Da Silva ended his presidency with an astonishingly high approval rating of 87%, having enacted a number of successful anti-poverty programs. But after his term ended the Car Wash anti-corruption investigation uncovered allegations of corruption on the part of the former president. The conviction that da Silva hopes to appeal is for accepting renovations to a beachfront apartment a larg construction companies in exchange for contracts with the state oil company Petrobras. The prosecutors allege that this particular infraction was just the tip of the iceberg and that da Silva orchestrated much of the much larger scandal that the Car Wash probe is meant to uncover. Since the scandal broke, da Silva's popularity has dropped, but he was still considered the front runner in the next presidential election. Now the viability of his campaign is in question as is whether he can legally run at all.

While our focus is generally on the more traditional business world, today we have an example of corruption and bribery from the world of college sports. This story also serves as a good example of the ways that the repercussions of bribery and corruption are not always limited to legal proceedings or prosecutions. The repercussions and impact on business and organizations can be wide-reaching, and can hit in unexpected ways.

When the participating teams in the 2018 NCAA Men’s Tournament were announced on March 11, many people noticed some teams that had been expected to play were missing from the list. Louisville, Oklahoma State, and USC all had very successful seasons and were widely expected to make the tournament; however, they did not make the list of 68 participating teams. Some sports journalists suggested that the reason they were not selected was because employees of and people connected to these universities are under federal investigation for corruption, bribery, and wire fraud.

We just wanted to alert everyone to a new scam going around in which the scammers pretend to be representing or to have some affiliation with FINRA, the Financial Industry Regulatory Authority. The letters offer fake investment opportunities and use the FINRA Logo, a lot of legal sounding language, and even a fake signature from the FINRA President and CEO to try to make them look more official. The letters falsely claim that FINRA is backing or "guaranteeing" these investments. However, it's just a classic advance-fee scam.

We here at Smith Brandon International are actually quite familiar with FINRA. They provide a lot of useful information about brokers and other financial professionals that we use frequently in our background investigations of potential business partners, employees and executives.

In January 2016, the UN started to remove some of the sanctions imposed on Iran, related to the country’s nuclear program and uranium-enrichment program.  The sanctions were eased as a result of the Joint Comprehensive Plan of Action (JCPOA) that was reached by the EU, the US, China, Russia, and Iran on July 14, 2015.  The agreement specified limitations and requirements pertaining to Iran’s nuclear and uranium programs in exchange for lifting certain international sanctions. 

Since the easement of sanctions, Iran has been eager to conduct business with new trade partners, and strengthen existing trade connections.  Iran’s largest industry is the energy sector, specifically oil and gas.  France has been particularly keen on nurturing business relations with Iran.   

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