Labuda on trade risks

Compliance: what are the trade risks (part 1)

by Janet.Labuda@FormerFedsGroup.Com

Over the last few weeks, I have written a series of short articles discussing the need for developing a compliance-based approach to transacting international trade. This will help to prepare your organization to effectively deal with the risks inherent in importing.

What are these risks that continue to be the focus of U.S. Customs and Border Protection (CBP)? There are various operational policies and programs that give insight into the agency’s concerns. The most important is the identification of Priority Trade Issues (PTIs). Currently, CBP considers the agency’s trade enforcement priorities to be:

Antidumping and Countervailing Duty case administration and enforcement;

Import Safety;

Intellectual Property Rights protection;

Revenue;

Textiles; and

Trade Agreements.

In CBP’s own words “Priority Trade Issues (PTIs) represent high-risk areas that can cause significant revenue loss, harm the U.S. economy, or threaten the health and safety of the American people. They drive risk-informed investment of CBP resources and enforcement and facilitation efforts, including the selection of audit candidates, special enforcement operations, outreach, and regulatory initiatives.”

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Compliance: it starts at the top

GeyerGorey LLP draws upon Janet Labuda’s contacts and experience to understand trade enforcement trends.  Here she is with her latest on the importance of compliance. Janet can be reached at the FormerFedsGroup.

By Janet.Labuda@FormerFedsGroup.Com

Whether you are a small to medium sized enterprise, or a large multinational corporation, creating a culture of compliance starts at the top. This compliance culture should permeate your entire organization starting with the Chief Executive, the Chief Financial Officer, and the corporate counsel.

Compliance is not something that can be compartmentalized, rather, it must be ingrained in the consciousness of every employee from the executive suite to the shop floor. This is one area where a top down driven process is vital. The compliance officer is responsible for implementing the compliance focused program that is established by the corporate ownership and top management.

However, all aspects of the company, whether sourcing, transportation, production, marketing, or sales must work together to support the compliance operation. Leaving just the compliance office to establish the ethic and carry the entire company is an accident waiting to happen.

I often hear that various departments in a company do not understand the compliance aspect of the operation, which sometimes leads them to negate the guidance of the compliance department.  This can lead a company down a slippery slope.

The corporate culture must embrace compliance across the entire company and all must understand the risk of potential regulatory violations.  A once a year training program is not going to cut it.  Compliance is something that everyone must  live, day in and day out.  Workplace evaluations should include a compliance segment for each and every employee. Every department head needs to understand and communicate compliance procedures to their direct reports.

The compliance department must keep a finger on the pulse of risk.  The compliance officer should be responsible for communicating these risks throughout the organization and information should be refreshed and disseminated as often as necessary.  To this end, the CEO must make time for compliance officers, and not leave this critical function on auto-pilot.

Once a vibrant internal compliance driven operation is rooted in the day-to-day operation, companies must push their ethic out to their entire supply chain.  This includes interaction with foreign suppliers, agents, and transporters.  Everyone in the supply chain needs to understand that by doing business with your company, they accept the strict standards that support adherence to the laws and regulations governing trade and all aspects of how the business conducts itself.  This should be reflected in all corporate negotiations, contracts, and purchasing agreements.

By taking this position, senior corporate management supports the highest levels of business ethics and integrity throughout the supply chain.  Compliance is not a skate on thin ice, or a fly by the seat of your pants exercise.  A culture of compliance provides that  sure footing needed when regul

Trade compliance–why bother?

by Janet Labuda

I worked in Customs for over thirty years and met regularly with importers to discuss trade risk, compliance, and enforcement. Often, companies would express their concerns about the cost of compliance–the proverbial cost benefit analysis. If money is spent to create a compliance department, what will the benefits be? Do the risks of possibly getting caught by Customs outweigh the investment in corporate trade compliance? How can there be an effective response to risk without the associated high costs?

Just as with most things, there are rules that govern our behavior. When we drive to work there are lane markings on major thoroughfares, and traffic light systems, and posted speed limits to guide us in an orderly fashion. The same can be said for international trade rules. They are meant to make order out of potential chaos. No person or company can operate successfully in an atmosphere of chaos. Business seeks out predictability, and stability. The rules and regulations governing trade provide a needed stable structure that can help companies weather shifts in the global economy or changes to the legal or regulatory framework.

More importantly, the rules help to level the playing field, and enhance and improve the competitive business dynamic. When companies fail to operate using these rules the underpinnings of trade policy collapse. Trade preference program become endangered, national economies become threatened, sourcing models get upended, business relationships are uprooted.

In addition, companies can get swept up in enforcement actions. Customs assesses risk using somewhat broad parameters. It could be driven by product, country of origin, manufacturer, preferential trade program usage, or combinations of these elements. There are also those instances when very specific information reaches the agency.

The better question to ask is what price is paid if my company does not invest in a culture of compliance? Getting enmeshed in Customs or other regulatory enforcement actions can tarnish your brand, lead to expensive law suits and penalty actions, and divert your resources away from your corporate mission and goals.

Ensuring a strong compliance structure in your organization ensures greater facilitation of product entering the commerce which supports just in time inventory practices. Costs are reduced for both government and business by focusing limited resources to enhancing productivity. A compliance driven operation is a win-win.

Who’s driving your trade compliance bus?

We are including a column by Janet Labuda of the FormerFedsGroup which has supported GeyerGorey LLP with investigative and compliance resources and helps FormerFedsGroup clients on compliance issues involving international trade and Customs matters. I will oversee FormerFedsGroup trade compliance training programs and set the protocols of the PerfectShield (TM) certification process.

By Janet Labuda

The short answer to the question who’s driving the compliance bus is your corporate compliance department. The driver’s seat, should not be filled with personnel from your transportation and logistics operation, the sourcing, or import management groups. All parts of your organization need to be involved in your culture of compliance, but the compliance department is where the rubber meets the road, so it should be staffed with highly focused compliance experts. Companies also should ensure that Customs is not in your driver’s seat.

In 1993, the U.S. Congress amended the Tariff Act of 1930 by enacting, as part of the North American Free Trade Agreement, the Customs Modernization Act (Mod Act). Inherent in the legislation was a shift of responsibility, to the importer, to ensure that imports are compliant. In addition, a series of recordkeeping requirements with tough penalty provisions were established. The Mod Act also introduced the two concepts of informed compliance and reasonable care into the legal and trade lexicon. Customs must explain the rules, and importers, and others in the trade community, must take care to understand and follow the rules.

The legislation gave the bus key to the importers. But, an important thing to remember is that although, the importers are driving the compliance bus, the route is dictated by Customs. Most times importers find that they do not travel on the most direct route. Often, there are bumps in the road and unexpected detours. You must be prepared for these inevitabilities.

Over the last few weeks, it has become obvious that international trade will be a priority for U.S. policy makers. The trade community can expect a greater emphasis on the enforcement of laws and regulations, and possible changes to current trade legislation, especially as it relates to preferential access to U.S. markets. Our traditional trade relationships will be tried and tested, and may see unexpected changes to the current norm.

From past experience, the federal government pendulum tends to swing in wide and sweeping arcs. Establishing a predictable balance can be difficult to achieve as guidance and focus shift. Often, the importing community gets caught in the middle.

The time for doing some critical introspection is now. Do not allow your company to be caught off guard. The following recommendations are ways your company can engage in upgrading your bus’s safety and navigation systems:

  1. Put yourself in Customs shoes and do a complete review of your operations and document how you believe your company is meeting a reasonable care standard.
  1. Enhance your corporate internal controls, as needed.
  1. Ensure a transparent and understandable supply chain for all phases of your overseas production.
  1. Don’t fly under the radar screen. Develop a regular outreach to Customs and other federal regulatory agencies.
  1. Review your business relationships to guarantee that there is an understanding that compliance is key to working with your company.
  1. Become a CTPAT tier three partner or an Authorized Economic Operator, and keep abreast of Customs Trusted Trader programs.
  1. Work closely with a professional broker to navigate complex trade issues. A broker dedicated to compliance is a force multiplier for your company.
  1. Understand the nature of any perceived risk, e.g., forced labor, anti-dumping circumvention, trade preference non-compliance, and how your products and partners might be affected by such risk.
  1. Review your sourcing strategies in light of the potential risk you identify.
  1. If you uncover a problem seek legal advice on the best way to move forward to mitigate any potential downstream penalties.
  1. Ensure that all corporate departments are pulling in the compliance direction.
  1. Provide regular compliance training throughout the company.
  1. Work through industry associations to have your voice heard when changes in government policies and procedures affect your business model.

Start your engines, buckle up, and try to enjoy the ride.

Janet Labuda: Global Trade – Expectations Under the New Administration

Vandegrift Blog – Global Trade – Expectations Under the New Administration November 28, 2016

FormerFedsGroup’s Janet Labuda gives us some insight on what importers can do to prepare for global trade under the new administration.

As always, continue to send us your comments and questions. We look forward to your feedback.  Janet can be reached at Janet.Labuda@FormerFedsGroup.Com

CCC’s: Some Thoughts On Compliance and Other Issues Raised by the Forex Guilty Pleas

It’s been almost two weeks since the Department of Justice announced its plea agreements in the Forex investigation. To recap the highlights, in his remarks announcing the case filings, Bill Baer Assistant Attorney General for the Antitrust Division said (here):

Today’s guilty pleas to criminal charges represent major developments in our investigation into collusion affecting foreign exchange markets, particularly the spot market for trading U.S. dollars and euros. The antitrust guilty pleas announced today involving four major international financial institutions – Citicorp, JPMorgan Chase, The Royal Bank of Scotland and Barclays – are without precedent. In light of the seriousness of the crimes and the unjustified benefit to the bottom lines of these banks, we demanded parent-level guilty pleas, secured record fines of more than $2.5 billion and insisted upon three years of court-supervised probation.

In addition, UBS agreed to plead guilty to a violation in the Libor market. UBS had previously received non-prosecution protection in the Libor investigation, but that protection was withdrawn in light of UBS’s participation in the Forex cartel.

Since the news of the case filings first broke, I’ve had some additional thoughts on the matter.  First, I want to give a big pat on the back to my former colleague, Joe Muoio, who signed the pleadings on behalf of the Antitrust Division. Joe and I worked together for many years in the now closed Philadelphia Field office. Joe was the Assistant Chief and transferred to the New York Field office when the Philadelphia office was closed in 2013. The Forex investigation was a team effort (a large international team, no doubt) and there could not have a better team leader than Joe.   Congratulations to Joe and the rest of the team.

The Forex plea agreements have two noteworthy departures from previous pleas in the financial sector. For the first time, the Antitrust Division acknowledged giving credit to a company for implementing an effective compliance program after the start of the investigation. Little has been revealed about what made Barclay’s compliance program effective, why the Division chose to give credit in this case, and what the value of the credit given to Barclays was?  The plea agreements states only: “The parties further agree that Recommended Sentence is sufficient, but not greater than necessary to comply with the purposes set forth in 18 U.S.C. §§ 3553(a), 3572(a), in considering, among other factors, the substantial improvements to the defendant’s compliance and remediation program to prevent recurrence of the charged offense.”  This language, while limited, is still an important first step for the Antitrust Division to acknowledge (and thereby encourage) implementation of effective antitrust compliance programs. The Antitrust Division does not make changes in policy lightly and it is likely they will have more to say about this development in future speeches.

Another noteworthy fact about the Forex plea agreements is that the Antitrust Division required pleas from the parent company. Previously, in most situations where financial institutions have been charged in Forex and Libor, the plea has come from a foreign subsidiary to avoid the collateral consequences that would flow from a conviction of a publicly traded company. Requiring the parent to plead was a relatively small step, however, as the pleas were only entered after waivers were secured from the SEC.  The banks wanted assurances from U.S. regulators that they would not be barred from certain businesses before agreeing to plead guilty to criminal charges. (here). The defendants received the desired waivers.

Public Reaction

The historic pleas have not been without some public criticism. An example is an editorial in the New York Times titled: “Banks as Felons, Or Criminality Lite

Besides the criminal label, however, nothing much has changed for the banks. And that means nothing much has changed for the public. There is no meaningful accountability in the plea deals and, by extension, no meaningful deterrence from future wrongdoing.”

SEC Commission, Kara M. Stein, was harsh in her dissent from the grant of waivers to the recidivist banks.

Allowing these institutions to continue business as usual, after multiple and serious regulatory and criminal violations, poses risks to investors and the American public that are being ignored. It is not sufficient to look at each waiver request in a vacuum.

And, in an article in USA Today (here), four leading antitrust commentators who are not usually found to be in agreement (Judge Douglas Ginsburg, FTC Commission Josh Wright and Albert Foer and Professor Robert H. Lande of the American Antitrust Institute) called for harsher penalties against individuals convicted of antitrust offenses.

Some thoughts on Compliance

As already noted, the Antitrust Division took a big step forward in encouraging the implementation of effective compliance programs. Hopefully, more details will be forthcoming about why now? What was it about Barclays’ program that was considered effective? And what was the monetary benefit for the compliance program.

The Division’s encouragement of an effective compliance program should be bolstered by the sheer magnitude of the fines and other consequences of these guilty pleas. In the compliance world, FCPA is “Top Dog” in terms of compliance resources and attention. No doubt issues like vetting third-party vendors worldwide rightfully account for this attention. But the consequences of an antitrust offense call out for an equally keen focus on antitrust compliance. I’ve written about this before (here), but the combination of huge fines, jails sentences for individuals, investigation by multiple U.S. agencies, and competition agencies around the world, and the significant damages paid out in civil class action lawsuits make a compelling case for robust antitrust compliance efforts.

Indeed, the Antitrust Division’s plea agreements with the other banks besides Barclays call for devoting resources to compliance programs:

“The defendant shall implement and shall continue to implement a compliance program designed to prevent and detect the conduct set forth in Paragraph 4 (g)-(i) above and, absent appropriate disclosure, the conduct in Paragraph 13 below throughout its operations including those of its affiliates and subsidiaries and provide an annual report to the probation officer and the United States on its progress in implementing the program, commencing on a schedule agreed to by the parties.”

The plea agreements, however, do not call for external compliance monitors. Given that the cartel involved billions of dollars, the brazen nature of the crime (the conspirators referred to themselves in private chat rooms as the “Cartel Club” and “The Mafia,” and finally, the degree of recidivism, one wonders (OK, I wonder) why no external compliance monitors? The Division sought (and received from the court) external compliance monitors in the Apple case, (a civil violation) and in AU Optronics (a first offense).  Unless the Antitrust Division provides further guidance, it appears that the only criteria for seeking an external monitor is if a company goes to trial against the Division and loses.

The Investigation Is Ongoing

There is some validity to the charge that the corporate fines are just a cost of doing business and don’t provide sufficient deterrent. Perhaps requiring a parent to plead was one step closer towards requiring a plea and no regulatory waivers. But fears of collateral damage to innocent employees (who would lose jobs), stockholders (who could be wiped out) and the economy in general make this a hard trigger to pull.  The real deterrent comes with prosecution of individuals—i.e., the guys in The Cartel or The Mafia, as they put it.   It is extremely likely that the Antitrust Division will seek charges against individuals in this case. The hard part is not so much prosecuting the traders who operated in the chat rooms and left a trail of evidence, but in determining if knowledge of the cartel went higher up in the banks. Holding the highest-level person in an organization responsible for the crime is the highest deterrence. But, this is challenging as superiors are often shielded from direct involvement in the crime and can only be convicted on the basis of the testimony of subordinates whose credibility may be compromised by their own plea. The public often cries for higher level executives to be held accountable, but juries take seriously their obligation to convict only where the proof establishes guilt “beyond a reasonable doubt.”

There will be much more to this story so stay tuned. Thanks for reading.

ANTITRUST GUIDANCE IN BRAZIL

ANTITRUST GUIDANCE IN BRAZIL

Today we have an update from Brazil by Mauro Grinberg, a former Commissioner of CADE, a former Attorney of the National Treasury and senior partner of Grinberg Cordovil.

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A Resolution issued by Conselho Administrativo de Defesa Econômica (CADE), dated March 11, 2015, made a comeback of the procedure for antitrust guidance to be requested to CADE. This request for guidance can be used in all competition cases, including cartels.

The first article of such Resolution says that any interested party can forward a request for guidance to CADE, related to specific situations, which may be real or potential. Interested parties can also be trade associations which have, as their goals, representation of the involved sector and can demonstrate that at least one of the represented companies is legitimately interested in such guidance.

There are some requirements for such request for guidance and, although it is pointless, for the purpose of this note, to go through all of them, it is interesting to mention that the party must declare all CADE´s precedents related to the object. So, no request for guidance can be asked before a thorough research through CADE´s jurisprudence. However, any research may have its problems and it is not clear what will happen if a certain research does not present a decision that CADE may understand as fundamental.

Another point that must be reported says that the request for guidance cannot refer to a purely hypothetical issue. This may be a somewhat tricky question because CADE may understand that a question that is not under practice is hypothetical (which, in a way, it may be). It is not clear what can happen if, e.g., a party asks whether it is legitimate to have certain contacts with competitors and, if the conduct is approved by CADE and the party does not perform it due to a further strategic and/or commercial decision, could the party can be punished for having submitted a request for guidance that CADE may consider hypothetical?.

The answer to the request for guidance is binding for CADE and the parties for five years, although the Resolution states that CADE can reconsider its decision, if based on new facts. So, in practice, the Resolution is really binding only for the parties submitting the request for guidance.

A last problematic article states that, if CADE understands that an already existing conduct, which is the object of the request for guidance, has the possibility of being illegal, an administrative file will be opened in order to prosecute the interested party. If the conduct is a possible cartel, a criminal file may also be opened. So, it is fundamental that, in case a party wants to make such request related to a conduct that is under way, it is advisable to stop such conduct before requesting the guidance.

Consequently, a request for guidance, in order to be in the safe side, must be related to conducts that are not being performed but are to be performed and depend on the guidance, with the additional task of demonstrating to the authorities that the request for guidance is not hypothetical.

Mauro Grinberg is a former Commissioner of CADE, a former Attorney of the National Treasury and senior partner of Grinberg Cordovil.

3C’s: Global Glimpses of Cartel Capers

Global Glimpses of Cartel Capers

There have been a number of developments around the globe relating to cartel enforcement that I think might be of interest:

Australia

I wrote about this in an earlier post, but a billionaire businessman in Australia invited an investigation, which has now been dropped, with his comments at a business dinner griping about low prices in the market.  He got himself in hot water, which never reached a boiling point, by stating he was ready to reduce output of iron ore if his competitors would do likewise. (here)

Cambodia

People are people and as Adam Smith noted, “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

In Cambodia, the Ministry of Agriculture and Forestry said that they were investigating a possible secret agreement between middlemen or traders in the supply chain to manipulate the price of agriculture commodities, leaving farmers with no option but to sell their products at a lower price. A spokesperson at the Ministry said traders had divided regions into zones, giving farmers no choice but to sell to that trader and at the trader’s asking price. In this case, if true, the conspiracy was to reduce the prices paid to farmers.  (full story here)

Canada

On April 27th, after a seven-month trial and six days of deliberation, a jury in Ottawa found nine defendants not guilty on all 60 charges of bid rigging and conspiracy to rig bids. “Six years earlier federal prosecutors had charged 14 individuals and seven computer services firms with rigging bids in connection with more than $60 million worth of contracts at three federal departments. Now in the courtroom were six individuals and three of their firms — they had elected to be tried by a jury, the first time anyone had done so in the 39-year history of the Competition Act.” (full story here)

Also in Canada here is a helpful article on the shift in on corporate criminal liability. Corporate criminal liability can now be based on the conduct not only of senior corporate officers such as board members, but also middle managers in some circumstances.

EU Grapples with Extraterritoriality of Competition Law

Like the United States, the EU is working to define the scope of the extraterritorial application if its competition laws. The Advocate General of the European Court of Justice, Melchior Wathelet, urged the court to rescind the Court’s decision that based part of a fine against Innolux based on LCD panels sold by the manufacturers to other companies and eventually shipped to the EU as components in other devices. Wathelet wrote in an opinion that: “It seems to me that, unless further evidence can be furnished that the cartel creates qualified effects in the [European Economic Area], the commission goes too far if it fines cartels relating to products manufactured and sold outside the EEA for the sole reason that those products are subsequently ‘transformed’ or incorporated into other products which (either wholly or in part) arrive in the EEA.”  The opinion agreed that EU law could be applied extraterritorially to component price-fixing if the Commission had met a “qualified effects” test. Innolux’s fine stand to be cut almost in half if the Court reduces its fine in accord with the Advocate General’s opinion.

United States

  • Civil Settlement News

Civil settlements have now exceeded $270 million in federal litigation stemming from the ongoing U.S. criminal antitrust investigation into automotive supplier price-fixing (here). These settlements, however pale in comparison to the civil settlements reached in the follow-on civil suits to the air cargo price-fixing cartel. These settlements now top $1 billion (here).  In fairness, the auto parts civil litigation is far from over.  These figures relate only to civil settlements in the U.S.  Civil damage actions, including class action suits (collective redress), are quickly spreading thoughout the globe.

  • Senate Committee Launches Investigation of Dish and affiliates

The Senate Committee on Commerce, Science and Transportation has begun an investigation of possible bid rigging between Dish and several of its smaller affiliates on a recent $3 billion spectrum auction. The investigation follows a complaint filed by Verizon with the Federal Communication Commission alleging that Dish colluded with its affiliates to violate the bidding rules as well as antitrust laws. (full story here)

Thanks for reading.

PS.  Guest posts, especially about cartel/compliance related developments outside of the United States, are most welcome.

CEO’s Say the Darndest Things (and salespeople too)

CEO’s Say the Darndest Things (and salespeople too)  

Since I spent over 30 years with the Antitrust Division, US Department of Justice, people sometimes ask me how investigations get started. This blog post addresses one way: “loose lips sink ships” or put another way “CEO’s Say the Darndest Thing (and salespeople too).”

This is a story from down under. The Chairman of Australia’s Fortescue Metals, Andrew Forrest, was at a business dinner on March 24th when he expressed his frustration that his main rivals, BHP Billiton and Rio Tinto were driving down the prices of iron ore with excess production. Mr. Forrest declared:

“I’m absolutely happy to cap my production right now. All of us should cap our production now and we’ll find the iron ore price will go straight back up to $70, $80, $90 and the tax revenues which that will generate will build more schools, more hospitals, more roads, more of everything which Australia needs — universities etc. I’m happy to put that challenge out there: let’s cap our production right here and start acting like grown-ups.”(full story here)

OOPS. The Australian Competition & Consumer Commission (which has the great shorthand name: A-Triple C) started an investigation. The ACCC just announced it would no take action against Mr. Forrest because of the “context and circumstances” of his remarks.  The ACCC Chairman Rod Sims warned: “However, it is important that the business community understands that public statements calling for competitors to agree to limit production or to raise prices may constitute a serious cartel ­offence.”  (full statement here).

In the United States an offer to fix prices, even if not accepted, can and has been, prosecuted by the Antitrust Division as mail and/or wire fraud.  And the Federal Trade Commission has charged price-fixing/bid rigging solicitations as violations of Section 5 of the FTC Act. That is not to say that either agency would have charged Mr. Forrest for the remarks he made, but with different circumstances, prosecutions have been brought for what are called “invitations to collude.” (A Sherman Act prosecution requires an actual agreement between the competitors, so unless an offer to collude is accepted, it can be prosecuted, but not under the Sherman Act.)  Mr. Forrest’s statement was also problematic because if competitors did raise prices, even if they had already been planning to do so, suspicion of collusion would be high.  And civil law suits may well have followed.

I am going to be making a presentation on this very subject with my friend Barbara Sicalides at the Society of Corporate Compliance and Ethics (SCCE’s) annual Compliance & Ethics Institute (October 4-7th) in Las Vegas. This is the SCCE’s primary education and networking event for professionals working in the Compliance and Ethics profession across all industries around the world. Sessions at the 2015 conference will offer the latest compliance information on hot topics and current events.   Our session is titled:  CEO’s (and salespeople too) Say The Darndest Things: How an Ill-Advised Statement or Email Can Start an Antitrust Investigation or Lawsuit – Robert E. Connolly, Partner, GeyerGorey LLP; Barbara T. Sicalides, Partner, Pepper Hamilton LLP.  We will have numerous examples, sometimes funny, sometimes not so funny and very expensive, of how companies and individuals have found themselves under investigation and/or charged with antitrust violations for things that simply never should have been said/written.  It should be a good session on how to counsel the unsuspecting of the potential perils of off the cuff remarks.

Hope to see you there.

Thanks for reading.

Former ExIm Bank Officer Pleads to Accepting Over $78,000 in Bribes

The nation’s most experienced Export Import Bank Fraud prosecutors, Senior Litigation Counsel Patrick M. Donley and Trial Attorney William H. Bowne of the Criminal Division’s Fraud Section, continue in their efforts.

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A former loan officer at the Export-Import Bank of the United States (Ex-Im Bank) pleaded guilty in federal court today for accepting more than $78,000 in bribes in return for recommending the approval of unqualified loan applications to the bank, among other misconduct.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Acting Inspector General Michael T. McCarthy of the Export-Import Bank of the United States and Assistant Director in Charge Andrew G. McCabe of the FBI’s Washington Field Office made the announcement.

Johnny Gutierrez, 50, of Stafford, Virginia, pleaded guilty before U.S. District Judge Gladys Kessler of the District of Columbia to one count of bribery of a public official.  A sentencing hearing is scheduled for July 20, 2015.

“Gutierrez risked both taxpayer dollars and the integrity of the Ex-Im Bank for his personal financial gain,” said Assistant Attorney General Caldwell.  “Those charged with serving the public will be held accountable when they seek personal enrichment at the public’s expense.”

“Gutierrez betrayed the trust and confidence of the hardworking Ex-Im Bank employees and the U.S. taxpayers,” said Acting Inspector General McCarthy.  “The Office of Inspector General will continue to aggressively and diligently investigate all allegations of waste, fraud, and abuse related to Ex-Im Bank programs.”

“In his role as a loan officer, Gutierrez betrayed the trust that was placed in him by fellow citizens and took bribes in exchange for providing favorable action on loan applicants,” said Assistant Director in Charge McCabe.  “The FBI, with our partners, will continue to investigate and expose fraudulent schemes that tarnish the good and ethical work of the U.S. government.”

According to his plea agreement, Gutierrez was a loan officer for the Ex-Im Bank based in Washington, D.C.  The Ex-Im Bank is the federal agency responsible for promoting the export of U.S. goods to foreign countries through the guarantee of domestic loans to foreign buyers.  As an Ex-Im Bank loan officer, Gutierrez was responsible for conducting credit underwriting reviews for companies and lenders submitting financing applications to the Ex-Im Bank.

As part of his guilty plea, Gutierrez admitted that on 19 separate occasions between June 2006 and December 2013, he accepted bribes totaling more than $78,000 in return for recommending the approval of unqualified loan applications and improperly expediting other applications.

Specifically, Gutierrez admitted that he intentionally ignored the fact that one company had previously defaulted in 10 previous transactions guaranteed by the bank, causing the Ex-Im Bank to lose almost $20 million.  Despite these defaults, Gutierrez accepted bribes to continue to recommend the approval of the company’s loan applications.  Additionally, Gutierrez admitted that he accepted bribes from a financing broker to expedite applications submitted by the broker, and that he privately assisted the broker to improve its applications before submission to the bank.  In exchange, Gutierrez was to receive half of the broker’s profit on the transactions financed by the bank.  Further, Gutierrez disclosed to the broker inside information about financing applications submitted to the Ex-Im Bank, so that the broker could solicit the applicants as clients.

The case was investigated by the Inspector General of the Export-Import Bank of the United States and the FBI, with significant assistance provided by the Internal Revenue Service-Criminal Investigation’s (IRS-CI) Washington Field Office.  The case is being prosecuted by Senior Litigation Counsel Patrick M. Donley and Trial Attorney William H. Bowne of the Criminal Division’s Fraud Section.