Breaking: Compliance sometimes works like it’s supposed to!

While you’re locked down, the SEC is trucking along, pounding fools for this or that. (As an aside, how are they doing it, exactly? Is the Commission having Zoom meetings like the rest of us? The Home Office is already equipped to hold remote meetings with its regional offices, but that doesn’t obviate the coronavirus risks for Commissioners in the same hearing room.) Anyway, on Monday the SEC charged a former Goldman Sachs banker with orchestrating a bribery scheme to help a client win a government contract to build an electrical power plant in the Republic of Ghana in violation of the FCPA.

The scheme has all the hallmarks of a typical foreign bribery scheme, but has the welcome inclusion of a compliance program that actually worked like it was supposed to. Longtime FCPA observers will be familiar with cases where competent compliance or legal staff really should have had a clue about problematic situations well before they turned into huge liabilities. Or worse, scenarios where compliance officers themselves become part of the problem. Happily, that’s not what we have here.

The Scheme

The SEC’s complaint, filed in the Eastern District of New York, alleges that former Goldman Sachs investment banker Asante Berko arranged for his firm’s client, a Turkish energy company, to funnel at least $2.5 million to a Ghana-based intermediary to pay illicit bribes to Ghanaian government officials to win their approval for an electrical power plant project. Berko also allegedly helped the intermediary pay more than $200,000 in bribes to various other government officials, and Berko personally paid more than $60,000 to members of the Ghanaian parliament and other government officials. Finally, Berko allegedly took deliberate measures to prevent his employer from detecting his bribery scheme, including misleading his employer’s compliance personnel about the intermediary company’s true purpose.

Compliance Steps In

If true, the whole thing is a mess, and thoroughly documented in (non-corporate) emails. But Goldman’s compliance department comes out looking pretty good. Anyway, all of this is from the SEC’s complaint:

In March 2016, as part of enhanced due diligence, Goldman compliance personnel reviewed Berko’s work emails and discovered the involvement of the intermediary shell company. At first, Berko downplayed the shell’s role, saying “[i]t is a company that [the Energy Company] was speaking to initially to outsource some local work.” The next month, compliance referred the matter to legal, which investigated further. In May, the Deal Team asked the Energy Company to clarify the shell’s role and to identify all payments it had made to the shell. The Energy Company’s CEO told a story about the shell, but didn’t add that it was a company set up solely to pay bribes to Ghanaian government officials.

On May 3, 2016, a Deal Team member emailed the Energy Company CEO this question:

Could you please detail why you contemplated keeping the [Intermediary Company] as a subcontractor when they were no longer part of the [joint venture] plan in Mar-2016? Could you please provide some colour on why you ultimately decided not to use [the Intermediary Company]?

This question was very difficult to answer. Despite further attempts to throw off investigators, the Deal Team continued to question the Energy Company about the shell’s services and payments. In late May 2016, the Energy Company CEO refused to answer any further questions concerning the Intermediary Company, essentially ending the Energy Company’s cooperation. By August 2016, compliance personnel effectively terminated the bank’s involvement in the power plant project.

A Job Well Done

That’s pretty quick! Compliance started asking questions in March, and by August the bank was out of the deal, saving what would surely have been tens of millions of dollars in investigative costs, disgorgement, and penalties. But the scheme never would have been caught if compliance staff had not had the good sense to ask what the shell company was about in the first place. This matter will be a good one for compliance personnel to cite when lobbying for reasonable resources to catch problems before they have the time to ripen into full-blown disasters.