No Result
View All Result
SUBSCRIBE | NO FEES, NO PAYWALLS
MANAGE MY SUBSCRIPTION
NEWSLETTER
Corporate Compliance Insights
  • Home
  • About
    • About CCI
    • CCI Magazine
    • Writing for CCI
    • Career Connection
    • NEW: CCI Press – Book Publishing
    • Advertise With Us
  • Explore Topics
    • See All Articles
    • Compliance
    • Ethics
    • Risk
    • FCPA
    • Governance
    • Fraud
    • Internal Audit
    • HR Compliance
    • Cybersecurity
    • Data Privacy
    • Financial Services
    • Well-Being at Work
    • Leadership and Career
    • Opinion
  • Vendor News
  • Library
    • Download Whitepapers & Reports
    • Download eBooks
    • New: Living Your Best Compliance Life by Mary Shirley
    • New: Ethics and Compliance for Humans by Adam Balfour
    • 2021: Raise Your Game, Not Your Voice by Lentini-Walker & Tschida
    • CCI Press & Compliance Bookshelf
  • Podcasts
    • Great Women in Compliance
    • Unless: The Podcast (Hemma Lomax)
  • Research
  • Webinars
  • Events
  • Subscribe
Jump to a Section
  • At the Office
    • Ethics
    • HR Compliance
    • Leadership & Career
    • Well-Being at Work
  • Compliance & Risk
    • Compliance
    • FCPA
    • Fraud
    • Risk
  • Finserv & Audit
    • Financial Services
    • Internal Audit
  • Governance
    • ESG
    • Getting Governance Right
  • Infosec
    • Cybersecurity
    • Data Privacy
  • Opinion
    • Adam Balfour
    • Jim DeLoach
    • Mary Shirley
    • Yan Tougas
No Result
View All Result
Corporate Compliance Insights
Home FCPA

Multi-Party Conspiracies in Central America: The Latest FCPA Case

by Matteson Ellis
August 28, 2015
in FCPA
Multi-Party Conspiracies in Central America: The Latest FCPA Case

This article was republished with permission from FCPAméricas Blog, for which Matteson Ellis is founder, editor and regular contributor.

On August 12, 2015, the U.S. Department of Justice (DOJ) announced that Vicente Eduardo Garcia, a former executive of the software and technology solutions company SAP International, pleaded guilty to criminal charges of conspiracy to violate the U.S. Foreign Corrupt Practices Act (FCPA). Mr. Garcia also consented to a cease-and-desist order by the U.S. Securities and Exchange Commission (SEC), agreeing to pay US$92,395, representing the sum of the total amount of kickbacks he received in the scheme plus prejudgment interest of US$6,430. The SEC found that Mr. Garcia violated both the anti-bribery and internal controls provisions of the FCPA.

The Miami-based executive is a 65-year-old former regional director of SAP who participated in a scheme over four years that was designed to bribe Panamanian officials to secure US$3.7 million in revenues for SAP from software contracts. Mr. Garcia is scheduled to be sentenced on December 16, 2015.

The Scheme. Mr. Garcia admitted to conspiring with Latin American advisors and consultants to bribe various Panamanian officials while he was responsible for Latin American sales of Germany-headquartered SAP between 2008 and 2014. According to the SEC, the conspirators paid US$145,000 to one official and offered to pay two other officials pursuant to the scheme to obtain four contracts to sell software.

In its Information, the DOJ explains, “Panama was viewed by SAP as strategically important, as it would showcase SAP’s technology in Latin America.” The DOJ states that Mr. Garcia estimated the Panamanian government contracts to be potentially worth approximately US$150 million. Winning a first contract was particularly important because it would position SAP to be favored for future contracts.

To win the first contract with the Panamanian social security agency, Mr. Garcia worked with an advisor, a local lobbyist that had existing relationships with the newly elected government in Panama, a second consultant and the principal of an SAP channel partner based in Mexico to devise a plan to pay bribes to two agency officials and the brother-in-law of a third official. The advisor was an SAP Mexico employee working under Mr. Garcia who resigned and began advising the Panamanian Government on assessing its technology needs.

The SEC explained that Mr. Garcia made arrangements to provide illegitimate discounts of up to 82 percent on sales to the channel partner, thereby generating a slush fund from which improper payments would be made. The SEC found that he did this by circumventing SAP’s internal controls. The DOJ stated that the conspirators used sham contracts and false invoices to disguise the true nature of the bribes. SAP’s partner was successful in obtaining the first contract for US$14.5 million, which included US$2.1 million in SAP software sales.

When developing the business relationships to support the scheme, Mr. Garcia agreed to send a fictitious invitation from SAP to one of the officials for a visit to Mexico that included a made-up itinerary where meetings ostensibly for business purposes would be held. This was designed to give the Panamanian official cover to take a trip to Mexico during Carnival. The lobbyist in the conspiracy told Mr. Garcia that, with this favor, the official would “owe us a big one.” In a follow up e-mail to the lobbyist that Mr. Garcia sent from his personal Yahoo account, Mr. Garcia inquired into whether the letter had been sufficient for the official’s purposes and requested that a deal for between US$5 and $10 million be finalized.

In the run up to the scheme, the lobbyist also proposed using sham consulting contracts that would be provided to the brother-in-law of one of the officials and drafted them in a way that “no trace remains if SAP conducts an audit … I made it as simple as possible and made it look like a real contract.” The advisor shared spreadsheets with Mr. Garcia listing planned payments to the officials.

FCPA Risk and Discounts. This FCPA action highlights once again the risks involved when companies extend discounts to distributors, resellers, channel partners or other third parties that purchase their goods and sell them to others. FCPA enforcement officials take the position that companies should seek to justify discounts as legitimate and should apply enhanced controls and heightened scrutiny when discounts exceed market rates. They maintain that large discounts have the potential to generate slush funds or “loose money” that can be used by third parties for bribe payments.

In the SEC’s settlement with Eli Lilly, authorities determined that the company generally gave discounts of between 6.5 percent and 15 percent to its Brazilian distributors and failed to apply special safeguards when extending unusually high discounts of between 17 percent and 19 percent to one particular distributor who was reselling to the Brazilian government. The SEC noted that Eli Lilly’s pricing committee had approved the distributor’s price without further inquiry and relied on representations of the sales and marketing manager without adequate verification and analysis of the surrounding circumstances of the transactions. Similarly, the DOJ and SEC include a hypothetical scenario on page 64 of the Resource Guide to the U.S. Foreign Corrupt Practices Act (FCPA Resource Guide) in which they provide that a distributor’s request for an additional discount would warrant “further inquiry into the economic justification for the change.”

Designing and implementing such compliance efforts are particularly important for companies that rely heavily on local partners as a core component of their business strategies. For example, the SEC highlights that SAP’s own network includes more than 11,500 partners worldwide with 380,000 individuals skilled in SAP software solutions and technology.

SAP’s Compliance Program. Though neither the DOJ nor the SEC explicitly address SAP’s anti-corruption compliance program, they demonstrate how the program had strong elements that Mr. Garcia’s efforts were designed to circumvent.

For example, to obtain approval for the discount, authorities note that Mr. Garcia had to submit internal approval forms with written justifications and that he misrepresented the reasons for the discount in those forms by saying that they were necessary to compete with other software companies in establishing a relationship with the Panamanian government. In its cease-and-desist order, the SEC references the SAP code of conduct prohibiting bribery and notes that Mr. Garcia engaged in the conspiracy despite signing it. Further, the SEC states that “SAP refused to pay additional commission to this new Panamanian company,” which led the conspirators to pursue the discount plan, suggesting that SAP’s controls helped impede the conduct.

Though the agencies do not focus on SAP’s compliance program (as they did, for example, in the Morgan Stanley declination discussed in Miller & Chevalier’s FCPA Summer Review 2012), practitioners can glean helpful guidance from these references to SAP’s program.

Bribe Offers and Promises under the FCPA. In its cease-and-desist order, the SEC explicitly provides that “Garcia, along with others, promised to make bribe payments to two senior government officials and made bribe payments to another government official, all in violation of the FCPA.” In doing so, the SEC highlights that the FCPA’s anti-bribery prohibitions extend not only to actual payments of bribes, but also to mere promises of payments. In fact, no actual payment is needed to violate the FCPA; a simple offer, promise or authorization of an improper payment can be sufficient. This aspect of the statute’s broad reach is often lost on companies and business people engaged in international business who mistake the type of activity necessary to constitute a violation.

Central America and Bribery Risk. This is the fifth time that improper payments in Panama have resulted in FCPA enforcement actions and the 13th time that Central American payments more generally have resulted in FCPA enforcement actions. Given its position as a financial center for Latin America, in at least one case Panama has also served as a conduit for illicit flows of bribe payments subject to FCPA enforcement – payments in Venezuela in the FCPA action involving traders from Direct Access Partners went through Panama.

Mr. Garcia’s conspiracy further highlights the uniquely close-knit relationships that are common between the business and government sectors in Central American countries, where political and economic power is highly concentrated. Interesting enough, almost a week after U.S. authorities announced their actions against Mr. Garcia, the issue had still not been covered thoroughly by the Panamanian or Central American press, despite the fact that numerous individuals from the region appear to have been involved in the conspiracy. This calls into question whether local Panamanian authorities will take action related to the conspiracy or cooperate with U.S. officials.

There also appears to be the possibility that U.S. officials could still proceed against non-U.S. individuals involved in the conspiracy. In particular, in the FCPA Resource Guide, the DOJ and SEC cite United States v. MacAllister, 160 F.3d 1304, 1307 (11th Cir. 1998) and United States v. Winter, 509 F.2d 975, 982 (5th Cir. 1975) for the proposition that the United States generally has jurisdiction over all conspirators where at least one conspirator is an issuer, a domestic concern or commits a reasonably foreseeable overt act within the United States: “[I]f a foreign company or individual conspires to violate the FCPA with someone who commits an overt act within the United States, the United States can prosecute the foreign company or individual for the conspiracy.”

 

The opinions expressed in this post are those of the author in his or her individual capacity and do not necessarily represent the views of anyone else, including the entities with which the author is affiliated, the author`s employers, other contributors, FCPAméricas or its advertisers. The information in the FCPAméricas blog is intended for public discussion and educational purposes only. It is not intended to provide legal advice to its readers and does not create an attorney-client relationship. It does not seek to describe or convey the quality of legal services. FCPAméricas encourages readers to seek qualified legal counsel regarding anti-corruption laws or any other legal issue. FCPAméricas gives permission to link, post, distribute or reference this article for any lawful purpose, provided attribution is made to the author and to FCPAméricas LLC.


Tags: Latin America
Previous Post

Georgia On My Mind – How Does Compliance Enhance Shareholder Value?

Next Post

Promoting Your Culture: Communications and Measurement

Matteson Ellis

Matteson Ellis

Matteson Ellis serves as Special Counsel to the FCPA and International Anti-Corruption practice group of Miller & Chevalier in Washington, DC.  He is also founder and principal of Matteson Ellis Law PLLC, a law firm focusing on FCPA compliance and enforcement. He has extensive experience in a broad range of international anti-corruption areas. Previously, he worked with the anti-corruption and anti-fraud investigations and sanctions proceedings unit at The World Bank. Mr. Ellis has helped build compliance programs associated with some of the largest FCPA settlements to date; performed internal investigations in more than 20 countries throughout the Americas, Asia, Europe and Africa considered “high corruption risk” by international monitoring organizations; investigated fraud and corruption and supported administrative sanctions and debarment proceedings for The World Bank and The Inter-American Development Bank; and is fluent in Spanish and Portuguese. Mr. Ellis focuses particularly on the Americas, having spent several years in the region working for a Fortune 50 multinational corporation and a government ethics watchdog group. He regularly speaks on corruption matters throughout the region and is editor of the FCPAméricas Blog. He has worked with every facet of FCPA enforcement and compliance, including legal analysis, internal investigations, third party due diligence, transactional due diligence, anti-corruption policy drafting, compliance training, compliance audits, corruption risk assessments, voluntary disclosures to the U.S. government and resolutions with the U.S. government. He has conducted anti-corruption enforcement and compliance work in the following sectors: agriculture, construction, defense, energy/oil and gas, engineering, financial services, medical devices, mining, pharmaceuticals, gaming, roads/infrastructure and technology. Mr. Ellis received his law degree, cum laude, from Georgetown University Law Center, his masters in foreign affairs from Georgetown’s School of Foreign Service, and his B.A. from Dartmouth College. He co-founded and serves as chairman of the board of The School for Ethics and Global Leadership in Washington, D.C. He is a member of the District of Columbia, Texas, New York, and New Jersey bar associations. Mr. Ellis is also author of The FCPA in Latin America: Common Corruption Risks and Effective Compliance Strategies for the Region.

Related Posts

fcpa latin america drug cartel

FCPA Changes & Terrorist Designations for Cartels Create Dangerous New Math in Latin America

by Matteson Ellis, James Tillen and Maria Lapetina
March 19, 2025

As the Trump Administration takes aim at Latin American cartels with foreign terrorist organization designations, the legal landscape for businesses...

Latin American Governance Report Cover

Cost of Governance in Latin America

by Corporate Compliance Insights
August 15, 2023

Cost of governance remains high in Latin America Special Report Latin American Entity Portfolio Management What’s in this report from...

latam protest

Our Shared Neighborhood: Corporate Criminal Enforcement & Compliance in Latin America

by Luke Cass
April 12, 2023

Navigating pitfalls of doing business in risk-filled region

US secretary of state Antony Blinken

Corporate Compliance Considerations Following the Publication of the Engel List

by Alejandra Montenegro Almonte, William Barry and Maria Lapetina
August 25, 2021

Published earlier this summer, the Engel List identifies over 50 prominent politicians and business people living in the Northern Triangle...

Next Post
Promoting Your Culture: Communications and Measurement

Promoting Your Culture: Communications and Measurement

No Result
View All Result

Privacy Policy | AI Policy

Founded in 2010, CCI is the web’s premier global independent news source for compliance, ethics, risk and information security. 

Got a news tip? Get in touch. Want a weekly round-up in your inbox? Sign up for free. No subscription fees, no paywalls. 

Follow Us

Browse Topics:

  • CCI Press
  • Compliance
  • Compliance Podcasts
  • Cybersecurity
  • Data Privacy
  • eBooks Published by CCI
  • Ethics
  • FCPA
  • Featured
  • Financial Services
  • Fraud
  • Governance
  • GRC Vendor News
  • HR Compliance
  • Internal Audit
  • Leadership and Career
  • On Demand Webinars
  • Opinion
  • Research
  • Resource Library
  • Risk
  • Uncategorized
  • Videos
  • Webinars
  • Well-Being
  • Whitepapers

© 2025 Corporate Compliance Insights

Welcome to CCI. This site uses cookies. Please click OK to accept. Privacy Policy
Cookie settingsACCEPT
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
cookielawinfo-checbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
SAVE & ACCEPT
No Result
View All Result
  • Home
  • About
    • About CCI
    • CCI Magazine
    • Writing for CCI
    • Career Connection
    • NEW: CCI Press – Book Publishing
    • Advertise With Us
  • Explore Topics
    • See All Articles
    • Compliance
    • Ethics
    • Risk
    • FCPA
    • Governance
    • Fraud
    • Internal Audit
    • HR Compliance
    • Cybersecurity
    • Data Privacy
    • Financial Services
    • Well-Being at Work
    • Leadership and Career
    • Opinion
  • Vendor News
  • Library
    • Download Whitepapers & Reports
    • Download eBooks
    • New: Living Your Best Compliance Life by Mary Shirley
    • New: Ethics and Compliance for Humans by Adam Balfour
    • 2021: Raise Your Game, Not Your Voice by Lentini-Walker & Tschida
    • CCI Press & Compliance Bookshelf
  • Podcasts
    • Great Women in Compliance
    • Unless: The Podcast (Hemma Lomax)
  • Research
  • Webinars
  • Events
  • Subscribe

© 2025 Corporate Compliance Insights