In the latest case involving French prosecution of international corruption, on September 16 the Paris Criminal Court convicted and sentenced the former longtime head of the International Association of Athletics Federations (IAAF) Lameke Diack and his son Papa Massata Diack to prison, for their respective roles in soliciting and accepting payments from Russian athletes who were suspected of doping to cover up the allegations and allow them to continue competing, including in the 2012 London Olympic Games.

In sentencing Lameke Diack, who reportedly was found guilty of multiple corruption charges and of breach of trust but acquitted of money laundering, Judge Rose-Marie Hunault accepted the prosecution’s sentencing recommendation of four years’ imprisonment and a maximum fine of €500,000 (US$593,423), but suspended two of those years, evidently because of Diack’s advanced age (87)).  Indeed, Judge Hunault indicated that he was unlikely to go to prison, saying “Given your age you can expect conditional release.”

The court also sentenced Papa Massata Diack, who had worked as a marketing consultant for the IAAF, to four years’ imprisonment and a €1 million (US$1.17 million) fine.  Papa Massata was tried in absentia because Senegal had refused to extradite him to France.

In addition to the Diacks, the court convicted and sentenced four other defendants connected with the corruption scheme.   Gabriel Dolle, a doctor who supervised drug testing at the IAAF, received a suspended sentence of two years’ imprisonment and a €140,000 (US$163,000) fine for taking money to slow doping sanctions.  Habib Cisse, Lameke Diack’s legal advisor, received a sentence of three years’ imprisonment (two of which were suspended).

Two other defendants, former IAAF treasurer Valentin Balakhnichev and Russian coach of long-distance walkers and runners Alexei Melnikov, were tried and convicted in absentia.  The court sentenced Balakhnichev to three years’ imprisonment and confiscation of nearly €1.9 million euros ($2.2 million) from his account in Monaco, and sentenced Melnikov to two years’ imprisonment.

Several aspects of the trial deserve mention:

• The trial had been scheduled to start in January 2020, but was postponed until June 2020 because Papa Massata Diack, though remaining in absentia, submitted documents containing testimony by him to the Paris court. He later asserted that he “refused to come to the French courts because they lacked impartiality.”
• At trial, French prosecutors argued that Lameke Diack had solicited a total of €3.45 million ($3.9 million) from the athletes, and that he had accepted a $1.5 million bribe from Russia to finance Macky Sall’s 2012 election campaign for the Presidency of Senegal in exchange for slowing doping cases involving Russian athletes.
• Testifying in his own defense, Lameke Diack admitted at trial that he should have been more vigilant during his tenure at the IAAF, and accused his son of “conduct[ing] himself like a thug” while he was at the IAAF.
• Nonetheless, at sentencing, Judge Hunault told Lameke Diack that there was “an understanding between you and your son” in diverting funds, and specifically described Lameke Diack’s role in the corruption scheme. In particular, she stated that “[t]he money was paid in exchange for a program of ‘full protection,’” and that the scheme allowed athletes who should have been suspended “purely and simply to escape sanctions.”  She also found that his actions had “undermined the values of athletics and the fight against doping.”
• With regard to Papa Massata Diack, Judge Hunault found that $15 million was funneled to the his companies, including commissions and money skimmed from contracts and the sale of television rights and other transactions while his father was head of the IAAF.
• In addition to the sentences and criminal fines, Judge Hunault awarded €16 million ($18.9 million) in damages to the IAAF. Approximately one-third is to be paid by the Diacks and the remain two-thirds by them and the four others found guilty.

This case is noteworthy for two reasons.  First, as with the 2017 trial and conviction of Equatorial Guinea Vice President Teodorin Obiang, it indicates France’s commitment to and vigor in prosecuting foreign corruption.

Second, it should not necessarily be viewed as the only case of IAAF-related corruption that France is willing to pursue.  French prosecutors are apparently investigating allegations that the bidding committee for the 2020 (now 2021) Tokyo Olympic Games bribed the Diacks in 2013 to secure votes.

While the bidding committee has denied those allegations, given the scale and duration of the corruption already proved in the Diacks’ prosecution and Lameke Diack’s 16-year tenure as IAAF head, it should surprise no one if new cases emerge from the investigation that cast further shadows over international track and field events during the Diacks’ tenure at the IAAF.

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Jonathan J. Rusch is Principal of DTG Risk & Compliance LLC and Adjunct Professor at Georgetown University Law Center and American University Washington College of Law.

On September 9, 2020, the law firm Cohen Milstein filed a lawsuit in the District Court for the Eastern District of Virginia against Anne Sacoolas, a United States citizen and wife of U.S. diplomat Jonathan Sacoolas, for her part in the wrongful death of Harry Dunn. The suit also names Jonathan Sacoolas as a defendant for vicarious liability for the conduct, actions, errors, or omissions committed by his wife.

The suit was filed on behalf of Harry Dunn’s family, including his parents Charlotte Charles and Tim Dunn, and his twin brother Niall. The lawsuit claims wrongful death of Dunn and seeks financial damages. According to the plaintiffs, Sacoolas’ unsafe driving led to a head on vehicular collision with Harry Dunn in 2019. The collision caused catastrophic injuries, including several fractures. The suit states that Ms. Sacoolas’ subsequent failure to call for an ambulance led to additional pain and suffering on the part of Harry Dunn, ultimately leading to his death.

Case Background

On August 27, 2019, Anne Sacoolas was driving her SUV on the wrong side of the road near Croughton, Northamptonshire, England when she hit 19-year-old Harry Dunn on his motorcycle. The SUV that Sacoolas was driving was owned by her husband Jonathan Sacoolas, who was working for the U.S. government at a Royal Air Force base in Croughton at the time.

Dunn had several open fractures on his extremities and internal bleeding. Although Sacoolas had her cellphone on her, she did not call an ambulance after the accident. Instead, a passerby approached the scene of the accident and called emergency services. When paramedics arrived, Dunn was conscious, breathing, and able to speak with them. He was able to tell the them that Sacoolas had been driving on the wrong side of the road and that she hit him with her SUV. Dunn died shortly after arriving at the hospital as a result of his injuries.

According to the complaint Cohen Milstein filed on behalf of the Dunn family, Sacoolas confessed that the accident was her fault and promised to cooperate with local authorities. However, she returned to the Unites States with her husband around September 15, 2019 without informing local authorities of her departure. She asserted diplomatic immunity as the reason for her return.

The British Crown Prosecution Service charged Sacoolas with causing Dunn’s death by dangerous driving, but she has refused to return to the United Kingdom for a trial. When the United Kingdom requested that she be extradited to Britain, the United States refused to comply.

Tim Dunn and Charlotte Charles accepted an invitation by President Trump to meet him at the White House on October 15, 2019. The parents refused to meet Ms. Sacoolas, who was waiting in another room, instead repeating their wish to meet with her in the UK. Charles said she “initially” thought the meeting was being held to sweep her son’s death under the rug.

The United States and the United Kingdom

The governments of the United States and the United Kingdom have been in contact with one another to discuss the handling of the case. As a result of the Dunn family’s lobbying, the loophole that allowed family members of Americans serving at the RAF base to claim diplomatic immunity was closed in July 2020. Closing the loophole ensures that if a similar accident were to occur again, a spouse of a diplomat at the base would not be immune from British prosecution.

“Since the tragic accident occurred, the United States has been closely engaged with the UK government, and we have been transparent about our positions on legal and diplomatic matters concerning this accident,” a State Department spokesperson said Wednesday. “The United States Government again expresses its profound condolences and sympathy to the Dunn family for the loss of their son.”

Radd Seiger, an adviser to the Dunn family, said the British foreign secretary will file a friend-of-the-court brief supporting the lawsuit brought by Cohen Milstein on behalf of the Dunn family, a move Seiger called “extraordinary.”

Julie Ross, a law professor at Georgetown University, said the plaintiffs in such cases could argue that a Virginia court has jurisdiction because the defendant resides there. However, Ross noted that several preliminary issues would need to be decided before the case went forward. One possible complication is that Sacoolas’s attorney could argue for dismissal due to forum non conveniens. Forum non conveniens allows a court to dismiss a case when another court, or forum, is better suited to hear the case. Sacoolas’s lawyer could argue for the case filed in Virginia to be thrown out, because the evidence and witnesses are in Britain.

Ross stated, “A lot of it depends on how much evidence is really needed to prove a wrongful-death case and how difficult or easy it is to take that evidence in the U.S. rather than pursue the case in the U.K..”

The filing of a civil suit in Virginia and charges by the Crown Prosecutor show that, even though the U.S. has asserted diplomatic immunity, the case will not go away.

On September 7, 2020, Saudi Arabia’s public prosecutor announced that eight people related to the killing of journalist Jamal Khashoggi had been issued prison sentences between seven and 20 years. The decision is “final,” according to a statement carried by the Saudi state-run news agency. The trial was closed to the public and the media.

The eight defendants, who were not named in the statement released by the Saudi state-run agency, were believed to be members of a 15-man hit squad that killed and dismembered Khashoggi in October 2018. The group reportedly traveled to Turkey from Saudi Arabia in 2018 before committing the murder inside the Saudi Consulate in Istanbul.

Khashoggi was killed when he went to the consulate in Istanbul to obtain papers that would allow him to marry his Turkish fiancée. He was a vocal critic of Saudi Arabian Crown Prince Mohammad bin Salman as well as a journalist for The Washington Post. Mohammad bin Salman is widely suspected of ordering the killing.

 

The Case

The new decision, delivered after Khashoggi’s sons announced they had forgiven their father’s killers, reverses the previous ruling that sentenced five of the eight defendants to death. The Saudi justice system allows families of victims in some capital cases to grant clemency to convicted killers. Both the December ruling and the latest ruling did not find any senior officials responsible for the murder of Khashoggi.

Two senior Saudi officials — Saud al-Qahtani, a powerful royal media adviser, and Ahmed al-Assiri, a former deputy head of intelligence — were exonerated by the Saudi court late last year, even after Saudi prosecutors said the two men played central roles in the plot that led to Khashoggi’s death.

Notably, the latest ruling does not answer key questions about Khashoggi’s murder, such as who ordered him to be killed and the whereabouts of his remains.

 

The United Nations

Human rights groups have criticized the court for its lack of transparency. Agnès Callamard, a U.N. human rights expert who conducted an investigation into the killing, wrote on Twitter after the sentences were announced, “These verdicts carry no legal or moral legitimacy. They came at the end of a process which was neither fair, nor just, or transparent.”.

U.N. spokesman Rupert Colville, noting that the United Nations opposes the death penalty, told a Geneva briefing: “This is a case where there has not been proper transparency in the justice process, those responsible should be prosecuted and given sentences commensurate with the crime.” Although the latest decision reverses the death penalty sentences that were delivered for five of the eight defendants, the UN and other human rights groups are still skeptical about how the courts reached their latest conclusion.

In the forty-first session of the Human Rights Council of the United Nations in 2019, the council condemned the killing of Khashoggi as a serious international crime and recommended that the UN Human Rights Council (UNHRC), the Security Council, or the UN Secretary General open an international investigation into Khashoggi’s death. The council also urged Turkey and Saudi Arabia to open an investigation into Khashoggi’s death and cooperate with each other and with the UN to ensure a fair and transparent trial.

 

Turkey

On October 8, 2018, one day after the Saudi government confirmed that Khashoggi died inside the consulate, Turkey announced that it would continue its own investigation into his death. The investigation resulted in a trial, in which 20 Saudi citizens are accused of involvement in the murder of Khashoggi. However, none of the accused were in attendance on July 3, 2020 when proceedings commenced, because Saudi Arabia declined to extradite them. The next hearing will be on November 24, 2020.

Human rights organizations praised Turkey’s opening of a trial as a step towards advancing justice in Khashoggi’s death. The trial is also understood to be the result of Turkish President Recep Tayyip Erdogan’s commitment to pursuing those responsible and even implicating the Saudi Crown Prince if necessary.

Jun Wei Yeo, also known as Dickson Yeo, pled guilty to one count of acting within the United States as an illegal agent of a foreign power without notifying the Attorney General, in violation of 18 U.S.C. § 951. The announcement of Yeo’s plea was made on July 24, 2020 by John C. Demers, Assistant Attorney General; Michael R. Sherwin, Acting U.S. Attorney for the District of Columbia; Timothy R. Slater, Assistant Director in Charge of the Federal Bureau of Investigation’s (FBI) Washington Field Office; and Alan E. Kohler, Jr., Assistant Director of the FBI’s Counterintelligence Division.

FBI Washington Field Office Assistant Director in Charge Timothy R. Slater said, “The tactics Mr. Yeo used to target cleared individuals on professional networking social media sites are just one facet of the full court press China employs on a daily basis to obtain non-public U.S. government information. The FBI urges citizens, especially those holding security clearances, to be cautious when being approached by individuals on social media sites with implausible career opportunities. We are committed to holding those accountable who attempt to work for Chinese intelligence and other adversaries to the detriment of our national security.”

Assistant Attorney General for the Justice Department’s National Security Division John C. Demers in a statement said, “The Chinese Government uses an array of duplicity to obtain sensitive information from unsuspecting Americans. Yeo was central to one such scheme, using career networking sites and a fake consulting firm to lure Americans who might be of interest to the Chinese government. This is yet another example of the Chinese government’s exploitation of the openness of American society.” .

Yeo submitted his plea via videoconference in the U.S. District Court for the District of Columbia before the Honorable Tanya S. Chutkan. The plea announcement comes five weeks after an indictment of Yeo was unsealed, accusing him of acting illegally as an agent of an unspecified foreign government. According to 18 U.S.C. § 951, he is facing up to ten years in prison. He will be sentenced on October 9, 2020.

Yeo admitted to establishing a fake consultancy that used the same name on LinkedIn as a prominent U.S. consulting firm that specializes in government and public relations; a professional networking application, publishing job roles under that company name; and sending resumes of interest that he received from U.S. military and government officials with high security clearances to Chinese intelligence operatives. He paid these officials to write reports and solicited them for non-public information, never informing them that the information they provided was intended for the Chinese government.

Yeo began working with Chinese intelligence officers as early as 2015. He initially targeted other Asian countries but later focused on the United States.

Yeo’s conviction raises concerns that citizens of Singapore, which has an ethnic Chinese majority, could be regarded with increased suspicion by the U.S. government. Although analysts believe the spying case is unlikely to have a major impact on Singapore’s ties with the U.S. or China, most agree that the island’s efforts to maintain a diplomatic balance between the two countries will add to the rapid deterioration of U.S.-China relations in the lead up to the U.S. Presidential election in November.

On July 30, 2020, a Swiss special prosecutor initiated criminal proceedings against Gianni Infantino for alleged collusion with Michael Lauber, the attorney general of Switzerland who was overseeing the investigation into FIFA.

Infantino is the successor to Sep Blatter, who resigned in 2016 after revelations of corruption at FIFA caused a global media storm for soccer’s global governing body.

The special prosecutor who announced the investigation, Stefan Keller, described the meetings between Infantino and Lauber as “abuse of office,” “breach of official secrecy,” and “assisting offenders.”  Keller is requesting the Swiss government lift Lauber’s immunity from criminal proceedings.

Rinaldo Arnold, who is a regional prosecutor in Switzerland and a childhood friend of Infantino, set up the meetings between the two men.  Arnold is also under investigation, though he has not been charged.  Lauber subsequently lied about those meetings. Emails concerning the meetings appeared on the platform “Football Leaks” over a year ago, but both Infantino and Lauber claimed they were unable to remember what had taken place at the meetings.

After the emails came to light, a supervisory body was convened to look into Lauber’s relationship with Infantino.  The panel announced, “Lauber intentionally made a false statement… and knowingly concealed the third meeting with Infantino.”  The supervisory body cut Lauber’s salary by 8 percent in March 2020 as  punishment but restored it shortly after.

Lauber later resigned from his position, after a federal court upheld the accusations against him.

Infantino responded to the accusations against himself, saying, “To meet with the Attorney General of Switzerland is perfectly legitimate and it’s perfectly legal. It’s no violation of anything.  On the contrary, it is also part of the fiduciary duties of the President of FIFA.”

FIFA has been embroiled in accusations of money laundering and corruption since 2015.  Infantino, who ran unopposed in an internal election in 2016, has claimed that the organization no longer suffers from a culture of corruption.  But high level officials in FIFA remain subject to investigations for various accusations of financial wrongdoing and corruption.  The head of African soccer, Ahmad Ahmad, has been under investigation by French financial prosecutors for over a year.

Nevertheless, the proceedings against Infantino suggest that authorities are responding more swiftly to problems at the organization than they did in 2014 when FIFA first complained about money laundering in the 2018 and 2022 World Cup bidding campaigns. The organization will be under heightened scrutiny for the foreseeable future.

On July 29, 2020, the Senate Permanent Investigative Subcommittee issued a report detailing how a prominent family of Russian oligarchs, sanctioned by the U.S. since Russia’s annexation of the Crimea, has used the opacity of the U.S. art industry to evade sanctions.

 

The Rotenbergs

The report traced over $18 million in purchases from U.S. art sellers, including auction houses and private dealers, to Arkady and Boris Rotenberg, who derive their wealth from energy and construction. President Barack Obama placed sanctions the Rotenbergs in 2014, following Russia’s annexation of the Crimea, due to the family’s close relationship to President Putin.  They often received large government contracts, including some for the Sochi Olympics.

However, three different shell companies, Highland Business Group Limited, Highland Ventures Group Limited and Advantage Alliance, obscured the identity of the Russian buyers behind the high value purchases.

Gregory Baltser, a U.S. citizen and an art dealer based in Moscow, served as the buyer and middleman for the Rotenberg.  Baltser used a shell company named Steamort Limited to transfer art purchases made in the U.S. to the Rotenberg’s shell companies.  His attorneys denied wrongdoing on his part, saying, “Baltser Limited’s compliance program has relied, and will continue to rely, on the United States Department of Treasury’s own Office of Foreign Assets Control’s (OFAC) Specially Designated Nationals and Blocked Persons List (SDN). According to the OFAC list, Baltser has acted appropriately and responsibly.”

 

Optimal Conditions for Money Laundering

As the largest unregulated legal market in the U.S., the art industry is extremely vulnerable to money laundering. Even though the Treasury Department of Foreign Asset Control (OFAC) forbids U.S. people and entities from transacting with sanctioned persons, the Bank Secrecy Act (BSA), which establishes certain AML and anti-terrorism financing controls for U.S. entities, does not apply to the art industry.

Senator Tom Carpenter, who is Vice Chair of the Committee on Investigations, said, “It is alarming and completely unacceptable that common sense regulations designed to prevent money laundering and the financing of terrorism do not apply if someone is purchasing a multi-million dollar piece of art. As a result, criminals, terrorists and wealthy Russian oligarchs like the Rotenbergs are able to use an unregulated art industry, as well as real estate and other investments, to hide assets, launder funds, and evade sanctions.”

Rotenberg purchased some pieces from auction houses including Christies and Sotheby’s, both of which have voluntary AML policies in place.  However, the auction houses treat the buyer, whether it is an agent, or dealer as the sole subject of interest when conducting due diligence research. Therefore, neither house detected Baltser’s connection to the Rotenbergs.

Sotheby’s and Christies representatives explained that Baltser paid out of his own bank account, leaving them no reason or right to question further the source of the money.

 

The Recommendations

                The report made a number of recommendations, the first being that Congress should amend the Bank Secrecy Act to add businesses handling transactions involving high-value art.  This recommendation is based on the European Union’s policy requiring businesses handling art transactions of €10,000 or more to comply with AML law.

More broadly, it stated that Treasury Department should be required to collect beneficial ownership information for companies formed or registered to do business in the United States. This possibly would have included some of the shell companies that ultimately linked U.S. dealers to the Rotenbergs.

It also recommended that OFAC “issue comprehensive guidance on the steps auction houses and art dealers should take to ensure they are not doing business with sanctioned individuals or entities.”  Such guidance would ideally prevent auction houses from confusing middlemen, such as Baltser, with their buyers.

The virtual event “Good Governance and Corruption in the Caribbean,” presented by Global Americans, the Embassy of the United States in Suriname, and the Youth Education and Leadership Foundation, will be taking place from July 30 to July 31, 2020.  Registration for the event is required at https://forms.gle/HnuiA1ep7xPeoDzPA.  Alternatively, listeners may RSVP with jgalindo@theglobalamericans.org.

The first part of the event “Good Governance and Corruption in Suriname and Guyana” takes place on July 30, 2020 from 10:AM to 11:15AM.  The second part “Corruption, Oil, and the role of External Agencies in the Caribbean” is scheduled for July 31, 2020 from 10:00 AM to 11:15 AM EDT.

On July 13, 2020, ICE’s Homeland Security Investigations (HSI) Detroit and the U.S. Attorney’s Office for the Eastern District of Michigan announced the seizure of an internet domain located at https://lafoauto.com/ pursuant to an international arms trafficking investigation into gun silencers from China. HSI Detroit led the investigation with assistance from U.S. Customs and Border Protection (CBP), and the Bureau of Alcohol, Tobacco, Firearms and Explosives. Visitors to the site will now see a seizure notice bearing law enforcement shields.

HSI determined that more than 350 silencers were seized by law enforcement. The silencers were smuggled from China into the United States and disguised as automotive parts. The website advertised the silencers as automotive components, but the images on the website clearly resembled firearm components.

“This website, operated from China, blatantly disregarded our customs laws, smuggled illegal silencers into our country, and placed the American public at risk,” Vance Callender, the Homeland Security special agent in charge for Michigan and Ohio, stated. “By shutting this website down, we keep illegal silencers off the streets and protect our communities from harm.”

HSI’s practice of seizing websites involved in illicit activity is relatively new and helps suppress illegal commerce from entering the United States. Using a Court order, HSI redirected the suspect website to one controlled by HSI, which posts a banner with a public service announcement warning against consumer purchase of illegal goods. The seizure of https://lafoauto.com/ is the first instance in which a website wholly dedicated to illegal arms deals has been seized by the agency.

Silencers, also known as suppressors, reduce the sound and muzzle flash from gunshots. Purchasing a silencer without a proper license is illegal in many states. Silencers were regulated under the 1934 National Firearms Act (NFA). Before purchasing a silencer, the NFA requires buyers to submit identification materials and answers background questions, as well as pay a $200 tax to the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF). An amendment to the NFA in 1986 regulates parts intended for use in the assembly or fabrication of a silencer. The activities of https://lafoauto.com/ fall under this amendment. It will be interesting to see if the HCI’s success in this case leads to future investigations and seizures of websites illegally trafficking arms or other goods in the U.S.

POSTED IN FOREIGN ACCOUNT TAX COMPLIANCE ACT (FATCA)

Originally published on July 15, 2020.