Analysis
14 July 2017

Enforcement / Court Decisions – July 2016 to July 2017

Bastille Day Newsletter 2017 - Enforcement / Court Decisions

 

Iran sanctions not a complete green light yet. In January 2016, the Council of the European Union lifted all nuclear-related economic and financial EU sanctions against Iran. However, some restrictions remain in force: asset freezes and visa bans for individuals and entities responsible for grave human rights violations and ban on exports to Iran of equipment which might be used for internal repression and of equipment for monitoring telecommunications. These measures are regularly updated and will remain in place. The last update, from 11 April 2017, extended them until April 13, 2018. On June 7, 2017, the U.S. Senate advanced a package of new sanctions on Iran.

Panama Paper triggers enforcement action. Since April 2016, French magistrates are investigating 26 institutions and individuals believed to have laundered money through Panama. These investigations arise out of the multijurisdictional scandal of the Panama Papers.

Data Protection creates new grounds for increasing corporate liability. In July 2016, the CNIL served a formal notice to Microsoft Corporation following on site and online inspections for excessive collection of personal data, tracking of user’s web-browsing without their consent and a lack of security and confidentiality of users’ data. Microsoft implemented several measures in order to comply with the requirements stated in the formal notice which led the Chair of the CNIL to consider the company had complied with the French Data Protection Act and the formal notice could therefore be closed.

New trial after DPA violates human rights. On September 21, 2016, Paris Court of Appeal held that the “muzzle clause”, a standardized clause included in most DPAs which prevents the defendant from making statements contradicting the statement of facts, deprived the accused of the right to a fair trial under article 6 of the ECHR as it prevented him from denying his guilt before the Court. The Court thus considered that the defendant could stand a fair trial and that public action was therefore extinct in France.

Lack of state of the art safeguards can lead to liability in case of fraud. On September 23, 2016, the Versailles Appeal Court slashed the damages due by the former trader Jérome Kerviel to Société Générale. His fine was cut to €1 million from €4,9 billion. The Court held that the patchy nature of Société Générale’s control systems, which created a high degree of vulnerability, was to blame and that the trader was only partly responsible for the losses.

Lava Jato reaches France in several matters. In October 2016, French financial prosecutors (PNF and OCLCIFF) launched an investigation into a €6,7 billion 2008 contract between French naval supplier DCNS and Brazil which included the sale of five submarines, concerning potential ‟corruption of foreign officialsˮ. This probe only disclosed last May that it is linked to the wider Brazilian ‟Lava Jatoˮ investigations initiated in 2014 to investigate alleged bribery involving hundreds of politicians and public figures.

Tax Fraud and Money Laundering: no hiding for French public officials. On December 8, 2016, the former French budget minister was sentenced to three years in prison for money-laundering and tax fraud for holding an undeclared Swiss bank account.

Diesel emissions scandal is not for German car manufacturers only. On February 9, 2017, after investigating on polluting emissions from diesel vehicles, the French Consumer Authority (DGCCRF) announced that it provided the results of its investigations on Peugeot Citroën automobiles SA and FIAT Chrysler to the Prosecutor’s office. The DGCCRF also provided information about Volkswagen (February 2016) and Renault (November 2016). Paris’ prosecutor opened criminal investigations in these two cases for deception. The DGCCRF is pursuing its investigations, including those concerning other manufacturers.

Soon to be first French DPA? On February 2017, HSBC, who is being investigated by prosecutors in at least five countries and had received requests from various regulatory and enforcement authorities, denied knowledge of any misconduct. However, the French financial Prosecutor requested a trial for HSBC Holdings and its Swiss private banking unit on suspicions it helped customers dodge taxes in 2006-2007. HSBC is currently negotiating the possibility to resort to a convention judiciaire d’intérêt public.

Extradition requests will receive thorough review. On February 22, 2017, the Paris Court of Appeal rejected a UK Serious Fraud Office extradition request for Stephane Esper, a former Société Générale trader, who the authority wants to stand trial for manipulating the benchmark rate for the euro on the grounds that Esper’s alleged conduct, which took place in France, wasn’t illegal a decade ago when it occurred.

Arbitration procedure leads to criminal liability. On March 8, 2017 in the case of the 400 million-euro payout by the French state to businessman Bernard Tapie in 2008, Stéphane Richard, Orange Chief executive and former chief of staff to Christine Lagarde, then French finance minister, was summoned to testify in IMF chief Christine Lagarde’s trial before the Cour de Justice de la République in December 2016. As he was also under investigation in this same case, he refused at the last minute to appear as witness.

Settling the matter is not the only option. On March 20, 2017, it was announced that UBS AG and UBS France will face trial for tax fraud after UBS refused the Financial prosecutor’s proposal for settlement (reportedly a $1.1bn fine).

French PNF will not sit and watch other prosecutors do their job. On March 16, 2017, French authorities joined the U.K. in a corruption investigation of Airbus Group SE targeting fraudulent practices related to sales of planes and aircraft financing. The probe by the Parquet National Financier followed steps by the U.K.’s Serious Fraud Office to look into possible bribery and corruption in Airbus’s civil aviation business related to third-party consultants, the Toulouse, France-based plane maker. Terrorist financing. In April 2017, Paris prosecutors opened a preliminary inquiry into alleged dealings between Lafarge Holcim and sanctioned groups in Syria following a complaint by the French Finance Ministry. Lafarge CEO (Eric Olsen) resigned after the world’s largest cement maker admitted having paid armed groups to keep a factory operating in war-ravaged Syria.

False Testimony. On May 14, 2017 Michel Aubier, former chief of the pneumology department of the Bichat hospital in Paris, was conditional sentenced to 6 months and 50,000 euros fine for “false testimony under oathˮ for having declared before the senatorial commission of inquiry on the cost Economic and financial consequences of air pollution that he had “no connection with the economic playersˮ of the sector while he was employed since 1997 by the Total group.

Business calls should be discussed with counsel: Prosecutors otherwise. In April 2017, Paris prosecutors opened a preliminary inquiry into alleged dealings between Lafarge Holcim and sanctioned groups in Syria following a complaint by the French Finance Ministry. Lafarge CEO (Eric Olsen) resigned after the world’s largest cement maker admitted having paid armed groups to keep a factory operating in war-ravaged Syria.

Make sure your expert actually is not conflicted: first major expert found guilty. On May 14, 2017 Michel Aubier, former chief of the pneumology department of the Bichat hospital in Paris, was conditional sentenced to 6 months and 50,000 euros fine for “false testimony under oathˮ for having declared before the senatorial commission of inquiry on the cost Economic and financial consequences of air pollution that he had “no connection with the economic playersˮ of the sector while he was employed since 1997 by the Total group.

The CNIL reacts to targeted advertising. On May 16, 2017, following inspections on site and online, as well as a documentary audit, Facebook was sanctioned by the CNIL for several violations of the French Data Protection Act. The investigations revealed that Facebook had proceeded to the compiled action of personal data in order to display targeted advertising and that it collected data on its users’ browsing data on third party websites without their knowledge. The Restricted Committee pronounced a public sanction of €150,000 against Facebook Inc. and Facebook Ireland.

Forex manipulation. On May 24, 2017, the New York Department of Financial Services fined French bank BNP Paribas US$350 million for manipulating foreign exchange rates and improperly sharing customer information between 2007 and 2011.

Compliance – AML legislation. On May 30, 2017, the Autorité de Contrôle Prudentiel and Resolution has issued a reprimand against BNP Paribas, with a monetary penalty of € 10 million, due to breaches in its “organization of suspicious transaction reports to Tracfinˮ.

Russia sanctions not gone just yet. On June 19th, 2017, the Council of the European Union voted to extend sanctions so to prohibit EU businesses from investing in Crimea, and introduced measures targeting tourism and imports of products from Crimea for another year.

Bien mal acquis. On July 7, 2017, the first trial on the “Bien mal acquis” case ended. Teodoring Obiang, eldest son of Equatorial Guinea Teodoro Obiang, faces a three-year prison sentence. The Tribunal Correctionnel will render its decision by the end of October 2017.

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