The FCPA Professor reports that a group of non-governmental organizations (NGOs) has requested that Blackfire Exploration, a Canadian mining and exploration company, be investigated for possible violations of Canada’s Corruption of Foreign Officials Act (CFPOA) for alleged improper payments to the Mayor of Chicomuselo, Chiapas. 

The NGOs claim that Blackfire provided the mayor with benefits, including airline tickets for himself, his family and his associates, but acknowledge that Blackfire stopped honoring the “ridiculous propositions” after the the mayor asked it to arrange a sexual affair with a Playboy model.

Mike Koehler, author of the FCPA Professor blog, reported today that the U.S. Department of Justice (DOJ) has announced the arrest of John Joseph O’Shea for his alleged role in the bribery of Mexican government officials to secure contracts with Mexico’s Comision Federal de Electricidad (CFE) in violation of the U.S. Foreign Corrupt Practices Act (FCPA).

O’Shea was the General Manager of a Sugar Land, Texas-based subsidiary of Swiss electrical engineering company ABB Ltd. (NYSE: ABB).  According to the indictment, the Texas subsidiary, which provides products and services to electrical utilities, allegedly paid money to a Mexican company that served as a sales representative for ABB on two CFE contracts worth approximately $81 million.  The Mexican company was run by Fernando Maya Basurto, a Mexican citizen who pleaded guilty last week to conspiracy to violate the FCPA and U.S. money laundering laws.

O’Shea and Basurto allegedly arranged for CFE officials to receive payments totaling as much as 10% of the revenue that ABB received from CFE.  The indictment seeks O’Shea’s forfeiture of approximately $3 million.

According to the FCPA Professor, “the improper payments were concealed through a series of financial transactions, first to U.S. bank accounts in the name of Basurto and certain of his family members, then through false invoices received from Basurto in the names of the intermediary companies, and then to the ‘foreign officials’”. 

The FCPA Professor notes that a Mexican company and a Panamian company may, in addition to ABB and its U.S. subsidiaries, be subject to DOJ enforcement action as “agents of domestic concerns” under U.S. Code §§ 78dd-2(a) and 78dd-2(h)(1).

In the U.S., there are various federal and state laws that, subject to certain limited exceptions, prohibit the granting of value (for example, money, gifts, etc.) in exchange for the opportunity to provide goods or services to healthcare recipients or healthcare providers.  These laws include the federal Anti-Kickback Statute, the self-referral prohibition (i.e., Stark Law), the Civil Monetary Penalty (CMP) laws, and any state law equivalents (in Texas, we have the Texas Patient Solicitation Act).  To avoid violations of this complex web of laws, Mexican and other foreign businesses seeking to sell medical-related goods and services in the U.S. should review their marketing plans and proposed contractual arrangements with a U.S.-licensed attorney with healthcare expertise before embarking on any such plans or arrangements.

Mexico also has certain laws prohibiting the granting of value in exchange for the opportunity to provide goods and services to healthcare recipients or healthcare providers.  The Mexican laws are less complex than their U.S. counterparts and are limited to the government sector. 

In general, these Mexican laws prohibit the granting of any payment, gift, or other consideration by bidders or prospective contracting parties on projects involving the supply of equipment or services to public-health related government (or other governmental) entities in Mexico, whether at the federal or state level.  Such entities include, without limitation, Mexico’s Social Security Institute (IMSS) and Institute for Social Security and Services for State Workers (ISSSTE).  There are also Mexican laws that prohibit government officials from receiving such payments, gifts, or other consideration.  Note that even if a payment is permitted under Mexican law, the payment may be prohibited under the U.S. Foreign Corrupt Practices Act (for more on the FCPA, check out The FCPA Blog).

For private bids and contracts in Mexico, including private bid contests organized by private hospitals or doctor groups that are not affiliated with government entities, there are generallyno prohibitions or restrictions on payments, gifts, or other consideration given to such hospitals or doctors.  However, the officers of the hospitals or the doctors may be subject to ethical rules that prohibit or restrict the receipt or acceptance of these benefits.