Aldo Verbruggen is a partner at Jones Day and is the captain of the Amsterdam investigations and white-collar defence (IWC) team. Following an impressive career with the Dutch Public Prosecution Service, Aldo is highly regarded as one of the most prominent lawyers in the Netherlands in the field of corporate investigations and corporate criminal law. He specialises in financial and economic criminal law, and has a wealth of experience in handling international, complex, high-profile cases. The majority of his clients are domestic and international companies and their management. Aldo is considered an opinion leader in the field of anti-corruption and bribery.
GTDT: What are the key developments related to anti-corruption regulation and investigations in the past year in your jurisdiction, and what lessons can compliance professionals learn from them?
Aldo Verbruggen: In the Netherlands, the fight against corruption is in the public eye more than ever before. Although for a long time the enforcement of the anti-bribery provisions was not, or else low, on the list of priorities of the Dutch Public Prosecution Service (PPS) it looks like catch-up efforts are being made.
The following contains a brief outline of the developments in Dutch anti-corruption law, enforcement and company-led investigations.
Legislation extending existing measures to combat financial and economic crime entered into force on 1 January 2015. The legislation aims at preventing financial and economic crime where possible, and making investigations and prosecution more efficient. The anti-bribery provisions were tightened.
Before 1 January 2015, in cases of active and passive bribery of public officials, a distinction was made between committing acts breaching official duty and acts not breaching official duty. The latter was punished by a lower prison sentence of two instead of four years. The amendment to the law removed this distinction. The government felt that case law had removed the need for the distinction as courts easily assumed that the official duty had been breached.
The criminal provision on private bribery was tightened in the new legislation. Until 1 January 2015, the threshold for punishment of bribery was the concealment of benefits from the employer contrary to good faith. Now, the key issue is the employee’s breach of his or her duty. This means it is important to define the exact obligations of employees, which may differ between sectors. Official legislative documents mention codes of conduct embodied in professional regulations as one example.
The maximum sentence for passive and active bribery of public officials was raised to six years’ imprisonment. The government hopes that this will send a signal to the criminal justice system, as analysis of case law reportedly showed that courts usually do not impose non-suspended prison sentences in cases of bribery of public officials. The maximum sentence for private bribery was also raised – from two to four years’ imprisonment.
Lastly, the new legislation introduced the possibility to impose fines on corporate entities of up to 10 per cent of their turnover in the financial year preceding the judgment or penalty order issued by the public prosecutor. For now, the question remains to what extent the increase of this maximum sentence for corporate entities in practice will actually result in higher fines. Although courts may not be inclined to apply this provision, the PPS will try to tie in with the settlement negotiations, as it did in a recent settlement with ING, a major Dutch bank.
Investigation enforcement authorities
Fighting corruption has become one of the top priorities of the PPS and the Dutch financial regulator De Nederlandsche Bank (DNB) in particular. More specifically, the focus of the PPS appears to be fighting the bribery of foreign public officials by Dutch companies and commercial bribery involving individuals.
The PPS’s enforcement efforts have resulted in convictions and high settlements in bribery cases. For example, the various rulings in the Klimop real estate fraud – the criminal case against a former member of the executive of the province of Noord-Holland and the case against several employees of SNS REAAL, a major property finance bank – in which the main suspects were convicted for bribery, respectively. Other bribery cases involved corrupt staff of educational institutions and housing associations.
In addition, the PPS has made ‘high settlements’ in foreign bribery cases.
At the end of 2012, the PPS made a sizeable settlement with the Dutch construction company Ballast Nedam regarding payments to foreign agents from 1996 to 2003. The company could settle by paying €5 million and relinquishing a claim against the Tax and Customs Administration of €12.5 million. The PPS considered it relevant that Ballast Nedam had tightened its compliance policy to better ensure the organisation’s integrity.
This was also one of the reasons to offer the Dutch-based oil-services provider SBM Offshore NV a settlement for a whopping US$240 million in late 2014 (US$40 million in fines and US$200 million in confiscated unlawfully obtained gains). The settlement related to unlawful payments to trade agents and foreign public officials in Equatorial Guinea, Angola and Brazil as established by the PPS and the Dutch Fiscal Intelligence and Investigation Service. In the investigation and the settlement the PPS worked together with the US authorities.
In February 2016, the PPS entered into a settlement with VimpelCom (now VEON), a telecommunications company based in Amsterdam. With US$397.5 million, this was the largest settlement ever made in the Netherlands. The settlement amount is made up of US$167.5 million in confiscated unlawfully obtained gains. The PPS accused VimpelCom of paying bribes to public officials in Uzbekistan prior to and after entering the Uzbek telecommunications market in 2006. The PPS held that this enabled VimpelCom to gain a dominant position in the Uzbek telecommunications market and thus make a great deal of profit. In PPS’s view those payments constituted bribery of public officials and forgery. It has been announced that the criminal investigation will be continued into several private individuals involved in criminal offences. In this case, too, the PPS worked together with the US authorities, the Department of Justice (DOJ) and the Securities and Exchange Commission. In its press release the PPS commented that ‘the parallel action by the public authorities against corruption is proof of the international fight against corruption and that corruption does not pay off’. In the settlement, the PPS said that VimpelCom had taken a large number of compliance measures, reducing the risk of recurrence. For the first time in its history, the PPS published an account of facts. In September 2017, another global settlement was reached, in relation to the VimpelCom case, this time with Telia Company. The settlement totalled US$965 million, of which US$548 million was paid in equal parts to the DOJ and PPS. Again, the remedial measures taken by the company, including creating a new and robust compliance programme, were taken into account by the authorities.
At the national level, from the end of 2016 until now, multimillion euro settlements have been reached with major Dutch importers in the automotive sector, as well as a major Dutch business operating in this sector. These cases involved the bribery of police and Ministry of Defence officials.
Today the fines imposed by the court, and the settlement amounts agreed between the PPS and several corporate entities in corruption cases, are considerably higher than a few years ago. There has been an upsurge in cross-border cooperation between the PPS and foreign enforcement agencies. Also, the PPS appears to use aggressive investigation methods, such as telephone tapping and bugs in offices, more readily and on a larger scale.
“For the first time in its history, the PPS published an account of facts.”
Dutch-based companies are increasingly having internal investigations conducted after the discovery of potential irregularities. In doing so, they tend to engage specialist third parties, such as forensic accountants and specialised counsel. If irregularities are found, companies usually take remedial action as quickly as possible, as they have learned from the aforementioned sizable settlements that the PPS considers rapid action a condition for out-of-court settlement. At any rate, this appears to affect the settlement amount in a manner that is favourable to the suspected company.
Compliance professionals would do well to prepare for the fight against corruption by the Dutch investigative and regulatory agencies to intensify. We expect the PPS’s focus to be on internationally operating companies with offices in the Netherlands, in particular if these are head offices. Obviously, the DNB will concentrate on financial institutions. Compliance professionals acting as advisers to employers of (potentially) bribed staff should be aware that recent cases in the Netherlands have demonstrated that passive bribery may have disastrous financial implications for the organisation. Further, as pointed out earlier, compliance professionals should instigate remedial action as soon as irregularities have been established, such as tightening the compliance policy, taking disciplinary action against the employee committing fraud or filing a report with the authorities.
In some cases, the PPS places great weight on the way in which a company has organised its compliance policy – on paper and, even more importantly, in practice. In the investigations into SBM and VimpelCom, the PPS, in determining the settlement amounts, explicitly considered that both companies – at their own initiative – had implemented ample measures improving their compliance, and had imposed several disciplinary sanctions. As such, it is worthwhile considering obtaining the new certification standard 37001 from the International Organization for Standardization, as it specifically addresses anti-bribery in corporations.
“The PPS and DNB have announced that they will turn the searchlight on the facilitators, such as attorneys, tax consultants, public law notaries and accountants.”
GTDT: What are the key areas of anti-corruption compliance risk on which companies operating in your jurisdiction should focus?
AV: It goes without saying that companies operating in the Netherlands should be aware of the general, presumably known, corruption risks associated with the sectors in which they operate, the countries in which they operate, the type of transactions they engage in and the third parties they hire.
In the Netherlands the trust, real estate and semi-public sectors and accountancy firms should be particularly aware as the enforcement agencies look at their activities with a magnifying glass. The PPS and DNB have announced that they will turn the searchlight on the facilitators, such as attorneys, tax consultants, public law notaries and – again – accountants. This trend is illustrated by a settlement of €775 million that was recently reached with ING for its role in the VimpelCom affair. The PPS based the criminal liability of the bank on its negligence to effectively install controls in relation to know-your-customer procedures and unusual transactions. As of September 2018, criminal proceedings are pending against the accountant for not (properly) notifying the authorities of unusual transactions.
GTDT: Do you expect the enforcement policies or priorities of anti-corruption authorities in your jurisdiction to change in the near future? If so, how do you think that might affect compliance efforts by companies or impact their business?
AV: We expect the trend in fighting corruption in the Netherlands to continue in the years to come. Enforcement will be increased, the capacity of the criminal justice system will be expanded and there will be a heightening of regulators’ interest.
Recent international evaluation reports show that there has been an upsurge in interest among Dutch enforcement agencies in foreign bribery by letterbox companies, in proactively discovering foreign bribery and raising the awareness of Dutch companies of foreign bribery. The responses of the Minister of Foreign Affairs, Minister of Interior and Kingdom Relations, and Minister of Justice and Security to these evaluation reports over the past few years show that this is an area that requires attention.
As to the proactive detection of foreign bribery, we expect the PPS to increasingly use the results of internal investigations. The information disclosed in such investigations is often invaluable to the PPS. Moreover, this ‘method’ requires less of the PPS’s capacity than if the PPS itself has to carry out a full investigation. Likewise, companies often have an interest in disclosing such information, in the hope that this form of cooperation will help reduce any fines imposed later. However, all facts and circumstances will be assessed case by case. Compliance professionals play a key part in advising on these strategic choices.
GTDT: Have you seen evidence of continuing or increasing cooperation by the enforcement authorities in your jurisdiction with authorities in other countries? If so, how has that affected the implementation or outcomes of their investigations?
AV: Urged by the Organisation for Economic Co-operation and Development (OECD), the Netherlands had to improve its efforts regarding cross-border anti-bribery and corruption (ABC) enforcement. This has been successful: since 2014 more cases have been taken on than ever before. SBM and VimpelCom are good examples. In taking on cases like these, the Netherlands has had to collaborate with foreign authorities – and it does. First and foremost, it has liaised with the DOJ’s Foreign Corrupt Practices Act (FCPA) unit – which has, by far, the most extensive experience, paired with a tried and tested process. The PPS has adopted several of the FCPA unit’s successful methods, making Dutch criminal law enforcement in ABC cases stand out from typical enforcement. Examples include:
- almost compulsory cooperation by the company, which includes self-investigation;
- no traditional case files;
- pressure on legal professional privilege;
- hand-in-glove cross-border exchange of information;
- open discussions and meetings with the authorities;
- unusual investigating methods;
- no charge sheets, but a statement of facts and a settlement agreement;
- the introduction of alien elements into the Dutch legal system: a compliance monitor and ongoing cooperation obligations;
- demands for penalties far outside the boundaries of Dutch sentencing traditions – following the US schemes and guidelines;
- individuals excluded from settling, much in line with the Yates Memorandum; and
- introducing lots of US elements into Dutch enforcement.
It has been said that high settlements, such as those with SBM and VimpelCom, should be approved by a court. We are at the early stages of development. ABC enforcement may change criminal enforcement drastically – or a case, brought before a judge, may make clear that the PPS is exceeding its mandate. The legislature could amend the law to institutionalise the new working methods (ie, update the settlement provisions and introduce guidance for self–reporting and sentencing guidelines). We are inclined to believe that the new methods of enforcement are here to stay. This will require compliance professionals to be creative, have investigating capability, keep abreast of US methods and maintain international connections.
GTDT: Have you seen any recent changes in how the enforcement authorities handle the potential culpability of individuals versus the treatment of corporate entities? How has this affected your advice to compliance professionals managing corruption risks?
AV: The recent past has definitely seen many changes. The majority of fraud and environmental cases, involving corporate entities, were settled. Settlements used to include the individuals responsible for the wrongdoing, but no longer so: individuals are increasingly prosecuted, resulting in notable convictions.
First, public opinion turned against this practice. People did not understand or accept that shoplifters were prosecuted while senior executives came off lightly in out-of-court settlements imposing mere financial penalties – usually paid by their companies. The minister had to render account to the parliament, and it was decreed that, in principle, no settlements should be made with individuals in high-profile cases.
This was the same approach being taken in the United States. The Yates Memorandum is well known in the Netherlands and the PPS has announced that it will act along the same lines. This is about more than just bringing charges against individuals instead of settling. The Yates Memo requires companies to investigate the role of individuals and surrender any evidence found to the authorities, and to cooperate with and assist the authorities in their fact-finding mission against the individuals responsible.
The price for non-compliance is high: under the US sentencing guidelines, a corporate entity could lose up to 25 per cent of its discount. But it makes for a tense relationship between the board and the company, and puts great pressure on the position of the board members. As no one can be expected to investigate or report themselves, engagement with outside attorneys shifts to the second tier or to a special committee, made up of the board, second tier and stakeholders. As a result of this pressure, we often see board members who held a position in the period when the violations occurred step down, either voluntarily or forced. Thus, the Yates Memo has a significant impact on the position of the board – even before any blame has been established. This impact, however, has an adverse effect on corporate entities in the Netherlands and is perhaps not the right way to enforce the rule of law.
In recent years, prosecution of individuals has increased, resulting in notable cases; for example, recently, an executive of Ballast Nedam was prosecuted for his role in a bribery case. Other prosecutions include an accountant involved in the VimpelCom case, the former director of a major port authority, the management of the Dutch Railway System, the former treasurer of a major housing association and several employees of a large automobile manufacturer accused of bribing public servants.
“The PPS should step up and meet international standards.”
GTDT: Has there been any new guidance from enforcement authorities in your jurisdiction regarding how they assess the effectiveness of corporate anti-corruption compliance programmes?
AV: There is a manifest lack of guidance in relation to ABC programmes, self-reporting and disclosure. The PPS should step up and meet international standards.
GTDT: How have developments in laws governing data privacy in your jurisdiction affected companies’ abilities to investigate and deter potential corrupt activities or cooperate with government inquiries?
AV: Dutch data privacy laws do not have a major impact on investigations. In May 2018, the EU General Data Protection Regulation took effect, based on which personal data may only be disclosed to a jurisdiction outside the European Economic Area if that jurisdiction offers a sufficient level of data protection. This is determined by assessing whether the jurisdiction complies with standards from the Council of Europe. Currently, the United States is considered to offer adequate protection. When conducting an internal investigation in the Netherlands, a company may collect information on its employees, for example by accessing business email accounts and telephone data without prior notification, as long as there is a reasonable suspicion of wrongdoing. In some cases, it may be necessary to liaise with the Dutch Data Protection Authority.
The Inside Track
What are the critical abilities or experience for an adviser in the anti-corruption area in your jurisdiction?
When approached for advice, counsel in the anti-corruption area should, first of all, make themselves familiar with the client’s business and translate a risk analysis into practical advice. External counsel advising companies faced with suspicions of corruption should be capable of directing investigations, and applying the outcome towards realistic objectives and strategies. They should have international connections, or be part of an international network. If public authorities are involved, counsel should know how they work, be well connected and be capable of creating support for speedy solutions. At all stages, counsel should be able to draw on their organisational and communication skills.
What issues in your jurisdiction make advising on anti-corruption compliance unique?
ABC enforcement in the Netherlands is still in development. The first serious cross-border corruption cases were closed in 2015. With parties still looking for the right working method, the process can be a little unpredictable at times – but fascinating. There is room for creative solutions. The Dutch authorities adopt much from their US counterparts in the DOJ’s FCPA unit. Even without US involvement it is good to be aware of the US approach. The practice evolving in corruption cases bears little semblance to the traditional Dutch enforcement practice in criminal cases. The investigation procedure is dual, relying on the cooperation of the company as well as drastic methods like dawn raids, wiretaps and bugs.
What have been the most interesting or challenging anti-corruption matters you have handled recently?
The most interesting is a recently settled case involving a major player in the telecommunications sector. It featured all the ingredients that make a case challenging for defence counsel: cross-border, international cooperation, high stakes, intense pressure from various sides and several unexpected twists. It was a difficult and strategic game of chess, and was a landmark case in the Netherlands.
The second was a case in which multimillion settlements were reached with major Dutch importers in the automotive sector.