November 24, 2023

DOJ settles FCPA investigation with reinsurance brokers Tysers and H.W. Wood

The US Department of Justice announced a settlement on November 20, 2023, resolving allegations under the Foreign Corrupt Practices Act with Tysers Insurance Brokers Limited and H.W. Wood Limited, both reinsurance brokers based in the United Kingdom.  Reinsurers provide insurance for insurance companies, enabling the latter to shift a portion of their risk; reinsurance brokers are the middlemen who collect premiums from the primary insurance companies and transfer the funds to the reinsurer, generally retaining a percentage of these premiums as their commission.

The information, filed under seal on October 24, 2023 in the US District Court for the Southern District of Florida, charges Tysers and H.W. Wood with conspiracy to violate the FCPA.  According to the facts stipulated by the parties, between 2013 and 2017, agents and employees of H.W. Wood and Tysers (then known as Integro Insurance Brokers Limited) arranged for the payment of $2.8 million in bribes to four Ecuadorian government officials in order to obtain and retain reinsurance business with state-owned companies.  As detailed in the documents, the bribery scheme was carried out through the payment of over $28 million in commissions and premiums by the two reinsurers, approximately 10 percent of which was transferred to three unnamed foreign officials and to Juan Ribas Domenech, the chairman of two state-owned entities, Seguros Sucre S.A. and Seguros Rocafuerte S.A.  Tysers and H.W. Wood are alleged to have retained millions of dollars of kickbacks from the commission payments.

The DOJ has charged eight individuals in connection with the bribery scheme.  Those charged include Ribas, who pleaded guilty to money laundering conspiracy in the US District Court for the Southern District of Florida in September 2020, and was sentenced to fifty-one months in prison; Esteban Eduardo Merlo Hidalgo, a dual US and Ecuadorian citizen who controlled and operated the two intermediary companies that were used to carry out the scheme, and several executives and managers of the intermediaries.  Another co-conspirator, Fernando Martinez Gomez, pleaded guilty in March 2022 in the Eastern District of New York for his involvement in the bribery and money laundering.  Two defendants remain at large.

Several times during the course of the bribery scheme,  H.W. Wood and Tysers increased the amount of commissions paid to the intermediaries, referring to additional payments as “local acquisition costs” for “local people who have given us the opportunity [to obtain lucrative reinsurance contracts].”  Other phrases used to discuss the payments were “local obligations” and  “local commitments that we must fulfill.”  The payments were transferred to Ribas and the other officials through accounts held by the intermediary companies in Panama, through correspondent banks in the United States.

To resolve its investigation of the reinsurance brokers, the DOJ entered into three-year deferred prosecution agreements with each of H.W. Wood and Tysers.  The DOJ did not accord voluntary disclosure credit to either H.W. Wood or Tysers because they did not voluntarily and timely disclose the misconduct.  However, both companies did receive credit for cooperating with the investigation – by accepting responsibility for the criminal conduct, making documents and employees available to the Fraud Section, producing financial analyses of voluminous transactions, making factual presentations to the authorities, taking measures to remediate, and demonstrating willingness to reach a prompt resolution.  The DPAs require that the companies implement corporate compliance programs designed to prevent and detect FCPA violations.  The programs must include a review of internal accounting controls, policies and procedures, regular compliance reports, disclosure obligations, independent oversight, training, compliance incentives, confidential internal reporting structures, management of third parties, pre- and post- acquisition due diligence, testing, monitoring, analysis and remediation where it is warranted.  The DOJ determined, based on both companies’ remediation and the state of their compliance programs, that an independent compliance monitor would not be necessary.

In the case of H.W. Wood, a reduced penalty of $508,000 was imposed, based on the company’s inability to pay a higher amount (the DOJ determined that the appropriate criminal penalty would be $22,500,000).  Tysers and AUB Group Limited, the company that acquired Tysers in September 2022, agreed to the imposition of a penalty in the amount of $36,000,000, and forfeiture of $10,589,275.

Press release | Information | DPA (Tysers) | DPA (HW Wood)