Argentina’s corruption notebooks scandal is just as it sounds—a scandal initiated by eight notebooks documenting at least seven years of elaborate corruption schemes involving senior officials in Argentina’s government. The notebooks were kept by the driver for a close advisor to Julio de Vido, who served as Minister of Federal Planning during the presidencies of Nestor Kirchner (2003-2007) and Cristina Fernandez de Kirchner (2007-2015).1Cristina Kirchner may be running for President again in 2019 (https://www.thebubble.com/cristina-kirchner-running-for-president-2019/) De Vido rose to power in 1991 when Nestor Kirchner became Governor of Santa Cruz Region and appointed de Vido as Economy Minister of Santa Cruz.
The notebooks contain meticulous records of money transported between construction companies, the presidential residence, the planning ministry, a series of safe houses, and the Kirchners’ private home. The notebooks document at least $35.6 million transported over the course of seven years. Federal Argentinian prosecutors estimate that closer to $200 million may have been transported to secure energy-related projects in Argentina.
The media in Argentina is now reporting that lawyers with the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) recently visited Argentina to meet with prosecutors tasked with investigating the scandal to determine if there are any potential Foreign Corrupt Practices Act 1977 (FCPA) violations. The primary targets of the DOJ and SEC inquiry would appear to be companies in Argentina that trade American Depository Receipts (ADRs) on American exchanges. While there are no reports of UK inquiries yet, the UK Bribery Act 2010 has significant extra-territorial effect and the UK Serious Fraud Office (SFO) – now being led by former U.S. federal prosecutor Lisa Osofsky – is becoming increasingly aggressive and effective in its pursuit of corruption and money laundering cases that involve companies with connections to the UK and/or its financial sector.
American and UK companies with business interests in Argentina should also be prepared to assess any potential exposure in a proactive manner. Both foreign companies that trade ADRs in the U.S. and American companies that operate abroad are subject to the FCPA, and evidence of a potential violation would threaten to thrust a company into a costly investigation that could result in significant penalties —not to mention extensive reputational damage. With regard to the UK Bribery Act, any company (wherever incorporated or located) that carries on business or part of a business in the UK, is subject to the jurisdiction of the act. This could include non-UK companies that have raised capital via a listing on the London Stock Exchange or other UK financial market, or that have UK subsidiaries or branch operations.
Most modern corruption schemes involve the use of intermediaries and the transfer of things of value less obvious than cash, and do not involve duffel bags full of money being handed off to people in power. However, the notebooks scandal is evidence that those types of schemes still exist. Schemes involving cash payments leave a greater impression of impropriety because the participants appear to be operating with impunity and making little attempt to cover their tracks. Moreover, anti-corruption investigations by U.S., UK and other authorities into such schemes typically expand to determine whether less obvious forms of improper payments were also being made to government officials.
It remains to be seen how significant the notebook scandal will be, but as the story progresses it would not be farfetched to expect enforcement authorities to investigate whether the notebooks in Argentina recording bags full of cash being transported to the Argentine president’s home are just the tip of the iceberg. Companies operating or having interests in Argentina should investigate their potential exposure and be prepared to answer any questions that U.S. or UK authorities may raise.