DOJ Announces 2020 Criminal Charges Against Individuals In Connection With Alleged Marshall Islands Bribery Scheme

Last Friday, the DOJ announced that two Marshall Island nationals (Cary Yan and Gina Zhou – pictured) arrived in the U.S. after being extradited from Thailand based on 2020 criminal charges that the individuals violated the Foreign Corrupt Practices Act (and other laws) in connection with an alleged scheme to bribe elected officials in the Republic of the Marshall Islands (RMI) in exchange for passing certain legislation.

According to the indictment, Yan and Zhou acted as officers, directors, employees, and agents of a New York City based non-governmental organization (NGO) and, while in New York City and other locations in U.S. territory, to offer and pay bribes to government officials in the RMI to pass certain legislation  that would benefit the business interests of Yan, Zhou and their associates.

As further alleged in the indictment, the NGO has it principal place of business in New York and at certain times during the time period relevant to the indictment was registered as a corporation in New York State and at other times as an unincorporated organization. The indictment further alleges that the NGO maintained, and held itself out as maintaining, “special consultative status” with the United Nations Department of Economic and Social Affairs from 2016 to 2018.

Although not mentioned in the indictment, the NGO is World Organization of Governance & Competitiveness (WOGC) – see here.

According to the indictment, in December 2016 Yan and Zhou “being officers, directors, employees, and agents of the NGO, began communicating and meeting with RMI officials in both New York, New York and the RMI concerning the development of a semi-autonomous region within a region of the RMI known as the Rongelap Atoll.” The indictment alleges:

“The creation of the proposed semi-autonomous region would help the NGO, Yan, Zhou, and those associated with them to obtain business by, among other things, allowing the NGO, Yan, and Zhou to attract investors to participate in economic and social development that Yan, Zhou, and others promised would occur in the semi-autonomous region.”

According to the indictment, “in a further effort to development relationships with RMI officials,” the NGO “began paying for the travel expenses of RMI officials, including air travel to and from the RMI and hotel accommodations in New York, New York.”

The indictment alleges that Official 1 promoted the Rongelap Atoll as a promising location to do business and that Yan invested in a private business venture owned in whole or in part by Official 1, and Official 1 appointed Yan as a special advisor to the Rongelap Atoll.”

The indictment then alleges as follows:

“In April 2018, … the defendants caused the NGO to host a conference in Hong Kong that was attended by, among others, RMI Officials. The purpose of the conference was to publicly launch an initiative to establish the so-called Rongelap Atoll Special Administrative Region (the RASAR), also known as the Rongelap Special Economic Zone or Rongelap Atoll Digital Special Economic Zone, among other names. As proposed by Yan and Zhou, the RASAR would be created by legislation (the RASAR Bill) that, if enacted by the RMI legislature, would significantly change the laws of the Rongelap Atoll to attract foreign businesses and investors, such as by lowering or eliminating taxation and relaxing immigration regulations. Yan planned to use the RASAR to, among other things, attract investors and customers to businesses that he would operate in the RASAR, in whole in part through the NGO.

A number of RMI officials attended the April 2018 conference, including Official 1 and at least two members of the RMI legislature with the ability to vote on the RASAR Bill if and when it was introduced (Official 2 and Official 3). The NGO paid for the travel of those officials to Hong Kong, and for their accommodations and entertainment while there. During the conference Official 2 gave a speech praising the RASAR.

In mid-August 2018, Official 2 and other RMI legislators officially introduced the RASAR Bill. Starting before that date, and continuing until at least November 1, 2018 … the defendants offered and provided a series of bribes and other incentives to obtain the support of RMI legislators for the RASAR Bill including:

… Zhou directed a foreign exchange company to wire approximately $10,000 to an RMI legislator (Official 4) although the foreign exchange company could not and did not ultimately complete the wire.

… Zhou provided approximately $22,000 to Official 4 free of charge or interest, which Zhou characterized as a loan. Official 4 had officially sponsored the RASAR Bill in or about August 2018 and also took other actions to attempt to pass the RASAR Bill in 2018.

… Yan and Zhou offered a cash bribe to an RMI official (Official 5) to support the RASAR Bill, which Official 5 refused to accept.

… Yan and Zhou paid a cash bribe to Official 3 (who had officially sponsored the RASAR Bill in August 2018, and also took other actions to attempt to pass the RASAR Bill before and after the cash bribe was paid.”

Under the heading “The 2020 RASAR Resolution and the Additional Bribe to Official 3” the indictment alleges in pertinent part:

“In a December 1, 2018 e-mail to the defendants an RMI Official (Official 6) who had worked with Yan and Zhou in the 2018 effort to pass the RASAR Bill, promised Yan “revenge” against the then-President of the RMI  (President 1) who had successfully opposed the RASAR Bill.

In November 18, 2019, the RMI held elections for the legislature. As a result of these elections, on January 13, 2020, President 1 left office. Shortly thereafter, in early February 2020 the defendants began e-mailing and meeting with certain RMI officials … to continue Yan’s and Zhou’s plan to create the RASAR.

In February 2020, Yan and Zhou e-mailed Official 6, promising that if the RASAR were created, Official 6’s ‘family will be one of the most powerful’ in the RMI.

In late February 2020, the RMI legislature began considering a resolution that would endorse the concept of the RASAR (the RASAR Resolution), a preliminary step that would allow the RMI legislature to enact the more detailed RASAR Bill at a later date.

On or about March 2020, the defendants met with a close relative of Official 3 (the Relative) in the RMI. During the meeting, which was recorded by Zhou, Yan and Zhou gave the Relative $7,000 in cash to pass on to Official 3, specifying that this money would be used to induce and influence other RMI legislators to support the RASAR Resolution. Yan and Zhou further stated, in sum, that they knew that Official 3 needed more than $7,000 for this purpose, and that Yan and Zhou would soon obtain additional cash for Official 3. Yan and Zhou also discussed having previously brought large sums of cash into the RMI through the United States, and that they planned to do so again in the future.

In March 20, 2020, the RMI legislature passed the RASAR Resolution, with the support of Official 2, Official 3, Official 4, and Official 6, among others.”

Based on the above, the indictment charges conspiracy to violate the FCPA’s anti-bribery provisions, violations of the FCPA’s anti-bribery provisions, conspiracy to commit money laundering, and money laundering.

According to the DOJ release:

“On Nov. 17, 2020, Yan and Zhou were arrested in Thailand at the request of the United States pursuant to a bilateral extradition treaty. After extradition proceedings concluded in Thai courts, the Royal Thai Government ordered the defendants’ extradition, which resulted in their arrival in the United States on Sept. 2.”

In the DOJ release, Assistant Attorney General Kenneth Polite stated:

“Yan and Zhou allegedly engaged in a multi-year scheme to bribe elected officials in the Marshall Islands and to corrupt the legislative process. The department is committed to prosecuting individuals who participate in international corruption and undermine the integrity of democratic institutions and the free marketplace.”

U.S. Attorney Damian Williams for the Southern District of New York stated:

“As alleged, Cary Yan and Gina Zhou’s bribery scheme was designed to influence and manipulate the legislative process of the Republic of the Marshall Islands in order to benefit themselves and their associates financially. Yan and Zhou’s bribes blatantly flouted the sovereignty of the Republic of the Marshall Islands and its legislature, and the dedicated investigative work carried out by this Office and our partners signals that the Southern District of New York will not tolerate those who openly violate the integrity of democratic processes.”

Assistant Director-in-Charge Michael Driscoll of the FBI New York Field Office stated:

“As alleged, the defendants conducted multiple illegal activities to benefit their personal interests at the expense of the people of the Marshall Islands. The FBI, along with our global law enforcement partners, is committed to bringing to justice those who seek to use corruption and fraud as a means of doing business – regardless of where in the world they are located.”

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