Spotlight on Belgian court settlements, fears financial crimes brushed under carpet

Jul 18 2017 Nick Kochan, published in ThomsonReuters Compliance Complete

 

Companies seeking out-of-court settlements in Belgium will face demands for greater transparency following the publication, expected towards the end of the year, of a report drawn up by a committee of 18 parliamentary representatives. One key finding will be the removal of much of the secrecy currently available to those convicted of serious money laundering and fraud, allowing them to withhold details of their offence.

Under the current law, the terms of the settlement, and the facts of the case, are only available to state officials. These should be disclosed to the public, the parliamentary representatives said.

The committee, which started its hearings earlier this year, has been examining the passage through the judicial process of a 21 million euro out-of-court settlement granted to a group of Kazakhs led by Patokh Chodiev, a London-based oligarch with Belgian citizenship.

The report on the settlement process will be published in November and is likely to be hard-hitting, Georges Gilkinet, a Green party member of the Belgian parliament, told Thomson Reuters Regulatory intelligence.

Lawyers for Chodiev, 64, have contested the validity of the enquiry, arguing a number of its members lacked impartiality.

Lack of transparency

The settlement has been the subject of much speculation in the French and Belgian media. Out-of-court settlements are treated as confidential by Belgian prosecutors and do not require a defendant to make a guilty plea.

Negotiations with prosecutors regarding the terms of the settlement take place in secret and are then ratified by a judge sitting in camera. All the same, details of a number of out-of-court settlements have appeared in the Belgian press.

The parliamentary commission has placed a spotlight on the settlement process, with many arguing it excessively serves the interests of defendants. According to many parliamentary representatives, a tightening-up in the settlement process is inevitable. The country’s enforcement agencies need to take a tougher approach to money laundering, given Belgium’s vulnerability to terrorism and its use as a transit point by human traffickers operating out of Africa, they said.

Backlog of investigations

Legislation providing for out-of-court settlements was passed in 2011 to relieve prosecutors of a backlog of investigations which, in some cases, dated back 20 years.

“The law on out-of-court settlements mirrors American and British practices of plea bargaining. Until recently, scope for those being investigated for large-scale financial crime to make a settlement had been very limited,” said Raf Verstraeten, senior partner of Verstraeten, Dewandeleer & Gillard in Liege.

The 2011 law brought serious financial crime into its scope; until then, only investigations into petty fraud could be concluded with a settlement, he said. A removal of secrecy would represent the next stage in Belgium’s move towards international standards.

One early recipient of such a settlement was the Belgian operations of the French bank Société Générale. State prosecutors agreed to close a long-standing investigation into money laundering and fraud in return for a payment of 40 million euros.

“This is an old case that dates back to the late 90s in which Societe Generale was the victim of fraudulent activities and, as a result, filed a civil law suit. From the start, Societe Generale fully cooperated with the appropriate authorities,” a SocGen spokesman told TRRI, declining further comment.

Lengthy investigations

Belgium’s economically powerful diamond industry has been a key beneficiary of out-of-court settlement process. Omega Diamonds, a leading Angolan company active in Antwerp, reached such a settlement, said a legal adviser to the company, speaking on condition of anonymity. The company paid 10 million euros to the Antwerp prosecutor’s office to settle the offences and 150 million euros to the tax authority, the source said.

Belgian law requires those seeking an out of court settlement to first resolve outstanding tax issues.

Diamond companies were among the hardest hit by the time taken to conclude investigations, as state investigators typically froze their assets until the review was concluded.

“The pressure built up for a change,” said Verstraeten, the lawyer who represented the Belgian diamond industry, and who was asked by the government to draft the settlement law in 2009. The draft became the subject of internal political wrangles and it did not surface as a fully-fledged law in the Belgian parliament for another two years.

Prosecutors weighed down by long and complex negotiations have been strong advocates of widening the settlement process, said Vincent Van Quickenborne, a former minister for administration and a former deputy Belgian prime minister. Prosecutors are also concerned defendants could take their cases to the EU Court of Justice, arguing their cases were being prejudiced by the length of the investigation.

The 2011 law followed lengthy negotiations between the ruling conservative Liberal party and the left-leaning opposition. The conclusion was a deal where the government agreed to limit the considerable secrecy available to Belgian banks with respect to data and asset disclosure, in return for opposition support for their demand for confidential out-of-court settlements. As recent events have shown, it was a compromise whose outcome was far from what could have been expected when it was first made.

 

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