Grupo Aval / Corficolombiana: Bribes Billed as Business Expenses

The Grupo Aval / Corficolombiana FCPA case required Grupo Aval to return $32,139,731 in profits to resolve Securities and Exchange Commission allegations that its merchant bank concealed highway bribes as business expenses. The order described an extension intended to bring at least $350 million in additional revenue. The alleged disguise would be familiar to someone inside project finance or construction: outside vendors billed for work handled internally, payments went through intermediaries, and the expenses reached the parent company’s financial statements.

The Commission described Grupo Aval as a Colombian financial holding company with shares listed on the New York Stock Exchange. Corficolombiana, its merchant bank subsidiary, brought infrastructure-financing experience to a highway joint venture and had influence over its payment approvals. This Foreign Corrupt Practices Act case followed the money from a Colombian road extension into the accounts of a publicly traded banking group.

How the Ocaña-Gamarra Extension Became an FCPA Case

The Ocaña-Gamarra Extension offered the joint venture more road to build and operate, with additional revenue and financing arrangements to secure. The SEC alleged that executives used intermediary success fees to buy the government decisions needed to add the extension to an existing highway contract.

The Commission’s order described the original Ruta del Sol II project as a 328-mile highway project connecting Bogotá with other parts of Colombia. Bidding began in 2009, and Corficolombiana joined a Brazilian construction company in the successful bid. The Justice Department identified that partner as Odebrecht. After the award, the partners and another company formed separate Colombian entities to manage the concession and build the highway.

That division matters in construction and power projects because the business involves more than construction invoices. In the Commission’s account, the concession company sought the extension, government officials controlled the approval and financing terms, and the construction company handled work on the road. A person who knows the engineering work may see a different part of the transaction from the person approving the financing.

According to the order’s account of the extension negotiations, a Brazilian executive agreed in 2013 to pay two intermediaries a success fee, knowing that part would become bribes. The SEC alleged that Corficolombiana’s former president learned of the arrangement, agreed to it and authorized payments through the joint venture.

The order dated the extension approval to March 14, 2014. The Commission alleged that the bribery secured that approval without a new public tender. We see the competitive harm right there: a valuable public project moved ahead without other builders getting a new bidding opportunity.

The financing decision created another opportunity for payments. The SEC alleged that the Brazilian executive agreed to additional bribes through illicit campaign contributions before officials approved the new financing obligations, and that Corficolombiana’s former president again authorized intermediary payments. According to the order, the government approved terms more favorable to the concession company in October 2014.

The Contracts That Carried the Payments

The Securities and Exchange Commission alleged that no-work contracts and sham invoices moved the bribe money through the joint venture. The contracts described services the construction company handled itself or services that were fictitious, while the payments appeared in the accounts as ordinary business expenses.

The Commission’s order described approximately $28 million in bribes from 2014 through 2016. Those payments came through the Brazilian construction company, the concession company and the construction entity, with approximately $2.7 million passing through a correspondent bank in the United States. For someone who knows the payment trail, the company named on an invoice is only one part of the story.

The order calls the Ruta del Sol II project RDS 2. Its description of the contracts and invoices makes the accounting problem concrete:

Someone inside the construction business could know that the supposed outside service had already been done by the project team. Someone inside accounts payable could know which invoice received approval despite missing support. We see the absurdity in that alleged arrangement: the project does the work, but an outsider gets paid for it.

The SEC also alleged that Corficolombiana’s former president signed financial-reporting certifications falsely stating that he knew of no illegal acts. That brought the alleged concealment into the parent company’s books and internal accounting controls: the invoices described a service, while an executive’s certification denied knowledge of the conduct behind them.

What the Justice Department and SEC Resolved

The Securities and Exchange Commission’s August 10, 2023 order addressed Grupo Aval’s accounting obligations and Corficolombiana’s role in the bribery and false records. It treated Corficolombiana as Grupo Aval’s agent in the scheme and alleged that the subsidiary caused the parent’s inaccurate books and inadequate accounting controls.

The Commission described the business benefit as fees, interest income and investment distributions that reached Grupo Aval’s financial statements through 2020. The profit from the extension therefore appeared in several forms within the banking group.

Corficolombiana acknowledged its role in the bribery scheme under a separate deferred prosecution agreement in the criminal case. The Justice Department’s announcement of that agreement described fictitious contracts with intermediary-linked companies that passed bribes to officials in Colombia’s executive and legislative branches and an executive at its state-owned infrastructure agency.

A Minority Stake With Influence Over Payments

The Commission described Corficolombiana as holding approximately 33% of the joint ventures through a subsidiary while exercising substantial influence over their financial and accounting operations. It could nominate and appoint employees responsible for monitoring and approving third-party obligations, including the controller and a contract administrator with joint approval authority. The ownership percentage and the authority to approve an invoice told different parts of the story.

That is why third-party due diligence has to reach the actual service and the people controlling payment. The 2022 paper How to Avoid Inadvertently Violating the Foreign Corrupt Business Practices Act Abroad, published in the Journal of Forensic and Investigative Accounting, describes the broader enforcement pattern:

Here, the SEC alleged that the executive used his influence over the accounts to authorize the intermediary payments. An approved vendor, an executed contract and a signed invoice could all sit in the file while the supposed service remained unsupported. The useful business question is who actually did the work and what decision the payment was buying.

In its separate guilty plea, Odebrecht admitted operating a shadow budget through its Division of Structured Operations. Separate systems handled payment requests and coded communications outside ordinary reporting. That separate case shows why an insider’s knowledge of how payments were requested can explain what the regular accounts conceal.

What Records Should I Preserve?

We work with you on which records matter and how to preserve what you already hold. The project agreement, intermediary engagement, work records, invoice approvals, payment instructions and financial-reporting certifications can connect the government decision to the service, payment and accounting entry.

A project employee may know who performed the work. A finance employee may know who approved the vendor payment, and an accounting or compliance employee may know what went into the parent company’s reporting. Those connections are the substance of FCPA whistleblower evidence, especially where an invoice’s description conceals the reason money left the project.

SEC whistleblower awards can pay eligible whistleblowers a combined 10% to 30% of the money collected in a qualifying case. A whistleblower case under the separate False Claims Act can pay 15% to 30% of what the government recovers. We assess the appropriate whistleblower program with you against the conduct and evidence you know.

You Know What the Project Actually Bought

If you know why an intermediary received a project payment or why an invoice described work your own team performed, speak to one of our Whistleblower Experts about what the project really paid for. We connect your knowledge of the project to the approvals and financial reporting, bring in foreign bribery whistleblower lawyers who understand cross-border payments, and stay beside you throughout the case.