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Justice Department Announces FCPA Charges Against Two Individuals for Bribery of Marshall Islands Officials

The Justice Department announced the indictment in New York of Cary Yan, a Chinese entrepreneur, and Gina Zhou, his assistant, on FCPA and money laundering charges relating to a scheme to secure control of an atoll owned by the Republic of the Marshall Islands (RMI).  Yan and Zhou paid bribes to elected officials in the RMI in exchange for passing specific legislation.  Yan and Zhou were extradited from Thailand and are scheduled to appear in U.S. District Court sometime this week.

Between 2016 and 2020, Yan and Zhou engaged in a bribery scheme designed to corrupt the legislative process in the RMI. Yan and Zhou were president and assistant in a U.S.-based non-governmental organization based in New York City.

The RMI is located in the central Pacific Ocean and consists of 29 separate atolls, or island chains.  Since 1979, the RMI has been an  independent nation governed principally by a legislature.  The lower house of the RMI legislature is democratically elected, can enact legislation and elects the president of the RMI.  The president can be replaced by a vote of no-confidence.

Yan and Zhou paid tens of thousands of dollars in bribes to elected Marshall Island government officials, including members of the legislature, in exchange for their support of legislation to create a semi-autonomous region in the Marshall Islands called the Rongelap Atoll Special Administrative Region (RASAR) that would benefit the business interests of the defendants and their associates.

Yan and Zhou represented themselves as part of the New York NGO.  Yan planned to use the RASAR to attract investors and businesses that he would operate through the U.S.-based NGO.

Initially, Yan and Zhou paid for RMI government officials to travel to and visit New York City to conduct meetings about the RASAR proposal.  Yan and Zhou created a business with one RMI official to participate in the RASAR zone once approved.

Subsequently, Yan and Zhou conducted a conference on the project in Hong Kong with RMI government officials.  The original RMI official and two others with authority to vote on the legislation attended the conference.  Yan and Zhou paid for all of the government officials’ travel expenses, lodgings and entertainment.

The RASAR legislation was introduced in the legislature by one of the government officials who attended the conference.

Yan’s bribery scheme involved multiple Marshall Islands government officials. One bribe was rejected by a Marshall Island government official.  But other government officials accepted cash payments and favorable “loans” to support and/or sponsor the RASAR legislation.

One of the corrupt legislators who had accepted bribes was at the center of a political conflict with a former president of the Marshall Islands who opposed the RASAR legislation.  This official committed publicly to seek revenge against the president, Hilda Cathy Heine, who opposed the legislation.  The political controversy surrounding the RASAR proposal was significant and inflamed by Yan’s commitment to the proposal and his bribery efforts to enact the legislation.

Hein left office in 2020 and was replaced by David Kabua, who supported the RASAR proposal.  The legislature passed the RASAR resolution in March 2020.

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