cele V'S \ fA thal INTERNATIONAL CENTRE FOR DISPUTE RESOLUTION Intemational Arbitration Tribunal In the Matter of the Arbitration between: Caser01-15:0003-2132 | Cardno International Pty Ltd., Cardno Holdings Pty Ltd. and Cardno Limited ACN 108'112 303, Be Claimants, vs. Carlos Diego Fernando Jécome Merino, Eduardo Jacome Merino, Rafael Alberto Jacome Varela, Galo Enrique Recalde Maldonado, Maria Del Carmen Moreano Barragan, and Patricia Rosero Garces, = Respondents. FIRST PARTIAL ARBITRATION AW f The Tribunal, Mr. Francisco Cerezo, Arbitrator Mr. Marty Steinberg, Arbitrator Mr. Eduardo Palmer, Chairmanclosing argument and swore in all of the witnesses. The parties filed their respective post-hearing briefs on September 1, 2016. After reviewing the post-hearing briefs and deliberating regarding whether it was necessary for the Tribunal to appoint a foreign legal expert to assist it in connection with resolving Respondents’ Petition, the Tribunal decided against appointment of such an expert and advised the parties that the final hearing was closed on September 23, 2016. B. Factual Findings.‘ \. The Parties. i, Cardno. “ Catdho is a professional inféastructure and environmental services company founded in ~-1945 in Brisbane, Australia.’ The company offers a range of integrated services in ten primary market sectors worldwide, namely: buildings; land; coastal end ocean; environment; emerging markets; management services; energy and resources; transportation, water; and defense.* Cardno is currently listed on the Australian Stock Exchange, ASX ticker symbol: CDD.’ The company is not listed on any U.S. exchanges.* Cardno has more than 6,000 employees, int ee al ii, Principals of Caminosca. Caminosea is an Ecuadorian infrastructure and engineering consulting firm founded in ‘ Because the extensive factual background presented in Claimant's Memorial in Support of Claims, filed April 1, 2016, is essentially unrebuited by any evidence presented by Respondents in this case, the Tribunal has ‘ncorporated much of the factual background contained in said Memorial forthe sake of efficiency. _ Ex, 101, Roberts Statement at | 10; Ex. 18, 2015 Annual Report at JACOME-1559; Ex. 21, Cardno Company Overview. . Ex, 101, Roberts Statement at 10; Ex. 22, Cardno Markets. : Ex, 101, Roberts Statement at 11; Ex. 21, Cardno Company Overview. : Ex. 10L, Roberts Statement at 11. ¢ Ex. 101, Roberts Statement at § 12; Ex. 18, 2015 Annual Report at JACOME-1563, 1566-67.9 ftom major contacts wit goverment cane @ of @ ey Srothere Carlow Diego Jécome and Béuardo Jtcome,” Galo Recslde nd Afberto Hicome came partners in Caminosca a few years later."" tn the early years, Caminosca’s infrastructure consulting focused on roads, but its services Jater expanded to include infrastructure consulting On projects relating to drinking water, sewage, cil, and hydroelecticity."2 Caminosca provides engineering consulting services in Ecuador and has participated in “mportant infrastructure projects of national scale."® The company has more than 400 employees, many of whom have specialized expertise in the various engineering fields necessary for the completion of Caminosca’s diversified projects." Caminosca’s project portfolio has included Oversight of the design and construction of hydroelectric instaliations around Ecuador and involvement in public tansportation, water and sewer, and other urban development projects throughout the country."* Histotically, at least 80 percent of Caminosca's Fevemues' have come For more than 35 years, Caminosca was owned by a close-knit, interrelated group of Ecuadorian citizens: Eduardo Jécome, Carlos Diego Jacome, Alberto Jacome, and Galo Recalde.'” As noted, Eduardo Jacome and Carlos Diego Jécome are brothers."¥ Galo Recalde has "© Ex. 93, Deposition of Eduardo Jacome Merino at p. 15:18-20 (“E, Jécome Dep."); Ex. 2, June 2012 Caminosca Corporate Presentation at JACOME-6752. : 2 Ex. 95, E. Jicome Dep. al p. 15:21-16:4, hy Ex.95, E, Jécome Dep. at p. 16:7-12, 18-24. By. 2, Caminosca Corporate Presentation at JACOME-6750, 6752, 6758; Ex.3, June 21, 2012, Correcaminos Project Company Visit at JACOME-5834-5836. x Ex.2, Caminosca Corporate Presentation at JACOME-6750, 6765. * Ex. 2, Caminosca Corporate Presentation at JACOME-6757-6763. | egy Ex.2, Caminosca Corporate Presentation at JACOME-6756; Ex 3, Comecaminos Project a TACOME SH34 59; “Ex.8, Commercial Plan of Caminosca S.A. for Yeat 2012 at YACOME-S93. 17 Bx. 95, E, Jacome Dep. atp. 15:18-16:4.heen connected to the Jécomes since the 1970s when he Met Carlos Diego Jécome as a classmate school.” Rec mm engineering school.” Recalde also met Eduardo Jécome as an older student within the x eines onan PEE is the uncle of Edomnas Tae and Carlos Diego Jicome, ind his role anes Tole in company management and decisions was more limited than that of the three primary partners.?! Jicome ted Caminosca’s commercial team as commercial vice-president, served as president of the board, and was the legal Tepresentative for Caminosca’s hydroelectric. projects”? Galo Recalde led Caminosca's technical team as technical vice-president. The partners’ positions and responsibilities remained the same following Cardno’s acquisition of Caminosca2> Through the years, Maria del Carmen and Patricia Rosero formed part of ‘Caminosca’s management team both before and following the acquisition. Maria del Carmen, the wife of - Ex.95, E. Jacome Dep. at p, 19:4-7; Ex, 96, Deposition of Carlos Diego Jacome at p.9:6-12 (°C.D. Jécome Dep.”) _ Ex..97, Deposition af Galo Recalde at p. 10:7-9 ("G, Recalde Dep."). 2 al Ex, 99, G. Recalde Dep. at p. 10:12-13. = *g» EX_95, E. licome Dep. at p. 17:14-18:2 (Eduardo Jécome describing three lead partners responsi Pea eter eset ince areas, and stating Alberto Jécome was involved in decision- snaking only “[sJometimes”). me Dep. at p. 58:7; see also Ex. 5, Sept. 17-18, 2012 Agenda/Presentation for 2 E95, E . ? Cardno/Caminosca Meeting at JACOME-I8 (“Sept. 2012 Meeting Agenda”); Ex. 1, Caminosca S.A. Management Profile. Es. 96, C.D. Jécome Dep. at pp. 13:58, 23:17-24:1 1; see Ex, , Sept. 2012 Meeting Agenda at JACOME- » 18. Ex, 97, G. Recalde Dep. at pp. 10:17-18, 13:4-6; see Ex.5, Sept. 2012 Meeting Agenda at JACOME-18. Ex. 95, E, Jacome Dep. at p. 58:7; Ex. 97, G. Recalde Dep. at p. 15:7-10. Po fi See, e.Carlos Diego Jécome, i » Worked as Caminosca’s Chief Financial Officer beginning in 2001 2* After the acquisitio i me , Maria del Carmen continued to work as financial manager, and later twansitioned to a new administrati administrative role related to Cardno’s Latin American operations, which then included both Caminosc @ and another Cardno subsidiary (Entrix Eeuados2” Patricia Rosero, Se G7 the wife of Galo Recalde, was Caminosca's Chief Administrative Officer?” Respondents Eduardo Jécome, Carlos Diego Jécome, Galo Recalde, Maria det Carmen, and Patricia Rosero each were authorized to write checks on behalf of Caminosca in payment of invoices received.” When Cardno representatives traveled to Ecuador in September 2012 for a due diligence visit, these five Respondents represented themselves us Caminosca’s “management seam”. In addition, each of these Respondents was designated as responsible for certain presentations of information to Cardno’s representatives during that meeting." 2. A Growth Opportunity in Latin America. In 2012, Cardno tearned of Caminosca as a potential growth opportunity for its existing Latin American operations.* Cardno had previously acquired ENTRIX Holding Company (Bntrix”) in June 2010, as part of its acquisition growth strategy and to gain a strategie partner in the growing environmental consulting market? Entrix was a large company with more than ee ee * Ex. 98, Deposition of Maria de{ Carmen at pp. 11:22. 12:1 (°M, del Carmen Dep.”). 4 Ex. 98, M. del Carmen Dep. at pp. 14:19 16:8. a ‘See Ex. 5, Sept. 2012 Meeting ‘Agenda at JACOME-I8. ei Ex. 98, M. del Carmen Dep. at pp- ath 13:t. ‘See Ex. 5, Sept. 2012 Meeting Agenda at JACOME-18. zi See generally Ex. 5, Sept. 2012 Meeting Agenda at JACOME-19-23. 2 Ex, 101, Roberts Statement at 13. s Ex. 101, Roberts Stasement at $13.30 offices throughout th . @ United States and with international branches in Canada, Peru, and Ecuador. Presented wit with an opportunity to expand its presence in Latin America and build on the successes of Ent rix Ecuador, Cardno sought to gain another strategic partner in the region?’ Broker Caminosca e1 ~ ngage __—— gaged a local brokerProventus, to fssist in Caminosca’s sale as part of a planned strategy for ownership succession.» In late April 2012, Proventus contacted Cardno Entrix Director of Latin America Operations, Edgar Uribe, regarding the Caminosca acquisition opportunity.”” Through Proventus, Cardno made an initial offer to purchase Caminosca for $10 million in May 2012, which Caminosca management rejected as low.>* However, negotiations continued.’ Proventus coordinated a visit between Cardno executives and Caminosca management on June 21, 2012. Eduardo Jécome, Carlos Diego Jécome, and Galo Recalde hosted a visit to review Caminosca’s operations in Quito." 3. Negotiating a Deal. Cardno believed Caminosca would be a strong strategic partner in Latin America and ceases Ex. 101, Roberts Statement at 413. Roberts Statement at $f] 13-14; Ex. 24, Paul Gardiner, Caminosca Recommendation to Pursue ss an Acquisition at CARDNO-2566347-2566348 (“Gardiner Recommendation”). x See Ex. 24, Gardner Recommendation at CARDNO-2566345, Ex, 24, Gardiner Recommendation at CARDNO-2566345. 1012 Cardno Indicative Offer to Cammosca S.A. at JACOME. 5654; Ex. 24, Gardiner 10-2566345; Ex. 101, Roberts Statement at | 15. Ex. 2, Caminosca Corporate Presentation at JACOME-6788, 6748; 2” 38 Bs 25, May 18, 21 Recommendation at CARDN - Ex, 101, Roberts Statement a¢ 16. # Ex. 24, Gardiner Recommendation at CARDNO-2566345; see generally a -amendation at CARDNO-2566345. ‘The title listed for each | ‘Cardno representative 1S Ex. 3, Correcaminos Project.decided t ‘ © Pursue an acquisition." Cardno had joined the bidding process late, however, and was competing with three other other firms to acquire the company.? Cardno made two offers in July 2012, which led to an agree : Sgreement in principle. Caminosca’s shareholders favored Cardno’s bid because a merger with an intemational firm would increase the potential for business growth, allow for intemati ‘onal expansion, and create professional development opportunities for their people.** oO: 7 August 17, 2012, Cardno and Caminosca signed a non-binding Letter of Intent to proceed with the acquisition, for an enterprise value of $16 million of a debt-free, cash-free 46 ‘The general scope of Cardno’s due diligence investigation was detailed in a three-page basii section of the Annex to the Letter of Intent.‘” Cardno’s pre-acquisition diligence team for the Caminosca deal inoiuded Bustamante & Bustamante, an Ecuadorian law firm; Kirkland & Ellis, an international law firm; PwC, a big four accounting firm; and several Cardno executives. 4. Cardno Acquires Caminosca; The SPA. Based on the representations made by Caminosca management and the results of its extensive due diligence efforts that Caminosca was a reputable, financially-sound, and promising Nia ee © Bx 24, Gardiner Recommendation at CARDNO-2566345, 2566352-2566353; Ex. LOL, Rabers Statement at $f 16-17. Ex. 24, Gardiner Recommendation at (CARDNO-25t 2012 Cardno Formal Offer o Caminosca S.A.; Ex. 24, Gardiner Recommendation st cement at ¥ 19. 66345; Ex, 101, Roberts Statement at} 18. a # ‘See Ex. 26, July 13, CARDNO-2566345; Ex, 101, Roberts Si Ex. 101, Roberts Statement at § 19. Ex. 24, Gardiner Recommendation at CARDNO-2566345; 19; Ex. 4, August 17, 2012 Leter of Intent fom Cardno Regarding “6 Ex 101, Roberts Statement at 4 . Caminosca S.A. st JACOME-2326 (“Leter of Intent”) a Letter of Intent at JACOME-2329-2331; see also Ex.24, Gardiner Recommendation at CARDNO- neeeret 86152.business on a trajectory of continued suocess and profitability, Cardno proceeded to acquire Caminosca ns par of ts expanding Latin American operations ** ‘The SPA was signed on December 18, 2012. The SPA. states that i i “(oly and among {Claimants] and the Sharebolders of Caminosca S.A... .. set forth on Annex fl hereto,” in tara, Annex II provides that the following persons are Shareholders: Carlos Diego Jécome, Eduardo Jacome, Alberto Jécome, and Galo Recalde (the “Sharehotders”). Similarly, Annex Ill sets out cach Shareholder’s equity percentages and incides only the above noted Caminosca Shareholders (Carlos Diego Jécome, Eduardo Jécome, Alberto Jécome, and Galo Recalde)." However, on the signature page of the SPA, under the word “Shareholders”, the following persons signed: Carlos Diego Jécome, Eduardo Jécome, Alberto Jécome, Galo Recalde, Maria Del Carmen, Patricia Rosero, Susana Espinosa Bermeo, and Maria Fernanda Villamar.” There is, no clause or explanation within the SPA as to why these additional four persons signed the SPA. The Shareholders made various written representations and warranties in Article 5 of the SPA. i, Representations And Warranties. a) The ice With Laws” Pi 10. The Shareholders pledged that Caminosca ‘is mows and hasbeen Within the past three “years, in compliance with all Laws and Orders... Tn tum, “Laws” is defined as “any law, stauue, code, ordinance, rule, regulation or other requirement of any Governmental ee Bx 101, Roberts Statement at 9124. © §x.9, SPA at CARDNO-S. 9 Ex.9, SPA, Annex Il at CARDNO-62, 5) Bx. 9, SPA, Annex II at CARDNO-63. S Ex. 9, SPA at CARDNO-5I. = Ex.9, SPA, § 5.10 at CARDNO-21. 1Bie COVERED Atop iss “acy ent cxeritng execute, legate Si Sines permere Inti ary site authori, agency, department, board. or Sovernment body ofthe Republic of Ecuador, or any other countr ak b) The “Litigation And Qrders” Provision, § 5.9. ‘The Shareholders also represented that; “No event has occurred or circumstances exist hat could give rise to or serve as a basis for the commencement of any Proceeding against, related to or affecting the Company or lis Business, operations or assets... “** “Proceeding” means “any claim, demand, charge, complain, action, suit, proceeding, hearing, audit, hearing or investigation, whether judicial or administrative, of any Person or Governmental Authority. ©) The “Conduet of ess” Provision, § 5.11. Additionally, the Shareholders represented: During the past owelve (12) months and from the Effective Date to the Closing Date, the Company has not and will not: (a) Borrowed any amount or incurred or become subject to any liability except (i) currem liabilities ixcurred in the Ordinary Course of Business, and (ii) liabilities under Contracts entered into in the Ordinary Course of Business and listed on Schedule 5.15; .. (Taken any action or entered into any other transaction ... (9 that would obligate the Company to pay ir excess of US $75,000 in any single transaction or US $150,000 ia a series of transactions during a single year or over the duration of any commitment; (ii) other than in the x Ex. 9, SPA, Annex I at CARDNO-58. Bx. 9, SPA, Annex I at CARDNO-56. * Ex. 9, SPA, § 5.9 at CARDNO-21. - Ex. 9, SPA, Annex I at CARDNO-59. . Ex. 9, SPA, § 5.11 at CARDNO-21-23.Ordinary Course of Business, or (iii) other than the transactions contemplated by this Agreement and the Ancillary Agreements; @ — Made any change in accounting or Tax principles. Practices. or policies from those ulilized in the Preparation of the Financial Statements; except from the application of IFRS; .. . or (6) Made any binding commitment to do any of the foregoing. d) The “Contracts” Provision, § 5.15. ‘The Shareholders further represented: Schedule 5.15 sets forth a lst of each Contract (and in the case of an oral Contract, the material terms of such Contract) to which the Company is a party to o to which any of the assets the Company are bound to [sic] . (ix) providing for any offset, countertrade or barter arrangement; . (iil) involving management services, consulting services, ‘support services or any other similar services provided to the Company in excess of USS75,000; (xix) that involves any Material Customer or Material ‘Subcontractor and has a value in excess of US$150,000 Material Customers” are Caminosca’s top fifteen customers (based on consolidated revenues) yeats 2010-2012. “Material Subcontractors” are Caminosca's top fifteen for each of the subcontractors (based on amounts paid to them) for each of the years 2010-2012." ©) The “Financial Statements” Provision, § 5.19. In the SPA, the Shareholders also represented: Seecule 5.19(a) sets forth true and complete copies of () the balance Ce eine of the Company as of December 31, 2011, December 31, 2010 9 fx.9, SPA, § 5.15(@) at CARDNO-26- @ Ex. 9, SPA, $5.24(a) at CARDNO-31. 6 Bx.9, SPA, § 5.24(b) at CARDNO-31- © Bx.9, SPA,§ 5.19 at CARDNO-29. 172009, and the related statements of income, equity hee bog for the fiscal years then ended, together with the rotes “Financial Serene financial information included therewith (the Company ag ers") and (Hi) the unaudited balance sheet of the Sane ¥ as of November 30, 2012, and the related unaudited rents of income, comprehensive income, equity and cash flows for ‘he 11-month period then ended (the “Intern Financial Statements") () He eee oe ‘Statements present fairly, in all material respects, the Comuitl position, results of operations, equity and cash flows of the Company at the dates and for the time beriods indicated and have been Prepared and reviewed by the management of the Company in accordance with IFRS, consistently applied throughout the periods indicated. The Interim Financial Statements present fairly. in all material respects, the financial position and results of operations of the Company at the date and for the period indicated and have been prepared and reviewed by the management of the Company in accordance with LERS, consistent with the Financial Statements, except for the absence of footnote disclosure and any ‘customary year-end adjustments, none of which will be material. The Financial Statements and the Interim Financial Statements were des ved from the books and recards of the Company. The Company has no liabilities ... arising out of transactions or events entered into prior to the Closing Date, or city action or inaction, or any state of facts existing, with Tespect to or based upon transactions or events occurring prior to the Closing Dale, excep! (a) liabilities reflected in the Financial ‘Statements,(b) liabilities that have arisen after the date of the Financial Statements in the Ordinary Course of Business, none of which relates to (i) breach of any Contract, (ii) breach of warranty, (iii) tort, (iv) infringement or (9) violation of Law or (vi) any environmental liability, (6) There are no significant deficiencies or material weaknesses in the design or operation of the Company's internal controls that adversely affect the ability of the Company to record, process, summarize and report financial information. There has been no, and there does not currently exist, any fraud, nor the existence of or allegation of financial iniproprieties that involves management of the Company. he “Bookkeey 'ractices” Provision, § 5.29. In addition, the Shareholders pledged that: The books of account, minute books, stock record books and any other legally required book and/or record of the Company are complete, correct, accurate, Ex.9, SPA § 5.29 at CARDNO-32.true, represent actual, b accordance with soun; applicable Law, ona fide transactions, and have been maintained in id business practices and the requirements established by fi, The Payment Prov Based on these written Tepresentations and warranties, Cardno agreed to pay the Shareholders more than $17 million for Caminosca.©! Specifically, the adjusted purchase price ‘was $17,119,281, to-be paid in a combination of cash and Cardno stock, icusve of «potential “ara-out payment of $4 million.“ Upon closing in April 2013, and to acquire 24% of Caminosca, Cardno paid the sellers $3,220,738.62 in cash. To acquire the remaining 76% of Caminosca, in May 2014 Cardno paid $5,770,490 in cash and granted the Shareholders Cardno stock valued at $4,428,516. Cardno further paid the Shareholders the fall earn-out amount of $4 milton in May 2014, comprised of $2,680,000.00 in cash and shares of Cardno stock valued at $1,320,000.00. The Shareholders’ receipt of the $4 million earn-out payment was contingent on Caminosca’s achievement of certain earnings thresholds in the 12-month period following the acquisition (December 2012 through November 2013).” The earn-out was to be paid 18 months after the SPA’s Financial Date of November 30, 2012 (i.e., the end of May 2014), if Caminosca EX.9, SPA at CARDNO-6, § 2 at CARDNO-8-14; Ex. 45, Closing Certificate at JACOME-4934-4935, - See Ex, 45, Closing Certificate. Cash Consideration of Tranche | at CARDNO-3016-3022. (0-4661-4671. “See Ex, 46, Closing © See Ex, 47, Wire transfer instructions to Sellers at CARDN See infra at p. 20-21 discussing Amendment No.4. © See Ex, 48, Wire Instructions at CARDNO-4633-4642, ® See Ex.9, SPA, $2.4 at CARDNO-11-13.satisfied the requisit ure 37 ‘auisite thresholds.” The amount of potential earn-out was tiered, as follows: @ it thar ie amings Before Income and Tax] was at last $3.5 millon, mstien® Shareholders would be paid the full eam-out amount of S4 a Seen at ieee e 7 million but less than $3.5 million, then the hareholders would be paid a prow n-out amount of $4 million; or ee aN eo if EBIT was $2.7 million or less. then the Shareholders would not receive an eam-out payment, 5. Amendments to The SPA. i, SPA Amendments 1-3, The closing was repeatedly delayed because Caminosca was unable to secure the consent of all of its government clients to effectuate the transfer of Caminosca’s ongoing goverument jai project operations to Cardno.” SPA Amendments | through 3 were executed on February 13, ¢1) os Ae Quatte 2013, February 27, 2013, and March 27, 2013, respectively, extending the closing date to allow tional time for Caminosca management to obtain the required consents for the transfer, However, Ecuador’s Ministry of Transport and Public Works (“MTOP") ‘refused to provide the necessary consent. Consequently, Cardno and the Shareholders agreed to two new Amendments to work around MTOP's consent.”* ii, SPA Amendments 4-5 ‘As more fully explained below, in/ru at pp. 76-79, the parties executed Amendment No. 4 Fg cgaee rein " Ex. 9, SPA, § 2.4at CARDNO-I}-13. 2 Ex. 9, SPA, § 2.4(d) at CARDNO-13. Ex.9, Amendment No. | at CARDNO-86-88; = Ex. 10}, Roberts Statement at $25. -ARDNO-86-88; Amendment No. 2 at CARDNO-83-85; Amendment ‘Amendment No. 2 at CARDNO-83-85; Amendment No. 2 3 at CARDNO-80-8: % See Ex.9, Amendment No. 1 at C No. 3 at CARDNO-80-82. 7 Ex. 101, Roberts Statement at 25. 0and agreed to close on A; 2 sr Ber TLL. 2013.™ Jn scat the parties bifucoated the closing into two parts, First, Cardno wo ‘ : no would immedistely receive 24% of Caminosce's shares and the remaining 76% of Caminosca’s shares vy 3ca's shares would be put into escrow for a later closing date. ‘more on this later).” Amendment No. § released from esctow the remaining consideration due under the SPA to the Shareholders (cash consideration of $5,770,490 and Cardno stock valued at $4,428,516). Accordingly, Cardno had full legal ownership of Caminosca by May 2014.” 6. Business as Usual at Caminosea, Following Cardno’s acquisition of Caminosca, several of the Respondents remained with the company in, effectively, the same role as before the acquisition.” Cardo introduced its own new members on the board oF directors, but Caminsoca’s original management team continued to oversee its day-to-day business.’ Indeed, it is Cardno’s customary practice following “sauisitions to allow and encourage newly-acquired. subsidiaries to continue runing their business/as\Ustal™ Taking a soft approsch to merger integration, Cardno's organic process of integrating and standardizing the systems and processes of each subsidiary to fit with Cardno’s % —Ex.9, Amendment No. 4 at CARDNO-72-79. a Ex. 10, Amendment No, 5 at JACOME-5978-5983. % Ex 10, Amendment No. 5; see Ex, 50, at JACOME-16750. ‘s Ex. 101, Roberts Statement at 27. Ex. 101, Roberts Statement at { 28; See, 2g, Ex.95, E. Jacome Dep. at p. 15:7-10; Ex. 98, M. del Carmen Dep. stp. 14:23-15:1, Ex. 91. G. Recalde Dep. at Bx, 101, Roberts Statement at 28. Bx 101, Roberts Statement at 4 29; see also Bx. $1, Cardno aoe ‘A Camminosea for growth across Latin America and beyond, (*Cardno Acquisition Presentation”), at JAC . 21Corporate processes would follow in due course ® 7 Carino Discovers And Investigates improper Payments. Due to concealment by Caminosca management, Cardno was unaware, for a period of Several months during the integration efforts, that Caminosca was involved in a scheme to offer bribes to government officials in connection with a number of government projects in Ecuador. Following integration efforts, flat 2014, Cardno became aware of payments made to a vendor that appeared to be incorrectly treated for Ecuadorian tax purposes."® The tax issue needed to be reviewed and resolved in connection with the year-end close of Caminosca’s books.” The payments at issue raised additional concerns because the destination of the payments (the Bahamas) differed from the vendor company's corporate domicile in Chile, and a signed contract supporting the payments could not be found." Jn addition, the invoices presented for payment did not provide sufficient explanation or detail of the services provided in exchange for the large sums invoiced. Following « preliminary review, in Decembler|2014;Cardnojrequested Caminosca's outside suditor BDO to certify payments from Caminosea and its joint venture partners in Ecuador to the Chilean company in question, Asesorias Australes SpA ("Asesovias Ausiales")" |, e Lp Sant eee Ex_iQ1, Roberts Statement at 29; see Ex.51, Cardno Acquisition Presentation at JACOME-5635-5636, + Ex, 104, Anderson Statement ot 6; Ex. 101, Roberts Statement at $35, BR. Fx 104, Anderson Statement at 6; Ex. 11, Roberts Statement $35, . Ex. 104, Anderson Statement at 6; Ex. 101, Roberts Statement at $35. BL Ex. 104, Anderson Statement a6; Ex 101, Roberts Statement 31195 son Statement 2t 6; Ex. 101, Roberts Statement at.35. He ge xs, Ale A 436; see also Ex.53, December 3, 2014 S Ex, 104, Anderson Statement 41417; Gx. 10], Roberts Staten’ 11936, se seT28, Letter from Santiago More, Consorcio Consullor Hidoausral, to Asesorias , nSteely, BDO wis sed to review wheter to payments ASSSAA ISGS a! i. BDO Report On January 13, 2015, BDO issued reports in response to Cardno's request, concluding that it could not certi Ould not certify the offshore payments and noting numerous red flags.°""The key findings of the BDO Report are as follows: BYR Ascits Ail se mae uk wna ne . oe Contact details or other information on Asesorias Australes could be found; The invoices had not been registered with the Chilean tax authorities as required under local law; ‘+ The invoices did not include descriptions that reasonably detailed the services provided; the invoices arrived, not been signed; * The contract between Asesorias Australes and Consorcio Consultor Hidroaustral (a joint venture in which Caminosca participated) was not provided to BDO; and © Caminosca could not produce any other supporting documentation for the services provided by Asesorias Australes. Cardno management called a meeting to discuss the BDO Report on January 14, 2015, with certain Cardno representatives appearing in person in Bcusdor and others participating by Jae is) x. 104, Anderson Statement at §7; £3.01, Roberts Statement st 36. 4.54, BDO Report at CARDNO-363708-363756; see also Statement at 437. c 7 Ex $4, BDO Report at CARDNO-363738-363756, CARDNO-363712-363717, CARDNO-363726- 744; Ex. 104, iets ‘Statement at ] 8; Ex 101, Roberts Statement at 37. (Ex. 104, Anderson Statement at § 8; Ex. 101. Bphone from Australia. ralia’” Respondents Eduardo Jécome, Carlos Diego Jécome, Galo Recald A del Carmen, and Patricia Rosero were each Prevent at this meeting.” Representatives of bs mss their findings regarding Asesorias Australes, and Cardno representatives asked > “spondents present ai the meeting to explain the payments and the relationship with 'sesorias Australes.” The Respondents expressed their disagreement with BDO’s findings, but hey were unable to provide an alternative explanation or otherwise substantiate the work Purportedly done by Asesorias Australes in exchange for the payments in question. Accordingly, on January 20, 2015, Cardno initiated a formal investigation.”” Early in the investigatiJ investigation, Caminosco management came forward with purported work product Y¢\oZ prepared by Asesorias Australes."" A forensic review conficmed that these documents were created by Caminosce, not Asesorias Australes, and therefore the purported work product was simply a recycled version of Caminosca’s own documents.” Respondents similarly produced in this erbitration purported Asesorias Australes work product copied from Caminosca’s work product,‘ Ex 104, Anderson Statement at 19; Ex, 101, Roberts Statement at} 38. Sx, 104, Anderson Statement at 9; Ex. 101, Roberts Statement x9 38. % Bx, 104, Anderson Statement at 9; Ex. 101, Roberts Statement at 38, - Ex, 104, Anderson Statement at 9; Ex. LOL, Roberts Statement at 438. 411; Ex. 101, Roberts Swiement at} 5, 38, 7 Bx. 194, Anderson Statement at “Negreira Statement”) S Ex. 105, March 31, 2016 Declaration of Sesgio Negreira at 16 (" TC Ex. 105, Negreira Statement at 16. i i cProduct (identified as dacbese files m lidated Ex, $5, Original Cardno Caminasca Work-Pr os200060853, G03 0008824, 535 00004507) with Consolidated Ex.56, Purported Asesoris Aan are Product at SACOME-1 1263-11274.Respondents were asked to leave Caminosca h 2015."°" It was only after they left ‘hat Cardno was informed by more junior staff members thatthe amounts owed by customers in Accounts receivable and work-in-progress were not, in fact, collectible. '"> Caminosca’s practice under Riesponiierte’ rmengement wae tp decline to iwoice customers. until the tive tat customers agreed to pay, and absent the customers! agreement to immediately pay, Caminosca withheld invoices for tax reasons.!" As a result, Caminosca’s cash reserves were significantly depleted and Cardno loaned Caminsoca money for working capital." Cardno later took substantial write-off of amounts denied uncollectible from customers end antounts Joaned to Caminosca.'°° ii, Asesorias Australes _-Asesorias Australes is an inactive Chilean entity purportedly involved in ‘financial consulting, accounts collection, and business services.'% Agesorias Australes was incorporated ‘(GRUURGS)ZO1219” The company is not registered to do business in Ecuador.'" “A field visit by Kroll to Asesorias Australes’ official adécess revealed a residential property with a “For Sale” sign.'” Asesorias Australes’ website is pro forma, with language = Ex. 104, Anderson Statertent at 911; Ex. [01, Roberts Statement at 38, im Ex. 104, Anderson Statement at 11. 103 Ex, 104, Anderson Statement at 41. ” Ex. 104, Anderson Statement at 11. WS Bx. 104, Anderson Statement at 4 11. cy Feb 23, 2015 Bifida can ah 712) x10 Rebere Senet 4 9; Ea Ss Fron Kroll Report at p. 8. : of 457, Kroll Report p 18; Ex. 101, Robers Statemen! st 125; x 05, Negreira Statement at 12. am x57 Kroll Repr at p- 25 Ex. OL, Rober States 2429 Ex. 105, Negreira Statement at, 12. 10 x. $17, Kroll Report at pp. 8, 19: 25copied from a Deloit jite,""0 joltte website." There is no evidence that Asesorias Australes conducts any legitimate business activity," Asesorias Australes" is 'as Australes’ registered agent is a Panamanian lawyer, Daisy Chacon Aparicio (Ms. Chacon”), wi ison"), who acts as an agent for hundreds of companies."”? Asesorius Australes” sole "), a Panamanian Shareholder is Flamingo Management, Intemational, S.A. (“Flaming corporation incorporated in May 2010.'" Ftamingo’s president is also Ms. Chacon." Like Asesorias Australes, Flamingo could not be located at its listed address,''* Ms. Chacon has a long history of creating offshore companies and trusts. From 1998-2010, she worked as a paralegel for Panamanian law firm Mossack Fonseca!!—a firm notorious for creating offshore shell companies used for money laundering,'"? Now a licensed attamey with her own firm in Panama, Ms. Chacon advertises her legal services to include formation of Panamanian and international corporations."'* Asesorias Australes was the vehicle for numerous illicit transactions in this case, which may be depicted in summary as follows: NO x 10), Roberts Statement at 4 40; Ex. 105, Negreira Statement at § 16; compare ExS8.Website of Asesorias Australes, with Ex,59, Website of Deloite in Bolivia. 1 Ex. 101, Roberts Statement at $41. Ex. 52, Kroll Report at pp. 8, 20, 23; Ex. 101, Roberts Statement 29 42; Ex. 105, Negsira Statement at m 14-15, Ma Ex. 57, Kroll Report at p. 20; Ex. 101, Roberts ‘Statement at $42; Ex. 105, Negreira Statement at 13. -. Ex. 57, Kroll Report at p. 20; Ex 101, Roberts Statement 4 42; Ex. 105, Negreira Stasemment at 14. 1p. 20; Bx, 40L, Roberts Statement 42; Ex. 105, Negeia Statement at 40. x Ex. 57, Kroll Report at statement at 43. ‘See Ex. 57, Kroll Report at p. 23; Ex. 101, Robers (citing various news articles). stat $43; Ex. 61, Website of Daisy Chacon 16 117 Bx. 101, Roberts Statement at 43 1B, 05, Negreira Statement at 15: E5101, Roberts Stateme Aparicio and Asociados, Abogados. %$1,20000000“subconact for SapladorePrjert, Respondents’ use of Asesorias Australes is detailed more fully below in connection with Caminosca’s three major government projects. iii, Crown Mergers and Acquisitions. Cardno also identified another transaction with an offshore entity that bore the same indicia of fraud as the Asesorias Australes transactions.'"” The suspect entity involved in this transaction was a Spanish company called Crown Mergers and Acquisitions SL (*Crown").” "21 tts 2013 financial statement on file with the evidence of providing products or services. 14 44; Ex. 105, Negreira Statement at} 41. Bec Ex. 101, Roberts Statement Ex, 101. Roberts ‘Statement at 44; Ex. 105, Negr p. 115 Ex. LOL, Roberts Statement a 45: yreira Statement at 941. Ex 105, Negrera Statement at 41 bi Bx, $7, Kroll Report at 27rate Registry reflects wo figures, “income from client q ie ome from clients” and “other cperating stement on file with the Registr and lacks other elements of a typical f Crown’s owner, Manuel Lameito, owns five othe HOt Tegistered. to; do’ bilwiAbss in Ecuador,'™ A field visit by Kroll to th listed as Crown’s official ad y Keoli to these jal adlress revealéd that the address provided for the company is @ large ts owner Manuel mercial building, whose Iding, whose receptionist had not heard of either Crown meiro.'"5 Crown Crown's website is also pro forma." ‘Crown was another vehicle for illicit tra icle for illicit transactions in this case, which may be depicted in summary as follows: $998,268.00“ abeonrat for use of Crown is detailed more fully below in connection with Caminosca’s Respondents’ ge ee —_—e Ex. 57, Kroll Report at p. 11; Es.101, Rovers Sratement at 4 45; Ex. 105, Negrira Statement at 941 Ex. 57, Kroll Report at pp. 16-17; Ex OL Roberts Statement at 45. 57, Kroll Repor at. 18: Ex10 Roberts Statement at 46. es . 101, Roberts Statement at 146 Ex. 57, Kroll Report at pp. 11, 14; Es Ex.51. Ex. 62, Website of Crown Acquisitions Ex. JOL. Roberts Statement at $46: 28affected government projects, iv. Carlos Diego Jécome’s Calendar Entries. Cardno's investigation revealed that Respondent Carlos Diego Jécome maintained ce of calendar entries with detailed notes regarding meetings, phone calls, and other events.'°” Many individual calendar entries recorded information spanning years.'* The entries and correlating spreadsheets use codes recounting the history of improper payments.” Although not necessarily apparent on their face, based on context, correlation, and corroboration, Respondents’ codes operate as follows:' + dh= payments to individuals, including purported payments to government officials * kbps =$7,000-increments of money © MHz= percentages of money © Energization / energizing = the flow or payment of money © Bandwidth = total payments of money Asked at deposition and at the Final Hearing regarding dh and their other code words, Respondents invoked their rights against self-incrimination or otherwise refused to answer.'°! “Accordingly, Cardno’s interpretation of the meaning of Respondents’ codes is uncontroverted. a (ek {egreira Statement at ¥ 17; Ex, 101, Roberts Statement at 147, * Ex. 105, Negreira Statement at 17; Ex. 10], Roberts Statement at | 47. 19 Bx. 101, Roberts Statement at 148. ” Ex, 101, Roberts Statement at 9.48; see also Ex. 105, Negreira Statement at $f 18-21. jemoric i at i 350 questions in total that 7s Init 1, Appendix 1, summarizing the approximately 380 quest r - ras eo eae evoking te igh! remtin slen id se isiinaton tod sagas 2 na Cet aca . suariing approxi ee As ‘noted in Procedural Order No. 14 in this case, suid hee Fight against se-incriminaion with respec 0 the spony Respondents subsequently Cees 1 sre Fi errata sheets naig tis change, Those eva SE eit 100 questions found in AP] : sci Degs eons Nae D ors oe as Exhibits 954 aldo Recalde testified via nelite during th ial heing Seid Respondents iva ea a on an refed to anew any a 724. hearing. See Final 97-72: fincriminat 1 H’g Tr. at pp- 5 29Further, the 1 the codes us Se @ straightforward system of abbreviations and code names representing individ i 70 lual_ persons involved, ‘including certain of the Respondents and family nts and family members. For example: !3? CDI = Carlos Diego Jicome * EJMor EJa= Eduardo Jécome Merino * GRe= Galo Recalde * DDLor DD = Diego Duenas Jicome!# Respondents again i i ‘gain invoked their rights against self-incrimination or otherwise refused to answe i ‘iat er questions regarding these abbreviations,'™* Therefore, Cardno’s interpretation of the ‘meaning of Respondents’ codes is unchallenged. ‘The same system of abbreviations and code names is used to represent government officials or appointees who were targeted in terms of the scheme to offer payments to the same in an effort to secure government contracts, including, for example:!** © SeVa- Segundo Vanegas, Member of Technical Commission for CELEC’s Project Sopladora Juan Leonardo Espinosa Abad, General Manager for CELEC’s Project Sopladora SaAr or SA = Santiago Arias, General Manager for CELEC’s Project Minas San Francisco EdCas or ECa= Edgar Castro, General Manager for CELEC’s Project Toachi-Pilaton IvAmm = Dr. [van Armendariz, Member of ‘Support Sub Commission for +449; Ex. 105, Negreira Statement at 122, 10s Diego Jécome and Maria del Carmen. Both Carlos Diego swerany questions regarding Diego Duenas Jécome beyond the fact that Sal ang er 1 at Q.302-303; Appendix at Q.60; Ex.98, M. del p. at pp. 75-77. pein se __ & ‘See Ex, 101. Roberts Statement at io) Diego Duenas Jacome is the nephew of Carle Jacome and Maria del a ae is their nephew. See Cardno’s Ini lene p. 74; Ex. 96, Carlos Diego Hacome De iM Cardno’s Initial Memorial, Appendix | and 2. ms) ‘Soe Ex, LO1, Roberts Statement at 50; Ex, 105, Negreira Staternent a2. an* ESAl= Esteban Albornos, Minister of| Blestricity for Ecuador ‘ot vidr vp = Jorge Glas, Vice President of ‘ote that “vidrio” is the Spanish equivalent of J As with the other code words and abbreviations used, Respondents refused to answer uestions regarding their abbreviated teferences to said foreign officials.’ They either invoked their rights against self-incrimination. or otherwise refused to answer.! of these references thus uncontroverted Cardno’s interpretation By way of example, Carlos Diego Jaécome’s calendar entries generally reflect the following format:'** ya) 0 aoe Coegzion a B09 foster os eee i See Cardno’s Initial Memorial, Append i ix } and 2 1? See Cardno’s Initial Memorial. Append 2531 produced by Cardno and labeled CARDNO-4250-4253 ‘See Ex.10, for file as 31Decipheri ‘Phering the acronyms in these Sntries required extensive investigative work by ye ‘orev ana nr oe with meeting dates and information, transfers of money, publicly available information oa Projects and key government officials connected to those projects." The evidence set forth below establishes that Cardno's_ interpretation of Catlos Diego Jécome’s calendar is a reasonable interpretation, and is farther corroborated by evidence from other sources, including Spreadsheets containing dollar amounts and tracking bank transfers.'"” Respondents did not Present any evidence challenging this interpretation or positing an alternative interpretation, 8. Caminosca’s Goverment Projects Tainted by Bribery Scheme ABESOReS ARREST WastaNpaymentovehicie for two of Caminosca's most Ineative Projects: Sopladora and Toachi-Pilaton.!! Carlog Diego Jécome’s calendar enties and other corroborating evidence show that the Shareholders made improper payments to Asesorias Australes for the apparent benefit of govemment officials in connection with these projects," Each of these projects was managed by a separate division of Ecuador's state-owned energy company, CELEC.'® pb = Ex. 1G1, Roberts Statement at {51 ~ Ex. 101, Roberts Statement at] 51. 1 Bx, JO], Roberts Statement a] 52, bs Ex, 101, Roberts Statement at 9 52. 13 Bx. 101, Roberts Statement at] 52. 4 1 April 6, 2015 Caminosca Contracts Analysis. Hf Ex. JO1, Roberts Statement at 53: Ex.63, Krol April 32was not foc A . fa ‘used on any corrupt acts or particular government officials."* Instead, Carino Tequested only that Kroll analyze the contracting processes for the Sopladora, Toachi-Pilaton, and Minas San Francisco projects." Regarding the award of public contracts in Ecuador, Kroll found as follows:'"” * The President of the Republic of Ecuador names both the Coordinating Minister of Strategic Sectors and the Minister of Electricity and Renewable Energy. * The Ecuadorian Electric Company, CELEC, is under the direction of the Minister of Electricity and Renewable Energy, who names the both the General Manager of CELEC and the Managers of the Business Units of CELEC. Through Resolutions, CELEC’s Board of Directors (led by the Minister of Electricity and Renewable Energy) authorizes the Manager of the Business Unit to continue with the Public Bidding of Consultants. Also through Resolutions, the Manager of the Business Unit designates the formation of Technical Commissions. The Technical Commission is comprised of one President and two vocals, all of them carry a voice and vote. The Technical Commission assigns a Secretary who cannot be any one of the members of the same Commission. Finally, the Technical Commission may designate a Support Sub-Commission and its members may have a voice but do not have a vote, 1. Soplaora (Project 415)" a) Project Background, In.2011, a CELEC division called Hidropaute entertained bids for consulting services for the management and supervision of the Paute Sopladora hydroelectric project (“Sopladora Project”). The tender was announced on June 15, 2011, and on August 18, 2011, the technical Bai Rober Smee a 4 He Ex JOL, Roberts Statement at 54. js at p. 1; Ex. 101, Roberts Statement at 455. | inosca Contracts Anlysi = BN ject Sopladora. Ex.9, SPA at CARDNO-169, it Proj us project 415 is Caminosca’s internal reference number for Proj veo, 101, Roberts Statement at 956. 33commission evaluated the submissions,! ‘was the only company to submit a proposal the submissions." ¢; .' Caminosca was the only y for the Sop! i ladora Project, which is the third of a total of four projects in the Paute River besi implemented eo : plemented to create a complex hydropower system,'5! In Septer Ci BE ‘ember 2011 Caminosca entered into a joint venture with Brazilian partner LEME Engenharia Ltda (“Leme”) to bid for the work and operate together this project as Consorcio Con: i 132 'sultor Hidroaustral,' Caminosca’s consortium won the bid for the Sopladora Project—a contract valued in excess of $46 miflion.'* b) Respondents’ Illegal Procus it of Contr: Upon investigation Cardno identified payments to Ascsorias Austrates in connection with the Sopladora Project.' Respondents, targeted the following officials in connection with this project:'5* © Juan Leonardo Espinosa Abad, Hidropaute’s General Manager for the Sopladora Project. © Segundo Vanegas Valencia (“Segundo Vanegas”), Area Professional of the Technical Commission for the Sopladora Project. + ln Ese Arn inne in noe lectricity for Ecuador, who has direct control and management of the operations of CELEC and its division Hidropaute, which was responsible {for the Sopladora Project. «Gabriel Tinano, a representative of Leme, Cominosca’s joint venture oe Pyle ne = Ex, 1OL, Roberts Statement at | 56. ie Ex. 101, Roberts Statement at 56; Ex. 52, 2013 Annual Report at p. 8 we See Ex, 64, September 16, 2011 Constitucion def Consorcio Consultor Hidroausiral Celebrado Entre Las Compaiias Caminosca S.A. LEME Engenharia Lida. t JACOME-2747-2775. 65, Contrato de Presiacién de Servicios de onsultotia Para El Gerenciamiento y Fiscalzacén de prayers Hl ‘Pante-Sopladors at JACOME-3969-4159- Proyecto Hidroeléctrico 1 Ex, 101, Roberts Statement et 157. Contracts Analysis Charts Ex. 101, Roberts Statement at 457. 18 See Ex. 63, Kroll Caminosea 34Partner in Consorcio Consultar Hidroaustral for this project. On the very day that Consorcio Consutor Hidroausiral was awarded the Sopladora Project, Carlos Diego Jécome met with Caminosca’s joint venture partner Gabriel Tinano to “define dh™'$6 Carlos Diego Tacome Merino [carlos jacome @caminosra-sa com] 9/25/2021 921.5 PM Carlos Diego lacome Merino [carlos jacome @caminosca-sa com) :00 PM 9/28/2041 $:30:00 PAM [show Time As Free The dh to be paid for the project was negotiated before the contract was awarded. One of Carlos Diego Jacome’s calendar entries ‘has the subject line: “c ~ Gich and Gabriel T dh blaw”.'"” The subject line is de-coded as follows:!"* © Gich refers to Segundo Vanegas. This is a nickname based on Vanegas” personal e-mail address, which uses the term gich. 4 Gabriel T refers to Caminosca’s joint verture partner for this project, Gabriel Tinano. dh refers to the subject of the meeting: potential payments to goverament officials. blow refers to Project Sopladora. The translation of “blow” to Spanish is “soplar”, iv., a short-form reference to Sopladora. Carlos Diego Jacome’s calendar entry, Exhibit 87, recounts the following: is ‘101, Roberts Statement at 4 58. = ‘See Ex,67, May 15, 2011 Calendar Entry, “e~ Gich and Gabriel T dh blow” at CARDNO-4087- 4089T. 15) Ex. 101, Roberts Statement at ¥ 59. See Ex, 66, September 28, 2011 Calendar Entry, “o - gabriel, definr dh blow” at CARDNO-4132T; Ex. 355 He net are sect i ea c em ike Saybody be checked at tue eh wack, gabr and 1 ved andy a ding to him, it is Avolend, bes{dee trying to cipport a eeapetiter Be the Conniseion is designated, , including Esai, The evi 4 he evidence supports Cardno’s unrebutted interpretation of Exhibit 67, which is that:'* * In May 2011, Carlos Diego Jécome met for dinner at Carmine (a restaurant in Quito) with gich (Segundo Vanegas) and gabr (Caminosca’s joint venture partner Gabriel Tinano). edie el are set”: A purported agreement to pay 5% of payments under the trac * They would use a Costa Rican (or other offshore) company as a vehicle for the payments. * “LAO will have to be involved and, according to him, it is 500 kbps x 3, including Esal.": Juan Leonardo Espinosa Abad (Project Sopladora General Manager for goverment customer Hidropaute) will have volved, and sein to him, the pene . * It is OK if somebody else needs to be involved in the scheme, besides gich (Segundo Vanegas) and LAO (Juan Leonards Espinosa Abad). © Finally, it doesn’t seem like anybody is trying to suppost a competitor for the project award on Sopladora, This will be confirmed when the Commission that awards the project is designated. In summary, Cardno’s unrebutted interpretation of the evidence is that Segundo Vanegas (referred to as ‘gich’, Member of the Technical Commission for the project) was promised $50,000.00 in payments shortly before the tender was announced." Juan Leonardo Espinosa ‘Abad (referred to as ‘LAO’, General Manager of the government customer forthe projet) was 2 1 Ex. 101, Roberts Statement at 60. 1 Bx. 104, Roberts Statement at $61. 36Promised $500,000.00 i " . 00 in payments.'*' Minister of Electricity Esteban Albomoz (referred to as “Esal’) was likewise promised $500,000.00 in payments." An Excel Spreadsheet circulated among Respondents also reflects dh payments made in connection with the Sopladora Project, including large payments identified as “DH Sopladora” and as “Segundo Vanegas Sopladora".'® ‘These payments described in Carlos Diego Jécome’s calendas entry are likewise tied to a fraudulent subcontract with an offshore shell company." A written agreement between Consoreio Consultor Hidroaustral and(Asesorias Australes is dated September 15, 2012—three months after Asesorias Australes was formed—for a purported contract value of $1,200,000.00.'** Eduardo Jacome signed that subcontract agreement as Legal Representative for Consorcio Consultor Hidroaustral.'% ‘The fraudulent nature of the subcontract is laid bare in a calendar entry by Carlos Diego Jécome regarding an e-mail to be sent to joint venture partner Gabriel Tinano.'® In the message, Carlos Diego Jacome explains the “subcontract” is a vehicle for making payments to government officials in connection with the Sopladora Project.' The entry reads in part: Ee diamant > ie Ex, J01, Roberts Statement at #61. = Ex. 101, Roberts Statement at 761. re ‘See Ex, 68. Excel Spreadsheet at CARDNO-4733. bs! Ex. 101, Roberts Statement at 62. (see Ex. 69, September 15, 2012 Contra de Servicios, § 5.2. CARDNO-363926. me ‘See Ex. 69, Contrato de Servicios at CARDNO-363929. (ot Bx, 101, Roberts Statement a 63. 13 Calendar Entry, “em gabriel, a CARDNO-2628-2630T; Ex. 101, Roberts 4 See Ex.10, January 8. 20 Statement at 163. 37[Dear Gebriet 2 1,000 kope contract already si neo Pee igned ‘conTact that Marcel ale animal DCE 2014 13 monihe age Invoice for 28,7 of Decembe: 2012, 'o be for projet 415, of wi eee ich 20 Kops ware pald locally and 980 Kops wl be pad ebroad, The evidence dno’ Supports Cardno’s unrebutted interpretation of Exhibit 70, which is that:'® * A subcontract was alread: st ly signed for project 415 (Sopladora) whereby governmer Officials would purportedly receive $1,000,000.00 to approve the poles . Of the $1,000,000.00 agreed. i 000, greed-to, $20,000.00 was paid locally (i.e, b physical exchange in cash) and $980,000.00 will be paid Paiities through an offshore abell corporation) as pera mibeontract that Marcla i andling, The references to payment in Carlos Diego Jacome’s calendar entries tie to the Asesorias ‘Australes contract for this project, which according to the calendar entries covers purported payments linked to Ecuadorian goverment officials or appointees Segundo Vanegas, Juan Leonardo Espinosa Abad, and Esteban Albornoz.' Toachi-Pilaton (Project 476)'" 2) Project Background, In 2012, a CELEC division called Hidroteapi entertained bids for consulting services for a of the Toachi-Pilaton hydroelectric project (“Toachi-Pilaton P The final evaluation of the proposals. the management and supervisior Project”).'”” The tender was announced in August 2012." x, 1OL, Roberts Statement at 1 64- 170 Ex. 101, Roberts Statement at 65. inasea's internal reference number for the ‘Foachi-Pilaton Project. Ex. 9, SPA st ami 171 Project 476 is C CARDNO-170. 12 Ex 101, Robert Statement at m Ex. 101, Roberts Statement at § 66. 38took place on November 8, 2013.'74 re * ~~ At that evaluation, Caminosca was awarded the contract, and the award w 3s confirmed by the head of CELEC on November 30, 2012.""3 On December 12, 2012, Caminosea entered into a joint venture with Brazilian partner sete {© operate together for this project ax Consultor Pilaton Toschi." The final value of the Toachi-Pilaton contract awarded to Caminosca was $21 680,000, by a contract signed.'”” b) Respondents’ illegal Procurement of Contract. Cardno identified payments to Asesorias Australes in connection with the Toacki-Pitaton Project.'* No Caminosea employee could explain what work or services Asesorias Australes performed for this project.'” Nor could any Caminosca employee provide the name of an Asesorias Australes employee.'*" In addition to Respondents, the scheme allegedly inctudes:'* ‘© Edgar Rodrigo Castro Hitchcock (“Edgar Castro”), Hidrotoapi's General Manager for the Toachi-Pilaton Project. © Dr, Ivan Ernesto Armendariz Jaque (“Dr. Ivan Armendariz”), a lawyer ‘on the Support Sub Commission for the Toachi-Pilatan Project. © Claudio Esteban Albornoz Vintimilla (“Esteban Albomoz”), Minister of Electricity for Ecuador, who holds the same position of power and TEx Lol, Roberts Statement at 66: Ex.7L, Public Contacting Information for Toachi-ilaton Project al CARDNO-485. 195 Bx. 101, Roberts Statement at 66. Constitucion del Consoreio Consulior Hidronustral Celebrado Enwre Las Compatias Caminasca tm.” See Eade, S.A. y LEME Engenharia Lida. at JACOME-2747-2775, EB, La Fiscalizacin de la fngenieria de Detalle, , December 26, 2012 Contrato de Consultoria Para ne eee a Doras Civiles, Suministro, Monts y Pricbes Del Equipamiemo y Puss En Servicio de is Central Hidroeléetrica Toachi Pifaton st ‘CARDNO-394951-394981. 1 Ex, 10}, Roberts Statement at 67. 1 Ex. JOL, Roberts Statement at 967. 108 Ex. 101, Roberts ‘Statement at ] 67. $ i ; Ex. |, Roberts Statement st 1 67. He See Ex. 63, Kroll Caminosea Contracts “Analysis, Chant; Ex. 101, ci]authority over CI ver CELEC’s division Hidrotoapi for the Toachi-Pilato Project as over C1 CHENG ; CELEC division Hidvopaute for the Sopladora Project. = * Jorge David Glas Es al spinel (“Jorge Glas”), Vi isa superior to Be Glas”), Vice President of Beu Esteban Albomon the Eotadoran Mins of Bless. cis * Gabriel Tina ‘lsc | this project, /enture partner in Consultor Pilaton-Toachi for Carlos Diego Jécome’: 20 Jacome’s calendar entries provide a timeline of alleged negotiations with = various government offici ent officials over payment amounts related to the Toachi-Pilaton Project." ae are] pe Nara xan cen 11/19/2012 7:00:27 PM a Cafes ng cone eto ee ocre@ inc co o- historia registro de dh edeas 476, 1571 opi... 12/27/2013 11:30:00 PM 12/28/2013 |show Time As: free ‘The subject line of Exhibit 14 is de-coded as follows: te «dh vefers to the subject of the notes: possible or purported payments to govemment officials. edeas refers to Edgar Castro, the General Manager of Hidrotoapi for the Toachi-Pilaton Project. 476 ond 1571 ace project numbers both refering to the Toschi Pilaton Project. Project 476 is Caminosce’s intemal project number for Toachi- Pilaton, used after it won the bid, Project 1971 Caminosce’s intemal project number for ToachiPilaton, used before the bid was won and this riessonfirmed as a project Caminosea would infact work on. # opilis an additional reference © the Toachi-Pilaton project. Carlos Diego Jacome’s calendar entry Exhibit 14, recounts the following: 013 Calendar Entry, “@ - history of record of dh edeas 476, 1571 opi", at ia i —_See Ex,_\4, Decembe (CARDNO-4250-4253; Ex. 104 Roberts Statement at 1 68. 185 Ex, 101, Roberts Statement #1 468.20% 4-10 Gabrieland \subain is ahout to recove BeMetat ten Goucn lee ev AOR's 70 + 125.5 + 60 ing it cover 135 ab + 60 vids. tt 2013.15.03 19 Ups. Yoal bandon 70 2013 27-02 He/She visits me and th ae ‘asks for more dh, ee 2013 29001 Encrgeation 35 kbps. 2012-27-12 & ace aiee 262 2032 2012 01.11 Energiation via Europe 1h appointment with attorney for his/her Company. He/She ind width $1 Kbps. will take care of consultancy contract wath for 16 kbps made by 55} + (135. 10) 2, \ meet Edeas in the car an agre Cardno’s unrebutted interpretation of Exhibit 14 is that:' * On November 1, 2012, while joint venture partners Gabriel Tintano and Wilson Carrilo were in Carlos Diego Jécome’s office, Carlos Diego Jécome met Edgar Castro (Hidrotoapi Project General Manager) in a cac and they purportedly agreed on a dh payment of $350,000.00 net, to be paid using an offshore company in Europe. © On December 20, 2012, an initial payment of $16,000.00 was allegedly made by Consultor Pilaton Teachi, Caminosca’s joint venture for this project. «On December 27, 2012, Carlos Diego Jécome noted that his brother Eduardo Jécome Merino would take care of a consultancy contraet with an offshore shell corporation for $350,000.00 lesa $59,000.00 to be paid Tocally (in relation to the agreed amount ro be paid to Edgar Castro); and an additional $135,000.00 less $10,000.00 to be paid locally (for another recipient of dh payments). For the $55,000.00 to be paid locally to Edga Cearo, this payment would be made in thres separate amounts of $16,000.00 (which as already purpartedly paid), $20,000.00, and $19,000.00. «On January 29, 2013, a payment of $35,000.00 was purportedly made, for total payment to-date, ‘of $51,000.00. ies ved a visit from someone On February 27, 2013, Carlos Diego Jécome torte : : ‘who Sa fr more di and set up an appointment with an attomey for his offshore shell company: On March 13, 2013, an additional $19,000.00 was purportedly paid, for total payment (0 date of $70,000.00. 2013, Gabriel Tinano {of joint venture partner Leme) and ss ee oi Satie cipmited a contract 10 Cari Pimnentt (also of joint Ex JOL, Roberts ‘Statement at § 69. FNventure part $350,000100 (for “Sn®). fF $623,000.00, indicating that it covers Edgar Castro), '$135,000.00 (f zi , attomey—Dr. ivan Ane $135,000.00 (for an ‘abogado’— Prendancaocge Gael nduriz), and $60,000.00 (for ‘vide'—vidrio—Vice Im summary, Edgar Castro (referred to as ‘edcas’, General Manager of the government customer for the project) was Purportedly promised $350,000.00 in payments during a meeting with Carlos Diego Jécome in a car on November 1, 2012, just one week before the tender was adjudicated.'> Dy. ivan Armendariz (@n attomey, referred to ‘IvAmn’ or ‘abogado’, Member of the Support Sub Commission for the project) was Purportedly promised $135,000.00 in Payments by Carlos Diego Jacome.'** Vice President Jorge Glas (referred to as ‘vidrio? or vide’), Was purportedly promised $60,000.00 by Carlos Diego Jicome, referenced in one of Respondents’ spreadsheets as purported “campaign donations”.'7 These payments are also referenced in Exhibit 68, a spreadsheet circulated among Respondents, which contains the following entries referencing payments to specific officials on specific dates, corresponding to the notes above:'#* | Project | Date ‘Amount Detail 100 1/30/2013 _| $30,000.00 L____-—~ == | 100 2/6/2013 | $30,000.00 [476 12/14/2012 | $16,000.00 _ | DH Eca/CPToachi 416 1/30/2013} $35,000.00 _ | DH Bca/CPToachi 476 2/28/2013 | $19,000.00 _ | DH Eca/CPToachi | 476 7220/2012 | $10,000.00 _ | DH/Hidrotoapi Abogado ia = Ex. 101, Roberts Statement at 70. i. Ex, 101, Roberts Statement at § 70. 1B 101, Roberts Statement at $70- ci Roberts Statement at 71. 188 Be 68, Excel Spreadsheet: Ex. 101, 2I 476 2/712013 | $23,750.00 | bay Hidrotoapi Abogado | [476 39/2013 _| $23,750.00 | DH/Hidrotoapi Abogado [476 3/17/2013 | $30,000.00 | DH/ Hidrotoapi Abogado [476 8728/2013 | $38,000.00 | DH/Hidrotoapi Abogado ‘The references to paying Messrs. Castro, Armendariz, and Glas in Carlos Diego Jacome’s calendar entries (contract for °623 KB") also tie directly to the $623,180.00 Asesorias Australes contract for this project.'"” A written agreement between Consorcio Consultor Pilaton- Toachi and Asesorias Australes for a purported subcontract value of $623,180.00 is back-dated to May 9, 2013.'% Eduardo Jécome signed this subcontract ‘agreement as Procurador Comun for Consorcio Consultor Pilaton-Toachi.'®" The subcontract amount makes Asesorias Australes one of the largest subcontractors for the Toachi-Pilaton Project,'% Payments to Asesorias Austrates were made under the contract in five tranches, totaling $505,635, between December 2013 and December 2014.'* The payment entries were booked in Caminosca’s records as payments to “national providers” despite Asesorias Australes being a Chilean company.'™ The fraudulent nature of this subcontract is likewise revealed in Carlos Diego Jécome’s calendar entry regarding an e-mail to be sent to joint venture partner Gabriel Tinano.'"* The entry makes clear that the “subcontract” is a vehicle for purportedly making payments to govemment = Ex, 101, Roberts Statement at 72. "© E12, May 9, 2013 Contrato de Servicios, § 5.2 at JACOME-1001; Ex. 101, Roberts Statement at 72. 19 See Ex, 12, Contrato de Servicios at JACOME-1004. - Ex. 104, Anderson Statement at J 12; Ex, 101, Roberts Statement at 72. -. Ex. 104, Anderson Statement at 13; Ex. 101, Roberts Statement at 473. o Ex. 104, Anderson Statement at Y 14; Ex.101, Roberts Statement at 473. Ex. 10], Roberts Statement at § 74. 4Bofficials in connection wit . on with the Toachi-Pilaton Project.'* The entry reads: ewe Gaba: Besos 8 sume at Wao, 100 wp eon 1B Caateas Ate $25 4 Comact 81013 fecaty andina 5} Lega aewce for Accordingly, the evidence supports Cardno’s unrebutted interpretation of Exhibit 70, which is that:'°7 + Vio ore Gas) was to reve 810000000, $50,000.00 of which is atibue to project 476 (Toachi-Pilaton). A contract was made for Project 476 (Toachi-Pilaton) for $135,000.00. To satisfy that amount, $10,000.00 was allegedly already paid, $10,000.00 more must be paid locally (i.e., by physical exchange in cash), and the remaining $125,000.00 should be paid abroad (ie, through an offshore shell corporation). «Another contract was made for Project 476 (Toachi-Pilaton) for $350,000.00. To satisfy that amount, $16,000.00 was allegedly already paid, an additional $20,000.00 and $19,000.00 must be paid locally for a total of $55,000.00 pxid locally (ce., by plysical exchange in cash), and the remaining $295,000.00 should be paid abroad (i.e., through an offshore shell corporation). © There is also a charge for “legal advice” for Project 476 (Toachi-Pilaton) for $80,000.00 [million is tated in errr], which amount shall be paid to Lawyer Fernando. ‘The May 9, 2013 sgreement with Asesorias Australes provides specific payment schedule for the $623,180.00 total contract valve: $200,000.00 due 30 days after the contract takes effeet; $103,000.00 due 60 days after the contract takes effect; and 14 monthly payments of eon ae 7 See Ex. 70, Calendar Entry; Ex. 401, Roberts Statement at} 74. x. 101, Roberts Statement a 174$22,870.00 thereafter, * fer." However, Asesorias Australes did not send an invoice for the first ayment of Payment of $200,000.00 until August 20, 2013; the next invoice for $103,000.00 is dated September 3 tember 11, 2013; and the first invoice of the 14 monthly payments of $22,870.00 is dated October 14, 20/3." Caminosca’s consortium paid at least some of the Asesorias Australes invoices.” Another calendar entry related to the Toachi-Pilaton Project states." From: Carlos Diego Jacome Merino Importance: Normal Subject: 0-476, gabriel, Marcelo DDJ contract. .. Categories: Work, Outside the office Fr 41512013 3:30:00 PM Fri 4/6/2013 4:00:00 PM Recurrence Pattem: None [We] Stockholders will collect 187.5 loaned for dh abroad In early 2013 Respondents made @ number of personal ‘loans’ in order to cover di jaton Project. According to spreadsheets prepared by and payments related to the Toachi: circulated among Respondents, Eduardo Jaécome, Carlos Diego Jacome, and Galo Recalde made these ‘loans’ from January to December 2013." These loans amounted to $197,541, and were in fact made before the written contract between Asesorias Australes and Consorcio Consultor 2 ‘Ex. 12, Contrato de Servicios at JACOME-1001 (§ 5.3); Ex. 105, Negreira Statement: at 428. ‘See Consolidated Ex74, Asesoris Australes Invoices to Consultr Pilaton Toschi at CARDNO-4795- GR03T: Ex, 105, Negreira Statement at § 29. at CARDNO-420-424; Ex. 105. Negreira Statervent at ] 30. ee Ex. 75, Wire Transfer Confirmation a - 476, Gabriel, Marcelo DDJ contract”, at CARDNO-4321- a See Ex. 76, April 5, 2013 Calendar Entry, 145237; see Ex. 105. Negreira Statement at] 317-32. 22 Bg 101, Robes Statement at §75; se Es, 76, Calendar Entry: 2 See, e.g, EX.15, Excel Spreadsheet at CARDNO-887288-88728% 4651, 4654. {EXTT, Excel Spreadsheet at CARDNO- 45