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Despite Statoil and Siemens (among other enforcement actions), many continue to describe the FCPA as the law that applies only to U.S. companies. Of course that is a wrong statement, as the FCPA applies to all issuers (foreign or domestic) and any foreign company or national that engages in acts in furtherance of a bribery scheme while in U.S. territory. In any event, it is sometimes hard to change perceptions.

Next time you hear this misperception, think February 12, 2010.

On February 12, 2010, it was reported that Daimler AG (a German carmaker) and Technip (a French oil and gas company) were close to resolving FCPA related enforcement actions.

Daimler

As reported here, Daimler is poised to “pay about $200 million and two subsidiaries will plead guilty to resolve a U.S. investigation into whether it paid bribes to secure business overseas.” According to the company’s prior filings, an internal investigation found that “improper payments were made in a number of jurisdictions, primarily in Africa, Asia, and Eastern Europe.” In addition, the report notes that Daimler has also faced scrutiny in connection with its role in the U.N. Oil-For-Food program in Iraq. The report quotes a Daimler spokesperson as saying, “we are in discussions with the DOJ and SEC regarding consensually resolving the agencies’ investigations.”

The report also notes that “government lawyers submitted the deal in Washington to U.S. District Judge Richard Leon.” Judge Leon is also overseeing the Africa Sting case. If true, the normally transparent DOJ (at least when it comes to alerting the public to FCPA enforcement actions) has yet to publicly announce any Daimler filing on its website. Nor does the DOJ website contain any information about the recent BAE matter. Perhaps it is because of the recent weather in D.C. which resulted in DOJ offices being closed for several days.

Technip

According to the company’s release (here), “Technip and the SEC and DOJ have discussed a resolution of all potential claims against the company” arising from an investigation involving TSKJ, a joint venture company in which Technip has a 25% share. The company disclosed that it will record a €245 million charge to reflect the “estimated costs” of the resolution. According to the release, “the potential resolution does not contemplate a criminal conviction for Technips’s role in the TSKJ joint venture.”

The TSKJ joint venture in Nigeria has been the focus of several previous FCPA enforcement actions. See here, here, and here.

In the News

Despite Statoil and Siemens (among other enforcement actions), many continue to describe the FCPA as the law that applies only to U.S. companies. Of course that is a wrong statement, as the FCPA applies to all issuers (foreign or domestic) and any foreign company or national that engages in acts in furtherance of a bribery scheme while in U.S. territory. In any event, it is sometimes hard to change perceptions.

Next time you hear this misperception, think February 12, 2010.

On February 12, 2010, it was reported that Daimler AG (a German carmaker) and Technip (a French oil and gas company) were close to resolving FCPA related enforcement actions.

Daimler

As reported here, Daimler is poised to “pay about $200 million and two subsidiaries will plead guilty to resolve a U.S. investigation into whether it paid bribes to secure business overseas.” According to the company’s prior filings, an internal investigation found that “improper payments were made in a number of jurisdictions, primarily in Africa, Asia, and Eastern Europe.” In addition, the report notes that Daimler has also faced scrutiny in connection with its role in the U.N. Oil-For-Food program in Iraq. The report quotes a Daimler spokesperson as saying, “we are in discussions with the DOJ and SEC regarding consensually resolving the agencies’ investigations.”

The report also notes that “government lawyers submitted the deal in Washington to U.S. District Judge Richard Leon.” Judge Leon is also overseeing the Africa Sting case. If true, the normally transparent DOJ (at least when it comes to alerting the public to FCPA enforcement actions) has yet to publicly announce any Daimler filing on its website. Nor does the DOJ website contain any information about the recent BAE matter. Perhaps it is because of the recent weather in D.C. which resulted in DOJ offices being closed for several days.

Technip

According to the company’s release (here), “Technip and the SEC and DOJ have discussed a resolution of all potential claims against the company” arising from an investigation involving TSKJ, a joint venture company in which Technip has a 25% share. The company disclosed that it will record a €245 million charge to reflect the “estimated costs” of the resolution. According to the release, “the potential resolution does not contemplate a criminal conviction for Technips’s role in the TSKJ joint venture.”

The TSKJ joint venture in Nigeria has been the focus of several previous FCPA enforcement actions. See here, here, and here.

The BAE “Soapbox”

Below is a compilation of what certain others in the FCPA community are saying about the BAE enforcement action.

Steven Tyrrell (here) notes (here) that the BAE “case again demonstrates the DOJ’s willingness to push its jurisdictional reach in cases involving foreign-based, non-issuers that make suspect payments outside the United States.” Tyrrell notes that “in spite of [a] seemingly slight jurisdictional nexus, DOJ aggressively pursued this FCPA matter and obtained an agreement from BAE to plead guilty to a felony and pay a $400 million penalty.” Even though the BAE criminal information contained bribery allegations (see here), the information did not change any FCPA offenses. Yet, Tyrrell and many others, continue to describe the BAE matter as an “FCPA matter.” Tyrrell’s aggressive comments are curious (and perhaps telling) in that he was the DOJ Chief of the Fraud Section responsible for prosecuting the FCPA from 2006 until his recent departure into private practice. (See here).

Miller Chevalier recently released (here) a thorough alert on the BAE matter. Among other things, the alert points out that the BAE matter “raises a host of significant legal and policy questions that are only partly explained in the public documents” associated with the matter. The alert points the “differences in the factual allegations in the two settlements” [SFO/DOJ] and notes that “the oblique nature of the violations charged, the negotiated terms of the settlements, and the allegations that are not made in the public settlement documents provide a glimpse of the political undercurrents, legal maneuvering, and policy objectives that underlie this settlement and raise potentially far-reaching precedential issues.”

Brian Whisler (here) had this to say:

“In a nutshell, the BAE resolution: (1) reconciles with DOJ’s publicly-stated commitment to deter corruption and bribery through the enforcement / prosecution of high impact, high profile cases — there are apparently other similar large scale matters in the DOJ pipeline (e.g., DaimlerChrysler); (2) reconciles with the UK’s effort to become a bigger player on the world enforcement scene, with the enhancement of penalties and other legislative efforts to give more teeth to the UK’s anti-corruption regime (keeping up with Germans in the aftermath of Siemens); and (3) suggests that defense contractor and procurement fraud in general will remain in the sights of the enforcement community for a considerable time, so long as we have one or more theaters of active military engagement.”

An FCPA lawyer who wished to remain anonymous had this to say:

“First, the SFO and the British justice system in general suffer in this settlement. From the British side, the deal has the feel of something that was quickly put together to put a lid on what else might develop. SFO investigators reportedly were still interviewing people on the morning the BAE resolution was announced. Larger than that issue, BAE clearly did wrong in Tanzania, but its actions in other markets were far equally disturbing and there will be no formal accounting for those acts. The unwritten message seems to be that industrialized nations continue to recognize that certain companies are “too big to fail,” and will take steps to protect even a company that does wrong, so long as the company is critical to some important national issue like defense or homeland security. Ultimately, these types of actions erode the moral authority of the industrialized world to demand the developing world to clean up its house. U.S. authorities have made a strong effort to have others step up and take the lead on anti-corruption issues, so that the world does not see anti-corruption as simply a U.S. issue. To some degree, the settlement in the U.S. diminishes that effort, as well. The developing world will see this deal as having been pushed by the U.S. They also will see the deal as not doing much to help the countries that BAE harmed through its corrupt business efforts. The small charity payment to Tanzania seems almost an afterthought inside of a $400 million deal, which is a drop in the bucket compared to BAE’s profits. The world likely will view the entire fine as a fairly minor slap for a company that has made a lot of money in the world market place because of its improper conduct.”

Finally, Ben Heineman, Jr. (here) noted that the BAE story is “depressingly familiar.” He notes that the BAE matter (and the Siemens matter) represent problems “in the developed world (!!), not in the developing world” and states that if “these iconic developed world companies had such widespread issues, it is reasonable to think that they are hardly alone.”

Willing to share you thoughts on the BAE matter? The comment box is open.

Lighthouses and Buoys – Additional Plea

The DOJ announced yesterday (here) that John Warwick pleaded guilty to a one-count criminal indictment charging him with conspiracy to pay bribes to former Panamanian officials to obtain contracts to maintain lighthouses and buoys along Panama’s waterways.

For additional posts about this case, including the prior guilty plea of Warwick’s co-conspirator Charles Jumet (see here). Warwick and Jumet are both associated with Virginia-based Ports Engineering Consultants Corporation (PECC).

The indictments against both individuals are substantively similar and involve a rather complex and convoluted way of getting the “thing of value” to the “foreign official.” According to the indictments, Warwick and Jumet designated certain corporate entities as shareholders of PECC and allowed the “foreign officials” to receive dividend payments and bearer shares from these entities.

BAE – The Non-Bribery Bribery Allegations

Back in law school, a professor was fond of the phrase ““if it walks like a duck, quacks like a duck, looks like a duck, it must be a duck.”

Among other allegations, DOJ’s criminal information (here) against BAE alleges that BAE served as the “prime contractor to the U.K. government following the conclusion of a Formal Understanding between the U.K. and the Kingdom of Saudi Arabia (“KSA”)” in which BAE sold to the U.K. government, which then in turn sold to the Saudi government several Tornado and Hawk aircraft, “along with other military hardware, training and services.” The information refers to these frequent arrangements as the “KSA Fighter Deals.”

In connection these deals, the information alleges that “BAE provided substantial benefits to one KSA public official, who was in a position of influence regarding the KSA Fighter Deals (the “KSA Official”), and to the KSA Official’s associates.” The indictment alleges that BAE “provided these benefits through various payment mechanisms both in the territorial jurisdiction of the U.S. and elsewhere.”

WALKS LIKE A DUCK!

This allegation is important from an FCPA perspective because the FCPA only applies to a company like BAE (a foreign company with no shares listed on a U.S. exchange) if conduct in furtherance of a bribery scheme has a U.S. nexus. See 78dd-3. [BAE does have a wholly-owned U.S. subsidiary – a “domestic concern” under the FCPA – but the information states that this entity was not involved in the conduct alleged in the information].

In addition, the information contains additional allegations which clearly demonstrate that BAE’s bribery scheme had a U.S. nexus. For instance, the information alleges that BAE “provided support services to [the] KSA Official while in the territory of the U.S.” and that these benefits “included the purchase of travel and accommodations, security services, real estate, automobiles and personal items.” The information alleges that over $5 million in invoices for benefits provided to the KSA Official were submitted by just one BAE employee during a one year period.

QUACKS LIKE A DUCK!

The information also alleges that BAE “used intermediaries and shell entities to conceal payments to certain advisers who were assisting in the solicitation, promotion and otherwise endeavoring to secure the conclusion or maintenance of the KSA Fighter Deals.”

Specifically, the information alleges that “in connection with the KSA Fighter Deals, BAE agreed to transfer sums totaling more than £10,000,00 and more than $9,000,000 to a bank account in Switzerland controlled by an intermediary. BAE was aware that there was a high probability that the intermediary would transfer part of these payments to the KSA Official.”

Such “high probability” language is a direct quote from the FCPA’s so-called third party payment provisions which prohibit making improper payments to any person “while knowing that all or a portion” of the money will be given to a foreign official in order to obtain or retain business. The FCPA specifically provides that “[w]hen knowledge of the existence of a particular circumstance is required for an offense, such knowledge is established if a person is aware of a high probability of the existence of such circumstance, unless the person actually believes that such circumstance does not exist.”

In order words, the “high probability” language used in the BAE criminal information is no mere coincidence. In fact, that language (i.e. a company was aware that there was a high probability that the intermediary would transfer part of its payments to a foreign official) is frequently used by the DOJ in resolving FCPA antibribery actions.

For instance, in the InVision FCPA enforcement action, the “investigations by the DOJ and SEC revealed that InVision, through the conduct of certain employees, was aware of a high probability that its agents or distributors” in Thailand, China and the Philippines “had paid or offered to pay money to foreign officials or political parties in connection with transactions or proposed transactions for the sale by InVision of its airport security screening machines.” (See here). Specifically, the non-prosecution agreement (here) notes that: (i) InVision “was aware of a high probability that part of the source of funds” to an agent was to be used by the agent “to fund an offer to promise to make payments” to Thai officials; (ii) InVision authorized a payment to an agent “with awareness of a high probability” that the agent “intended to use part of that payment to influence” Chinese officials; and (iii) InVision sought authorization for a payment to an agent “with awareness of a high probability that” the agent “intended to use part of that payment to influence officials of the government of the Philippines” – all in an effort to obtain or retain business for InVision.

LOOKS LIKE A DUCK!

Yet, the DOJ’s criminal information merely charges one count of conspiracy and it lacks any FCPA antibribery charges. Moreover, the conspiracy charge relates only to “making certain false, inaccurate and incomplete statements to the U.S. government and failing to honor certain undertakings given to the U.S. government, thereby defrauding the United States” and “caus[ing] to be filed export license applications with [various U.S. government entities] that omitted a material fact” concerning fee and commission payments.” Among the false statements BAE is alleged to have made to the U.S. government is its commitment to not knowingly violate the FCPA.

This is the only mention of the FCPA in the information despite the above allegations concerning the KSA Fighter Deals – facts which clearly implicate the FCPA’s antibribery provisions.

In other words, NO DUCK!

For a prior post on BAE (see here).

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