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The G-20 On Corruption

Prior to reading this post, you no doubt have already come to your own conclusions about whether declarations released when international political leaders get together are: meaningful and significant, political posturing with little practical significance, or something in between.

Whatever your views, it should be noted that paragraph 40 of the declaration released in connection with the recent G-20 Summit in Toronto (see here) contained this statement:

“We agree that corruption threatens the integrity of markets, undermines fair competition, distorts resource allocation, destroys public trust and undermines the rule of law. We call for the ratification and full implementation by all G-20 members of the United Nations Convention against Corruption (UNCAC) and encourage others to do the same. We will fully implement the reviews in accordance with the provisions of UNCAC. Building on the progress made since Pittsburgh to address corruption, we agree to establish a Working Group to make comprehensive recommendations for consideration by Leaders in Korea on how the G-20 could continue to make practical and valuable contributions to international efforts to combat corruption and lead by example, in key areas that include, but are not limited to, adopting and enforcing strong and effective anti-bribery rules, fighting corruption in the public and private sectors, preventing access of corrupt persons to global financial systems, cooperation in visa denial, extradition and asset recovery, and protecting whistleblowers who stand-up against corruption.”

The White House released this statement by President Obama on the issue which states, among other things, as follows:

“Preventing and tackling corruption must be a key part of [the G-20’s] efforts to shape an international economic architecture that is rules-based and transparent; that promotes trade and fair competition among businesses; and that fosters prosperity and development, by recognizing the fact that corruption, illicit outflows of capital, and their absorption in the global financial system represent impediments to economic growth.”

Talking about rules-based, transparent enforcement and establishing a working group to make comprehensive recommendations on how to adopt and enforce strong and effective anti-bribery rules is good.

However, the big picture issue will remain – what level of committment will there be to adopting and enforcing strong and effective anti-bribery rules when doing so threatens a key supplier or vendor of a key product valued by the prosecuting government?

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What is the G-20?

As described here, it is “The Group of Twenty (G-20) Finance Ministers and Central Bank Governors […] established in 1999 to bring together systemically important industrialized and developing economies to discuss key issues in the global economy.”

Friday Roundup

Some FCPA developments and news to pass along this Friday.

Additional Prosecutor Joins DOJ FCPA Unit

As reported earlier this week in the New York Times (see here), Jeffrey Knox, a current federal prosecutor in the Eastern District of New York, will soon assume a new position in the DOJ’s FCPA unit. Knox, a prosecutor with extensive terrorism and foreign intelligence gathering experience, describes himself in the NY Times article “as a traditional law-and-order Republican.” Prior to becoming a DOJ prosecutor, Knox was an attorney at Simpson Thacher & Bartlett in New York. For additional coverage, see here from Christopher Matthews at Main Justice.

Flavio Ricotti Extradition

As detailed in this DOJ release, “Flavio Ricotti, a former executive of Rancho Santa Margarita, Calif.-based valve company Control Components Inc. (CCI), has been extradited to the United States from Germany in connection with his alleged participation in a conspiracy to secure contracts by paying bribes to officials of foreign state-owned companies as well as officers and employees of foreign and domestic private companies.” According to the release, “Ricotti, 49, of Bientina, Italy, was arrested on Feb. 14, 2010, in Frankfurt, Germany, and arrived in the United States on July 2, 2010.”

As noted in the release:

“Ricotti and five other former executives of CCI were charged on April 8, 2009, in a 16-count indictment (see here) for their alleged roles in the foreign bribery scheme. According to the indictment, Ricotti, who served as CCI’s vice president and head of sales for Europe, Africa and the Middle East from 2001 through 2007, allegedly caused CCI employees and agents to make corrupt payments totaling approximately $750,000 to officers and employees of state-owned companies, and corrupt payments totaling approximately $380,000 to officers and employees of private companies. According to the indictment, these corrupt payments occurred in connection with CCI projects in various countries around the world, including in the United Arab Emirates, Kazakhstan, India and Qatar.”

For more on the CCI matter, see here.

Other foreign nationals facing extradition to the U.S. to face FCPA charges include Jeffrey Tesler, the U.K. agent at the center of the Bonny Island bribery scheme, and Wojciech Chodan, also a U.K. citizen and a former salesperson and consultant of a U.K. subsidiary of Kellogg, Brown & Root. (See here). British judges have ruled that Tesler and Chodan can be extradited to the U.S. and these individuals are appealing that decision. And then of course there is Viktor Kozeny (see here).

A good weekend to all.

Friday Roundup

Some FCPA developments and news to pass along this Friday.

Additional Prosecutor Joins DOJ FCPA Unit

As reported earlier this week in the New York Times (see here), Jeffrey Knox, a current federal prosecutor in the Eastern District of New York, will soon assume a new position in the DOJ’s FCPA unit. Knox, a prosecutor with extensive terrorism and foreign intelligence gathering experience, describes himself in the NY Times article “as a traditional law-and-order Republican.” Prior to becoming a DOJ prosecutor, Knox was an attorney at Simpson Thacher & Bartlett in New York. For additional coverage, see here from Christopher Matthews at Main Justice.

Flavio Ricotti Extradition

As detailed in this DOJ release, “Flavio Ricotti, a former executive of Rancho Santa Margarita, Calif.-based valve company Control Components Inc. (CCI), has been extradited to the United States from Germany in connection with his alleged participation in a conspiracy to secure contracts by paying bribes to officials of foreign state-owned companies as well as officers and employees of foreign and domestic private companies.” According to the release, “Ricotti, 49, of Bientina, Italy, was arrested on Feb. 14, 2010, in Frankfurt, Germany, and arrived in the United States on July 2, 2010.”

As noted in the release:

“Ricotti and five other former executives of CCI were charged on April 8, 2009, in a 16-count indictment (see here) for their alleged roles in the foreign bribery scheme. According to the indictment, Ricotti, who served as CCI’s vice president and head of sales for Europe, Africa and the Middle East from 2001 through 2007, allegedly caused CCI employees and agents to make corrupt payments totaling approximately $750,000 to officers and employees of state-owned companies, and corrupt payments totaling approximately $380,000 to officers and employees of private companies. According to the indictment, these corrupt payments occurred in connection with CCI projects in various countries around the world, including in the United Arab Emirates, Kazakhstan, India and Qatar.”

For more on the CCI matter, see here.

Other foreign nationals facing extradition to the U.S. to face FCPA charges include Jeffrey Tesler, the U.K. agent at the center of the Bonny Island bribery scheme, and Wojciech Chodan, also a U.K. citizen and a former salesperson and consultant of a U.K. subsidiary of Kellogg, Brown & Root. (See here). British judges have ruled that Tesler and Chodan can be extradited to the U.S. and these individuals are appealing that decision. And then of course there is Viktor Kozeny (see here).

A good weekend to all.

More on Snamprogetti, ENI

Yesterday’s post (see here) provided a high-level overview of the joint DOJ / SEC FCPA enforcement action.

Today’s post provides a summary of the DOJ criminal information (here), deferred prosecution agreement (here), and SEC civil complaint (here).

For starters, the conduct at issue focuses on Snamprogetti Netherlands BV (“Snamprogetti”), a Dutch company headquartered in Amsterdam. Snamprogetti was a wholly-owned subsidiary of Snamprogetti, S.p.A., an Italian company, which in turn was a wholly-owned subsidiary of ENI, S.p.A., an Italian company headquartered in Rome that has been an issuer since 1995 and currently has common stock and American Depository Shares listed on the New York Stock Exchange. In February 2006, ENI sold Snamprogetti to Saipem, S.p.A., an Italian company. As indicated in this Saipem press release, even though Snamprogetti is a current subsidiary of Saipem, “in connection with the sale of Snamprogetti to Saipem, Eni agreed to indemnify Saipem for losses resulting” from the Bonny Island bribery investigation and accordingly neither the DOJ or SEC penalty “will impact Saipem’s consolidated income statement and balance sheet.” According to the SEC, “ENI owns 43% of, and exercises control over” Saipem.

With that out of the way, back to Snamprogetti.

Information

Not surprisingly, the Snamprogetti information largely mirrors the criminal informations previously filed last week against Technip (see here) and in February 2009 against the Kellogg Brown & Root (see here) – entities also part of the joint venture engaged in the Bonny Island bribery scheme.

The Snamprogetti information charges conspiracy to violate the FCPA and aiding and abetting violations of the FCPA’s antibribery provisions and alleges that Snamprogetti was part of a joint venture (“JV”) in Nigeria to design, build and expand LNG facilities on Bonny Island. According to the information, JV profits, revenues, and expenses were equally shared among the four JV partners. The JV’s Steering Committee consisted of high-level executives from each of the four companies and the Steering Committee made major decisions on behalf of the JV, including whether to hire agents to assist the JV in winning contracts, who to hire as agents, and how much to pay the agents.

The information charges that the JV operated through three Portuguese special purpose corporations, including a corporation (#3), 25% owned by Snamprogetti, specifically used to enter into consulting agreements with JV agents.

The criminal conduct charged centers on two agents hired by the JV.

The first agent, Jeffrey Tesler was a citizen of the United Kingdom who used a Gibraltar-based company as a vehicle to enter into agent contracts and receive payments from the JV. The information charges that the JV paid the company over $130 million to bribe high-ranking Nigerian government officials. According to the information, Tesler was an agent of the JV and each of the JV companies.

The second agent was a global trading company headquartered in Tokyo (the “Japanese Agent”), which was hired by the JV to help it obtain business in Nigeria, including by paying bribes to Nigerian officials. The information charges that the JV paid the consulting company over $50 million to bribe Nigerian government officials. According to the information, the Japanese Agent was an agent of the JV and each of the JV companies.

According to the information, between 1995 and 2004, the JV was awarded four contracts (collectively valued at over $6 billion) to build the Bonny Island Project and alleges that Snamprogetti, Technhip, Kellogg Brown & Root, Tesler, the Japanese Agent, and others, were engaged in a conspiracy to obtain and retain the contracts “through the promise and payment of tens of millions in bribes to officials of the Executive Branch of Nigeria, officials of Nigeria National Petroleum Corporation (NNPC), officials of Nigeria LNG Limited (NLNG) and others.”

[According to the information, NNPC was a Nigerian government-owned company and an entity and instrumentality of the Government of Nigeria whose officers and employees were “foreign officials” under the FCPA. According to the information, NLNG was also an entity and instrumentality of the Government of Nigeria whose officers and employees were “foreign officials” under the FCPA, notwithstanding the fact that NLNG was 51% owned by multinational oil companies. Why? Presumably because, as the information alleges, “through the NLNG board members appointed by NNPC, among other means, the Nigerian government exercised control over NLNG, including but not limited to the abilty to block the award” of the relevant contracts.]

Among other means of the conspiracy, the information alleges that:

“officers, employees, and agents of Snamprogetti and their co-conspirators caused wire transfers totaling approximately $132 million to be sent from [#3’s] bank account in Amsterdam, The Netherlands, to bank accounts in New York, New York, to be further credited to bank accounts in Switzerland and Monaco controlled by Tesler for Tesler to use to bribe Nigerian government officials.”

“officers and employees of Snamprogetti and their co-conspirators caused wire transfers totaling over $50 million to be sent from [#3’s] bank account in Amsterdam, The Netherlands to [Japanese Agent’s] bank account in Japan for [the Japanese Agent to use to bribe Nigerian government officials.”

Based on the same core conduct, the information also charges Snamprogetti with aiding and abetting violations of the FCPA’s antibribery provisions and alleges that “Snamprogetti aided and abetted Kellogg, Brown and Root in causing […] corrupt U.S. dollar payments to be wire transferred from [#3’s] bank account in Amsterdam, The Netherlands, via correspondent bank accounts in New York, New York, to bank accounts of [Tesler’s Gibraltar based company] in Switzerland for use in part to bribe Nigerian government officials.”

DPA

The DPA has a term of two years. Parties to the DPA include Snamprogetti, Saipem and ENI.

Pursuant to the DPA, Snamprogetti admitted, accepted, and acknowledged that it is responsible for the acts of its employees, subsidiaries, and agents as detailed in the above criminal information.

According to the DPA, the DOJ agreed to enter into the agreement with the parties based on the following factors: “(a) Snamprogetti, Saipem, and ENI cooperated with the DOJ’s investigation of Snamprogetti and others; (b)Snamprogetti, Saipem, and ENI undertook remedial measures, including the implementation of an enhanced compliance program; and (c) Snamprogetti, Saipem, and ENI agreed to continue to cooperate with the DOJ in any ongoing investigation of the conduct of Snamprogetti and its present and former employees, agents, consultants, contractors, subcontractors, subsidiaries, and others relating to violations of the FCPA.”

According to the DPA, the fine range under the advisory U.S. Sentencing Guidelines for Snamprogetti’s conduct is $300 million – $600 million. Snamprogetti agreed to pay a criminal penalty of $240 million or approximately 20% below the bottom of the fine range. Thus another example of the DOJ allowing a corporation to settle significant bribery allegations for an amount below even the bottom range of fines available under the advisory Sentencing Guidelines.

The DPA, unlike the recent Technip DPA, does require the engagement of a corporate compliance monitor.

Representing Snamprogetti, Saipem, and ENI in the FCPA enforcement action was Karen Patton Seymour (here) and Nicolas Bourtin (here) of Sullivan & Cromwell LLP.

In the DOJ release (here) Principal Deputy Assistant Attorney General Mythili Raman stated: “the resolutions in this investigation demonstrate the U.S. government’s commitment to identifying and holding accountable all companies and individuals who scheme to bribe foreign government officials to win business;” “Snamprogetti and its joint-venture partners conspired to pursue lucrative contracts through a massive bribery scheme – a scheme that has led to more than $1.28 billion in criminal and civil penalties to date. The monetary penalties and enforcement actions that have resulted from this investigation should send a clear message to companies and their employees that using foreign bribery as a means of winning contracts abroad will be punished.” Kevin L. Perkins, assistant director of the FBI’s Criminal Investigative Division added: this “resolution is yet another example of the FBI’s willingness to aggressively investigate individuals and businesses that engage in corrupt conduct around the globe;” “those who elect to expand or protect their business interests through the payment of illegal bribes to foreign public officials should know that they are not beyond the reach of the FBI. Together, with our law enforcement partners around the world, we will identify these bad actors and work with the Justice Department to prosecute them under the Foreign Corrupt Practices Act and other appropriate federal statutes.”

SEC Complaint

The SEC complaint “arises from multiple violations of the Foreign Corrupt Practices Act” by ENI and its former indirect subsidiary Snamprogetti. According to the complaint: “between at least 1995 and 2004, senior executives at Snamprogetti, among others, devised and implemented a scheme to bribe Nigerian government officials to assist in obtaining multiple contracts worth over $6 billion to build liquefied natural gas production facilities on Bonny Island, Nigeria” that a four-company JV, of which Snamprogetti was a member, won the contracts to build.

Specifically, the SEC complaint alleges that “to conceal the illicit payments, Snamprogetti and others, through the JV, entered into sham ‘consulting’ or ‘services’ agreements” with Tesler and the Japanese Agent “who would then funnel their purportedly legitimate fees to Nigerian government officials.”

According to the SEC, “as a result of the scheme, numerous books and records of Snamprogetti and ENI contained false information relating to, among other things” Tesler and the Japanese Agent “and the payments made to them.” Specifically, the SEC alleged that “Snamprogetti’s business records […] contained the contracts with [Tesler] and the Japanese Agent, which falsely described the purpose of the contracts in order to make it appear that the agents would perform legitimate services.” According to the SEC, “these documents were part of Snamprogetti’s business records and supported Snampogetti’s financial statements, which were consolidated into ENI’s financial statements.”

The SEC alleges that “Snamprogetti did not conduct due diligence” on Tesler or the Japanese Agent and “ENI failed to ensure that Snamprogetti complied with ENI’s policies regarding the use of agents.” Specifically, the SEC alleged that “ENI’s policies and procedures governed Snamprogetti’s use of agents” but that “ENI failed to ensure that Snamprogetti conducted due diligence on agents hired through JV’s in which Snamprogetti participated.” “As a result,” the complaint alleged, “ENI’s internal controls failed to detect, deter or prevent the decades-long bribery scheme.”

Based on the above allegations, the SEC charged Snamprogetti, as “an agent of a U.S. issuer” with violating the FCPA’s antibribery provisions and knowingly falsifying books and records that supported the financial statements of ENI and knowingly circumventing ENI’s internal accounting controls. The SEC charged ENI with violating the FCPA’s books and records and internal control provisions. According to the SEC, “ENI exercised control and supervision of […] Snamprogetti during the relevant time and on certain of its business decisions, such as Snamprogetti’s entry into the JV.”

Without admitting or denying the SEC’s allegations, Snamprogetti and ENI consented to court orders permanently enjoining the companies from future violations of the FCPA and court orders requiring the companies, jointly and severally, to pay $125 million in disgorgement.

In a press release (see here) with the grabbing line “SEC charges Italian Company and Dutch Subsidiary in Scheme Bribing Nigerian Officials With Carloads of Cash,” Robert Khuzami, Director of the SEC’s Division of Enforcement stated: “this elaborate bribery scheme featured sham intermediaries, Swiss bank accounts, and carloads of cash as everyone involved made a concerted effort to cover their tracks” … “but the billion-plus dollars in sanctions paid by these companies show that ultimately there is no hiding or profiting from bribery.”

[As to the carload of cash, the SEC complaint alleges that the joint venture in which Snamprogetti participated in, paid Tesler (the UK agent) $40 million under a sham consulting agreement, and that Tesler then used a subcontractor to transfer $5 million to a Nigerian government official for the benefit of a Nigerian political party. According to the SEC complaint, “on several occassions, the Subcontractor personally delivered hand-delivered $1 million in U.S. currency in a brief case to the Nigerian official in a hotel room in Abuja, Nigeria.” The complaint alleges that the “Subcontractor delivered the remainder of the $5 million to the Nigerian official in local Nigerian currency,” but that because the currency “was too bulky to deliver by hand, the Subcontractor loaded the cash into vehicles, which were delivered to the Nigerian official.”

In a press release (see here) ENI stated, among other things, as follows:

“As the U.S. authorities’ court filings indicate, the criminal activity with which Snamprogetti Netherlands B.V. was charged ceased by June 15, 2004. Eni, Saipem, and Snamprogetti cooperated with the U.S. authorities’ investigations. In the agreements, the SEC and DOJ did not require the implementation of any independent compliance monitor. Since the conduct at issue, Eni, Saipem, and Snamprogetti Netherlands B.V. have made substantial enhancements to their anti-corruption compliance programs, which monitor Eni and its subsidiaries’ compliance systems. Eni and its subsidiaries are committed to continuous improvements to their internal compliance program and policies.”

Snamprogetti The Latest to Join The Bonny Island Bribery Club

Last week (see here and here), it was French company Technip that admitted to bribing Nigerian foreign officials with the end result being $338 million paid into the United States treasury.

This week its a Dutch company and its former Italian parent company that admitted to bribing Nigerian foreign officials with the end result being an additional $365 million paid into the United States treasury.

As indicated in this DOJ release: “Snamprogetti Netherlands B.V., (Snamprogetti) has agreed to pay a $240 million criminal penalty to resolve charges related to the Foreign Corrupt Practices Act (FCPA) for its participation in a decade-long scheme to bribe Nigerian government officials to obtain engineering, procurement and construction contracts” to build liquefied natural gas facilities on Bonny Island, Nigeria.”

According to the release, the DOJ “filed a deferred prosecution agreement [DPA] and a criminal information today against Snamprogetti [a Dutch corporation headquartered in Amsterdam, The Netherlands, which was a wholly owned subsidiary of Snamprogetti S.p.A., an Italian company headquartered in Milan, Italy] charging Snamprogetti with one count of conspiracy and one count of aiding and abetting violations of the FCPA.” The release further states that pursuant to the two-year DPA “Snamprogetti, its current parent company, Saipem S.p.A., and its former parent company, ENI S.p.A. (ENI), agreed to ensure that their compliance programs satisfied certain standards and to cooperate with the department in ongoing investigations.”

In addition, the release notes that:

“Today, Snamprogetti and ENI also reached a settlement of a related civil complaint filed by the U.S. Securities and Exchange Commission (SEC), charging Snamprogetti with violating the FCPA’s anti-bribery provisions, falsifying books and records, and circumventing internal controls and charging ENI with violating the FCPA’s books and records and internal controls provisions. As part of that settlement, Snamprogetti and ENI agreed jointly to pay $125 million in disgorgement of profits relating to those violations.”

For a copy of the SEC release and complaint (see here and here).

Stay tuned for analysis of the DOJ deferred prosecution agreement, criminal information, and SEC complaint.

In the meantime, some questions to ponder.

For those scoring at home, the current U.S. treasury deposit slip, because a joint venture largely comprised of foreign companies bribed Nigerian officials, stands at $1.28 billion given the related February 2009 enforcement action against Kellogg Brown & Root entities as well as Halliburton Company – an enforcement action that was settled for $579 million in combined fines and penalties.

Bribery and corruption, the conventional wisdom goes, is not a victimless crime. Accordingly, the Bonny Island bribery scheme resulted in victims. Surely those victims were not U.S. taxpayers, but the U.S. Treasury is where the entire $1.28 billion has gone.

The Bonny Island bribery scheme, which now stands as the largest collective FCPA enforcement action in history, begs the question – where should the fines and penalties resulting from an FCPA enforcement action go? Solely to U.S. taxpayers? To the “victims” of the alleged crime? If to the “victims” who are the “victims” and how best does one get the money to the “victims?” Are the enforcement agencies willing to sacrifice portions of their current FCPA cash cow? (see here for more).

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