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Will The DOJ Also Bring An Enforcement Action Against Griffiths Energy?

Last month, in an event widely reported, Canadian authorities brought an enforcement action against Griffiths Energy International Inc. (“GEI”) under Canada’s Corruption of Foreign Public Officials Act (“CFPOA”)

This post summarizes that enforcement action, including allegations in the Statement of Facts concerning conduct in the U.S. that would seem to provide a basis for the U.S. Department of Justice to also bring a Foreign Corrupt Practices Act (“FCPA”) enforcement action against GEI.

Indeed, in GEI’s press release announcing resolution of the CFPOA matter, the company stated that it voluntarily disclosed the conduct at issue to both Canadian and U.S. authorities in November 2011 and specifically noted as follows.  “Since its voluntary disclosure Griffiths Energy has been cooperating and working with the Royal Canadian Mounted Police, the Public Prosecution Service of Canada (“PPSC”) and the U.S. Department of Justice to bring the matter to a close.”

Given that the above release was unclear as to whether the DOJ investigation is active or closed, I asked GEI this precise question, and the response from the company’s external public relations advisor last week was as follows.  “Griffiths Energy’s management is not available to comment.”  That answer would seem to suggest that the DOJ investigation is not closed.

The Statement of Facts in the CFPOA matter (see here) focuses on GEI’s efforts to obtain a production sharing contract (“PSC”) with the African nation of Chad to provide GEI with the exclusive right to explore and develop oil and gas reserves and resources in the Borogop and Doseo blocks in southern Chad.  In sum, GEI agreed that it “directly agreed to provide, and indirectly provided, improper benefits to a Chadian public official in order to further the business objectives of GEI and its subsidiaries.”  The public official is Chad’s Ambassador to Canada, Mahamoud Adam Bechir (the “Ambassador”), and by extension his wife Ms. Nouracham Niam.  Because Chad had no embassy located in Canada, the Ambassador resided in Washington D.C.

The Statement of Facts highlights a number of attempts by GEI to obtain the blocks in Chad as well as various consulting agreements designed to facilitate that process.   The first consulting agreement in August 2009 was signed by GEI and the Ambassador, on behalf of a Maryland-based entity wholly-owned by the Ambassador, and it provided for a $2 million fee payable to the entity if “GEI was awarded the Doseo and Borogop blocks on or before December 31, 2009.”  According to the Statement of Facts, “the services to be provided under the consulting agreement by the consultant were generally described as providing advisory, logistics, operational other assistance with respect to implementing GEI’s oil and gas projects in Chad.”

The Statement of Facts indicates however that “GEI’s outside legal counsel advised … that the Ambassador was a government official and that GEI could not make an offer or give an advantage or do anything directly or indirectly with him.  The agreement was terminated and no payments were made by GEI pursuant to this agreement.”

However, a second consulting agreement, “with identical terms” was entered into in September 2009 between GEI and a Nevada entity wholly-owned by the Ambassador’ wife.  According to the Statement of Facts, “a subscription agreement associated with the grant of 1,600,000 founders shares in GEI” to the Ambassador’s wife was also entered into and accompanied by a Western Union payment for the share price.  The Statement of Facts also indicates that “two other individuals” nominated by the Ambassador’s wife also were given the opportunity to purchase founders shares.  These individuals included the wife of the Deputy Chief of the Chadian Embassy in Washington D.C.

The Statement of Facts next discuss a meeting in Washington D.C. arranged by the Ambassador’s wife between “high-level officials from both GEI and the Government of Chad” to sign a memorandum of understanding (MOU) in relation to the blocks.  The MOU was not signed at this meeting, but was shortly thereafter.  During a change in Chad’s government, a final production sharing agreement was delayed, and a new MOU was signed in November 2010.  According to the Statement of Facts, in January 2011, “GEI engaged new external legal counsel and transferred PSC-related documents for review” and GEI “also instructed new external legal counsel to either extend or redo the original consulting agreement” referenced above.  In mid-January 2011, the renewed consulting agreement was signed by GEI and the Ambassador’s wife.

Thereafter, “GEI and its outside legal advisors then travelled to Chad to complete the negotiations for the PSC” and on January 19, 2011, the PSC was signed.  Shortly thereafter, the $2 million payment from GEI to the Maryland entity wholly-owned by the Ambassador’s wife was made and deposited in the entity’s bank account in Washington D.C.

However, the Statement of Facts noted that even though the payments were made to persuade the “Ambassador to exercise his influence to assist GEI entering Chad,” no “influence was actually realized.”

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GEI is a privately-held Canadian company and as such the FCPA’s dd-3 prong could apply if (in the words of the FCPA) GEI “or any officer, director, employee, or agent … while in the territory of the United States, corruptly [made] use of the mails or any means or instrumentality of interstate commerce or to do any other act in furtherance of” the payment scheme.

It is also interesting to note the relevance of the two “domestic concerns” (in the words of the FCPA) – namely the Maryland entity and Nevada entity – in the conduct at issue.

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Returning to the CFPOA action, this is only the third instance Canadian authorities have brought corporate charges under the CFPOA.  (See this prior post with an analysis of the Nikko Resources enforcement action and general reference to the Hydro Kleen enforcement action).  The Statement of Facts provide a useful description by the Canadian authorities of facts and circumstances they considered when arriving at the ultimate fine amount of $9 million (plus the 15% victim fine surcharge) for a total amount of $10.35 million.

Under the heading “Full and Extensive Cooperation with Authorities” the Statement of Facts indicates as follows.

  • An entirely new management team was hired within GEI between July 2011 and August 2011 and six new independent directors were appointed to GEI’s board.  “No current member of GEI’s management team or board of directors was involved with or knowledgeable about the consulting agreements that are issue in this case.”
  • GEI’s current board and management learned of the consulting agreements “in the course of conducting due diligence in anticipation of its initial public offering which was to take place prior to Dec. 31, 2011.  “Immediately” thereafter, a Special Committee comprised entirely of the independent members of GEI’s board was created and engaged outside legal counsel and forensic accounting experts.
  • GEI “disclosed the existence of the issues [and the results of its internal investigation] to representatives of the Public Prosecution Service of Canada” as well as “enforcement authorities in the U.S.”
  • “Hard costs paid to GEI’ legal and accounting advisors on the internal investigation currently stand at CAD $5.0 million.
  • “GEI made the further decision to withdraw its IPO, causing GEI to write off approximately CAD $1.8 million in sunk pre-IPO expenses” and “causing GEI to incur significantly higher costs of capital through private placements in order to be able to continue its operations.”

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As to GEI’s “current development and exploration activities in Chad” see this recent company release.

Friday Roundup

Out with the tide, a former DOJ Fraud Section Chief speaks on voluntary disclosure, guidance issues, will candy fall from the pinata, schooled in the FCPA, a Section 1504 development, and “Minegolia.”

Tidewater Derivative Complaint Dismissed

As highlighted in this previous post, in November 2010 Tidewater Inc. was one of several companies to resolve a “CustomsGate” case.  The conduct at issue focused on Azeri tax officials and Nigerian temporary import permits and the company resolved DOJ and SEC enforcement actions by agreeing to pay $15.7 million in fines and penalties.

As if on cue in this new era of FCPA enforcement, along came the private plaintiff firms representing shareholders who filed a derivative complaint alleging that officers and members of the Board of Directors of Tidewater breached their fiduciary duties “in that they: (1) knew or recklessly disregarded the fact that employees, representatives, agents and/or contractors were paying, had paid and/or had offered to pay bribes to Azerbaijani and Nigerian government officials to obtain favorable treatment for Tidewater; (2) caused Tidewater to pay bribes and to disguise the bribe payments as legitimate expenses in Tidewater’s books and financial disclosures; and (3) failed to maintain adequate internal controls to ensure compliance with the FCPA and Exchange Act.”

Earlier this week, the case was swept out with the tide as U.S. District Court Judge Jane Triche Milazzo dismissed the complaint – see here for the decision.  In short, Judge Milazzo found that “Plaintiff did not adequately plead demand futility.”  Judge Milazzo utilized various tests in reaching her decision such as director interest and independence and whether the board could impartially consider the merits of the demand without being influenced by improper considerations.

As to interest, Judge Milazzo stated as follows.

“This Court finds that the Complaint is completely devoid of any allegations of an interested director. There is no allegation that any director appeared on both sides of a transaction or expected to derive a personal financial benefit from it. Nowhere in the Complaint can it be found that any one of the directors, much the less a majority of them, benefitted from the bribes themselves, benefitted from failing to establish and maintain adequate internal controls, benefitted from enforcing policies and programs designed to prevent violations, benefitted from improperly recorded payment of bribes in Tidewater’s books and records or benefitted from inadequately training their employees, agents, representatives and/or contractors with respect to compliance with the FCPA.”

As to alleged director participation or knowledge , Judge Milazzo stated that the “Complaint falls woefully short of pleading facts that are sufficient to show that there was any knowledge or conscious disregard on behalf of the directors.”

As to whether the directors exhibited bad faith sufficient to overcome business judgment rule presumptions, Judge Milazzo stated as follows.  “While Plaintiff’s allegations are sufficient to show that Tidewater was evidently violating both the FCPA and the Exchange Act, nowhere in the Complaint do Plaintiff’s allegations meet the specificity to show that the Individual Defendants were acting with the intent to violate these laws.  ‘[T]he mere fact that a violation occurred does not demonstrate that the board acted in bad faith.  Alleging that ‘upon information and belief’ the ‘Headquarters’ made the decision to avoid tax assessments in violation of the FCPA falls woefully short of the pleading requirements. Nowhere can this Court find who made this decision, how this decision was made or that there was an intent to violate any law. Moreover, the Court finds it significant that Tidewater’s directors voted and voluntarily initiated an FCPA investigation and advised the federal government of their violations before the government even suspected any violations.”

Tyrell on Voluntary Disclosure

You know the talking points.  The DOJ wants companies to voluntarily disclose, not ifs, ands or buts about it.  It’s interesting though how this becomes less of a black and white issues when individuals leave the DOJ.

In this recent Q&A in The Metropolitan Corporate Counsel, Steven Tyrell (a former DOJ Fraud Section Chief and current partner at Weil Gotshal – here) was asked the following question – “what is the role of voluntary reporting in establishing a good relationship with the regulatory and enforcement authorities?”

He stated as follows.

In the first instance, if a company has a legal obligation to disclose – for example, government contractors are obliged to disclose fraud – then the analysis begins and ends there. Assuming there is no legal obligation that compels disclosure or no imminent threat of disclosure by an outside party, such as a newspaper, then I typically advise clients to take credible allegations of wrongdoing seriously, look into those allegations in a manner that is appropriate under the circumstances, and assess the nature and extent of the company’s exposure and the pros and cons of disclosure. Then, and only then, should a disclosure be made if it is in the best interest of the company – or, for a public company, if the securities laws require it. Of course, it often will not be in a company’s best interest to disclose if, for example, the allegations prove not to be credible or if it is unclear whether the conduct even amounts to a violation of law. Under those circumstances, a disclosure could unnecessarily embroil the company in a lengthy and costly government investigation and result in other repercussions such as triggering civil litigation and harm to a company’s reputation that could otherwise be avoided. It’s a challenging calculus. I can tell you from past experience that there are companies that have strong reputations for compliance with regulators and others that do not. However, the fact that a company doesn’t disclose a problem that ultimately comes to DOJ’s attention is not necessarily going to damage the company’s credibility with DOJ. Regulators recognize that not every allegation should be of interest to them – and, frankly, having counsel that knows when they’ll be interested and when they won’t is really important.”

Guidance Issues

As highlighted in this previous post, soon after Assistant Attorney General Lanny Breuer announced in November 2011 that FCPA guidance would be forthcoming in 2012, Senator Grassley sought guidance on the guidance and asked Attorney General Holder several follow-up questions for the record.  For a copy of Holder’s responses, see here.

In this previous post, among others, I commented that non-binding DOJ guidance is not the best way to accomplish real and meaningful FCPA reform.

Thus, I completely agree with former DOJ Deputy Attorney General George Terwilliger and former DOJ attorney and Senate counsel Matthew Miner (both currently at White & Case, see here and here) when they state as follows in this article.

“The fact that the Justice Department recognizes the need for such guidance underscores the existence of blurry lines and fuzzy standards surrounding the FCPA. US businesses trying to compete successfully in the international commercial arena deserve better. Justice Department ‘guidance’ is neither enough, nor is it properly the role of prosecutors to be definitive interpreters of ambiguities in criminal laws. Congress writes the laws and, as the US Supreme Court has firmly established, has a responsibility to set clear standards for what is permissible and what is not. It should not stand aside in deference to the Justice Department’s plan to craft guidance, especially when that guidance will have no effect in court.”

Yara Fertilizer

It has been said before that anytime a foreign company is the subject of a corruption probe, the U.S. enforcement agencies are like children at a birthday party waiting for some candy to fall from the pinata.  Think what you will of the analogy.

The Wall Street Journal recently reported (here) that “Norwegian fertilizer producer Yara International ASA’s chief executive, Jorgen Ole Haslestad, apologized Friday to the company’s employees after an investigation uncovered millions of dollars in ‘unacceptable’ payments in India and Switzerland, as well as ‘unacceptable offers of payments’ in Libya.”  According to the article, the “unacceptable offers of payments” in Libya involve “a consultant related to the establishment of the company Libyan Norwegian Fertilizer Co., or Lifeco, in Libya, a joint venture with the Libyan National Oil Corp. and the Libyan Investment Authority.”

As noted on the company’s website here, Yara “has a sponsored Level 1 ADR program for American Depositary Receipts (ADRs), which represent ownership in shares of foreign (non-US) companies that trade on US financial markets.”  Whether foreign companies, including those with Level 1 ADR’s can become subject to the FCPA, see this excellent piece “When Does an ADR Program Give U.S. Authorities FCPA Jurisdiction Over a Foreign Issuer?”

Time will tell if the candy falls.

Checking in on Wynn Resorts

Previous posts here, here and here focused on the Wynn-Okada dispute including Wynn’s $135 million charitable contribution to the University of Macau.  On that topic, this recent Wall Street Journal article focused on the “web of political ties” between a Macau company paid by Wynn and government officials.  Regarding Wynn’s FCPA compliance in expanding in Macau, company CEO Steve Wynn stated as follows.  “This whole business of the Foreign Corrupt Practices Act—we were schooled in this.”

Final grade is pending.

Section 1504 Development

Several prior posts, see here for example, discussed Section 1504 of Dodd-Frank, the so-called Resource Extraction Disclosure Provisions and the long delay in SEC final rules.  As noted in this Corruption Current post by Samuel Rubenfeld, the SEC recently announced here that on August 22nd, “the Commission will consider whether to adopt rules regarding disclosure and reporting obligations with respect to payments to governments made by resource extraction issuers to implement the requirements of Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

“Minegolia”

There has been only one FCPA enforcement concerning, at least in part, business conduct in Mongolia (see here for the 2009 UTStarcom action).  This is hardly surprising, as few companies subject to the FCPA have traditionally engaged in business in the country.  However, as noted in this recent Al Jazerra article, Mongolia or “Minegolia” as the country is sometimes called, “is undergoing a rapid transformation, due to its incredible resource wealth in minerals such as coal, copper, and gold.” At the same time, the article notes that “Transparency International placed Mongolia 120th out of 183 nations on its corruption perception index” and that “90 percent of Mongolians believe politicians are benefitting from ‘special arrangements’ with foreign enterprises over mining rights.”

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A good weekend to all.

U.S. Bonny Island Bribery Bounty Grows

Few question the U.S. foreign bribery surplus, but it should be asked:  is the US Treasury the best place for fines and penalties when a foreign company bribes a foreign official?

In April 2011, JGC Corp. of Japan formally joined the Bonny Island (Nigeria) bribery club – see here for the prior post.  Some predicted this was the end of the Bonny Island enforcement actions, but I ended the post as follows.  “This may not be the last we hear of Bonny Island bribery. Consulting Company B (based in Japan) was a key participant in the bribery scheme. Does anyone know anything about Consulting Company B and whether it might be next to resolve its Bonny Island exposure? If so, please share.”

Yesterday, the DOJ shared as it announced (here) that Marubeni Corporation (a Japanese trading company headquartered in Tokyo) resolved an FCPA enforcement action  by agreeing to pay a $54.6 million criminal penalty.

As the DOJ trumpets in the headline of its release, the U.S. Bonny Island bribery intake now stands at $1.7 billion.  Previous enforcement actions were brought against the four TSKJ joint venture partners:  Kellogg Brown & Root LLC / Halliburton Co. / KBR Inc.  ($579 million in combined DOJ/SEC fines and penalties); Technip S.A. ($338 million in combined DOJ/SEC fines and penalties); Snamprogetti Netherlands BV / ENI S.p.A. ($365 million in combined DOJ/SEC fines and penalties); and JGC Corp. of Japan ($219 million in DOJ fines). In addition, as the DOJ notes in its release, is Jeffrey Tesler’s $149 million forfeiture, Wojciech Chodan’s $700,000 forfeiture, and Albert Jack Stanley’s guilty plea.

This post summarizes the Marubeni enforcement action, the first FCPA enforcement action of 2012.

The DOJ enforcement action involved a criminal information (here) against Marubeni Corporation resolved through a deferred prosecution agreement (here)

Criminal Information

The information focuses on the same Bonny Island (Nigeria) conduct at issue in the above referenced enforcement actions.  According to the information, Marubeni is a “major Japanese trading company headquartered in Tokyo, Japan, with operations around the world, including in Nigeria.”  The company’s shares are listed in Japan and the U.K.

According to the information, the TSKJ joint venture, in addition to hiring Jeffrey Tesler, “also hired Marubeni to help it obtain and retain business in Nigeria, including by offering to pay and paying bribes to Nigerian government officials.”  The information further states as follows.  “By the time TSKJ had stopped paying Marubeni in June 2005, TSKJ had paid Marubeni $51 million in part for use in bribing Nigerian government officials.  Marubeni was an agent within the meaning of the FCPA of TSKJ and of each of the joint venture companies, including KBR and Technip.  Thus, Marubeni was an agent of a “domestic concern” within the meaning of the FCPA and an agent of an “issuer” within the meaning of the FCPA.”

Based on the above allegations, the information charges one count of conspiracy and one count of aiding and abetting FCPA anti-bribery provisions.  The information contains the following  U.S. jurisdictional allegations.  (1) “Marubeni met with Stanley and others in Houston, Texas to discuss Marubeni’s contracts with TSKJ and its fees;” (2) “Marubeni’s co-conspirators caused wire transfers totaling approximately $132 million to be sent from Maderia Company’s 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;” (3) “on or about April 7, 1999 Marubeni faxed a letter to Stanley in Houston, Texas, regarding Marubeni’s fee for Train 3.”  The aiding and abetting charge is based on the following allegation:  “Marubeni aided and abetted KBR in causing the following corrupt payments to be wire transferred from Madeira Company 3’s bank account in Amsterdam, The Netherlands, to Marunbeni’s bank accounts in Japan intending for Marubeni to use such funds in part to bribe Nigerian government officials:  $17 million in payments between August 2002 and June 2004 “payments to Marubeni pursuant to Agreement for Trains 4 & 5.”

As in prior Bonny Island bribery enforcement actions, the “foreign officials” identified were Nigeria LNG Limited (“NLNG”) officers and employees,  NLNG is majority owned by multinational oil companies and Nigerian National Petroleum Corporation (“NNPC”) owns 49% of NLNG and “through the NLNG board members appointed by NNPC, among other means, the Nigerian government exercised control over NLNG, including but not limited to the ability to block the award of EPC contracts.”  In addition, the Marubeni enforcement action (like the prior enforcement actions) generically refer to the other Nigerian government officials.

Deferred Prosecution Agreement

The DOJ’s charges against Marubeni were resolved via a deferred prosecution agreement.  Pursuant to the DPA, Marubeni admitted, accepted, and acknowledged “that it is responsible under U.S. law for acts of its employees and agents” as set forth in the information.

The term of the DPA is two years and it states that the DOJ entered into the agreement based “on the individual facts and circumstances presented by this case” and that “among the facts considered were that Marubeni has agreed to undertake remedial measures as contemplated by [the DPA], and the impact on Marubeni, including collateral consequences, of a guilty plea or criminal conviction.”  When the DOJ cites the facts considered in resolving a matter via a DPA or NPA typically the facts are much more extensive than above.

As detailed in the DPA, the advisory Sentencing Guidelines range for the charges at issue was $54.6 million – $109.2 million.  Pursuant to the DPA, Marubeni agreed to pay $54.6 million – a rare instance in which the fine amount is within the guidelines range.

Pursuant to the DPA, Marubeni represented that it “has implemented and will continue to implement a compliance and ethics program designed to prevent and detect violations of the FCPA, the anti-corruption provisions of Japanese law, and other applicable anti-corruption laws throughout its operations …”.  The specifics of such a program are set forth in an attachment to the DPA.  In the DPA, Marubeni agreed to annual reporting obligations to the DOJ regarding its compliance program and internal controls.  In addition, Marubeni also agreed to engage a “corporate compliance consultant” for a two-year period.

As is common in FCPA DPA’s Marubeni expressly agreed that it shall not, directly or indirectly, “make any public statement … contradicting the acceptance of responsibility by Marubeni” set forth in the DPA.

In the DOJ’s release, Mythili Raman (Principal Deputy Assistant Attorney General, Criminal Division) stated as follows.  “With today’s resolution, the department has held accountable all five of the corporations that participated in the massive, decade-long scheme to bribe Nigerian government officials in connection with the so-called Bonny Island project.  As a result of this extensive investigation, the department and our partners have obtained more than $1.7 billion in penalties and forfeiture orders from the joint venture partners, their agents and individuals who sought illegally to obtain the Bonny Island contracts. Several individuals also have pleaded guilty for their roles in the scheme. Our FCPA enforcement efforts are an essential part of our comprehensive approach to rooting out corruption across the globe.”

In this company release, Marubeni said that the effects of the enforcement action on its business forecasts “will not be material.”  One interesting aside is that Marubeni states in its most recent annual report (here) as follows.  “FTSE4Good Global Index:  The FTSE4Good Global Index is a stock price indicator developed and established by the Financial Times Stock Exchange (FTSE), a joint venture between the Financial Times Ltd. of the U.K. and the London Stock Exchange. Companies are evaluated on their environmental sustainability efforts, relationships with stakeholders, protection of human rights, safeguarding of labor standards in their supply chains, and commitment to preventing corruption. Marubeni has been consistently selected for inclusion in the index since 2001, when the index was initially established.” (emphasis added).

Derek Adler (here) and Marc Weinstein (here) of Hughes Hubbard & Reed LLP represented Marubeni.

Bridgestone Corporation Resolves FCPA (and Antitrust) Enforcement Action

The DOJ announced yesterday (here) that “Bridgestone Corporation [a Japanese company that is the world’s largest manufacturer of tires and rubber products] has agreed to plead guilty and to pay a $28 million criminal fine for its role in conspiracies to rig bids and to make corrupt payments to foreign government officials in Latin America related to the sale of marine hose and other industrial products manufactured by the company.” 

Part conspiracy to violate the Sherman Act and part conspiracy to violate the FCPA, the FCPA portion of the criminal information (see here) alleges that Bridgestone conspired with others to “obtain and retain for Bridgestone’s IEPD [International Engineered Products Department] business million of dollars of sales of marine hose and other industrial products by making corrupt payments to foreign government officials in Latin America and elsewhere.”  Among other things, the DOJ alleged that Bridgestone: (i) “contracted with local sales agents in many of the Latin American countries where Bridgestone sought IEPD sales;” (ii) developed relationships with employees of the state-owned entities [PEMEX in Mexico is specifically mentioned] with which Bridgestone sought to do business;” (iii) “negotiated with employees of state-owned entities who were ‘foreign officials’ under the FCPA, in Mexico and other Lartin American countries, to make corrupt payments to those foreign officials to secure business for Bridgestone and BIPA [Bridgestone Industrial Products of America Inc. – Bridgestone’s U.S. subsidiary];” (iv) “approved the making of corrupt payments to the foreign officials through the local sales agents to secure business for Bridgestone and BIPA;” (v) paid local sales agents commissions within which BIPA included corrupt payments to be paid to the foreign officials; (vi) “coordinated these corrupt payments in Latin America through Bridgestone’s agents in the United States located in BIPA’s offices, including in Houston, Texas; and (vii) “took steps to conceal these payments, including, in some instances writing ‘Read and Destroy’ on facsimiles that contained information related to the corrupt payments and, in other instances using verbal communication rather than written communication to avoid creating written record.”

As to jurisdiction against Bridgestone, the DOJ asserts 78dd-3 and merely alleges that e-mails or faxes were sent to or from Japan to the U.S. in connection with bribery scheme.  Interestingly, in the Africa Sting case, Judge Leon – in the first judicial test of 78dd-3 jurisdiction – seemed to reject the notion that such conduct, in and of itself, satisfied 78dd-3’s “while in the territory of the U.S.” requirement.  See here for the prior post.

According to this filing, it would appear that approximately 80% of the $28 million fine is for the FCPA conduct.  The guidelines range for the antitrust conduct was $6.7 million – $13.4 million.  The guidelines range for the FCPA conduct was $40 million – $80 million. 

In other respects, the DOJ release states as follows.  “Under the plea agreement, the department recognized Bridgestone’s cooperation with the investigations, including conducting a worldwide internal investigation, voluntarily making employees available for interviews, and collecting, analyzing and providing to the department voluminous evidence and information.  In addition, the plea agreement acknowledges Bridgestone’s extensive remediation, including restructuring the relevant part of its business, terminating many of its third-party agents and taking remedial actions with respect to employees responsible for many of the corrupt payments.  Under the terms of the plea agreement, Bridgestone has committed to continuing to enhance its compliance program and internal controls.  As a result of these mitigating factors, the department agreed to recommend a substantially reduced fine.”

In a press release (here), Bridgestone [BSJ] noted as follows.  “Since May 2007, the DOJ has been investigating BSJ’s involvement in international cartel activities relating to the sale of marine hose. The DOJ has also investigated improper payments to government officials through local sales agents focusing primarily on Latin America in connection with certain industrial products. BSJ has cooperated fully in this matter.  The DOJ has agreed that BSJ’s cooperation has been ‘extraordinary’.  The DOJ has also acknowledged that BSJ has engaged in extensive remediation including dismantling the International Engineered Products Department, closing its Houston office of Bridgestone Industrial Products of America, Inc., terminating many of its third party agents, and taking remedial actions with respect to its employees. BSJ has also decided to withdraw from the marine hose business.”  The release further notes that the $28 million fine is a “significant reduction from the applicable sentencing guidelines due to BSJ’s cooperation and remediation efforts.”

Ordinarily, extraordinary cooperation, remediation, etc. allow a company to settle an FCPA enforcement action via a non-prosecution or deferred prosecution agreement.  Yet, the two-crime nature of the Bridgestone enforcement action may have prompted the DOJ to insist on a plea agreement to actual criminal charges.

As noted in the DOJ release, in 2008 Misao Hioki, the former general manager of Bridgestone’s international engineered products department, pleaded guilty to antitrust and FCPA conspiracy charges.  See here for that prior enforcement action.

Since April, Japanese companies have contributed approximately $248 million to the U.S. Treasury for violating the FCPA (recognizing that the Bridgestone action also contains an antitrust component).  See here for the prior JGC Corporation enforcement action.  Another Japanese company, Sojitz Corporation, is also reportedly the subject of an FCPA investigation in relation to conduct in Bahrain.  See here for the prior post. 

You ask, doesn’t Japan have its own “FCPA-like” law?  Yes, it does; however there is no criminal liability for corporations under the law.  To learn more see here.

Finally, the FCPA Blog reports (here) that Bridgestone has ADRs traded in the U.S. over the counter in the pink sheets.  In the past, the SEC has asserted FCPA books and records and internal controls jurisdiction over a company based on such a listing.  Given that DOJ and SEC enforcement actions are typically announced on the same day, and given nothing was announced yesterday by the SEC, it is further interesting that the SEC has apparently chosen to sit out the Bridgestone matter.

JGC of Japan Formally Joins the Bonny Island Bribery Club

In an enforcement action anticipated for months (see here for the prior post), JGC Corporation on Japan last week became the fourth joint venture partner to resolve its FCPA exposure in connection with the Bonny Island, Nigeria project.
Other joint venture partners in the so-called TSKJ consortium to previously resolve Bonny Island bribery probes were KBR / Halliburton (see here), Technip (see here) and Snamprogetti (see here). In addition, M.W. Kellogg Ltd., the entity that originally formed the TSKJ consortium resolved a U.K. Serious Fraud Office enforcement action (see here). In terms of individual prosecutions, Albert Jack Stanley pleaded guilty and awaits sentencing (see here); Wojciech Chodan pleaded guilty and awaits sentencing (see here); and Jeffrey Tesler recently pleaded guilty and awaits sentencing (see here).

The JGC enforcement action involved only a DOJ component. Total settlement amount was $218.8 million and the criminal charges (see here for the information) were resolved via a DOJ deferred prosecution agreement (here).

Criminal Information

The substance of the criminal allegations are the same as in the prior KBR, Technip, and Snamprogetti enforcement actions. That is, the TSKJ consortium, of which JGC was a member, was formed for purposes of bidding on and performing a series of engineering, procurement, and construction (“EPC”) contracts to design and build a liquefied natural gas plant on Bonny Island, Nigeria.

Tesler was hired by TSKJ to “help it obtain business in Nigeria, including by offering to pay and paying bribes to high-level Nigerian government officials” and Tesler “was an agent of TSKJ and of each of the joint venture companies.”

According to the information, TSKJ also hired “Consulting Company B” – a “global trading company headquartered in Tokyo” to help it “obtain business in Nigeria, including by offering to pay and paying bribes to Nigerian government officials” and “Consulting Company B was an agent of TSKJ and of each of the joint venture companies.”

Most of the allegations in the information focus on the conduct of the JGC’s alleged co-conspirators such as Stanley, Tesler, and Tesler’s corporate entity, Tri-Star Investments Ltd. As to U.S. nexus, the information alleges money flowing through U.S. based accounts “to bribe Nigerian government officials” and co-conspirators faxing or e-mailing information into the U.S. in furtherance of the bribery scheme.

Based on the above conduct, the information charges conspiracy to violate the FCPA’s anti-bribery provisions and aiding and abetting FCPA anti-bribery violations.

DPA

The DOJ’s charges against JGC were resolved via a deferred prosecution agreement.

Pursuant to the DPA, JGC admitted, accepted and acknowledged “that it is responsible for the acts of its employees, subsidiaries, and agents” as set forth above. As is typical in FCPA DPAs, JGC expressly agreed not to make any statements, directly or indirectly, “contradicting” the facts alleged.

The term of the DPA is two years and it states that the DOJ entered into the agreement based on the following factors.

“(a) after initially declining to cooperate with the Department based on jurisdictional arguments, JGC began to cooperate, and has agreed to continue to cooperate, with the Department in its ongoing investigation of the conduct of JGC and its present and former employees, agents, consultants, contractors, subcontractors, subsidiaries, and others relating to violations of the FCPA;

(b) JGC has undertaken remedial measures, including evaluating and enhancing its compliance program, and has agreed to undertake further remedial measures as contemplated by this Agreement; and

(c) the impact of JGC, including collateral consequences, of a guilty plea or criminal conviction.”

As stated in the DPA, the fine range for the above conduct under the U.S. Sentencing Guidelines was $312.6 million to $625.2 million. Pursuant to the DPA, JGC agreed to pay a monetary penalty of $218.8 million (30% below the minimum amount suggested by the guidelines). DPAs frequently then state why such a below-guidelines fine amount is “appropriate,” however the JGC DPA is silent as to this issue. Interesting also is that the conduct at issue took place between 1995 and 2004. Yet, the 2010 sentencing guidelines were used in calculating the fine rather than the 2003 guidelines that were used in the prior KBR, Technip, and Snamprogetti enforcement actions.

Pursuant to the DPA, JGC agreed to “engage a corporate compliance consultant.”

The DOJ release (here) states as follows. “With [the JGC] resolution, each of the four companies in the TSKJ joint venture, the former chairman of the U.S. joint venture partner, and several other individuals have now been held accountable for a massive conspiracy to bribe Nigerian government officials to obtain lucrative construction contracts.” “The approximately $1.5 billion in criminal and civil penalties that have been imposed on the members of the joint venture far exceed their profits from the scheme. Foreign bribery is a serious crime, and as this case makes clear, we are investigating and prosecuting it vigorously.”

Manny Abascal (Latham & Watkins – see here – a former DOJ enforcement attorney) represented JGC.

This may not be the last we hear of Bonny Island bribery. Consulting Company B (based in Japan) was a key participant in the bribery scheme. Does anyone know anything about Consulting Company B and whether it might be next to resolve its Bonny Island exposure? If so, please share.

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