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Friday Roundup

Telling, scrutiny alerts and updates, and query whether.  It’s all here in the Friday roundup.

Telling

It is a rather telling indication of the nonsensical nature of criminal law “enforcement” when what is presumed to be a well-intentioned legislator introduces a bill that fails in its intended purpose.

Case in point, Representative John Conyers (D-Michigan) recently introduced the “Corporate Crime Database Act” to require the Attorney General to:

“acquire data, for each calendar year, regarding all administrative, civil, and criminal judicial proceedings initiated or concluded by the Federal Government and State governments against any corporation or corporate official acting in an official capacity involving a felony or misdemeanor charge or any civil charge where potential fines may be $1,000 or more.”

The problem of course, and why the bill fails in its intended purpose, is that a meaningful percentage of DOJ enforcement actions do not result in “judicial proceedings.”  Rather, many DOJ enforcement actions are resolved through non-prosecution agreements.  Moreover, many of the requirements in the bill hinge on “charges” and NPAs do not involve charges.

(See here and here for similar posts).

Scrutiny Alerts and Updates

GSK

In this week’s GSK news, as reported here:

“GlaxoSmithKline is facing a criminal investigation in Poland for allegedly bribing doctors to promote its lung drug Seretide, adding to problems for a company already accused of corruption in China and Iraq. Poland’s Central Anti-Corruption Bureau, or CBA, said on Monday that 13 people had been charged in connection with the investigation launched by Polish prosecutors. Britain’s biggest drugmaker said one employee had been disciplined following a company probe into the matter and it was co-operating with the Polish authorities. “The investigation found evidence of inappropriate communication in contravention of GSK policy by a single employee. The employee concerned was reprimanded and disciplined as a result,” the drugmaker said in a statement.”

Further, as reported here:

“[GSK] is investigating claims its employees bribed doctors in Jordan and Lebanon by offering perks such as flexible travel arrangements and free samples that doctors could sell on, according to emails reviewed by The Wall Street Journal.  […]  Glaxo has said it has launched an internal investigation into its operations in the United Arab Emirates, Qatar, Bahrain, Oman, Kuwait, Lebanon, Syria, Jordan and Iraq.  […]  Glaxo sales representatives allegedly bribed doctors in Jordan to prescribe Glaxo drugs by issuing free samples that the doctors were then allowed to sell on, according to the emails. Glaxo representatives also allegedly permitted Jordanian doctors to bring their spouses on business trips that Glaxo paid for, according to the emails. Doctors were issued with business-class tickets to attend conferences but would exchange them at travel agencies for two economy-class tickets, allowing their spouses or other family members to come along free, a practice local Glaxo employees were aware of, according to the emails. Glaxo said that it is against company policy to allow airplane tickets to be exchanged for tickets of a lower value or refunded. The emails allege Glaxo sales representatives gave doctors in Jordan up to 60 free samples of its vaccine Synflorix, which they then sold on at up to $70 a vial. In Lebanon, Glaxo employees allegedly gave doctors free Synflorix vials as part of an incentive scheme to get them to prescribe the vaccine and not its competitors, another email to company representatives said. In both countries, Glaxo made payments to “key opinion-leader” doctors—influential and leading practitioners in their field—for lectures and other speaking engagements that may not have taken place, the emails allege, in return for them prescribing more Glaxo drugs.”

In response to the above recent media reports, GSK released this statement which states, in pertinent part, as follows.

“GSK can confirm we are investigating allegations regarding the activity of a small number of individuals in our operations in Jordan and Lebanon. We started investigating using internal and external teams as soon as we became aware of these claims. These investigations have not yet concluded.  We have zero tolerance for unethical or illegal behaviour. We expect our employees to uphold our high standards and we believe the vast majority do so. GSK welcomes and respects people speaking up where they have concerns and we have a number of channels internally to enable them to do this, including hotlines and online portals. We implement regular training for employees in compliance matters and we continue to improve compliance processes and procedures wherever we see a need. We publicly disclose all cases of misconduct identified in the company. Last year there were 161 violations relating to breaches of our sales and marketing polices, resulting in 48 dismissals and 113 written warnings. These numbers are very similar to those reported by other companies in our sector. We are confident in our processes and controls and that we do not have a systemic issue with unethical behaviour in GSK. However, we recognise there are concerns regarding interactions between pharmaceutical companies and doctors, particularly related to perceptions of conflicts of interest. That’s why we are the first company to have committed to undertake fundamental reforms to our business model to eliminate this concern by stopping payments to doctors to speak about our products, stopping payments to doctors to attend medical conferences and stopping pay for our sales reps being linked to individual sales targets.”

BSG Resources / Beny Steinmetz

Regarding BSG Resources and Beny Steinmetz, as reported here:

“Billionaire Beny Steinmetz approved millions of dollars in payments to a wife of the former president of Guinea as he fought to keep part of the world’s largest iron-ore deposit, a suspect in a U.S. graft investigation said in conversations secretly taped by the FBI.  The 109 pages of transcripts were among a cache of evidence posted on a Guinean government website April 9. The transcripts were introduced in the course of an investigation by the West African nation into whether bribery was used to obtain rights to the Simandou deposit. The Federal Bureau of Investigation shared evidence with the Guinean government from its own probe into the circumstances surrounding the award of the licenses, according to the Guinean release.  Both Steinmetz and his company BSG Resources Ltd. have denied any wrongdoing by the Guernsey-based company or its employees. BSGR said April 10 it would prove all allegations of bribery and corruption are false.”

Alstom / Marubeni Related

As reported here and here:

“Indonesia’s main anti-corruption court sentenced a lawmaker to three years’ jail today for accepting bribes from French company Alstom and Japan’s Marubeni in a multimillion-dollar contract.  Izedrik Emir Moeis was found guilty of accepting USD 357,000 from the companies to help them secure a USD 118 million joint contract in 2004 to supply and install boilers at a power plant on the island of Sumatra.”

(See here and here for previous posts on the related FCPA enforcement actions).

Query Whether

Given a common theory of FCPA enforcement, query whether hotels in the Middle East are state-owned or state-controlled.  Arabianbusiness.com reports:

“Almost 55 percent of hotel suppliers have been asked to offer a monetary bribe by a hotel procurement manager, while 72.6 percent of suppliers know of other supply firms that are using bribes, according to the results of a new industry survey carried out earlier this year.  The Hotelier Middle East Supplier Survey 2014, which received 108 responses during January and February of this year, also found 46.8 percent of suppliers believe that corruption, in terms of bribery, is a problem in the region’s hotel supply sector that is negatively impacting business.”

*****

A good weekend to all.

Of Note From The Marubeni Enforcement Action

This previous post highlighted specifics from the recent Marubeni Foreign Corrupt Practices Act enforcement action and this post continues the coverage by discussing various items of note.

Do Legal Principles Even Matter?

Forgive me for being the law guy, but in the aftermath of the Marubeni enforcement action, like so many others, one can legitimately ask – do legal principles even matter?

As highlighted in the previous post, the most recent alleged overt act in support of Marubeni’s conspiracy charge allegedly occurred in November 2008.  In other words, all of the alleged conduct supporting the conspiracy charge was beyond the five year statute of limitations applicable to FCPA offenses.

In addition, the information also charged 7 substantive FCPA anti-bribery violations.  One charge concerned a 2005 wire transfer, three charges concerned 2006 wire transfers, one charge concerned a 2007 wire transfer, and one charge concerned a 2008 wire transfer.  In other words, 6 of the 7 substantive FCPA anti-bribery charges concerned alleged conduct beyond the five year limitations period applicable to FCPA offenses.  (Note:  the final substantive FCPA charge was based on an October 2009 wire transfer made, not by any Marubeni employee, but Alstom employees).

In corporate FCPA enforcement actions, companies often enter into tolling agreements and statute of limitations can also otherwise be extended in other ways, but the DOJ’s criminal information and plea agreement are silent as to any of these issues relevant to statute of limitations.

Is Marubeni A Recidivist?

As noted in the original Marubeni post, last week’s $88 million FCPA enforcement action followed closely on the heels of Marubeni exiting a deferred prosecution agreement from its 2012 FCPA enforcement action based on conduct at Bonny Island, Nigeria.  (See here for the prior post).

Against this backdrop, it is tempting to call Marubeni an FCPA recidivist.

However, as noted in Marubeni’s release (a release that the DOJ needed to approve per the plea agreement) “the Tarahan conduct pre-dates the execution of Marubeni’s 2012 Deferred Prosecution Agreement with the DOJ.”

At the very least, Marubeni is a repeat FCPA offender and joins a category that also includes IBM, Tyco, Aibel Group, General Electric, Diebold (at least as to books and records and internal controls issues) and Ashland Oil (at least in theory given that the first enforcement action occurred prior to passage of the FCPA in 1977).

The distinction Marubeni has among the group though is the shortest gap between enforcement actions.

More Details Please As to Lack of Cooperation

As noted in the previous post, the $88 million Marubeni enforcement action was a relatively rare instance of a company paying a criminal fine within the advisory guidelines range.  The plea agreement includes the DOJ’s justification as to why, including Marubeni’s lack of cooperation.  However, the plea agreement merely states that Marubeni refused to cooperate with the Department’s investigation when given the opportunity to do so.

It sure would have been nice for the DOJ to provide some additional details regarding Marubeni’s apparent lack of cooperation.

For instance, in the Bonny Island, Nigeria enforcement action against JGC Corp. (also a Japanese company), the DOJ stated that the company declined “to cooperate with the Department based on jurisdictional arguments?”

The DOJ’s statement motivated this prior post, “Does the DOJ Except FCPA Counsel to Roll Over and Play Dead?

While the DOJ declined to provide specifics as to Marubeni’s lack of cooperation, it would be truly frightening if the DOJ’s position is that a company is not cooperating if it raises purely legal issues such as jurisdiction or statute of limitations.

FCPA Enforcement Statistics

FCPA enforcement statistics are literally all over the map given the creative and unique ways in which many FCPA Inc. participants keep such statistics.  (For instance, see this prior post for visual proof).

As I have long maintained, the most reliable and accurate way to keep FCPA enforcement statistics is by using the “core” approach, an approach to tracking FCPA enforcement endorsed by the DOJ and a commonly accepted method used in other areas.

Consider the stark difference in approaches using just the Marubeni enforcement action and the April 2013 FCPA enforcement action against current and former employees of Alstom.  The enforcement actions were virtual carbon copies of each other involving the same project in Indonesia, involving the same alleged “foreign officials,” the same consultants, Marubeni was a central actor in the Alstom related action and the Alstom employees were central actors in the Marubeni enforcement action.

In short, the Marubeni and Alstom related action were the same “core” action.

However, many in FCPA Inc. will no doubt count these actions as five enforcement actions:  Marubeni and Alstom employees Frederic Pierucci, David Rothschild, Lawrence Hoskins and William Pomponi.  Make that six enforcement actions when – in all likelihood – Alstom resolves an enforcement action based, in whole or in part, on the same conduct.   In short, by tracking FCPA enforcement statistics this way the statistics will be distorted.

Marubeni Enforcement Action Specifics

A post last week mentioned the $88 million Foreign Corrupt Practices Act enforcement action (the 12th largest of all-time in terms of settlement amount) against Marubeni (a Japanese company).  In 2012, Marubeni resolved a $55 million FCPA enforcement action (see here for the prior post) involving Bonny Island, Nigeria conduct.

This post highlights specifics from the enforcement action in the original source documents – the criminal information and plea agreement.  [Previously, the DOJ released original source documents relevant to an FCPA enforcement action at the same time as announcing the enforcement action.  However, according to a knowledgeable source, the DOJ has a new policy of releasing original source documents only when those documents have been filed-stamped by the relevant court.  While an understandable policy, the end result will likely be that the majority of reporting of FCPA enforcement actions will be reporting exclusively from DOJ press releases, not original source documents.  Not on this website] 

The Marubeni enforcement action is a virtual carbon copy of the April 2013 FCPA enforcement action against various current and former employees of Alstom concerning the Tarahan power project in Indonesia.  Indeed, as highlighted in the previous post, Marubeni is the “Consortium Partner” in the prior enforcement action and those associated with Alstom previously charged (Lawrence Hoskins, Frederic Pierucci, William Pomponi and David Rothschild) are mentioned prominently in the Marubeni enforcement action.

Information

The information alleges that Marubeni and its subsidiaries, including Marubeni Power Systems Corporation (“MPSC”), partnered with Alstom (simply referred to in the Information as Power Company) and its subsidiaries in bidding and carrying out of the Tarahan Project in Indonesia, a $118 project to provide power-related services to the citizens of Indonesia that was bid and contracted through Indonesia’s state-owned and state-controlled electricity company, Perusahaan Listrik Negara (“PLN”). According to the information, Marubeni managed all work on the project, including auxiliary equipment and civil building and installation work.

According to the information, Marubeni and Alstom retained two consultants (the same consultants as in the prior 2013 enforcement action) and the “consultant’s primary purpose was not to provide legitimate consulting services to Marubeni and Alstom but was instead to pay bribes to Indonesian officials who had the ability to influence the award of the Tarahan Project contract.”  The Indonesian officials are the same as the officials in the prior enforcement action.

“Official 1 … a member of Parliament in Indonesia [who] had influence over the award of contracts by PLN, including on the Tarahan Project”

“Official 2 … a high-ranking official at PLN [who] had broad decision-making authority and influence over the award of contracts by PLN, including on the Tarahan Project”

“Official 3 … an official at PLN [who] was a high-ranking member of the evaluation committee for the Tarahan Project. Official 3 had broad decision-making authority and influence over the award of the Tarahan contract.”

According to the information, Marubeni, through its employees and agents made payments to a consultant’s bank account in Maryland, knowing that a portion of the payments to the consultant was intended for Indonesian officials in exchange for their influence and assistance in awarding the Tarahan Project to Marubeni and Alstom.  In addition, the information alleges that Marubeni, through its employees and agents, attended meetings in Connecticut in connection with the Tarahan Project.

There are no specifics in the information concerning the Marbueni employees such as rank, title or position of the employees (as noted in the information, Marubeni has approximately 24,000 employees in over 70 countries).

Based on the above allegations, the information charges Marubeni with conspiracy to violate the FCPA’s anti-bribery provisions. As to jurisdiction, the information alleges that Marubeni, through its employees, together with others, while in Connecticut discussed in person, via telephone and via e-mail the need to obtain the Tarahan Project and making bribe payments to various alleged foreign officials in order to obtain the contract, and offered to pay, promised to pay, and authorized the payment of bribes to obtain the contract.  The information alleges approximately 60 separate overt acts in furtherance in the conspiracy and the vast majority of these allegations concerning the alleged co-conspirators associated with Alstom.  There are relatively few specific overt acts allegations concerning Marubeni employees other than the following.

In 2002 and 2004 employees of Marubeni traveled to Connecticut “to attend meetings … in connection with the Tarahan Project”

Between 2002 – 2004, e-mails were sent to Marubeni employees from co-conspirators or from Marubeni employees to co-conspirators in connection with the project and bribery scheme

Twice in 2005 and once in 2008 “Marubeni caused” wire transfers from a bank account in New York to a consultant’s bank account in Maryland in furtherance of the bribery scheme

The “most recent” allegation supporting Marubeni’s conspiracy charge allegedly occurred in November 2008.

In addition to the conspiracy charge, the information also alleges 7 substantive FCPA anti-bribery violations under the 78dd-3 prong of the statute.  The jurisdictional element of 78dd-3 is “while in the territory of the United States, corruptly to make use of the mails or any means or instrumentality of interstate commerce or to do any other act in furtherance …” of a bribery scheme.

Two of the 7 FCPA anti-bribery charges are Marubeni specific (the above mentioned 2005 and 2008 wire transfers).  The other 5 FCPA anti-bribery charges are based on the conduct of Alstom employees.

Plea Agreement

In the plea agreement, Marubeni admitted to the factual allegations in the information and agreed that it was responsible for the acts of its present and former employees described in the information.

As set forth in the plea agreement, the advisory sentencing guidelines range for the conduct at issue was $63.7 million to $127.4 million.  Pursuant to the plea agreement, Marubeni agreed to pay $88 million.  This is a relatively rare situation of an FCPA corporate defendant paying a criminal fine amount within the guidelines range.

The plea agreement states that the DOJ believes that the fine amount was the appropriate disposition based on:  “(1) the nature and seriousness of the offense; (2) the Defendant’s failure to voluntarily disclose the conduct; (3) the Defendants refusal to cooperate with the Department’s investigation when given the opportunity to do so; (4) the lack of an effective compliance and ethics program at the time of the offense; (5) the Defendant’s failure to properly remediate: and (6) the Defendant’s history of prior criminal misconduct.”

As is typical in corporate FCPA resolutions, Marubeni agreed to a host of compliance requirements and the plea agreement also contains a muzzle clause.

DOJ Release

In this release, Acting Assistant Attorney General Raman stated:

“Marubeni pleaded guilty to engaging in a seven-year scheme to pay – and conceal – bribes to a high-ranking member of Parliament and other foreign officials in Indonesia.  The company refused to play by the rules, then refused to cooperate with the government’s investigation.  Now Marubeni faces the consequences for its crooked business practices in Indonesia .”

Acting U.S. Attorney Michael Gustafson (D. Conn.) stated:

“For several years, the Marubeni Corporation worked in concert with a Connecticut company, among others, to bribe Indonesian officials in order to secure a contract to provide power-related services in Indonesia.  Today’s guilty plea by Marubeni Corporation is an important reminder to the business community of the significant consequences of participating in schemes to bribe government officials, whether at home or abroad.”

FBI Assistant Director in Charge of the Washington Field Office Valerie Parlave stated:

“Companies that wish to do business in the United States or with U.S. companies must adhere to U.S. law, and that means bribery is unacceptable.  The FBI continues to work with our international law enforcement partners as demonstrated in this case to ensure that companies are held accountable for their criminal conduct.  I want to thank the agents, analysts and prosecutors who brought this case to today’s conclusion.”

Marubeni’s Release

In this release, Marubeni stated:

“[The enforcement action follows the successful completion by Marubeni of its obligations under a January 2012 Deferred Prosecution Agreement entered with the DOJ relating to the liquid natural gas project in Nigeria. That Agreement required Marubeni to retain a corporate compliance consultant for two years to review and enhance its anticorruption compliance program to ensure that it satisfies standards specified by the DOJ, and to report to the DOJ regarding the results of this review. This was completed in January 2014, and at the request of the DOJ the related proceeding was dismissed on February 26, 2014.

The Tarahan conduct pre-dates the execution of Marubeni’s 2012 Deferred Prosecution Agreement with the DOJ. Marubeni has undertaken extensive efforts to enhance its anti-corruption compliance program, and believes that its current program is robust and effective. Although the agreement reached with DOJ today does not require Marubeni to further engage a compliance consultant, Marubeni is taking this matter seriously and commits to continue to thoroughly implement and enhance its anti-corruption compliance program.”

Marc Weinstein (Hughes Hubbard & Reed) represented Marubeni.  Weinstein also represented Marubeni in connection with the 2012 FCPA enforcement action.

“The Shadow Lengthens”

[Late yesterday the DOJ announced this $88 million FCPA enforcement action (the 12th largest of all-time in terms of settlement amount) against Marubeni Corporation – the same company that resolved a $55 million DOJ FCPA enforcement action in 2012 (see here for the prior post) involving Bonny Island, Nigeria conduct.  Yesterday’s FCPA enforcement action against Marubeni involving the Tarahan power plant project in Indonesia is not a surprise.  In this April 2013 post regarding the FCPA enforcement action against current and former Alstom employees in connection with the same project, I sniffed out the details and accurately connected the dots to Marubeni.  A future post will go in-depth as to yesterday’s Marubeni enforcement action when original source documents become available]

I have long called for abolition of non-prosecution and deferred prosecution agreements in the FCPA context.  (See previous posts here, herehere, and here for instance).  In short, and as noted in the prior posts, use of NPAs and DPAs to resolve alleged corporate criminal liability in the FCPA context present two distinct, yet equally problematic public policy issues as well as other issues.  (See “The Facade of FCPA Enforcement“).

As noted in this previous post, in May 2012 the Center for Legal Policy Research at the Manhattan Institute released this dandy report titled “The Shadow Regulatory State: The Rise of Deferred Prosecution Agreements.” Authored by James Copland, the report stated in pertinent part as follows:

“… [P]rosecutors’ virtually unchecked powers under DPAs and NPAs threaten our constitutional framework. To be sure, prosecutors are acting upon duly enacted laws, but federal criminal provisions are often vague or ambiguous, and the fact that prosecutors and large corporations alike feel obliged to reach agreement, rather than follow an orderly regulatory process and litigate disagreements in court, denies the judiciary an opportunity to clarify the boundaries of such laws. Instead, the laws come to mean what the prosecutors say they mean—and companies do what the prosecutors say they must. Federal prosecutors are thus assuming the role of judge (interpreting the law) and of legislature (setting broad policy choices about industry conduct), substantially eroding the separation of powers. That such discretion is often delegated to private contractors with sweeping powers—namely, corporate monitors—makes the denial of justice even graver.”

Recently, Copland and a co-authored followed up with this dandy report titled “The Shadow Lengthens:  The Continuing Threat of Regulation by Prosecution.”  In pertinent part, the Executive Summary states:

“The last ten years have seen the emergence of a new approach to business regulation and prosecution of wrongdoing in the United States. The U.S. Department of Justice now regularly enters into “deferred prosecution” or “non-prosecution” agreements (DPAs or NPAs) with large corporations, in which companies are paying billions of dollars in fines annually without trial. These agreements are presented as steps short of prosecution of corporations, a step that might drive firms into bankruptcy and disrupt their economic sectors. At the same time, a good case can be made that these agreements suffer from a lack of transparency. Questions naturally arise as to whether attorneys working for the federal government, with minimal to no judicial oversight, are best positioned to change significantly the business practices of individual companies and, indeed, entire industries.

Businesses prefer to enter into DPAs or NPAs rather than face trial, even when the costs of such arrangements are severe, because of the significant capital-market pressures stemming from criminal inquiries (including depressed stock prices and impaired credit) as well as the statutory and regulatory consequences flowing from indictment or conviction—for example, exclusion from government reimbursement or contracts, or the retraction of government licenses vital to a company’s operation. Prosecutors, in turn, prefer to avoid the risk and cost of trial as well as the potentially severe collateral consequences that indictment or conviction can impose on corporate stakeholders, including employees and creditors, as witnessed in the collapse of the large accounting firm Arthur Andersen following its 2002 federal indictment—which was ultimately set aside by the U.S. Supreme Court.

Thus, such arrangements have become commonplace, so much so that they might be characterized as a “shadow regulatory state” over business. The federal government has reached 278 DPAs and NPAs with businesses since 2004, with ten of the Fortune 100 companies operating under such agreements just since 2010. Although the federal government entered into only 17 DPAs and NPAs from 1993 through 2003, it entered into 66 in just the last two years, in which almost $12 billion in total fines and penalties were imposed. Companies in the finance and health-care sectors have been particularly likely to wind up under such agreements, with the finance sector accounting for 13 DPAs and NPAs and the health-care sector accounting for 8 of them in 2012–13. The reach of federal prosecutorial agreements has not stopped at America’s shores: the Department of Justice has asserted authority over hosts of foreign businesses—in some cases, for alleged conduct occurring completely outside the United States.

DPAs and NPAs are notable in that they impose terms on companies that go beyond the fines or incarceration normally associated with criminal punishment and because they go beyond requiring that the companies correct the specific practices alleged to be violations of the law. Instead, these agreements often call for major changes in firms’ internal processes of many types—from training to human resources—based on the apparent assumption that absent such changes, wrongdoing will be more likely to recur.

[…]

In many cases, the alleged predicate offenses underlying DPAs or NPAs involve ambiguous facts or strained or novel interpretations of law—interpretations that have remained untested in court, given companies’ pronounced pressure to settle. In addition, DPAs and NPAs regularly cede to prosecutors the sole discretion to determine whether companies are in breach of the agreement’s terms, without judicial oversight or the possibility of appeal.”

One of the NPAs highlighted in the recent report is the Ralph Lauren Corporation.  Citing to, among other sources, prior FCPA Professor posts, the report states:

“The Ralph Lauren [NPA] also highlights the broad scope of federal FCPA enforcement, in which the executive branch is arguably holding companies to account for activities exempted from Congress’s statute, with minimal prospects for judicial review.”

The report also rightly notes:

“Congress’s intent in enacting the FCPA was clearly to deter American companies from buying foreign influence on a large scale – but not to police all foreign bribes potentially paid by U.S. businesses.  Given the powerful incentives that businesses have to enter into DPAs and DPAs, however, federal prosecutors have broadly interpreted the FCPA’s scope – and limited its express exemption – effectively insulting it from judicial review.”

To learn more about Congressional intent in enacting the FCPA, see “The Story of the Foreign Corrupt Practices Act.”

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.

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