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The Chiquita Enforcement Action – A Bunch Of Bananas With A Slippery Origin

chiquita

[This post is part of a periodic series regarding “old” FCPA enforcement actions]

If you think strict liability enforcement of the FCPA books and records and internal controls provisions is a recent invention, think again.

If you think off-the-rails FCPA enforcement (that is enforcement theories seemingly in conflict with actual legal authority) is a recent invention, think again.

A dubious FCPA enforcement action occurred in 2001 when the SEC announced this administrative cease and desist order finding that Chiquita Brands International Inc. violated the books and records and internal controls provisions of the Foreign Corrupt Practices Act.

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A Focus On Angola

Angola

Angola is probably not a country that tops most people’s list of the location of Foreign Corrupt Practices Act enforcement actions.

Yet, Angola is the second largest oil producing country in Africa. This means that oil and gas and related service companies are doing business in Angola. Add in the fact that control of the oil industry is overseen by Sonangol (a state-owned / state-controlled enterprise) and throw in some trade barriers and distortions, such as local content requirements, and you have the right conditions for FCPA issues to arise.

And arise they have. As highlighted in this post, the recent FCPA enforcement action against Halliburton was the 11th FCPA enforcement action involving, in whole or in part, conduct in Angola. (10 of the 11 actions have occurred since 2007).

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Issues To Consider From The Halliburton Enforcement Action

Issues

This prior post went in-depth into last week’s $29.2 million Foreign Corrupt Practices Act enforcement action against Halliburton and this post continues the analysis by highlighting additional issues to consider.

Timeline

Halliburton disclosed to the DOJ / SEC in December 2010 or perhaps early 2011. Regardless of the precise date, Halliburton’s FCPA scrutiny lasted approximately 6.5 years.

If the SEC wants the public to have confidence in its FCPA enforcement program, it must resolve instances of FCPA scrutiny much quicker. Having FCPA scrutiny linger for 6.5 years is inexcusable particularly since Halliburton, in the words of the SEC, “[cooperated] including making foreign witnesses available, compiling financial data and analysis relating to the transactions at issue, and making substantive presentations on key topics at the staff’s request.”

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Halliburton Joins FCPA Repeat Offender Club As The SEC Also Finds That A Former VP Violated The FCPA

halliburton

In 2009, Halliburton Company, KBR Inc. (a wholly-owned subsidiary of Halliburton during the relevant time period) and Kellogg, Brown & Root, LLC (a wholly-owned subsidiary of KBR) resolved parallel DOJ and SEC Foreign Corrupt Practices Act enforcement actions in connection with a bribery scheme involving a $6 billion liquefied natural gas plant on Bonny Island, Nigeria. (See here and here).

The combined $579 million settlement amount (DOJ – $402 million / SEC $177 million) remains the third largest FCPA settlement of all-time. The SEC’s resolution contained the perfunctory condition of permanently enjoining Halliburton from violating the FCPA’s books and records and internal controls provisions.

However, yesterday Halliburton joined the ever-increasing (see here and here for recent posts) FCPA repeat offender club as the SEC announced an FCPA enforcement action concerning alleged conduct in Angola. Without admitting or denying the SEC’s findings in this administrative order that it violated the FCPA’s books and records and internal controls provisions, Halliburton agreed to pay $29.2 million. In the same order, the SEC also found that Jeannot Lorenz (Halliburton’s former vice president) causing the company’s violations, circumvented internal accounting controls, and falsified books and records. Without admitting or denying the SEC’s findings, Lorenz agreed to pay a $75,000 penalty.

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OECD Report Misses The Mark

Targets3

Recently, a High-Level Advisory Group on Anti-Corruption and Integrity, “composed of independent experts from a variety of professional backgrounds in the anti-corruption field” drafted a lengthy report to the OECD to “strengthen its work on combating corruption and promoting integrity.”

In the report the Group makes 22 separate recommendations.

Problem is, the report completely misses the mark on the most obvious and effective way to reduce corruption.

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