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DOJ Announces FCPA And Related Actions In Connection With Russian Nuclear Industry Bribe Scheme – Additional Actions Likely

TENEX

It’s not often the DOJ announces a Foreign Corrupt Practices Act enforcement action via a one sentence statement in a press release about another enforcement action.

But that is what the DOJ did earlier this week when it announced in this press release that Daren Condrey (50, of Glenwood, Maryland) pleaded guilty on June 17, 2015, to conspiring to violate the FCPA and conspiring to commit wire fraud.

This June 2015 criminal information sets forth the DOJ’s allegations.

According to the information, Condrey was an owner and executive of Transportation Corporation A (a Maryland headquartered company in the business of providing logistical support services for the transportation of nuclear materials to customers in the United States and to foreign customers) from August 1998 through in or about October 2014.

According to this Wall Street Journal, Transportation Corporation A is Transport Logistics International (TLI).  In November 2014, TLI released this statement concerning the DOJ’s investigation.

The Condrey information alleges various bribe payments made to “Foreign Official One” to secure business with TENEX.

JSC Techsnabexport (“TENEX”) is described as a supplier of “uranium and uranium enrichment services to nuclear power companies throughout the world on behalf of the government of the Russian Federation.”  According to the information, “TENEX was indirectly owned and controlled by, and performed functions of, the government of the Russian Federation, and thus was an “agency” and “instrumentality” of a foreign government, as those terms are used in the FCPA.”  The information further states:

“TENEX established a wholly-owned subsidiary company located in the United States in or about October 2010, TENAM Corporation (“TENAM”). TENAM was TENEX’s official representative office in the United States. TENAM was indirectly owned and controlled by, and performed functions of, the government of the Russian Federation, and thus was an “agency” and “instrumentality” of a foreign government, as those terms are used in the FCPA.”

“Foreign Official One”[Vadim Mikerin – see below] is described in the information as follows:

“[A] national of the Russian Federation, was a Director of TENEX from at least 2004 through in or about October 2010, and was the President of TENAM from in or about October 2010 through in or about October 2014. Foreign Official One was a”foreign official,” as that term is used in the FCPA. From in or about December 2011 through in or about October 2014, Foreign Official One was a resident of Maryland.”

According to the information, Condrey and others:

“with the knowledge of Foreign Official One, caused Transportation Corporation A to provide quotations and invoices to TENEX hiding the cost of the bribe payments promised to Foreign Official One within Transportation Corporation A’s pricing”;

“at the direction of Foreign Official One, attempted to conceal the payments to Foreign Official One by making the bribe payments to bank accounts in Cyprus, Latvia, and Switzerland”;

“sent email communications and used other forms of communication in which they used terms like “lucky figure,” “LF,” “cake,” and “remuneration” as code words to conceal the true nature of the bribe payments, and utilized fraudulent invoices which did not truthfully describe the services provided or the purpose of the payments”;

“caused Transportation Corporation A to act as a conduit for a bribe payment another company made to Foreign Official One in order to conceal that bribe payment;” and

“wired, and caused to be wired, payments from Transportation Corporation A’s bank account in Maryland to bank accounts in Cyprus, Latvia, and Switzerland for the purpose of making bribe payments to Foreign Official One.”

Based on the above allegations, Condrey was charged with conspiracy to violate the FCPA and to commit wire fraud.

In this June plea agreement, Condrey pleaded guilty. The statement of facts attached to the Condrey plea agreement also refers to the following company:

“Cylinder Corporation A was a company, based in Ohio, which engaged in the manufacture of tanks and vessels for the oil and gas, nuclear, and marine markets. Cylinder Corporation A secured contracts with TENEX to supply storage and transportation cylinders. In or about September 2012, Cylinder Corporation A was acquired by another company headquartered in Ohio (“Ohio Corporation”).”

According to this Wall Street Journal article:

“People familiar with the investigation identified that company as Westerman Cos., which was acquired by [publicly traded] Worthington Industries, Inc. in 2012 and now operates as Worthington Cylinders. Court records refer to the company as Cylinder Corporation A and identify its location as Bremen, Ohio.”

According to the DOJ’s release, Condrey will be sentenced on Nov. 2, 2015. Condrey is represented by Robert Bonsib.

Back to the DOJ’s press release earlier this week which made brief mention of the above FCPA enforcement action.  As noted in the release:

“[Vadim Mikerin] a Russian official residing in Maryland pleaded guilty today to conspiracy to commit money laundering in connection with his role in arranging over $2 million in corrupt payments to influence the awarding of contracts with the Russian state-owned nuclear energy corporation. According to court documents, Mikerin was the president of TENAM Corporation and a director of the Pan American Department of JSC Techsnabexport (TENEX).  TENAM, based in Bethesda, Maryland, is a wholly-owned subsidiary and the official representative of TENEX in the United States.  TENEX, based in Moscow, acts as the sole supplier and exporter of Russian Federation uranium and uranium enrichment services to nuclear power companies worldwide.  TENEX is a subsidiary of Russia’s State Atomic Energy Corporation.”

According to the release, Mikerin is to be sentenced on Dec. 8, 2015.  See here for the Mikerin plea agreement.  Mikerin is represented by former FCPA Unit Assistant Chief William Jacobson and Jonathan Lopez (both with Orrick, Herrington & Sutcliffe).

As noted in the release, “Boris Rubizhevsky, 64, of Closter, New Jersey, pleaded guilty on June 15, 2015, to conspiracy to commit money laundering and will be sentenced on Oct. 19, 2015.” Rubinzhevsky is described in the Mikerin plea agreement as the owner and sole employee of “Consulting Corporation Two,” which was based in New Jersey.

Friday Roundup

Roundup2

World’s most ethical FCPA violators, scrutiny alerts and updates, and shareholder meeting action.  It’s all here in the Friday roundup.

World’s Most Ethical FCPA Violators

This 2011 post coined the term “World’s Most Ethical FCPA Violators” (that is, companies recognized on Ethisphere’s World’s Most Ethical Companies list, yet also companies that have resolved FCPA enforcement actions and/or been the subject of FCPA scrutiny).

Highlighting this dynamic is not a dig at Ethisphere’s methodology or the companies themselves.

Rather, it is further to the point of how easy it can be for a multi-national company to become the subject of FCPA scrutiny as well as debunking the fallacy of “good companies don’t bribe period” (see here for the prior post).

The 2015 version of the “World’s Most Ethical Companies” list contains several companies that have resolved FCPA enforcement actions and/or been the subject of FCPA scrutiny in recent years.

By my estimation, the companies are as follows: 3M Company, ABB Group, CBRE Group, Cisco, Deere & Co., Dun & Bradstreet, Fluor, GE, Microsoft, Rockwell Automation, Schnitzer Steel, and Sempra Energy.

Scrutiny Alerts and Updates

Barry Keller, etc.

The Wall Street Journal went in-depth in this article about a pending FCPA investigation.  In pertinent part, the article states:

“A widening U.S. bribery probe involving Russian uranium has reached from Moscow to a company in the heart of America’s Rust Belt.

U.S. authorities are investigating whether an executive in Bremen, Ohio—a rural community with about 1,500 residents roughly 40 miles southeast of Columbus—bribed Russian energy officials to win his company millions of dollars in contracts to supply shipping containers for uranium, according to people familiar with the matter.

People familiar with the investigation identified that company as Westerman Cos., which was acquired by Worthington Industries Inc. in 2012 and now operates as Worthington Cylinders. Court records refer to the company as Cylinder Corporation A and identify its location as Bremen.

[…]

Authorities suspect that the Westerman executive, who became part of a long-running criminal probe, paid Russian officials tens of thousands of dollars in bribes between 2011 and 2013, court documents say.

People familiar with the investigation say the man, identified by the documents as “Executive A” or “Barry,” is Barry Keller, a Bremen native who has spent more than three decades at Westerman, working his way up from the shop floor to senior management.

Mr. Keller couldn’t be reached for comment. Neither he nor the company has been charged with any crime.

Worthington, through a spokeswoman, declined to comment on Mr. Keller.

“We first learned of [the investigation] in November, and we are fully cooperating with the Justice Department,” said Worthington Industries general counsel Dale Brinkman.He said the company hasn’t heard from federal investigators since January.

Mr. Brinkman stressed that Westerman’s ties with the Russians began before Worthington acquired it. “When we became aware of this [investigation], we quit selling to them,” he added.”

Gold Fields

In September 2013 (see here for the prior post), South African company Gold Fields Limited was the subject of a South African newspaper article which then prompted the company with ADRs listed on a U.S. exchange to disclose:

“Gold Fields Limited has been informed that it is the subject of a regulatory investigation in the United States by the US Securities and Exchange Commission relating to the Black Economic Empowerment transaction associated with the granting of the mining license for its South Deep operation. Given the early stage of this investigation, it is not possible to estimate reliably what effect, the outcome this investigation, any regulatory findings and any related developments may have on the Company.”

Recently Gold Fields disclosed:

“[The company] been informed by the Foreign Corrupt Practices Act Unit of the United States Securities Exchange Commission (the Commission) that it has concluded its investigation in connection with the Black Economic Empowerment (BEE) transaction related to South Deep and, based on the information available to them, will not recommend to the Commission that enforcement action be taken against Gold Fields.”

According to the “declination” crowd, this is another example of a “declination.”  This Compliance Week article went so far as to suggest that Gold Fields “dodged” FCPA charges.

Both assertions are off-target for the same reason it would be off-target to say that a sober driver who passes through a field sobriety test “dodged” drug driving charges or that law enforcement “declined” to prosecute the driver for drunk driving.

Compass Group

The U.K. catering company with ADRs listed on a U.S. exchange was recently the focus of this U.K. Guardian article.  According to the article:

“An international subsidiary of Compass Group, the British catering giant … paid bribes to government officials in Kazakhstan, documents seen by the Guardian reveal.

The unit’s agents made “facilitation payments” to customs officers in the former Soviet republic for an unspecified period up to 2011, internal Compass papers show, with the transactions originating in the same international division that was separately accused of bribing a UN official to win contracts.

The company paid £40m to settle civil litigation in the UN case in 2006, without admitting legal liability.

The new allegations are detailed in documents that relate to an employment tribunal claim brought by a former finance director of a Compass subsidiary in Kazakhstan. Karim Pabani says he was sacked after blowing the whistle on corruption, but Compass is fighting the claim.”

Shareholder Meeting Action

Corporate shareholder meetings are often boring affairs.  (See here for a recent Wall Street Journal article).

This is until a shareholder stands up and goes on an uninformed FCPA rant.

As noted in this article:

“The annual meeting of Time Warner shareholders in Atlanta on Friday somehow managed not to be soul-drainingly boring for a few minutes, when an unhinged female shareholder launched into a lengthy rant about George Clooney and his wife, attorney Amal Alamuddin.

“I have a compensation question … How much have we paid George Clooney for ‘Gravity’ and ‘Argo?’” the shareholder asked Time Warner chairman and CEO Jeff Bewkes, before unspooling a scatter-shot jeremiad with xenophobic overtones.

“How much money went to Amal Alamuddin, a foreign fiancée and spouse? To her family, to Lebanon, to the mayor of Rome to officiate at the wedding? To Arab contractors to renovate his home in London? Are there violations of the Foreign Corrupt Practices Act?””

*****

A good weekend to all.

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