Do not finalize those 2017 Foreign Corrupt Practices Act statistics just yet. Similar to prior years, late December has become an active time for FCPA enforcement.
Yesterday, the DOJ announced a net $105.5 million enforcement action against Keppel Offshore & Marine Ltd. (a Singapore-based company which describes itself as a “global leader in offshore rig design, construction and repair, ship repair and conversion, and specialised shipbuilding”) and Keppel Offshore & Marine USA Inc. (a wholly-owned subsidiary based in Texas).
The enforcement action involved this criminal information against KOM USA charging conspiracy to violate the FCPA’s anti-bribery provisions resolved through this plea agreement and this criminal information against KOM charging conspiracy to violate the FCPA’s anti-bribery provisions resolved through this deferred prosecution agreement.
Under the heading bribery scheme, the information alleges:
“In or about and between 2007 and 2014, KOM USA, together with others, including KOM, knowingly and willfully conspired to pay, and paid, bribes for the benefit of foreign officials, including Brazilian Official 1 [described as an employee of Petrobras], Brazilian Official 2 [described as an employee of Petrobras] and the Worker’s Party [described as a political party in Brazil], to secure improper advantages and to influence those foreign officials and the Workers’ Party to assist them in obtaining and retaining business in Brazil.
In or about 2008, Petrobras invited KOM JV USA [described as a joint venture between an engineering company and KOM USA and incorporated in Delaware] to bid on the P-61 project, a tension leg platform project, along with at least two other companies. After the invitation to bid, Consultant [described as a citizen of Brazil]met with Brazilian Official 1, who told him that if KOM wanted to win the contract, it would need to pay a percentage of the contract value in bribes to Brazilian Official 1 and the Workers’ Party.
In or about November 2009, to facilitate the payment of bribes and to conceal their purpose, KOM and KOM USA executives created and executed an agreement on behalf of a KOM subsidiary with a consulting company controlled by Consultant. In or about and between July 2010 and September 2014, under the guise of the consulting agreement, a KOM subsidiary effectuated the payment of bribes in relation to the P-61 project by making payments to a bank account in the United States in the name of a shell company controlled by Consultant. Consultant then transferred money from that bank account in the United States to bank accounts outside the United States controlled by, or for the benefit of, Brazilian Official 1, Brazilian Official 2, Party Official [described as a senior official in the Workers’ Party] and the Workers’ Party to further the bribery scheme.
In total, KOM USA, together with HOM and others, paid approximately $8.8 million in bribes to Brazilian Official 1 and the Workers’ Party in connection with the P-61 project. KOM and its related entities, including KOM USA, earned profits totaling approximately $159.9 million from the P-61 project.”
The plea agreement sets forth an advisory guidelines range of $6.3 million to $12.6 million yet sets forth an “appropriate” criminal penalty amount of $4.725 million “in light of the KOM DPA.”
The KOM information is similar in certain respects to the KOM USA charges but involves different projects. Under the heading “overview of the bribery scheme,” the information alleges:
“For a number of years, executives and employees of Petrobras with responsibility over the bidding process for certain large projects, including Brazilian Official 1 and Brazilian Official 2, and politicians and political parties in Brazil, including the Workers’ Party, administered a scheme to secure corrupt payments equal to a percentage of a contract’s value from the companies awarded those projects. In or around 2011, this scheme was extended to projects awarded by Sete Brasil [described as a privately held corporation headquartered in Rio de Janeiro that specialized in portfolio management of assets related to the offshore oil and gas sector] which commissioned a large fleet of rigs for Petrobras’s end use.
In or about and between 2011 and 2014, KOM, together with others, including executives of KOM USA, knowingly and willfully conspired to pay, and paid, bribes in connection with thirteen projects in Brazil tendered by Petrobras and Sete Brasil. These bribes amounted to approximately $55 million paid corruptly for the benefit of foreign officials, including Brazilian Official 1 and Brazilian Official 2, and the Workers’ Party to secure improper advantages and to influence those foreign officials and the Workers’ Party to obtain and retain business in Brazil. KOM and its related entities, including KOM USA, earned profits totaling approximately $351.8 million from business in Brazil obtained through the bribery scheme.”
The project referenced in the information are:
- Petrobras’s P-48 project, which involved converting a floating platform;
- Petrobras’s P-51 and P-52 projects, both of which involved the construction of floating production units;
- Petrobras’s P-56 project, another project involving the construction of a floating production unit;
- Petrobras’s P-53 and P-58 projects, both of which involved hull conversions of floating production storage and offloading units;
- Petrobras’s P-61 project, which involved the construction of a tension leg platform; and
- Sete Brasil contracted with five companies to commission the construction of a fleet of ultra deepwater rigs for which Petrobras would be the end user.
The information invokes the dd-3 portion of the FCPA and alleges the following jurisdictional acts: executive of an agreement in Houston in furtherance of the bribery scheme signed in Houston and payments through U.S. bank accounts.
The three year DPA sets forth the following “relevant considerations”:
“the Company did not receive voluntary disclosure credit because, although it notified the Fraud Section about publicly-reported allegations in Brazil prior to the Fraud Section and the Office contacting the Company, the Fraud Section and the Office were already aware of the allegations;
the Company received full credit for its substantial cooperation with the Fraud Section and the Office’s investigation, including conducting a thorough internal investigation, meeting the Fraud Section’s and the Office’s requests promptly, proactively identifying issues and facts that would likely be of interest to the Fraud Section and the Office, making regular factual presentations to the Fraud Section and the Office, agreeing to make foreign-based employees available for interviews in the United States, producing documents to the Fraud Section and the Office from foreign countries in ways that did not implicate foreign data privacy laws, and collecting, analyzing, and organizing voluminous evidence and information for the Fraud Section and the Office;
the Company provided to the Fraud Section and the Office all relevant facts known to it, including information about the individuals involved in the misconduct, which assisted the Fraud Section’s and the Office’s prosecution of individuals in this case;
the Company engaged in extensive remedial measures, including: taking disciplinary action against 17 former or current employees in relation to the misconduct …; causing seven employees who participated in the misconduct … to separate from the Company; issuing demotions and/or written warnings to seven employees who failed to detect the misconduct and/or failed to take appropriate steps to mitigate corruption and compliance risks; imposing approximately $8.9 million in financial sanctions on 12 former or current employees as part of the disciplinary process; and conducting individualized anti-corruption and compliance training for six employees;
the Company has enhanced and has committed to enhance its compliance program and internal controls, including by implementing heightened controls and additional procedures and policies for third parties; instituting a compliance governance framework, including a formal compliance function; developing a comprehensive anti-corruption training program; conducting ongoing reviews of its compliance program with the assistance of outside advisors, and ensuring that its compliance program satisfies the minimum elements set forth in [an attachment to the DPA];
based on the Company’s remediation and the state of its compliance program, and the Company’s agreement to report to the Fraud Section and the Office … the Fraud Section and the Office determined that an independent compliance monitor was unnecessary;
the Company is entering into resolutions with authorities in Singapore and Brazil relating to the same conduct … which the Fraud Section and the Office are crediting in connection with the penalty;
the nature and seriousness of the offense conduct, including a long-running scheme, the amount of bribe payments made to Brazilian government officials, and the involvement of high-level KOM executives;
the Company has no prior criminal history;
the Company has agreed to continue to cooperate with the Fraud Section and the Office in any ongoing investigation of the conduct of the Company, its subsidiaries and affiliates, and its officers, directors, employees, agents, business partners, and consultants relating to violations of the FCPA; and
accordingly … the Company received full cooperation and remediation credit of 25 percent off the bottom of the applicable U.S. Sentencing Guidelines fine range.”
The DPA sets forth an advisory guidelines range of $563 million to $1.1 billion and references an “appropriate criminal fine amount” of $422 million. The DPA further states:
“The Fraud Section, the Office and the Company further agree that the Company will pay a monetary penalty to the U.S. Treasury in the amount of $105,554,245, of which $4,725,000 will be paid as a criminal fine on behalf of the Company’s U.S. subsidiary [KOM USA] …. The Fraud Section, the Office, and the Company further agree that the Fraud Section and the Office will credit the amount the Company pays to Brazilian authorities up to a maximum of $211,108,490, and to Singaporean authorities, up to a maximum of $105,554,245.”
In the DOJ release, Acting Assistant Attorney General John Cronan stated:
“Today’s resolution once again underscores the importance of the Department of Justice’s collaboration with foreign authorities to hold corrupt companies and individuals accountable for their crimes, while ensuring the fair and appropriate allocation of fines and penalties. This case also represents the first coordinated FCPA resolution with Singapore and the most recent of several coordinated resolutions with Brazil. The Criminal Division is committed to working with our international partners to ensure that honest, law abiding companies are able to compete on a level playing field across the globe.”
Acting U.S. Attorney Bridget Rohde (E.D. of N.Y.) stated:
“The resolutions with KOM and its U.S. subsidiary are the result of a multinational effort to investigate and prosecute a corruption scheme that resulted in the payment by the defendant companies of over $50 million in bribes to Brazilian officials and in profits for the defendant companies of over $350 million from business corruptly obtained in Brazil. In an attempt to conceal their crimes, the defendants used the global financial system – including the United States banking system – to disguise the source and disbursement of the bribe payments by passing funds through a series of shell companies. The United States, working with its law enforcement partners abroad, will continue to hold responsible those corporations and individuals who seek to enrich themselves through the corruption of government officials and legitimate governmental functions.”
Stephen Richardson (Assistant Director of the FBI’s Criminal Investigative Division) stated:
“The resolution to this investigation shows to those around the world that the FBI and our law enforcement partners are dedicated to work together to bring justice to companies who play outside the rule of law. The FBI won’t stand by while individuals operate their business illegally using bribes.”
The DOJ’s release further states:
“The Department also unsealed charges today against a former senior member of KOM’s legal department, who pleaded guilty to one count of conspiracy to violate the FCPA on Aug. 29, 2017 in the Eastern District of New York. He is awaiting sentencing.”
In this release, KOM states:
“As part of the global resolution, KOM has accepted a conditional warning from the Corrupt Practices Investigation Bureau (CPIB) in Singapore, and entered into a Deferred Prosecution Agreement (DPA) with the U.S. Department of Justice (DOJ), while Keppel FELS Brasil, a wholly-owned subsidiary of KOM, has reached a Leniency Agreement with the Public Prosecutor’s Office in Brazil, the Ministério Público Federal (MPF). The Leniency Agreement would become effective following approval of the Fifth Chamber for Coordination and Review of the MPF. In addition, Keppel Offshore and Marine USA (KOM USA), also a wholly owned subsidiary of KOM, has agreed to plead guilty pursuant to a plea agreement with the DOJ.
These agreements relate to corrupt payments made by Mr Skornicki [its former agent in Brazil] in relation to several KOM projects in Brazil, which were made with knowledge or approval of former KOM executives. As announced in October 2016, Keppel undertook a thorough internal investigation, identified certain suspicious transactions involving Mr Skornicki, and cooperated fully and extensively with the authorities to resolve the issues arising from or in connection with those transactions.
Dr Lee Boon Yang, Chairman of Keppel Corporation, said, “Integrity is one of Keppel’s core values. We do not and will not tolerate any illegal activity in the conduct of our business. We regret and are deeply disappointed by the actions that we now know to have taken place at the Group’s offshore and marine business in Brazil from around 2001 to 2014.
“Global companies such as Keppel have both a legal and moral duty to operate fully within international laws and regulations. Any perception that illegal payments can be condoned, if they are made by agents, is wrong and will not be tolerated.
“Since the allegations emerged, we have moved quickly and decisively to put in place stricter controls and embedded best practices across the Group to ensure that such unacceptable behavior will not be repeated.”
Mr Loh Chin Hua, CEO of Keppel Corporation, added, “The past practices uncovered at KOM do not reflect how the Keppel Group conducts business today. Keppel does not just care about results, we care deeply about how our results are achieved. We have zero tolerance for corruption. Effective compliance controls are now thoroughly embedded across all our businesses supported by rigorous anti-corruption training and robust compliance and governance regimes.
“Today’s settlement means we can draw a line under this difficult issue which has been a key focus of the board and senior management since the bribery allegations first emerged, and look to the future. It has been a very painful chapter for Keppel and the thousands of hard working and honest colleagues we employ in Singapore and around the world. We must now work hard to win back the trust our stakeholders have placed in us and demonstrate our determination to hold ourselves to the highest ethical standards everywhere we operate.
“Given Keppel’s strong track record and capabilities, I am confident that we will emerge as a more disciplined and sustainable company, better able to pursue our growth plans.”
KOM’s release also contained a Q&A including the following:
5. When did Keppel start cooperating with the investigating authorities?
When bribery allegations first emerged in the Brazilian media in 2015, Keppel investigated the facts as part of its zero tolerance approach to such conduct. As announced in October 2016, when Keppel’s internal investigations revealed suspicious transactions, we notified the authorities in the relevant jurisdictions to cooperate in connection with these transactions.
6. What are the enhanced regulatory compliance measures that Keppel has implemented?
Keppel has moved quickly to strengthen its regulatory compliance measures and has rolled out an enhanced programme across the Group in 2015. Specific measures include the following:
– An enhanced Code of Conduct containing detailed anti-corruption provisions and guidance on dealing with intermediaries.
– Establishment of a group-wide compliance and governance framework.
– A dedicated independent Group-wide compliance function has been set up, reporting to the head of Group Risk and Compliance and the respective Board Risk Committees. Keppel is further strengthening its compliance function with the addition of experienced compliance personnel.
– Extensive risk-based due diligence procedures for third parties who represent Keppel in business dealings.
– An on-going program to educate staff on Keppel’s zero tolerance for bribery and corruption. Whistleblower and anti-bribery mechanisms are in place and full information on employee responsibilities and reporting structures has been distributed across all business units.
– Rigorous and regular training programmes to enhance the compliance culture across the Group, including comprehensive annual compliance-related e-learning and attestations exercises. Specific compliance training for KOM employees in Singapore and Brazil has been introduced and KOM is also rolling out training for key third party associates.
– New and revised compliance policies have been issued, including:
• A new Supplier Code of Conduct, including specific anti-bribery provisions
• An updated Group Whistleblower Policy, with centralized procedures and a new whistleblower committee.
• A Group Policy on Agent Fees to strengthen procedures and requirements when hiring agents
Other ongoing enhancements include refinement of our due diligence procedures, clarification of reporting lines to reinforce the independence of the compliance function, and streamlining policies and procedures.
7. How is the US Department of Justice involved when the issues took place in Brazil?
There were various grounds for the US DOJ to claim jurisdiction, including the fact that KOM USA is based in the US and was involved in KOM’s business in Brazil.
FCPA Institute - Boston (Oct. 3-4)
A unique two-day learning experience ideal for a diverse group of professionals seeking to elevate their FCPA knowledge and practical skills through active learning. Learn more, spend less. CLE credit is available.