It’s been quite a week on the FCPA enforcement front.
On Monday, the DOJ announced (here) criminal obstruction of justice charges against “Frederic Cilins a French citizen [for] attempting to obstruct an ongoing investigation into whether a mining company paid bribes to win lucrative mining rights in the Republic of Guinea.”
Yesterday, it was reported (here) that former Siemens executive Uriel Sharef had, as expected, settled the SEC enforcement action against him by agreeing, without admitting or denying the SEC’s allegations, to pay a $275,000 penalty. (See here for the prior post discussing the DOJ’s and SEC’s December 2011 charges against Sharef and others).
Yesterday, the DOJ announced (here) that criminal charges “have been unsealed against one current and one former executive of the U.S. subsidiary of a French power and transportation company for their alleged participation in a scheme to pay bribes to foreign government officials.” The individuals are:
Frederic Pierucci (“a current company executive who previously held the position of vice president of global sales for the Connecticut-based U.S. subsidiary) “who was charged in an indictment unsealed in the District of Connecticut with conspiring to violate the Foreign Corrupt Practices Act (FCPA) and to launder money, as well as substantive charges of violating the FCPA and money laundering.” According to the DOJ, Pierucci, a French national, was arrested Sunday night at John F. Kennedy International Airport.
David Rothschild (“a former vice president of sales for the Connecticut-based U.S. subsidiary”) who pleaded guilty on Nov. 2, 2012, to a criminal information charging one count of conspiracy to violate the FCPA. The charges against Rothschild and his guilty plea were recently unsealed.
Future posts will explore in more detail each of the above developments.
Today’s post is about yesterday’s other FCPA development – the announcement of the long-expected enforcement action against Parker Drilling (a Houston-based oil drilling services company) for conduct in Nigeria.
As indicated in this DOJ release, the Parker Drilling action “stemmed from the DOJ’s Panalpina-related investigations.”
As detailed in this prior post, in November 2010, the DOJ and SEC announced coordinated FCPA enforcement actions against Swiss-based freight forwarder Panalpina and six oil and gas companies that utilized its services in connection with business in Nigeria. The November 2010 enforcement action resulted in approximately $237 million in combined DOJ/SEC settlement amounts. (For additional reading on these actions, please visit the CustomsGate tab under the search feature of this site or see here where all the prior actions are linked). As noted in this prior statistical post, Panalpina-related enforcement actions are one, of just a few unique events, that have given rise to the majority of FCPA enforcements since 2007, and Panalpina-related enforcement actions significantly contributed to the “spike” in FCPA enforcement actions in 2010.
Total fines and penalties in the Parker Drilling enforcement action were approximately $15.9 million (approximately $11.8 million in the DOJ enforcement action and approximately $4.1 million in the SEC enforcement action).
This post summarizes the DOJ’s and SEC’s allegations and resolution documents.
Parker Drilling operated oil-drilling rigs in Nigeria owned by Parker Drilling (Nigeria Limited), a Nigerian entity and wholly-owned subsidiary of Parker Drilling Offshore International, Inc., (a Cayman Islands corporation wholly-owned by Parker Drilling). According to the information, “Parker Drilling ceased drilling operations in Nigeria in 2006” and the conduct at issues focused on two issues or events that occurred between 8 to 12 years ago.
First, the information, like the prior Panalpina-related enforcement actions, alleged conduct in connection with obtaining temporary importation permits (TIPs) in Nigeria for oil-drilling rigs. The information alleges that in 2001, Parker Drilling retained Panalpina to “obtain TIPs and TIP extensions on Parker Drilling’s behalf. According to the information, between 2001 and 2002:
“Panalpina obtained new TIPs for Parker Drilling’s rigs by submitting false paperwork on Parker Drilling’s behalf to avoid the time, cost, and risk associated with exporting the rigs and re-importing them into Nigerian waters (a process that Panalpina referred to as the ‘paper process’ or ‘recycling.’). Panalpina created and caused to be presented to Nigerian officials documents that reflected that the rigs had been physically exported and re-imported. In reality, the drilling rigs never left Nigerian waters.”
Second, and more significant in terms of the conduct alleged in the information, the DOJ alleges conduct in relation to the Nigerian “Panel of Inquiry for the Investigation of All Cases of Temporary Import Permits Issued Between 1984 to Year 2000” (the “TI Panel”). According to the information, the TI Panel was “presidentially appointed, operated under the auspices of the Nigerian President’s Office, and possessed the power to issue subpoenas and levy fines” in connection with certain duties and tariffs that the Nigerian Customs Service (“NCS”) collected or failed to collect between 1984 and 2000.
As to the TI Panel, the information alleges that beginning in 2002 the TI Panel began reviewing Parker Drilling. According to the information, thereafter Parker Drilling engaged Nigeria Outside Counsel (a Nigerian citizen based in Nigeria who advised Parker Drilling on customs and other matters in Nigeria) and a Nigeria Agent (a Nigerian and British citizen based in the U.K. to assist Parker Drilling in connection with customs matters in Nigeria) who represented Parker Drilling before the TI Panel.
The information alleges that in 2004 “the TI Panel concluded that Parker Drilling had violated [Nigerian law] with respect to several of its TIPS” and that the “TI Panel assessed a fine of $3.8 million against Parker Drilling.” The information then outlines a “bribery scheme,” that resulted in the TI Panel reducing Parking Drilling’s fine “to just $750,000.”
In connection with this “bribery scheme,” the information alleges conduct as to Employee A (a U.S. citizen based in Nigeria who, during the relevant time period, was the General Manager of Parker Drilling’s operations in Nigeria); Employee B (a U.S. citizen based in Nigeria who also was a General Manager of Parker Drilling’s Operations in Nigeria); Executive A (a U.S. citizen based in Houston who performed financial and compliance functions for Parker Drilling between 2002 through 2005); Executive B (a U.S. citizen based in Houston who performed a legal function for Parker Drilling); U.S. Outside Counsel (a U.S. citizen and partner in a U.S. law firm who served as Parker Drilling’s outside counsel who provided legal and business advice to Parker Drilling on customs and other issues in Nigeria).
Specifically, the information alleges that U.S Outside Counsel suggested that Parker Drilling retain the Nigeria Agent to resolve its Nigerian customs issues even though Nigeria Agent’s “resume, which U.S. Outside Counsel provided to Parker Drilling, did not reflect any past experience in Nigeria or handling customs issues.” According to the information, Parker Drilling “conducted no additional due diligence into Nigeria Agent’s qualifications.”
The information alleges that “with one exception, Parking Drilling paid Nigeria agent indirectly through the U.S.-based law firm” and that “Executives A and B paid and caused to be paid all of Nigeria Agent’s expenses without receiving any invoices particularly describing the expenditures’ purposes.” According to the information, many of expenses related to food, entertainment, social events and the like and the information alleges various meetings the Nigeria Agent had with various Nigerian foreign officials.
The information further alleges that Parker Drilling’s treasurer informed Executive B “that the lack of invoices could raise an issue in Parker Drilling’s ongoing Sarbanes Oxley audit.” Thereafter, the information alleges, the Nigeria Agent sent an invoice and that Executive B “accepted the invoice and retained it in Parker Drilling’s files, knowing that the invoice did not accurately reflect the true purpose of Parker’s Drillings” prior payments to the Nigeria Agent.
The information then states as follows. “All told, Parker Drilling transferred and caused to be transferred to Nigeria Agent approximately $1.25 million to address Parker Drilling’s TI Panel issues” and that “Nigeria Agent succeeded in reducing Parker Drilling’s TI Panel Fines.”
Based on the above conduct, the information charges one count of violating the FCPA’s anti-bribery provisions. Although the above Panalpina-related allegations are incorporated by reference into the paragraphs charging the FCPA violation, the information specifically identifies only the TI Panel conduct and states as follows. “Parker Drilling made and cause to be made from the United States … a series of payments totaling approximately $1.25 million to Nigeria Agent, knowing that all or a portion of those payments would be given or used to procure goods and services that were to be given to a foreign government official in return for the diminution of a lawfully assessed fine.”
Deferred Prosecution Agreement
The above charge against Parker Drilling was resolved via a DPA in which Parker Drilling admitted, accepted, and acknowledged that it was responsible for the acts of its officers, directors, employees and agents as charged in the information.
The DPA has a term of three years and under the heading “relevant considerations” it states as follows.
“The Department enters into this Agreement based on the individual facts and circumstances presented by this case and the Company. Among the facts considered were the following: (a) the Company’s cooperation, including conducting an extensive internal investigation and collecting, analyzing, and organizing voluminous evidence and information for the Department; (b) the Company has engaged in extensive remediation, including ending its business relationships with officers, employees or agents primarily responsible for the corrupt payments, enhancing its due diligence protocol for third-party agents and consultants, increasing training and testing requirements, and instituting heightened review of proposals and other transactional documents for all the Company’s contracts; (c) the Company has retained a full-time Chief Compliance Officer and Counsel who reports to the Chief Executive Officer and Audit Committee, as well as staff to assist the Chief Compliance Officer and Counsel; (d) the Company has already significantly enhanced and is committed to continue to enhance its compliance program and internal controls, including ensuring that its compliance program satisfies the minimum elements set forth [elsewhere in the DPA]; (e) the Company has implemented a compliance-awareness improvement initiative and program that includes issuance of periodic anti-bribery compliance alerts; (f) the Company has already implemented many of the elements described [elsewhere in the DPA]; and (g) the Company has agreed to continue to cooperate with the Department in any ongoing investigation …”.
Pursuant to the DPA, the advisory Sentencing Guidelines range for the conduct at issue was $14.7 million to $29.4 million. The DPA then states as follows.
“The Company agrees to pay a monetary penalty in the amount of $11,760,000, an approximately 20% reduction off the bottom of the fine range […]. The Company and the Department agree that this fine is appropriate given the facts and circumstances of this case, including the Company’s cooperation, extensive remediation, committment to continue to enhance its compliance program, and culpability relative to other companies examined in this investigation.”
During the period of the DPA, Parker Drilling will have annual reporting obligations to the DOJ concerning its remediation and implementation of various compliance measures. As is typical in FCPA DPAs, Parker Drilling also agreed to a “muzzle clause” (see this prior post for more information).
In a related enforcement action based on the same core conduct, the SEC brought a civil complaint (here) against Parking Drilling.
The introductory paragraph of the complaint states as follows.
“This matter involves violations of the Foreign Corrupt Practices Act (“FCPA”) by Defendant Parker Drilling Company. In 2004, through its outside counsel, Parker Drilling retained a Nigerian agent to assist the company with customs disputes related to the importation of its drilling rigs into Nigeria. During the course of the agent’s work, two Parker Drilling executives knowingly paid the agent large sums of money through its outside counsel for, among other things, the “entertainment” of Nigerian foreign officials in an effort to obtain their influence in resolving the customs disputes.”
The SEC complaint also contains a paragraph with the same general Panalpina-related allegations as alleged in the DOJ’s criminal information.
Under the heading “Remedial Efforts” the complaint states as follows.
“Parker Drilling demonstrated significant cooperation and conducted an extensive internal investigation. Since the time of the conduct noted in this Complaint, Parker Drilling has made significant enhancements to its global anti-corruption compliance program, including: retaining a full-time Chief Compliance Officer and Counsel who reports to the Chief Executive Officer and Audit Committee and full-time staff to assist him; enhancing anti-corruption due diligence requirements for relationships with third parties; increasing compliance monitoring and corporate auditing specifically tailored to anti-corruption; implementing a compliance awareness initiative that includes issuance of periodic anti-bribery compliance alerts; enhancing financial controls and governance; and expanding anti-corruption training throughout the organization.”
Based on the above conduct, the SEC charged an FCPA anti-bribery violation and an FCPA books and records and internal controls violation. Other than restating the language of the books and records and internal controls provisions, the SEC complaint does not contain any specific allegations concerning these charges.
As noted in this SEC release, Parker Drilling agreed to pay disgorgement of 3,050,00 plus pre-judgment interest of $1,040,818, and consented to the entry of a final judgment permanently enjoining it from future FCPA violations.
Parker Drilling in this release stated as follows.
“After an extensive investigation, with which we fully cooperated, we are pleased to have reached agreement with the DOJ and the SEC, and we will continue to maintain a vigorous FCPA compliance program, to emphasize the importance of compliance and ethical business conduct, and to enhance our compliance efforts.”
Parker Drilling had previously disclosed that the DOJ and SEC’s investigations concerned “certain of our operations relating to countries in which we currently operate or formerly operated, including Kazakhstan and Nigeria.”