As highlighted in this prior post, in 2014 Netherlands-based SBM Offshore resolved a $240 million Dutch law enforcement action alleging improper payments to sales agents and foreign government officials in Equatorial Guinea, Angola and Brazil between 2007 through 2011. In connection with this action, the company disclosed: ““the United States Department of Justice has informed SBM Offshore that it is not prosecuting the Company and has closed its inquiry into the matter.”
Fast forward to earlier this month when, as highlighted in this prior post, the DOJ announced resolution of criminal charges against former SBM Offshore executive Anthony Mace and Robert Zubiate for their roles in a scheme to bribe foreign government officials in Brazil, Angola and Equatorial Guinea.
Yesterday, the DOJ announced that SBM Offshore and its wholly owned U.S. subsidiary, SBM Offshore USA Inc. (SBM USA) “have agreed to resolve criminal charges and pay a criminal penalty of $238 million in connection with schemes involving the bribery of foreign officials in Brazil, Angola, Equatorial Guinea, Kazakhstan and Iraq in violation of the Foreign Corrupt Practices Act (FCPA). SBM USA pleaded guilty today in connection with the resolution.”
The enforcement action involved:
- a criminal information against SBM USA charging conspiracy to violate the FCPA’s anti-bribery provisions resolved through a plea agreement; and
- a criminal information against SBM Offshore charging conspiracy to violate the FCPA’s anti-bribery provisions resolved through a deferred prosecution agreement.
This post summarizes the approximate 170 pages of resolution documents.
SBM USA Information
SBM is described as a Texas-incorporated wholly-owned subsidiary of SBM Offshore.
Under the heading “Overview,” the information alleges:
“Beginning by at least in or around 1996 and continuing until in or around 2012, SBM USA and its co-conspirators […] knowingly and willfully conspired with each other and others known and unknown to cause SBM to make corruption “commission” payments to sales intermediaries and others, knowing that a portion of those “commission” payments would be used to bribe foreign officials in Brazil and elsewhere to influence those foreign officials for the purpose of securing improper advantages and obtaining and retaining business with Petrobras and other state-owned oil companies.”
In pertinent part, the information alleges that, at a third-party’s request, SBM “typically split its “commission” payments to [the third party] into two accounts, transferring one portion to bank accounts in Brazil … and another, larger, portion of its “commission” to bank accounts in Switzerland held in the names of [the third party’s] shell companies.” The information further alleges that “SBM USA understood that the purpose of splitting payments [to the third party] was to facilitate the payment of bribes.”
According to the information, SBM USA and SBM “also obtained confidential information from Petrobras officials [through the third party] in its efforts to obtain or retain business.” Moreover, the information alleges that “executives and employees at SBM used personal e-mail accounts to receive this confidential information.” Elsewhere, the information alleges:
“SBM USA, through its executives, employees and agents, and through SBM and SBM’s executives, employees, and agents, and together with others, undertook acts to conceal the bribery scheme, such as using codes to refer to foreign officials who received bribes, communicating using methods of communications, such as personal e-mail accounts and faxes, which would leave no trace on SBM’s servers, and destroying confidential information.”
According to the information, “in connection with SBM USA’s and SBM’s bribery scheme, SBM USA obtained or benefitted from at least $13.2 million in proceeds from one or more projects with Petrobras.
SBM USA Plea Agreement
The criminal charge against SBM USA was resolved through a plea agreement in which the company plead guilty to conspiracy to violate the FCPA’s anti-bribery provisions.
The plea agreement sets forth an advisory guidelines fine range of $3.38 billion to $6.76 billion, however the companies agreed that the appropriate criminal fine was $500,000 and criminal forfeiture of $13.2 million (with these amounts being included in the $238 million resolution agreed to by SBM Offshore in its DPA).
As is typical in corporate FCPA resolutions, SBM USA agreed to a so-called “muzzle clause” in which agreed that it “shall not, through present or future attorneys, officers, directors, employees, agents or any other person authorized to speak [on its behalf] make any public statement, in litigation or otherwise, contradicting acceptance of responsibility” as set forth in the plea agreement.
SBM Offshore Information
The SBM Offshore information alleges, under the heading “Overview of the Bribery Scheme” as follows:
“Beginning by at least in or around 1996 and continuing until in or around 2012, SBM Offshore and its co-conspirators … knowingly and willfully conspired with each other and others known and unknown, to cause SBM to make corrupt “commission” payments to sales intermediaries and others, knowing that a portion of those “commission” payments would bused to bribe foreign officials in Brazil, Angola, Equatorial Guinea, Kazakhstan, Iraq, and elsewhere to influence those foreign officials for the purpose of securing improper advantages and obtaining and retaining business with state-owned oil companies in Brazil, Angola, Equatorial Guinea, Kazakhstan, Iraq and elsewhere. At various times, [various executives] oversaw and executed SBM’s worldwide bribery scheme. In total, SBM made at least $180 million in corrupt “commission” payments to intermediaries for the purpose of obtaining or retaining business from state-owned oil companies in Brazil, Angola, Equatorial Guinea, Kazakhstan, and Iraq; and earned or expected to earn at least $2.8 billion in gain from the work it obtained from those state-owned oil companies.
In furtherance of the bribery scheme, SBM gave its marketing and sales staff discretion to pay smaller bribes directly to foreign officials, such as for jewelry or electronics, while requiring high-level approval for larger bribes.
In addition, SBM regulatory sent foreign officials “thank you” money after successfully winning projects, whether or not such payments had been agreed to before SBM bid on the projects.
SBM paid a number of bribes through corrupt sales intermediaries by paying them a “commission” knowing that these intermediaries would use a portion of such “commissions” to fund the bribes. SBM included a standard percentage for “commission” payments into its template for estimating project costs.
In addition to paying monetary bribes to foreign officials, SBM also paid for foreign officials’ travel to sporting events and provided these foreign officials with cash of $1,000 or more as “spending money.” In addition, SBM paid for the tuition and living expenses of foreign officials’ relatives, and employed foreign officials’ relatives, including some relatives who did not perform satisfactorily for the positions held or were overpaid for the work performed.
SBM maintained detailed records related to SBM’s worldwide bribery scheme in a safe in the office of [executives] in Monaco, to which only [the executives] and their personal assistants had access. These records included a spreadsheet generated by [an executive] reflecting approximately $16.42 million in “commission” payments SBM made [to an intermediary] which [the intermediary] subsequently paid to officials in Equatorial Guinea as bribes.
SBM also developed and used a system of codes to refer to foreign officials who received bribes from SBM, and used methods of communication, such as personal e-mail accounts and faxes, which would leave no e-mail trace on SBM’s servers.”
The Brazil portion of the SBM Offshore information is generally the same as summarized above in connection with SBM USA’s information.
As to Angola, the information alleges:
“From in or around 1997 through in or around 2012, SBM knowingly paid bribes either directly or through [an intermediary] to officials with the Angolan government for the purpose of securing an improper advantage and assisting SBM in obtaining and retaining business from Sonangol. SBM paid bribes to at least nine Angolan officials within Sonangol and Sonusa. [Sonangol is described as a state-owned and state-controlled oil company that was controlled by the Angolan government and performed government functions for Angola. Sonusa [Sonangol USA Co.] is described as a Houston, Texas based wholly-owned subsidiary of Sonangol. Sonusa was controlled by the Angolan government and performed government functions for Angola.”]
In addition to other improper payments, the information alleges:
“SBM also gave things of value to Sonangol officials in the form of gifts, travel, and entertainment, including paying for travel to sporting events.
Further, SBM conferred benefits upon Sonangol officials by hiring and paying for the education of their relatives. For example, in or around 2000, SBM hired the daughter of a Sonusa official as a cashier in their Monaco office, and overpaid her for the work she performed, including agreeing to pay her a salary and half of her rent. Later, [SBM executives] agreed to have SBM assist her in purchasing an apartment. Additionally, in 2010, SBM USA hired the son of a Sonangol official as an administrative intern, a position he kept until 2014, despite the fact that he did not satisfactorily perform in that position.”
As to Equatorial Guinea, the information alleges:
“From in or around 2008 through in or around 2012, SBM knowingly paid bribes through [an intermediary] to officials within the Equatorial Guinean government for the purpose of securing an improper advantage and assisting SBM in obtaining and retaining business from GEPetrol and MMIE. SBM paid bribes to at least nine Equatorial Guinean officials within GEPetrol and MMIE. [GEPetrol is described as the national oil company of Equatorial Guinea, controlled by the country’s Ministry of Mines, Industry and Energy [MMIE] and performed government functions for Equatorial Guinea.”
In addition to other improper payments, the information alleges:
“SBM also provided things of value to GEPetrol and MMIE officials in the form of gifts, travel, and entertainment, including travel to sporting events, the provision of luxury good like watches and sports memorabilia, and shipping vehicles to Equatorial Guinea. For example … an SBM employee approved an expense report seeking reimbursement for hundreds of Euros in gifts he had purchased. The report included handwritten, coded notes indicating that certain gifts were for Equatorial Guinean officials. […] [An executive and employee] discussed shipping a BMW X5 from Belgium to a GEPetrol official in Equatorial Guinea.”
The information further alleges:
“SBM used its corrupt relationships with Equatorial Guinean officials to advance its commercial interests with other companies as well. For example at some point during the conspiracy, [and executive and employee] met with an employee of another oil and gas company, with which SBM was doing business in Equatorial Guinea, at a private club in Houston, TX and discussed [the executive’s] access to foreign officials in Equatorial Guinea.”
As to Kazakhstan, the information alleges:
“From in or around 2003 through in or around 2009, SBM knowingly conspired to pay bribes and attempted to pay bribes [through intermediaries] to officials within the Kazakhstan government, for the purpose of securing an improper advantage and assisting SBM in its business in Kazakhstan. SBM attempted to pay bribes to at least one KazMunayGas officials at least one Company 1 employee. [KazMunayGas is described as Kazakhstan’s state-owned and state-controlled oil company, controlled by the Kazakh government that performed government functions. Company 1 is described as a subsidiary of an Italian oil and gas company in which the government of Kazakhstan granted the company a concession as the operator of the Kashagan oil field development in Kazakhstan. In this capacity, Company 1 was acting in an official capacity for or on behalf of KazMunayGas in awarding contracts].
As to Iraq, the information alleges:
From in or around 2009 through at least in or around 2012, SBM knowingly conspired to pay bribes and attempted t pay bribes through [an intermediary] to officials within the Iraq government for the purpose of securing an improper advantage and assisting SBM in obtaining and retaining business from the government of Iraq. SBM attempted to pay bribes to at least two Iraqi officials within SOC. [SOC is described as South Oil Company, an Iraqi state-owned and state-controlled oil company, controlled by the Iraqi government that performed government functions.].
Based on the above allegations, the information charges SBM Offshore with conspiring to violate the FCPA’s anti-bribery provisions and the information specifically invokes 78dd-2 and 78dd-3. The “overt acts” portion of the information contains no explicit U.S. jurisdictional allegations other than the generic statement that “SBM Offshore, by and through SBM USA, and SBM USA’s executives and employees, including Zubiate, agreed that [an intermediary] would pay bribes to Petrobras officials.”
SBM Offshore DPA
The criminal charge against SBM Offshore was resolved through a DPA in which the company admitted, accepted, and acknowledged that it was responsible under U.S. law for the acts of its officers, directors, employees, and agents as set forth in the Information.
The three-year DPA sets forth the following relevant considerations:
“(a) the Company did not receive voluntary disclosure credit because, although it voluntarily brought the conduct to the attention of the Fraud Section and to Dutch authorities, the disclosure did not occur for approximately one year and thus was not timely.
(b) although the Fraud Section initially declined to continue investigating the Company, it communicated that this declination was based on the findings of the Company’s investigation and the facts known to the Fraud Section at the time, and that there was no apparent jurisdiction at that point in time, but that the Fraud Section reserved the right to reopen the investigation if it learned of additional information or evidence that established U.S. jurisdiction;
(c) the Fraud Section informed the Company in 2016 that it was reopening the investigation because the Fraud Section learned additional information that was not uncovered during the Company’s investigation, and not known to either the Company or the Fraud Section at the time of the declination; specifically, that a United States-based executive of one of SBM’s wholly-owned domestic concerns managed a significant portion of the corrupt scheme, and engaged in conduct within the jurisdiction of the United States; in addition, even though the Offices are crediting the full amount paid in fines and forfeiture to the Dutch authorities in connection with the Dutch resolution, the penalty owed in the United States exceeds the amount paid to the Dutch authorities;
(d) the Company received full credit for its cooperation with the Unites States’ investigation because, once it fully disclosed the conduct to the Offices, the Company engaged in full cooperation, including: conducting a thorough internal investigation, making regular factual presentations to the Offices, voluntarily making foreign-based employees available for interviews in the United States, producing documents to the United States from foreign countries, collecting, analyzing,, and organizing voluminous evidence and information for the Offices, and conducting an expedited internal investigation into the conduct related to [an intermediary] as identified in the information;
(e) by the completion of the investigation, the Company provided to the Offices all relevant facts, including information about the individuals involved in the conduct .. and conduct disclosed to the Offices prior to the Agreement, which assisted the Offices’ prosecution of culpable individuals;
(f) the company engaged in remedial measures, including the following: of the three employees who had engaged in the misconduct and who remained with the Company when the Company learned of the misconduct, terminating two employees and demoting the other; seeking and obtaining the return of corrupt funds from agents; terminating longstanding agency relationships with corrupt and questionable third parties; stopping all payments to all of its agents in order to engage in a complete review of its then-current agents, resulting in a significant reduction in the Company’s total number of agents; hiring a full-time Chief Governance and Compliance Officer, with authority to raise issues directly to the Supervisory Board or Audit Committee; engaging an independent company to design a new compliance program; creating a whistleblower hotline; training its sales and marketing personnel; and completing 3 years of monitoring under the supervision of Dutch authorities.
(g) the Company has committed to continuing to enhance its compliance program and internal controls …
(h) based on the Company’s remediation and the state of its compliance program, and the Company’s agreement to report to the United States as set forth in the DPA … the United States determined that an independent compliance monitor was unnecessary;
(i) the nature and seriousness of the offense, which lasted over 16 years, was carried out by employees at the highest level of the organization, including two high-level executives who were at times directors of a wholly-owned U.S. domestic concern, involved large bribe payments, and included deliberate efforts to conceal the scheme;
(j) the Company has no prior criminal history;
(k) the Company has agreed to continue to cooperate with the United States in the Offices’ ongoing investigation of individuals or other companies; and
(l) accordingly, despite the nature and seriousness, pervasiveness, and scope of the offense, due to the ability of the Offices to prosecute the culpable individual wrongdoers, the significant collateral consequences that a parent-level guilty plea would cause, the significant cooperation and remediation undertaken by the Company, the fact that the Company reached a resolution with the Dutch authorities and has ongoing efforts to resolve with the Brazilian authorities involving certain overlapping conduct (which the Offices have taken into account in the Company’s penalty), the avoidance of a penalty that would substantially jeopardize the continued viability of the Company, and the other considerations outlined [above] the Offices have determined that a subsidiary guilty plea, a parent-level deferred prosecution agreement, and an aggregate discount of 25% off of the bottom of the the otherwise-applicable U.S. Sentencing Guidelines fine range is sufficient but not greater than necessary …”.
The DPA sets forth an advisory sentencing guidelines range of $4.5 billion to $9.0 billion and states:
“The Company agrees to pay total monetary penalties in the amount of $238 million, $500,000 of which will be paid as a criminal fine and $13.2 million of which will be paid as forfeiture by the Company on behalf of [SBM USA]. […] The Company and the United States agree that this penalty is appropriate given the facts and circumstances of this case … and in consideration of imposing a penalty that will avoid substantially jeopardizing the continued viability of the Company. In determining the appropriate penalty amount, the Offices have credited the company’s disgorgement of $200 million in profits to the Netherlands, payment of a $40 million fine to the Netherlands, and the amount provisioned for by the Company in connection its ongoing efforts to reach resolution in Brazil, because that fine, disgorgement, and payment arise out of some of the conduct [alleged].”
Pursuant to the DPA, “The Company agrees that it will report to the U.S. annually during the Term regarding remediation and implementation of the compliance measures [mandated as a condition of settlement].”
In the DOJ’s release, Acting Assistant Attorney General John Cronan of the Justice Department’s Criminal Division stated:
“This corrupt scheme involved some of the highest-level executives within the company, spanned five countries, and lasted for more than a decade. The resolution announced today demonstrates the Criminal Division’s continuing commitment to work closely with our foreign partners to hold both companies and individuals accountable for their actions as we continue to level the playing field for ethical and honest businesses to compete in the marketplace.”
Acting U.S. Attorney Abe Martinez of the Southern District of Texas stated:
“Deterring corporate crime requires enforcing the law on multiple fronts. These cases involve both individual and corporate misconduct, which the guilty pleas reflect. We will continue to aggressively investigate and prosecute individuals and corporations who violate the FCPA and those who misuse our financial system to do so.”
Special Agent in Charge Mark Dawson of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI) Houston Field Office stated:
“This case exemplifies how HSI works diligently with our foreign law enforcement partners to promote and protect international trade practices, ensuring a fair and equal playing field for U.S. companies and consumers.”
See here for SBM Offshore’s release.
On the other side of the Atlantic, the U.K. Serious Fraud Office announced:
“Paul Bond [formerly a Senior Sales Manager with SBM Offshore] and Stephen Whiteley [formerly a Vice President with SBM Offshore and Unaoil’s General Territories Manager for Iraq, Kazakhstan and Angola] have both been charged with conspiracy to make corrupt payments to secure the award of contracts in Iraq to Unaoil’s client SBM Offshore.
The charges relate to alleged corrupt conduct within Unaoil, between June 2005 and August 2011.
Paul Bond has been charged with two offences of conspiracy to make corrupt payments, contrary to section (1) of the Criminal Law Act 1977 and contrary to section 1 of the Prevention of Corruption Act 1906.
Stephen Whiteley has been charged with one offence of conspiracy to make corrupt payments, contrary to section (1) of the Criminal Law Act 1977 and contrary to section 1 of the Prevention of Corruption Act 1906.”
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