As highlighted in prior posts here and here, in January 2017 the DOJ announced a $170 million Foreign Corrupt Practices Act enforcement action against U.K. based Rolls-Royce. The allegations included several generic references to employees at Rolls-Royce and Rolls-Royce Energy Systems (RRESI, an indirect subsidiary located in Ohio) who conspired to cause “to make over $35 million in commission payments to commercial advisors and others, knowing that the commission payments would be used to bribe foreign officials on behalf of Rolls-Royce and RRESI in Thailand, Brazil, Kazakhstan, Azerbaijan, Angola, Iraq and elsewhere, in exchange for foreign officials’ assistance in providing confidential information and awarding contracts to Rolls-Royce, RRESI, and affiliated entities.”
Earlier this week, the DOJ announced an FCPA enforcement action against five individuals based on the same Kazakhstan conduct alleged in the prior corporate action. That is, bribery in connection with an RRESI contract to supply gas turbine units to Asia Gas Pipeline LLC (AGP) for approximately $145 million.
AGP is described in the DOJ’s resolution documents as a “state-owned joint venture between Kazakh and Chinese state-owned entities, which they created to build and connect a gas pipeline between Kazakhstan and China.” According to the DOJ, “AGP was controlled by the Kazakh and Chinese governments and performed government functions for Kazakhstan and China and thus was an instrumentality.” As indicated on AGP’s website, it is a partnership of National Company KazMunayGas Joint Stock Company and China National Petroleum Corporation. The Partners of the Partnership are KazTransGas JSC (RK) and Trans-Asia Gas Pipeline Company Limited (China).
The “Foreign Official” is described in the resolution documents as:
“a high-ranking Kazakh official of a Kazakh state-owned entity that had authority over AGP and was a “foreign official” within the meaning of the meaning of the FCPA. Foreign Official has the authority to exert official influence over purchasing decisions at AGP.”
In this information, Barnett (a U.S. citizen and employee of RRESI) was charged with one count of conspiracy to violate the FCPA’s anti-bribery provisions.
Barnett is further described as follows:
“At various points between approximately 2000 and 2012 Barnett worked in a sales capacity for RRESI, where he communicated frequently with commercial advisors and foreign officials on behalf of RRESI. […] By the time he left RRESI in 2012, Barnett had been promoted to Regional Director for the Asia/Pacific region. During his time with RRESI, Barnett had, at various points in his career, responsibility in a sales capacity all over the globe, including in Angola, Azerbaijan, Brazil, Indonesia, Kazakhstan, Nigeria, Russia and Thailand.”
As the part of the conspiracy, the information alleges that Barnett and others offered to pay, promised to pay, and caused corruption commission payments to be made by RRESI to commercial advisors … knowing that such commission payments, or portions thereof, would be used to bribe foreign officials, including Foreign Official, to help secure an improper advantage and obtain and retain business for RRESI and Roll-Royce with foreign governments and instrumentalities, including AGP.”
The information alleges that Barnett and others “attempted to conceal their receipt of confidential competitor information from others at Rolls-Royce and RRESI, by among other things, using personal email accounts to communicate and receive such information.” According to the information, Barnett and others “used codenames and acronyms to conceal the identities of certain foreign officials, including Foreign Official, who were to receive corrupt payments.”
In this information, Finley (a U.K. citizen) was charged with one count of conspiracy to violate the FCPA’s anti-bribery provisions and one substantive count of violating the FCPA’s anti-bribery provisions based on the same core conduct.
Finley is described in FCPA terms as an “agent” of a “domestic concern” and otherwise as follows:
“A senior executive of Rolls-Royce with responsibility over the Rolls-Royce energy sales division, including the sale of equipment manufactured and assembled by RRESI and on behalf of Rolls-Royce affiliated entities in multiple countries worldwide.”
The only reference to U.S. conduct alleged in the information is that Finley and others “caused RRESI to make … corrupt commission payments from RRESI’s bank accounts in Mount Vernon, Ohio … to Intermediary’s bank accounts in the United Kingdom, with knowledge that [a co-conspirator] would use the commission payments to bribe Foreign Official in furtherance of the corrupt bribery scheme.”
In terms of the substantive FCPA charge, the information alleges that Finley “caused a wire transfer … to be made from RRESI’s bank accounts in Mount Vernon, Ohio … to Intermediary’s bank accounts in the United Kingdom.”
In this information, Kohler (an Australian national and employee of the Munich, Germany office of an engineering and consulting firm that served as a consultant to AGP) was charged with one count of conspiracy to violate the FCPA’s anti-bribery provisions based on the same core conduct.
The only reference to U.S. conduct alleged in the information is that Kohler and others “caused corrupt commission payments to be made from RRESI’s bank account [located in Ohio] to the bank account of Intermediary, knowing that such commission payments, or portions thereof, would be used to bribe Foreign Official, to help secure an improper advantage and obtain and retain business for RRESI and Rolls-Royce.
In this information, Zuurhout (a Dutch citizen and employee of Dutch subsidiaries or Rolls-Royce where he assisted in the sale of equipment, including equipment that was manufactured or assembled by RRESI) was charged with one count of conspiracy to violate the FCPA’s anti-bribery provisions based on the same core conduct.
The information makes reference to Zuurhout traveling to Mount Vernon, Ohio from which he e-mailed various co-conspirators about the bribery scheme. In addition, the information alleges that Zuurhoust and others “caused RRESI to make corrupt commission payments” to Intermediary with knowledge that other co-conspirators would use the commission payments to bribe Foreign Official.
In this indictment, Contoguris (a Greek national and resident of Turkey) was charged with various criminal offenses, including conspiracy to violate the FCPA’s anti-bribery provisions and seven substantive counts of FCPA anti-bribery violations, based on the same core conduct. Contoguris is described as the found and CEO of Gravitas & CIE International, a Turkey-based commercial agent and advisor for various oil and gas projects throughout the world. In FCPA terms, Contoguris is described as an “agent” of a domestic concern.
In summary fashion, the indictment alleges:
“Rolls-Royce, through its U.S. subsidiary RRESI, retained Contoguris to pay bribes to various individuals … in order to help Rolls-Royce and RRESI secure and maintain contracts with AGP. After securing the contracts, RRESI paid Contoguris a percentage of the payments it received from AGP, which Contoguris in turn divided with Foreign Official and other co-conspirators.”
The indictment alleges that Rolls-Royce and RRESI began working toward an agreement with Contoguris and others in or around late 2008 when AGP was awarding the first project, Compressor Station 4. However, the indictment alleges, RRESI had put its bid too late to influence the decision and AGP awarded Compressor Station 4 to RRESI’s main competitor in or around March 2009. According to the indictment, the sides still continued to work on coming to an agreement and ultimately AGP went on to award RRESI a contract for 11 of the 14 units comprising Compressor Stations 1, 2, 6, and 7 in or around November 2009 for approximately $145 million.
The indictment makes reference to Contoguris traveling to and from the United States in furtherance of the alleged bribery scheme as well as transferring and causing to be transferred funds, including bribe payments, to and from bank accounts in the United States.
As stated in the DOJ’s release:
- Petros Contoguris, 70, a citizen of Greece residing in Turkey, was charged by an indictment filed in the Southern District of Ohio on Oct. 12 … with one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA), one count of conspiracy to launder money, seven counts of violating the FCPA and 10 counts of money laundering. Contoguris is believed to be outside of the United States.
- James Finley, 66, a citizen of the United Kingdom residing in Taiwan, pleaded guilty on July 28, before Chief Judge Edmund A. Sargus Jr. of the Southern District of Ohio, to one count of conspiracy to violate the FCPA and one count of violating the FCPA.
- Aloysius Johannes Jozef Zuurhout, 53, of the Netherlands; Andreas Kohler, 53, of Austria; and Keith Barnett, 48, of Houston, Texas, each pleaded guilty to one count of conspiracy to violate the FCPA before Chief Judge Sargus on June 13; June 6; and Dec. 20, 2016, respectively.
In the DOJ’s release, Acting Assistant Attorney General Kenneth Blanco stated:
“The charges announced today against executives, employees, and third parties affiliated with Rolls-Royce, is another example of the Criminal Division’s commitment to holding individuals – and not just corporations – accountable for violating the FCPA. Thanks to the coordinated efforts by our prosecutors and agents – working closely with their counterparts in Brazil and at the United Kingdom’s Serious Fraud Office, among others – these defendants, many of whom reside overseas, will face justice in this case, which represents another important step towards leveling the playing field for all ethical and honest businesses.”
Benjamin Glassman (U.S. Attorney for the Southern District of Ohio) stated:
“The charges unsealed today reflect the determination and ability of the United States to investigate and prosecute individuals who engage in foreign corrupt business practices, regardless of how sophisticated or far-flung the scheme may be. We can and will follow the evidence wherever it leads – from Columbus to Kazakhstan and beyond.”
Inspector in Charge Regina Faulkerson of the U.S. Postal Inspection Service’s Criminal Investigations Group stated:
“This type of sophisticated fraud scheme can cause immeasurable economic losses to competitive markets around the world. Anyone who engages in deceptive practices should know they will not go undetected and will be held accountable. The U.S. Postal Inspection Service has an extensive history of successfully investigating complex fraud and corruption cases. The collaborative investigative work conducted by Postal Inspectors and our domestic and international law enforcement partners illustrates our efforts to protect the United States and the international marketplace.”
Assistant Director Stephen Richardson of the FBI’s Criminal Investigative Division stated:
“Today’s indictment and guilty pleas reveal that those associated with this corruption did knowingly conspire to break the law for their own personal gain. No one is above the law, so let today’s announcement be a warning to those who may try to perpetrate a similar scheme that the FBI will aggressively pursue those who attempt to bribe foreign officials for an unfair advantage in the global marketplace.”
Assistant Director in Charge Andrew Vale of the FBI’s Washington Field Office stated:
“Today’s charges demonstrate the immense capabilities of the FBI’s Washington Field Office international corruption program and the global impact of the anti-corruption program. The FBI is committed to holding accountable those who disrupt the level playing field to which companies in the United States and around the world are entitled.”
See here for a U.K. Serious Fraud Office release about the matter.
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