In this post discussing a recent civil action filed by Harvest Natural Resources Inc. against various former high-ranking officials at Venezuela’s national oil company Petroleos de Venezuela, S.A. (“PDVSA”) and others, Tom Fox (who calls himself the Compliance Evangelist) asserts “bribery and corruption are rarely used as the basis of civil actions between entities and individuals.”
Not true. Bribery and corruption allegations are frequently used as the basis for civil litigation and it would be nice if commentators engaged in a bit of research before hitting the publish button and polluting the internet with false and misleading information.
The article “FCPA Ripples” highlights numerous examples of bribery and corruption being used “as the basis of civil actions between entities and individuals” including many outside the context of shareholder derivative and securities fraud actions.
For instance, Aluminum Bahrain BSC (“Alba”), one of the largest aluminum smelters in the world owned by, among others, the government of Bahrain, filed a civil lawsuit against Alcoa Inc., the world’s leading producer of primary aluminum products, and others alleging RICO violations. The complaint alleged that certain Alcoa entities and their agents engaged in a conspiracy over a 15 year period to defraud Alba and specifically alleged that the defendants: (i) illegally bribed officials of the government of Bahrain and /or officers of Alba in order to force Alba to purchase alumina at excessively high prices; (ii) illegally bribed officials of the government of Bahrain and /or officers of Alba and issued threats in order to pressure Alba to enter into an agreement by which Alcoa would purchase an equity interest in Alba; and (iii) assigned portions of existing supply contracts between Alcoa and Alba for the sole purpose of facilitating alleged bribes and unlawful commissions. After the judge denied the defendants’ motion to dismiss, Alcoa agreed to settle the case by paying Alba approximately $85 million and the action represented the “first time that a foreign-owned corporation has successfully sued a U.S. company in a federal court to recover losses suffered due to allegations of corrupt activity.”
For instance, after Innospec resolved an FCPA enforcement action, NewMarket Corp., a competitor company, learned of Innospec’s conduct from the DOJ and SEC resolution documents, including allegations that Innospec’s bribe payments in Iraq ensured that a field test of a competitor’s product failed. Based on Innospec’s acknowledgment of this conduct in resolving the FCPA enforcement action, NewMarket filed a civil case against Innospec alleging violations of the Robinson-Patman Act, the Virginia Antitrust Act, and the Virginia Business Conspiracy Act. Innospec agreed to resolve the case by agreeing to pay NewMarket approximately $45 million.
Civil claims that use FCPA-like conduct as the “basis of civil actions between entities and individuals” are so numerous that the “Related Civil Litigation” tab of FCPA Professor’s search feature contains 80 entries. To learn about several example in the past year or so, see prior posts here, here, here, here, here, here and here. Indeed, in some years, there is more activity in this space than actual FCPA enforcement actions brought by the DOJ/SEC. Moreover, several civil arbitration matters have involved bribery and corruption issues.
In short, last week’s civil by Harvest Natural Resources Inc. (a former publicly traded company that dissolved in May 2017 but still exists until May 2020 for the purposes of prosecuting lawsuits, liquidating, and closing its business) against various former high-ranking PDVSA officials and others is just the latest civil action concerning bribery and corruption. In summary fashion, the complaint alleges:
“For over a decade, Venezuelan national oil company Petroleos de Venezuela, S.A. (“PDVSA”), the Defendants, other high-ranking PDVSA executives, third party “agents,” and business partners, and various financial institutions conspired to force American companies to pay-to-play in Venezuela’s oil and gas industry in one of the largest bribery and money laundering schemes in history. Harvest is just one, but perhaps one of the largest, known victims of this scheme. In short, because Harvest and its business partners refused four separate $10 million bribe demands solicited by the Defendants, Venezuela’s Ministerio del Poder Popular de Petroleo y Mineria withheld final approval for Harvest to sell its Venezuelan energy assets to two different buyers in 2013 and 2014 (first for $725 million and then for $400 million). As a result, Harvest was forced to sell the same assets for approximately $255 million, at a loss of $470 million, and unexpectedly to cease doing business and wind up its affairs.
Harvest was directly and immediately harmed by Defendants’ wrongful conduct. Harvest was never complicit in that conduct, refusing to participate at every turn. Harvest seeks compensation for the harm suffered from the Defendants’ pattern of wrongful behavior, and for the loss of rights that Harvest otherwise would have been able to obtain in a fair and competitive market untainted by bribery. Harvest accordingly brings this action asserting violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”); the Sherman Act; the Robinson Patman Act; and the Texas Free Enterprise and Antitrust Act.”
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