This post highlights thirteen FCPA enforcement actions concerning conduct (in whole or in part) in Kazakhstan.
The enforcement action against Cyrus Ahsani and Saman Ahsani (the former CEO and Chief Operations Officer of Monaco-based Unaoil) concerned conduct in Iraq, Kazakhstan, Libya, Algeria, Iran, Azerbaijan, Angola, Syria, the Democratic Republic of the Congo, and elsewhere.
As to Kazakhstan, the allegations concerned various schemes involving officials at state-owned oil and gas companies to obtain and retain business for Unaoil and its client companies. In one instance, the information alleged that although the promise to pay bribes occurred while Kazakh Official worked for an SOE, Unaoil “did not make payments to Kazakh Official 1 until [the official] stopped working” for the SOE. The information does allege however that C. Ahsani did “arrange for the purchase of an automobile and furniture for Kazakh Official 1 while Kazakh Official 1 was still employed” by SOE. The information further alleged that C. Ahsani and others caused Unaoil “to make payments to a company they knew was beneficially owned and controlled by Kazakh Official 1.”
The enforcement action concerned conduct in Kazakhstan, Jordan, Lebanon, Syria, and the region of Palestine, Bahrain, Kuwait, Qatar, Yemen, Oman, and the United Arab Emirates.
As to Kazakhstan, the allegations were: “Between 2007 and 2011, senior managers of Sanofi KZ [a Kazakh company which engaged distributors to facilitate the sale and distribution of pharmaceutical products with its own sales and marketing staff to promote Sanofi pharmaceutical products] engaged in a scheme to bribe foreign officials to corruptly influence the award of tenders at public institutions. The funds paid to foreign officials were derived from discounts and credit notes extended to several distributors who colluded with senior managers to kick back funds to Sanofi employees in Kazakhstan which were then used to pay Kazakh officials. […] During the relevant period, tender sales increased by over 200 percent and included top selling products of Sanofi. The distributors involved in the conduct were some of the largest distributors by sales in Kazakhstan. As a result of the improper conduct in Kazakhstan, Sanofi derived profits equivalent to approximately USD 11,580,099.”
The enforcement action concerned conduct in Thailand, Brazil, Kazakhstan, Azerbaijan, Angola and Iraq.
As to Kazakhstan, the allegations were: Rolls-Royce and RRESI sold RRESI gas turbines and aftermarket products and services to Asia Gas Pipeline [AGP a joint venture between Kazakh and Chinese state-owned and state-controlled entities that was designed to transport gas through a pipeline between Kazakhstan and China. AGP was controlled by the Kazakh and Chinese governments and performed government functions for Kazakhstan and China]. First, Roll-Royce, RRESI, Executive, and Employee 1 knowingly conspired with each other and others … to make corrupt commission payments to Intermediary 3 [a U.K.-incorporated oil and gas services intermediary], knowing that Intermediary 3 intended to use at least a portion of the commission payments to bribe foreign officials in order to win contracts to supply turbines on AGP Lines A and B in 2009. Later, in 2012, RRESI corruptly engaged a local distributor of parts and services, knowing that the distributor was beneficially owned by a high-ranking Kazakh government official with decision-making authority over Rolls-ROyce’s ability to continue operating in the Kazakh market and win contract awards to supply turbines for AGP Line C. In total, RRESI made $5.44 million in corrupt commissions to multiple advisors and conveyed additional benefits upon the high-ranking government official who was the beneficial owner of RRESI’s local distributor.”
The enforcement action involved conduct in Brazil, Angola, Equatorial Guinea, Kazakhstan and Iraq.
As to Kazakhstan, the allegations were: “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].
The enforcement action concerned conduct in Russia, Ghana, Israel, Kazakhstan, Ukraine, and Vietnam.
As to Kazakhstan, the allegations were: “From at least 2001 through early 2011, BK Medical participated in hundreds of highly suspicious transactions at its distributors’ direction which posed a significant risk of bribery or other improper conduct. The suspicious transactions involved BK Medical’s … distributors in [various countries including] Kazakhstan. The transactions routinely involved fictitious invoices issued by BK Medical at inflated prices, overpayments to BK Medical from the distributors against the inflated invoices, and subsequent payments by BK Medical out of the distributors’ excess funds to unknown third parties all over the world for unknown reasons. In short, for at least nine years, BK Medical acted as a conduit for its distributors to funnel money to parties, and for reasons, unknown to BK Medical.”
The enforcement action concerned conduct in Bulgaria, China, Croatia, Czech Republic, Indonesia, Italy, Kazakhstan, Pakistan, Russia, Saudi Arabia, and Serbia.
As to Kazakhstan, the allegations were as follows: “On or about May 5, 2000, Pfizer HCP entered into an exclusive distribution contract for a Pfizer product with Kazakh Company [a Kazakh company that contracted with Pfizer HCP to provide distribution services and related services in the Republic of Kazakhstan] that was valued at a minimum of $500,000 believing that all or part of the value of the contract would be provided to a high-level Kazakh government official. On or about September 23, 2003, a regional supervisor responsible for Pfizer HCP’s representative office in Kazakhstan sent a memorandum to his supervisor memorializing a conversation held in Kazakhstan, in which he indicated that the controller of Kazakh Company was “very close to government officials,” and that Kazakh Company was likely responsible for Pfizer HCP’s past problems with the registration of a Pfizer product in Kazakhstan.”
The enforcement action concerned conduct in Nigeria, Venezuela, Mexico, Kazakhstan, India, Saudi Arabia, the Republic of Congo, and Libya.
As to Kazakhstan, the allegations were that the Kazakhstan affiliate of Panalpina informed a Pride Forasol logistics manager “that Kazakh customs officials had identified irregularities during a customs audit of Pride Forasol Kazakhstan, but that the issue could be resolved by making a cash payment of approximately $45,000 and paying substantially reduced monetary penalties.” “Certain Pride Forasol managers authorized the cash payment by [Panalpina] to resolve the customs irregularities.” Pride Forasol Kazakhstan made “three payments totaling approximately $204,000” to a Kazakh Tax Consultant while “knowing facts that suggested a high probability that the Kazakh Tax Consultant would give all or a portion of the payments to Kazakh tax officials” who previously threatened to levy substantial taxes and penalties against Pride Forasol Kazakhstan.
The enforcement action concerned conduct in Nigeria, Angola, Azerbaijan, Brazil, Kazakhstan, Russia, and Turkmenistan.
As to Kazakhstan, the allegations were: “Between in or around 2002 and in or around 2007, Panalpina Kazakhstan paid over $4 million in bribes to Kazakh government officials, including, for example, payments to Kazakh government officials responsible for assessing and collecting duties and tariffs on imported goods and officials responsible for administering and enforcing Kazakhstan tax policy. […] The purpose of many of the bribes paid to the Kazakh government officials was to cause officials to overlook incomplete or inaccurate documentation; avoid levying proper customs duties; and avoid imposition of fines relating to the failure of Panalpina, or its customer, to comply with legal requirements.” The payments “ranged from several hundred dollars to $50,000 per transaction.” “Panalpina Kazakhstan paid bribes to Kazakhstan officials responsible for administering Kazkhstan tax policy in conjunction with its annual tax audits to minimize the duration and depth of the audits as well as to reduce proposed fines.”
The enforcement action concerned conduct in Kazakhstan.
The allegations were: “TEST Automation & Controls, Inc. (“TEST”), a wholly owned subsidiary of oil field services provider NATCO Group Inc., created and accepted false documents while paying extorted immigration fines and obtaining immigration visas in the Republic of Kazakhstan. NATCO’s system of internal accounting controls failed to ensure that TEST recorded the true purpose of the payments, and NATCO’s
consolidated books and records did not accurately reflect these payments.”
The enforcement action concerned conduct in Kazakhstan, Indonesia, Angola, and Nigeria.
As to Kazakhstan, the allegations concerned “approximately $4.1 million in bribes over approximately a two-year period to an intermediary whom the company understood and believed would transfer all or part of the corrupt payments to an official of Kazakhoil, the state-owned oil company. These corrupt payments were paid through a consulting firm retained as an agent for Baker Hughes in connection with a major oil field services contract [known as Karachaganak in northwestern Kazakhstan.”
The enforcement action concerned conduct in China, Indonesia, Kazakhstan, Mexico and Nigeria.
As to Kazakhstan, the allegations were: In August 2005, KazMunaiGas, Kazakhstan’s national oil company, issued a tender for geological software. During the tender process, an unidentified KazMunaiGas official recommended Paradigm retain Frontera Holding S.A. (“Frontera”), a company registered in the British West Indies, ostensibly to assist Paradigm in preparing tender documentation. Paradigm
retained Frontera without conducting due diligence and without entering into a written agreement detailing the services to be provided. After retaining Frontera, Paradigm submitted a bid to KazMunaiGas in the amount of $249,290 and won the tender in or about August 2005. On October 21, 2005,Paradigm entered into a contract with KazMunaiGas. Paradigm then received an invoice from Frontera requesting a “commission” in the amount of $22,250 in January 2006. On April 3, 2006, Paradigm wired payment in the amount of $22,250 from an account in Glasgow, Scotland to an account at the Latvian Trade Bank in the name of Frontera. Documentary evidence showing that Frontera actually prepared any tender documentation or performed any other services for Paradigm is lacking.”
The enforcement action concerned conduct in Nigeria, Angola and Kazakhstan.
As to Kazakhstan, the allegations were: “In December 2001, ABB KZ began making payments to Kazakhstan companies owned by ABB KZ’s former sales manager who was, at the time of the payments, a government official employed in Kazakhstan’s state oil and gas companies (the “Official”). These payments, which continued through February 2003, totaled $125,126, and were made for the purpose of assisting in obtaining or retaining Kazakhstan government business for Vetco Gray US. and ABB KZ.”
James Giffen / Mercator (2003)
The enforcement action concerned conduct in Kazakhstan.
The original 2003 indictment charged Giffen with “making more than $78 million in unlawful payments to two senior officials of the Republic of Kazakhstan in connection with six separate oil transactions, in which the American oil companies Mobil Oil, Amoco, Texaco and Phillips Petroleum acquired valuable oil and gas rights in Kazakhstan.”
Giffen’s defense was that his actions were taken with the knowledge and support of the Central Intelligence Agency, the National Security Council, the Department of State and the White House. The DOJ did not dispute the fact that Giffen had frequent contacts with senior U.S. intelligence officials or that he used his ties within the Kazakh government to assist the United States. With the court’s approval, Giffen sought discovery from the government to support such a public authority defense and much of the delay in the case was due to the government’s resistance to such discovery and who was entitled to see such discovery.
In 2010, the case took a mysterious turn when Giffen agreed to plead guilty to a one-paragraph superseding indictment charging a misdemeanor tax violation.
Mercator Corp. (of which Giffen was the Chairman and CEO) resolved an FCPA enforcement action focused on “unlawful payments to three senior officials of the Kazakh Government” including money spent on on luxury items, including snowmobiles, and provided those items free of charge to senior Kazakh officials.”
