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Amec Foster Wheeler / John Wood Group Enforcement Actions – What Actually Was Accomplished?

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Previous posts here, herehere and here highlighted various aspects of the recent U.S. and U.K. enforcement actions against Amec Foster Wheeler / John Wood Group.

The enforcement actions included: (i) a net $17.7 million FCPA enforcement action concerning conduct in Brazil; (ii) a net $142 million U.K. enforcement action concerning conduct in Brazil, Nigeria, Saudi Arabia, Malaysia, and India; and (iii) a net approximately $17 million Brazil enforcement action concerning conduct in Brazil.

That is a lot of money going into government coffers, but the question needs to be asked: what actually was accomplished through these enforcement actions?

For starters, the entity bearing ultimate responsibility for payment of the settlement amounts is John Wood Group Plc which acquired Amec Plc in 2014, which previously acquired Amec Foster Wheeler – the culpable entity.

How far removed (through merger or acquisition activity) is too far removed for a corporate entity to resolve an enforcement action based on conduct it played no role in? The law of course provides certain exceptions where merger or acquisition activity is motivated by a desire to extinguish prior legal liability, but there is no suggestion that this motivated the merger and acquisition activity relevant to John Wood Group ultimately becoming responsible for the improper conduct in this instance.

Indeed, John Wood Group was a completely innocent party.

Says who?

Says Lord Justice Edis (the U.K. judge who presided over the case) who stated that Wood is “a blameless entity not responsible for any of the offending and responsible instead for (to put it in the vernacular) clearing up the mess.” Elsewhere Lord Justice Edis called Wood an “innocent party” and stated: “It is an extremely important part of the case that Wood is “twice removed” from the management of FWEL which was responsible for the misconduct.” Further, Lord Justice Edis stated: “This outlay [responsibilities and undertakings pursuant to the DPA] was not caused by any fault on [Wood’s] part.  Wood is the corporation which will “carry the can” for the activities detailed in the Statement of Facts and it was entirely innocent of them.”

Even though Wood is a “blameless entity” and an “innocent party,” both the U.S. and U.K. resolution vehicles impose all sorts of undertakings on Wood including a reporting requirement to law enforcement authorities post-resolution.

Was this really necessary?

In the words of the DOJ:

“Wood and its affiliates, including the Company, engaged in remedial measures, including: implementation of enhanced policies, procedures and internal controls relating to, among other things, anti-corruption compliance, including retention and management of commercial agents; enhancements to training and internal reporting programs; and undertaking employees actions based on its findings, which included terminating certain employees;

Wood has enhanced and has committed to continuing to enhance its compliance program and internal controls … including ensuring that its compliance programs satisfies the minimum elements set forth in Attachment C to this agreement”

In the words of the SEC:

“Amec Foster Wheeler’s and Wood’s remedial efforts included termination of employees responsible for the misconduct and enhancements to its internal accounting controls. Amec Foster Wheeler, and subsequently Wood, strengthened its ethics and compliance organization; enhanced its code of conduct, policies and procedures regarding gifts and hospitality, and the use of third parties; created positions to address potential risks; and increased training of employees on anti-bribery issues.”

In the words of the U.K. SFO:

“Following Wood’s acquisition of AFW in October 2017, AFWEL has been fully integrated into Wood’s governance and management structure, including the group-wide E&C Programme which applies uniformly across Wood’s business units (except in relation to certain joint ventures). Wood has also introduced significant enhancements to the E&C Programme, in particular to strengthen internal controls, policies, and procedures regarding compliance with the Bribery Act 2010 and other applicable anti-corruption laws. Specifically, in order to address the bribery and corruption risks inherent in the use of commercial intermediaries, including sales agents and national sponsors (the use of the latter is mandated by local law in certain jurisdictions), Wood has implemented the following relevant changes to the E&C Programme since its acquisition of AFWEL in October 2017:

a. The complete integration, under the senior supervision of Wood’s Chief Ethics and Compliance Officer, of the AFW ethics and compliance team, policies and processes into the E&C Programme;

b. The post-acquisition development and 2018 rollout of Wood’s Code of Conduct across the entirety of Wood, including AFWEL;

c. The termination of all sales agent relationships (aside from national sponsors mandated by local law in certain jurisdictions) in the legacy AFW business and Wood more widely;

d. The development and implementation of a risk-based due diligence, on-boarding and monitoring process in respect of commercial intermediaries (being any third party that engages with a government entity on Wood’s behalf), which includes a requirement for enhanced due diligence on national sponsors, including their wider group and officers/directors;

e. The development and implementation of risk-based due diligence processes around joint venture partners and supply chain partners;

f. The engagement of a third party consultant to carry out an anti-bribery and anticorruption programme review;

g. The reinforcement of the consistent, visible “Tone from the Top” across Wood from senior management and Ethics Responsible Officers around anti-bribery and anticorruption as well as ethics and compliance more widely;

h. The implementation of a practical and risk-based training programme, ensuring that all employees are trained in the importance of good ethics and compliance, and the consequent actions reflective of good compliance culture, tailored to the relative risk profiles of certain business units/functions and jurisdictions, as well as to the seniority or practical involvement of relevant staff members in those business units/functions; and

i. Specific remediation programmes for certain jurisdictions in which compliance deficiencies have been identified.”

In the words of Lord Justice Edis:

“The age of the offences and what has happened since they ended means that the company which would be prosecuted and fined if convicted is now an entirely different entity from that which committed the offences.”

Speaking of the age of the offenses, what is really accomplished in an enforcement action concerning conduct that is a quarter century old? You read that correctly, the U.K. enforcement action included conduct in Nigeria that began in 1996 – 25 years before the enforcement action. In fact, the most “recent” conduct at issue in the U.K. enforcement action occurred in 2010 (11 years prior to the enforcement action).

Is it fair for a “blameless entity” and an “innocent party” to bear ultimate responsibility for conduct that took place a very long time ago?

What is really accomplished by the U.S. FCPA enforcement agencies (DOJ and SEC) and the U.K. SFO prosecuting the same conduct and both receiving settlement amounts for the same conduct?

The DOJ and SEC FCPA enforcement action concerned conduct in Brazil and the use of an agent in connection with efforts to win a Petrobras contract to design a gas-to-chemicals complex called Complexo Gás-Químico UFN-IV (“UFN-IV”). For this conduct, the DOJ and SEC charged or found conspiracy to violate the FCPA’s anti-bribery provisions, FCPA anti-bribery violations, and FCPA books and records and internal controls violations.

Count 10 of the U.K. enforcement action concerned the same exact conduct for which the SFO charged failure to prevent bribery contrary to section 7 of the Bribery Act 2010. As stated by the SFO:

“Amec Foster Wheeler Energy Ltd. … being a relevant commercial organisation, between the 1st day of September 2011 and the 31st day of October 2014, failed to prevent its associated persons from bribing others, namely employees, servants or agents of Petróleo Brasileiro S.A, intending to obtain and/or retain business for Foster Wheeler Energy Ltd. namely the award and/or retention of a contract to design a gas-to-chemicals complex in Brazil called Complexo Gás Químico UFN-IV, including a contract for the provision of Front End Engineering and Design services.”

For this conduct – the same conduct for which the U.S. extracted a net $17.7 million settlement – the SFO extracted an additional $8,125,010.40 (see here for the penalty schedule).

A common narrative when “bribery” occurs is that there must be harm, there must be a victim. However, even the SFO acknowledged that for most of the counts in its indictment there was no actual loss to victims and Lord Justice Edis stated that “only one of the counts on this indictment [a 10 count indictment] caused direct loss.” [More on that one count later].

In returning to the opening question: what was really accomplished in the overall Amec Foster Wheeler / John Wood Group enforcement action?

At a minimum, it can be said that:

  • Various law enforcement agencies around the world secured millions of dollars for their government coffers. Indeed, the SFO specifically mentioned in its press release the following: “Through fines, disgorgement and confiscation, the SFO has contributed around £1.4bn to the Treasury over the past five years. The penalties in this DPA are equivalent to almost twice the SFO’s core annual budget.”
  • The Nigerian government received a “feel good” payment (my words) from the SFO of £210,610 given that Count 2 of the Indictment concerned a reduction in tax payable in Nigeria. How this money is ultimately spent by the Nigerian government is anyone’s guess as the only requirement for this money per the DPA is that it “shall be deployed for the benefit of the citizens of Nigeria in a manner that is accountable and transparent.”
  • FCPA Inc. and Bribery Act Inc. presumably secured millions (although, to my knowledge, the companies involved did not disclose pre-enforcement action professional fees and expenses, such expenses frequently exceed actual settlement amounts in an enforcement action).
  • FCPA Inc. and Bribery Act Inc. will continue to secure millions in fees during the three year period of the DPA; and
  • Commentators, including myself, had something to write about for nearly one week.

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