More On Technip
A post last week (see here) contained a high-level overview of the Technip matter as described in the DOJ release.
Let’s take a closer look at the criminal information (see here) and the deferred prosecution agreement (see here).
Information
Not surprisingly, the Technip information largely mirrors the criminal information previously filed in February 2009 (see here) against the Kellogg Brown & Root entity also part of the joint venture engaged in the Bonny Island bribery scheme.
That is, the Technip information charges conspiracy to violate the FCPA and violations of the FCPA’s antibribery provisions and alleges that Technip was part of a joint venture (“JV”) in Nigeria to design, build and expand LNG facilities on Bonny Island. According to the information, JV profits, revenues, and expenses were equally shared among the four JV partners. The JV’s Steering Committee consisted of high-level executives from each of the four companies and the Steering Committee made major decisions on behalf of the JV, including whether to hire agents to assist the JV in winning contracts, who to hire as agents, and how much to pay the agents.
The information charges that the JV operated through three Portuguese special purpose corporations, including a corporation (#3), 25% owned by Technip, specifically used to enter into consulting agreements with JV agents.
The criminal conduct charged centers on two agents hired by the JV.
The first agent, Jeffrey Tesler was a citizen of the United Kingdom who used a Gibraltar-based company as a vehicle to enter into agent contracts and receive payments from the JV. The information charges that the JV paid the company over $130 million to bribe high-ranking Nigerian government officials. According to the information, Tesler was an agent of the JV and each of the JV companies.
The second agent was a global trading company headquartered in Tokyo (the “Japanese Agent”), which was hired by the JV to help it obtain business in Nigeria, including by paying bribes to Nigerian officials. The information charges that the JV paid the consulting company over $50 million to bribe Nigerian government officials. According to the information, the Japanese Agent was an agent of the JV and each of the JV companies.
According to the information, between 1995 and 2004, the JV was awarded four contracts (collectively valued at over $6 billion) to build the Bonny Island Project and alleges that Technip, Tesler, the Japanese Agent, Kellogg Brown & Root, and others, were engaged in a conspiracy to obtain and retain the contracts “through the promise and payment of tens of millions in bribes to officials of the Executive Branch of Nigeria, officials of Nigeria National Petroleum Corporation (NNPC), officials of Nigeria LNG Limited (NLNG) and others.”
[According to the information, NNPC was a Nigerian government-owned company and an entity and instrumentality of the Government of Nigeria whose officers and employees were “foreign officials” under the FCPA. According to the information, NLNG was also an entity and instrumentality of the Government of Nigeria whose officers and employees were “foreign officials” under the FCPA, notwithstanding the fact that NLNG was 51% owned by multinational oil companies. Why? Presumably because, as the information alleges, “through the NLNG board members appointed by NNPC, among other means, the Nigerian government exercised control over NLNG, including but not limited to the abilty to block the award” of the relevant contracts.]
Among other means of the conspiracy, the information alleges that:
“Senior executives and employees of Technip and their co-conspirators caused wire transfers totaling approximately $132 million to be sent from [#3’s] bank account in Amsterdam, The Netherlands, to bank accounts in New York, New York, to be further credited to bank accounts in Switzerland and Monaco controlled by Tesler for Tesler to use to bribe Nigerian government officials.”
“Senior executives and employees of Technip and their co-conspirators caused wire transfers totaling over $50 million to be sent from [#3’s] bank account in Amsterdam, The Netherlands to [Japanese Agent’s] bank account in Japan for [the Japanese Agent to use to bribe Nigerian government officials.”
Based on the same core conduct, the information also charges a substantive violation of the FCPA’s antibribery provisions and alleges that “Technip
caused […] corrupt U.S. dollar payments to be wire transferred
from [#3’s] bank account in Amsterdam, The Netherlands, via correspondent bank accounts in New York, New York, to bank accounts of [Tesler’s Gibraltar based company] in Switzerland for use in part to bribe Nigerian government officials.”
DPA
The DPA has a term of two years and seven months. A DPA is a less harsh resolution to an FCPA enforcement action because, while the criminal charges are technically filed, the charges are deferred or not prosecuted during the term of the DPA. If Technip abides by its obligations under the DPA, the criminal charges will be dismissed when the DPA’s term expires.
Pursuant to the DPA, Technip admitted, accepted, and acknowledged that it is responsible for the acts of its employees, subsidiaries, and agents as detailed in the above criminal information.
According to the DPA, the DOJ agreed to enter into the agreement with Technip based on the following factors: “(a) Technip cooperated with the DOJ’s investigation of Technip and others; (b) Technip undertook remedial measures, including the implementation of an enhanced compliance program, and agreed to undertake further remedial measures; (c) Technip agreed to continue to cooperate with the DOJ in any ongoing investigation of the conduct of Technip and its employees, agents, consultants, contractors, subcontractors, subsidiaries, and others relating to violations of the FCPA; and (d) the impact on Technip, including collateral consequences, of a guilty plea or criminal conviction. (emphasis added).
According to the DPA, the fine range under the advisory U.S. Sentencing Guidelines for Technip’s conduct is $318.4 million – $636.8 million. Technip agreed to pay a criminal penalty of $240 million or approximately 25% below the bottom of the fine range. The Technip enforcement action is thus another example of the DOJ allowing a corporation to settle significant bribery allegations for an amount below even the bottom range of fines available under the advisory Sentencing Guidelines.
Pursuant to the DPA, Technip agreed to engage a corporate compliance monitor for a two year period. The DPA specifically states that this individual will be a “French national.”
Representing Technip in the FCPA enforcement action was Robert Luskin from Patton Boggs LLP (see here) and John Savarese from Wachtell Lipton Rosen & Katz (see here).
As referenced above, the Technip allegations largely mirror the previous allegations against the Kellogg Brown & Root entity also part of the joint venture engaged in the Bonny Island bribery scheme.
How does the DOJ component of these two FCPA enforcement actions compare?
Technip settled pursuant to a DPA and paid a $240 million criminal penalty – an amount 25% below the bottom range allowed under the advisory Sentencing Guidelines.
Kellogg Brown & Root was required to plead guilty and paid a $402 million criminal penalty – an amount within the advisory Sentencing Guidelines range of $376.8 million – $753.6 million.
The disparate treatment of Technip and Kellogg Brown & Root – two entities involved in the same joint venture engaged in the same bribery scheme – is likely due to the fact that, per the government’s allegations, Kellogg Brown & Root appeared to have played a more active role in the bribery scheme. Specifically, Albert Jack Stanley, a former officer and director of various Kellogg Brown & Root entities, was directly involved in the bribery scheme as evidenced by his prior guilty plea (see here).
Technip Joins the Bonny Island Bribery Club
A French company bribes Nigerian foreign officials with the end result being $338 million paid into the United States treasury.
Welcome to the sometimes wacky world of Foreign Corrupt Practices Act enforcement. Except in this case, the end result is not so wacky because the French company, Technip (see here) was a U.S. issuer, and thus subject to the FCPA, because, between August 2001 and November 2007, it had American Depository Shares registered with and listed on the New York Stock Exchange. In addition to being an Issuer subject to the FCPA, “Technip and other members of the joint venture [described below] routinely made use of the U.S. mails and of U.S. common carriers, and of other instrumentalities of U.S. interstate commerce” including improper payments “routed through banks in New York.”
The Technip FCPA enforcement action has been anticipated since February when the company (see here) foreshadowed the pending settlement.
Yesterday, the DOJ and SEC announced the settlement. It includes payment of a $240 criminal penalty pursuant to a DOJ deferred prosecution agreement and payment of $98 million in disgorgement and prejudgment interest pursuant to a settled SEC civil complaint.
The below post summarizes the DOJ release (to my knowledge the DOJ deferred prosecution agreement and criminal information are not yet publicly available) and the SEC settled civil complaint.
DOJ
The DOJ release (here) states that Technip “has agreed to pay a $240 million criminal penalty to resolve charges related to the Foreign Corrupt Practices Act (FCPA) for its participation in a decade-long scheme to bribe Nigerian government officials to obtain engineering, procurement and construction (EPC) contracts […] to build liquefied natural gas (LNG) facilities on Bonny Island, Nigeria, [contracts that] were valued at more than $6 billion.”
According to the release, “Technip, Kellogg Brown & Root Inc. (KBR) (see here for the prior FCPA enforcement action), and two other companies were part of a four-company joint venture that was awarded four EPC contracts.”
The release further states that “Technip authorized the joint venture to hire two agents, Jeffrey Tesler (see here for the criminal indictment) and a Japanese trading company, to pay bribes to a range of Nigerian government officials, including top-level executive branch officials, to assist Technip and the joint venture in obtaining the EPC contracts. According to the release, “at crucial junctures preceding the award of EPC contracts, a senior executive of Technip, KBR’s former CEO, Albert “Jack” Stanley (see here and here for the prior FCPA enforcement action), and others met with successive holders of a top-level office in the executive branch of the Nigerian government to ask the office holders to designate a representative with whom the joint venture should negotiate bribes to Nigerian government officials.” According to the release, “the joint venture paid approximately $132 million to a Gibraltar corporation controlled by Tesler and more than $50 million to the Japanese trading company during the course of the bribery scheme” and that “Technip intended for these payments to be used, in part, for bribes to Nigerian government officials.”
As has become the norm in corporate FCPA prosecutions, Technip will not be required to plead guilty to anything as the criminal charges (one count of conspiracy and one count of violating the FCPA), while filed, will be deferred pursuant to two-year deferred prosecution agreement.
In a press release (see here) Technip Chairman and CEO, Thierry Pilenko said:
“The final agreement with the US authorities, completely in line with the road map that we laid out in February, puts this legacy story behind us and enables us to focus on continuing to develop Technip’s business. We stand by Technip’s commitment to carrying out its business activities ethically and according to both the spirit and letter of the law worldwide. The Board of Directors of Technip and its management are strongly committed to the continued enhancement of our internal compliance policies and processes.”
Technip’s release further states:
“The DOJ investigation of Technip was resolved through a deferred prosecution agreement, in which the Department of Justice agreed not to pursue a prosecution of Technip in return for Technip’s agreement to undertake a variety of steps during the next two years, including maintaining and enhancing its compliance program and cooperating with the DOJ. Technip agreed to pay USD 240 million to the DOJ in eight equal installments of USD 30 million over the next two years. Technip will retain a French national, approved by the Department of Justice, to serve as an independent corporate monitor, who will be chiefly responsible for reviewing Technip’s compliance initiatives and recommending improvements.”
Principal Deputy Assistant Attorney General Mythili Raman of the Criminal Division stated: “The resolutions announced today demonstrate once again the department’s commitment to aggressively investigate and prosecute international bribery by U.S. and foreign corporations alike.”
SEC
In a settled civil complaint (see here) charging FCPA anti-bribery violations and FCPA books and records and internal violations, the SEC alleged that “between at least 1995 and 2004, senior executives at Technip, among others, devised and implemented a scheme to bribe Nigerian government officials to assist in obtaining multiple contracts worth over $6 billion to build liquefied natural gas (“LNG”) production facilities on Bonny Island, Nigeria.” According to the SEC, “to conceal the illicit payments, Technip and others, through the joint venture, entered into sham ‘consulting’ or ‘services’ agreements with intermediaries who would then funnel their purportedly legitimate fees to Nigerian officials.” Specifically, the SEC alleged that “Technip, through the joint venture, implemented this scheme by using a Gibraltar shell company controlled by a solicitor based in the United Kingdom (“the UK Agent” [Tesler]) and a Japanese trading company (“the Japanese Agent”) as conduits for the bribes” and that “as a result of the scheme, numerous books and records of Technip contained false information relating to, among other things, the UK Agent and the Japanese Agent, and the payments made to them.”
As to Technip’s internal controls violations, the SEC alleges as follows:
“Technip conducted due diligence on the UK Agent that was not adequate to detect, deter or prevent the UK Agent from paying bribes, and Technip conducted no due diligence on the Japanese Agent.”
“Although the executives of Technip who participated in the joint venture were aware of [the FCPA’s] prohibitions, Technip did not implement adequate controls to ensure compliance with the Act. For example, Technip did not adopt due diligence procedures as to agents that were adequate to detect, deter or prevent the payment of bribes by agents. The due diligence procedures adopted by Technip only required that potential agents respond to a written questionnaire, seeking minimal background information about the agent. No additional due diligence was required, such as an interview of the agent, or a background check, or obtaining information beyond that provided by the answers to the questionnaire. A senior executive of Technip admitted that the due diligence procedures adopted by Technip were a perfunctory exercise, conducted so that Technip would have some documentation in its files of purported due diligence. In fact, Technip executives knew that the purpose of the agreements with the UK Agent was to funnel bribes to Nigerian officials, and therefore certain answers by the UK Agent to the questionnaire were false.”
According to the SEC release (see here) “without admitting or denying the SEC’s allegations, Technip has consented to the entry of a court order permanently enjoining it from” future FCPA violations “and ordering Technip to disgorge $98 million in ill-gotten profits derived from the scheme and prejudgment interest.”
Other members of the TSKJ joint venture that also potentially face FCPA exposure include Snamprogetti Netherlands B.V. (see below information regarding Eni SpA), and JGC of Japan (see here).
In March 2010, Eni SpA of Italy disclosed (here) as follows:
“Snamprogetti SpA, the holding company of Snamprogetti Netherlands BV, was a wholly owned subsidiary of Eni until February 2006, when an agreement was entered into for the sale of Snamprogetti to Saipem SpA and Snamprogetti was merged into Saipem as of October 1, 2008. Eni holds a 43% participation in Saipem. In connection with the sale of Snamprogetti to Saipem, Eni agreed to indemnify Saipem for a variety of matters, including potential losses and charges resulting from the investigations into the TSKJ matter referred […}, even in relation to Snamprogetti subsidiaries.”
The disclosure further stated:
“As to Eni, the contacts with the US authorities have been intensified recently. Based on the ongoing status of the discussions, the Company has been able to estimate the cost of a global resolution of all potential claims arising from the investigation with the US authorities, similarly to Technip. As a result of this, a provision in the amount of €250 million has been accrued, also considering the contractual obligations assumed by Eni to indemnify Saipem as part of the divestment of Snamprogetti. Discussions with the US authorities are underway.”
Stay tuned for additional analysis of the Technip DPA, criminal information, and other issues raised by the Technip enforcement action.
“I was taught if they violated a law, you charge them. If they didn’t violate the law, you don’t charge them.”
In 2008 (the most recent year for which I’ve seen the following statistic) seven of the sixteen non-prosecution or deferred prosecution agreements entered into by the DOJ were in the FCPA context. (See here).
NPAs and DPAs are thus very much a Foreign Corrupt Practices Act topic and these resolution vehicles are frequently covered on this blog. (See here and here).
Thus, the following exchange between Senator Jeff Sessions (R-AL) and James Cole caught my eye. It occurred during Cole’s Senate Judiciary Committee confirmation hearings last week for the Deputy Attorney General position.
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SEN. SESSIONS: […] I noticed just as an aside you did a speech entitled role of an in-house lawyer in a corporation in October of ’06, and you stated this. Quote: “The experience with Arthur Andersen taught the government something that consequences were too drastic and hurt too many innocent employees. The government now tries to work settlements with companies that find themselves in that kind of predicament and the company does not get indicted and therefore can continue to exist.” Closed quote. Well, we know that Arthur Andersen failed immediately upon being charged as I recall that. So I’m not suggesting this is a totally improper statement. But it seems to go beyond strict enforcement of the law and try to preserve corporations who perhaps should be charged and suffer whatever consequences might result from their criminal acts. Do you have any second thoughts about that quote that I just read?
MR. COLE: Senator Sessions, I don’t. The point of that was to say that there are reasons why you charge corporations and reasons why you don’t charge corporations. And certainly the Justice Department starting back when the Attorney General Eric Holder was deputy attorney general has issued a series of memoranda that guide prosecutors in determining when a corporation should be charged. The issue is so sensitive because when you charge a corporation and you cause its demise through that charge, thousands and thousands of employees who had no role in the misconduct are hurt. Thousands and thousands of shareholders who had no role in the misconduct and whose savings were invested in that corporation are hurt, and it’s those people who had no role who are hurt are the ones you need to think about, as well, when you decide whether to charge a corporation.
SEN. SESSIONS: Well, I think that’s, I guess, a reality, but it’s got to be carefully thought through, else you’re just picking and choosing winners. You’re saying BP is too big to fail. They’ve got employees, too. This is a dangerous philosophy. Normally, I was taught if they violated a law, you charge them. If they didn’t violate the law, you don’t charge them.
MR. COLE: Well — and one of the issues, Senator, that is very much, as I understand it, in the forefront of the prosecution decisions in the Department is to prosecute the individual executives in these companies who are responsible for these criminal acts because that’s how you’re going to get the most deterrence.
SEN. SESSIONS: But are you now saying that you’re backing off corporate indictments?
MR. COLE: No, I am not at all. I’m just saying there are many ways to be quite effective, and I think you have to balance the interests of how much damage you’re doing to people who had nothing to do with the wrongdoing versus how much deterrence you’re going to be placing on future conduct like this. And I think you have to make sure that you are effective in the prosecution, both of corporations and of the individual officers.
SEN. SESSIONS: Yeah, so how much empathy you have for the employees. Well, anyway, it’s a tough decision. I guess we could go ’round and ’round, but I think you need to be careful with that philosophy. It has some danger to it. I think you fully recognize, as an experienced prosecutor that you are, the — I also salute you for wanting to reinvigorate traditional prosecutions in the Department. I hope that you will look at the numbers, you will look at the prosecutions and make sure that they are working effectively and that they’re high enough based on the number of prosecutors and investigators in the country. I’m not sure that we are. We’ve added a lot of prosecutors and assistant United States attorneys around the country. They’re paid big salaries. They need to be producing day after day. […]
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The above exchange raises an interesting question – what is the “shelf life” of the Arthur Anderson prosecution?
In other words, how long will the 2002 prosecution (and related consequences) guide DOJ corporate charging decisions? Will a DOJ prosecutor in 2015 or 2020 be persuaded not to criminally indict a corporation because of what happened in 2002? Should a corporation escape the most severe consequences of criminal conduct just because it employs lots of people? Just because the corporation sells certain products to certain customers?
All questions to ponder as another week begins.
FCPA Enforcement and Credit Ratings
Fitch Ratings (see here) is a global rating agency that provides credit opinions, research and data to the world’s credit markets.
It recently issued a report titled “U.S. Foreign Corrupt Practices Act – No Minor Matter.”
The report contains some interesting and informative non-legal perspectives on FCPA enforcement which are excerpted below.
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“Aside from management distraction and reputational risk, additional compliance costs and fines [arising from FCPA violations] could have rating implications for those companies with modest FCF [free cash flow] and/or liquidity. It should also be noted that it can take years from the discovery of a violation to the time a plea agreement is reached. In the interim, corporate credit profiles, liquidity, and ratings may weaken. The fine that could be easily paid with cash on hand today might not be readily payable years down the road if a company’s credit profile has weakened and liquidity becomes constrained.”
The report notes that many FCPA fines are “imposed on large investment grade corporations whose substantial cash balances easily afforded them the ability to absorb the payments with no or minimal increases in leverage.”
However, the report notes, “there have also been violations by non-investment grade companies.”
The report then discusses Willbros Group, Inc. “which borrowed from banks on a secured basis.” The report notes that when the company became aware of its FCPA issues (see here for prior posts on Willbros) the issues resulted “in the restatement of its annual financial statements at December 2002 and 2003, as well as the first, second, and third fiscal quarters iof 2004 and 2003.”
The report continues:
“In its 2005 10-K [Willbros] noted that it required an amendment on an indenture due to late filing and several amendments on its bank credit facility. In the July 1, 2005 Second Amendment and Waiver Agreement the credit facility was reduced from $150 million to $100 million.”
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The report also discusses the fiscal consequences of “deferring the legal consequences” of an FCPA violation – as so often happens given the frequency in which non-prosecution and deferred prosecution agreements are used to resolve FCPA enforcement actions. Pursuant to these agreements, the non-prosecuted or deferred charges could go “live” if the company fails to adhere to its obligations under the agreement. “This means,” according to the report, “that investors and analysts cannot take a deep breath or relax until” the time period in the NPA or DPA has expired.
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The report also discusses how FCPA issues can become a “sticking point in acquisitions/dispositions of businesses.”
The report notes:
“Sellers may have contingent liabilities related to violations even after assets or businesses are sold. Prices could be less than expected and may hamper sellers who need to receive a certain level of cash or offload debt to deleverage or meet covenants. Additionally, buyers who have not done enough due diligence up front may find themselves with an unexpected obligation and higher litigation expenses in the future.”
For a recent example of a company halting a planned acquisition because of an FCPA issue (see here).
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As to “management distraction” resulting from an FCPA inquiry, the report notes:
“Fines, penalties, widespread adverse publicity with potential damage to corporate reputations, having an independent compliance monitor, and building up the compliance organization can all pose an enormous distraction to management. More importantly, while many companies tend to have significant financial resources at the
start of an inquiry, it generally takes years before there is a conclusion. In that interim, it is possible that a corporation’s financial profile could weaken.”
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The report contains an informative chart detailing “Fitch-Rate Issuers” that tracks the date the FCPA issue first went public.
Noteworthy examples include:
Accenture Ltd. (identified a potential FCPA issue in July 2003 – in its March 2010 SEC filing the company stated that there has been no new developments);
Bristol-Myers Squibb Company (the SEC notified the company in October 2004 of an inquiry of certain pharma subsidiaries in Germany – in its 2009 10-K the company stated that it is cooperating with the SEC);
Eli Lilly & Co (the SEC notified the company in 2003 that it was investigating whether certain Polish units has violated the FCPA – in its 2009 10-K the company stated that the DOJ and SEC had issued subpoenas relating to other countries).
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As to “credit implications,” the report notes, among other things:
That, because the time from discovery of FCPA violations to resolution can take years, a company’s credit profile could weaken – perhaps reflecting a weak economic cycle. When allegations of bribery separately arise, “for most corporations if the credit profile weakens, potential fines and/or legal contingencies would be among the items of concern in the Rating or Outlook.”
The report then talks specifically about Avon and its FCPA issues (see here for a prior post).
The report notes:
“The cost of investigations and ongoing compliance can be sizeable, and each company’s liquidity and metrics over the medium term would need to be considered. Avon, with $10 billion in 2009 revenues, had $120 million in FCF. In April 2010 the company disclosed that the cost of the investigation would be in the $85 million – $95 million range, up from $35 million in 2009. The additional cost of widening the investigation represents a significant percentage of the company’s 2009 FCF. While the company has more than $1 billion in cash on hand, Fitch’s expectation of moderate FCF in the medium term was part of the rationale for the downgrade to ‘A-’ from ‘A’ on Feb. 2, 2010. Additional layers of investigatory or compliance-related expenses could hamper FCF for Avon and other companies that violate the FCPA. Continued relative weakness in FCF and/or increased leverage typically can provide the impetus for a downgrade or change in outlook for many corporations.”
All in all, the Fitch Report is an interesting and informative read.
A couple of observations.
Some FCPA enforcement actions, per the enforcement agencies’ allegations, involve conduct that goes “all the way to the top” – the Siemens enforcement action comes to mind. In this type of FCPA enforcement action, the company’s credit ratings, and much else about the company’s business, ought to be negatively impacted by the FCPA enforcement action.
However, enforcement actions like Siemens are clearly outliers.
The far more common FCPA enforcement action involves allegations of improper conduct by a single employee or a small group of employees – often in a foreign subsidiary. Even so, because of respondeat superior, the parent company issuer faces FCPA exposure. In such a situation – a common FCPA scenario – is it proper for company’s credit rating to be negatively impacted by the enforcement action?
Add to this the fact that most FCPA enforcement actions are resolved through non-prosecution or deferred prosecution agreements. These agreements are privately negotiated, subject to no (or little) judicial scrutiny, and do not necessarily represent the triumph of one party’s legal position over the other. In such a situation – again a very common FCPA scenario – is it proper for the company’s credit rating to be negatively impacted by the enforcement action?
In my forthcoming piece “The Facade of FCPA Enforcement,” I discuss why the facade of FCPA enforcement matters.
The Fitch Report has informed me of another reason why the facade of FCPA enforcement matters – and that is because FCPA enforcement actions can negatively impact a company’s credit rating.
Friday Roundup
A “foreign official” headed to prison, more on monitors, the language of bribery, more pre-enforcement action news, and perspectives from the field.
It’s all here in the Friday roundup.
Haitian “Foreign Official” Headed to U.S. Prison
Numerous prior posts (see here, here, and here) have covered the FCPA and FCPA-related enforcement action involving Telecommunications D’Haiti (“Haiti Teleco”).
The action was noteworthy because it involved “foreign officials.” Because the Foreign Corrupt Practices Act only applies to bribe givers and not bribe recipients, the charges were not FCPA charges, but rather a money laundering conspiracy charge.
Earlier this week, Robert Antoine (a former Director of International Relations of Haiti Teleco responsible for negotiating contracts with international telecommunications companies on behalf of Haiti Teleco), was sentenced to four years in prison. In addition, Antoine was ordered to serve three years of supervised release following his prison term, ordered to pay $1,852,209 in restitution, and ordered to forfeit $1,580,771. (See here for the DOJ release).
Certain of the indicted defendants, including “foreign official” Jean Rene Duperval, have not pleaded and the DOJ release notes that “trial for these remaining defendants is scheduled to begin July 19, 2010, in U.S. District Court in Miami.”
Additional Guidance on the Use of Monitors in Deferred Prosecution Agreements and Non-Prosecution Agreements
Most corporate FCPA enforcement actions involve deferred prosecution or non-prosecution agreements. Many of these agreements require the appointment of a compliance monitor.
Thus, most FCPA aficionados are familiar with the “Morford Memo” – the March 2008 DOJ guidance “relating to the use of independent corporate monitors in connection with deferred prosecution agreements and non-prosecution agreements with corporations.” The Morford Memo (see here) sets forth nine basic principles for
drafting monitor-related provisions in such agreements.
Recently Acting Deputy Attorney General Gary Grindler issued a memo (see here) “to supplement the guidance in the Morford Memorandum by adding a tenth basic principle to guide prosecutors in drafting agreements: namely, that an agreement should explain what role the Department could play in resolving any disputes between the monitor and the corporation, given the facts and circumstances of the case.”
The Language of Bribery
The FCPA is a serious topic.
But that doesn’t mean an FCPA article can’t be informative and entertaining at the same time.
Case in point, “A Bribe By Any Other Name” by James Tillen and Sonia Delman (Miller & Chevalier) (see here).
Don’t understand the significance of “moon cakes,” “rice cake expenses” or “black mist?”
You probably should.
As the authors note, “[w]hen an expatriate manager does not recognize that a subordinate is seeking reimbursement for a bribe disguised by a code word or when auditors miss a suspect transaction concealed behind a local idiom, the employees themselves and the company as a whole are at serious risk of running afoul of anti-bribery laws.”
The article concludes with a “few simple steps” companies can take to incorporate the language of bribery into compliance training and policies.
The Flood of Pre-Enforcement Action News Continues
One of these days, the FCPA dam is going to burst because the surge of pre-enforcement action news continues.
Among others in the “stay-tuned” category are: Alcatel-Lucent, Technip, Panalpina, Pfizer and Johnson & Johnson.
Add to the list Universal Corporation, “the world’s leading leaf tobacco merchant and processor.” (see here).
The company’s recent 10-K (see here) notes as follows:
“As a result of a posting to our Ethics Complaint hotline alleging improper activities that involved or related to certain of our tobacco subsidiaries, the Audit Committee of our Board of Directors engaged an outside law firm to conduct an investigation of the alleged activities. That investigation revealed that there have been payments that may have violated the U.S. Foreign Corrupt Practices Act. The payments approximated $2 million over a seven-year period. In addition, the investigation revealed activities in foreign jurisdictions that may have violated the competition laws of such jurisdictions, but we believe those activities did not violate U.S. antitrust laws. We voluntarily reported these activities to the Department of Justice (“DOJ”) and the SEC in March 2006. On June 6, 2006, the SEC notified us that a formal order of investigation had been issued.
Since voluntarily reporting, we have cooperated with and assisted the DOJ and SEC in their investigations, and for the past year we have engaged in settlement discussions with both authorities to resolve the matter. Those negotiations have resulted in agreements in principle being reached with representatives of the DOJ and the staff of the SEC. The final resolution of this matter remains subject to the completion of definitive agreements and the approval and execution of those agreements by the DOJ and the SEC. In addition, each settlement is subject to the approval of a federal district court with jurisdiction over the matter. We have been given no assurance that the settlements will be approved by the DOJ, SEC, or federal district courts. Based on the agreements in principle that have been reached to date, the resolution of this matter with the DOJ and the SEC is expected to include injunctive relief, disgorgement and prejudgment interest, fines, penalties, and the retention of an independent compliance monitor. Based in part on the progress of the matter and consultation with outside counsel, we have recorded accruals from time to time since the matter arose that are adequate to satisfy the estimated financial settlement we expect with the resolution of the matter. The financial settlement is not expected to have a material effect on our financial condition or results of operations.”
Incidentally, on the same day, Universal issued a press release announcing record annual earnings (see here).
U.K. Bribery Bill – Perspectives from the Conference Circuit
Michael Osajda (see here) is an attorney and business ethics consultant. He frequently writes and speaks on FCPA issues, including for World-Check (see here).
In the below guest post, Osajda offers perspectives from recent presentations in Singapore and Hong Kong attended by over 120 business professionals and attorneys.
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“My presentation compared and contrasted the FCPA and the U.K. Bribery Act. I spoke of the different bases for the two statutes, the FCPA being a product of a unique post Watergate cloture and a significant Cold War foreign policy element and the Bribery Act, a product of legislative efficiency and the need for the UK to comply with the OECD convention. The new offenses of foreign private bribery and failure to prevent bribery were stressed.
Like many commentators, the attendees were nervous about the SFO’s stated use of prosecutorial discretion to address issues such as facilitation payments and the appropriateness of business expenses. Attendees were concerned that SFO statements that it does not intend to shut down business and that it will look reasonably at facilitation payments, especially in circumstances that appear to be coercion that can be given to the field. These issues may be a mine filed until some pattern of prosecution or abstention is established. Another concern of attendees was the new strict liability offense of failure to prevent bribery. The attendees were interested as to the elements of “adequate procedures.” While the Sentencing Guidelines, the Woolf Report and OECD guidance are good starts, we will all wait for the guidance to come from the UK Secretary of State on the components of “adequate procedures”.
All in all this Asia trip underscores the world-wide interest of multinationals, whatever their home jurisdictions, to the issue of corruption. All understand that the landscape is changing and are interested in doing the right thing.”
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Also, Trace recently conducted a symposium in London “attended by over 60 company representatives and featuring speakers from government, the private bar and in-house legal and compliance departments.” For insight into what was on the minds of program participants see here.