Tesler Pleas to Bonny Island Bribery Charges
Last Friday, the DOJ announced (here) that Jeffrey Tesler, a U.K. citizen and licensed solicitor who was recently extradited to the U.S., pleaded guilty before U.S. District Judge Keith P. Ellison (S.D. of Texas) to one count of conspiracy to violate the FCPA and one count of violating the FCPA.
In February 2009, Tesler (a former consultant to Kellogg, Brown & Root Inc. and its joint venture partners – Technip, Snamprogetti and JGC Corporation of Japan – in in the Bonny Island, Nigeria project) was charged via an 11 count indictment (1 count conspiracy to violate the FCPA and 10 counts of substantive FCPA violations) (see here) for his role in the massive Bonny Island, Nigeria bribery scheme.
According to the DOJ release announcing Tesler’s plea:
“Tesler admitted that from approximately 1994 through June 2004, he and his co-conspirators agreed to pay bribes to Nigerian government officials, including top-level executive branch officials, in order to obtain and retain the EPC contracts. The joint venture hired Tesler as a consultant to pay bribes to high-level Nigerian government officials and hired a Japanese trading company to pay bribes to lower-level Nigerian government officials. During the course of the bribery scheme, the joint venture paid approximately $132 million in consulting fees to a Gibraltar corporation controlled by Tesler and more than $50 million to the Japanese trading company. Tesler admitted that he used the consulting fees he received from the joint venture, in part, to pay bribes to Nigerian government officials.”
As part of his plea agreement (here), Tesler agreed to forfeit $148,964,568 to the U.S. – an amount which “represents proceeds traceable” to the charges Tesler pleaded guilty. The forfeiture amount is the largest individual forfeiture in the FCPA’s history. Tesler is to be sentenced on June 22, 2011.
In December 2009, Tesler’s co-defendant Wojciech Chodan pleaded guilty to conspiracy to violate the FCPA (see here for the prior post). Chodan faces a maximum penalty of 60 months in prison and as part of his plea agreement he agreed to forfeit $726,885. Chodan is to be sentenced on April 27, 2011.
Both Tesler and Chodan reported to KBR’s former CEO Albert Jack Stanley who pleaded guilty in September 2008 to conspiracy to violate the FCPA and conspiracy to commit mail and wire fraud (see here). Stanley’s plea agreement (here) contemplates a $10.8 million restitution payment and a sentence of 84 months.
For a summary of the corporate entities previously settling Bonny Island bribery charges see here. In January 2011, JGC (the remaining joint venture partner that has not yet settled) disclosed that it was in discussions with the DOJ to resolve its exposure via an agreement that would require it to pay approximately $218 million.
For additional coverage of Tesler’s plea see here from Bloomberg and here for certain questions raised by the FCPA Blog as to the forfeiture amount.
Salvoch Enforcement Action Flies Under The Radar
It is not every day that a former chief financial officer is criminally charged with conspiracy to violate the FCPA.
On December 17, 2010 a criminal information (here) was filed under seal against Manuel Salvoch, the former CFO of LatiNode. On January 11, 2011 Salvoch was arrested, the case unsealed, and a plea agreement (here) was executed on January 12, 2011.
This is likely the first you have heard of the Salvoch enforcement action. The DOJ did not issue a press release and, to my knowledge, this enforcement action has never been reported.
Salvoch was charged in connection with payments to Hondutel (see here), according to the charging documents a state-owned telecommunications company in Honduras responsible for providing telecommunications services in Honduras. The Hondutel payments have also resulted in criminal charges against Jorge Granados (the founder and former CEO and Chairman of the Board of LatiNode) and Manuel Caceres (a former Vice President of Business Development) (see here).
The theory of prosecution in these cases is the same theory of prosecution being challenged in the Carson and Lindsey cases (see here and here) – that employees of alleged state-owned or state-controlled enterprises are “foreign officials” under the FCPA.
This theory of prosecution was also the support for the March 2009 enforcement action against LatiNode (see here) a former privately held Florida telecommunications company that agreed to a pay a $2 million criminal penalty for violating the FCPA in connection with alleged Hondutel payments as well as payments to officials of Tele Yemen, the Yemeni government-owned telecommunications company. LatiNode was acquired by eLandia International Inc. (an issuer) in June 2007.
The conduct at issue in the Salvoch criminal information and plea agreement is similar to the conduct at issue in the Granados and Caceres indictment (see here for the prior post).
The Granados and Caceres case remains open (their trial is set for September 26, 2011) and in his plea agreement Salvoch agreed to “cooperate fully” with the DOJ including by “providing truthful and complete information and testimony” at any trial, or other Court proceeding. According to the docket, Salvoch is to be sentenced on March 23rd, but it is likely that his sentencing will be delayed until after the Granados and Caceres trial.
Thanks to Gregory Bates (here – Squire Sanders) who stumbled upon this case while wandering around on the DOJ’s FCPA website. Bates is a contributor to Squire Sanders’ Anticorruption blog (see here).
Once Slumbering FCPA is “Alive and Well”
Slumbering to alive and well is a good way describe it when a law, one that has not changed during a decade, goes from zero DOJ enforcement actions (2000) to the DOJ collecting approximately $1 billion in fines in enforcement actions (2010) during that same decade.
Earlier this week, Assistant Attorney General (Criminal Division) Lanny Breuer spoke before the Annual Meeting of the Washington Metropolitan Area Corporate Counsel Association (see here for his remarks). The focus of the meeting was individual liability for corporate executives and in-house counsel.
Breuer posted the following questions and then stated the following regarding the FCPA.
“So what kind of federal criminal liability might a corporation have to worry about? How might the Criminal Division’s enforcement efforts affect you?”
“As an initial matter, in the Criminal Division we have dramatically increased our enforcement of the Foreign Corrupt Practices Act in recent years. That statute, which was once seen as slumbering, is now very much alive and well. In fact, over the last two years, we have charged more than 50 individuals with FCPA-related offenses and collected nearly $2 billion in FCPA-related fines and penalties – by far the most people charged and penalties imposed in any similar period. We have brought these cases against some of the largest corporations in the world. As just one example, in November we resolved a wide-ranging FCPA investigation involving the freight forwarding company Panalpina World Transport, its U.S. subsidiary, and five oil and gas service providers. They agreed to pay combined criminal penalties of $156 million.
Just as important as the collection of fines and penalties, we have aggressively pursued individual executives under the FCPA. For example, we recently charged the president and the CFO of Lindsey Manufacturing Company with FCPA violations for participating in a scheme to bribe officials of the state-owned electrical utility in Mexico. We also recently arrested the former CEO and the former vice president of business development of LatiNode, a Miami-based telecommunications company, and charged them in connection with bribes made by LatiNode employees to officials of the state-owned telecommunications company in Honduras.
The Fraud Section of the Criminal Division has primary responsibility within the Department for enforcing the FCPA. We recently promoted a new head of the Section’s FCPA Unit and two assistant chiefs, and we have also increased the number of line prosecutors in the Unit, attracting high caliber attorneys with extensive experience – including Assistant U.S. Attorneys with significant trial and prosecutorial experience and attorneys from private practice with defense-side knowledge and experience. These changes have significantly increased our FCPA enforcement capabilities.”
*****
A good weekend to all.
DOJ Enforcement of the FCPA – Year in Review
A few weeks ago I ran a SEC FCPA enforcement year in review (here).
Today I highlight facts and figures from the DOJ’s FCPA enforcement program in 2010.
And what it year it had.
As noted in this recent DOJ release, “the Criminal Division’s Foreign Corrupt Practices Act (FCPA) enforcement involved imposition of $1 billion in penalties in FY 2010, the largest in the history of FCPA enforcement.”
In comparison, in 2000 the DOJ did not bring one FCPA enforcement action. The past decade has thus witnessed a remarkable transformation – not as to the FCPA itself (the statute has not changed since 1998), but as to FCPA enforcement and theories of prosecution both at the DOJ and the SEC.
As the DOJ’s former Assistant Chief for FCPA enforcement candidly stated (here), “the government sees a profitable program, and it’s going to ride that horse until it can’t ride it anymore.”
This post highlights the 16 DOJ corporate FCPA enforcement actions from 2010. Not included are BAE (an enforcement action (see here) in which the DOJ did not even charge FCPA offenses) or Lindsey Manufacturing (see here) given that the company was indicted and thus the enforcement action remains open.
Of the 16 enforcement actions, 6 of the actions were in Panalpina related actions; 2 were the related Bonny Island, Nigeria actions; and 2 were the related Alliance One and Universal actions. Thus, if one looks at unique enforcement actions (the best way to analyze FCPA facts and figures in my opinion), the DOJ broght 9 unique corporate FCPA enforcement actions in 2010.
In the 16 corporate FCPA enforcement actions from 2010, the DOJ brought in $870 million in criminal fines – thrown in the $400 million BAE enforcement action if you insist and the number is $1.27 billion.
Tack on the SEC’s recovery (both civil penalties and disgorgement) in 2010 corporate FCPA enforcement actions of approximately $530 million and one finds $1.8 billion in corporate FCPA fines, penalties and disgorgement in 2010.
DOJ FCPA enforcement in 2010 was both large ($240 million in criminal fines against both Technip and Snamprogetti, $93.6 million in criminal fines against Daimler) and small ($32,000 against Mercator Corporation in the bizarre James Giffen related case involving two snowmobiles, and $1.7 million against RAE Systems).
The numbers present some interesting results.
Despite aggressive DOJ rhetoric and despite the DOJ seeking a sentencing guidelines enhancement applicable to FCPA offenses (see here) in 10 of 12 FCPA enforcement actions where an analysis was possible, the DOJ agreed to a criminal fine below the minimum range suggested by the sentencing guidelines.
In these 10 cases, the average was approximately 25% below the minimum guidelines range and the distribution range was 55% below the minimum guidelines range (Pride International) and 5% below the minimum guidelines range (Panalpina).
The only two corporate FCPA enforcement actions from 2010 where the company paid a criminal fine within the guidelines range were Alliance One (the company voluntarily disclosed and receive a non-prosecution agreement) and Alcatel-Lucent.
[Note – why are only 12 of the 16 enforcement actions included in the above analysis? I excluded Innospec because the company’s claimed inability to pay (but see here) resulted in an invalid fine to guidelines analysis; I excluded Mercator Corp. because the DOJ and the company could not even agree on what guidelines to use; and I excluded Noble Corp. and RAE Systems (both enforcement actions resolved via an NPA) because the DOJ never set forth a guidelines range in the agreement or related documents].
During the November 2010 Senate FCPA hearing (see here) an issue discussed was the general lack of individual DOJ FCPA prosecutions.
How many corporate FCPA enforcement actions involved related individual prosecutions of company employees (not talking agents here such as in Innospec) by the DOJ (recognizing that such prosecutions may be forthcoming in the future)?
Of the 17 corporate DOJ enforcement actions or indictments (Lindsey Manufacturing is back in the mix here) 12 of the 17 enforcement actions (70%) have not involved (at least thus far) DOJ prosecutions of company employees. Included in the 12 enforcement actions are the top 3 from 2010 from a criminal fine perspective: Technip, Snamprogetti, and Daimler.
What about non-prosecution and deferred prosecutions vs. old fashioned law enforcement (i.e., if a company committed a crime the DOJ charged it and if the company did not commit a crime the DOJ did not charge it)?
2010 saw 15 such resolution vehicles (4 NPAs) and (11 DPAs).
As Gibson Dunn highlighted in this recent report, FCPA enforcement actions comprised approximately 50% of all DOJ NPA or DPA agreements.
Among the criticisms noted in the Gibson Dunn report is that “by continually entering DPAs and NPAs, the DOJ can shield its expansive interpretation of important statutes from judicial review.” As to the FCPA the report states, “because FCPA allegations against corporations rarely, if ever, go to trial, and DPAs and NPAs are subject to only minimal judicial scrutiny, the DOJ’s sometimes expansive interpretations of the FCPA is never truly tested.”
Spot on!
As evident from the material below, a typical way for DOJ to resolve corporate FCPA enforcement actions in 2010 was for the parent company to enter into an NPA or DPA and for a subsidiary (usually a foreign subsidiary) to plea to a criminal charge. Daimler, Alliance One, Universal, ABB, Panalpina, Pride International, Royal Dutch Shell, and Alcatel-Lucent all involved such hybrid resolution vehicles.
In the SEC year in review piece, I noted that 97% of the $529,967,294 collected in SEC FCPA enforcement actions in 2010 appears to be in enforcement actions that were voluntarily or otherwise publicly disclosed and not the result of original investigation by either the SEC or DOJ.
What does this number look like for DOJ FCPA enforcement actions in 2010 – recognizing that by disclosure I am talking about voluntary disclosure in the traditional sense (i.e. the company disclosing the conduct at issue to the enforcement agencies) as well as other forms of public disclosure (such as identification in the U.N. Oil for Food Report, the result of a whistleblower complaint to U.S. authorities, the result of prior foreign law enforcement agency investigations, or based on disclosures by other companies)?
Of the $870 million in criminal fines collected by the DOJ in FCPA enforcement actions, 97% would appear to fit this description as well.
Thus, much like the SEC, the DOJ also appears to be a reactive agency when it comes to corporate FCPA enforcement.
Set forth below are facts and figures from each 2010 DOJ corporate FCPA enforcement action.
Innospec (March 2010)
See here for the prior analysis and principal allegations.
Charges: Conspiracy to commit wire fraud and to violate the FCPA’s anti-bribery and books and records provisions; wire fraud; and FCPA anti-bribery and books and records violations.
Resolution Vehicle: Plea.
Guidelines Range: $101.5 – $203 million.
Penalty: $14.1 million (based on claimed inability to pay).
Disclosure: Yes.
Monitor: Yes – three years.
Individuals Charged by DOJ: No.
Daimler (March 2010)
See here for the prior analysis and principal allegations.
Charges: Daimler AG (conspiracy to violate the FCPA’s books and records provisions and violating the FCPA’s books and records provisions); DaimlerChrysler China Ltd. (conspiracy to violate the FCPA’s anti-bribery provisions and violating the FCPA’s anti-bribery provisions); DaimlerChrysler Automotive Russia SAO (conspiracy to violate the FCPA’s anti-bribery provisions and violating the FCPA’s anti-bribery provisions); Daimler Export and Trade Finance GmbH (conspiracy to violate the FCPA’s anti-bribery provisions and violating the FCPA’s anti-bribery provisions).
Resolution Vehicle: Daimler AG (deferred prosecution agreement); DaimlerChrysler China Ltd. (deferred prosecution agreement); DaimlerChrysler Automotive Russia SAO (plea); Daimler Export and Trade Finance GmbH (plea).
Guidelines Range: $116 – $232 million.
Penalty: $93.6 million (20% below the minimum guidelines range).
Disclosure: Yes.
Monitor: Yes – three years.
Individuals Charged by DOJ: No.
Technip (June 2010)
See here for the prior analysis and principal allegations.
Charges: Conspiracy to violate the FCPA’s anti-bribery provisions and violating the FCPA’s anti-bribery provisions.
Resolution Vehicle: Deferred prosecution agreement.
Guidelines Range: $318.4 – $636.8 Million
Penalty: $240 million (25% below the minimum guidelines range).
Disclosure: Yes.
Monitor: Yes – two years.
Individuals Charged by DOJ: No.
Snamprogetti (July 2010)
See here for the prior analysis and principal allegations.
Charges: Conspiracy to violate the FCPA’s anti-bribery provisions and aiding and abetting FCPA anti-bribery violations.
Resolution Vehicle: Deferred prosecution agreement.
Guidelines Range: $300 Million – $600 Million
Penalty: $240 million (20% below the minimum guidelines range)
Disclosure: Yes.
Monitor: No.
Individuals Charged by DOJ: No.
Alliance One (August 2010)
See here for the prior analysis and principal allegations.
Charges: Alliance One International AG (conspiracy to violate the FCPA, violations of the FCPA’s anti-bribery provisions, and violations of the FCPA’s books and records provisions); Alliance One Tobacco Osh LLC (conspiracy to violate the FCPA, violations of the FCPA’s anti-bribery provisions and books and records provisions).
Resolution Vehicle: Alliance One International Inc. (non-prosecution agreement); Alliance One International AG (plea); Alliance One Tobacco Osh LLC (plea).
Guidelines Range: $8.4 – $16.8 million.
Penalty: $9.45 million.
Disclosure: Yes.
Monitor: Yes – three years.
Individuals Charged by DOJ: Yes.
Universal Corp. (August 2010)
See here for the prior analysis and principal allegations.
Charges: Universal Leaf Tabacos Ltd. (conspiracy to violate the FCPA’s anti-bribery and books and records provisions and violating the FCPA’s anti-bribery provisions).
Resolution Vehicle: Universal Corporation (non-prosecution agreement); Universal Leaf Tabacos Ltd. (plea).
Guidelines Range: $6.3 – $12.6 million
Penalty: $4.4 million (30% below the minimum guidelines range).
Disclosure: Yes.
Monitor: Yes – three years.
Individuals Charged by DOJ: No.
Mercator Corp. (August 2010)
See here for the prior analysis and principal allegations.
Charges: FCPA anti-bribery violations.
Resolution Vehicle: Plea.
Guidelines Range: The parties disagreed as to whether the 2009 or 2008 guidelines applied. If 2009, $650,000 – $1.3 million; If 2008, $30,000 to $60,000.
Penalty: $32,000.
Disclosure: Unclear.
Monitor: No.
Individuals Charged by DOJ: Yes (but Giffen pleaded to a misdemeanor tax violation).
ABB Ltd. (September 2010)
See here for the prior analysis and principal allegations.
Charges: ABB Inc. (conspiracy to violate the FCPA’s anti-bribery provisions and violating the FCPA’s anti-bribery provisions); ABB Ltd. – Jordan (conspiracy to commit wire fraud and to violate the FCPA’s books and records provisions).
Resolution Vehicle: ABB Ltd. (deferred prosecution agreement); ABB Inc. (plea); ABB Ltd. – Jordan (plea).
Guidelines Range: $30.42 – $60.2 million.
Penalty: $19 million (approximately 38% below the minimum guidelines range).
Disclosure: Yes.
Monitor: Company agreed to follow the recommendations of an independent compliance consultant.
Individuals Charged by DOJ: Yes.
Lindsey Manuf. (October 2010)
See here for the prior analysis and principal allegations.
Charges: Conspiracy to violate the FCPA’s anti-bribery provisions and violating the FCPA’s anti-bribery provisions.
Resolution Vehicle: N/A
Guidelines Range: N/A
Penalty: N/A
Disclosure: Unclear.
Monitor: N/A
Individuals Charged by DOJ: Yes.
Panalpina (November 2010)
See here for the prior analysis and principal allegations.
Charges: Panalpina World Transport (Holding) Ltd. (conspiracy to violate and violating the FCPA’s anti-bribery provisions) ; Panalpina Inc. (conspiracy to violate the FCPA’s books and records provisions and aiding and abetting certain customers in violating the FCPA books and records provisions).
Resolution Vehicle: Panalpina World (deferred prosecution agreement); Panalpina Inc. (plea).
Guidelines Range: 72.8 million to $145.6 million.
Penalty: 70.6 million (approximately 5% below the minimum guidelines range).
Disclosure: Yes.
Monitor: No.
Individuals Charged by DOJ: No.
Pride International (November 2010)
See here for the prior analysis and principal allegations.
Charges: Pride International Inc. (conspiracy to violate the FCPA’s anti-bribery and books and records provisions and violating the FCPA’s anti-bribery and books and records provisions); Pride Forasol S.A.S. (conspiracy to violate the FCPA’s anti-bribery and books and records provisions, violating the FCPA’s anti-bribery provisions, and aiding and abetting violations of the FCPA’s books and records provisions).
Resolution Vehicle: Pride International Inc. (deferred prosecution agreement); Pride Forasol (plea).
Guidelines Range: $72.5 – $145 million.
Penalty: $32.6 million (approximately 55% below the minimum guideline range).
Voluntary Disclosure: Yes.
Monitor: No.
Individuals Charged: No.
Tidewater (November 2010)
See here for the prior analysis and principal allegations.
Charges: Tidewater Marine International Inc. (conspiracy to violate the FCPA’s anti-bribery and books and records provisions and violating the FCPA’s books and records provisions).
Resolution Vehicle: Deferred prosecution agreement.
Guidelines Range: $10.5 – $21 million.
Penalty: $7.4 million (30% below the minimum guidelines range).
Disclosure: Yes.
Monitor: No.
Individuals Charged by DOJ: No.
Transocean (November 2010)
See here for the prior analysis and principal allegations.
Charges: Transocean Inc. (conspiracy to violate the FCPA’s anti-bribery and books and records provisions; violating the FCPA’s anti-bribery provisions; and aiding and abetting FCPA books and record violations).
Resolution Vehicle: Deferred prosecution agreement.
Guidelines Range: $16.8 – $33.6 million.
Penalty: $13.4 million (20% below the minimum guidelines range).
Disclosure: Yes.
Monitor: No.
Individuals Charged by DOJ: No.
Noble Corp. (November 2010)
See here for the prior analysis and principal allegations.
Charges: N/A
Resolution Vehicle: Non-prosecution agreement.
Guidelines Range: Not addressed.
Penalty: $2.6 million.
Disclosure: Yes.
Monitor: No.
Individuals Charged by DOJ: No.
Royal Dutch Shell (November 2010)
See here for the prior analysis and principal allegations.
Charges: Shell Nigeria Exploration and Production Company Ltd. (conspiracy to violate the FCPA’s anti-bribery and books and records provisions; aiding and abetting FCPA books and records violations).
Resolution Vehicle: Deferred prosecution agreement.
Guidelines Range: $34.2 – $68.4 million.
Penalty: $30 million (approximately 15% below the minimum guidelines range).
Disclosure: No.
Monitor: No.
Individuals Charged by DOJ: No.
RAE Systems (December 2010)
See here for the prior analysis and principal allegations.
Charges: Although a non-prosecution agreement, the agreements states “knowing violations of the FCPA’s books and records and internal controls provisions.”
Resolution Vehicle: Non-prosecution agreement.
Guidelines Range: Not addressed.
Penalty: $1.7 million.
Disclosure: Yes.
Monitor: No.
Individuals Charged by DOJ: No.
Alcatel-Lucent (December 2010)
See here for the prior analysis and principal allegations.
Charges: Alcatel-Lucent S.A. (FCPA books and records and internal control provisions); Alcatel-Lucent France S.A., Alcatel-Lucent Trade International A.G., and Alcatel Centroamerica S.A. (conspiracy to violate the FCPA’s anti-bribery, books and records, and internal control provisions).
Resolution Vehicle: Alcatel-Lucent S.A. (deferred prosecution agreement); Alcatel-Lucent France S.A., Alcatel-Lucent Trade International A.G., and Alcatel Centroamerica S.A. pleas.
Guidelines Range: $86.58 – $173.16 million.
Penalty: $92 million.
Disclosure: Yes.
Monitor: Yes – three years.
Individuals Charged by DOJ: Yes.
First Enforcement Action of 2011 Involves a Former Executive Officer
In March 2010, Innospec Inc. was charged on both sides of the Atlantic in a joint DOJ / SEC / U.K. Serious Fraud Office enforcement action. (See here and here).
In August 2010, the SEC charged David Turner, the Business Director of Innospec’s TEL Group, and Ousama Naaman, the company’s agent, for their role in the bribery scheme. (See here). Naaman was also charged by the DOJ, pleaded guilty, and awaits sentencing. (See here).
Yesterday, in the first FCPA enforcement action of the year, the SEC charged Paul Jennings, Innospec’s former CFO and CEO, for his involvement in the bribery scheme. (See here). Jennings resigned from Innospec in March 2009 (see here).
Jennings name is now included on a rather short list of high-ranking executives of public companies (or affiliates) recently charged by the SEC in an FCPA enforcement action. In July 2009, Douglas Faggioli (the current President and CEO) and Craig Huff (the former CFO) of Nature’s Sunshine Products were charged (see here); in September 2008, Albert Jackson Stanley (the former CEO of Kellogg Brown & Root Inc.) was charged (see here); in December 2007, Robert Philip (the former Chairman/CEO of Schnitzer Steel was charged (see here); and in September 2007, Monty Fu (the former Chairman of Syncor International Corp. was charged (see here).
The facts of the underlying bribery scheme in the Jennings enforcement action are detailed in the prior posts linked above and this post details the allegations in the SEC’s complaint (here) regarding Jennings knowledge and involvement in the scheme.
In summary fashion, the complaint alleges as follows:
“This action arises from widespread bribery of foreign officials by Innospec, Inc., some of which occurred and was approved by Paul W. Jennings beginning in mid to late 2004 during his tenure as Chief Financial Officer (“CFO”) and continuing after he became Chief Executive Officer (“CEO”) in 2005.”
“Beginning in mid to late 2004, Jennings, who held various senior roles at Innospec, including CFO and CEO, actively participated in the bribery schemes in Iraq and Indonesia.”
“Jennings violated [the FCPA’s anti-bribery provisions] by engaging in widespread bribery of government officials in Iraq during the post-Oil for Food period in order to sell TEL to the Iraqi Ministry of Oil (“MoO”) and by engaging in bribery of Indonesian officials to sell TEL to state owned oil companies in Indonesia. Jennings aided and abetted Innospec’s violations of [the FCPA’s anti-bribery provisions] by substantially assisting in Innospec’s bribery of Iraqi and Indonesian government officials.”
“Innospec, a U.S. issuer, made use of U.S. mails and interstate commerce to carry out the scheme, and Jennings, a dual U.S. and U.K. national was complicit in the scheme. Jennings both sent and received e-mails to and from the United States to carry out the scheme. He also used interstate commerce and the mails as part of the scheme. Jennings obtained $116,092 in bonuses that were tied to the success of the TEL sales, which were procured through bribery.”
“Jennings also violated Section13(b)(5)of the Exchange Act and Rule 13b2-1 thereunder by falsifying documents as part of the bribery scheme. Jennings also violated Exchange Act Rule 13b2-2 by making false statements to accountants and violated Exchange Act Rule 13a-14 by signing false personal certifications required by the Sarbanes-Oxley Act of 2002 that were attached to annual and quarterly Innospec public filings.”
“Jennings also aided and abetted Innospec’s violations of [the FCPA’s books and records and internal control provisions] by substantially assisting in Innospec’s failure to maintain internal controls to detect and prevent bribery of officials in Iraq and Indonesia, and the improper recording of the illicit payments in Innospec’s books and records.”
According to the SEC, “beginning in 2005, Jennings, along with other members of Innospec’s management, approved bribery payments to officials at the Iraqi Ministry of Oil in order to sell TEL to Iraq. The complaint alleges that Innospec, with the approval of Jennings, used Naaman as its agent in Iraq to make improper payments and the complaint alleges that Jennings was copied on certain e-mails between Naaman and Turner discussing the bribery scheme. The complaint further alleges that Jennings approved certain payments to Naaman to facilitate the bribery scheme including certain payments Jennings approved “while in the United States.” Many of the SEC’s allegations as to the Iraqi conduct are phrased as Jennings had “general knowledge” or that Jennings was “generally aware” of the conduct at issue.
As to Indonesian payments, the complaint alleges that “Jennings became aware of and approved the improper payments to Indonesian government officials in order to win contracts for the sale of TEL to state owned oil and gas companies. Among other allegations, the complaint alleges that “in December 2004, Jennings and Executive B [the CEO of Innospec from 1998 to April 2005] discussed Innospec’s bribery scheme in Iraq and Indonesia on a flight from Denver to New York” and that “while Indonesian Agent was in the United States during the holidays, various e-mails were sent to and from the United States that discussed Jennings’ and Turner’s continued efforts to support Indonesian Agent’s payment of bribes on Innospec’s behalf.” The SEC also alleges that the “bribery scheme” was also discussed “during Jennings’ performance review in January 2005.”
As to Jennings false certifications, the complaint alleges as follows.
“From 2004 to February 2009, Jennings signed annual certifications that were provided to auditors where he falsely stated that he complied with Innospec’s Code of Ethics incorporating the company’s Foreign Corrupt Practices Act policy, and that he was unaware of any violations of the Code of Ethics by anyone else. During that time frame, Jennings actively participated in bribery of Iraqi and Indonesian officials as described above. Jennings also signed annual and quarterly personal certifications pursuant to the Sarbanes-Oxley Act of 2002 in which Jennings made false certifications concerning the company’s books and records and internal controls. Jennings also signed false management certifications to Innospec’s auditors indicating that the books and records were accurate and that Innospec had appropriate internal controls.”
As noted in the SEC release, without admitting or denying the SEC’s allegations, Jennings agreed to disgorge $116,092 plus prejudgment interest of $12,945 and pay a civil penalty of $100,000. The SEC stated that the figures take into consideration Jennings’s cooperation in this matter.
In the release, Cheryl Scarboro (Chief of the SEC’s FCPA Unit) stated, “we will vigorously hold accountable those who approve such bribery and who sign false SOX certifications and other documents to cover up the wrongdoing.”