An Interesting Resolution To An Individual FCPA Matter
In 2011, the DOJ announced that Maxwell Technologies (a California-based manufacturer of energy-storage and power-delivery products) “agreed to pay an $8 million criminal penalty to resolve charges related to the FCPA for bribing Chinese government officials to secure sales of Maxwell’s products to state-owned manufacturers of electric-utility infrastructure in several Chinese provinces.”
In 2013, in connection with the same core conduct, the DOJ criminally charged Alain Riedo (a Swiss citizen and former executive of a Maxwell subsidiary in Switzerland) with nine criminal offenses: conspiracy to violate the FCPA’s anti-bribery, books and records, and internal controls provisions, two substantive violations of the FCPA’s anti-bribery provisions, five substantive violations of the FCPA’s books and records provisions; and one substantive violation of the FCPA’s internal controls provisions.
According to the court docket, nothing meaningful happened in the case for over a decade.
Maxwell Technologies Becomes A Repeat Offender Of The FCPA’s Books And Records And Internal Controls Provisions
As highlighted in this previous post, in 2011 Maxwell Technologies (a California-based manufacturer of energy storage and power delivery products) resolved parallel DOJ and SEC Foreign Corrupt Practices Act enforcement actions concerning alleged business conduct in China by agreeing to pay approximately $14 million.
As noted in the previous post, the SEC’s charges included disclosure violations not often seen in FCPA enforcement actions, based on allegations that Maxwell’s bribe payments allowed the company to offset losses and fund product expansions that are now a source of revenue for the company. Specifically the SEC alleged: ““Maxwell greatly depended on the revenue from Maxwell SA’s high-voltage capacitor sales to China in order to help fund Maxwell’s expansion into new product lines that are now expected to become Maxwell’s future source of revenue. Maxwell engaged in the bribery scheme because it enabled the company to obtain material revenue needed to financially position itself to help fund the very products that today are sustaining Maxwell’s future growth.”
Potpourri
Disgraceful, scrutiny alerts, resource alert, for the reading stack, and for your consideration. It’s all here in a potpourri edition of FCPA Professor.
Disgraceful
It’s a disgraceful practice.
A for-profit business invites a high-ranking DOJ official to its private event in which people have to pay to hear the public official speak.
It’s a disgraceful practice.
The for-profit company treats the DOJ official’s comments as if they own his words and then put the words behind a paywall.
Andrew Weissmann, the DOJ’s fraud section chief, recently spoke at GIR Live, an event hosted by a private for-profit company. According to this teaser post Weissmann spoke about issues of public concern including “how the department will factor in compliance, how it intends to reward those that self-report, and how it aims to increase transparency around resolutions and declinations.”
I requested a transcript of Mr. Weissmann’s remarks from the DOJ press office and was told: “[Mr. Weissmann] did not prepare formal remarks but spoke from notes, so I don’t have anything to provide. You’re welcome to check with the event organizers to see if they have a recording of it.”
Thankfully, Carlos Ayres was at the event and publicly posted a summary of Mr. Weisssmann’s remarks on the FCPAmericas website. According to his post:
“Weissmann said that the DOJ will publish in the next weeks a list of questions that companies can expect to be asked when being assessed by the DOJ’s new compliance consultant.”
“Weissmann said that the DOJ will shed more light on declination decisions in the short term, publishing related data with aggregate information.”
“Weissmann stated that DOJ will make an effort to complete cases for companies that self-report within one year.”
Thank you Mr. Ayres for your public service in sharing the comments of a high-ranking DOJ official on matters of public concern.
Scrutiny Alerts
HSBC Holdings
The company recently disclosed:
“Hiring practices investigation
The US Securities and Exchange Commission (the ‘SEC’) is investigating multiple financial institutions, including HSBC, in relation to hiring practices of candidates referred by or related to government officials or employees of state-owned enterprises in AsiaPacific. HSBC has received various requests for information and is cooperating with the SEC’s investigation. Based on the facts currently known, it is not practicable at this time for HSBC to predict the resolution of this matter, including the timing or any possible impact on HSBC, which could be significant.”
Novartis
The Swiss company, which qualifies as an issuer under the FCPA, was recently the focus of news reports. According to this article:
“South Korean authorities raided Novartis offices in search of evidence the company provided bribes to local doctors, according to media reports. The Seoul Western District Prosecutors’ Office confiscated various documents, including account books, in order to determine whether rebates the drug maker offered physicians may have actually been bribes.”
Mondelēz International, Inc.
Approximately five years ago (see here for the prior post), Kraft Foods disclosed FCPA scrutiny resulting from its acquisition of Cadbury in connection with a manufacturing facility in India. Kraft, now known as Mondelēz International, Inc., recently disclosed:
“As we previously disclosed, on February 1, 2011, we received a subpoena from the SEC in connection with an investigation under the FCPA, primarily related to a facility in India that we acquired in the Cadbury acquisition. The subpoena primarily requests information regarding dealings with Indian governmental agencies and officials to obtain approvals related to the operation of that facility. We are continuing to cooperate with the U.S. and Indian governments in their investigations of these matters, including through ongoing meetings with the U.S. government to discuss potential conclusion of the U.S. government investigation. On February 11, 2016, we received a “Wells” notice from the SEC indicating that the staff has made a preliminary determination to recommend that the SEC file an enforcement action against us for violations of the books and records and internal controls provisions of the Exchange Act in connection with the investigation. We intend to make a submission to the staff of the SEC in response to the notice.”
So-called Wells Notices are rare in the FCPA context for the simple reason that few issuers actually publicly push back against the SEC. See here for an example of a company that prevailed against the SEC after receiving a Wells Notice.
Key Energy Services
The company has been under FCPA scrutiny since Spring 2014 and continues to bleed cash in connection with its scrutiny. In this recent filing, the company disclosed $2.7 million “related to” its FCPA scrutiny.
Sweet Group
The U.K. Serious Fraud Office recently announced:
“Construction and professional services company Sweett Group PLC was … sentenced and ordered to pay £2.25 million as a result of a conviction arising from a Serious Fraud Office investigation into its activities in the United Arab Emirates. The company pleaded guilty in December 2015 to a charge of failing to prevent an act of bribery intended to secure and retain a contract with Al Ain Ahlia Insurance Company (AAAI), contrary to Section 7(1)(b) of the Bribery Act 2010. The relevant conduct occurred between 1 December 2012 and 1 December 2015.”
In the release, David Green (Director of the SFO) stated:
“Acts of bribery by UK companies significantly damage this country’s commercial reputation. This conviction and punishment, the SFO’s first under section 7 of the Bribery Act, sends a strong message that UK companies must take full responsibility for the actions of their employees and in their commercial activities act in accordance with the law.”
As further noted in the release:
“His Honour Judge Beddoe described the offence as a system failure and said that the offending was patently committed over a period of time. Referring to Section 7 of the Bribery Act 2010 and to Sweett’s ignorance of its subsidiary’s actions , HHJ Bedoe said:
The whole point of section 7 is to impose a duty on those running such companies throughout the world properly to supervise them. Rogue elements can only operate in this way – and operate for so long – because of a failure properly to supervise what they are doing and the way they are doing it.
The SFO’s investigation into Sweett Group PLC, which commenced on 14 July 2014, uncovered that its subsidiary company, Cyril Sweett International Limited had made corrupt payments to Khaled Al Badie, the Vice Chairman of the Board and Chairman of the Real Estate and Investment Committee of AAAI to secure the award of a contract with AAAI for the building of the Rotana Hotel in Abu Dhabi. The amount is broken down as £1.4m in fine, £851,152.23 in confiscation. Additionally, £95,031.97 in costs were awarded to the SFO.”
Maxwell Technologies
In 2011, Maxwell Technologies (a California-based manufacturer of energy storage and power delivery products) resolved parallel DOJ and SEC FCPA enforcement actions concerning alleged business conduct in China by agreeing to pay approximately $14 million. The company recently disclosed:
“In January 2011, we reached settlements with the SEC and the U.S. Department of Justice (“DOJ”) with respect to charges asserted by the SEC and DOJ relating to the anti-bribery, books and records, internal controls, and disclosure provisions of the U.S. Foreign Corrupt Practices Act (“FCPA”) and other securities laws violations. We paid the monetary penalties under these settlements in installments such that all monetary penalties were paid in full by January 2013. With respect to the DOJ charges, a judgment of dismissal was issued in the U.S. District Court for the Southern District of California on March 28, 2014.
On October 15, 2013, we received an informal notice from the DOJ that an indictment against the former Senior Vice President and General Manager of our Swiss subsidiary had been filed in the United States District Court for the Southern District of California. The indictment is against the individual, a former officer, and not against the Company and we do not foresee that further penalties or fines could be assessed against us as a corporate entity for this matter. However, we may be required throughout the term of the action to advance the legal fees and costs incurred by the individual defendant and to incur other financial obligations. While we maintain directors’ and officers’ insurance policies which are intended to cover legal expenses related to our indemnification obligations in situations such as these, we cannot determine if and to what extent the insurance policy will cover the legal fees for this matter. Accordingly, the legal fees that may be incurred by us in defending this former officer could have a material impact on our financial condition and results of operation.
Swiss Bribery Matter
In August 2013, our Swiss subsidiary was served with a search warrant from the Swiss federal prosecutor’s office. At the end of the search, the Swiss federal prosecutor presented us with a listing of the materials gathered by the representatives and then removed the materials from our premises for keeping at the prosecutor’s office. Based upon the our exposure to the case, we believe this action to be related to the same or similar facts and circumstances as the FCPA action previously settled with the SEC and the DOJ. During initial discussions, the Swiss prosecutor has acknowledged both the existence of our deferred prosecution agreement (“DPA”) with the DOJ and our cooperation efforts thereunder, both of which should have a positive impact on discussions going forward. Additionally, other than the activities previously reviewed in conjunction with the SEC and DOJ matters under the FCPA, we have no reason to believe that additional facts or circumstances are under review by the Swiss authorities. In late March 2015, we were informed that the Swiss prosecutor intended to inform the parties in April 2015 as to whether the prosecutor’s office would bring charges or abandon the proceedings. However, to date, the Swiss prosecutor has not issued its formal decision. At this stage in the investigation, we are currently unable to determine the extent to which we will be subject to fines in accordance with Swiss bribery laws and what additional expenses will be incurred in order to defend this matter. As such, we cannot determine whether there is a reasonable possibility that a loss will be incurred nor can we estimate the range of any such potential loss. Accordingly, we have not accrued an amount for any potential loss associated with this action, but an adverse result could have a material adverse impact on our financial condition and results of operation.”
As noted here by Wall Street Journal – Risk & Compliance Journal, in the same disclosure Maxwell disclosed approximately $2.4 million in FCPA professional fees and expenses in 2015.
Resource Alert
As highlighted here, Stanford Law School and Sullivan & Cromwell recently announced the launch of an FCPA clearinghouse – “a public database that aggregates and curates source documents and provides analytic tools related to enforcement of the Foreign Corrupt Practices Act (FCPA).”
For the Reading Stack
An informative read here in Bloomberg Law from John Cunningham and Geoff Martin (both of Baker & McKenzie) titled “Casting a Wider Net: Conspiracy Charges in FCPA Cases.”
Another informative read here in the New York Times regarding the DOJ’s Kleptocracy Asset Recovery Initiative.
For Your Consideration
Did U.S. involvement in Afghanistan result in more corruption? Did the U.S. fail to conduct adequate due diligence on intermediaries (a frequent FCPA enforcement theory against companies)? NPR explores the issue here.
Swiss National, A Former Maxwell Technologies Exec, Criminally Charged
When highlighting the frequent lack of individual Foreign Corrupt Practices Act charges in connection with most corporate FCPA enforcement action, the qualifier “at least yet” has always been used. This qualifier if warranted because in certain instances individual charges follow years after a corporate FCPA enforcement action.
For instance, in January 2011 Maxwell Technologies (a California-based manufacturer of energy storage and power delivery products) resolved parallel DOJ and SEC FCPA enforcement actions concerning alleged business conduct in China by agreeing to pay approximately $14 million.
Alleging the same core conduct at issue in the 2011 corporate enforcement action, earlier this week the DOJ criminally charged Alain Riedo, a Swiss citizen, with conspiracy and substantive violations of the FCPA’s anti-bribery provisions, books and records and internal controls provisions. According to the indictment, Riedo was, at various relevant times, a Vice President and General Manager of Maxwell Technologies S.A. (a wholly-owned subsidiary of Maxwell Technologies incorporated and located in Switzerland) as well as a Senior Vice President and officer of Maxwell. As noted in this SEC filing, in July 2009 the employment contract between Riedo and Maxwell was terminated.
According to this Wall Street Journal Risk and Compliance post, Riedo is currently “the director of the Fribourg chapter of the Chamber of Commerce and Industry of Switzerland” and the DOJ considers Riedo a fugitive.
As indicated above, the allegations in the Riedo indictment mirror the conduct at issue in the 2011 Maxwell corporate enforcement action.
In pertinent part, the DOJ alleges that Riedo and others made “corrupt payments to Chinese government officials, including officials at Pinggao Group, Xi-an XD and Shenyang HV, and to others” and falsely “record[ed] such payments on Maxwell’s books, records, and accounts, in order to obtain and retain business, prestige, and increased compensation for Riedo, Maxwell, Maxwell S.A. and others.”
As in the prior corporate enforcement action, Pinggao is alleged to be a “state-owned and state-controlled manufacturer of electric-utility infrastructure in Henan Provice, China,” Xi-an XD is alleged to be a “state-owned and state-controlled manufacturer of electric-utility infrastructure in Shaanxi Province, China,” and Shenyang HV is alleged to be “either state-owned or substantially controlled by the Chinese government.”
Like the prior corporate enforcement, Agent 1 (a Chinese national who served as Maxwell S.A.’s third party agent from 2002 to 2009 and was “responsible for the sale of Maxwell capacitors to customers” in China) is prominently mentioned in the Riedo indictment. According to the indictment, Agent 1 “would and did pay bribes to Chinese government officials” and “would and did ensure that the quotes [obtained from Maxwell S.A.] contained a secret mark-up of approximately 20 percent, resulting in a higher total price to the Chinese customers for Maxwell S.A.’s equipment.” According to the indictment, Riedo and another individual caused Maxwell S.A.’s books and records to “falsely record the ‘extra amount’ bribe payments as commissions, sales expenses, or consulting fees.”
The indictment further alleges that Riedo and another individual “would and did hamper efforts by other Maxwell executives to learn the truth about operations and finances at Maxwell S.A’s operations in Switzerland” and that “after Maxwell terminated its sales-representative arrangement with Agent 1, Riedo would and did attempt to re-hire Agent 1 as the company’s sales agent in China under the name of another company and against the instructions of Maxwell’s CEO.”
The DOJ generally alleges the following U.S. acts by Riedo.
- Riedo electronically transmitted or caused to be transmitted to Maxwell’s headquarters in California Maxwell S.A’s false books and records and also caused the false entries to be included “in Maxwell’s books, records, and accounts, including Maxwell’s publicly filed financial statements and SEC filings.”
- Riedo signed a “sub-certification” as part of Maxwell’s Sarbanes-Oxley process and falsely certified information that Riedo knew was incorrect and that Riedo caused the false “sub-certification” and other financial data to be sent to corporate headquarters in California.
- Riedo sent an e-mail from Switzerland to California “asking Maxwell’s CFO to release funds to Agent 1 to retain business in China”
- Riedo sent an e-mail from Switzerland to California attaching an “FCPA” certificate and asking Maxwell’s CFO to proceed in approving payment of an extra amount.
The DOJ further alleges that Riedo completed an internal Maxwell questionnaire and answered “no” to various FCPA issues “when in fact Riedo knew that Agent 1 was, directly and indirectly, receiving extra-amount payments and passing those payments along to employees of Chinese state-owned entities and other companies in order to obtain or retain business.”
Based on the above allegations, the indictment charges conspiracy to violate the FCPA’s anti-bribery and books and records and internal controls provisions, two substantive violations of the anti-bribery provisions, five substantive violations of the FCPA’s books and records provisions, and one substantive violation of the FCPA’s internal controls provisions.
This will be an interesting case to follow should Riedo choose to contest the DOJ’s charges.
Aside from the enforcement theory that employees of alleged China SOEs are “foreign officials” under the FCPA (the same general issue is currently on appeal before the 11th Circuit – see here), are potential jurisdiction issues. In certain respects, this action may implicate the same general issues as in SEC v. Elek Strab et. al (see here for the pre-trial motion to dismiss decision) and SEC v. Herbet Steffen (see here for the pre-trial motion to dismiss decision).
Friday Roundup
Reader mail, an Olympic loophole, this week’s disclosure(s), the SEC speaks, and so do executives … it’s all here in the Friday Roundup.
Reader Mail
At times, even I ask myself why I spend countless hours maintaining a free website. Then I receive an e-mail from a reader such as the one below (the reader encouraged me to share it) and I keep writing.
“I just wanted to thank you for your blog. My son-in-law, [former Africa Sting defendant], was involved in the sting case.
After his arrest we found your website and learned alot from it. We had never heard of the fcpa before all of this happened. Your site was the most informative and easy for nonlawyers to understand. I would check it everyday for updates! It was my lifeline! Thank you again for writing so much about the case. I’m just glad it is over and life can go back to normal.
Sincerely,
[Relative of former Africa Sting defendant]”
Olympic Loophole
A recent article in the Wall Street Journal (A Battle for Mongolia’s Copper Lode – Feb. 22nd) reminded me of a post lost in the unpublished archives.
Last August, Rio Tinto PLC, which manages the Oyu Tolgoi mine in Mongolia, announced (here) that the company “signed an agreement with the Mongolian National Olympic Committee (MNOC) to be a Gold Partner sponsor for the Mongolian National Team competing at the London 2012 Olympic and Paralympic Games.” In the release, Rio Tinto Country Director Mongolia, David Paterson, stated “we are sponsoring the National Olympic Team as part of our long-term commitment to Mongolia and Oyu Tolgoi.” The release further stated as follows. “Rio Tinto’s Olympic sponsorship is just one of many ways the company is contributing to Mongolia’s development. For example, Rio Tinto invests in numerous programmes that assist regional and local communities and young Mongolians in the areas of education and training, local procurement practices and sustainable development.”
An August 2011, Wall Street Journal article discussing Rio Tinto’s sponsorship states that Mongolia “is a key battleground for mining companies, which are vying to extract its rich mineral deposits” and that the Oyu Tolgoi project “is expected to yield 1.2 billion metric tons of copper and 650,000 ounces of gold a year in its first 10 years, as well as silver and other metals.”
For more on Rio Tinto’s involvement at Oyu Tolgoi, see here from the company’s website.
On one level, engaged corporate citizens with a committment to community welfare and development is a good thing and ought to be encouraged.
But, on another level, and FCPA jurisdictional issues aside (although Rio Tinto’s ADR’s are traded on a U.S. exchange), is a company’s sponsorship of a country’s Olympic team any less problematic than a company providing a laptop computer or an expensive bottle of wine to an employee of a state-owned or state-controlled enterprise? What about pre-paid gifts cards (oops, getting ahead of myself, that is coming up next)? Such instances have never been the sole basis for an FCPA enforcement action, but such allegations (or those similar) are frequently included in FCPA enforcement actions suggesting that the enforcement agencies do indeed view such conduct as problematic.
Strange as it may sound, the FCPA’s anti-bribery provisions are only implicated when something of value is provided, directly or indirectly, to a foreign official to influence the official in obtaining or retaining business. The FCPA’s anti-bribery provisions are not implicated when the thing of value is provided to a foreign government itself. Even the DOJ recognizes this. See here for DOJ Opinion Procedure Release 09-01 in which the DOJ states that the proposed course of conduct “fall[s] outside the scope of the FCPA in that the [thing of value] will be provided to the foreign government, as opposed to individual government officials …”.
Is this an FCPA loophole? If so, ought it be closed?
This Week’s Disclosure(s)
Back to those pre-paid gift cards.
On Feb. 16th in this prior post, I commented (somewhat tongue-in-cheek) that every week another company seems to be disclosing FCPA scrutiny. So far two weeks have passed and there have been two new disclosures. This week’s disclosure is from W.W. Grainger Inc. (consistently ranked as one of the “world’s most admired companies” by Forbes). In a recent SEC filing, the company (a broad-line distributor of maintenance, repair and operating supplies and other related products and services) stated as follows.
“The Company is conducting an inquiry into alleged falsification of expense accounts submitted by employees in certain sales offices of Grainger China LLC, a subsidiary of the Company. In the course of the investigation the Company learned that sales employees may have provided prepaid gift cards to certain customers. The extent and value of the gift cards are subject to further inquiry. The Company’s investigation includes determining whether there were any violations of laws, including the U.S. Foreign Corrupt Practices Act. Consequently, on January 24, 2012, the Company contacted the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) to voluntarily disclose that the Company was conducting an internal investigation, and agreed to fully cooperate and update the DOJ and SEC periodically on further developments. The Company has retained outside counsel to assist in its investigation of this matter. Because the investigation is on-going, the Company cannot predict at this time whether any regulatory action may be taken or any other potential consequences may result from this matter.”
Finally on the disclosure front, in August 2011, Brucker Corp. made an FCPA disclosure concerning its Brucker Optics subsidiary in China. Recently, the company further disclosed as follows.
“As previously reported, in 2011 the Audit Committee of our Board of Directors commenced an internal investigation, with the assistance of independent outside counsel and an independent forensic consulting firm, in response to certain anonymous communications received by us alleging improper conduct in connection with the China operations of our Bruker Optics subsidiary. The Audit Committee’s investigation, which included a review of compliance by Bruker Optics and its employees in China and Hong Kong with the requirements of the Foreign Corrupt Practices Act (FCPA) and other applicable laws and
regulations, has been completed. The investigation found evidence indicating that payments were made that improperly benefited employees or agents of government-owned enterprises in China. The investigation also has found evidence that certain employees of Bruker Optics in China and Hong Kong failed to comply with our corporate policies and standards of conduct. As a result, we have taken personnel actions, including the termination of certain individuals. We have also terminated our business relationships with certain third party agents, implemented an enhanced FCPA compliance program, and strengthened the financial controls and oversight at our subsidiaries operating in China and Hong Kong. We have also initiated a review of the China operations of our other subsidiaries, which is being conducted with the assistance of an independent audit firm.
“In the fiscal year ended December 31, 2011, $4.3 million was recorded for legal and other professional services incurred related to the internal investigation of these matters.”
As noted in Brucker’s initial filing, in 2010, the China operations of Bruker Optics accounted for less than 2.5 percent of the Company’s consolidated net sales and less than 1.0 percent of its consolidated total assets.
SEC Speaks
The Subject to Inquiry Blog published by McGuireWoods has this post regarding the recent SEC Speaks event. Regarding anti-corruption enforcement, the post states as follows.
The Commission now has a “cross-border group” charged with ferreting out corruption in corporations that trade on US exchanges, but are headquartered abroad. The group is particularly interested in the accounting policies and financial disclosures of cross-border companies, many of which rely on “small US audit firms.” As a result, the SEC is leaning on audit firms, which the SEC regards as “gatekeepers.” To that end, the SEC issued guidance in 2010 and again in 2012, advising that they conduct risk-based analyses of their overseas clients. According to Kara Brockmeyer, head of the SEC’s FCPA Unit, the SEC has seen a spike in Form 8-K reports of accounting irregularities, as well as a jump in Rule 10A reports. She expects additional 10A reports to flow in through the Office of the Whistleblower.
Brockmeyer noted that the SEC is also devoting significant resources to Foreign Corrupt Practices Act (FCPA) enforcement. The SEC’s FCPA Unit is focusing heavily on international cooperation, teaming with regulators around the world. She highlights the FCPA Unit’s cooperation with Switzerland, Russia, and China, each of which recently enacted anticorruption laws. The FCPA Unit brought 20 FCPA enforcement cases 2011, including 19 against companies and one against an individual. Brockmeyer cautioned, however, that the 2011 numbers should not be seen as a model. Indeed, in 2012 the SEC has already charged 14 individuals with FCPA violations, compared with only five companies charged.
From the Executive’s Mouth
Some excerpts from earnings conference calls that caught my eye.
From Bill Utt (President, CEO and Chairman of KBR Inc.) during a recent call. “I would also like to report that in February KBR successfully concluded our three-year independent corporate monitorship related to KBR’s 2009 plea under the US Foreign Corrupt Practices Act case. Overall, the engagement with our corporate monitor was a positive experience for KBR. We remain committed to consistently doing the right thing every time, and our commitment to compliance is a fundamental part of KBR’s culture. In fact, our compliance programs are paying off in terms of new work as we were recently awarded an international project where our compliance program was a differentiating factor in KBR securing the work.”
From Kevin Royal (Senior VP, CFO of Maxwell Technologies) during a recent call. “Now I would like to provide an update regarding the shareholder derivatives. As we have disclosed in past public filings in 2010, two shareholders had alleged that certain of our past and current officers and directors failed to prevent us from violating the US Foreign Corrupt Practices Act, or FCPA. It is important to note that the Company is only a nominal defendant in this suit. In December 2011 mediation was held and a proposed settlement was reached wherein $3 million would be paid to plaintiff’s counsels, with $2.7 million to be paid by our insurance carrier, and $290,000 would be paid by the Company. In addition, we would be required to insure that certain corporate governance measures are in place and in force. The agreement is subject to among other things, court approval and notice to our shareholders. Without admitting any wrongdoing, the defendants to this suit are willing to enter into this settlement in order to expedite resolution of the matter, and to relieve the defendants and the Company from further financial burden. We are pleased that this suit is near final settlement, and look forward to putting this matter behind us.” [For a recent post on FCPA-related civil litigation titled “A Purpose or Parasitic” – see here].
From Bernard Duroc-Danner (President and CEO of Weatherford International in response to a question about the company’s FCPA inquiry) “Well, there’s not a lot to say about, that I can say, about the DOJ process. To a degree, I think it fell off the screen as it were. For us it moves slowly, that’s all I can tell you. So, I don’t have much of an update that I can tell you. And actually even if I could, I wouldn’t have much of an update period.”
*****
On that note, a good weekend to all.