Friday Roundup
Nigeria drops charges against Dick Cheney after Halliburton reportedly pays $250 million; James Giffen is sad, though not bitter; an Iraqi Oil for Food prosecution … in Scotland; International Anti-Corruption Day is “marred”; and another voice joins “the FCPA simply means what the enforcement agencies say it means” chorus … it’s all here in the Friday Roundup.
Charges Against Cheney in Nigeria Dropped
On December 7th, Nigerian authorities apparently filed criminal charges against Dick Cheney, and others, in connection with the Bonny Island bribery scheme. As discussed in this prior post, Cheney was CEO of Halliburton from 1995 until 2000. In February 2009, Halliburton, Kellogg Brown & Root LLC, and KBR Inc. agreed to pay $579 million in combined DOJ/SEC FCPA enforcement action to resolve charges related to Bonny Island. According to the DOJ, the improper conduct took place between 1994 and 2004. The case remains the largest ever FCPA enforcement action against a U.S. company.
Farida Mzamber Waziri, the executive chairwomen of Nigeria’s Economic and Financial Crimes Commission stated, “Dick Cheney was head of Halliburton” “There’s no way such amount of money would’ve been moved to bribe Nigeria without his approval and without his knowledge, this is what we’re saying.” (See here for a video).
In a swift conclusion to the matter, it is been reported (see here among other places) that Nigeria has dropped charges against Cheney after his former employer, Halliburton, agreed to pay a $250 million fine. According to the report, the sum consists of $120 million in penalties and the repatriation of $130 million.
According to this report in the U.K. Telegraph, former U.S. President George H.W. Bush and former Secretary of State James Baker helped in the negotiations.
A Halliburton spokesman is quoted as saying “we have no comment to make on this.”
Sad, But Not Bitter
David Glovin (Bloomberg) recently sat down with James Giffen and penned this article. For more on the Giffen enforcement action and its mysterious conclusion see here for numerous prior posts.
Giffen is sad, though not bitter about what he terms the DOJ’s “selective” prosecution of him and he asks “in whose interest was the investigation in the first place.” Given Giffen’s “public authority” defense, much of the case focused on classified documents. Not even Giffen’s lawyer, William Schwartz (here) had access to many of the documents – one person did and that was Judge William Pauley (S.D.N.Y.) “who made his feelings known.” (see here).
Wehr Group
Glasgow, Scotland based engineering firm Wehr Group plc (here) recently pleaded guilty to two charges of breaching UN sanctions in connection with a number of UN sanctioned Iraqi Oil for Food contracts awarded between 2000 and 2002. As noted in the company’s release (here), “following the guilty plea, Weir has been subject to a confiscation order in the sum of £13,945,962. In addition it has been fined £3 million.” For more see here.
International Anti-Corruption Day “Marred”
Raymond Baker (here), the Director of Global Financial Integrity, says here that “this year’s International Anti-Corruption Day [was] marred by a U.S. Chamber of Commerce attempt to weaken the Foreign Corrupt Practices Act.” In November, the Chamber released a paper (here) authored by Andrew Weissman and Alixandra Smith titled “Restoring Balance – Proposed Amendments to the Foreign Corrupt Practices Act.”
According to Baker, “the short answer” to various issues raised by the current era of FCPA enforcement is simple: “don’t bribe anyone, whether she/he is a public official, a private citizen, or someone in between.”
Gee, thanks for that guidance, problem solved!
The FCPA’s Big Lesson
Richard Cassin, creator of the FCPA Blog and a pioneer of the FCPA’s blogosphere, hit the ball out of the park with this recent column for Ethisphere.
Among other things, Cassin writes as follows: “I know there’s practically no FCPA-related case law, no precedent to follow, no stare decisis to light the way. So the FCPA is pretty much what the enforcement agencies say it is. And that’s what’s so very different and difficult about it. It’s what I call the FCPA’s Big Lesson.”
*****
A good weekend to all.
Its All About Pancourier Services in Shell
The Nigerian customs services has a reputation for being notoriously corrupt. According to this recent report (jointly commissioned by the European Union, the UN Office on Drugs and Crime, Nigeria’s Economic and Financial Crimes Commission, and the National Bureau of Statistics) “in the case of clearance of goods through customs [in Nigeria], the percentage of business who were requested to pay a bribe is considerable.”
So, what happens when ….
A Nigerian company uses two United Kingdom contractors in connection with a Nigerian project. The U.K. contractors utilize a Swiss company that provides freight forwarding and logistics services. The Swiss company makes payments to Nigerian customs officials to “expedite the delivery of goods and equipment into Nigeria.” The U.K. contractors seek reimbursement from the Nigerian company. The Nigerian company records the payments as “local processing fees” and “administrative / transport charges” on its books and records. The Nigerian company is wholly-owned by a U.K. company based in the Netherlands. The U.K. company based in the Netherlands has ADRs traded on a U.S. exchange. A few low-ranking employees or contract employees located in the U.S. of another subsidiary of the U.K. company based in the Netherlands receive letters or e-mails regarding the payments.
Why of course, $48 million into the U.S. treasury via an FCPA enforcement action even though the FCPA specifically states that the anti-bribery provisions “shall not apply to any facilitating or expediting payment to a foreign official … the purpose of which is to expedite or to secure the performance of a routine governmental action …”
Next up in the analysis of CustomsGate enforcement actions is Shell.
See here for the prior post on the Transocean enforcement action, here for the prior post on the Tidewater enforcement action here for the prior post on the Noble enforcement action and here for the prior post on the GlobalSantaFe enforcement action.
The Shell enforcement action involved both a DOJ and SEC component. Total settlement amount was approximately $48.1 million ($30 million criminal fine via a DOJ deferred prosecution agreement; $18.1 million in disgorgement and prejudgment interest via a SEC administrative order).
DOJ
Criminal Information
The DOJ enforcement action included a criminal information (here) filed against Shell Nigeria Exploration and Production Company Ltd. (“SNEPCO”), a Nigerian wholly-owned subsidiary of Royal Dutch Shell (“RDS”) with headquarters in Nigeria. RDS is a U.K. company based in The Hague, The Netherlands, with ADRs traded on the New York Stock Exchange.
The information alleges that “SNEPCO’s agents, including employees of its U.S. affiliates, while in the territory of the United States, used and caused the use of the mails and means and instrumentalities of interstate commerce and performed other acts for SNEPCO’s benefit in furtherance of the payment of bribes to foreign government officials for the purpose of assisting in obtaining or retaining business for, or directing business, to SNEPCO and others.”
The criminal information relates to “an express door-to-door courier service” called “Pancourier” provided by Panalpina “that expedited the delivery of goods and equipment into Nigeria.” [The Transocean enforcement action here also involved, in part, Pancourier services]. According to the information, “the Pancourier service involved the payment of bribes by [Panalpina] to [Nigerian Customs Service] officials to expedite the delivery of materials by inducing the officials to circumvent the official Nigerian customs clearance process and to provide an improper advantage with respect to the importation of certain tools and materials that were imported into Nigeria.” The information states: “as a result of the payment of bribes, SNEPCO employees knew that official Nigerian duties, taxes, and penalties would not [be] paid when the items were imported.”
According to the information, Panalpina invoiced the “Subsea EPIC Contractor” (a U.K. corporation and SNEPCO’s engineering, procurement, installation and commissioning contractor for subsea services) and the “Topsides EPIC Contractor (a U.K. corporation that provided project management, engineering design, and fabrication services) “for the bribes that it paid to the NCS officials and characterized the payments as, among other things, ‘local processing fees’ or ‘administrative/transport charges.'” The contractors, in turn sought reimbursement from SNEPCO for these charges.
According to the information:
(i) in approximately March 2004 “SNEPCO and SIEP [Shell International Exploration and Production Inc. – a wholly-owned subsidiary of RDS based in Houston] employees … knew, or were substantially certain, that all or a portion of the money paid by the Subsea EPIC Contractor and the Topsides EPIC Contractor to [Panalpina] for the Pancourier service was being paid as bribes to NCS officials to secure an improper advantage with respects to the importation of certain tools and materials that were imported into Nigeria. SNEPCO and SIEP employees were aware that as a result of the payment of bribes, official Nigerian duties, taxes, and penalties were not paid when the items were imported;
(ii) in approximately March 2004 to approximately March 2006 “certain other SNEPCO employees repeatedly authorized the Subsea EPIC Contractor and the Topsides EPIC Contractor to use the Pancourier service. This resulted in the payment of over $2 million to reimburse the subcontractors for charges submitted by [Panalpina]. SNEPCO intended that some or all of this money was to reimburse the subcontractors for the bribes made to NCS officials. The benefit to SNEPCO resulting from the bribes exceeded $7 million.”
(iii) “throughout the relevant time period, SNEPCO recorded the reimbursements for the improper payments to the NCS officials in its books, records, and accounts as ‘local processing fees’ and ‘administrative/transport charges’ among other terms.”
(iv) “at the end of SNEPCO’s fiscal years 2004 through 2006, the books and accounts of SNEPCO containing the false characterizations of the payments to the NCS officials, were incorporated into the books, records and accounts of RDS for purposes of preparing RDS’s consolidated year-end financial statements filed with the SEC.”
Based on the above conduct, the DOJ charged SNEPCO with conspiracy to violate the FCPA’s anti-bribery provisions and to knowingly falsify books and records; and aiding and abetting false books and records violation.
In terms of a U.S. nexus, the information charges as follows:
(i) “the Subsea Contract Manager [a U.S. citizen and employee of SIEP] located in Houston, Texas, sent an email to SNEPCO employees in Nigeria authorizing the Subsea EPIC Contractor to use Pancourier to transport electrical equipment, with knowledge of facts indicating that a bribe would be paid through [Panalpina] to the NCS officials to expedite the delivery of materials by inducing the officials to circumvent the Nigerian customs clearance process and which resulted in the non-payment of official Nigerian duties, taxes, and penalties.”
(ii) “the Subsea Contract Engineer [a SIEP contract employee] located in Houston, Texas sent an e-mail to SNEPCO employees in Nigeria authorizing the Subsea EPIC Contractor to use Pancourier to transport miscellaneous parts, with knowledge of facts indicating that a bribe would be paid through [Panalpina] to the NCS officials to expedite the delivery of materials by inducing the officials to circumvent the Nigerian customs clearance process and which resulted in the non-payment of official Nigerian duties, taxes, and penalties.”
(iii) “a Subsea EPIC Contractor employee drafted and sent an e-mail from Nigeria to … the Subsea Contract Manager and Subsea Contract Engineer, in Houston, Texas advising that Pancourier was ‘illegal.'”.
The criminal charges against SNEPCO were resolved via a deferred prosecution agreement (here) between the DOJ, SNEPCO and RDS “on behalf of its wholly-owned subsidiary SNEPCO.”
Deferred Prosecution Agreement
Pursuant to the DPA, SNEPCO admitted, accepted and acknowledged that it was responsible for the acts of its officers, employees, subsidiaries, and agents as set forth above.
The term of the DPA is three years and seven months and it states that the DOJ entered into the agreement “based on the individual facts and circumstances” of the case and SNEPCO. Among the factors stated are the following.
(a) SNEPCO and RDS cooperated with the Department’s investigation of SNEPCO and RDS entities; (b) SNEPCO and RDS undertook remedial measures, including the implementation of an enhanced compliance program, and agreed to undertake further remedial measures …; (c) SNEPCO and RDS agreed to continue to cooperate with the Department in any ongoing investigation …; and (d) the impact on SNEPCO and other RDS entities, including collateral consequences, of a guilty plea or criminal conviction.”
As stated in the DPA, the fine range for the above describe conduct under the U.S. Sentencing Guidelines was $34.2 million to $68.4 million. Pursuant to the DPA, SNEPCO and RDS agreed that SNEPCO shall pay a monetary penalty of $30 million – approximately 15% below the minimum guideline amount.
Pursuant to the DPA, SNEPCO and RDS agreed to a host of compliance undertakings and to report to the DOJ on an annual basis (during the term of the DPA) “on its progress and experience in maintaining and, as appropriate, enhancing its compliance policies and procedures.”
As is standard in FCPA DPAs, SNEPCO and RDS agreed not to make any public statement “contradicting the acceptance of responsibility by SNEPCO as set forth” in the DPA and SNEPCO and RDS further agreed to only issue a press release in connection with the DPA if the DOJ does not object to the release.
SEC
The SEC’s administrative order against RDS and SIEP (here) concerns “violations of the anti-bribery provisions of the FCPA” by SIEP and “the record keeping and internal controls provisions of the FCPA” by RDS.
Both violations concern the same core set of facts as set forth in the DOJ’s DPA. The SEC order states as follows.
“From September 2002 through November 2005, SIEP, on behalf of Shell, authorized the reimbursement or continued use of services provided by a company acting as a customs broker that involved suspicious payments of approximately $3.5 million to officials of the Nigerian Customs Service in order to obtain preferential treatment during the customs process for the purpose of assisting Shell in obtaining or retaining business in Nigeria on Shell’s Bonga Project. As a result of these payments, Shell profited in the amount of approximately $14 million. None of the improper payments was accurately reflected in Shell’s books and records, nor was Shell’s system of internal accounting controls adequate at the time to detect and prevent these suspicious payments.”
According to the SEC, “the Nigerian customs clearance process was routinely delayed, often taking weeks or even months to clear equipment through customs.” Use of the Pancourier service “expedited shipments into Nigeria by about 20 to 39 days.” “A shipment that would take 30 days to clear Nigerian customs using regular air freight could clear customs in as quickly as 10 days using” the Pancourier service.
In summary fashion, the SEC’s order states as follows:
“Shell benefitted through these payments by bypassing the normal customs process and importing equipment into Nigeria faster than Shell would have had the payments not been made. Ultimately, this accelerated Shell’s ability to reach First Oil and provided Shell with the value of its oil production profits sooner than it would have had it not made the payments. By avoiding the payment of certain customs duties through these payments, Shell also benefited by having the use of those funds when Shell would have otherwise had to wait to be reimbursed from the proceeds of oil production. As a result of these payments, Shell profited in the amount of $14,153,536.”
The SEC’s administrative order requires, among other things, the payment of $14,153,536 in disgorgment and $3,995,923 in prejudgment interest.
Ralph Ferrara (here) and Christopher Clark, a former DOJ attorney, (here), both at Dewey & LeBoeuf, represented Shell.
Chodan’s 9% Plea Agreement
If one were to categorize “successful” FCPA enforcement actions or DOJ “wins” and “losses” in FCPA enforcement actions, how does one categorize a plea agreement in which the defendant agrees to plead guilty to 9% of the original charges?
In February 2009, Wojciech Chodan (along with Jeffrey Tesler) was charged with one count of conspiracy to violate the FCPA’s anti-bribery provisions and ten counts of substantive FCPA anti-bribery violations in connection with the massive Bonny Island, Nigeria bribery case. (See here).
Earlier this week, the DOJ announced (here) that Chodan agreed to plead guilty to the one conspiracy charge. What you will not see in the DOJ’s release is that, in exchange, the DOJ agreed to dismiss the other 10 charges (i.e. 91% of the original charges) assuming the court accepts the plea agreement. (See here for the plea agreement).
Who is Wojciech Chodan?
As reflected in the plea agreement and original indictment, Chodan is a United Kingdom citizen who “was a commercial vice president (a non-officer position) and then, beginning in 1999, a consultant for M.W. Kellogg Ltd., which was a United Kingdom subsidiary of The M.W. Kellogg Company and then Kellogg, Brown & Root, Inc. (collectively KBR).”
Chodan reported to KBR’s CEO, Albert Jackson Stanley, among others. (In August 2008, Stanley pleaded guilty (see here) to conspiracy to violate the FCPA and conspiracy to commit mail and wire fraud.).
According to the plea agreement, Chodan assisted KBR and its three partners in the so-called TSKJ joint venture obtain engineering, procurement, and construction (“EPC”) contracts (collectively valued at over $6 billion) to build liquefied natural gas facilities on Bonny Island.
According to the plea agreement, between 1994 and June 2004 “Chodan agreed with Stanley and others to pay bribes to Nigerian government officials in order for TSKJ, KBR, and others to obtain and retain the EPC contracts to build the Bonny Island Project.” The plea agreement states that “Chodan knew that it was unlawful under U.S. law to bribe foreign government officials.”
According to the plea agreement, Chodan “recommended and agreed to the hiring of Jeffrey Tesler and Tri-Star Investments Ltd. (“Tri-Star) by TSKJ, expecting that Tesler and Tri-Star would pay bribes to high-level Nigerian government officials to assist TSKJ, KBR, and others in winning the EPC contracts to build the Bonny Island Project.” Also, according to the plea agreement, Chodan “recommended and agreed to the hiring of a global trading company headquartered in Tokyo, Japan (“Consulting Company B”) by TSKJ, expecting that Consulting Company B would pay bribes to lower level Nigerian government officials to assist TSKJ, KBR, and others in winning the EPC contracts to build the Bonny Island Project.”
The factual basis for the guilty plea states that “Chodan and his co-conspirators committed acts in furtherance of the scheme […] in Houston, Texas, however, the factual basis for the guilty plea does not provide any further detail on this issue.
As noted in the DOJ release, Chodan “faces a maximum penalty of 60 months in prison on the conspiracy charge” and “as part of his plea agreement, Chodan agreed to forfeit $726,885.”
Andrew Lourie (here – who “served in various high-level positions with the U.S. Department of Justice, including as Principal Deputy Assistant Attorney General and Chief of Staff for the Criminal Division and as Chief of the Public Integrity Section”) represents Chodan.
For an overview of prior Bonny Island enforcement actions – see here.
Cheney Reportedly To Be Charged By Nigerian Authorities In Connection With Bonny Island
During Tuesday’s Senate subcommittee FCPA hearing, Senator Christopher Coons noted, in connection with other nations ramping up enforcement of their own bribery laws, that “today we are the only nation that is extending extraterritorial reach and going after the citizens of other countries, we may some day find ourselves on the receiving end of such transnational actions.”
Prescient statement.
Bloomberg is reporting (here) that Nigeria’s Economic and Financial Crimes Commission will soon files charges against former Vice President Dick Cheney and officials from five foreign companies, including Halliburton Co., in connection with the Bonny Island bribery scheme.
Bloomberg reports that indictments will be filed in a Nigeria court and that an arrest warrant for Cheney “will be issued and transmitted through Interpol” for enforcement. As noted by Bloomberg, Cheney was CEO of Halliburton from 1995 until 2000.
In February 2009, Halliburton, Kellogg Brown & Root LLC, and KBR Inc. agreed to pay $579 million in combined DOJ/SEC FCPA enforcement action to resolve charges related to Bonny Island. According to the DOJ, the improper conduct took place between 1994 and 2004. The case remains the largest ever FCPA enforcement action against a U.S. company.
See here for the DOJ resolution and here for the SEC resolution.
The DOJ’s press release (here) states that the “successful prosecution of KBR […] demonstrates that no one is above the law” and that the FBI “will continue to investigate these matters by working in partnership with other law enforcement agencies, both foreign and domestic, to ensure that corporate executives who have been found guilty of bribing foreign officials in return for lucrative business contracts, are punished to the full extent of the law.”
Over the summer, Technip and Snamprogetti/Eni, joint venture partners with KBR, also agreed to settle FCPA enforcement actions in connection with Bonny Island.
Technip agreed to pay $338 million in a joint DOJ / SEC enforcement action (see here and here).
Snamprogetti/ENI agreed to pay $365 million in a joint DOJ / SEC enforcement action (see here and here).
The fourth joint venture partner, JGC of Japan, has yet to resolve its exposure although it has been reported that it is settlement discussions with the DOJ.
For a complete run-down of “Bonny Island Bribery Club Statistics” see here.
The only individual charged thus far has been Albert Jack Stanley (see here). Stanley pleaded guilty and was originally scheduled to be sentenced in May 2009, but has not yet been sentenced.
Two joint venture agents, Jeffrey Tesler and Wojciech Chodan (both U.K. citizens) have also been charged (see here). Tesler and Chodan have been fighting extradition.
Yesterday, the U.K. Guardian (here) reported that Chodan, who had given up his extradition battle, is to arrive in the U.S. in the next 10 days to stand trial. The Guardian reports that Tesler will seek to overturn his extradition today.
Transocean – More TIPs and Express Courier Services
Next up in the analysis of CustomsGate enforcement actions is Transocean. This enforcement action involves more Nigerian TIPs and express courier services (yes, you read that right, an FCPA anti-bribery enforcement action involving express courier services).
See here for the prior post on the Tidewater enforcement action here for the prior post on the Noble enforcement action and here for the prior post on the GlobalSantaFe enforcement action.
The Transocean enforcement action involved both a DOJ and SEC component. Total settlement amount was approximately $20.7 million ($13.4 million criminal fine via a DOJ deferred prosecution agreement; $7.2 million in disgorgement and interest via a SEC complaint).
DOJ
The DOJ enforcement action included a criminal information (here) filed against Transocean Inc. (“Transocean”) which “was a Cayman Islands corporation with its principal executive offices in the Cayman Islands and in Houston, Texas.” Transocean’s securities were traded on the New York Stock Exchange. As set forth in the information, “in December 2008, Transocean completed a merger among Transocean Ltd., Transocean Inc., which was the former parent holding company, and Transocean Cayman Ltd. As a result of the merger, Transocean became a wholly-owned subsidiary of Transocean Ltd., a Swiss corporation with principal executive offices in Vernier, Switzerland.” (See here).
The criminal charges against Transocean were resolved via a deferred prosecution agreement (here) between the DOJ and Transocean and Transocean Ltd. “on behalf of its wholly-owned subsidiary Transocean.”
Criminal Information
Once again, the criminal information concerns Nigeria’s rules and regulations relating to temporarily importing vessels and the “temporary importation permit” (“TIP”). For more on the TIP process see here.
Relevant Transocean entities include Sedco Forex Nigeria Limited (“SFNL”), a Nigerian entity 60% owned by Transocean, and Transocean Support Services Nigeria Ltd. (“TSSNL”), a wholly-owned Nigerian subsidiary of Transocean.
According to the information, between February 2002 and January 2003, “on three occasions when a TIP (and related TIP extensions) expired for a rig Nigeria, Customs Agent 1 [a Nigerian entity that provided freight forwarding, customs clearing, haulage and general logistics services to companies doing business in Nigeria and SFNL’s customs agent in Nigeria between 2002 – July 2007] and Customs Agent 2 [a Nigerian entity that provided, among other things, customs clearing and freight forwarding and support services to oil and gas services companies operating in Nigeria and one of SFNL and TSSNL’s customs agents in Nigeria], with the knowledge of SFNL, engaged in a process of obtaining false paperwork on SFNL’s behalf to avoid the time, cost, and risks associated with exporting the rig and re-importing it into Nigerian waters.” The information alleges that “Customs Agent 1 and Customs Agent 2, with the knowledge of SFNL, obtained false documents that reflected that the rig had been physically exported and re-imported, when, in fact, the rig had remained in Nigeria.”
In addition, the information alleges that between May 2007 and June 2007, “Customs Agent 2, with the knowledge of TSSNL, engaged in a process of obtaining false paperwork on behalf of TSSNL for another rig.” According to the information, “Customs Agent 2, with the knowledge of TSSNL, obtained documents that reflected that the rig had been physically exported and re-imported, when, in fact, the rig had remained in Nigeria.”
The information alleges, that “SFNL and TSSNL’s employees knew or were aware of a high probability that certain bribe payments were made by Customs Agent 1 and Customs Agent 2 to Nigerian Customs Service (“NCS”) officials to resolve these issues.” The information alleges that “to secure reimbursement for the payments made on behalf of SFNL and TSSNL, these Custom Agents provided invoices to SFNL and TSSNL without supporting documentation” and that “Transocean Nigeria, in turn, reimbursed these Customs Agents for the expenses.”
According to the information, payments to Customs Agent 1 and Customs Agent 2 were mischaracterized as “freight and shipping/courier charges” or “crewboat, workboat, tug Hire” (in the case of Agent 1) and “miscellaneous operating expenses” (in the case of Customs Agent 2) in Transocean Nigeria’s books and records which then were incorporated into Transocean’s year-end financial statements filed with the SEC.
According to the information, “by corruptly circumventing the TIP requirements in 2002 and 2007, Transocean, through Transocean Nigeria, was able to continue its drilling operations using [certain rigs] that otherwise should have been temporarily removed from Nigerian waters.” The information states, “as a consequence, Transocean was able to corruptly gain a net profit of approximately $2,129,839 on its rig operations that […] otherwise would have been suspended because of the failure to comply with Nigerian TIP requirements.”
As to express courier services, the information states that “one of the services provided by [Panalpina] was an express door-to-door courier service that expedited the importation of goods and equipment into Nigeria.” According to the information, “the express service involved the payment of bribes by [Panalpina] to NCS officials to avoid the normal customs clearance process and the payment of official duties and taxes.”
The information alleges that various Transocean Nigeria employees were aware that the express courier service in Nigeria was not compliant with local law, but that despite this, “SFNL and TSSNL used the express courier service eleven times between August 2005 and September 23, 2005 when they knew or were aware of a high probability that the express courier service would make bribe payments to Nigerian officials to avoid applicable customs duties.” According to the information, “as a consequence, SFNL and TSSNL corruptly avoided paying $37,781.73 in applicable customs duties for these element shipments.” The information charges that SFNL and TSSNL “falsely recorded the payments to the express courier service as ‘air freight’ in their books and records” and that these transactions were then incorporated into Transocean’s SEC filings.
Based on the above conduct, the DOJ charged Transocean with conspiracy to violate the FCPA’s anti-bribery and books and records provisions, FCPA anti-bribery violations, and knowingly violating the FCPA’s books and records provisions.
According to the criminal information, “Transocean Nigeria employees knew or were aware of a high probability that the [Panalpina] was making bribe payments to Nigerian Customs Service officials on behalf of SFNL and TSSNL to cause such officials to disregard certain customs regulatory requirements relating to importing goods and materials into Nigeria for use on Transocean’s rigs in Nigeria, and sought reimbursement from SFNL and TSSNL for these payments.”
According to the information, certain unnamed co-conspirators committed various overt acts in furtherance of the conspiracy including Employee C [manager of Transocean’s operations in Nigeria from August 2001 to January 2004 and an agent of an “issuer”], Executive B [a French citizen who was responsible for Transocean’s Africa Region, including offshore drilling operations in Nigeria, and an agent of an “issuer”], Senior Executive A [a permanent resident of the U.S. from 2005 until July 2007 and a “domestic concern” as well as agent of an “issuer”].
Deferred Prosecution Agreement
Pursuant to the DPA, Transocean admitted, accepted and acknowledged that it was responsible for the acts of its officers, employees, subsidiaries, and agents as set forth above.
The term of the DPA is three years and seven months and it states that the DOJ entered into the agreement “based on the individual facts and circumstances” of the case and Transocean. Among the factors stated are the following.
“Transocean and Transocean personnel in Nigeria promptly commenced an internal investigation into dealings between Transocean’s Nigeria operations and [Panalpina] after becoming aware of information indicating potential issues with [Panalpina]
“Transocean expanded its internal investigation to numerous operations and areas of the world outside Nigeria where no misconduct had been reported or suspected, and reported all relevant findings to thc Dcpartment;”
“A subsidiary of Transocean Ltd., Transocean Offshore Deepwater
Drilling Inc., hired a new chief compliance officer with substantial experience in corporate ethics and anti-corrption compliance policies. The compliance officer, who is an officer of Transocean Ltd., is responsible for the oversight of compliance for Transocean Ltd. and all of its subsidiaries and affiliates, including Transocean;”
“Transocean Ltd. established a specific internal audit team of well-trained auditors to focus on fraud, FCPA compliance, and anti-bribery issues at Transocean Ltd.’s worldwide operations;”
“Transocean Ltd. issued a revised FCPA compliance policy and revised its code of conduct, instituted a worldwide FCP A training program for its companies’ employees, and implemented a well-defined due diligence process for retaining third party service providers and business partners that interact with government officials;”
“Transocean and Transocean Ltd. cooperated with the Department’s investigation, including sharing all relevant investigation findings and making available numerous current and former employees;”
“Transocean and Transocean Ltd. agreed to undertake further remedial
measures;”
“Transocean and Transocean Ltd. agreed to provide a written report to the Department on their progress and experience in maintaining and, as necessary and appropriate, enhancing their compliance policies and procedures;”
“Transocean and Transocean Ltd. agreed to continue to cooperate with the Department in any ongoing investigation of the conduct of Transocean and its directors, employees, agents, consultants, contractors, subcontractors, subsidiaries, and any affliates it controls relating to violations of the FCPA.”
As stated in the DPA, the fine range for the above describe conduct under the U.S. Sentencing Guidelines was $16.8 million to $33.6 million. Pursuant to the DPA, Transocean and Transocean agreed that Transocean shall pay a monetary penalty of $13.44 million – 20% below the minimum guideline amount.
As is standard in FCPA DPAs, Transocean and Transocean Ltd. agreed not to make any public statement “contradicting the acceptance of responsibility by Transocean and Transocean Ltd. as set forth” in the DPA and Transocean and Transocean Ltd. further agreed to only issue a press release in connection with the DPA if the DOJ does not object to the release.
SEC
The SEC’s complaint (here) concerns the same core set of facts as set forth in the DOJ’s DPA, plus a few additional allegations.
In summary fashion, the SEC alleged “from at least 2002 through 2007, Transocean made illicit payments through its customs agents to Nigerian government officials to extend the temporary importation status of its drilling rigs, to obtain false paperwork associated with its drilling rigs, and obtain inward clearance authorizations for its rigs and a bond registration.”
The SEC further alleged as follows. “Transocean made illicit payments through Panalpina World Transport Holding Ltd.’s Pancourier express courier service to Nigerian government officials to expedite the import of various goods, equipment and materials into Nigeria. In most instances, customs duties for these items were not paid by either Panalpina or Transocean. In addition, Transocean made illicit payments through Panalpina to Nigerian government officials to expedite the delivery of medicine and other materials into Nigeria. Transocean’s total gains from the conduct were approximately $5,981,693.”
According to the complaint, Pancourier, is “an express door to door courier service operated by Panalpina” and the complaint alleges that Transocean used Panalpina and Pancourier “to expedite the delivery of goods and to import goods into Nigeria without always paying applicable duties to the Nigerian government.”
As to the TIPs and movement of rigs, the complaint allegess that Transocean’s illicit payments through its customs agents to Nigerian government officials avoided “moving costs of approximately $1,088,985 and gain profits of approximately $3,172,378.”
The SEC complaint also alleges that “Transocean made illicit payments totaling $207,170 to Customs Agent 2 for what were described on invoices as “customs intervention” charges related to six rigs.” According to the complaint, the payments ensured that “Transocean could operate its rigs in Nigerian waters without proper paperwork and without compliance with local law requirements.”
As to Panalpina and Pancourier, the SEC complaint states that “from January 2002 to September 2005, Transocean used Pancourier 404 times to import various goods and materials into Nigeria without paying any customs duties to the Nigerian government.” According to the complaint, “the total customs duties that Transocean avoided through its use of Pancourier for the 404 shipments to Nigeria were approximately $1,480,419.”
Finally, the SEC complaint alleges that “aside from its use of Pancourier, Transocean also used Panalpina to expedite delivery of medicine and other goods into Nigeria.” The complaint states that “Transocean made illict payments through Panalpina to Nigerian government officials for the importation of these goods totaling $32,741.”
Based on the above conduct, the SEC charged Tidewater with violating the FCPA’s anti-bribery and books and records and internal control provisions.
As to the company’s internal controls, the SEC complaint simply states as follows. “… [A]s evidenced by the extent and duration of the improper payments to Nigerian officials, the improper recording of these payments in Transocean’s books and records, the failure of Transocean’s management to detect these irregularities, and the actual involvement of certain members of senior management, Transocean failed to devise and maintain an effective system ofinternal controls to prevent or detect these violations.”
Without admitting or denying the SEC’s allegations, Transocean agreed to pay disgorgement and prejudgment interest of $7,265,080. .
Former DOJ fraud section attorney Richard Smith (here) (Fulbright & Jaworski LLP) represented Transocean.