Friday Roundup
The Bribery Act is not the only thing delayed in the U.K., where in the world is James Tillery, Thai authorities looking into Alliance One and Universal Corp bribe recipients, and corporate directors appear satisfied … it’s all here in the Friday roundup.
BAE U.K. Plea Agreement Delayed
In a recent article in The Times (London), Alex Spence and David Robertson report that the BAE – SFO plea agreement “is unlikely to come before the courts for approval before November.”
In February (see here) the SFO announced that it “reached an agreement with BAE Systems that the company will plead guilty” to the offense of “failing to keep reasonably accurate accounting records in relation to its activities in Tanzania.” The SFO resolution was controversial given that BAE was viewed by many to have engaged in bribery around the world.
The Times reports “that the SFO fears that a judge may now refuse to approve the BAE settlement or increase the penalties imposed on the company.” The article indicates that “BAE, which has always denied bribery, is understood to be frustrated by the slow progress of the SFO case, but the delay is not thought to have had an impact on the company’s operations.”
James Tillery
In December 2008, James Tillery, a former executive of Willbros International Inc., and Paul Novak, a consultant to the company, were criminally charged “in connection with a conspiracy to pay more than $6 million in bribes to government officials in Nigeria and Ecuador …” (see here).
In November 2009, Novak pleaded guilty to one count of conspiracy to violate the FCPA and one substantive count of violating the FCPA (see here).
Tillery has apparently been hanging out in Nigeria, but is now apparently in custody according to various Nigerian news outlets. According to the sources, “Tillery was believed to have been handed over by officials of Interpol to officials of the US Federal Bureau of Investigation (FBI).”
Apparently this occurred “without the knowledge of Attorney-General of the Federation and Minister of Justice, Mr. Mohammed Adoke, who is supposed to be notified before such action is taken. Under section 6 of the Extradition Act, a request for extradition is supposed to be sent to the AGF who is supposed to arraign such a deportee before a magistrate court and upon the declaration of the magistrate, the deportee is deported accordingly.”
Then it was reported that Tillery’s extradition “was stopped by immigration officials at the Murtala Muhammed International Airport, Lagos because he did not have a travel document.”
Then Tillery’s Nigerian lawyer apparently stepped in and said that the attempted extradition was a “grave assault on the sovereignty of Nigeria” and a violation of Nigeria’s Extradition Act because Tillery renounced his U.S. citizenship and became a Nigerian by naturalization in 2009. Thus, the lawyer argued that the U.S. needed to follow legal steps in Tillery’s extradition.
Then it was reported that Justice Abang Okon of the Federal High Court in Lagos ordered the Federal Government to halt its alleged plan to extradite Tillery from Nigeria to the U.S.
For more on Willbros Group and other individuals involved in related enforcement actions (see here and here).
Thai Authorities Investigating Alliance One / Universal Corp. Bribe Recipients
Earlier this month, the DOJ and SEC announced a joint FCPA enforcement action against tobacco companies Alliance One International Inc. and Universal Corporation. Certain of the allegations against both companies involved bribe payments to “Thai government officials to secure contracts with the Thailand Tobacco Monopoly (TTM), a Thai government agency, for the sale of tobacco leaf.” (See here).
In this prior post, I noted that it is potentially embarrassing for a foreign country to have “one of its own” profiled in a U.S. FCPA enforcement action. With increasing frequency, the end result is that the alleged “foreign official” bribe recipient becomes the subject of an “in-country” investigation.
As noted in this Bangkok Post article:
“A local investigation is expected into US allegations that Thailand Tobacco Monopoly staff accepted US$1.93 million (62 million baht) in bribes to buy Brazilian tobacco. The Department of Special Investigation has asked the Finance Ministry to file a complaint against the TTM staff so it can look into the allegations. DSI director-general Tharit Pengdit told the Bangkok Post yesterday the Finance Ministry, which supervises the state-owned cigarette maker, should file a complaint with the DSI so it can look into the US claims. […] Sathit Limpongpan, permanent secretary for finance, said his ministry would work with the Justice Ministry to seek information from the US Justice Department and would conduct an initial investigation.”
Corporate Directors Are Satisfied
According to a recent legal survey by Corporate Board Member and FTI Consulting (see here), 90% of directors “are satisfied with their in-house legal department’s management” of FCPA issues.
A good weekend to all.
Year Two … Plus The Friday Roundup
I missed my own anniversary, the anniversary of FCPA Professor that is.
On July 17, 2009, I formally launched FCPA Professor with this Mission Statement.
Approximately 220 posts later, year two has arrived and the mission remains the same.
It is a pleasure to make frequent deliveries to the marketplace of ideas. FCPA Professor is read worldwide by a diverse group of readers and I thank you for making this space a part of your day.
Now for the Friday roundup.
BAE U.K. Settlement Still Pending
BAE’s bribery, yet no bribery U.S. settlement has long been signed, sealed and delivered. See here and here for more. Yet things are taking a bit longer on the other side of the Atlantic according to this report from a U.K. financial website.
According to the report, Serious Fraud Office director Richard Alderman has admitted “that legal challenges by anti-arms campaigners, and the need to get the case’s extensive documentation in order, have seen the conclusion of the bribery investigation put off until autumn at the earliest.”
With the lashing the SFO took in the Innospec enforcement action (see here), the SFO understandably wants to get this one right.
The BAE U.K. settlement is not the only event that has been delayed. As highlighted in this post from earlier week so too is the new U.K. Bribery Act.
Business is Booming
Furthering the notion that anti-bribery and compliance work is an industry in and of itself, the San Jose Business Journal reports in this recent piece that business is booming – and not just among law firms – as the article profiles Deloitte and KPMG.
The article touches upon certain topics highlighted by others, including Nathan Vardi in this Forbes piece, and Steve Pearlstein in this Washington Post piece.
Noble and Nigeria
A recent post (see here) described Nigeria as a challenging market and highlighted a recent report that found that one in three companies reported paying a bribe to Nigerian public officials in undertaking administrative tasks. The post talked about facilitation payments, which are allowed by the FCPA – at least as written, yet highlighted the many FCPA enforcement actions seemingly based on facilitating payments.
Throw a pending enforcement action against Noble Corporation into that mix.
Here is what the company said in its recent 8-K filing:
“In 2007, we began, and voluntarily contacted the SEC and the U.S. Department of Justice (“DOJ”) to advise them of, an internal investigation of the legality under the FCPA and local laws of certain reimbursement payments made by our Nigerian affiliate to customs agents in Nigeria. The SEC and the DOJ have indicated that they believe that violations of the FCPA occurred and will seek civil and/or criminal sanctions against us, including monetary penalties, and may include additional sanctions against us and/or certain of our employees, as well as additional changes to our business practices and compliance programs. We could also face fines or sanctions in relevant foreign jurisdictions.
We consider the matter relating to the Nigeria investigation to be ongoing and cannot predict (a) when it will conclude, (b) whether either the SEC or the DOJ will open its own proceeding to investigate this matter, or (c) if a proceeding is opened, what potential sanctions, penalties or other remedies these agencies may seek. Based on information obtained to date, we believe it is probable that we will pay an amount to settle this matter with the DOJ and SEC. Given that the matter is not finally resolved, we cannot predict with certainty what amount we will pay in civil and criminal fines and penalties; however, as of June 30, 2010, we accrued approximately $5.1 million relating to this ongoing matter. Any of the sanctions as a result of the Nigerian investigation or any other future violation of the FCPA or similar law could have a material adverse effect on our business or financial condition and could damage our reputation and ability to do business, to attract and retain employees and to access capital markets.
Frontier identified certain payments totaling approximately $35,000 made by one of its former agents to Nigeria immigration officials in 2009 and reported this matter to the DOJ as a possible violation of the FCPA. We reviewed this matter as part of our diligence investigation of Frontier. The DOJ has not indicated what, if any, action it may take with respect to such payments, although the DOJ could seek civil and/or criminal sanctions against Frontier. Upon closing the Frontier acquisition, we would be responsible for such sanctions as well as any other sanctions relating to violations of applicable laws by Frontier, except to the extent that they may be covered by indemnities contained in the merger agreement with Frontier. Any such sanctions could have a material adverse effect on our business or financial condition.”
Nigeria … A Challenging Market
Nigeria.
It is one of Africa’s largest markets. It is also one of the largest oil and gas producing nations in the world.
No surprise then that many companies subject to the FCPA do business in Nigeria.
Problem is, Nigeria is also an incredibly challenging and complex market to do business in from an FCPA perspective.
The recent Bonny Island bribery enforcement actions (see here and here), and Panalpina’s pending FCPA enforcement action (see here), which is largely focused on Nigeria, all highlight this point.
Just how challenging and complex is the Nigerian market?
Based on a report (see here) released earlier this month, incredibly so.
The report, jointly commissioned by the European Union (EU), the UN Office on Drugs and Crime, Nigeria’s Economic and Financial Crimes Commission (EFCC), and the National Bureau of Statistics (NBS), was carried out in 2007 and funded by the EU at a cost of 25 million euro (US$31.2 million). It is the aggregation of results from a survey of 2,200 companies doing business across Nigeria.
Among the findings of the report, 71% of respondents answered that corruption presents a serious risk for doing business in Nigeria and the payment of bribes affects most companies operating in the country. According to the report, one in three companies reported paying a bribe to public officials in undertaking administrative tasks. According to the report, in dealing with police or clearing goods through customs, the payment of bribes is common.
Payment of bribes in connection with custom clearances is at the heart of the pending Panalpina enforcement action (as well as numerous other recent FCPA enforcement actions such as Helmerich & Payne, Inc. (see here) and Nature’s Sunshine Products, Inc. (see here).
The recent Nigeria report, specifically its finding that the payment of bribes is common in clearing goods through customs, begs the questions – is this exactly the reason why Congress included a facilitation payment exception to the FCPA? If the answer if yes, then what does it say about the pending Panalpina enforcement action, the recent Helmerich & Payne and Nature’s Sunshine Products enforcement actions, and the numerous other enforcement actions based in whole or in part on customs issues.
For a prior post on facilitating payments, see here.
Snamprogetti The Latest to Join The Bonny Island Bribery Club
Last week (see here and here), it was French company Technip that admitted to bribing Nigerian foreign officials with the end result being $338 million paid into the United States treasury.
This week its a Dutch company and its former Italian parent company that admitted to bribing Nigerian foreign officials with the end result being an additional $365 million paid into the United States treasury.
As indicated in this DOJ release: “Snamprogetti Netherlands B.V., (Snamprogetti) has agreed to pay a $240 million criminal penalty to resolve charges related to the Foreign Corrupt Practices Act (FCPA) for its participation in a decade-long scheme to bribe Nigerian government officials to obtain engineering, procurement and construction contracts” to build liquefied natural gas facilities on Bonny Island, Nigeria.”
According to the release, the DOJ “filed a deferred prosecution agreement [DPA] and a criminal information today against Snamprogetti [a Dutch corporation headquartered in Amsterdam, The Netherlands, which was a wholly owned subsidiary of Snamprogetti S.p.A., an Italian company headquartered in Milan, Italy] charging Snamprogetti with one count of conspiracy and one count of aiding and abetting violations of the FCPA.” The release further states that pursuant to the two-year DPA “Snamprogetti, its current parent company, Saipem S.p.A., and its former parent company, ENI S.p.A. (ENI), agreed to ensure that their compliance programs satisfied certain standards and to cooperate with the department in ongoing investigations.”
In addition, the release notes that:
“Today, Snamprogetti and ENI also reached a settlement of a related civil complaint filed by the U.S. Securities and Exchange Commission (SEC), charging Snamprogetti with violating the FCPA’s anti-bribery provisions, falsifying books and records, and circumventing internal controls and charging ENI with violating the FCPA’s books and records and internal controls provisions. As part of that settlement, Snamprogetti and ENI agreed jointly to pay $125 million in disgorgement of profits relating to those violations.”
For a copy of the SEC release and complaint (see here and here).
Stay tuned for analysis of the DOJ deferred prosecution agreement, criminal information, and SEC complaint.
In the meantime, some questions to ponder.
For those scoring at home, the current U.S. treasury deposit slip, because a joint venture largely comprised of foreign companies bribed Nigerian officials, stands at $1.28 billion given the related February 2009 enforcement action against Kellogg Brown & Root entities as well as Halliburton Company – an enforcement action that was settled for $579 million in combined fines and penalties.
Bribery and corruption, the conventional wisdom goes, is not a victimless crime. Accordingly, the Bonny Island bribery scheme resulted in victims. Surely those victims were not U.S. taxpayers, but the U.S. Treasury is where the entire $1.28 billion has gone.
The Bonny Island bribery scheme, which now stands as the largest collective FCPA enforcement action in history, begs the question – where should the fines and penalties resulting from an FCPA enforcement action go? Solely to U.S. taxpayers? To the “victims” of the alleged crime? If to the “victims” who are the “victims” and how best does one get the money to the “victims?” Are the enforcement agencies willing to sacrifice portions of their current FCPA cash cow? (see here for more).
More On Technip
A post last week (see here) contained a high-level overview of the Technip matter as described in the DOJ release.
Let’s take a closer look at the criminal information (see here) and the deferred prosecution agreement (see here).
Information
Not surprisingly, the Technip information largely mirrors the criminal information previously filed in February 2009 (see here) against the Kellogg Brown & Root entity also part of the joint venture engaged in the Bonny Island bribery scheme.
That is, the Technip information charges conspiracy to violate the FCPA and violations of the FCPA’s antibribery provisions and alleges that Technip was part of a joint venture (“JV”) in Nigeria to design, build and expand LNG facilities on Bonny Island. According to the information, JV profits, revenues, and expenses were equally shared among the four JV partners. The JV’s Steering Committee consisted of high-level executives from each of the four companies and the Steering Committee made major decisions on behalf of the JV, including whether to hire agents to assist the JV in winning contracts, who to hire as agents, and how much to pay the agents.
The information charges that the JV operated through three Portuguese special purpose corporations, including a corporation (#3), 25% owned by Technip, specifically used to enter into consulting agreements with JV agents.
The criminal conduct charged centers on two agents hired by the JV.
The first agent, Jeffrey Tesler was a citizen of the United Kingdom who used a Gibraltar-based company as a vehicle to enter into agent contracts and receive payments from the JV. The information charges that the JV paid the company over $130 million to bribe high-ranking Nigerian government officials. According to the information, Tesler was an agent of the JV and each of the JV companies.
The second agent was a global trading company headquartered in Tokyo (the “Japanese Agent”), which was hired by the JV to help it obtain business in Nigeria, including by paying bribes to Nigerian officials. The information charges that the JV paid the consulting company over $50 million to bribe Nigerian government officials. According to the information, the Japanese Agent was an agent of the JV and each of the JV companies.
According to the information, between 1995 and 2004, the JV was awarded four contracts (collectively valued at over $6 billion) to build the Bonny Island Project and alleges that Technip, Tesler, the Japanese Agent, Kellogg Brown & Root, and others, were engaged in a conspiracy to obtain and retain the contracts “through the promise and payment of tens of millions in bribes to officials of the Executive Branch of Nigeria, officials of Nigeria National Petroleum Corporation (NNPC), officials of Nigeria LNG Limited (NLNG) and others.”
[According to the information, NNPC was a Nigerian government-owned company and an entity and instrumentality of the Government of Nigeria whose officers and employees were “foreign officials” under the FCPA. According to the information, NLNG was also an entity and instrumentality of the Government of Nigeria whose officers and employees were “foreign officials” under the FCPA, notwithstanding the fact that NLNG was 51% owned by multinational oil companies. Why? Presumably because, as the information alleges, “through the NLNG board members appointed by NNPC, among other means, the Nigerian government exercised control over NLNG, including but not limited to the abilty to block the award” of the relevant contracts.]
Among other means of the conspiracy, the information alleges that:
“Senior executives and employees of Technip and their co-conspirators caused wire transfers totaling approximately $132 million to be sent from [#3’s] bank account in Amsterdam, The Netherlands, to bank accounts in New York, New York, to be further credited to bank accounts in Switzerland and Monaco controlled by Tesler for Tesler to use to bribe Nigerian government officials.”
“Senior executives and employees of Technip and their co-conspirators caused wire transfers totaling over $50 million to be sent from [#3’s] bank account in Amsterdam, The Netherlands to [Japanese Agent’s] bank account in Japan for [the Japanese Agent to use to bribe Nigerian government officials.”
Based on the same core conduct, the information also charges a substantive violation of the FCPA’s antibribery provisions and alleges that “Technip
caused […] corrupt U.S. dollar payments to be wire transferred
from [#3’s] bank account in Amsterdam, The Netherlands, via correspondent bank accounts in New York, New York, to bank accounts of [Tesler’s Gibraltar based company] in Switzerland for use in part to bribe Nigerian government officials.”
DPA
The DPA has a term of two years and seven months. A DPA is a less harsh resolution to an FCPA enforcement action because, while the criminal charges are technically filed, the charges are deferred or not prosecuted during the term of the DPA. If Technip abides by its obligations under the DPA, the criminal charges will be dismissed when the DPA’s term expires.
Pursuant to the DPA, Technip admitted, accepted, and acknowledged that it is responsible for the acts of its employees, subsidiaries, and agents as detailed in the above criminal information.
According to the DPA, the DOJ agreed to enter into the agreement with Technip based on the following factors: “(a) Technip cooperated with the DOJ’s investigation of Technip and others; (b) Technip undertook remedial measures, including the implementation of an enhanced compliance program, and agreed to undertake further remedial measures; (c) Technip agreed to continue to cooperate with the DOJ in any ongoing investigation of the conduct of Technip and its employees, agents, consultants, contractors, subcontractors, subsidiaries, and others relating to violations of the FCPA; and (d) the impact on Technip, including collateral consequences, of a guilty plea or criminal conviction. (emphasis added).
According to the DPA, the fine range under the advisory U.S. Sentencing Guidelines for Technip’s conduct is $318.4 million – $636.8 million. Technip agreed to pay a criminal penalty of $240 million or approximately 25% below the bottom of the fine range. The Technip enforcement action is thus another example of the DOJ allowing a corporation to settle significant bribery allegations for an amount below even the bottom range of fines available under the advisory Sentencing Guidelines.
Pursuant to the DPA, Technip agreed to engage a corporate compliance monitor for a two year period. The DPA specifically states that this individual will be a “French national.”
Representing Technip in the FCPA enforcement action was Robert Luskin from Patton Boggs LLP (see here) and John Savarese from Wachtell Lipton Rosen & Katz (see here).
As referenced above, the Technip allegations largely mirror the previous allegations against the Kellogg Brown & Root entity also part of the joint venture engaged in the Bonny Island bribery scheme.
How does the DOJ component of these two FCPA enforcement actions compare?
Technip settled pursuant to a DPA and paid a $240 million criminal penalty – an amount 25% below the bottom range allowed under the advisory Sentencing Guidelines.
Kellogg Brown & Root was required to plead guilty and paid a $402 million criminal penalty – an amount within the advisory Sentencing Guidelines range of $376.8 million – $753.6 million.
The disparate treatment of Technip and Kellogg Brown & Root – two entities involved in the same joint venture engaged in the same bribery scheme – is likely due to the fact that, per the government’s allegations, Kellogg Brown & Root appeared to have played a more active role in the bribery scheme. Specifically, Albert Jack Stanley, a former officer and director of various Kellogg Brown & Root entities, was directly involved in the bribery scheme as evidenced by his prior guilty plea (see here).