DOJ Announces FCPA Enforcement Action Against Two Former SBM Offshore Executives
If you are scoring at home, in the past 48 hours the DOJ has announced FCPA enforcement actions involving 7 individuals. (See here for the prior post regarding the FCPA enforcement action earlier this week against 5 individuals associated with Rolls-Royce).
By way of comparison, as highlighted in this post, in all of 2016 8 individuals were involved in DOJ FCPA enforcement actions and in 2015 8 individuals were also involved in DOJ FCPA enforcement actions.
In other words, those predicting a slow down in FCPA enforcement in the Trump administration were ignorant to begin with, but now really need to move on to other topics.
Friday Roundup
Asset recovery, scrutiny alerts and updates, nominate, and for the reading stack. It’s all here in the Friday roundup.
Asset Recovery
FCPA enforcement is not the only prong of the DOJ’s bribery and corruption fight.
Asset recovery – part of the DOJ’s so-called Kleptocracy Initiative – is another prong and recently the DOJ announced its largest action ever brought under the program. As stated in this release:
Friday Roundup
DOJ seeks legislative changes, a focus on FCPA Inc., credit ratings, across the pond, scrutiny update, and for the reading stack.
It’s all here in the Friday Roundup
DOJ Seeks Legislative Changes
The DOJ’s efforts to eradicate corruption and bribery is broader than just Foreign Corrupt Practices Act enforcement and includes: “public integrity prosecutions, bribery prosecutions, prosecutions of taxpayers who seek to conceal foreign accounts, money laundering prosecutions, [and its] Kleptocracy Initiative.”
Friday Roundup
Scrutiny alerts and updates, double standard, ripple, job description, new website, quotable and for the reading stack. It’s all here in the Friday roundup.
Scrutiny Alerts and Updates
Vimpelcom / TeliaSonera
As highlighted in this recent post, when recently asked about the slowdown in 2015 DOJ corporate FCPA enforcement Andrew Weissmann (Chief of the DOJ Fraud Section) stated: “just wait three months, it might be a very different picture.”
According to this report:
“Vimpelcom “is set to announce a settlement with the US Department of Justice and Swiss and Dutch authorities that will be “just shy of a billion dollars.” […] A source close to the DoJ, which does not comment publicly on individual cases, said it is expected that approximately three-quarters of the funds would go to the US government and the remainder to the European governments. […] [S]ources say [the Vimpelcom action] is a precursor for a much larger settlement coming down the line with TeliaSonera, the Swedish telecom operator.”
See this prior post titled “The Burgeoning Uzbekistan Telecommunication Investigations.”
SBM Offshore
Previous posts have highlighted SBM Offshore’s scrutiny including its disclosure in November 2014 that the DOJ informed the company “that it is not prosecuting the Company and has closed its inquiry” into allegations of improper conduct in Brazil and other countries.
Earlier this week, the company disclosed:
“[The DOJ] has informed SBM Offshore that it has re-opened its past inquiry of the Company and has made information requests in connection with that inquiry. The Company is seeking further clarification about the scope of the inquiry. The Company remains committed to close-out discussions on this legacy issue which the Company self-reported to the authorities in 2012 and for which it reached a settlement with the Dutch Public Prosecutor in 2014.”
British American Tobacco
This previous Friday roundup highlighted the scrutiny surrounding British American Tobacco. Recently, several members of Congress sent this letter to Andrew Weissmann (Chief of the DOJ’s Fraud Section) stating in pertinent part:
“We are deeply troubled by recent media reports alleging that British American Tobacco (BAT) conspired to bribe politicians and public health officials across Central and East Africa to block, weaken, and delay the passage and implementation of public health laws designed to protect people from the deadly effects of tobacco. We request the Department of Justice to investigate BAT’s alleged bribery to determine whether it violated the Foreign Corrupt Practices Act.”
General Cable
The company has been under FCPA scrutiny since approximately September 2014 and recently disclosed:
“As previously disclosed, we have been reviewing, with the assistance of external counsel, our use and payment of agents in connection with, and certain other transactions involving, our operations in Angola, Thailand, India, China and Egypt (the “Subject Countries”). Our review has focused upon payments and gifts made, offered, contemplated or promised by certain employees in one or more of the Subject Countries, directly and indirectly, and at various times, to employees of public utility companies and/or other officials of state owned entities that raise concerns under the Foreign Corrupt Practices Act (“FCPA”) and possibly under the laws of other jurisdictions. We have substantially completed our internal review in the Subject Countries and, based on our findings, we have increased our outstanding FCPA-related accrual of $24 million by an incremental $4 million, which represents the estimated profit derived from these subject transactions that we believe is probable to be disgorged. We have also identified certain other transactions that may raise concerns under the FCPA for which it is at least reasonably possible we may be required to disgorge estimated profits derived therefrom in an incremental aggregate amount up to $33 million.The amounts accrued and the additional range of reasonably possible loss solely reflect profits that may be disgorged based on our investigation in the Subject Countries, and do not include, and we are not able to reasonably estimate, the amount of any possible fines, civil or criminal penalties or other relief, any or all of which could be substantial. The SEC and DOJ inquiries into these matters remain ongoing, and we continue to cooperate with the DOJ and the SEC with respect to these matters.”
Qualcomm
As highlighted in previous posts, Qualcomm has been under FCPA scrutiny for over four years and recently disclosed:
“On March 13, 2014, the Company received a Wells Notice from the SEC’s Los Angeles Regional Office indicating that the staff has made a preliminary determination to recommend that the SEC file an enforcement action against the Company for violations of the anti-bribery, books and records and internal control provisions of the FCPA. The bribery allegations relate to benefits offered or provided to individuals associated with Chinese state-owned companies or agencies. The Wells Notice indicated that the recommendation could involve a civil injunctive action and could seek remedies that include disgorgement of profits, the retention of an independent compliance monitor to review the Company’s FCPA policies and procedures, an injunction, civil monetary penalties and prejudgment interest.
A Wells Notice is not a formal allegation or finding by the SEC of wrongdoing or violation of law. Rather, the purpose of a Wells Notice is to give the recipient an opportunity to make a “Wells submission” setting forth reasons why the proposed enforcement action should not be filed and/or bringing additional facts to the SEC’s attention before any decision is made by the SEC as to whether to commence a proceeding. On April 4, 2014 and May 29, 2014, the Company made Wells submissions to the staff of the Los Angeles Regional Office explaining why the Company believes it has not violated the FCPA and therefore enforcement action is not warranted.
On November 19, 2015, the DOJ notified the Company that it was terminating its investigation and would not pursue charges in this matter. The DOJ’s decision is independent of the SEC’s investigation, with which we continue to cooperate.”
Double Standard
While we wait for additional FCPA enforcement actions against financial service firms based on alleged improper internship and hiring practices in the mold of the BNY Mellon action, the Wall Street Journal reports:
“Wall Street is emerging as a particularly dominant funding source for Republicans and Democrats in the presidential election, early campaign-finance reports filed with the Federal Election Commission show. So far, super PACs have received more than one-third of their donations from financial-services executives, according to data from the nonpartisan Center for Responsive Politics.”
Separately, certain FCPA enforcement actions have been based on alleged “foreign officials” receiving speaking fees or excessive honorariums. Against this backdrop, here is the list of Hillary Clinton’s speaking fees for speeches delivered to Wall Street audiences after she left the State Department but while she was a presumptive presidential candidate.
Ripple
Och-Ziff Capital Management has been under FCPA scrutiny since 2011. In this recent investor conference call, a company executive stated: “Uncertainty stemming from the FCPA investigation has also had some impact on investment decisions by certain LPs.”
In other words, a ripple of FCPA scrutiny.
To learn how FCPA scrutiny and enforcement has a range of negative financial impacts on a company beyond enforcement action settlement amounts, see “FCPA Ripples.”
Job Description
What is the Assistant Deputy Chief of the DOJ’s Foreign Corrupt Practices Act Unit expected to do? See here for the job opening and expected duties.
New Website
The U.K. Serious Fraud Office recently unveiled a new website. Among the feature is a “current cases” page which specifically lists the following companies are under investigation for bribery/corruption offenses.
- Alstom Network UK Ltd & Alstom Power Ltd
- ENRC Ltd
- GPT Special Project Management Ltd
- Innovia Securency PTY Ltd
- Rolls-Royce PLC
- Soma Oil & Gas
Quotable
In this Corporate Crime Reporter interview, Crispin Rapinet (a partner at Hogan Lovells in London) states:
“The danger of deferred prosecution agreements is the commercial temptation to deal with a problem that may or may not be in reality a real problem. If you pushed the prosecutor to actually establish that it is a criminal offense, it may not be that straight-forward. But the temptation for any corporate to deal with that risk through a commercial settlement which involves a sum of money and living with someone looking over your shoulder for a period of time is understandably great.
Whether that, from a jurisprudential point of view, is the ideal world is questionable. You can see why people might take the view of — we don’t actually know whether these people have committed a criminal offense or not. But the power of the threat of the cost and time and management distraction associated with defending a claim, to say nothing of the ultimate risk if you are ultimately unsuccessful in your defense, is such that in the overwhelming majority of circumstances where these problems arise, the commercial temptation is to enter into a deferred or non prosecution agreement.”
Spot-on.
For The Reading Stack
An informative read here from Jon Eisenberg (K&L Gates) regarding SEC civil monetary penalties.
Friday Roundup
In-depth, scrutiny alert, further Alstom-developments, quotable, and for the reading stack. It’s all here in the Friday roundup.
In-Depth
In November 2014, Dutch-based SBM Offshore resolved an enforcement action in the Netherlands. With a settlement amount of $240 million, the SBM Offshore enforcement action was one of the largest bribery-related enforcement actions of 2014 – regardless of country.
This recent article titled “The Cover-Up at Dutch Multinational SBM” in Vrij Nederland (a Dutch magazine) goes in-depth as to SBM’s scrutiny. The article has largely escaped the attention of Western media and the FCPA-related blogosphere, but is worth the time to read. The article begins as follows.
“The corruption scandal at Dutch multinational SBM Offshore, which in November reached a $240 million out-of-court settlement with the Dutch Public Prosecutor (OM), is much larger than thought, as testimony of a former employee now shows. The company has actively pursued a strategy of “containment” and has consistently misled the market. So why did the OM settle?”
Among other things, the article highlights the role of U.S. lawyers and law firms involved in the SBM representation.
Scrutiny Alert
In this recent article, the L.A. Times details, based on obtained documents, the expenditures involved in filming the movie Sahara. Among the expenditures, according to the article – “local bribes” within the Kingdom of Morocco. The article states:
“Courtesy payments,” “gratuities” and “local bribes” totaling $237,386 were passed out on locations in Morocco to expedite filming. A $40,688 payment to stop a river improvement project and $23,250 for “Political/Mayoral support” may have run afoul of U.S. law, experts say.
[…]
According to Account No. 3,600 of the “Sahara” budget, 16 “gratuity” or “courtesy” payments were made throughout Morocco. Six of the expenditures were “local bribes” in the amount of 65,000 dirham, or $7,559.
Experts in Hollywood accounting could not recall ever seeing a line item in a movie budget described as a bribe.
[…]
The final budget shows that “local bribes” were handed out in remote locations such as Ouirgane in the Atlas Mountains, Merzouga and Rissani. One payment was made to expedite the removal of palm trees from an old French fort called Ouled Zahra, said a person close to the production who requested anonymity.
Other items include $23,250 for “Political/Mayoral support” in Erfoud and $40,688 “to halt river improvement project” in Azemmour. The latter payment was made to delay construction of a government sewage system that would have interrupted filming.”
Further Alstom Developments
Yesterday, the U.K. Serious Fraud Office announced:
“Charges have been brought by the SFO against Alstom Network UK Ltd and an Alstom employee in phase three of its ongoing investigation.
Alstom Network UK Ltd, formerly called Alstom International Ltd, a UK subsidiary of Alstom, has been charged with a further two offences of corruption contrary to section 1 of the Prevention of Corruption Act 1906, as well as two offences of conspiracy to corrupt contrary to section 1 of the Criminal Law Act 1977.
Michael John Anderson, 54, of Kenilworth in Warwickshire, who was working as a business development director for Alstom Transport SA in France, has been charged with the same offences.
The alleged offences are said to have taken place between 1 January 2006 and 18 October 2007 and concern the supply of trains to the Budapest Metro.
The first hearing in this case will take place at Westminster Magistrates’ Court on 12 May 2015.”
Quotable
In this recent speech, DOJ Assistant Attorney General Leslie Caldwell stated:
“Through deferred prosecution agreements and non-prosecution agreements – or DPAs and NPAs – in cases against companies, we are frequently able to accomplish as much as, and sometimes even more than, we could from even a criminal conviction. We can require remedial measures and improved compliance policies and practices. We also can require companies to cooperate in ongoing investigations, including investigations of responsible individuals. To ensure compliance with the terms of the agreements and to help facilitate companies getting back on the right track, we can impose monitors and require periodic reporting to courts that oversee the agreements for their terms.
Some of these outcomes may resemble remedies that can be imposed by regulators. But these agreements have several features that cannot be achieved by regulatory or civil resolutions.
Criminal Division resolutions require that an entity admit to its misconduct. Commerzbank, for example, admitted responsibility and agreed to a detailed statement of facts that was filed with the court. Whereas some regulators permit “no admit, no deny” resolutions – for legitimate reasons of their own – we require that individuals and entities acknowledge their criminal culpability if they are entering into a NPA, DPA or pleading guilty.
Where we enter into DPAs, a criminal information is filed with the court and prosecution of the information is deferred for the time of the agreement. Where a company fails to live up to the terms of its agreement, an information is already filed, and we can tear up the agreement and prosecute based on the admitted statement of facts. That’s a powerful incentive to live up to the terms of the agreements.
When we suspect or find non-compliance with the terms of DPAs and NPAs, we have other tools at our disposal, too. We can extend the term of the agreements and the term of any monitors, while we investigate allegations of a breach, including allegations of new criminal conduct. Where a breach has occurred, we can impose an additional monetary penalty or additional compliance or remedial measures. And let me be clear: the Criminal Division will not hesitate to tear up a DPA or NPA and file criminal charges, where such action is appropriate and proportional to the breach.
Obviously, not every breach of a DPA warrants the same penalty. We are committed to pursuing an appropriate remedy in each case, and we will calibrate the penalty we pursue to fit the nature of the violation and the corporation’s history and culture. And we will do so transparently, with an explanation of what factors led to the resolution in each case.
[…]
[C]riminal prosecution is the best manner in which to punish culpable individuals. And the seriousness of potential or actual punishment for felony criminal convictions, including incarceration for individuals, and the stigma and reputational harm associated with criminal charges or convictions, serve as powerful deterrents.”
For the Reading Stack
This Wall Street Journal Risk & Compliance post suggests that the ongoing corruption investigations in Brazil are becoming full-employment events for FCPA Inc. According to the article:
“Multinationals with operations in Brazil are making frightened calls to their lawyers, as the country’s spreading corruption scandal reaches more companies.
[…]
Attorneys say companies with operations in Brazil are scrambling to assess whether they could get swept up in the probe. “They are very worried,” said Ruti Smithline, an anti-bribery specialist at Morrison & Foerster LLP. “The investigation is so widespread. If you have business in Brazil, the likelihood that this is going to touch you in some way is very high.”
Companies are racing to discover questionable activities before authorities in Brazil do. “They are asking: ‘Is our house clean? If authorities look at these relationships what are they going to find?’” Ms. Smithline said.”
The WSJ post asserts:
“[Brazil’s new anti-corruption law, the Clean Companies Act] holds companies to even higher standards and stricter liability than the U.S. Foreign Corrupt Practices Act. For example, unlike the FCPA, under the Brazilian law a company can be prosecuted for corruption even if didn’t realize it was paying a bribe and had a great compliance program in place.”
This is a most off-target statement as Brazil law does not even provide for corporate criminal liability like the FCPA. Moreover, business organizations are often the subject of FCPA enforcement actions even though the company had in place pre-existing compliance policies and procedures.
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Miller & Chevalier’s FCPA Spring Review 2015 is here.
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A good weekend to all.