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Friday Roundup

Out with the tide, a former DOJ Fraud Section Chief speaks on voluntary disclosure, guidance issues, will candy fall from the pinata, schooled in the FCPA, a Section 1504 development, and “Minegolia.”

Tidewater Derivative Complaint Dismissed

As highlighted in this previous post, in November 2010 Tidewater Inc. was one of several companies to resolve a “CustomsGate” case.  The conduct at issue focused on Azeri tax officials and Nigerian temporary import permits and the company resolved DOJ and SEC enforcement actions by agreeing to pay $15.7 million in fines and penalties.

As if on cue in this new era of FCPA enforcement, along came the private plaintiff firms representing shareholders who filed a derivative complaint alleging that officers and members of the Board of Directors of Tidewater breached their fiduciary duties “in that they: (1) knew or recklessly disregarded the fact that employees, representatives, agents and/or contractors were paying, had paid and/or had offered to pay bribes to Azerbaijani and Nigerian government officials to obtain favorable treatment for Tidewater; (2) caused Tidewater to pay bribes and to disguise the bribe payments as legitimate expenses in Tidewater’s books and financial disclosures; and (3) failed to maintain adequate internal controls to ensure compliance with the FCPA and Exchange Act.”

Earlier this week, the case was swept out with the tide as U.S. District Court Judge Jane Triche Milazzo dismissed the complaint – see here for the decision.  In short, Judge Milazzo found that “Plaintiff did not adequately plead demand futility.”  Judge Milazzo utilized various tests in reaching her decision such as director interest and independence and whether the board could impartially consider the merits of the demand without being influenced by improper considerations.

As to interest, Judge Milazzo stated as follows.

“This Court finds that the Complaint is completely devoid of any allegations of an interested director. There is no allegation that any director appeared on both sides of a transaction or expected to derive a personal financial benefit from it. Nowhere in the Complaint can it be found that any one of the directors, much the less a majority of them, benefitted from the bribes themselves, benefitted from failing to establish and maintain adequate internal controls, benefitted from enforcing policies and programs designed to prevent violations, benefitted from improperly recorded payment of bribes in Tidewater’s books and records or benefitted from inadequately training their employees, agents, representatives and/or contractors with respect to compliance with the FCPA.”

As to alleged director participation or knowledge , Judge Milazzo stated that the “Complaint falls woefully short of pleading facts that are sufficient to show that there was any knowledge or conscious disregard on behalf of the directors.”

As to whether the directors exhibited bad faith sufficient to overcome business judgment rule presumptions, Judge Milazzo stated as follows.  “While Plaintiff’s allegations are sufficient to show that Tidewater was evidently violating both the FCPA and the Exchange Act, nowhere in the Complaint do Plaintiff’s allegations meet the specificity to show that the Individual Defendants were acting with the intent to violate these laws.  ‘[T]he mere fact that a violation occurred does not demonstrate that the board acted in bad faith.  Alleging that ‘upon information and belief’ the ‘Headquarters’ made the decision to avoid tax assessments in violation of the FCPA falls woefully short of the pleading requirements. Nowhere can this Court find who made this decision, how this decision was made or that there was an intent to violate any law. Moreover, the Court finds it significant that Tidewater’s directors voted and voluntarily initiated an FCPA investigation and advised the federal government of their violations before the government even suspected any violations.”

Tyrell on Voluntary Disclosure

You know the talking points.  The DOJ wants companies to voluntarily disclose, not ifs, ands or buts about it.  It’s interesting though how this becomes less of a black and white issues when individuals leave the DOJ.

In this recent Q&A in The Metropolitan Corporate Counsel, Steven Tyrell (a former DOJ Fraud Section Chief and current partner at Weil Gotshal – here) was asked the following question – “what is the role of voluntary reporting in establishing a good relationship with the regulatory and enforcement authorities?”

He stated as follows.

In the first instance, if a company has a legal obligation to disclose – for example, government contractors are obliged to disclose fraud – then the analysis begins and ends there. Assuming there is no legal obligation that compels disclosure or no imminent threat of disclosure by an outside party, such as a newspaper, then I typically advise clients to take credible allegations of wrongdoing seriously, look into those allegations in a manner that is appropriate under the circumstances, and assess the nature and extent of the company’s exposure and the pros and cons of disclosure. Then, and only then, should a disclosure be made if it is in the best interest of the company – or, for a public company, if the securities laws require it. Of course, it often will not be in a company’s best interest to disclose if, for example, the allegations prove not to be credible or if it is unclear whether the conduct even amounts to a violation of law. Under those circumstances, a disclosure could unnecessarily embroil the company in a lengthy and costly government investigation and result in other repercussions such as triggering civil litigation and harm to a company’s reputation that could otherwise be avoided. It’s a challenging calculus. I can tell you from past experience that there are companies that have strong reputations for compliance with regulators and others that do not. However, the fact that a company doesn’t disclose a problem that ultimately comes to DOJ’s attention is not necessarily going to damage the company’s credibility with DOJ. Regulators recognize that not every allegation should be of interest to them – and, frankly, having counsel that knows when they’ll be interested and when they won’t is really important.”

Guidance Issues

As highlighted in this previous post, soon after Assistant Attorney General Lanny Breuer announced in November 2011 that FCPA guidance would be forthcoming in 2012, Senator Grassley sought guidance on the guidance and asked Attorney General Holder several follow-up questions for the record.  For a copy of Holder’s responses, see here.

In this previous post, among others, I commented that non-binding DOJ guidance is not the best way to accomplish real and meaningful FCPA reform.

Thus, I completely agree with former DOJ Deputy Attorney General George Terwilliger and former DOJ attorney and Senate counsel Matthew Miner (both currently at White & Case, see here and here) when they state as follows in this article.

“The fact that the Justice Department recognizes the need for such guidance underscores the existence of blurry lines and fuzzy standards surrounding the FCPA. US businesses trying to compete successfully in the international commercial arena deserve better. Justice Department ‘guidance’ is neither enough, nor is it properly the role of prosecutors to be definitive interpreters of ambiguities in criminal laws. Congress writes the laws and, as the US Supreme Court has firmly established, has a responsibility to set clear standards for what is permissible and what is not. It should not stand aside in deference to the Justice Department’s plan to craft guidance, especially when that guidance will have no effect in court.”

Yara Fertilizer

It has been said before that anytime a foreign company is the subject of a corruption probe, the U.S. enforcement agencies are like children at a birthday party waiting for some candy to fall from the pinata.  Think what you will of the analogy.

The Wall Street Journal recently reported (here) that “Norwegian fertilizer producer Yara International ASA’s chief executive, Jorgen Ole Haslestad, apologized Friday to the company’s employees after an investigation uncovered millions of dollars in ‘unacceptable’ payments in India and Switzerland, as well as ‘unacceptable offers of payments’ in Libya.”  According to the article, the “unacceptable offers of payments” in Libya involve “a consultant related to the establishment of the company Libyan Norwegian Fertilizer Co., or Lifeco, in Libya, a joint venture with the Libyan National Oil Corp. and the Libyan Investment Authority.”

As noted on the company’s website here, Yara “has a sponsored Level 1 ADR program for American Depositary Receipts (ADRs), which represent ownership in shares of foreign (non-US) companies that trade on US financial markets.”  Whether foreign companies, including those with Level 1 ADR’s can become subject to the FCPA, see this excellent piece “When Does an ADR Program Give U.S. Authorities FCPA Jurisdiction Over a Foreign Issuer?”

Time will tell if the candy falls.

Checking in on Wynn Resorts

Previous posts here, here and here focused on the Wynn-Okada dispute including Wynn’s $135 million charitable contribution to the University of Macau.  On that topic, this recent Wall Street Journal article focused on the “web of political ties” between a Macau company paid by Wynn and government officials.  Regarding Wynn’s FCPA compliance in expanding in Macau, company CEO Steve Wynn stated as follows.  “This whole business of the Foreign Corrupt Practices Act—we were schooled in this.”

Final grade is pending.

Section 1504 Development

Several prior posts, see here for example, discussed Section 1504 of Dodd-Frank, the so-called Resource Extraction Disclosure Provisions and the long delay in SEC final rules.  As noted in this Corruption Current post by Samuel Rubenfeld, the SEC recently announced here that on August 22nd, “the Commission will consider whether to adopt rules regarding disclosure and reporting obligations with respect to payments to governments made by resource extraction issuers to implement the requirements of Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.


There has been only one FCPA enforcement concerning, at least in part, business conduct in Mongolia (see here for the 2009 UTStarcom action).  This is hardly surprising, as few companies subject to the FCPA have traditionally engaged in business in the country.  However, as noted in this recent Al Jazerra article, Mongolia or “Minegolia” as the country is sometimes called, “is undergoing a rapid transformation, due to its incredible resource wealth in minerals such as coal, copper, and gold.” At the same time, the article notes that “Transparency International placed Mongolia 120th out of 183 nations on its corruption perception index” and that “90 percent of Mongolians believe politicians are benefitting from ‘special arrangements’ with foreign enterprises over mining rights.”


A good weekend to all.

Troubling Trends and Problematic Patterns

That is the alternate title I’ve given to Shearman & Sterling’s “Recent Trends and Patterns in FCPA Enforcement” (here).

The periodic publication is always in my “must-read” category. The author group is first-rate and includes noted FCPA practitioners Philip Urofsky (former Assistant Chief of the DOJ Fraud Section responsible for FCPA enforcement) and Danforth Newcomb (a dean of the FCPA bar).

The Shearman & Sterling piece raises particularly pointed questions as to the Panalpina-related enforcement actions and the seemingly vanishing “obtain or retain business” element of an FCPA anti-bribery violation.

I have covered these issues extensively as well – see here for several posts on the Panalpina-related enforcement actions and here (pg. 971 “Just How Was that Business Obtained or Retained”) as to questions about the enforcement agencies’ “obtain or retain business” allegations or interpretations.

The Shearman & Sterling piece states that “some of the government’s cases appear to blur the lines or muddy the waters when it comes to the limits of the statute.” The authors state as follows:

“In several cases, such as Pride International, Panalpina, and Royal Dutch Shell, the theories used to hold parents accountable for the acts of subsidiaries and vice versa appear to be unclear. In others, such as Pride International and Tidewater, the connection of the alleged conduct to “obtaining or retaining business,” a critical element of the statute was not pleaded or, worse, was pled in a way that suggests that virtually any bribe that improves a company’s profitability is sufficient – a result that is not consistent with established precedent and the language of the statute.”

Under the heading “Enforcement Strategies” the authors state:

“As in years past, the enforcement actions brought in 2010 provide insight, albeit sometimes clouded, into the DOJ’s and the SEC’s views of the scope and meaning of certain aspects of the statute, as well as their enforcement priorities and strategies. In doing so they are at times helpful and at other times opaque or, even worse, disturbing. As always, however, it is important to remember that although these agreements may have been hotly negotiated, in the end each of the companies and individuals settled. Thus, none of the government’s interpretations, or its view of how the law applied to the facts, has been subjected to a searching judicial examination in the context of a contested adversary proceeding.”

Under the heading “The Business Nexus” the author state:

“The Panalpina cases and certain allegations in other cases are likely to reopen the debate as to the meaning of the “obtain or retain business” element. This element is recognized as a critical factor in narrowing the scope of the FCPA. How much it does so, however, has long been a matter of debate. In its 2004 decision in U.S. v. Kay, the Fifth Circuit appeared to have ended the debate, holding that the FCPA was not limited to bribes to obtain business from a foreign government or even to bribes that led “directly to the award or renewal of contracts.” Analyzing the indictment in that case, the court held that “bribes paid to foreign officials in consideration for unlawful evasion of customs duties and sales taxes could fall within the purview of the FCPA’s proscription.” (emphasis in original). The court warned, however, that the scope of the statute was not limitless, stating, “We hasten to add, however, that this conduct does not automatically constitute a violation of the FCPA: It still must be shown that the bribery was intended to produce an effect – here, through tax savings – that would ‘assist in obtaining or retaining business.’”

Although some of the bribes in the Panalpina cases were made to obtain contracts and other specific business advantages, most of the payments were made to customs or tax officials to reduce duties and taxes, to expedite customs clearances, or to evade import regulations. In the latter cases, the government made very little effort to link such payments to obtaining or retaining business. For example, in Pride International, the DOJ alleged a number of what it termed “bribery schemes,” including payments to a Mexican Customs Official “to avoid taxes and penalties for alleged violations of Mexican customs regulations relating to a vessel leased by Pride International.” Similarly, in GlobalSantaFe, the SEC alleged that through a number of “suspicious payments” the company “avoided costs and gained revenue.” Without more explanation, such barebones allegations create the impression that the government equates gaining revenue or reducing costs generally with “obtaining or retaining business.” That, however, is the very opposite of the holding in Kay […].”

“Reading between the lines of the pleadings, we can, in many cases, construct some theory of how certain of the payments might have fallen within the Kay rule, e.g., some payments appear to have allowed the importers to bring in equipment and rigs without which they could not perform new or existing contracts. It is even possible that, similar to the facts in Kay, the importers could not have competed for existing or new business had they paid the full duties or taxes or complied with other local requirements. The pleadings, however, for the most part only hint at such an underlying rationale, leaving us to wonder exactly what does the government think the business nexus means today?”

When an author group including a former DOJ official responsible for enforcing the FCPA (in a more measured and disciplined era) uses words such as “disturbing” and phrases such as “not consistent with established precedent and the language of the statute” – well, I think we all should take notice.

Azeri Tax Officials and More On Nigeria TIPs

Next up in the analysis of CustomsGate enforcement actions is Tidewater.

See here for the prior post on the Noble Corporation enforcement action and here for the prior post on the GlobalSantaFe enforcement action.

The Tidewater enforcement action involved both a DOJ and SEC component. Total settlement amount was approximately $15.7 million ($7.35 million criminal fine via a DOJ deferred prosecution agreement; $8.3 million in disgorgement and a civil penalty via a SEC complaint).


The DOJ enforcement action included a criminal information (here) filed against Tidewater Marine International Inc. (“TMII), a wholly-owned subsidiary of Tidewater Inc. (“TDW”) and the primary international operating entity for TDW.

TDW (see here) operates offshore service and supply vessels designed to support all phases of offshore energy exploration, development and production throughout the world. TDW is headquartered in New Orleans and has publicly traded shares on the New York Stock Exchange.

The criminal charges against TMII were resolved via a deferred prosecution agreement (here) between the DOJ and TMII and TDW “on behalf of its wholly-owned subsidiary TMII.”

Criminal Information

According to the criminal information, TMII “had managerial and administrative operations in the United States, and it exercised contractual rights and control over Tidewater’s vessel operations in Nigeria and Azerbaijan, among other areas.”

The criminal information concerns: (1) “bribes paid to Azeri tax inspectors”, and (2) “payment of bribes to Nigerian customs officials through the freight fowarding agent [Panalpina].”


According to the information, “in 2001, 2003, and 2005, the Azeri Tax Authority [a government entity responsible for administering and collecting tax assessments and duties for the Republic of Azerbaijan] initiated tax audits of TMII’s business operations in Azerbaijan.”

The information states that TMII employed the “Consulting Firm” [a U.S. consulting company incorporated in Texas and headquartered in Baku, Azerbaijan to provide a broad range of services including accounting services and tax advice and assistance] including the “Azerbaijan Agent” [the Managing Director of the Consulting Firm] to assit with the audits.

The information charges that “in 2001, 2003, and 2005, TMII, through its employees and agents, paid bribes to Azeri tax inspectors to improperly secure favorable tax assessments.”

According to the information, TMII “caused approximately $160,000 to be paid to the Dubai Entity [an entity associated with the Consulting Firm], while knowing that some or all of the money would be paid, with the assistance of the Azerbaijan Agent to Azeri tax inspectors.”

The information states that “the benefit received and the potential tax liability avoided by TMII as a result of the payment of the bribes was approximately $820,000.”


According to the information, between January 2002 through March 2007, Tidex Nigeria Limited (“Tidex”) [a Nigerian company 60% majority owned by Tidewater Marine” that “provided agency and operational support, at the direction of TMII, for all vessels that Tidewater operated in Nigeria during the relevant period”], through its employees, affiliates, and agents, authorized the payment of approximately $1.6 million to [Panalpina] as reimbursements for bribes paid by [Panalpina], made on Tidex’s behalf, to Nigeria Customs Service (“NCS”) employees to induce the officials to disregard certain regulatory requirements in Nigeria relating to the temporary importation of Tidewater vessles into Nigerian waters.” The information charges that by August 2004, “TMII managers and employees were aware of and condoned the payments.”

The regulatory requirements set forth in the information concern Nigeria’s rules and regulations relating to temporarily importing vessels and the “temporary importation permit” (“TIP”). For more on the TIP process see here.

According to the information, between August 2004 and 2007, TMII employees and other Tidewater employees authorized the payment of approximately $1,089,000 to [Panalpina], on Tidex’s behalf, knowing that some or all of the monies had been paid by [Panalpina] to NCS officials to induce them to disregard Nigerian regulations, to not impose fines and penalties, and to allow Tidewater vessels to operate in Nigerian waters without a valid TIP.”

The information states that the “total benefit in avoided costs, duties, and penalties received by TMII in exchange for these payments was approximately $5,800,000.”

Based on the above information, the information charges TMII with conspiracy to violate the FCPA’s anti-bribery provisions and to knowingly falsify books and records (in connection with both the Azeri and Nigeria payments) and knowing falsification of books, records, and accounts in connection with “129 payments totaling approximately $1,089,00, as [Panalpina] costs when, in fact, the payments were, in whole or in part, paid to NCS officials.”

According to the information, the following individuals “authorized the payment of bribes” or “know, or were aware of a high probability” that bribes were being paid:

Director of Tax [a U.S. citizen located in New Orleans], the Dubai Area Controller[a U.S. citizen], the Regional Finance Director [a British citizen, but described as a “employee and agent of a domestic concern], the Azerbaijan General Manager A [a U.S. citizen] and the Azerbaijan General Manager B [a U.S. citizen] (as to Azeri payments); and

the Vice President of Operations [an Australian citizen who supervised, at various times, both Azerbaijan and Nigerian operations and described as an employee an agent of a domestic concern] and the Nigeria Area Manager [a British citizen] (as to Nigeria payments).

In addition, the information charges that certain money in furtherance of the bribe payments were wired from accounts located in the U.S.

Deferred Prosecution Agreement

Pursuant to the DPA, TMII 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 TMII. Among the factors stated are the following.

“TMII and TDW promptly commenced an internal investigation into its dealings with [Panalpina] after becoming aware of information indicating potential issues with [Panalpina];”

“promptly after commencing its internal investigation, TMII and TDW voluntarily disclosed the conduct described in the Information to the Deparment;”

“TMII and TDW voluntarily expanded their 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 the Department;”

“TMII and TDW hired a General Counsel with substantial international compliance experience, appointed him the Chief Compliance Offcer, and established a Corporate Compliance Committee;”

“TMII and TDW issued an enhanced, stand-alone FCPA compliance policy, substantially revised its Code of Conduct, as well as additional relevant policies and procedures, including a vetting and approval process for third part service providers and business parners upon implementation of that policy, and instituted a worldwide training program for employees;”

“TMII and TDW expanded their internal investigation to cover additional countries and business activities;”

“TMII and TDW cooperated with the Department’s investigation, including sharing all relevant investigation findings and making available numerous current and former employees;”

“TMII and TDW exhibited leadership in the oil and gas industry by leading an oil and gas industry initiative, both in the United States and abroad, to address the [Nigeria TIPs conduct];”

“TMII and TDW implemented an enhanced compliance program and have agreed to undertake further remedial measures as contemplated by this Agreement …;”

“TDW, on behalf of TMII, agreed to provide a written report to the Deparment on its progress and experience in maintaining and, as appropriate, enhancing its compliance policies and procedures …;” and

“TMII and TDW agreed to continue to cooperate with the Deparment in any ongoing investigation of the conduct of TMI and its directors, employees, agents, consultants, contractors, subcontractors, subsidiaries, affiliates,
and others 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 $10.5 million – $21 million. Pursuant to the DPA, TMII and TDW agreed that TMII shall pay a monetary penalty of $7.35 million – 30% below the minimum guideline amount.

As is standard in FCPA DPAs, TMII and TDW agreed not to make any public statement “contradicting the acceptance of responsibility by TMII as set forth” in the DPA and TMII and TDW further agreed to only issue a press release in connection with the DPA if the DOJ does not object to the release.


The SEC’s complaint (here) concerns the same core set of facts as set forth in the DOJ’s DPA.

In summary fashion, the SEC alleges as to Azerbaijan conduct that “between August 2001 and November 2005, Tidewater Inc. […] directly or through its subsidiaries, affiliates, employees and agents, violated [the FCPA’s anti-bribery and books and records and internal control provisions] by paying $160,000 in bribes to foreign government officials in Azerbaijan through a third party disguised as legitimate services to influence acts and decisions by these officials to resolve local Azeri tax audits in a Company subsidiary’s favor.”

According to the SEC, “these improper payments were authorized by senior employees at Tidewater and its subsidiaries while knowing, or ignoring red flags which indicated a high probability, such payments would be passed to government officials, inaccurately recorded in the Company’s or its affiliates’ books and records, and Tidewater failed to maintain sufficient internal controls to prevent such payments.”

The SEC complaint alleges that the payments included: (i) “on or about August 14, 2001, Tidewater authorized and paid $50,000 to a third party that it knew, or was reckless in not knowing, would be passed to government officials in Azerbaijan; (ii) “in July 2003, Tidewater authorized and paid $40,000 to a third party in two installments that it knew, or was reckless in not knowing, would be passed to government officials in Azerbaijan; and (iii) “on or about November 11, 2005, a Tidewater subsidiary authorized and paid $70,000 to a third party that it knew, or was reckless in not knowing, would be passed to government officials in Azerbaijan.”

The SEC’s complaint provides additional detail regarding the Azeri tax audits than the DOJ’s criminal information. The SEC’s allegations seem to suggest that the payments to the Azeri tax officials were the result of extortionate demands communicated to Tidewater entities through the Azerbaijan Agent. For instance, in connection with the 2001 tax audit, the complaint states that “Executive A [Tidewater’s CFO during the relevant period] believed that the 2001 Audit was sort of a ‘shakedown’ that the Azerbaijan Agent created in order to collect a fee.” As to this audit, the complaint further alleges that “Executive A and [another company employee] learned that the Azeri tax auditors threatened to use an accounting method that would result in a higher tax assessment because the tax auditors did not feel ‘respected.'” In connection with the 2002 tax audit, the complaint alleges that the Azerbaijan Agent informed Tidewater personnel “that the Azeri tax auditors had verbally identified a potential figure of up to $600,000 to resolve the 2003 audit” but that this “amount bore no relation to any actual tax assessment or penalty.”

As to Nigeria conduct, the SEC complaint alleges, in summary fashion, that “from in or about January 2002 through March 2007, Tidewater, through its subsidiaries and agents, also authorized the reimbursement of approximately $1.6 million to its customs broker in Nigeria used, in whole or in part, to make improper payments to Nigerian Customs Services (“NCS”) employees to induce them to disregard certain regulatory requirements in Nigeria relating to the temporary importation of the Company’s vessels into Nigerian waters.”

According to the SEC, both the Azeri and Nigerian payments:

“[W]ere improperly recorded as legitimate expenses in the Company’s books and records and all of them, with the exception of the 2003 Azerbaijan payments, were consolidated into Tidewater’s financial statements. Tidewater’s internal controls, including at least two internal audits, failed to detect numerous red flags which should have alerted its management that the Azerbaijan agent and Nigerian customs broker were likely using funds provided by Tidewater, in whole or in part, to make improper payments to government officials.”

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 specifically alleged as follows.

“Tidewater’s controls over the engagement and activities of agents operating in high-risk jurisdictions outside of the marketing and sales area were inadequate. For example, the Company’s compliance program, including training provided to its employees, did not adequately address the applicability of the FCPA to customs, tax, and similar regulatory issues in its foreign subsidiary operations until March 2007. Moreover, employees in Azerbaijan easily circumvented the Company’s internal controls by setting up small cash reserves for contingencies, dividing the improper payments into increments below their discretional financial authority and processing a payment through a Company affiliate. Some of the payments for invoices that the Nigerian Agent submitted to Tidex were authorized, processed and funded without the work order or supporting documentation necessary to verify that the service was requested and rendered. Tidewater also conducted internal audits in 2001 and 2003 of its Nigerian operations that failed to detect the improper payments even though weaknesses with invoices from, and payments to, agents and consultants were identified.”

Without admitting or denying the SEC’s allegations, Tidewater agreed to an injunction and the payment of $8,104,362 in disgorgement and a $217,000 penalty.

Lucinda Low (here) (Steptoe & Johnson) represented Tidewater.

Major Shipment – Customs Cases Bring In $236.5 Million

The pipeline that contains pending FCPA enforcement actions burst yesterday as the DOJ and SEC announced enforcement actions against 13 separate entities.

In enforcement actions that have long been anticipated, Panalpina entities, as well as several others, settled DOJ and SEC enforcement actions principally focused on customs and related payments in Nigeria, but also including alleged improper conduct in Angola, Brazil, Russia, Kazakhstan, Venezuela, India, Mexico, Saudi Arabia, the Republic of Congo, Libya, Azerbaijan, Turkmenistan, Gabon and Equatorial Guinea.

The combined DOJ/SEC settlement amounts total $236.5 million.

Your FCPA scorecard thus shows that since June 28th, the U.S. government has brought FCPA enforcement actions totaling approximately $1.1 billion. With numbers like these, aggressive FCPA enforcement based on, often times, dubious legal theories (more on that later) seems like the most profitable government program ever conceived.

Set forth below is a basic overview of the settlements. A more thorough review of the hundreds of pages of relevant documents will be forthcoming.

The DOJ resolution documents can be found here, the SEC resolution documents here.

Panalpina Entities


Entities: Panalpina World Transport (Holding) Ltd. and Panalpina Inc.

Resolution Vehicles: Criminal information charging Panalpina World Transport(Holding) with conspiracy to violate and violating the FCPA’s anti-bribery provisions. Charges resolved through a deferred prosecution agreement. Criminal information charging Panalpina Inc. with conspiracy to violate the FCPA’s books and records provisions and aiding and abetting certain customers in violating the FCPA’s books and records provisions. Charges resolved through a plea agreement.

Countries: Angola, Azerbaijan, Brazil, Kazakhstan, Nigeria, Russia, and Turkmenistan

Penalty: Combined $70.56 million


Entity: Panalpina, Inc.

Resolution Vehicle: Settled civil complaint charging FCPA anti-bribery violations, aiding and abetting FCPA anti-bribery violations, and FCPA books and records and internal controls violations.

Countries: Nigeria, Angola, Brazil, Russia, and Kazakhstan

Disgorgement: $11,329,369

Pride Entities


Entities: Pride International Inc. and Pride Forasol S.A.S.

Resolution Vehicle: Criminal information charging Pride International with conspiracy to violate the FCPA’s anti-bribery provisions and books and records provisions; violating the FCPA’s anti-bribery provisions; and violating the FCPA’s books and records provisions. Charges resolved through a deferred prosecution agreement. Criminal information charging Pride Forasol with conspiracy to violate the FCPA’s anti-bribery provisions; violating the FCPA’s anti-bribery provisions; and aidng and abetting violations of the FCPA’s books and records provisions. Charges resolved through a plea agreement.

Countries: Venezuela, India and Mexico

Penalty: $32.625 million (combined)


Entity: Pride International Inc.

Resolution Vehicle: Settled civil complaint charging FCPA anti-bribery violations, FCPA books and records and internal controls violations.

Countries: Venezuela, India, Mexico, Kazakhstan, Nigeria, Saudi Arabia, Republic of Congo, and Libya

Disgorgement and interest: $23,529,718

Tidewater Entities


Entities: Tidewater Marine International Inc., Tidewater Inc.

Resolution Vehicle: Criminal information charging Tidewater Marine with conspiracy to violate the FCPA’s anti-bribery and books and records provisions and violating the FCPA’s books and records provisions. Charges resolved through a deferred prosecution agreement with Tidewater that requires, among other things, Tidewater Marine to pay a $7.35 million criminal penalty.

Countries: Azerbaijan and Nigeria

Penalty: $7.35 million


Entity: Tidewater Inc.

Resolution Vehicle: Settled civil complaint charging FCPA anti-bribery violations, FCPA books and records and internal controls violations

Countries: Nigeria, Azerbaijan

Disgorgement: $8,104,362

Civil Penalty: $217,000

Transocean Entities


Entities: Transocean Inc. and Transocean Ltd.

Resolution Vehicle: Criminal information charging Transocean Inc. with conspiracy to violate the FCPA’s anti-bribery and books and records provision; violating the FCPA’s anti-bribery provisions; and aiding and abetting the FCPA’s books and records provisions. Charges resolved through a deferred prosecution agreement with Transocean Ltd. that requires, among other things, Transocean Inc. to pay a $13.44 million criminal penalty.

Countries: Nigeria

Penalty: $13.44 million


Entity: Transocean Inc.

Resolution Vehicle: Settled civil complaint charging FCPA anti-bribery violations, FCPA books and records and internal controls violations

Countries: Nigeria

Disgorgement and interest: $7,265,080

GlobalSantaFe Corp.


Entity: GlobalSantaFe Corp.

Resolution Vehicle: Settled civil complaint charging FCPA anti-bribery provisions, FCPA books and records and internal controls violations

Countries: Nigeria, Gabon, Angola, Equatorial Guinea

Disgorgement: $3,758,165

Civil Penalty: $2.1 million

Noble Corporation


Entity: Noble Corporation

Resolution Vehicle: Non-proseuction agreement in which Noble Corporation: (i) acknowledged that certain of its employees knew that payments would be passed on as bribes to Nigerian customs officials; and (ii) admitted that the company falsely recorded the bribe payments as legitimate business expenses.

Countries: Nigeria

Penalty: $2.59 million


Entity: Noble Corporation

Resolution Vehicle: Settled civil complaint charging FCPA anti-bribery violations, FCPA books and records and internal controls violations

Countries: Nigeria

Disgorgement and interest: $5,576,998

Royal Dutch Shell Entities


Entities: Royal Dutch Shell plc and Shell Nigeria Exploration and Production Company Ltd. (“SNEPCO”)

Resolution Vehicle: Criminal information charging SNEPCO with conspiracy to violate the FCPA’s anti-bribery and books and records provisions and with aiding and abetting the FCPA’s books and records provisions resolved through a deferred prosecution agreement with Royal Dutch Shell Plc requiring, among other things, SNEPCO to pay a $30 million criminal penalty

Countries: Nigeria

Penalty: $30 million


Entity: Royal Dutch Shell plc and Shell International Exploration and Production Inc (“SIEP”).

Resolution Vehicle: Administrative cease and desist order finding FCPA books and records and internal control violations by Royal Dutch Shell and FCPA anti-bribery violations by SIEP

Countries: Nigeria

Disgorgement: $18,149,459


According to the SEC release (here), Cheryl Scarboro, Chief of the SEC’s FCPA Unit stated: “This investigation was the culmination of proactive work by the SEC and DOJ after detecting widespread corruption in the oil services industry. The FCPA Unit will continue to focus on industry-wide sweeps, and no industry is immune from investigation.”

The SEC release further states: [t]his is the first sweep of a particular industrial sector in order to crack down on public companies and third parties who are paying bribes abroad.”

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