As highlighted in this prior post, in February 2018 Albemarle Corp. (a North Carolina based chemical company) disclosed Foreign Corrupt Practices Act scrutiny.
More than 5.5 years later, the DOJ and SEC announced a net $218.4 million FCPA enforcement action against the company.
The resolution included a DOJ non-prosecution agreement (pursuant to which the company agreed to pay a $98.2 million criminal penalty and $16.6 million in forfeiture) and an SEC administrative order (pursuant to which the company agreed to pay approximately $103.6 million in disgorgement and prejudgment interest).
DOJ
The NPA (with a term of three years) provides the relevant corporate background:
“During the relevant time period, Albemarle Corp. with operations [in approximately 70 countries] was organized globally into three global business units (“GBUs”): Lithium, Bromine, and Catalysts. Albemarle Corp.’s subsidiaries were characterized as regional offices.
[…]
One business line of the Catalyst GBU was known as Refining Solutions, which provided chemical catalysts that are added to crude oil at a refinery to create specific oil products for the customer. Albemarle sold Refining Solutions products to between 600 and 700 refineries worldwide, including in Vietnam, Indonesia, and India. Albemarle engaged third-party sales agents to assist with sales and interactions with customers. Third-party sales agents were paid a commission based on a percentage of sales. An Albemarle Corp. executive in the United States was part of an approval chain for agent contracts and commissions worldwide, including for agents retained by Albemarle Corp.’s regional subsidiaries.”
Under the heading “Bribery Schemes,” the NPA states in summary fashion:
“[B]etween in or around 2009 and 2017, Albemarle, through its third-party sales agents and subsidiary employees, engaged in a conspiracy to pay bribes to government officials to obtain and retain catalyst business with state-owned oil refineries in three countries—Vietnam, Indonesia, and India—obtaining profits of approximately $98.5 million as a result.”
As to Vietnam, the NPA states:
“Albemarle corruptly obtained contracts at two state-owned oil refineries in Vietnam through the use of an intermediary sales agent who requested increased commissions to pay bribes to PetroVietnam and refinery officials and to structure tender requirements to favor Albemarle.
In or around 2012, Albemarle participated in a tender to win catalyst business with BSR, a state-owned refinery managed by PetroVietnam. Prior to 2012, Albemarle had not won any catalyst business in Vietnam.
Before the 2012 BSR tender, Albemarle was required to undergo a “trial test” to assess how its catalysts would work with the refinery’s oil.
In or around May 2012, in connection with its effort to obtain BSR business, Albemarle agreed to pay a 4.25 percent commission to Vietnam Intermediary Company to act as its agent in Vietnam. The contract between Albemarle Singapore and Vietnam Intermediary Company was approved by employees of Albemarle Corp.
Albemarle hired Vietnam Intermediary Company because of Vietnam Intermediary’s connections with BSR officials and promise to obtain a trial test and the resulting sales contract for the Company.
Leading up to the BSR tender, Vietnam Intermediary provided Albemarle access to Vietnam Intermediary’s “friend,” PetroVietnam Official. For example, on or about November 9, 2012, Albemarle Vietnam Sales Representative sent an email to other Albemarle personnel, including Albemarle Sales Director, confirming that Vietnam Intermediary would transmit Albemarle’s request to meet with PetroVietnam Official. In the email, Albemarle Vietnam Sales Representative reminded the other Albemarle personnel of Vietnam Intermediary’s instruction “not to mention” PetroVietnam Official by name over email, and instead refer to him as “just ‘His Friend.’” Another Albemarle Singapore employee responded, “[H]ope ‘his friend’ can help us get this business.”
On or about December 19, 2012, Albemarle Vietnam Sales Representative sent an email to Albemarle Sales Director and five others at Albemarle regarding a meeting Albemarle Sales Director and others had at BSR. In the email, Albemarle Vietnam Sales Representative also stated that Vietnam Intermediary “needs to take care of” another BSR official.
In or around January 2013, Vietnam Intermediary requested that Albemarle increase Vietnam Intermediary Company’s commission from 4.25 percent to “4.25% + 4% extra,” which he told Albemarle Vietnam Sales Representative would be used to “settle down” PetroVietnam officials and to “contribute to his friends.” Albemarle Vietnam Sales Representative sent this information – including Vietnam Intermediary’s warning that “if ALB could not provide such extra 4% commission,” Albemarle’s competitor that had the business before Albemarle “will be kept in BSR still” – to four Albemarle sales employees who were pursuing the Company’s first business in Vietnam.
On or about February 8, 2013, Vietnam Intermediary sent an email to the personal email account of Albemarle Vietnam Sales Representative, stating, “I have received strong message from our friend that the total commission must be fix [sic] at 7%” and that it did not matter how the commission was allocated, only the total amount, adding, “Please find the way to add to somewhere.” After internal discussions, Albemarle Vietnam Sales Representative responded to Vietnam Intermediary that Albemarle could not pay more than a 4.25 percent commission.
On or about March 4, 2013, Vietnam Intermediary again sent an email to the personal email account of Albemarle Vietnam Sales Representative with the subject line “Follow up of our previous discussion,” stating, “You are [str]ongly recommended that our commission must reach to 7% or our friend cannot secure the order after trial test. Please [note] that [Albemarle’s competitor] offer to their agent the same amount.”
On or about May 20, 2014, Vietnam Intermediary sent an email to Albemarle Vietnam Sales Representative and Albemarle Sales Director regarding Vietnam Intermediary’s efforts to secure a long-term BSR contract for Albemarle. Vietnam Intermediary requested an increased commission “to win the job, keep BSR continue to use Albemarle catalyst,” and stated, “we must work hard, meet many people from low level to high level people with too much expense and marketing fee.” Vietnam Intermediary stated that “so far” BSR had agreed to sign a contract until the end of 2014 and that to “convince them” to sign for a year, Vietnam Intermediary needed “support from your side to increase our commission to 10%.”
In an email exchange the following day, on or about May 21, 2014, Albemarle Vietnam Sales Representative, Albemarle Sales Director, and Albemarle Regional Sales Director discussed Albemarle’s competitor “and their friends” trying to secure a new trial at the BSR refinery where Albemarle was then the contractor providing the catalyst. Albemarle Regional Sales Director asked whether the possible trial was due to an ash problem with Albemarle’s product or due to “commission level” or “just a fight within BSR.” Albemarle Vietnam Sales Representative and Albemarle Regional Sales Director then discussed whether and when to raise Vietnam Intermediary Company’s commission from 4.25 percent to seven percent.
On or about May 22, 2014, Albemarle Regional Sales Director emailed an Albemarle vice president in Belgium seeking approval of the Vietnam Intermediary Company Acommission increase. In the email, Albemarle Regional Sales Director stated, “it is clear that ash problem is more a way to keep high attention from Albemarle and [Albemarle’s competitor].” In his response, the Albemarle vice president wrote, “If [an Albemarle global business director] agrees to pay that amount of money (which I would never do) then I will not object,” but cautioned that “if just commission increases and job for us remains the same then you have an issue…” Albemarle ultimately agreed to increase Vietnam Intermediary Company’s commission from 4.25 percent to 6.5 percent.
After increasing Vietnam Intermediary Company’s commission rate from 4.25 percent to 6.5 percent, in or around 2015 and 2016, Albemarle also increased commissions it paid to Vietnam Intermediary Company by expanding the scope of products with which Vietnam Intermediary Company assisted.
[…]
With the help of Vietnam Intermediary Company, Albemarle obtained business with BSR, including the trial test beginning in or around April 2013, followed by two sales contracts and three addenda, continuing until in or around May 2017.”
In 2016, Albemarle also used Vietnam Intermediary Company and its connections to PetroVietnam officials to corruptly obtain business at another state-owned refinery in Vietnam, Nghi Son Refinery and Petrochemicals LLC (“NSRP”).
NSRP was owned by a joint venture that included, among others, PetroVietnam and Kuwait Petroleum International, also a state-owned entity.
In an email exchange on or about September 25, 2015, Albemarle Vietnam Sales Representative, Albemarle Sales Director, Albemarle Regional Sales Director, and an Albemarle global business director discussed to which NSRP officials Vietnam Intermediary had access. 39. On or about July 5, 2016, Vietnam Intermediary sent an email to Albemarle Vietnam Sales Representative, copying Albemarle Sales Director and two other Refining Solutions employees, regarding “NSRP Approach,” stating, “Please let me know what commercial and technical thing that [Albemarle’s competitor] cannot meet ? (reference, customer list . . . .) pls advise me by today then I can work out with my friend to add to [the bid solicitation]. The official [bid solicitation] will be issued end of this week or earlier next week.”
[…]
According to an employee of Albemarle’s competitor, an NSRP official solicited a bribe from the competitor and informed the competitor’s employee that Albemarle was paying an above-market commission of six percent to Vietnam Intermediary Company, two percent of which Vietnam Intermediary Company offered to the NSRP official. Prior to Albemarle winning the NSRP bid, Vietnam Intermediary informed Albemarle Vietnam Sales Representative that Vietnam Intermediary had won the support of this NSRP official.
With the help of Vietnam Intermediary Company, Albemarle obtained a sales contract with NSRP, which was in place from approximately October 2016 until June 2019.
Albemarle paid Vietnam Intermediary Company approximately $3.5 million in commissions related to the BSR and NSRP business between approximately 2013 and 2017 and obtained profits of approximately $69.25 million on that business.
In or around April 2017, after learning of bribery allegations, Albemarle terminated its relationship with Vietnam Intermediary Company.”
As to Indonesia, the NPA states:
“Albemarle also used a third-party intermediary to corruptly obtain catalyst business with Indonesia’s state-owned oil company Pertamina, despite that third-party intermediary informing Albemarle that it was necessary to pay bribes to Pertamina officials to obtain business.
In or around 2012, following a change in leadership at Pertamina, Albemarle engaged Indonesia Intermediary Company to act as its local agent in return for four percent commission on sales to Pertamina. According to an Albemarle memorandum, Albemarle decided to replace its third-party agent in Indonesia at the “strong[] request[]” of Pertamina Official, the “big boss” of Pertamina, because the president of the new third-party agent was a close friend of Pertamina Official, despite the fact that the third-party agent was a small company and posed a “medium” risk.
On or about December 14, 2012, Albemarle Senior Sales Manager sent an email to Albemarle Regional Sales Director, copying Albemarle Sales Director and another Albemarle sales representative, notifying Albemarle Regional Sales Director in advance of a trip to Indonesia that Pertamina Official was “close to the owner of [Indonesia Intermediary Company] and will be influential in decisions once his people are in place.”
In or around November or December 2012, Indonesia Intermediary Company paid bribes to Pertamina officials to obtain samples of a competitor’s product, which Albemarle used to craft its bids and improve its product. Albemarle Senior Sales Manager learned from Indonesia Intermediary Company that Indonesia Intermediary Company had paid these bribes, but did not report this to Albemarle’s compliance function and did not consider terminating Albemarle’s relationship with Indonesia Intermediary Company.
On or about December 16, 2012, Albemarle Senior Sales Manager sent an email to five Refinery Solutions sales colleagues, including Albemarle Regional Sales Director and Albemarle Sales Director, regarding how to “thwart” Albemarle’s competitor. In the email, Albemarle Senior Sales Manager stated that the competitor samples Indonesia Intermediary Company had obtained were “unofficial, meaning that only selected and trusted Pertamina employees were aware that the samples had been taken and released to” Indonesia Intermediary Company.
On or about December 24, 2012, an Indonesia Intermediary Company employee cautioned Albemarle personnel that to include in Albemarle’s bid to Pertamina a comparison of Albemarle’s proposed catalyst to the competitor’s catalyst (of which the samples had been obtained) was “way too obvious showing our dirty job.”
On or about February 1, 2013, an Albemarle Singapore sales representative emailed Albemarle Senior Sales Manager regarding outreach from Indonesia Intermediary Company trying to reach Albemarle Senior Sales Manager “or one of ALB people who can make the decision on pricing or commission fee.” The email explained that, according to Indonesia Intermediary Company, the reason Albemarle’s competitor had maintained the catalyst business at a Pertamina refinery for so many years was “not mainly the catalyst performance itself but it is because of strong relationship between [Albemarle’s competitor] and some Pertamina guys. [Albemarle’s competitor] provides some personnel benefits to them.” According to the email, Indonesia Intermediary Company indicated that it wanted to discuss with Albemarle Senior Sales Manager “how we can manage this situation and beat [Albemarle’s competitor] at Pertamina.”
Days later, on or about February 6, 2013, Indonesia Intermediary Company asked Albemarle to increase its commission from four percent to ten percent so Indonesia Intermediary Company could pay bribes to Pertamina officials. The request was made during a meeting at Albemarle’s Singapore office and was attended by, among others, a close relative of Pertamina Official, who purportedly was a director of Indonesia Intermediary Company.
In response to the request at the meeting, Albemarle personnel told Indonesia Intermediary Company that they refused to increase the commission and that no bribes should be paid per Albemarle policy, but maintained its relationship with Indonesia Intermediary Company and never reported the conversation to Albemarle legal, compliance, or supervisory personnel. Albemarle Senior Sales Manager was aware that Indonesia Intermediary Company paid “tips” to Pertamina officials, but directed that such category not be listed in expenses that Indonesia Intermediary Company charged to Albemarle. Albemarle continued to receive inside information on the bidding process from Indonesia Intermediary Company.
Albemarle paid Indonesia Intermediary Company commissions and other fees totaling approximately $1.28 million. A portion of that money was then paid by Indonesia Intermediary Company to the close relative of Pertamina Official.
Albemarle won two purchase orders for trial tests with Pertamina in or around April 2013 and June 2014, while Pertamina Official was in place, on which Albemarle obtained profits of approximately $18.1 million.
Following another change in leadership at Pertamina in or around 2015, Albemarle terminated its relationship with Indonesia Intermediary Company.”
As to India, the NPA states:
“Albemarle used a third-party intermediary to corruptly retain catalyst business with India’s state-owned oil company, IOCL [Indian Oil Corporation Limited], by avoiding Albemarle being blacklisted.
On or about May 14, 2009, India Intermediary, which had no prior relationship or contact with Albemarle, sent a “most urgent” email to Albemarle Regional Sales Manager stating that it was aware that Albemarle had been sent a letter from IOCL asking why Albemarle should not be “sent on Holiday list. You may be required to supply six months catalyst free of cost.” India Intermediary further stated in the email that “[w]e can definitely help you to come out of this situation and get the orders for you in the refineries.”
On or about May 27, 2009, India Intermediary sent another email to Albemarle Regional Sales Manager labeled as “for your eyes only,” stating that it had learned that IOCL had issued a letter to Albemarle that day notifying Albemarle it would be put on the “Holiday list” for at least one year. India Intermediary again offered its assistance in getting Albemarle “removed from Holiday list.”
On or about May 28, 2009, Albemarle Regional Sales Manager sent an email to Albemarle Vice President, copying four others at Albemarle, regarding “IOCL developments” and multiple consultants who had contacted Albemarle to offer “assistance to influence and get in contact with higher level to discuss on non official basis.” Albemarle Regional Sales Manager described India Intermediary Company as “know[ing] a lot of detail” and as “more aggressive” and noted that India Intermediary Company “do[es] confirm, no bribing and we can put that in the agreement.”
On or about July 10, 2009, Albemarle Regional Sales Manager sent an email to Albemarle Vice President, copying Albemarle Regional Sales Director and two others at Albemarle regarding Albemarle’s efforts to avoid being blacklisted by IOCL. Albemarle Regional Sales Manager stated that Albemarle had had discussions with IOCL but at each stage was “blocked by top,” and that this may have been because IOCL “want us to use [sic] consultant.” Albemarle Regional Sales Manager further stated that to date IOCL had not accepted Albemarle’s “‘reasonable’ arguments” and that “indications are mostly that they will put us on holiday list. As I see it time has come to seriously consider using a consultant and if so it must be done very fast.”
On or about July 13, 2009, an Albemarle manager sent an email to Albemarle Vice President summarizing his discussion with India Intermediary. The Albemarle manager stated that, according to India Intermediary, India Intermediary Company could “keep Albemarle business smooth with IOCL . . . [and] also with [other IOCL refineries] and can give sensitive competitive information for Albemarle not only to win but to win with higher margins.” The Albemarle manager further stated “That all sounds good results we all desire,” and “[a]fter asking questions on how he can do that, it was clear to me . . . that the Consultant would be using part of the commission to handle [IOCL Official], and many levels below.” The Albemarle manager continued, “I may be too conservative, but their would [sic] risk engaging such a consultant under such situation . . . who we do not really know or what he may do that may put Albemarle in an unacceptable infringement of the foreign corrupt practices act.”
Notwithstanding multiple red flags, Albemarle entered into a consulting contract with India Intermediary Company, effective July 15, 2009, signed by Albemarle Vice President.
Following engagement of India Intermediary Company, Albemarle was not put on the “holiday list” by IOCL.
Albemarle paid approximately $1.14 million in commissions to India Intermediary Company relating to IOCL business and obtained approximately $11.1 million in profits on that business between approximately 2009 and 2011.”
According to the NPA, Albemarle admitted, accepted, and acknowledged that the above conduct constituted a conspiracy to violate the FCPA’s anti-bribery provisions.
The NPA is “based on the individual facts and circumstances presented by this case and the Company, including”
“(a) the nature and seriousness of the offense conduct […] including the Company’s participation in a bribery scheme to obtain business in Vietnam, Indonesia, and India;
(b) the Company voluntarily disclosed to the Offices conduct that forms the basis for this Agreement; however, the disclosure was not “reasonably prompt” as defined in the Criminal Division Corporate Enforcement and Voluntary Self-Disclosure Policy and the U.S. Sentencing Guidelines (“U.S.S.G.” or “Sentencing Guidelines”) § 8C2.5(g)(1). The Company learned of allegations regarding possible misconduct in Vietnam approximately 16 months before disclosing to the Offices. After an internal investigation, the Company gathered evidence demonstrating the potential misconduct at least approximately nine months prior to the disclosure. The Company took remedial action and continued to investigate other potential issues. In January 2018, the Company disclosed to the Fraud Section misconduct relating to four separate geographies, including Vietnam. Hence, the disclosure was not within a reasonably prompt time after becoming aware of the misconduct in Vietnam. Although the Company did not meet the standard for voluntary self-disclosure under the Criminal Division Corporate Enforcement and Voluntary Self-Disclosure Policy, the Offices gave significant weight, in evaluating the appropriate disposition of this matter—including the appropriate form of the resolution and the reduction for cooperation and remediation—to the Company’s voluntary, even if untimely, disclosure of the misconduct;
(c) the Company received credit for its cooperation with the Offices’ investigation pursuant to U.S.S.G. § 8C2.5(g)(2) because it cooperated with their investigation and demonstrated recognition and affirmative acceptance of responsibility for its criminal conduct; the Company also received credit for its substantial cooperation and extensive and timely remediation pursuant to Criminal Division Corporate Enforcement and Voluntary Self-Disclosure Policy, by, among other things: (i) voluntarily disclosing the conduct that forms the basis for this Agreement before it came to the attention of the Offices; (ii) promptly providing information obtained through its internal investigation, which allowed the government to preserve and obtain evidence as part of its own extensive independent investigation; (iii) making regular and detailed presentations to the Offices; (iv) proactively identifying information previously unknown to the Offices; (v) meeting the Offices’ requests promptly; (vi) voluntarily making foreign-based employees available for interviews in the United States; (vii) collecting and producing voluminous relevant documents and translations to the Offices, including documents located outside the United States; and (viii) producing documents to the Offices from foreign countries in ways that did not implicate foreign data privacy laws;
(d) the Company provided to the Offices all relevant facts known to it, including information about the individuals involved in the conduct described […] and conduct disclosed to the Offices prior to the Agreement;
(e) the Company also received credit pursuant to the Criminal Division Corporate Enforcement and Voluntary Self-Disclosure Policy because it engaged in extensive and timely remedial measures, including: (i) commencing remedial measures based on its internal investigation of the misconduct prior to the commencement of the Offices’ investigation; (ii) disciplining employees involved in the misconduct, including terminating eleven employees and withholding bonuses from sixteen employees; (iii) strengthening its anti-corruption compliance program by investing in compliance resources, expanding its compliance function with experienced and qualified personnel, and taking steps to embed compliance and ethical values at all levels of its business organization; (iv) transforming its business model and risk management process to reduce corruption risk in its operation and to embed compliance in the business, including implementing a go-to-market strategy that resulted in eliminating the use of sales agents throughout the Company, terminating hundreds of other third-party sales representatives, such as distributors and resellers, and shifting to a direct sales business model; (v) providing extensive training to its sales team and restructuring compensation and incentives so that compensation is no longer tied to sales amounts; (vi) using data analytics to monitor and measure its compliance program’s effectiveness; and (vii) engaging in continuous testing, monitoring and improvement of all aspects of its compliance program beginning almost immediately following the identification of misconduct.
(f) the Company withheld bonuses totaling $763,453 during the course of its internal investigation from employees who engaged in suspected wrongdoing in connection with the conduct under investigation, or who both (a) had supervisory authority over the employee(s) or business area engaged in the misconduct and (b) knew of, or were willfully blind to, the misconduct, qualifying the Company for an additional fine reduction in the amount of the withheld bonuses under the Criminal Division’s March 2023 Compensation Incentives and Clawbacks Pilot Program (“Pilot Program”);
(g) the Company has enhanced and has committed to continuing to enhance its compliance program and internal controls, including ensuring that its compliance program satisfies the minimum elements set forth in Attachment C to this Agreement;
(h) the Company has some limited history of prior civil and regulatory actions, including environmental and workplace safety matters, but no prior criminal history;
(i) the Company’s agreement to resolve concurrently an investigation by the U.S. Securities and Exchange Commission (“SEC”) relating to the conduct described in the attached Statement of Facts through a cease-and-desist proceeding, and agreeing to pay $103,618,310 in disgorgement and prejudgment interest;
(j) the Company has agreed to continue to cooperate with the Offices in any ongoing investigation of the conduct of the Company and its officers, directors, employees, agents, business partners, and consultants relating to violations of the FCPA; and
(k) based on the Company’s remediation and the state of its compliance program, and the Company’s agreement to report to the Offices as set forth in Attachment D to this Agreement, the Offices determined that an independent compliance monitor is unnecessary.”
The NPA states:
“[The DOJ has] determined that the appropriate resolution of this case is a non-prosecution agreement with the Company; payment by the Company in the amount of a $98,236,547 criminal monetary penalty, which reflects a discount of 45 percent off the bottom of the otherwise-applicable U.S. Sentencing Guidelines fine range and an additional discount of $763,453 under the Pilot Program, and $98,511,669 in forfeiture, which […] will be credited, in large part, against disgorgement of ill-gotten profits that the Company pays to the SEC in a concurrent resolution.”
[…]
The Company agrees to pay a monetary penalty in the amount of $98,236,547 to the United States Treasury no later than ten business days after the Agreement is fully executed. The Company further agrees that, as a result of the Company’s conduct, including the conduct set forth in the attached Statement of Facts, the Offices could institute a civil and/or criminal forfeiture action against certain funds held by the Company and that such funds would be forfeitable to the United States.”
[…]
[The DOJ agrees] that illicit proceeds disgorged by the Company in connection with the concurrent resolution with the SEC shall be credited against the Forfeiture Amount in the amount of $81,856,863 (the “Forfeiture Credit Amount”).
The Company agrees to pay $16,654,806, i.e., the Forfeiture Amount less the Forfeiture Credit Amount, to the United States Treasury no later than ten business days after the Agreement is fully executed, provided that the Company pays the Forfeiture Credit Amount to the SEC in connection with the Company’s concurrent resolution with the SEC.”
As a condition of settlement, Albemarle agreed, during the three year term of the NPA, to “review, test, and update its compliance program and internal controls, policies, and procedures.” As a further condition of settlement, Albemarle agreed that “thirty days prior to the expiration of [the NPA] the Company, by its Chief Executive Officer and Chief Compliance Officer, will certify to the [DOJ] … that the Company has met its compliance obligations pursuant to this Agreement.”
In the DOJ release, Acting Assistant Attorney General Nicole Argentieri of the Justice Department’s Criminal Division stated:
“Albemarle earned nearly $100 million by participating in schemes to pay bribes to government officials in multiple countries. As today’s announcement makes clear, the Justice Department will work tirelessly with our partners in the ongoing fight against international corruption. Today’s resolution also demonstrates the real benefits that companies can receive if they self-disclose misconduct, substantially cooperate, and extensively remediate.”
U.S. Attorney Dena King for the Western District of North Carolina stated:
“Corruption has no borders, but neither does justice. Companies are expected to adhere to the same ethical and legal standards whether they are doing business on U.S. soil or overseas. Albemarle’s eventual voluntary disclosure of fraud and subsequent efforts to remedy its business practices abroad are a step in the right direction for the company. Above all, today’s announcement underscores our commitment to fight corruption affecting the United States no matter where it occurs.”
IRS Criminal Investigation (IRS-CI) Chief Jim Lee stated:
“The $218 million resolution announced today reflects IRS Criminal Investigation (IRS-CI) special agents’ commitment to working with our law enforcement partners to aggressively expose and disrupt organizations engaged in unscrupulous business practices. Thanks to our domestic and international law enforcement partners, we’ve ensured Albemarle will be held accountable for their misdeeds.”
SEC
This administrative order is based on the same core conduct alleged in the DOJ enforcement action as well as conduct in China and the United Arab Emirates and finds in summary fashion:
“This matter concerns violations of the anti-bribery, books and records, and internal accounting controls provisions of the FCPA by Albemarle, a global specialty chemicals company that develops and sells catalysts used in the operation of oil refineries. From at least 2009 through 2017, Albemarle’s agents paid bribes to obtain sales of catalysts to public-sector oil refineries in Vietnam, India, and Indonesia and to private-sector oil refineries in India. Despite significant red flags indicating a high probability of bribery, Albemarle retained and paid these intermediaries, who in turn made corrupt payments to government officials. Albemarle also failed to implement sufficient internal accounting controls to provide reasonable assurances that payments made to agents in Vietnam, Indonesia, India, China, and the United Arab Emirates (“UAE”) were for legitimate services. Albemarle’s books and records failed to accurately reflect, or contain reasonable detail supporting, such payments. As a result of its misconduct, Albemarle obtained an improper benefit of approximately $81.86 million from sales to state-owned customers.”
[…]
Albemarle sold refinery catalysts to state-owned refineries in Vietnam, India, Indonesia, China, and the UAE through four wholly owned and consolidated foreign subsidiaries: Albemarle Catalysts Company B.V. in the Netherlands (“Albemarle Netherlands”); Albemarle Singapore Pte. Ltd in Singapore (“Albemarle Singapore”); Albemarle Chemicals (Shanghai) Co. Ltd. in China (“Albemarle China”); and Albemarle Middle East FZE in the UAE (“Albemarle Middle East”) (each, an “Albemarle Subsidiary,” and together, the “Albemarle Subsidiaries”). Albemarle also used sales agents to sell refinery catalysts in Vietnam, India, Indonesia, China, and the UAE. The sales agents in Indonesia and China were also retained as distributors.
Albemarle exercised control over the sales activities of the Albemarle Subsidiaries, which acted as agents for Albemarle when retaining agents to sell catalysts globally. Albemarle officers served on the Albemarle Subsidiaries’ boards of directors and held signatory authority over bank accounts, at local branches of both U.S. and non-U.S. banks, used to pay sales intermediaries in the relevant countries. Albemarle sold refinery catalysts globally through agents and distributors approved by Albemarle sales, business, legal, compliance, and finance personnel and management. Personnel at the center of the misconduct reported directly or indirectly to issuer-employed managers in Albemarle’s sales and Refining Solutions organizations, who at times met with and communicated directly with customers. These managers also participated in regular sales strategy calls and meetings with Albemarle Subsidiary personnel and participated in evaluating and approving agent commissions and expenses.”
Under the heading “Albemarle Failed to Timely Address Identified Deficiencies in its Internal Accounting Controls Surrounding Sales Agents and Distributors,” the order states:
“Despite the known risks posed by Albemarle’s reliance on third-party sales agents and distributors in the sale of catalyst products to state-owned and -controlled oil refineries, Albemarle failed for many years to institute sufficient compliance systems and devise and maintain a sufficient system of internal accounting controls concerning the retention, payment, and oversight of these intermediaries.
A series of internal audit reports in 2013, 2015, and 2016 identified multiple gaps in Albemarle’s internal accounting controls with respect to the Refining Solutions business’s use of intermediaries. For example, sales agents and distributors were paid: despite incomplete due diligence; despite a lack of an executed contract; despite having a contract that lacked required anticorruption provisions; and at rates higher than those provided for by contract – all in contravention of Albemarle’s policies and procedures.
The audit team for the 2013 internal audit recommended that Albemarle establish a comprehensive program to manage and monitor the entire life cycle for intermediaries. While Albemarle hired compliance personnel, reduced the number of sales agents and distributors without contracts, and implemented software to assist in third-party onboarding and contracting, it failed to devise and maintain a sufficient system of internal accounting controls with respect to commission rates and deviations from contracted rates. As a result, sales personnel were able to increase agents’ commission rates in multiple countries – including Vietnam, India, China, and UAE – despite certain Albemarle personnel having knowledge of red flags indicating the agents would use a portion of the commission to make bribe payments to obtain contracts, influence tender specifications, or obtain nonpublic information concerning competitors’ bids.
Other examples of internal accounting controls deficiencies during the relevant period include the payment of sales agents in Vietnam, India, Indonesia, China, and the UAE despite a lack of contractually required reports from the agents describing the services provided. In some instances, Albemarle Subsidiaries also entered backdated agreements with the sales agents and reimbursed vague, unsupported, and extra-contractual expenses. Certain personnel also instructed sales agents to omit detail from their invoices or to re-submit the invoices to a different Albemarle Subsidiary to avoid a lengthy approval process.”
The SEC’s order contains various findings regarding “India Private Customer” and states:
“Between 2009 and 2017, Albemarle also paid India Agent what personnel understood was an excessive commission to obtain catalyst orders from India Private Customer. As Albemarle’s sales to India Private Customer grew, India Agent demanded increases to its commission rate. In support of one such request, India Agent provided nonpublic details about a competitor’s bid and a confidential report by India Private Customer’s technical team on the results of a performance evaluation. India Agent noted that Albemarle was obtaining sales “very easily due to our relationships, without any competition.” Alluding to its relationship with India Private Customer’s management, India Agent contended that the increase had been “discussed with all the friends and . . . agreed upon.” In response, Albemarle increased India Agent’s commission in 2010 (via a backdated agreement) and again in 2012. A July 2014 email from an Albemarle Europe sales executive to India Agent described the commissions as “extremely high” and “far from any possible realistic justification.”
India Agent obtained business from India Private Customer by paying a senior executive (“Private Customer Executive”) and his family more than $190,000 between August 2009 and March 2018, including monthly payments directly to Private Customer Executive’s wife and son. In 2011, at the request of Sales Executive, Albemarle sales personnel in Brazil arranged a hotel and tour of Rio de Janeiro for Private Customer Executive’s son, who was working in Brazil at the time, and transferred the charge to India Agent’s credit card. In March 2014, India Private Customer suspended shipments under Albemarle’s supply contract while conducting a trial of a competitor’s products. India Agent paid Private Customer Executive $81,000 by check to restore Albemarle’s catalyst order. India Private Customer resumed Albemarle’s deliveries in July 2014 and placed additional catalyst orders through December 2017.”
Under the heading “Albemarle Had Insufficient Internal Accounting Controls Surrounding the Payment of High-Risk Agents in China and the UAE,” the order finds:
“As a result of weaknesses in Albemarle’s internal accounting controls surrounding intermediaries, Albemarle hired, paid, and increased commission rates for agents in additional countries, including China and the UAE, despite elevated risks of bribery and without reasonable assurance that its payments compensated legitimate services.
From 2013 through 2017, Albemarle obtained catalyst sales from a refinery (“China State-Owned Customer”) through a sales agent (“China Agent”) retained through Albemarle China based on the recommendation of an official from China State-Owned Customer. Emails among Albemarle Subsidiary personnel described a senior official (“China Official”) at China State-Owned Customer as the “uncle” of China Agent’s principal (“China Agent’s Principal”), a situation they recognized was “thorny.” Neither China Agent nor Albemarle Subsidiary personnel identified China Agent’s Principal, or reported the possible familial connection to China Official, in the due diligence questionnaire or other documents submitted to Albemarle compliance personnel conducting due diligence on China Agent. However, Albemarle compliance department due diligence revealed that China Agent had no website and was authorized to do business only a few weeks before China Agent’s Principal first met with Albemarle personnel.
Despite these red flags, Albemarle retained China Agent. When an Albemarle business director questioned China Agent’s compensation as “high,” an Albemarle Netherlands business director replied that he anticipated large returns on the contract. In February 2014 Albemarle agreed to increase China Agent’s commission if it obtained higher prices from China State-Owned Customer. In August 2016 Albemarle China further increased the commission rate. Albemarle Subsidiary management knew that, due to a “powerful agent” who had a “good connection” to China State-Owned Customer’s management, Albemarle was able to obtain business on a sole source basis and at an “incredibly high price.” Albemarle’s system of internal accounting controls provided inadequate assurances that payments and discounts to China Agent were used for legitimate purposes. Moreover, Albemarle China’s books and records, which were consolidated into Albemarle’s financial statements, lacked support for payments to China Agent that were recorded as legitimate commissions or for discounts recorded as appropriate adjustments to sales.
In the UAE, Albemarle, contracting through Albemarle Netherlands, used a sales agent (“UAE Agent”) between 2011 and 2016 to obtain catalyst orders from a state-owned refinery (“UAE State-Owned Customer”). In violation of Albemarle policy, due diligence was conducted on UAE Agent only after entering sales agency agreements with the agent, including an addendum increasing its commission. UAE Agent had close and well publicized ties to the UAE government and royal family, contrary to UAE Agent’s representations in its due diligence questionnaire.
In May 2011, a consultant (“UAE Consultant”) approached an Albemarle Middle East regional sales representative offering to assist in obtaining business from UAE State-Owned Customer. UAE Consultant claimed to have good contacts with the engineering, procurement, and construction (“EPC”) firm to which UAE State-Owned Customer had outsourced portions of the catalysts tender. UAE Agent formally retained UAE Consultant in June 2012, purportedly to assist it with logistics and administrative functions in connection with Albemarle’s bid for additional business with UAE State-Owned Customer. Although certain Albemarle Subsidiary personnel in the Middle East and the Netherlands knew of UAE Consultant’s involvement, they did not inform Albemarle Legal or Compliance personnel of the relationship, and no due diligence was conducted on UAE Consultant. The agreement with UAE Agent was amended in 2013 to increase its commission by one percent — the same amount UAE Agent agreed to pay UAE Consultant. UAE Consultant provided no discernable services other than conveying confidential tender evaluations and competitors’ bids obtained from the refinery and the EPC firm.
In addition to commissions that Albemarle paid to UAE Agent (and, through it, UAE Consultant), Albemarle paid UAE Agent undefined “administrative charges” equal to ten percent of its invoices for customs clearance and other non-sales services. These undocumented charges fell outside the scope of Albemarle’s agreement with UAE Agent. Albemarle’s system of internal accounting controls provided inadequate assurances that payments to UAE Agent were used for legitimate services. Moreover, Albemarle Netherlands and Albemarle Middle East, whose books and records were consolidated into Albemarle’s financial statements, lacked support for payments to UAE Agent that were recorded as legitimate commissions and business expenses.”
Based on the above, the order finds that Albemarle violated the FCPA’s anti-bribery, books and records and internal controls provisions.
Regarding the books and records provisions, the order states:
“Albemarle’s books and records inaccurately characterized payments to agents in Vietnam, India, and Indonesia that included portions intended for bribes as commissions and legitimate business expenses, and it lacked sufficient detail and support to record payments to agents in Vietnam, India, Indonesia, China, and the UAE as legitimate commissions and business expenses.”
Regarding the internal controls provisions, the order states:
“Albemarle failed to implement a system of internal accounting controls sufficient to provide reasonable assurances that access to assets was permitted, and transactions were executed, only in accordance with management’s general or specific authorization. Specifically, Albemarle had insufficient internal accounting controls over vendor management and accounts payable to provide reasonable assurances that the Albemarle Subsidiaries were adhering to Albemarle’s anti-corruption policy and procedures before paying agents, lacked sufficient entity level controls over the Albemarle Subsidiaries, and failed to address repeated audit findings regarding identified deficiencies in its controls surrounding intermediaries.”
To resolve the matter, Albemarle agreed to cease and desist from future FCPA violations and agreed to pay approximately $103 million ($81.8 million in disgorgement and prejudgment interest of $21.8 million).
The order contains a section titled “Albemarle’s Disclosures, Cooperation, and Remediation” which states:
“Albemarle made an initial self-disclosure to the Commission of potential FCPA violations in Vietnam following its completion of an internal investigation of such conduct and, at the same time, self-reported potential violations it was investigating in India, Indonesia, and China. Albemarle later self-disclosed to the Commission potential violations in other jurisdictions as part of an expanded internal investigation.
Albemarle’s cooperation included providing regular updates on its internal investigation; giving regular and detailed factual presentations to the staff; voluntarily producing relevant documents (including translations, bank records, emails, and text messages); making current and certain former employees available to the Commission staff, including those who needed to travel to the United States; and summarizing the results of forensic accounting and auditing analysis.
Albemarle began its remediation upon identifying issues and continued its efforts thereafter. Its remediation included: (1) terminating culpable personnel and intermediaries; (2) exercising third-party audit rights; (3) revamping its anti-corruption policies, procedures, and systems; (4) enhancing internal accounting controls over the retention, payment, and oversight of third parties, including the use of transaction monitoring and data analytics; (5) hiring a dedicated and experienced compliance officer and compliance staff; and (6) ceasing use of all sales agents globally across its business units, including Refining Solutions, and significantly decreasing the use of other third parties involved in the sale or resale of its products; and (7) enhancing risk-based training regarding anti-corruption, internal accounting controls, and other compliance matters.”
In the SEC release, Charles Cain (Chief of the SEC Enforcement Division’s FCPA Unit) stated:
“Despite repeated and glaring bribery-related red flags, Albemarle failed for many years to implement sufficient internal accounting controls relevant to the use of agents by its global refining solutions business to make sales to state-owned customers around the world. This failure set the stage for wide-ranging misconduct.”
Courtney Trombly (King & Spalding LLP) and William Barry (Miller & Chevalier) represented Albemarle.
