Call me old-fashioned, but I believe that FCPA information sources should strive to make things more clear and not muddy the conversational waters.
Yet, the FCPA Blog seems to have a knack for the later (e.g. sorry FCPA Blog, but Legg Mason did not pay $2.4 million to the SEC, but rather $34.5 million) including its posts on so-called “declinations” which are then frequently flung into the FCPA’s echo chamber.
As highlighted in prior posts here and here (among others) the FCPA Blog has been muddying the declination conversation for years by using the term “declination” anytime a company is under FCPA scrutiny but there is no enforcement action. That’s like saying the police “declined” to charge a sober driver with drunk driving when passing through a field sobriety checkpoint.
As highlighted in this prior post, in its November 2017 Corporate Enforcement Policy, the DOJ formally defined the term “declination” as follows:
“A declination pursuant to the FCPA Corporate Enforcement Policy is a case that would have been prosecuted or criminally resolved except for the company’s voluntary disclosure, full cooperation, remediation, and payment of disgorgement, forfeiture, and/or restitution. If a case would have been declined in the absence of such circumstances, it is not a declination pursuant to this Policy. Declinations awarded under the FCPA Corporate Enforcement Policy will be made public.” (emphasis added).
After this formal government definition of the term “declination,” one might assume that declination conversations would become more clear.
But alas, the FCPA Blog continues to muddy the conversation with the recent headline “Ensco FCPA Investigation Ends in Double Declination.”
Let’s analyze this.
As highlighted in this prior 2015 post Ensco disclosed:
“Pride International, Inc. (“Pride”), a company we acquired in 2011, commenced drilling operations in Brazil during 2001 and, in 2008, entered into a drilling contract with Petrobras for DS-5, a rig Pride had ordered from a shipyard in South Korea. Beginning in 2006, Pride conducted periodic compliance reviews of its business with Petrobras, and, after the acquisition, Ensco conducted similar compliance reviews, the most recent of which commenced in early 2015 after media reports were released regarding ongoing investigations of various kickback and bribery schemes in Brazil involving Petrobras. While conducting our compliance review, we became aware of an internal audit report by Petrobras alleging irregularities in relation to DS-5 – specifically, that Petrobras overpaid under the drilling contract. We believe this allegation is inaccurate, as publicly available data show that the contract’s compensation terms were in line with other contracts signed by Petrobras and other customers with our competitors during the same timeframe (late 2007 and early 2008). We provided this information to Petrobras in June 2015. We continue to operate DS-5 under its existing contract. In addition, all our other rigs contracted to Petrobras – ENSCO 6001, 6002, 6003 and 6004 – continue to work under their contracts. Upon learning of the Petrobras internal audit report, our Audit Committee appointed independent counsel to lead an investigation into the alleged irregularities. Subsequently, the internal audit report and the alleged irregularities were referenced in Brazilian court documents connected to the prosecution of former Petrobras directors and employees as well as certain other third parties, including a former marketing consultant who provided services to Pride in connection with DS-5. The former marketing consultant entered into a plea agreement with the Brazil authorities. This plea agreement was referenced in a Brazilian court proceeding relating to a project for a competitor having no connection to us. This court proceeding document states that another court action would be made public in due course with respect to DS-5; to date no further proceedings relating to DS-5 have been released. Independent counsel, under the direction of our Audit Committee, has substantially completed the investigation of these allegations by reviewing and analyzing available documents and correspondence and interviewing current and former employees involved in the contracting of DS-5 as well as the former marketing consultant. To date, our Audit Committee has found no evidence that Pride or Ensco or any of their current or former employees were aware of or involved in any wrongdoing, and our Audit Committee has found no evidence linking Ensco or Pride to any illegal acts committed by our former marketing consultant. Although the investigation is substantially complete, we cannot predict whether any new or additional allegations will be made and what impact those allegations will have on the timing or conclusions of the investigation. Our Audit Committee will examine any new or additional allegations and the facts and circumstances surrounding them. To date, we have not been contacted by Brazil authorities, and no authority has alleged wrongdoing by Pride or Ensco or any of their current or former employees. In June and July 2015, we voluntarily contacted the SEC and the U.S. Department of Justice (“DOJ”), respectively, to advise them of this matter and our Audit Committee’s independent investigation, and we provided them an update on the investigation in September 2015. We cannot predict whether any governmental authority will seek to investigate this matter, or if a proceeding were opened, the scope or ultimate outcome of any such investigation. If the SEC or DOJ determines that violations of the U.S. Foreign Corrupt Practices Act of 1977 (the “FCPA”) have occurred, or if any governmental authority determines that we have violated applicable anti-bribery laws, they could seek civil and criminal sanctions, including monetary penalties, against us, as well as changes to our business practices and compliance programs, any of which could have a material adverse effect on our business and financial condition.”
In other words, Ensco clearly disclosed that it found no evidence of wrongdoing.
Fast forward to last month as Ensco disclosed:
“On August 29, 2018, Ensco plc received a letter from the Division of Enforcement of the U.S. Securities and Exchange Commission (the “SEC”) informing Ensco that the Division has concluded its investigation into alleged irregularities related to a drilling services contract for ENSCO DS-5 and does not intend to recommend any enforcement action against the Company. On August 31, 2018, Ensco received a letter from the U.S. Department of Justice (the “DOJ”) stating that the DOJ had closed its inquiry into the matter and acknowledging Ensco’s full cooperation in the investigation. Ensco previously disclosed an internal investigation of alleged irregularities related to a drilling services agreement between an acquired subsidiary, Pride International LLC (“Pride”), and Petrobras for ENSCO DS-5 that was executed in 2008. After becoming aware of the alleged irregularities in 2015, Ensco voluntarily contacted the SEC and the DOJ to advise them of the investigation and continued to update and cooperate with both agencies over the course of the investigation. The Company’s investigation did not identify any evidence that Pride or Ensco or any of their current or former employees were aware of or involved in any wrongdoing.”
Ensco’s disclosure clearly did not use the “d” word, yet in addition to the FCPA Blog’s muddy headline “Ensco FCPA Investigation Ends in Double Declination,” the FCPA Blog stated that “in an SEC filing … Ensco said it received declination letters from the SEC on August 29 and from the DOJ on August 31.”
That’s simply not true. Again, Ensco never used the term “declination letters,” rather this is term used solely by the FCPA Blog.
In short, it would be nice if certain FCPA information sources would stop muddying the FCPA’s conversational waters.
