Last Friday the DOJ quietly updated its FCPA Pilot Program “declinations” page to include a June 16th letter from the Fraud Section and the U.S. Attorney’s Office (D.N.J.) to counsel for Linde North America Inc. and Linde Gas North America LLC.
The letter states that “consistent with the FCPA Pilot Program announced on April 5, 2016, the [DOJ is closing its] investigation of [Linde] and certain of their subsidiaries and affiliates concerning violations of the FCPA.”
Pursuant to the letter agreement, Linde agreed to disgorge or forfeit approximately $11.2 million. The Linde enforcement action is the first corporate FCPA enforcement action in the Trump era and is similar to the previous “declinations with disgorgement” enforcement actions released by the Obama DOJ in September 2016. (See here for a prior post).
In pertinent part, the DOJ letter states:
“The Department’s investigation found that from approximately November 2006 to December 2009, Linde, through Spectra Gases, Inc., a New Jersey company that Linde acquired in October 2006, made corrupt payments to high-level officials at the National High Technology Center (NHTC) of the Republic of Georgia, a 100% state-owned and-controlled entity, in connection with its purchase of certain income-producing assets from the NHTC. Specifically, on or about November 13, 2006, Spectra Gases purchased from the NHTC assets and equipment, most notably the “boron column,” which were used to produce boron gas. In advance of the boron column purchase and prior to Linde’s acquisition of Spectra Gases, three high-level executives who were the principal shareholders and managers of Spectra Gases (the “Spectra Executives”), and who continued to manage Spectra Gases for three years following Linde’s acquisition pursuant to a so-called “Earn-Out” arrangement, agreed to share the profits earned from the sale of the boron gas with certain high-level officials at the NHTC and a third-party intermediary with close connections to the officials (collectively the NHTC Officials) in return for the NHTC Officials’ assistance in ensuring that Spectra Gases be selected as the purchaser of the boron column (which agreement followed a previous corrupt arrangement between the same parties for a similar purpose).
In order to effectuate this corrupt agreement and funnel monies to the NHTC Officials the Spectra Executives and the NHTC Officials agreed to form, and did form, two new companies, Spectra Investors LLC (Spectra Investors), a New Jersey limited liability company which purchased the boron column from the NHTC, and Spectra Gases Georgia, a Georgian company which was 100%-owned by Spectra Investors, and was the company through which the boron column was operated. Spectra Investors entered into a “management agreement” with a company owned and operated by the NHTC Officials (the “management company”), pursuant to which the management company purportedly provided services (although there is no evidence of any services being performed) and received 49% of the profits of Spectra Investors. Spectra Investor’s remaining profits were distributed in accordance with the respective parties’ ownership interests in Spectra Investors: 51% to another company owned and operated by the NHTC Officials, and 49% to Spectra Gases. The net result of the corrupt arrangement was that the NHTC Officials owned 51% of Spectra Investors and received approximately 75% of the profits generated by the boron column, while Spectra Gases owned 49% of Spectra Investors and received approximately 25% of the profits. In January 2010, prior to Linde’s discovery of the corrupt conduct, Linde dissolved Spectra Gases and become its successor-in-interest. Prior to the dissolution of Spectra Gases, Spectra Gases received approximately $6,390,000 as a result of the corrupt conduct, which profit was a driving force in the determination of the “Earn-Out” amount described above. After Spectra Gases was dissolved, Linde received approximately $1,430,000 as a result of the corrupt conduct.
Upon discovery of the corrupt arrangements, Linde withheld $10 million of the “Earn-Out” payment purportedly due to the Spectra Executives and deposited it in a segregated account holding only those funds pending the results of its investigation. It also withheld further payments to companies owned or controlled by the NHTC Officials.”
The DOJ letter further states:
“The Department’s decision to close its investigation into this matter is based on a number of factors, including but not limited to: (1) Linde’s timely, voluntary self-disclosure of the matter; (2) the thorough, comprehensive and proactive investigation undertaken by Linde; (3) Linde’s full cooperation in this matter (including its provision of all known relevant facts about the individuals involved in or responsible for the misconduct) and its agreement to continue to cooperate in any ongoing investigations of individuals; (4) Linde’s agreement to disgorge the profits Spectra Gases and it received from the improper conduct and forfeit to the United States the corrupt proceeds its withheld from companies owned or controlled by the NHTC Officials; (5) the steps Linde has taken and continues to take to enhance its compliance program and its internal accounting controls; and (6) Linde’s full remediation (including terminating and/or taking disciplinary action against the employees involved in the misconduct, including the Spectra Executives and lower-level employees involved in the misconduct; terminating the agreement with the “management company” owned by the NHTC Officials; withholding “Earn-Out” payments attributable to the corrupt conduct from the Spectra Executives; and withholding payments due to companies owned or controlled by the NHTC Officials.”
Based on the above, the DOJ letter states:
“Linde agreed to (1) disgorge $1,430,000 (the Linde Disgorgement Amount), which represents the profit received by Linde from the improperly obtained sales of boron gas after the dissolution of Spectra Gases and Linde’s having become Spectra Gases’ successor-in-interest; (2) disgorge $6,390,000 which represents the benefits received by Spectra Gases from the improperly obtained sales of boron gas from 2007 through December 2009 (the Spectra Disgorgement Amount)(collectively with the Linde Disgorgement Amount, the Total Disgorgement Amount); and (3) forfeit to the United States the sum of $3,415,000 (the Forfeiture Amount), which constitutes corrupt proceeds owed to companies owned or controlled by the NHTC Officials, which Linde withheld upon discovery of the corrupt conduct.”
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