This previous post highlighted various issues to consider in the recent SBM Offshore enforcement action.
Buried deep in the approximate 170 pages of resolution documents was another important issue to consider deserving of its own post.
This important issue was likely not a significant factor in the overall resolution of the matter (after all, as highlighted in the previous post, the conduct at issue “lasted over 16 years, was carried out by employees at the highest level of the organization, including two high-level executives who were at times directors of a wholly-owned U.S. domestic concern, involved large bribe payments, and included deliberate efforts to conceal the scheme”).
Even so, there are two ways to look at such non-determinative allegations in FCPA enforcement actions: (i) either the DOJ (or SEC) are practicing their typing skills; or (2) the DOJ (or SEC) are using the enforcement action to send a message to the business community regarding its FCPA interpretations. I think the best answer is the later.
The SBM Offshore enforcement action was largely based on the typical enforcement theory that employees of alleged state-owned or state-controlled enterprises were “foreign officials” under the FCPA. As highlighted in this post, this enforcement theory is certainly nothing new and is very prominent. (Even though the 2014 11th Circuit opinion blessing this enforcement theory was flawed. See here and more extensively my Supreme Court amicus brief and here for my “foreign official” declaration).
What makes the SBM Offshore enforcement action “foreign official” notable is the following.
Among the allegations in support of the conspiracy to violate the FCPA’s anti-bribery provisions charge was the following:
“SBM paid bribes to at least nine Angolan officials within Sonangol and Sonusa. Sonusa refers to Sonangol USA Co. which is described in the information as a Houston-Texas based company that is a wholly-owned subsidiary of Sonangol described as a state-owned and state-controlled oil company. According to the information, Sonusa was controlled by the Angolan government and performed government functions for Angola.”
In short, the DOJ alleged that a Texas incorporated, Texas based company was an “instrumentality” of the Angolan government.
Another allegation in support of the conspiracy to violate the FCPA’s anti-bribery provisions charge was the following:
“SBM knowingly conspired to pay bribes and attempted to pay bribes [through intermediaries] to officials within the Kazakhstan government, for the purpose of securing an improper advantage and assisting SBM in its business in Kazakhstan. SBM attempted to pay bribes to at least one KazMunayGas officials at least one Company 1 employee. [KazMunayGas is described as Kazakhstan’s state-owned and state-controlled oil company, controlled by the Kazakh government that performed government functions. Company 1 is described as a subsidiary of an Italian oil and gas company in which the government of Kazakhstan granted the company a concession as the operator of the Kashagan oil field development in Kazakhstan. In this capacity, Company 1 was acting in an official capacity for or on behalf of KazMunayGas in awarding contracts].”
In short, the DOJ alleged that a subsidiary of an Italian oil and gas company was an “instrumentality” of the Kazakh government because it was granted a concession by the Kazakh government and was thus “acting in an official capacity for or on behalf” of the Kazakh government.
The breadth of this type of allegation is practically boundless.
Other recent expansive “foreign official” interpretations (untethered to statutory language and congressional intent) include the following.
As highlighted in this prior post, in the Darren Condrey enforcement action, the DOJ alleged that a U.S. resident working for a U.S. company was a Russian “foreign official.” Why? Because the company was a wholly-owned subsidiary on an entity indirectly owned and controlled by, and performed functions of, Russian government
In the Alstom enforcement action, the DOJ alleged that a dual U.S. / Egyptian citizen working for a U.S. company was an Egyptian “foreign official.” Why? Because he was assigned by the company to be the general manager of a joint venture between the U.S. company and an Egyptian SOE.
In U.S. v. Castle, the Fifth Circuit correctly noted that “foreign officials” were a “well-defined group of persons.”
Gosh, how far interpretation of the FCPA’s important “foreign official” element has come. As highlighted above, recent DOJ interpretations of “foreign official” are practically boundless.
FCPA Institute - Zoom (May 16-18, 2023)
Elevate your FCPA knowledge and practical skills. Nine hours of integrated and cohesive instruction led by Professor Koehler (an FCPA expert with teaching experience). Learn more, spend less. Professional credential available.