This prior post highlighted the net $17.7 million FCPA enforcement action against U.K. companies Amec Foster Wheeler Energy, which was acquired by Amec Plc in 2014, which in turn, was acquired by John Wood Group Plc in 2017.
This post continues the analysis by highlighting additional issues to consider.
Timeline
As highlighted in this previous post, in Spring 2017 the company disclosed:
“Amec Foster Wheeler has received voluntary requests for information from, and continues to cooperate with, the SEC and the US Department of Justice (‘DOJ’) regarding the historical use of agents by Foster Wheeler, primarily in the Middle East, and certain of the Company’s other business counterparties in that region. In addition, the Company has provided information relating to the historical use of third parties by Foster Wheeler and certain of its operations to the DOJ and SEC in other regions. The Company has also made a disclosure to the UK Serious Fraud Office. Given the stage of these matters, it is not possible to estimate reliably what effect the outcome that any investigation or any regulatory determination may have on the Company.”
Thus, from start to finish, the company’s scrutiny lasted approximately 4.25 years.
Yes, there were several law enforcement agencies around the world involved in the conduct at issue. Yes, COVID may have impacted the pace of the law enforcement inquiries. Nevertheless, 4.25 years is far too long to resolve an FCPA inquiry.
This is particularly true in the case of Amec Foster Wheeling given that the DOJ stated:
“the Company received full credit for its cooperation and Wood’s cooperation with the [DOJ] including: (i) making factual presentations to the DOJ; (ii) voluntarily facilitating the interview in the U.S. of former foreign-based employees; and (iii) producing to the DOJ on a prompt basis, extensive relevant documentation, including documents located outside the U.S.”
In the words of the SEC:
“Amec Foster Wheeler, and subsequently Wood, cooperated in the Commission’s investigation by identifying and timely producing key documents identified in the course of its own internal investigation, providing the facts developed in its internal investigation, and making current or former employees available to the Commission staff, including those who needed to travel to the United States.”
Gaining Access to Confidential Information
In pertinent part, the bribery scheme at issue in the enforcement action concerned:
“Foster Wheeler Energy, through certain of its employees, entered into a sham agency agreement with the Brazil Intermediary Company [a Brazil-based oil and gas services company] for the purpose of funding and paying bribes to decision-makers at Petrobras to win the UFN-IV contract. In exchange for making the bribe payments, and after obtaining confidential documents, inside information and secret assistance from Petrobras Manager 1 [a manager in the Petrobras Engineering Department], Foster Wheeler Energy won the contract from Petrobras.” (Emphasis added).
In other words, the enforcement action was yet another instance (see here for numerous other instances) of an alleged bribery scheme resulting in a company gaining access to confidential information from an alleged government entity it was seeking to do business with.
Third Parties
The overwhelming majority of corporate FCPA enforcement actions involve, in whole or in part, the conduct of various third parties and the Foster Wheeler enforcement action was no exception.
In many instances, the use of a problematic third party is straight-forward. However, in the Foster Wheeler enforcement action, the problematic third parties were part of an interesting web.
The story goes something like this.
- Foster Wheeler decided to establish a business presence in Brazil’s oil and gas industry and a significant part of the initiative was the company’s bid on the contract to design Petrobras’s UFN-IV gas-to-chemical complex.
- An Italian Agent and Brazil Intermediary Company met in New York to discuss pitching themselves as sales agents for Foster Wheeler in connection with an upcoming bid on the UFN-IV contract.
- After the meeting, a Brazil Intermediary Company executive sent the Italian Agent internal, confidential Petrobras documents concerning its planned UFN-IV project.
- Italian Agent then shared the confidential Petrobras documents with a New York Clothing Store Manager, whose clients included a Foster Wheeler executive, in an effort to convince the Foster Wheeler executive to hire Italian Agent as a sales agent to help Foster Wheeler win the UFN-IV contract.
- Petrobras sent Foster Wheeler a request for a proposal to design the UFN-IV complex.
- The New York Clothing Store Manager arranged for Italian Agent to meet with the Foster Wheeler executive in Switzerland. During the meeting, the Italian Agent attempted to persuade the Foster Wheeler executive to hire the Italian Agent as a sales manager to help Foster Wheeler win the UFN-IV contract.
- In an effort to convince Foster Wheeler to Italian Agent to help with the UFN-IV contract, the Italian Agent requested that Foster Wheeler enter into an agency agreement with Monaco Intermediary Company because Italian Agent believed that Monaco Intermediary Company could pass Foster Wheeler’s due diligence process, whereas Italian Agent may not have been able to do so independently.
- A Foster Wheeler employee told several Monaco Intermediary Company employees that Foster Wheeler could not retain Monaco Intermediary Company and Italian Agent as agents for the UFN-IV contract because “it came very late in the day, not at an early enough point in the bidding process. Italian Agent does not spend enough time in country of speak Portuguese. Neither Monaco Intermediary Company or Italian Agent have anything like a proper set up in territory [Brazil].”
- The Italian Agent emailed the CEO of Monaco Intermediary Company and indicated that it was important for a legitimate seeming sales intermediary company to sign the agreement with Foster Wheeler.
- Seven days before Foster Wheeler submitted its bid to Petrobras for the UFN-IV contract, Foster Wheeler offered Italian Agent an interim agency agreement before completing due diligence on Italian Agent.
- The CEO of Monaco Intermediary Company sent a Foster Wheeler Brazil executed a completed set of Foster Wheeler’s due diligence forms on behalf of Italian Agent, which included a note indicating that Italian Agent and Monaco Intermediary Company wanted the Brazil Executive to decide whether to disclose the relationship between Italian Agent and Brazil Intermediary Company in the due diligence forms.
- Brazil Intermediary Company also submitted due diligence forms to Foster Wheeler. A Foster Wheeler employee based in Houston told the Brazil Executive to take action that prevented the disclosure, in due diligence materials, of Italian Agent’s involvement with Brazil Intermediary Company, which left the false impression that Brazil Intermediary Company was not working with Italian Agent.
- Petrobras informed Foster Wheeler that it was the only remaining qualified bidder for the UFN-IV contract. After learning this information, a Foster Wheeler employee wrote to the Brazil Executive that they should “chat re: need for agent on this matter.”
- Foster Wheeler received a third-party due diligence report on Italian Agent stating that investigators were “not able to verify any of the information that Italian Agent presents in his CV” and found it “surprising” that “none of the dozen or so contacts they spoke to had ever heard of Italian Agent including senior executives who have worked on projects that Italian Agents claims to have consulted on.
- The Brazil Executive wrote to the Italian Agent that there was a decision not to hire the Italian Agent.
- The Italian Agent responded that he had no concern as long as he was permitted to proceed with his job behind the scenes as an unofficial agent.
- To help Foster Wheeler win the UFN-IV contract, Brazil Intermediary Company and Italian Agent obtained confidential documents, inside information and secret assistance from a Petrobras Manager.
- Italian Agent told Brazil Executive that if Foster Wheeler were to approve the retention of the Brazil Intermediary Company as a sales agent, it would enable Italian Agent and the Brazil Intermediary Company to work more “efficiently.”
- Foster Wheeler approved the Brazil Intermediary Company as a sales agent to help Foster Wheeler win the UFN-IV contract.
- At the time, a Petrobras manager personally owed Brazil Intermediary Company approximately $200,000.
- The Italian Agent complained to a Brazil Intermediary Company executive that it was taking too long for Foster Wheeler to sign the agency agreement with the Brazil Intermediary Company.
- Foster Wheeler won the UFN-IV contract from Petrobras.
- While Foster Wheeler was negotiating the final terms of its agency agreement with Brazil Intermediary Company, at a meeting to discuss the agency agreement, a Foster Wheeler executive told an in-house attorney at Foster Wheeler that he believed that Italian Agent might have promised to pay bribes to Petrobras officials. The executive further stated that he wanted to ensure that Foster Wheeler entered into the agency agreement with Brazil Intermediary Company because there could be a problem with the UFN-IV contract if Italian Agent were not to receive funds to pay those bribes through Brazil Intermediary Company’s agency commissions.
- Foster Wheeler executed an agency agreement with Brazil Intermediary Company which entitled Brazil Intermediary Company to a two percent commission on Foster Wheeler’s approximately $190 million UFN-IV contact with Petrobras.
- Brazil Intermediary Company submitted for quarterly reports to Foster Wheeler and invoices for payment, none of which documented any meaningful work by Brazil Intermediary Company to justify the two percent commission.
- Foster Wheeler made the four payments to Brazil Intermediary Company totaling approximately $1.1 million.
- Italian Agent and Brazil Intermediary Company executive discussed how to split 80% of the commission funds received from Foster Wheeler, which left a 20% share available for bribe payments.
- Brazil Intermediary Company Executive decided to use a money launderer in Brazil to transfer Italian Agent’s share of the commission payments.
Got it?
I bet you forgot about the role of the New York Clothing Store Manager didn’t you!
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