This previous post went in-depth into the net $105.5 million Foreign Corrupt Practices Act enforcement action against Keppel Offshore & Marine (and a related entity) regarding various bribery schemes in Brazil. This post continues the analysis by highlighting additional issues to consider.
FCPA First
The enforcement action against Keppel Offshore & Marine is believed to be the first FCPA enforcement action ever against a company based in Singapore.
Origin
As highlighted here, in July 2016 “Zwi Skornicki, the former third-party commercial representative for Keppel in Brazil, told a [Brazilian] judge that five leading executives, including current Keppel Offshore & Marine Ltd chief executive officer Chow Yew Yuen, authorised him to bribe public officials in exchange for Petrobras contracts that often exceeded a billion dollars.”
Keppel initially denied the allegation. This July 24, 2016 release states:
“The Company refers to the testimony given by Mr Zwi Skornicki on 21 July 2016 in connection with the ongoing Lava Jato investigations. We refute the allegations made by Mr Skornicki regarding Keppel’s involvement in the illegal payments made by Mr Skornicki. Keppel reiterates its zero-tolerance stance against any form of illegal activity, including bribery and corruption, involving its employees or associates, and will take all necessary steps to eradicate such conduct if discovered. We are unable to comment further in view of the ongoing investigations.”
In this August 3, 2016 release, the company states:
“Keppel refers to the Bloomberg article dated 3 August 2016 reporting allegations made by Mr Zwi Skornicki in criminal proceedings brought against him in Brazil. Keppel strongly denies the allegations reportedly made that Keppel executives authorized Mr Skornicki to pay bribes on its behalf. None of the individuals named in the article, including the current CEO of Keppel Offshore and Marine Mr Chow Yew Yuen, have ever authorized Mr Skornicki to make any payments as bribes.”
Once Again, The DOJ Keeps Shooting Itself in the Foot
Similar to the issues discussed in previous posts here and here, if the DOJ wants companies to voluntarily disclose conduct that implicates the FCPA, why does it continually shot itself in the foot by making decisions that should result in any board member, audit committee member, or general counsel informed of current events not making the decision to voluntarily disclose?
The Keppel enforcement action was not a true voluntary disclosure. According to the DOJ “the Company did not receive voluntary disclosure credit because, although it notified the Fraud Section about publicly-reported allegations in Brazil prior to the Fraud Section and the Office contacting the Company, the Fraud Section and the Office were already aware of the allegations.”
The conduct at issue was egregious – in the words of the DOJ – a “long-running scheme” with significant amount of bribe payments to various alleged foreign officials, in connection with numerous projects, and involving “high-level Keppel executives.”
The end result?
Keppel received a DPA with a settlement amount – according to the DOJ – 25% below the minimum amount suggested by the guidelines (even though the actual net FCPA settlement amount was $105.5 million after crediting amounts paid in connection with related enforcement actions in Singapore and Brazil).
If I am a rational board member, audit committee member, or general counsel, I look at this “precedent” (along with other recent examples) the DOJ recently created and think to myself:
“Why in the world should we disclose. Let’s thoroughly investigate the issues, promptly implement remedial measures, and effectively revise and enhance compliance policies and procedures – all internally and without disclosing to the enforcement agencies. In the unlikely event the DOJ finds out about the conduct, even if it is truly egregious, the DOJ is still likely to offer the company an NPA or DPA and we will still likely be able to resolve the matter for a meaningful reduction off the minimum amount suggested by the guidelines.”
In short, if the goal of the DOJ is to encourage corporate voluntarily disclosures, it is actually shooting itself in the foot by virtue of its recent decisions.
The message seems to be clear for any board member, audit committee member, or general counsel informed of current events – do not voluntarily disclose.
Piling On?
While the Keppel enforcement action did include a prong against Keppel Offshore & Marine USA Inc. (a Texas-based company), approximately 95% of the $105.5 million net FCPA settlement amount was against Keppel Offshore & Marine, a Singapore company based on allegations it bribed various alleged Brazilian foreign officials.
As noted in the DPA, Keppel also entered into resolutions “with authorities in Singapore and Brazil relating to the same conduct.”
Was the U.S. enforcement action against Keppel, based on sparse jurisdiction allegations, piling on?
For instance, as highlighted in this recent post, Sandra Moser (Principal Deputy Chief, Fraud Section, DOJ) stated:
“We are working harder than ever to coordinate with global partners and avoid what some have termed “piling on” in attendant global resolutions.”
Sure, the DOJ did credit amounts paid in connection with the Singapore and Brazil enforcement actions, but is this an instance in which the DOJ should simply have stepped back? What is the policy interest (other than perhaps filling U.S. Treasury coffers) in bringing an FCPA enforcement action against a Singapore company for allegedly bribing Brazilian officials when Singapore and Brazil also brought enforcement actions based on the same conduct?
See here and here for recent FCPA Flash podcast episodes regarding this dynamic. See also this recent post.
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