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Issues To Consider From The Sargeant Marine Enforcement Action


This prior post went in-depth into the recent Foreign Corrupt Practices Act enforcement action against Sargeant Marine Inc. (SMI) and this post continues the analysis by highlighting additional issues to consider.

Why Disclose?

For approximately 15 years, the DOJ has been encouraging business organizations to voluntarily disclose FCPA violations. Yet, time and time again, the DOJ undermines its goal by how it resolves certain enforcement actions.

The SMI matter is the latest example that should cause a board member, audit committee member or others involved in the voluntary disclosure decision to pause.

SMI did not voluntarily disclose and per the DOJ, the SMI enforcement action “included executives at the highest level of the Company, including payment of bribes to high-level government officials in Brazil over a period of years, and conduct in multiple jurisdictions.”

Very few corporate FCPA enforcement actions combine all of these factors.

Yet the DOJ still agreed to a total criminal penalty 25% below the bottom of the applicable Sentencing Guidelines fine range and further allowed SMI to settle for approximately $75 million below this amount because a greater amount “would substantially threaten the continued viability of the Company.”

Say What?

The FCPA’s anti-bribery provisions have a required obtain or retain business element. Given this element, I have read, re-read and re-read again the DOJ’s allegations regarding the Venezuelan bribery scheme and they still make little sense.

In pertinent part, the DOJ alleged:

” … PDVSA refused to sell asphalt to SMI or companies related to SMI. To circumvent this prohibition, SMI and Swiss Asphalt Company agreed that Swiss Asphalt Company would purchase asphalt from PDVDSA at the request and direction of SMI, and then resell that asphalt to SMI at a small premium.

For Swiss Asphalt Company to obtain the contracts, SMI, through certain agents and employees … agreed to offer and pay bribes to PDVSA [officials].” (emphasis added).

Interestingly, the plea agreement, in which SMI pleaded guilty to conspiracy to violate the FCPA’s anti-bribery provisions only relates to “conduct by the Defendant in Brazil and the United States.”

Further to the Strange Public-Private Divide

This prior post highlighted the strange public-private divide when it comes to DOJ individual enforcement actions.

That is, most DOJ corporate enforcement actions involve public companies, yet in those actions individuals are rarely charged, but in a private company enforcement action, individuals (often times numerous individuals are charged). Specifically, a private company DOJ FCPA enforcement action is more than twice as likely to result in individual criminal charges than a public company DOJ FCPA enforcement.

The SMI matter, in which numerous individuals were also criminally charged, once again highlights this strange divide.

Country Exits

As highlighted in this previous post, a troubling aspect of the current FCPA enforcement climate is that the enforcement agencies seem to view retreat from a foreign country that presents FCPA risk as a good thing – perhaps even a “remedial measure.”

The SMI enforcement action is another example as the DOJ stated: “the Defendant engaged in extensive remedial measures, including: no longer operating in Brazil, Venezuela, Ecuador or Chile.”

Calling all Plaintiff Lawyers

In the FCPA’s modern era, few corporate FCPA enforcements are resolved through a plea agreement (rather a non-prosecution agreement, deferred prosecution agreement or so-called declination with disgorgement.

Yet, the SMI matter was resolved through a plea agreement involving conspiracy to violate the FCPA’s anti-bribery provisions (a Title 18 offense rather than a Title 15 offense for substantive FCPA violations).

Thus, the SMI matter falls squarely within this recent decision in which a court held that a business entity which loses out on opportunities because of another business organization violating the FCPA may seek restitution pursuant to the Mandatory Victims Restitution Act for losses allegedly incurred as a result of the underlying conduct.

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