- FCPA Professor - https://fcpaprofessor.com -

Scrutiny Alerts

Honeywell

As highlighted in this prior post [1], in mid-2019 Honeywell disclosed that it was cooperating with the DOJ/SEC and Brazilian law enforcement investigations relating to its use of third parties in relation to Petrobras business as well as a matter involving a foreign subsidiary’s prior engagement of Unaoil in Algeria.

Honeywell recently disclosed [2]: “We have begun discussions with the authorities with respect to a potential resolution of these matters. As the discussions are ongoing, there can be no assurance as to whether we will reach a resolution with such authorities or as to the potential timing, terms, or collateral consequences of any such resolution. As a result, we cannot predict the outcome of these matters, the potential impact on the Company, or a reasonable estimate of losses or range of losses at this time.”

DeepGreen Metals

As highlighted here [3], Campaign for Accountability (CfA) has requested “that the Securities and Exchange Commission (“SEC”) investigate the proposed Special Purpose Acquisition Company (“SPAC”) transaction between Sustainable Opportunities Acquisition Corp. (“SOAC”) and DeepGreen Metals Inc. (“DeepGreen”)/The Metals Company Inc. (“TMC”) for potential violations of securities law.”

Under the heading “Potential Violations of the Foreign Corrupt Practices Act” CfA asserts:

“DeepGreen’s Nauru exploration rights, held through its ownership of Nauru Ocean Resources Inc. (NORI), may pose civil and criminal risks under the Foreign Corrupt Practices Act, with potential liability extended to SOAC if its merger with DeepGreen is consummated.

There are unresolved questions about the ownership structures of the two Nauru foundations— the Nauru Education and Training Foundation Inc. (NEAT) and the Nauru Health and Environment Foundation Inc. (NHEF)— that own NORI. SOAC’s most recent S-4 amendment states that NORI and the two foundations that control it are wholly-owned by DeepGreen. This seems at odds with prior statements by the International Seabed Authority, claiming the foundations “are controlled by Nauru and will distribute within the State the income the company received from mineral production in the License Area.”

Further, SOAC’s S-4 does not explain how DeepGreen gained control of these entities. A recent Wall Street Journal report suggested that the transfer of NORI’s ownership from the foundations to DeepGreen in 2012 coincided with a college scholarship awarded to the niece of Nauru’s former Trade Minister Michael Aroi, whose oversight responsibilities included deep-sea mining. A 2014 government gazette filing also mentions Aroi in relation to oversight of the appointment of two directors of NORI, NETF, and NHEF. The DeepGreen scholarship money awarded to a relative of a government official who has oversight of the company’s business interests could constitute bribery punishable by civil and criminal penalties under the Foreign Corrupt Practices Act, which prohibits payments to foreign government officials in exchange for assistance in obtaining or retaining business. Although DeepGreen is a Canadian firm, it has had a U.S. subsidiary, DeepGreen Resources LLC, registered in North Carolina since 2013.”

Siemens, GE, Phillips

News organization 100Reporters recently published two in-depth articles about alleged bribery in the Chinese health sector including by companies who have previously resolved Foreign Corrupt Practices Act enforcement actions.

The first article [4] is titled “Pandemic, Prosecutions Aside, Bribery Persists in Chinese Hospitals” and asserts:

“As the coronavirus pandemic threatened to overwhelm Chinese hospitals last year, Chinese resellers appear to have colluded to inflate the prices of ventilators and other essential medical equipment from multinational companies including Siemens, GE, and Philips, according to a review of public records on the sale of medical equipment in China. The inflated prices did not translate into oversized profits for the multinationals. Rather, they appear to be part of a complex system through which third-party resellers allegedly camouflaged bribes to corrupt hospital officials. Court cases and further interviews suggest that regional representatives of the multinationals themselves at times tolerated or were directly involved in bribery schemes.”

The second article [5] is titled “Slammed for Bribery, Siemens Continued to Ignore Red Flags” and asserts:

“German engineering giant Siemens, one of the world’s biggest multinational companies, ignored its own red flags for foreign bribery in the aftermath of a major corruption scandal in 2008, according to newly released monitoring reports and other confidential documents. The warnings involved the company’s use of third-party resellers, who have often served as conduits for bribing foreign officials, according to former company insiders and internal assessments. Evidence from public records in China suggests this practice has continued into recent months, and resulted in the sale of medical equipment to Chinese state-owned hospitals at vastly inflated prices amidst the pandemic.”

As highlighted in this previous post and others [6], from the beginning of the 2016 battle over the Siemens’ monitor reports (see here [7] for the prior post), I’ve long had my own suspicion as to why the DOJ and Siemens were actively seeking to block release of the Monitor reports and it has nothing to do with the issues discussed in the briefs by the DOJ and Siemens. It has to do with issues highlighted in the above article and previously in this New York Times article [8].

[9]