The SEC’s fiscal year ends on September 30th. Thus, it is likely that many loose ends are being closed this week and, with history as a guide, there is likely to be more FCPA enforcement actions this week.
Most FCPA enforcement actions against issuers that include a DOJ and SEC component are resolved on the same day. However, as noted in prior posts here and here concerning the DOJ’s net $81.9 million FCPA enforcement action against TechnipFMC in June 2019, the SEC prong of the enforcement action was left open.
This loose end was closed yesterday as the SEC announced an approximate $5 million enforcement action against the company “for violations of the FCPA by FMC Technologies prior to its 2017 merger with Technip S.A.”
The enforcement action involves the same core FMC conduct at issue in the DOJ’s June enforcement action and this administrative order states in summary fashion:
“These proceedings arise from violations of the FCPA by Respondent’s predecessor FMC Technologies, an oil field services company headquartered in Houston, TX. From at least 2008 through 2013, FMC Technologies made over $794,000 in payments to a third party consultant, which used at least some of those funds to pay bribes to Iraqi government officials to procure business with Iraq state-owned oil companies. The bribes were paid in connection with FMC Technologies obtaining contracts to provide metering technologies for oil and gas production measurement to the Iraqi government. The payments were not accurately reflected in FMC Technologies’ books and records. FMC Technologies also failed to have sufficient internal accounting controls in place, which contributed to the misconduct in Iraq.”
[…]
From 2008 through 2013, FMC Technologies, its employees and agents, together with others, engaged in a scheme to pay bribes to Iraqi oil officials to win numerous contracts to provide metering technologies for oil and gas production measurement to the Iraqi government. FMC Technologies entered into a series of agreements with Intermediary Company, which passed the bribes to the Iraqi officials on FMC Technologies’ behalf and in some instances, passed the bribes to subagents that forwarded the payments to the Iraqi officials. FMC Technologies used the agreements to conceal the bribery scheme and to capitalize on Intermediary Company’s relationships with Iraqi oil officials directly involved in the decision making process for contracts sought by FMC Technologies. An FMC Technologies Sales Manager outside of the United States took active steps to engage in the bribery. FMC Technologies personnel in the United States communicated with Intermediary Company throughout this period, including sending numerous documents and emails and approving payments from the United States.
FMC Technologies entered into numerous agreements with Intermediary Company, some of which covered time periods that pre-dated the execution of those agreements. Numerous red flags were overlooked and payments were made to Intermediary Company without evidence of services rendered. FMC Technologies allowed Intermediary Company to use sub-agents and success-fee based compensation without adequate due diligence. FMC Technologies falsely characterized the payments in its books and records as site installation payments. Further, FMC Technologies failed to properly assess and manage its anticorruption risks in Iraq, and devoted insufficient resources to compliance concerning its Iraq business. In addition, FMC Technologies lacked appropriate internal accounting controls with respect to the use of the consultants in Iraq.”
Under the heading “Failure to Maintain Accurate Books and Records,” the order finds:
“FMC Technologies directly and through its wholly-owned subsidiaries, failed to make and keep books, records, and accounts that accurately and fairly reflected FMC Technologies’ transactions with the Intermediary Company. The transactions intended as conduits for the bribe payments were inaccurately characterized as legitimate transactions and thereby concealed within FMC Technologies’ books and records.”
Under the heading “Failure to Maintain Adequate Internal Accounting Controls,” the order finds:
“FMC Technologies failed to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that illicit payments were not being made by Intermediary Company to foreign officials. FMC Technologies failed to require adequate supporting documentation and adequate due diligence prior to making payments to Intermediary Company. Further, FMC Technologies made payments to Intermediary Company based upon contracts covering periods prior to the execution date, purchase orders with inaccurate scopes of work, and invoices with documentation that pre-dated purchase orders. While FMC Technologies’ internal accounting controls required due diligence on third parties, inadequate due diligence was conducted with respect to Intermediary Company despite entering into numerous vague contracts with Intermediary Company that were renewed over multiple years. Despite these red flags, FMC Technologies nonetheless paid Intermediary Company $794,000, some of which was used for illicit purposes.”
Based on the above, the SEC found that TechnipFMC violated the FCPA’s anti-bribery provisions, books and records provisions and internal controls provisions. To resolve the matter, TechnipFMC agreed to pay approximately $5.06 million (disgorgement of $4,427,194 and prejudgment interest of $734,712).
Under the heading “TechnipFMC’s Cooperation and Remedial Efforts,” the order states:
“In determining to accept the Offer, the Commission considered TechnipFMC’s’ cooperation afforded the Commission staff and remedial acts undertaken. TechnipFMC did not self-report to the SEC until after being contacted by the United States Department of Justice. TechnipFMC did cooperate during the investigation. It provided the staff with the results of its investigation into its relationship with Intermediary Company including retaining accounting experts to identify payments to Intermediary Company, and provided supporting documentation requested. It also provided summary charts and downloads of employee interviews.
TechnipFMC’s remedial actions included: (i) separating employees who were primarily responsible for the conduct; (ii) implementing certain third party controls, including new financial controls, enhanced due diligence and prohibiting the use of certain third parties; and (iii) making improvements to its compliance program, including by increasing its headcount and adding experienced personnel in key positions, enhancing its ethics and compliance policies, and providing additional training for certain third parties and employees.”
As a condition of settlement, TechnipFMC agreed to report to the SEC “periodically during a three year term, the status of its remediation and implementation of compliance measures, particularly as to the areas of due diligence on prospective and existing third-party consultants and vendors, FCPA training and the testing of relevant controls including the collection and analysis of compliance data.”
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