Approximately 7-10 years ago, a U.K. corporation (#1) engaged in alleged improper conduct with alleged Brazilian officials largely through a Brazilian intermediary company with the assistance of an Italian agent. Approximately 7 years ago, a different U.K. corporation (#2) acquired U.K. corporation #1 and then approximately 4 years ago another U.K. corporation (#3) acquired U.K. corporation #2.
And then, the U.S. government brought an FCPA enforcement action against U.K. corporation #1 because, at one time, the company had shares traded on NASDAQ – even though in connection with the same core conduct the U.K. Serious Fraud Office and Brazil law enforcement also brought an enforcement action.
That pretty much sums up last Friday’s net $17.7 million FCPA enforcement action against Amec Foster Wheeler Energy, which was acquired by Amec Plc in 2014, which in turn, was acquired by John Wood Group Plc in 2017.
The enforcement action was the first corporate FCPA enforcement action of the Biden administration and closed the approximate six month gap in corporate FCPA enforcement.
This post summarizes the DOJ component (in which Foster Wheeler and Wood agreed to pay net $7.6 million) and the SEC component (in which the companies agreed to pay net $10.1 million).
In summary fashion, this criminal information alleges that during the relevant time period, Foster Wheeler Energy, through certain of its employees and agents, knowingly and willfully conspired and agreed with others to corruptly offer and pay bribes to, and for the benefit of, decision-makers at Petrobras (described as an entity in which the Brazilian government directly owned a majority of common shares with voting rights with additional shares controlled by the Brazilian Development Bank and Brazil’s Sovereign Wealth Fund) to secure an improper advantage in order to obtain and retain business from Petrobras in connection with … efforts to win an approximately $190 million contract from Petrobras to design a gas-to-chemical complex in Brazil called Complexo Gas-Quimico UFN-IV (UFN-IV).”
According to the information, Foster Wheeler through certain of its employees and agent “took acts in furthereance of the scheme while located in New York and Texas and Foster Wheeler earned at least $12.9 million in profits from the corruptly obtained business.”
According to the information:
“In furtherance of the scheme, among other things, 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.”
According to the information, Brazil Intermediary Company “submitted four quarterly payments to Foster Wheeler Energy and invoices for payment, none of which documented any meaningful work by Brazil Intermediary Company to justify the two percent commission.” The information further alleges that between June 2013 and October 2014 “Foster Wheeler Energy made four payments to Brazil Intermediary Company totaling approximately $1.1 million through a correspondent account at an American bank in New York and that the payments were credited to the Brazil Intermediary Company’s bank account in Brazil.”
Based on the above, the information charges conspiracy to violate the FCPA’s anti-bribery provisions. The charge was resolved through this three year deferred prosecution agreement. The DPA was based on the following “relevant considerations.”
“(a) the Company did not receive voluntary disclosure credit pursuant to the FCPA Corporate Enforcement Policy … or pursuant to the Sentencing Guidelines, because it did not voluntarily and timely self-disclose ….;
(b) 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.;
(c) the Company and Wood provided to the DOJ all relevant facts know to them, including information about the individuals involved in the conduct ….;
(d) Wood and its affiliates, including the Company, engaged in remedial measures, including: implementation of enhanced policies, procedures and internal controls relating to, among other things, anti-corruption compliance, including retention and management of commercial agents; enhancements to training and internal reporting programs; and undertaking employees actions based on its findings, which included terminating certain employees;
(e) Wood has enhanced and has committed to continuing to enhance its compliance program and internal controls … including ensuring that its compliance programs satisfies the minimum elements set forth in Attachment C to this agreement;
(f) based on the Company’s and Wood’s remediation and the state of Wood’s compliance program, and the Company’s and Wood’s agreement to report to the DOJ … the DOJ determined that an independent compliance monitor was unnecessary;
(g) the nature and seriousness of the offense conduct … including the Company’s involvement in a scheme to retain a corrupt sales agents to pay bribes to Brazilian government officials in exchange for assisting the Company with obtaining a contract from the government of Brazil, as well as the duration of the misconduct (from approximately 2011 to 2014) and the involvement of a high level executive of the Company;
(h) the Company has no prior criminal history;
(i) the Company has resolved with the SEC through an Order instituting cease and desist proceedings, relating to the conduct … and has agreed to pay $17,656,302 in disgorgement and $5,107,985 in pre-judgment interest;
(j) the Company is entering into a resolution with authorities in Brazil and the United Kingdom relating to the same conduct … which the DOJ is crediting in connection with the penalty in this Agreement;
(k) the Company has agreed to continue to cooperate with the DOJ …
(l) accordingly … the DOJ believes that the appropriate resolution in this case is a DPA with the Company; a criminal monetary penalty in the amount of $18,375,000 which reflects a discount of 25% off the bottom of the otherwise applicable Sentencing Guidelines fine range; and the Company’s and Wood’s agreement to report to the DOJ as set forth in Attachment D to this Agreement.”
The DOJ sets forth an advisory guidelines range of $24.5 – $49 million. Pursuant to the DPA, the Company agreed to pay a criminal penalty of $18,375,000 (“Total Criminal Fine”). Pursuant to the DPA, the DOJ agreed to “credit towards satisfaction of the Total Criminal Fine the amount the Company pays to authorities in Brazil, up to a maximum of $6,125,000 ….” and further agreed “to credit towards satisfaction of payment of the Total Criminal Fine the amount the Company pays to authorities in the United Kingdom, up to a maximum of $4,593,750 …”.
In the DOJ’s release, Acting Assistant Attorney General Nicholas McQuaid stated:
“Amec Foster Wheeler has now admitted to paying bribes in Brazil to win a lucrative contract. In the pursuit of profits, the company resorted to corruption, which distorts markets and undermines the rule of law. [This] resolution, including the financial penalty and agreement to enhance compliance, underscores the Department of Justice’s commitment to holding companies accountable when they break the law and to rooting out criminal misconduct.”
Acting U.S. Attorney Jacquelyn Kasulis for the Eastern District of New York stated:
“Amec Foster Wheeler conspired to pay bribes to officials in Brazil as part of a corrupt scheme to obtain a $190 million government contract and generate millions of dollars in profits. The defendant’s lengthy DPA and agreement to pay a penalty of more than $18 million demonstrate the commitment of this office to enforcing the anti-bribery provisions of the FCPA and holding companies like Amec Wheeler Foster accountable for its illegal conduct and corporate greed.”
Assistant Director in Charge Steven D’Antuono of the FBI’s Washington Field Office stated:
“[This] announcement demonstrates the FBI’s dedication to work with our international partners in the global effort to hold individuals and companies accountable who may believe corruption is the only way to do business. When companies like Amec Foster Wheeler attempt to cheat the system, it creates an uneven playing field for businesses who don’t pay bribes. This deferred prosecution agreement, which includes both a substantial criminal penalty and other provisions, should serve as a warning to companies that even using a third-party intermediary to pay bribes will not preclude them from being held responsible for international corruption.”
Based upon the same core conduct, the SEC released this administrative order which finds, in summary fashion:
“These proceedings arise out of a bribery scheme to obtain an oil and gas engineering and design contract in Brazil by respondent Amec Foster Wheeler Limited (“Amec Foster Wheeler”), formerly Foster Wheeler AG (collectively “Foster Wheeler”), a company that provided project, engineering, and technical services to energy and industrial markets in over 30 countries. From 2012 through 2014, Foster Wheeler’s UK subsidiary, Foster Wheeler Energy Limited (“FWEL”) made improper payments to Brazilian officials in connection with efforts to win a contract with the Brazilian state-owned oil company, Petróleo Brasileiro S.A. – Petrobras (“Petrobras”). The bribes were made through third party agents, including one agent who failed Foster Wheeler’s due diligence process for prospective sales agents, but was allowed to “unofficially” continue working on the project. Foster Wheeler, through FWEL, paid approximately $1.1 million in bribes in connection with the Brazilian contract. None of the improper payments were accurately reflected in Foster Wheeler’s books and records and it failed to have sufficient internal accounting controls in place to detect or prevent the misconduct. Foster Wheeler obtained a benefit of over $17.6 million. As a result of this conduct, Foster Wheeler violated the anti-bribery, books and records, and internal accounting controls provisions of the FCPA.”
Under the heading “Cooperation and Remediation,” the order finds:
“In determining to accept the Offer, the Commission considered remedial acts promptly undertaken by Respondent and cooperation afforded the Commission staff. 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.
Amec Foster Wheeler’s and Wood’s remedial efforts included termination of employees responsible for the misconduct and enhancements to its internal accounting controls. Amec Foster Wheeler, and subsequently Wood, strengthened its ethics and compliance organization; enhanced its code of conduct, policies and procedures regarding gifts and hospitality, and the use of third parties; created positions to address potential risks; and increased training of employees on anti-bribery issues.”
In the order, Foster Wheeler acknowledged that the SEC was not “imposing a civil penalty based upon the imposition of an $18.375 million criminal fine as part of the resolution with the DOJ.” The order further states:
“The disgorgement and prejudgment interest ordered … is consistent with equitable principles, does not exceed Respondent’s net profits from its violations, and returning the money to Respondent would be inconsistent with equitable principles. Therefore, in these circumstances, distributing disgorged funds to the U.S. Treasury is the most equitable alternative.”
The order further states:
“Respondent is liable to the U.S. Securities and Exchange Commission for disgorgement of $17,656,302 and prejudgment interest of $5,107,985, for a total of $22,764,287. Respondent shall receive a disgorgement offset up to (a) $9,105,714.80 based on the U.S. dollar value of any disgorgement paid to the Controladoria-Geral da Uniᾶo (“CGU”)/Advocacia-Geral da Uniᾶo (“AGU”) and the Ministério Publico Federal (“MPF”) reflected by evidence acceptable to the Commission staff in its sole discretion, in a parallel proceeding against Respondent in Federal Court in Brazil; and (b) $3,531,260.40 based on the U.S. dollar value of any disgorgement paid to the Serious Fraud Office reflected by evidence acceptable to the Commission staff in its sole discretion in a parallel proceeding against Respondent in the Crown Court in the United Kingdom. Such evidence of payment shall include a copy of the wire transfer or other evidence of the amount of the payment, the date of the payment, and the name of the government agency to which payment was made. To receive this offset, Respondent must make the above-identified payments within 30 days from the date of this Order. Any amounts not paid as an offset within the specified time shall be immediately due to the U.S. Securities and Exchange Commission. Respondent shall, within 30 days of the entry of this Order, pay disgorgement of $7,062,520.80 and prejudgment interest of $3,064,791 for a total payment of $10,127,311.80 to the Securities and Exchange Commission …”.
In the SEC’s release, Tracy Price (Deputy Chief of the SEC’s FCPA Unit) stated:
“Continuing to use an agent who presented a significant corruption risk so that Foster Wheeler could expand its business and win a contract in Brazil demonstrates a fundamental flaw in the corporate compliance program.”
Charles Cain (Chief of the SEC’s FCPA Unit) stated:
“The potential for a new market cannot be a siren’s song that overwhelms good corporate governance.”
Gibson Dunn attorneys Richard Grime, Lora MacDonald, and Michael Dziuban represented Foster Wheeler and Wood.
This release by John Wood Group Plc, announced “that agreements have been reached with the Serious Fraud Office (‘SFO’) in the UK, the Department of Justice (‘DOJ’) and Securities and Exchange Commission (‘SEC’) in the US, and the Ministério Público Federal (‘MPF’), the Comptroller General’s Office (‘CGU’) and the Solicitor General (‘AGU’) in Brazil, to resolve their respective bribery and corruption investigations into the past use of third parties in the legacy Amec Foster Wheeler business.”
As stated in the release:
“Under the terms of the agreements, the Company will pay compensation, disgorgement and prejudgment interest, fines and penalties totalling $177m. This will be phased over the next three years with approximately $62m payable in H2 2021, and the balance to be paid in instalments in 2022, 2023 and 2024. The amount and payment plan are as disclosed and provided for in Wood’s financial statements for the year ending 31 December 2020, published in March 2021.
The resolutions relate to historical conduct which occurred before Amec plc acquired Foster Wheeler AG in November 2014 and prior to the combined firm’s acquisition by Wood in October 2017. Wood cooperated fully with all authorities in their investigations, which is reflected in the cooperation credit that Wood received from the authorities in their respective resolutions.
In the UK, a three-year deferred prosecution agreement (‘DPA’) relating to the use of third-party agents for bribery and corruption in five countries by Foster Wheeler, has been agreed with the SFO and was the subject of a preliminary Crown Court hearing […]. Wood and the SFO will seek final judicial approval of the DPA from the Court on 1st July 2021.
Wood has also entered into a three-year DPA with the DOJ, a cease & desist order with the SEC, and leniency agreements with a term of 18 months with the CGU, AGU and MPF, all in relation to the historical use of third-party agents for bribery and corruption in connection with winning a project in Brazil.
Assuming that final judicial approval is received in the UK, it will officially conclude these investigations into the legacy Amec Foster Wheeler business.
Wood continually reviews and enhances its compliance programme to mitigate the risk of recurrence of similar conduct, and now prohibits the use of sales agents or similar unless required by law. In light of its remediation actions conducted to date and compliance improvements, none of the resolutions require the appointment of an independent compliance monitor but do include certain ongoing compliance obligations to the SFO, DOJ, and Brazilian authorities for the duration of the relevant agreements.”
In the release, Robin Watson (Wood CEO stated):
“The investigations brought to light unacceptable, albeit historical, behaviour that I condemn in the strongest terms. Although we inherited these issues through acquisition, we took full responsibility in addressing them, as any responsible business would. Since our acquisition of Amec Foster Wheeler, we have cooperated fully with the authorities and have taken steps to further improve our ethics and compliance programme from an already strong foundation. I’m pleased that, subject to final court approval in the UK, we have been able to resolve these issues and can now look to the future.”
Roy Franklin (Wood Chair) stated:
“The historical conduct that led to these investigations does not reflect the values of Wood that unite us as a global team. The resolutions underline why we attach such importance to upholding the highest standards of ethics and compliance in all parts of the world where we operate, and why we continue to invest in strengthening our governance in this area.”
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