The DOJ announced yesterday (here) that “Bridgestone Corporation [a Japanese company that is the world's largest manufacturer of tires and rubber products] has agreed to plead guilty and to pay a $28 million criminal fine for its role in conspiracies to rig bids and to make corrupt payments to foreign government officials in Latin America related to the sale of marine hose and other industrial products manufactured by the company.”
Part conspiracy to violate the Sherman Act and part conspiracy to violate the FCPA, the FCPA portion of the criminal information (see here) alleges that Bridgestone conspired with others to “obtain and retain for Bridgestone’s IEPD [International Engineered Products Department] business million of dollars of sales of marine hose and other industrial products by making corrupt payments to foreign government officials in Latin America and elsewhere.” Among other things, the DOJ alleged that Bridgestone: (i) ”contracted with local sales agents in many of the Latin American countries where Bridgestone sought IEPD sales;” (ii) developed relationships with employees of the state-owned entities [PEMEX in Mexico is specifically mentioned] with which Bridgestone sought to do business;” (iii) “negotiated with employees of state-owned entities who were ‘foreign officials’ under the FCPA, in Mexico and other Lartin American countries, to make corrupt payments to those foreign officials to secure business for Bridgestone and BIPA [Bridgestone Industrial Products of America Inc. - Bridgestone's U.S. subsidiary];” (iv) “approved the making of corrupt payments to the foreign officials through the local sales agents to secure business for Bridgestone and BIPA;” (v) paid local sales agents commissions within which BIPA included corrupt payments to be paid to the foreign officials; (vi) “coordinated these corrupt payments in Latin America through Bridgestone’s agents in the United States located in BIPA’s offices, including in Houston, Texas; and (vii) “took steps to conceal these payments, including, in some instances writing ‘Read and Destroy’ on facsimiles that contained information related to the corrupt payments and, in other instances using verbal communication rather than written communication to avoid creating written record.”
As to jurisdiction against Bridgestone, the DOJ asserts 78dd-3 and merely alleges that e-mails or faxes were sent to or from Japan to the U.S. in connection with bribery scheme. Interestingly, in the Africa Sting case, Judge Leon – in the first judicial test of 78dd-3 jurisdiction – seemed to reject the notion that such conduct, in and of itself, satisfied 78dd-3′s “while in the territory of the U.S.” requirement. See here for the prior post.
According to this filing, it would appear that approximately 80% of the $28 million fine is for the FCPA conduct. The guidelines range for the antitrust conduct was $6.7 million - $13.4 million. The guidelines range for the FCPA conduct was $40 million – $80 million.
In other respects, the DOJ release states as follows. “Under the plea agreement, the department recognized Bridgestone’s cooperation with the investigations, including conducting a worldwide internal investigation, voluntarily making employees available for interviews, and collecting, analyzing and providing to the department voluminous evidence and information. In addition, the plea agreement acknowledges Bridgestone’s extensive remediation, including restructuring the relevant part of its business, terminating many of its third-party agents and taking remedial actions with respect to employees responsible for many of the corrupt payments. Under the terms of the plea agreement, Bridgestone has committed to continuing to enhance its compliance program and internal controls. As a result of these mitigating factors, the department agreed to recommend a substantially reduced fine.”
In a press release (here), Bridgestone [BSJ] noted as follows. “Since May 2007, the DOJ has been investigating BSJ’s involvement in international cartel activities relating to the sale of marine hose. The DOJ has also investigated improper payments to government officials through local sales agents focusing primarily on Latin America in connection with certain industrial products. BSJ has cooperated fully in this matter. The DOJ has agreed that BSJ’s cooperation has been ‘extraordinary’. The DOJ has also acknowledged that BSJ has engaged in extensive remediation including dismantling the International Engineered Products Department, closing its Houston office of Bridgestone Industrial Products of America, Inc., terminating many of its third party agents, and taking remedial actions with respect to its employees. BSJ has also decided to withdraw from the marine hose business.” The release further notes that the $28 million fine is a “significant reduction from the applicable sentencing guidelines due to BSJ’s cooperation and remediation efforts.”
Ordinarily, extraordinary cooperation, remediation, etc. allow a company to settle an FCPA enforcement action via a non-prosecution or deferred prosecution agreement. Yet, the two-crime nature of the Bridgestone enforcement action may have prompted the DOJ to insist on a plea agreement to actual criminal charges.
As noted in the DOJ release, in 2008 Misao Hioki, the former general manager of Bridgestone’s international engineered products department, pleaded guilty to antitrust and FCPA conspiracy charges. See here for that prior enforcement action.
Since April, Japanese companies have contributed approximately $248 million to the U.S. Treasury for violating the FCPA (recognizing that the Bridgestone action also contains an antitrust component). See here for the prior JGC Corporation enforcement action. Another Japanese company, Sojitz Corporation, is also reportedly the subject of an FCPA investigation in relation to conduct in Bahrain. See here for the prior post.
You ask, doesn’t Japan have its own “FCPA-like” law? Yes, it does; however there is no criminal liability for corporations under the law. To learn more see here.
Finally, the FCPA Blog reports (here) that Bridgestone has ADRs traded in the U.S. over the counter in the pink sheets. In the past, the SEC has asserted FCPA books and records and internal controls jurisdiction over a company based on such a listing. Given that DOJ and SEC enforcement actions are typically announced on the same day, and given nothing was announced yesterday by the SEC, it is further interesting that the SEC has apparently chosen to sit out the Bridgestone matter.