The decrease in FCPA enforcement has been a hot topic of late, for instance see here from the FCPA Blog.

Let me share a not-so-secret, secret and that is this.  FCPA enforcement 2007-2011 was, to a great extent, the function of just three unique events:  (1) publication in 2005 of the so-called Volcker Report on the United Nations Iraq Oil for Food Program which served as a ready-made list of enforcement actions; (2) in 2003 Georges Krammer, a former top official at Technip, shared information with French investigators concerning a $6 billion dollar project at Bonny Island, Nigeria; and (3) several oil and gas companies utilized the services of Panalpina.

These three unique events have resulted in approximately 35% of the core corporate FCPA enforcement actions between 2007-2011.

There have been 14 core corporate enforcement actions focused on Iraq Oil for Food conduct (Chevron, Azko Nobel, El Paso, Novo Nordisk, AGCO, ABB, Innospec, Ingersall-Rand, Textron, York, AB Volvo, Flowserve, General Electric and Fiat).  Siemens and Daimler also included Iraq Oil for Food conduct, but such conduct was a minor focus of the overall allegations and thus not included in the above figure.  In short, the Iraqi Oil for Food enforcement actions have largely run their course (one of the few remaining inquiries would seem to be Weatherford International where the conduct under investigation includes Iraq Oil for Food conduct).  [Note:  most of the Iraq Oil for Food enforcement actions involved "only" FCPA books and records and internal control charges given that the kickback payments were to the Iraqi government, not a particular foreign official.  Nevertheless such actions are usually included in FCPA enforcement statistics].

There have been 7 core corporate enforcement actions concerning oil and gas companies utilizing the services of Panalpina in Nigeria (Panalpina, Noble, Pride, Shell, Tidewater, Transocean, and Global SantaFe).  These actions, all announced in November 2010, largely account for the spike in 2010 corporate FCPA enforcement.

There have been 4 core corporate enforcement actions concerning the so-called TSKJ joint venture in relation to Bonny Island, Nigeria conduct (KBR / Halliburton, Technip, ENI/Snamprogetti, and JGC Corp.) [Throw in the 2012 enforcement action against Marunbeni and the number is 5].  These enforcement actions of course have not been mere garden-variety types; rather Bonny Island enforcement actions have resulted in 4 of the top 6 FCPA enforcement actions of all time.

Add these numbers together and you find that 25 of the 73 core corporate enforcement actions between 2007-2011 were the direct result of just three unique events.

Viewing FCPA enforcement statistics in the abstract is not a very useful exercise.  Rather, the more thoughtful way to view such statistics is to understand the root causes leading to the enforcement actions in the first place.  When viewed in this way, the not-so-secret, secret is that approximately 35% of FCPA enforcement actions between 2007-2011 were the direct result of just three unique events.  These events have largely run their course and I submit this is the biggest reason why enforcement actions in 2012 are not on pace with the past few years.

[Note - as discussed in previous posts, unlike some others, I keep my corporate FCPA statistics using the “core” approach.  Thus, for instance, the Siemens  enforcement action was 1 ”core” enforcement action even if the DOJ entered into separate agreements with Siemens AG, Siemens Argentina, Siemens Bangladesh, and Siemens Venezuela and even if the SEC separately brought an enforcement action against Siemens AG.  I submit that counting Siemens as 5 corporate enforcement actions, as many do, results in misleading FCPA enforcement statistics.  Further distorting FCPA enforcement statistics is separately counting related individual enforcement actions.  For instance, if one took such an approach in connection with Siemens the end result would be 20 enforcement actions - even though all enforcement actions were based on the same core set of conduct].

Albert Stanley (a former chairman and CEO of Kellogg, Brown & Root, Inc.) was sentenced to 30 months in prison, ordered to serve three years of supervised release and to pay $10.8 million in restitution to KBR, the victim of a separate kickback scheme Stanley engaged in;

Jeffrey Tesler (a U.K. citizen and agent of the TSKJ joint venture at the center of the bribery scheme) was sentenced to 21 months in prison, followed by two years of supervised release, and ordered to pay a $25,000 fine in addition to previously forfeiting approximately $149 million.

Wojciech Chodan (a U.K. citizen and former salesman at KBR’s U.K. subsidiary) was sentenced to 1 year of probation and ordered to pay a $20,000 fine in addition to previously forfeiting approximately $727,000.

The Bonny Island bribery conduct the defendants were charged in was massive in scope and involved a decade-long scheme to bribe Nigerian officials to obtain engineering, procurement and construction contracts at Bonny Island Nigeria valued at more than $6 billion.

As detailed in this previous post, the corporate Bonny Island bribery enforcement actions resulted in approximately $1.6 billion in DOJ/SEC fines and penalties.  The DOJ’s press release announcing the sentences states as follows.  “Today’s prison sentences for Mr. Stanley and Mr. Tesler mark another important step in our prosecution of those responsible for a massive bribery scheme involving engineering, procurement and construction contracts in Nigeria.  These sentences reflect not only the defendants’ illegal acts, but also their substantial cooperation with the government. As a result of this investigation, three individuals have been convicted of FCPA-related crimes, and five companies in four countries have paid substantial penalties and undertaken significant efforts to enhance their compliance programs.  This case shows the importance the department places on putting an end to foreign bribery.”

Two people that probably have not heard of last week’s Bonny Island bribery sentences are Joel Esquenazi and Carlos Rodriguez – two of the defendants in the Haiti Teleco enforcement action.  As noted in this prior post, in October 2011, Esquenazi was sentenced to 15 years in prison and Rodriguez was sentenced to 7 years in prison.

Was the conduct that Esquenazi and Rodriguez engaged in more egregious than the Bonny Island bribery conduct engaged in by Stanley, Tesler, and Chodan?

Not even close.  According to the DOJ, Esquenazi and Rodriguez participated in a scheme in which their employer, Terra Telecommunications Inc. paid $890,000 to shell companies to be used for bribes to Haiti Teleco officials to receive preferred telecommunications rates.

So what did Esquenazi and Rodriguez do to receive a significantly longer sentence than the defendants charged in connection with one of the largest bribery schemes ever under the FCPA?

Esquenazi and Rodriguez tested their innocence.  They exercised their constitutional right to a trial, put the DOJ to its burden of proof, and were convicted by a jury (their appeals are pending).

Professor Ellen Podgor notes in White Collar Innocence:  Irrelevant in the High Stakes Risk Game (here) as follows. “Our existing legal system places the risk of going to trial, and in some cases even being charged with a crime so high, that innocence and guilt no longer become the real considerations;” rather, “maneuvering the system to receive the least onerous consequences may ensure the best result for the accused party, regardless of innocence.”  In the article, Professor Podgor details several stories involving disparate criminal sanctions and states “the real moral of these stories is not whether the punishment was warranted, but rather the appropriateness of the level of risk that one has to take to proceed to trial, and the chilling effect of the high risk caused by the ―trial penalty.”  Podgor notes that “iinnocence becomes irrelevant as the real question becomes whether it is worth the risk of testing an innocence claim.”

Esquenazi and Rodriguez were found guilty by a jury.  However, the greatest factor in their sentences is likely that they tested their innocence.  In contrast, Stanley, Tesler, Chodan pleaded guilty and cooperated (although Tesler and Chodan did fight extradition for several years) and received substantially shorter sentences for engaging in much more egregious conduct.

Is this justice or is this merely knowing how to play a game?  Were Stanley, Tesler, and Chodan sentenced too lightly or were Esquenazi and Rodriguez sentenced too harshly?  What is the message sent to future FCPA individual defendants who might want to test their innocence?

If so, the final Bonny Island Bribery statistics are set forth below.  In terms of enforcement agency recoveries the statistics are as follows:  DOJ ($1.3 billion), SEC (400 million), U.K. SFO (11 million).  In addition, the Stanley plea agreement contemplates a $10.8 million in restitution to his former employer.

Some observations.  Of the four TSKJ joint venture partners (KBR, Technip, Samprogetti, and JGC Corp.) only KBR plead guilty to actual criminal charges.  The other three entities (all foreign) resolved alleged FCPA exposure via deferred prosecution agreements.  Of the four joint venture partners, only two (KBR and Technip) were required to engage a compliance monitor.  The two Japanese entities (JGC Corp. and Marubeni Corp.) did not receive a Sentencing Guidelines reduction for cooperation, the other entities did.  Of the five corporate enforcement actions, only two (KBR and Marubeni) involved criminal fine amounts within the guidelines range, the other three corporate enforcement actions involved criminal fines below even the minimum amount suggested by the Guidelines with a range of (30% below the Guidelines range to 20% below the Guidelines range).  Interestingly, JGC Corp., an entity that did not receive cooperation credit, received the “highest” reduction (30%) from the minimum guidelines range.

Because the DOJ’s resolution documents included specific figures for “value of benefit received from improper payments” it is possible to calculate a ratio between the value of benefit received based on improper conduct and the criminal fine amount.  The ratios are as follows.

KBR:  1 to 1.7

Technip: 1 to 1.2

Snamprogetti:  1 to 1.2

JGC Corp. 1 to 1.1

*****

Kellogg Brown & Root LLC / Halliburton Company / KBR Inc. (Feb. 2009)

Attorneys: Paul, Hastings, Janofsky & Walker LLP

DOJ

Entity: Kellogg Brown & Root LLC

Charges: Conspiracy to Violate the FCPA (1 Count), Substantive FCPA  Anti-Bribery Violation (4 Counts)

Resolution Vehicle: Criminal Information and Plea Agreement

Benefit Received From Improper Payments: $235.5 Million

Sentencing Guidelines Range: $376.8 Million – $753.6 Million

Amount of Fine: $402 Million

Monitor: Yes – Three Years

SEC

Entity: Halliburton Company, KBR Inc.

Charges: FCPA Books and Records and Internal Controls Violation (Halliburton Company), Substantive FCPA Anti-Bribery Violation, Aiding and Abetting Halliburton’s FCPA Books and Records and Internal Controls Violation, Knowingly  Falsifying Books and Records and Knowingly Circumventing Internal Controls (KBR  Inc.),

Disgorgement Amount: $177 Million

Technip S.A. (June 2010)

Attorneys: Patton Boggs LLP; Wachtell, Lipton, Rosen & Katz

DOJ

Charges: Conspiracy to Violate the FCPA (1 Count), Substantive FCPA Anti-Bribery Violation (1 Count)

Resolution Vehicle: Criminal Information and Deferred Prosecution Agreement (Term – 2 Years)

Value of Benefit Received From Improper Payments: $199 Million

Sentencing Guidelines Range: $318.4 Million – $636.8 Million

Amount of Fine: $240 Million (25% Below Minimum Guidelines Range)

Monitor: Yes – Two Years

SEC

Charges: Substantive FCPA Anti-Bribery Violation, FCPA Books and Records and Internal Controls Violation

Disgorgement Amount: $98 Million

Snamprogetti Netherlands BV, ENI S.p.A (July 2010)

Attorneys: Sullivan & Cromwell LLP

DOJ

Entity: Snamprogetti Netherlands BV

Charges: Conspiracy to Violate the FCPA (1 Count), Aiding and Abetting FCPA Anti-Bribery Violation (1 Count)

Resolution Vehicle: Criminal Information and Deferred Prosecution Agreement (Term 2 Years)

Value of Benefit Received From Improper Payments: $214.3 Million

Sentencing Guidelines Range: $300 Million – $600 Million

Amount of Fine: $240 Million (20% Below Minimum Guidelines Range)

Monitor: No

SEC

Entity: Snamprogetti Netherlands BV, ENI S.p.A.

Charges: Substantive FCPA Anti-Bribery Violation, Knowingly Falsifying Books and Records and Knowingly Circumventing Internal Controls (Snamprogetti Netherlands BV), FCPA Books and Records and Internal Controls Violation (ENI S.p.A.)

Disgorgement Amount: $125 Million

JGC Corporation of Japan (April 2011)

Attorneys: Latham & Watkins

DOJ

Charges: Conspiracy to Violate the FCPA (1 Count), Aiding and Abetting FCPA Anti-Bribery Violation (1 Count)

Resolution Vehicle: Criminal Information and Deferred Prosecution Agreement (Term 2 Years)

Value of Benefit Received From Improper Payments: $195.4 Million.

Sentencing Guidelines Range: $312.6 – $625.2

Amount of Fine: $218.8 Million (30% Below Minimum Guidelines Range)

Monitor: Yes

Marubeni Corporation  (January 2012)

Attorneys: Hughes Hubbard & Reed

DOJ

Charges: Conspiracy to Violate the FCPA (1 Count), Aiding and Abetting FCPA Anti-Bribery Violation (1 Count)

Resolution Vehicle: Criminal Information and Deferred Prosecution Agreement (Term 2 Years)

Value of Benefit Received From Improper Payments: $20 Million – $50 Million

Sentencing Guidelines Range: $54.6 Million – $109.2 Million

Amount of Fine: $54.6 Million

Monitor: Yes.

Albert Jackson Stanley (August 2008)

Attorney: Larry Veselka (Smyser, Kaplan & Veselka LLP)

DOJ

Charges: Conspiracy to Violate the FCPA (1 Count), Conspiracy to Commit Mail and Wire Fraud (1 Count)

Resolution Vehicle: Criminal Information and Plea Agreement

Plea Agreement Contemplates a $10.8 Million Restitution Order (the amount Stanley agreed the victim – his former employer – incurred as a monetary loss because of his conduct)

Plea Agreement Contemplates a Sentence of 84 months (subject to a downward departure for cooperation)

SEC

Charges: Substantive FCPA Anti-Bribery Violation, Knowingly Falsifying Books and Records and Knowingly Circumventing Internal Controls

Permanent Injunction

Jeffrey Tesler (March 2009)

Attorney: Bradley Simon (Simon & Partners LLP)

Charges: Conspiracy to Violate the FCPA (1 Count), Substantive FCPA Anti-Bribery Violations (10 Counts)

Resolution Vehicle:  Plea Agreement as to the Conspiracy Charge and One Substantive FCPA Anti-Bribery Violation.

Plea Agreement contemplates a $149 million forfeiture.

Plea Agreement Contemplates a Sentencing Guidelines Range of 10 Years.

Wojciech Chodan (March 2009)

Attorneys:  Kobre Kim LLP

Charges: Conspiracy to Violate the FCPA (1 Count), Substantive FCPA Anti-Bribery Violations (10 Counts)

Resolution Vehicle: Plea Agreement as to the Conspiracy Charge.

Plea Agreement Contemplates a $726,885 forfeiture.

Plea Agreement Contemplates a Sentencing Guidelines Range of 5 Years.

*****

In addition to the above U.S. enforcement actions, in February 2011, the U.K. Serious Fraud Office brought an enforcement action against M.W. Kellogg Limited (“MKWL”), the entity that originally formed the TSKJ consortium, in which it paid  “just over £7 million [approximately $11.2 million] in recognition of sums it is due to receive which were generated through the criminal activity of third parties.”  MKWL is currently a wholly-owned subsidiary of KBR.

In April 2011, JGC Corp. of Japan formally joined the Bonny Island (Nigeria) bribery club – see here for the prior post.  Some predicted this was the end of the Bonny Island enforcement actions, but I ended the post as follows.  “This may not be the last we hear of Bonny Island bribery. Consulting Company B (based in Japan) was a key participant in the bribery scheme. Does anyone know anything about Consulting Company B and whether it might be next to resolve its Bonny Island exposure? If so, please share.”

Yesterday, the DOJ shared as it announced (here) that Marubeni Corporation (a Japanese trading company headquartered in Tokyo) resolved an FCPA enforcement action  by agreeing to pay a $54.6 million criminal penalty.

As the DOJ trumpets in the headline of its release, the U.S. Bonny Island bribery intake now stands at $1.7 billion.  Previous enforcement actions were brought against the four TSKJ joint venture partners:  Kellogg Brown & Root LLC / Halliburton Co. / KBR Inc.  ($579 million in combined DOJ/SEC fines and penalties); Technip S.A. ($338 million in combined DOJ/SEC fines and penalties); Snamprogetti Netherlands BV / ENI S.p.A. ($365 million in combined DOJ/SEC fines and penalties); and JGC Corp. of Japan ($219 million in DOJ fines). In addition, as the DOJ notes in its release, is Jeffrey Tesler’s $149 million forfeiture, Wojciech Chodan’s $700,000 forfeiture, and Albert Jack Stanley’s guilty plea.

This post summarizes the Marubeni enforcement action, the first FCPA enforcement action of 2012.

The DOJ enforcement action involved a criminal information (here) against Marubeni Corporation resolved through a deferred prosecution agreement (here)

Criminal Information

The JGC enforcement action involved only a DOJ component. Total settlement amount was $218.8 million and the criminal charges (see here for the information) were resolved via a DOJ deferred prosecution agreement (here).

Criminal Information

The substance of the criminal allegations are the same as in the prior KBR, Technip, and Snamprogetti enforcement actions. That is, the TSKJ consortium, of which JGC was a member, was formed for purposes of bidding on and performing a series of engineering, procurement, and construction (“EPC”) contracts to design and build a liquefied natural gas plant on Bonny Island, Nigeria.

Tesler was hired by TSKJ to “help it obtain business in Nigeria, including by offering to pay and paying bribes to high-level Nigerian government officials” and Tesler “was an agent of TSKJ and of each of the joint venture companies.”

According to the information, TSKJ also hired “Consulting Company B” – a “global trading company headquartered in Tokyo” to help it “obtain business in Nigeria, including by offering to pay and paying bribes to Nigerian government officials” and “Consulting Company B was an agent of TSKJ and of each of the joint venture companies.”

Most of the allegations in the information focus on the conduct of the JGC’s alleged co-conspirators such as Stanley, Tesler, and Tesler’s corporate entity, Tri-Star Investments Ltd. As to U.S. nexus, the information alleges money flowing through U.S. based accounts “to bribe Nigerian government officials” and co-conspirators faxing or e-mailing information into the U.S. in furtherance of the bribery scheme.

Based on the above conduct, the information charges conspiracy to violate the FCPA’s anti-bribery provisions and aiding and abetting FCPA anti-bribery violations.

DPA

The DOJ’s charges against JGC were resolved via a deferred prosecution agreement.

Pursuant to the DPA, JGC admitted, accepted and acknowledged “that it is responsible for the acts of its employees, subsidiaries, and agents” as set forth above. As is typical in FCPA DPAs, JGC expressly agreed not to make any statements, directly or indirectly, “contradicting” the facts alleged.

The term of the DPA is two years and it states that the DOJ entered into the agreement based on the following factors.

“(a) after initially declining to cooperate with the Department based on jurisdictional arguments, JGC began to cooperate, and has agreed to continue to cooperate, with the Department in its ongoing investigation of the conduct of JGC and its present and former employees, agents, consultants, contractors, subcontractors, subsidiaries, and others relating to violations of the FCPA;

(b) JGC has undertaken remedial measures, including evaluating and enhancing its compliance program, and has agreed to undertake further remedial measures as contemplated by this Agreement; and

(c) the impact of JGC, including collateral consequences, of a guilty plea or criminal conviction.”

As stated in the DPA, the fine range for the above conduct under the U.S. Sentencing Guidelines was $312.6 million to $625.2 million. Pursuant to the DPA, JGC agreed to pay a monetary penalty of $218.8 million (30% below the minimum amount suggested by the guidelines). DPAs frequently then state why such a below-guidelines fine amount is “appropriate,” however the JGC DPA is silent as to this issue. Interesting also is that the conduct at issue took place between 1995 and 2004. Yet, the 2010 sentencing guidelines were used in calculating the fine rather than the 2003 guidelines that were used in the prior KBR, Technip, and Snamprogetti enforcement actions.

Pursuant to the DPA, JGC agreed to “engage a corporate compliance consultant.”

The DOJ release (here) states as follows. “With [the JGC] resolution, each of the four companies in the TSKJ joint venture, the former chairman of the U.S. joint venture partner, and several other individuals have now been held accountable for a massive conspiracy to bribe Nigerian government officials to obtain lucrative construction contracts.” “The approximately $1.5 billion in criminal and civil penalties that have been imposed on the members of the joint venture far exceed their profits from the scheme. Foreign bribery is a serious crime, and as this case makes clear, we are investigating and prosecuting it vigorously.”

Manny Abascal (Latham & Watkins – see here – a former DOJ enforcement attorney) represented JGC.

This may not be the last we hear of Bonny Island bribery. Consulting Company B (based in Japan) was a key participant in the bribery scheme. Does anyone know anything about Consulting Company B and whether it might be next to resolve its Bonny Island exposure? If so, please share.

The JGC enforcement action involved only a DOJ component. Total settlement amount was $218.8 million and the criminal charges (see here for the information) were resolved via a DOJ deferred prosecution agreement (here).

Criminal Information

The substance of the criminal allegations are the same as in the prior KBR, Technip, and Snamprogetti enforcement actions. That is, the TSKJ consortium, of which JGC was a member, was formed for purposes of bidding on and performing a series of engineering, procurement, and construction (“EPC”) contracts to design and build a liquefied natural gas plant on Bonny Island, Nigeria.

Tesler was hired by TSKJ to “help it obtain business in Nigeria, including by offering to pay and paying bribes to high-level Nigerian government officials” and Tesler “was an agent of TSKJ and of each of the joint venture companies.”

According to the information, TSKJ also hired “Consulting Company B” – a “global trading company headquartered in Tokyo” to help it “obtain business in Nigeria, including by offering to pay and paying bribes to Nigerian government officials” and “Consulting Company B was an agent of TSKJ and of each of the joint venture companies.”

Most of the allegations in the information focus on the conduct of the JGC’s alleged co-conspirators such as Stanley, Tesler, and Tesler’s corporate entity, Tri-Star Investments Ltd. As to U.S. nexus, the information alleges money flowing through U.S. based accounts “to bribe Nigerian government officials” and co-conspirators faxing or e-mailing information into the U.S. in furtherance of the bribery scheme.

Based on the above conduct, the information charges conspiracy to violate the FCPA’s anti-bribery provisions and aiding and abetting FCPA anti-bribery violations.

DPA

The DOJ’s charges against JGC were resolved via a deferred prosecution agreement.

Pursuant to the DPA, JGC admitted, accepted and acknowledged “that it is responsible for the acts of its employees, subsidiaries, and agents” as set forth above. As is typical in FCPA DPAs, JGC expressly agreed not to make any statements, directly or indirectly, “contradicting” the facts alleged.

The term of the DPA is two years and it states that the DOJ entered into the agreement based on the following factors.

“(a) after initially declining to cooperate with the Department based on jurisdictional arguments, JGC began to cooperate, and has agreed to continue to cooperate, with the Department in its ongoing investigation of the conduct of JGC and its present and former employees, agents, consultants, contractors, subcontractors, subsidiaries, and others relating to violations of the FCPA;

(b) JGC has undertaken remedial measures, including evaluating and enhancing its compliance program, and has agreed to undertake further remedial measures as contemplated by this Agreement; and

(c) the impact of JGC, including collateral consequences, of a guilty plea or criminal conviction.”

As stated in the DPA, the fine range for the above conduct under the U.S. Sentencing Guidelines was $312.6 million to $625.2 million. Pursuant to the DPA, JGC agreed to pay a monetary penalty of $218.8 million (30% below the minimum amount suggested by the guidelines). DPAs frequently then state why such a below-guidelines fine amount is “appropriate,” however the JGC DPA is silent as to this issue. Interesting also is that the conduct at issue took place between 1995 and 2004. Yet, the 2010 sentencing guidelines were used in calculating the fine rather than the 2003 guidelines that were used in the prior KBR, Technip, and Snamprogetti enforcement actions.

Pursuant to the DPA, JGC agreed to “engage a corporate compliance consultant.”

The DOJ release (here) states as follows. “With [the JGC] resolution, each of the four companies in the TSKJ joint venture, the former chairman of the U.S. joint venture partner, and several other individuals have now been held accountable for a massive conspiracy to bribe Nigerian government officials to obtain lucrative construction contracts.” “The approximately $1.5 billion in criminal and civil penalties that have been imposed on the members of the joint venture far exceed their profits from the scheme. Foreign bribery is a serious crime, and as this case makes clear, we are investigating and prosecuting it vigorously.”

Manny Abascal (Latham & Watkins – see here – a former DOJ enforcement attorney) represented JGC.

This may not be the last we hear of Bonny Island bribery. Consulting Company B (based in Japan) was a key participant in the bribery scheme. Does anyone know anything about Consulting Company B and whether it might be next to resolve its Bonny Island exposure? If so, please share.

In February 2009, Tesler (a former consultant to Kellogg, Brown & Root Inc. and its joint venture partners – Technip, Snamprogetti and JGC Corporation of Japan – in in the Bonny Island, Nigeria project) was charged via an 11 count indictment (1 count conspiracy to violate the FCPA and 10 counts of substantive FCPA violations) (see here) for his role in the massive Bonny Island, Nigeria bribery scheme.

According to the DOJ release announcing Tesler’s plea:

“Tesler admitted that from approximately 1994 through June 2004, he and his co-conspirators agreed to pay bribes to Nigerian government officials, including top-level executive branch officials, in order to obtain and retain the EPC contracts. The joint venture hired Tesler as a consultant to pay bribes to high-level Nigerian government officials and hired a Japanese trading company to pay bribes to lower-level Nigerian government officials. During the course of the bribery scheme, the joint venture paid approximately $132 million in consulting fees to a Gibraltar corporation controlled by Tesler and more than $50 million to the Japanese trading company. Tesler admitted that he used the consulting fees he received from the joint venture, in part, to pay bribes to Nigerian government officials.”

As part of his plea agreement (here), Tesler agreed to forfeit $148,964,568 to the U.S. – an amount which “represents proceeds traceable” to the charges Tesler pleaded guilty. The forfeiture amount is the largest individual forfeiture in the FCPA’s history. Tesler is to be sentenced on June 22, 2011.

In December 2009, Tesler’s co-defendant Wojciech Chodan pleaded guilty to conspiracy to violate the FCPA (see here for the prior post). Chodan faces a maximum penalty of 60 months in prison and as part of his plea agreement he agreed to forfeit $726,885. Chodan is to be sentenced on April 27, 2011.

Both Tesler and Chodan reported to KBR’s former CEO Albert Jack Stanley who pleaded guilty in September 2008 to conspiracy to violate the FCPA and conspiracy to commit mail and wire fraud (see here). Stanley’s plea agreement (here) contemplates a $10.8 million restitution payment and a sentence of 84 months.

For a summary of the corporate entities previously settling Bonny Island bribery charges see here. In January 2011, JGC (the remaining joint venture partner that has not yet settled) disclosed that it was in discussions with the DOJ to resolve its exposure via an agreement that would require it to pay approximately $218 million.

For additional coverage of Tesler’s plea see here from Bloomberg and here for certain questions raised by the FCPA Blog as to the forfeiture amount.

In February 2009, Tesler (a former consultant to Kellogg, Brown & Root Inc. and its joint venture partners – Technip, Snamprogetti and JGC Corporation of Japan – in in the Bonny Island, Nigeria project) was charged via an 11 count indictment (1 count conspiracy to violate the FCPA and 10 counts of substantive FCPA violations) (see here) for his role in the massive Bonny Island, Nigeria bribery scheme.

According to the DOJ release announcing Tesler’s plea:

“Tesler admitted that from approximately 1994 through June 2004, he and his co-conspirators agreed to pay bribes to Nigerian government officials, including top-level executive branch officials, in order to obtain and retain the EPC contracts. The joint venture hired Tesler as a consultant to pay bribes to high-level Nigerian government officials and hired a Japanese trading company to pay bribes to lower-level Nigerian government officials. During the course of the bribery scheme, the joint venture paid approximately $132 million in consulting fees to a Gibraltar corporation controlled by Tesler and more than $50 million to the Japanese trading company. Tesler admitted that he used the consulting fees he received from the joint venture, in part, to pay bribes to Nigerian government officials.”

As part of his plea agreement (here), Tesler agreed to forfeit $148,964,568 to the U.S. – an amount which “represents proceeds traceable” to the charges Tesler pleaded guilty. The forfeiture amount is the largest individual forfeiture in the FCPA’s history. Tesler is to be sentenced on June 22, 2011.

In December 2009, Tesler’s co-defendant Wojciech Chodan pleaded guilty to conspiracy to violate the FCPA (see here for the prior post). Chodan faces a maximum penalty of 60 months in prison and as part of his plea agreement he agreed to forfeit $726,885. Chodan is to be sentenced on April 27, 2011.

Both Tesler and Chodan reported to KBR’s former CEO Albert Jack Stanley who pleaded guilty in September 2008 to conspiracy to violate the FCPA and conspiracy to commit mail and wire fraud (see here). Stanley’s plea agreement (here) contemplates a $10.8 million restitution payment and a sentence of 84 months.

For a summary of the corporate entities previously settling Bonny Island bribery charges see here. In January 2011, JGC (the remaining joint venture partner that has not yet settled) disclosed that it was in discussions with the DOJ to resolve its exposure via an agreement that would require it to pay approximately $218 million.

For additional coverage of Tesler’s plea see here from Bloomberg and here for certain questions raised by the FCPA Blog as to the forfeiture amount.

Case(s) in point – the recent enforcement actions announced by the Serious Fraud Office against MK Kellogg Ltd. and Mabey & Johnson directors.

MK Kellogg Ltd.

Yesterday, the SFO announced (here) that M.W. Kellogg Limited (“MKWL”) has been ordered to pay “just over £7 million [approximately $11.2 million] in recognition of sums it is due to receive which were generated through the criminal activity of third parties.”

This SFO enforcement action has been expected for some time, as noted in this previous post from October 2009.

MKWL was the entity that originally formed the TSKJ consortium the focus of the Bonny Island bribery scandal. See this post for current enforcement statistics as to KBR/Halliburton, Technip, and Snamprogetti / ENI.

MKWL is currently a wholly-owned subsidiary of KBR and as noted in this previous post as well as KBR’s release (here) Halliburton has indemnification obligations to KBR in connection with the SFO enforcement action of “55% of such penalties, which is KBR’s beneficial ownership interest in MWKL.”

According to the SFO release, “the SFO recognized that MKWL took no part in the criminal activity that generated the funds” but that the “funds due to MKWL are share dividends payable from profits and revenues generated by contracts obtained through bribery and corruption undertaken by MWKL’s parent company and others.” The SFO release notes that “MWKL was used by the parent company and was not a willing participant in the corruption.”

As noted in the SFO release, the court order against MKWL was pursuant to the Proceeds of Crime Act 2002. What is the Proceeds of Crime Act? See this piece from John Rupp (Covington & Burling).

Richard Alderman, the Director of the SFO, stated in the release: “our goal is to prevent bribery and corruption or remove any of the benefits generated by such activities – this case demonstrates the range of tools we are prepared to use.”

Mabey & Johnson Directors

In July 2009, the SFO brought an enforcement action against Mabey & Johnson Ltd. (a U.K. company that designs and manufacturers steel bridges). The conduct at issue involved allegations (that the company voluntarily disclosed) that it sought to influence decision-makers in public contracts in Jamaica and Ghana between 1993 and 2001. The prosecution also involved breaches of United Nations sanctions in connection with the Iraq Oil for Food program.

It was the first ever prosecution against a U.K. company for overseas corruption. See here and here for the prior post.

On February 10th, the SFO announced (here) that “two former directors … of Mabey & Johnson Ltd. [Charles Forsyth and David Mabey] have been found guilty of inflating the contract price for the supply of steel bridges in order to provide kickbacks to the Iraqi government of Saddam Hussein.”

According to the release, at the time of the offense, Forsyth was the Managing Director of Mabey & Johnson and Mabey was the Sales Director. The release notes that Richard Gledhill, a Sales Manager for contracts in Iraq, previously pleaded guilty. According to the release, all individuals are to be sentenced on February 23rd.

The U.S. has prosecuted numerous companies in connection with Iraqi Oil-For-Food fraud. See here for such allegations in the ABB matter, here for such allegations in the Innospec matter, here for such allegations in the General Electric matter.

However, these prosecutions have generally been corporate only prosecutions with few related enforcement actions against individuals.

In just its single Mabey & Johnson prosecution, the SFO would appear to have prosecuted more individuals than the U.S. has in its approximately 15 Iraqi Oil for Food corporate enforcement actions combined.

In a disclosure earlier this week (here) the company stated:

“JGC and DOJ have been engaged in discussions about a potential resolution of the investigation relating to JGC. It was confirmed at the meeting of JGC’s board of directors held on January 31, 2011 that the Board has approved a potential resolution of the investigation. Based on this approval, JGC recognized a provision for the cost estimated for such a resolution, which will be appropriated as a financial loss in the 3rd Quarter Financial Result. The amount of such loss is 17.8 billion Japanese yen [approximately $218 million]“.

The expected JGC settlement would thus fall in the Top Ten FCPA enforcement actions of all time (see here for the FCPA Blog’s current list) and would bump the total amount of corporate fines and penalties U.S. authorities have collected in Bonny Island bribery cases to approximately $1.52 billion.

See here for my current Bonny Island bribery statistics.

How will JGC’s expected settlement affect KBR (a company, along with its current or former affiliated entities, that has already paid $579 million in U.S. fines and penalties in connection with Bonny Island)?

In early January, KBR announced (here) that it “completed the acquisition of the 44.94 percent share interest in M.W. Kellogg Limited (MWKL) previously held by JGC Corporation. With the completion of the transaction, MWKL, which was previously an affiliate of both companies since 1992, is again a wholly-owned KBR subsidiary.”

During a January 13th earnings call, Sue Carter (KBR – Senior VP and CFO) stated as follows:

“Also in regards to MWKL, included in the transaction is an estimate of JGC’s share of the ongoing [Serious Fraud Office] investigation. Any potential liabilities at this point are only estimated. Therefore any financial impact pending an actual outcome in the investigation will be trued up positive or negative.”

During the Q&A, William Utt (KBR – Chairman, President and CEO) was asked “can you tell us what kind of risks are structured in the MWKL deal? I mean, you have indemnification clauses for FCPA from Halliburton on your original stake. Do you have a similar clause with JGC?” He responded as follows: “Well I think the indemnification from Halliburton goes towards any financial penalties associated with the SFO investigation and as Sue commented, we’ve already factored that into the purchase price with JGC subject to a true-up.”

As Halliburton disclosed in its Oct. 22, 2010 10-Q filing, its indemnification obligations to KBR in connection with the SFO investigation “is limited to 55% of such penalties, which is KBR’s beneficial ownership interest in MWKL.”