Dutch-based SBM Offshore recently resolved an enforcement action in the Netherlands. With a settlement amount of $240 million, the SBM Offshore enforcement action is believed to be the third largest bribery enforcement action of 2014 with China’s $490 million enforcement action against GlaxoSmithKline and the U.S.’s $384 million enforcement action against Alcoa consisting of the top two.
The enforcement action was pursuant to Article 74 of the Dutch Penal Code, a provision of Dutch law that has been criticized by the OECD.
As stated by the OECD, Article 74 of the Dutch Penal Code “essentially involves the payment of a sum of money by the defendant to avoid criminal proceedings.” Regarding such out-of-court settlements, the OECD has further noted that “out-of-court settlements in the Netherlands do not require an admission of guilt.”
In its December 2012 Phase 3 review of the Netherlands, one of the follow-up items listed was: “the use of out-of-court transactions for foreign bribery offences, as governed by article 74 of the Dutch Penal Code, to ensure that they result in the imposition of effective, proportionate and dissuasive sanctions (Convention, Article 3.1).”
Regarding the SBM Offshore action, the Dutch Prosecutor’s Service announced:
“SBM Offshore has accepted an offer from the Dutch Public Prosecutor’s Service to enter into an out-of-court settlement. The settlement consists of a payment by SBM Offshore … of US$ 240,000,000 in total. This amount consists of a US$ 40,000,000 fine and US$ 200,000,000 disgorgement. This settlement relates to improper payments to sales agents and foreign government officials in Equatorial Guinea, Angola and Brazil in the period from 2007 through 2011 [...]. According to the [Dutch prosecutors] those payments constitute the indictable offences of bribery in the public and the private sector as well as forgery.”
According to the release, the reasons for the out-of-court settlement include:
- SBM Offshore itself brought the facts to the attention of the authorities …, SBM Offshore itself investigated the matter and agreed to fully cooperate with subsequent criminal investigations …;
- there has been a new Management Board since 2012;
- after it became aware of the facts, the newly established Management Board of SBM Offshore, at its own initiative, has taken significant measures to improve the company’s compliance; and
- as noted in SBM Offshore’s press release, the current Management Board and Supervisory Board regret the failure of control mechanisms in place in the past.
According to the release, “from 2007 to 2011, SBM Offshore paid approximately US$ 200 million in commissions to foreign sales agents for services. The largest part of these commissions totaling US $180.6 million, relate to Equatorial Guinea, Angola and Brazil.”
As to Equatorial Guinea, the release states:
“In early 2012, it came to SBM Offshore’s attention that one of its former sales agents might have given certain items of value to government officials in Equatorial Guinea. This reportedly involved one or more cars and a building. In the opinion of the Openbaar Ministerie and the FIOD, SBM Offshore’s former sales agent paid a significant portion of the commissions paid to him by SBM Offshore on to third parties, who in turn would have forwarded parts of these payments to one or more government officials in Equatorial Guinea. There also are other payments, such as education and health insurance costs. In the opinion of the [Dutch authorities], such (forwarded) payments took place with the knowledge of people who at the time were SBM Offshore employees, including someone who at the time was a member of the Management Board. From 2007 through 2011, SBM Offshore paid that particular sales agent USD 18.8 million in total in relation to Equatorial Guinea.”
As to Angola, the release states:
“In the period from 2007 through 2011, SBM Offshore also used several sales agents in Angola. These sales agents received commissions for services regarding certain projects in Angola. In the opinion of the [Dutch authorities], Angolan government officials, or persons associated with Angolan government officials, who are associated with at least one of these sales agents, received funds. In addition, there are payments for travel and study costs to one or more Angolan government officials or their relatives. Also with respect to Angola, the [Dutch authorities] are of the opinion that such payments took place with the knowledge of people who at the time were SBM Offshore employees. In the period from 2007 through 2011, SBM Offshore paid USD 22.7 million in commissions to its sales agents in connection with Angola.”
As to Brazil, the release states:
“With regard to Brazil, certain “red flags” relating to the main sales agent used in Brazil were found during the internal investigation commissioned by SBM Offshore. These red flags included:
- the high amounts (in absolute terms) of commission that were paid to the sales agent and its companies;
- a split between commissions paid to the sales agent between its Brazilian and its offshore entities; and
- documents indicating the sales agent had knowledge of confidential information about a Brazilian client.
The internal investigation conducted by SBM Offshore did not yield any concrete evidence that payments may have been made to one or more government officials in Brazil. In the period from 2007 through 2011, SBM Offshore paid USD 139.1 million in commissions to its sales agents in connection with Brazil.
A mutual legal assistance request in the context of the investigation conducted by the [Dutch authorities] established that payments were made from the Brazilian sales agent’s offshore entities to Brazilian government officials. These findings resulted from means of investigation inaccessible to SBM Offshore.”
The release states, under the heading “Further Investigation” as follows.
“It appears from the criminal investigation that certain natural persons have been involved in the criminal offences committed in the opinion of the [Dutch authorities]. In a case like the one at hand, the [Dutch authorities] has jurisdiction if criminal acts are committed in the Netherlands, or when criminal acts are committed abroad by persons with the Dutch nationality. From the current state of affairs of the investigation, this does not appear to be the case. The [Dutch authorities] will cooperate fully with the countries that have jurisdiction to prosecute the natural persons involved.”
In this release, SBM Offshore stated that “the United States Department of Justice has informed SBM Offshore that it is not prosecuting the Company and has closed its inquiry into the matter.”
The SBM Offshore release further states:
The settlement with the [Dutch authorities] is a result of the discussions between the [Dutch authorities] and SBM Offshore, which started after SBM Offshore voluntarily informed the [Dutch authorities] and the United States Department of Justice of its self-initiated internal investigation in the spring of 2012. The findings of the internal investigation were communicated in SBM Offshore’s press release of April 2, 2014. SBM Offshore fully cooperated with the [Dutch authorities] and the United States Department of Justice.
With its voluntary reporting of the internal investigation to the [Dutch authorities], the United States Department of Justice and the market in April 2012, SBM Offshore made it clear that it wants to conduct its business transparently. The Supervisory Board appointed a new Management Board that took office in the first half of 2012. The new Management Board has repeatedly stressed the importance of compliance inside and outside the organisation. The Company, with the assistance of its advisors, enhanced its anti-corruption compliance program and related internal controls. The Company shared these measures with the [Dutch authorities] and the United States Department of Justice. The measures include:
- the appointment of [a] Chief Governance and Compliance Officer, a newly created Management Board position;
- the appointment of a seasoned compliance professional as Compliance Director, another newly created position;
- the enhancement of anti-corruption related policies and procedures designed to ensure compliance by Company employees as well as third parties;
- at the inception of the internal investigation, a review of all sales agents who were active at that time;
- a decision to no longer use sales agents in those countries where the Company itself has a substantial presence;
- the enhancement of compliance procedures related to the retention of sales agents, other intermediaries and joint venture partners;
- the launch of a significant training effort for employees in compliance-sensitive positions;
- the enhancement of mechanisms to report potential wrongdoing;
- the enhancement of the Company’s internal financial controls related to anti-corruption compliance and internal audit processes; and
- disciplinary actions against employees who were involved in or had knowledge of possible improper payments, including termination of employment agreements.
Although the current Management Board and the Supervisory Board regret that in the past, SBM Offshore’s processes relating to the monitoring of its sales agents appeared to not have been of a standard that allowed SBM Offshore to ensure the integrity of the actions taken by its sales agents, SBM Offshore believes that with these measures it offers a transparent and open Company to its clients and other stakeholders.
In the release Bruno Chabas (CEO of SBM Offshore) stated:
“SBM welcomes the conclusion of all discussions with the Dutch and U.S. authorities. We have been open, transparent and accountable throughout this difficult process which has addressed issues from a past era. We can now focus on the future, secure in the knowledge that we have put in place an enhanced compliance culture which embeds our core values.”
To some, the lack of a DOJ enforcement action against SBM Offshore was a declination. However, such a conclusion implies that there was actually an FCPA enforcement action to bring against SBM Offshore.
Two points are relevant to this issue. First, as noted in this Global Investigations Review article, SBM Offshore’s outside counsel comments that the company disclosed to the Dutch authorities an the DOJ “before we had done much of the internal investigation.” Second, SBM Offshore could only be prosecuted for FCPA anti-bribery violations to the extent the conduct at issue had a U.S. nexus.