Archive for the ‘Nigeria’ Category

Friday Roundup

Friday, April 11th, 2014

It’s a complex world, you ask – I answer, scrutiny alerts and updates, quotable, and for the reading stack.  It’s all here in the Friday Roundup.

It’s a Complex World

The world in which we live in is seldom simple and straight-forward.  This includes the so-called “fight” against corruption and bribery.  Regarding China’s “crackdown” on bribery, the BBC China Blog reports:

“Much has been written about China’s ongoing crackdown on corruption, but now one of the world’s biggest banks has put a price on it.  According to a report published by Bank of America Merrill Lynch this week, the Chinese government’s anti-graft campaign could cost the economy more than $100bn this year alone. [...]  Many of the micro effects of Xi Jingping’s anti-corruption drive have already been well documented of course; a slowdown in the restaurant trade for example, and a big dip in sales of luxury goods.  Over the past year or so, in Shanghai’s posh malls and boutique designer shops – once at the centre of the happy merry-go-round of official largesse and gift giving – you’ve almost been able to hear the sound of the weeping and gnashing of teeth. But the BofAML report suggests that the campaign is also having a significant and troubling macroeconomic effect.  Since early last year, it says, government bank deposits have been soaring, up almost 30% year on year. Even honest officials, the report suggests, are now so terrified of starting new projects, for fear of being seen as corrupt, that they’re simply keeping public funds in the bank.  [...] The report’s authors admit their calculations are a “back-of-the-envelope estimate of fiscal contraction”, but even if they are only half right it is an extraordinary amount of money and it highlights some of the challenges facing China’s anti-corruption crusader-in-chief, President Xi Jinping.”

Some-what related to the above topic, as noted in this Washington Times article:

“A key player in Nigeria’s emergence as Africa’s largest economy says U.S. companies are ceding investment opportunities to China and the Obama administration should do more to reverse the trend.  “The Obama administration has to focus more on Nigeria, said Prince Adetokunbo Sijuwade, whose family holds royal status in a vital corner of southern Nigeria and is invested heavily in transportation and oil infrastructures. “We feel that we can learn from the U.S. in terms of expertise. [...]  Prince Sijuwade speculated that several factors may have deterred U.S. investors in recent years, from concerns about government corruption to security. But he argued that allegations of widespread corruption in Nigeria are “overstated.”“Corruption is all over the world,” he said, noting potential U.S. investors’ fears of violating the Justice Department’s anti-corruption laws as an inhibiting factor on Nigerian investment.”

You Ask – I Answer

This op-ed poses the question “what’s driving pharma’s international bribery scandals?”

You ask – I answer.

A dubious and untested enforcement theory + extreme risk aversion because of potential exclusion from government sponsored healthcare programs + other typical reasons for why other companies face FCPA scrutiny, such as employees and third parties acting contrary to a company’s good-faith compliance policies and procedures = several FCPA enforcement actions against pharma and healthcare related companies.

Scrutiny Alerts and Updates

The Wall Street Journal reported earlier this week:

“GlaxoSmithKline PLC is investigating allegations of bribery by employees in the Middle East, according to emails reviewed by The Wall Street Journal, opening a new front for the company as it manages a separate corruption probe in China.  A person familiar with Glaxo’s Mideast operations emailed the U.K. drug company late last year and earlier this year to report what the person said were corrupt practices in Iraq, including continuing issues and alleged misconduct dating from last year and 2012. The emails cite behavior similar to Glaxo’s alleged misconduct in China, including alleged bribery of physicians. [...]  In an email, the person said Glaxo hired 16 government-employed physicians and pharmacists in Iraq as paid sales representatives for the company while they continued to work for the government. A government-employed Iraqi emergency-room physician has prescribed Glaxo products, even when they weren’t in the hospital’s pharmacy and a competitor’s brand was in stock, an email from the person said. Glaxo has been hiring government-employed Iraqi doctors as medical representatives and paying their expenses to attend international conferences, the person alleged in the emails. Glaxo pays other doctors high fees to give lectures in exchange for promoting and prescribing its drugs, the allegations continued. After Glaxo won a contract with the Iraqi Ministry of Health in 2012 to supply the company’s Rotarix vaccine, Glaxo paid for a workshop in Lebanon for Iraqi Ministry of Health officials, the email said. That included paying for a doctor’s family to travel to Lebanon “so it would be a family vacation for him at the hotel.”

As noted in the article, GSK has been under FCPA scrutiny since 2011 and GSK’s scrutiny China was the frequent focus of media attention last summer (see here for the prior post).

Quotable

Russel Ryan (King & Spalding and former high-ranking SEC enforcement attorney) hits a home run with this recent Wall Street Journal editorial titled:  ”When Regulators Think They Are Prosecutors.”  It states, in pertinent part:

“[A]dministrative agencies like the SEC were never intended to become arms of law enforcement. They were created to regulate, not prosecute. [...]  There are good constitutional reasons why agencies like the SEC were not born with this power to prosecute and punish. Prosecuting private citizens and companies is serious business. It’s a core executive branch function historically entrusted to the attorney general, a “principal Officer” subject to unfettered presidential control under Article II of the Constitution. [...]   [I]f policy makers insist on transforming the commission and similar agencies into quasi-criminal prosecutors with ever-increasing power to seek harsh punitive sanctions, those agencies should be brought under the stewardship of the attorney general or given cabinet rank with leaders who are removable at the president’s pleasure. Even that wouldn’t cure a second level of constitutional infirmity. Based mostly on precedent established before the SEC had any power to punish, courts have exempted SEC prosecutions from many bedrock due-process protections taken for granted in criminal cases. The presumption of innocence, for example, is largely meaningless because the SEC can win by a mere “preponderance of the evidence” rather than proof beyond reasonable doubt. The right to remain silent is equally hollow because courts let the SEC treat silence as evidence of guilt. For SEC defendants who can’t afford a good lawyer, tough luck, because there’s no right to have counsel appointed at government expense as there would be in a criminal prosecution. And even when the SEC loses after trial, double jeopardy doesn’t prevent it from trying to reverse the verdict or force a retrial, as it would a criminal prosecutor.  Dodd-Frank made things even worse by expanding the SEC’s ability to impose draconian financial penalties in administrative proceedings that have lax evidentiary rules, no jury trial, and limited judicial oversight.Basic constitutional safeguards should protect American citizens and businesses whenever a law-enforcement agency seeks to punish them for alleged wrongdoing, even in nominally civil proceedings. It’s time to incorporate those safeguards into an increasingly penal administrative prosecution system that is quickly sliding down a slick and constitutionally hazardous slope.”

For Ryan’s previous guest post on similar issues, see here.

Reading Stack

Certain of the conduct at issue in this week’s FCPA enforcement action against HP and related entities concerned alleged conduct in Poland.  This article from a Polish news service looks at what happens “when the dust settles.”

An insightful post on the Trace Blog from a former DOJ FCPA enforcement attorney who oversaw several monitors titled “Five Questions That can Keep Your Monitor From Running Away.”  Perhaps the best question though is: are monitors truly needed in many FCPA resolutions?  (See here and here for prior posts).

For your viewing enjoyment here, recently indicted Ukrainian businessman Dmytro Firtash (see here) has released a video which insists he is an innocent party caught at the center of a “battlefield for the two biggest global players of Russia and the USA”.

*****

A good weekend to all.

Of Note From The Bilfinger Enforcement Action

Wednesday, December 11th, 2013

This previous post went long and deep as to the Bilfinger enforcement action.  This post continues the analysis by highlighting additional notable issues.

Comprehensive “Core” Enforcement Action

The Bilfinger enforcement action of course was not a new action (although it is likely to be counted as such in FCPA Inc. statistics).

Rather, the enforcement action is directly related to several other previous enforcement actions and thus part of one “core” enforcement action.  As alluded to in the previous post, the core conduct at issue in the Bilfinger enforcement action – involving the Eastern Gas Gathering System (EGGS) project in Nigeria – has also been the focus, in whole or in part, in the following enforcement actions: Willbros Group (2008), James Tillery and Paul Novak (2008), Jason Steph (2007), and Jim Brown (2006).

This makes the ”core” EGGS FCPA enforcement action stand out in terms of its comprehensive nature in that the action targeted two joint venture participants (Bilfinger and Willbros), Willbros employees (Tillery, Brown and Steph) and Willbros’s consultant (Novak).  Another FCPA enforcement action involving conduct in connection with the Bonny Island, Nigeria project was similarly broad in its scope (see here), but few FCPA enforcement actions are.

The question remains, why did it take approximately 5.5 years from the 2008 Willbros enforcement action for the Bilfinger enforcement action to occur?  After all, Bilfinger was mentioned in the Willbros enforcement action as “a German construction company, a subsidiary or affiliate of a multinational construction services company based in Mannheim, Germany.”

Repeat – FCPA Settlements Have Come a Long Way in a Short Amount of Time

This recent post highlighted how FCPA settlement amounts have come a long way in a short amount of time and posed the question – have FCPA settlement amounts increased … just because?

Consider that the Bilfinger and 2008 Willbros enforcement action involved the same EGGS project.

The DOJ’s DPA in Willbros does not set forth a detailed advisory Sentencing Guidelines calculation as is the norm in most current FCPA DPAs, including the Bilfinger DPA, but the DOJ settlement amount in Willbros was $22 million.  This $22 million settlement amount was in connection with not only the EGGS project, but also DOJ allegations that ”certain Willbros employees based in South America agreed to make approximately $300,000 in corrupt payments to Ecuadoran government officials of the state-owned oil company PetroEcuador and its subsidiary, PetroComercial, to assist in obtaining the Santo Domingo project, which involved the rehabilitation of approximately sixteen kilometers of a gas pipeline in Ecuador, running from Santo Domingo to El Beaterio.”

The DOJ settlement amount in Bilfinger was $32 million and this action involved only the EGGS project.

Misc.

As a foreign company, the FCPA’s anti-bribery provisions apply to Bilfinger only to the extent a “means or instrumentality of interstate commerce” is used in connection with a bribery scheme.  Of note, in the Bilfinger information, the “means and instrumentality” used to support one substantive FCPA anti-bribery charge was a “flight from Houston, TX, to Boston, MA to discuss promised bribe payments.”

As a foreign non-issuer company, the most logical section of the FCPA anti-bribery provisions that Bilfinger would be subject to is dd-3 - “prohibited trade practices by persons other than issuers or domestic concerns.”

Yet, the DOJ information charges Bilfinger under dd-1 applicable to issuers and dd-2 applicable to domestic concerns.

For more on this aspect of the Bilfinger enforcement action, see here.

German Company Resolves FCPA Enforcement Action Based On Conduct From “The Distant Past”

Tuesday, December 10th, 2013

Approximately 8 years ago, a German company owned 80% of a German entity doing business in Nigeria.  The German entity doing business in Nigeria entered into a joint venture consortium agreement with subsidiaries of a Panamanian company.  The Panamanian company had principal places of business in the U.S. and had shares traded on the New York Stock Exchange.  The joint venture consortium allegedly made bribe payments to Nigerian officials.

The end result?

Why of course, $32 million dollars to the U.S. Treasury.

Yesterday, the DOJ announced (here) that “Bilfinger SE, an international engineering and services company based in Mannheim, Germany, has agreed to pay a $32 million penalty to resolve charges that it violated the Foreign Corrupt Practices Act by bribing [Nigerian] government … to obtain and retain contracts related to the Eastern Gas Gathering System (EGGS) project, which was valued at approximately $387 million.”

As noted in the DOJ’s release, the EGGS has been the focus, in whole or in part, in several prior enforcement actions against Willbros Group, Jim Brown, Jason Steph, James Tillery and Paul Novak.

The enforcement action involved a DOJ criminal information resolved via a deferred prosecution agreement.

Information

The information alleges that Bilfinger conspired with others “to obtain and retain contracts related to the EGGS project through the promise and payment of over $6 million in bribes to officials of [the Nigerian National Petroleum Corporation - NNPC], [National Petroleum Investment Management Services - a subsidiary of NNPC], the [dominant political party in Nigeria], an official in the executive branch of the Government of Nigeria, and others (collectively – the Nigerian Officials).”

According to the information, in 2003 Bilfinger ”agreed to create a joint venture with [Willbros West Africa, Inc. (WWA) and Willbros Nigeria Ltd. (WNL) - both subsidiaries of Willbros International Inc., a Panamanian corporation with principal places of business in the U.S. and with shares traded on the New York Stock Exchange] to bid on the EGGS contract and its optional scopes of work.”  In late 2003, [Bilfinger Berger Gas and Oil Services Nigeria Ltd. "BBGOS" - a German company based in Nigeria that was owned 80% by Bilfinger] and WWA/WNL executed a “Consortium Agreement” which formalized Bilfinger’s agreement to create a joint venture in connection with the EGGS project.”

According to the information, “Bilfinger and its coconspirators agreed that the EGGS Consortium would inflate the price of its bids for the EGGS project by 3% so it could cover the cost of paying bribes to Nigerian officials for their assistance in obtaining and retaining the EGGS project and its optional scopes of work.

The information alleges, among other things, that when other conspirators ”encountered difficulty obtaining money to make [their] share of the promised bribe payments to Nigerian officials,” Bilfinger agreed to those loan the other conspirators $1 million “with the understanding that the $1 million would be used to pay some of the promised bribe payments to Nigerian officials …”.

The information contains the following relevant jurisdictional allegations.

  • “[In 2004] WWA opened a bank account in the U.S. on behalf of the EGGS Consortium, in which payments for work conducted by the EGGS Consortium would be deposited and out of which payments would be made to BBGOS or WWA when authorized by both BBGOS and WWA.”
  • “[In 2005], Bilfinger Employee 1 [a German citizen] telephoned Bilfinger Employee 3 [a German citizen], who was in the United States, and asked Bilfinger Employee 3 to meet with Tillery in Boston, MA, to find out what payments had been promised to officials and whether [a relevant contract] was at risk because those payments had not yet been made.”
  • [In 2005], Bilfinger Employee 3 flew from Houston, TX, to Boston, MA, to meet with Tillery and inquire about the outstanding corrupt payments and the [relevant contract].”

Based on the above allegations, the information charges conspiracy to violate the FCPA’s anti-bribery provisions and two substantive FCPA anti-bribery charges.  The two substantive charges are based on (1) a 2005 “flight from Houston, TX to Boston, MA to discuss promised bribe payments,” and (2) a 2005 “wire transfer of $2,804,496 from Houston, TX to Frankfurt, Germany in connection with the EGGS contract.”

DPA

The charges against Bilfinger were resolved via a DPA in which the company admitted, accepted, and acknowledged that it was responsible for the acts of its officers, directors, employees, and agents as charged in the information.

The DPA has a term of three years and under the heading “relevant considerations” it states:

“The Department enters into this Agreement based on the individual facts and circumstances presented by this case and the Company.  Among the facts considered were the following:  (a) the Company’s cooperation with the Department, albeit at a late date, including interviewing relevant employees and disclosing the facts learned during those interviews to the Department, facilitating the Department’s interviews of foreign employees; (b) the Company’s remediation efforts, including terminating the employment of certain employees responsible for the corrupt payments and disciplining others, and enhancing its compliance program and internal accounting controls; (c) the Company’s committment to continue to enhance its compliance program and internal accounting controls …; and (d) the Company’s agreement to continue to cooperate with the Department in any ongoing investigation of the conduct of the Company and its officers, directors, employees, agents, and consultants relating to violations of the FCPA …”.

Pursuant to the DPA, the advisory Sentencing Guidelines range for the conduct at issue was $28 million to $56 million.  The DPA states that the monetary penalty of $32 million “is appropriate given the facts and circumstances of this case, including the Company’s cooperation and remediation in this matter.”

Pursuant to the DPA, Bilfinger agreed to review its existing internal controls, policies and procedures regarding compliance with the FCPA and other applicable anti-corruption laws.   The specifics are detailed in Attachment C to the DPA.  The DPA also requires Bilfinger to engage a corporate compliance monitor for ”a period of not less than 18 months from the date the monitor is selected.”  The specifics, including the Monitor’s reporting obligations to the DOJ, are detailed in Attachment D to the DPA.

As is common in FCPA corporate enforcement actions, the DPA contains a “muzzle clause” prohibiting Bilfinger or anyone on its behalf from “contradicting the acceptance of responsibility by the company” as set forth in the DPA.

Sidley Austin attorneys Thomas Green and Jeffrey Green represented Bilfinger.

In this press release (which the company had to consult with the DOJ before releasing) Bilfinger CEO stated:

“We are pleased that we have now been able to put these events from the distant past behind us. In recent years, Bilfinger has consistently expanded its compliance instruments and today has a modern and efficient system.”

Parker Drilling Resolves FCPA Enforcement Action Involving Conduct In Nigeria

Wednesday, April 17th, 2013

It’s been quite a week on the FCPA enforcement front.

On Monday, the DOJ announced (here) criminal obstruction of justice charges against “Frederic Cilins a French citizen [for] attempting to obstruct an ongoing investigation into whether a mining company paid bribes to win lucrative mining rights in the Republic of Guinea.”

Yesterday, it was reported (here) that former Siemens executive Uriel Sharef had, as expected, settled the SEC enforcement action against him by agreeing, without admitting or denying the SEC’s allegations, to pay a $275,000 penalty.  (See here for the prior post discussing the DOJ’s and SEC’s December 2011 charges against Sharef and others).

Yesterday, the DOJ announced (here) that criminal charges “have been unsealed against one current and one former executive of the U.S. subsidiary of a French power and transportation company for their alleged participation in a scheme to pay bribes to foreign government officials.”  The individuals are:

Frederic Pierucci (“a current company executive who previously held the position of vice president of global sales for the Connecticut-based U.S. subsidiary) “who was charged in an indictment unsealed in the District of Connecticut with conspiring to violate the Foreign Corrupt Practices Act (FCPA) and to launder money, as well as substantive charges of violating the FCPA and money laundering.”  According to the DOJ, Pierucci, a French national, was arrested Sunday night at John F. Kennedy International Airport.

David Rothschild (“a former vice president of sales for the Connecticut-based U.S. subsidiary”) who pleaded guilty on Nov. 2, 2012, to a criminal information charging one count of conspiracy to violate the FCPA.  The charges against Rothschild and his guilty plea were recently unsealed.

Future posts will explore in more detail each of the above developments.

Today’s post is about yesterday’s other FCPA development - the announcement of the long-expected enforcement action against Parker Drilling (a Houston-based oil drilling services company) for conduct in Nigeria.

As indicated in this DOJ release, the Parker Drilling action “stemmed from the DOJ’s Panalpina-related investigations.”

As detailed in this prior post, in November 2010, the DOJ and SEC announced coordinated FCPA enforcement actions against Swiss-based freight forwarder Panalpina and six oil and gas companies that utilized its services in connection with business in Nigeria.  The November 2010 enforcement action resulted in approximately $237 million in combined DOJ/SEC settlement amounts.  (For additional reading on these actions, please visit the CustomsGate tab under the search feature of this site or see here where all the prior actions are linked).  As noted in this prior statistical post, Panalpina-related enforcement actions are one, of just a few unique events, that have given rise to the majority of FCPA enforcements since 2007, and Panalpina-related enforcement actions significantly contributed to the “spike” in FCPA enforcement actions in 2010.

Total fines and penalties in the Parker Drilling enforcement action were approximately $15.9 million (approximately $11.8 million in the DOJ enforcement action and approximately $4.1 million in the SEC enforcement action).

This post summarizes the DOJ’s and SEC’s allegations and resolution documents.

DOJ

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

Criminal Information

Parker Drilling operated oil-drilling rigs in Nigeria owned by Parker Drilling (Nigeria Limited), a Nigerian entity and wholly-owned subsidiary of Parker Drilling Offshore International, Inc., (a Cayman Islands corporation wholly-owned by Parker Drilling).  According to the information, “Parker Drilling ceased drilling operations in Nigeria in 2006″ and the conduct at issues focused on two issues or events that occurred between 8 to 12 years ago.

First, the information, like the prior Panalpina-related enforcement actions, alleged conduct in connection with obtaining temporary importation permits (TIPs) in Nigeria for oil-drilling rigs.  The information alleges that in 2001, Parker Drilling retained Panalpina to “obtain TIPs and TIP extensions on Parker Drilling’s behalf.  According to the information, between 2001 and 2002:

“Panalpina obtained new TIPs for Parker Drilling’s rigs by submitting false paperwork on Parker Drilling’s behalf to avoid the time, cost, and risk associated with exporting the rigs and re-importing them into Nigerian waters (a process that Panalpina referred to as the ‘paper process’ or ‘recycling.’).  Panalpina created and caused to be presented to Nigerian officials documents that reflected that the rigs had been physically exported and re-imported.  In reality, the drilling rigs never left Nigerian waters.”

Second, and more significant in terms of the conduct alleged in the information, the DOJ alleges conduct in relation to the Nigerian ”Panel of Inquiry for the Investigation of All Cases of Temporary Import Permits Issued Between 1984 to Year 2000″ (the “TI Panel”).  According to the information, the TI Panel was “presidentially appointed, operated under the auspices of the Nigerian President’s Office, and possessed the power to issue subpoenas and levy fines” in connection with certain duties and tariffs that the Nigerian Customs Service (“NCS”) collected or failed to collect between 1984 and 2000.

As to the TI Panel, the information alleges that beginning in 2002 the TI Panel began reviewing Parker Drilling.  According to the information, thereafter Parker Drilling engaged Nigeria Outside Counsel (a Nigerian citizen based in Nigeria who advised Parker Drilling on customs and other matters in Nigeria) and a Nigeria Agent (a Nigerian and British citizen based in the U.K. to assist Parker Drilling in connection with customs matters in Nigeria) who represented Parker Drilling before the TI Panel.

The information alleges that in 2004 “the TI Panel concluded that Parker Drilling had violated [Nigerian law] with respect to several of its TIPS” and that the “TI Panel assessed a fine of $3.8 million against Parker Drilling.”  The information then outlines a “bribery scheme,” that resulted in the TI Panel reducing Parking Drilling’s fine ”to just $750,000.”

In connection with this ”bribery scheme,” the information alleges conduct as to Employee A (a U.S. citizen based in Nigeria who, during the relevant time period, was the General Manager of Parker Drilling’s operations in Nigeria); Employee B (a U.S. citizen based in Nigeria who also was a General Manager of Parker Drilling’s Operations in Nigeria); Executive A (a U.S. citizen based in Houston who performed financial and compliance functions for Parker Drilling between 2002 through 2005); Executive B (a U.S. citizen based in Houston who performed a legal function for Parker Drilling); U.S. Outside Counsel (a U.S. citizen and partner in a U.S. law firm who served as Parker Drilling’s outside counsel who provided legal and business advice to Parker Drilling on customs and other issues in Nigeria).

Specifically, the information alleges that U.S Outside Counsel suggested that Parker Drilling retain the Nigeria Agent to resolve its Nigerian customs issues even though Nigeria Agent’s “resume, which U.S. Outside Counsel provided to Parker Drilling, did not reflect any past experience in Nigeria or handling customs issues.”  According to the information, Parker Drilling “conducted no additional due diligence into Nigeria Agent’s qualifications.”

The information alleges that “with one exception, Parking Drilling paid Nigeria agent indirectly through the U.S.-based law firm” and that “Executives A and B paid and caused to be paid all of Nigeria Agent’s expenses without receiving any invoices particularly describing the expenditures’ purposes.”   According to the information, many of expenses related to food, entertainment, social events and the like and the information alleges various meetings the Nigeria Agent had with various Nigerian foreign officials.

The information further alleges that Parker Drilling’s treasurer informed Executive B “that the lack of invoices could raise an issue in Parker Drilling’s ongoing Sarbanes Oxley audit.”  Thereafter, the information alleges, the Nigeria Agent sent an invoice and that Executive B “accepted the invoice and retained it in Parker Drilling’s files, knowing that the invoice did not accurately reflect the true purpose of Parker’s Drillings” prior payments to the Nigeria Agent.

The information then states as follows.  “All told, Parker Drilling transferred and caused to be transferred to Nigeria Agent approximately $1.25 million to address Parker Drilling’s TI Panel issues” and that “Nigeria Agent succeeded in reducing Parker Drilling’s TI Panel Fines.”

Based on the above conduct, the information charges one count of violating the FCPA’s anti-bribery provisions.  Although the above Panalpina-related allegations are incorporated by reference into the paragraphs charging the FCPA violation, the information specifically identifies only the TI Panel conduct and states as follows.  “Parker Drilling made and cause to be made from the United States … a series of payments totaling approximately $1.25 million to Nigeria Agent, knowing that all or a portion of those payments would be given or used to procure goods and services that were to be given to a foreign government official in return for the diminution of a lawfully assessed fine.”

Deferred Prosecution Agreement

The above charge against Parker Drilling was resolved via a DPA in which Parker Drilling admitted, accepted, and acknowledged that it was responsible for the acts of its officers, directors, employees and agents as charged in the information.

The DPA has a term of three years and under the heading “relevant considerations” it states as follows.

“The Department enters into this Agreement based on the individual facts and circumstances presented by this case and the Company.  Among the facts considered were the following:  (a) the Company’s cooperation, including conducting an extensive internal investigation and collecting, analyzing, and organizing voluminous evidence and information for the Department; (b) the Company has engaged in extensive remediation, including ending its business relationships with officers, employees or agents primarily responsible for the corrupt payments, enhancing its due diligence protocol for third-party agents and consultants, increasing training and testing requirements, and instituting heightened review of proposals and other transactional documents for all the Company’s contracts; (c) the Company has retained a full-time Chief Compliance Officer and Counsel who reports to the Chief Executive Officer and Audit Committee, as well as staff to assist the Chief Compliance Officer and Counsel; (d) the Company has already significantly enhanced and is committed to continue to enhance its compliance program and internal controls, including ensuring that its compliance program satisfies the minimum elements set forth [elsewhere in the DPA]; (e) the Company has implemented a compliance-awareness improvement initiative and program that includes issuance of periodic anti-bribery compliance alerts; (f) the Company has already implemented many of the elements described [elsewhere in the DPA]; and (g) the Company has agreed to continue to cooperate with the Department in any ongoing investigation …”.

Pursuant to the DPA, the advisory Sentencing Guidelines range for the conduct at issue was $14.7 million to $29.4 million.  The DPA then states as follows.

“The Company agrees to pay a monetary penalty in the amount of $11,760,000, an approximately 20% reduction off the bottom of the fine range [...].  The Company and the Department agree that this fine is appropriate given the facts and circumstances of this case, including the Company’s cooperation, extensive remediation, committment to continue to enhance its compliance program, and culpability relative to other companies examined in this investigation.”

During the period of the DPA, Parker Drilling will have annual reporting obligations to the DOJ concerning its remediation and implementation of various compliance measures.  As is typical in FCPA DPAs, Parker Drilling also agreed to a ”muzzle clause” (see this prior post for more information).

SEC

In a related enforcement action based on the same core conduct, the SEC brought a civil complaint (here) against Parking Drilling.

The introductory paragraph of the complaint states as follows.

“This matter involves violations of the Foreign Corrupt Practices Act (“FCPA”) by Defendant Parker Drilling Company.  In 2004, through its outside counsel, Parker Drilling retained a Nigerian agent to assist the company with customs disputes related to the importation of its drilling rigs into Nigeria. During the course of the agent’s work, two Parker Drilling executives knowingly paid the agent large sums of money through its outside counsel for, among other things, the “entertainment” of Nigerian foreign officials in an effort to obtain their influence in resolving the customs disputes.”

The SEC complaint also contains a paragraph with the same general Panalpina-related allegations as alleged in the DOJ’s criminal information.

Under the heading “Remedial Efforts” the complaint states as follows.

“Parker Drilling demonstrated significant cooperation and conducted an extensive internal investigation. Since the time of the conduct noted in this Complaint, Parker Drilling has made significant enhancements to its global anti-corruption compliance program, including: retaining a full-time Chief Compliance Officer and Counsel who reports to the Chief Executive Officer and Audit Committee and full-time staff to assist him; enhancing anti-corruption due diligence requirements for relationships with third parties; increasing compliance monitoring and corporate auditing specifically tailored to anti-corruption; implementing a compliance awareness initiative that includes issuance of periodic anti-bribery compliance alerts; enhancing financial controls and governance; and expanding anti-corruption training throughout the organization.”

Based on the above conduct, the SEC charged an FCPA anti-bribery violation and an FCPA books and records and internal controls violation.  Other than restating the language of the books and records and internal controls provisions, the SEC complaint does not contain any specific allegations concerning these charges.

As noted in this SEC release, Parker Drilling agreed to pay disgorgement of 3,050,00 plus pre-judgment interest of $1,040,818, and consented to the entry of a final judgment permanently enjoining it from future FCPA violations.

Mitchell Ettinger, Saul Pilchen and Stephanie Cherny (Skadden, Arps) represented Parker Drilling.

Parker Drilling in this release stated as follows.

“After an extensive investigation, with which we fully cooperated, we are pleased to have reached agreement with the DOJ and the SEC, and we will continue to maintain a vigorous FCPA compliance program, to emphasize the importance of compliance and ethical business conduct, and to enhance our compliance efforts.”

Parker Drilling had previously disclosed that the DOJ and SEC’s investigations concerned “certain of our operations relating to countries in which we currently operate or formerly operated, including Kazakhstan and Nigeria.”

Friday Roundup

Friday, December 21st, 2012

Better late than never, Judge Leon pulls a Judge Rakoff, Edmonds sentenced, it’s official, whistleblower statistics, it ought to stop marketing, China related issues, ICE melted quickly, and a U.K. enforcement action.  It’s all here in the Friday roundup.

The Foreign Corrupt Practices Act Under The Microscope

Academic publishing is seldom quick. Yet before the calendar flips into another year, I am pleased to share my article concerning 2011 FCPA enforcement.  The abstract of ”The Foreign Corrupt Practices Act Under The Microscope” (see here to download) recently published in the University of Pennsylvania Journal of Business Law is as follows.  Information in the article is current as of January 16, 2012.

For most of the Foreign Corrupt Practices Act’s history, key decisions concerning its scope and enforcement were made behind closed doors around conference room tables in Washington, D.C. The FCPA took on a life of its own and, in many instances, the statute came to mean whatever the DOJ or SEC could get putative corporate FCPA defendants (mindful of the consequences of actual prosecuted charges) to agree to behind those closed doors. However, as the enforcement agencies continued to push the envelope on enforcement theories and practices, and as the DOJ brought more individual FCPA enforcement actions, including through manufactured sting operations, business entities and individuals alike began to openly fight back. While many FCPA enforcement decisions and procedures remain opaque, 2011 witnessed the most intense year of public scrutiny in the FCPA’s history. This Article (i) provides an overview of 2011 FCPA enforcement and discusses certain problematic enforcement trends, and (ii) highlights how in 2011 the FCPA was subjected to the most meaningful public scrutiny in its history. FCPA enforcement trends and scrutiny demonstrate that as the FCPA nears its thirty-fifth year, basic legal and policy questions remain as to the purpose, scope, and effectiveness of the FCPA.

Start your collection of FCPA Year in Reviews.  For my 2011 (short version), see here.  For 2010, see here (short version), here (long version).  For 2009, see here (long version).

Judge Leon Pulls a Judge Rakoff

My post concerning the SEC’s March 2011 enforcement action against IBM was titled “Questions Abound in IBM Enforcement Action.”  (See here).  Among the issues I discussed were the following.  That in December 2000, IBM resolved an FCPA enforcement action and consented, as part of the settlement, to the entry of an Order that requires IBM to cease and desist from committing or causing any future violation of [the FCPA's books and records provisions].  I noted that because the March 2011 enforcement action alleged FCPA books and records charges, that IBM was thus in clear violation of the 2000 court order.

The case was assigned to Judge Richard Leon (of Africa Sting fame) and lingered for a long time.  This Wall Street Journal Corruption Currents post and this Bloomberg article report that Judge Leon has refused to approve the settlement.

As stated by Bloomberg – “The heart of the dispute is that Leon, who has had the case under review for 22 months, wants reporting on a broader range of possible wrongdoing than the company is willing to turn over.  Leon, who spoke loudly and angrily, asked why the regulator would agree to limit such requirements for a company with a history of books-and-records violations. [...]   “I guess you want that $10 million judgment on your list of achievements this year,” Leon told [the SEC lawyer]. “Well, it’s not going to happen.”  He scheduled a hearing for Feb. 4.”

As stated by Wall Street Journal Corruption Current – “Leon also questioned broader SEC settlement policies and warned that he was among “a growing number of district judges who are increasingly concerned” by those policies.”

In not ”rubber stamping” the SEC – IBM settlement, Judge Leon pulled a Judge Rakoff.  Judge Rakoff of the S.D. of N.Y. has been a frequent focus on this site – see here, here, here and here.  See also, the discussion of Judge Rakoff in my 2010 article “The Facade of FCPA Enforcement.”

Edmonds Sentence

This past June, David Edmonds, a defendant in the long-running “Carson” enforcement action involving former employees of Control Components Inc., agreed to plead guilty on the eve of trial to substantially reduced charges. (See here for the prior post).  Earlier this week, Judge James Selna sentenced Edmonds to four months in prison and four months of home confinement.  (See here for Judge Selna’s sentencing memo).  As noted in the DOJ’s sentencing memo (here), the DOJ sought a 14 month prison sentence.

Other defendants previously sentenced in the case are Stuart Carson (4 months in prison followed by 8 months of home detention), Hong Carson (3 years probation to include 6 months of home detention) and Paul Cosgrove (13 months home detention).

It’s Official

Imagine a foreign country in which the president is actively seeking and accepting corporate money to fund inaugural festivities.  All sorts of red flags right?

But wait, this describes the United States and President Obama’s upcoming inauguration.  As detailed in this prior post, President Obama’s fundraising advisers “have urged the White House to accept corporate donations for his January 2013 inaugural celebration rather than rely exclusively on weary donors who underwrote his $1 billion re-election effort.”

It’s now official.  As noted by this recent New York Times article “President Obama’s finance team is offering corporations and other institutions that contribute $1 million exclusive access to an array of inaugural festivities.”  As noted in the article, Obama’s finance team is offering four different packages “with differing levels of access depending on the level of contribution.”

Our FCPA enforcement agencies are bringing enforcement actions against companies for conduct that includes providing $600 bottles of wine, Cartier watches, cameras, kitchen appliances, business suits, and executive education classes to individuals employed by foreign companies that are allegedly state-owned or state-controlled.  (These are all allegations found in recent FCPA enforcement actions).

But remember, as Assistant Attorney General Lanny Breuer recently declared (see here), “we in the United States are in a unique position to spread the gospel of anti-corruption.”

Whistleblower Statistics

The Dodd-Frank Act enacted in July 2010 contained whistleblower provisions applicable to all securities law violations including the Foreign Corrupt Practices Act.  In this prior post from July 2010, I predicted that the new whistleblower provisions would have a negligible impact on FCPA enforcement.  As noted in this prior post, my prediction was an outlier (so it seemed) compared to the flurry of law firm client alerts that predicted that the whistleblower provisions would have a significant impact on FCPA enforcement.

So far, there have not been any whistleblower awards in connection with FCPA enforcement actions.  Given that enforcement actions (from point of first disclosure to resolution) typically take between 2-4 years, it still may be too early to effectively analyze the impact of the whistleblower provisions on FCPA enforcement.

Whatever your view, I previously noted that the best part of the new whistleblower provisions were that its impact on FCPA enforcement can be monitored and analyzed because the SEC is required to submit annual reports to Congress.  Last month, the SEC released (here) its annual report for FY2012.

Of the 3,001 whisteblower tips received by the SEC in FY2012, 3.8% (115) related to the FCPA.  As noted in this similar post from last year, in FY2011 (a partial reporting year)  3.9% of the 334 tips received by the SEC related to the FCPA.

It Ought to Stop Marketing

In this previous post titled “It Ought to Stop” I focused on the FCPA conference industry and how conference firms drive attendance to their events by touting the public servants who will speak at the event.

Here is how conference firm C5 touts its upcoming conference in a press release (here).

Ask the U.S. DOJ and U.S. SEC directly how your company can remain compliant

Hear the latest on the newly released FCPA guidance. Along with the U.S. Securities & Exchange Commission’s, Charles E. Cain, the Deputy Chief of the FCPA Unit, Enforcement Division, we will have Matthew S. Queler, from the Criminal Division at the U.S. Department of Justice, presenting comprehensive, insightful and practical details of the U.S. government’s interpretation of the guidance, and highlight recent examples designed to help prevent future violations.  Their session at 14:00 on Day 1, will help you navigate the ever evolving markets and recognize the current enforcement trends; giving you the tools to reanalyse risk profiles and minimize areas of exposure. Finally, to top off the hour you will be given an exclusive opportunity to have your FCPA questions answered. The only way to obtain answers directly from the U.S. DOJ and U.S. SEC is to register for this forum!

The event, depending when you register and which package you select, costs between €4341 – €1795.

It ought to stop.

China Related Issues

An occassional topic of discussion on this site is Chinese state-owned enterprises (SOEs) and how such companies are frequently doing business outside its borders, including here in the U.S. (See here, here, and here for prior posts).

Wall Street Journal Columnist Dennis Berman “hit the nail on the head” in his recent column when he noted that one of “the most intriguing business stories of the past month has been taking place in San Francisco, where a group of U.S. developers is planning the biggest real-estate expansion there since the 1906 earthquake. The group—which includes Lennar Corp., Ross Perot Jr. and others —isn’t getting financing from an American bank or pension fund. No, the money, some $1.7 billion of it, is coming from the China Development Bank, a policy arm of the Chinese state.  As Berman further notes, a financing contingency is that China Railway Construction Corp. – a state-owned infrastructure builder with roots in the People’s Liberation Army—take part in the projects, which will develop up to 20,000 new homes.

Another occasional topic of discussion on this site is how Chinese companies are listing shares on U.S. exchanges and thus becoming “issuers” for purposes of the FCPA.  (See here for a prior post).  A core FCPA enforcement action of a Chinese issues has never occurred, but I predict it will some day – diplomatic and foreign policy issues aside.  Only now, the universe of potential targets is shrinking.  As noted in this recent Wall Street Journal article, several Chinese companies have delisted from U.S. exchanges.  The article provides the following information.  “At the peak, at year-end 2010, 167 Chinese companies were listed on Nasdaq and 99 on the NYSE. That compares with 84 China-based companies on NYSE and 129 on Nasdaq as of Nov. 30, 2012, according to the exchanges.”  For more, see this recent article from the New York Times.

ICE Melted Quickly

This recent post highlighted the cert petition of Instituto Constarricense de Electricidad of Costa Rica (“ICE”) to the Supreme Court related to victim issues in connection with the December 2010 Alcatel-Lucent FCPA enforcement action.  After several unsuccessful 11th Circuit appeals, ICE petitioned the Supreme Court to hears it case (see here).  The question presented for review is as follows.  “Whether a crime victim who is denied rights conferred by the federal Crime Victims’ Rights Act has a right to directly appeal the denial of those rights.”

The ice melted quickly as recently the Supreme Court denied ICE’s petition.

U.K. Enforcement Action

Earlier this week, the U.K. Serious Fraud Office announced (here) charges against former employees of Swift Group (an oil and gas services provider) following “a two-year investigation into allegations of corruption in relation to the tax affairs of Swift Technical Energy Solutions Ltd, a Nigerian subsidiary of the Swift Group of companies.”  According to the SFO release,  ”the value of the bribes alleged to have been paid is approximately£180,000.”

The SFO release notes that Paul Jacobs (the former Chief Financial Officer of Swift), Bharat Sodha (the former Tax Manager of Swift), Nidhi Vyas (the former Financial Controller of Swift), and Trevor Bruce (the former Area Director for Nigeria of Swift) were charged in relation to “bribes to tax officials to avoid, reduce or delay paying tax on behalf of workers placed by Swift.  The charges relate to payments said to have been made to agents of the Rivers State Board of Internal Revenue and the Lagos State Board of Internal Revenue, both in Nigeria. The payments were made in 2008 and 2009.”

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A happy holiday season to all.