Earlier this week, Data Systems & Solutions LLC (“DS&S”), a wholly-owned subsidiary of Rolls Royce Holdings and based in Reston Virginia, resolved a DOJ FCPA enforcement action.  The total fine was $8.82 million.

DS&S’s business includes the design, installation, and maintenance of instrumentation and controls systems at nuclear power plants, fossil fuel power plants, and other critical infrastructure facilities.  According to the information, “DS&S’s instrumentation and controls business customers included state-owned nuclear power plants in Eastern Europe.”  The charged conduct focuses on DS&S’s business with Ignalina Nuclear Power Plant (“INPP”) described as a “state-owned nuclear power plant in Lithuania and an ‘agency’ and ‘instrumentality’ of a foreign government, as that term is used in the FCPA.”  For more on INPP, see its website here.

According to the charging documents, payments were made by DS&S to various INPP employees primarily through subcontractors.  The INPP employees are described as follows.  Official 1 (the Deputy Head of the Instrumentation & Controls Department at INPP with influence over the award of contracts); Official 2 (the Head of Instrumentation & Controls Department at INPP with influence over the award of contracts); Official 3 (the Director General at INPP with influence over the award of contracts); Official 4 (the Head of International Projects Department at INPP with influence over the award of contracts); and Official A (the lead software engineer at INPP with influence over the award of contracts).  All officials are alleged to “foreign officials as that term is used in the FCPA.”

The DOJ enforcement action involved a criminal information (here) against DS&S resolved through a deferred prosecution agreement (here).

Criminal Information

The information charges conspiracy to violate the FCPA’s anti-bribery provisions and one substantive FCPA anti-bribery violation.  As to the conspiracy charge, the information alleges that between 1999 to 2004, DS&S and others conspired to “obtain and retain contracts for DS&S from INPP to design, install, and maintain INPP’s instrumentation and controls systems through the promise and payment of bribes to foreign officials employed by INPP.”

According to the information, DS&S would and did attempt to conceal the payments to foreign officials by using Subcontractor A Subcontractor B and Subcontractor C (an alleged U.S. shell company) to funnel bribes from DS&S to INPP officials.  The information further alleges that: (i) ”Subcontractor A would and did pay bribes to INPP officials on behalf of DS&S by issuing tens of thousands of dollars in checks to INPP officials for deposit into the officials’ bank accounts in the United States”; (ii) DS&S “would and did pay INPP employees who were also employed by Subcontractor B significantly above-market rates for services performed by Subcontractor B in connection with DS&S contracts with INPP in exchange for the INPP employees’ support for the award of contracts to DS&S” and in a manner designed to allow those employees to avoid taxes on the payments from DS&S; (iii) DS&S “would and did provide gifts, travel, and entertainment to employees of INPP in exchange for those foreign officials’ agreements to help DS&S secure contracts with INPP.  The travel alleged includes trips to Florida and Hawaii and gifts alleged include a Cartier watch.

Executive A (vice president of marketing and business development at DS&S during the relevant time period responsible for marketing and business development efforts in connection with DS&S’s nuclear services, including power plant customers in Eastern Europe) is alleged to have engaged in a variety of the improper conduct.

DPA

The DOJ’s charges against DS&S were resolved via a deferred  prosecution agreement.  Pursuant to the DPA, DS&S admitted, accepted and acknowledged that it is responsible for the acts of its officers, directors, employees, and agents as charged in the information.

The term of the DPA is two years and it states that the DOJ entered into the agreement based on the following factors: “(a) following the receipt of subpoenas in connection with the government’s investigation, DS&S initiated an internal investigation and provided real-time reports and updates of its investigation into the conduct described in the Information; (b) DS&S’s cooperation has been extraordinary, including conducting an extensive, thorough, and swift internal investigation; providing to the Department searchable databases of documents downloaded from servers, computers, laptops, and other electronic devices; collecting, analyzing, and organizing voluminous evidence and information to provide to the Department in a comprehensive report; and responding promptly and fully to the Department’s requests; (c) DS&S has engaged in extensive remediation, including terminating the officers and employees responsible for the corrupt payments; dissolving the joint venture and reorganizing and integrating the Company as a subsidiary with a more rigorous compliance program; enhancing its due diligence protocol for third-party agents and subcontractors, including CEO review and approval of the retention of any agent or subcontractor; strengthening its ethics policies, including the appointment of a Company Ethics Representative who reports directly to the CEO and provides regulator reports to the Members Committee at each Committee meeting; providing FCPA training for all agents and subcontractors; and establishing heightened review of most foreign transactions; (d) DS&S has committed to continue to enhance its compliance program and internal controls …; and (e) DS&S has agreed to continue to cooperate with the Department in any ongoing investigation of the conduct of DS&S and its officers, directors, employees, agents and subcontractors relating to violations of the FCPA.

Pursuant to the DPA, the advisory Sentencing Guidelines range for the conduct at issue was $12.6 – $25.2 million.  The DPA states as follows.  “DS&S agrees to pay a monetary penalty in the amount of $8,820,000, an approximately thirty-percent reduction off the bottom of the fine range [...]  DS&S and the Department agree that this fine is appropriate given the facts and circumstances of this case, including the nature and extent of DS&S’s extraordinary cooperation and extensive remediation in this matter.”

Pursuant to the DPA, DS&S agreed to report to the DOJ “periodically, at no less than twelve-month intervals during the two-year term, regarding remediation and implementation of the compliance program and internal controls, policies, and procedures” described in an attachment to the DPA.    As is customary in FCPA DPA’s, DS&S agreed that it shall not make any public statement contradicting its acceptance of responsibility.

See here for the DOJ’s release.  Given the allegation in the information that INPP officials received payments into their bank accounts in the U.S., it will be interesting to see whether the INPP officials are charged with non-FCPA offenses.  Such a U.S. nexus was used to prosecute certain of the “foreign officials” in the Haiti Teleco enforcement action (see here for a summary of those actions) as well as the Siriwan’s in connection with the Green matter (see here for the prior post).

Carl Rauh (Hogan Lovells – here)  represented DS&S.