Yesterday's post (see here) provided a high-level overview of the joint DOJ / SEC FCPA enforcement action.
Today's post provides a summary of the DOJ criminal information (here), deferred prosecution agreement (here), and SEC civil complaint (here).
For starters, the conduct at issue focuses on Snamprogetti Netherlands BV ("Snamprogetti"), a Dutch company headquartered in Amsterdam. Snamprogetti was a wholly-owned subsidiary of Snamprogetti, S.p.A., an Italian company, which in turn was a wholly-owned subsidiary of ENI, S.p.A., an Italian company headquartered in Rome that has been an issuer since 1995 and currently has common stock and American Depository Shares listed on the New York Stock Exchange. In February 2006, ENI sold Snamprogetti to Saipem, S.p.A., an Italian company. As indicated in this Saipem press release, even though Snamprogetti is a current subsidiary of Saipem, "in connection with the sale of Snamprogetti to Saipem, Eni agreed to indemnify Saipem for losses resulting" from the Bonny Island bribery investigation and accordingly neither the DOJ or SEC penalty "will impact Saipem's consolidated income statement and balance sheet." According to the SEC, "ENI owns 43% of, and exercises control over" Saipem.
With that out of the way, back to Snamprogetti.
Not surprisingly, the Snamprogetti information largely mirrors the criminal informations previously filed last week against Technip (see here) and in February 2009 against the Kellogg Brown & Root (see here) - entities also part of the joint venture engaged in the Bonny Island bribery scheme.
The Snamprogetti information charges conspiracy to violate the FCPA and aiding and abetting violations of the FCPA's antibribery provisions and alleges that Snamprogetti was part of a joint venture ("JV") in Nigeria to design, build and expand LNG facilities on Bonny Island. According to the information, JV profits, revenues, and expenses were equally shared among the four JV partners. The JV's Steering Committee consisted of high-level executives from each of the four companies and the Steering Committee made major decisions on behalf of the JV, including whether to hire agents to assist the JV in winning contracts, who to hire as agents, and how much to pay the agents.
The information charges that the JV operated through three Portuguese special purpose corporations, including a corporation (#3), 25% owned by Snamprogetti, specifically used to enter into consulting agreements with JV agents.
The criminal conduct charged centers on two agents hired by the JV.
The first agent, Jeffrey Tesler was a citizen of the United Kingdom who used a Gibraltar-based company as a vehicle to enter into agent contracts and receive payments from the JV. The information charges that the JV paid the company over $130 million to bribe high-ranking Nigerian government officials. According to the information, Tesler was an agent of the JV and each of the JV companies.
The second agent was a global trading company headquartered in Tokyo (the "Japanese Agent"), which was hired by the JV to help it obtain business in Nigeria, including by paying bribes to Nigerian officials. The information charges that the JV paid the consulting company over $50 million to bribe Nigerian government officials. According to the information, the Japanese Agent was an agent of the JV and each of the JV companies.
According to the information, between 1995 and 2004, the JV was awarded four contracts (collectively valued at over $6 billion) to build the Bonny Island Project and alleges that Snamprogetti, Technhip, Kellogg Brown & Root, Tesler, the Japanese Agent, and others, were engaged in a conspiracy to obtain and retain the contracts "through the promise and payment of tens of millions in bribes to officials of the Executive Branch of Nigeria, officials of Nigeria National Petroleum Corporation (NNPC), officials of Nigeria LNG Limited (NLNG) and others."
[According to the information, NNPC was a Nigerian government-owned company and an entity and instrumentality of the Government of Nigeria whose officers and employees were "foreign officials" under the FCPA. According to the information, NLNG was also an entity and instrumentality of the Government of Nigeria whose officers and employees were "foreign officials" under the FCPA, notwithstanding the fact that NLNG was 51% owned by multinational oil companies. Why? Presumably because, as the information alleges, "through the NLNG board members appointed by NNPC, among other means, the Nigerian government exercised control over NLNG, including but not limited to the abilty to block the award" of the relevant contracts.]
Among other means of the conspiracy, the information alleges that:
"officers, employees, and agents of Snamprogetti and their co-conspirators caused wire transfers totaling approximately $132 million to be sent from [#3's] bank account in Amsterdam, The Netherlands, to bank accounts in New York, New York, to be further credited to bank accounts in Switzerland and Monaco controlled by Tesler for Tesler to use to bribe Nigerian government officials."
"officers and employees of Snamprogetti and their co-conspirators caused wire transfers totaling over $50 million to be sent from [#3's] bank account in Amsterdam, The Netherlands to [Japanese Agent's] bank account in Japan for [the Japanese Agent to use to bribe Nigerian government officials."
Based on the same core conduct, the information also charges Snamprogetti with aiding and abetting violations of the FCPA's antibribery provisions and alleges that "Snamprogetti aided and abetted Kellogg, Brown and Root in causing [...] corrupt U.S. dollar payments to be wire transferred from [#3's] bank account in Amsterdam, The Netherlands, via correspondent bank accounts in New York, New York, to bank accounts of [Tesler's Gibraltar based company] in Switzerland for use in part to bribe Nigerian government officials."
The DPA has a term of two years. Parties to the DPA include Snamprogetti, Saipem and ENI.
Pursuant to the DPA, Snamprogetti admitted, accepted, and acknowledged that it is responsible for the acts of its employees, subsidiaries, and agents as detailed in the above criminal information.
According to the DPA, the DOJ agreed to enter into the agreement with the parties based on the following factors: "(a) Snamprogetti, Saipem, and ENI cooperated with the DOJ's investigation of Snamprogetti and others; (b)Snamprogetti, Saipem, and ENI undertook remedial measures, including the implementation of an enhanced compliance program; and (c) Snamprogetti, Saipem, and ENI agreed to continue to cooperate with the DOJ in any ongoing investigation of the conduct of Snamprogetti and its present and former employees, agents, consultants, contractors, subcontractors, subsidiaries, and others relating to violations of the FCPA."
According to the DPA, the fine range under the advisory U.S. Sentencing Guidelines for Snamprogetti's conduct is $300 million - $600 million. Snamprogetti agreed to pay a criminal penalty of $240 million or approximately 20% below the bottom of the fine range. Thus another example of the DOJ allowing a corporation to settle significant bribery allegations for an amount below even the bottom range of fines available under the advisory Sentencing Guidelines.
The DPA, unlike the recent Technip DPA, does require the engagement of a corporate compliance monitor.
Representing Snamprogetti, Saipem, and ENI in the FCPA enforcement action was Karen Patton Seymour (here) and Nicolas Bourtin (here) of Sullivan & Cromwell LLP.
In the DOJ release (here) Principal Deputy Assistant Attorney General Mythili Raman stated: "the resolutions in this investigation demonstrate the U.S. government’s commitment to identifying and holding accountable all companies and individuals who scheme to bribe foreign government officials to win business;" "Snamprogetti and its joint-venture partners conspired to pursue lucrative contracts through a massive bribery scheme – a scheme that has led to more than $1.28 billion in criminal and civil penalties to date. The monetary penalties and enforcement actions that have resulted from this investigation should send a clear message to companies and their employees that using foreign bribery as a means of winning contracts abroad will be punished." Kevin L. Perkins, assistant director of the FBI’s Criminal Investigative Division added: this "resolution is yet another example of the FBI’s willingness to aggressively investigate individuals and businesses that engage in corrupt conduct around the globe;" "those who elect to expand or protect their business interests through the payment of illegal bribes to foreign public officials should know that they are not beyond the reach of the FBI. Together, with our law enforcement partners around the world, we will identify these bad actors and work with the Justice Department to prosecute them under the Foreign Corrupt Practices Act and other appropriate federal statutes."
The SEC complaint "arises from multiple violations of the Foreign Corrupt Practices Act" by ENI and its former indirect subsidiary Snamprogetti. According to the complaint: "between at least 1995 and 2004, senior executives at Snamprogetti, among others, devised and implemented a scheme to bribe Nigerian government officials to assist in obtaining multiple contracts worth over $6 billion to build liquefied natural gas production facilities on Bonny Island, Nigeria" that a four-company JV, of which Snamprogetti was a member, won the contracts to build.
Specifically, the SEC complaint alleges that "to conceal the illicit payments, Snamprogetti and others, through the JV, entered into sham 'consulting' or 'services' agreements" with Tesler and the Japanese Agent "who would then funnel their purportedly legitimate fees to Nigerian government officials."
According to the SEC, "as a result of the scheme, numerous books and records of Snamprogetti and ENI contained false information relating to, among other things" Tesler and the Japanese Agent "and the payments made to them." Specifically, the SEC alleged that "Snamprogetti's business records [...] contained the contracts with [Tesler] and the Japanese Agent, which falsely described the purpose of the contracts in order to make it appear that the agents would perform legitimate services." According to the SEC, "these documents were part of Snamprogetti's business records and supported Snampogetti's financial statements, which were consolidated into ENI's financial statements."
The SEC alleges that "Snamprogetti did not conduct due diligence" on Tesler or the Japanese Agent and "ENI failed to ensure that Snamprogetti complied with ENI's policies regarding the use of agents." Specifically, the SEC alleged that "ENI's policies and procedures governed Snamprogetti's use of agents" but that "ENI failed to ensure that Snamprogetti conducted due diligence on agents hired through JV's in which Snamprogetti participated." "As a result," the complaint alleged, "ENI's internal controls failed to detect, deter or prevent the decades-long bribery scheme."
Based on the above allegations, the SEC charged Snamprogetti, as "an agent of a U.S. issuer" with violating the FCPA's antibribery provisions and knowingly falsifying books and records that supported the financial statements of ENI and knowingly circumventing ENI's internal accounting controls. The SEC charged ENI with violating the FCPA's books and records and internal control provisions. According to the SEC, "ENI exercised control and supervision of [...] Snamprogetti during the relevant time and on certain of its business decisions, such as Snamprogetti's entry into the JV."
Without admitting or denying the SEC's allegations, Snamprogetti and ENI consented to court orders permanently enjoining the companies from future violations of the FCPA and court orders requiring the companies, jointly and severally, to pay $125 million in disgorgement.
In a press release (see here) with the grabbing line "SEC charges Italian Company and Dutch Subsidiary in Scheme Bribing Nigerian Officials With Carloads of Cash," Robert Khuzami, Director of the SEC's Division of Enforcement stated: "this elaborate bribery scheme featured sham intermediaries, Swiss bank accounts, and carloads of cash as everyone involved made a concerted effort to cover their tracks" ... "but the billion-plus dollars in sanctions paid by these companies show that ultimately there is no hiding or profiting from bribery."
[As to the carload of cash, the SEC complaint alleges that the joint venture in which Snamprogetti participated in, paid Tesler (the UK agent) $40 million under a sham consulting agreement, and that Tesler then used a subcontractor to transfer $5 million to a Nigerian government official for the benefit of a Nigerian political party. According to the SEC complaint, "on several occassions, the Subcontractor personally delivered hand-delivered $1 million in U.S. currency in a brief case to the Nigerian official in a hotel room in Abuja, Nigeria." The complaint alleges that the "Subcontractor delivered the remainder of the $5 million to the Nigerian official in local Nigerian currency," but that because the currency "was too bulky to deliver by hand, the Subcontractor loaded the cash into vehicles, which were delivered to the Nigerian official."
In a press release (see here) ENI stated, among other things, as follows:
"As the U.S. authorities' court filings indicate, the criminal activity with which Snamprogetti Netherlands B.V. was charged ceased by June 15, 2004. Eni, Saipem, and Snamprogetti cooperated with the U.S. authorities' investigations. In the agreements, the SEC and DOJ did not require the implementation of any independent compliance monitor. Since the conduct at issue, Eni, Saipem, and Snamprogetti Netherlands B.V. have made substantial enhancements to their anti-corruption compliance programs, which monitor Eni and its subsidiaries' compliance systems. Eni and its subsidiaries are committed to continuous improvements to their internal compliance program and policies."