Coming Soon, "Freight Forwarding" Starring Panalpina, Shell, and Others

For the second time over a one week span, the FCPA was front page news in the Wall Street Journal. This time, it was Panalpina and how it, and one of its customers, Royal Dutch Shell, are reportedly close to settling FCPA enforcement actions. [See here for the other recent WSJ story regarding Schlumberger.]

Last December, Panalpina announced that it had commenced settlement discussions with the DOJ. For more information on this, as well as background on the Panalpina matter see this prior post.

For background on the Shell matter, in its most recent Form 2O-F (March 2010) Shell stated (here) as follows:

"In July 2007, Shell’s US subsidiary, Shell Oil, was contacted by the US Department of Justice regarding Shell’s use of the freight forwarding firm Panalpina, Inc and potential violations of the US Foreign Corrupt Practices Act (FCPA) as a result of such use. Shell has an ongoing internal investigation and is co-operating with the US Department of Justice and the US Securities and Exchange Commission investigations. As a result of these investigations, Shell may face fines and additional costs."

According to the WSJ story by Kara Scannell and Thomas Catan, Panalpina is expected to pay around $85 million in fines to settle charges that it violated the FCPA and Shell is expected to pay around $30 million in penalties to settle charges stemming from its use of Panalpina as an agent in Nigeria."

As noted in the WSJ article, the Panalpina matter has spawned several related inquiries of Panalpina customers, including Shell, Nabor Industries Ltd., Schlumberger Ltd., Transocean Ltd., and Noble Corp. The WSJ reports that "several of those companies also are expected to reach settlements with U.S. authorities in coming weeks or months."

Freight forwarding, customs clearance, and logistics. It's rather mundane stuff.

It will be interesting to see the allegations in these upcoming enforcement actions as the public disclosures have suggested conduct and facts that would seem to implicate the FCPA's facilitating payments exception. However, because these FCPA enforcement actions (like most) will never be challenged or subjected to meaningful judicial scrutiny, this relevant exception will likely not be explored.

If you are scoring at home, this means that an additional $115 million will flow into the U.S. Treasury based on allegations that two foreign companies made "improper payments" to foreign officials. For more on this issue, see here for my recent comments (pg. 4) at the World Bribery and Corruption Compliance Forum and here for how the FCPA has become, in the eyes of some, a U.S. government cash cow.