Senate Subcommittee to Examine FCPA Enforcement

Senator Arlen Specter will chair a hearing of the Subcommittee on Crime and Drugs of the Senate Judiciary Committee on Tuesday, November 30th.

The hearing, "Examining Enforcement of the Foreign Corrupt Practices Act" will be held at 9:30 a.m. in Room 226 of the Dirksen Senate Office Building and a webcast of the hearing can be seen here.

I am delighted to have the opportunity to be one of the witnesses testifying at the hearing.

Other witnesses are: Greg Andres (DOJ - Deputy Assistant Attorney General, Criminal Division), Andrew Weissmann (Jenner & Block); and Michael Volkov (Mayer Brown).

Turkey and the FCPA

The following FCPA enforcement actions have involved (in whole or in part) business conduct in Turkey.

Daimler AG (March 2010)

In March 2010, Damiler AG agreed to settle a wide-ranging FCPA enforcement action alleging that "between 1998 and January 2008, Daimler made hundreds of improper payments worth tens of milions of dollars to foreign officials in at least 22 countries - including China, Croatia, Egypt, Greece, Hungary, Indonesia, Iraq, Ivory Coast, Latvia, Nigeria, Russia, Serbia and Montenegro, Thailand, Turkey, Turkmenistan, Uzbekistan, Vietnam, and others - to assist in securing contracts with government customers for the purchase of Daimler vehicles valued at hundreds of milions of dollars."

As to Turkey, the criminal information (here) charges that Daimler's Corporate Audit Department "discovered three binders located in a safe at MB Turk's [a Daimler subsidiary in Turkey] offices in Istabul" that, along with other evidence, demonstrated that "MB Turk made approximately €6.05 million in payments to third parties in connection with vehicle export transactions that involved the sale of vehicles to non-Turkish government customers in North Korea, Latvia, Bulgaria, Libya, Romania, Russia, Saudi Arabia, Yemen, and other countries in deals with revenues of approximately €95 million." According to the information, at least €3.88 million of the €6.05 million comprised of "improper payments and gifts [...] paid to foreign government officials or to third parties with the understanding that the payments and gifts would be passed on, in whole or in part, to foreign government officials to assist in securing the sale of Daimler vehicles to government customers."

Daimler agreed to pay $185 million in combined DOJ and SEC fines and penalties (see here).

York International Corp. (Oct. 2007)

In October 2007, York International Corporation (York), a global provider of heating, ventilation, air conditioning, and refrigeration products and services, agreed to pay approximately $22 million in combined fines and penalties to settle DOJ and SEC enforcement actions principally relating to improper payments made by various subsidiaries to the Iraqi government under the United Nations Oil-for-Food Program. The enforcement action also involved certain other improper payments made in connection with government projects in Bahrain, Egypt, India, Turkey and the United Arab Emirates. (see here).

Delta & Pine Land Co. (July 2007)

In July 2007, the SEC announced a settled FCPA enforcement action against Delta & Pine Land Company, a Mississippi-based cottonseed company, and its subsidiary, Turk Deltapine, Inc. According to the SEC, between 2001 - 2006, Turk Deltapine made payments of approximately $43,000 to officials of the Turkish Ministry of Agricultural and Rural Affairs in order to obtain various governmental reports and certifications that were necessary for Turk Deltapine to obtain, retain and operate its business in Turkey. Per the complaint, the improper payments were discovered by Delta & Pine, but instead of halting the payments, the payments continued via a third party supplier and pursuant to an inflated invoice scheme. Based on the above conduct, Delta & Pine and Turk Deltapine jointly agreed to pay a $300,000 civil penalty and engage an independent compliance consultant. (see here and here).

Micrus Corp. (March 2005)

In March 2005, Micrus Corporation, a privately-held California medical device manufacturer, agreed to a two year non-prosecution agreement with the DOJ to resolve its FCPA liability in connection with over $100,000 in payments (disguised in the company's books and records as stock options, honorariums and commissions) to physicians employed at publicly owned and operated hospitals in France, Turkey, Spain, and Germany.(see here) and here)

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Thanks for reading, safe travels, and may your turkey be golden brown!

Transocean - More TIPs and Express Courier Services

Next up in the analysis of CustomsGate enforcement actions is Transocean. This enforcement action involves more Nigerian TIPs and express courier services (yes, you read that right, an FCPA anti-bribery enforcement action involving express courier services).

See here for the prior post on the Tidewater enforcement action here for the prior post on the Noble enforcement action and here for the prior post on the GlobalSantaFe enforcement action.

The Transocean enforcement action involved both a DOJ and SEC component. Total settlement amount was approximately $20.7 million ($13.4 million criminal fine via a DOJ deferred prosecution agreement; $7.2 million in disgorgement and interest via a SEC complaint).

DOJ

The DOJ enforcement action included a criminal information (here) filed against Transocean Inc. ("Transocean") which "was a Cayman Islands corporation with its principal executive offices in the Cayman Islands and in Houston, Texas." Transocean's securities were traded on the New York Stock Exchange. As set forth in the information, "in December 2008, Transocean completed a merger among Transocean Ltd., Transocean Inc., which was the former parent holding company, and Transocean Cayman Ltd. As a result of the merger, Transocean became a wholly-owned subsidiary of Transocean Ltd., a Swiss corporation with principal executive offices in Vernier, Switzerland." (See here).

The criminal charges against Transocean were resolved via a deferred prosecution agreement (here) between the DOJ and Transocean and Transocean Ltd. "on behalf of its wholly-owned subsidiary Transocean."

Criminal Information

Once again, the criminal information concerns Nigeria's rules and regulations relating to temporarily importing vessels and the "temporary importation permit" ("TIP"). For more on the TIP process see here.

Relevant Transocean entities include Sedco Forex Nigeria Limited ("SFNL"), a Nigerian entity 60% owned by Transocean, and Transocean Support Services Nigeria Ltd. ("TSSNL"), a wholly-owned Nigerian subsidiary of Transocean.

According to the information, between February 2002 and January 2003, "on three occasions when a TIP (and related TIP extensions) expired for a rig Nigeria, Customs Agent 1 [a Nigerian entity that provided freight forwarding, customs clearing, haulage and general logistics services to companies doing business in Nigeria and SFNL's customs agent in Nigeria between 2002 - July 2007] and Customs Agent 2 [a Nigerian entity that provided, among other things, customs clearing and freight forwarding and support services to oil and gas services companies operating in Nigeria and one of SFNL and TSSNL's customs agents in Nigeria], with the knowledge of SFNL, engaged in a process of obtaining false paperwork on SFNL's behalf to avoid the time, cost, and risks associated with exporting the rig and re-importing it into Nigerian waters." The information alleges that "Customs Agent 1 and Customs Agent 2, with the knowledge of SFNL, obtained false documents that reflected that the rig had been physically exported and re-imported, when, in fact, the rig had remained in Nigeria."

In addition, the information alleges that between May 2007 and June 2007, "Customs Agent 2, with the knowledge of TSSNL, engaged in a process of obtaining false paperwork on behalf of TSSNL for another rig." According to the information, "Customs Agent 2, with the knowledge of TSSNL, obtained documents that reflected that the rig had been physically exported and re-imported, when, in fact, the rig had remained in Nigeria."

The information alleges, that "SFNL and TSSNL's employees knew or were aware of a high probability that certain bribe payments were made by Customs Agent 1 and Customs Agent 2 to Nigerian Customs Service ("NCS") officials to resolve these issues." The information alleges that "to secure reimbursement for the payments made on behalf of SFNL and TSSNL, these Custom Agents provided invoices to SFNL and TSSNL without supporting documentation" and that "Transocean Nigeria, in turn, reimbursed these Customs Agents for the expenses."

According to the information, payments to Customs Agent 1 and Customs Agent 2 were mischaracterized as "freight and shipping/courier charges" or "crewboat, workboat, tug Hire" (in the case of Agent 1) and "miscellaneous operating expenses" (in the case of Customs Agent 2) in Transocean Nigeria's books and records which then were incorporated into Transocean's year-end financial statements filed with the SEC.

According to the information, "by corruptly circumventing the TIP requirements in 2002 and 2007, Transocean, through Transocean Nigeria, was able to continue its drilling operations using [certain rigs] that otherwise should have been temporarily removed from Nigerian waters." The information states, "as a consequence, Transocean was able to corruptly gain a net profit of approximately $2,129,839 on its rig operations that [...] otherwise would have been suspended because of the failure to comply with Nigerian TIP requirements."

As to express courier services, the information states that "one of the services provided by [Panalpina] was an express door-to-door courier service that expedited the importation of goods and equipment into Nigeria." According to the information, "the express service involved the payment of bribes by [Panalpina] to NCS officials to avoid the normal customs clearance process and the payment of official duties and taxes."

The information alleges that various Transocean Nigeria employees were aware that the express courier service in Nigeria was not compliant with local law, but that despite this, "SFNL and TSSNL used the express courier service eleven times between August 2005 and September 23, 2005 when they knew or were aware of a high probability that the express courier service would make bribe payments to Nigerian officials to avoid applicable customs duties." According to the information, "as a consequence, SFNL and TSSNL corruptly avoided paying $37,781.73 in applicable customs duties for these element shipments." The information charges that SFNL and TSSNL "falsely recorded the payments to the express courier service as 'air freight' in their books and records" and that these transactions were then incorporated into Transocean's SEC filings.

Based on the above conduct, the DOJ charged Transocean with conspiracy to violate the FCPA's anti-bribery and books and records provisions, FCPA anti-bribery violations, and knowingly violating the FCPA's books and records provisions.

According to the criminal information, "Transocean Nigeria employees knew or were aware of a high probability that the [Panalpina] was making bribe payments to Nigerian Customs Service officials on behalf of SFNL and TSSNL to cause such officials to disregard certain customs regulatory requirements relating to importing goods and materials into Nigeria for use on Transocean's rigs in Nigeria, and sought reimbursement from SFNL and TSSNL for these payments."

According to the information, certain unnamed co-conspirators committed various overt acts in furtherance of the conspiracy including Employee C [manager of Transocean's operations in Nigeria from August 2001 to January 2004 and an agent of an "issuer"], Executive B [a French citizen who was responsible for Transocean's Africa Region, including offshore drilling operations in Nigeria, and an agent of an "issuer"], Senior Executive A [a permanent resident of the U.S. from 2005 until July 2007 and a "domestic concern" as well as agent of an "issuer"].

Deferred Prosecution Agreement

Pursuant to the DPA, Transocean admitted, accepted and acknowledged that it was responsible for the acts of its officers, employees, subsidiaries, and agents as set forth above.

The term of the DPA is three years and seven months and it states that the DOJ entered into the agreement "based on the individual facts and circumstances" of the case and Transocean. Among the factors stated are the following.

"Transocean and Transocean personnel in Nigeria promptly commenced an internal investigation into dealings between Transocean's Nigeria operations and [Panalpina] after becoming aware of information indicating potential issues with [Panalpina]

"Transocean expanded its internal investigation to numerous operations and areas of the world outside Nigeria where no misconduct had been reported or suspected, and reported all relevant findings to thc Dcpartment;"

"A subsidiary of Transocean Ltd., Transocean Offshore Deepwater
Drilling Inc., hired a new chief compliance officer with substantial experience in corporate ethics and anti-corrption compliance policies. The compliance officer, who is an officer of Transocean Ltd., is responsible for the oversight of compliance for Transocean Ltd. and all of its subsidiaries and affiliates, including Transocean;"

"Transocean Ltd. established a specific internal audit team of well-trained auditors to focus on fraud, FCPA compliance, and anti-bribery issues at Transocean Ltd.'s worldwide operations;"

"Transocean Ltd. issued a revised FCPA compliance policy and revised its code of conduct, instituted a worldwide FCP A training program for its companies' employees, and implemented a well-defined due diligence process for retaining third party service providers and business partners that interact with government officials;"

"Transocean and Transocean Ltd. cooperated with the Department's investigation, including sharing all relevant investigation findings and making available numerous current and former employees;"

"Transocean and Transocean Ltd. agreed to undertake further remedial
measures;"

"Transocean and Transocean Ltd. agreed to provide a written report to the Department on their progress and experience in maintaining and, as necessary and appropriate, enhancing their compliance policies and procedures;"

"Transocean and Transocean Ltd. agreed to continue to cooperate with the Department in any ongoing investigation of the conduct of Transocean and its directors, employees, agents, consultants, contractors, subcontractors, subsidiaries, and any affliates it controls relating to violations of the FCPA."

As stated in the DPA, the fine range for the above describe conduct under the U.S. Sentencing Guidelines was $16.8 million to $33.6 million. Pursuant to the DPA, Transocean and Transocean agreed that Transocean shall pay a monetary penalty of $13.44 million - 20% below the minimum guideline amount.

As is standard in FCPA DPAs, Transocean and Transocean Ltd. agreed not to make any public statement "contradicting the acceptance of responsibility by Transocean and Transocean Ltd. as set forth" in the DPA and Transocean and Transocean Ltd. further agreed to only issue a press release in connection with the DPA if the DOJ does not object to the release.

SEC

The SEC's complaint (here) concerns the same core set of facts as set forth in the DOJ's DPA, plus a few additional allegations.

In summary fashion, the SEC alleged "from at least 2002 through 2007, Transocean made illicit payments through its customs agents to Nigerian government officials to extend the temporary importation status of its drilling rigs, to obtain false paperwork associated with its drilling rigs, and obtain inward clearance authorizations for its rigs and a bond registration."

The SEC further alleged as follows. "Transocean made illicit payments through Panalpina World Transport Holding Ltd.'s Pancourier express courier service to Nigerian government officials to expedite the import of various goods, equipment and materials into Nigeria. In most instances, customs duties for these items were not paid by either Panalpina or Transocean. In addition, Transocean made illicit payments through Panalpina to Nigerian government officials to expedite the delivery of medicine and other materials into Nigeria. Transocean's total gains from the conduct were approximately $5,981,693."

According to the complaint, Pancourier, is "an express door to door courier service operated by Panalpina" and the complaint alleges that Transocean used Panalpina and Pancourier "to expedite the delivery of goods and to import goods into Nigeria without always paying applicable duties to the Nigerian government."

As to the TIPs and movement of rigs, the complaint allegess that Transocean's illicit payments through its customs agents to Nigerian government officials avoided "moving costs of approximately $1,088,985 and gain profits of approximately $3,172,378."

The SEC complaint also alleges that "Transocean made illicit payments totaling $207,170 to Customs Agent 2 for what were described on invoices as "customs intervention" charges related to six rigs." According to the complaint, the payments ensured that "Transocean could operate its rigs in Nigerian waters without proper paperwork and without compliance with local law requirements."

As to Panalpina and Pancourier, the SEC complaint states that "from January 2002 to September 2005, Transocean used Pancourier 404 times to import various goods and materials into Nigeria without paying any customs duties to the Nigerian government." According to the complaint, "the total customs duties that Transocean avoided through its use of Pancourier for the 404 shipments to Nigeria were approximately $1,480,419."

Finally, the SEC complaint alleges that "aside from its use of Pancourier, Transocean also used Panalpina to expedite delivery of medicine and other goods into Nigeria." The complaint states that "Transocean made illict payments through Panalpina to Nigerian government officials for the importation of these goods totaling $32,741."

Based on the above conduct, the SEC charged Tidewater with violating the FCPA's anti-bribery and books and records and internal control provisions.

As to the company's internal controls, the SEC complaint simply states as follows. "... [A]s evidenced by the extent and duration of the improper payments to Nigerian officials, the improper recording of these payments in Transocean's books and records, the failure of Transocean's management to detect these irregularities, and the actual involvement of certain members of senior management, Transocean failed to devise and maintain an effective system ofinternal controls to prevent or detect these violations."

Without admitting or denying the SEC's allegations, Transocean agreed to pay disgorgement and prejudgment interest of $7,265,080. .

Former DOJ fraud section attorney Richard Smith (here) (Fulbright & Jaworski LLP) represented Transocean.

Judge Denies Esquenazi's "Foreign Official" Challenge

In a cursory November 19th opinion (see here) devoid of substantive analysis, Judge Jose Martinez (S.D. Fla.) denied Joel Esquenazi's "foreign official" challenge. (See here and here for prior posts).

Esquenazi's challenge was launched by a lawyer with no apparent FCPA expertise and his brief did not even scratch the surface as to the FCPA's extensive legislative history regarding the "foreign official" element. Esquenazi's "foreign official" brief was just one of several dismissal motions (such as selective and vindictive prosecution and spoilation of defense favorable evidence) filed over a brief time period - a factor which perhaps influenced Judge Martinez's view of Esquenazi's otherwise valid "foreign official" challenge - an issue at the core of a significant number of recent FCPA enforcement actions.

In its November 17th response, the DOJ termed Esquenazi's challenge premature. The DOJ did offer to provide supplemental briefing on the meaning of "foreign official" "to elaborate on how the FCPA’s plain text, its current interpretation by courts, its legislative history, and U.S. treaty obligations provide no support for the defendants’ novel and confusing definition."

Against this backdrop, within 48 hours of the DOJ's response, Judge Martinez denied Esquenazi's challenge.

The substance of Judge Martinez's decision is as follows.

"The Court [...] finds that the Government has sufficiently alleged that Antoine and Duperval were foreign officials by alleging that these individuals were directors in the state-owned Haiti Teleco. Any factual arguments Defendant has on this point may be addressed at trial."

"The Court also disagrees that Haiti Teleco cannot be an instrumentality under the FCPA's definition of foreign official. The plain language of this statute and the plain meaning of this term show that as the facts are alleged in the indictment Haiti Teleco could be an instrumentality of the Haitian government."

As to Esquenazi's vagueness challenge, the Court stated as follows.

"... the Court also disagrees that the phrase 'department, agency, or instrumentality' in the definition of 'foreign official' is unconstitutionally vague. 'Vagueness arises when a statute is so unclear as to what conduct is applicable that persons of common intelligence must necessarily guess at its meaning and differ as to its application.' Defendant has not met this standard, and the Court find that persons of common intelligence would have fair notice of this statute's prohibitions."

The Giffen Gaffe - The Final Chapter

The original 2003 indictment (here) charged James Giffen with "making more than $78 million in unlawful payments to two senior officials of the Republic of Kazakhstan in connection with six separate oil transactions, in which the American oil companies Mobil Oil, Amoco, Texaco and Phillips Petroleum acquired valuable oil and gas rights in Kazakhstan."

Giffen's defense?

Partly that his actions were taken with the knowledge and support of the Central Intelligence Agency, the National Security Council, the Department of State and the White House. The DOJ did not dispute the fact that Giffen had frequent contacts with senior U.S. intelligence officials or that he used his ties within the Kazakh government to assist the United States. With the court's approval, Giffen sought discovery from the government to support such a public authority defense and much of the delay in the case was due to the government's resistance to such discovery and who was entitled to see such discovery.

In August, the case took a mysterious turn when Giffen agreed to plead guilty (here) to a one-paragraph superseding indictment charging a misdemeanor tax violation.

The case ended Friday in a Manhattan court room.

U.S. District Court Judge William Pauley called Giffen a Cold War hero, imposed no jail time, and stated that the case should never had been brought in the first place.

It's the Giffen Gaffe, the biggest blunder in the history of the FCPA.

Today's post is from Steve LeVine who was present in Judge Pauley's courtroom on Friday. LeVine writes "The Oil and The Glory" For Foreign Policy (here) and the below is reprinted with his permission.

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James Giffen, the oil dealmaker at the center of what was once the largest foreign bribery case in U.S. history, is officially a free man.

The 69-year-old former oil adviser to Kazakhstan's president, accused of diverting $78 million from oil companies to the Kazakh government, waited out more than a dozen federal prosecutors and sat through some two dozen court appearances and five trial dates over the course of seven years. Today, the effort paid off. Three months after prosecutors announced a stunning capitulation, dropping all foreign bribery, money laundering, and fraud charges against Giffen in exchange for a guilty plea on a misdemeanor tax charge, U.S. District Judge William Pauley ordered no prison time and no fines in sentencing proceedings at a Manhattan courthouse.

In handing down the non-sentence, Pauley seemingly validated the argument to which Giffen's lawyers had clung since 2003: that whatever crimes Giffen had allegedly committed occurred while he was a highly valued foreign asset of the American intelligence. "Suffice it to say, Mr. Giffen was a significant source of information to the U.S. government and a conduit of secret information from the Soviet Union during the Cold War," Pauley said today.

Giffen may have been lesser-known than the other businessmen-cum-criminal-defendants of recent decades, but he was equally colorful, a swaggering, coarse-talking, heavy-drinking womanizer and a charismatic fixture on the Caspian Sea. He arrived in Kazakhstan in 1992, but the trajectory that ultimately landed him there began in 1969, when he started traveling to Moscow as an aide to a Connecticut metals trader. Giffen worked his way up to become a major player in a U.S-Soviet business association with top-level political ties in both Washington and Moscow. When the Soviet Union collapsed in 1991, business in Russia dried up, and Giffen moved on to Kazakhstan, which was quickly becoming one of the hottest oil plays on the planet.

Giffen managed to ingratiate himself with a man he called The Boss: Kazakh President Nursultan Nazarbayev. He became Nazarbayev's chief oil negotiator and, prosecutors alleged, his personal banker. While honchoing some of the era's biggest oil deals, he also diverted some $78 million in payments made to Kazakhstan by now-dead companies like Mobil, Amoco, and Texaco into Swiss and other bank accounts that he set up in the name of Nazarbayev, other senior Kazakh officials, and their relatives, prosecutors alleged. (U.S. diplomats said that Nazarbayev, an unindicted co-conspirator in the case, so dreaded being tarnished by a Giffen conviction that both he and his envoys pleaded repeatedly for the George W. Bush Administration to order the case dropped.)

The case seemed open and shut, since the prosecutors presented a detailed paper trail -- provided by a Swiss magistrate -- of Giffen slicing payments into tiny discrete pieces for transfer into secret Swiss bank accounts, rather than shifting them as a whole, a classic method of money laundering. Even at their most voluble and expansive in court, Giffen's lawyers made no attempt openly to dispute the prosecution's facts. They simply kept repeating that, whatever Giffen may have done, he was taking orders from the Kazakh government -- a sovereign state entitled to its own ideas of legality -- and otherwise serving the patriotic interests of the Central Intelligence Agency.

It was an audacious defense that many thought verged on the preposterous. For one thing, CIA officers of the era deny that Giffen was anything of the sort -- he walked into CIA headquarters on his own volition and talked to agency officers about Kazakhstan, they said, but that was very different from being a trusted asset on an informal assignment. In short, they asserted, Giffen was simply another dude talking.

The CIA, however, appears to have refused to hand over many -- if any -- documents sought by the defense. Judge Pauley had ruled that such documents were obligatory if Giffen were to have access to his rights to adequately defend himself. So the prosecution was left with having to drop the charges.

In his sentencing remarks, Pauley said that he had had access to classified documents that no one else in the courtroom had seen, and that they largely validated Giffen's claims. "He was one of the only Americans with sustained access to" high levels of government in the region, Pauley said. "These relationships, built up over a lifetime, were lost the day of his arrest. This ordeal must end. How does Mr. Giffen reclaim his reputation? This court begins by acknowledging his service."

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For additional coverage see here (David Glovin - Bloomberg) and here (Larry Neumeister - AP).

For Giffen's contribution to FCPA case law (see here).

DOJ Argues That Esquenazi's "Foreign Official" Challenge is Premature

The DOJ filed its response brief (here) in the Joel Esquenazi enforcement action - an action which, as described in this prior post, the defendant is challenging the DOJ's "foreign official" interpretation.

As it did in the Nguyen / Nexus Technologies case (see here - middle of the post) the DOJ asserts as follows. "Although styled as a “motion to dismiss,” the defendants’ submission is instead a premature request for a ruling on the sufficiency of the government’s evidence concerning the status of officers of Telecommunications D’Haiti (“Haiti Teleco”) as a foreign officials of a government instrumentality before the evidence regarding that issue has been presented to the jury. The defendants’ arguments, which are premised on misstatements of both the law and the facts and are premature at best, will be moot after presentation of the government’s case. Therefore the defendants’ motion should be denied."

The response brief contains a separate section on "the Nature of Haiti Teleco" and states as follows. "At the times relevant to the Indictment, between 2001 and 2004, Haiti Teleco held a state granted monopoly over land line telephone service in Haiti. During that time, Haiti Teleco was 97% state-owned by the Central Bank of Haiti, the Banque de la Republic of Haiti (“BRH”), which held 97% of Haiti Teleco’s shares. No one knows who owned the remaining 3% of Haiti Teleco’s shares, as no records still exist concerning their ownership, yet no person or company has claimed them in institutional memory. Therefore, effectively and functionally, during this period, Haiti Teleco operated with 100% state-ownership. Also during this period, Haiti Teleco was 100% state-controlled."

The response brief asserts as follows. "... the defendants seek to circumvent the trial process and have the Court determine, before the presentation of any evidence, that the government has not met its burden of proving that Haiti Teleco was a instrumentality of a foreign government as defined by the FCPA. As will be demonstrated in the government’s case-in-chief, whether Haiti Teleco was an instrumentality of the Republic of Haiti is not a close case, a fact the defendants likely understand and therefore attempt to raise this issue before the evidence has been presented. Taken as true, the Indictment is more than sufficient to meet the Hagner standard and the precedent of this Circuit. Therefore, the motion should be denied."

Under the heading, "Interpretation of the Term Government Instrumentality" the DOJ's brief states in full as follows.

"The bulk of the defendants’ Motion focuses on suggesting that the Court adopt an insupportably narrow interpretation of government instrumentality that is contradicted by the statute on its face, case law, legislative history, and international treaties. The defendants’ proffered arguments are, in any event, arguments for jury instructions or for the Court after the government’s
case-in-chief pursuant to Federal Rule of Criminal Procedure 29. However, if the Court would like supplemental briefing on the meaning of “foreign official,” the government is more than willing to elaborate on how the FCPA’s plain text, its current interpretation by courts, its legislative history, and U.S. treaty obligations provide no support for the defendants’ novel and confusing definition. These sources confirm that the definition of “foreign official” includes officials of state-owned and state-controlled companies. Further, it is not limited to the narrow and ambiguous restriction that it applies only to “officials performing a public function.” DE 283 at 2. This tortured formulation finds no support, even in the sources the defendants themselves cite. The government stands prepared to brief and argue this issue again, should the defendants raise it, upon a Rule 29 motion or in the context of formulating jury instructions."

The DOJ response brief also contains a section which argues that the term "foreign official" is not unconstitutionally vague.

Guiding Words

FCPA reform proposals circulating on what seems like a weekly basis.

Claims that the FCPA is bad for business.

Questions about how the FCPA enforcement agencies resolve matters.

In some circles these valid and legitimate questions or calls for reform are being met with claims that some want to weaken the FCPA and pave the way for corporations to go on a bribery binge.

Within days of the U.S. Chamber of Commerce sponsored piece (here - I will do a separate post on this in the near future) various commentators assailed mere discussion of reforming the FCPA as being pro-bribery.

For instance, Keith Olbermann began his October 27th MSNBC Countdown program as follows: "The plot to buy America. U.S. Chamber of Commerce job one: It wants the Congress it thinks it‘s going to buy to roll back enforcement of the anti-bribery Foreign Corrupt Practices Act." Later in the program Olbermann noted: "The Chamber of Commerce—the U.S. Chamber of Commerce, the biggest secret right-wing ad buyer, today released a report calling for weakening the FCPA. What the hell‘s that? The Foreign Corrupt Practices Act, which punishes American businesses for bribing officials overseas. Quote, “Unfortunately for the business community, an active FCPA enforcement environment appears likely to continue.” The chamber wants to make it easier for American companies to do business with corrupt officials, even, quote, “in countries where many companies are state owned, e.g., China.” Later in the program, Olbermann stated as follows: "I mentioned the U.S. Chamber of Commerce and this call on the new Congress to make it easier for rich Americans to bribe officials overseas and then get away with it if they‘re caught—which seems to sort of represent part of the American spirit, in a bizarre way."

It is unfortunate that any discussion of examining and perhaps reforming the FCPA, or more importantly FCPA enforcement, is met in some circles with naive and reactionary claims of being "pro-bribery."

In many ways, we are back to the 1980's.

In 1980, Congress set about amending the FCPA. The FCPA, at that time: contained a broad "reason to know" knowledge standard as to indirect payments to "foreign officials;" no affirmative defenses; and no express facilitating payment exception.

It took Congress eight years to wrestle with the issues and the FCPA was finally amended in 1988.

In 1981, Senator Alfonse D’Amato opened Senate hearings on a bill to amend the FCPA. He stated that the bill "provides us with a good opportunity to assess the effect of recently enacted legislation and its implementation.” Senator D’Amato noted as follows. “The discussion which takes place during these hearings is not a debate between those who oppose bribery and those who support it. I see the major issue before us to be whether the law, including both its antibribery and accounting provisions, is the best approach, or whether it has created unnecessary costs and burdens out of proportion to the purposes for which it was enacted, and whether it serves our national interests.”

In an opening statement during Senate hearings, Senator John Chafee, a leader in the FCPA reform movement stated: "We've learned a great deal about the Foreign Corrupt Practices Act in the last three years. We've learned that the best of intentions can go awry and create confusion and great cost to our economy."

During the hearing, Senator Chafee further stated as follows: "Critics have attempted to characterize my bill as a signal to U.S. companies that they can return to the 'bad old days' of foreign bribery. That is not my intent, nor should it be the signal. I abhor bribery, whether domestic or foreign, but I also dislike confusion. Thus, my bill will eliminate uncertainty while maintaining strong prohibitions against bribery. The ambiguities and murkiness of the bill's language have caused U.S. companies to withdraw from legitimate markets and contributed to the decline in the U.S. share of world exports. We need to end this confusion."

During Senate hearings, Senator D'Amato noted as follows: "The thing that bothers me about this kind of a debate is that we tend to posture this thing as if somebody were for or against bribery. I think it is important to state for the record that bribery of any foreign official by any U.S. concern is bad for our national health, and it is something that we have got to stop, we have got to deal with, and we have, I think, gone a long way with the FCPA. What we proposed to do is to simplify that law and to make it workable so that we can set that standard in concrete from now on and not have the abuses that occurred prior to 1977, but not by stopping exports, but by stopping bribery. That is the objective."

Senator D'Amato further stated as follows. "I think it is very important that in the committee's work that we not create the attitude that this committee is making it easier for businesses to engage in illegal activity. That has, in fact, been suggested, not only by our distinguished colleague from Wisconsin [Senator Proxmire, a Senate leader in enactment of the FCPA who generally opposed the reform efforts], but also by certain journalists, who are questioning the need for proposed changes. I think that rather than hampering prosecution of illegal acts, [the reform bill at issue] would clarify and make possible just prosecution of those who engage in bribery. It would eliminate any 'gray area' by clearly spelling out the limits of the law."

During Senate hearings, Senator John Heinz stated as follows. "... There are many people that are extremist, and there are others who get carried away by their enthusiasm who are going to argue that even if we change the provisions in the present act, that are unnecessary or ambiguous or uncertain, that even though we are not doing so, we are legalizing bribery. That strikes me as the worst kind of demagoguery, because it implies that everything that Congress has done in the past is perfect. And does anybody believe that?"

During the Senate hearing, William Satterwhite (Senior VP, General Counsel and Chief Legal Officer of Enserch Corp.) testified. He began his testimony as follows: "Before I begin my comments, I would like to state for the record, Enserch Corp. is not in favor of bribery. It is a sad commentary on the political atmosphere surrounding this legislation that those who support the bill feel compelled to make clear that they do not condone corruption."

The interesting thing about these representative comments is that they occurred during an era when the FCPA was, for all practical purposes, not even enforced!

As noted in yesterday's post, we are, in the words of Assistant Attorney General Breuer, in a new era of FCPA enforcement.

Part of this new era should be a renewed effort to examine the FCPA and more importantly FCPA enforcement.

The above comments from the 1980's should serve as useful guiding words.

"We Are In a New Era of FCPA Enforcement; and We Are Here to Stay"

These were the words of Assistant Attorney General Lanny Breuer yesterday at ACI's signature FCPA conference (see here).

This post contains excerpts of Breuer's speech (see here) and contains my comments in italics.

Breuer's speech begins as follows:

"... I’m proud to say that our FCPA enforcement is stronger than it’s ever been – and getting stronger. To give you just one metric, in the past year, we’ve imposed the most criminal penalties in FCPA-related cases in any single 12-month period – ever. Well over $1 billion.

I am aware that, for some of you, as we have become more aggressive, you have become more worried.

On one hand, I want to tell you this afternoon that you are right to be more concerned. As our track record over the last year makes clear, we are in a new era of FCPA enforcement; and we are here to stay. On the other hand, I want to impress upon you that you should not wait in worry for us to come knocking on your door. There are many steps that you can be taking that would put your organization in a better position for the day we do come knocking, or that could prevent us from coming at all.

Perhaps it’s no surprise that in the last 19 months, as we’ve stepped up our FCPA investigations and prosecutions, there are some who have stepped up their criticism of the Act itself. No doubt, some of the criticisms and suggestions out there are worth debating, and you should know that we do take serious commentary into account. For example, I am aware that some practitioners and others would like to see, in the FCPA area, an amnesty program similar to the one that exists in the realm of antitrust. Although I think there are significant differences between foreign bribery and antitrust violations, I can at least tell you that we listen to considered suggestions of this kind.

I am also aware, however, of much less thoughtful commentary. For example, there are some who have suggested recently that FCPA enforcement is "bad for business." To me, this is a little like saying that our public corruption prosecutions are "bad for government." It’s exactly upside down. As Attorney General Holder explained to an audience earlier this year, bribery in international business transactions weakens economic development; it undermines confidence in the marketplace; and it distorts competition."

I agree, we are in a new era of FCPA enforcement. See here for my recent piece "The Foreign Corrupt Practices Act in the Ultimate Year of its Decade of Resurgence."

But the question needs to be asked - why are we in a new era?

Has the FCPA changed?

No.

Has a court opinion legitimized certain enforcement theories that yield the highest quantity of enforcement actions?

No. (If your answer was yes, U.S. v. Kay, 359 F.3d 738 (5th Cir. 2004), I suggest you carefully analyze the opinion).

So why are we in a new era of FCPA enforcement?

Because enforcement theories have changed.

Who says so.

Let's start with Mark Mendelsohn (here) the DOJ's top FCPA prosecutor from 2005 to 2010 and the individual "responsible for overseeing all DOJ investigations and prosecutions under the FCPA" during his tenure.

In this recent interview with "The Boardroom Channel" (3 minute mark approximately), Mendelsohn candidly states that “What’s really changed is not so much the legislation, but the enforcement and approach to enforcement by U.S. authorities.”

Is this enforcement that defines this new era taking place within the context of the judicial system?

By and large no, as I demonstrate in my recent "Facade of FCPA Enforcement" article (see here).

Against this backdrop, there has been increased criticism of FCPA enforcement and rightfully so.

Who are the critics?

For starters, how about former DOJ and SEC FCPA enforcement attorneys.

In a recent interview with the Corporate Crime Reporter (Sept. 10th), Mendelsohn stated that "some of the factors" the DOJ uses to resolve FCPA cases are transparent, but "there are other factors less easy to see from the outside." Mendelsohn also noted, in connection with non-prosecution and deferred prosecution agreements that the "danger" "is that it is tempting for the Department, or the SEC [to use these vehicles] to seek to resolve cases through DPAs or NPAs that don't actually constitute violations of the law."

Philip Urofsky (here) used to enforce the FCPA while at the DOJ. In this piece, and others he has written, he has questioned certain FCPA enforcement theories.

Martin Weinstein (here) used to enforce the FCPA while at the DOJ. In this Q&A, he agrees that FCPA enforcement has morphed and he proposes his own revisions to the law.

Richard Grime (here) used to be an FCPA enforcement attorney while at the SEC. He recently questioned (here) several aspects and theories of FCPA enforcement.

Kenneth Winer (here) is a former SEC enforcement attorney. In this piece he asks "are the DOJ and SEC frustrating the intent of Congress by ignoring the reason that Congress amended the FCPA?"

These are only a few representative samples of former enforcement officials criticizing the enforcement policies that define this "new era of FCPA enforcement" that Breuer speaks of.

Who else is asking questions?

Congress (see here and here) and it should ask many more questions about this new era of FCPA enforcement.

I agree with Breuer that simply saying FCPA enforcement is "bad for business" is not very effective or persuasive.

However, as I point out in the "Facade of FCPA Enforcement" the facade matters and not just because it breeds overcompliance and creates uncertainty for business.

The facade of FCPA enforcement matters because it is troubling when any area of law largely develops outside of the judicial process. The facade of FCPA enforcement matters because when any law develops through an opaque process, public confidence in that law suffers.

So deep is the facade of FCPA enforcement that when the House passes a bill that is supposed to be triggered by a company violating the FCPA's anti-bribery provisions, the bill will be impotent because very few companies are actually found to have violated the FCPA's anti-bribery provisions. See here.

The facade of FCPA enforcement is not just a business issue, it is a rule of law issue, and having a discussion about the facade of FCPA enforcement is a valid and legitimate discussion to be having.

Breuer continues:

"So let me be perfectly clear about the Justice Department’s views on that topic: FCPA enforcement is not bad for business; it is, instead, vital to ensuring the integrity of our markets. Our FCPA enforcement program serves not only to hold accountable those who corrupt foreign officials, but in doing so it also serves to make the international business climate more transparent and fair for everyone. FCPA enforcement both roots out foreign corruption and deters it from taking hold in the first place."

The government's FCPA enforcement program "holds accountable those who corrupt foreign officials?" If accountability means the company pays an eye-popping multi-million dollar fine, then yes there is accountability - even if the fine paid, in most instances, is less than the amount of the bribes paid and less than the amount of business allegedly obtained or retained because of the bribe payments.

However, where is the accountability when the most egregious instances of corporate bribery (per the government's own evidence) are resolved without FCPA anti-bribery charges as in the Siemens and BAE prosecutions?

Where is the accountability when, within a year of charging Siemens with bribery “unprecedented in scale and geographic scope" where “bribery was nothing less than standard operating procedure," the U.S. government turns around and awards the company multi-million dollar contracts? (See here for the prior post).

Where is the accountability when the same government agency (the FBI) that assisted in the investigation of BAE's improper conduct awards a $40 million dollar contract to the company? See here for the prior post.

Breuer continues:

"... the United States, through its FCPA enforcement efforts, leads by example; and other countries are following. For instance, the United Kingdom passed a landmark anti-bribery law earlier this year, sending a clear message to the British business community that the U.K will not tolerate bribery in international commerce."

True, the U.S. government's enforcement of the FCPA is held up as a model for other nations. That's precisely why the facade of FCPA enforcement matters. Because other nations are modeling enforcement of their own anti-bribery laws on U.S. enforcement of the FCPA.

Leading by example?

What example is set by the Giffen Gaffe (see here)? This enforcement action began with allegations that Giffen " made more than $78 million in unlawful payments to two senior officials of the Republic of Kazakhstan in connection with six separate oil transactions, in which the American oil companies Mobil Oil, Amoco, Texaco and Phillips Petroleum acquired valuable oil and gas rights in Kazakhstan." It abruptly ended this past summer with Giffen agreeing to resolve the enforcement action via a one-paragraph superseding information charging a misdemeanor tax violation. Part of Giffen's defense was that his actions were taken with the knowledge and support of the Central Intelligence Agency, the National Security Council, the Department of State and the White House.

For more see this prior post "As We Say, Not Necessarily As We Do."

Breuer then mentions the recent OECD and states that "while the OECD had some constructive suggestions, it strongly commended us for our exemplary enforcement actions - and for the extraordinary commitment of the United States to combating bribery."

As I noted in this previous post, quantity of enforcement does not always mean quality of enforcement.

Lost in the coverage of the OECD report is the salient fact that while loudly praising the U.S. for its "high level" of enforcement, the OECD quitely criticizes and questions many of the policies and enforcement theories which yield the "high level" of enforcement. For instance, the OECD Report notes that the FCPA's language "does not specifically convey" that cases concerning "an operating license or permit to operate a business, or a reduction in tax or import duty" are in violation of the statute. Yet, many FCPA enforcement actions are based on this theory - such as the entire line of Panalpina related enforcement actions earlier this month (see here). Further, the OECD Report notes that "due to an absence of explicit language in the definition of foreign official" it is an open question whether employees of so-called state-owned or state controlled enterprises are "foreign officials" under the FCPA. Yet, numerous FCPA enforcement actions are based on this theory.

Breuer's speech ends as follows:

"In a climate in which FCPA enforcement matters; in which the United States is pursuing foreign bribery vigorously, both here and abroad; and in which the government stands ready to reward sincere cooperation, what should you and your clients be doing? Let me offer you three suggestions.

First, take a hard look at your organization’s FCPA compliance practices. It is never too early to undertake such a review. You will rest easier if you satisfy yourselves that your company is behaving responsibly and in full compliance with the law. Or, if you discover problems before we do, and then work to fix them, you will receive a benefit for having done so.

Second, if your compliance program is lacking, strengthen it. This includes finding ways to tighten internal controls and encouraging a culture of compliance. The OECD’s recently adopted "Good Practice Guidance on Internal Controls, Ethics, and Compliance" is an excellent place to start. Establishing a top-notch compliance program will not only help to prevent misconduct from occurring, but it will also improve your position with us in any eventual investigation.

Finally, voluntarily disclose wrongdoing if you discover it. As a former defense lawyer, I understand that the question of whether to self-report is a difficult one. But I can assure you that if you do not voluntarily disclose your organization’s conduct, and we discover it on our own, or through a competitor or a customer of yours, the result will not be the same. Of course, voluntary disclosure is not the only factor we consider in deciding how to resolve a particular case. We take into account all the factors set forth in the Principles of Federal Prosecution of Business Organizations, and we consider the particular facts and circumstances of each individual case. But there is no doubt that a company that comes forward on its own will see a more favorable resolution than one that doesn’t.

Foreign bribery has a severe, negative impact on international democratic institutions, the worldwide marketplace, and American businesses. The Justice Department is firmly committed to investigating and prosecuting foreign bribery wherever it occurs – because rooting out foreign bribery matters. It matters for the health of democratic institutions across the globe and it matters for the strength of international commerce. At the same time, we are also determined to reward responsible behavior. If you are equally committed to conducting business transparently and free of foreign corruption, we can be strong partners in this fight. I hope you will join us in the months and years ahead."

Azeri Tax Officials and More On Nigeria TIPs

Next up in the analysis of CustomsGate enforcement actions is Tidewater.

See here for the prior post on the Noble Corporation enforcement action and here for the prior post on the GlobalSantaFe enforcement action.

The Tidewater enforcement action involved both a DOJ and SEC component. Total settlement amount was approximately $15.7 million ($7.35 million criminal fine via a DOJ deferred prosecution agreement; $8.3 million in disgorgement and a civil penalty via a SEC complaint).

DOJ

The DOJ enforcement action included a criminal information (here) filed against Tidewater Marine International Inc. ("TMII), a wholly-owned subsidiary of Tidewater Inc. ("TDW") and the primary international operating entity for TDW.

TDW (see here) operates offshore service and supply vessels designed to support all phases of offshore energy exploration, development and production throughout the world. TDW is headquartered in New Orleans and has publicly traded shares on the New York Stock Exchange.

The criminal charges against TMII were resolved via a deferred prosecution agreement (here) between the DOJ and TMII and TDW "on behalf of its wholly-owned subsidiary TMII."

Criminal Information

According to the criminal information, TMII "had managerial and administrative operations in the United States, and it exercised contractual rights and control over Tidewater's vessel operations in Nigeria and Azerbaijan, among other areas."

The criminal information concerns: (1) "bribes paid to Azeri tax inspectors", and (2) "payment of bribes to Nigerian customs officials through the freight fowarding agent [Panalpina]."

Azerbaijan

According to the information, "in 2001, 2003, and 2005, the Azeri Tax Authority [a government entity responsible for administering and collecting tax assessments and duties for the Republic of Azerbaijan] initiated tax audits of TMII's business operations in Azerbaijan."

The information states that TMII employed the "Consulting Firm" [a U.S. consulting company incorporated in Texas and headquartered in Baku, Azerbaijan to provide a broad range of services including accounting services and tax advice and assistance] including the "Azerbaijan Agent" [the Managing Director of the Consulting Firm] to assit with the audits.

The information charges that "in 2001, 2003, and 2005, TMII, through its employees and agents, paid bribes to Azeri tax inspectors to improperly secure favorable tax assessments."

According to the information, TMII "caused approximately $160,000 to be paid to the Dubai Entity [an entity associated with the Consulting Firm], while knowing that some or all of the money would be paid, with the assistance of the Azerbaijan Agent to Azeri tax inspectors."

The information states that "the benefit received and the potential tax liability avoided by TMII as a result of the payment of the bribes was approximately $820,000."

Nigeria

According to the information, between January 2002 through March 2007, Tidex Nigeria Limited ("Tidex") [a Nigerian company 60% majority owned by Tidewater Marine" that "provided agency and operational support, at the direction of TMII, for all vessels that Tidewater operated in Nigeria during the relevant period"], through its employees, affiliates, and agents, authorized the payment of approximately $1.6 million to [Panalpina] as reimbursements for bribes paid by [Panalpina], made on Tidex's behalf, to Nigeria Customs Service ("NCS") employees to induce the officials to disregard certain regulatory requirements in Nigeria relating to the temporary importation of Tidewater vessles into Nigerian waters." The information charges that by August 2004, "TMII managers and employees were aware of and condoned the payments."

The regulatory requirements set forth in the information concern Nigeria's rules and regulations relating to temporarily importing vessels and the "temporary importation permit" ("TIP"). For more on the TIP process see here.

According to the information, between August 2004 and 2007, TMII employees and other Tidewater employees authorized the payment of approximately $1,089,000 to [Panalpina], on Tidex's behalf, knowing that some or all of the monies had been paid by [Panalpina] to NCS officials to induce them to disregard Nigerian regulations, to not impose fines and penalties, and to allow Tidewater vessels to operate in Nigerian waters without a valid TIP."

The information states that the "total benefit in avoided costs, duties, and penalties received by TMII in exchange for these payments was approximately $5,800,000."

Based on the above information, the information charges TMII with conspiracy to violate the FCPA's anti-bribery provisions and to knowingly falsify books and records (in connection with both the Azeri and Nigeria payments) and knowing falsification of books, records, and accounts in connection with "129 payments totaling approximately $1,089,00, as [Panalpina] costs when, in fact, the payments were, in whole or in part, paid to NCS officials."

According to the information, the following individuals "authorized the payment of bribes" or "know, or were aware of a high probability" that bribes were being paid:

Director of Tax [a U.S. citizen located in New Orleans], the Dubai Area Controller[a U.S. citizen], the Regional Finance Director [a British citizen, but described as a "employee and agent of a domestic concern], the Azerbaijan General Manager A [a U.S. citizen] and the Azerbaijan General Manager B [a U.S. citizen] (as to Azeri payments); and

the Vice President of Operations [an Australian citizen who supervised, at various times, both Azerbaijan and Nigerian operations and described as an employee an agent of a domestic concern] and the Nigeria Area Manager [a British citizen] (as to Nigeria payments).

In addition, the information charges that certain money in furtherance of the bribe payments were wired from accounts located in the U.S.

Deferred Prosecution Agreement

Pursuant to the DPA, TMII admitted, accepted and acknowledged that it was responsible for the acts of its officers, employees, subsidiaries, and agents as set forth above.

The term of the DPA is three years and seven months and it states that the DOJ entered into the agreement "based on the individual facts and circumstances" of the case and TMII. Among the factors stated are the following.

"TMII and TDW promptly commenced an internal investigation into its dealings with [Panalpina] after becoming aware of information indicating potential issues with [Panalpina];"

"promptly after commencing its internal investigation, TMII and TDW voluntarily disclosed the conduct described in the Information to the Deparment;"

"TMII and TDW voluntarily expanded their internal investigation to numerous operations and areas of the world outside Nigeria where no misconduct had been reported or suspected, and reported all relevant findings to the Department;"

"TMII and TDW hired a General Counsel with substantial international compliance experience, appointed him the Chief Compliance Offcer, and established a Corporate Compliance Committee;"

"TMII and TDW issued an enhanced, stand-alone FCPA compliance policy, substantially revised its Code of Conduct, as well as additional relevant policies and procedures, including a vetting and approval process for third part service providers and business parners upon implementation of that policy, and instituted a worldwide training program for employees;"

"TMII and TDW expanded their internal investigation to cover additional countries and business activities;"

"TMII and TDW cooperated with the Department's investigation, including sharing all relevant investigation findings and making available numerous current and former employees;"

"TMII and TDW exhibited leadership in the oil and gas industry by leading an oil and gas industry initiative, both in the United States and abroad, to address the [Nigeria TIPs conduct];"

"TMII and TDW implemented an enhanced compliance program and have agreed to undertake further remedial measures as contemplated by this Agreement ...;"

"TDW, on behalf of TMII, agreed to provide a written report to the Deparment on its progress and experience in maintaining and, as appropriate, enhancing its compliance policies and procedures ...;" and

"TMII and TDW agreed to continue to cooperate with the Deparment in any ongoing investigation of the conduct of TMI and its directors, employees, agents, consultants, contractors, subcontractors, subsidiaries, affiliates,
and others relating to violations of the FCPA."

As stated in the DPA, the fine range for the above describe conduct under the U.S. Sentencing Guidelines was $10.5 million - $21 million. Pursuant to the DPA, TMII and TDW agreed that TMII shall pay a monetary penalty of $7.35 million - 30% below the minimum guideline amount.

As is standard in FCPA DPAs, TMII and TDW agreed not to make any public statement "contradicting the acceptance of responsibility by TMII as set forth" in the DPA and TMII and TDW further agreed to only issue a press release in connection with the DPA if the DOJ does not object to the release.

SEC

The SEC's complaint (here) concerns the same core set of facts as set forth in the DOJ's DPA.

In summary fashion, the SEC alleges as to Azerbaijan conduct that "between August 2001 and November 2005, Tidewater Inc. [...] directly or through its subsidiaries, affiliates, employees and agents, violated [the FCPA's anti-bribery and books and records and internal control provisions] by paying $160,000 in bribes to foreign government officials in Azerbaijan through a third party disguised as legitimate services to influence acts and decisions by these officials to resolve local Azeri tax audits in a Company subsidiary’s favor."

According to the SEC, "these improper payments were authorized by senior employees at Tidewater and its subsidiaries while knowing, or ignoring red flags which indicated a high probability, such payments would be passed to government officials, inaccurately recorded in the Company’s or its affiliates’ books and records, and Tidewater failed to maintain sufficient internal controls to prevent such payments."

The SEC complaint alleges that the payments included: (i) "on or about August 14, 2001, Tidewater authorized and paid $50,000 to a third party that it knew, or was reckless in not knowing, would be passed to government officials in Azerbaijan; (ii) "in July 2003, Tidewater authorized and paid $40,000 to a third party in two installments that it knew, or was reckless in not knowing, would be passed to government officials in Azerbaijan; and (iii) "on or about November 11, 2005, a Tidewater subsidiary authorized and paid $70,000 to a third party that it knew, or was reckless in not knowing, would be passed to government officials in Azerbaijan."

The SEC's complaint provides additional detail regarding the Azeri tax audits than the DOJ's criminal information. The SEC's allegations seem to suggest that the payments to the Azeri tax officials were the result of extortionate demands communicated to Tidewater entities through the Azerbaijan Agent. For instance, in connection with the 2001 tax audit, the complaint states that "Executive A [Tidewater's CFO during the relevant period] believed that the 2001 Audit was sort of a 'shakedown' that the Azerbaijan Agent created in order to collect a fee." As to this audit, the complaint further alleges that "Executive A and [another company employee] learned that the Azeri tax auditors threatened to use an accounting method that would result in a higher tax assessment because the tax auditors did not feel 'respected.'" In connection with the 2002 tax audit, the complaint alleges that the Azerbaijan Agent informed Tidewater personnel "that the Azeri tax auditors had verbally identified a potential figure of up to $600,000 to resolve the 2003 audit" but that this "amount bore no relation to any actual tax assessment or penalty."

As to Nigeria conduct, the SEC complaint alleges, in summary fashion, that "from in or about January 2002 through March 2007, Tidewater, through its subsidiaries and agents, also authorized the reimbursement of approximately $1.6 million to its customs broker in Nigeria used, in whole or in part, to make improper payments to Nigerian Customs Services (“NCS”) employees to induce them to disregard certain regulatory requirements in Nigeria relating to the temporary importation of the Company’s vessels into Nigerian waters."

According to the SEC, both the Azeri and Nigerian payments:

"[W]ere improperly recorded as legitimate expenses in the Company’s books and records and all of them, with the exception of the 2003 Azerbaijan payments, were consolidated into Tidewater’s financial statements. Tidewater’s internal controls, including at least two internal audits, failed to detect numerous red flags which should have alerted its management that the Azerbaijan agent and Nigerian customs broker were likely using funds provided by Tidewater, in whole or in part, to make improper payments to government officials."

Based on the above conduct, the SEC charged Tidewater with violating the FCPA's anti-bribery and books and records and internal control provisions.

As to the company's internal controls, the SEC specifically alleged as follows.

"Tidewater’s controls over the engagement and activities of agents operating in high-risk jurisdictions outside of the marketing and sales area were inadequate. For example, the Company’s compliance program, including training provided to its employees, did not adequately address the applicability of the FCPA to customs, tax, and similar regulatory issues in its foreign subsidiary operations until March 2007. Moreover, employees in Azerbaijan easily circumvented the Company’s internal controls by setting up small cash reserves for contingencies, dividing the improper payments into increments below their discretional financial authority and processing a payment through a Company affiliate. Some of the payments for invoices that the Nigerian Agent submitted to Tidex were authorized, processed and funded without the work order or supporting documentation necessary to verify that the service was requested and rendered. Tidewater also conducted internal audits in 2001 and 2003 of its Nigerian operations that failed to detect the improper payments even though weaknesses with invoices from, and payments to, agents and consultants were identified."

Without admitting or denying the SEC's allegations, Tidewater agreed to an injunction and the payment of $8,104,362 in disgorgement and a $217,000 penalty.

Lucinda Low (here) (Steptoe & Johnson) represented Tidewater.

Yet Another Noisy Exit

Rodolfo Michelon was the Director & Controller - Mexico of Sempra Global. Michelon was also the legal representative of various Sempra subsidiary companies located in Mexico and served as a member of the board of directors of the Mexican subsidiaries.

That is until March 10, when Michelon was terminated by Sempra.

In a lawsuit (here) recently filed in California state court, Michelon claims that his termination was wrongful for many reasons, including the following:

"Sempra regularly required Michelon to transfer funds, and account for illegitimate expenditures that boiled down to bribes of government officials - everything from fraudulent trusts ostensibly to purchase fire fighting equipment for Mexican governments, to paying off local fisherman to move their operations away from Sempra facilities, to demanding remediation of accounting that falsely stated Sepmpra's assets, to the outright wiring of huge amounts of money to 'consultants' throughout Mexico. As with his other attempts to ensure he was complying with his ethical requirements as a CPA, Michelon's repeated questioning and protests of the miscellaneous frauds and bribes was met with open hostility and threats of termination. The termination of the Controller employment was not only in retaliation for Michelon's complaints, but it was also meant to keep Michelon from reporting the frauds and bribes to governmental, law enforcement officials."

Sempra Global is described (here) as "the umbrella for Sempra Energy's businesses operating in competitive energy markets. Sempra Global companies acquire, develop and operate infrastructure assets related to the production and distribution of energy, including power plants, natural gas pipelines and liquefied natural gas (LNG) receipt terminals."

Various Sempra entities are publicly traded issuers (see here).

In this San Diego Union Tribune report Sempra officials "called Michelon a disgruntled ex-employee attempting to cash in by making 'outlandishly false claims and misrepresentations' after being let go in a routine reorganization." A Sempra spokesperson said that the “company first became aware of Mr. Michelon’s claims several months ago" and that “Sempra’s board of directors ordered an independent investigation, which found Mr. Michelon’s allegations to be completely without merit.”

Michelon's "noisy exit" is the fourth such exit publicly reported over the past three months that may implicate the FCPA. See here and here for the prior posts.

The Facade of FCPA Enforcement

I am pleased to release (here) my paper, "The Facade of FCPA Enforcement," recently published by Georgetown Journal of International Law.

Below is an abstract.

*****

The rise in Foreign Corrupt Practices Act (“FCPA”) enforcement actions has been well documented. Against the backdrop of aggressive enforcement and the resulting multi-million dollar fines and penalties is the undeniable fact that, in most instances, there is no judicial scrutiny of the FCPA enforcement theories. The end result is that the FCPA often means what the enforcement agencies say it means. Because of the “carrots” and “sticks” relevant to resolving a government enforcement action, FCPA defendants are nudged to accept resolution vehicles notwithstanding the enforcement agencies’ untested and dubious enforcement theories or the existence of valid and legitimate defenses. The end result is often the facade of FCPA enforcement.

This article discusses various pillars that contribute to the facade of FCPA enforcement and highlights that the FCPA, during its decade of resurgence, is being enforced like no other law. This article does not argue, or even suggest, that every FCPA enforcement action is unwarranted or that no company or individual has ever violated the FCPA. Rather, this article demonstrates that a significant majority of recent FCPA enforcement actions are a facade—including those that allege clear instances of corporate bribery—yet are resolved without FCPA anti-bribery charges.

The facade of FCPA enforcement matters. Even though the resolution vehicles typically used to resolve an FCPA enforcement action are not subject to judicial scrutiny and the vehicles do not necessarily reflect the triumph of the enforcement agencies’ theories, in the absence of substantive FCPA case law, these privately negotiated resolution vehicles have come to represent de facto FCPA case law. The facade of FCPA enforcement also breeds inefficient overcompliance by risk averse business actors fearful of enterprise–threatening liability because of the enforcement agencies’ untested and dubious theories. Because the factors that contribute to the facade are being modeled by other nations when enforcing their own bribery laws, the facade of FCPA enforcement is a global issue affecting a broad segment of the marketplace.

Identifying and acknowledging the existence of a problem is a necessary first step to crafting solutions. This article exposes the facade of FCPA enforcement, argues that addressing the facade and subjecting FCPA enforcement actions to greater judicial scrutiny is in the public interest, and encourages more FCPA defendants to challenge the enforcement agencies and further expose the facade of FCPA enforcement.

"The Payments ... Would Not Constitute Facilitation Payments for Routine Governmental Actions Within the Meaning of the FCPA"

The above words are from the DOJ's non-prosecution agreement with Noble Corporation ("Noble"). The DOJ used this phrase twice in the NPA and one can reasonably conclude that if the DOJ felt the need to express such a statement twice, that the FCPA's facilitating payment exception is probably on the minds of many in connection with the CustomsGate enforcement actions.

Next up in the analysis of CustomsGate enforcement actions is Noble Corporation (see here). See this prior post for analysis of the GlobalSantaFe enforcement action.

The Noble enforcement action involved both a DOJ and SEC component. Total settlement amount was approximately $8.2 million ($2.6 million criminal fine via a non-prosecution agreement; $5.6 million in disgorgement and interest via a SEC complaint).

During the time period relevant to the enforcement action, Noble was a Cayman Islands company. In March 2009, a new Swiss parent company, also called Noble Corporation, was created and Noble Corporation, the Cayman Islands company, became a wholly-owned subsidiary of the Swiss parent company.

DOJ

As set forth in the NPA (see here), the DOJ agreed "not to criminally prosecute Noble [...] or any of subsidiaries [...] related to the making of improper payments by employees and agents of Noble and/or its subsidiaries to officials of the Nigerian Customs Service in connection with Noble's and/or its subsidiaries' import and export of goods and items relating to its operations in Nigeria from January 2003 to July 2007, and the accounting and record-keeping associated with these improper payments."

According to the Statement of Facts in the NPA, a "Nigerian Customs Agent" provided a variety of logistics and customs services for Noble Drilling (Nigeria) Ltd. ("Noble Nigeria") a wholly-owned subsidiary of Noble and the primary Noble operating company in Nigeria. The Nigerian Customs Agent submitted false documents to Nigerian customs officials on behalf of Noble Nigeria "relating to the temporary importation of rigs owned or operated by Noble Nigeria into Nigerian waters" and the Nigerian Customs Agent invoiced Noble Nigeria and was paid for its services.

The Statement of Facts describes "The Nigerian Temporary Import Process." As described, if Noble were to "permanently import a rig into Nigerian waters" the customs duties were significant, between 10-20% of the total value of the rig. Alternatively, Noble could import rigs and other items on a temporary basis in which case no customs duties would be assessed. However, as described in the Statement of Facts, "a rig, or other item, could be imported on a temporary basis only if the item: (a) was considered a high valued piece of special equipment, (b) was not available for sale in Nigeria, and (c) was being imported temporarily and was intended to be exported." If these requirements were met, "a company, through a local customs agent, could apply for a temporary import permit." ("TIP").

According to the Statement of Facts, "items imported under a TIP (and TIP extension) could not remain in Nigeria longer than the period allowed for by the TIP and/or TIP extensions. When the TIP (or TIP extension) expired, the owner "could either choose to permanently import the rig ... or export the rig and re-import it and obtain a new initial TIP." According to the Statement of Facts, "the failure to export the rig after the TIP expired could result in the assessment of Nigerian penalties of up to six times its cost."

The Statement of Facts indicate that Noble Nigeria chose to temporarily import rigs into Nigeria and that Noble Nigeria employed the Nigeria Customs Agent to apply for and secure its TIPs and TIP extension.

According to the Statement of Facts, "whenever a TIP (and related TIP extensions) expired for a rig in Nigeria, the Nigerian Customs Agent, with the knowledge of Noble Nigeria, engaged in a process of submitting false paperwork on Noble Nigeria's behalf to avoid the time, cost, and risk associated with exporting the rig and reimporting it into Nigerian waters" - the so called "paper process" or a "paper move." The Statement of Facts further assert that the "Nigeria Customs Agent, with the knowledge of Noble Nigeria, created and caused to be presented to the [Nigeria Customs Service] NCS documents that reflected that the rig had been physically exported and reimported, when, in fact, the rig had remained in Nigeria."

According to the Statement of Facts, the Nigeria Customs Agent included a line item in its invoices for "special handling charges" and "Noble Nigeria personnel were informed by the Nigerian Customs Agent that all or part of the 'special handling charges' would be paid by the Nigeria Customs Agents to NCS officials." Further, the Statement of Facts assert that "Noble Nigeria personnel approved the payments to the Nigerian Customs Agent with the knowledge that some or all of the payments would be paid to NCS officials."

The Statement of Facts assert that "certain Noble and Noble Nigeria managers and employees authorized paper moves on five occasions." In a separate section of the NPA titled, "Corporate Knowledge of the TIP Paper Process" the following statements are made.

"Manager A" (a U.S. citizen and a former manager in Noble's Internal Audit Department) "interviewed several Noble-Nigeria employees who explained that false paperwork had been created and submitted to NCS officials through the Nigeria Customs Agent in connection with the process of securing TIPs" and that Manager A "also learned that the Nigeria Customs Agent in the past had charged a fee of approximately $75,000 per TIP to secure the TIPS."

Manager A provided a written summary to Executive A (a U.S. citizen, an officer of Noble, and Head of Internal Audit).

Executive A discussed Manager A's findings with Executive B (a U.S. citizen, an officer of Noble, and the Vice President-Eastern Hemisphere with management responsibility for Nigerian operations). Executive A then informed the Senior Executive (a U.S. citizen, an officer of Noble, and the former Chief Financial Officer).

The Audit Committee was advised of the "paper process" as was "members of Noble's senior management."

Executive B was tasked with "ensuring the Company's compliance with all applicable rules and regulations related to the importation and exportation of assets in Nigeria...".

Corrective action was contemplated, such as permanently importing rigs or moving them to a free trade zone, but Manager A and Executive B "decided that due to the time, cost, and risk of permanently importing or moving the rigs, the paper process would be used for three rigs for which TIPs had expired."

"The Audit Committee was not advised of the decision to resume the paper process."

Without any elaboration, the Statement of Facts states that the above described payments "would not constitute facilitation payments for routine governmental actions within the meaning of the FCPA."

The Statement of Facts continue - between May 2005 and March 2006 "a total of five (5) TIPs were obtained through the submission of false documents via the paper process, and each included the payment of 'special handling fees' to the Nigeria Customs Agent. The 'special handling fees' ranged from approximately $13,800 to $17,000."

According to the Statement of Facts:

"By their approval of the payments and the process, the Senior Executive, and Executive B caused Noble to inaccurately record in its books, records, and accounts the five (5) "special handling fee" payments paid to the Nigeria Customs Agent in a "facilitation payments" account totaling approximately $74,000, when the Senior Executive, Executive A, and Executive B knew that some or all of these payments would be passed on to NCS officials to obtain TIPs. Thus, such payments could not be facilitation payments for the performance of a "routine governmental action" within the meaning of the FCPA."

The remainder of the Statement of Facts describes how Executive A failed to advise the Audit Committee and/or concealed from the Audit Committee that the paper process had resumed.

According to the Statement of Facts, "the total benefit received by Noble Nigeria for these payments in avoided costs, duties, and penalties was approximately $2,973,000."

As noted in the NPA, the DOJ agreed to enter into the NPA based, in part, on the following factors:

"The Department enters into this Non-Prosecution Agreement based, in part, on the following factors: (a) Noble's discovery of the violations through its own internal investigation; (b) Noble's timely, voluntary, and complete disclosure of the facts described in [the Statement of Facts]; (c) Noble's extensive, thorough, real-time cooperation with the Department and the SEC ...; (d) Noble's voluntary investigation of the Company's business operations throughout the world; (e) the existence of Noble's pre-existing compliance program and steps taken by Noble's Audit Committee to detect and prevent improper conduct from occurring; (f) Noble's remedial efforts to enhance its compliance program and oversight that have already been undertaken; (g) Noble's agreement to continue to implement enhanced compliance measures ...; and (h) Noble's agreement to provide annual, written reports to the Department on its progress and experience in maintaining and, as appropriate, enhancing its compliance policies and procedures ...".

As is standard process in an NPA, Noble admitted, accepted, and acknowledged its responsibility for the conduct of its employees, agents, and subsidiaries as set forth in a Statement of Facts, and further agreed "not to make any public statement contradicting" the Statement of Facts.

SEC

The SEC's complaint (here) concerns the same core set of facts as set forth in the DOJ's NPA.

In summary fashion, the SEC alleges that "through the TIPs obtained using the paper process, Noble obtained profits from continued operations of rigs in Nigeria and avoided the costs of moving rigs out of and back into Nigerian waters." According to the SEC, "Noble's total gains from this conduct were at least $4,294,933."

The SEC charged Noble with violating the FCPA's anti-bribery provisions, as well as the FCPA's books and records and internal control provisions.

As to the FCPA's books and records charge, the SEC alleges that "Noble Nigeria recorded the portion of the payments it made to its customs agent that certain Noble personnel believed were being passed on to Nigerian government officials in Noble's 'facilitating payment' account and in some cases to other operating expense accounts..." However, without elaborating the SEC states, "because these payments were not qualifying facilitating payments under the FCPA or otherwise legitimate expenses, Noble created false books and records by recording the payments as such."

As to the internal controls charges, the SEC alleges that "although Noble had an FCPA policy in place, Noble lacked sufficient FCPA procedures, training, and internal controls to prevent the use of the paper process and making of payments to Nigerian government officials to obtain TIPs and TIP extensions."

Without admitting or denying the SEC's allegations, Noble agreed to agreed to an injunction and will pay disgorgement and prejudgment interest of $5,576,998.

Neither the DOJ nor the SEC resolution require the company to engage a compliance monitor.

Both the DOJ's NPA and the SEC's complaint specifically mention that Noble conducted a worldwide review of its operations. That no other conduct was mentioned in either the DOJ's NPA or the SEC's complaint, suggests that Noble's Nigerian import/export issues were an isolated incident, not indicative of systemic issues throughout the company's other operations.

In a press release (here) Noble's CEO stated that "ethical business conduct and strict compliance with the law remain central to Noble's operating philosophy," that the company "is pleased that these investigations have been concluded and a resolution has been reached," and that the company "is moving forward with a continuing commitment to ethical business practices and a dedication to compliance, ideas that are reflected in our core values, our policies, our training and our expectations for ethical behavior." The release notes as follows: "In May 2007, the Company self-reported to the DOJ and the SEC possible improper payments by a customs agent in connection with securing temporary import permits and extensions for the operations of Noble's rigs in Nigeria. An internal investigation was promptly conducted by independent outside counsel, and the Company has cooperated thoroughly with the independent investigator's review and the government's investigation."

In a 10-K filing yesterday, Noble stated as follows:

"We are currently operating three jackup rigs offshore Nigeria. The temporary import permits covering two of these rigs expired in November 2008 and we have pending applications to renew these permits. We have received notice that we will be allowed to obtain a new temporary import permit for one of the two rigs and are in the process of clarifying this approval. However, as of October 31, 2010, the Nigerian customs office had not acted on our application for the second unpermitted rig, but we are discussing undertaking the same process as for the first rig. We did obtain a new temporary import permit for the third rig in 2009 that had previously been operating with an expired temporary import permit, while the application was pending, by exporting and re−importing the rig. We continue to seek to avoid material disruption to our Nigerian operations; however, there can be no assurance that we will be able to obtain new permits or further extensions of permits necessary to continue the operation of our rigs in Nigeria. If we cannot obtain a new permit or an extension necessary to continue operations of any rig, we may need to cease operations under the drilling contract for such rig and relocate such rig from Nigerian waters. In any case, we also could be subject to actions by Nigerian customs for import duties and fines for these two rigs, as well as other drilling rigs that operated in Nigeria in the past. We cannot predict what impact these events may have on any such contract or our business in Nigeria. Furthermore, we cannot predict what changes, if any, relating to temporary import permit policies and procedures may be established or implemented in Nigeria in the future, or how any such changes may impact our business there.

Mary Spearing, a former DOJ attorney (here), represented Noble.

Failure to Move Rigs Costs GlobalStantaFe

When an FCPA enforcement action involving 13 separate entities, comprising both DOJ and SEC components, is announced on the same day, there is a natural tendency to look at the forest, without spending much time on the trees.

Today's post, and those that will follow in the near future, will focus on the separate enforcement actions (see here) announced by the DOJ/SEC on November 4th, in what I'll call "CustomsGate."

First up, GlobalSantaFe Corp. ("GSF"), the only enforcement action without a DOJ component.

GSF provided offshore oil and gas drilling services for oil and gas exploration companies. (GSF is a former issuer that completed a merger with a subsidiary of Transocean Inc. and became known as Transocean Worldwide, Inc. which is a subsidary of Transocean Ltd., an issuer).

In order to import equipment necessary to do such work in Nigeria, GSF needed to obtain a temporary importation permit ("TIP") from the Nigerian government through the Nigerian Customs Service ("NCS"). Obtaining a TIP required mounds of paperwork. TIPS were initially issued for one year and were allowed to be extended twice for a period of six months each. Rarely, and only in the discretion of NCS officials, could a third six-month extension be granted.

Prior to or after a TIP expired, GSF was required to move its rigs out of Nigerian waters and to begin again the paper heavy TIP application process. Failure to export a rig after the expiration of a TIP, and all permissible extensions, would render a rig subject to potential forfeiture or seizure.

Moving a rig is no small task, it requires tug boats and money.

So begins the SEC's complaint (here) against GSF.

According to the SEC, "instead of moving its oil drilling rigs out of Nigerian waters when GSF's permit to temporarily import the rigs into Nigeria had expired, GSF, through its customs brokers, made payments to NCS officials in order to obtain documentation reflecting that the rigs had moved out of Nigerian waters, when in fact, the rigs had not moved at all."

According to the SEC, there were four such instances.

The Adriatic VIII should have left Nigerian waters on or before October 15, 2004. However, in September 2004, the SEC alleges that "GSF, through its customs broker, took steps to obtain false documentation from NCS reflecting that the Adriatic VIII left Nigeria on September 29, 2004." According to the SEC, "GSF paid its customs broker $87,500 (wired through a bank account in the name of GSF located in the U.S.) to obtain the new TIP, including a payment of $3,500 identified on the customs broker's invoice as 'additional charges for export." According to the SEC, GSF managers in Nigeria "knew that the Adriatic VIII had never actually left Nigerian waters and knew, or knew that there was a high probability, that the explanation on the invoice as 'additional charges for export' was for purposes of disguising a bribe." According to the SEC, a fews years later, GSF, through its customs-broker, again obtained false documentation from NCS reflecting that the Adriatic VIII had left Nigerian waters when, in fact, it had not."

The Adriatic I should have left Nigerian waters on or before January 31, 2004. However, before this date, the SEC alleges that "GSF, through its customs broker, obtained documentation from NCS, reflecting that the Adriatic I left Nigeria on January 31, 2004 when, in fact, it had not."

The Baltic I should have left Nigerian waters on or before June 3, 2004. However, before this date, the SEC alleges that "GSF, through its customs broker, took steps to obtain documentation from NCS, reflecting that the Baltic I left Nigeria on June 25, 2004. According to the SEC, the GSF managers "authorized and submitted for payment invoices containing charges described as 'additional charges for export' when the same GSF managers knew that the GSF rig had not been exported from Nigeria." Thus, the SEC alleges, the "GSF managers either knew that the 'additional charges for export' were bribes, or knew that there was a high probability that they were bribes.

By engaging in the above referenced conduct, the SEC alleged that GSF: (1) avoided costs of approximately $1.5 million from not physicially moving the rigs; and (2) gained revenues of approximately $619,000 from not interrupting operations to move the rigs."

The SEC charged GSF, on the above facts, with violating the FCPA's anti-bribery provisions.

Because none of the above-described payments were "accurately reflected in GSF's books and records," the SEC also charged GSF with violating the FCPA's books and records and internal control provisions in connection with the above payments.

There is more to the SEC's complaint.

It is common for an enforcement agency (whether DOJ or SEC) to ask the "where else question." In other words, if the company was making the above-described payments in country x, where else was the company also making similar payments?

This frequent question causes the company to do a worldwide review of its operations and report back the results to the enforcement agency.

This is why an SEC complaint or DOJ resolution vehicle often contains a laundry list of related allegations towards the end of the resolution vehicle.

Case in point, the SEC's complaint against GSF.

The SEC alleges that "GSF, through its customs brokers, made a number of additional payments to government officials in Nigeria totaling approximately $82,000." The complaint gives sparse detail as to these alleged "other suspicious payments."

Further, the SEC alleges that "GSF, through its customs brokers, also made a number of other payments [...] totaling approximately $300,000 to government officials in Gabon, Angola, and Equatorial Guinea."

These "other suspicious payments" in Nigeria and the Gabon, Angola, and Equatorial Guinea payments were not accurately reflected in GSF's books and records and GSF failed to devise and maintain an effective system of internal controls to prevent or detect them, thus giving rise to FCPA books and records and internal charges. (These other payments were not included in the FCPA anti-bribery charges).

Based on the entire above-described conduct, and without admitting or denying the SEC's allegations, GSF agreed to pay $5.85 million (approximately 3.75 million in disgorgement and a 2.1 million penalty).