During last week's FCPA hearing in the House, Representative John Conyers (D-MI) had a contentious Q&A exchange with Shana-Tara Regon (Director, White Collar Crime Policy, National Association of Criminal Defense Lawyers). See here for the previous post regarding the hearing.
Conyers asked - "give me some examples of overcriminalization of the FCPA." He repeatedly interrupted Regon and asked "just give me some examples" "give me an instance of where one case was ever brought by the DOJ that would constitute overcriminalization." Conyers stated, "only 140 cases have been brought in 10 years -that averages 14 cases a year - is that overcriminalization to you?" Regon stated that overcriminlization occurs when a statute provides no reasonable limits and that she is concerned more about prosecutions that may occur in the future more so than prosecutions that have already occurred.
There should be plenty of concern regarding prosecutions that have already occurred, but given the glare of the cameras, the stress of testifying, and the disruption of being interrupted, it would have been difficult for any witness to retrieve from their memory bank specific FCPA enforcement actions.
This post provides a summer reading list of FCPA enforcement actions, commentary and analysis, and legal scholarship for Representative Conyers so that he can best seek answers to the question he posed to Regon.
For starters, what does overcriminalization mean?
To be sure, it can mean different things to different people in different circumstances. In "The Overcriminalization Phenomenon(here) Eric Luna provides this definition - "the overcriminalization phenomenon consists of: (1) untenable offenses; (2) superfluous statutes; (3) doctrines that
overextend culpability; (4) crimes without jurisdictional authority; (5) grossly disproportionate punishments; and (6) excessive or pretextual enforcement of petty violations. In this piece, Jeffrey Parker (while observing that "definitions of “overcriminalization” are a bit fuzzy and debatable") identifies the following as among the factors that may contribute to overcriminalization: "the vague, arcane, or trivial nature of such prohibitions, as undermining citizens ability to conform, and debasing the moral moment of the criminal sanction" and "the lack of adequate mens rea standards in criminal prohibitions."
Not all overcriminalization factors are relevant to this "new era of FCPA enforcement" (see here), but in the minds of many, several factors are.
Enforcement Actions
In the 2011 Comverse Technologies enforcement action (see here), the company paid $2.8 million in combined fines and penalties (and no doubt millions more in connection with the investigative and resolution process) to resolve a matter in which the DOJ did not allege that the company even knew about the improper payments at issue. The action was resolved via a non-prosecution agreement meaning there was no judicial scrutiny of the DOJ's enforcement theory.
In the 2010 Alliance One International enforcement action (see here), the company paid approximately $20 million in combined fines and penalties (and millions more in connection with the investigative and resolution process) to resolve a matter in which it did absolutely nothing wrong. Rather, the entire DOJ enforcement action was based on a successor liability theory. Again, the action was resolved via a non-prosecution agreement meaning there was no judicial scrutiny of the DOJ's enforcement theory.
In the 2010 Noble Corporation enforcement action (see here), the company paid approximately $8 million in combined fines and penalties (and millions more in connection with the investigative and resolution process) to resolve a matter involving the import and export of goods into Nigeria. When Congress passed the FCPA, its intent as to so-called facilitating or grease payments was clear. Senate Report No. 95-114 (May 2, 1977) states, in pertinent part, as follows. “The statute does not […] cover so-called ‘grease’ payments such as payments for expediting shipments through customs ...". The relevant House Report (No. 95-640, September 28, 1977) similarly states as follows. “The language of the bill is deliberately cast in terms which differentiate between [corrupt payments] and facilitating payments, sometimes called ‘grease payments.’ […] For example, a gratuity paid to a customs official to speed the processing of a customs document would not be reached by this bill. Nor would it reach payments made to secure permits, licenses, or the expeditious performance of similar duties of an essentially ministerial or clerical nature which must of necessity be performed in any event. While payments made to assure or to speed the proper performance of a foreign official’s duties may be reprehensible in the United States, the committee recognizes that they are not necessarily so viewed elsewhere in the world and that it is not feasible for the United States to attempt unilaterally to eradicate all such payments." The Noble enforcement action was resolved via a non-prosecution agreement meaning, again, there was no judicial scrutiny of the DOJ's enforcement theory.
And then of course there is the issue of "foreign official" and the fact that most FCPA enforcement actions in this new era are based on alleged improper payments to employees of alleged state-owned or state-controlled enterprises ("SOEs") on the theory that such business entities are "instrumentalities" of a foreign government and thus all employees, regardless of rank or position, are "foreign officials" under the FCPA. Yet, (1) During its multi-year investigation of foreign corporate payments, Congress was aware of the existence of SOEs and that some of the questionable payments uncovered or disclosed may have involved such entities. (2) In certain of the bills introduced in Congress to address foreign corporate payments, the definition of “foreign government” expressly included SOE entities. These bills were introduced in both the Senate and the House during both the 94th and 95th Congress. (3) Despite being aware of SOEs and despite exhibiting a capability for drafting a definition that expressly included SOEs in other bills, Congress chose not to include such definitions or concepts in what ultimately become the FCPA in 1977. See here for extensive reading on this issue.
Commentary and Analysis
In 2010, Forbes ran a feature article (here) titled "The Bribery Racket" - "How Federal Crackdown on Bribery Hurts Business And Enriches Insiders." Lucinda Low, a respected FCPA practitioner, notes in the article that "the scope of things companies have to worry about is enlarging all the time as the government asserts violations in circumstances where it's unclear if they would prevail in court" and that "you don't have the checks and balances you would normally have if you had more litigation." Commenting on the current era of FCPA enforcement, Joseph Covington (who headed the DOJ's FCPA efforts in the 1980's) said that the current era "is good business for law firms [...] good business for accounting firms, it's good business for consulting firms, the media--and Justice Department lawyers who create the marketplace and then get yourself a job."
Here, Michael Levy (a former Assistant United States Attorney in the District of Columbia and law clerk to U.S. Supreme Court Justice Lewis F. Powell Jr.) talks about what he calls prosecutorial common law. Levy states that "prosecutors don’t set out deliberately to interpret criminal statutes in ways that convict hundreds of people on the basis of a standard that not a single Supreme Court Justice finds supportable ...". Levy notes that "we have seen this before in connection with the interpretation of the honest services fraud and obstruction of justice statutes, and it is certainly happening today with the FCPA."
In this publication, an author group including Philip Urofsky (former Assistant Chief of the DOJ Fraud Section responsible for FCPA enforcement) and Danforth Newcomb (a dean of the FCPA bar) noted that in several recent FCPA enforcement actions "the theories used to hold parents accountable for the acts of subsidiaries and vice versa appear to be unclear." In other cases, the author group states that in many cases critical elements of the statute were not pleaded or were pled in a way "that is not consistent with established precedent and the language of the statute."
In a September 10, 2010 interview with the Corporate Crime Reporter, Mark Mendelsohn (the former head of DOJ FCPA enforcement during this era of resurgence who departed the DOJ for private practice in 2010) 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 (the common way FCPA enforcement actions are resolved) 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."
In this Q&A exchange, Martin Weinstein (a former DOJ FCPA attorney who prosecuted the Lockheed case in the mid-1990's and is now a prominent FCPA practitioner) stated as follows. "The last decade of FCPA enforcement has seen extraordinary evolution, and I think you have to say that when Congress passed the law in 1977, they did not envision the wide reach of enforcement today and the types of things that the government gets involved in, such as transactions, joint ventures, and successor liability."
Legal Scholarship
In "Enthusiastic Enforcement, Informal Legislation: The Unruly Expansion of the Foreign Corrupt Practices Act" (here), Amy Westbrook (Washburn University School of Law) argues that the recent "transformation of the FCPA has been brought about by ad hoc enforcement actions, rather than legislation, judicial decision, or regulation" and that "in the absence of formal process or reasoned articulation, the actual scope of the law is unclear."
In "The Facade of FCPA Enforcement" (here), I argue that "the FCPA often means what the enforcement agencies say it means" and that "even though the resolution vehicles typically used to resolve an FCPA enforcement action are not subject to judicial scrutiny and [thus] 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" which breed "inefficient overcompliance by risk averse business actors fearful of enterprise - threatening liability because of the enforcement agencies’ untested and dubious theories."
Showing posts with label Noble Corporation. Show all posts
Showing posts with label Noble Corporation. Show all posts
Wednesday, June 22, 2011
Wednesday, November 10, 2010
"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.
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.
Friday, November 5, 2010
Major Shipment - Customs Cases Bring In $236.5 Million
The pipeline that contains pending FCPA enforcement actions burst yesterday as the DOJ and SEC announced enforcement actions against 13 separate entities.
In enforcement actions that have long been anticipated, Panalpina entities, as well as several others, settled DOJ and SEC enforcement actions principally focused on customs and related payments in Nigeria, but also including alleged improper conduct in Angola, Brazil, Russia, Kazakhstan, Venezuela, India, Mexico, Saudi Arabia, the Republic of Congo, Libya, Azerbaijan, Turkmenistan, Gabon and Equatorial Guinea.
The combined DOJ/SEC settlement amounts total $236.5 million.
Your FCPA scorecard thus shows that since June 28th, the U.S. government has brought FCPA enforcement actions totaling approximately $1.1 billion. With numbers like these, aggressive FCPA enforcement based on, often times, dubious legal theories (more on that later) seems like the most profitable government program ever conceived.
Set forth below is a basic overview of the settlements. A more thorough review of the hundreds of pages of relevant documents will be forthcoming.
The DOJ resolution documents can be found here, the SEC resolution documents here.
Panalpina Entities
DOJ
Entities: Panalpina World Transport (Holding) Ltd. and Panalpina Inc.
Resolution Vehicles: Criminal information charging Panalpina World Transport(Holding) with conspiracy to violate and violating the FCPA's anti-bribery provisions. Charges resolved through a deferred prosecution agreement. Criminal information charging Panalpina Inc. with conspiracy to violate the FCPA's books and records provisions and aiding and abetting certain customers in violating the FCPA's books and records provisions. Charges resolved through a plea agreement.
Countries: Angola, Azerbaijan, Brazil, Kazakhstan, Nigeria, Russia, and Turkmenistan
Penalty: Combined $70.56 million
SEC
Entity: Panalpina, Inc.
Resolution Vehicle: Settled civil complaint charging FCPA anti-bribery violations, aiding and abetting FCPA anti-bribery violations, and FCPA books and records and internal controls violations.
Countries: Nigeria, Angola, Brazil, Russia, and Kazakhstan
Disgorgement: $11,329,369
Pride Entities
DOJ
Entities: Pride International Inc. and Pride Forasol S.A.S.
Resolution Vehicle: Criminal information charging Pride International with conspiracy to violate the FCPA's anti-bribery provisions and books and records provisions; violating the FCPA's anti-bribery provisions; and violating the FCPA's books and records provisions. Charges resolved through a deferred prosecution agreement. Criminal information charging Pride Forasol with conspiracy to violate the FCPA's anti-bribery provisions; violating the FCPA's anti-bribery provisions; and aidng and abetting violations of the FCPA's books and records provisions. Charges resolved through a plea agreement.
Countries: Venezuela, India and Mexico
Penalty: $32.625 million (combined)
SEC
Entity: Pride International Inc.
Resolution Vehicle: Settled civil complaint charging FCPA anti-bribery violations, FCPA books and records and internal controls violations.
Countries: Venezuela, India, Mexico, Kazakhstan, Nigeria, Saudi Arabia, Republic of Congo, and Libya
Disgorgement and interest: $23,529,718
Tidewater Entities
DOJ
Entities: Tidewater Marine International Inc., Tidewater Inc.
Resolution Vehicle: Criminal information charging Tidewater Marine with conspiracy to violate the FCPA's anti-bribery and books and records provisions and violating the FCPA's books and records provisions. Charges resolved through a deferred prosecution agreement with Tidewater that requires, among other things, Tidewater Marine to pay a $7.35 million criminal penalty.
Countries: Azerbaijan and Nigeria
Penalty: $7.35 million
SEC
Entity: Tidewater Inc.
Resolution Vehicle: Settled civil complaint charging FCPA anti-bribery violations, FCPA books and records and internal controls violations
Countries: Nigeria, Azerbaijan
Disgorgement: $8,104,362
Civil Penalty: $217,000
Transocean Entities
DOJ
Entities: Transocean Inc. and Transocean Ltd.
Resolution Vehicle: Criminal information charging Transocean Inc. with conspiracy to violate the FCPA's anti-bribery and books and records provision; violating the FCPA's anti-bribery provisions; and aiding and abetting the FCPA's books and records provisions. Charges resolved through a deferred prosecution agreement with Transocean Ltd. that requires, among other things, Transocean Inc. to pay a $13.44 million criminal penalty.
Countries: Nigeria
Penalty: $13.44 million
SEC
Entity: Transocean Inc.
Resolution Vehicle: Settled civil complaint charging FCPA anti-bribery violations, FCPA books and records and internal controls violations
Countries: Nigeria
Disgorgement and interest: $7,265,080
GlobalSantaFe Corp.
SEC
Entity: GlobalSantaFe Corp.
Resolution Vehicle: Settled civil complaint charging FCPA anti-bribery provisions, FCPA books and records and internal controls violations
Countries: Nigeria, Gabon, Angola, Equatorial Guinea
Disgorgement: $3,758,165
Civil Penalty: $2.1 million
Noble Corporation
DOJ
Entity: Noble Corporation
Resolution Vehicle: Non-proseuction agreement in which Noble Corporation: (i) acknowledged that certain of its employees knew that payments would be passed on as bribes to Nigerian customs officials; and (ii) admitted that the company falsely recorded the bribe payments as legitimate business expenses.
Countries: Nigeria
Penalty: $2.59 million
SEC
Entity: Noble Corporation
Resolution Vehicle: Settled civil complaint charging FCPA anti-bribery violations, FCPA books and records and internal controls violations
Countries: Nigeria
Disgorgement and interest: $5,576,998
Royal Dutch Shell Entities
DOJ
Entities: Royal Dutch Shell plc and Shell Nigeria Exploration and Production Company Ltd. ("SNEPCO")
Resolution Vehicle: Criminal information charging SNEPCO with conspiracy to violate the FCPA's anti-bribery and books and records provisions and with aiding and abetting the FCPA's books and records provisions resolved through a deferred prosecution agreement with Royal Dutch Shell Plc requiring, among other things, SNEPCO to pay a $30 million criminal penalty
Countries: Nigeria
Penalty: $30 million
SEC
Entity: Royal Dutch Shell plc and Shell International Exploration and Production Inc ("SIEP").
Resolution Vehicle: Administrative cease and desist order finding FCPA books and records and internal control violations by Royal Dutch Shell and FCPA anti-bribery violations by SIEP
Countries: Nigeria
Disgorgement: $18,149,459
*****
According to the SEC release (here), Cheryl Scarboro, Chief of the SEC's FCPA Unit stated: "This investigation was the culmination of proactive work by the SEC and DOJ after detecting widespread corruption in the oil services industry. The FCPA Unit will continue to focus on industry-wide sweeps, and no industry is immune from investigation."
The SEC release further states: [t]his is the first sweep of a particular industrial sector in order to crack down on public companies and third parties who are paying bribes abroad."
In enforcement actions that have long been anticipated, Panalpina entities, as well as several others, settled DOJ and SEC enforcement actions principally focused on customs and related payments in Nigeria, but also including alleged improper conduct in Angola, Brazil, Russia, Kazakhstan, Venezuela, India, Mexico, Saudi Arabia, the Republic of Congo, Libya, Azerbaijan, Turkmenistan, Gabon and Equatorial Guinea.
The combined DOJ/SEC settlement amounts total $236.5 million.
Your FCPA scorecard thus shows that since June 28th, the U.S. government has brought FCPA enforcement actions totaling approximately $1.1 billion. With numbers like these, aggressive FCPA enforcement based on, often times, dubious legal theories (more on that later) seems like the most profitable government program ever conceived.
Set forth below is a basic overview of the settlements. A more thorough review of the hundreds of pages of relevant documents will be forthcoming.
The DOJ resolution documents can be found here, the SEC resolution documents here.
Panalpina Entities
DOJ
Entities: Panalpina World Transport (Holding) Ltd. and Panalpina Inc.
Resolution Vehicles: Criminal information charging Panalpina World Transport(Holding) with conspiracy to violate and violating the FCPA's anti-bribery provisions. Charges resolved through a deferred prosecution agreement. Criminal information charging Panalpina Inc. with conspiracy to violate the FCPA's books and records provisions and aiding and abetting certain customers in violating the FCPA's books and records provisions. Charges resolved through a plea agreement.
Countries: Angola, Azerbaijan, Brazil, Kazakhstan, Nigeria, Russia, and Turkmenistan
Penalty: Combined $70.56 million
SEC
Entity: Panalpina, Inc.
Resolution Vehicle: Settled civil complaint charging FCPA anti-bribery violations, aiding and abetting FCPA anti-bribery violations, and FCPA books and records and internal controls violations.
Countries: Nigeria, Angola, Brazil, Russia, and Kazakhstan
Disgorgement: $11,329,369
Pride Entities
DOJ
Entities: Pride International Inc. and Pride Forasol S.A.S.
Resolution Vehicle: Criminal information charging Pride International with conspiracy to violate the FCPA's anti-bribery provisions and books and records provisions; violating the FCPA's anti-bribery provisions; and violating the FCPA's books and records provisions. Charges resolved through a deferred prosecution agreement. Criminal information charging Pride Forasol with conspiracy to violate the FCPA's anti-bribery provisions; violating the FCPA's anti-bribery provisions; and aidng and abetting violations of the FCPA's books and records provisions. Charges resolved through a plea agreement.
Countries: Venezuela, India and Mexico
Penalty: $32.625 million (combined)
SEC
Entity: Pride International Inc.
Resolution Vehicle: Settled civil complaint charging FCPA anti-bribery violations, FCPA books and records and internal controls violations.
Countries: Venezuela, India, Mexico, Kazakhstan, Nigeria, Saudi Arabia, Republic of Congo, and Libya
Disgorgement and interest: $23,529,718
Tidewater Entities
DOJ
Entities: Tidewater Marine International Inc., Tidewater Inc.
Resolution Vehicle: Criminal information charging Tidewater Marine with conspiracy to violate the FCPA's anti-bribery and books and records provisions and violating the FCPA's books and records provisions. Charges resolved through a deferred prosecution agreement with Tidewater that requires, among other things, Tidewater Marine to pay a $7.35 million criminal penalty.
Countries: Azerbaijan and Nigeria
Penalty: $7.35 million
SEC
Entity: Tidewater Inc.
Resolution Vehicle: Settled civil complaint charging FCPA anti-bribery violations, FCPA books and records and internal controls violations
Countries: Nigeria, Azerbaijan
Disgorgement: $8,104,362
Civil Penalty: $217,000
Transocean Entities
DOJ
Entities: Transocean Inc. and Transocean Ltd.
Resolution Vehicle: Criminal information charging Transocean Inc. with conspiracy to violate the FCPA's anti-bribery and books and records provision; violating the FCPA's anti-bribery provisions; and aiding and abetting the FCPA's books and records provisions. Charges resolved through a deferred prosecution agreement with Transocean Ltd. that requires, among other things, Transocean Inc. to pay a $13.44 million criminal penalty.
Countries: Nigeria
Penalty: $13.44 million
SEC
Entity: Transocean Inc.
Resolution Vehicle: Settled civil complaint charging FCPA anti-bribery violations, FCPA books and records and internal controls violations
Countries: Nigeria
Disgorgement and interest: $7,265,080
GlobalSantaFe Corp.
SEC
Entity: GlobalSantaFe Corp.
Resolution Vehicle: Settled civil complaint charging FCPA anti-bribery provisions, FCPA books and records and internal controls violations
Countries: Nigeria, Gabon, Angola, Equatorial Guinea
Disgorgement: $3,758,165
Civil Penalty: $2.1 million
Noble Corporation
DOJ
Entity: Noble Corporation
Resolution Vehicle: Non-proseuction agreement in which Noble Corporation: (i) acknowledged that certain of its employees knew that payments would be passed on as bribes to Nigerian customs officials; and (ii) admitted that the company falsely recorded the bribe payments as legitimate business expenses.
Countries: Nigeria
Penalty: $2.59 million
SEC
Entity: Noble Corporation
Resolution Vehicle: Settled civil complaint charging FCPA anti-bribery violations, FCPA books and records and internal controls violations
Countries: Nigeria
Disgorgement and interest: $5,576,998
Royal Dutch Shell Entities
DOJ
Entities: Royal Dutch Shell plc and Shell Nigeria Exploration and Production Company Ltd. ("SNEPCO")
Resolution Vehicle: Criminal information charging SNEPCO with conspiracy to violate the FCPA's anti-bribery and books and records provisions and with aiding and abetting the FCPA's books and records provisions resolved through a deferred prosecution agreement with Royal Dutch Shell Plc requiring, among other things, SNEPCO to pay a $30 million criminal penalty
Countries: Nigeria
Penalty: $30 million
SEC
Entity: Royal Dutch Shell plc and Shell International Exploration and Production Inc ("SIEP").
Resolution Vehicle: Administrative cease and desist order finding FCPA books and records and internal control violations by Royal Dutch Shell and FCPA anti-bribery violations by SIEP
Countries: Nigeria
Disgorgement: $18,149,459
*****
According to the SEC release (here), Cheryl Scarboro, Chief of the SEC's FCPA Unit stated: "This investigation was the culmination of proactive work by the SEC and DOJ after detecting widespread corruption in the oil services industry. The FCPA Unit will continue to focus on industry-wide sweeps, and no industry is immune from investigation."
The SEC release further states: [t]his is the first sweep of a particular industrial sector in order to crack down on public companies and third parties who are paying bribes abroad."
Friday, July 23, 2010
Year Two ... Plus The Friday Roundup
I missed my own anniversary, the anniversary of FCPA Professor that is.
On July 17, 2009, I formally launched FCPA Professor with this Mission Statement.
Approximately 220 posts later, year two has arrived and the mission remains the same.
It is a pleasure to make frequent deliveries to the marketplace of ideas. FCPA Professor is read worldwide by a diverse group of readers and I thank you for making this space a part of your day.
Now for the Friday roundup.
BAE U.K. Settlement Still Pending
BAE's bribery, yet no bribery U.S. settlement has long been signed, sealed and delivered. See here and here for more. Yet things are taking a bit longer on the other side of the Atlantic according to this report from a U.K. financial website.
According to the report, Serious Fraud Office director Richard Alderman has admitted "that legal challenges by anti-arms campaigners, and the need to get the case's extensive documentation in order, have seen the conclusion of the bribery investigation put off until autumn at the earliest."
With the lashing the SFO took in the Innospec enforcement action (see here), the SFO understandably wants to get this one right.
The BAE U.K. settlement is not the only event that has been delayed. As highlighted in this post from earlier week so too is the new U.K. Bribery Act.
Business is Booming
Furthering the notion that anti-bribery and compliance work is an industry in and of itself, the San Jose Business Journal reports in this recent piece that business is booming - and not just among law firms - as the article profiles Deloitte and KPMG.
The article touches upon certain topics highlighted by others, including Nathan Vardi in this Forbes piece, and Steve Pearlstein in this Washington Post piece.
Noble and Nigeria
A recent post (see here) described Nigeria as a challenging market and highlighted a recent report that found that one in three companies reported paying a bribe to Nigerian public officials in undertaking administrative tasks. The post talked about facilitation payments, which are allowed by the FCPA - at least as written, yet highlighted the many FCPA enforcement actions seemingly based on facilitating payments.
Throw a pending enforcement action against Noble Corporation into that mix.
Here is what the company said in its recent 8-K filing:
"In 2007, we began, and voluntarily contacted the SEC and the U.S. Department of Justice (“DOJ”) to advise them of, an internal investigation of the legality under the FCPA and local laws of certain reimbursement payments made by our Nigerian affiliate to customs agents in Nigeria. The SEC and the DOJ have indicated that they believe that violations of the FCPA occurred and will seek civil and/or criminal sanctions against us, including monetary penalties, and may include additional sanctions against us and/or certain of our employees, as well as additional changes to our business practices and compliance programs. We could also face fines or sanctions in relevant foreign jurisdictions.
We consider the matter relating to the Nigeria investigation to be ongoing and cannot predict (a) when it will conclude, (b) whether either the SEC or the DOJ will open its own proceeding to investigate this matter, or (c) if a proceeding is opened, what potential sanctions, penalties or other remedies these agencies may seek. Based on information obtained to date, we believe it is probable that we will pay an amount to settle this matter with the DOJ and SEC. Given that the matter is not finally resolved, we cannot predict with certainty what amount we will pay in civil and criminal fines and penalties; however, as of June 30, 2010, we accrued approximately $5.1 million relating to this ongoing matter. Any of the sanctions as a result of the Nigerian investigation or any other future violation of the FCPA or similar law could have a material adverse effect on our business or financial condition and could damage our reputation and ability to do business, to attract and retain employees and to access capital markets.
Frontier identified certain payments totaling approximately $35,000 made by one of its former agents to Nigeria immigration officials in 2009 and reported this matter to the DOJ as a possible violation of the FCPA. We reviewed this matter as part of our diligence investigation of Frontier. The DOJ has not indicated what, if any, action it may take with respect to such payments, although the DOJ could seek civil and/or criminal sanctions against Frontier. Upon closing the Frontier acquisition, we would be responsible for such sanctions as well as any other sanctions relating to violations of applicable laws by Frontier, except to the extent that they may be covered by indemnities contained in the merger agreement with Frontier. Any such sanctions could have a material adverse effect on our business or financial condition."
On July 17, 2009, I formally launched FCPA Professor with this Mission Statement.
Approximately 220 posts later, year two has arrived and the mission remains the same.
It is a pleasure to make frequent deliveries to the marketplace of ideas. FCPA Professor is read worldwide by a diverse group of readers and I thank you for making this space a part of your day.
Now for the Friday roundup.
BAE U.K. Settlement Still Pending
BAE's bribery, yet no bribery U.S. settlement has long been signed, sealed and delivered. See here and here for more. Yet things are taking a bit longer on the other side of the Atlantic according to this report from a U.K. financial website.
According to the report, Serious Fraud Office director Richard Alderman has admitted "that legal challenges by anti-arms campaigners, and the need to get the case's extensive documentation in order, have seen the conclusion of the bribery investigation put off until autumn at the earliest."
With the lashing the SFO took in the Innospec enforcement action (see here), the SFO understandably wants to get this one right.
The BAE U.K. settlement is not the only event that has been delayed. As highlighted in this post from earlier week so too is the new U.K. Bribery Act.
Business is Booming
Furthering the notion that anti-bribery and compliance work is an industry in and of itself, the San Jose Business Journal reports in this recent piece that business is booming - and not just among law firms - as the article profiles Deloitte and KPMG.
The article touches upon certain topics highlighted by others, including Nathan Vardi in this Forbes piece, and Steve Pearlstein in this Washington Post piece.
Noble and Nigeria
A recent post (see here) described Nigeria as a challenging market and highlighted a recent report that found that one in three companies reported paying a bribe to Nigerian public officials in undertaking administrative tasks. The post talked about facilitation payments, which are allowed by the FCPA - at least as written, yet highlighted the many FCPA enforcement actions seemingly based on facilitating payments.
Throw a pending enforcement action against Noble Corporation into that mix.
Here is what the company said in its recent 8-K filing:
"In 2007, we began, and voluntarily contacted the SEC and the U.S. Department of Justice (“DOJ”) to advise them of, an internal investigation of the legality under the FCPA and local laws of certain reimbursement payments made by our Nigerian affiliate to customs agents in Nigeria. The SEC and the DOJ have indicated that they believe that violations of the FCPA occurred and will seek civil and/or criminal sanctions against us, including monetary penalties, and may include additional sanctions against us and/or certain of our employees, as well as additional changes to our business practices and compliance programs. We could also face fines or sanctions in relevant foreign jurisdictions.
We consider the matter relating to the Nigeria investigation to be ongoing and cannot predict (a) when it will conclude, (b) whether either the SEC or the DOJ will open its own proceeding to investigate this matter, or (c) if a proceeding is opened, what potential sanctions, penalties or other remedies these agencies may seek. Based on information obtained to date, we believe it is probable that we will pay an amount to settle this matter with the DOJ and SEC. Given that the matter is not finally resolved, we cannot predict with certainty what amount we will pay in civil and criminal fines and penalties; however, as of June 30, 2010, we accrued approximately $5.1 million relating to this ongoing matter. Any of the sanctions as a result of the Nigerian investigation or any other future violation of the FCPA or similar law could have a material adverse effect on our business or financial condition and could damage our reputation and ability to do business, to attract and retain employees and to access capital markets.
Frontier identified certain payments totaling approximately $35,000 made by one of its former agents to Nigeria immigration officials in 2009 and reported this matter to the DOJ as a possible violation of the FCPA. We reviewed this matter as part of our diligence investigation of Frontier. The DOJ has not indicated what, if any, action it may take with respect to such payments, although the DOJ could seek civil and/or criminal sanctions against Frontier. Upon closing the Frontier acquisition, we would be responsible for such sanctions as well as any other sanctions relating to violations of applicable laws by Frontier, except to the extent that they may be covered by indemnities contained in the merger agreement with Frontier. Any such sanctions could have a material adverse effect on our business or financial condition."
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