Bonny Island.
It is located at the southern edge of the Niger delta of Nigeria. (see here).
It is the location featured in several corporate and individual FCPA enforcement actions - actions that have thus far resulted in approximately $1.3 billion in fines, penalties and disgorgement.
This number is sure to grow as one member of the joint venture at the center of bribery scheme - JGC of Japan - has yet to resolve its exposure although (as noted in this post from the FCPA Blog) it has confirmed that it is discussions with the DOJ.
In addition, the DOJ, in its indictments of Jeffrey Tesler and Wojciech Chodan, is seeking forfeiture of $132 million.
Further, as noted in this prior post, Halliburton has disclosed that it faces exposure in the U.K. in connection with a Serious Fraud Office investigation of M.W. Kellogg Company ("MWKL"), a United Kingdom joint venture 55% owned by KBR. In its most recent 10-Q (here) Halliburton stated:
"MWKL is cooperating with the SFO’s investigation. Whether the SFO pursues civil or criminal claims, and the amount of any fines, restitution, confiscation of revenues or other penalties that could be assessed would depend on, among other factors, the SFO’s findings regarding the amount, timing, nature and scope of any improper payments or other activities, whether any such payments or other activities were authorized by or made with knowledge of MWKL, the amount of revenue involved, and the level of cooperation provided to the SFO during the investigations. MWKL has informed the SFO that it intends to self-report corporate liability for corruption-related offenses arising out of the Bonny Island project. MWKL has received confirmation that it has been admitted into the plea negotiation process under the Guidelines on Plea Discussions in Cases of Complex or Serious Fraud, which have been issued by the Attorney General for England and Wales."
While the Bonny Island Bribery Club statistics are not yet final, this post provides a detailed breakdown of the current statistics.
Kellogg Brown & Root LLC / Halliburton Company / KBR Inc. (Feb. 2009)
Attorneys: Paul, Hastings, Janofsky & Walker LLP
DOJ
Entity: Kellogg Brown & Root LLC
Charges: Conspiracy to Violate the FCPA (1 Count), Substantive FCPA Anti-Bribery Violation (4 Counts)
Resolution Vehicle: Criminal Information and Plea Agreement
Benefit Received From Improper Payments: $235.5 Million
Sentencing Guidelines Range: $376.8 Million - $753.6 Million
Amount of Fine: $402 Million
Monitor: Yes - Three Years
SEC
Entity: Halliburton Company, KBR Inc.
Charges: FCPA Books and Records and Internal Controls Violation (Halliburton Company), Substantive FCPA Anti-Bribery Violation, Aiding and Abetting Halliburton's FCPA Books and Records and Internal Controls Violation, Knowingly Falsifying Books and Records and Knowingly Circumventing Internal Controls (KBR Inc.),
Disgorgement Amount: $177 Million
Technip S.A. (June 2010)
Attorneys: Patton Boggs LLP; Wachtell, Lipton, Rosen & Katz
DOJ
Charges: Conspiracy to Violate the FCPA (1 Count), Substantive FCPA Anti-Bribery Violation (1 Count)
Resolution Vehicle: Criminal Information and Deferred Prosecution Agreement (Term - 2 Years, 7 Months)
Value of Benefit Received From Improper Payments: $199 Million
Sentencing Guidelines Range: $318.4 Million - $636.8 Million
Amount of Fine: $240 Million (25% Below Minimum Guidelines Range)
Monitor: Yes - Two Years
SEC
Charges: Substantive FCPA Anti-Bribery Violation, FCPA Books and Records and Internal Controls Violation
Disgorgement Amount: $98 Million
Snamprogetti Netherlands BV, ENI S.p.A (July 2010)
Attorneys: Sullivan & Cromwell LLP
DOJ
Entity: Snamprogetti Netherlands BV
Charges: Conspiracy to Violate the FCPA (1 Count), Aiding and Abetting FCPA Anti-Bribery Violation (1 Count)
Resolution Vehicle: Criminal Information and Deferred Prosecution Agreement (Term 2 Years)
Value of Benefit Received From Improper Payments: $214.3 Million
Sentencing Guidelines Range: $300 Million - $600 Million
Amount of Fine: $240 Million (20% Below Minimum Guidelines Range)
Monitor: No
SEC
Entity: Snamprogetti Netherlands BV, ENI S.p.A.
Charges: Substantive FCPA Anti-Bribery Violation, Knowingly Falsifying Books and Records and Knowingly Circumventing Internal Controls (Snamprogetti Netherlands BV), FCPA Books and Records and Internal Controls Violation (ENI S.p.A.)
Disgorgement Amount: $125 Million
[Note in all three of the above corporate actions, the entity received a -2 reduction in the culpability score for cooperation. Snamprogetti's total culpability score (and thus base fine multiplier) was below that of Kellogg, Brown & Root LLC, and Technip given that the company has fewer employees].
Albert Jackson Stanley (August 2008)
Attorney: Larry Veselka (Smyser, Kaplan & Veselka LLP)
DOJ
Charges: Conspiracy to Violate the FCPA (1 Count), Conspiracy to Commit Mail and Wire Fraud (1 Count)
Resolution Vehicle: Criminal Information and Plea Agreement
Plea Agreement Contemplates an $10.8 Million Restitution Order (the amount Stanley agreed the victim - his former employer - incurred as a monetary loss because of his conduct)
Plea Agreement Contemplates a Sentence of 84 months (subject to a downward departure for cooperation)
SEC
Charges: Substantive FCPA Anti-Bribery Violation, Knowingly Falsifying Books and Records and Knowingly Circumventing Internal Controls
Permanent Injunction
Jeffrey Tesler (March 2009)
Indictment Charges: Conspiracy to Violate the FCPA (1 Count), Substantive FCPA Anti-Bribery Violations (10 Counts)
Indictment Seeks Forfeiture $132 Million
Wojciech Chodan (March 2009)
Indictment Charges: Conspiracy to Violate the FCPA (1 Count), Substantive FCPA Anti-Bribery Violations (10 Counts)
Indictment Seeks Forfeiture $132 Million
Showing posts with label Technip. Show all posts
Showing posts with label Technip. Show all posts
Thursday, August 26, 2010
Wednesday, July 7, 2010
More On Technip
A post last week (see here) contained a high-level overview of the Technip matter as described in the DOJ release.
Let's take a closer look at the criminal information (see here) and the deferred prosecution agreement (see here).
Information
Not surprisingly, the Technip information largely mirrors the criminal information previously filed in February 2009 (see here) against the Kellogg Brown & Root entity also part of the joint venture engaged in the Bonny Island bribery scheme.
That is, the Technip information charges conspiracy to violate the FCPA and violations of the FCPA's antibribery provisions and alleges that Technip was part of a joint venture ("JV") in Nigeria to design, build and expand LNG facilities on Bonny Island. According to the information, JV profits, revenues, and expenses were equally shared among the four JV partners. The JV's Steering Committee consisted of high-level executives from each of the four companies and the Steering Committee made major decisions on behalf of the JV, including whether to hire agents to assist the JV in winning contracts, who to hire as agents, and how much to pay the agents.
The information charges that the JV operated through three Portuguese special purpose corporations, including a corporation (#3), 25% owned by Technip, specifically used to enter into consulting agreements with JV agents.
The criminal conduct charged centers on two agents hired by the JV.
The first agent, Jeffrey Tesler was a citizen of the United Kingdom who used a Gibraltar-based company as a vehicle to enter into agent contracts and receive payments from the JV. The information charges that the JV paid the company over $130 million to bribe high-ranking Nigerian government officials. According to the information, Tesler was an agent of the JV and each of the JV companies.
The second agent was a global trading company headquartered in Tokyo (the "Japanese Agent"), which was hired by the JV to help it obtain business in Nigeria, including by paying bribes to Nigerian officials. The information charges that the JV paid the consulting company over $50 million to bribe Nigerian government officials. According to the information, the Japanese Agent was an agent of the JV and each of the JV companies.
According to the information, between 1995 and 2004, the JV was awarded four contracts (collectively valued at over $6 billion) to build the Bonny Island Project and alleges that Technip, Tesler, the Japanese Agent, Kellogg Brown & Root, and others, were engaged in a conspiracy to obtain and retain the contracts "through the promise and payment of tens of millions in bribes to officials of the Executive Branch of Nigeria, officials of Nigeria National Petroleum Corporation (NNPC), officials of Nigeria LNG Limited (NLNG) and others."
[According to the information, NNPC was a Nigerian government-owned company and an entity and instrumentality of the Government of Nigeria whose officers and employees were "foreign officials" under the FCPA. According to the information, NLNG was also an entity and instrumentality of the Government of Nigeria whose officers and employees were "foreign officials" under the FCPA, notwithstanding the fact that NLNG was 51% owned by multinational oil companies. Why? Presumably because, as the information alleges, "through the NLNG board members appointed by NNPC, among other means, the Nigerian government exercised control over NLNG, including but not limited to the abilty to block the award" of the relevant contracts.]
Among other means of the conspiracy, the information alleges that:
"Senior executives and employees of Technip and their co-conspirators caused wire transfers totaling approximately $132 million to be sent from [#3's] bank account in Amsterdam, The Netherlands, to bank accounts in New York, New York, to be further credited to bank accounts in Switzerland and Monaco controlled by Tesler for Tesler to use to bribe Nigerian government officials."
"Senior executives and employees of Technip and their co-conspirators caused wire transfers totaling over $50 million to be sent from [#3's] bank account in Amsterdam, The Netherlands to [Japanese Agent's] bank account in Japan for [the Japanese Agent to use to bribe Nigerian government officials."
Based on the same core conduct, the information also charges a substantive violation of the FCPA's antibribery provisions and alleges that "Technip
caused [...] corrupt U.S. dollar payments to be wire transferred
from [#3's] bank account in Amsterdam, The Netherlands, via correspondent bank accounts in New York, New York, to bank accounts of [Tesler's Gibraltar based company] in Switzerland for use in part to bribe Nigerian government officials."
DPA
The DPA has a term of two years and seven months. A DPA is a less harsh resolution to an FCPA enforcement action because, while the criminal charges are technically filed, the charges are deferred or not prosecuted during the term of the DPA. If Technip abides by its obligations under the DPA, the criminal charges will be dismissed when the DPA's term expires.
Pursuant to the DPA, Technip admitted, accepted, and acknowledged that it is responsible for the acts of its employees, subsidiaries, and agents as detailed in the above criminal information.
According to the DPA, the DOJ agreed to enter into the agreement with Technip based on the following factors: "(a) Technip cooperated with the DOJ's investigation of Technip and others; (b) Technip undertook remedial measures, including the implementation of an enhanced compliance program, and agreed to undertake further remedial measures; (c) Technip agreed to continue to cooperate with the DOJ in any ongoing investigation of the conduct of Technip and its employees, agents, consultants, contractors, subcontractors, subsidiaries, and others relating to violations of the FCPA; and (d) the impact on Technip, including collateral consequences, of a guilty plea or criminal conviction. (emphasis added).
According to the DPA, the fine range under the advisory U.S. Sentencing Guidelines for Technip's conduct is $318.4 million - $636.8 million. Technip agreed to pay a criminal penalty of $240 million or approximately 25% below the bottom of the fine range. The Technip enforcement action is thus another example of the DOJ allowing a corporation to settle significant bribery allegations for an amount below even the bottom range of fines available under the advisory Sentencing Guidelines.
Pursuant to the DPA, Technip agreed to engage a corporate compliance monitor for a two year period. The DPA specifically states that this individual will be a "French national."
Representing Technip in the FCPA enforcement action was Robert Luskin from Patton Boggs LLP (see here) and John Savarese from Wachtell Lipton Rosen & Katz (see here).
As referenced above, the Technip allegations largely mirror the previous allegations against the Kellogg Brown & Root entity also part of the joint venture engaged in the Bonny Island bribery scheme.
How does the DOJ component of these two FCPA enforcement actions compare?
Technip settled pursuant to a DPA and paid a $240 million criminal penalty - an amount 25% below the bottom range allowed under the advisory Sentencing Guidelines.
Kellogg Brown & Root was required to plead guilty and paid a $402 million criminal penalty - an amount within the advisory Sentencing Guidelines range of $376.8 million - $753.6 million.
The disparate treatment of Technip and Kellogg Brown & Root - two entities involved in the same joint venture engaged in the same bribery scheme - is likely due to the fact that, per the government's allegations, Kellogg Brown & Root appeared to have played a more active role in the bribery scheme. Specifically, Albert Jack Stanley, a former officer and director of various Kellogg Brown & Root entities, was directly involved in the bribery scheme as evidenced by his prior guilty plea (see here).
Let's take a closer look at the criminal information (see here) and the deferred prosecution agreement (see here).
Information
Not surprisingly, the Technip information largely mirrors the criminal information previously filed in February 2009 (see here) against the Kellogg Brown & Root entity also part of the joint venture engaged in the Bonny Island bribery scheme.
That is, the Technip information charges conspiracy to violate the FCPA and violations of the FCPA's antibribery provisions and alleges that Technip was part of a joint venture ("JV") in Nigeria to design, build and expand LNG facilities on Bonny Island. According to the information, JV profits, revenues, and expenses were equally shared among the four JV partners. The JV's Steering Committee consisted of high-level executives from each of the four companies and the Steering Committee made major decisions on behalf of the JV, including whether to hire agents to assist the JV in winning contracts, who to hire as agents, and how much to pay the agents.
The information charges that the JV operated through three Portuguese special purpose corporations, including a corporation (#3), 25% owned by Technip, specifically used to enter into consulting agreements with JV agents.
The criminal conduct charged centers on two agents hired by the JV.
The first agent, Jeffrey Tesler was a citizen of the United Kingdom who used a Gibraltar-based company as a vehicle to enter into agent contracts and receive payments from the JV. The information charges that the JV paid the company over $130 million to bribe high-ranking Nigerian government officials. According to the information, Tesler was an agent of the JV and each of the JV companies.
The second agent was a global trading company headquartered in Tokyo (the "Japanese Agent"), which was hired by the JV to help it obtain business in Nigeria, including by paying bribes to Nigerian officials. The information charges that the JV paid the consulting company over $50 million to bribe Nigerian government officials. According to the information, the Japanese Agent was an agent of the JV and each of the JV companies.
According to the information, between 1995 and 2004, the JV was awarded four contracts (collectively valued at over $6 billion) to build the Bonny Island Project and alleges that Technip, Tesler, the Japanese Agent, Kellogg Brown & Root, and others, were engaged in a conspiracy to obtain and retain the contracts "through the promise and payment of tens of millions in bribes to officials of the Executive Branch of Nigeria, officials of Nigeria National Petroleum Corporation (NNPC), officials of Nigeria LNG Limited (NLNG) and others."
[According to the information, NNPC was a Nigerian government-owned company and an entity and instrumentality of the Government of Nigeria whose officers and employees were "foreign officials" under the FCPA. According to the information, NLNG was also an entity and instrumentality of the Government of Nigeria whose officers and employees were "foreign officials" under the FCPA, notwithstanding the fact that NLNG was 51% owned by multinational oil companies. Why? Presumably because, as the information alleges, "through the NLNG board members appointed by NNPC, among other means, the Nigerian government exercised control over NLNG, including but not limited to the abilty to block the award" of the relevant contracts.]
Among other means of the conspiracy, the information alleges that:
"Senior executives and employees of Technip and their co-conspirators caused wire transfers totaling approximately $132 million to be sent from [#3's] bank account in Amsterdam, The Netherlands, to bank accounts in New York, New York, to be further credited to bank accounts in Switzerland and Monaco controlled by Tesler for Tesler to use to bribe Nigerian government officials."
"Senior executives and employees of Technip and their co-conspirators caused wire transfers totaling over $50 million to be sent from [#3's] bank account in Amsterdam, The Netherlands to [Japanese Agent's] bank account in Japan for [the Japanese Agent to use to bribe Nigerian government officials."
Based on the same core conduct, the information also charges a substantive violation of the FCPA's antibribery provisions and alleges that "Technip
caused [...] corrupt U.S. dollar payments to be wire transferred
from [#3's] bank account in Amsterdam, The Netherlands, via correspondent bank accounts in New York, New York, to bank accounts of [Tesler's Gibraltar based company] in Switzerland for use in part to bribe Nigerian government officials."
DPA
The DPA has a term of two years and seven months. A DPA is a less harsh resolution to an FCPA enforcement action because, while the criminal charges are technically filed, the charges are deferred or not prosecuted during the term of the DPA. If Technip abides by its obligations under the DPA, the criminal charges will be dismissed when the DPA's term expires.
Pursuant to the DPA, Technip admitted, accepted, and acknowledged that it is responsible for the acts of its employees, subsidiaries, and agents as detailed in the above criminal information.
According to the DPA, the DOJ agreed to enter into the agreement with Technip based on the following factors: "(a) Technip cooperated with the DOJ's investigation of Technip and others; (b) Technip undertook remedial measures, including the implementation of an enhanced compliance program, and agreed to undertake further remedial measures; (c) Technip agreed to continue to cooperate with the DOJ in any ongoing investigation of the conduct of Technip and its employees, agents, consultants, contractors, subcontractors, subsidiaries, and others relating to violations of the FCPA; and (d) the impact on Technip, including collateral consequences, of a guilty plea or criminal conviction. (emphasis added).
According to the DPA, the fine range under the advisory U.S. Sentencing Guidelines for Technip's conduct is $318.4 million - $636.8 million. Technip agreed to pay a criminal penalty of $240 million or approximately 25% below the bottom of the fine range. The Technip enforcement action is thus another example of the DOJ allowing a corporation to settle significant bribery allegations for an amount below even the bottom range of fines available under the advisory Sentencing Guidelines.
Pursuant to the DPA, Technip agreed to engage a corporate compliance monitor for a two year period. The DPA specifically states that this individual will be a "French national."
Representing Technip in the FCPA enforcement action was Robert Luskin from Patton Boggs LLP (see here) and John Savarese from Wachtell Lipton Rosen & Katz (see here).
As referenced above, the Technip allegations largely mirror the previous allegations against the Kellogg Brown & Root entity also part of the joint venture engaged in the Bonny Island bribery scheme.
How does the DOJ component of these two FCPA enforcement actions compare?
Technip settled pursuant to a DPA and paid a $240 million criminal penalty - an amount 25% below the bottom range allowed under the advisory Sentencing Guidelines.
Kellogg Brown & Root was required to plead guilty and paid a $402 million criminal penalty - an amount within the advisory Sentencing Guidelines range of $376.8 million - $753.6 million.
The disparate treatment of Technip and Kellogg Brown & Root - two entities involved in the same joint venture engaged in the same bribery scheme - is likely due to the fact that, per the government's allegations, Kellogg Brown & Root appeared to have played a more active role in the bribery scheme. Specifically, Albert Jack Stanley, a former officer and director of various Kellogg Brown & Root entities, was directly involved in the bribery scheme as evidenced by his prior guilty plea (see here).
Tuesday, June 29, 2010
Technip Joins the Bonny Island Bribery Club
A French company bribes Nigerian foreign officials with the end result being $338 million paid into the United States treasury.
Welcome to the sometimes wacky world of Foreign Corrupt Practices Act enforcement. Except in this case, the end result is not so wacky because the French company, Technip (see here) was a U.S. issuer, and thus subject to the FCPA, because, between August 2001 and November 2007, it had American Depository Shares registered with and listed on the New York Stock Exchange. In addition to being an Issuer subject to the FCPA, "Technip and other members of the joint venture [described below] routinely made use of the U.S. mails and of U.S. common carriers, and of other instrumentalities of U.S. interstate commerce" including improper payments "routed through banks in New York."
The Technip FCPA enforcement action has been anticipated since February when the company (see here) foreshadowed the pending settlement.
Yesterday, the DOJ and SEC announced the settlement. It includes payment of a $240 criminal penalty pursuant to a DOJ deferred prosecution agreement and payment of $98 million in disgorgement and prejudgment interest pursuant to a settled SEC civil complaint.
The below post summarizes the DOJ release (to my knowledge the DOJ deferred prosecution agreement and criminal information are not yet publicly available) and the SEC settled civil complaint.
DOJ
The DOJ release (here) states that Technip "has agreed to pay a $240 million criminal penalty to resolve charges related to the Foreign Corrupt Practices Act (FCPA) for its participation in a decade-long scheme to bribe Nigerian government officials to obtain engineering, procurement and construction (EPC) contracts [...] to build liquefied natural gas (LNG) facilities on Bonny Island, Nigeria, [contracts that] were valued at more than $6 billion."
According to the release, "Technip, Kellogg Brown & Root Inc. (KBR) (see here for the prior FCPA enforcement action), and two other companies were part of a four-company joint venture that was awarded four EPC contracts."
The release further states that "Technip authorized the joint venture to hire two agents, Jeffrey Tesler (see here for the criminal indictment) and a Japanese trading company, to pay bribes to a range of Nigerian government officials, including top-level executive branch officials, to assist Technip and the joint venture in obtaining the EPC contracts. According to the release, "at crucial junctures preceding the award of EPC contracts, a senior executive of Technip, KBR’s former CEO, Albert "Jack" Stanley (see here and here for the prior FCPA enforcement action), and others met with successive holders of a top-level office in the executive branch of the Nigerian government to ask the office holders to designate a representative with whom the joint venture should negotiate bribes to Nigerian government officials." According to the release, "the joint venture paid approximately $132 million to a Gibraltar corporation controlled by Tesler and more than $50 million to the Japanese trading company during the course of the bribery scheme" and that "Technip intended for these payments to be used, in part, for bribes to Nigerian government officials."
As has become the norm in corporate FCPA prosecutions, Technip will not be required to plead guilty to anything as the criminal charges (one count of conspiracy and one count of violating the FCPA), while filed, will be deferred pursuant to two-year deferred prosecution agreement.
In a press release (see here) Technip Chairman and CEO, Thierry Pilenko said:
"The final agreement with the US authorities, completely in line with the road map that we laid out in February, puts this legacy story behind us and enables us to focus on continuing to develop Technip’s business. We stand by Technip's commitment to carrying out its business activities ethically and according to both the spirit and letter of the law worldwide. The Board of Directors of Technip and its management are strongly committed to the continued enhancement of our internal compliance policies and processes."
Technip's release further states:
"The DOJ investigation of Technip was resolved through a deferred prosecution agreement, in which the Department of Justice agreed not to pursue a prosecution of Technip in return for Technip’s agreement to undertake a variety of steps during the next two years, including maintaining and enhancing its compliance program and cooperating with the DOJ. Technip agreed to pay USD 240 million to the DOJ in eight equal installments of USD 30 million over the next two years. Technip will retain a French national, approved by the Department of Justice, to serve as an independent corporate monitor, who will be chiefly responsible for reviewing Technip’s compliance initiatives and recommending improvements."
Principal Deputy Assistant Attorney General Mythili Raman of the Criminal Division stated: "The resolutions announced today demonstrate once again the department’s commitment to aggressively investigate and prosecute international bribery by U.S. and foreign corporations alike."
SEC
In a settled civil complaint (see here) charging FCPA anti-bribery violations and FCPA books and records and internal violations, the SEC alleged that "between at least 1995 and 2004, senior executives at Technip, among others, devised and implemented a scheme to bribe Nigerian government officials to assist in obtaining multiple contracts worth over $6 billion to build liquefied natural gas (“LNG”) production facilities on Bonny Island, Nigeria." According to the SEC, "to conceal the illicit payments, Technip and others, through the joint venture, entered into sham 'consulting' or 'services' agreements with intermediaries who would then funnel their purportedly legitimate fees to Nigerian officials." Specifically, the SEC alleged that "Technip, through the joint venture, implemented this scheme by using a Gibraltar shell company controlled by a solicitor based in the United Kingdom (“the UK Agent” [Tesler]) and a Japanese trading company (“the Japanese Agent”) as conduits for the bribes" and that "as a result of the scheme, numerous books and records of Technip contained false information relating to, among other things, the UK Agent and the Japanese Agent, and the payments made to them."
As to Technip's internal controls violations, the SEC alleges as follows:
"Technip conducted due diligence on the UK Agent that was not adequate to detect, deter or prevent the UK Agent from paying bribes, and Technip conducted no due diligence on the Japanese Agent."
"Although the executives of Technip who participated in the joint venture were aware of [the FCPA's] prohibitions, Technip did not implement adequate controls to ensure compliance with the Act. For example, Technip did not adopt due diligence procedures as to agents that were adequate to detect, deter or prevent the payment of bribes by agents. The due diligence procedures adopted by Technip only required that potential agents respond to a written questionnaire, seeking minimal background information about the agent. No additional due diligence was required, such as an interview of the agent, or a background check, or obtaining information beyond that provided by the answers to the questionnaire. A senior executive of Technip admitted that the due diligence procedures adopted by Technip were a perfunctory exercise, conducted so that Technip would have some documentation in its files of purported due diligence. In fact, Technip executives knew that the purpose of the agreements with the UK Agent was to funnel bribes to Nigerian officials, and therefore certain answers by the UK Agent to the questionnaire were false."
According to the SEC release (see here) "without admitting or denying the SEC’s allegations, Technip has consented to the entry of a court order permanently enjoining it from" future FCPA violations "and ordering Technip to disgorge $98 million in ill-gotten profits derived from the scheme and prejudgment interest."
Other members of the TSKJ joint venture that also potentially face FCPA exposure include Snamprogetti Netherlands B.V. (see below information regarding Eni SpA), and JGC of Japan (see here).
In March 2010, Eni SpA of Italy disclosed (here) as follows:
"Snamprogetti SpA, the holding company of Snamprogetti Netherlands BV, was a wholly owned subsidiary of Eni until February 2006, when an agreement was entered into for the sale of Snamprogetti to Saipem SpA and Snamprogetti was merged into Saipem as of October 1, 2008. Eni holds a 43% participation in Saipem. In connection with the sale of Snamprogetti to Saipem, Eni agreed to indemnify Saipem for a variety of matters, including potential losses and charges resulting from the investigations into the TSKJ matter referred [...}, even in relation to Snamprogetti subsidiaries."
The disclosure further stated:
"As to Eni, the contacts with the US authorities have been intensified recently. Based on the ongoing status of the discussions, the Company has been able to estimate the cost of a global resolution of all potential claims arising from the investigation with the US authorities, similarly to Technip. As a result of this, a provision in the amount of €250 million has been accrued, also considering the contractual obligations assumed by Eni to indemnify Saipem as part of the divestment of Snamprogetti. Discussions with the US authorities are underway."
Stay tuned for additional analysis of the Technip DPA, criminal information, and other issues raised by the Technip enforcement action.
Welcome to the sometimes wacky world of Foreign Corrupt Practices Act enforcement. Except in this case, the end result is not so wacky because the French company, Technip (see here) was a U.S. issuer, and thus subject to the FCPA, because, between August 2001 and November 2007, it had American Depository Shares registered with and listed on the New York Stock Exchange. In addition to being an Issuer subject to the FCPA, "Technip and other members of the joint venture [described below] routinely made use of the U.S. mails and of U.S. common carriers, and of other instrumentalities of U.S. interstate commerce" including improper payments "routed through banks in New York."
The Technip FCPA enforcement action has been anticipated since February when the company (see here) foreshadowed the pending settlement.
Yesterday, the DOJ and SEC announced the settlement. It includes payment of a $240 criminal penalty pursuant to a DOJ deferred prosecution agreement and payment of $98 million in disgorgement and prejudgment interest pursuant to a settled SEC civil complaint.
The below post summarizes the DOJ release (to my knowledge the DOJ deferred prosecution agreement and criminal information are not yet publicly available) and the SEC settled civil complaint.
DOJ
The DOJ release (here) states that Technip "has agreed to pay a $240 million criminal penalty to resolve charges related to the Foreign Corrupt Practices Act (FCPA) for its participation in a decade-long scheme to bribe Nigerian government officials to obtain engineering, procurement and construction (EPC) contracts [...] to build liquefied natural gas (LNG) facilities on Bonny Island, Nigeria, [contracts that] were valued at more than $6 billion."
According to the release, "Technip, Kellogg Brown & Root Inc. (KBR) (see here for the prior FCPA enforcement action), and two other companies were part of a four-company joint venture that was awarded four EPC contracts."
The release further states that "Technip authorized the joint venture to hire two agents, Jeffrey Tesler (see here for the criminal indictment) and a Japanese trading company, to pay bribes to a range of Nigerian government officials, including top-level executive branch officials, to assist Technip and the joint venture in obtaining the EPC contracts. According to the release, "at crucial junctures preceding the award of EPC contracts, a senior executive of Technip, KBR’s former CEO, Albert "Jack" Stanley (see here and here for the prior FCPA enforcement action), and others met with successive holders of a top-level office in the executive branch of the Nigerian government to ask the office holders to designate a representative with whom the joint venture should negotiate bribes to Nigerian government officials." According to the release, "the joint venture paid approximately $132 million to a Gibraltar corporation controlled by Tesler and more than $50 million to the Japanese trading company during the course of the bribery scheme" and that "Technip intended for these payments to be used, in part, for bribes to Nigerian government officials."
As has become the norm in corporate FCPA prosecutions, Technip will not be required to plead guilty to anything as the criminal charges (one count of conspiracy and one count of violating the FCPA), while filed, will be deferred pursuant to two-year deferred prosecution agreement.
In a press release (see here) Technip Chairman and CEO, Thierry Pilenko said:
"The final agreement with the US authorities, completely in line with the road map that we laid out in February, puts this legacy story behind us and enables us to focus on continuing to develop Technip’s business. We stand by Technip's commitment to carrying out its business activities ethically and according to both the spirit and letter of the law worldwide. The Board of Directors of Technip and its management are strongly committed to the continued enhancement of our internal compliance policies and processes."
Technip's release further states:
"The DOJ investigation of Technip was resolved through a deferred prosecution agreement, in which the Department of Justice agreed not to pursue a prosecution of Technip in return for Technip’s agreement to undertake a variety of steps during the next two years, including maintaining and enhancing its compliance program and cooperating with the DOJ. Technip agreed to pay USD 240 million to the DOJ in eight equal installments of USD 30 million over the next two years. Technip will retain a French national, approved by the Department of Justice, to serve as an independent corporate monitor, who will be chiefly responsible for reviewing Technip’s compliance initiatives and recommending improvements."
Principal Deputy Assistant Attorney General Mythili Raman of the Criminal Division stated: "The resolutions announced today demonstrate once again the department’s commitment to aggressively investigate and prosecute international bribery by U.S. and foreign corporations alike."
SEC
In a settled civil complaint (see here) charging FCPA anti-bribery violations and FCPA books and records and internal violations, the SEC alleged that "between at least 1995 and 2004, senior executives at Technip, among others, devised and implemented a scheme to bribe Nigerian government officials to assist in obtaining multiple contracts worth over $6 billion to build liquefied natural gas (“LNG”) production facilities on Bonny Island, Nigeria." According to the SEC, "to conceal the illicit payments, Technip and others, through the joint venture, entered into sham 'consulting' or 'services' agreements with intermediaries who would then funnel their purportedly legitimate fees to Nigerian officials." Specifically, the SEC alleged that "Technip, through the joint venture, implemented this scheme by using a Gibraltar shell company controlled by a solicitor based in the United Kingdom (“the UK Agent” [Tesler]) and a Japanese trading company (“the Japanese Agent”) as conduits for the bribes" and that "as a result of the scheme, numerous books and records of Technip contained false information relating to, among other things, the UK Agent and the Japanese Agent, and the payments made to them."
As to Technip's internal controls violations, the SEC alleges as follows:
"Technip conducted due diligence on the UK Agent that was not adequate to detect, deter or prevent the UK Agent from paying bribes, and Technip conducted no due diligence on the Japanese Agent."
"Although the executives of Technip who participated in the joint venture were aware of [the FCPA's] prohibitions, Technip did not implement adequate controls to ensure compliance with the Act. For example, Technip did not adopt due diligence procedures as to agents that were adequate to detect, deter or prevent the payment of bribes by agents. The due diligence procedures adopted by Technip only required that potential agents respond to a written questionnaire, seeking minimal background information about the agent. No additional due diligence was required, such as an interview of the agent, or a background check, or obtaining information beyond that provided by the answers to the questionnaire. A senior executive of Technip admitted that the due diligence procedures adopted by Technip were a perfunctory exercise, conducted so that Technip would have some documentation in its files of purported due diligence. In fact, Technip executives knew that the purpose of the agreements with the UK Agent was to funnel bribes to Nigerian officials, and therefore certain answers by the UK Agent to the questionnaire were false."
According to the SEC release (see here) "without admitting or denying the SEC’s allegations, Technip has consented to the entry of a court order permanently enjoining it from" future FCPA violations "and ordering Technip to disgorge $98 million in ill-gotten profits derived from the scheme and prejudgment interest."
Other members of the TSKJ joint venture that also potentially face FCPA exposure include Snamprogetti Netherlands B.V. (see below information regarding Eni SpA), and JGC of Japan (see here).
In March 2010, Eni SpA of Italy disclosed (here) as follows:
"Snamprogetti SpA, the holding company of Snamprogetti Netherlands BV, was a wholly owned subsidiary of Eni until February 2006, when an agreement was entered into for the sale of Snamprogetti to Saipem SpA and Snamprogetti was merged into Saipem as of October 1, 2008. Eni holds a 43% participation in Saipem. In connection with the sale of Snamprogetti to Saipem, Eni agreed to indemnify Saipem for a variety of matters, including potential losses and charges resulting from the investigations into the TSKJ matter referred [...}, even in relation to Snamprogetti subsidiaries."
The disclosure further stated:
"As to Eni, the contacts with the US authorities have been intensified recently. Based on the ongoing status of the discussions, the Company has been able to estimate the cost of a global resolution of all potential claims arising from the investigation with the US authorities, similarly to Technip. As a result of this, a provision in the amount of €250 million has been accrued, also considering the contractual obligations assumed by Eni to indemnify Saipem as part of the divestment of Snamprogetti. Discussions with the US authorities are underway."
Stay tuned for additional analysis of the Technip DPA, criminal information, and other issues raised by the Technip enforcement action.
Monday, February 22, 2010
Understanding Issuers
The FCPA (both the antibribery provisions and the books and records and internal control provisions) apply to issuers.
That was easy.
What is not so easy is figuring out just which companies are issuers. The FCPA defines an issuer as when a company "has a class of securities registered" with the SEC pursuant to the securities laws or when a company is "required to file reports" with the SEC pursuant to the securities laws.
These terms can be confusing, particularly when talking about non-U.S. based companies.
In connection with both the BAE and Technip matters, there was some mention of a potential SEC angle despite the fact that neither company currently has shares traded on a U.S. exchange.
Miller & Chevalier's release in connection with the BAE matter (here) states:
"The U.S. pleadings detail significant issues with BAE’s compliance program and internal controls, yet the pleadings did not allege substantive violations of the FCPA’s accounting provisions, and the Securities and Exchange Commission (“SEC”) has yet to bring an action against BAE. The absence of SEC charges may reflect a lack of SEC jurisdiction because BAE was not subject to the registration and reporting requirements of the Securities and Exchange Act during the relevant time period, which is required for FCPA accounting provision jurisdiction. According to press accounts, however, the SEC may have investigated BAE in connection with the al-Yamamah arms sale. The status of this possible investigation remains unclear."
Technip's release (here) speaks of both the DOJ and SEC involvement in resolution of that matter.
Enter James Tillen (here), one of the co-authors of the Miller & Chevalier piece, to help explain SEC jurisdiction in these two similar, yet different matters.
Here is what he had to say.
"We specifically note in the Client Alert that the absence of an SEC resolution was likely due to the fact that the SEC did not have jurisdiction: 'The absence of SEC charges may reflect a lack of SEC jurisdiction because BAE was not subject to the registration and reporting requirements of the Securities and Exchange Act during the relevant time period, which is required for FCPA accounting provision jurisdiction.' Press accounts reported that the SEC was investigating at some point so it was worth raising the question of why no SEC resolution (especially since the DOJ effectively brought an internal controls case).
I looked quite closely at the issue of whether BAE was an issuer and concluded the following:
The definition of issuer includes any entity “which has a class of securities registered pursuant to” Section 12(g) of the Securities Exchange Act of 1934 or “which is required to file reports under” Section 15(d) of the Securities Exchange Act. 15 U.S.C. §§ 78dd-1(a), 78c(a)(8), 781, 78o(d). During the relevant time period, BAE Systems plc’s ADRs were sold in the United States Over The Counter (“OTC”), and not on any national securities exchanges, such as the NYSE, which require registration with the SEC. In fact, BAE has filed for an exemption from registration under Section 12(g) of the Exchange Act since at least 2002. See List of Foreign Issuers That Have Submitted Information Under the Exemption Relating to Certain Foreign Securities, SEC Release No. 34-45855 (May 1, 2002) (BAE listed as British Aerospace plc), SEC Release No. 34-49846 (June 10, 2004), and SEC Release No. 34-51893 (June 28, 2005). Pursuant to this exemption, BAE must provide information to the SEC on a yearly basis by completing Form F-6. See Rule 12g3-2. However, BAE is exempt from the annual and other periodic reports under Section 15(d) of the Act. See 17 C.F.R. § 240.15d-3. Based on these considerations, it would appear that BAE is not subject to the registration and reporting requirements of the Securities Exchange Act and therefore not an “issuer” for purposes of FCPA jurisdiction."
In contrast, Tillen stated that Technip "had American Depository Shares listed on NYSE from at least 2001 until 2007. Thereafter, it delisted (see here and here) and now only trades on the OTC (over-the-counter) market. When it was listed, Technip was an 'issuer' for purposes of the FCPA."
*****
Thanks for the explanation James.
As my mentor was fond of saying ... "at least now I am confused on a higher level."
That was easy.
What is not so easy is figuring out just which companies are issuers. The FCPA defines an issuer as when a company "has a class of securities registered" with the SEC pursuant to the securities laws or when a company is "required to file reports" with the SEC pursuant to the securities laws.
These terms can be confusing, particularly when talking about non-U.S. based companies.
In connection with both the BAE and Technip matters, there was some mention of a potential SEC angle despite the fact that neither company currently has shares traded on a U.S. exchange.
Miller & Chevalier's release in connection with the BAE matter (here) states:
"The U.S. pleadings detail significant issues with BAE’s compliance program and internal controls, yet the pleadings did not allege substantive violations of the FCPA’s accounting provisions, and the Securities and Exchange Commission (“SEC”) has yet to bring an action against BAE. The absence of SEC charges may reflect a lack of SEC jurisdiction because BAE was not subject to the registration and reporting requirements of the Securities and Exchange Act during the relevant time period, which is required for FCPA accounting provision jurisdiction. According to press accounts, however, the SEC may have investigated BAE in connection with the al-Yamamah arms sale. The status of this possible investigation remains unclear."
Technip's release (here) speaks of both the DOJ and SEC involvement in resolution of that matter.
Enter James Tillen (here), one of the co-authors of the Miller & Chevalier piece, to help explain SEC jurisdiction in these two similar, yet different matters.
Here is what he had to say.
"We specifically note in the Client Alert that the absence of an SEC resolution was likely due to the fact that the SEC did not have jurisdiction: 'The absence of SEC charges may reflect a lack of SEC jurisdiction because BAE was not subject to the registration and reporting requirements of the Securities and Exchange Act during the relevant time period, which is required for FCPA accounting provision jurisdiction.' Press accounts reported that the SEC was investigating at some point so it was worth raising the question of why no SEC resolution (especially since the DOJ effectively brought an internal controls case).
I looked quite closely at the issue of whether BAE was an issuer and concluded the following:
The definition of issuer includes any entity “which has a class of securities registered pursuant to” Section 12(g) of the Securities Exchange Act of 1934 or “which is required to file reports under” Section 15(d) of the Securities Exchange Act. 15 U.S.C. §§ 78dd-1(a), 78c(a)(8), 781, 78o(d). During the relevant time period, BAE Systems plc’s ADRs were sold in the United States Over The Counter (“OTC”), and not on any national securities exchanges, such as the NYSE, which require registration with the SEC. In fact, BAE has filed for an exemption from registration under Section 12(g) of the Exchange Act since at least 2002. See List of Foreign Issuers That Have Submitted Information Under the Exemption Relating to Certain Foreign Securities, SEC Release No. 34-45855 (May 1, 2002) (BAE listed as British Aerospace plc), SEC Release No. 34-49846 (June 10, 2004), and SEC Release No. 34-51893 (June 28, 2005). Pursuant to this exemption, BAE must provide information to the SEC on a yearly basis by completing Form F-6. See Rule 12g3-2. However, BAE is exempt from the annual and other periodic reports under Section 15(d) of the Act. See 17 C.F.R. § 240.15d-3. Based on these considerations, it would appear that BAE is not subject to the registration and reporting requirements of the Securities Exchange Act and therefore not an “issuer” for purposes of FCPA jurisdiction."
In contrast, Tillen stated that Technip "had American Depository Shares listed on NYSE from at least 2001 until 2007. Thereafter, it delisted (see here and here) and now only trades on the OTC (over-the-counter) market. When it was listed, Technip was an 'issuer' for purposes of the FCPA."
*****
Thanks for the explanation James.
As my mentor was fond of saying ... "at least now I am confused on a higher level."
Sunday, February 14, 2010
In the News
Despite Statoil and Siemens (among other enforcement actions), many continue to describe the FCPA as the law that applies only to U.S. companies. Of course that is a wrong statement, as the FCPA applies to all issuers (foreign or domestic) and any foreign company or national that engages in acts in furtherance of a bribery scheme while in U.S. territory. In any event, it is sometimes hard to change perceptions.
Next time you hear this misperception, think February 12, 2010.
On February 12, 2010, it was reported that Daimler AG (a German carmaker) and Technip (a French oil and gas company) were close to resolving FCPA related enforcement actions.
Daimler
As reported here, Daimler is poised to "pay about $200 million and two subsidiaries will plead guilty to resolve a U.S. investigation into whether it paid bribes to secure business overseas." According to the company's prior filings, an internal investigation found that "improper payments were made in a number of jurisdictions, primarily in Africa, Asia, and Eastern Europe." In addition, the report notes that Daimler has also faced scrutiny in connection with its role in the U.N. Oil-For-Food program in Iraq. The report quotes a Daimler spokesperson as saying, "we are in discussions with the DOJ and SEC regarding consensually resolving the agencies' investigations."
The report also notes that "government lawyers submitted the deal in Washington to U.S. District Judge Richard Leon." Judge Leon is also overseeing the Africa Sting case. If true, the normally transparent DOJ (at least when it comes to alerting the public to FCPA enforcement actions) has yet to publicly announce any Daimler filing on its website. Nor does the DOJ website contain any information about the recent BAE matter. Perhaps it is because of the recent weather in D.C. which resulted in DOJ offices being closed for several days.
Technip
According to the company's release (here), "Technip and the SEC and DOJ have discussed a resolution of all potential claims against the company" arising from an investigation involving TSKJ, a joint venture company in which Technip has a 25% share. The company disclosed that it will record a €245 million charge to reflect the "estimated costs" of the resolution. According to the release, "the potential resolution does not contemplate a criminal conviction for Technips's role in the TSKJ joint venture."
The TSKJ joint venture in Nigeria has been the focus of several previous FCPA enforcement actions. See here, here, and here.
Next time you hear this misperception, think February 12, 2010.
On February 12, 2010, it was reported that Daimler AG (a German carmaker) and Technip (a French oil and gas company) were close to resolving FCPA related enforcement actions.
Daimler
As reported here, Daimler is poised to "pay about $200 million and two subsidiaries will plead guilty to resolve a U.S. investigation into whether it paid bribes to secure business overseas." According to the company's prior filings, an internal investigation found that "improper payments were made in a number of jurisdictions, primarily in Africa, Asia, and Eastern Europe." In addition, the report notes that Daimler has also faced scrutiny in connection with its role in the U.N. Oil-For-Food program in Iraq. The report quotes a Daimler spokesperson as saying, "we are in discussions with the DOJ and SEC regarding consensually resolving the agencies' investigations."
The report also notes that "government lawyers submitted the deal in Washington to U.S. District Judge Richard Leon." Judge Leon is also overseeing the Africa Sting case. If true, the normally transparent DOJ (at least when it comes to alerting the public to FCPA enforcement actions) has yet to publicly announce any Daimler filing on its website. Nor does the DOJ website contain any information about the recent BAE matter. Perhaps it is because of the recent weather in D.C. which resulted in DOJ offices being closed for several days.
Technip
According to the company's release (here), "Technip and the SEC and DOJ have discussed a resolution of all potential claims against the company" arising from an investigation involving TSKJ, a joint venture company in which Technip has a 25% share. The company disclosed that it will record a €245 million charge to reflect the "estimated costs" of the resolution. According to the release, "the potential resolution does not contemplate a criminal conviction for Technips's role in the TSKJ joint venture."
The TSKJ joint venture in Nigeria has been the focus of several previous FCPA enforcement actions. See here, here, and here.
Subscribe to:
Posts (Atom)
