International Trade Law News

Despite the snow in the Washington, DC area, the blizzard of FCPA prosectutions continues.

Today, John W. Warwick pleaded guilty before U.S. District Court Judge Henry E. Hudson in Richmond, Virginia., to a one-count indictment charging him with conspiring to make corrupt payments to foreign government officials for the purpose of securing business for Ports Engineering Consultants Corporation (PECC) in violation of the Foreign Corrupt Practices Act

According to the indictment issued on December 15, 2009, PECC, a company incorporated under the laws of Panama, was affiliated with an engineering firm based in Virginia Beach. According to the indictment, PECC was created so that Warwick, co-conspirator Charles Jumet, an the engineering firm could obtain certain maritime contracts from the Panamanian government.

According to the Justice Department, Warwick and Jumet participated in a conspiracy to pay money secretly to Panamanian government officials for awarding contracts to PECC to maintain lighthouses and buoy in Panama. In December 1997, the Panamanian government awarded PECC a no-bid, 20-year concession to perform these duties. Upon receipt of the concession, Warwick, Jumet, and others authorized payments to be made to the Panamanian government officials.

In connection with his guilty plea, Warwick admitted that at least from 1997 through approximately July 2003, he, Jumet and others conspired to make corrupt payments totaling more than $200,000 to the former administrator and deputy administrator of the Panama Maritime Authority and to a former, high-ranking elected executive official of the Republic of Panama.

As part of his plea agreement, Warwick agreed to forfeit $331,000,the proceeds of the contract. At sentencing, scheduled for May 14, 2010, Warwick faces a maximum of five years in prison and a fine of the greater of $250,000 or twice the gain.

Jumet pleaded guilty on Nov. 13, 2009, to a two-count criminal information charging him with conspiring to make corrupt payments to foreign government officials for the purpose of securing business for PECC, in violation of the FCPA, and making a false statement. Jumet is scheduled to be sentenced on March 26, 2010.

Labels: FCPA

The Justice Department announced today that 22 executives and employees of companies in the military and law enforcement products industry have been indicted and arrested in the largest single investigation and prosecution against individuals in the history of the enforcement of the U.S. Foreign Corrupt Practices Act (FCPA).

Twenty one of the defendants were arrested in Las Vegas yesterday and one defendant was arrested in Miami. In addition, approximately 150 FBI agents executed 14 search warrants in locations across the U.S. In addition, the United Kingdom’s City of London Police executed seven search warrants in connection with their own investigations into companies involved in the foreign bribery conduct that formed the basis for the indictments.

The defendants arrested in Las Vegas were there because they were attending the annual Shooting, Hunting, Outdoor Trade Show and Conference, known as the SHOT Show, the largest trade show of its kind. 

According to the Justice Department, the indictments allege that the defendants engaged in a scheme to pay bribes to the minister of defense for a country in Africa. In fact, the scheme was part of the undercover operation, with no actual involvement from any minister of defense. As part of the undercover operation, the defendants allegedly agreed to pay a 20 percent "commission" to a sales agent who the defendants believed represented the minister of defense for a country in Africa in order to win a portion of a $15 million deal to outfit the country’s presidential guard. In reality, the "sales agent" was an undercover FBI agent.

The defendants were told that half of that "commission" would be paid directly to the minister of defense. The defendants allegedly agreed to create two price quotations in connection with the deals, with one quote representing the true cost of the goods and the second quote representing the true cost, plus the 20 percent "commission." The defendants also allegedly agreed to engage in a small "test" deal to show the minister of defense that he would personally receive the 10 percent bribe.

Each of the indictments allege that the defendants conspired to violate the FCPA, conspired to engage in money laundering, and engaged in substantive violations of the FCPA. The indictments also seek criminal forfeiture of the defendants’ ill gotten gains.

The maximum prison sentence for the conspiracy count and for each FCPA count is five years. The maximum sentence for the money laundering conspiracy charge is 20 years in prison.

A list of the persons named in the indictments are included in the press release.

Labels: FCPA

In connection with the marking of December 9th as International Anti-Corruption Day (see previous post) and the 10th Anniversary of the Entry into Force of the Organization of Economic Cooperation and Development (OECD) Anti-Bribery Convention, the OECD held a program yesterday in Geneva, Switzerland on anti-bribery efforts that included some high level speeches by a number of U.S. officials, including Secretary of State Clinton and Commerce Department Locke.

One of the main features of the program was the release of the OECD’s new Recommendation for Further Combating Bribery of Foreign Public Officials which, among other things, recommends that OECD member countries prohibit or discourage the use of small facilitation payments.

Specifically, the OECD recommendation is as follows:

RECOMMENDS, in view of the corrosive effect of small facilitation payments, particularly on sustainable economic development and the rule of law that Member countries should:

i. undertake to periodically review their policies and approach on small facilitation payments in order to effectively combat the phenomenon;

ii. encourage companies to prohibit or discourage the use of small facilitation payments in internal company controls, ethics and compliance programmes or measures, recognising that such payments are generally illegal in the countries where they are made, and must in all cases be accurately accounted for in such companies’ books and financial records.

URGES all countries to raise awareness of their public officials on their domestic bribery and solicitation laws with a view to stopping the solicitation and acceptance of small facilitation payments.

• Ensuring companies cannot avoid sanctions by using agents and intermediaries to bribe for them;
• Improve co-operation between countries on foreign bribery investigations and the seizure, confiscation and recovery of the proceeds of transnational bribery;
• Provide effective channels for reporting foreign bribery to law enforcement authorities and for protecting whistleblowers from retaliation; and
• Working more closely with the private sector to adopt more stringent internal controls, ethics and compliance programs and measures to prevent and detect bribery.

Labels: FCPA

Today, December 9th, marks International Anti-Corruption Day. The theme of this year's International Anti-Corruption Day is "Don't let corruption kill development."

In order to promote the United Nations' anti-corruption campaign, the U.N.'s Office of Drugs and Crime (UNODC) has produced the following 60 second video that promotes the power to say no when confronted with bribery.

In addition, Dow Jones today released a State of Anti-Corruption Compliance Survey that found more than half of all companies are delaying or abandoning key business initiatives as executives struggle to both interpret a patch-work of anti-corruption regulations and collect the information they need to confidently assess corruption risk.

Labels: FCPA, United Nations

Transparency International today released its annual 2009 Corruption Perceptions Index (CPI) that measures the perceived levels of public-sector corruption in countries. The 2009 CPI scores 180 countries on a scale from zero (highly corrupt) to ten (highly clean) using 13 sources from 10 independent
institutions. All sources measure the overall extent of corruption (frequency and/or size of bribes) in the public and political sectors of numerous countries.

Transparency International's CPI is a very useful tool for determining the extent and risk of corruption in countries where companies conduct business.

Highest scorers in the 2009 CPI are New Zealand at 9.4, Denmark at 9.3, Singapore and Sweden tied at 9.2 and Switzerland at 9.0. These scores reflect political stability, long-established conflict of interest regulations and solid, functioning public institutions.

Japan and the United Kingdom are both ranked 17th (7.7) and the United States is ranked 19th (7.5)

Not surprisingly, fragile, unstable countries that have been scarred by war and ongoing conflict linger at the bottom of the index. These countries include: Somalia, ranked 180th with a score of 1.1, Afghanistan at 1.3, Myanmar at 1.4 and Sudan tied with Iraq at 1.5. Nigeria is ranked 130th with a score of 2.5.

The vast majority of the 180 countries included in the 2009 CPI scored below five.

Countries experiencing significant declines in their CPI score from 2008 to 2009 were Bahrain, Greece, Iran, Malaysia, Malta and Slovakia.

Countries that improved their CPI scores from 2008 to 2009 were Bangladesh, Belarus, Guatemala, Lithuania, Moldova, Montenegro, Poland, Syria and Tonga.

According to Transparency International:

Overall results in the 2009 index are of great concern because corruption continues to lurk where opacity rules, where institutions still need strengthening and where governments have not implemented anti-corruption legal frameworks.

Even industrialized countries cannot be complacent: the supply of bribery and the facilitation of corruption often involve businesses based in their countries. Financial secrecy jurisdictions, linked to many countries that top the CPI, severely undermine efforts to tackle corruption and recover stolen assets.

Labels: FCPA

Women In International Trade will be holding a Brown Bag discussion from noon to 1:30 in Washington, DC on November 17, 2009 entitled "Foreign Corrupt Practices Act: Recent Updates”.

The program will feature Kathleen Hamann, Trial Attorney, Fraud Section, Criminal Division, U.S. Department of Justice.

The program will be held at the offices of the law firm of Sandler, Travis & Rosenberg, P.A., 1300 Pennsylvania Avenue, Suite 400, Washington, DC 20004.

The program if free for WIIT members and $10 for non-members. To register for the program, visit www.WIIT.org.

Labels: FCPA

The United Nations Development Program (UNDP) and the United Nations Office on Drugs and Crime (UNODC) today launched a joint 2009 campaign to raise awareness on how corruption adversely impacts development.

The launch of this anti-corruption campaign was timed to coincide with the third session of the Conference of State Parties to the U.N. Convention against Corruption in Doha, Qatar from November 9-13. The Convention against Corruption has been ratified by over two-thirds of the 192 State Members of the U.N. since its entered force in 2005.

Through a series of posters, brochures and other material, the new campaign highlights how corruption obstructs access to education, health and justice, limiting their opportunity to prosper and undermining democracy.

The 2009 campaign is a follow-up to the UN's widely praised "Your No Counts" campaign.

Labels: FCPA

The Justice Department issued a press release today regarding Friday's conviction of two Los Angeles-area film executives in a closely watched criminal case involving the U.S. Foreign Corrupt Practices Act (FCPA).

After a two and a half week jury trial in the Central District of California Courthouse in Los Angeles, Gerald Green and Patricia Green were found guilty of conspiracy and substantive violations of the FCPA and U.S. money laundering laws in relation to an alleged bribery scheme that enabled the defendants to obtain a series of Thai government contracts, including contracts to manage and operate the annual Bangkok International Film Festival.

Patricia Green was also found guilty of falsely subscribing U.S. income tax returns in connection with this scheme.

Mr. and Mrs. Green, who were charged and arrested in December 2007, owned and operated Film Festival Management, a Los Angeles-based business that was created to bid for the management contract for the annual Bangkok International Film Festival. In January 2008 they were indicted by a federal grand jury in Los Angeles on one count of conspiracy to bribe a foreign public official in violation of the FCPA and six substantive counts of violating the FCPA.

Earlier this year, the Greens were charged in a second superseding indictment with 21 counts, including conspiracy to violate the FCPA, conspiracy to violate U.S. anti-money laundering laws, eight substantive counts of violating the FCPA, seven counts of violating anti-money laundering laws, one count of obstruction of justice and two counts of making a false statement on a U.S. Income Tax Return.

Trial evidence also showed that the Greens used different business entities, some with fake business addresses and telephone numbers, in their dealings with the TAT in order to hide the money the Greens were being paid under the contracts. Trial evidence also showed that the Greens disguised the payments as "sales commission" payments and made the payments for the benefit of the former governor through the foreign bank accounts of intermediaries, including bank accounts in the name of the former governor’s daughter and friend.

The conspiracy and FCPA charges each carry a maximum penalty of five years in prison, and each of the money laundering counts carries a maximum penalty of up to 20 years in prison. The false subscription of a U.S. income tax return carries a maximum penalty of three years in prison and a fine of not more than $100,000.

Sentencing has been set for Dec. 17, 2009.

Labels: FCPA

The Organization of Economic Cooperation and Development's (OECD) Working Group on Bribery recently issued a report (pdf) (the "Phase 2bis" report) addressing Turkey's progress in complying with the OECD Anti-Bribery Convention.

The report examined Turkey's progress in the following areas: (1) investigating and prosecuting allegations of bribing foreign public officials; (2) re-instating the liability of legal persons; and (3) awareness-raising by the Turkish Government.

The report noted that Turkey has taken "important steps" to address recommendations from the Working Group, including:

• Two foreign bribery cases are currently under investigation, and Turkish officials have recently increased their efforts to gather information about allegations against Turkish companies in the 2005 Final Report of the Independent Inquiry Committee in the UN Oil-for-Food Programme.
  
• A draft law re-introducing corporate liability for foreign bribery is currently under consideration by the Turkish Parliament.
  
• Turkey has implemented a wide range of awareness-raising efforts, which appear to have significantly raised awareness in the business community about the prohibition against bribing foreign public officials in the Turkish Penal Code.

Despite this progress the OECD Working Group's noted that it remains concerned that Turkey continues to be in non-compliance with Article 2 of the Anti-Bribery Convention as long as companies are not liable for foreign bribery and recommended that Turkey urgently adopt the draft law on corporate liability.

The Working Group also recommended a peer review analysis of the new law on corporate liability once it is enacted and a further assessment of progress on foreign bribery investigations and prosecutions in December 2009.

Labels: FCPA

In the first Foreign Corrupt Practices Act (FCPA) involving Vietnam, the Justice Department announced yesterday that Joseph T. Lukas, a former executive of Philadelphia-based Nexus Technologies Inc. pleaded guilty to one count of conspiracy to violate the FCPA and one count of violating the FCPA in connection with his role in a scheme to pay bribes to Government of Vietnam officials in exchange for contracts to supply equipment and technology to Vietnamese government agencies.

Mr. Lukas was arrested on September 5, 2008, after being indicted by a federal grand jury in Philadelphia. Also indicted in this case was Nexus Technologies and three alleged co-conspirators. Cases are still pending against the remaining defendants and the company.

Nexus Technologies Inc. is a Delaware company with offices in Philadelphia, New Jersey and Vietnam that allegedly purchased a wide variety of equipment and technology, including underwater mapping equipment, bomb containment equipment, helicopter parts, chemical detectors, satellite communication parts and air tracking systems, for export to agencies of the government of Vietnam. The indictment alleged that from approximately 1999 through 2008, the defendants engaged in a conspiracy to pay Vietnamese government officials bribes in order to secure lucrative contracts. Over the course of the scheme, the defendants are alleged to have paid at least $150,000 in bribes to foreign officials in Vietnam. The customers in Vietnam are alleged to have included the commercial branches of Vietnam's Ministries of Transport, Industry and Public Safety.

In connection with his guilty plea, Mr. Lukas admitted that from 1999 to 2005, he and other employees of Nexus Technologies Inc. agreed to pay, and knowingly paid, bribes to Vietnamese government officials in exchange for contracts with the agencies for which the officials worked. The bribes were falsely described as "commissions" in the company’s records.

Mr. Lukas faces a maximum prison sentence of 10 years in prison and a $350,000 fine when he is sentenced in April 2010.

Labels: FCPA, Vietnam

The Justice Department announced today that Latin Node Inc. (Latinode), a privately held Florida telecommunications company, pleaded guilty today to a one-count information charging that the company violated the Foreign Corrupt Practices Act's anti-bribery provisions. As part of the plea agreement, Latinode agreed to pay a $2 million fine over a three-year period.

Latinode is a provider of wholesale telecommunications services using Internet protocol technology countries throughout the world, including Honduras and Yemen. Latinode admitted that from approximately March 2004 through June 2007, it paid approximately $1,099,889 in payments to third parties, knowing that some or all of those funds would be passed on as bribes to officials of Hondutel, the Honduran state-owned telecommunications company.

In addition, from in 2005 and 2006, Latinode allegedly made 17 payments totaling approximately $1,150,654 either directly to Yemeni officials or to a third-party consultant with the knowledge that some or all of the money would be passed on to Yemeni officials in exchange for favorable interconnection rates in Yemen. Each of those payments was made from Latinode’s Miami bank account. According to court documents, company e-mails indicate that the intended payment recipients included, but were not limited to, the son of the Yemeni president; the vice president of operations at TeleYemen, the Yemeni government-owned telecommunications company; other officials of TeleYemen; and officials from the Yemeni Ministry of Telecommunications.

Latinode’s parent company, eLandia International Inc., voluntarily disclosed the potential FCPA violations to the Justice Department after it acquired Latinode.

Labels: FCPA

Black Money, a FRONTLINE documentary on international bribery, will air Tuesday, April 7, 2009, at 9 P.M. EDT on PBS. The documentary investigates the shadowy side of international business, shedding light on multinational companies that have routinely made secret payments—often referred to as “black money”—to win business. Click here for a preview of the show.

Black Money includes interviews with current and former prosecutors involved in several high profile anti-bribery cases.

FRONTLINE has also been presenting a series of related stories on international bribery cases on its FRONTLINE/WORLD site. The The Business of Bribes site contains news and interviews with middlemen, prosecutors and whistleblowers, detailing the stories behind some of the largest bribery investigations in history.

Labels: FCPA

Israel recently became the 38th signatory to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

The OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, which entered into force on February 15, 1999, provides a broad definition of bribery and requires countries to pass anti-bribery laws and to impose sanctions for engaging in prohibited acts.

Labels: FCPA

Today's Compliance Week contains a story on the the broad reach of the U.S. Foreign Corrupt Practices Act to companies located in the U.K. and other countries in Europe.

The article notes that "the long arm of U.S. regulatory compliance is now reaching ever more deeply into overseas corporations—even, when necessary, reaching over the shoulder of local regulators not enforcing their own standards to U.S. liking."

Labels: FCPA

The Society of Corporate Compliance and Ethics (SCCE) has released the results of a benchmarking survey finding that despite the proliferation of third party relationships in business, relatively few companies set ethics and compliance expectations on the companies that they rely on to act on their behalf.

The SCCE survey found that only about half of companies (47%) disseminate their internal employee code of conduct to third parties. Just 26% require that third parties certify to their codes of conduct, and only 17% of organization have a code of conduct that is applicable to third parties.

The survey data comes from research fielded by the SCCE in January 2009 among compliance and ethics professionals at private, public, non-profit and governmental institutions. More than 400 responses to the survey were filed.

"Companies have really stepped up their activities internally when it comes to compliance and ethics," said SCCE CEO Roy Snell. "But we're just not seeing the same level of commitment by companies when it comes to managing third parties. There's a great deal of risk there, as [recent FCPA] cases have shown. Companies risk both wrong doing occurring on their behalf, and substantial liability that might have been mitigated by a more rigorous approach."

The complete survey can be accessed here (free registration required).

Labels: FCPA

Deloitte announced today the results of an anti-corruption study of 329 management, finance, strategy and business development professionals from around the world. The study, entitled Fortifying Anti-Corruption in Today's Corporation, indicated that the vast majority of those surveyed (93 percent) believe that an internal investigation should be conducted if a significant incident of corruption were uncovered and 75 percent support zero tolerance anti-corruption policies with strong disciplinary measures, including firing those responsible for corrupt acts.

The study found that only 41% of respondents indicated that senior management should investigate and deal with matters internally or wait to see if there are consequences rather than make a voluntary disclosure to authorities if a significant incident of corruption was uncovered at their organizations.

The study also found the following:

• Fitting in and gaining business are top motivators for bribery by executives. When asked about the top motivators for an executive to pay bribes in their industry, fitting in with local business cultures (33 percent) and gaining more business (40 percent) garnered the most responses. Key Point: It's human nature to be tempted to adjust ones moral compass to the situation.

• Tone at the top should set anti-corruption policy. While senior management (39 percent), general counsel (24 percent) and compliance officers (21 percent) were the first groups identified from which executives would seek advice in handling a corruption incident, 61 percent of respondents said that the most effective role for the CEO is to send out a strong signal and remain personally involved in anti-corruption efforts. Key point: Executives expect committed leadership on this issue from the CEO.

Labels: FCPA

Here are some useful articles published on various U.S. Foreign Corrupt Practices Act and anti-bribery issues in the past few weeks:

• Forbes.com: Do Honest Corporations Stand A Chance?

• Ethical Corporation: Transparency International UK, Shining a light on British bribery

• Bloomberg: Bribery Warrants Global War

• WSJ's China Journal: Bribes and Transparency on Chinese Holidays: A Primer (also, the interviewee, Alexandra Wrage, President of TRACE International, recently started writing the WrageBlog, an Anti-Bribery Compliance Blog)

• AmLaw Daily: Kroll Report: Fraud Will Rise as Economic Crisis Deepens

• Compliance Week: FCPA Enforcement Expected to Stay High in 2009

Labels: FCPA

A story in today's Compliance Week discusses the lessons learned from the FCPA enforcement cases brought against Siemens AG and several of its foreign subsidiaries by the Justice Department and Securities and Exchange Commission.

The article notes:

Siemens’ new management is practically doing a road show of self-confession, speaking at conferences and holding Webcasts to discuss how the company managed the investigations and pieced its compliance function back together again. Experts say large companies everywhere can take away lessons of what to do, and what not to do.

Siemens footed the bill for more than 200 outside lawyers and support staff from the law firm Debevoise & Plimpton, plus another 1,300 forensic investigators from Deloitte; the two firms racked up a total of 1,531,000 man-hours on the project. Siemens itself had 16 employees working on the probe full-time.

In all, investigators conducted more than 1,150 interviews, reviewed more than 14 million documents, and analyzed 38 million separate financial transactions, Kirsch said. Total cost of the investigation: $850 million.

Labels: FCPA

On January 28, 2009, the Securities Docket blog is holding a free one-hour webcast that will shed light on the significant developments in 2008 in the enforcement of the Foreign Corrupt Practices Act (FCPA). Some of the trends that will be discussed during the webcast include:

• increasingly aggressive enforcement against individuals;
• ramped up international coordination; and
• the joining of FCPA prosecutions with prosecutions for distinct federal crimes.

The panelists include Bruce Carton, editor of Securities Docket and the author of Compliance Week’s “Enforcement Action”, attorney F. Joseph Warin of Gibson, Dunn & Crutcher LLP and Elliott Leary of KPMG Forensic.

To attend this webcast scheduled for January 28, at 2 pm Eastern, please click here.

Labels: FCPA

Italian automobile and truck manufacturer Fiat S.p.A. and several of the company's subsidiaries today agreed to pay a total of more than $17 million in connection with Foreign Corrupt Practices Act (FCPA) charges brought by the U.S. Department of Justice and U.S. Securities and Exchange Commission (SEC) in connection with the U.N. Oil for Food Program.

In the criminal case, Fiat subsidiaries Iveco S.p.A. and CNH Italia S.p.A. were each charged with one count of conspiracy to commit wire fraud and to violate the books and records provisions of the FCPA in connection with illegal kickbacks paid to officials of the former Iraqi government. Fiat agreed to pay a $7 million penalty in connection with these charges. The Justice Department agreed to enter into a deferred prosecution agreement with Fiat whereby the criminal charges would be dismissed if Fiat and its affiliates abide by the agreement.

In the civil case, the SEC filed FCPA books and records and internal controls charges against Fiat S.p.A. and CNH Global N.V. The SEC's complaint (pdf) alleged that from 2000 through 2003, certain Fiat and CNH Global subsidiaries made approximately $4.3 million in kickback payments in connection with their sales of humanitarian goods to Iraq under Oil for Food Program. The SEC alleged that Fiat and CNH Global failed to maintain adequate systems of internal controls to detect and prevent the payments and their accounting for these transactions failed properly to record the nature of the payments.

Fiat was ordered to pay $5,309,632 in disgorged profits, $1,899,510 in pre-judgment interest and a civil penalty of $3,600,000.

Labels: FCPA

The Justice Department announced on Friday that a former executive and a consultant of Willbros International Inc. (WII), a subsidiary of Houston-based Willbros Group Inc., have been charged in connection with a conspiracy to pay more than $6 million in bribes to government officials in Nigeria and Ecuador.

James K. Tillery, a former executive of WII, and Paul G. Novak, a former consultant to WII, were each charged with one count of conspiracy to violate the FCPA, two counts of violating the FCPA in connection with the authorization of corrupt payments to officials in Nigeria and Ecuador, and one count of conspiring to launder the bribe payments through purported consulting companies controlled by Novak.

Novak was arrested in Houston upon arrival on a flight from South Africa after his passport was revoked. Tillery remains at large.

If convicted of all charges, Tillery and Novak each face sentences of up to 35 years in prison and fines of $250,000, or twice the gain or loss from the offense, whichever is greater, for conspiring to violate the FCPA and for each violation of the FCPA; and $500,000 or twice the value of the funds involved in the transfer, whichever is greater, for the money laundering conspiracy.

In May of this year, Willbros and WII entered into a deferred prosecution agreement with the Justice Department and agreed to pay a $22 million criminal penalty in connection with corrupt payments to Nigerian and Ecuadorian government officials in violation of the FCPA.

Labels: FCPA

The New York Times, ProPublica, a nonprofit investigative journalism organization, and PBS’s Frontline published an in-depth story in today's NYT on the Siemens FCPA case.

The story includes extensive interviews with a former accountant at Siemens who oversaw an annual bribery budget of about $40 million to $50 million.

Frontline will air a documentary on the Siemens case on April 7, 2009 at 9 P.M. ET on PBS. Video excerpts from the documentary are now posted on Frontline's website here.

Labels: FCPA

Siemens AG announced today that legal proceedings against it arising from allegations of bribing public officials were concluded on the same day in Munich, Germany and in Washington, DC and that the company will pay total fines and penalties of US$ 1.6 billion.

In Washington, DC, Siemens today pleaded guilty before Judge Richard Leon in Federal Court to charges of knowingly circumventing and failing to maintain adequate internal controls and failing to comply with the books and records provisions of the U.S. Foreign Corrupt Practices Act (FCPA). The Criminal Information (definitely worth reading) filed by the Justice Department against Siemens indicates that the Siemens was charged with one count of violating the FCPA's internal controls provisions (15 U.S.C Sections 78m(b)(2)(B), 78m(b)(5) and 78ff(a)) and one count of violating the FPCA's books and records provisions (15 U.S.C. Sections 78m(b)(2)(A), 78m(b)(5), and 78ff(a)). Siemens was not charged with violating the anti-bribery provisions of the FCPA. In related cases, three Siemens foreign subsidiaries pleaded guilty today to individual counts of conspiracy to violate the FCPA.

In connection with these pleas, Siemens and the three subsidiaries agreed to pay a fine of US$450 million to resolve charges brought by the Justice Department. At the same time, Siemens settled a civil action against it brought by the SEC for violations of the FCPA. Siemens agreed to the disgorgement of profits in the amount of US$350 million. The civil Complaint filed by the U.S. Securities and Exchange Commission (SEC) against Siemens can be found here.

In Germany, the Munich public prosecutor today announced the termination of the legal proceeding alleging the failure of the former Managing Board of Siemens AG to fulfill its supervisory duties. Siemens agreed to pay a fine of €395 million (approximately US$540 million). In a similar action in October 2007 relating to Siemens’ former telecommunications group, Siemens paid €201 million (US$275 million). This brings the total amount payable to authorities in Germany in connection with these legal proceedings to €596 million ($815 million). The investigations of former members of the Managing Board, employees of Siemens AG and other individuals is still ongoing and remains unaffected by this settlement.

Under the terms of the plea and settlement agreements reached today in the U.S., Siemens has engaged Dr. Theo Waigel, former German Finance Minister, as compliance monitor to evaluate and report on the company’s progress in implementing and operating its new compliance programs. Waigel will be the first non-U.S. national appointed to serve as a FCPA compliance monitor. As compliance monitor, Dr. Waigel will deliver regular reports to the SEC und DOJ regarding the effectiveness of the Company’s newly implemented compliance measures.

Because Siemens cooperated in the case and has implemented a comprehensive compliance program, the Defense Logistics Agency (DLA) has held that Siemens will remain a contractor for U.S. government business.

Siemens and its employees are still facing anti-corruption cases in Argentina, Austria, Bangladesh, China, Germany, Greece, Hungary, Indonesia, Israel, Italy, Malaysia, Nigeria, Norway, Poland, Russia, Switzerland and Vietnam.

Labels: FCPA

Bloomberg has reported that Siemens AG has agreed to pay $800 million to settle allegations that it violated the U.S. Foreign Corrupt Practices Act. If finalized, this will be the largest FCPA penalty ever, dwarfing the $44.1 million penalty imposed on Baker Hughes in April 2007.

The article states that prosecutors are proposing that the company pay a criminal penalty of $450 million. In addition, under an agreement with the Securities and Exchange Commission, Siemens will also be required to disgorge $350 million in profits and agree to an outside compliance monitor. The settlement agreement is likely to be finalized on Monday during a hearing in federal court in Washington, DC.

During the past few years, public prosecutors and other government authorities in jurisdictions around the world have been conducting investigations of Siemens AG and its consolidated subsidiaries and certain of its current and former employees regarding allegations of public corruption. The SEC and the DOJ have also been investigating possible violations of U.S. law by Siemens in connection with the Oil-for-Food Program.

Labels: FCPA

In connection with International Anti-Corruption Day (see previous post), Transparency International (TI) today issued its 2008 Bribe Payers Index (BPI) and Survey.

The BPI report, which focuses on the supply-side of bribery, ranked the 22 countries with the largest economies by the tendency of their firms to bribe abroad. The report found that companies based in Russia, China, Mexico and India represented the highest bribery risk.

For the first time, the BPI reviewed the risk of bribery by business sector. Out of 19 sectors reviewed, the report found that the public works construction, real estate and oil and gas sectors are most prone to corruption.

TI said that the "report notes that the findings of the 2008 BPI and sector rankings highlight that both governments and businesses must do more to effectively curb supply side corruption. There is no place for complacency – even the best performers among the 22 countries are to a degree likely to pay bribes, as illustrated by 16 percent of respondents considering Belgian companies to ‘often’ or ‘almost always’ use familiar or personal relationships to win public contracts."

TI also indicated that "companies headquartered in the world’s most economically influential countries have a duty to make sure their anti-bribery standards are comprehensive and enforced rigorously at every step."

Labels: FCPA

Labels: FCPA, United Nations

Representative William J. Jefferson (D-LA), the first U.S. public official be indicted for violating the Foreign Corrupt Practices Act lost his bid for reelection to Congress on Saturday to Republican Anh "Joseph" Cao, a New Orleans attorney. Cao will be the first Vietnamese-American elected to Congress.

Jefferson was indicted in June 2007 on charges including bribery and racketeering for allegedly using his office to corruptly solicit bribes and for paying bribes to a foreign official. The indictment alleges that Jefferson violated the FCPA by allegedly offering, promising and making payments to a foreign official located in the U.S. to advance his family's business endeavors involving NITEL, the government-controlled telecommunications service provider in Nigeria.

Jefferson's trial has been delayed pending the outcome of an appeal pending in the Fourth Circuit relating to non-FCPA aspects of this case.

Labels: FCPA

The Law Commission of the United Kingdom, a non-political independent body established in 1965 to review and recommend reform where it is needed, recently issued a report entitled Reforming Bribery, that recommends significant changes to U.K.'s anti-bribery laws.

The Law Commission's report, which calls the current anti-bribery laws "out-dated" and "unfit", proposes that the U.K.'s numerous anti-bribery laws currently in place be repealed and replaced with two general offenses of Bribery, one concerned with the conduct of persons that pay bribes and one concerned with the recipient of the bribes. These offenses would be confined to activity of a business, professional or public nature.

In addition, the Law Commission also recommends the following two new anti-bribery offenses:

1. Bribery of a foreign public official; and

2. Corporate offense of negligently failing to prevent bribery by an employee or agent. It would be a defense to this crime that the company had adequate systems in place to prevent bribery.

The Law Commission also recommends extending the anti-bribery laws to cover foreign nationals who reside in the U.K. and conduct their business there.

The full version of Law Commission's final report can be found here.

Labels: FCPA, United Kingdom

Yet another company involved in the oil and gas business has been found guilty of violating the Foreign Corrupt Practices Act (FCPA).

On November 21, 2008, the Aibel Group Ltd., a United Kingdom-based provider of products and services to the upstream oil and gas industry that is owned by Norwegian private equity funds, pleaded guilty in federal court in Houston, Texas to conspiracy to violate the FCPA and violating the anti-bribery provisions of the FCPA.

According to the Justice Department, the corrupt payments were coordinated largely through an affiliated company’s offices in Houston and paid through a major international freight forwarding and customs clearance company to the Nigerian officials.

Aibel Group also admitted that it was not in compliance with a deferred prosecution agreement it had entered into with the Justice Department in February 2007 regarding the same underlying conduct. As part of the plea agreement, Aibel Group agreed to pay a $4.2 million criminal fine and to serve a two year term of organizational probation that requires, among other things, that it submit periodic reports regarding its progress in implementing antibribery compliance measures.

Aibel Group admitted to conspiring with others to make at least 378 corrupt payments totaling approximately $2.1 million to Nigerian customs service officials in an effort to induce those officials to give the defendants preferential treatment during the customs clearance process in connection with Nigeria's first deepwater oil drilling operation.

The Justice Department said that the resolution of the criminal investigation against Aibel Group now and its affiliates in 2007 resulted, in large part, from the actions of the companies in voluntarily disclosing the matter to the Justice Department and the companies’ agreement to take significant remedial steps.

Labels: FCPA

Mr. Shu Quan-Sheng, president of Newport News, Virgina-based AMAC International, today pleaded guilty in federal court in Norfolk, Virginia to two counts of violating the Arms Export Control Act (AECA) and one count of attempting to bribe Chinese government officials, in violation of the Foreign Corrupt Practices Act (FCPA).

Count one of the criminal information alleged that Shu violated the AECA by willfully exporting a defense service from the United States to the PRC without first obtaining the required export license or written approval from the State Department. Shu is alleged to have provided the PRC with assistance in the design and development of a cryogenic fueling system for space launch vehicles to be used at the heavy payload launch facility located in the southern Chinese island province of Hainan.

Count two alleged that Shu violated the AECA by willfully exporting a defense article to the PRC without first obtaining the required export license or written approval from the State Department. Shu is alleged to have illegally exported to the PRC controlled military technical data contained in a document entitled "Commercial Information, Technical Proposal and Budgetary Officer -Design, Supply, Engineering, Fabrication, Testing & Commissioning of 100m3 Liquid Hydrogen Tank and Various Special Cryogenic Pumps, Valves, Filters and Instruments."

Count three alleged that Shu offered to pay money to foreign officials of the PRC’s 101 Institute to obtain a contract for a French company he represented to develop of a liquid hydrogen tank system. Shu is alleged to have received more than $386,000 in commissions for securing the contract and has agreed to forfeit those funds.

Shu is schedule to be sentenced on April 6, 2009. Shu faces a possible maximum sentence of 10 years in prison and a fine of $1,000,000 for each violation of the Arms Export Control Act, and a possible maximum sentence of five years in prison and a fine of $250,000 or twice the gross gain for violating the Foreign Corrupt Practices Act.

Labels: FCPA, ITAR

As I mentioned during today's Compliance Week/Approva webinar on "Addressing FCPA Risks with Automated Controls Monitoring" (which can be viewed here in case you missed it), the Securities and Exchange Commission (SEC) yesterday announced the agency's enforcement statistics for fiscal year 2008.

In assessing the past year, which included the second-highest number of enforcement actions in the SEC's history, the agency confirmed that it considers the enforcement of the U.S Foreign Corrupt Practices a "growth area." During fiscal year 2008, the SEC noted that it filed 15 FCPA cases against U.S. companies that violated the books and records provisions of the FCPA. The SEC also indicated that "since January 2006, the SEC has brought 38 FCPA enforcement actions — more than were brought in all prior years combined since FCPA became law in 1977." Of course, a similar trend exists at the Justice Department.

Further information and analysis of the SEC's enforcement statistics can found on Compliance Week's Enforcement Action blog.

Labels: FCPA

Join Approva & Strasburger & Price for the following free FCPA-related webcast presented by Compliance Week:

Date & Time: Thursday, October 23, 2008 2:00 p.m. EST

Webcast Description:

Aggressive enforcement by the US Justice Department and SEC has resulted in record numbers of enforcement actions for violations of the Foreign Corrupt Practices Act (FCPA). Responding to FCPA enforcement actions can be costly and associated penalties can run into the tens of millions of dollars.

This webcast will outline the risks companies face in light of the DOJ & SEC's expansive reading of the FCPA's provisions and will demonstrate how automated controls monitoring systems can be applied to avoid FCPA enforcement actions, assist with investigations and mitigate penalties resulting from FCPA enforcement actions by automating the monitoring of FCPA-related internal controls.

Specific areas to be covered:

• What risks are you exposed to under the provisions of the FCPA?
• What are the rules for U.S. companies, U.S. persons, and foreign entities?
• What are the implications of recent Justice Department charges and settlements in the FCPA area for understanding the DOJ's approach?
• What should a company do if management believes that prohibited conduct has occurred?
• How can automated controls monitoring be used to prevent FCPA actions and to help reduce penalties and monitoring costs once an FCPA investigation has been initiated.

Speakers Include:
Doug Jacobson, Partner, International Trade Practice, Strasburger & Price LLP
Dana Hamerschlag, Sr. Director Product Marketing, Approva

Labels: FCPA

The Boston Herald has published an op-ed by Ambassador Christopher F. Egan, the U.S. representative to the Organization for Economic Cooperation and Development (OECD) discussing the benefits of the OECD’s Anti-Bribery Convention to U.S. companies.

Ensuring open, fair trade is good business globally

By Christopher F. Egan

When a U.S. contractor loses a major plant construction job or pipeline project because an international conglomerate bribed an official in the purchasing country, who cracks down on it?

When a foreign company illegally copies and resells a Massachusetts company’s product, who works to prevent it from re-occuring?

The answer, in part, is the Organization for Economic Cooperation and Development (OECD), comprised of 30 market democracies from across the globe devoted to making the world economy work better.

Negotiated 10 years ago, the OECD’s Anti-Bribery Convention makes it a crime to bribe a foreign official, an act that once was tax deductable in some countries. The OECD is also helping member countries deal with illicit global trade in counterfeited and pirated products.

OECD work is vital to the United States because bribery and piracy cost American companies billions of dollars, and that translates to fewer jobs for our citizens.

Massachusetts companies like Genzyme, Biogen, Boston Scientific, Gillette and others reap benefits because OECD conventions serve to protect their products and patents worldwide.

Before accepting the appointment as U.S. ambassador to the OECD in 2007, I was skeptical about the value of U.S. contributions to this global organization. I can now report that the OECD promotes open and fair markets, key to global economic growth and stability.

Global trade now supports some 775,000 jobs in Massachusetts - that’s 19.1 percent of all jobs. Trade through Bay State ports has an annual economic impact of $449 million.

In 2004, more than 10,000 Massachusetts companies sold their products abroad. But this growth is under threat from foreign entities that would cut corners through corruption and graft.

Our companies, and rightly so, are not allowed to participate in such schemes. The OECD is working to make our response to corrupt practices the world standard. This is especially valuable to Massachusetts and its innovation economy.

The OECD grew out of the Marshall Plan and essentially became the economic counterpart to NATO. There are indications the OECD’s fair-play doctrine is catching on, as Israel, Chile, Russia, and other nations seek admission.

More nations committed to open and fair trade, best practices, and protection of intellectual assets and patents will be a vital part of our economic health.

Labels: FCPA

Transparency International has released its annual Corruption Perceptions Index (CPI) for 2008 that measures the perceived levels of public-sector corruption in countries. The 2008 CPI scores 180 countries (the same number as the 2007 CPI) on a scale from zero (highly corrupt) to ten (highly clean). Transparency International's CPI is a very useful tool for determining the extent and risk of corruption in countries where companies conduct business.

Denmark, New Zealand and Sweden share the highest CPI score at 9.3, followed by Singapore at 9.2. The U.S. is ranked 18th (7.3), tied with Belgium.

Bringing up the rear are Somalia (1.0), Iraq and Myanmar (1.3) and Haiti (1.4). Nigeria and Vietnam are tied at 121 with a CPI score of 2.7.

Countries experiencing significant declines in their CPI score from 2007 to 2008 were Bulgaria, Burundi, Maldives, Norway and the United Kingdom.

Countries that improved their CPI scores from 2007 to 2008 were Albania, Cyprus, Georgia, Mauritius, Nigeria, Oman, Qatar, South Korea, Tonga and Turkey.

According to Transparency International:

The weakening performance of some wealthy exporting countries, with notable European decliners in the 2008 CPI, casts a further critical light on government commitment to reign in the questionable methods of their companies in acquiring and managing overseas business, in addition to domestic concerns about issues such as the role of money in politics. The continuing emergence of foreign bribery scandals indicates a broader failure by the world’s wealthiest countries to live up to the promise of mutual accountability in the fight against corruption.

Labels: FCPA

In what appears to be the latest trend, the U.S. Attorney for the Eastern District of Virginia announced the arrest of an individual that was charged with violating export controls laws and the Foreign Corrupt Practices Act (FCPA).

Mr. Shu Quan-Sheng, a PhD physicist the President of AMAC International (AMAC), a Newport News, Virgina company involved in the research and development of superconducting RF power technologies, magnetic levitation and cryogenics in space, was charged with:

• Unlawfully exporting a defense service to foreign persons without prior approval, in violation of the Arms Export Control Act;
  
• Unlawfully exporting a defense article in violation of the Arms Export Control Act; and
  
• Bribing, offering a bribe, and attempting to bribe a foreign government official, in violation of the FCPA.

According to the complaint, Shu allegedly provided technical assistance and foreign technology acquisition expertise to several PRC government entities involved in the design, development, engineering and manufacture of a space launch facility in the southern island province of Hainan, China.

According to the complaint, Shu has been involved in the PRC's systematic effort to upgrade their space exploration and satellite technology capabilities by providing technical expertise and foreign technology acquisition in the fields of cryogenic pumps, valves, transfer lines and refrigeration equipment, components critical for the use of liquefied hydrogen in a launch facility. Shu has also been instrumental in arranging for PRC officials to visit various European space launch facilities and hydrogen production/storage facilities.

The complaint also alleges that Shu offered bribes to government officials with the PRC’s 101 Institute to induce the award of the hydrogen liquefier project to the French company Shu represented. According to the complaint, on Dec. 1, 2003, Shu and his company AMAC entered into an agreement with the French company establishing AMAC and Shu as the French company’s representative in China. The agreement provided that AMAC was entitled to a success fee of ten to fifteen percent.

According to the complaint, prior to the ultimate decision to award the hydrogen liquefier project to the French company in January 2007, Shu offered payments to PRC officials within the 101 Institute to induce those officials to award the contract to the French company rather than a competitor and to earn Shu and AMAC a commission. The contract value for the hydrogen liquefier is believed to total approximately $4 million.

Labels: FCPA

National Foreign Trade Counsel President Bill Reinsch made a speech today on "The Impact of Corruption on Global Business" at a FCPA program held in Washington, DC. This speech is worth reading, since Mr. Reinsch made several interesting and important points regarding the dramatic increase in FCPA cases and fines and the use of outside compliance monitors. Here are some excerpts:

Despite a plethora of multilateral and U.S. based efforts, corruption remains a serious problem. Be assured that the NFTC fully supports vigorous and even-handed enforcement of anti-corruption measures. As I said at the beginning, we view corruption as a serious trade barrier. At the same time, however, we are concerned about the ambiguous scope of some enforcement trends, the significant amounts companies must spend on compliance with no assurance that even best efforts will prevent major fines or expenditures, the chilling effect that government action can have on bona fide corporate social responsibility, and finger pointing at the business community as the main source of the problem.

* * *

Our members and most members of the US business community want to comply with the law, but they have to know what it is before they can do that effectively. The deliberate expansion of the FCPA by Justice and SEC through targeting new areas such as charitable contributions and foreign company operations outside US jurisdiction may be warranted by public policy, but expansion driven by prosecutions and not by amendments to the law raises questions of basic process. Companies do not have notice of the expanded scope or changed policy and an opportunity to comment before they can be penalized. Finally, emphasizing draconian enforcement against corporations as the principal means of eradicating global corruption is not enough to put a meaningful dent in the [corruption] problem . . . .

Labels: FCPA

The latest issue of the well-respected Corporate Crime Reporter contains a summary of Justice Department attorney Mark F. Mendelsohn's comments made recently at a Foreign Corrupt Practices Program (FCPA) in Washington, DC. Mendelsohn serves as Deputy Chief of the Justice Department's Fraud Section and oversees the criminal enforcement of the FCPA.

The article contains some interesting and important information on recent and future FCPA trends, such as:

Mendelsohn said the trend toward more bribery prosecutions is going to continue “given the significant number of matters that we have under investigation.”

And he said the trend toward more prosecutions of individuals – as opposed to corporations – is a result of explicit Department policy.

“The number of individual prosecutions has risen – and that’s not an accident,” Mendelsohn said. “That is quite intentional on the part of the Department. It is our view that to have a credible deterrent effect, people have to go to jail. People have to be prosecuted where appropriate. This is a federal crime. This is not fun and games.”

“We have come up some creative ways to try to resolve cases involving companies so that we are no longer faced with a binary decision to either charge a company or not charge a company,” Mendelsohn said. “We have crafted resolutions – non prosecution agreements, deferred prosecution agreements, corporate compliance monitors – we have come up with tools that provide positive incentives for responsible companies to self-disclose, to self- investigate, to remediate appropriately. And that has had an enormous impact on the number of companies that have been willing to come in an talk to us about the problems they are identifying in their operations.”

“Another factor is that we have been increasingly effective in gathering evidence overseas through treaties as well as informal arrangements with law enforcement in other countries. That has made our work easier. Foreign law enforcement authorities are beginning to investigate and prosecute their own cases. That has had a positive effect on our efforts."

Labels: FCPA

Today's Wall Street Journal reports on the increasing number of antibribery cases brought under the U.S. Foreign Corrupt Practices Act (FCPA). While the article confirms what those of us who deal with the FCPA on a regular basis already know, the story contains a good overview of recent FCPA trends and issues. Here are some highlights:

A global crackdown on companies that use bribery to advance their foreign business interests is rapidly gathering steam.

Governments in the U.S. and other nations have dramatically increased their investigation and prosecution of foreign corruption cases in recent years, thanks to a spate of new anticorruption laws that has fostered growing international cooperation.

* * *

Mark F. Mendelsohn, deputy chief of the U.S. Justice Department's fraud section, says pursuing anticorruption cases has become "a significant priority in recent years." Additional lawyers have been assigned to these cases and, a year ago, the Federal Bureau of Investigation created a team to work on foreign bribery and antitrust cases, he says.

* * *

Increased cooperation among investigators in different nations is believed to be a primary reason for the escalation, say lawyers who handle these cases.

* * *

Another factor: More companies are voluntarily turning over evidence of wrongdoing in the hope of getting leniency from prosecutors. The 2002 Sarbanes-Oxley law in the U.S., which requires executives to certify that their company's financial disclosures are accurate, has also led to more disclosures. A bribe that is mischaracterized as a legitimate payment to a consultant, for instance, can be considered a misleading entry on the corporate books.

* * *

More recently, working ties between prosecutors in different nations have been expanding. In a meeting in Paris this summer, antibribery prosecutors from several countries gathered for the first time in an informal, roll-up-your-sleeves meeting, according to lawyers briefed on the meeting. There they discussed ongoing investigations and strengthened collaboration.

Labels: FCPA

Last Thursday, a Federal grand jury in Philadelphia indicted Nexus Technologies Inc. and four employees of the company on one count of conspiracy to bribe Vietnamese public officials in violation of the Foreign Corrupt Practices Act (FCPA) and four substantive counts of violating the FCPA by paying bribes to various Vietnamese government officials in exchange for contracts to supply equipment and technology to Vietnamese government agencies. The four employees were arrested the following day.

This appears to be the first FCPA case involving Vietnam.

According to the Justice Department, the indictment alleged that:

Nexus Technologies Inc. was a Delaware company with offices in Philadelphia, New Jersey and Vietnam that purchased a wide variety of equipment and technology, including underwater mapping equipment, bomb containment equipment, helicopter parts, chemical detectors, satellite communication parts and air tracking systems, for export to agencies of the government of Vietnam. The indictment alleges that from approximately 1999 through 2008, the defendants engaged in a conspiracy to pay Vietnamese government officials bribes in order to secure lucrative contracts for Nexus Technologies Inc. Over the course of the scheme, the defendants are alleged to have paid at least $150,000 in bribes to foreign officials in Vietnam. The defendants' customers in Vietnam are alleged to have included multiple Vietnamese government agencies, including the commercial branches of Vietnam's Ministries of Transport, Industry and Public Safety.

Labels: FCPA, Vietnam

The U.S. Department of Justice (DOJ) announced yesterday that a former Pacific Consolidated Industries LP (PCI) executive pleaded guilty today to charges related to the bribery of a U.K. Ministry of Defence (UK-MOD) official in order to obtain lucrative equipment contracts with the U.K. Royal Air Force, in violation of the Foreign Corrupt Practices Act (FCPA)

According to the DOJ, Martin Eric Self, 51, of Orange, Calif., pleaded guilty today before Judge Andrew J. Guilford in U.S. District Court in Santa Ana, California to a two-count information charging him with violating the FCPA in connection with the illicit payment of more than $70,000 in bribes for the benefit of a UK-MOD official in exchange for obtaining and retaining lucrative contracts for PCI.

Self was a partial owner and the president of PCI at the time the crimes were committed. PCI was a private company headquartered in Santa Ana that manufactured Air Separation Units (ASUs) and other equipment for defense departments throughout the world. ASUs generate oxygen in remote, extreme and confined locations for aircraft support and military hospitals. PCI was subsequently acquired by a group of investors and re-named Pacific Consolidated Industries, LLC (PCI, LLC). PCI, LLC referred this matter to DOJ and fully cooperated in the government’s investigation.

According to the plea agreement, in or about October 1999, Self and Leo Winston Smith, PCI’s then-executive vice president and director of sales and marketing, caused PCI to enter into a marketing agreement with a person Self understood to be a relative of the UK-MOD official. The official, as a result of his position within the UK-MOD, was able to influence the awarding of UK-MOD contracts for services and equipment. As part of the plea agreement, Self admitted that he was not aware of any genuine services provided by the official’s relative, and believed there was a high probability that the payments were being made to the official’s relative in order to benefit the official in exchange for obtaining and retaining the ASU contracts. Despite these beliefs, Self initiated several of the improper wire transfers to the relative and deliberately avoided learning the true facts relating to the nature and purpose of the payment.

Self is scheduled to be sentenced on September 29, 2008. At sentencing, Self faces a statutory maximum sentence of five years in prison per count. However, the plea agreement contemplates a prison term of eight months.

Mr. Smith was indicted in April 2007 for his role in the scheme and is scheduled to stand trial in July 2008. The UK-MOD official was investigated by U.K. authorities and has pleaded guilty in the United Kingdom to accepting bribes from PCI and was sentenced to two years in prison.

Labels: FCPA

The National Council on International Trade Development's (www.ncitd.org) December 13, 2007 meeting in Washington, DC will feature the following speakers:

• Ms. Hillary Hess, Director, Regulatory Policy Division, Bureau of Industry and Security, U.S. Department of Commerce.
  

• Mr. William Jacobson, Assistant Chief, Fraud Section, Criminal Division, U.S. Department of Justice and Ms. Stacy Luck, Attorney, Fraud Section, Criminal Division, U.S. Department of Justice.
  

• Mr. Matthew Tanzer, Vice President and Chief Compliance Counsel, Tyco International (US) Inc.
  

Mr. Jacobson, Ms. Luck and Mr. Tanzer will be speaking on the U.S. Foreign Corrupt Practices Act.

Labels: BIS, FCPA

The Justice Department recently announced that two former executives of ITXC Corporation, a provider of Voice over Internet Protocol services, recently pleaded guilty to conspiring to violate the Foreign Corrupt Practices Act (FCPA) and the Travel Act. The defendants face up to five years in prison and a $250,000 fine when they are sentenced in October.

In their guilty pleas, both defendants admitted they conspired with each other and other former ITXC employees and officers to make corrupt payments to employees of foreign state-owned and foreign-owned telecommunications carriers in Nigeria, Rwanda and Senegal to obtain and retain contracts for ITXC.

In a related case, a former regional manager of ITXC was sentenced to 18 months in prison and required to pay a $7,500 fine for conspiring to violate the anti-bribery provisions of the FCPA and to violate the Travel Act stemming from corrupt payments to foreign officials in order to retain business for ITXC in Africa.

The Securities and Exchange Commission (SEC) also brought parallel civil enforcement actions against these individuals and is seeking injunctions, disgorgement of all ill-gotten gains derived from the alleged misconduct and civil penalties for the alleged FCPA violations.

ITXC was acquired by Teleglobe in 2004. Teleglobe was acquired by VSNL Ltd. in 2006.

Labels: FCPA, SEC

Yet another U.S. company has been fined under the Foreign Corrupt Practices Act (FCPA) for payments made by a foreign subsidiary. This time, the Securities and Exchange Commission (SEC) announced yesterday that it has imposed a $300,000 civil penalty on Delta & Pine Land Company (Delta & Pine), a Mississippi-based company engaged in the production and marketing of cottonseed, and its Turkish subsidiary, Turk Deltapine, Inc., for violating the FCPA.

The SEC found that Delta & Pine violated the books-and-records and internal controls provisions of the FCPA and that Turk Deltapine violated the anti-bribery provisions of the FCPA. Specifically, the FCPA charged that, from 2001 through 2006, Turk Deltapine made payments of approximately $43,000 to multiple officials of the Turkish Ministry of Agricultural and Rural Affairs in order to obtain governmental reports and certifications that were necessary for Turk Deltapine to obtain, retain and operate its business in Turkey. According to the SEC, the payments included cash and payment of travel and hotel expenses, air conditioners, computers, office furniture and refrigerators.

In addition, in connection with these improper payments, the SEC found that Delta & Pine failed to keep accurate books and records and failed to have effective internal controls. In addition, the SEC found that Delta & Pine officers in the U.S. learned of these payments in 2004, but did not receive all facts concerning those payments from Turk Deltapine employees. Instead of halting the payments, the payments continued to be made via a company that supplied chemicals to Turk Deltapine.

Turk Deltapine’s payments to MOA officials did not cease until 2006, when the payments came to light in connection with due diligence being performed by a potential acquirer of Delta & Pine. Delta & Pine was subsequently acquired by Monsanto on June 1, 2007.

In its administrative order, the SEC ordered the SEC ordered Deltapine and Turk Deltapine to cease and desist from such violations and required Delta & Pine to retain an independent consultant to review and make recommendations concerning the company's FCPA compliance policies and procedures.

Labels: FCPA

Dow Jones Newswires reported tonight that the U.S. Department of Justice (DOJ) is conducting a criminal inquiry of nearly a dozen oil and oil-services companies, focusing on potentially illegal payments to customs agents who provided freight forwarding and other services, including in Nigeria. The article states that the Securities and Exchange Commission is also conducting a civil investigation. The article states that:

Labels: FCPA, Nigeria

Last week a federal grand jury in Houston indicted Jason Edward Steph, a former executive of a subsidiary of Houston-based Willbros Group Inc., on charges of conspiring to make payments to Nigerian officials in violation of the Foreign Corrupt Practices Act (FCPA). Willbros is a publicly-traded company that provides construction, engineering and other services to the oil and gas industry.

The Grand Jury alleged that Mr. Steph conspired to make over $6 million in bribe payments to Nigerian officials in order to obtain and retain gas pipeline construction business from a joint venture controlled by the Nigerian state oil company. Mr. Steph was also charged with money laundering and conspiracy to commit money laundering based upon the international transfer of some of the bribe money. The indictment alleges that most of the payments were allegedly laundered through consultants, who typically received three percent of Willbros' contract revenue by wire transfer from Houston to a foreign bank. The consultants subsequently transferred some or all of the funds to Nigerian officials.

The maximum sentence for a charge of conspiring to violate the FCPA is five years in prison and a fine of up to $250,000, or twice the gross gain or loss. Each of the money laundering charges carries a maximum sentence of 20 years in prison and a fine of up to $500,000 or twice the value of the funds involved in the transfer, whichever is greater.

This is the second FCPA prosecution of a Willbros executive arising from Willbros' overseas operations. In September 2006, Jim Bob Brown, who is named as a co-conspirator in the Steph indictment, pled guilty to violating the FCPA by conspiring with others to bribe Nigerian and Ecuadorian officials. Mr. Brown also settled civil charges brought by the Securities and Exchange Commission. Mr. Brown has not yet been sentenced.

A copy of the indictment can be found at the following link.

Labels: FCPA

Last week was an unusually busy one for news relating to Foreign Corrupt Practices Act (FCPA) investigations, guilty pleas and arrests:

• As was widely reported, BAE Systems PLC announced last Monday that it was notified by the U.S. Department of Justice that the agency has commenced a formal investigation relating to the company's compliance with the FCPA, including the company's business with the Kingdom of Saudi Arabia.

• GlobalSantaFe Corp., an offshore oil and gas drilling contractor, announced that it is conducting an internal investigation of its Nigerian operations, focusing on agents who handled customs matters with respect to a Nigerian affiliate of the Company and whether those agents have fully complied with the FCPA and local laws.
  

• Global Industries, Ltd., a Louisiana-based company that provides offshore construction, engineering, project management and support services to the oil and gas industry, announced that it is conducting an internal investigation of its West Africa operations, focusing on the legality under the FCPA and local laws, of one of its subsidiary's reimbursement of certain expenses incurred by a customs agent in connection with shipments of materials and the temporary importation of its vessels into Nigeria.
  

• Si Chan Wooh, a former executive vice president and head of SSI International, Inc., a wholly-owned subsidiary of Schnitzer Steel Industries Inc., pleaded guilty to conspiracy to violate the FCPA. Wooh also agreed to pay about $40,000 in disgorged bonuses, interest and penalties to settle civil charges brought by the U.S. Securities and Exchange Commission. The SEC alleged that from 1999 to 2004, Wooh paid more than $200,000 and other gifts to managers of government-owned steel mills in China to induce them to purchase scrap metal from Schnitzer. Wooh has agreed to cooperate with the Justice Department in its long-running criminal investigation of Schnitzer Steel and its management. In 2006 Schnitzer Steel agreed to a deferred prosecution agreement with the DOJ and a cease and desist order with the SEC against future violations of the FCPA, and agreed to disgorge profits of $6,279,095 and prejudgment interest of US $1,446,106. Schnitzer Steel also agreed that its Korean subsidiary would plead guilty to violating the FCPA and pay a penalty of US $7,500,000.

• Leo Smith, a former executive of Pacific Consolidated Industries LP (PCI) was recently arrested for allegedly violating the Foreign Corrupt Practices Act (FCPA) as part of a conspiracy to bribe a U.K. Ministry of Defence (U.K. MOD) official in order to obtain contracts with the U.K. Royal Air Force. California-based PCI manufactures portable air separation units for the defense, petroleum and medical markets. The indictment alleged that Smith conspired to make over $300,000 in bribe payments for the benefit of a U.K. MOD official in order to obtain equipment contracts for PCI valued at over $11 million. In addition to the FCPA violations, the indictment also charges Smith with money laundering and tax offenses. Smith's conduct was discovered after PCI was acquired by a private equity company in late 2003. The private equity company ultimately referred this matter to the Justice Department. The U.K. official that received the payments was sentenced in April to two-years in prison.

Labels: FCPA